Wednesday, November 23, 2011

CFTC Defines "Swaps"- Silver Shorts Have 60 Days to Comply With Spot-Month Limits

Not sure how we missed this, but the CFTC officially defined "swaps" last Friday on November 18th, giving 60 days for traders to comply with the CFTC's new spot-month position limits.
Look for:
1. Continued massive short covering and silver smashes 
2. Volume to begin to decrease in spot month contracts and massively increase in non spot-month contracts.

From SD's report on the CFTC position limit ruling :
Establishment of speculative limits on Referenced Contracts will occur in two phases:
o Spot-month position limits. Spot-month limits will be effective sixty days after the term “swap” is further defined under the Dodd-Frank Act. The limits adopted at that time will be based on the spot-month position limit levels currently in place at DCMs. Thereafter, the spot-month limits will be adjusted biennially for agricultural contracts and annually for energy and metal contracts. These subsequent limits will be based on the Commission’s determination of deliverable supply (developed in consultation with DCMs).

November 18, 2011
CFTC’s Division of Market Oversight Issues Letter to Market Participants Requiring Compliance with New Large Trader Reporting System for Physical Commodity Swaps and Swaptions
Division to Provide Temporary and Conditional Safe Harbor for Less than Fully Compliant Reporting

Washington, DC – The Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (Division) today issued a letter to market participants requiring compliance with the new large trader reporting system for physical commodity swaps and swaptions. Clearing organizations and clearing members must begin reporting under the new system on November 21, 2011, and the Division requires fully compliant month-end open interest reports to be collected beginning September 2011 through February 2012 and submitted to the Commission by March 20, 2012.

The Division is providing a temporary and conditional safe harbor for less than fully compliant reporting as it launches its XML-based large trader reporting system for swaps. This safe harbor is only for market participants making a good faith effort to comply with the new rules. Because this is the first time that swaps data is being collected on a systematic basis, this temporary relief is intended to provide sufficient time for the industry and the CFTC to transition to fully compliant reporting by March 20, 2012.

Parties relying on the safe harbor must also submit an e-mail to the Division for its review that includes information on arrangements being made to come into full compliance with the rules, as well as the expected date of such compliance.
From the CFTC