External Meetings: Meeting with Bunge

Participants discussed the product definitions proposed rulemaking and in particular the proposed guidance regarding the forward contract exclusion.  Bunge takes the position that a forward contract with an embedded option that meets the Commission's past guidance, but includes optionality with respect to volume of the underlying commodity, should qualify for the forward exclusion.  Bunge also described the forward market for grains for barge shipment on the Mississippi River, and noted that commercial participants in other markets may utilize these forwards for risk management purposes. Notwithstanding the participation of these commercials from other markets, Bunge maintained that the Mississippi barge forward market should qualify for the forward exclusion.  Participants also discussed the application of the swap dealer definition to physical market participants, the definition of the phrase "hedge or mitigate commercial risk" in the end-user exception proposed rule and the proposed definition of major swap participant, and the CFTC's proposed definition of hedge in the proposed rule on position limits.  The concern was raised that the exclusion from the definition of "hedge or mitigate commercial risk" in the major swap participant definition for speculative or trading activities, or hedges with respect to speculative or trading activity, could be read to preclude commercial firms that merchandise commodities or act as intermediaries in the supply chain from considering such positions as hedging or mitigating their commercial risk, since merchandising could be considered trading activity (i.e. the merchandiser "trades" the commodity or swaps related thereto).~ ~The timing of the position limits proposal was also discussed.