Notice of Intent, Pursuant to the Authority in Section 2(h)(7) of the Commodity Exchange Act and Commission Rule 36.3(c)(3), To Undertake a Determination Whether the Henry Financial LD1 Fixed Price Contract Traded on the IntercontinentalExchange, Inc., Performs a Significant Price Discovery Function, 28028-28030 [E9-13871]
Download as PDF
<![CDATA[
28028
Federal Register / Vol. 74, No. 112 / Friday, June 12, 2009 / Notices
Deletions
On 3/27 and 4/10/2009, the
Committee for Purchase From People
Who Are Blind or Severely Disabled
published notices (74 FR 58, pgs.
13413–13414 and 74 FR 68, pgs. 16367–
16369, respectively) of proposed
deletions from the Procurement List.
After consideration of the relevant
matter presented, the Committee has
determined that the products and
services listed below are no longer
suitable for procurement by the Federal
Government under 41 U.S.C. 46–48c
and 41 CFR 51–2.4.
Regulatory Flexibility Act Certification
I certify that the following action will
not have a significant impact on a
substantial number of small entities.
The major factors considered for this
certification were:
1. The action will not result in
additional reporting, recordkeeping or
other compliance requirements for small
entities.
2. The action may result in
authorizing small entities to furnish the
products and services to the
Government.
3. There are no known regulatory
alternatives which would accomplish
the objectives of the Javits-WagnerO’Day Act (41 U.S.C. 46–48c) in
connection with the products and
services deleted from the Procurement
List.
End of Certification
Accordingly, the following products
and services are deleted from the
Procurement List:
Products
PCU, Level 1 Boxer
NSN: 8420–01–542–5494—Size S;
NSN: 8420–01–542–5495—Size M;
NSN: 8420–01–542–5496—Size L;
NSN: 8420–01–542–5497—Size LL;
NSN: 8420–01–542–5499—Size XL;
NSN: 8420–01–542–5500—Size XLL;
NSN: 8420–01–542–5491—Size XS;
NSN: 8420–01–543–7068—Size ML;
NSN: 8420–01–542–5478—Size XXL;
NSN: 8420–01–542–5490—Size XXLL;
NSN: 8420–01–542–5485—Size XXXL;
NSN: 8420–01–542–5488—Size XXXLL.
NPA: Southeastern Kentucky Rehabilitation
Industries, Inc., Corbin, KY.
Contracting Activity: XR W2DF RDECOM
ACQ CTR NATICK, Natick, MA &
Washington, DC.
Services
Service Type/Location: Custodial Services:
VA Primary Care Center, North Pinellas
Park, St. Petersburg, Marion City, Naples
& Sarasota, Multiple Locations, FL.
NPA: Abilities, Inc. of Florida, Clearwater,
FL.
Contracting Activity: Department Of Veterans
VerDate Nov<24>2008
17:53 Jun 11, 2009
Jkt 217001
Affairs, St. Petersburg, FL.
Service Type/Location: Shelf Stocking,
Custodial & Warehousing: Key West
Naval Air Station, Key West, FL.
NPA: Unknown (No Providing Agency).
Contracting Activity: Defense Commissary
Agency (DECA).
COMMITTEE FOR PURCHASE FROM
PEOPLE WHO ARE BLIND OR
SEVERELY DISABLED
than the small organizations that will
furnish the service to the Government.
2. If approved, the action will result
in authorizing small entities to furnish
the service to the Government.
3. There are no known regulatory
alternatives which would accomplish
the objectives of the Javits-WagnerO’Day Act (41 U.S.C. 46–48c) in
connection with the service proposed
for addition to the Procurement List.
Comments on this certification are
invited. Commenters should identify the
statement(s) underlying the certification
on which they are providing additional
information.
Procurement List; Proposed Addition
End of Certification
AGENCY: Committee for Purchase From
People Who Are Blind or Severely
Disabled.
ACTION: Proposed addition to the
procurement list.
The following service is proposed for
addition to Procurement List for
production by the nonprofit agency
listed:
Lou Bartalot,
Director, Compliance.
[FR Doc. E9–13886 Filed 6–11–09; 8:45 am]
BILLING CODE 6353–01–P
SUMMARY: The Committee is proposing
to add to the Procurement List a service
to be furnished by the nonprofit agency
employing persons who are blind or
have other severe disabilities.
DATES: Comments Must be Received on
or Before: 7/13/2009.
ADDRESSES: Committee for Purchase
From People Who Are Blind or Severely
Disabled, Jefferson Plaza 2, Suite 10800,
1421 Jefferson Davis Highway,
Arlington, Virginia, 22202–3259.
FOR FURTHER INFORMATION OR TO SUBMIT
COMMENTS CONTACT: Barry S. Lineback,
Telephone: (703) 603–7740, Fax: (703)
603–0655, or e-mail
CMTEFedReg@AbilityOne.gov.
SUPPLEMENTARY INFORMATION: This
notice is published pursuant to 41 U.S.C
47(a) (2) and 41 CFR 51–2.3. Its purpose
is to provide interested persons an
opportunity to submit comments on the
proposed actions.
Additions
If the Committee approves the
proposed addition, the entities of the
Federal Government identified in this
notice for each service will be required
to procure the service listed below from
nonprofit agency employing persons
who are blind or have other severe
disabilities.
Regulatory Flexibility Act Certification
I certify that the following action will
not have a significant impact on a
substantial number of small entities.
The major factors considered for this
certification were:
1. If approved, the action will not
result in any additional reporting,
recordkeeping or other compliance
requirements for small entities other
PO 00000
Frm 00034
Fmt 4703
Sfmt 4703
Services
Service Type/Locations: Consolidated Base
Operation Support (BOS).
Naval & Marine Corps Reserve Center, 1600
Lafayette Ave., Moundsville, WV;
Naval Reserve Center, 1200 Navy Way
Road Avoca, PA;
Naval & Marine Corps Reserve Center, 3938
Old French Road Erie, PA;
Naval & Marine Corps Reserve Center
Lehigh Valley, PA, 1400 Postal Drive,
Allentown, PA;
Naval & Marine Corps Reserve Center, 261
Industrial Park Road Ebensburg, PA;
Naval & Marine Corps Reserve Center
Pittsburgh, PA, 625 East Pittsburgh
McKeesport Blvd., North Versailles, PA;
Marine Corps Reserve Center, 615 Kenhorst
Boulevard Reading, PA;
Naval & Marine Corps Reserve Center, 3920
Kirkwood Highway Wilmington, DE.
NPA: Human Technologies Corporation,
Utica, NY.
Contracting Activity: Dept of the Navy, U.S.
Fleet Forces Command, Norfolk, VA.
Barry S. Lineback,
Director, Business Operations.
[FR Doc. E9–13802 Filed 6–11–09; 8:45 am]
BILLING CODE 6353–01–P
COMMODITY FUTURES TRADING
COMMISSION
Notice of Intent, Pursuant to the
Authority in Section 2(h)(7) of the
Commodity Exchange Act and
Commission Rule 36.3(c)(3), To
Undertake a Determination Whether
the Henry Financial LD1 Fixed Price
Contract Traded on the
IntercontinentalExchange, Inc.,
Performs a Significant Price Discovery
Function
AGENCY: Commodity Futures Trading
Commission.
E:\FR\FM\12JNN1.SGM
12JNN1
Federal Register / Vol. 74, No. 112 / Friday, June 12, 2009 / Notices
ACTION: Notice of action and request for
comment.
SUMMARY: The Commodity Futures
Trading Commission (‘‘CFTC’’ or
‘‘Commission’’) is undertaking a review
to determine whether the Henry
Financial LD1 Fixed Price contract
traded on the IntercontinentalExchange,
Inc. (ICE), an exempt commercial
market (‘‘ECM’’) under sections 2(h)(3)–
(5) of the Commodity Exchange Act
(‘‘CEA’’ or the ‘‘Act’’), performs a
significant price discovery function. The
Commission is undertaking this review
based upon its evaluation of information
provided by the ICE, as well as a
Commission report on ECMs. Authority
for this action is found in section 2(h)(7)
of the CEA and Commission rule 36.3(c)
promulgated thereunder. In connection
with this evaluation, the Commission
invites comment from interested parties.
DATES: Comments must be received on
or before July 13, 2009.
ADDRESSES: Comments may be
submitted by any of the following
methods:
• Follow the instructions for
submitting comments. Federal
eRulemaking Portal: https://
www.regulations.gov.
• E-mail: secretary@cftc.gov. Include
ICE Henry Financial LD1 Fixed Price
Contract in the subject line of the
message.
• Fax: (202) 418–5521.
• Mail: Send to David A. Stawick,
Secretary, Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
• Courier: Same as mail above.
All comments received will be posted
without change to https://
www.CFTC.gov/.
FOR FURTHER INFORMATION CONTACT:
Gregory K. Price, Industry Economist,
Division of Market Oversight,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581. Telephone: (202) 418–5515. Email: gprice@cftc.gov; or Susan Nathan,
Senior Special Counsel, Division of
Market Oversight, same address.
Telephone: (202) 418–5133. E-mail:
snathan@cftc.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
On March 16, 2009, the CFTC
promulgated final rules implementing
provisions of the CFTC Reauthorization
Act of 2008 (‘‘Reauthorization Act’’) 1
1 74 FR 12178 (Mar. 23, 2009); these rules became
effective on April 22, 2009.
VerDate Nov<24>2008
17:53 Jun 11, 2009
Jkt 217001
which subjects ECMs with significant
price discovery contracts (‘‘SPDCs’’) to
self-regulatory and reporting
requirements, as well as certain
Commission oversight authorities, with
respect to those contracts. Among other
things, these rules and rule amendments
revise the information-submission
requirements applicable to ECMs,
establish procedures and standards by
which the Commission will determine
whether an ECM contract performs a
significant price discovery function, and
provide guidance with respect to
compliance with nine statutory core
principles applicable to ECMs with
SPDCs. These rules became effective on
April 22, 2009.
In determining whether an ECM’s
contract is or is not a SPDC, the
Commission will consider the contract’s
material liquidity, price linkage to other
contracts, potential for arbitrage with
other contracts traded on designated
contract markets or derivatives
transaction execution facilities, use of
the ECM contract’s prices to execute or
settle other transactions, and other
factors.
In order to facilitate the Commission’s
identification of possible SPDCs,
Commission rule 36.3(c)(2) requires that
an ECM operating in reliance on section
2(h)(3) promptly notify the Commission
and provide supporting information or
data concerning any contract: (i) That
averaged five trades per day or more
over the most recent calendar quarter;
and (ii) (A) for which the ECM sells
price information regarding the contract
to market participants or industry
publications; or (B) whose daily closing
or settlement prices on 95 percent or
more of the days in the most recent
quarter were within 2.5 percent of the
contemporaneously determined closing,
settlement or other daily price of
another agreement.
II. Determination of a SPDC
A. The SPDC Determination Process
Commission rule 36.3(c)(3)
establishes the procedures by which the
Commission makes and announces its
determination on whether a specific
ECM contract serves a significant price
discovery function. Under those
procedures, the Commission will
publish a notice in the Federal Register
that it intends to undertake a
determination as to whether the
specified agreement, contract, or
transaction performs a significant price
discovery function and to receive
written data, views, and arguments
relevant to its determination from the
PO 00000
Frm 00035
Fmt 4703
Sfmt 4703
28029
ECM and other interested persons.2
After prompt consideration of all
relevant information, the Commission
will, within a reasonable period of time
after the close of the comment period,
issue an order explaining its
determination. Following the issuance
of an order by the Commission that the
ECM executes or trades an agreement,
contract, or transaction that performs a
significant price discovery function, the
ECM must demonstrate, with respect to
that agreement, contract, or transaction,
compliance with the core principles
under section 2(h)(7)(C) of the CEA 3
and the applicable provisions of part 36.
If the Commission’s order represents the
first time it has determined that one of
the ECM’s contracts performs a
significant price discovery function, the
ECM must submit a written
demonstration of its compliance with
the core principles within 90 calendar
days of the date of the Commission’s
order. For each subsequent
determination by the Commission that
the ECM has an additional SPDC, the
ECM must submit a written
demonstration of its compliance with
the core principles within 30 calendar
days of the Commission’s order.
B. ICE’s Henry Financial LD1 Fixed
Price Contract
The ICE Henry Financial LD1 Fixed
Price contract is cash settled based on
the final settlement price of the New
York Mercantile Exchange’s (NYMEX’s)
physically-delivered Henry Hub-based
Natural Gas futures contract for the
corresponding contract month. 4 The
trading unit of the ICE Henry Financial
LD1 Fixed Price contract is 2,500
mmBtu multiplied by the number of
calendar days in the contract month. For
example, if a contract month has 30
days, the trading unit is 75,000 mmBtu,
which is referred to as 30 lots.
Based upon a required quarterly
notification filed on April 30, 2009
(mandatory under Rule 36.3(c)(2)), the
subject contract realized more than an
average of five trades per day during the
first quarter of 2009. In addition, the
average volume of natural gas traded
each business day over that period was
449,010 contracts, and the open interest
in the contract as of March 31, 2009,
was 2,932,798 contracts.
2 The Commission may commence this process on
its own initiative or on the basis of information
provided to it by an ECM pursuant to the
notification provisions of Commission rule
36.3(c)(2).
3 7 U.S.C. 2(h)(7)(C).
4 The NYMEX is a designated contract market that
offers futures and option contracts on a wide range
of energy products, including crude oil, refined
petroleum products, and natural gas.
E:\FR\FM\12JNN1.SGM
12JNN1
28030
Federal Register / Vol. 74, No. 112 / Friday, June 12, 2009 / Notices
It appears that the ICE Henry
Financial LD1 Fixed Price contract may
satisfy the material liquidity, price
linkage, and arbitrage criteria for SPDC
determination. With regard to material
liquidity, the high average daily trading
volume indicates that the subject
contract is relatively liquid. With
respect to the price linkage and arbitrage
tests, it is noted above that the ICE
Henry Financial LD1 Fixed Price
contract and the NYMEX’s physicallydelivered Natural Gas futures contract
have the same final settlement prices.
Moreover, ICE uses the NYMEX’s
forward settlement curve when
conducting its mark-to-market
accounting procedures to settle the
subject contract on daily basis. An
October 2007 CFTC publication entitled
Report on the Oversight of Trading on
Regulated Futures Exchanges and
Exempt Commercial Markets (‘‘ECM
Study’’) stated that traders and voice
brokers view the subject ICE contract as
economically equivalent to the NYMEX
physically-delivered Natural Gas futures
contract. 5 The ICE and NYMEX
contracts essentially comprise a single
market for natural gas derivatives
trading, and traders look to both the ICE
and to the NYMEX when determining
where to execute a trade at the best
price. The ECM Study also stated that
the ICE natural gas contract acts as price
discovery market. To this end, the ECM
Study referenced an analysis 6 of
whether the NYMEX, ICE, or both
facilities exhibit price leadership with
respect to their natural gas contracts. If
a particular exchange’s prices lead those
on another exchange, then the former
exchange’s contract is thought of as a
price discovery market. In 2006, the
ICE’s natural gas contract exhibited
price leadership on 20 percent of the
contract days; the NYMEX’s physicallydelivered natural gas contract, on the
other hand, exhibited price leadership
on 63 percent of the contract days.
Based on these factors, the ECM Study
concluded that the ICE and the NYMEX
contracts are both price discovery
venues for natural gas trading.
III. Request for Comment
In evaluating whether an ECM’s
agreement, contract, or transaction
performs a significant price discovery
function, section 2(h)(7) of the CEA
directs the Commission to consider, as
appropriate, four specific criteria: Price
linkage, arbitrage, material price
reference, and material liquidity. As it
5 https://www.cftc.gov/stellent/groups/public/
@newsroom/documents/file/pr540307_ecmreport.pdf.)
6 ECM Study at 11.
VerDate Nov<24>2008
17:53 Jun 11, 2009
Jkt 217001
explained in Appendix A to the part 36
rules, the Commission, in making SPDC
determinations, will apply and weigh
each factor, as appropriate, to the
specific contract and circumstances
under consideration. In addition, as part
of its evaluation, the Commission will
consider the written data, views, and
arguments from the ECM that lists the
potential SPDC and from any other
interested parties.
The Commission requests comment
on whether the ICE’s Henry Financial
LD1 Fixed Price contract performs a
significant price discovery function.
Commenters’ attention is directed
particularly to Appendix A of the
Commission’s part 36 rules for a
detailed discussion of the factors
relevant to SPDC determination. The
Commission notes that comments which
analyze the contract in terms of these
factors will be especially helpful to the
determination process. In order to
determine the relevance of comments
received, the Commission requests that
commenters explain in what capacity
are they knowledgeable about the Henry
Financial LD1 Fixed Price contract.
price discovery; (4) sound risk
management practices; and (5) other
public interest considerations.
The bulk of the costs imposed by the
requirements of Commission Rule 36.3
relate to significant and increased
information-submission and reporting
requirements adopted in response to the
Reauthorization Act’s directive that the
Commission take an active role in
determining whether contracts listed by
ECMs qualify as SPDCs. The enhanced
requirements for ECMs will permit the
Commission to acquire the information
it needs to discharge its newly
mandated responsibilities and to ensure
that ECMs with SPDCs are identified as
entities with the elevated status of
registered entity under the CEA and are
in compliance with the statutory terms
of the core principles of section
2(h)(7)(C) of the Act. The primary
benefit to the public is to enable the
Commission to discharge its statutory
obligation to monitor for the presence of
SPDCs and extend its oversight to the
trading of SPDCs.
IV. Related Matters
The Regulatory Flexibility Act
(‘‘RFA’’) 9 requires that agencies
consider the impact of their rules on
small businesses. The requirements of
part 36 affect exempt commercial
markets. The Commission previously
has determined that exempt commercial
markets are not small entities for
purposes of the RFA.10 Accordingly, the
Chairman, on behalf of the Commission,
hereby certifies pursuant to 5 U.S.C.
605(b) that this Order, taken in
connection with the part 36 rules, will
not have a significant economic impact
on a substantial number of small
entities.
A. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(‘‘PRA’’) 7 imposes certain requirements
on Federal agencies, including the
Commission, in connection with their
conducting or sponsoring any collection
of information, as defined by the PRA.
Certain provisions of final Commission
rule 36.3 impose new regulatory and
reporting requirements on ECMs,
resulting in information collection
requirements within the meaning of the
PRA; OMB previously has approved and
assigned OMB control number 3038–
0060 to this collection of information.
B. Cost-Benefit Analysis
Section 15(a) of the CEA 8 requires the
Commission to consider the costs and
benefits of its actions before issuing an
order under the Act. By its terms,
section 15(a) does not require the
Commission to quantify the costs and
benefits of an order or to determine
whether the benefits of the order
outweigh its costs; rather, it requires
that the Commission ‘‘consider’’ the
costs and benefits of its action. Section
15(a) further specifies that the costs and
benefits shall be evaluated 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 futures markets; (3)
C. Regulatory Flexibility Act
Issued in Washington, DC on June 9, 2009
by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9–13871 Filed 6–11–09; 8:45 am]
BILLING CODE 6351–01–P
CONSUMER PRODUCT SAFETY
COMMISSION
[CPSC Docket No. 09–C0019]
Mattel, Inc. and Fisher-Price, Inc.,
Provisional Acceptance of a
Settlement Agreement and Order
AGENCY: Consumer Product Safety
Commission.
ACTION: Notice.
7 44
95
87
10 66
PO 00000
U.S.C. 3507(d).
U.S.C.19(a).
Frm 00036
Fmt 4703
Sfmt 4703
U.S.C. 601 et seq.
FR 42256, 42268 (Aug. 10, 2001).
E:\FR\FM\12JNN1.SGM
12JNN1
]]>Agencies
[Federal Register Volume 74, Number 112 (Friday, June 12, 2009)]
[Notices]
[Pages 28028-28030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-13871]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
Notice of Intent, Pursuant to the Authority in Section 2(h)(7) of
the Commodity Exchange Act and Commission Rule 36.3(c)(3), To Undertake
a Determination Whether the Henry Financial LD1 Fixed Price Contract
Traded on the IntercontinentalExchange, Inc., Performs a Significant
Price Discovery Function
AGENCY: Commodity Futures Trading Commission.
[[Page 28029]]
ACTION: Notice of action and request for comment.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is undertaking a review to determine whether the Henry
Financial LD1 Fixed Price contract traded on the
IntercontinentalExchange, Inc. (ICE), an exempt commercial market
(``ECM'') under sections 2(h)(3)-(5) of the Commodity Exchange Act
(``CEA'' or the ``Act''), performs a significant price discovery
function. The Commission is undertaking this review based upon its
evaluation of information provided by the ICE, as well as a Commission
report on ECMs. Authority for this action is found in section 2(h)(7)
of the CEA and Commission rule 36.3(c) promulgated thereunder. In
connection with this evaluation, the Commission invites comment from
interested parties.
DATES: Comments must be received on or before July 13, 2009.
ADDRESSES: Comments may be submitted by any of the following methods:
Follow the instructions for submitting comments. Federal
eRulemaking Portal: https://www.regulations.gov.
E-mail: secretary@cftc.gov. Include ICE Henry Financial
LD1 Fixed Price Contract in the subject line of the message.
Fax: (202) 418-5521.
Mail: Send to David A. Stawick, Secretary, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street,
NW., Washington, DC 20581.
Courier: Same as mail above.
All comments received will be posted without change to https://www.CFTC.gov/.
FOR FURTHER INFORMATION CONTACT: Gregory K. Price, Industry Economist,
Division of Market Oversight, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.
Telephone: (202) 418-5515. E-mail: gprice@cftc.gov; or Susan Nathan,
Senior Special Counsel, Division of Market Oversight, same address.
Telephone: (202) 418-5133. E-mail: snathan@cftc.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
On March 16, 2009, the CFTC promulgated final rules implementing
provisions of the CFTC Reauthorization Act of 2008 (``Reauthorization
Act'') \1\ which subjects ECMs with significant price discovery
contracts (``SPDCs'') to self-regulatory and reporting requirements, as
well as certain Commission oversight authorities, with respect to those
contracts. Among other things, these rules and rule amendments revise
the information-submission requirements applicable to ECMs, establish
procedures and standards by which the Commission will determine whether
an ECM contract performs a significant price discovery function, and
provide guidance with respect to compliance with nine statutory core
principles applicable to ECMs with SPDCs. These rules became effective
on April 22, 2009.
---------------------------------------------------------------------------
\1\ 74 FR 12178 (Mar. 23, 2009); these rules became effective on
April 22, 2009.
---------------------------------------------------------------------------
In determining whether an ECM's contract is or is not a SPDC, the
Commission will consider the contract's material liquidity, price
linkage to other contracts, potential for arbitrage with other
contracts traded on designated contract markets or derivatives
transaction execution facilities, use of the ECM contract's prices to
execute or settle other transactions, and other factors.
In order to facilitate the Commission's identification of possible
SPDCs, Commission rule 36.3(c)(2) requires that an ECM operating in
reliance on section 2(h)(3) promptly notify the Commission and provide
supporting information or data concerning any contract: (i) That
averaged five trades per day or more over the most recent calendar
quarter; and (ii) (A) for which the ECM sells price information
regarding the contract to market participants or industry publications;
or (B) whose daily closing or settlement prices on 95 percent or more
of the days in the most recent quarter were within 2.5 percent of the
contemporaneously determined closing, settlement or other daily price
of another agreement.
II. Determination of a SPDC
A. The SPDC Determination Process
Commission rule 36.3(c)(3) establishes the procedures by which the
Commission makes and announces its determination on whether a specific
ECM contract serves a significant price discovery function. Under those
procedures, the Commission will publish a notice in the Federal
Register that it intends to undertake a determination as to whether the
specified agreement, contract, or transaction performs a significant
price discovery function and to receive written data, views, and
arguments relevant to its determination from the ECM and other
interested persons.\2\ After prompt consideration of all relevant
information, the Commission will, within a reasonable period of time
after the close of the comment period, issue an order explaining its
determination. Following the issuance of an order by the Commission
that the ECM executes or trades an agreement, contract, or transaction
that performs a significant price discovery function, the ECM must
demonstrate, with respect to that agreement, contract, or transaction,
compliance with the core principles under section 2(h)(7)(C) of the CEA
\3\ and the applicable provisions of part 36. If the Commission's order
represents the first time it has determined that one of the ECM's
contracts performs a significant price discovery function, the ECM must
submit a written demonstration of its compliance with the core
principles within 90 calendar days of the date of the Commission's
order. For each subsequent determination by the Commission that the ECM
has an additional SPDC, the ECM must submit a written demonstration of
its compliance with the core principles within 30 calendar days of the
Commission's order.
---------------------------------------------------------------------------
\2\ The Commission may commence this process on its own
initiative or on the basis of information provided to it by an ECM
pursuant to the notification provisions of Commission rule
36.3(c)(2).
\3\ 7 U.S.C. 2(h)(7)(C).
---------------------------------------------------------------------------
B. ICE's Henry Financial LD1 Fixed Price Contract
The ICE Henry Financial LD1 Fixed Price contract is cash settled
based on the final settlement price of the New York Mercantile
Exchange's (NYMEX's) physically-delivered Henry Hub-based Natural Gas
futures contract for the corresponding contract month. \4\ The trading
unit of the ICE Henry Financial LD1 Fixed Price contract is 2,500 mmBtu
multiplied by the number of calendar days in the contract month. For
example, if a contract month has 30 days, the trading unit is 75,000
mmBtu, which is referred to as 30 lots.
---------------------------------------------------------------------------
\4\ The NYMEX is a designated contract market that offers
futures and option contracts on a wide range of energy products,
including crude oil, refined petroleum products, and natural gas.
---------------------------------------------------------------------------
Based upon a required quarterly notification filed on April 30,
2009 (mandatory under Rule 36.3(c)(2)), the subject contract realized
more than an average of five trades per day during the first quarter of
2009. In addition, the average volume of natural gas traded each
business day over that period was 449,010 contracts, and the open
interest in the contract as of March 31, 2009, was 2,932,798 contracts.
[[Page 28030]]
It appears that the ICE Henry Financial LD1 Fixed Price contract
may satisfy the material liquidity, price linkage, and arbitrage
criteria for SPDC determination. With regard to material liquidity, the
high average daily trading volume indicates that the subject contract
is relatively liquid. With respect to the price linkage and arbitrage
tests, it is noted above that the ICE Henry Financial LD1 Fixed Price
contract and the NYMEX's physically-delivered Natural Gas futures
contract have the same final settlement prices. Moreover, ICE uses the
NYMEX's forward settlement curve when conducting its mark-to-market
accounting procedures to settle the subject contract on daily basis. An
October 2007 CFTC publication entitled Report on the Oversight of
Trading on Regulated Futures Exchanges and Exempt Commercial Markets
(``ECM Study'') stated that traders and voice brokers view the subject
ICE contract as economically equivalent to the NYMEX physically-
delivered Natural Gas futures contract. \5\ The ICE and NYMEX contracts
essentially comprise a single market for natural gas derivatives
trading, and traders look to both the ICE and to the NYMEX when
determining where to execute a trade at the best price. The ECM Study
also stated that the ICE natural gas contract acts as price discovery
market. To this end, the ECM Study referenced an analysis \6\ of
whether the NYMEX, ICE, or both facilities exhibit price leadership
with respect to their natural gas contracts. If a particular exchange's
prices lead those on another exchange, then the former exchange's
contract is thought of as a price discovery market. In 2006, the ICE's
natural gas contract exhibited price leadership on 20 percent of the
contract days; the NYMEX's physically-delivered natural gas contract,
on the other hand, exhibited price leadership on 63 percent of the
contract days. Based on these factors, the ECM Study concluded that the
ICE and the NYMEX contracts are both price discovery venues for natural
gas trading.
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\5\ https://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/pr5403-07_ecmreport.pdf.)
\6\ ECM Study at 11.
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III. Request for Comment
In evaluating whether an ECM's agreement, contract, or transaction
performs a significant price discovery function, section 2(h)(7) of the
CEA directs the Commission to consider, as appropriate, four specific
criteria: Price linkage, arbitrage, material price reference, and
material liquidity. As it explained in Appendix A to the part 36 rules,
the Commission, in making SPDC determinations, will apply and weigh
each factor, as appropriate, to the specific contract and circumstances
under consideration. In addition, as part of its evaluation, the
Commission will consider the written data, views, and arguments from
the ECM that lists the potential SPDC and from any other interested
parties.
The Commission requests comment on whether the ICE's Henry
Financial LD1 Fixed Price contract performs a significant price
discovery function. Commenters' attention is directed particularly to
Appendix A of the Commission's part 36 rules for a detailed discussion
of the factors relevant to SPDC determination. The Commission notes
that comments which analyze the contract in terms of these factors will
be especially helpful to the determination process. In order to
determine the relevance of comments received, the Commission requests
that commenters explain in what capacity are they knowledgeable about
the Henry Financial LD1 Fixed Price contract.
IV. Related Matters
A. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \7\ imposes certain
requirements on Federal agencies, including the Commission, in
connection with their conducting or sponsoring any collection of
information, as defined by the PRA. Certain provisions of final
Commission rule 36.3 impose new regulatory and reporting requirements
on ECMs, resulting in information collection requirements within the
meaning of the PRA; OMB previously has approved and assigned OMB
control number 3038-0060 to this collection of information.
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\7\ 44 U.S.C. 3507(d).
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B. Cost-Benefit Analysis
Section 15(a) of the CEA \8\ requires the Commission to consider
the costs and benefits of its actions before issuing an order under the
Act. By its terms, section 15(a) does not require the Commission to
quantify the costs and benefits of an order or to determine whether the
benefits of the order outweigh its costs; rather, it requires that the
Commission ``consider'' the costs and benefits of its action. Section
15(a) further specifies that the costs and benefits shall be evaluated
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 futures markets; (3) price
discovery; (4) sound risk management practices; and (5) other public
interest considerations.
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\8\ 7 U.S.C.19(a).
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The bulk of the costs imposed by the requirements of Commission
Rule 36.3 relate to significant and increased information-submission
and reporting requirements adopted in response to the Reauthorization
Act's directive that the Commission take an active role in determining
whether contracts listed by ECMs qualify as SPDCs. The enhanced
requirements for ECMs will permit the Commission to acquire the
information it needs to discharge its newly mandated responsibilities
and to ensure that ECMs with SPDCs are identified as entities with the
elevated status of registered entity under the CEA and are in
compliance with the statutory terms of the core principles of section
2(h)(7)(C) of the Act. The primary benefit to the public is to enable
the Commission to discharge its statutory obligation to monitor for the
presence of SPDCs and extend its oversight to the trading of SPDCs.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \9\ requires that agencies
consider the impact of their rules on small businesses. The
requirements of part 36 affect exempt commercial markets. The
Commission previously has determined that exempt commercial markets are
not small entities for purposes of the RFA.\10\ Accordingly, the
Chairman, on behalf of the Commission, hereby certifies pursuant to 5
U.S.C. 605(b) that this Order, taken in connection with the part 36
rules, will not have a significant economic impact on a substantial
number of small entities.
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\9\ 5 U.S.C. 601 et seq.
\10\ 66 FR 42256, 42268 (Aug. 10, 2001).
Issued in Washington, DC on June 9, 2009 by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-13871 Filed 6-11-09; 8:45 am]
BILLING CODE 6351-01-P
