NASDAQ Futures, Inc. issued Frequently Asked Questions related to position limits and accountability levels. In general, position limits on NASDAQ Futures may not be violated at any time, including intraday. (Click here to access NASDAQ Futures Rules, Chapter V, Section 13(a).) Moreover, no futures participant (i.e., any person is who authorized to access the exchange’s electronic trading system directly) may “effect” a transaction for any other person that the participant “knows or has reason to believe would result in the Futures Participant, a Customer, or any other Person holding or controlling, separately or in combination” a net position in violation of a position limit. If a clearing member carries positions for a customer in excess of position limits, the exchange requires the FCM “to discover and to liquidate such excess positions” within one business day. NASDAQ Futures’s FAQ provides help on understanding so-called "Diminishing Balance Contracts” where the front month volume in any given contract month ratably diminishes as the contact month progresses towards expiration. As a result, a customer holding a position in a diminishing balance contract that appears to be in excess of a position limit may in fact not be in violation of the position limit because of the manner in which portions of the position are deemed to be eliminated day by day.
Compliance Weeds: Position limit rules are generally equivalent among US exchanges, but are not 100 percent identical. In general, exchange position limits apply to all traders whether members of an exchange or not. On some exchanges (e.g., CME Group and NASDAQ Futures), if a customer breaches a position limit, clearing members will not be deemed in violation of the exchange’s position limits proscriptions for a "reasonable time" (typically one business day) in order to permit a firm to discover and liquidate the violating position. However, on at least one exchange, ICE Futures U.S., clearing members are technically responsible for maintaining “their Customers’ positions within [position limits] on both an intraday and end-of-day basis” (click here to access IFUS Rule 6.13(a)). As a result, it is always important for traders to monitor for position limit compliance both intraday and as of end of day. It is also important for clearing brokers to monitor their customers’ position limit compliance at least as of end of day, and potentially for at least IFUS, intraday too. (Click here to access CME Group Rule 562 and here for CME MRAN RA1518-5R: Position Limits and Accountability Levels (November 19, 2015).) In general, violating an exchange’s position limit could be construed to constitute a violation of speculative position limits' requirements of the Commodity Futures Trading Commission.