On March 16, 2016, the U.S. Commodity Futures Trading Commission (“CFTC”) approved a final rule that eliminates the reporting and recordkeeping requirements in current CFTC regulations for trade option counterparties that are neither swap dealers nor major swap participants (“Non-SD/MSPs”), including commercial end users that transact trade options in connection with their businesses. Significantly, the final rule eliminates the requirement that such counterparties annually file a Form TO in connection with their trade options, and does not require them, as had been proposed, to notify the CFTC’s Division of Market Oversight (“DMO”) if they enter into trade options that have, or are expected to have, an aggregate notional value in excess of $1 billion in any calendar year. The final rule is effective upon publication in the Federal Register, which occurred on March 21, 2016.

Background -

Commodity options, whether physically or financially settled, are included within the definition of the term “swap” as added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) to the Commodity Exchange Act (“CEA”). However, commodity options that qualify for the trade option exemption are exempt from most requirements applicable to swaps under Dodd-Frank. To qualify for the trade option exemption, a commodity option must involve a nonfinancial commodity (i.e., an exempt or agricultural commodity) and must be...