FR Doc 2010-24198[Federal Register: September 28, 2010 (Volume 75, Number 187)]

[Proposed Rules]

[Page 59666-59670]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr28se10-19]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 35

Agricultural Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Advanced notice of proposed rulemaking and request for comment.

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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”). Section 723(c)(3) of

the Dodd-Frank Act provides that swaps in an “agricultural commodity”

(as defined by the Commission) are prohibited unless entered into

pursuant to a rule, regulation or order of the Commission adopted

pursuant to section 4(c) of the Commodity Exchange Act (“CEA” or

“Act”). This advance notice of proposed rulemaking (“ANPRM”)

requests comment on the appropriate conditions, restrictions or

protections to be included in any such rule, regulation or order

governing the trading of agricultural swaps.

DATES: Comments must be received on or before October 28, 2010. The

Commission is not inclined to grant extensions of this comment period.

ADDRESSES: You may submit comments, identified with “Agricultural

Swaps ANPRM” in the subject line, by any of the following methods:

E-mail for comments: [email protected].

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. All comments provided in any electronic form

or on paper will be published on the CFTC Web site, without review and

without removal of personally identifying information. All comments are

subject to the CFTC privacy policy.

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:

I. Background

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street

Reform and Consumer Protection Act.1 Title VII of the Dodd-Frank Act

2 amended the CEA3 to establish a comprehensive new regulatory

framework for swaps and security-based

[[Page 59667]]

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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1 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.

2 Pursuant to Sec. 701 of the Dodd-Frank Act, Title VII may

be cited as the “Wall Street Transparency and Accountability Act of

2010.”

3 7 U.S.C. 1 et seq.

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Section 723(c)(3) of the Dodd-Frank Act provides that swaps in an

“agricultural commodity” (as defined by the Commission) are

prohibited unless entered into pursuant to a rule, regulation or order

of the Commission adopted pursuant to Sec. 4(c) of the Commodity

Exchange Act. This ANPRM reviews the current statutory and regulatory

framework governing agricultural swaps, as well as the Dodd-Frank Act

provisions applicable to agricultural swaps. The ANPRM then requests

comment on the appropriate conditions, restrictions or protections to

be included in any Commission rule, regulation or order governing the

trading of agricultural swaps.

A. Current Statutory Framework for OTC Agricultural Swaps, Including

Options Swaps

Since 2000, bilateral over-the-counter (“OTC”) swaps 4 between

certain sophisticated counterparties have been generally exempted from

the Commission’s jurisdiction pursuant to current CEA Sec. 2(g),5

which was added to the CEA by the Commodity Futures Modernization Act

of 2000 (“CFMA”).6 However, current Sec. 2(g) specifically

excludes an “agreement, contract, or transaction” in an

“agricultural commodity” from the CFMA swaps exemption.

—————————————————————————

4 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.

5 Current Sec. 2(g) provides:

Excluded swap transactions.

No provision of this chapter (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. 2(g).

6 Current CEA Sec. 2(g) was added to the CEA as Sec. 105(b)

of the CFMA, enacted as Appendix E to PL 106-554.

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While the term “agricultural commodity” is not specifically

defined in the Act, it is used in the Act in conjunction with the

definition of the term “exempt commodity,” which is defined as

neither an “agricultural commodity” nor an “excluded commodity.”

7 There is limited legislative history regarding the CFMA to explain

Congress’ intent in excluding “agricultural commodities” from the

Sec. 2(g) swaps exemption.8 However, the legislative history of H.R.

4541, the predecessor to the CFMA (H.R. 5660),9 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).10 The House Committee on

Agriculture stated the following:

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7 “The term `exempt commodity’ means a commodity that is not

an excluded commodity or an agricultural commodity.” Current CEA

Sec. 1a(14). An “excluded commodity” is defined in current CEA

Sec. 1a(13) to include financial commodities such as interest

rates, currencies, economic indexes, and other similar items. As

noted above, of the three operative terms, only “agricultural

commodity” is not defined.

8 H.R. 5660, the final version of the CFMA, which was enacted

into law as an appendix to Public Law No. 106-554, the Consolidated

Appropriations Act, 2001, was not accompanied by congressional

committee reports.

9 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.

10 Current CEA Sec. 1a(4) defines the term “commodity” to

include 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.” 7 U.S.C. 1a(4). 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).

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.11

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11 H.R. Rep. No. 106-711, Part 1, at 33 (June 29, 2000).

Notably, the definition of exempt commodity did not change from H.R.

4541 to H.R. 5660, the final version of the CFMA as enacted into law.

The effect of excluding agricultural commodities from current CEA

Sec. 2(g) was that swaps involving exempt and excluded commodities

were allowed to transact largely outside of the Commission’s

jurisdiction or oversight, while swaps involving agricultural

commodities, including both the enumerated agricultural commodities and

other non-enumerated agricultural commodities, remained subject to the

Commission’s pre-CFMA swaps regulations as set forth in 17 CFR part

35.12

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12 Notably, current CEA Sec. 2(g) is not the only statutory

provision that excludes or exempts bilateral swaps between eligible

contract participants from the Commission’s jurisdiction. Current

CEA Sec. 2(d)(1) excludes any such bilateral “agreement, contract,

or transaction” in excluded commodities from Commission

jurisdiction, while CEA Sec. 2(h)(1) creates a similar exemption

for a “contract, agreement or transaction” in exempt commodities.

The overlap between these two provisions and the swap exemption in

CEA Sec. 2(g) serves to reinforce Congress’ clear intent to not

exclude agricultural swaps from the Commission’s jurisdiction

through the CFMA.

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Options

The Dodd-Frank Act defines the term “swap” to include not only

the various types of swaps listed in the definition, including

commodity swaps and agricultural swaps, but also OTC options of any

kind.13 Commodity options are subject to the Commission’s plenary

authority under CEA Sec. 4c(b).14 Based on Sec. 4c(b)’s general

prohibition of any option transactions contrary to any

[[Page 59668]]

Commission rule, regulation or order prohibiting options, or allowing

them under such conditions as the Commission may prescribe, the only

options currently authorized under the CEA are those specifically

provided for in the Commission’s regulations.

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13 Exchange-traded futures and options on futures are

specifically excluded from the Dodd-Frank swaps definition. See new

CEA Sec. 1a(47)(B), as added to the CEA by Sec. 721 of the Dodd-

Frank Act.

14 Section 4c(b) provides:

Regulated option trading

No person shall offer to enter into, enter into or confirm the

execution of, any transaction involving any commodity regulated

under this Act which is of the character of, or is commonly known to

the trade as, an “option”, “privilege”, “indemnity”, “bid”,

“offer”, “put”, “call”, “advance guaranty”, or “decline

guaranty”, contrary to any rule, regulation, or order of the

Commission prohibiting any such transaction or allowing any such

transaction under such terms and conditions as the Commission shall

prescribe. Any such order, rule, or regulation may be made only

after notice and opportunity for hearing, and the Commission may set

different terms and conditions for different markets. CEA Sec.

4c(b); 7 U.S.C. 6c(b).

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B. Current Regulatory Framework

Swaps

As mentioned previously, 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 1993,15

Part 35 allows for swaps to transact OTC if certain conditions are met:

(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.16

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15 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. This is discussed more fully

at section C, below.

16 See id. at 5590-5591; see also 17 C.F.R. Sec. 35.2(a)-(d).

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After the CFMA amendments to the CEA, which excluded swaps on

“exempt” and “excluded” commodities from virtually all of the

Commission’s jurisdiction, Part 35 remained relevant only for

agricultural swaps. With the exception of three outstanding Sec. 4(c)

exemptions related to cleared agricultural basis and calendar

swaps,17 Part 35 is the sole authority under which market

participants may transact agricultural swaps that are not options.

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17 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, 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).

—————————————————————————

Options

As noted above, the Commission maintains plenary authority over

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 OTC options,18 but allows for OTC

option transactions under certain conditions. Part 32 allows OTC

options on agricultural commodities in two instances.19

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18 See Commission regulation 32.11, 17 CFR 32.11.

19 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

fall within the Act’s definition of a swap. Accordingly, it is

important to identify what options on agricultural commodities are

currently being traded pursuant to part 32.

—————————————————————————

Rule 32.13 establishes rules for trading OTC 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 1999,20 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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20 63 FR 18821 (April 16, 1998); and 64 FR 68011 (December 6,

1999), respectively.

—————————————————————————

In either case (whether transacted pursuant to the ATOM

registration scheme or accomplished via the exemption at Sec.

32.13(g)), the phrase “agricultural trade option” refers specifically

to an OTC 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. options on

coffee, sugar, cocoa, and other agricultural products that do not

appear in the enumerated commodity list) would also fall under the

Dodd-Frank Act’s general prohibition of agricultural swaps (see

discussion below of the Dodd-Frank rules for agricultural swaps and

their implication for the existing agricultural swaps markets,

including OTC options on agricultural commodities).

C. Dodd-Frank Provisions

Non-Agricultural Swaps

Under the CEA, as amended by the Dodd-Frank Act, only eligible

contract participants (“ECPs”) 21 may enter into a swap, unless

such swap is entered into on a designated contract market

(“DCM”),22 in which case any person may enter into the swap.23

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21 “Eligible contract participant” is defined in current CEA

Sec. 1a(12). Generally speaking, an eligible contract participant

is considered to be a sophisticated investor.

22 A designated contract market is a board of trade designated

as a contract market under CEA Sec. 5.

23 See new CEA Sec. 2(e) as added by Sec. 723(a)(2) of the

Dodd-Frank Act.

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New CEA Sec. 2(h), as added by Sec. 723(a)(3) of the Dodd-Frank

Act, establishes a clearing requirement for

[[Page 59669]]

swaps. Under that subsection, the Commission would determine, based on

factors listed in the statute, whether a swap, or a group, category,

type, or class of swaps, should be required to be cleared. A swap

entered into by a commercial end user 24 is not subject to the

mandatory clearing requirement; however an end user may opt to submit

the swap for clearing. A swap that is required to be cleared must be

executed on a DCM or a swap execution facility (“SEF”),25 if a DCM

or SEF makes the swap available for trading. Swaps that are not

required to be cleared may be executed bilaterally OTC.

—————————————————————————

24 Generally, a commercial end user is described in new CEA

Sec. 2(h)(7) as a non-financial entity that is using swaps to hedge

or mitigate commercial risk and that notifies the Commission as to

how it generally meets its financial obligations associated with

entering into non-cleared swaps.

25 The requirements for SEFs are set forth in new CEA Sec.

5h.

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Section 731 of the Dodd-Frank Act adds a new Sec. 4s to the CEA

that provides for the registration and regulation of swap dealers and

major swap participants.26 The new requirements for swap dealers and

major swap participants include, in part, capital and margin

requirements, business conduct standards, and reporting, recordkeeping,

and documentation requirements.

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26 “Swap dealer” is defined in new CEA Sec. 1a(49), as

added by Sec. 721(a)(21) of the Dodd-Frank Act. “Major swap

participant” is defined in new CEA Sec. 1a(33), as added by Sec.

721(a)(16) of the Dodd-Frank Act.

—————————————————————————

Section 737 of the Dodd-Frank Act amends current CEA Sec. 4a

regarding position limits. Under the Dodd-Frank provisions, the

Commission must 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.

Agricultural Swaps

Under Sec. 723(c)(3) of the Dodd-Frank Act, swaps in an

“agricultural commodity” (as defined by the Commission) are

prohibited unless the swap is entered into pursuant to an exemption

granted under CEA Sec. 4(c). Generally speaking, Sec. 4(c) provides

that, in order to grant an exemption, the Commission must determine

that: (1) The exemption would be consistent with the public interest

and the purposes of the CEA; (2) any agreement, contract, or

transaction affected by the exemption would be entered into by

“appropriate persons” as defined in Sec. 4(c); and (3) any

agreement, contract, or transaction affected by the exemption would not

have a material adverse effect on the ability of the Commission or any

contract market to discharge its regulatory or self-regulatory duties

under the CEA.

Section 723(c)(3) includes a “grandfather” clause that provides

that any rule, regulation, or order regarding agricultural swaps that

was issued pursuant to Sec. 4(c), and that was in effect on the date

of enactment of the Dodd-Frank Act, would continue to be permitted.

Such rules, regulations or orders would include Part 35 with respect to

agricultural swaps and the agricultural basis and calendar swaps noted

above, but would not include options entered into pursuant to Part 32.

D. Agricultural Commodities Definition

As noted above, Sec. 723(c)(3) of the Dodd-Frank Act applies to

any swap in an agricultural commodity “as defined by the Commodity

Futures Trading Commission.” The Commission plans to publish a

proposed definition of the term “agricultural commodity” in the near

future. That proposed definition will cover all such commodities that

are, or could in the future be, traded pursuant to a swap or futures

contract. However, for purposes of commenting on this ANPRM, commenters

may assume that “agricultural commodity” includes the following

commodities that are currently the subject of derivatives trading,

whether listed for trading on a futures exchange or traded bilaterally

OTC: (1) The enumerated commodities that are listed in current Sec.

1a(4) of the CEA (e.g., corn, wheat, soybeans, livestock, cotton); (2)

the international “soft commodities” (e.g., coffee, sugar, cocoa);

(3) lumber, plywood and similar wood-derived commodities; (4) contracts

based on underlying commodities listed in (1)-(3) (e.g., corn and wheat

basis swaps and calendar swaps); and (5) other commodities derived from

living organisms, including plant, animal or aquatic life, that are

used for human food, animal feed or fiber, and that currently are the

subject of derivatives trading. To the extent that any commenter is

aware of any agricultural commodity that is not currently the subject

of derivatives trading, but which they anticipate may be so traded in

the future, and which might be affected by potential rules governing

the trading of agricultural swaps, the Commission would welcome

comments regarding such commodity.

Part II–Questions for Comment

Section 723(c)(3) of the Dodd-Frank Act and CEA Sec. 4(c)

authorize the Commission to impose such terms and conditions as it

deems appropriate in order for a person to enter into or execute an

agricultural swap. The Commission is requesting input on the following

questions:

Current Agricultural Swaps Business

1. How big is the current agricultural swaps business–including

both agricultural swaps trading under current part 35 and ATOs under

Sec. Sec. 32.4 and 32.13(g) of the Commission’s regulations?

2. What types of entities are participating in the current

agricultural swaps business?

3. Are agricultural swaps/ATO participants significantly different

than the types of entities participating in other physical commodity

swaps/trade options?

Agricultural Swaps Clearing

4. What percentage of existing agricultural swaps trading is

cleared vs. non-cleared?

5. What percentage of existing agricultural swaps would be eligible

for the commercial end-user exemption from the mandatory clearing

requirement?

6. What percentage of trading would be subject to the Dodd-Frank

clearing requirement, if that requirement applied automatically to

agricultural swaps (other than those eligible for the commercial end-

user exemption)?

7. What would be the practical and economic effect of a rule

requiring agricultural swaps transactions (other than those eligible

for the commercial end-user exemption) generally to be cleared? The

Commission is interested in the views of agricultural swaps market

participants (both users and swap dealers) regarding a potential

clearing requirement for agricultural swaps.

8. What would be the practical and economic effect of requiring

agricultural swaps to be cleared under the Dodd-Frank clearing regime?

Trading

9. Have current agricultural swaps/ATO participants experienced any

significant trading problems, including: (a) economic problems (i.e.,

contracts not providing an effective hedging mechanism, or otherwise

not performing as expected); (b) fraud or other types of abuse; or (c)

difficulty gaining access to the agricultural swaps market?

Agricultural Swaps Purchasers

10. Do agricultural swaps/ATO purchasers need more protections than

[[Page 59670]]

participants in other physical commodity swaps/trade options?

11. If so, why, and what should those protections be?

12. Would additional protections for agricultural swaps purchasers

unduly restrict their risk management opportunities?

13. Should the Commission consider rules to make it easier for

agricultural producers to participate in agricultural swaps–for

example, by allowing producers who do not qualify as ECPs to purchase

agricultural swaps?

Designated Contract Markets

14. Should agricultural swaps transactions be permitted to trade on

DCMs to the same extent as all other swaps are permitted on DCMs?

15. If yes, why?

16. If no, what other requirements, conditions or limitations

should apply?

Swap Execution Facilities

17. Should agricultural swaps transactions be permitted on SEFs to

the same extent as all other swaps are permitted to transact on SEFs?

18. If yes, why?

19. If no, what other requirements, conditions or limitations

should apply?

Trading Outside of DCMs and SEFs

20. Should agricultural swaps be permitted to trade outside of a

DCM or SEF to the same extent as all other swaps?

21. If yes, why?

22. If no, what other requirements, conditions or limitations

should apply?

23. Should agricultural swaps be permitted to trade outside of a

DCM or SEF to a different extent than other swaps due to the nature of

the products and/or participants in the agricultural swaps market?

24. In general, should agricultural swaps be treated like all other

physical commodity swaps under Dodd-Frank?

25. If yes, why?

26. If no, are there any additional requirements, conditions or

limitations not already discussed in other answers that should apply?

27. If agricultural swaps are generally treated like swaps in other

physical commodities, are there specific agricultural commodities that

would require special or different protections?

Issued in Washington, DC, on September 21, 2010, by the

Commission.

David A. Stawick,

Secretary of the Commission.

[FR Doc. 2010-24198 Filed 9-27-10; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: September 28, 2010