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External Meetings: Definitions Meeting with BP

1/27/2011 1:00 PM
II. Definitions

XXI. Joint Rules w/ SEC

CFTC Staff:
Julian Hammar

Lee Ann Duffy

Mark Fajfar

David Aron

Steve Kane

Somi Seong

Nela Richardson
Andy P. Milnes (BP)

Vincent B. Johnson (BP)
  • BP explained that it can be difficult to separate its activities as an end user of swaps from its activities that may potentially constitute dealing in swaps.  As an end user, BP uses swaps to fix prices of its forward sales and purchases of oil, gasoline, diesel fuel and aircraft fuel.  Its use of swaps is part of an overall risk management program.~On the other hand, BP is approached by end users of swaps who are seeking to fix the prices of their forward sales and purchases.  In this respect, BP assists other parties in managing their risks.  BP engages in both of these activities in the same legal entity.~As for its swaps with end users, some are closely tied to (and may even be set out in the same document as) a particular sale or purchase of petroleum products, while other swaps are structured to provide for fixed prices over a long term.  BP frequently submits swaps for clearing.~BP is concerned that if it were a swap dealer, the applicable documentation and business conduct requirements would be a hindrance to BP’s customers in their use of swaps.  BP believes that many of the proposed requirements for swap dealers have not typically applied in the past to swaps related to petroleum products.  Since the requirements are unfamiliar to participants in the petroleum markets, there would be resistance to application of those requirements.  ~BP is also concerned that the proposed de minimis exception from the swap dealer definition does not set out a threshold that can be clearly applied in the petroleum markets.

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