WASHINGTON — The National Grain and Feed Association (N.G.F.A.) said it “cautiously supports” action taken April 18 by the Commodity Futures Trading Commission (C.F.T.C.) to approve rules intended to exclude from swap-dealer regulation under the Dodd-Frank financial regulatory reform law those commercial end-users — including grain elevators, feed and feed ingredient manufacturers, grain processors and exporters — that offer risk-management tools to hedge physical commodities.
“While we will await publication of the actual text of the regulations before rendering a final judgment, we are encouraged that the C.F.T.C. acted to increase significantly the de minimis level of swap activity — to $8 billion annually — that would be necessary before an entity is classified as a swap dealer compared to what initially was proposed,” said Todd E. Kemp, vice-president of marketing and corporate treasurer for the N.G.F.A. “We look forward to publication of the C.F.T.C.’s rules and will analyze them carefully. And we will continue to work with the agency to help ensure that critically important risk-management tools are not precluded from being used by agribusiness firms and U.S. agricultural producers.”
The N.G.F.A. also commended comments made by Gary Gensler, chairman of the C.F.T.C. Mr. Gensler said end-users other than those genuinely making markets in swaps won’t be required to register as swap dealers, consistent with congressional intent.
For several months, the C.F.T.C. has been wrangling with the Dodd-Frank law’s definition of “swap dealer” as part of its so-called entity-definition rules, and the N.G.F.A. and other groups have argued that agribusiness firms providing risk-management tools to producers and other agribusinesses in their normal course of business should not be considered swap dealers.
The consequences of being classified as a swap dealer are major, since such firms will be subject to considerable registration, reporting, recordkeeping, business practice, financial standards and other requirements.
The actual language of the C.F.T.C. interim final rule is expected to be released by next week.