Opening Statement of Commissioner Sharon Y. Bowen Before the Second Meeting of the CFTC’s Energy and Environmental Markets Advisory Committee (Washington, DC)

July 29, 2015

Thank you and good morning. It’s good to be here for another meeting of the Energy and Environmental Markets Advisory Committee. And, for those of you who are here from out of town, thank you for braving D.C.’s less than pleasant weather to be here today. We are covering some important topics and I look forward to hearing the views of this Committee.

I have had the benefit of hearing from many end-users, such as farmers, ranchers, energy producers, utilities and manufacturers this past year. I appreciate the time you all devoted to share your concerns and for your continuing commitment to fulfilling vital roles in our economy.

The Commission recently released new guidance regarding forward contracts with embedded optionality. As I have said before, I support the Commission’s efforts to provide legal clarity regarding these products.

And it is important that we provide relief, so that end-users, particularly those in the energy and agricultural spheres, can continue to utilize these contracts for hedging and also have certainty about their treatment.

Yet, I think we need to do more. Options and forward contracts are distinct categories of contracts under the Commodity Exchange Act. If a contract, or some portion of a contract, meets the definition of an ‘option,’ that portion which is an option inherently cannot be a forward contract.

A product that has embedded volumetric optionality, or EVO, may be a forward if the optionality is being utilized as a forward. If, however, an entity attaches EVO to a forward and uses that product as an option, the overall product is not a forward and cannot qualify for the exclusion.

I believe the Commission does have a route for providing the clarity market participants are seeking for these products. I have proposed that the Commission use its exemptive authority to provide an additional, easier solution for obtaining the relief those stakeholders are requesting. I look forward to reviewing the comments the Commission receives and working with my colleagues to see what more we can do.

I also wish to speak briefly about position limits. Nearly eight months ago, we re-opened our comment period on the position limits rule, something we have done quite a bit recently. At that time, I said that I support the reopening of the comment period. But I also said that “we cannot allow this rule to linger indefinitely on our docket. It has been over a year since we re-proposed this rule and nearly four years since it was first proposed.” It has now been nearly another year, spring has turned to late summer, and this rule is still not finalized.

Having reviewed summaries of the comments submitted over the last year on this rule, I think we’ve seen pretty much all the original comments we’re going to see.

In the last comment period, many comments restated previous ones. In some cases, almost identically! So, I get the sense that commentators not only feel strongly about their positions, but want to make sure we hear them loud and clear. And we do.

I therefore do not think it makes sense to re-open the comment period for this rule again, unless it is necessary to seek public input on some new, additional proposals the Commission has for addressing concerns that have been raised. I think we need to buckle down and finish this rule.

Thank you again to the Committee and the sponsorship of Commissioner Giancarlo for providing this opportunity to hear from you.

Last Updated: July 29, 2015