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Shell Unit Applies to Become Swaps Dealer

Houston-based Shell Trading Risk Management LLC, a unit of Royal Dutch Shell plc, has applied to become a registered swaps dealer, according to a registry kept by the National Futures Association (NFA).

Both the swaps dealer status and NFA membership requested in Shell's application are currently pending, an NFA spokesman told NGI.

BP Energy Co., a unit of BP plc, which filed a similar application in July, has been "provisionally registered," according to NFA. The other 93 entities listed in the registry are traditional financial institutions, some -- Macquarie Energy, for example -- with a clear focus on energy issues.

Large swap market participants -- those meeting an $8 billion de minimis threshold of swap dealing activity -- are required by Dodd-Frank regulations to register with the Commodity Futures Trading Commission (CFTC) (seeDaily GPI, April 19, 2012). The de minimis level is expected to remain in effect during the Dodd-Frank phase-in period and then fall to $3 billion after the CFTC conducts a study on the swap markets.

Energy associations have urged the CFTC not to lower that threshold, saying it would result in commercial end-users being misclassified as swap dealers (see Daily GPI, June 12). The threshold initially started at $100 million when the CFTC approved the proposed rule on swap dealers in December 2010 (see Daily GPI, Dec. 2, 2010). If that had been approved, a greater number of market participants would have been classified as swap dealers and become subject to the Dodd-Frank requirements.

The Dodd-Frank rules have been the target of a number of lawsuits. Last fall, the U.S. Court of Appeals for the District of Columbia Circuit rejected the agency's initial rule on speculative trading, saying that Dodd-Frank "clearly and unambiguously" requires the CFTC to make a finding of necessity prior to imposing position limits. The International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association challenged the rule. It was remanded to the Commission for further consideration (see Daily GPI, Oct. 1, 2012).

The CFTC has appealed the court decision and is said to be working on a new rule (see Daily GPI, May 2). Challenges arguing that the regulations applying to derivatives trading were unlawfully adopted and invalid have been turned away in court decisions this year (see Daily GPI, June 28).

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