Aggregated Position Requirements Clarified

     WASHINGTON (CN) – Swap market participants would not have to report their aggregated positions across different accounts if doing so poses a reasonable risk of violating federal law, according to new rules proposed by the Commodity Futures Trading Commission.
     The proposal clarifies an interim rule the CFTC implemented last year, which requires participants to share information about their positions in the market with others who hold positions in the same swap.
     The CFTC is trying to strike a balance between limiting the ability of individual participants to manipulate the market through trades from multiple accounts and the burden of forcing participants to report all of their positions together.
     Many traders also were worried that such disclosure could violate anti-trust laws which frequently prohibit participants from sharing information for fear of market collusion and manipulation.
     The proposed rules still require buyers and sellers to file an opinion of counsel in support of an exemption from information sharing, which the CFTC will evaluate against the reasonable risk of violating federal law, as opposed to the current threshold of actual violation of federal law.
     The CFTC rejected calls to drop aggregation of positions based on 10 percent ownership, or control of a position in favor of aggregation based strictly on controlling interest in trade decisions on the position, saying it would be too costly to determine the controlling trade interest in every major swap position.
     It might also allow market participants to use ownership interest to “circumvent aggregation in circumstances where an ownership interest is used to directly or indirectly influence control over an account or position,” the CFTC said.
     Instead, the CFTC will continue to allow market participants who own at least a 10 percent share in a position to petition for relief from having to aggregate their positions.
     Relief would be granted if they can prove that they, and the entity in which they hold a greater than 10 percent but less than 50 percent stake, do not have knowledge of each other’s trading decisions.
     The CFTC is asking for public comments on the proposed revisions by June 29.

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