23718 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

46 5 U.S.C. 601 et seq. 47 66 FR 42256, 42268 (Aug. 10, 2001). 

48 7 U.S.C. 1a(29). 

49Because 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 53720 (October 20, 2009). 

2 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Pub. L. 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. 

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 authorizes 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’’) 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 

this Order, 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 ICE PG&E 

Citygate 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 PG&E 

Citygate Financial Basis contract, traded 

on the IntercontinentalExchange, Inc., 

satisfies the statutory material liquidity 

and material price reference criteria for 

significant price discovery contracts. 

Consistent with this determination, and 

effective immediately, the 

IntercontinentalExchange, Inc., must 

comply with, with respect to the PG&E 

Citygate Financial Basis 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 48

with respect to the PG&E Citygate 

Financial Basis contract and is subject 

to all 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., 

commence with the issuance of this 

Order.49

Issued in Washington, DC on April 28, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. 2010–10305 Filed 5–3–10; 8:45 am] 

BILLING CODE P 

COMMODITY FUTURES TRADING 

COMMISSION 

Orders Finding That the Henry 

Financial Basis Contract, Henry 

Financial Index Contract and Henry 

Financial Swing Contract Traded on 

the IntercontinentalExchange, Inc., Do 

Not Perform a Significant Price 

Discovery Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final orders. 

SUMMARY: On October 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 

Henry Financial Basis (‘‘HEN’’) contract, 

Henry Financial Index (‘‘HIS’’) contract 

and Henry Financial Swing (‘‘HHD’’) 

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’’), 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 HEN, HIS and 

HHD contracts do 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 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23719 

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. 

8The comment letters are available on the 

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

lawandregulation/federalregister/ 

federalregistercomments/2009/09-027.html. 

9McGraw-Hill, through its division Platts, 

compiles and calculates monthly natural gas price 

indices from natural gas trade data submitted to 

Platts by energy marketers. Platts includes those 

price indices in its monthly Inside FERC’s Gas 

Market Report (‘‘Inside FERC’’). 

10FERC stated that the HEN, HIS and HHD 

contracts are cash-settled and that none of them 

contemplates the 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 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 

‘‘FERC staff will continue to monitor for any such 

conflict * * * [and] advise the CFTC’’ should any 

such potential conflict arise. CL 01. 

11PUCT noted that it oversees the Electric 

Reliability Council of Texas, much like FERC 

oversees independent system operators. The 

mission of PUCT is ‘‘to ensure nondiscriminatory 

access to the [electricity] transmission and 

distribution systems, to ensure the reliability and 

adequacy of the regional electrical network and to 

perform other essential market functions.’’ CL 04. 

12 In its October 20, 2009, Federal Register 

release, the Commission identified material 

liquidity, material price reference and price linkage 

as the possible criteria for SPDC determination of 

the HEN contract (arbitrage was not identified as a 

possible criterion). With respect to the HIS contract, 

the Federal Register release identified material 

liquidity and material price reference as possible 

criteria for SPDC determination (price linkage and 

arbitrage were not identified as possible criteria). 

With respect to the HHD contract, the Federal 

Register release identified material liquidity, 

arbitrage and material price reference as possible 

criteria for SPDC determination (price linkage was 

not identified as a possible criterion). The criteria 

not indentified in the initial release will not be 

discussed further in this document or the associated 

Orders. 

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 20, 2009, the Commission 

published in the Federal Register notice 

of its intent to undertake a 

determination whether the HEN, HIS 

and HHD contracts performs a 

significant price discovery function and 

requested comment from interested 

parties.7 Comments 8 were received 

from the Federal Energy Regulatory 

Commission (‘‘FERC’’), Platts,9 Public 

Utility Commission of Texas (‘‘PUCT’’) 

and ICE. The comment letters from 

FERC,10 Platts and PUCT11 did not 

directly address the issue of whether or 

not the HEN, HIS and HHD contracts are 

SPDCs; ICE’s comments raised 

substantive issues with respect to the 

applicability of section 2(h)(7) to the 

subject contracts. Generally, ICE 

asserted that its HEN, HIS and HHD 

contracts are not SPDCs as they do not 

meet any of the criteria for SPDC 

determination (CL 03). ICE’s 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.12 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 

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23720 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

13 17 CFR part 36, Appendix A. 

14The term ‘‘hub’’ refers to a juncture where two 

or more natural gas pipelines are connected. Hubs 

also serve as pricing points for natural gas. 

15 If the firm simultaneously takes positions 

involving the NYMEX futures contract and the ICE 

HEN basis contract, the firm will be able to price 

the natural gas at the bidweek price. 

16As 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 HEN contract. 

17The OTC Gas End of Day dataset includes daily 

settlement prices for natural gas contracts listed for 

all points in North America. 

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.13 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 whether 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. 

IV. Findings and Conclusions 

The Commission’s findings and 

conclusions with respect to the Henry 

Financial Basis (HEN) contract, the 

Henry Financial Index (HIS) contract 

and the Henry Financial Swing (HHD) 

contract are discussed separately below. 

a. The Henry Financial Basis (HEN) 

Contract and the SPDC Indicia 

The ICE HEN contract is cash settled 

based on the difference between the 

bidweek price of natural gas at the 

Henry Hub for the contract-specified 

month of delivery, as reported in Platts’ 

Inside FERC’s Gas Market Report, 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 Platts 

bidweek price, which is published 

monthly, is based on a survey of cash 

market traders who voluntarily report to 

Platts data on their fixed-price 

transactions conducted during the last 

five business days of the month for 

physical delivery of natural gas at the 

Henry Hub; such bidweek transactions 

specify the delivery of natural gas on a 

uniform basis throughout the following 

calendar month at the agreed upon rate. 

The Platts 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 HEN contract 

is 2,500 million British thermal units 

(‘‘mmBtu’’), and the unit of trading is 

any multiple of 2,500 mmBtu. The HEN 

contract is listed for up to 72 calendar 

months commencing with the next 

calendar month. 

The Henry Hub,14 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. 

The HEN contract price measures the 

discrepancy between two Henry Hubrelated prices, where one price is a 

futures price and the other is a forward 

cash price. Traders may make 

commitments to buy or sell natural gas 

at the Henry Hub using the NYMEX 

Henry Hub natural gas futures contract, 

which specifies physical delivery. 

Because the NYMEX futures contract is 

listed for at least twelve years, market 

participants can make such decisions a 

long time before delivery actually 

occurs, since they can have an effective 

hedge in place to offset price risk 

associated with long-dated cash market 

commitments. While the futures price 

and the bidweek price both reflect the 

price of natural gas during the following 

month, the two values may not be equal. 

This is because the NYMEX futures 

contract stops trading three business 

days prior to first business day of the 

delivery month. In contrast, the bidweek 

price is derived from cash market deals 

consummated during the last five 

business days of the month that specify 

physical delivery during the following 

calendar month. Thus, it is possible that 

the bidweek price could include two 

additional days of market information, 

which could result in a price that is 

significantly higher or lower than the 

futures price. The ICE HEN contract can 

be used to more accurately price natural 

gas in the delivery month. For example, 

a firm may lock in its November 2009 

needs by taking a long position in the 

November 2009 contract. Assume that 

the futures position is established at 

$4.00 per mmBtu. This means that the 

gas was purchased at $4, which may be 

higher or lower than the spot price 

during the delivery month. During the 

final few days in October, the November 

2009 natural gas contract stops trading 

and the November bidweek price is 

determined. Assume that the weather 

forecast calls for warmer than normal 

temperatures in the area, causing the 

futures price to fall and settle on 

October 27 at $3.90 per mmBtu, 

resulting in a loss of $0.10 per mmBtu 

on the futures side. Market sentiment of 

a strong downward pressure on gas 

prices may persist, leading spot 

transactions for next-month delivery to 

be priced even lower than the futures 

settlement price. In this regard, the 

bidweek price is determined as a 

volume weighted average of fixed-price 

transactions for November 2009 delivery 

that were conducted between October 

25, 2009, and October 29, 2009. If the 

bidweek price ends up being at $3.75 

per mmBtu, the firm will incur an 

additional loss of $0.15 per mmBtu 

because of falling spot prices. By taking 

a position in the ICE HEN contract, the 

firm can mitigate some of the losses by 

accounting for the difference between 

the final settlement price and the 

bidweek price.15

In its October 20, 2009, Federal 

Register notice, the Commission 

identified material liquidity, price 

linkage and material price reference as 

the potential SPDC criteria applicable to 

the HEN contract. Each of these criteria 

is discussed below.16

1. Material Price Reference Criterion 

The Commission’s October 20, 2009, 

Federal Register notice identified 

material price reference as a potential 

basis for a SPDC determination with 

respect to this contract. The 

Commission noted 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 ‘‘Gulf Gas End of Day’’ and 

‘‘OTC Gas End of Day’’ 17 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 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23721 

18Trading data was obtained by the Commission 

using the Integrated Surveillance System. 

19The Commission will rely on one of two 

sources of evidence—direct or indirect—to 

determine a SPDC. Direct evidence can be cash 

market transactions that are frequently based on or 

quoted as a differential to the potential SPDC. 

Indirect evidence includes contracts whose price 

series are routinely disseminated in industry 

publications or are sold to market participants by 

the ECM. 20Appendix A to the Part 36 rules. 

21The HEN contract is one-quarter the size of the 

NYMEX Henry Hub physically-delivered futures 

contract. 

historical data. These two packages 

include price data for the HEN contract. 

Although the Henry Hub is a major 

trading center for natural gas in the 

United States and, as noted, ICE sells 

price information for the HEN contract, 

the Commission has found upon further 

evaluation that the HEN contract is not 

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. In this regard, 

the NYMEX Henry Hub physically 

delivered natural gas futures contract is 

routinely consulted by industry 

participants in pricing cash market 

transactions at this location. Because 

both the HEN and the NYMEX contracts 

basically price the same commodity at 

the same location and time and the 

NYMEX contract has significantly 

higher trading volume and open 

interest,18 it is not necessary for market 

participants to independently refer to 

the HEN contract for pricing natural gas 

at this location. Furthermore, the 

Commission notes that publication of 

the HEN contract’s prices is not indirect 

evidence of routine dissemination. The 

HEN contract’s prices are published 

with those of numerous other contracts, 

which are of more interest to market 

participants.19 The Commission cannot 

surmise whether or not traders 

specifically purchase the ICE data 

packages for the HEN contract’s prices. 

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HEN contract is 

a SPDC. ICE stated in its comment letter 

that the HEN contract does not meet the 

material price reference criterion for 

SPDC determination. ICE stated that the 

Commission appeared to base the case 

that the HEN contract is potentially a 

SPDC on a disputable assertion. In 

issuing its notice of intent to determine 

whether the HEN 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.’’ ICE states that ‘‘[b]asing a 

material price reference determination 

on general statements made in a two 

year old study does not seem to meet 

Congress’ intent that the CFTC use its 

considerable expertise to study the OTC 

markets.’’ The Commission cited the 

ECM study’s general finding that some 

ICE natural gas contracts appear to be 

regarded as price discovery markets as 

an 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 HEN 

contract does not meet the material 

price reference criterion because it is 

not routinely consulted by cash market 

participants when pricing transactions 

at the Henry Hub (direct evidence is not 

supported). Moreover, the ECM sells the 

HEN contract’s price data along with 

those of other contracts, which are of 

more interest to market participants 

(indirect evidence is not supported). 

2. Price Linkage Criterion 

In its October 20, 2009, Federal 

Register notice, the Commission 

identified price linkage as a potential 

basis for a SPDC determination with 

respect to the HEN contract. In this 

regard, the final settlement of the HEN 

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 20

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 

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 HEN contract 

meets the price linkage criterion, 

Commission staff obtained price data 

from ICE and performed the statistical 

tests cited above. Staff found that the 

Henry Hub futures/cash price 

differential is determined in part by the 

final settlement price of the NYMEX 

Henry Hub physically-delivered natural 

gas futures contract (a DCM contract) 

and that the derived Henry Hub prices 

(using the NYMEX Henry Hub natural 

gas futures contract’s settlement prices 

and the Henry Hub cash price 

differentials) are within 2.5 percent of 

the settlement prices 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, 100 percent of the Henry Hub 

natural gas prices derived from the HEN 

values were within 2.5 percent of the 

daily settlement price of NYMEX Henry 

Hub natural gas futures contract. 

However, staff found that the HEN 

contract fails to meet the volume 

threshold requirement. In particular, the 

total trading volume in the NYMEX 

Henry Hub natural gas futures 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 HEN contract 

during the same period totaled 173,973 

contracts (equivalent to 43,493 NYMEX 

futures contracts, given the size 

difference).21 Thus, total amount of 

centralized-market trades in the HEN 

contract was significantly below the 

minimum threshold. 

i. Federal Register Comments 

ICE was the sole respondent which 

addressed the question of whether the 

HEN contract is a SPDC. ICE stated in 

its comment letter that the HEN contract 

does not meet the price linkage criterion 

for SPDC determination because it fails 

the volume test provided in the 

Commission’s Guidance. 

mstockstill on DSKH9S0YB1PROD with NOTICES

23722 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

22 74 FR 53720 (October 20, 2009). 

23 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 HEN 

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. 

24 73 FR 75892 (December 12, 2008). 

25Supplemental data supplied by ICE confirmed 

that block trades in the third quarter of 2009 were 

in addition to the trades that were conducted on the 

electronic platform; block trades comprised 62.2 

percent of all transactions in the HEN contract. 

ii. Conclusion Regarding the Price 

Linkage Criterion 

The Commission finds that the HEN 

contract does not meet the price linkage 

criterion because it fails the volume test 

provided for in the Commission’s 

Guidance. 

3. Material Liquidity Criterion 

As noted above, in its October 20, 

2009, Federal Register notice, the 

Commission identified material 

liquidity, price linkage and material 

price reference as potential criteria for 

SPDC determination of the HEN 

contract. With respect to the material 

liquidity criterion, the Commission 

noted that the total number of 

transactions executed on ICE’s 

electronic platform in the HEN contract 

was 538 in the second quarter of 2009, 

resulting in a daily average of 8.4 trades. 

During the same period, the HEN 

contract had a total trading volume of 

78,780 contracts and an average daily 

trading volume of 1,232 contracts. 

Moreover, open interest as of June 30, 

2009, was 128,504 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 

November 13, 2009, ICE reported that 

total trading volume in the third quarter 

of 2009 was 173,973 contracts (or 2,636 

contracts on a daily basis). In term of 

number of transactions, 1,174 trades 

occurred in the third quarter of 2009 

(17.8 trades per day). As of September 

30, 2009, open interest in the HEN 

contract was 160,804 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 Commission notes that trading 

activity in the HEN contract increased 

between the second and third quarters 

of 2009. However, the number of trades 

per day remained relatively low and 

only slightly more than the reporting 

level of five trades per day. Moreover, 

the Commission notes that the number 

of contracts traded is comparable to that 

experienced in a relatively small futures 

market, such as the NYMEX Platinum 

and ICE US Frozen Concentrated Orange 

Juice contracts. Accordingly, the data at 

best provides weak evidence that the 

HEN contract meets the material 

liquidity criterion.23

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HEN contract is 

a SPDC. ICE stated in its comment letter 

that the HEN contract does not meet the 

material liquidity criterion for SPDC 

determination for a number of reasons. 

First, 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.’’ On 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’’ 24 rather than solely relying 

upon an ECM on its own to identify any 

such potential SPDCs to the 

Commission. While a contract that 

meets this threshold may be subject to 

scrutiny as a potential SPDC, the 

threshold is not a test for material 

liquidity. As noted above, the 

Commission has not reached a decision 

regarding material liquidity because, 

regardless of the relatively large 

quarterly trading volume in the HEN 

contract, material liquidity alone is not 

sufficient to support a SPDC 

determination. 

ICE also stated that ‘‘the statistics 

[provided by ICE] have been 

misinterpreted and misapplied.’’ In 

particular, ICE stated that the volume 

figures used in the Commission’s 

analysis (cited above) ‘‘include trades 

made in all 120 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.’’ 

Furthermore, ICE noted that for the HEN 

contract, ‘‘98% of the trades and volume 

actually executed on the ICE platform 

occurred in the single most liquid, 

usually prompt, month of the contract.’’ 

It is the Commission’s opinion that 

liquidity, as it relates to the HEN 

contract, is typically a function of 

trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the HEN contract itself 

would be considered liquid. ICE’s 

analysis of its own trade data confirms 

this to be the case for the HEN contract, 

and thus, the Commission believes that 

it applied the statistical data cited above 

in an appropriate manner for gauging 

material liquidity. 

In addition, ICE stated that the tradesper-day statistics that it provided to the 

Commission in its quarterly filing and 

which are cited above includes 2(h)(1) 

transactions, which were not completed 

on the electronic trading platform and 

should not be considered in the SPDC 

determination process. Commission 

staff asked ICE to review the data it sent 

in its quarterly filings. In response, ICE 

confirmed that the volume data it 

provided and which the Commission 

cited in its October 20, 2009, Federal 

Register notice, as well as the additional 

volume information it cites above, 

includes only transaction data executed 

on ICE’s electronic trading platform.25

The Commission acknowledges that the 

open interest information it cites above 

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. 

ii. Conclusion Regarding Material 

Liquidity 

For the reasons discussed above, the 

Commission finds at best weak evidence 

that the HEN contract meets the material 

liquidity criterion. However, because 

the HEN contract does not meet either 

the price linkage or material price 

reference criterion, it is not possible to 

declare the HEN contract a SPDC since 

material liquidity cannot be used alone 

as a basis for a SPDC determination. 

4. Overall Conclusion the HEN Contract 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the HEN contract does 

not perform a significant price discovery 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23723 

26See 73 FR 75888, 75893 (Dec. 12, 2008). 

27As noted above, the Commission did not find 

an indication of arbitrage and price linkage in 

connection with this contract; accordingly, those 

criteria are not discussed in reference to the HIS 

contract. 

28The OTC Gas End of Day dataset includes daily 

settlement prices for natural gas contracts listed for 

all points in North America. 

29The Commission will rely on one of two 

sources of evidence—direct or indirect—to 

determine a SPDC. Direct evidence can be cash 

market transactions that are frequently based on or 

quoted as a differential to the potential SPDC. 

Indirect evidence includes contracts whose price 

series are routinely disseminated in industry 

publications or are sold to market participants by 

the ECM. 

function under the criteria established 

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

Specifically, the Commission has 

determined that the HEN contract does 

not meet the material price reference 

and price linkage criteria at this time, 

and there is at best weak evidence that 

it meets the material liquidity criterion, 

which is not sufficient by itself to 

support a SPDC determination. 

Accordingly, the Commission will issue 

the attached Order declaring that the 

HEN 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 HEN contract.26

Accordingly, with respect to its HEN 

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. 

b. The Henry Financial Index (HIS) 

Contract and the SPDC Indicia 

The ICE HIS contract is cash settled 

based on the arithmetic average of the 

daily natural gas prices at the Henry 

Hub, as quoted in the ‘‘Daily Price 

Survey’’ table of Platts’ Gas Daily during 

the specified month, less the Platts 

bidweek price that is reported in the 

first issue of Inside FERC’s Gas Market 

Report in which the natural gas is 

delivered. The Platts prices are based on 

the fixed-price cash market transactions 

that are voluntarily reported by traders. 

As noted above, the Platts bidweek price 

is based on a survey of cash market 

traders who voluntarily report data on 

their fixed-price transactions conducted 

during the last five business days of the 

month for physical delivery of natural 

gas at the Henry Hub on a uniform basis 

throughout the following calendar 

month. The Platts bidweek index is 

published on the first business day of 

the calendar month in which the natural 

gas is to be delivered. The Gas Daily 

price is for next-day delivery of natural 

gas at the Henry Hub. The size of the 

HIS contract is 2,500 mmBtu, and the 

unit of trading is any multiple of 2,500 

mmBtu. The HIS contract is listed for 36 

calendar months. 

The index used to settle the HIS 

contract measures the discrepancy 

between two cash market prices for 

natural gas, where one (the Platts 

bidweek price) is a fixed forward price 

that locks in the price paid for gas 

deliveries made on each calendar day of 

the following month. The other price 

(the Platts Daily Price Survey) is a 

calendar month average of the daily spot 

price for gas deliveries made during the 

same month. The forward and average 

spot prices may differ from each other 

as new market conditions unfold during 

the month in which deliveries are made. 

For example, assume that a firm 

prices natural gas that is going to be 

delivered at the Henry Hub in 

November 2009 at the bidweek price. 

The NYMEX Henry Hub futures can be 

used to procure the physical gas, and 

HEN contract can be overlayed in order 

to achieve the bidweek price. If there is 

a potential that the average daily price 

during the delivery month may differ 

from the bidweek price, the firm can 

add the HIS contract to the NYMEX 

futures/ICE HEN combination to achieve 

a price that is based on actual daily 

prices rather than a forward spot price 

that applies to all business days in the 

delivery month. As a result, the HIS 

contract allows commercial participants 

to price natural gas more accurately 

during the delivery period. 

In its October 20, 2009, Federal 

Register notice, the Commission 

identified material liquidity and 

material price reference as the potential 

SPDC criteria applicable to the HIS 

contract. Each of these factors is 

discussed below.27

1. Material Price Reference Criterion 

The Commission’s October 20, 2009, 

Federal Register notice identified 

material price reference as a potential 

basis for a SPDC determination with 

respect to this contract. The 

Commission noted 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 ‘‘Gulf Gas End of Day’’ and ‘‘OTC 

Gas End of Day’’ 28 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 HIS contract. 

Although the Henry Hub is a major 

trading center for natural gas in the 

United States, and as noted ICE does 

sell price information for the HIS 

contract, the Commission has found 

upon further evaluation that the HIS 

contract is not ‘‘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. In this 

regard, the NYMEX Henry Hub natural 

gas futures contract is routinely 

consulted by industry participants in 

pricing cash market transactions at this 

location. Because both the HIS and the 

NYMEX contracts basically price the 

same commodity at the same location 

and time and the NYMEX futures 

contract has significantly higher trading 

volume and open interest, it is not 

necessary for market participants to 

independently refer to the HIS contract 

for pricing natural gas at this location. 

Furthermore, the Commission notes that 

publication of the HIS contract’s prices 

is not indirect evidence of routine 

dissemination. The HIS contract’s prices 

are published with those of numerous 

other contracts, which are of more 

interest to market participants.29 The 

Commission cannot surmise whether or 

not traders specifically purchase the ICE 

data packages for the HIS contract’s 

prices. 

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HIS contract is 

a SPDC. ICE stated in its comment letter 

that the HIS contract does not meet the 

material price reference criterion for 

SPDC determination and, further, that 

the Commission’s identification of the 

HIS contract as a potential SPDC is 

based on a disputable assertion. In 

issuing its notice of intent to determine 

whether the HIS 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.’’ ICE states that ‘‘[b]asing a 

material price reference determination 

on general statements made in a two 

year old study does not seem to meet 

Congress’ intent that the CFTC use its 

considerable expertise to study the OTC 

markets.’’ The Commission cited the 

ECM study’s general finding that some 

ICE natural gas contracts appear to be 

regarded as price discovery markets as 

an 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. 

mstockstill on DSKH9S0YB1PROD with NOTICES

23724 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

30 74 FR 53720 (October 20, 2009). 

31 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 HIS 

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. 

32 73 FR 75892 (December 12, 2008). 

33Supplemental data supplied by ICE confirmed 

that block trades in the third quarter of 2009 were 

in addition to the trades that were conducted on the 

electronic platform; block trades comprised 59.7 

percent of all transactions in the HIS contract. 

ii. Conclusion Regarding Material Price 

Reference 

The Commission finds that the HIS 

contract does not meet the material 

price reference criterion because it is 

not routinely consulted by cash market 

participants when pricing transactions 

at the Henry Hub (direct evidence is not 

supported). Moreover, the ECM sells the 

HIS contract’s price data along with 

those of other contracts, which are of 

more interest to market participants 

(indirect evidence is not supported). 

2. Material Liquidity Criterion 

As noted above, in its October 20, 

2009, Federal Register notice, the 

Commission identified material 

liquidity and material price reference as 

potential criteria for SPDC 

determination of the HIS contract. With 

respect to the material liquidity 

criterion, the Commission noted that the 

total number of transactions executed 

on ICE’s electronic platform in the HIS 

contract was 550 in the second quarter 

of 2009, resulting in a daily average of 

8.6 trades. During the same period, the 

HIS contract had a total trading volume 

of 79,330 contracts and an average daily 

trading volume of 1,239 contracts. 

Moreover, open interest as of June 30, 

2009, was 127,346 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.30 In a subsequent filing dated 

November 13, 2009, ICE reported that 

total trading volume in the third quarter 

of 2009 was 178,649 contracts (or 2,707 

contracts on a daily basis). In term of 

number of transactions, 1,250 trades 

occurred in the third quarter of 2009 

(18.9 trades per day). As of September 

30, 2009, open interest in the HIS 

contract was 255,496 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 Commission notes that trading 

activity in the HIS contract increased 

between the second and third quarters 

of 2009. However, the number of trades 

per day remained relatively low and 

only slightly more than the reporting 

level of five trades per day. Moreover, 

the Commission notes that the number 

of contracts traded is comparable to that 

experienced in a relatively small futures 

market, such as the NYMEX Platinum 

and ICE U.S. Frozen Concentrated 

Orange Juice contracts. Accordingly, the 

data at best provides weak evidence that 

the HIS contract meets the material 

liquidity criterion.31

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HIS contract is 

a SPDC. ICE stated in its comment letter 

that the HIS contract does not meet the 

material liquidity criterion for SPDC 

determination for a number of reasons. 

First, 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.’’ On 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’’ 32 rather than solely relying 

upon an ECM on its own to identify any 

such potential SPDCs to the 

Commission. While a contract that 

meets this threshold may be subject to 

scrutiny as a potential SPDC, the 

threshold is not a test for material 

liquidity. As noted above, the 

Commission has not reached a decision 

regarding material liquidity because, 

regardless of the relatively large 

quarterly trading volume in the HIS 

contract, material liquidity alone is not 

sufficient to support a SPDC 

determination. 

ICE also stated that ‘‘the statistics 

[provided by ICE] have been 

misinterpreted and misapplied.’’ In 

particular, ICE stated that the volume 

figures used in the Commission’s 

analysis (cited above) ‘‘include trades 

made in all 120 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.’’ 

Furthermore, ICE noted that for the HIS 

contract, ‘‘98% of the trades and volume 

actually executed on the ICE platform 

occurred in the single most liquid, 

usually prompt, month of the contract.’’ 

It is the Commission’s opinion that 

liquidity, with regard to the HIS 

contract, is typically a function of 

trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the HIS contract itself 

would be considered liquid. ICE’s 

analysis of its own trade data confirms 

this to be the case for the HIS contract, 

and thus, the Commission believes that 

it applied the statistical data cited above 

in an appropriate manner for gauging 

material liquidity. 

In addition, ICE stated that the tradesper-day statistics that it provided to the 

Commission in its quarterly filing and 

which are cited above includes 2(h)(1) 

transactions, which were not completed 

on the electronic trading platform and 

should not be considered in the SPDC 

determination process. Commission 

staff asked ICE to review the data it sent 

in its quarterly filings. In response, ICE 

confirmed that the volume data it 

provided and which the Commission 

cited in its October 20, 2009, Federal 

Register notice as well as the additional 

volume information it cites above 

includes only transaction data executed 

on ICE’s electronic trading platform.33

The Commission acknowledges that the 

open interest information it cites above 

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. 

ii. Conclusion Regarding Material 

Liquidity 

For the reasons discussed above, the 

Commission finds weak evidence at best 

that the HIS contract meets the material 

liquidity criterion. However, because 

the HIS contract does not meet the 

material price reference criterion, it is 

not possible to declare the HIS contract 

a SPDC since material liquidity cannot 

be used alone as a basis for a SPDC 

determination. 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23725 

34See 73 FR 75888, 75893 (Dec. 12, 2008). 

35As noted above, the Commission did not find 

an indication of price linkage in connection with 

this contract; accordingly, that criterion is not 

discussed in reference to the HHD contract. 

36The OTC Gas End of Day dataset includes daily 

settlement prices for natural gas contracts listed for 

all points in North America. 

37The Commission will rely on one of two 

sources of evidence—direct or indirect—to 

determine a SPDC. Direct evidence can be cash 

market transactions that are frequently based on or 

quoted as a differential to the potential SPDC. 

Indirect evidence includes contracts whose price 

series are routinely disseminated in industry 

publications or are sold to market participants by 

the ECM. 

3. Overall Conclusion 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the HIS 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 HIS contract does 

not meet the material price reference 

criterion at this time, and there is weak 

evidence at best that it meets the 

material liquidity criterion, which is not 

sufficient by itself to support a SPDC 

determination. Accordingly, the 

Commission will issue the attached 

Order declaring that the HIS 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 HIS contract.34

Accordingly, with respect to its HIS 

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. 

c. The Henry Financial Swing (HHD) 

Contract and the SPDC Indicia 

The ICE HHD contract is cash settled 

based on the spot index price for natural 

gas at the Henry Hub on a specified day, 

as reported in the ‘‘Daily Price Survey’’ 

table of Platts’ Gas Daily. The Platts 

index price is based on fixed-price cash 

market transactions that are voluntarily 

reported by traders. The size of the HHD 

contract is 2,500 mmBtu, and the unit 

of trading is any multiple of 2,500 

mmBtu. The HHD contract is listed for 

65 consecutive calendar days. 

Swing contracts are cash-settled 

natural gas contracts that specify 2,500 

mmBtu of gas at a particular location on 

a specific day and is settled using a 

price index published by a third-party 

price reporter. The ICE HHD swing 

contract represents the spot price of 

natural gas at the Henry Hub on a 

particular day. Swing contracts allow 

traders to refine or lift hedges during the 

delivery month that were previously 

established using the NYMEX Henry 

Hub natural gas futures contract. Swing 

contracts are most useful after the 

NYMEX futures contract has stopped 

trading, which is just prior to the 

beginning of the delivery month. 

Physically-delivered and cash-settled 

transactions based on the NYMEX 

Henry Hub price involves natural gas 

that is delivered over the entire delivery 

month. If, for example, a firm’s needs 

change and it no longer needs all of the 

natural gas for which it hedged (say it 

now requires only half of the originally 

hedged natural gas in the final week of 

the delivery month), then the HHD 

contract can be used to offset the part of 

the original hedge even though NYMEX 

futures contract has ceased trading. 

In its October 20, 2009, Federal 

Register notice, the Commission 

identified material liquidity, arbitrage 

and material price reference as the 

potential SPDC criteria applicable to the 

HHD contract. Each of these criteria is 

discussed below.35

1. Material Price Reference Criterion 

The Commission’s October 20, 2009, 

Federal Register notice identified 

material price reference as a potential 

basis for a SPDC determination with 

respect to this contract. The 

Commission noted 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 ‘‘Gulf Gas End of Day’’ and ‘‘OTC 

Gas End of Day’’ 36 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 HHD contract. 

Although the Henry Hub is a major 

trading center for natural gas in the 

United States and, as noted, ICE sells 

price information for the HHD contract, 

the Commission has found upon further 

evaluation that the HHD contract is not 

‘‘routinely consulted by industry 

participants in pricing cash market 

transactions’’ and thus does not meet the 

Commission’s guidance for the Material 

Price Reference criteria. In this regard, 

the NYMEX Henry Hub futures contract 

is routinely consulted by industry 

participants in pricing cash market 

transactions at this location, because 

both the HHD and the NYMEX contracts 

basically price the same commodity at 

the same location and the NYMEX 

contract has significantly higher trading 

volume and open interest, it is not 

necessary for market participants to 

independently refer to the HHD contract 

for pricing natural gas at this location. 

Furthermore, the Commission notes that 

publication of the HHD contract’s prices 

is not indirect evidence of routine 

dissemination. The HHD contract’s 

prices are published with those of 

numerous other contracts, which are of 

more interest to market participants.37

The Commission cannot surmise 

whether or not traders specifically 

purchase the ICE data packages for the 

HHD contract’s prices. 

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HHD contract is 

a SPDC. ICE stated in its comment letter 

that the HHD contract does not meet the 

material price reference criterion for 

SPDC determination. ICE stated that the 

Commission appeared to base the case 

that the HHD contract is potentially a 

SPDC on a disputable assertion. First, in 

issuing its notice of intent to determine 

whether the HHD 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.’’ ICE states that ‘‘[b]asing a 

material price reference determination 

on general statements made in a two 

year old study does not seem to meet 

Congress’ intent that the CFTC use its 

considerable expertise to study the OTC 

markets.’’ The Commission cited the 

ECM study’s general finding that some 

ICE natural gas contracts appear to be 

regarded as price discovery markets as 

an 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 HHD 

contract does not meet the material 

price reference criterion because it is 

not routinely consulted by cash market 

participants when pricing transactions 

at the Henry Hub (direct evidence is not 

supported). Moreover, the ECM sells the 

HHD contract’s price data along with 

those of other contracts, which are of 

more interest to market participants 

(indirect evidence is not supported). 

2. Arbitrage Criterion 

In its October 20, 2009, Federal 

Register notice, the Commission 

identified arbitrage as a potential basis 

mstockstill on DSKH9S0YB1PROD with NOTICES

23726 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

38 74 FR 53720 (October 20, 2009). 

39 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 HEN 

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. 

40 73 FR 75892 (December 12, 2008). 

for a SPDC determination with respect 

to the HHD contract. 

The Commission’s Guidance 

(Appendix A to Part 36) notes that ‘‘the 

Commission will consider an arbitrage 

contract potentially to be a [SPDC] 

* * * if, over the most recent quarter, 

greater than 95 percent of the closing or 

settlement prices of the contract, which 

have been calculated using transaction 

prices, fall within 2.5 percent of the 

closing or settlement price of the 

contract or contracts which it could be 

arbitraged.’’ As noted above, the HHD 

contract is a daily contract that reflects 

the spot price of natural gas at the Henry 

Hub and is listed for 65 calendar days. 

In contrast, the NYMEX Henry Hub 

natural gas futures contract is a pricing 

mechanism for natural gas in the future. 

The NYMEX Henry Hub natural gas 

futures contract is available for trading 

many months prior to the delivery 

period. 

Arbitrage between the ICE HHD and 

NYMEX Henry Hub physicallydelivered natural gas futures contract 

potentially is possible. However, the 

ability to arbitrage likely would be 

limited based on a number of factors. 

First, the HHD contract prices the value 

of natural gas on a single day while the 

NYMEX futures contract prices the 

value of gas over a calendar month. 

Second, the futures contract and the 

HHD contract are not always trading 

simultaneously. For example, the 

NYMEX futures contract trades many 

years before delivery while the HHD 

contract is listed out only 65 

consecutive calendar days. Moreover, 

the HHD contract trades into the 

delivery month while the NYMEX 

futures contract stops trading three 

business days before the first business 

day of the delivery month. Even during 

the times where the two contracts are 

simultaneously traded, arbitrage 

between the two contracts likely would 

involve multiple HHD contract to cover 

a period of several days or weeks against 

a single NYMEX position, which would 

be rather cumbersome and probably not 

practicable. Due to the heterogeneous 

attributes of the two contracts, the test 

noted above to determine the similarity 

of the two price series was not 

performed. 

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HHD contract is 

a SPDC. ICE stated in its comment letter 

that the HHD contract does not meet the 

arbitrage criterion because it is a 

‘‘ ‘decaying’ product that expires daily 

throughout its contract term. The HHD 

[contract] typically trades ‘balance of 

month’ therefore using multiple daily 

settlement prices. In fact, the majority of 

HHD trades are intra-month after the 

* * * [NYMEX Henry Hub natural gas 

futures contract] has already been 

priced.’’ 

ii. Conclusion Regarding the Arbitrage 

Criterion 

The HHD contract does not meet the 

arbitrage criterion because it prices 

natural gas on a daily basis while the 

NYMEX futures contract prices gas on a 

monthly basis. Moreover, the futures 

contract is used to discover prices while 

the HHD contract is used to modify or 

lift preexisting hedges. 

3. Material Liquidity Criterion 

As noted above, in its October 20, 

2009, Federal Register notice, the 

Commission identified material 

liquidity, arbitrage and material price 

reference as potential criteria for SPDC 

determination of the HHD contract. 

With respect to the material liquidity 

criterion, the Commission noted that the 

total number of transactions executed 

on ICE’s electronic platform in the HHD 

contract was 5,246 in the second quarter 

of 2009, resulting in a daily average of 

82 trades. During the same period, the 

HHD contract had a total trading volume 

of 242,968 contracts and an average 

daily trading volume of 3,796 contracts. 

Moreover, open interest as of June 30, 

2009, was 20,173 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.38 In a subsequent filing dated 

November 13, 2009, ICE reported that 

total trading volume in the third quarter 

of 2009 was 407,037 contracts (or 6,167 

contracts on a daily basis). In term of 

number of transactions, 10,376 trades 

occurred in the third quarter of 2009 

(157.2 trades per day). As of September 

30, 2009, open interest in the HHD 

contract was 25,418 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 Commission notes that trading 

activity in the HHD contract increased 

between the second and third quarters 

of 2009. Moreover, the number of trades 

per day was quite large and was 

significantly greater than the reporting 

level of five trades per day. 

Furthermore, the number of contracts 

traded is comparable to the levels 

experienced in a moderately active 

futures market, such as the ICE US 

Cotton No. 2 contract. Accordingly, the 

transaction data provide evidence that 

the HHD contract may meet the material 

liquidity criterion.39

i. Federal Register Comments 

As noted above, ICE was the sole 

respondent which addressed the 

question of whether the HHD contract is 

a SPDC. ICE stated in its comment letter 

that the HHD contract does not meet the 

material liquidity criterion for SPDC 

determination for a number of reasons. 

First, 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.’’ On 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’’ 40 rather than solely relying 

upon an ECM on its own to identify any 

such potential SPDCs to the 

Commission. While a contract that 

meets this threshold may be subject to 

scrutiny as a potential SPDC, the 

threshold is not a test for material 

liquidity. As noted above, the 

Commission has not reached a decision 

regarding material liquidity because, 

regardless of the relatively large number 

of trades per day and the large quarterly 

trading volume in the HHD contract, 

material liquidity alone is not sufficient 

to support a SPDC determination. 

ICE also stated that ‘‘the statistics 

[provided by ICE] have been 

misinterpreted and misapplied.’’ In 

particular, ICE stated that the volume 

figures used in the Commission’s 

analysis (cited above) ‘‘include trades 

made in all 120 months of each 

contract’’ as well as in strips of contract 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23727 

41Supplemental data supplied by ICE confirmed 

that block trades in the third quarter of 2009 were 

in addition to the trades that were conducted on the 

electronic platform; block trades comprised 1.2 

percent of all transactions in the HHD contract. 

42See 73 FR 75888, 75893 (Dec. 12, 2008). 

43 44 U.S.C. 3507(d). 

44 7 U.S.C. 19(a). 45 5 U.S.C. 601 et seq. 

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.’’ 

Furthermore, ICE noted that for the 

HHD contract, ‘‘78% of the total volume 

was actually executed on the ICE 

platform in the single most liquid, 

usually prompt, month of the contract.’’ 

It is the Commission’s opinion that 

liquidity, with regard to the HHD 

contract, is typically a function of 

trading activity in particular lead 

months and, given sufficient liquidity in 

such months, the HHD contract itself 

would be considered liquid. ICE’s 

analysis of its own trade data confirms 

this to be the case for the HHD contract, 

and thus, the Commission believes that 

it applied the statistical data cited above 

in an appropriate manner for gauging 

material liquidity. 

In addition, ICE stated that the tradesper-day statistics that it provided to the 

Commission in its quarterly filing and 

which are cited above includes 2(h)(1) 

transactions, which were not completed 

on the electronic trading platform and 

should not be considered in the SPDC 

determination process. Commission 

staff asked ICE to review the data it sent 

in its quarterly filings and ICE 

confirmed that the volume data it 

provided and which the Commission 

cited in its October 20, 2009, Federal 

Register notice as well as the additional 

volume information it cites above 

includes only transaction data executed 

on ICE’s electronic trading platform.41

The Commission acknowledges that the 

open interest information it cites above 

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. 

ii. Conclusion Regarding Material 

Liquidity 

For the reasons discussed above, the 

Commission finds that the HHD contract 

may meet the material liquidity 

criterion. However, because the HHD 

contract does not meet the material 

price reference or the arbitrage criterion, 

it is not possible to declare the HHD 

contract a SPDC since material liquidity 

cannot be used alone as a basis for SPDC 

determination. 

4. Overall Conclusion 

After considering the entire record in 

this matter, including the comments 

received, the Commission has 

determined that the HHD 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 HHD contract does 

not meet the material price reference 

and arbitrage criteria at this time nor is 

material liquidity sufficient by itself to 

support a SPDC determination. 

Accordingly, the Commission will issue 

the attached Order declaring that the 

HHD 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 HHD contract.42

Accordingly, with respect to its HHD 

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. 

V. Related Matters 

a. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 43 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 44 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. 

The Commission has concluded that 

ICE’s HEN, HIS and HHD contracts that 

are the subject of the attached Orders 

are not SPDCs; accordingly, the 

Commission’s Orders impose no 

additional costs and no additional 

statutorily or regulatory mandated 

responsibilities on the ECM. 

c. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 45 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 

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23728 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

46 66 FR 42256, 42268 (Aug. 10, 2001). 

47 7 U.S.C. 1a(29). 48 7 U.S.C. 1a(29). 49 7 U.S.C. 1a(29). 

are not small entities for purposes of the 

RFA.46 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 ICE Henry 

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: 

The Commission, pursuant to its 

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

Act, hereby determines that the Henry 

Financial Basis contract, traded on the 

IntercontinentalExchange, Inc., does not 

at this time satisfy the material price 

reference and price linkage criteria for 

significant price discovery contracts. 

Moreover, under Commission Guidance 

material liquidity alone cannot support 

a significant price discovery finding for 

the Henry Financial Basis contract. 

Consistent with this determination, the 

IntercontinentalExchange, Inc., is not 

considered a registered entity 47 with 

respect to the Henry 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 Henry 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 Henry 

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. 

b. Order Relating to the ICE Henry 

Financial Index 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: 

The Commission, pursuant to its 

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

Act, hereby determines that the Henry 

Financial Index contract, traded on the 

IntercontinentalExchange, Inc., does not 

at this time satisfy the material price 

reference criterion for significant price 

discovery contracts. Moreover, under 

Commission Guidance material 

liquidity alone cannot support a 

significant price discovery finding for 

the Henry Financial Index contract. 

Consistent with this determination, the 

IntercontinentalExchange, Inc., is not 

considered a registered entity 48 with 

respect to the Henry Financial Index 

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 Henry Financial Index 

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 Henry 

Financial Index 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. 

c. Order Relating to the ICE Henry 

Financial Swing 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: 

The Commission, pursuant to its 

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

Act, hereby determines that the Henry 

Financial Swing contract, traded on the 

IntercontinentalExchange, Inc., does not 

at this time satisfy the material price 

reference and arbitrage criteria for 

significant price discovery contracts. 

Moreover, under Commission Guidance 

material liquidity alone cannot support 

a significant price discovery finding for 

the Henry Financial Swing contract. 

Consistent with this determination, the 

IntercontinentalExchange, Inc., is not 

considered a registered entity 49 with 

respect to the Henry Financial Swing 

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 Henry Financial Swing 

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 Henry 

Financial Swing 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. 2010–10313 Filed 5–3–10; 8:45 am] 

BILLING CODE P 

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