Position Limits - Guide to the CFTC Federal rules
The newest set of Position Limits rules from the CFTC come into effect on the 1st January 2022.
For more information on the regulatory updates please read our four part blog series:
To support the new regulation, FundApps have had to introduce four new Position Limit rules. This article explains the updates FundApps have made.
Four new CFTC Federal rules
The new rules will be automatically deployed and approved in your Position Limits environment:
CFTC Federal Single Month
CFTC Federal All Month
CFTC Federal Spot Month Cash Settled
CFTC Federal Spot Month Physically Settled
These rules will run alongside the Mifid II and Exchange set Position Limits rules.
Cash and Physically settled contracts will be netted separately in the Spot Month rules but for Single and All Months will be netted together.
Core Reference Contract Conversion
For contracts that refer to a Core Reference contract, the new CFTC rules will do this conversion automatically using data from FIA Tech to determine what the Core Reference is. If a contract has to be converted into a parent contract first before identifying what the Core Reference contract is, then FundApps will do that also (For example YGO will be converted to YG before checking if there is a Core Reference contract YG references).
Cross Exchange Aggregation
The new CFTC rules can require contracts listed on different exchanges to be aggregated together to be monitored against a single limit.
FundApps will automatically handle this cross exchange aggregation requirement using FIA Tech’s data to determine what the Core Reference contract and exchange are.
Where a result has contracts from different exchanges aggregated together, the Exchange populated in the Dashboard will be the exchange the Core Reference contract is listed on. If you click into the result details you will be able to see all the original, child contracts and the market they were originally listed on.
Where a contract has been aggregated into a Core Reference contract and it is scope for a spot month rule. FundApps will use the calendar data we fetch from exchanges for the Core Reference contract and not the original, child contract.
User Interface changes
The only change to the UI is you will be able to filter by the new CFTC rules in the “Limit Type” column.
Q. What if my FundApps Position Limits license covers the exchange of the contract I hold but not the exchange of the Core Reference contract? What happens in the opposite case?
A. You will not be able to see the CFTC limit result for your holding in this contract as it relates to an exchange you are not licensed to. You will be able to see the contract in the Exchange Coverage view. You will still be able to monitor the contract against the Exchange set limits as those don’t relate to cross exchange aggregation. The same principle will apply in the opposite case.