CFTC commodity market moves take commercial end-users into account

CFTC commodity market moves take commercial end-users into account

Commissioners are not only signaling greater cooperation with the congressional intent of Dodd-Frank; they’re also cooperating with one another and with industry to get things done. Part of the collaborative mindset owes to the way new CFTC Chairman, Timothy Massad, has guided the business of the commission as he also works on the international scene to seek agreement on challenges involving OTC derivatives and the location of clearinghouses. The new era of cooperation could signify a big plus for the markets, in that it can help eliminate lingering questions and move regulatory matters in a direction that’s sensitive to the needs and the burdens of industry. And as the CFTC extends its cooperative approach directly toward industry, opportunities open up for more organizations to engage in discussions directly with commissioners. Of particular note are two recent proposals that the commission has addressed with a sympathetic ear toward commercial end-users in commodity markets.

Embedded volumetric optionality (EVO). The commission has opened the EVO contract question back up for industry comment. At issue are challenges involving flexibility or “right-sizing” when it comes to the delivery and quantities of commodities.

Record-keeping for commodity interest and related transactions. Recent CFTC action gives industry some flexibility when it comes to record-keeping for transactions and for transaction-related communications.

Under Massad, the commission appears to be emphasizing the need to stay on task and to stay engaged. There’s a growing sense among industry that commissioners want to get things right the first time, and that means listening to as many perspectives as possible and, when necessary, delaying decisions until sufficient industry comment has come in.

The impact of the cooperation should extend deep into the agriculture and energy markets, and to the areas where they overlap—such as corn and ethanol.  And even as the number of key players in some parts of the commodities world shrinks, there’s no shortage of participants who want to make their opinions known to the commission. The good news is that all commissioners appear to be open to speaking with industry, and Deloitte can offer market participants help when it comes to facilitating and preparing for such meetings—particularly in the development of proposed solutions to present to commissioners.

For more information on recent commission actions, visit the CFTC website.

Posted by Mike Prokop, Director, Deloitte & Touche LLP

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