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CFTC reviews ICE Henry Financial fixed price contract

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The Commodity Futures Trading Commission is determining whether the Henry Financial LD1 fixed price contract traded on the Intercontinental Exchange performs a significant price discove

The Commodity Futures Trading Commission is determining whether the Henry Financial LD1 fixed price contract traded on the Intercontinental Exchange performs a significant price discovery function.
 
‘Our review of the ICE contract is the Commission’s first use of this important new authority provided by Congress last year. We intend to deploy this authority to the fullest extent possible to promote transparency and guard against fraud, manipulation, and other abuses,’ says CFTC chairman Gary Gensler.  
 
The Commission is undertaking this review based upon its initial evaluation of information provided by ICE which indicates that the ICE Henry Financial LD1 fixed price contract appears to satisfy several of the statutory criteria for a significant price discovery determination.

Following issuance of an order determining that an exempt commercial market (ECM) contract performs a significant price discovery function, the ECM must come into compliance with core principles under the Commodity Exchange Act, the Commission’s Part 36 rules and statutory provisions applicable to registered entities.

These requirements would subject the ECM contract and market participants to the Commission’s position limit and emergency authorities, as well as large trader reporting requirements, among others.
 
Commission rule 36.3(c)(3) became effective on 22 April 2009 and establishes the procedures under which the Commission will make its determination whether a specific transaction, contract or agreement traded on an ECM serves a significant price discovery function. 

The procedures specify that the Commission will publish a notice in the Federal Register that it intends to undertake a determination whether a particular contract performs a price discovery function and receive written data, views, and arguments relevant to its determination from the ECM and other interested persons. After consideration of all relevant information the Commission will issue an order explaining its determination.
 
Comments are due no later than 30 days from the date of Federal Register publication of the Commission’s notice of intent.

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