Update on the Dodd-Frank Act

Article excerpt

  I. FINAL RULES AND ORDERS      A. Exemption for Transactions between FPA 201(f)         and Similar Entities      B. Exemption of Specified Transactions in Regional         Transmission Organization or Independent         System Operator Markets      C. Legal Entity Identifiers and the CICI Number         Requirement      D. Clearing Exemption for Swaps Between Certain         Affiliates      E. Policy Statement on Anti-Disruptive Trading         Practices   II. NO-ACTION LETTERS      A. No-Action Letter 12-17 (October 12, 2012): Swap         Guarantors as ECPs      B. No-Action Letter 13-08 (April 5, 2013): Trade         Options      C. No-Action Letter 13-10 (April 9, 2013): Relief with         Respect to the Compliance Date of 4-10-13 for         Reporting Obligations under Part 43, 45 and 46 of         the CFTC's Regulations      D. No-Action Letter 13-22 (June 4, 2013): Relief from         the Clearing Requirement for Swaps Entered into         by Eligible Treasury Affiliates  III. JUDICIAL DECISIONS      A. Challenge to the CFTC Position Limits Rule: ISDA         v. CFTC      B. Public Disclosure of Payments to Governments:         API v. SEC  IV. ISDA COMPLIANCE DOCUMENTATION      A. Swap Guarantors as ECPs      B. ISDA Protocols  V. CONCLUSION 

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") is intended to provide a comprehensive framework for the regulation of over-the-counter ("OTC") derivatives. (1) The obligations of companies transacting in swaps in the natural gas and power markets have been shaped by recent court cases and by multiple final rules, no-action letters, and interpretive guidance and policy statements of the Commodity Futures Trading Commission (the "CFTC"). This paper identifies and discusses some of the developments in those areas arising since late 2012, with particular emphasis given to those developments that most impact end users.


From late 2012 through 2013, the CFTC has proposed rules, responded to comments, provided policy statements, and promulgated final orders. This section summarizes recent orders exempting certain transactions between government and cooperatively-owned electric utilities, transactions in certain regional transmission organization ("RTO") or independent system operator (ISO) markets, the CICI-number requirement, the clearing exemption for swaps between affiliates, and a policy statement regarding the CFTC's interpretation of certain antidisruptive trading practice rules.

A. Exemption for Transactions between FPA 201(f) and Similar Entities

Section 201(f) of the Federal Power Act ("FPA") exempts certain government and cooperatively-owned electric utilities ("201(f) Entities") from the Federal Energy Regulatory Commission's ("FERC") jurisdiction. (2) Similarly, Dodd-Frank provides the CFTC the discretion to exempt from the Commodity Exchange Act ("CEA") certain transactions between 201(f) Entities if the exemption is consistent with public interest and the CEA's purpose. (3) In April 2013 the CFTC adopted a final order that exempts specific non-financial energy derivative transactions between 201(f) Entities and/or other similar entities from most of Dodd-Frank's amendments to the CEA, including: (1) Electric Energy Delivered transactions; (2) Generation Capacity transactions; (3) Transmission Services transactions; (4) Fuel Delivered transactions; (5) Cross-Commodity Pricing transactions; or (6) other goods and services transactions related to sharing the costs and benefits of construction, operation, and maintenance of generation or transmission facilities. (4)

The order's exemption is not absolute. The CFTC explicitly reserves its general anti-fraud and anti-manipulation authority, enforcement authority, and its general authority to inspect books and records. (5) Further, the exemption requires both an eligible entity and an eligible transaction. …