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Oversight of energy swap dealers should be priority for CFTC, senators say


From the December 6, 2013 issue of Public Power Daily

Originally published December 6, 2013

By Jeannine Anderson
Editor

Vigorous oversight of energy swap dealers should be a top priority for anyone the president nominates to sit on the Commodity Futures Trading Commission, nine Senate Democrats said in a Nov. 25 letter to President Obama.

Better cooperation between the CFTC and the Federal Energy Regulatory Commission also should be a priority, they said.

The senators said they are worried that the departure of CFTC Chairman Gary Gensler and Commissioner Bart Chilton at the end of this year will encourage "some industry interests" to try push the CFTC to roll back or slow down reforms required by the Dodd-Frank Act. In particular, they said, industry is likely to press the commission to "allow major swap dealers in energy and commodities to avoid registration requirements, allowing the possibility of Enron-like unregulated trading to continue outside of the Dodd-Frank Act framework."

The senators said they will "seek assurances from any future nominee that the CFTC will begin working cooperatively with the Federal Energy Regulatory Commission on energy market oversight." The CFTC's "failure to share vital data that FERC needs in order to perorm its duties is unacceptable," they said.

The letter was signed by Sens. Barbara Boxer, California; Maria Cantwell, Washington; Dianne Feinstein, California; Carl Levin, Michigan; Edward J. Markey, Massachusetts; Jeff Merkley, Oregon; Bill Nelson, Florida; Elizabeth Warren, Massachusetts; and Ron Wyden, Oregon.

The president announced in November that he intends to nominate Timothy Massad to replace Chairman Gensler (see Public Power Daily, Nov. 13). He also said he plans to nominate Chris Giancarlo to replace Republican CFTC Commissioner Jill Sommers, who left the agency earlier this year. He has not, however, yet formally submitted these nominations to the Senate and has not announced any candidate to replace Commissioner Chilton, who retired from the CFTC last month.

APPA Senior Government Relations Representative John Godfrey said APPA agrees with the letter’s goal of ensuring better oversight of electricity financial markets and is actively advocating for better coordination and cooperation between the CFTC and FERC. However, he said, the senators' letter to the White House "incorrectly implies that a transaction with an entity that has not registered as a swap dealer is somehow 'Enron-like unregulated trading ... outside the Dodd Frank Act framework.’"

"Every swap transaction into which APPA members enter will be fully reported to the CFTC, and — in so far as margin or clearing requirements do not apply — exceptions are absolutely within the 'framework' of the Dodd-Frank Act, reflecting the end-user exceptions or standards established by the CFTC," he said.

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