CFTC asks whether 17 contracts perform significant price discovery functions

CFTC asks whether 17 contracts perform significant price discovery functions

The US Commodity Futures Trading Commission has issued a notice of intent to undertake a determination whether 17 contracts offered for trading on the IntercontinentalExchange perform significant price discovery functions. 

The contracts are: PB&E Citygate Financial Basis; Waha Financial Basis; Malin Financial Basis; HSC Financial Basis; Dominion-South Financial Basis; AECO Financial Basis; Permian Financial Basis; TCO Financial Basis; San Juan Financial Basis; Tetco-M3 Financial Basis; Zone 6-NY Financial Basis;Chicago Financial Basis; NGPL TxOk Financial Basis; Mid-C Financial Peak; Mid-C Financial Peak Daily; Mid-C Financial Off-Peak; and Mid-C Financial Off-Peak Daily.

The commission is undertaking the review based upon its initial evaluation of information provided by ICE, which indicates that each of these contracts appears to satisfy several of the statutory criteria for a significant price discovery determination specified in Section 2(h)(7) of the Commodity Exchange Act. 

Following issuance of an order determining that a contract traded on an exempt commercial market (ECM) such as ICE performs a significant price discovery function, the ECM must, with respect to that contract, come into compliance with core principles mandated by Section 2(h)(7) of the Act and with other statutory provisions applicable to registered entities. 

These provisions would subject the ECM’s contract or contracts and market participants to the commission’s position limit authority, emergency authority and large trader reporting requirements, among others.

Commission Rule 36.3(c)(3) became effective on 22 April 2009 and establishes the procedures under which the commission will make and issue its determination whether a specific transaction, contract or agreement traded on an ECM serves a significant price discovery function. 

Those procedures specify that the commission will publish notice in the Federal Register that it intends to undertake a determination whether a particular contract serves a significant price discovery function and to receive written data, views and arguments relevant to its determination from the ECM and other interested persons. 

After prompt consideration of all relevant information, the commission will issue an order announcing and explaining its determination.

Comments are due no later than 15 day from the date of publication of the commission’s notice of intent in the Federal Register.

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