It's Official: ICE Sets Cotton Position Limit

Tyler Durden's picture

Earlier today we noted that the ICE was considering establishing size limits in [insert surging commodity here], in this particular case cotton. This has just been formalized as per the press release below, and explains why cotton is among the worst performing softs today. If gold continues refusing to play along with the script, look for the CME to do something comparable with gold and silver (for the third time) shortly. But never, and we repeat never, expect the Globex to do something crazy like hiking margin requirement on ES.... Ever.

From the ICE:

Market Regulation Advisory

Cotton No. 2® Notice Period Exemptions

Effective with the March 2011 Cotton No. 2® futures contract, ICE Futures U.S.®, Inc. (“Exchange”) will require Cotton market participants who expect to carry positions in excess of 300 contracts into the notice period to file an exemption request form with  the Market Surveillance Department. To be eligible for a notice period exemption under Exchange Rule 6.26 (Hedge Exemption), applicants must request a specific long or short position sufficient to cover the applicant’s bona fide hedging requirements for the contract month’s delivery month and the next succeeding calendar month.

Information must be provided to demonstrate that the requested position limit is economically appropriate to the reduction of risks arising from the potential change in the value of the assets owned by the applicant such as inventories and fixed price physical purchases or liabilities owed such as fixed price physical sales.

An exemption request must be approved by the Exchange in order for a market participant to carry a Cotton No. 2® futures  position in excess of the 300 contract spot month speculative position limit into the Notice Period.

Pursuant to Rule 6.26, exemption requests must be received by the Exchange no later than five (5) business days prior to the first notice day of the contract month. Thus, exemption requests for the March 2011 notice period should be submitted by February 14, 2011. Any exemptions granted will be for a specified contract month only and should not be viewed as relief from the responsibilities all traders have to transact their business in a manner consistent with an orderly market.