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Summary of the Rule for Large Trader Reporting for Physical Commodity Swaps

WHAT'S THE RULE? Under Dodd-Frank, large traders are required to report position data for physical commodity swaps and futures directly to the Commodity Futures Trading Commission. The data will be used to implement a new framework to impose position limits on commodity trading, intended to curb excessive speculation that has increased prices for food and oil. The data has to be grouped into price-related sets to calculate the position limits.

WHY IS IT IMPORTANT?  The CFTC is hampered by lack of information in the $600 trillion over-the-counter swaps market, where trades are conducted off exchanges. To help fill this void, Dodd-Frank created a system that requires real-time reporting of data and new framework of repositories to house this data. The large-trader reporting requirement is the first step toward implementing this system.

WHAT DID BETTER MARKETS ARGUE? Better Markets urged the CFTC to expand the fields to be reported by the large dealers to better capture the role they play in the market. We argued that improvements should be made in reporting paired swaps, which are derivatives that are linked to a price of a futures contract. The definition did not capture all contracts and should be expanded. For example, contracts for crude oil have different physical delivery points compared to electric power and those differences should be considered.

WHAT DID THE AGENCY DO? The CFTC dropped the ball in its ruling and missed several opportunities to gather key data from these large traders. The rule, issued July 22, 2011, did not expand the information fields that traders would be required to report. The agency said the information was available from other sources. The CFTC also narrowed its standards for reporting on paired swaps. 

Proposed rule

Final rule

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