August 21, 2012

CFTC Issues Proposed Order to Exempt Certain Specified Transactions of Regional Transmission Organizations and Independent System Operators

Washington, DC – The Commodity Futures Trading Commission (CFTC) today approved a proposed order that would exempt certain specified transactions of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) from certain provisions of the Commodity Exchange Act (CEA) and Commission regulations. This order is in response to a petition from certain RTOs and ISOs that are subject to regulation by either the Federal Energy Regulatory Commission (FERC) or the Public Utility Commission of Texas (PUCT). The Commission voted 5 to 0 via seriatim, and the comment period will be open for 30 days after publication in the Federal Register. Comments may be submitted electronically through the Commission’s website at http://comments.cftc.gov.

The proposed order would exempt the purchase or sale of specifically defined “financial transmission rights,” “energy transactions,” “forward capacity transactions,” and “reserve or regulation transactions” that are offered or sold in a market administered by one of the petitioning RTOs or ISOs pursuant to a protocol that has been approved or permitted to take effect by FERC or PUCT. The proposed order also would exempt persons offering, entering into, or rendering advice or other services with respect to those transactions.

To be eligible for the proposed exemption, the transactions would have to be entered into by persons who are “appropriate persons,” as defined in section 4(c)(3)(A) through (J) of the CEA or “eligible contract participants,” as defined in section 1a(18) of the CEA and Commission regulation 1.3(m). Under the proposed order, the Commission’s general anti-fraud, anti-manipulation, enforcement, and books and records inspection authorities will continue to apply. The proposed exemption also would be subject to, among other things, the continuation of information sharing arrangements between the Commission and FERC and between the Commission and PUCT.

Last Updated: August 21, 2012