Southern Cotton Association - Futures Contracts

Southern Cotton Association > Organization > Futures Contracts
Futures Contracts

FUTURES CONTRACTS
Adopted at the SCA 95th Annual Meeting
Chickasaw Country Club, Memphis, Tennessee – April 13, 2010

The Committee recommends the adoption of the following policy resolutions:

1. MERGER OF THE CFTC WITH THE SEC:

Urge that the U.S. Congress continue the CFTC as an independent regulatory agency with full authority over all forms of futures and options trading and that the CFTC not be merged with the SEC or other regulatory agency or federal department.

2. USER FEE ON FUTURES AND OPTIONS TRANSACTIONS:

We oppose the imposition of exchange service fees or transactional taxes to finance the operation of the Commodity Futures Trading Commission.

3. DEFINITION OF HEDGE:

Recommend that the Congress expand the definition of a hedge to include risks other than price, such as yield, in order to facilitate the development of contracts that will expand the risk management alternatives available to producers.

4. CERTIFICATION CLASSIFICATION

Recommend to AMS/USDA that the certification review classification become the class of record for those bales submitted for certification that are tenderable and those bales that are not tenderable revert to the prior class of record.

5. TAXATION OF COMMODITY FUTURES TRANSACTIONS:

That the Congress maintain the IRS Code Section 1256-tax treatment of commodity futures transactions.

6. RESTRICTIONS ON SPECULATIVE ACTIVITY OF INDEX FUNDS WITH

HEDGE EXEMPTIONS

Require that an index fund with a hedge exemption restrict its position in a commodity to the dollar allocation or the percentage of funds allocated to that commodity as defined in the fund’s prospectus and recorded with the CFTC. Further, any variation should be subject to speculative position limits, and that such funds should report their cash positions on a weekly basis.

7. REQUIRE FULL REPORTING & CFTC MONITORING OF ALL MARKET

PARTICIPANTS

Recommend that the CFTC monitor and oversee all swaps and OTC activity by requiring the reporting of all swap and OTC contracts by market participants, and that the CFTC determine the aggregation of positions from all sources, including the exchanges, ETFs, swaps, OTC, and all other trading entities.

8. SEPARATE REPORTING CATEGORIES FOR NON-TRADITIONAL

HEDGERS

Require that all non-traditional hedge accounts, those not involved in the commercial enterprise of physically trading bales of cotton, be reported as a separate individual category.

9. MARGIN FUTURES TO FUTURES & OPTIONS TO OPTIONS

SETTLEMENTS

Require that the ICE and its clearing members adhere to the practice of margining futures to futures settlements and options to option settlements.

10. HEDGE MARGIN LEVELS

That only those involved in the commercial enterprise of physically trading bales of cotton, shall be eligible for hedge margin levels.

11. STUDY IMPACT BEFORE INCREASING SPECULATIVE POSITION

LIMITS

Urge the CFTC to study the impact on price discovery and volatility, prior to any additional increases above current levels in speculative position limits in the single months or all months.

12. ICE NO. 2 CONTRACT:

We urge the ICE to consider the following:

· That increased margin requirements not be retroactive.

· That limits be established on the daily price movement in the Options Contract equal to the daily price limit in affect for the No. 2 Cotton Futures Contract.

· That Speculative Position Limits not be increased above the levels currently in effect unless approved by the Cotton Contract Specifications Committee.

· That ACSA oppose an increase in the speculative limits for the spot month pending study and review.

· That no additional delivery points be established or existing points deleted.

· That it not increase the number of deliverable grades.

· That it not adopt the practice of interior sampling for certification.

· That it continue to study the stickiness and sugar content of cotton and that it work with USDA and other organizations to develop a reliable, accurate, and cost effective test that is compatible with existing cotton tests that measure the quality characteristics of cotton.

· Recommend that the ICE study the impact of the PBI system on the certified stock.

· Recommend that strict standards for bale conditions be maintained and enforced.

· That manual class be utilized for leaf grade in determining tender eligibility.

· That the Warehouse Delivery Committee and/or its successor Committee review the penalties for delivery defaults to determine whether the penalties for non-compliance with the Delivery Rules are sufficient to discourage and deter contract defaults.

· That it maintain the delivery of certificated stocks via electronic warehouse receipts.

· Recommend that all certificated stocks show the state or area of growth and the original USDA class.

· Recommend that the trading positions of the commodity index funds continue to be reported as Non Commercial Speculative Accounts rather than Commercial Hedge Accounts in the weekly ICE spec/hedge report.

· Recommend that any changes in the rules, terms, procedures, or trading practices not be instituted without prior approval of the cotton committee.

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	Southern Cotton Association > Organization > Futures Contracts Futures Contracts FUTURES CONTRACTS Adopted at the SCA 95th Annual Meeting Chickasaw Country Club, Memphis, Tennessee – April 13, 2010 The Committee recommends the adoption of the following policy resolutions: 1. MERGER OF THE CFTC WITH THE SEC: Urge that the U.S. Congress continue the CFTC as an independent regulatory agency with full authority over all forms of futures and options trading and that the CFTC not be merged with the SEC or other regulatory agency or federal department. 2. USER FEE ON FUTURES AND OPTIONS TRANSACTIONS: We oppose the imposition of exchange service fees or transactional taxes to finance the operation of the Commodity Futures Trading Commission. 3. DEFINITION OF HEDGE: Recommend that the Congress expand the definition of a hedge to include risks other than price, such as yield, in order to facilitate the development of contracts that will expand the risk management alternatives available to producers. 4. CERTIFICATION CLASSIFICATION Recommend to AMS/USDA that the certification review classification become the class of record for those bales submitted for certification that are tenderable and those bales that are not tenderable revert to the prior class of record. 5. TAXATION OF COMMODITY FUTURES TRANSACTIONS: That the Congress maintain the IRS Code Section 1256-tax treatment of commodity futures transactions. 6. RESTRICTIONS ON SPECULATIVE ACTIVITY OF INDEX FUNDS WITH HEDGE EXEMPTIONS Require that an index fund with a hedge exemption restrict its position in a commodity to the dollar allocation or the percentage of funds allocated to that commodity as defined in the fund’s prospectus and recorded with the CFTC. Further, any variation should be subject to speculative position limits, and that such funds should report their cash positions on a weekly basis. 7. REQUIRE FULL REPORTING & CFTC MONITORING OF ALL MARKET PARTICIPANTS Recommend that the CFTC monitor and oversee all swaps and OTC activity by requiring the reporting of all swap and OTC contracts by market participants, and that the CFTC determine the aggregation of positions from all sources, including the exchanges, ETFs, swaps, OTC, and all other trading entities. 8. SEPARATE REPORTING CATEGORIES FOR NON-TRADITIONAL HEDGERS Require that all non-traditional hedge accounts, those not involved in the commercial enterprise of physically trading bales of cotton, be reported as a separate individual category. 9. MARGIN FUTURES TO FUTURES & OPTIONS TO OPTIONS SETTLEMENTS Require that the ICE and its clearing members adhere to the practice of margining futures to futures settlements and options to option settlements. 10. HEDGE MARGIN LEVELS That only those involved in the commercial enterprise of physically trading bales of cotton, shall be eligible for hedge margin levels. 11. STUDY IMPACT BEFORE INCREASING SPECULATIVE POSITION LIMITS Urge the CFTC to study the impact on price discovery and volatility, prior to any additional increases above current levels in speculative position limits in the single months or all months. 12. ICE NO. 2 CONTRACT: We urge the ICE to consider the following: · That increased margin requirements not be retroactive. · That limits be established on the daily price movement in the Options Contract equal to the daily price limit in affect for the No. 2 Cotton Futures Contract. · That Speculative Position Limits not be increased above the levels currently in effect unless approved by the Cotton Contract Specifications Committee. · That ACSA oppose an increase in the speculative limits for the spot month pending study and review. · That no additional delivery points be established or existing points deleted. · That it not increase the number of deliverable grades. · That it not adopt the practice of interior sampling for certification. · That it continue to study the stickiness and sugar content of cotton and that it work with USDA and other organizations to develop a reliable, accurate, and cost effective test that is compatible with existing cotton tests that measure the quality characteristics of cotton. · Recommend that the ICE study the impact of the PBI system on the certified stock. · Recommend that strict standards for bale conditions be maintained and enforced. · That manual class be utilized for leaf grade in determining tender eligibility. · That the Warehouse Delivery Committee and/or its successor Committee review the penalties for delivery defaults to determine whether the penalties for non-compliance with the Delivery Rules are sufficient to discourage and deter contract defaults. · That it maintain the delivery of certificated stocks via electronic warehouse receipts. · Recommend that all certificated stocks show the state or area of growth and the original USDA class. · Recommend that the trading positions of the commodity index funds continue to be reported as Non Commercial Speculative Accounts rather than Commercial Hedge Accounts in the weekly ICE spec/hedge report. · Recommend that any changes in the rules, terms, procedures, or trading practices not be instituted without prior approval of the cotton committee. *DOWNLOAD A COPY*
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