Menacing signs in C.F.T.C. steps on position limit exemptions
Menacing signs in C.F.T.C. steps on position limit exemptions
BakingBusiness.com, September 08, 2009
by Editorial Staff

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In the July 14 issue of Milling & Baking News, it was suggested in this column that the temptation for the Commodity Futures Trading Commission (C.F.T.C.) to jump into the fray of controlling market positions in soybeans, wheat and corn would be so tempting that they could not resist the opportunity to extend their ever swelling proboscis into these markets.

As the world markets have shrunk and production, at least for the moment, seems to have swollen, the temptation appears to have been too great. As we suspected on Aug. 19, the C.F.T.C. withdrew two No-Action Letters Granting Relief from Federal Speculative Position Limits on Soybeans, Corn and Wheat. Gary Gensler, chairman of the C.F.T.C., said in this case that C.F.T.C.’s position limits should be "consistently applied and vigorously enforced. Position limits promote market integrity by guarding against concentrated positions."

The Division of Market Oversight (D.M.O.) gave an exemption to DB (Deutsche Bank) Commodity Services L.L.C., a commodity pool operator (C.P.O.) and commodity trade adviser (C.T.A.), permitting the DB commodity Index Tracking Master Fund to take positions in corn and wheat futures that exceed federal speculative position limits set forth in C.F.T.C. regulation 150.2. Subsequently in C.F.T.C. Letter 06-19 (Sept. 6, 2006) D.M.O. granted similar relief to a C.P.O./C.T.A. employing a commodity investment strategy that includes positions in Chicago Board of Trade soybeans, corn and wheat futures contracts. Among other things, D.M.O.’s no-action position in both stated that any change in circumstances or conditions may result in a different conclusion. The D.M.O. previously has stated that the trading strategies employed by these entities would not qualify for a bona fide hedge exemption under the C.F.T.C.’s regulations.

The D.M.O. will work with each of these entities as they transition to positions within current speculative limits. The withdrawal of these no-action positions is very specific and limited and does not affect any other no-action position in very specific and limited or regulatory position taken by the C.F.T.C. or its staff to these entities or other markets.

Well, if you are inclined to believe this story from the federal government you also will believe that President Barack Obama and his boys from Chicago don’t want to change health care, renew the environment or create a new entitlement to long life and good health. This president is awash in promises for which his wallet can’t pay. Remember his wallet is now your wallet, so beware.

When exposed, his Chicago connections go into their full denial mode, "well, we are just trying to get along by cramming another 49 million people who cannot or don’t want to pay for health care into a system that is already broken under its own weight." As more baby boomers cross the line between 65 and 66, it swells the rolls of Medicare recipients and shifts more government resources to those ends. Moving the system’s bankruptcy ever closer.

In our last column on this issue we cautioned that the oil position limits issue would morph into position limits on grain and soybeans. The consistent opening line of these transitions is that "We are from the government and we are here to help!" Do not take that statement at face value. Examine your positions, the amount of coverage against market fluctuations they afford you and the length of the coverage they offer. Do not be surprised if the positions come up short of your desired goals, but be careful when exposing yourself to the mercies of this new, better version of the federal government who may or may not be here to help you.


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