42380 Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 

1 74 FR 51264 (October 6, 2009). 

DEPARTMENT OF COMMERCE 

International Trade Administration 

[A–427–001] 

Revocation of Antidumping Duty Order 

on Sorbitol From France 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

SUMMARY: On July 1, 2009, the 

Department of Commerce (the 

Department) initiated the sunset review 

of the antidumping duty order on 

sorbitol from France. See Initiation of 

Five-year (‘‘Sunset’’) Review, 74 FR 

31412 (July 1, 2009). Pursuant to section 

751(c) of the Tariff Act of 1930, as 

amended (the Act), the U.S. 

International Trade Commission (the 

Commission) determined that 

revocation of the existing antidumping 

duty order on sorbitol from France 

would not be likely to lead to 

continuation or recurrence of material 

injury to an industry in the United 

States within a reasonably foreseeable 

time. Sorbitol From France; 

Determination, 75 FR 39277 (July 8, 

2010) (ITC Final). Therefore, pursuant to 

section 751(d)(2) of the Act and 19 CFR 

351.222(i)(1)(iii), the Department is 

revoking the antidumping duty order on 

sorbitol from France. 

DATES: Effective Date: August 5, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Steve Bezirganian or Robert James, AD/ 

CVD Operations Office 7, Import 

Administration, International Trade 

Administration, U.S. Department of 

Commerce, 14th Street and Constitution 

Avenue, NW., Washington, DC 20230; 

telephone: (202) 482–1131 and (202) 

482–0649, respectively. 

SUPPLEMENTARY INFORMATION: 

Background 

On April 9, 1982, the Department 

published the antidumping duty order 

on sorbitol from France. See Sorbitol 

From France; Antidumping Duty Order, 

47 FR 15391 (April 9, 1982). On June 29, 

1984, the order was revoked, in part. 

See Sorbitol From France; Revocation in 

Part of Antidumping Duty Order, 49 FR 

26773 (June 29, 1984). On July 1, 2009, 

the Department initiated its most recent 

sunset review of the antidumping duty 

order on sorbitol from France. See 

Initiation of Five-year (‘‘Sunset’’) Review. 

On July 2, 2009, the Commission 

instituted its most-recent five-year 

review of the order. See Sorbitol From 

France, 74 FR 31762 (July 2, 2009). 

As a result of the Department’s sunset 

review, the Department determined that 

revocation of the antidumping duty 

order would be likely to lead to the 

continuation or recurrence of dumping. 

See Sorbitol from France: Final Results 

of Expedited Five-year (Sunset) Review 

of Antidumping Duty Order, 74 FR 

56793 (November 3, 2009). The 

Department notified the Commission of 

the magnitude of the margin likely to 

prevail were the antidumping duty 

order to be revoked. 

On July 8, 2010, the Commission 

published its determination that, 

pursuant to section 751(c) of the Act, 

revocation of the antidumping duty 

order on sorbitol from France would not 

be likely to lead to continuation or 

recurrence of material injury to an 

industry in the United States within a 

reasonably foreseeable time. See ITC 

Final and USITC Publication 4164 (June 

2010), titled Sorbitol from France 

(Investigation No. 731–TA–44 (Third 

Review)). 

Scope of the Order 

The products covered by the order are 

shipments of crystalline sorbitol. 

Crystalline sorbitol is a polyol produced 

by the catalytic hydrogenation of sugars 

(glucose). It is used in the production of 

sugarless gum, candy, groceries, and 

pharmaceuticals. The above-described 

sorbitol is currently classifiable under 

item 2905.44.00 of the Harmonized 

Tariff Schedule of the United States 

(HTSUS). Although the HTSUS 

subheading is provided for convenience 

and customs purposes, the written 

description remains dispositive. 

Determination 

As a result of the determination by the 

Commission that revocation of the 

antidumping duty order is not likely to 

lead to the continuation or recurrence of 

material injury to an industry in the 

United States, the Department, pursuant 

to section 751(d) of the Act, is revoking 

the antidumping duty order on sorbitol 

from France. Pursuant to section 

751(d)(2) of the Act and 19 CFR 

351.222(i)(2)(i), the effective date of 

revocation is August 5, 2009 (i.e., the 

fifth anniversary of the publication in 

the Federal Register of the notice of 

continuation of this order). The 

Department will notify U.S. Customs 

and Border Protection to terminate 

suspension of liquidation and collection 

of cash deposits on entries of the subject 

merchandise entered or withdrawn from 

warehouse on or after August 5, 2009. 

Entries of subject merchandise prior to 

the effective date of revocation will 

continue to be subject to suspension of 

liquidation and antidumping duty 

deposit requirements. The Department 

will complete any pending 

administrative reviews of this order. 

This five-year sunset review and 

notice are in accordance with section 

751(d)(2) of the Act and published 

pursuant to section 777(i)(1) of the Act. 

Dated: July 15, 2010. 

Ronald K. Lorentzen, 

Deputy Assistant Secretary for Import 

Administration. 

[FR Doc. 2010–17800 Filed 7–20–10; 8:45 am] 

BILLING CODE 3510–DS–P 

COMMISSION OF FINE ARTS 

Notice of Meeting 

The next meeting of the U.S. 

Commission of Fine Arts is scheduled 

for 15 July 2010, at 10 a.m. in the 

Commission offices at the National 

Building Museum, Suite 312, Judiciary 

Square, 401 F Street, NW., Washington, 

DC 20001–2728. Items of discussion 

may include buildings, parks and 

memorials. 

Draft agendas and additional 

information regarding the Commission 

are available on our Web site: http:// 

www.cfa.gov. Inquiries regarding the 

agenda and requests to submit written 

or oral statements should be addressed 

to Thomas Luebke, Secretary, U.S. 

Commission of Fine Arts, at the above 

address; by e-mailing staff@cfa.gov; or 

by calling 202–504–2200. Individuals 

requiring sign language interpretation 

for the hearing impaired should contact 

the Secretary at least 10 days before the 

meeting date. 

Dated: July 6, 2010 in Washington, DC. 

Thomas Luebke, 

AIA, Secretary. 

[FR Doc. 2010–17653 Filed 7–20–10; 8:45 am] 

BILLING CODE 6330–01–M 

COMMODITY FUTURES TRADING 

COMMISSION 

Orders Finding That the SP–15 

Financial Day-Ahead LMP Peak 

Contract and SP–15 Financial DayAhead LMP Off-Peak Contract Offered 

for Trading on the 

IntercontinentalExchange, Inc., 

Perform a Significant Price Discovery 

Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final orders. 

SUMMARY: On October 6, 2009, the 

Commodity Futures Trading 

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

published for comment in the Federal 

Register 1 a notice of its intent to 


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2The acronym ‘‘SP’’ stands for ‘‘South Path.’’ 

3The Federal Register notice also requested 

comment on the SP–15 Financial Day-Ahead LMP 

Peak Daily (‘‘SDP’’) contract; SP–15 Financial DayAhead LMP Off-Peak Daily (‘‘SQP’’) contract; SP–15 

Financial Swap Real Time LMP–Peak Daily (‘‘SRP’’) 

contract; NP–15 Financial Day-Ahead LMP Peak 

Daily (‘‘DPN’’) contract and NP–15 Financial DayAhead LMP Off-Peak Daily (‘‘UNP’’) contract; these 

contracts will be addressed in a separate Federal 

Register release. 

4 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Public Law 

No. 110–246, 122 Stat. 1624 (June 18, 2008). 

5 7 U.S.C. 1a(29). 

6 74 FR 12178 (Mar. 23, 2009); these rules became 

effective on April 22, 2009. 

7Public 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). 

8For 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. 

9As noted above, the Federal Register notice also 

requested comment on the SP–15 Financial DayAhead LMP Peak Daily (‘‘SDP’’) contract; SP–15 

Financial Day-Ahead LMP Off-Peak Daily (‘‘SQP’’) 

contract; SP–15 Financial Swap Real Time LMP– 

Peak Daily (‘‘SRP’’) contract; NP–15 Financial DayAhead LMP Peak Daily (‘‘DPN’’) contract and NP– 

15 Financial Day-Ahead LMP Off-Peak Daily 

(‘‘UNP’’) contract. These contracts will be addressed 

in a separate Federal Register release. 

10The 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. 

11FERC is an independent federal regulatory 

agency that, among other things, regulates the 

interstate transmission of natural gas, oil and 

electricity. EPSA describes itself as the ‘‘national 

trade association representing competitive power 

suppliers, including generators and marketers.’’ 

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.’’ 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 

Continued 

undertake a determination whether the 

SP–15 2 Financial Day-Ahead LMP Peak 

(‘‘SPM’’) contract and SP–15 Financial 

Day-Ahead LMP Off-Peak (‘‘OFP’’) 

contract,3 which are listed for trading 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’’), perform 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 SPM and OFP 

contracts 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: July 9, 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’’) 4

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.5 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.6 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.7 The issuance of such an order 

also triggers the obligations, 

requirements and timetables prescribed 

in Commission rule 36.3(c)(4).8

II. Notice of Intent To Undertake SPDC 

Determination 

On October 6, 2009, the Commission 

published in the Federal Register notice 

of its intent to undertake a 

determination whether the SPM and 

OFP contracts 9 perform a significant 

price discovery function and requested 

comment from interested parties.10

Comments were received from the 

Federal Energy Regulatory Commission 

(‘‘FERC’’), Electric Power Supply 

Association (‘‘EPSA’’), Financial 

Institutions Energy Group (‘‘FIEG’’), 

Working Group of Commercial Energy 

Firms (‘‘WGCEF’’), ICE, California Public 

Utilities Commission (‘‘CPUC’’), Edison 

Electric Institute (‘‘EEI’’), Western Power 

Trading Forum (‘‘WPTF’’) and Public 

Utility Commission of Texas 

(‘‘PUCT’’).11 The comment letters from 


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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. CPUC is a ‘‘constitutionally established 

agency charged with the responsibility for 

regulating electric corporations within the State of 

California.’’ EEI is the ‘‘association of shareholderowned electric companies, international affiliates 

and industry associates worldwide.’’ WPTF 

describes itself as a ‘‘broad-based membership 

organization dedicated to encouraging competition 

in the Western power markets * * * WTPF strives 

to reduce the long-run cost of electricity to 

consumers throughout the region while maintaining 

the current high level of system reliability.’’ PUCT 

is the independent organization that oversees the 

Electric Reliability Council of Texas (‘‘ERCOT’’) to 

‘‘ensure nondiscriminatory access to the 

transmission and distribution systems, to ensure the 

reliability and adequacy of the regional electrical 

network, and to perform other essential market 

functions.’’ The comment letters are available on the 

Commission’s Web site: http://www.cftc.gov/ 

lawandregulation/federalregister/ 

federalregistercomments/2009/09–012.html. 

12FERC expressed the opinion that a 

determination by the Commission that either of the 

subject contracts performs a significant price 

discovery function ‘‘would not appear to conflict 

with FERC’s exclusive jurisdiction under the 

Federal Power Act (FPA) over the transmission or 

sale for resale of electric energy in interstate 

commerce or with its other regulatory 

responsibilities under the FPA’’ and further that 

‘‘FERC staff will monitor proposed SPDC 

determinations and advise the CFTC of any 

potential conflicts with FERC’s exclusive 

jurisdiction over RTOs, [(regional transmission 

organizations)], ISOs [(independent system 

operators)] or other jurisdictional entities.’’ 

13 In its October 6, 2009, Federal Register release, 

the Commission identified material price reference 

and material liquidity as the possible criteria for 

SPDC determination of the SPM and OFP contracts. 

Arbitrage and price linkage were not identified as 

possible criteria. As a result, arbitrage and price 

linkage will not be discussed further in this 

document and the associated Orders. 

14 17 CFR 36, Appendix A. 

15An LMP represents the additional cost 

associated with producing an incremental amount 

of electricity. LMPs account for generation costs, 

congestion along the transmission lines, and 

electricity loss. 

16The acronym ‘‘ISO’’ signifies ‘‘Independent 

System Operator,’’ which is an entity that 

coordinates electricity generation and transmission, 

as well as grid reliability, throughout its service 

area. 

FERC12 and PUCT did not directly 

address the issue of whether or not the 

subject contracts are SPDCs. CPUC 

stated that the subject contracts are 

SPDCs but did not provide reasons for 

how the contracts meet the criteria for 

SPDC determination. The remaining 

comment letters raised substantive 

issues with respect to the applicability 

of section 2(h)(7) to the subject contracts 

and generally expressed the opinion 

that the contracts are not SPDCs because 

they do not meet the material price 

reference or material liquidity criteria 

for SPDC determination. These 

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.13 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.14 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 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 

The Commission’s findings and 

conclusions with respect to the SPM 

and OFP contracts are discussed 

separately below. 

a. The SP–15 Financial Day-Ahead LMP 

Peak (SPM) Contract and the SPDC 

Indicia 

The SPM contract is cash settled 

based on the arithmetic average of peakhour, day-ahead locational marginal 

prices (‘‘LMPs’’) 15 posted by the 

California ISO 16 (‘‘CAISO’’) for the SP– 

15 Existing Zone Generation (‘‘EZ Gen’’) 

hub for all peak hours during the 

contract month. The LMPs are derived 

from power trades that result in 

physical delivery. The size of the SPM 

contract is 400 megawatt hours 

(‘‘MWh’’), and the SPM contract is listed 

for up to 110 calendar months. 

In general, electricity is bought and 

sold in an auction setting on an hourly 

basis at various point along the 

electrical grid. An LMP associated with 

a specific hour is derived as a volumeweighted average price of all of the 

transactions where electricity is to be 

supplied and consumed during that 

hour. 

Electricity is traded in a day-ahead 

market as well as a real-time market. 

Typically, the bulk of energy 

transactions occur in the day-ahead 

market. The day-ahead market 

establishes prices for electricity that is 

to be delivered during the specified 

hour on the following day. Day-ahead 

prices are determined based on 

generation and energy transaction 


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17The Pacific Intertie comprises three alternating 

current (‘‘AC’’) lines and one direct current (‘‘DC’’) 

line. Together, these lines comprise the largest 

single electricity transmission program in the 

United States. The northern end of the DC line is 

at the Bonneville Power Administration’s Celilo 

Converter Station, which is just south of The Dalles 

Dam about 90 miles east of Portland. The southern 

end is 846 miles away at the Sylmar Converter 

Station on the northern outskirts of Los Angeles. 

That station is operated by utilities including the 

Los Angeles Department of Water and Power 

(‘‘LADWP’’) and Southern California Edison. The 

AC lines follow generally the same path but 

terminate in Northern California. Only a few parties 

actually own the Intertie, but numerous entities 

have contracts to share its transmission capacity. 

The California-California border is a dividing line 

for Intertie ownership and capacity sharing. 

Depending on seasonal conditions, the Intertie is 

capable of transmitting up to 7,900 MW—4,800 MW 

of AC power (1,600 MW of this amount is in the 

California-Oregon Transmission Project, also known 

as the ‘‘Third AC Line’’) and 3,100 MW of DC power. 

Over the past five years, the limit has ranged 

between about 6,300 MW and 7,900 MW. Most of 

the power transmitted on the Intertie is surplus to 

regional needs, but some firm power also is 

transmitted. See http://www.nwcouncil.org/ 

LIBRARY/2001/2001-11.pdf. 

18The third 500 kV line was installed between 

2003 and 2004 in order to relieve constraints on the 

existing north-south transmission lines. This 

capacity constraint contributed to the California 

energy crisis in 2000 and 2001. See http:// 

www.wapa.gov/sn/ops/transmission/path15/ 

factSheet.pdf. 19 17 CFR 36, Appendix A. 

quotes offered in advance. Because the 

power quotes are dependent on 

estimates of supply and demand, 

electricity needs usually are not 

perfectly satisfied in the day-ahead 

market. In this regard, on the day the 

electricity is transmitted and used, 

auction participants typically realize 

that they bought or sold either too much 

power or too little power. A real-time 

auction is operated to alleviate this 

problem by serving as a balancing 

mechanism. Specifically, electricity 

traders use the real-time market to sell 

excess electricity and buy additional 

power to meet demand. Only a 

relatively small amount of electricity is 

traded in the real-time market as 

compared to the day-ahead market. 

Path 15 is an 84-mile portion of the 

north-south power transmission 

corridor in California, forming part of 

the Pacific AC Intertie and the 

California-Oregon Transmission 

Project.17 Path 15, along with the Pacific 

DC Intertie running far to the east, 

completes an important transmission 

interconnection between the 

hydroelectric plants to the north and the 

fossil fuel plants to the south. Path 15 

currently consists of three lines at 500 

kilovolts (‘‘kV’’) and four lines at 230 

kV.18 The 500 kV lines connect Los 

Banos to Gates (two lines) and Los 

Banos to Midway (one line); all four 230 

kV lines have Gates at one end with the 

other ends terminating at the Panoche 

#1, Panoche #2, Gregg, or McCall 

substations. ‘‘NP–15’’ refers to the 

northern half of Path 15; conversely, 

‘‘SP–15’’ refers to the lower half of Path 

15. 

When the weather is hot in California 

and the Desert Southwest, it is 

comparatively cool in the Pacific 

Northwest. Conversely, when the 

weather is cold in the Pacific Northwest 

it is comparatively warm in California 

and the Desert Southwest. Consumers 

on the West Coast take advantage of 

seasonal weather differences to share 

large amounts of power between the 

Desert Southwest and the Pacific 

Northwest. In the spring and summer, 

when generators (mostly hydroelectric 

plants) generally have surplus power in 

the Northwest and temperatures climb 

in the Southwest, power is shipped 

south to help meet increasing power 

demand, particularly for air 

conditioning. Conversely in the winter, 

when generators in the Southwest 

generally have surplus power and 

temperatures drop in the Northwest, 

power is shipped north to meet 

increasing electricity demand, 

particularly for heating. 

CAISO is charged with operating the 

high-voltage grid in California. Because 

CAISO’s service area is basically the 

entire state of California, it is 

responsible for serving millions of 

businesses and households, particularly 

in the Los Angeles and San Francisco 

areas. CAISO’s current mission is to 

ensure the efficient and reliable 

operation of the power grid, provide fair 

and open transmission access, promote 

environmental stewardship, facilitate 

effective markets, promote 

infrastructure development and support 

the timely and accurate dissemination 

of information. CAISO is responsible for 

operating the hourly auctions in which 

the power is traded, and CAISO 

publishes LMP data on its Web site. 

1. Material Price Reference Criterion 

The Commission’s October 6, 2009, 

Federal Register notice identified the 

SPM contract as a potential SPDC based 

on the material price reference and 

material liquidity statutory criteria. The 

Commission considered the fact that 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 Power of Day’’ package 

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. This package includes 

price data for the SPM contract. 

The Commission also noted that its 

October 2007 Report on the Oversight of 

Trading on Regulated Futures 

Exchanges and Exempt Commercial 

Markets (‘‘ECM Study’’) found that in 

general, market participants view ICE as 

a price discovery market for certain 

electricity contracts. The study did not 

specify which markets performed this 

function; nevertheless, the Commission 

determined that the SPM contract, while 

not mentioned by name in the ECM 

Study, warranted further review. 

The Commission explains in its 

Guidance to the statutory criteria that in 

evaluating a contract under the material 

price reference criterion, it 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. 

The SP–15 power market is a major 

pricing center for electricity on the West 

Coast. Traders, including producers, 

keep abreast of the electricity prices in 

the SP–15 power market when 

conducting cash deals. These traders 

look to a competitively determined 

price as an indication of expected 

values of power at the SP–15 hub when 

entering into cash market transactions 

for electricity, especially those trades 

providing for physical delivery in the 


erowe on DSKG8SOYB1PROD with NOTICES
42384 Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 

20 In addition to referencing ICE prices, firms 

participating in the SP–15 power market may rely 

on other cash market quotes as well as industry 

publications and price indices that are published by 

third-party price reporting firms in entering into 

power transactions. 

21The SDP contract is cash settled based on the 

arithmetic average of peak-hour, day-ahead LMPs 

posted by CAISO for the SP–15 EZ Gen hub for all 

peak hours on the day prior to generation. The 

LMPs are derived from power trades that result in 

physical delivery. The size of the SDP contract is 

400 MWh, and the SDP contract is listed for 75 

consecutive calendar days. 

future. Traders use the ICE SPM 

contract, as well as other ICE power 

contracts, to hedge cash market 

positions and transactions—activities 

which enhance the SPM contract’s price 

discovery utility. The substantial 

volume of trading and open interest in 

the SPM contract appears to attest to its 

use for this purpose. While the SPM 

contract’s settlement prices may not be 

the only factor influencing spot and 

forward transactions, electricity traders 

consider the ICE price to be a critical 

factor in conducting OTC transactions.20

As a result, the SPM contract satisfies 

the direct price reference test. 

The fact that ICE’s SPM monthly 

contract is used more widely as a source 

of pricing information rather than the 

daily contract (i.e., the SDP contract) 21

bolsters the argument that it serves as a 

direct price reference. In this regard, the 

SPM contract prices power at the SP–15 

hub up to almost five years into the 

future. Thus, market participants can 

use the SPM contract to lock-in 

electricity prices far into the future. 

Traders use monthly power contracts 

like the SPM contract to price future 

electric power commitments, where 

such commitments are based on long 

range forecasts of power supply and 

demand. In contrast, the SDP contract is 

listed for a much shorter length of 

time—up to 75 days in the future. As 

generation and usage nears, market 

participants have a better understanding 

of actual power supply and needs. As a 

result, they can modify previouslyestablished hedges with daily contracts, 

like the SDP contract. 

The Commission notes that SP–15 is 

a major trading point for electricity, and 

the SPM contract’s prices are well 

regarded in the industry as indicative of 

the value of power at the SP–15 hub. 

Accordingly, the Commission believes 

that it is reasonable to conclude that 

market participants purchase the data 

packages that include the SPM 

contract’s prices in substantial part 

because the SPM contract’s prices have 

particular value to them. Moreover, 

such prices are consulted on a frequent 

and recurring basis by industry 

participants in pricing cash market 

transactions. In these circumstances, the 

SPM contract meets the indirect price 

reference test. 

i. Federal Register Comments: 

WGCEF, EPSA, WPTF, FIEG, EEI and 

ICE stated that no other contract directly 

references or settles to the SPM 

contract’s price. Moreover, the 

commenters argued that the underlying 

cash price series against which the SPM 

contract is settled (in this case, the 

average day-ahead peak-hour SP–15 

electricity prices over the contract 

month, which is derived from cash 

market transactions) is the authentic 

reference price and not the ICE contract 

itself. The Commission believes that this 

interpretation of price reference is too 

narrow and 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 SP–15 hub is a 

major trading center for electricity in the 

western United States. Traders, 

including producers, keep abreast of the 

prices of the SPM contract when 

conducting cash deals. These traders 

look to a competitively determined 

price as an indication of expected 

values of electricity at the SP–15 hub 

when entering into cash market 

transaction for power, especially those 

trades that provide for physical delivery 

in the future. Traders use the ICE SPM 

contract to hedge cash market positions 

and transactions, which enhances the 

SPM contract’s price discovery utility. 

While the SPM contract’s settlement 

prices may not be the only factor 

influencing spot and forward 

transactions, natural gas traders 

consider the ICE price to be a crucial 

factor in conducting OTC transactions. 

In addition, WGCEF and EPSA stated 

that the publication of price data for the 

SPM contract price is weak justification 

for material price reference. Market 

participants generally do not purchase 

ICE data sets for one contract’s prices, 

such as those for the SPM contract. 

Instead, traders are interested in the 

settlement prices, so the fact that ICE 

sells the SPM prices as part of a broad 

package is not conclusive evidence that 

market participants are buying the ICE 

data sets because they find the SPM 

prices have substantial value to them. 

As noted above, the Commission notes 

that publication of the SPM contract’s 

prices is indirect evidence of routine 

dissemination. The SPM contract’s 

prices, while sold as a package, are of 

particular interest to market 

participants. Thus, the Commission has 

concluded that traders likely 

specifically purchase the ICE data 

packages for the SPM contract’s prices 

and consult such prices on a frequent 

and recurring basis in pricing cash 

market transactions. 

Lastly, EEI argued that the ECM Study 

did not specifically identify the SPM 

contract as a contract that is referred to 

by market participants on a frequent and 

recurring basis. In response, the 

Commission notes that it cited the ECM 

Study’s general finding that some ICE 

electricity contracts appear to be 

regarded as price discovery markets 

merely as indication that an 

investigation of certain ICE contracts 

may be warranted. The ECM Study was 

not intended to serve as the sole basis 

for determining whether or not a 

particular contract meets the material 

price reference criterion. 

ii. Conclusion Regarding Material 

Price Reference: 

The Commission finds that the ICE 

SPM contract meets the material price 

reference criterion because cash market 

transactions are priced either explicitly 

or implicitly on a frequent and recurring 

basis at a differential to the SPM 

contract’s price (direct evidence). 

Moreover, the SPM contract’s price data 

are sold to market participants, and 

those individuals likely purchase the 

ICE data packages specifically for the 

SPM contract’s prices and consult such 

prices on a frequent and recurring basis 

in pricing cash market transactions 

(indirect evidence). 

2. Material Liquidity Criterion 

As noted above, in its October 6, 

2009, Federal Register notice, the 

Commission identified the SPM contract 

as a potential SPDC based on the 

material price reference and material 

liquidity criteria. 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 changes to the subject-contract’s 

prices potentially may have on prices 

for other contracts listed on an ECM or 

a DCM. 

The total number of transactions 

executed on ICE’s electronic platform in 

the SPM contract was 3,235 in the 

second quarter of 2009, resulting in a 

daily average of 50.5 trades. During the 

same period, the SPM contract had a 


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Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 42385 

22 74 FR 51264 (October 6, 2009). 

23Staff 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. 

24Specifically, Commission staff econometrically 

estimated a cointegrated vector autoregression 

(CVAR) model using daily settlement prices. CVAR 

methods permit a dichotomization of the data 

relationships into long run equilibrium components 

(called the cointegration space or cointegrating 

relationships) and a short run component. A CVAR 

model was chosen over the more traditional vector 

autoregression model in levels because the 

statistical properties of the data (lack of stationarity 

and ergodicity) precluded the more traditional 

modeling treatment. Moreover, the statistical 

properties of the data necessitated the modeling of 

the contracts’ prices as a CVAR model containing 

both first differences (to handle stationarity) and an 

error-correction term to capture long run 

equilibrium relationships. The prices were treated 

as a single reduced-form model in order to test 

hypothesis that power prices in the same market 

affect each other. The prices of ICE’s SPM and OFP 

contracts are positively related to each other in a 

cointegrating relationship and display a high level 

of statistical strength. On average, during the 

sample period, each percentage rise in SPM 

contract’s price elicited a 0.7 percent rise in OFP 

contract’s price. 

25 Guidance, supra. 

26 73 FR 75892 (December 12, 2008). 

27 In addition, 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 6, 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 66 percent of all transactions in the SPM 

contract (as of the fourth quarter of 2009). 

Commission acknowledges that the open interest 

information it provided in its October 6, 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. 

total trading volume of 143,717 

contracts and an average daily trading 

volume of 2,245.6 contracts. Moreover, 

open interest as of June 30, 2009, was 

460,583 contracts, which included 

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 this regard, ICE does not 

differentiate between open interest 

created by a transaction executed on its 

trading platform and that created by a 

transaction executed off its trading 

platform.22

In a subsequent filing dated March 24, 

2010, ICE reported that total trading 

volume in the fourth quarter of 2009 

was 311,819 contracts (or 4,797.2 

contracts on a daily basis). In terms of 

number of transactions, 6,199 trades 

occurred in the fourth quarter of 2009 

(95.4 trades per day). As of December 

31, 2009, open interest in the SPM 

contract was 622,503 contracts, which 

included 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. 

The number of trades per day was 

substantial between the second and 

fourth quarters of 2009. In addition, 

trading activity in the SPM contract, as 

characterized by total quarterly volume, 

indicates that the SPM contract 

experiences trading activity that is 

greater than that of thinly-traded futures 

markets.23 Thus, it is reasonable to infer 

that the SPM contract could have a 

material effect on other ECM contracts 

or on DCM contracts. 

To measure the effect that the SPM 

contract potentially could have on 

another ECM contract staff performed a 

statistical analysis 24 using daily 

settlement prices (between July 1, 2008 

and December 31, 2009) for the ICE SPM 

and OFP contracts. The simulation 

suggest that, on average over the sample 

period, a one percent rise in the SPM 

contract’s price elicited a 0.7 percent 

increase in ICE OFP contract’s price. 

i. Federal Register Comments: 

ICE and WGCEF stated that the SPM 

contract lacks a sufficient number of 

trades to meet the material liquidity 

criterion. These two commenters, along 

with WPTF, EPSA, FIEG and EEI argued 

that the SPM contract cannot have a 

material effect on other contracts, such 

as those listed for trading by the New 

York Mercantile Exchange (‘‘NYMEX’’), 

a DCM. The commenters pointed out 

that it is not possible for the SPM 

contract to affect a DCM contract 

because price linkage and the potential 

for arbitrage do not exist. The DCM 

contracts do not cash settle to the SPM 

contract’s price. Instead, the DCM 

contracts and the SPM contract are both 

cash settled based on physical 

transactions, which neither the ECM or 

the DCM contracts can influence. The 

Commission’s statistical analysis shows 

that changes in the ICE SPM contract’s 

price significantly influences the prices 

of other ECM contracts (namely, the 

OFP contract). 

WGCEF and ICE noted that the 

Commission’s Guidance had posited 

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 SPM 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.’’ 25

ICE opined that the Commission 

‘‘seems to have adopted a five trade per 

day test for material liquidity.’’ To the 

contrary, 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’’ 26 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; however, 

the contract will not be found to be a 

SPDC merely because it met the 

reporting threshold. 

ICE argued 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’’ as well as in strips 

of contract months. ICE suggested that a 

more appropriate method of 

determining liquidity is to examine the 

activity in a single traded month of a 

given contract.’’ 27 It is the Commission’s 

opinion that liquidity, as it pertains to 

the SPM contract, is typically a function 

of trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the ICE SPM contract 

itself would be considered liquid. ICE’s 

analysis of its own trade data confirms 

this to be the case for the SPM contract, 

and thus, the Commission believes that 

it applied the statistical data cited above 

in an appropriate manner for gauging 

material liquidity. 

ii. Conclusion Regarding Material 

Liquidity: 

For the reasons discussed above, the 

Commission finds that the SPM satisfies 

the material liquidity criterion. 

Specifically, there is sufficient trading 

activity in the SPM contract to have a 

material effect on ‘‘other agreements, 

contracts or transactions listed for 

trading on or subject to the rules of a 

designated contract market...or an 

electronic trading facility operating in 

reliance on the exemption in section 

2(h)(3) of the Act.’’ 


erowe on DSKG8SOYB1PROD with NOTICES
42386 Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 

28See 73 FR 75888, 75893 (Dec. 12, 2008). 

29The Pacific Intertie comprises three alternating 

current AC lines and one direct current DC line. 

Together, these lines comprise the largest single 

electricity transmission program in the United 

States. The northern end of the DC line is at the 

Bonneville Power Administration’s Celilo Converter 

Station, which is just south of The Dalles Dam 

about 90 miles east of Portland. The southern end 

is 846 miles away at the Sylmar Converter Station 

on the northern outskirts of Los Angeles. That 

station is operated by utilities including LADWP 

and Southern California Edison. The AC lines 

follow generally the same path but terminate in 

Northern California. Only a few parties actually 

own the Intertie, but numerous entities have 

contracts to share its transmission capacity. The 

California-Oregon border is a dividing line for 

Intertie ownership and capacity sharing. Depending 

on seasonal conditions, the Intertie is capable of 

transmitting up to 7,900 MW–4,800 MW of AC 

power (1,600 MW of this amount is in the 

California-Oregon Transmission Project, also known 

as the Third AC Line) and 3,100 MW of DC power. 

Over the past five years, the limit has ranged 

between about 6,300 MW and 7,900 MW. Most of 

the power transmitted on the Intertie is surplus to 

regional needs, but some firm power also is 

transmitted. See http://www.nwcouncil.org/ 

LIBRARY/2001/2001-11.pdf. 

30The third 500 kV line was installed between 

2003 and 2004 in order to relieve constraints on the 

existing north-south transmission lines. This 

capacity constraint contributed to the California 

energy crisis in 2000 and 2001. See http:// 

www.wapa.gov/sn/ops/transmission/path15/ 

factSheet.pdf. 

3. Overall Conclusion Regarding the 

SPM Contract 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the ICE SPM contract 

performs a significant price discovery 

function under two of the four criteria 

established in section 2(h)(7) of the 

CEA. Specifically, the Commission has 

determined that the SPM contract meets 

the material price reference and material 

liquidity criteria at this time. 

Accordingly, the Commission is issuing 

the attached Order declaring that the 

SPM contract is a SPDC. 

Issuance of this Order signals the 

immediate effectiveness of the 

Commission’s authorities with respect 

to ICE as a registered entity in 

connection with its SPM contract,28 and 

triggers the obligations, requirements— 

both procedural and substantive—and 

timetables prescribed in Commission 

rule 36.3(c)(4) for ECMs. 

b. The SP–15 Financial Day-Ahead LMP 

Off-Peak (OFP) Contract and the SPDC 

Indicia 

The OFP contract is cash settled based 

on the arithmetic average of off-peak 

hour, day-ahead LMPs posted by CAISO 

for the SP–15 EZ Gen hub for all peak 

hours during the contract month. The 

LMPs are derived from power trades 

that result in physical delivery. The size 

of the OFP contract is 25 MWh, and the 

SPM contract is listed for up to 86 

calendar months. 

In general, electricity is bought and 

sold in an auction setting on an hourly 

basis at various points along the 

electrical grid. An LMP associated with 

a specific hour is derived as a volumeweighted average price of all of the 

transactions where electricity is to be 

supplied and consumed during that 

hour. 

Electricity is traded in a day-ahead 

market as well as a real-time market. 

Typically, the bulk of energy 

transactions occur in the day-ahead 

market. The day-ahead market 

establishes prices for electricity that is 

to be delivered during the specified 

hour on the following day. Day-ahead 

prices are determined based on 

generation and energy transaction 

quotes offered in advance. Because 

power quotes are dependent on 

estimates of supply and demand, 

electricity needs usually are not 

perfectly satisfied in the day-ahead 

market. Consequently, on the day the 

electricity is transmitted and used, 

auction participants typically realize 

that they bought or sold either too much 

power or too little power. A real-time 

auction is operated to alleviate this 

problem by serving as a balancing 

mechanism. Specifically, electricity 

traders use the real-time market to sell 

excess electricity and buy additional 

power to meet demand. Only a 

relatively small amount of electricity is 

traded in the real-time market as 

compared to the day-ahead market. 

Path 15 is an 84-mile portion of the 

north-south power transmission 

corridor in California, forming part of 

the Pacific AC Intertie and the 

California-Oregon Transmission 

Project.29 Path 15, along with the Pacific 

DC Intertie running far to the east, 

completes an important transmission 

interconnection between the 

hydroelectric plants to the north and the 

fossil fuel plants to the south. Path 15 

currently consists of three lines at 500 

kilovolts (‘‘kV’’) and four lines at 230 

kV.30 The 500 kV lines connect Los 

Banos to Gates (two lines) and Los 

Banos to Midway (one line); all four 230 

kV lines have Gates at one end with the 

other ends terminating at the Panoche 

#1, Panoche #2, Gregg, or McCall 

substations. ‘‘NP–15’’ refers to the 

northern half of Path 15; conversely, 

‘‘SP–15’’ refers to the lower half of Path 

15. 

When the weather is hot in California 

and the Desert Southwest, it is 

comparatively cool in the Pacific 

Northwest. Conversely, when the 

weather is cold in the Pacific Northwest 

it is comparatively warm in California 

and the Desert Southwest. Consumers 

on the West Coast take advantage of 

seasonal weather differences to share 

large amounts of power between the 

Desert Southwest and the Pacific 

Northwest. In the spring and summer, 

when generators (mostly hydroelectric 

plants) generally have surplus power in 

the Northwest and temperatures climb 

in the Southwest, power is shipped 

south to help meet increasing power 

demand, particularly for air 

conditioning. Conversely in the winter, 

when generators in the Southwest 

generally have surplus power and 

temperatures drop in the Northwest, 

power is shipped north to meet 

increasing electricity demand, 

particularly for heating. 

CAISO is charged with operating the 

high-voltage grid in California. Because 

CAISO’s service area is basically the 

entire state of California, it is 

responsible for serving millions of 

businesses and households, particularly 

in the Los Angeles and San Francisco 

areas. CAISO’s current mission is to 

ensure the efficient and reliable 

operation of the power grid, provide fair 

and open transmission access, promote 

environmental stewardship, facilitate 

effective markets, promote 

infrastructure development and support 

the timely and accurate dissemination 

of information. CAISO is also 

responsible for operating the hourly 

auctions in which the power is traded 

and publishing the LMP data on its Web 

site. 

1. Material Price Reference Criterion 

The Commission’s October 6, 2009, 

Federal Register notice identified the 

OFP contract as a potential SPDC based 

on the material price reference and 

material liquidity criteria. The 

Commission considered the fact that 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 Power of Day’’ package 

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. This package includes 

price data for the OFP contract. 

The Commission also noted that its 

October 2007 ECM Study found that in 

general, market participants view ICE as 

a price discovery market for certain 

electricity contracts. The study did not 

specify which markets performed this 

function; nevertheless, the Commission 

determined that the OFP contract, while 

not mentioned by name in the ECM 

Study, warranted further review. 


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Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 42387 

31 17 CFR 36, Appendix A. 

32 In addition to referencing ICE prices, firms 

participating in the SP–15 power market may rely 

on other cash market quotes as well as industry 

publications and price indices that are published by 

third-party price reporting firms in entering into 

power transactions. 

33The SDP contract is cash settled based on the 

arithmetic average of peak-hour, day-ahead LMPs 

posted by CAISO for the SP–15 EZ Gen hub for all 

peak hours on the day prior to generation. The 

LMPs are derived from power trades that result in 

physical delivery. The size of the SDP contract is 

400 MWh, and the SDP contract is listed for 75 

consecutive calendar days. 

The Commission explains in its 

Guidance to the statutory criteria that in 

evaluating a contract under the material 

price reference criterion, it 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.31 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. 

The SP–15 power market is a major 

pricing center for electricity on the West 

Coast. Traders, including producers, 

keep abreast of the electricity prices in 

the SP–15 power market when 

conducting cash deals. These traders 

look to a competitively determined 

price as an indication of expected 

values of power at the SP–15 hub when 

entering into cash market transaction for 

electricity, especially those trades 

providing for physical delivery in the 

future. Traders use the OFP contract, as 

well as other ICE power contracts, to 

hedge cash market positions and 

transactions—activities which enhance 

the OFP contract’s price discovery 

utility. The substantial volume of 

trading and open interest in the OFP 

contract appear to attest to its use for 

this purpose. While the OFP contract’s 

settlement prices may not be the only 

factor influencing spot and forward 

transactions, electricity traders consider 

the ICE price to be a critical factor in 

conducting OTC transactions.32 In these 

circumastances, the OFP contract 

satisfies the direct price reference test. 

The fact that ICE’s OFP monthly 

contract is used more widely as a source 

of pricing information rather than the 

daily contract (i.e., the SQP contract) 33

is further evidence of direct price 

reference. In this regard, OFP contract 

prices power at the SP–15 hub up to six 

years into the future. Thus, market 

participants can use the OFP contract to 

lock-in electricity prices far into the 

future. Traders use monthly power 

contracts like the OFP contract to price 

future power electricity commitments, 

where such commitments are based on 

long range forecasts of power supply 

and demand. In contrast, the SQP 

contract is listed for a much shorter 

length of time—up to 38 days in the 

future. As generation and usage nears, 

market participants have a better 

understanding of actual power supply 

and needs. As a result, they can modify 

previously-established hedges with 

daily contracts, like the SQP contract. 

The Commission notes that SP–15 is 

a major trading point for electricity, and 

the OFP contract’s prices are well 

regarded in the industry as indicative of 

the value of power at the SP–15 hub. 

Accordingly, the Commission believes 

that it is reasonable to conclude that 

market participants purchase the data 

packages that include the OFP contract’s 

prices in substantial part because the 

SPM contract’s prices have particular 

value to them. Moreover, such prices are 

consulted on a frequent and recurring 

basis by industry participants in pricing 

cash market transactions. In light of the 

above, the OFP contract satisfies the 

indirect price reference test. 

i. Federal Register Comments: 

WGCEF, EPSA, WPTF, FIEG, EEI and 

ICE stated that no other contract directly 

references or settles to the OFP 

contract’s price. Moreover, the 

commenters argued that the underlying 

cash price series against which the SPM 

contract is settled (in this case, the 

average day-ahead peak-hour SP–15 

electricity prices over the contract 

month, which is derived from cash 

market transactions) is the authentic 

reference price and not the ICE contract 

itself. The Commission believes that this 

interpretation of price reference is too 

narrow and 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 SP–15 hub is a 

major trading center for electricity in the 

western United States. Traders, 

including producers, keep abreast of the 

prices of the OFP contract when 

conducting cash deals. These traders 

look to a competitively determined 

price as an indication of expected 

values of electricity at the SP–15 hub 

when entering into cash market 

transactions for power, especially those 

trades that provide for physical delivery 

in the future. Traders use the ICE OFP 

contract to hedge cash market positions 

and transactions, which enhances the 

OFP contract’s price discovery utility. 

While the OFP contract’s settlement 

prices may not be the only factor 

influencing spot and forward 

transactions, natural gas traders 

consider the ICE price to be a crucial 

factor in conducting OTC transactions. 

In addition, WGCEF and EPSA stated 

that the publication of price data for the 

OFP contract price is weak justification 

for material price reference. Market 

participants generally do not purchase 

ICE data sets for one contract’s prices, 

such as those for the OFP contract. 

Instead, traders are interested in the 

settlement prices, so the fact that ICE 

sells the OFP prices as part of a broad 

package is not conclusive evidence that 

market participants are buying the ICE 

data sets because they find the OFP 

prices have substantial value to them. 

As noted above, the Commission notes 

that publication of the OFP contract’s 

prices is indirect evidence of routine 

dissemination. The OFP contract’s 

prices, while sold as a package, are of 

particular interest to market 

participants. Thus, the Commission has 

concluded that traders likely purchase 

the ICE data packages specifically for 

the OFP contract’s prices and consult 

such prices on a frequent and recurring 

basis in pricing cash market 

transactions. 

Lastly, EEI argued that the ECM Study 

did not specifically identify the OFP 

contract as a contract that is referred to 

by market participants on a frequent and 

recurring basis. The Commission notes 


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34 74 FR 51264 (October 6, 2009). 

35Staff 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. 

36Specifically, Commission staff econometrically 

estimated a cointegrated vector autoregression 

(CVAR) model using daily settlement prices. CVAR 

methods permit a dichotomization of the data 

relationships into long run equilibrium components 

(called the cointegration space or cointegrating 

relationships) and a short run component. A CVAR 

model was chosen over the more traditional vector 

autoregression model in levels because the 

statistical properties of the data (lack of stationarity 

and ergodicity) precluded the more traditional 

modeling treatment. Moreover, the statistical 

properties of the data necessitated the modeling of 

the contracts’ prices as a CVAR model containing 

both first differences (to handle stationarity) and an 

error-correction term to capture long run 

equilibrium relationships. The prices were treated 

as a single reduced-form model in order to test the 

hypothesis that power prices in the same market 

affect each other. The prices of ICE’s SPM and OFP 

contracts are positively related to each other in a 

cointegrating relationship and display a high level 

of statistical strength. On average during the sample 

period, each percentage rise in OFP contract’s price 

elicited a 1.4 percent rise in SPM contract’s price. 

37 Guidance, supra. 

38 73 FR 75892 (December 12, 2008). 

that it cited the ECM Study’s general 

finding that some ICE electricity 

contracts appear to be regarded as price 

discovery markets merely as indication 

that an investigation of certain ICE 

contracts may be warranted. The ECM 

Study was not intended to serve as the 

sole basis for determining whether or 

not a particular contract meets the 

material price reference criterion. 

ii. Conclusion Regarding Material 

Price Reference: 

The Commission finds that the ICE 

OFP contract meets the material price 

reference criterion because cash market 

transactions are priced either explicitly 

or implicitly on a frequent and recurring 

basis at a differential to the OFP 

contract’s price (direct evidence). 

Moreover, the OFP contract’s price data 

are sold to market participants, and 

those individuals likely purchase the 

ICE data packages specifically for the 

OFP contract’s prices and consult such 

prices on a frequent and recurring basis 

in pricing cash market transactions 

(indirect evidence). 

2. Material Liquidity Criterion 

As noted above, in its October 6, 

2009, Federal Register notice, the 

Commission identified the OFP contract 

as a potential SPDC based on the 

material price reference and material 

liquidity criteria. 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 changes to the subject-contract’s 

prices potentially may have on prices 

for other contracts listed on an ECM or 

a DCM. 

The total number of transactions 

executed on ICE’s electronic platform in 

the OFP contract was 187 in the second 

quarter of 2009, resulting in a daily 

average of 2.9 trades. During the same 

period, the OFP contract had a total 

trading volume of 116,559 contracts and 

an average daily trading volume of 

1,793.2 contracts. Moreover, open 

interest as of June 30, 2009, was 

1,408,870 contracts, which included 

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 this regard, ICE does not 

differentiate between open interest 

created by a transaction executed on its 

trading platform and that created by a 

transaction executed off its trading 

platform.34

In a subsequent filing dated March 24, 

2010, ICE reported that total trading 

volume in the fourth quarter of 2009 

was 406,418 contracts (or 6,252.6 

contracts on a daily basis). In terms of 

number of transactions, 329 trades 

occurred in the fourth quarter of 2009 

(5.1 trades per day). As of December 31, 

2009, open interest in the OFP contract 

was 2,009,556 contracts, which 

included 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. 

The number of trades per day during 

the period between the second and 

fourth quarters of 2009 was not 

substantial. However, trading activity in 

the OFP contract, as characterized by 

total quarterly volume, indicates that 

the OFP contract experiences trading 

activity that is greater than that of 

thinly-traded futures markets.35 Thus, it 

is reasonable to infer that the OFP 

contract could have a material effect on 

other ECM contracts or on DCM 

contracts. 

To measure the effect that the SPM 

contract potentially could have on 

another ECM contract staff performed a 

statistical analysis 36 using daily 

settlement prices (between July 1, 2008 

and December 31, 2009) for the ICE SPM 

and OFP contracts. The simulation 

suggest that, on average over the sample 

period, a one percent rise in the OFP 

contract’s price elicited a 1.4 percent 

increase in ICE SPM contract’s price. 

i. Federal Register Comments: 

ICE and WGCEF stated that the OFP 

contract lacks a sufficient number of 

trades to meet the material liquidity 

criterion. These two commenters, along 

with WPTF, EPSA, FIEG and EEI argued 

that the OFP contract cannot have a 

material effect on other contracts, such 

as those listed for trading by the 

NYMEX. The commenters pointed out 

that it is not possible for the OFP 

contract to affect a DCM contract 

because price linkage and the potential 

for arbitrage do not exist. The DCM 

contracts do not cash settle to the OFP 

contract’s price. Instead, the DCM 

contracts and the OFP contract are both 

cash settled based on physical 

transactions, which neither the ECM or 

the DCM contracts can influence. The 

Commission’s statistical analysis shows 

that changes in the ICE OFP contract’s 

price significantly influences the prices 

of other ECM contracts (namely, the 

SPM contract). 

WGCEF and ICE noted that the 

Commission’s Guidance had posited 

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 OFP 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.’’37

ICE opined that the Commission 

‘‘seems to have adopted a five trade per 

day test for material liquidity.’’ To the 

contrary, 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’’ 38 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; however, 

the contract will not be found to be a 

SPDC merely because it met the 

reporting threshold. 

ICE argued 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 


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Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 42389 

39 In addition, 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 6, 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 79 percent of all transactions in the OFP 

contract (as of the fourth quarter of 2009). 

Commission acknowledges that the open interest 

information it provided in its October 6, 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. 

40See 73 FR 75888, 75893 (Dec. 12, 2008). 

41 44 U.S.C. 3507(d). 

42 7 U.S.C. 19(a). 

43 5 U.S.C. 601 et seq. 44 66 FR 42256, 42268 (Aug. 10, 2001). 

made in all months’’ as well as in strips 

of contract months. ICE suggested that a 

more appropriate method of 

determining liquidity is to examine the 

activity in a single traded month of a 

given contract.’’ 39 It is the Commission’s 

opinion that liquidity, as it pertains to 

the SPM contract, is typically a function 

of trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the ICE OFP contract itself 

would be considered liquid. ICE’s 

analysis of its own trade data confirms 

this to be the case for the OFP contract, 

and thus, the Commission believes that 

it applied the statistical data cited above 

in an appropriate manner for gauging 

material liquidity. 

ii. Conclusion Regarding Material 

Liquidity: 

For the reasons discussed above, the 

Commission finds that the OFP meets 

the material liquidity criterion. 

Specifically, there is sufficient trading 

activity in the OFP contract to have a 

material effect on ‘‘other agreements, 

contracts or transactions listed for 

trading on or subject to the rules of a 

designated contract market * * * or an 

electronic trading facility operating in 

reliance on the exemption in section 

2(h)(3) of the Act.’’ 

3. Overall Conclusion Regarding the 

OFP Contract 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the ICE OFP contract 

performs a significant price discovery 

function under the two of the four 

criteria established in section 2(h)(7) of 

the CEA. Specifically, the Commission 

has determined that the OFP contract 

meets the material price reference and 

material liquidity criteria at this time. 

Accordingly, the Commission is issuing 

the attached Order declaring that the 

OFP contract is a SPDC. 

Issuance of this Order signals the 

immediate effectiveness of the 

Commission’s authorities with respect 

to ICE as a registered entity in 

connection with its OFP contract,40 and 

triggers the obligations, requirements— 

both procedural and substantive—and 

timetables prescribed in Commission 

rule 36.3(c)(4) for ECMs. 

V. Related Matters 

a. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 41 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 42 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 

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. 

c. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 43 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.44 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. Orders 

a. Order Relating to the SP–15 Financial 

Day-Ahead LMP Peak 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 


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42390 Federal Register / Vol. 75, No. 139 / Wednesday, July 21, 2010 / Notices 

45 7 U.S.C. 1a(29). 

46Because ICE already lists for trading a contract 

(i.e., the Henry Financial LD1 Fixed Price contract) 

that was previously declared by the Commission to 

be a SPDC, ICE must submit a written 

demonstration of compliance with the Core 

Principles within 30 calendar days of the date of 

this Order. 17 CFR 36.3(c)(4). 

47 7 U.S.C. 1a(29). 

48Because ICE already lists for trading a contract 

(i.e., the Henry Financial LD1 Fixed Price contract) 

that was previously declared by the Commission to 

be a SPDC, ICE must submit a written 

demonstration of compliance with the Core 

Principles within 30 calendar days of the date of 

this Order. 17 CFR 36.3(c)(4). 

1 74 FR 54966 (October 26, 2009). 

2The acronym ‘‘PJM’’ stands for Pennsylvania 

New Jersey Maryland Interconnection, LLC (‘‘PJM 

Interconnection’’), and signifies the regional 

electricity transmission organization (‘‘RTO’’) that 

coordinates the generation and distribution of 

electricity in all or parts of 13 states and the District 

of Columbia. 

3The acronym ‘‘WH’’ signifies the PJM’s Western 

Hub. 

4The Federal Register notice also requested 

comment on the PJM WH Real Time Peak Daily 

(‘‘PDP’’) contract, PJM WH Day Ahead LMP Peak 

Daily (‘‘PDA’’) contract and PJM WH Real Time OffPeak Daily (‘‘ODP’’) contract. Those contracts will be 

addressed in a separate Federal Register release. 

5 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Public Law 

No. 110–246, 122 Stat. 1624 (June 18, 2008). 

6 7 U.S.C. 1a(29). 

7 74 FR 12178 (Mar. 23, 2009); these rules became 

effective on April 22, 2009. 

Act, hereby determines that the SP–15 

Financial Day-Ahead LMP Peak 

contract, traded on the 

IntercontinentalExchange, Inc., satisfies 

the material price preference and 

material liquidity criteria for significant 

price discovery contracts. Consistent 

with this determination, and effective 

immediately, the 

IntercontinentalExchange, Inc., must 

comply with, with respect to the SP–15 

Financial Day-Ahead LMP Peak 

contract, the nine core principles 

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

Additionally, the 

IntercontinentalExchange, Inc., shall be 

and is considered a registered entity 45

with respect to the SP–15 Financial 

Day-Ahead LMP Peak contract and is 

subject to all the provisions of the 

Commodity Exchange Act applicable to 

registered entities. 

Further with respect to the SP–15 

Financial Day-Ahead LMP Peak 

contract, the obligations, requirements 

and timetables prescribed in 

Commission rule 36.3(c)(4) governing 

core principle compliance by the 

IntercontinentalExchange, Inc., 

commence with the issuance of this 

Order.46

b. Order Relating to the SP–15 Financial 

Day-Ahead LMP Off-Peak 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 SP–15 

Financial Day-Ahead LMP Off-Peak 

contract, traded on the 

IntercontinentalExchange, Inc., satisfies 

the statutory material price reference 

and material liquidity criteria for 

significant price discovery contracts. 

Consistent with this determination, and 

effective immediately, the 

IntercontinentalExchange, Inc., must 

comply with, with respect to the SP–15 

Financial Day-Ahead LMP Off-Peak 

contract, the nine core principles 

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

Additionally, the 

IntercontinentalExchange, Inc., shall be 

and is considered a registered entity 47

with respect to the SP–15 Financial 

Day-Ahead LMP Off-Peak contract and 

is subject to all the provisions of the 

Commodity Exchange Act applicable to 

registered entities. 

Further with respect to the SP–15 

Financial Day-Ahead LMP Off-Peak 

contract, the obligations, requirements 

and timetables prescribed in 

Commission rule 36.3(c)(4) governing 

core principle compliance by the 

IntercontinentalExchange, Inc., 

commence with the issuance of this 

Order.48

Issued in Washington, DC, on July 9, 2010, 

by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. 2010–17747 Filed 7–20–10; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Orders Finding That the PJM WH Real 

Time Peak Contract and PJM WH Real 

Time Off-Peak Contract Offered for 

Trading on the 

IntercontinentalExchange, Inc., 

Perform a Significant Price Discovery 

Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final orders. 

SUMMARY: On October 26, 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 

PJM 2 WH 3 Real Time Peak (‘‘PJM’’) 

contract and PJM WH Real Time OffPeak (‘‘OPJ’’) contract,4 which are listed 

for trading 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’’), perform 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 PJM and OPJ 

contracts 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: July 9, 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’’) 5

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.6 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.7 As relevant here, rule 36.3 


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