The National Grain and Feed Association (NGFA) said it cautiously supports action taken on April 18 by the Commodity Futures Trading Commission (CFTC) to approve rules intended to exclude from swap-dealer regulation under the Dodd-Frank financial regulatory reform law those commercial end-users – including grain elevators, feed and feed ingredient manufacturers, grain processors and exporters – that offer risk-management tools to hedge physical commodities.
“While we will await publication of the actual text of the regulations before rendering a final judgment, we are encouraged that the CFTC acted to increase significantly the de minimis level of swap activity – to $8 billion annually – that would be necessary before an entity is classified as a swap dealer compared to what initially was proposed,” said Todd E. Kemp, NGFA’s vice president of marketing and corporate treasurer. “We look forward to publication of the CFTC’s rules and will analyze them carefully. And we will continue to work with the agency to help ensure that critically important risk-management tools are not precluded from being used by agribusiness firms and U.S. agricultural producers.”
The NGFA also commended statements made during the public meeting by CFTC Chairman Gary Gensler that end-users other than those genuinely making markets in swaps won’t be required to register as swap dealers, consistent with congressional intent.
For several months, the CFTC has been wrangling with the Dodd-Frank law’s definition of “swap dealer” as part of its so-called entity-definition rules. The NGFA, as well as agricultural producer and commodity organizations, had opposed a narrow reading of the statute under the swap-dealer definition that could have ensnared even country elevators that provide certain risk-management services to producers.
The consequences of being classified as a swap dealer are major, since such firms will be subject to considerable registration, reporting, recordkeeping, business practice, financial standards and other requirements.
The NGFA and other groups had argued that agribusiness firms providing risk-management tools to producers and other agribusinesses in their normal course of business should not be considered swap dealers. The NGFA also had urged the CFTC to set any de minimis level for swap activity sufficiently high to exclude such firms.
The actual language of the CFTC interim final rule is expected to be released by next week.