Release: 5581-08

For Release: December 11, 2008

CFTC Seeks Public Comment on Proposed Rules to Expand Regulatory Authority Over Exempt Commercial Markets

Washington, DC – The Commodity Futures Trading Commission requests public comment on rules and rule amendments that increase the oversight of Exempt Commercial Markets (ECMs) as directed by the CFTC Reauthorization Act of 2008. ECMs are lesser-regulated electronic trading facilities that allow institutional participants to trade exempt over-the-counter commodities such as energy swaps.

“The proposed rules provide the Commission with a clear window and robust tools to oversee these exempt commodity swap markets, allowing the Commission to better protect the integrity of the price discovery function of regulated futures exchanges,” said CFTC Acting Chairman Walt Lukken. “Oversight of ECMs was the first policy initiative I pursued after becoming Acting Chairman in June 2007 and these proposed rules are a culmination of the hard work of many here at the Commission and in Congress over the last 18 months.”

The proposed rules implement provisions of the CFTC Reauthorization Act of 2008, which passed Congress earlier this year as part of the Farm Bill and adopted the Commission’s recommendations to expand the CFTC’s regulatory authority over ECMs.

On September 18, 2007, the Commission held a hearing to examine the oversight of trading on regulated futures exchanges and ECMs. Based upon the evidence and testimony presented, the Commission unanimously found that when an ECM contract begins to serve a significant price discovery function for a commodity in interstate commerce, the contract warrants increased oversight to deter and prevent price manipulation or other disruptions to market integrity. In October 2007, the Commission provided a report to Congress recommending legislative changes to provide the Commission with additional regulatory authority over ECM contracts that serve a significant price discovery function.

The CFTC Reauthorization Act of 2008 significantly expands the CFTC’s regulatory authority over ECMs by creating a new regulatory category—ECMs with significant price discovery contracts (SPDCs)—and subjecting these electronic trading facilities to additional regulatory and reporting requirements.

The proposed rules would revise the information-submission requirements applicable to ECMs; establish procedures and standards by which the CFTC will determine that an ECM contract performs a significant price discovery function; provide guidance with respect to compliance with the nine core principles for ECMs with SPDCs; and amend existing regulations applicable to registered entities in order to clarify that such regulations are now applicable to ECMs with SPDCs.

The proposed rules will be published in the Federal Register on December 12, 2008. Comments should be received on or before February 10, 2009.

Comments may be submitted electronically to All comments will be posted on the CFTC’s website.

Media Contact
R. David Gary

Last Updated: December 11, 2008