The CFTC has proposed to modify the aggregation provisions of the position limits rule that it issued in late 2011 (summary, final rule). The rule currently requires aggregation of positions across all entities in which a person owns a 10 percent or greater ownership or equity interest. In the announcement accompanying its proposed rulemaking, the Commission states that the modifications would allow any person with a greater than 10 percent ownership or equity interest in an entity to disaggregate the owned entity’s positions, provided there are protections and firewalls in place to ensure trading decisions are made independently of one another.
According to the announcement, under the proposed rule:
1. Any person with an ownership or equity interest in an entity (financial or non-financial) of between 10 percent and 50 percent may disaggregate the owned entity’s positions upon demonstrating independence of trading
2. In order to be permitted to disaggregate:
– Trading must be conducted in separate locations;
– Risk management systems must not allow the sharing of trades or trading strategy;
– Different traders must be doing the trading;
– Information about individual trades or trading strategies may not be shared between entities.
3. Aggregation would always be required if one entity owns greater than 50 percent of another entity.
An unofficial draft release of the proposed rulemaking is available here.