Regulators and exchanges typically impose limits on the number of commodity positions any customer may maintain with the intent of controlling excessive speculation, deterring market manipulation, ensuring sufficient market liquidity for bona fide hedgers and to prevent disruptions to the price discovery function of the underlying market. These limits are intended as strict caps, with no one account or group of related accounts allowed to aggregate or maintain a position in excess of the stated limit. Outlined below is an overview of the various limit types, calculation considerations, enforcement and links for finding additional information.

I. POSITION LIMIT TYPES

Position limits generally fall into one of the following 4 categories:

1. All Months Limit - apply to the account holder's positions summed across all delivery months for a given contract (e.g. positions in CBOT Oat futures contract for the Mar, May, Jul, Sep and Dec delivery months combined).

2. Single Month Limit - apply to the account holder's positions in any given futures delivery month (e.g. positions in CBOT Oat futures contract for any of the Mar, May, Jul, Sep and Dec delivery months). Note that in certain instances, the limit may vary by delivery month.

3. Spot Month Limit - apply to the account holder's positions in the contract month currently in delivery. For example, the March contract month for a product having delivery months of March, June, September and December, while considered a nearby month at the start of the year, does not become a spot month contract for position limit purposes until the date it actually enters delivery. Most spot month limits become effective at the close of trading on the day prior to the First Notice Date (e.g., if the First Notice Date for a Dec contract is the last trading date of the prior month, then the spot month limit would apply as of the close of business on Nov 29th). In other instances, the limit goes into effect or tightens during the last 3-10 days of trading.

4. Expiration Month Limit - expiration month limits apply to the account holder's positions in the contract currently in its last month of trading.  Most expiration month limits become effective at the open of trading on the first business day of the last trading month.  If the contract ceases trading before delivery begins, then the expiration month may precede the delivery month. (e.g., if the last trade date for a Dec contract is Nov 30th, then the expiration month limit would apply as Nov 1st). In other instances, the limit goes into effect or tightens during the last 3-10 days of trading.

II. CALCULATION CONSIDERATIONS

- Position limits are determined by aggregating option and futures contracts. In the case of option contracts, the position is converted to an equivalent futures position based upon the delta calculations provided by the exchange.

- Positions in contracts with non-standard notional values (e.g. mini-sized contracts) are normalized prior to aggregation.

- Most limits are applied on a net position basis (long - short) although certain are applied on a gross position basis (long + short). For purposes of determining the net or gross position, long calls and short puts are considered equivalent to long futures positions (subject to the delta adjustment) and short calls and long puts equivalent to short futures positions.

- Limits are imposed on both an intra-day and end of day basis.

III. ENFORCING LIMITS

IB acts to prevent account holders from entering into transactions which would result in a position limit violation. This process includes monitoring account activity, sending a series of notifications intended to allow the account holder to self-manage exposure and placing trading restrictions upon accounts approaching a limit. Examples of notifications which are sent via email, TWS bulletin and Message Center are as follows:

1. Information Level - sent when the position exceeds 50% of the limit. Intended to inform as to the existence of the position limit and its level.

2. Warning Level - sent when the position exceeds 70% of the limit. Intended to provide advance warning that account will be subject to trading restrictions should exposure increase to 90%.

3. Restriction Level - sent when the position exceeds 90% of the limit. Provides notice that account is restricted to closing transactions until exposure has been reduced to 85%.

IV. ADDITIONAL INFORMATION

For additional information, including various exchange rules position limit thresholds by contract and limit type, please refer to the following website links:

CFE ( Rule 412) - http://cfe.cboe.com/publish/CFERuleBook/CFERuleBook.pdf

CME (Rule 559) - http://www.cmegroup.com/rulebook/CME/index.html

CME (CBOT Rule 559) - http://www.cmegroup.com/rulebook/CBOT/index.html

CME (NYMEX Rule 559) - http://www.cmegroup.com/rulebook/NYMEX/index.html

ELX Futures (Rule IV-11) - http://www.elxfutures.com/PDFs/Rulebooks/ELX-FUTURES-RULEBOOK.aspx

ICE US / NYBOT (Rules 6.26 to 6.28) - https://www.theice.com/publicdocs/rulebooks/futures_us/6_Regulatory.pdf

NYSE LIFFE (Rule 420) - http://www.nyseliffeus.com/rulebook

OneChicago (Rule 414) - http://www.onechicago.com/wp-content/uploads/rules/OneChicago_Current_Rulebook.pdf