RULE 12 SPECULATIVE POSITION LIMITS

Transcription

1 RULE 12 SPECULATIVE POSITION LIMITS TABLE OF CONTENTS Requirement to Provide Reports Speculative Position Limits Exemptions - Positions Which May Exceed Limits Aggregation of Positions Provision of Information upon Request of Regulatory Division Policy for Market Surveillance Matters Page 1 of 10

2 RULE 12 SPECULATIVE TRADING LIMITS Requirement to Provide Reports a. Position and Call for Intentions Report Annex 12.A and 12.B (1) All FCMs holding a total gross long or gross short positions of 100 or more futures contracts and/or delta-adjusted options are required to file a Position and Call for Intentions Report in the form set out in Annex 12.A, reporting the information for each client account and house account where such accounts hold 100 or more futures contracts and/or delta-adjusted options in the nearby futures contract month. FCMs must ensure that they include the correct legal names of all beneficial owners required to be listed on Annex 12.A. FCMs must further ensure that they have obtained each beneficial owners instructions on whether it intends to liquidate, make/take delivery, or execute an EFP transaction. If the Regulatory Division approves, an FCM may submit the information in another form, provided that the information submitted contains at least the minimum information required by Annex 12.A. (2) All Merchant Participants are required to complete and file a Position & Call for Intentions Report in the form set out in Annex 12.B, reporting where they hold 100 or more futures contracts and/or delta-adjusted options in the nearby futures contract month. If the Regulatory Division approves, a Merchant Participant required to submit an Annex 12.B may submit the information in another form, provided that the information submitted contains at least the minimum information required by Annex 12.B. (3) Annex 12.A and Annex 12.B are to be filed with the Regulatory Division no later than 12:00 noon on the first Trading Day of each week commencing six (6) weeks prior to the first day of spot month. The information to be reported is information as at the last Trading Day of the week immediately preceding the date the Annex is due. b. Futures and Cash Positions by Hedgers Report Annex 12.C (1) For positions that exceed the speculative limits, separately or in aggregate with affiliated entities, an Annex 12.C form must be completed by all Merchant Participants and all other Persons that intend to take delivery utilizing the Bona Fide Hedging Transaction exemption. Annex 12.C is to be filed no later than 4:00 pm on the first Trading Day of each week commencing four (4) weeks prior to spot month, until such time as the reporting entity s position, or, where its position is aggregated, the combined positions of all affiliated entities falls below the speculative limit. During delivery month, long futures position holders must submit an Annex 12.C no later than 12:00 noon commencing the first day of spot month and daily thereafter until such time as the reporting entity s position falls below the speculative limit. Amended by the Special Regulatory Committee June 25, 2014; effective July 11, 2014 [12.01a.(1) 2 nd paragraph; b. (1)]. Page 2 of 10

3 Amended by the Special Regulatory Committee November 7, 2017; effective Trade Date December 1, 2017 [12.01 title; a. (1) and (2) and b. (1)] Speculative Position Limits Except as otherwise provided, no Person may hold or control futures positions, (net long or net short) and/or Delivery Certificates, separately or in combination, in spot month, in excess of the following: Speculative Position Limits Contract Limit by number of contracts In spot month Canola 3,000 In calculating the number of contracts, all Persons must combine the futures contracts held with all contracts under Delivery Certificates owned by the Person. The total contracts, by contract, may not exceed the speculative position limit, commencing with spot month, unless the Person falls within an exemption. Amended by the Board October 25, 2017; effective Trade Date October 26, 2017 [12.02 removal of milling wheat, durum wheat and barley]. Amended by the Special Regulatory Committee November 7, 2017; effective Trade Date December 1, 2017 [12.02] [New Speculative Position Limits effective with March 2018 canola contract] Exemptions - Positions Which May Exceed Limits Provided that all obligations under this Rule, and the Policy to this Rule, are met, the speculative position limits set forth in this Rule may be exceeded to the extent such positions are: a. Bona Fide Hedging Transactions. b. For the purpose of reclaiming or offsetting outstanding Warrants, or re-delivering existing Delivery Certificates. Amended by the Special Regulatory Committee March 21, 2013; effective April 25, 2013 [removal of b, then re-numbered] Aggregation of Positions a. Positions to be aggregated. The position limits set forth in shall apply to all positions in accounts for which any Person by power of attorney or otherwise directly or indirectly holds positions or controls trading or to positions held by two or more Persons acting pursuant to an expressed or implied agreement or understanding the same as if the positions were held by, or the trading of the position were done by, a single individual. b. No aggregation offsets. Aggregation of positions, for the purposes of applying the position limits in 12.02, shall only be done for positions on the same side of the market (long or short). Positions on opposing sides of the market will be considered separately, and will not be offset or netted, for the purposes of applying position limits. Page 3 of 10

4 c. Ownership of accounts. (1) For the purpose of applying the position limits set forth in 12.02, except as set out below, any Person holding positions in more than one account, or holding accounts or positions in which the Person by power of attorney or otherwise directly or indirectly has a 10% or greater ownership or equity interest, must aggregate all such accounts or positions. (2) Aggregation is not required if the Person can demonstrate to the Regulatory Division that the accounts are independently controlled. Independent control means that the individuals controlling the trading decisions for the accounts: (i) (ii) (iii) (iv) Do not have knowledge of each other s trading decisions; Trade pursuant to separate and independent trading strategies; Do not share personnel who control trading decisions; and Have written policies which ensure the above conditions are met. d. Ownership by limited partners, shareholders or other pool participants. For the purpose of applying the position limits set forth in 12.02: (1) A commodity pool operator having ownership or equity interest of 10% or greater in an account or positions as a limited partner, shareholder or other similar type of pool participant must aggregate those accounts or positions with all other accounts or positions owned or controlled by the commodity pool operator; (2) A Person that is a limited partner, shareholder or other similar type of pool participant with an ownership or equity interest of 10% or greater in a pooled account or positions who is also a principal or affiliate of the operator of the pooled account must aggregate the pooled account or positions with all other accounts or positions owned or controlled by that Person, provided, however, that the Person need not aggregate such pooled positions or accounts if: (i) (ii) (iii) The pool operator has, and enforces, written procedures to preclude the Person from having knowledge of, gaining access to, or receiving data about, the trading or positions of the pool; The Person does not have direct, day-to-day supervisory authority or control over the pool's trading decisions; and The Person, if a principal of the commodity pool operator, maintains only such minimum control over the commodity pool operator as is consistent with its responsibilities as a principal and necessary to fulfill its duty to supervise the trading activities of the commodity pool; (3) Each limited partner, shareholder, or other similar type of pool participant having an ownership or equity interest of 25% or greater in a commodity pool the operator of which is exempt from registration by virtue of Sec of Part 4 of the Regulation to The Commodity Exchange Act (of the United States of America) must aggregate the pooled account or Page 4 of 10

5 positions with all other accounts or positions owned or controlled by that Person. e. Trading control by Futures Commission Merchants. The position limits set forth in of this part shall be construed to apply to all positions held by an FCM or its separately organized affiliates in a discretionary account, or in an account which is part of, or participates in, or receives trading advice from a customer trading program of an FCM or any of the officers, partners, or employees of such FCM or its separately organized affiliates, unless: (1) A Person other than the FCM or the affiliate directs trading in such an account; (2) The FCM or the affiliate maintains only such minimum control over the trading in such an account as is necessary to fulfill its duty to supervise diligently trading in the account; and (3) Each trading decision of the discretionary account or the customer trading program is determined independently of all trading decisions in other accounts which the FCM or the affiliate holds, has a financial interest of 10% or more in, or controls. f. Exemptions to the aggregation requirements in this Rule may be provided by the Regulatory Division. Any request for such an exemption must be submitted, in writing, at least two (2) Trading Days in advance of the commencement of Spot Month. Amended by the Special Regulatory Committee March 21, 2013; effective April 25, 2013 [ b new sub-section, then renumbered]. Amended by the Special Regulatory Committee April 6, 2016; effective Trade Date May 16, 2016 [added f.]. Amended by the Special Regulatory Committee March 7, 2017; effective Trade Date March 23, 2017 [12.04 c. (1); added c. (2)]. Amended by the Special Regulatory Committee November 7, 2017; effective Trade Date December 1, 2017 [12.04 c. (1) and (2); d. (2) and (3); and e. (1)] Provision of Information upon Request of Regulatory Division Upon request by the Regulatory Division, Persons must provide to the Regulatory Division any and all relevant information and documentation, including, but not limited to, information on the positions owned or controlled by that Person, trading done pursuant to an exemption, and the relevant business relationships supporting a claim of exemption. Amended by the Special Regulatory Committee November 7, 2017; effective Trade Date December 1, 2017 [12.05]. Page 5 of 10

6 Policy For Market Surveillance Matters Introduction The purpose of this Policy is to provide direction and guidance on various matters relating to Rule 12 and, in particular, to set out the obligations of Persons who carry futures positions in excess of the speculative position limits. The examples in this Policy are intended to assist Persons in fulfilling the obligations of Rule 12. This Policy is not intended to, and should not be read as, setting out all possible issues and scenarios. Many additional situations may arise beyond those set out in this Policy and they will be dealt with on a case-by-case basis. Persons are encouraged to contact the Regulatory Division to discuss their unique situations on a confidential basis. The Policy 1. Speculative Position Limits Rule 12 sets out the speculative position limits that are permitted during spot month. The Rules provide that no Person can exceed the speculative position limit(s) in a spot month unless they fall within one of the listed exemptions. In calculating one s position, an entity is required to include all futures positions and all Delivery Certificates. The total number may not exceed, in spot month, the speculative position limits - unless the Person can fall within an exemption. Positions How to calculate. The following are examples of how to calculate positions involving both futures positions and Delivery Certificates. NOTE All examples are based on canola spec limits (3,000 contracts). Example #1 Futures position: Delivery Certificates: TOTAL: 2,400 contracts 700 contracts (14,000 tonnes) 3,100 contracts Therefore, this entity exceeds the Speculative Limit, and would be obligated to either: a. Liquidate their futures positions by 100 contracts, or b. Call for shipment, and accept nominations, for 2000 tonnes (100 contracts) of Delivery Certificates, or c. Qualify for an exemption under the policy. Example #2 Futures position: Delivery Certificates: 3,200 contracts (using the hedge exemption) 0 (as of first day of spot month) On the first day of spot month, the long is bidding in the cash market at futures equivalent. On first delivery day, the long takes delivery of their entire position. They now have: Futures position: Delivery Certificates: 0 contracts 3,200 contracts (64,000 tonnes) The long must still continue to bid in the cash market at futures equivalent, until such time as they call for shipment of at least 4,000 tonnes (200 contracts), and accept the nominations provided. Alternatively, the long may seek an exemption under a different provision of the Market Surveillance Policy, or go short 200 futures to give them a net long of 3,000. Page 6 of 10

7 Example #3 Futures position: Delivery Certificates: -100 contracts 3,200 contracts (64,000 tonnes) In this scenario, even though the entity is short futures, they are net long, in an amount that exceeds the speculative limits. Therefore, they would be treated as a long under the Market Surveillance Policy, and be obligated to either: a. Go short an additional 100 contracts b. Call for shipment, and accept nominations, for 2,000 tonnes (100 contracts). c. Qualify for an exemption as a long under the Market Surveillance Policy, as noted in example 1 above. Amended by the Special Regulatory Committee November 7, 2017; effective Trade Date December 1, 2017 [New Speculative Position Limits effective with March 2018 canola contract]. 2. Exemptions From Speculative Limits There are two exemptions from the speculative position limits set out in Rule 12; 1. The positions are Bona Fide Hedging Transactions as that term is defined in Rule The positions are held to offset outstanding Warrant obligations, or to re-deliver existing Delivery Certificates. Rule 12 provides that the Persons wishing to rely on an exemption must meet all other obligations in the Rule and the Policy. Administrative amendment June 19, 2013; [first sentence]. Amended by the Special Regulatory Committee March 21, 2013; effective April 25, 2013 [removal of 2, then re-numbered]. 3. Position and Call for Intention Reports - Annex 12.A and Annex 12.B Annex 12.A must be completed and filed by all Futures Commission Merchants, and must include all relevant information on their house accounts and on all of their clients accounts where the accounts include positions in excess of 100 futures contracts and/or delta-adjusted options in the nearby contract months of canola. Annex 12.A must set out the correct, full legal names of each beneficial owner listed. If the Regulatory Division agrees, the FCM may provide a legend document in which it provides full legal names and sets out a short form for each client. The FCM may then report the short form name on its future filings of Annex 12.A. In addition, it is the obligation of the FCM to ensure it has obtained and reports directions from each client as to its intention to liquidate, or make delivery on, or execute an EFP transaction. The FCM may not simply use the default Liquidate. Annex 12.B must be completed and filed by all Merchant Participants where their combined accounts (including accounts held by FCMs) exceed a position of 100 futures contracts and/or delta-adjusted options in the nearby contract month. These entities will be registered in some Page 7 of 10

8 category with the Exchange. The Merchant Participant is required to turn its mind to its intention to make delivery, liquidate, or enter into an EFP and report that intention on the Annex 12.B. Rule 12 provides that, with the consent of the Regulatory Division, Persons required to file either Annex 12.A or Annex 12.B, may submit the information on another form, provided that all of the required information is included. This is to cover situations where the Persons may have the information already available in another format in their system and the requirement to complete an Annex 12.A or Annex 12.B would cause duplication and extra work for the Person. Persons wishing to submit another form should contact the Regulatory Division and obtain approval in advance of the first reporting deadline. Amended by the Special Regulatory Committee June 3, 2015; effective Trade Date July 17, 2015 [2 nd paragraph, last sentence]. 4. Futures and Cash Positions by Hedgers Report Annex 12.C Annex 12.C must be completed and filed by all Merchant Participants and by any other Person who wishes to utilize the Bona Fide Hedging Transaction exemption to take delivery of a commodity over the speculative position limit, where the reporting entity holds a position over the speculative limit itself, or in aggregate with affiliated entities. While it would be unusual for a Person that was not a Merchant Participant to be able to meet all of the requirements in the Rules and in the Policy to Rule 12, such that they would qualify to take delivery over the speculative limit, it is not impossible. In such situations, considerable advance planning would be required. Such entities should contact the Regulatory Division to discuss their plans on a confidential basis and should ensure that they meet all of the reporting requirements for the filing of the Annex 12.C. Amended by the Special Regulatory Committee June 25, 2014; effective July 11, 2014 [4. 1 st paragraph]. 5. Obligations of a Long Position Holder Relying on the Bona Fide Hedge Transaction Exemption In the event that a Person is holding a long position that exceeds the speculative limits and is relying on the bona fide hedging transaction exemption the long must; a. be actively bidding to source cash grain in the cash market at its locations registered as regular for delivery, at futures price equivalent, in a manner acceptable to the Regulatory Division. Futures price equivalent means the futures price with the applicable regional premiums or discounts. Further, long position-holders are permitted to include a reasonable, limited amount of elevation and handling costs in the futures equivalent bids. It is expected this amount will be approximately $10/tonne; however, longs may provide information to the Regulatory Division to support a different elevation/handling figure. The determination of whether such costs are reasonable and permitted will be solely that of the Regulatory Division. Bids may be for any shipment period between first notice day of the spot month and last trading day of the next-nearest delivery month, provided the shipment period reflects the timing of the long's cash requirements. If bids are for months other than the delivery month, an Annex 12.C, breaking down purchases and sales by month, shall be submitted. Bids on a non-spot basis must include a premium for storage, at posted Exchange storage rates; and b. bid elsewhere in the ICE Futures Canada delivery regions, or at port or terminal locations in Western Canada, at futures-equivalent values in such a manner as to evidence indifference between taking delivery through the futures market or through the cash Page 8 of 10

9 market on the same terms. Bids at other locations in the ICE Futures Canada delivery regions must be FOB elevator at futures-price equivalent. Bids at port must be on a Track basis, incorporating the average single-car freight rate from the Par region. The long position-holder must be able to provide proof of their bidding, via broker instructions or similar written evidence. The long position-holder must also be able to provide an explanation, satisfactory to the Regulatory Division, as to the sufficiency of its pricing and the scope of its cash market bids; and c. provide, no later than 12:00 noon each day of spot month, an Annex 12.C Futures and Cash Positions by Hedgers Report ( Annex 12.C ). Futures positions in excess of the new hedge levels as reflected on the revised Annex 12.C must be liquidated by the close of business on the day in question; and d. provide the Regulatory Division with evidence to support its claim to the exemption. Upon request by the Regulatory Division, the long must provide detailed information regarding its cash inventories, purchases, and sales. The sales information may be required to include: the contract number, the purchaser s name, the number of tonnes outstanding, the delivery period, and the price (if unpriced contracts, provide that detail). The detailed position statement information must be provided no later than the day after the request is made. The Regulatory Division may, at any time, request additional information or backup supporting documentation, and it is the obligation of the long to have that information available to the Regulatory Division within one day; and e. include only those contractual obligations up to the next futures delivery month in its calculation for an exemption based on the bona fide hedge transaction exemption; and Example: For January canola futures contract. Contractual obligations for months of January, February and March may be included. Any obligations past late March cannot be applied to the calculation for the January futures contract. f. show a net short cash position on its Annex 12.C report equal to or greater than its futures positions that exceed the spec limit. Amended by the Special Regulatory Committee June 3, 2015; effective Trade Date July 17, 2015 [5. a., b., c., d., e., and f.] [5. First para]. 6. Obligations of a Short Position Holder Relying on the Bona Fide Hedge Transaction Exemption In the event that a Person is holding a short position that exceeds the spec limit and it is relying on the bona fide hedging transactions exemption the Person must; a. meet the criteria under Exchange Rules to issue Warrants, or otherwise make delivery, in an amount equal to or greater than the tonnage represented by the position exceeding the speculative position limit; b. upon request, provide the Regulatory Division with evidence to support its claim to an exemption under the bona fide hedge transactions provision. If the request is made, the short shall provide detailed information commencing on or before the first day of spot month, regarding its cash inventories, purchases, and sales. The information provided may be required to include a summary of all contractual obligations with the following details: the contract number, the seller s name, the number of tonnes required to be purchased, the applicable delivery period and the price (if priced, if unpriced, please Page 9 of 10

10 advise). This information must be provided no later than the day after it is requested. The Regulatory Division may, at any time, request additional information or backup supporting documentation and it is the obligation of the short to have that information available to the Regulatory Division within one day. c. show a sufficient net long cash position on its Annex 12.C report to support the amount of its position that exceeds the spec limit. Amended by the Special Regulatory Committee June 3, 2015; effective Trade Date July 17, 2015 [6. b., and c.]. Amended by the Board October 25, 2017; effective Trade Date October 26, 2017 [6. c. - removal of reference to Annex 14.D, 15.D, 16.D and 17.D]. 7. Position Holder Standing Long to Offset Warrant Obligations In the event a Person is standing for delivery in order to offset its outstanding warrant obligations, it must be bidding for outstanding Delivery Certificates at futures price (up to the level at which the position held no longer exceeds the Speculative Position limits). The bidding must be proactive and, upon request by the Regulatory Division, the information provided must include names, contact information and the level of the bid. If the bidding is done through a cash broker, the Person is required, in the one-week period prior to the first day of spot month to provide proof to the Regulatory Division of the instructions given to the cash broker. The Person must also provide the name, phone, fax and of the cash broker and have instructed the cash broker to respond to any enquiries by the Regulatory Division. If the Person purchases the Delivery Certificates and is no longer eligible for the exemption, it must liquidate its futures position in an expeditious manner, acceptable to the Regulatory Division. 8. Obligation on all Participants to Provide Information All Persons are reminded of their obligations to provide information as and when requested by staff of the Regulatory Division. Failure to do so will result in disciplinary action. Amended by the Special Regulatory Committee June 3, 2015; effective Trade Date July 17, 2015 [previous 8. deleted; 9. re-numbered as 8.] Page 10 of 10