CFTC Staff Letter 00-64: No-Action Relief for Electronic Commodities Trading Platform

00-64
CFTC Letter No. 00-64
May 8, 2000
No-Action
Division of Economic Analysis
Re: Electronic Commodities Trading Platform
Dear :
This is in response to your letter dated April 7, 2000, to the Division of Trading and Markets of the Commodity Futures Trading Commission (the Commission), as supplemented by subsequent telephone conversations. Your letter has been reviewed by the staffs of both the Division of Trading and Markets and the Division of Economic Analysis (Divisions). In your April 7, 2000 letter you seek confirmation that the Divisions will not recommend that the Commission authorize or commence enforcement action under the Commodity Exchange Act, 7 U.S.C. § 1 et seq. (Act), or the regulations thereunder in connection with a proposed electronic platform (the Platform) for the trading of physical commodities and derivatives products in connection with the operation of the Platform, any transactions effected through the Platform, or any participants in such transactions. Facts Your letter represents the facts to be as follows. The Platform, which will be referred to as "X," is in the process of being developed by commercial participants in the markets for physical commodities and derivative products1 and will be operated by a newly organized entity that will be controlled by a number of the participants and the provider of the Platform technology. The founding members of "X" include the following companies or their affiliates, [names of companies redacted]. Among the derivative products to be traded through the Platform will be "swap agreements," as defined in Commission Rule 35.1, relating to physical commodities.2 The Platform will be available only to approved participants that satisfy specified criteria, which will be designed to limit participants to commercial entities. In particular, participants will be limited to those "eligible swap participants" that are commercial entities and are encompassed within subsections (i), (ii), (iii), (vi) or (viii) of Commission Rule 35.1(b).3 For this purpose, a "commercial entity," with respect to a given product, will be defined to include (i) any party that, in connection with its business, makes and takes delivery of the underlying physical commodity and regularly incurs risks related to such commodity, and (ii) entities whose business includes regularly providing hedging, risk management or market-making services to file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/00letters/tm00-64.htm (1 of 4) [5/6/2010 6:19:57 PM]