ICE Moving Cleared Energy Swaps to Futures

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The Intercontinental Exchange (“ICE”), the world’s largest OTC energy marketplace for oil, natural gas and power, has announced that it plans to transition all cleared OTC products listed on its OTC energy market to economically equivalent futures contracts in 2013. The products will continue to be listed and traded on the ICE platform and cleared at ICE Clear Europe. ICE expects the transition to take place seamlessly over a weekend in January 2013 and stated that there will be no change to execution and clearing fees or margin requirements. All uncleared swaps will continue to be listed on the ICE OTC platform, which will register as a swap execution facility, and treated as swaps. The stated reason for the transition of cleared energy swaps to futures contracts is to avoid the increased compliance costs that will soon be imposed on swaps markets by the CFTC’s Dodd-Frank regulations. Futures contracts are explicitly excluded from the definition of “swap” by the Dodd-Frank Act, although many swaps are essentially futures look-alikes. Regulatory approvals of the transition from the CFTC and FSA (U.K.) will be required.

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