Hedge Exemption

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Market participants who can demonstrate that their futures positions are bona fide hedging transactions can apply to the CFTC and the exchange on which they trade to receive an exemption from speculative position limits.

Bona fide hedging transactions are defined by the CFTC as transactions that normally represent a substitute for transactions to be made at a later time in a physical market and are economically appropriate to the reduction of risk in a commercial enterprise.[1]

For example, a grain elevator who owns grain it expects to sell in the future can hedge the risk that the price will decrease by selling futures.


  1. Speculative Position Limits and Hedge Fund Exemptions. CME Group.