What Does the Implementation of the Dodd-Frank Act Mean for the Energy Sector?

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When the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was enacted by Congress in July 2010, it was hailed by its proponents as the most comprehensive financial reform since the 1930s. Others viewed it as a needlessly complex and convoluted morass that would disproportionally complicate hedging in markets or industries that were functioning well without expansive regulation – like the energy sector. Broad in scope, the Dodd-Frank Act gave particular attention to regulating the previously unregulated over-the-counter (OTC) market in derivatives trading – a market in swaps that is now estimated to be worth $650 trillion in notional value.

Over the past two years, the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and certain other federal governmental agencies have been proposing and issuing rules designed to implement the provisions of Title VII of the Dodd-Frank Act, applicable to OTC derivatives. Over the last year, the CFTC has finalized numerous rules and proposed others that remain pending or subject to public comment, all of which are of critical importance to companies in the energy and natural resources sectors trading in OTC financial derivatives involving commodities.

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