Commodity Futures Trading Commission (CFTC) Acting Chairman Caroline D. Pham has announced a new pilot program aimed at increasing liquidity and improving risk management for energy commodity end users in the swaps market. The initiative, developed by the Market Participants Division, also introduces additional reporting requirements to enhance oversight of trading activity.
Acting Chairman Pham said, “Over the past 13 years, energy markets have seen sharply higher price volatility due in part to many dealers exiting CFTC markets to avoid punitive Dodd-Frank costs. This has resulted in less liquidity providers and higher costs per trade, which are passed down to commercial end users like U.S. energy producers, utilities, and ultimately, consumers. By recalibrating outdated regulatory requirements in our energy markets, we can restore opportunities to manage critical business risks involved in powering our cities, factories and homes across America.
“The CFTC’s new pilot program will expand access to energy markets, increase the ability to hedge risks and lower costs, which can unlock potentially billions of dollars of energy savings for U.S. consumers. This is a win for all Americans by unleashing U.S. energy production through less red tape and cutting costs for the entire value chain.”
Deputy Secretary of Energy James P. Danly expressed support for the program: “The Department of Energy supports initiatives that reduce energy prices for Americans, cut unnecessary red tape, and drive forward the energy needed to achieve America’s global AI dominance,” he said. “DOE commends the CFTC’s efforts to reduce regulatory barriers and costs and increase reliability of American energy."
According to details provided by the CFTC, staff have issued a no-action letter establishing that certain Energy Commodity End User Swaps will be excluded from swap dealer de minimis calculations under this pilot program. Participants must submit monthly reports including information on sub-categories of commodities traded, aggregate notional values, and number of counterparties involved so that market oversight can be maintained.
