FR Doc 2010-26951[Federal Register: October 26, 2010 (Volume 75, Number 206)]
[Proposed Rules]
[Page 65586-65593]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26oc10-19]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
RIN 3038-AD23
Agricultural Commodity Definition
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
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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''). The Dodd-Frank Act,
which amends the Commodity Exchange Act (``CEA'' or ``Act''), includes
provisions applicable to ``a swap in an agricultural commodity (as
defined by the [CFTC]).'' Neither Congress nor the CFTC has previously
promulgated a definition of that term for purposes of the CEA or CFTC
regulations. This notice reviews the statutory and regulatory history
of the term ``agricultural commodity'' in the context of the CEA and
Commission regulations and proposes a definition of that term for
purposes of the CEA and Commission regulations.
DATES: Comments must be received on or before November 26, 2010. The
Commission is not inclined to grant extensions of this comment period.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD21,
by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail for Comments: [email protected]. Include the RIN
number 3038-AD21 in the subject line of the message.
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. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the established procedures in
CFTC Regulation 145.9.\1\
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\1\ 17 CFR 145.9.
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The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
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:
Part I--Background
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act.\2\ Title VII of the Dodd-Frank Act
\3\ amended the CEA \4\ to establish a comprehensive new regulatory
framework for swaps and security-based 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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\2\ 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.
\3\ Pursuant to Sec. 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\4\ 7 U.S.C. 1 et seq.
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The Dodd-Frank Act includes provisions applicable to ``a swap in an
agricultural commodity (as defined by the [CFTC]).'' Neither Congress
nor the CFTC has previously promulgated a definition of that term for
purposes of the CEA or CFTC regulations. This notice reviews the
statutory and regulatory history of the term ``agricultural commodity''
in the context of the CEA and Commission regulations and proposes a
definition of that term for purposes of the CEA and Commission
regulations.
A. Statutory Framework and History--``Agricultural Commodity''
1. The Commodity Exchange Act
In developing a proposed definition of ``agricultural commodity''
for purposes of the CEA and CFTC regulations, the Commission first
considered the historical development of federal commodities regulation
in the United States. Before 1974, the Commodity Exchange Act, 7 U.S.C.
1 et seq., gave the Commodity Exchange Authority \5\ jurisdiction over
only those commodities specifically enumerated in the Act. Starting
with the 1936 Act, the CEA applied to certain transactions in
commodities then being traded for future delivery on certain U.S.
futures exchanges, including wheat, cotton, rice, corn, oats, barley,
rye, flaxseed, grain sorghum, mill feeds, butter, eggs, and Solanum
tuberosum (Irish potatoes).\6\ As the exchanges regulated under the CEA
added futures contracts for additional commodities, all of which were
agricultural in nature, subsequent amendments to the Act added those
[[Page 65587]]
additional commodities to the Act's list of enumerated commodities.\7\
Thus, prior to 1974, the CEA provided authority exclusively for the
regulation of futures transactions in those commodities enumerated in
the statute, all of which were agricultural in nature.
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\5\ The Commodity Exchange Authority was an agency of the United
States Department of Agriculture and was established to administer
the CEA. For a detailed history of the evolution of the various
agencies charged with administering the CEA, see http://
www.archives.gov/research/guide-fed-records/groups/180.html. The
Commodity Exchange Authority was the predecessor of the CFTC.
\6\ See Act of June 15, 1936, Public Law 74-675, 49 Stat. 1491
(1936), which, among other things, set out the original list of
enumerated commodities and changed the name of the ``Grain Futures
Act'' to the ``Commodity Exchange Act.'' However, the CEA did not
apply to all commodity futures markets then in existence, such as
markets for coffee, cocoa, sugar, and metals.
\7\ Wool tops were added in 1938. Commodity Exchange Act
Amendment of 1938, Public Law 75-471, 52 Stat. 205 (1938). Fats and
oils, cottonseed meal, cottonseed, peanuts, soybeans and soybean
meal were added in 1940. Commodity Exchange Act Amendment of 1940,
Public Law No. 76-818, 54 Stat. 1059 (1940). Livestock, livestock
products, and frozen concentrated orange juice were added in 1968.
Commodity Exchange Act Amendment of 1968, Public Law 90-258, 82
Stat. 26 (1968) (livestock and livestock products); Act of July 23,
1968, Public Law 90-418, 82 Stat. 413 (1968) (frozen concentrated
orange juice). Trading in onion futures on United States exchanges
was prohibited in 1958. Commodity Exchange Act Amendment of 1958,
Public Law 85-839, 72 Stat. 1013 (1958).
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With the enactment of the Commodity Futures Trading Commission Act
of 1974 (``the 1974 Act''),\8\ Congress overhauled the CEA and created
the Commodity Futures Trading Commission, an independent regulatory
agency with powers greater than those of its predecessor agency, the
Commodity Exchange Authority. For the purposes of this Notice, the most
significant change was that, while the Commodity Exchange Authority
only regulated those commodities enumerated in the CEA, which were all
agricultural in nature, the 1974 Act granted the CFTC exclusive
jurisdiction over futures trading in all commodities traded for future
delivery, including not only the enumerated commodities, but also ``all
other goods and articles * * * and all services, rights, and interests
in which contracts for future delivery are presently or in the future
dealt in.'' \9\ For the first time, the CEA would apply to all U.S.
futures exchanges and to the full range of commodities that were or
could be traded for future delivery thereon, including many commodities
that did not fall under the enumerated agricultural category--for
example, coffee, sugar, cocoa, metals and energy products, as well as
interest rates, currencies, and other financial commodities.\10\
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\8\ See Commodity Futures Trading Commission Act of 1974, Public
Law 93-463, 88 Stat. 1389 (1974).
\9\ Except, of course, onions, which were excluded in 1958. See
cite in footnote 7, above.
\10\ See the pre-Dodd-Frank CEA definition of ``commodity,''
which had remained unchanged since the 1974 amendments: ``The term
``commodity'' means 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.''
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) and adds ``motion picture box
office receipts (or any index, measure, value or data related to
such receipts)'' as a second commodity which, along with onions, is
specifically excluded from the Act's definition of commodity.
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2. The Commodity Futures Modernization Act
In 2000, the Commodity Futures Modernization Act of 2000 (``CFMA'')
\11\added certain exemptions for swaps \12\ transactions to the CEA.
One exemption appears in current CEA Sec. 2(g).\13\ With the Sec.
2(g) swaps exemption, Congress for the first time made an explicit
distinction between agricultural commodities and other commodity
categories. The Sec. 2(g) exemption explicitly excluded any
``agreement, contract, or transaction'' in an ``agricultural
commodity.'' Instead of providing a definition for agricultural
commodity in this context, Congress used the term in conjunction with
the definition of exempt commodity--defined as neither an agricultural
commodity nor an excluded commodity.\14\ Excluded commodities were in
turn defined at current CEA Sec. 1a(13) to include financial
commodities such as interest rates, currencies, economic indexes, and
other similar items. Thus, of the three operative terms, only
agricultural commodity was not ascribed a formal definition.\15\
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\11\ The CFMA was enacted into law as Appendix E to Public Law
106-554, the Consolidated Appropriations Act, 2001 (2000).
\12\ 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.
\13\ Current Sec. 2(g) provides:
Excluded swap transactions
No provision of this Act (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. Sec. 2(g). Current CEA Sec. 2(g) was
added to the CEA by Sec. 105(b) of the CFMA, enacted as Appendix E
to Public Law 106-554.
\14\ ``The term `exempt commodity' means a commodity that is not
an excluded commodity or an agricultural commodity.'' Current CEA
Sec. 1a(14).
\15\ Another swap exemption was provided in current CEA Sec.
2(h), which affects transactions in exempt commodities. Current CEA
Sec. 2(h) was added to the CEA by Sec. 106 of the CFMA. Also,
current CEA Sec. 2(d) contains a swap exemption for transactions in
excluded commodities. Current CEA Sec. 2(d) was added to the CEA by
Sec. 103 of the CFMA.
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There is limited legislative history regarding the CFMA to explain
Congress' intent in excluding ``agricultural commodities'' from the
Sec. 2(g) swaps exemption.\16\ However, the legislative history of
H.R. 4541 (106th Congress), the predecessor to the CFMA (H.R.
5660),\17\ 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).\18\ The House Committee on Agriculture stated the
following:
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\16\ H.R. 5660, the final version of the CFMA, which was enacted
into law as an appendix to Public Law 106-554, the Consolidated
Appropriations Act, 2001, was not accompanied by congressional
committee reports.
\17\ 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.
\18\ See footnote 10 above.
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.\19\
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\19\ H.R. Rep. No. 106-711, Part 1, at 33 (June 29, 2000).
Notably, the definition of exempt commodity, and its interplay with
both agricultural and excluded commodities, did not change from H.R.
4541 to H.R. 5660, the final version of the CFMA as enacted into law.
3. The Dodd-Frank Act
The Dodd-Frank Act, when it becomes effective, will delete two
references to ``agricultural commodity'' that were added to the CEA by
the CFMA.\20\ First, the Dodd-Frank Act will
[[Page 65588]]
delete the current CEA Sec. 2(g) swaps exemption.\21\ Second, the
Dodd-Frank Act will eliminate a provision, found in current CEA Sec.
5a(b)(2)(F), that deals with the permissibility of trading agricultural
commodities on a derivatives transaction execution facility (``DTEF'').
The Dodd-Frank Act repeals current CEA Sec. 5a \22\ (which provides
for the registration and regulation of DTEFs).\23\
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\20\ Two other references to agricultural commodities that were
added to the CEA by the CFMA will remain in the CEA, but are not
relevant to defining an agricultural commodity. CEA Sec. 5c(c)
provides that a designated contract market must seek prior
Commission approval for any rule amendment that would make material
changes in any futures contract in an enumerated agricultural
commodity, if the rule amendment applies to contracts and delivery
months which have been listed for trading and have open interest.
CEA Sec. 4q requires the Commission to consider procedures to
encourage bona fide hedging on contract markets by domestic
agricultural producers.
Title IV of the CFMA included an additional reference to
``agricultural commodity'' that was not an amendment to the CEA. The
Legal Certainty for Bank Products Act, enacted as Title IV of the
CFMA, includes a definition of ``covered swap agreement'' that
incorporates a reference to ``a commodity other than an agricultural
commodity enumerated in section 1a(4).'' Section 725(g) of the Dodd-
Frank Act deletes all references to ``covered swap agreement,''
including the reference to agricultural commodities, from the Legal
Certainty for Bank Products Act.
\21\ See Sec. 723(a)(1)(A) of the Dodd-Frank Act. That
provision of the Dodd-Frank Act will also delete current CEA Sec.
2(h) regarding swaps in exempt commodities. Current CEA Sec. 2(h)
does not explicitly mention agricultural commodities but, as noted
above, exempt commodities are defined as those that are neither
agricultural nor excluded commodities.
\22\ See Sec. 734(a) of the Dodd-Frank Act.
\23\ In addition, CEA Sec. 5(e)(2), which was added to the CEA
by the CFMA, provides that the Commission, through notice and
comment rulemaking, may allow futures and options in agricultural
commodities to trade on DTEFs. Once the Dodd-Frank Act repeals the
authority for DTEFs, Sec. 5(e)(2) will no longer have any practical
effect.
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The Dodd-Frank Act also contains several new provisions relating to
agricultural commodities. Section 721(a)(21) of the Dodd-Frank Act adds
a new Sec. 1a(47) to the CEA that defines the term ``swap.'' As part
of the definition, clause (iii) of Sec. 1a(47)(A) provides that a swap
includes ``any agreement, contract, or transaction commonly known as *
* * an agricultural swap * * *.'' \24\ In addition, the Dodd-Frank
Act's definition of swap includes commodity options, other than
exchange-traded options on futures, thus requiring off-exchange options
on agricultural commodities to be regulated as swaps.\25\
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\24\ See new CEA Sec. 1a(47)(A)(iii)(XX) as added by Sec.
721(a)(21) of the Dodd-Frank Act.
\25\ See new CEA Sec. 1a(47)(A)(i) and new CEA Sec.
1a(47)(B)(i) as added by Sec. 721(a)(21) of the Dodd-Frank Act:
* * * SWAP.--
(A) IN GENERAL.--Except as provided in subparagraph (B), the
term `swap' means any agreement, contract, or transaction--
(i) That is * * * [an] option of any kind that is for the
purchase or sale * * * [of] commodities * * *.
(B) EXCLUSIONS.--The term `swap' does not include--
(i) any contract of sale of a commodity for future delivery (or
option on such a contract) * * *.
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Section 723(c)(3)(A) of the Dodd-Frank Act, which is a free-
standing provision that does not amend the CEA, contains a general rule
that, except as provided in Sec. 723(c)(3)(B), ``no person shall offer
to enter into, enter into, or confirm the execution of, any swap in an
agricultural commodity (as defined by the [CFTC]).'' Section
723(c)(3)(B) provides that a swap in an agricultural commodity may be
permitted pursuant to the Commission's exemptive authority under CEA
Sec. 4(c), ``or any rule, regulation, or order issued thereunder
(including any rule, regulation, or order in effect as of the date of
enactment of this Act) by the [CFTC] to allow swaps under such terms
and conditions as the Commission shall prescribe.''
Section 733 of the Dodd-Frank Act adds a new Sec. 5h to the CEA
that governs the registration and regulation of swap execution
facilities. New CEA Sec. 5h(b)(2) provides that a swap execution
facility ``may not list for trading or confirm the execution of any
swap in an agricultural commodity (as defined by the Commission) except
pursuant to a rule or regulation of the Commission allowing the swap
under such terms and conditions as the Commission shall prescribe.''
Section 737 of the Dodd-Frank Act amends CEA Sec. 4a to direct the
Commission to 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.
B. Regulatory Framework
1. ``Agricultural Commodity'' in Current Regulations
The term agricultural commodity appears in the Commission's
regulations in multiple places, the most relevant of which are the
rules for swaps and options.
a. Part 35 Swaps Exemption
Regarding the pre Dodd-Frank Act swaps rules, 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,\26\ Part 35 allows for swaps to transact
bilaterally if certain conditions are met.\27\ As mentioned above, the
CFMA swaps exemption, current CEA Sec. Sec. 2(d), 2(g) and 2(h),
provided an even broader exemption for excluded and exempt commodities
than that provided by Part 35. As a result, only swap transactions in
agricultural commodities still rely on the exemption found in Part 35.
With the exception of three outstanding Sec. 4(c) exemptions related
to cleared agricultural basis and calendar swaps,\28\ Part 35 is the
sole authority under which market participants may transact
agricultural swaps that are not options--until such
[[Page 65589]]
time as the Commission issues other or different rules and regulations
for agricultural swaps transactions.\29\
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\26\ 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 (See Dodd-Frank Sec.
723(c)(3)(B)).
\27\ The requirements are: (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. See id. at 5590-5591;
see also 17 CFR 35.2(a)-(d).
\28\ 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 from
Part 35, 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).
\29\ See Agricultural Swaps, Advance Notice of Proposed
Rulemaking and Request for Comment, 75 FR 59666 (September 28, 2010)
(the ``Agricultural Swaps ANPRM'').
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b. Part 32 and Options
The Commission maintains plenary authority over commodity 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 off-exchange options.\30\ However, Part 32 allows for
off-exchange option transactions under certain conditions, including
allowing off-exchange options on agricultural commodities in two
instances.\31\
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\30\ See Commission regulation 32.11, 17 CFR 32.11.
\31\ 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
will fall within the CEA'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 off-exchange 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,\32\ 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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\32\ 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 ATO exemption at Sec.
32.13(g)), the phrase ``agricultural trade option'' refers specifically
to an off-exchange 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. off-
exchange options on coffee, sugar, cocoa, and other agricultural
products that do not appear in the enumerated commodity list) will be
considered to be swaps in an agricultural commodity--and subject to any
Commission rules that specifically address agricultural swaps.
c. Other Regulations
The definition of agricultural commodity will also apply to any
other Commission regulation that references agricultural commodity and
is not specifically limited to the enumerated agricultural
commodities.\33\ However, the definition is not anticipated to have any
significant substantive impact outside of the Part 35 swaps rules, the
Part 32 options rules, and the position limit rulemaking that will
address agricultural commodities (see discussion in next section).
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\33\ For example, see current Commission regulation 150.5(e)(3)
(17 CFR 150.5(e)(3)), which applies to exchange-set speculative
position limits for, among other things, the ``international soft
agricultural products.'' Section 150.5 may be amended when the
Commission adopts position limits for agricultural commodities
pursuant to Sec. 737(a) of the Dodd-Frank Act.
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2. ``Agricultural Commodity'' in New CFTC Regulations
The definition of agricultural commodity will also be necessary in
order to provide context for certain rulemakings under the Dodd-Frank
Act. For example, if the Commission proceeds with an agricultural swaps
rulemaking, the definition will identify the scope of commodities that
will be subject to it.\34\ Any such rulemaking would provide rules and
regulations governing the trading of swaps in an agricultural
commodity. The definition will similarly provide a basis for the
Commission's planned rulemaking addressing speculative position limits
on agricultural commodities,\35\ and by reverse implication,
speculative position limits on exempt commodities (defined as a
commodity that is not an excluded commodity or an agricultural
commodity)--i.e., once a definition of agricultural commodity is
adopted, any commodity that does not fall within that definition, or
the definition of excluded commodity, will be considered an exempt
commodity.\36\
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\34\ See Sec. Sec. 723(c)(3) and 733 of the Dodd-Frank Act and
the Agricultural Swaps ANPRM.
\35\ See Sec. 737(a) of the Dodd-Frank Act.
\36\ Id.
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Similarly, defining an agricultural commodity could clarify those
swaps that are eligible for the exemptions in current CEA Sec. 2(g)
and 2(h) (which are not available to swaps in agricultural
commodities). As noted above, the Dodd-Frank Act provides for the
eventual repeal of current CEA Sec. 2(g) and Sec. 2(h). However, if
the definition of an agricultural commodity is made effective prior to
the repeal of those provisions, it would provide greater certainty as
to the proper scope of those provisions during the interim.
Part II--Explanation of the Definition
A. Terms of the Proposed Definition
This notice of proposed rulemaking proposes to add the following
definition to section 1.3, the Definitions section, of the Commission's
regulations:
As used in the Act and CFTC regulations, the term ``agricultural
commodity'' means:
(1) The following commodities specifically enumerated in the
definition of a ``commodity'' found in section 1a of the Act: 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, but not
onions;
(2) All other commodities that are, or once were, or are derived
from, living organisms, including plant, animal and aquatic life,
which are generally fungible, within their respective classes, and
are used primarily for human food, shelter, animal feed, or natural
fiber;
(3) Tobacco, products of horticulture, and such other
commodities used or consumed by animals or humans as the Commission
may by rule, regulation, or order designate after notice and
opportunity for hearing; and
(4) Commodity-based contracts based wholly or principally on a
single underlying agricultural commodity.
B. Explaining the Definition
Category One--Enumerated Agricultural Commodities
Category one includes the ``enumerated agricultural commodities''
[[Page 65590]]
specified in current Sec. 1a(4) of the Act (renumbered as Sec. 1a(9)
under the Dodd-Frank Act). While there is considerable overlap between
categories one and two, category one includes some commodities that
would not qualify under category two. For example, ``fats and oils''
would include plant-based oils, such as tung oil and linseed oil, which
are used solely for industrial purposes (and thus would not fall within
category two). Section 1a(4)'s reference to ``oils'' would not,
however, extend to petroleum products.\37\
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\37\ Petroleum products clearly would not fall within the
enumerated commodities. ``These itemized commodities are
agricultural in nature.'' Philip McBride Johnson, Commodities
Regulation, Sec. 1.01, p. 3 (1982). The Commission has never even
considered treating petroleum products as agricultural commodities.
Nor would petroleum products fall within the second category. Even
though they could be viewed as derived from living organisms--albeit
organisms that lived millions of years ago--such products would not
qualify under the ``used primarily for human food, shelter, animal
feed or natural fiber'' standard of category two.
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Category Two: Operative Definition of Agricultural Commodities
As a general matter, category 2 seeks to draw a line between
products derived from living organisms that are used for human food,
shelter, animal feed or natural fiber (covered by the definition) and
products that are produced through processing plant or animal-based
inputs to create products largely used as industrial inputs (outside
the definition). In that context, some of the terms used in describing
the second category require further clarification, particularly the
terms, ``generally fungible,'' ``used primarily,'' ``human food'' and
``natural fiber.''
``Generally fungible''--means substitutable or interchangeable
within general classes. For example, apples, coffee beans, and cheese
are generally fungible within general classes, even though there are
various grades and types, and so they would be agricultural
commodities. On the other hand, commodities that have been processed
and have taken on a unique identity would not be generally fungible.
Thus, while flax or mohair are generally fungible natural fibers, lace
and linen garments made from flax, or sweaters made from mohair, are
not generally fungible and would not be agricultural commodities under
category two.
``Used primarily''--means any amount of usage over 50%. If 50% of
the peaches harvested, plus one, are used for human food, then peaches
fall within category two.
``Human food''--includes drink. Thus fruit juice, wine and beer are
``food'' for purposes of the definition of ``agricultural commodity.''
``Natural fiber''--means any naturally occurring fiber that is
capable of being spun into a yarn or made into a fabric by bonding or
by interlacing in a variety of methods including weaving, knitting,
braiding, felting, twisting, or webbing, and which is the basic
structural element of textile products.
Based on the foregoing, therefore, category two would include such
products as: Fruits and fruit juices; vegetables and edible vegetable
products; edible products of enumerated commodities, such as wheat
flour and corn meal; poultry; milk and milk products, including cheese,
nonfat dry milk and dry whey; distiller's dried grain; eggs; cocoa
beans, cocoa butter and cocoa; coffee beans and ground coffee;
sugarcane, sugar beets, beet pulp (used as animal feed), raw sugar,
molasses and refined sugar; honey; beer and wine; shrimp; and silk,
flax and mohair.
Category two would also include stud lumber, plywood, strand board
and structural panels because they are derived from living organisms
(trees), are generally fungible (e.g., random length 2 x 4s and 4 x 8
standard sheets of plywood) and are used primarily for human shelter--
i.e., in the construction of dwellings. Category two would not,
however, include industrial inputs such as wood pulp, paper or
cardboard, nor would it include raw rubber, turpentine or rosin.
Although derived from living organisms--trees--and generally fungible,
none of these products are used primarily for human food, shelter,
animal feed or natural fibers. On the other hand, maple syrup and maple
sugar, also derived from trees, would be ``agricultural commodities.''
Rayon, which is a fiber derived from trees or other plants, falls out
of category two because it is not a natural fiber--i.e., it must be
chemically processed from cellulose before it becomes fiber.
Category two would include high fructose corn syrup, but not corn-
based products such as polylactic acid (a corn derivative used in
biodegradable packaging), butanol (a chemical derived from cornstarch
and used in plasticizers, resins, and brake fluid) or other plant-based
industrial products. Category two would include pure ethanol, which is
derived from living organisms (corn and other plants), is generally
fungible, and may be used for human food (as an ingredient of alcoholic
beverages). However, it would not include denatured ethanol, which is
used for fuel and for other industrial uses, because denatured ethanol
cannot be used for human food. Likewise, neither would Category 2
include other plant or animal based renewable fuels, such as methane or
biodiesel. Fertilizer and other agricultural chemicals, even though
they are used almost exclusively in agriculture, would not fall within
the definition because they would not fit into the food, shelter,
animal feed or natural fiber category.
Category Three--Other Agricultural Commodities
Category three would include commodities that do not readily fit
into the first two categories, but would nevertheless be widely
recognized as commodities of an agricultural nature. Such commodities
would include, for example, tobacco, products of horticulture (e.g.,
ornamental plants), and such other commodities used or consumed by
animals or humans as the Commission may by rule, regulation or order
designate after notice and opportunity for hearing. The Commission
would determine the status of any such other commodities for purposes
of the Act and CFTC regulations on a case-by-case basis as questions
arise in the context of specific markets or transactions.
Category Four--Commodity-Based Contracts
The term, ``agricultural commodity,'' also covers contracts that
are based wholly or principally on a single underlying agricultural
commodity. Such contracts do not necessarily involve the potential for
physical delivery of the underlying agricultural commodity--for example
basis swaps, calendar swaps or crop yield swaps. The commodity-based
contracts category would also include an index based wholly or
principally on a single underlying agricultural commodity. Thus, for
example, the Minneapolis Grain Exchange (``MGE'') wheat, corn and
soybean price index contracts \38\ would be considered agricultural
commodities. Also, any index made up of more than 50% of any single
agricultural commodity, since it is based principally on a single
underlying agricultural commodity, would be considered a commodity-
based contract for purposes of including it within the agricultural
commodity definition.
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\38\ The MGE agricultural index products are currently available
for corn, soybeans, and various types of wheat. These index products
are financially settled to a spot index of country origin pricing as
calculated by a firm called Data Transmission Network (``DTN'').
Cash settlement is based upon the simple average of the spot prices
published on the last three trading days of the settlement month.
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For purposes of the commodity-based contract category, the soybean
complex
[[Page 65591]]
would be considered a single commodity, so that an index based on the
prices of soybeans, soybean meal and soybean oil would be an
agricultural commodity under this provision. Likewise, for purposes of
this provision, wheat would be considered a single commodity, so that
an index based on the prices of Chicago Board of Trade (``CBT'') soft
red winter wheat, Kansas City Board of Trade (``KCBT'') hard red winter
wheat and MGE hard red spring wheat would be an agricultural commodity
under the commodity-based contract provision.
On the other hand, a contract based on an index of the prices of
multiple agricultural commodities would not be based wholly or
principally on a single agricultural commodity and would not fall
within the commodity-based contract category. Thus, for example, under
the commodity-based contract provision, a swap contract based on a
price index of equal parts wheat, corn and soybeans, or even a swap
based on a price index of 50% corn and 50% wheat, would not be based
wholly or principally on a single underlying agricultural commodity and
so would not fall within the agricultural commodity definition.
Therefore, such index-based swaps would not be subject to special rules
(if any) that might be adopted for agricultural commodity swaps.\39\
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\39\ See the Agricultural Swaps ANPRM.
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The definition of an ``excluded commodity'' in current CEA Sec.
1a(13)(iii) \40\ could be read to include any index of agricultural
commodities. That definition provides that ``excluded commodity''
means, among other things, ``any economic or commercial index based on
prices, rates, values, or levels that are not within the control of any
party to the relevant contract, agreement, or transaction.'' However,
such a reading would frustrate the requirement in Dodd-Frank that swaps
in agricultural commodities be permitted only pursuant to a Sec. 4(c)
order of the Commission. For example, a swap contract based on a price
index of solely wheat should reasonably be considered as a swap in
agricultural commodity. Applying a mechanical interpretation of the
definition of excluded commodity could permit ``gaming'' by allowing an
index based principally, or even overwhelmingly, on one agricultural
commodity to evade the limitations on trading agricultural swaps that
are found in the Dodd-Frank Act. For this reason, the definition
proposed herein would include an index based wholly or principally on a
single underlying agricultural commodity.
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\40\ New Sec. 1a(19)(iii) as renumbered under the Dodd-Frank
Act.
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Onions
Onions present a unique case in that onions are the only
agricultural product specifically excluded from the enumerated
commodities list in current Sec. 1a(4). Also, Public Law 85-839
prohibits the trading of onion futures on any board of trade in the
United States.\41\ Nothing in the definition proposed herein affects
the prohibition on onion futures trading.
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\41\ 7 U.S.C. 13-1.
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In defining an agricultural commodity, given the foregoing
statutory history, as well as the Act's grammatical construction, it
would appear that ``agricultural commodity'' is a subset of
``commodity'' and, since onions are excluded from the definition of
``commodity,'' onions cannot be considered an ``agricultural
commodity.'' However, under the Dodd-Frank Act, the definition of
``swap'' in new Sec. 1a(47) of the CEA is not limited to transactions
based upon ``commodities'' as defined in current Sec. 1a(4) of the
Act. Therefore, under the CEA as amended by Dodd-Frank, a swap may be
based upon an item that is not defined as a ``commodity.'' Thus, onion
swaps would seem to be permissible, but would not be considered to be
swaps in an ``agricultural commodity'' under the definition proposed
herein.
C. Effects of Applying the Definition
It is also important to consider the uses to which the definition
will be put--i.e., what would be the practical effect of a commodity
being classified as an ``agricultural commodity'' under the definition
proposed herein? One effect is that the commodity would be covered by
any rules the Commission ultimately adopts for agricultural swaps. If,
based on the comments received on the Agricultural Swaps ANPRM,\42\ it
is determined that agricultural swaps should be treated the same as
other physical commodity swaps, the definition will have no effect in
the agricultural swaps context.
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\42\ See Agricultural Swaps, Advance Notice of Proposed
Rulemaking and Request for Comment, 75 FR 59666 (September 28,
2010).
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The other significant effect of a commodity being classified as an
``agricultural commodity'' is that the commodity would be subject to
the speculative position limits for agricultural commodities,\43\
rather than the speculative limits for exempt commodities. Again, the
classification of a given commodity as ``agricultural'' vs. ``exempt''
should have no practical effect on the commodity or how it is traded in
the speculative limits context because: (1) The definition will only
apply to commodities that are the subject of actual swaps or futures
trading; and (2) the speculative limits for any such commodities will
be based not on any general across-the-board definition or principle,
but on the individual characteristics of each commodity, its swaps/
futures market and its underlying cash market.
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\43\ The Commission is required to adopt speculative position
limits for agricultural commodities within 270 days of the adoption
of the Dodd-Frank Act.
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Also, as noted above, during the interim period until Sec. Sec.
2(g) and 2(h) are repealed, any commodities falling within the new
``agricultural commodity'' definition could not legally be traded
pursuant to either section (although Part 35 would still be available
to commodities/contracts meeting its requirements).
Part III--Request for Comments Regarding the Proposed Definition
The Commission requests comments on any aspect of the agricultural
commodity definition proposed herein, and also on the following
specific questions:
(1) Are there any commodities that do not fit within the terms of
the definition proposed herein, but which nevertheless should be
considered to be ``agricultural commodities'' for purposes of the CEA
and Commission regulations? If so, why, and what undesirable effects,
if any, might result from omitting such commodities from the
definition?
(2) Are there any commodities that do fit within the terms of the
definition proposed herein, but which nevertheless should not be
considered to be ``agricultural commodities'' for purposes of the CEA
and Commission regulations? If so, why, and what undesirable effects,
if any, might result from including such commodities in the definition?
(3) Does the definition's proposed treatment of commodity-based
contracts, including index contracts, for purposes of the agricultural
commodity definition constitute an appropriate mechanism for
classifying such contracts? If not, what other treatment would be a
better alternative?
(4) Are biofuels, such as methane and biodiesel, appropriately
excluded from the agricultural commodity definition? If not, why should
such products be included in the definition and what undesirable
effects, if any, might result from omitting them from the definition?
(5) Under the proposed definition, lumber, plywood and other
products of
[[Page 65592]]
trees used in human shelter would fall within the agricultural
commodity definition, whereas products of trees used as industrial
inputs, such as wood pulp, paper, raw rubber and turpentine, would fall
outside the definition. Does this formulation draw an appropriate
dividing line between the products of trees that are covered by the
agricultural commodity definition and those that are not?
(6) As noted above, if the definition of an agricultural commodity
is made effective upon the publication of a final rule, it would
provide clarity as to what swaps are or are not eligible for the
exemptions found in current CEA Sec. Sec. 2(g) and 2(h) until the
point at which their repeal by the Dodd-Frank Act becomes effective. Is
there any reason not to make the definition of agricultural commodity
effective upon the publication of a final rule? Are there swaps
currently being transacted under Sec. 2(g) or Sec. 2(h) that would be
considered transactions in an agricultural commodity (and thus
potentially, temporarily illegal) under the definition proposed herein?
If so, should the effective date of the definition be postponed until
the repeal of current CEA Sec. Sec. 2(g) and 2(h), for all purposes
other than for the setting of speculative position limits, which will
become effective prior to the repeal?
Part IV--Related Matters
A. Paperwork Reduction Act
The proposed rule will not impose any new recordkeeping or
information collection requirements, or other collections of
information that require approval of the Office of Management and
Budget under the Paperwork Reduction Act.\44\ The Commission invites
public comment on the accuracy of its estimate that no additional
recordkeeping or information collection requirements or changes to
existing collection requirements would result from the rules proposed
herein.
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\44\ 44 U.S.C. 3501 et seq.
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B. Cost Benefit Analysis
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before issuing new regulations under
the Act. Section 15(a) does not require the Commission to quantify the
costs and benefits of new regulations or to determine whether the
benefits of adopted regulations outweigh their costs. Rather, section
15(a) requires the Commission to consider the costs and benefits of the
subject regulations in light of five broad areas of market and public
concern: (1) Protection of market participants and the public; (2)
efficiency, competitiveness, and financial integrity of the market for
listed derivatives; (3) price discovery; (4) sound risk management
practices; and (5) other public interest considerations. The Commission
may, in its discretion, give greater weight to any one of the five
enumerated areas of concern and may, in its discretion, determine that,
not withstanding its costs, a particular regulation is necessary or
appropriate to protect the public interest.
Defining an agricultural commodity for purposes of the CEA would
seem to have limited immediate practical effects. However, the
definition will be necessary for later substantive rulemakings, such as
setting speculative position limits for exempt and agricultural
commodities under Sec. 737 of the Dodd-Frank Act and determining the
permissibility of trading agricultural swaps under Sec. 723(c)(3) and
Sec. 733 of the Dodd-Frank Act. Accordingly, this analysis will focus
on the prospective costs/benefits of defining ``agricultural
commodity.''
As noted above, Sec. 737(a) of the Dodd-Frank Act amends CEA Sec.
4a(a) to direct the Commission to adopt speculative 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. Under CEA Sec. 4a(a)(3), the Commission in
setting position limits must balance the goals of: (1) Diminishing,
eliminating, or preventing excessive speculation; (2) deterring and
preventing market manipulation, squeezes, and corners; (3) ensuring
sufficient liquidity for bona fide hedgers; and (4) ensuring that the
price discovery function of the underlying market is not disrupted. If
speculative position limits for exempt and agricultural commodities are
set at an inappropriate level, it could have the consequence of not
achieving the optimum blend of these important goals and could be
detrimental to the competitiveness and financial integrity of these
markets.
As noted above, Sec. 723(c)(3) of the Dodd-Frank Act contains a
general rule that ``no person shall offer to enter into, or confirm the
execution of, any swap in an agricultural commodity (as defined by the
[CFTC]).'' Section 723(c)(3) contains an exception to that general rule
that provides that a swap in an agricultural commodity may be permitted
pursuant to the Commission's exemptive authority under CEA Sec. 4(c),
``or any rule, regulation, or order issued thereunder (including any
rule, regulation, or order in effect as of the date of enactment of
this Act) by the [CFTC] to allow swaps under such terms and conditions
as the Commission shall prescribe.''
Also as noted above, Sec. 733 of the Dodd-Frank Act adds a new
Sec. 5h to the CEA that governs the registration and regulation of
swap execution facilities. New CEA Sec. 5h(b)(2) provides that a swap
execution facility ``may not list for trading or confirm the execution
of any swap in an agricultural commodity (as defined by the Commission)
except pursuant to a rule or regulation of the Commission allowing the
swap under such terms and conditions as the Commission shall
prescribe.''
Both Sec. 723 and Sec. 733 require the Commission to define an
agricultural commodity if agricultural swaps (beyond those currently
allowed under CEA Sec. 4(c) exemptions) are to be traded. If the
Commission decides to promulgate a rule permitting additional types of
agricultural swaps to trade, such a rule could enhance price discovery
and improve risk management for the agricultural commodities involved.
The Commission invites public comments on its cost-benefit
considerations. Commenters also are invited to submit any data or other
information that they may have quantifying or qualifying the costs and
benefits of the proposal with their comment letters.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \45\ requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis respecting the
impact. The rules proposed by the Commission provide a definition that
will largely be used in future rulemakings and which, by itself,
imposes no significant new regulatory requirements. Accordingly, the
Chairman, on behalf of the Commission, hereby certifies pursuant to 5
U.S.C. 605(b) that the proposed rules will not have a significant
impact on a substantial number of small entities.
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\45\ 5 U.S.C. 601 et seq.
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List of Subjects in 17 CFR Part 1
Definitions, Agriculture, Agricultural commodity.
In consideration of the foregoing, and pursuant to the authority
contained in
[[Page 65593]]
the Commodity Exchange Act and, in particular, sections 2(a)(1), 5h,
and 8a thereof, 7 U.S.C. 2, 7b-3, and 12a, and pursuant to the
authority contained in section 723(c)(3) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376
(2010), the Commission hereby proposes to amend Chapter 1 of Title 17
of the Code of Federal Regulations as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
1. The authority citation for Part 1 is revised to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6a-6p, 7, 7a, 7b, 7b-3, 8, 9,
12, 12a, 12c, 13a, 13a-1, 16, 16a, 19, 21, 23 and 24, unless
otherwise noted.
2. Section 1.3 is amended by adding paragraph (zz) to read as
follows:
Sec. 1.3 Definitions.
* * * * *
(zz) Agricultural commodity. As used in the Act and CFTC
regulations, this term means:
(1) The following commodities specifically enumerated in the
definition of a ``commodity'' found in section 1a of the Act: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, but not onions;
(2) All other commodities that are, or once were, or are derived
from, living organisms, including plant, animal and aquatic life, which
are generally fungible, within their respective classes, and are used
primarily for human food, shelter, animal feed or natural fiber;
(3) Tobacco, products of horticulture, and such other commodities
used or consumed by animals or humans as the Commission may by rule,
regulation or order designate after notice and opportunity for hearing;
and
(4) Commodity-based contracts based wholly or principally on a
single underlying agricultural commodity.
Issued in Washington, DC, on October 19, 2010, by the
Commission.
David A. Stawick,
Secretary of the Commission.
Statement of Chairman Gary Gensler
Agriculture Commodity Definition
October 19, 2010
I support the proposal to publish for comment a definition of the term,
``agricultural commodity.'' This is necessary as the Dodd-Frank Act
includes two provisions that apply to swaps in an agricultural
commodity, as defined by the CFTC. First, the definition will be used
to fulfill the Dodd-Frank Act's requirement that swaps in an
``agricultural commodity'' be prohibited unless permitted under the
Commission's general exemptive authority. An Advance Notice of Proposed
Rulemaking seeking comment on the appropriate conditions, restrictions
or protections to be included in any rules governing agricultural swaps
is currently out for comment. Second, the Dodd-Frank Act directs the
Commission to adopt speculative position limits for ``agricultural
commodities'' within 270 days of the enactment of Dodd-Frank.
I believe the proposed agricultural commodity definition draws a good
line between agricultural and non-agricultural commodities, though I am
very interested to hear the public's views on this definition.
[FR Doc. 2010-26951 Filed 10-25-10; 8:45 am]
BILLING CODE P
Last Updated: October 26, 2010