Comment Text:
The following statement is in the Federal Register:
"The Commission is proposing to simultaneously establish position limits and limit formulas for certain physical commodity futures and option contracts executed pursuant to the rules of designated contract markets (‘‘DCM’’) and physical commodity swaps that are
economically equivalent to such DCM contracts."
It is interesting to note that twice it uses the term "Physical commodity." To that end it appears to me that any "Naked" contract, ie; one not covered by physical metal, would have a Position Limit of ZERO. Any paper contracts not backed by physical metal is against the intent, and integrity, of the CFTC, as well as the investing public.
Notice also that the Federal Register states, "SUMMARY: Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 (‘‘Dodd-Frank Act’’) requires the Commodity Futures Trading Commission (‘‘Commission’’ or ‘‘CFTC’’) to establish position limits for certain physical commodity derivatives." This is telling us that the will, and intent, of Congress is for "Physical commodities" only. No provision is made for "Naked" contracts of any kind. It seems to be totally absurd to allow a contract to be sold that has nothing to back it up. As you know, in law a contract requires three elements, 1. Something of value, 2. Consideration, and 3. A meeting of the minds of the parties that what is being contracted has a value equal to the consideration.
When a naked contract is sold there is nothing of value to base the contract on, and therefore cannot have a proper meeting of the minds. Paying consideration for a promise of only possible future return of the item contracted for is a false promise. If you ordered a meal and paid $10.00 for it, and 5 minutes later were told they didn't have what you ordered, but they would keep a commission and fees and only return $7.00 to you, you would be upset.
Position limits for Physical commodities should be limited to 1,500 contracts, and naked contracts should be ZERO. Anything outside of these limits opens the door to manipulation, which is contrary to the requirement of the CFTC to maintain honesty, integrity, and fairness in the markets.
