[Federal Register Volume 75, Number 187 (Tuesday, September 28, 2010)]
[Proposed Rules]
[Pages 59666-59670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24198]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 35
Agricultural Swaps
AGENCY: Commodity Futures Trading Commission.
ACTION: Advanced notice of proposed rulemaking and request for comment.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is charged with proposing rules to implement new statutory
provisions enacted by Title VII of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (``Dodd-Frank Act''). Section 723(c)(3) of
the Dodd-Frank Act provides that swaps in an ``agricultural commodity''
(as defined by the Commission) are prohibited unless entered into
pursuant to a rule, regulation or order of the Commission adopted
pursuant to section 4(c) of the Commodity Exchange Act (``CEA'' or
``Act''). This advance notice of proposed rulemaking (``ANPRM'')
requests comment on the appropriate conditions, restrictions or
protections to be included in any such rule, regulation or order
governing the trading of agricultural swaps.
DATES: Comments must be received on or before October 28, 2010. The
Commission is not inclined to grant extensions of this comment period.
ADDRESSES: You may submit comments, identified with ``Agricultural
Swaps ANPRM'' in the subject line, by any of the following methods:
E-mail for comments: [email protected].
Mail: David A. Stawick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
All comments must be submitted in English, or if not, accompanied
by an English translation. All comments provided in any electronic form
or on paper will be published on the CFTC Web site, without review and
without removal of personally identifying information. All comments are
subject to the CFTC privacy policy.
FOR FURTHER INFORMATION CONTACT: Donald Heitman, Senior Special
Counsel, (202) 418-5041, [email protected], or Ryne Miller, Attorney
Advisor, (202) 418-5921, [email protected], Division of Market
Oversight, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act.\1\ Title VII of the Dodd-Frank Act
\2\ amended the CEA\3\ to establish a comprehensive new regulatory
framework for swaps and security-based
[[Page 59667]]
swaps. The legislation was enacted to reduce risk, increase
transparency, and promote market integrity within the financial system
by, among other things: (1) Providing for the registration and
comprehensive regulation of swap dealers and major swap participants;
(2) imposing clearing and trade execution requirements on standardized
derivative products; (3) creating robust recordkeeping and real-time
reporting regimes; and (4) enhancing the Commission's rulemaking and
enforcement authorities with respect to, among others, all registered
entities and intermediaries subject to the Commission's oversight.
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\1\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
\2\ Pursuant to Sec. 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\3\ 7 U.S.C. 1 et seq.
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Section 723(c)(3) of the Dodd-Frank Act provides that swaps in an
``agricultural commodity'' (as defined by the Commission) are
prohibited unless entered into pursuant to a rule, regulation or order
of the Commission adopted pursuant to Sec. 4(c) of the Commodity
Exchange Act. This ANPRM reviews the current statutory and regulatory
framework governing agricultural swaps, as well as the Dodd-Frank Act
provisions applicable to agricultural swaps. The ANPRM then requests
comment on the appropriate conditions, restrictions or protections to
be included in any Commission rule, regulation or order governing the
trading of agricultural swaps.
A. Current Statutory Framework for OTC Agricultural Swaps, Including
Options Swaps
Since 2000, bilateral over-the-counter (``OTC'') swaps \4\ between
certain sophisticated counterparties have been generally exempted from
the Commission's jurisdiction pursuant to current CEA Sec. 2(g),\5\
which was added to the CEA by the Commodity Futures Modernization Act
of 2000 (``CFMA'').\6\ However, current Sec. 2(g) specifically
excludes an ``agreement, contract, or transaction'' in an
``agricultural commodity'' from the CFMA swaps exemption.
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\4\ Prior to the Dodd-Frank Act, the Commission had defined a
``swap'' as follows: ``A swap is a privately negotiated exchange of
one asset or cash flow for another asset or cash flow. In a
commodity swap [including an agricultural swap], at least one of the
assets or cash flows is related to the price of one or more
commodities.'' (See 72 FR 66099, note 7 (November 27, 2007)). See
new CEA Sec. 1a(47) for the statutory definition of a ``swap,'' as
added to the CEA by Sec. 721 of the Dodd-Frank Act.
\5\ Current Sec. 2(g) provides:
Excluded swap transactions.
No provision of this chapter (other than section 5a (to the
extent provided in section 5a(g)), 5b, 5d, or 12(e)(2)) shall apply
to or govern any agreement, contract, or transaction in a commodity
other than an agricultural commodity if the agreement, contract, or
transaction is--
(1) Entered into only between persons that are eligible contract
participants at the time they enter into the agreement, contract, or
transaction;
(2) subject to individual negotiation by the parties; and
(3) not executed or traded on a trading facility.
CEA Sec. 2(g), 7 U.S.C. 2(g).
\6\ Current CEA Sec. 2(g) was added to the CEA as Sec. 105(b)
of the CFMA, enacted as Appendix E to PL 106-554.
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While the term ``agricultural commodity'' is not specifically
defined in the Act, it is used in the Act in conjunction with the
definition of the term ``exempt commodity,'' which is defined as
neither an ``agricultural commodity'' nor an ``excluded commodity.''
\7\ There is limited legislative history regarding the CFMA to explain
Congress' intent in excluding ``agricultural commodities'' from the
Sec. 2(g) swaps exemption.\8\ However, the legislative history of H.R.
4541, the predecessor to the CFMA (H.R. 5660),\9\ which included the
same basic structure of excluded and exempt commodities, indicates that
Congress did not intend that the term ``agricultural commodity'' be
limited to those commodities enumerated in the definition of the term
``commodity'' in current CEA Sec. 1a(4).\10\ The House Committee on
Agriculture stated the following:
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\7\ ``The term `exempt commodity' means a commodity that is not
an excluded commodity or an agricultural commodity.'' Current CEA
Sec. 1a(14). An ``excluded commodity'' is defined in current CEA
Sec. 1a(13) to include financial commodities such as interest
rates, currencies, economic indexes, and other similar items. As
noted above, of the three operative terms, only ``agricultural
commodity'' is not defined.
\8\ H.R. 5660, the final version of the CFMA, which was enacted
into law as an appendix to Public Law No. 106-554, the Consolidated
Appropriations Act, 2001, was not accompanied by congressional
committee reports.
\9\ H.R. 4541, also titled the Commodity Futures Modernization
Act of 2000, was reported by all three committees of jurisdiction
(Agriculture, Commerce, and Banking and Financial Services) in the
House of Representatives and was passed by the House on October 19,
2000 by a vote of 377 yeas to 4 nays. On December 14, 2000, H.R.
5660 was introduced and contained major provisions of the House-
passed version of H.R. 4541.
\10\ Current CEA Sec. 1a(4) defines the term ``commodity'' to
include wheat, cotton, rice, corn, oats, barley, rye, flaxseed,
grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish
potatoes), wool, wool tops, fats and oils (including lard, tallow,
cottonseed oil, peanut oil, soybean oil, and all other fats and
oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal,
livestock, livestock products, and frozen concentrated orange juice,
and all other goods and articles, except onions as provided in
Public Law 85-839 (7 U.S.C. 13-1), and all services, rights, and
interests in which contracts for future delivery are presently or in
the future dealt in.'' 7 U.S.C. 1a(4). The agricultural commodities
specifically identified in current CEA Sec. 1a(4) are often
referred to as the ``enumerated'' agricultural commodities. The
Dodd-Frank Act redesignates current CEA Sec. 1a(4) as new CEA Sec.
1a(9).
The Committee notes that the term ``exempt commodity'' means a
commodity other than an ``excluded commodity'' or an ``agricultural
commodity.'' For purposes of this definition, the Committee intends
``agricultural commodity'' to include all agricultural commodities,
whether or not such agricultural commodities are specifically
enumerated in the definition of ``commodity'' in section 1a[4] of
the CEA.\11\
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\11\ H.R. Rep. No. 106-711, Part 1, at 33 (June 29, 2000).
Notably, the definition of exempt commodity did not change from H.R.
4541 to H.R. 5660, the final version of the CFMA as enacted into law.
The effect of excluding agricultural commodities from current CEA
Sec. 2(g) was that swaps involving exempt and excluded commodities
were allowed to transact largely outside of the Commission's
jurisdiction or oversight, while swaps involving agricultural
commodities, including both the enumerated agricultural commodities and
other non-enumerated agricultural commodities, remained subject to the
Commission's pre-CFMA swaps regulations as set forth in 17 CFR part
35.\12\
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\12\ Notably, current CEA Sec. 2(g) is not the only statutory
provision that excludes or exempts bilateral swaps between eligible
contract participants from the Commission's jurisdiction. Current
CEA Sec. 2(d)(1) excludes any such bilateral ``agreement, contract,
or transaction'' in excluded commodities from Commission
jurisdiction, while CEA Sec. 2(h)(1) creates a similar exemption
for a ``contract, agreement or transaction'' in exempt commodities.
The overlap between these two provisions and the swap exemption in
CEA Sec. 2(g) serves to reinforce Congress' clear intent to not
exclude agricultural swaps from the Commission's jurisdiction
through the CFMA.
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Options
The Dodd-Frank Act defines the term ``swap'' to include not only
the various types of swaps listed in the definition, including
commodity swaps and agricultural swaps, but also OTC options of any
kind.\13\ Commodity options are subject to the Commission's plenary
authority under CEA Sec. 4c(b).\14\ Based on Sec. 4c(b)'s general
prohibition of any option transactions contrary to any
[[Page 59668]]
Commission rule, regulation or order prohibiting options, or allowing
them under such conditions as the Commission may prescribe, the only
options currently authorized under the CEA are those specifically
provided for in the Commission's regulations.
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\13\ Exchange-traded futures and options on futures are
specifically excluded from the Dodd-Frank swaps definition. See new
CEA Sec. 1a(47)(B), as added to the CEA by Sec. 721 of the Dodd-
Frank Act.
\14\ Section 4c(b) provides:
Regulated option trading
No person shall offer to enter into, enter into or confirm the
execution of, any transaction involving any commodity regulated
under this Act which is of the character of, or is commonly known to
the trade as, an ``option'', ``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance guaranty'', or ``decline
guaranty'', contrary to any rule, regulation, or order of the
Commission prohibiting any such transaction or allowing any such
transaction under such terms and conditions as the Commission shall
prescribe. Any such order, rule, or regulation may be made only
after notice and opportunity for hearing, and the Commission may set
different terms and conditions for different markets. CEA Sec.
4c(b); 7 U.S.C. 6c(b).
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B. Current Regulatory Framework
Swaps
As mentioned previously, Part 35 of the Commission's regulations
provides a broad-based exemption for certain swap agreements. Adopted
by the Commission under its Sec. 4(c) exemptive authority in 1993,\15\
Part 35 allows for swaps to transact OTC if certain conditions are met:
(1) The swap agreements are entered into solely between eligible swap
participants; (2) the swap agreements are not part of a fungible class
of agreements that are standardized as to their material economic
terms; (3) the creditworthiness of any party having an actual or
potential obligation under the swap agreement must be a material
consideration in entering into or determining the terms of the swap
agreement, including pricing, cost, or credit enhancement terms; and
(4) the swap agreement is not entered into and traded on or through a
multilateral transaction execution facility.\16\
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\15\ See 58 FR 5587 (Jan. 22, 1993). Note that because Part 35
was implemented pursuant to a Sec. 4(c) exemption, agricultural
swaps that rely on Part 35 for their legal authority will continue
to be permitted under the Dodd-Frank language whereby existing
agricultural swaps provisions adopted pursuant to Sec. 4(c),
including Part 35, are grandfathered. This is discussed more fully
at section C, below.
\16\ See id. at 5590-5591; see also 17 C.F.R. Sec. 35.2(a)-(d).
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After the CFMA amendments to the CEA, which excluded swaps on
``exempt'' and ``excluded'' commodities from virtually all of the
Commission's jurisdiction, Part 35 remained relevant only for
agricultural swaps. With the exception of three outstanding Sec. 4(c)
exemptions related to cleared agricultural basis and calendar
swaps,\17\ Part 35 is the sole authority under which market
participants may transact agricultural swaps that are not options.
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\17\ Part 35, at Sec. 35.2(d), also provides that ``any person
may apply to the Commission for exemption from any of the provisions
of the Act (except 2(a)(1)(B) [liability of principal for act of
agent]) for other arrangements or facilities, on such terms and
conditions as the Commission deems appropriate, including but not
limited to, the applicability of other regulatory regimes.'' See 17
CFR 35.2(d). The Commission has granted three such exemptions, which
have in each instance been styled as Sec. 4(c) exemptive orders.
See:
Order: (1) Pursuant to Section 4(c) of the Commodity Exchange
Act (a) Permitting Eligible Swap Participants To Submit for Clearing
and ICE Clear U.S., Inc. and Futures Commission Merchants To Clear
Certain Over-The-Counter Agricultural Swaps and (b) Determining
Certain Floor Brokers and Traders To Be Eligible Swap Participants;
and (2) Pursuant to Section 4d of the Commodity Exchange Act,
Permitting Certain Customer Positions in the Foregoing Swaps and
Associated Property To Be Commingled With Other Property Held in
Segregated Accounts, 73 FR 77015 (Dec. 18, 2008);
Order (1) Pursuant to Section 4(c) of the Commodity Exchange
Act, Permitting the Chicago Mercantile Exchange to Clear Certain
Over-the-Counter Agricultural Swaps and (2) Pursuant to Section 4d
of the Commodity Exchange Act, Permitting Customer Positions in Such
Cleared-Only Contracts and Associated Funds To Be Commingled With
Other Positions and Funds Held in Customer Segregated Accounts, 74
FR 12316 (March 24, 2009); and
Order (1) Pursuant to Section 4(c) of the Commodity Exchange
Act, Permitting the Kansas City Board of Trade Clearing Corporation
To Clear Over-the-Counter Wheat Calendar Swaps and (2) Pursuant to
Section 4d of the Commodity Exchange Act, Permitting Customer
Positions in Such Cleared-Only Swaps and Associated Funds To Be
Commingled With Other Positions and Funds Held in Customer
Segregated Accounts, 75 FR 34983 (June 21, 2010).
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Options
As noted above, the Commission maintains plenary authority over
options pursuant to CEA Sec. 4c(b). It has used that authority to,
among other things, issue Part 32 of the Commission's regulations,
which includes a general ban on OTC options,\18\ but allows for OTC
option transactions under certain conditions. Part 32 allows OTC
options on agricultural commodities in two instances.\19\
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\18\ See Commission regulation 32.11, 17 CFR 32.11.
\19\ Note that Part 32 was not issued under the Commission's
Sec. 4(c) exemptive authority. After the effective date of the
Dodd-Frank Act, options on agricultural commodities will also fall
under the Dodd-Frank Act's provisions governing the trading of swaps
(and, specifically, agricultural swaps) since options on commodities
fall within the Act's definition of a swap. Accordingly, it is
important to identify what options on agricultural commodities are
currently being traded pursuant to part 32.
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Rule 32.13 establishes rules for trading OTC options on the
``enumerated'' agricultural commodities (``agricultural trade options''
or ``ATOs'') whereby ATOs may only be sold by an Agricultural Trade
Option Merchant (``ATOM''), who must first register with the Commission
as such pursuant to CFTC rule 3.13. Since its 1998 adoption and one
amendment in 1999,\20\ the ATOM registration scheme has attracted only
one registrant, which registrant has since withdrawn its ATOM
registration. Accordingly, ATOs currently may only be transacted
pursuant to an exemptive provision found at Sec. 32.13(g)(1). The
exemption at Sec. 32.13(g)(1) allows ATOs to be sold when: (1) The
option is offered to a commercial (``a producer, processor, or
commercial user of, or a merchant handling'' the underlying commodity);
(2) the commercial enters the transaction solely for purposes related
to its business as such; and (3) each party to the option contract has
a net worth of not less than $10 million.
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\20\ 63 FR 18821 (April 16, 1998); and 64 FR 68011 (December 6,
1999), respectively.
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In either case (whether transacted pursuant to the ATOM
registration scheme or accomplished via the exemption at Sec.
32.13(g)), the phrase ``agricultural trade option'' refers specifically
to an OTC option on an enumerated agricultural commodity.
In addition to the Sec. 32.13(g) ATO exemption, Part 32 includes,
at Sec. 32.4, a basic trade option exemption applicable to options on
commodities other than the enumerated agricultural commodities. The
terms of the Sec. 32.4 exemption are essentially the same as those of
the Sec. 32.13(g) exemption with one significant difference. Under
Sec. 32.4, the option must be offered to a producer, processor, or
commercial user of, or a merchant handling, the commodity, who enters
into the commodity option transaction solely for purposes related to
its business as such. However, Sec. 32.4 does not include any net
worth requirement.
Because the term ``agricultural commodity'' in the Act refers to
more than just the enumerated commodities, the Commission recognizes
that certain options authorized under Sec. 32.4 (e.g. options on
coffee, sugar, cocoa, and other agricultural products that do not
appear in the enumerated commodity list) would also fall under the
Dodd-Frank Act's general prohibition of agricultural swaps (see
discussion below of the Dodd-Frank rules for agricultural swaps and
their implication for the existing agricultural swaps markets,
including OTC options on agricultural commodities).
C. Dodd-Frank Provisions
Non-Agricultural Swaps
Under the CEA, as amended by the Dodd-Frank Act, only eligible
contract participants (``ECPs'') \21\ may enter into a swap, unless
such swap is entered into on a designated contract market
(``DCM''),\22\ in which case any person may enter into the swap.\23\
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\21\ ``Eligible contract participant'' is defined in current CEA
Sec. 1a(12). Generally speaking, an eligible contract participant
is considered to be a sophisticated investor.
\22\ A designated contract market is a board of trade designated
as a contract market under CEA Sec. 5.
\23\ See new CEA Sec. 2(e) as added by Sec. 723(a)(2) of the
Dodd-Frank Act.
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New CEA Sec. 2(h), as added by Sec. 723(a)(3) of the Dodd-Frank
Act, establishes a clearing requirement for
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swaps. Under that subsection, the Commission would determine, based on
factors listed in the statute, whether a swap, or a group, category,
type, or class of swaps, should be required to be cleared. A swap
entered into by a commercial end user \24\ is not subject to the
mandatory clearing requirement; however an end user may opt to submit
the swap for clearing. A swap that is required to be cleared must be
executed on a DCM or a swap execution facility (``SEF''),\25\ if a DCM
or SEF makes the swap available for trading. Swaps that are not
required to be cleared may be executed bilaterally OTC.
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\24\ Generally, a commercial end user is described in new CEA
Sec. 2(h)(7) as a non-financial entity that is using swaps to hedge
or mitigate commercial risk and that notifies the Commission as to
how it generally meets its financial obligations associated with
entering into non-cleared swaps.
\25\ The requirements for SEFs are set forth in new CEA Sec.
5h.
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Section 731 of the Dodd-Frank Act adds a new Sec. 4s to the CEA
that provides for the registration and regulation of swap dealers and
major swap participants.\26\ The new requirements for swap dealers and
major swap participants include, in part, capital and margin
requirements, business conduct standards, and reporting, recordkeeping,
and documentation requirements.
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\26\ ``Swap dealer'' is defined in new CEA Sec. 1a(49), as
added by Sec. 721(a)(21) of the Dodd-Frank Act. ``Major swap
participant'' is defined in new CEA Sec. 1a(33), as added by Sec.
721(a)(16) of the Dodd-Frank Act.
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Section 737 of the Dodd-Frank Act amends current CEA Sec. 4a
regarding position limits. Under the Dodd-Frank provisions, the
Commission must adopt position limits for futures, exchange-traded
options, and swaps that are economically equivalent to futures and
exchange-traded options within 180 days of the date of enactment of the
Dodd-Frank Act for exempt commodities and within 270 days of the date
of enactment of the Dodd-Frank Act for agricultural commodities.
Agricultural Swaps
Under Sec. 723(c)(3) of the Dodd-Frank Act, swaps in an
``agricultural commodity'' (as defined by the Commission) are
prohibited unless the swap is entered into pursuant to an exemption
granted under CEA Sec. 4(c). Generally speaking, Sec. 4(c) provides
that, in order to grant an exemption, the Commission must determine
that: (1) The exemption would be consistent with the public interest
and the purposes of the CEA; (2) any agreement, contract, or
transaction affected by the exemption would be entered into by
``appropriate persons'' as defined in Sec. 4(c); and (3) any
agreement, contract, or transaction affected by the exemption would not
have a material adverse effect on the ability of the Commission or any
contract market to discharge its regulatory or self-regulatory duties
under the CEA.
Section 723(c)(3) includes a ``grandfather'' clause that provides
that any rule, regulation, or order regarding agricultural swaps that
was issued pursuant to Sec. 4(c), and that was in effect on the date
of enactment of the Dodd-Frank Act, would continue to be permitted.
Such rules, regulations or orders would include Part 35 with respect to
agricultural swaps and the agricultural basis and calendar swaps noted
above, but would not include options entered into pursuant to Part 32.
D. Agricultural Commodities Definition
As noted above, Sec. 723(c)(3) of the Dodd-Frank Act applies to
any swap in an agricultural commodity ``as defined by the Commodity
Futures Trading Commission.'' The Commission plans to publish a
proposed definition of the term ``agricultural commodity'' in the near
future. That proposed definition will cover all such commodities that
are, or could in the future be, traded pursuant to a swap or futures
contract. However, for purposes of commenting on this ANPRM, commenters
may assume that ``agricultural commodity'' includes the following
commodities that are currently the subject of derivatives trading,
whether listed for trading on a futures exchange or traded bilaterally
OTC: (1) The enumerated commodities that are listed in current Sec.
1a(4) of the CEA (e.g., corn, wheat, soybeans, livestock, cotton); (2)
the international ``soft commodities'' (e.g., coffee, sugar, cocoa);
(3) lumber, plywood and similar wood-derived commodities; (4) contracts
based on underlying commodities listed in (1)-(3) (e.g., corn and wheat
basis swaps and calendar swaps); and (5) other commodities derived from
living organisms, including plant, animal or aquatic life, that are
used for human food, animal feed or fiber, and that currently are the
subject of derivatives trading. To the extent that any commenter is
aware of any agricultural commodity that is not currently the subject
of derivatives trading, but which they anticipate may be so traded in
the future, and which might be affected by potential rules governing
the trading of agricultural swaps, the Commission would welcome
comments regarding such commodity.
Part II--Questions for Comment
Section 723(c)(3) of the Dodd-Frank Act and CEA Sec. 4(c)
authorize the Commission to impose such terms and conditions as it
deems appropriate in order for a person to enter into or execute an
agricultural swap. The Commission is requesting input on the following
questions:
Current Agricultural Swaps Business
1. How big is the current agricultural swaps business--including
both agricultural swaps trading under current part 35 and ATOs under
Sec. Sec. 32.4 and 32.13(g) of the Commission's regulations?
2. What types of entities are participating in the current
agricultural swaps business?
3. Are agricultural swaps/ATO participants significantly different
than the types of entities participating in other physical commodity
swaps/trade options?
Agricultural Swaps Clearing
4. What percentage of existing agricultural swaps trading is
cleared vs. non-cleared?
5. What percentage of existing agricultural swaps would be eligible
for the commercial end-user exemption from the mandatory clearing
requirement?
6. What percentage of trading would be subject to the Dodd-Frank
clearing requirement, if that requirement applied automatically to
agricultural swaps (other than those eligible for the commercial end-
user exemption)?
7. What would be the practical and economic effect of a rule
requiring agricultural swaps transactions (other than those eligible
for the commercial end-user exemption) generally to be cleared? The
Commission is interested in the views of agricultural swaps market
participants (both users and swap dealers) regarding a potential
clearing requirement for agricultural swaps.
8. What would be the practical and economic effect of requiring
agricultural swaps to be cleared under the Dodd-Frank clearing regime?
Trading
9. Have current agricultural swaps/ATO participants experienced any
significant trading problems, including: (a) economic problems (i.e.,
contracts not providing an effective hedging mechanism, or otherwise
not performing as expected); (b) fraud or other types of abuse; or (c)
difficulty gaining access to the agricultural swaps market?
Agricultural Swaps Purchasers
10. Do agricultural swaps/ATO purchasers need more protections than
[[Page 59670]]
participants in other physical commodity swaps/trade options?
11. If so, why, and what should those protections be?
12. Would additional protections for agricultural swaps purchasers
unduly restrict their risk management opportunities?
13. Should the Commission consider rules to make it easier for
agricultural producers to participate in agricultural swaps--for
example, by allowing producers who do not qualify as ECPs to purchase
agricultural swaps?
Designated Contract Markets
14. Should agricultural swaps transactions be permitted to trade on
DCMs to the same extent as all other swaps are permitted on DCMs?
15. If yes, why?
16. If no, what other requirements, conditions or limitations
should apply?
Swap Execution Facilities
17. Should agricultural swaps transactions be permitted on SEFs to
the same extent as all other swaps are permitted to transact on SEFs?
18. If yes, why?
19. If no, what other requirements, conditions or limitations
should apply?
Trading Outside of DCMs and SEFs
20. Should agricultural swaps be permitted to trade outside of a
DCM or SEF to the same extent as all other swaps?
21. If yes, why?
22. If no, what other requirements, conditions or limitations
should apply?
23. Should agricultural swaps be permitted to trade outside of a
DCM or SEF to a different extent than other swaps due to the nature of
the products and/or participants in the agricultural swaps market?
24. In general, should agricultural swaps be treated like all other
physical commodity swaps under Dodd-Frank?
25. If yes, why?
26. If no, are there any additional requirements, conditions or
limitations not already discussed in other answers that should apply?
27. If agricultural swaps are generally treated like swaps in other
physical commodities, are there specific agricultural commodities that
would require special or different protections?
Issued in Washington, DC, on September 21, 2010, by the
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2010-24198 Filed 9-27-10; 8:45 am]
BILLING CODE 6351-01-P