CFTC Agriculture Advisory Sub-Committee Adopts Recommendations on Oversight of Open Interest Futures Contracts – Finance and Banking

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United States: CFTC Agriculture Advisory Sub-Committee Adopts Recommendations on Oversight of Open Interest Futures Contracts

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A CFTC Agriculture Advisory Sub-Committee (the “Sub-Committee”) made recommendations to the Agriculture Advisory Committee (“AAC”) on “Effective and Efficient Monitoring of Futures Contract Changes. farming with open interest ”.

In its report, the Sub-Committee discussed improvements to the current procedures for monitoring changes to open interest contracts. The Sub-Committee found that effective oversight cannot avoid the trade-off between the need to make the necessary changes to contracts and the fact that such changes will result in transfers of value. The subcommittee, however, found that it is possible for the CFTC to play a critical role in the contract amendment process by “facilitating the flow of information and maintaining channels of public engagement and dialogue. [which
would] respond to the stated desire of market players to inform and be informed of the contract amendment process. “

The Sub-Committee recommended that the CFTC:

  • providing the public with improved information on (i) contracts that are subject to CFTC approval processes and (ii) the results of past rule changes;
  • create a strengthened system, for public comments on submitted changes, which allows all market players to comment;
  • improve risk information to clarify the possibility of changes to open interest contracts;
  • focus on changes to the contract that are more likely to have a significant impact on the value of the contract; and
  • modify staff policy and guidelines to reflect current market conditions and contract specifications.

The subcommittee’s vote to adopt the recommendations was unanimous.

In remarks made at the CFTC’s AAC meeting on June 9, 2021, Commissioner Dawn Stump praised the subcommittee’s efforts to come up with “a consensus approach to manage open interests when amending contracts from agricultural products “.

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