Having already pulled the Henry Hub look-alike contract traded on IntercontinentalExchange Inc. (ICE) under its regulatory oversight authority, the Commodity Futures Trading Commission (CFTC) last Monday issued a Notice of Intent to consider whether 13 other natural gas contracts and 11 power contracts offered by ICE should receive similar treatment.
The CFTC said it would determine whether the named contracts, which are based on some of the most heavily traded market locations, “perform significant price discovery functions,” which would subject them to the Commission’s position limit authority, emergency authority and large trader reporting requirements, among others.
The 13 natural gas financial basis contracts are PG&E Citygate; Waha; Malin; HSC; Dominion-South; AECO; Permian; TCO; San Juan; TETCO-M3; Zone 6-NY; Chicago; and NGPL TxOk.
The 11 power contracts are: Mid-C Financial Peak; Mid-C Financial Peak Daily; Mid-C Financial Off-Peak; Mid-C Financial Off-Peak Daily; SP-15 Financial Day-Ahead LMP Peak; SP-15 Financial Day-Ahead LMP Peak Daily; SP-15 Financial Day-Ahead LMP Off-Peak Daily; SP-15 Financial Swap Real Time LMP Peak Daily; SP-15 Financial Day-Ahead LMP Off-Peak; NP-15 Financial Day-Ahead LMP Peak Daily; and NP-15 Financial Day-Ahead LMP Off-Peak Daily.
The CFTC said it is reviewing the contracts based upon its initial evaluation of information provided by ICE, which indicates that each of these contracts appears to satisfy several of the statutory criteria for a significant price discovery determination. The criteria center on the volume of trades and the market’s use of data from those trades. The rule setting out the CFTC’s intention to act in this area became effective in April as Congress started hearings to consider stronger regulation of the financial markets.
Earlier this year the Commission determined that the Henry Hub look-alike contract, Henry Financial LD1 Fixed Price contract, which tracks the Henry Hub futures contract on the New York Mercantile Exchange, performs a significant price discovery function (see NGI, Aug. 3).
The CFTC will accept comments on its notice on the 24 contracts for 15 days following publication of the notice in the Federal Register before making its decision.
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