Position limits

Position limits are rules set by regulators that restrict how much of a particular financial asset or derivative an individual or entity can hold at one time. These limits help prevent market manipulation, reduce systemic risk, and promote fair trading by ensuring no single trader or institution can dominate a market. For example, a limit might cap the number of futures contracts one person can hold on a specific commodity. By enforcing these boundaries, markets remain balanced and less vulnerable to extreme or manipulative actions.