CFTC offers end-user relief

Washington, DC — The Commodity Futures Trading Commission (Commission) Acting Chairman Mark Wetjen and Commissioner Scott O’Malia today announced three actions to benefit utility special entities, further consider certain hedging practices for commercial market participants, and promote end-user trading on swap execution facilities (SEFs) and designated contract markets (DCMs). 

Acting Chairman Mark Wetjen said, “I am pleased the Commission is acting to address the impact the special entity de minimis threshold is having on utility special entities and the markets in which they operate and to further consider the appropriate treatment of hedging practices in the marketplace today.” 

“I am equally pleased,” continued Acting Chairman Wetjen, “that the Divisions are acting to promote trading on SEFs and DCMs and give certain members of these important exchanges and platforms additional time to come into compliance with Regulation 1.35(a).

“These proposals collectively reflect our continuing efforts to ensure that market regulations accomplish their intended function without creating negative, unintended consequences, in particular for commercial end-users,” said Acting Chairman Wetjen.

”Today marks a significant victory for the end-user community and for the Commission’s rulemaking process.  End-users will win today, with the proposal fixing the Special Entity rule and further relief from rule 1.35, which applied unworkable and costly recording requirements.  The relief will remain effective until the Commission revisits the rule to appropriately tailor the rule’s requirements to the relevant entities and more carefully consider the costs and technological feasibility of compliance with the rule.  I am pleased that the Commission has chosen to confront the shortcomings in its rules by using the proper process that is consistent with the Administrative Procedure Act,” said Commissioner O’Malia.

CFTC Issues Proposal to Amend its Regulations for Entities Entering into Swaps with Utility Special Entities 

The Commission issued today a proposed rule amendment to adjust the de minimis threshold for determining if an entity that enters into swaps with utility special entities must register as a swap dealer.

The proposal would amend the Commission’s swap dealer definition to permit a person dealing in “utility operations-related swaps” with “utility special entities” to exclude those swaps in determining whether that person has exceeded the de minimis threshold specific to dealing with special entities.  Under the proposal, however, such swaps would be counted for determining whether the general dealing de minimis threshold applies.

The Commission is seeking comments from the public on the proposal.  The comment period will close 30 days after the proposal is published in the Federal Register.

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