External Meetings: Telephone conversation with Ronald Oppenheimer

The participants discussed the application of the swap dealer definition to physical market particiipants, 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" 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).  Concern also was raised that the definition of hedging activity in the proposed speculative postion limit rule did not adequately capture hedges arising from merchandising activity.