NYMEX parent CME Group on Monday sought to ease energy trading customers' concerns that new derivatives market reform regulations could affect the exchange's ClearPort platform.
Amid questions over how transactions on CME's ClearPort platform will work when some new rules take effect on October 12, CME executives said in an open letter to customers that all energy transactions submitted to ClearPort are exempt from the new rules until at least next year.
"This means, among other things, customers can continue conducting business on ClearPort following the October 12 effective date of the product definition rulemaking exactly as they do today without their trades being counted toward their de minimis swap dealing threshold," according to the letter signed by Executive Chairman and President Terry Duffy and CEO Phupinder Gill.
Under the US Commodity Futures Trading Commission's swap dealer rule market players will be classified as swap dealers, and subject to the most extensive derivatives reform rules, if they have a notional amount of swaps in excess of $8 billion annually, a threshold known as the de minimis exemption.
In their letter, Duffy and Gill wrote that CME is working to make sure that any potential changes to ClearPort will have a minimal impact on customers and will be "providing new alternatives for customers who prefer the certainty of futures regulatory treatment throughout the contract lifecycle."
CME announced on September 10 that it would launch more than 200 new natural gas and power derivatives contracts as exchanges scramble to boost their futures product offerings as new swaps reforms come into effect. It also plans to establish new block thresholds that will allow privately negotiated transactions in more than 80 contracts to be treated as futures.
IntercontinentalExchange has said it would transition its cleared swaps products to futures by October 15.
In a speech at the University of Notre Dame on Friday, CFTC Commissioner Scott O'Malia, a Republican, said that the agency's "combination of rules has created a trading environment that has become too complicated and too costly and thus has driven customers to seek protection from the swaps rules by shifting their positions to the futures markets."
O'Malia said it was likely not the intent of the CFTC or of Congress, when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, to create rules that would drive participants from the swaps market.
"[But] I believe the regulatory uncertainty was so great that energy markets voted with their pocketbooks and moved their trading business from the complex regulatory nightmare of the swaps markets to the well-functioning futures markets," O'Malia said.
