The Commodity Futures Trading Commission held a roundtable on April 3 to discuss outstanding issues and confusion about rulemaking surrounding the end-user exemption to the Dodd-Frank Act’s swap clearing requirements.
Commissioner Scott O’Malia said, “The Commission has failed to follow the express direction of Congress in promulgating its rules. As a result, end-users are getting caught up in the Commission’s rules or are spending too much time and resources to get the necessary reassurance from the Commission.”
The roundtable addressed three topics: 1) Commission regulation 1.35 concerning record keeping, 2) forward contracts with embedded volumetric optionality, and 3) the special entity de minimis threshold for swap dealing to government-owned electric utilities. Commissioner O’Malia said, “These three topics are good examples of how the Commission has failed to consider the impact of its rules on end-users.”
The Commission issued revised temporary relief on the third of these points in March, in which it excluded utilities’ operations-related swaps from the calculation of the $25 million de minimis threshold. Utilities would have been hard pressed to adequately hedge their operations otherwise, the CFTC staff said.
Acting Chairman Mark Wetjen said he would circulate Notice of Proposed Rulemaking that would amend the de minimis exception to address this issue permanently.