CFTC Notice of Proposed Order and Request for Comment on a Petition from Certain ISOs and RTOs to Exempt Specified Transactions Authorized by a Tariff or Protocol

In response to a petition from certain Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), the CFTC approved a proposed order that would exempt certain specified transactions of the RTOs and ISOs from the provisions of the CEA and CFTC regulations. The proposed order would exempt contracts, agreements and transactions for the purchase or sale of limited electricity-related products.

To be eligible for the exemption, the transactions would have to be entered into by "appropriate persons," as defined in Section 4(c)(3)(A) through (J) of the CEA, or "eligible contract participants," as defined in Section 1a(18) of the CEA and Commission regulation 1.3(m). The order would also exempt persons offering, entering into, or rendering advice/other services with respect to those transactions. In addition, the Commission's general anti-fraud and anti-manipulation enforcement authority and books and records inspection authority will continue to apply.

The comment period will be open for 30 days after publication in the Federal Register.

[Lofchie Comment: The proposed exemption also is intended to serve as an expression of the CFTC's authority. It notes several times that the CFTC's authority over "swaps" is "exclusive," and emphasizes the CFTC's duty to share that authority only when there has been a clear demonstration of the public interest. Chairman Gensler's statement emphasizes that the transactions are "inextricably linked to the physical delivery of electricity," which would suggest they have the elements of a forward.]

Cross-Reference(s): Dodd-Frank Sec. 712; CFTC Rule 23.410(a), (b), 32.4, Part 180; CEA Sec. 4(c)(6), 4(c)(3).

View Notice of Proposed Order in full here (links externally to CFTC website). Additional Materials:CFTC Press Release; CFTC Chairman Gary Gensler's Statement.