Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23679 

Evaluation Criteria: Review Panels, 

convened pursuant to Section V of the 

FFO announcement, will evaluate 

applications based on the following 

criteria, which will be weighted equally: 

1. Merit 

The extent to which Applicants 

demonstrate: 

• A clear understanding of a real or 

persistent problem or an unaddressed 

opportunity and its urgency; 

• Creative or even potentially 

transformative models or solutions and 

how the proposal is different from those 

that are funded by other government 

agencies; 

• A clear understanding of the 

challenges facing the region’s 

entrepreneurs and innovators; 

• A ‘‘roadmap’’ for filling the gaps in 

the research-to-commercialization 

continuum and eliminating obstacles to 

commercialization; and 

• Alignment with EDA investment 

priorities, as described at http:// 

www.eda.gov/InvestmentsGrants/ 

InvestmentPriorities.xml. 

2. Feasibility 

The extent to which Applicants 

demonstrate: 

• A coherent plan to leverage regional 

strengths, mitigate regional weaknesses, 

and capitalize on strategic opportunities 

while minimizing short- and long-term 

threats; 

• A sound strategy to support 

entrepreneurs and innovators at 

appropriate phase(s) of the process, that 

could include assessments for 

commercialization potential, patenting, 

licensing, venture formation, financing, 

and marketing; 

• Adequate financial resources to 

ensure robust institutional capacity, as 

well as access to capital for high-growth 

firms; 

• Strong potential to become selfsustaining, even without significant 

future federal funding; 

• Long-term, broad, and deep 

commitment from private and public 

sector leaders throughout the region, 

and strong participation and buy-in 

from stakeholders; and 

• Qualified personnel that, as a 

group, demonstrate project management 

expertise, as well as demonstrated 

success in protecting, licensing, and 

commercializing intellectual property. 

3. Impact 

The extent to which Applicants 

demonstrate: 

• Quantifiable benefits that go beyond 

the Applicant and benefit the regional 

economy; 

• The extent to which infrastructure 

for commercialization and enterprise 

formation will be enhanced; and 

• A clear understanding of how the 

model or solution could be replicated 

elsewhere. 

Information Session: Please be 

advised that the informational 

teleconferences may be audio-taped and 

the actual recordings or a transcript of 

the actual recording may be made 

available online or otherwise for the 

benefit of prospective applicants unable 

to participate. Prospective applicants 

who participate on the teleconferences 

are deemed to consent to the taping. 

The Department of Commerce PreAward Notification Requirements for 

Grants and Cooperative Agreements: 

Administrative and national policy 

requirements for all Department of 

Commerce awards are applicable to this 

competitive solicitation. These 

requirements may be found in the 

Department of Commerce Pre-Award 

Notification Requirements for Grants 

and Cooperative Agreements, which 

was published in the Federal Register 

on February 11, 2008 (73 FR 7696). This 

notice may be accessed by entering the 

Federal Register volume and page 

number provided in the previous 

sentence at the following Web site: 

http://www.gpoaccess.gov/fr/ 

index.html. 

Paperwork Reduction Act: This 

document contains the following 

collections of information subject to the 

Paperwork Reduction Act (PRA) and 

approved by the Office of Management 

and Budget (OMB): (i) Form ED–900 

(OMB Control No. 0610–0094); (ii) Form 

SF–424 (OMB Control No. 4040–0004); 

(iii) Form SF–424A (OMB Control No. 

4040–0006); (iv) Form SF–424B (OMB 

Control No. 4040–0007); (v) Form SF– 

LLL (OMB Control No. 0348–0046). This 

document contains the following 

collections of information subject to the 

Paperwork Reduction Act (PRA) and 

approved by the Office of Management 

and Budget (OMB): (i) Form ED–900 

(OMB Control No. 0610–0094); (ii) Form 

SF–424 (OMB Control No. 4040–0004); 

(iii) Form SF–424A (OMB Control No. 

4040–0006); (iv) Form SF–424B (OMB 

Control No. 4040–0007); (v) Form SF– 

LLL (OMB Control No. 0348–0046). The 

documents that are listed in section IV.B 

of the FFO announcement have been 

approved by OMB under the following 

respective forms/control numbers. 

Specifically, the Project Narrative, 

Biographies of Key Individuals and 

Letter(s) of commitment from any 

Partner(s) are supplemental information 

requested by Form SF–424 and 

approved under OMB Control No. 4040– 

0004. The Letter(s) of commitment for 

Matching Share; Budget Narrative; 

Facilities and Administrative Cost Rate 

Agreement; and Staffing Plan are 

supplemental information requested by 

Form SF–424A and approved under 

OMB Control No. 4040–0006. The 

collection of a Comprehensive 

Economic Development Strategy is 

requested by ED–900 and approved 

under OMB Control No. 0610–0094. 

Notwithstanding any other provision of 

law, no person is required to respond to, 

nor shall any person be subject to a 

penalty for failure to comply with, a 

collection of information subject to the 

requirements of the PRA unless that 

collection of information displays a 

currently valid OMB control number. 

Executive Order 12866: This notice 

has been determined to be not 

significant for purposes of Executive 

Order 12866. 

Executive Order 13132 (Federalism): 

It has been determined that this notice 

does not contain policies with 

Federalism implications as that term is 

defined in Executive Order 13132. 

Administrative Procedure Act/ 

Regulatory Flexibility Act: Prior notice 

and an opportunity for public comments 

are not required by the Administrative 

Procedure Act or any other law for rules 

concerning grants, benefits, and 

contracts (5 U.S.C. 553(a)(2)). Because 

notice and opportunity for comment are 

not required pursuant to 5 U.S.C. 553 or 

any other law, the analytical 

requirements of the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) are 

inapplicable. Therefore, a regulatory 

flexibility analysis has not been 

prepared. 

Dated: April 29, 2010. 

John R. Fernandez, 

Assistant Secretary of Commerce for 

Economic Development, Economic 

Development Administration. 

[FR Doc. 2010–10433 Filed 5–3–10; 8:45 am] 

BILLING CODE 3510–24–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Order Finding That the ICE Malin 

Financial Basis Contract Traded on the 

IntercontinentalExchange, Inc., Does 

Not Perform a Significant Price 

Discovery Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final orders. 

SUMMARY: On October 9, 2009, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or ‘‘Commission’’) 

published for comment in the Federal 

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23680 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

1 74 FR 52192 (October 9, 2009). 

2 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Public Law 

110–246, 122 Stat. 1624 (June 18, 2008). 

3 7 U.S.C. 1a(29). 

4 74 FR 12178 (Mar. 23, 2009); these rules became 

effective on April 22, 2009. 

5Public Law 110–246 at 13203; Joint Explanatory 

Statement of the Committee of Conference, H.R. 

Rep. No. 110–627, 110 Cong., 2d Sess. 978, 986 

(Conference Committee Report). See also 73 FR 

75888, 75894 (Dec. 12, 2008). 

6For an initial SPDC, ECMs have a grace period 

of 90 calendar days from the issuance of a SPDC 

determination order to submit a written 

demonstration of compliance with the applicable 

core principles. For subsequent SPDCs, ECMs have 

a grace period of 30 calendar days to demonstrate 

core principle compliance. 

7The Commission’s Part 36 rules establish, 

among other things, procedures by which the 

Commission makes and announces its 

determination whether a specific ECM contract 

serves a significant price discovery function. Under 

those procedures, the Commission publishes a 

notice in the Federal Register that it intends to 

undertake a determination whether a specified 

agreement, contract or transaction performs a 

significant price discovery function and to receive 

written data, views and arguments relevant to its 

determination from the ECM and other interested 

persons. 

8 IECA describes itself as an ‘‘association of 

leading manufacturing companies’’ whose 

membership ‘‘represents a diverse set of industries 

including: plastics, cement, paper, food processing, 

brick, chemicals, fertilizer, insulation, steel, glass, 

industrial gases, pharmaceutical, aluminum and 

brewing.’’ WGCEF describes itself as ‘‘a diverse 

group of commercial firms in the domestic energy 

industry whose primary business activity is the 

physical delivery of one or more energy 

commodities to customers, including industrial, 

commercial and residential consumers’’ and whose 

membership consists of ‘‘energy producers, 

marketers and utilities.’’ ICE is an ECM, as noted 

above. EI is an economic consulting firm with 

offices located in Washington, DC, and San 

Francisco, CA. NGSA is an industry association 

comprised of natural gas producers and marketers. 

FERC is an independent federal regulatory agency 

that, among other things, regulates the interstate 

transmission of natural gas, oil and electricity. FIEG 

describes itself as an association of investment and 

commercial banks who are active participants in 

various sectors of the natural gas markets, 

‘‘including acting as marketers, lenders, 

underwriters of debt and equity securities, and 

proprietary investors.’’ The comment letters are 

available on the Commission’s Web site: http:// 

www.cftc.gov/lawandregulation/federalregister/ 

federalregistercomments/2009/09–020.html. 

9FERC stated that the MLN contract is cash 

settled and does not contemplate actual physical 

delivery of natural gas. Accordingly, FERC 

expressed the opinion that a determination by the 

Commission that a contract performs a significant 

price discovery function ‘‘would not appear to 

conflict with FERC’s exclusive jurisdiction under 

Register 1 a notice of its intent to 

undertake a determination whether the 

Malin Financial Basis (‘‘MLN’’) contract, 

traded on the IntercontinentalExchange, 

Inc. (‘‘ICE’’), an exempt commercial 

market (‘‘ECM’’) under sections 2(h)(3)– 

(5) of the Commodity Exchange Act 

(‘‘CEA’’ or the ‘‘Act’’), performs a 

significant price discovery function 

pursuant to section 2(h)(7) of the CEA. 

The Commission undertook this review 

based upon an initial evaluation of 

information and data provided by ICE as 

well as other available information. The 

Commission has reviewed the entire 

record in this matter, including all 

comments received, and has determined 

to issue orders finding that the MLN 

contract does not perform a significant 

price discovery function. Authority for 

this action is found in section 2(h)(7) of 

the CEA and Commission rule 36.3(c) 

promulgated thereunder. 

DATES: Effective date: April 28, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Gregory K. Price, Industry Economist, 

Division of Market Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. Telephone: (202) 418–5515. Email: gprice@cftc.gov; or Susan Nathan, 

Senior Special Counsel, Division of 

Market Oversight, same address. 

Telephone: (202) 418–5133. E-mail: 

snathan@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The CFTC Reauthorization Act of 

2008 (‘‘Reauthorization Act’’) 2

significantly broadened the CFTC’s 

regulatory authority with respect to 

ECMs by creating, in section 2(h)(7) of 

the CEA, a new regulatory category— 

ECMs on which significant price 

discovery contracts (‘‘SPDCs’’) are 

traded—and treating ECMs in that 

category as registered entities under the 

CEA.3 The legislation authorizes the 

CFTC to designate an agreement, 

contract or transaction as a SPDC if the 

Commission determines, under criteria 

established in section 2(h)(7), that it 

performs a significant price discovery 

function. When the Commission makes 

such a determination, the ECM on 

which the SPDC is traded must assume, 

with respect to that contract, all the 

responsibilities and obligations of a 

registered entity under the Act and 

Commission regulations, and must 

comply with nine core principles 

established by new section 2(h)(7)(C). 

On March 16, 2009, the CFTC 

promulgated final rules implementing 

the provisions of the Reauthorization 

Act.4 As relevant here, rule 36.3 

imposes increased information reporting 

requirements on ECMs to assist the 

Commission in making prompt 

assessments whether particular ECM 

contracts may be SPDCs. In addition to 

filing quarterly reports of its contracts, 

an ECM must notify the Commission 

promptly concerning any contract 

traded in reliance on the exemption in 

section 2(h)(3) of the CEA that averaged 

five trades per day or more over the 

most recent calendar quarter, and for 

which the exchange sells its price 

information regarding the contract to 

market participants or industry 

publications, or whose daily closing or 

settlement prices on 95 percent or more 

of the days in the most recent quarter 

were within 2.5 percent of the 

contemporaneously determined closing, 

settlement or other daily price of 

another contract. 

Commission rule 36.3(c)(3) 

established the procedures by which the 

Commission makes and announces its 

determination whether a particular ECM 

contract serves a significant price 

discovery function. Under those 

procedures, the Commission will 

publish notice in the Federal Register 

that it intends to undertake an 

evaluation whether the specified 

agreement, contract or transaction 

performs a significant price discovery 

function and to receive written views, 

data and arguments relevant to its 

determination from the ECM and other 

interested persons. Upon the close of 

the comment period, the Commission 

will consider, among other things, all 

relevant information regarding the 

subject contract and issue an order 

announcing and explaining its 

determination whether or not the 

contract is a SPDC. The issuance of an 

affirmative order signals the 

effectiveness of the Commission’s 

regulatory authorities over an ECM with 

respect to a SPDC; at that time such an 

ECM becomes subject to all provisions 

of the CEA applicable to registered 

entities.5 The issuance of such an order 

also triggers the obligations, 

requirements and timetables prescribed 

in Commission rule 36.3(c)(4).6

II. Notice of Intent To Undertake SPDC 

Determination 

On October 9, 2009, the Commission 

published in the Federal Register notice 

of its intent to undertake a 

determination whether the MLN 

contract performs a significant price 

discovery function and requested 

comment from interested parties.7

Comments were received from the 

Industrial Energy Consumers of America 

(‘‘IECA’’), Working Group of Commercial 

Energy Firms (‘‘WGCEF’’), ICE, 

Economists Incorporated (‘‘EI’’), Natural 

Gas Suppliers Association (‘‘NGSA’’), 

Federal Energy Regulatory Commission 

(‘‘FERC’’), and Financial Institutions 

Energy Group (‘‘FIEG’’).8 The comment 

letter from FERC9 did not directly 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23681 

the Natural Gas Act (NGA) over certain sales of 

natural gas in interstate commerce for resale or with 

its other regulatory responsibilities under the NGA’’ 

and further that, ‘‘the FERC staff will continue to 

monitor for any such conflict * * * [and] advise 

the CFTC’’ should any such potential conflict arise. 

CL 06. 

10 IECA stated that the subject ICE contract should 

‘‘be required to come into compliance with core 

principles mandated by Section 2(h)(7) of the Act 

and with other statutory provisions applicable to 

registered entities. [This contract] should be subject 

to the Commission’s position limit authority, 

emergency authority and large trader reporting 

requirements, among others.’’ CL 01. 

11 In its October 9, 2009, Federal Register release, 

the Commission identified material price reference, 

price linkage and material liquidity as the possible 

criteria for SPDC determination of the MLN 

contract. Arbitrage was not identified as a possible 

criterion. As a result, arbitrage will not be discussed 

further in this document and the associated Order. 

12 17 CFR 36, Appendix A. 

13The term ‘‘hub’’ refers to a juncture where two 

or more natural gas pipelines are connected. Hubs 

also serve as pricing points for natural gas. 

14See http://www.eia.doe.gov/pub/oil_gas/ 

natural_gas/feature_articles/2009/ngmarketcenter/ 

ngmarketcenter.pdf. 

address the issue of whether or not the 

MLN contract is a SPDC; IECA 

concluded that the MLN contract is a 

SPDC, but did not provide a basis for its 

conclusion.10 The other parties’ 

comments raised substantive issues 

with respect to the applicability of 

section 2(h)(7) to the MLN contract, 

generally asserting that the MLN 

contract is not a SPDC as it does not 

meet the material liquidity, material 

price reference and price linkage criteria 

for SPDC determination. Those 

comments are more extensively 

discussed below, as applicable. 

III. Section 2(h)(7) of the CEA 

The Commission is directed by 

section 2(h)(7) of the CEA to consider 

the following criteria in determining a 

contract’s significant price discovery 

function: 

• Price Linkage—the extent to which 

the agreement, contract or transaction 

uses or otherwise relies on a daily or 

final settlement price, or other major 

price parameter, of a contract or 

contracts listed for trading on or subject 

to the rules of a designated contract 

market (‘‘DCM’’) or derivatives 

transaction execution facility (‘‘DTEF’’), 

or a SPDC traded on an electronic 

trading facility, to value a position, 

transfer or convert a position, cash or 

financially settle a position, or close out 

a position. 

• Arbitrage—the extent to which the 

price for the agreement, contract or 

transaction is sufficiently related to the 

price of a contract or contracts listed for 

trading on or subject to the rules of a 

DCM or DTEF, or a SPDC traded on or 

subject to the rules of an electronic 

trading facility, so as to permit market 

participants to effectively arbitrage 

between the markets by simultaneously 

maintaining positions or executing 

trades in the contracts on a frequent and 

recurring basis. 

• Material price reference—the extent 

to which, on a frequent and recurring 

basis, bids, offers or transactions in a 

commodity are directly based on, or are 

determined by referencing or 

consulting, the prices generated by 

agreements, contracts or transactions 

being traded or executed on the 

electronic trading facility. 

• Material liquidity—the extent to 

which the volume of agreements, 

contracts or transactions in a 

commodity being traded on the 

electronic trading facility is sufficient to 

have a material effect on other 

agreements, contracts or transactions 

listed for trading on or subject to the 

rules of a DCM, DTEF or electronic 

trading facility operating in reliance on 

the exemption in section 2(h)(3). 

Not all criteria must be present to 

support a determination that a 

particular contract performs a 

significant price discovery function, and 

one or more criteria may be inapplicable 

to a particular contract.11 Moreover, the 

statutory language neither prioritizes the 

criteria nor specifies the degree to 

which a SPDC must conform to the 

various criteria. In Guidance issued in 

connection with the Part 36 rules 

governing ECMs with SPDCs, the 

Commission observed that these criteria 

do not lend themselves to a mechanical 

checklist or formulaic analysis. 

Accordingly, the Commission has 

indicated that in making its 

determinations it will consider the 

circumstances under which the 

presence of a particular criterion, or 

combination of criteria, would be 

sufficient to support a SPDC 

determination.12 For example, for 

contracts that are linked to other 

contracts or that may be arbitraged with 

other contracts, the Commission will 

consider whether the price of the 

potential SPDC moves in such harmony 

with the other contract that the two 

markets essentially become 

interchangeable. This co-movement of 

prices would be an indication that 

activity in the contract had reached a 

level sufficient for the contract to 

perform a significant price discovery 

function. In evaluating a contract’s price 

discovery role as a price reference, the 

Commission will consider the extent to 

which, on a frequent and recurring 

basis, bids, offers or transactions are 

directly based on, or are determined by 

referencing, the prices established for 

the contract. 

IV. Findings and Conclusions 

a. The Malin Financial Basis (MLN) 

Contract and the SPDC Indicia 

The ICE MLN contract is cash settled 

based on the difference between the 

bidweek price index of natural gas at the 

Malin hub for the contract-specified 

month of delivery, as published in 

Intelligence Press Inc.’s (‘‘IPI’’) Natural 

Gas Bidweek Survey, and the final 

settlement price for New York 

Mercantile Exchange’s (‘‘NYMEX’s’’) 

Henry Hub physically-delivered natural 

gas futures contract for the same 

specified calendar month. The IPI 

bidweek price, which is published 

monthly, is based on a survey of cash 

market traders who voluntarily report to 

IPI data on their fixed-price transactions 

for physical delivery of natural gas at 

the Malin hub conducted during the last 

five business days of the month; such 

bidweek transactions specify the 

delivery of natural gas on a uniform 

basis throughout the following calendar 

month at the agreed upon rate. The IPI 

bidweek index is published on the first 

business day of the calendar month in 

which the natural gas is to be delivered. 

The size of the MLN contract is 2,500 

million British thermal units (‘‘mmBtu’’), 

and the unit of trading is any multiple 

of 2,500 mmBtu. The MLN contract is 

listed for up to 72 calendar months 

commencing with the next calendar 

month. 

The Henry Hub,13 which is located in 

Erath, Louisiana, is the primary cash 

market trading and distribution center 

for natural gas in the United States. It 

also is the delivery point and pricing 

basis for the NYMEX’s actively traded 

Henry Hub physically-delivered natural 

gas futures contract, which is the most 

important pricing reference for natural 

gas in the United States. The Henry 

Hub, which is operated by Sabine Pipe 

Line, LLC, serves as a juncture for 13 

different pipelines. These pipelines 

bring in natural gas from fields in the 

Gulf Coast region and move it to major 

consumption centers along the East 

Coast and Midwest. The throughput 

shipping capacity of the Henry Hub is 

1.8 trillion mmBtu per day. 

In addition to the Henry Hub, there 

are a number of other locations where 

natural gas is traded. In 2008, there were 

33 natural gas market centers in North 

America.14 Some of the major trading 

centers include Alberta, Northwest 

Rockies, Southern California border and 

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15See http://www.eia.doe.gov/pub/oil_gas/ 

natural_gas/feature_articles/2009/ngmarketcenter/ 

ngmarketcenter.pdf. 

16Basis contracts denote the difference in the 

price of natural gas at a specified location minus the 

price of natural gas at the Henry Hub. The 

differential can be either a positive or negative 

value. 

17As noted above, the Commission did not find 

an indication of arbitrage in connection with this 

contract; accordingly, that criterion is not discussed 

in reference to the MLN contract. 

18The OTC Gas End of Day dataset includes daily 

settlement prices for natural gas contracts listed for 

all points in North America. 

19 17 CFR part 36, Appendix A. 

the Houston Ship Channel. For 

locations that are directly connected to 

the Henry Hub by one or more pipelines 

and where there typically is adequate 

shipping capacity, the price at the other 

locations usually directly tracks the 

price at the Henry Hub, adjusted for 

transportation costs. However, at other 

locations that are not directly connected 

to the Henry Hub or where shipping 

capacity is limited, the prices at those 

locations often diverge from the Henry 

Hub price. Furthermore, one local price 

may be significantly different than the 

price at another location even though 

the two markets’ respective distances 

from the Henry Hub are the same. The 

reason for such pricing disparities is 

that a given location may experience 

supply and demand factors that are 

specific to that region, such as 

differences in pipeline shipping 

capacity, unusually high or low demand 

for heating or cooling or supply 

disruptions caused by severe weather. 

As a consequence, local natural gas 

prices can differ from the Henry Hub 

price by more than the cost of shipping 

and such price differences can vary in 

an unpredictable manner. 

The Malin hub is the entry point 

along the California-Oregon border at 

which natural gas reaches the California 

market. This trading center connects 

with the Gas Transmission Northwest 

interstate pipeline, which carries gas 

from the Canada/Idaho border through 

Washington State and Oregon. A 

connection with the California Gas 

Transmission Company also exists at 

the Malin hub. The Malin hub is 

considered by traders to be an important 

trading center for natural gas. 

The Malin hub is part of the Golden 

Gate Market Center, which is located in 

Northern California. The Golden Gate 

Market Center offers seven different 

transaction points, which are Malin, 

Citygate, Kern River Station, High 

Desert Lateral, Daggett, Southern Trails 

and Topock. The Golden Gate Market 

Center had an estimated throughput 

capacity of two billion cubic feet per 

day in 2008. Moreover, the number of 

pipeline interconnections at the Golden 

Gate Market Center was nine in 2008, 

up from eight in 2003. Lastly, the 

pipeline interconnection capacity of the 

Golden Gate Market Center in 2008 was 

6 billion cubic feet per day, which 

constituted a 32 percent increase over 

the pipeline interconnection capacity in 

2003.15 The Malin hub is far removed 

from the Henry Hub and is not directly 

connected to the Henry Hub by an 

existing pipeline. 

The local price at the Malin hub 

typically differs from the price at the 

Henry Hub. Thus, the price of the Henry 

Hub physically-delivered futures 

contract is an imperfect proxy for the 

Malin price. Moreover, exogenous 

factors, such as adverse weather, can 

cause the Malin gas price to differ from 

the Henry Hub price by an amount that 

is more or less than the cost of shipping, 

making the NYMEX Henry Hub futures 

contract even less precise as a hedging 

tool than desired by market participants. 

Basis contracts 16 allow traders to more 

accurately discover prices at alternative 

locations and hedge price risk that is 

associated with natural gas at such 

locations. In this regard, a position at a 

local price for an alternative location 

can be established by adding the 

appropriate basis swap position to a 

position taken in the NYMEX 

physically-delivered Henry Hub 

contract (or in the NYMEX or ICE Henry 

Hub look-alike contract, which cash 

settle based on the NYMEX physicallydelivered natural gas contract’s final 

settlement price). 

In its October 9, 2009, Federal 

Register notice, the Commission 

identified material price reference, price 

linkage and material liquidity as the 

potential SPDC criteria applicable to the 

MLN contract. Each of these criteria is 

discussed below.17

1. Material Price Reference Criterion 

The Commission’s October 9, 2009, 

Federal Register notice identified 

material price reference as a potential 

basis for a SPDC determination with 

respect to this contract. The 

Commission considered the fact that ICE 

maintains exclusive rights over IPI’s 

bidweek price indices. As a result, no 

other exchange can offer such a basis 

contract based on IPI’s Malin bidweek 

index. While other third-party price 

providers produce natural gas price 

indices for this and other trading 

centers, market participants indicate 

that the IPI Malin bidweek index is 

highly regarded for this particular 

location and should market participants 

wish to establish a hedged position 

based on this index, they would need to 

do so by taking a position in the ICE 

MLN swap since ICE has the right to the 

IPI index for cash settlement purposes. 

In addition, ICE sells its price data to 

market participants in a number of 

different packages which vary in terms 

of the hubs covered, time periods, and 

whether the data are daily only or 

historical. For example, ICE offers the 

‘‘West Gas End of Day’’ and ‘‘OTC Gas 

End of Day’’ 18 packages with access to 

all price data or just current prices plus 

a selected number of months (i.e., 12, 

24, 36 or 48 months) of historical data. 

These two packages include price data 

for the MLN contract. 

The Commission will rely on one of 

two sources of evidence—direct or 

indirect—to determine that the price of 

a contract was being used as a material 

price reference and therefore, serving a 

significant price discovery function.19

With respect to direct evidence, the 

Commission will consider the extent to 

which, on a frequent and recurring 

basis, cash market bids, offers or 

transactions are directly based on or 

quoted at a differential to, the prices 

generated on the ECM in question. 

Direct evidence may be established 

when cash market participants are 

quoting bid or offer prices or entering 

into transactions at prices that are set 

either explicitly or implicitly at a 

differential to prices established for the 

contract in question. Cash market prices 

are set explicitly at a differential to the 

section 2(h)(3) contract when, for 

instance, they are quoted in dollars and 

cents above or below the reference 

contract’s price. Cash market prices are 

set implicitly at a differential to a 

section 2(h)(3) contract when, for 

instance, they are arrived at after adding 

to, or subtracting from the section 

2(h)(3) contract, but then quoted or 

reported at a flat price. With respect to 

indirect evidence, the Commission will 

consider the extent to which the price 

of the contract in question is being 

routinely disseminated in widely 

distributed industry publications—or 

offered by the ECM itself for some form 

of remuneration—and consulted on a 

frequent and recurring basis by industry 

participants in pricing cash market 

transactions. 

Following the issuance of the Federal 

Register release, the Commission further 

evaluated the ICE’s data offerings and 

their use by industry participants. The 

Malin hub is a significant trading center 

for natural gas but is not as important 

as other hubs, such as the PG&E 

Citygate, for pricing natural gas in the 

western half of the U.S. marketplace. 

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20CL 02. 21CL 04. 

22CL 05. 

23CL 06. 

24CL 08. 

25As noted above, IECA expressed the opinion 

that the MLN contract met the criteria for SPDC 

determination but did not provide its reasoning. 

26CL 03. 

27CL 03. 

28CL 05. 

29CL 02. 30Appendix A to the Part 36 rules. 

Although the Malin hub is a major 

trading center for natural gas in the 

United States and, as noted, ICE sells 

price information for the MLN contract, 

the Commission has found upon further 

evaluation that the cash market 

transactions are not being directly based 

or quoted as a differential to the MLN 

contract nor is that contract routinely 

consulted by industry participants in 

pricing cash market transactions and 

thus does not meet the Commission’s 

Guidance for the material price 

reference criterion. Thus, the MLN 

contract does not satisfy the direct price 

reference test for existence of material 

price reference. Furthermore, the 

Commission notes that publication of 

the MLN contract’s prices is not indirect 

evidence material price reference. The 

MLN contract’s prices are published 

with those of numerous other contracts, 

which are of more interest to market 

participants. Due to the less importance 

of the Malin hub, the Commission has 

concluded that traders likely do not 

specifically purchase the ICE data 

packages for the MLN contract’s prices 

and do not consult such prices on a 

frequent and recurring basis in pricing 

cash market transactions. 

i. Federal Register Comments 

As noted above, WGCEF,20 ICE,21

EI,22 NGSA 23 and FIEG 24 addressed the 

question of whether the MLN contract 

met the material price reference 

criterion for a SPDC.25 The commenters 

argued that because the MLN contract is 

cash-settled, it cannot truly serve as an 

independent ‘‘reference price’’ for 

transactions in natural gas at this 

location. Rather, the commenters argue, 

the underlying cash price series against 

which the ICE MLN contract is settled 

(in this case, the IPI bidweek price for 

natural gas at this location) is the 

authentic reference price and not the 

ICE contract itself. The Commission 

believes that this interpretation of price 

reference is too limiting in that it only 

considers the final index value on 

which the contract is cash settled after 

trading ceases. Instead, the Commission 

believes that a cash-settled derivatives 

contract could meet the price reference 

criterion if market participants ‘‘consult 

on a frequent and recurring basis’’ the 

derivatives contract when pricing 

forward, fixed-price commitments or 

other cash-settled derivatives that seek 

to ‘‘lock in’’ a fixed price for some future 

point in time to hedge against adverse 

price movements. As noted above, the 

Malin hub is a significant trading center 

for natural gas in North America. 

However, traders do not consider the 

Malin hub to be as important as other 

natural gas trading points, particularly 

the nearby PG&E Citygate. 

ICE argued that the Commission 

appeared to base the case that the MLN 

contract is potentially a SPDC on two 

disputable assertions. First, in issuing 

its notice of intent to determine whether 

the MLN contract is a SPDC, the CFTC 

cited a general conclusion in its ECM 

Study ‘‘that certain market participants 

referred to ICE as a price discovery 

market for certain natural gas 

contracts.’’ 26 ICE states that CFTC’s 

reason is ‘‘hard to quantify as the ECM 

report does not mention’’ this contract as 

a potential SPDC. ‘‘It is unknown which 

market participants made this statement 

in 2007 or the contracts that were 

referenced.’’ 27 In response to the above 

comment, the Commission notes that it 

cited the ECM study’s general finding 

that some ICE natural gas contracts 

appear to be regarded as price discovery 

markets merely as an indicia that an 

investigation of certain ICE contracts 

may be warranted, and was not 

intended to serve as the sole basis for 

determining whether or not a particular 

contract meets the material price 

reference criterion. 

Second, ICE argued that the 

Commission should not base a 

determination that the MLN contract is 

a SPDC on the fact that this contract has 

the exclusive right to base its settlement 

on the IPI Malin Index price. While the 

Commission acknowledges that there 

are other firms that produce price 

indices for the Malin hub, as it notes 

above, market participants indicate that 

the IPI Index is very highly regarded. 

However, since the Malin hub is not 

considered the predominant pricing 

point for natural gas in the upper 

Northwest, it is likely that cash market 

participants do not consult the MLN 

contract’s prices on a frequent and 

recurring basis in pricing cash market 

transactions. 

Both EI 28 and WGCEF 29 stated that 

publication of price data in a package 

format is a weak justification for 

material price reference. These 

commenters argue that market 

participants generally do not purchase 

ICE data sets for one contract’s prices, 

such as those for the MLN contract. 

Instead, traders are interested in the 

settlement prices, so the fact that ICE 

sells the MLN prices as part of a broad 

package is not conclusive evidence that 

market participants are buying the ICE 

data sets because they find the MLN 

prices have substantial value to them. 

As mentioned above, the Commission 

notes that publication of the MLN 

contract’s prices is not indirect evidence 

of routine dissemination. The MLN 

contract’s prices are published with 

those of numerous other contracts, 

which are of more interest to market 

participants. Due to the lack of 

importance of the Malin hub, the 

Commission has concluded that traders 

likely do not specifically purchase the 

ICE data packages for the MLN 

contract’s prices and do not consult 

such prices on a frequent and recurring 

basis in pricing cash market 

transactions. 

ii. Conclusion Regarding Material Price 

Reference 

Based on the above, the Commission 

finds that the MLN contract does not 

meet the material price reference 

criterion because cash market 

transactions are not priced on a frequent 

and recurring basis at a differential to 

the MLN contract’s price (direct 

evidence). Moreover, while the ECM 

sells the MLN contract’s price data to 

market participants, market participants 

likely do not specifically purchase the 

ICE data packages for the MLN 

contract’s prices and do not consult 

such prices on a frequent and recurring 

basis in pricing cash market transactions 

(indirect evidence). 

2. Price Linkage Criterion 

In its October 9, 2009, Federal 

Register notice, the Commission 

identified price linkage as a potential 

basis for a SPDC determination with 

respect to the MLN contract. In this 

regard, the final settlement of the MLN 

contract is based, in part, on the final 

settlement price of the NYMEX’s Henry 

Hub physically-delivered natural gas 

futures contract, where the NYMEX is 

registered with the Commission as a 

DCM. 

The Commission’s Guidance on 

Significant Price Discovery Contracts 30

notes that a ‘‘price-linked contract is a 

contract that relies on a contract traded 

on another trading facility to settle, 

value or otherwise offset the pricelinked contract.’’ Furthermore, the 

Guidance notes that ‘‘[f]or a linked 

contract, the mere fact that a contract is 

linked to another contract will not be 

sufficient to support a determination 

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31The MLN contract is one-quarter the size of the 

NYMEX Henry Hub physically-delivered futures 

contract. 

32As noted above, IECA expressed the opinion 

that the MLN contract met the criteria for SPDC 

determination but did not provide its reasoning. 

33Staff has advised the Commission that in its 

experience, a thinly-traded contract is, generally, 

one that has a quarterly trading volume of 100,000 

contracts or less. In this regard, in the third quarter 

of 2009, physical commodity futures contracts with 

trading volume of 100,000 contracts or fewer 

constituted less than one percent of total trading 

volume of all physical commodity futures contracts. 

34 In establishing guidance to illustrate how it 

will evaluate the various criteria, or combinations 

of criteria, when determining whether a contract is 

a SPDC, the Commission made clear that ‘‘material 

liquidity itself would not be sufficient to make a 

determination that a contract is a [SPDC], * * * but 

combined with other factors it can serve as a 

guidepost indicating which contracts are 

functioning as [SPDCs].’’ For the reasons discussed 

above, the Commission has found that the MLN 

contract does not meet either the price linkage or 

material price reference criterion. In light of this 

finding and the Commission’s Guidance cited 

above, there is no need to evaluate further the 

material liquidity criteria since it cannot be used 

alone as a basis for a SPDC determination. 

35As noted above, IECA expressed the opinion 

that the MLN contract met the criteria for SPDC 

determination but did not provide its reasoning. 

36CL 02. 

37CL 04. 

38CL 05. 

that a contract performs a significant 

price discovery function. To assess 

whether such a determination is 

warranted, the Commission will 

examine the relationship between 

transaction prices of the linked contract 

and the prices of the referenced 

contract. The Commission believes that 

where material liquidity exists, prices 

for the linked contract would be 

observed to be substantially the same as, 

or move substantially in conjunction 

with, the prices of the referenced 

contract.’’ The Guidance proposes a 

threshold price relationship such that 

prices of the ECM linked contract will 

fall within a 2.5 percent price range for 

95 percent of contemporaneously 

determined closing, settlement or other 

daily prices over the most recent 

quarter. Finally, the Commission also 

stated in the Guidance that it would 

consider a linked contract that has a 

trading volume equivalent to 5 percent 

of the volume of trading in the contract 

to which it is linked to have sufficient 

volume potentially to be deemed a 

SPDC (‘‘minimum threshold’’). 

To assess whether the MLN contract 

meets the Price Linkage criterion, 

Commission staff obtained price data 

from ICE and performed the statistical 

tests cited above. Staff found that, while 

the Malin price is determined, in part, 

by the final settlement price of the 

NYMEX physically-delivered natural 

gas futures contract (a DCM contract), 

the Malin price is not within 2.5 percent 

of the settlement price of the 

corresponding NYMEX Henry Hub 

natural gas futures contract on 95 

percent or more of the days. 

Specifically, during the third quarter of 

2009, 10 percent of the Malin hub 

natural gas prices derived from the ICE 

basis values were within 2.5 percent of 

the daily settlement price of the NYMEX 

Henry Hub futures contract. In addition, 

staff finds that the MLN contract fails to 

meet the volume threshold requirement. 

In particular, the total trading volume in 

the NYMEX Natural Gas contract during 

the third quarter of 2009 was 14,022,963 

contracts, with 5 percent of that number 

being 701,148 contracts. The number of 

trades on the ICE centralized market in 

the MLN contract during the same 

period was 54,759 contracts (equivalent 

to 13,690 NYMEX contracts, given the 

size difference).31 Thus, centralizedmarket trades in the MLN contract 

amounted to less than the minimum 

threshold. 

i. Federal Register Comments 

WGCEF, ICE, EI, NGSA and FIEG 

addressed the question of whether the 

MLN contract met the price linkage 

criterion for a SPDC.32 Each of the 

commenters expressed the opinion that 

the MLN contract did not appear to 

meet the above-discussed Commission 

guidance regarding the price 

relationship and/or the minimum 

volume threshold relative to the DCM 

contract to which the MLN is linked. 

Based on its analysis discussed above, 

the Commission agrees with this 

assessment. 

ii. Conclusion Regarding the Price 

Linkage Criterion 

The Commission finds that the MLN 

contract does not meet the price linkage 

criterion because it fails the volume and 

price linkage tests provided for in the 

Commission’s Guidance. 

3. Material Liquidity Factor 

As noted above, in its October 9, 

2009, Federal Register notice, the 

Commission identified material price 

reference, price linkage and material 

liquidity as potential criteria for SPDC 

determination of the MLN contract. To 

assess whether a contract meets the 

material liquidity criterion, the 

Commission first examines trading 

activity as a general measurement of the 

contract’s size and potential importance. 

If the Commission finds that the 

contract in question meets a threshold 

of trading activity that would render it 

of potential importance, the 

Commission will then perform a 

statistical analysis to measure the effect 

that the prices of the subject contract 

potentially may have on prices for other 

contracts listed on an ECM or a DCM. 

Based upon on a required quarterly 

filing made by ICE on July 27, 2009, the 

total number of MLN trades executed on 

ICE’s electronic trading platform was 

664 in the second quarter of 2009, 

resulting in a daily average of 10.4 

trades. During the same period, the 

MLN contract had a total trading 

volume on ICE’s electronic trading 

platform of 59,564 contracts and an 

average daily trading volume of 930.7 

contracts. The open interest as of June 

30, 2009, was 65,804 contracts, which 

includes trades executed on ICE’s 

electronic trading platform, as well as 

trades executed off of ICE’s electronic 

trading platform and then brought to 

ICE for clearing. 

In a subsequent filing dated 

November 13, 2009, ICE reported that 

686 separate trades occurred on its 

electronic platform in the third quarter 

of 2009, resulting in a daily average of 

10.4 trades. During the same period, the 

MLN contract had a total trading 

volume on its electronic platform of 

54,759 contracts (which was an average 

of 830 contracts per day). As of 

September 30, 2009, open interest in the 

MLN contract was 57,332 contracts. 

Reported open interest included 

positions resulting from trades that were 

executed on ICE’s electronic platform, 

as well as trades that were executed off 

of ICE’s electronic platform and brought 

to ICE for clearing. 

As indicated above, the average 

number trades per day in the second 

and third quarters of 2009 was only 

slightly above the minimum reporting 

level (5 trades per day). Moreover, 

trading activity in the MLN contract, as 

characterized by total quarterly volume, 

indicates that the MLN contract 

experiences trading activity similar to 

that of other thinly-traded contracts.33

Thus, the MLN contract does not meets 

a threshold of trading activity that 

would render it of potential importance 

and no additional statistical analysis is 

warranted.34

i. Federal Register Comments 

As noted above, WGCEF, ICE, EI, 

NGSA and FIEG addressed the question 

of whether the MLN contract met the 

material liquidity criterion for a SPDC.35

These commenters stated that the MLN 

contract does not meet the material 

liquidity criterion for SPDC 

determination for a number of reasons. 

WGCEF,36 ICE 37 and EI 38 noted that 

the Commission’s Guidance had posited 

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39CL 08. 

40CL 06. 

41 73 FR 75892 (December 12, 2008). 

42 In addition, both EI and ICE stated that the 

trades-per-day statistics that it provided to the 

Commission in its quarterly filing and which were 

cited in the Commission’s October 9, 2009, Federal 

Register notice includes 2(h)(1) transactions, which 

were not completed on the electronic trading 

platform and should not be considered in the SPDC 

determination process. The Commission staff asked 

ICE to review the data it sent in its quarterly filings; 

ICE confirmed that the volume data it provided and 

which the Commission cited includes only 

transaction data executed on ICE’s electronic 

trading platform. As noted above, supplemental 

data supplied by ICE confirmed that block trades 

are in addition to the trades that were conducted 

on the electronic platform; block trades comprise 

about 55 percent of all transactions in the MLN 

contract. The Commission acknowledges that the 

open interest information it provided in its October 

9, 2009, Federal Register notice includes 

transactions made off the ICE platform. However, 

once open interest is created, there is no way for 

ICE to differentiate between ‘‘on-exchange’’ versus 

‘‘off-exchange’’ created positions, and all such 

positions are fungible with one another and may be 

offset in any way agreeable to the position holder 

regardless of how the position was initially created. 

43See 73 FR 75888, 75893 (Dec. 12, 2008). 

44 44 U.S.C. 3507(d). 

45 7 U.S.C. 19(a). 

concepts of liquidity that generally 

assumed a fairly constant stream of 

prices throughout the trading day, and 

noted that the relatively low number of 

trades per day in the MLN contract did 

not meet this standard of liquidity. The 

Commission observes that a continuous 

stream of prices would indeed be an 

indication of liquidity for certain 

markets but the Guidance also notes that 

‘‘quantifying the levels of immediacy 

and price concession that would define 

material liquidity may differ from one 

market or commodity to another.’’ 

WGCEF, FIEG 39 and NGSA 40 noted 

that the MLN contract represents a 

differential, which does not affect other 

contracts, including the NYMEX Henry 

Hub contract and physical gas contracts. 

FIEG and WGCEF also noted that the 

MLN contract’s trading volume 

represents only a fraction of natural gas 

trading. 

ICE opined that the Commission 

‘‘seems to have adopted a five trade-perday test to determine whether a contract 

is materially liquid. It is worth noting 

that ICE originally suggested that the 

CFTC use a five trades-per-day 

threshold as the basis for an ECM to 

report trade data to the CFTC.’’ 

Furthermore, FIEG cautioned the 

Commission in using a reporting 

threshold as a measure of liquidity. In 

this regard, the Commission adopted a 

five trades-per-day threshold as a 

reporting requirement to enable it to 

‘‘independently be aware of ECM 

contracts that may develop into 

SPDCs’’ 41 rather than solely relying 

upon an ECM on its own to identify any 

such potential SPDCs to the 

Commission. Thus, any contract that 

meets this threshold may be subject to 

scrutiny as a potential SPDC but this 

does not mean that the contract will be 

found to be a SPDC merely because it 

met the reporting threshold. 

ICE and EI proposed that the statistics 

provided by ICE were misinterpreted 

and misapplied by the Commission. In 

particular, ICE stated that the volume 

figures used in the Commission’s 

analysis (cited above) ‘‘include trades 

made in all months of each contract’’ as 

well as in strips of contract months, and 

a ‘‘more appropriate method of 

determining liquidity is to examine the 

activity in a single traded month or strip 

of a given contract.’’ 42 A similar 

argument was made by EI, which 

observed that the five-trades-per-day 

number ‘‘is highly misleading * * * 

because the contracts can be offered for 

as long as 120 months, [thus] the 

average per day for an individual 

contract may be less than 1 per day.’’ 

It is the Commission’s opinion that 

liquidity, as it pertains to the MLN 

contract, is typically a function of 

trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the ICE MLN contract 

itself would be considered liquid. In any 

event, in light of the fact that the 

Commission has found that the MLN 

contract does not meet the material 

price reference or price linkage criteria, 

according to the Commission’s 

Guidance, it would be unnecessary to 

evaluate whether the MLN contract 

meets the material liquidity criterion 

since it cannot be used alone for SPDC 

determination. 

ii. Conclusion Regarding Material 

Liquidity 

For the reasons discussed above, the 

Commission does not find evidence that 

the MLN contract meets the material 

liquidity criterion. 

4. Overall Conclusion Regarding the 

MLN Contract 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the MLN contract does 

not perform a significant price discovery 

function under the criteria established 

in section 2(h)(7) of the CEA. 

Specifically, the Commission has 

determined that the MLN contract does 

not meet the material price reference, 

price linkage and material liquidity 

criteria at this time. Accordingly, the 

Commission will issue the attached 

Order declaring that the MLN contract 

is not a SPDC. Issuance of this Order 

indicates that the Commission does not 

at this time regard ICE as a registered 

entity in connection with its MLN 

contract.43 Accordingly, with respect to 

its MLN contract, ICE is not required to 

comply with the obligations, 

requirements and timetables prescribed 

in Commission rule 36.3(c)(4) for ECMs 

with SPDCs. However, ICE must 

continue to comply with the applicable 

reporting requirements. 

V. Related Matters 

a. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 44 imposes certain requirements 

on Federal agencies, including the 

Commission, in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA. 

Certain provisions of Commission rule 

36.3 impose new regulatory and 

reporting requirements on ECMs, 

resulting in information collection 

requirements within the meaning of the 

PRA. OMB previously has approved and 

assigned OMB control number 3038– 

0060 to this collection of information. 

b. Cost-Benefit Analysis 

Section 15(a) of the CEA 45 requires 

the Commission to consider the costs 

and benefits of its actions before issuing 

an order under the Act. By its terms, 

section 15(a) does not require the 

Commission to quantify the costs and 

benefits of an order or to determine 

whether the benefits of the order 

outweigh its costs; rather, it requires 

that the Commission ‘‘consider’’ the 

costs and benefits of its actions. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission may in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

order is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or 

accomplish any of the purposes of the 

Act. 

When a futures contract begins to 

serve a significant price discovery 

function, that contract, and the ECM on 

which it is traded, warrants increased 

oversight to deter and prevent price 

manipulation or other disruptions to 

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46 5 U.S.C. 601 et seq. 

47 66 FR 42256, 42268 (Aug. 10, 2001). 48 7 U.S.C. 1a(29). 

1 74 FR 42052 (August 20, 2009). 

2 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Public Law 

110–246, 122 Stat. 1624 (June 18, 2008). 

market integrity, both on the ECM itself 

and in any related futures contracts 

trading on DCMs. An Order finding that 

a particular contract is a SPDC triggers 

this increased oversight and imposes 

obligations on the ECM calculated to 

accomplish this goal. The increased 

oversight engendered by the issue of a 

SPDC Order increases transparency and 

helps to ensure fair competition among 

ECMs and DCMs trading similar 

products and competing for the same 

business. Moreover, the ECM on which 

the SPDC is traded must assume, with 

respect to that contract, all the 

responsibilities and obligations of a 

registered entity under the CEA and 

Commission regulations. Additionally, 

the ECM must comply with nine core 

principles established by section 2(h)(7) 

of the Act—including the obligation to 

establish position limits and/or 

accountability standards for the SPDC. 

Section 4(i) of the CEA authorize the 

Commission to require reports for 

SPDCs listed on ECMs. These increased 

responsibilities, along with the CFTC’s 

increased regulatory authority, subject 

the ECM’s risk management practices to 

the Commission’s supervision and 

oversight and generally enhance the 

financial integrity of the markets. 

The Commission has concluded that 

ICE’s MLN contract, which is the subject 

of the attached Order, is not a SPDC; 

accordingly, the Commission’s Order 

imposes no additional costs and no 

additional statutorily or regulatory 

mandated responsibilities on the ECM. 

c. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 46 requires that agencies 

consider the impact of their rules on 

small businesses. The requirements of 

CEA section 2(h)(7) and the Part 36 

rules affect ECMs. The Commission 

previously has determined that ECMs 

are not small entities for purposes of the 

RFA.47 Accordingly, the Chairman, on 

behalf of the Commission, hereby 

certifies pursuant to 5 U.S.C. 605(b) that 

these Orders, taken in connection with 

section 2(h)(7) of the Act and the Part 

36 rules, will not have a significant 

impact on a substantial number of small 

entities. 

VI. Order 

a. Order Relating to the Malin Financial 

Basis Contract 

After considering the complete record 

in this matter, including the comment 

letters received in response to its 

request for comments, the Commission 

has determined to issue the following 

Order: 

The Commission, pursuant to its 

authority under section 2(h)(7) of the 

Act, hereby determines that the Malin 

Financial Basis contract, traded on the 

IntercontinentalExchange, Inc., does not 

at this time satisfy the material price 

reference, price linkage or material 

liquidity criteria for significant price 

discovery contracts. Consistent with this 

determination, the 

IntercontinentalExchange, Inc., is not 

considered a registered entity 48 with 

respect to the Malin Financial Basis 

contract and is not subject to the 

provisions of the Commodity Exchange 

Act applicable to registered entities. 

Further, the obligations, requirements 

and timetables prescribed in 

Commission rule 36.3(c)(4) governing 

core principle compliance by the 

IntercontinentalExchange, Inc., are not 

applicable to the Malin Financial Basis 

contract with the issuance of this Order. 

This Order is based on the 

representations made to the 

Commission by the 

IntercontinentalExchange, Inc., dated 

July 27, 2009, and November 13, 2009, 

and other supporting material. Any 

material change or omissions in the 

facts and circumstances pursuant to 

which this order is granted might 

require the Commission to reconsider its 

current determination that the Malin 

Financial Basis contract is not a 

significant price discovery contract. 

Additionally, to the extent that it 

continues to rely upon the exemption in 

Section 2(h)(3) of the Act, the 

IntercontinentalExchange, Inc., must 

continue to comply with all of the 

applicable requirements of Section 

2(h)(3) and Commission Regulation 

36.3. 

Issued in Washington, DC on April 28, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. 2010–10306 Filed 5–3–10; 8:45 am] 

BILLING CODE P 

COMMODITY FUTURES TRADING 

COMMISSION 

Order Finding That the Carbon 

Financial Instrument Contract Offered 

for Trading on the Chicago Climate 

Exchange, Inc. Does Not Perform a 

Significant Price Discovery Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final order. 

SUMMARY: On August 20, 2009, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or ‘‘Commission’’) 

published for comment in the Federal 

Register 1 a notice of its intent to 

undertake a determination whether the 

Carbon Financial Instrument (‘‘CFI’’) 

contract offered for trading on the 

Chicago Climate Exchange, Inc. (‘‘CCX’’), 

an exempt commercial market (‘‘ECM’’) 

under Section 2(h)(3)–(5) of the 

Commodity Exchange Act (‘‘CEA’’ or the 

‘‘Act’’), performs a significant price 

discovery function pursuant to section 

2(h)(7) of the CEA. The Commission 

undertook this review based upon an 

initial evaluation of information and 

data provided by CCX. The Commission 

has reviewed public comments and the 

entire record in this matter and has 

determined to issue an order finding 

that the CCX CFI contract, at this time, 

does not perform a significant price 

discovery function. Authority for this 

action is found in section 2(h)(7) of the 

CEA and Commission rule 36.3(c) 

promulgated thereunder. 

DATES: Effective date: April 28, 2010. 

FOR FURTHER INFORMATION CONTACT: Irina 

Leonova, Financial Economist, Division 

of Market Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. Telephone: 

(202) 418–5646. Email: 

ileonova@cftc.gov, or Gregory K. Price, 

Industry Economist, Division of Market 

Oversight, same address. Telephone: 

(202) 418–5515. E-mail: gprice@cftc.gov, 

or Susan Nathan, Senior Special 

Counsel, Division of Market Oversight, 

same address. Telephone: (202) 418– 

5133. E-mail: snathan@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The CFTC Reauthorization Act of 

2008 (‘‘Reauthorization Act’’) 2

significantly broadened the CFTC’s 

regulatory authority with respect to 

ECMs by creating, in section 2(h)(7) of 

the CEA, a new regulatory category— 

ECMs on which significant price 

discovery contracts (‘‘SPDCs’’) are 

traded—and treating ECMs in that 

category as registered entities under the 

CEA. The legislation authorizes the 

CFTC to designate an agreement, 

contract or transaction traded on an 

ECM as a SPDC if the Commission 

determines, under criteria established in 

section 2(h)(7), that it performs a 

significant price discovery function. 

When the Commission makes such a 

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