Under the Dodd-Frank financial regulatory reform law, the CFTC and Securities and Exchange Commission (SEC) are required to develop and implement regulations governing swaps, which are commodities or financial instruments generally traded over-the-counter rather than on a regulated commodity exchange. Swaps involve the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities or otherwise shifting risks, and are used most commonly in financial instruments.
In addition, the NGFA:
- Opposed the CFTC’s proposal to require bona fide hedgers to submit reports with the agency each day they enter into or maintain a market position that exceeds speculative position limits. The association said that the types of bona fide hedgers involved do not pose the type of systemic financial risks that were targeted by the Dodd-Frank law, and that imposing overly restrictive reporting requirements on bona fide hedgers and end-users “would serve only to increase costs” ultimately shifted to consumers. Instead, the NGFA recommended that the CFTC retain its current requirement that bona fide hedgers report annually to relevant commodity exchanges if they exceed speculative position limits.
- Recommended that the CFTC account for the quantity of enumerated commodities committed to long-term contractual agreements when determining deliverable supply estimates in the calculation of spot-month position limits. Spot month refers to the month a futures contract matures and becomes deliverable. While the agency proposed to exclude deliverable supplies covered under such long-term agreements from its calculations, the NGFA noted that such commodities should be accounted for since they are available to the market at any time, which has become more likely given the use of shipping certificates as the primary mechanism of delivery for grains and oilseeds in satisfaction of an expiring futures contract.