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ARTICLE · 06 AUGUST 2009

CFTC Designates First Significant Price Discovery Contract

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In May 2008, the Commodity Futures Trading Commission (CFTC) was "reauthorized" by Congress.

United StatesFinance and Banking
David Perlman
David Perlman
William Wolf
William Wolf

In May 2008, the Commodity Futures Trading Commission (CFTC) was "reauthorized" by Congress. In the reauthorization, the CFTC's authority over Exempt Commercial Markets like the IntercontinentalExchange Inc. (ICE), particularly with respect to the trading of Significant Price Discovery Contracts (SPDC), was significantly enhanced. SPDCs are contracts that are linked to existing exchange-traded contracts; are traded on an electronic exchange; and perform a "significant price discovery function." In March of 2009, the CFTC finalized its rulemaking regarding the definition of SPDCs and its process for designating contracts as SPDCs.

On June 9, 2009, the CFTC proposed to designate the Henry Hub Financial LD1 Fixed Price contract as an SPDC and on July 24th it formalized the designation. The CFTC determined that the high daily trading volume, the contract's reliance on the settlement price for NYMEX natural gas futures, and the prevalent use of the contract's prices by

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