CFTC Issues Proposed Rule Reducing Trade Option Obligations For End-Users

On May 7, 2015, the Commodity Futures Trading Commission ("CFTC") published in the Federal Register a proposed rule (the "Proposed Rule") that would reduce the reporting and recordkeeping burdens of end-users engaging in commodity trade options.¹

Under the Commodity Exchange Act, as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("CEA"), the definition of "swap" includes commodity options.²  However, the CFTC issued an interim final rule in April 2012 exempting qualifying commodity options ("trade options") from most swap regulations, subject to certain specified conditions (the "Trade Option Exemption").³  For a commodity option to qualify for the Trade Option Exemption, the commodity option must involve a nonfinancial commodity (i.e., either an exempt commodity, such as energy and metals, or an agricultural commodity) and the parties to the option must satisfy the following three-part test: (i) the offeror of the