65586 Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Proposed Rules 

1 17 CFR 145.9. 

2See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov./ 

LawRegulation/OTCDERIVATIVES/index.htm. 

3Pursuant to § 701 of the Dodd-Frank Act, Title 

VII may be cited as the ‘‘Wall Street Transparency 

and Accountability Act of 2010.’’ 

4 7 U.S.C. 1 et seq. 

5The Commodity Exchange Authority was an 

agency of the United States Department of 

Agriculture and was established to administer the 

CEA. For a detailed history of the evolution of the 

various agencies charged with administering the 

CEA, see http://www.archives.gov/research/guidefed-records/groups/180.html. The Commodity 

Exchange Authority was the predecessor of the 

CFTC. 

6See Act of June 15, 1936, Public Law 74–675, 

49 Stat. 1491 (1936), which, among other things, set 

out the original list of enumerated commodities and 

changed the name of the ‘‘Grain Futures Act’’ to the 

‘‘Commodity Exchange Act.’’ However, the CEA did 

not apply to all commodity futures markets then in 

existence, such as markets for coffee, cocoa, sugar, 

and metals. 

Proposed Rulemaking, Airspace Docket 

No. 10–ANE–106, as published in the 

Federal Register on July 22, 2010 (75 FR 

42630) (FR Doc. 2010–0323), is hereby 

withdrawn. 

Authority: 49 U.S.C. 106(g); 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

Issued in College Park, Georgia, on October 

15, 2010. 

Mark D. Ward, 

Manager, Operations Support Group, Eastern 

Service Center, Air Traffic Organization. 

[FR Doc. 2010–26943 Filed 10–25–10; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

RIN 3038–AD23 

Agricultural Commodity Definition 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is charged with proposing rules 

to implement new statutory provisions 

enacted by Title VII of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’). The 

Dodd-Frank Act, which amends the 

Commodity Exchange Act (‘‘CEA’’ or 

‘‘Act’’), includes provisions applicable to 

‘‘a swap in an agricultural commodity 

(as defined by the [CFTC]).’’ Neither 

Congress nor the CFTC has previously 

promulgated a definition of that term for 

purposes of the CEA or CFTC 

regulations. This notice reviews the 

statutory and regulatory history of the 

term ‘‘agricultural commodity’’ in the 

context of the CEA and Commission 

regulations and proposes a definition of 

that term for purposes of the CEA and 

Commission regulations. 

DATES: Comments must be received on 

or before November 26, 2010. The 

Commission is not inclined to grant 

extensions of this comment period. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AD21, 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail for Comments: 

agdefnprm@cftc.gov. Include the RIN 

number 3038–AD21 in the subject line 

of the message. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http:// 

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that is exempt from disclosure under the 

Freedom of Information Act, a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the established procedures in CFTC 

Regulation 145.9.1

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from http://www.cftc.gov that it may 

deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Donald Heitman, Senior Special 

Counsel, (202) 418–5041, 

dheitman@cftc.gov, or Ryne Miller, 

Attorney Advisor, (202) 418–5921, 

rmiller@cftc.gov, Division of Market 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Part I—Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act.2

Title VII of the Dodd-Frank Act 3

amended the CEA 4 to establish a 

comprehensive new regulatory 

framework for swaps and security-based 

swaps. The legislation was enacted to 

reduce risk, increase transparency, and 

promote market integrity within the 

financial system by, among other things: 

(1) Providing for the registration and 

comprehensive regulation of swap 

dealers and major swap participants; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. 

The Dodd-Frank Act includes 

provisions applicable to ‘‘a swap in an 

agricultural commodity (as defined by 

the [CFTC]).’’ Neither Congress nor the 

CFTC has previously promulgated a 

definition of that term for purposes of 

the CEA or CFTC regulations. This 

notice reviews the statutory and 

regulatory history of the term 

‘‘agricultural commodity’’ in the context 

of the CEA and Commission regulations 

and proposes a definition of that term 

for purposes of the CEA and 

Commission regulations. 

A. Statutory Framework and History— 

‘‘Agricultural Commodity’’ 

1. The Commodity Exchange Act 

In developing a proposed definition of 

‘‘agricultural commodity’’ for purposes 

of the CEA and CFTC regulations, the 

Commission first considered the 

historical development of federal 

commodities regulation in the United 

States. Before 1974, the Commodity 

Exchange Act, 7 U.S.C. 1 et seq., gave 

the Commodity Exchange Authority 5

jurisdiction over only those 

commodities specifically enumerated in 

the Act. Starting with the 1936 Act, the 

CEA applied to certain transactions in 

commodities then being traded for 

future delivery on certain U.S. futures 

exchanges, including wheat, cotton, 

rice, corn, oats, barley, rye, flaxseed, 

grain sorghum, mill feeds, butter, eggs, 

and Solanum tuberosum (Irish 

potatoes).6 As the exchanges regulated 

under the CEA added futures contracts 

for additional commodities, all of which 

were agricultural in nature, subsequent 

amendments to the Act added those 


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7Wool tops were added in 1938. Commodity 

Exchange Act Amendment of 1938, Public Law 75– 

471, 52 Stat. 205 (1938). Fats and oils, cottonseed 

meal, cottonseed, peanuts, soybeans and soybean 

meal were added in 1940. Commodity Exchange 

Act Amendment of 1940, Public Law No. 76–818, 

54 Stat. 1059 (1940). Livestock, livestock products, 

and frozen concentrated orange juice were added in 

1968. Commodity Exchange Act Amendment of 

1968, Public Law 90–258, 82 Stat. 26 (1968) 

(livestock and livestock products); Act of July 23, 

1968, Public Law 90–418, 82 Stat. 413 (1968) 

(frozen concentrated orange juice). Trading in onion 

futures on United States exchanges was prohibited 

in 1958. Commodity Exchange Act Amendment of 

1958, Public Law 85–839, 72 Stat. 1013 (1958). 

8See Commodity Futures Trading Commission 

Act of 1974, Public Law 93–463, 88 Stat. 1389 

(1974). 

9Except, of course, onions, which were excluded 

in 1958. See cite in footnote 7, above. 

10See the pre-Dodd-Frank CEA definition of 

‘‘commodity,’’ which had remained unchanged 

since the 1974 amendments: ‘‘The term 

‘‘commodity’’ means wheat, cotton, rice, corn, oats, 

barley, rye, flaxseed, grain sorghums, mill feeds, 

butter, eggs, Solanum tuberosum (Irish potatoes), 

wool, wool tops, fats and oils (including lard, 

tallow, cottonseed oil, peanut oil, soybean oil, and 

all other fats and oils), cottonseed meal, cottonseed, 

peanuts, soybeans, soybean meal, livestock, 

livestock products, and frozen concentrated orange 

juice, and all other goods and articles, except 

onions as provided in Public Law 85–839 (7 U.S.C. 

13–1), and all services, rights, and interests in 

which contracts for future delivery are presently or 

in the future dealt in.’’ 

The agricultural commodities specifically 

identified in current CEA § 1a(4) are often referred 

to as the ‘‘enumerated’’ agricultural commodities. 

The Dodd-Frank Act redesignates current CEA 

§ 1a(4) as new CEA § 1a(9) and adds ‘‘motion picture 

box office receipts (or any index, measure, value or 

data related to such receipts)’’ as a second 

commodity which, along with onions, is 

specifically excluded from the Act’s definition of 

commodity. 

11The CFMA was enacted into law as Appendix 

E to Public Law 106–554, the Consolidated 

Appropriations Act, 2001 (2000). 

12Prior to the Dodd-Frank Act, the Commission 

had defined a ‘‘swap’’ as follows: ‘‘A swap is a 

privately negotiated exchange of one asset or cash 

flow for another asset or cash flow. In a commodity 

swap [including an agricultural swap], at least one 

of the assets or cash flows is related to the price 

of one or more commodities.’’ (See 72 FR 66099, 

note 7 (November 27, 2007)). See new CEA § 1a(47) 

for the statutory definition of a ‘‘swap,’’ as added to 

the CEA by § 721 of the Dodd-Frank Act. 

13Current § 2(g) provides: 

Excluded swap transactions 

No provision of this Act (other than section 5a (to 

the extent provided in section 5a(g)), 5b, 5d, or 

12(e)(2)) shall apply to or govern any agreement, 

contract, or transaction in a commodity other than 

an agricultural commodity if the agreement, 

contract, or transaction is— 

(1) Entered into only between persons that are 

eligible contract participants at the time they enter 

into the agreement, contract, or transaction; 

(2) subject to individual negotiation by the 

parties; and 

(3) not executed or traded on a trading facility. 

CEA § 2(g), 7 U.S.C. § 2(g). Current CEA § 2(g) was 

added to the CEA by § 105(b) of the CFMA, enacted 

as Appendix E to Public Law 106–554. 

14 ‘‘The term ‘exempt commodity’ means a 

commodity that is not an excluded commodity or 

an agricultural commodity.’’ Current CEA § 1a(14). 

15Another swap exemption was provided in 

current CEA § 2(h), which affects transactions in 

exempt commodities. Current CEA § 2(h) was added 

to the CEA by § 106 of the CFMA. Also, current 

CEA § 2(d) contains a swap exemption for 

transactions in excluded commodities. Current CEA 

§ 2(d) was added to the CEA by § 103 of the CFMA. 

16H.R. 5660, the final version of the CFMA, 

which was enacted into law as an appendix to 

Public Law 106–554, the Consolidated 

Appropriations Act, 2001, was not accompanied by 

congressional committee reports. 

17H.R. 4541, also titled the Commodity Futures 

Modernization Act of 2000, was reported by all 

three committees of jurisdiction (Agriculture, 

Commerce, and Banking and Financial Services) in 

the House of Representatives and was passed by the 

House on October 19, 2000 by a vote of 377 yeas 

to 4 nays. On December 14, 2000, H.R. 5660 was 

introduced and contained major provisions of the 

House-passed version of H.R. 4541. 

18See footnote 10 above. 

19H.R. Rep. No. 106–711, Part 1, at 33 (June 29, 

2000). 

20Two other references to agricultural 

commodities that were added to the CEA by the 

CFMA will remain in the CEA, but are not relevant 

to defining an agricultural commodity. CEA § 5c(c) 

provides that a designated contract market must 

seek prior Commission approval for any rule 

amendment that would make material changes in 

Continued 

additional commodities to the Act’s list 

of enumerated commodities.7 Thus, 

prior to 1974, the CEA provided 

authority exclusively for the regulation 

of futures transactions in those 

commodities enumerated in the statute, 

all of which were agricultural in nature. 

With the enactment of the Commodity 

Futures Trading Commission Act of 

1974 (‘‘the 1974 Act’’),8 Congress 

overhauled the CEA and created the 

Commodity Futures Trading 

Commission, an independent regulatory 

agency with powers greater than those 

of its predecessor agency, the 

Commodity Exchange Authority. For the 

purposes of this Notice, the most 

significant change was that, while the 

Commodity Exchange Authority only 

regulated those commodities 

enumerated in the CEA, which were all 

agricultural in nature, the 1974 Act 

granted the CFTC exclusive jurisdiction 

over futures trading in all commodities 

traded for future delivery, including not 

only the enumerated commodities, but 

also ‘‘all other goods and articles * * * 

and all services, rights, and interests in 

which contracts for future delivery are 

presently or in the future dealt in.’’ 9 For 

the first time, the CEA would apply to 

all U.S. futures exchanges and to the full 

range of commodities that were or could 

be traded for future delivery thereon, 

including many commodities that did 

not fall under the enumerated 

agricultural category—for example, 

coffee, sugar, cocoa, metals and energy 

products, as well as interest rates, 

currencies, and other financial 

commodities.10

2. The Commodity Futures 

Modernization Act 

In 2000, the Commodity Futures 

Modernization Act of 2000 

(‘‘CFMA’’) 11added certain exemptions 

for swaps 12 transactions to the CEA. 

One exemption appears in current CEA 

§ 2(g).13 With the § 2(g) swaps 

exemption, Congress for the first time 

made an explicit distinction between 

agricultural commodities and other 

commodity categories. The § 2(g) 

exemption explicitly excluded any 

‘‘agreement, contract, or transaction’’ in 

an ‘‘agricultural commodity.’’ Instead of 

providing a definition for agricultural 

commodity in this context, Congress 

used the term in conjunction with the 

definition of exempt commodity— 

defined as neither an agricultural 

commodity nor an excluded 

commodity.14 Excluded commodities 

were in turn defined at current CEA 

§ 1a(13) to include financial 

commodities such as interest rates, 

currencies, economic indexes, and other 

similar items. Thus, of the three 

operative terms, only agricultural 

commodity was not ascribed a formal 

definition.15

There is limited legislative history 

regarding the CFMA to explain 

Congress’ intent in excluding 

‘‘agricultural commodities’’ from the 

§ 2(g) swaps exemption.16 However, the 

legislative history of H.R. 4541 (106th 

Congress), the predecessor to the CFMA 

(H.R. 5660),17 which included the same 

basic structure of excluded and exempt 

commodities, indicates that Congress 

did not intend that the term 

‘‘agricultural commodity’’ be limited to 

those commodities enumerated in the 

definition of the term ‘‘commodity’’ in 

current CEA § 1a(4).18 The House 

Committee on Agriculture stated the 

following: 

The Committee notes that the term ‘‘exempt 

commodity’’ means a commodity other than 

an ‘‘excluded commodity’’ or an ‘‘agricultural 

commodity.’’ For purposes of this definition, 

the Committee intends ‘‘agricultural 

commodity’’ to include all agricultural 

commodities, whether or not such 

agricultural commodities are specifically 

enumerated in the definition of ‘‘commodity’’ 

in section 1a[4] of the CEA.19

Notably, the definition of exempt 

commodity, and its interplay with both 

agricultural and excluded commodities, 

did not change from H.R. 4541 to H.R. 

5660, the final version of the CFMA as 

enacted into law. 

3. The Dodd-Frank Act 

The Dodd-Frank Act, when it 

becomes effective, will delete two 

references to ‘‘agricultural commodity’’ 

that were added to the CEA by the 

CFMA.20 First, the Dodd-Frank Act will 


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any futures contract in an enumerated agricultural 

commodity, if the rule amendment applies to 

contracts and delivery months which have been 

listed for trading and have open interest. CEA § 4q 

requires the Commission to consider procedures to 

encourage bona fide hedging on contract markets by 

domestic agricultural producers. 

Title IV of the CFMA included an additional 

reference to ‘‘agricultural commodity’’ that was not 

an amendment to the CEA. The Legal Certainty for 

Bank Products Act, enacted as Title IV of the 

CFMA, includes a definition of ‘‘covered swap 

agreement’’ that incorporates a reference to ‘‘a 

commodity other than an agricultural commodity 

enumerated in section 1a(4).’’ Section 725(g) of the 

Dodd-Frank Act deletes all references to ‘‘covered 

swap agreement,’’ including the reference to 

agricultural commodities, from the Legal Certainty 

for Bank Products Act. 

21See § 723(a)(1)(A) of the Dodd-Frank Act. That 

provision of the Dodd-Frank Act will also delete 

current CEA § 2(h) regarding swaps in exempt 

commodities. Current CEA § 2(h) does not explicitly 

mention agricultural commodities but, as noted 

above, exempt commodities are defined as those 

that are neither agricultural nor excluded 

commodities. 

22See § 734(a) of the Dodd-Frank Act. 

23 In addition, CEA § 5(e)(2), which was added to 

the CEA by the CFMA, provides that the 

Commission, through notice and comment 

rulemaking, may allow futures and options in 

agricultural commodities to trade on DTEFs. Once 

the Dodd-Frank Act repeals the authority for 

DTEFs, § 5(e)(2) will no longer have any practical 

effect. 

24See new CEA § 1a(47)(A)(iii)(XX) as added by 

§ 721(a)(21) of the Dodd-Frank Act. 

25See new CEA § 1a(47)(A)(i) and new CEA 

§ 1a(47)(B)(i) as added by § 721(a)(21) of the DoddFrank Act: 

* * * SWAP.— 

(A) IN GENERAL.—Except as provided in 

subparagraph (B), the term ‘swap’ means any 

agreement, contract, or transaction— 

(i) That is * * * [an] option of any kind that is 

for the purchase or sale * * * [of] commodities 

* * *. 

(B) EXCLUSIONS.—The term ‘swap’ does not 

include— 

(i) any contract of sale of a commodity for future 

delivery (or option on such a contract) * * *. 

26See 58 FR 5587 (Jan. 22, 1993). Note that 

because Part 35 was implemented pursuant to a 

§ 4(c) exemption, agricultural swaps that rely on 

Part 35 for their legal authority will continue to be 

permitted under the Dodd-Frank language whereby 

existing agricultural swaps provisions adopted 

pursuant to § 4(c), including Part 35, are 

grandfathered (See Dodd-Frank § 723(c)(3)(B)). 

27The requirements are: (1) The swap agreements 

are entered into solely between eligible swap 

participants; (2) the swap agreements are not part 

of a fungible class of agreements that are 

standardized as to their material economic terms; 

(3) the creditworthiness of any party having an 

actual or potential obligation under the swap 

agreement must be a material consideration in 

entering into or determining the terms of the swap 

agreement, including pricing, cost, or credit 

enhancement terms; and (4) the swap agreement is 

not entered into and traded on or through a 

multilateral transaction execution facility. See id. at 

5590–5591; see also 17 CFR 35.2(a)–(d). 

28Part 35, at § 35.2(d), also provides that ‘‘any 

person may apply to the Commission for exemption 

from any of the provisions of the Act (except 

2(a)(1)(B) [liability of principal for act of agent]) for 

other arrangements or facilities, on such terms and 

conditions as the Commission deems appropriate, 

including but not limited to, the applicability of 

other regulatory regimes.’’ See 17 CFR 35.2(d). The 

Commission has granted three such exemptions 

from Part 35, which have in each instance been 

styled as § 4(c) exemptive orders. See: 

Order: (1) Pursuant to Section 4(c) of the 

Commodity Exchange Act (a) Permitting Eligible 

Swap Participants To Submit for Clearing and ICE 

Clear U.S., Inc. and Futures Commission Merchants 

To Clear Certain Over-The- Counter Agricultural 

Swaps and (b) Determining Certain Floor Brokers 

and Traders To Be Eligible Swap Participants; and 

(2) Pursuant to Section 4d of the Commodity 

Exchange Act, Permitting Certain Customer 

Positions in the Foregoing Swaps and Associated 

Property To Be Commingled With Other Property 

Held in Segregated Accounts, 73 FR 77015 (Dec. 18, 

2008); 

Order (1) Pursuant to Section 4(c) of the 

Commodity Exchange Act, Permitting the Chicago 

Mercantile Exchange to Clear Certain Over-theCounter Agricultural Swaps and (2) Pursuant to 

Section 4d of the Commodity Exchange Act, 

Permitting Customer Positions in Such ClearedOnly Contracts and Associated Funds To Be 

Commingled With Other Positions and Funds Held 

in Customer Segregated Accounts, 74 FR 12316 

(March 24, 2009); and 

Order (1) Pursuant to Section 4(c) of the 

Commodity Exchange Act, Permitting the Kansas 

City Board of Trade Clearing Corporation To Clear 

Over-the-Counter Wheat Calendar Swaps and (2) 

Pursuant to Section 4d of the Commodity Exchange 

Act, Permitting Customer Positions in Such 

Cleared-Only Swaps and Associated Funds To Be 

Commingled With Other Positions and Funds Held 

in Customer Segregated Accounts, 75 FR 34983 

(June 21, 2010). 

delete the current CEA § 2(g) swaps 

exemption.21 Second, the Dodd-Frank 

Act will eliminate a provision, found in 

current CEA § 5a(b)(2)(F), that deals 

with the permissibility of trading 

agricultural commodities on a 

derivatives transaction execution 

facility (‘‘DTEF’’). The Dodd-Frank Act 

repeals current CEA § 5a 22 (which 

provides for the registration and 

regulation of DTEFs).23

The Dodd-Frank Act also contains 

several new provisions relating to 

agricultural commodities. Section 

721(a)(21) of the Dodd-Frank Act adds 

a new § 1a(47) to the CEA that defines 

the term ‘‘swap.’’ As part of the 

definition, clause (iii) of § 1a(47)(A) 

provides that a swap includes ‘‘any 

agreement, contract, or transaction 

commonly known as * * * an 

agricultural swap * * *.’’ 24 In addition, 

the Dodd-Frank Act’s definition of swap 

includes commodity options, other than 

exchange-traded options on futures, 

thus requiring off-exchange options on 

agricultural commodities to be regulated 

as swaps.25

Section 723(c)(3)(A) of the DoddFrank Act, which is a free-standing 

provision that does not amend the CEA, 

contains a general rule that, except as 

provided in § 723(c)(3)(B), ‘‘no person 

shall offer to enter into, enter into, or 

confirm the execution of, any swap in 

an agricultural commodity (as defined 

by the [CFTC]).’’ Section 723(c)(3)(B) 

provides that a swap in an agricultural 

commodity may be permitted pursuant 

to the Commission’s exemptive 

authority under CEA § 4(c), ‘‘or any rule, 

regulation, or order issued thereunder 

(including any rule, regulation, or order 

in effect as of the date of enactment of 

this Act) by the [CFTC] to allow swaps 

under such terms and conditions as the 

Commission shall prescribe.’’ 

Section 733 of the Dodd-Frank Act 

adds a new § 5h to the CEA that governs 

the registration and regulation of swap 

execution facilities. New CEA § 5h(b)(2) 

provides that a swap execution facility 

‘‘may not list for trading or confirm the 

execution of any swap in an agricultural 

commodity (as defined by the 

Commission) except pursuant to a rule 

or regulation of the Commission 

allowing the swap under such terms and 

conditions as the Commission shall 

prescribe.’’ 

Section 737 of the Dodd-Frank Act 

amends CEA § 4a to direct the 

Commission to adopt position limits for 

futures, exchange-traded options, and 

swaps that are economically equivalent 

to futures and exchange-traded options 

within 180 days of the date of 

enactment of the Dodd-Frank Act for 

exempt commodities and within 270 

days of the date of enactment of the 

Dodd-Frank Act for agricultural 

commodities. 

B. Regulatory Framework 

1. ‘‘Agricultural Commodity’’ in Current 

Regulations 

The term agricultural commodity 

appears in the Commission’s regulations 

in multiple places, the most relevant of 

which are the rules for swaps and 

options. 

a. Part 35 Swaps Exemption 

Regarding the pre Dodd-Frank Act 

swaps rules, Part 35 of the 

Commission’s regulations provides a 

broad-based exemption for certain swap 

agreements. Adopted by the 

Commission under its § 4(c) exemptive 

authority in 1993,26 Part 35 allows for 

swaps to transact bilaterally if certain 

conditions are met.27 As mentioned 

above, the CFMA swaps exemption, 

current CEA §§ 2(d), 2(g) and 2(h), 

provided an even broader exemption for 

excluded and exempt commodities than 

that provided by Part 35. As a result, 

only swap transactions in agricultural 

commodities still rely on the exemption 

found in Part 35. With the exception of 

three outstanding § 4(c) exemptions 

related to cleared agricultural basis and 

calendar swaps,28 Part 35 is the sole 

authority under which market 

participants may transact agricultural 

swaps that are not options—until such 


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29See Agricultural Swaps, Advance Notice of 

Proposed Rulemaking and Request for Comment, 75 

FR 59666 (September 28, 2010) (the ‘‘Agricultural 

Swaps ANPRM’’). 

30See Commission regulation 32.11, 17 CFR 

32.11. 

31Note that Part 32 was not issued under the 

Commission’s § 4(c) exemptive authority. After the 

effective date of the Dodd-Frank Act, options on 

agricultural commodities will also fall under the 

Dodd-Frank Act’s provisions governing the trading 

of swaps (and, specifically, agricultural swaps) 

since options on commodities will fall within the 

CEA’s definition of a swap. Accordingly, it is 

important to identify what options on agricultural 

commodities are currently being traded pursuant to 

Part 32. 

32 63 FR 18821 (April 16, 1998); and 64 FR 68011 

(December 6, 1999), respectively. 

33For example, see current Commission 

regulation 150.5(e)(3) (17 CFR 150.5(e)(3)), which 

applies to exchange-set speculative position limits 

for, among other things, the ‘‘international soft 

agricultural products.’’ Section 150.5 may be 

amended when the Commission adopts position 

limits for agricultural commodities pursuant to 

§ 737(a) of the Dodd-Frank Act. 

34See §§ 723(c)(3) and 733 of the Dodd-Frank Act 

and the Agricultural Swaps ANPRM. 

35See § 737(a) of the Dodd-Frank Act. 

36 Id. 

time as the Commission issues other or 

different rules and regulations for 

agricultural swaps transactions.29

b. Part 32 and Options 

The Commission maintains plenary 

authority over commodity options 

pursuant to CEA § 4c(b). It has used that 

authority to, among other things, issue 

Part 32 of the Commission’s regulations, 

which includes a general ban on offexchange options.30 However, Part 32 

allows for off-exchange option 

transactions under certain conditions, 

including allowing off-exchange options 

on agricultural commodities in two 

instances.31

Rule 32.13 establishes rules for 

trading off-exchange options on the 

‘‘enumerated’’ agricultural commodities 

(‘‘agricultural trade options’’ or ‘‘ATOs’’) 

whereby ATOs may only be sold by an 

Agricultural Trade Option Merchant 

(‘‘ATOM’’), who must first register with 

the Commission as such pursuant to 

CFTC rule 3.13. Since its 1998 adoption 

and one amendment in 1999,32 the 

ATOM registration scheme has attracted 

only one registrant, which registrant has 

since withdrawn its ATOM registration. 

Accordingly, ATOs currently may only 

be transacted pursuant to an exemptive 

provision found at § 32.13(g)(1). The 

exemption at § 32.13(g)(1) allows ATOs 

to be sold when: (1) The option is 

offered to a commercial (‘‘a producer, 

processor, or commercial user of, or a 

merchant handling’’ the underlying 

commodity); (2) the commercial enters 

the transaction solely for purposes 

related to its business as such; and (3) 

each party to the option contract has a 

net worth of not less than $10 million. 

In either case (whether transacted 

pursuant to the ATOM registration 

scheme or accomplished via the ATO 

exemption at § 32.13(g)), the phrase 

‘‘agricultural trade option’’ refers 

specifically to an off-exchange option on 

an enumerated agricultural commodity. 

In addition to the § 32.13(g) ATO 

exemption, Part 32 includes, at § 32.4, a 

basic trade option exemption applicable 

to options on commodities other than 

the enumerated agricultural 

commodities. The terms of the § 32.4 

exemption are essentially the same as 

those of the § 32.13(g) exemption with 

one significant difference. Under § 32.4, 

the option must be offered to a 

producer, processor, or commercial user 

of, or a merchant handling, the 

commodity, who enters into the 

commodity option transaction solely for 

purposes related to its business as such. 

However, § 32.4 does not include any 

net worth requirement. Because the 

term ‘‘agricultural commodity’’ in the 

Act refers to more than just the 

enumerated commodities, the 

Commission recognizes that certain 

options authorized under § 32.4 (e.g. offexchange options on coffee, sugar, 

cocoa, and other agricultural products 

that do not appear in the enumerated 

commodity list) will be considered to be 

swaps in an agricultural commodity— 

and subject to any Commission rules 

that specifically address agricultural 

swaps. 

c. Other Regulations 

The definition of agricultural 

commodity will also apply to any other 

Commission regulation that references 

agricultural commodity and is not 

specifically limited to the enumerated 

agricultural commodities.33 However, 

the definition is not anticipated to have 

any significant substantive impact 

outside of the Part 35 swaps rules, the 

Part 32 options rules, and the position 

limit rulemaking that will address 

agricultural commodities (see 

discussion in next section). 

2. ‘‘Agricultural Commodity’’ in New 

CFTC Regulations 

The definition of agricultural 

commodity will also be necessary in 

order to provide context for certain 

rulemakings under the Dodd-Frank Act. 

For example, if the Commission 

proceeds with an agricultural swaps 

rulemaking, the definition will identify 

the scope of commodities that will be 

subject to it.34 Any such rulemaking 

would provide rules and regulations 

governing the trading of swaps in an 

agricultural commodity. The definition 

will similarly provide a basis for the 

Commission’s planned rulemaking 

addressing speculative position limits 

on agricultural commodities,35 and by 

reverse implication, speculative 

position limits on exempt commodities 

(defined as a commodity that is not an 

excluded commodity or an agricultural 

commodity)—i.e., once a definition of 

agricultural commodity is adopted, any 

commodity that does not fall within that 

definition, or the definition of excluded 

commodity, will be considered an 

exempt commodity.36

Similarly, defining an agricultural 

commodity could clarify those swaps 

that are eligible for the exemptions in 

current CEA § 2(g) and 2(h) (which are 

not available to swaps in agricultural 

commodities). As noted above, the 

Dodd-Frank Act provides for the 

eventual repeal of current CEA § 2(g) 

and § 2(h). However, if the definition of 

an agricultural commodity is made 

effective prior to the repeal of those 

provisions, it would provide greater 

certainty as to the proper scope of those 

provisions during the interim. 

Part II—Explanation of the Definition 

A. Terms of the Proposed Definition 

This notice of proposed rulemaking 

proposes to add the following definition 

to section 1.3, the Definitions section, of 

the Commission’s regulations: 

As used in the Act and CFTC regulations, 

the term ‘‘agricultural commodity’’ means: 

(1) The following commodities specifically 

enumerated in the definition of a 

‘‘commodity’’ found in section 1a of the Act: 

Wheat, cotton, rice, corn, oats, barley, rye, 

flaxseed, grain sorghums, mill feeds, butter, 

eggs, Solanum tuberosum (Irish potatoes), 

wool, wool tops, fats and oils (including lard, 

tallow, cottonseed oil, peanut oil, soybean oil 

and all other fats and oils), cottonseed meal, 

cottonseed, peanuts, soybeans, soybean meal, 

livestock, livestock products, and frozen 

concentrated orange juice, but not onions; 

(2) All other commodities that are, or once 

were, or are derived from, living organisms, 

including plant, animal and aquatic life, 

which are generally fungible, within their 

respective classes, and are used primarily for 

human food, shelter, animal feed, or natural 

fiber; 

(3) Tobacco, products of horticulture, and 

such other commodities used or consumed 

by animals or humans as the Commission 

may by rule, regulation, or order designate 

after notice and opportunity for hearing; and 

(4) Commodity-based contracts based 

wholly or principally on a single underlying 

agricultural commodity. 

B. Explaining the Definition 

Category One—Enumerated Agricultural 

Commodities 

Category one includes the 

‘‘enumerated agricultural commodities’’ 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
65590 Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Proposed Rules 

37Petroleum products clearly would not fall 

within the enumerated commodities. ‘‘These 

itemized commodities are agricultural in nature.’’ 

Philip McBride Johnson, Commodities Regulation, 

§ 1.01, p. 3 (1982). The Commission has never even 

considered treating petroleum products as 

agricultural commodities. Nor would petroleum 

products fall within the second category. Even 

though they could be viewed as derived from living 

organisms—albeit organisms that lived millions of 

years ago—such products would not qualify under 

the ‘‘used primarily for human food, shelter, animal 

feed or natural fiber’’ standard of category two. 

38The MGE agricultural index products are 

currently available for corn, soybeans, and various 

types of wheat. These index products are 

financially settled to a spot index of country origin 

pricing as calculated by a firm called Data 

Transmission Network (‘‘DTN’’). Cash settlement is 

based upon the simple average of the spot prices 

published on the last three trading days of the 

settlement month. 

specified in current § 1a(4) of the Act 

(renumbered as § 1a(9) under the DoddFrank Act). While there is considerable 

overlap between categories one and two, 

category one includes some 

commodities that would not qualify 

under category two. For example, ‘‘fats 

and oils’’ would include plant-based 

oils, such as tung oil and linseed oil, 

which are used solely for industrial 

purposes (and thus would not fall 

within category two). Section 1a(4)’s 

reference to ‘‘oils’’ would not, however, 

extend to petroleum products.37

Category Two: Operative Definition of 

Agricultural Commodities 

As a general matter, category 2 seeks 

to draw a line between products derived 

from living organisms that are used for 

human food, shelter, animal feed or 

natural fiber (covered by the definition) 

and products that are produced through 

processing plant or animal-based inputs 

to create products largely used as 

industrial inputs (outside the 

definition). In that context, some of the 

terms used in describing the second 

category require further clarification, 

particularly the terms, ‘‘generally 

fungible,’’ ‘‘used primarily,’’ ‘‘human 

food’’ and ‘‘natural fiber.’’ 

‘‘Generally fungible’’—means 

substitutable or interchangeable within 

general classes. For example, apples, 

coffee beans, and cheese are generally 

fungible within general classes, even 

though there are various grades and 

types, and so they would be agricultural 

commodities. On the other hand, 

commodities that have been processed 

and have taken on a unique identity 

would not be generally fungible. Thus, 

while flax or mohair are generally 

fungible natural fibers, lace and linen 

garments made from flax, or sweaters 

made from mohair, are not generally 

fungible and would not be agricultural 

commodities under category two. 

‘‘Used primarily’’—means any amount 

of usage over 50%. If 50% of the 

peaches harvested, plus one, are used 

for human food, then peaches fall 

within category two. 

‘‘Human food’’—includes drink. Thus 

fruit juice, wine and beer are ‘‘food’’ for 

purposes of the definition of 

‘‘agricultural commodity.’’ 

‘‘Natural fiber’’—means any naturally 

occurring fiber that is capable of being 

spun into a yarn or made into a fabric 

by bonding or by interlacing in a variety 

of methods including weaving, knitting, 

braiding, felting, twisting, or webbing, 

and which is the basic structural 

element of textile products. 

Based on the foregoing, therefore, 

category two would include such 

products as: Fruits and fruit juices; 

vegetables and edible vegetable 

products; edible products of enumerated 

commodities, such as wheat flour and 

corn meal; poultry; milk and milk 

products, including cheese, nonfat dry 

milk and dry whey; distiller’s dried 

grain; eggs; cocoa beans, cocoa butter 

and cocoa; coffee beans and ground 

coffee; sugarcane, sugar beets, beet pulp 

(used as animal feed), raw sugar, 

molasses and refined sugar; honey; beer 

and wine; shrimp; and silk, flax and 

mohair. 

Category two would also include stud 

lumber, plywood, strand board and 

structural panels because they are 

derived from living organisms (trees), 

are generally fungible (e.g., random 

length 2 x 4s and 4 x 8 standard sheets 

of plywood) and are used primarily for 

human shelter—i.e., in the construction 

of dwellings. Category two would not, 

however, include industrial inputs such 

as wood pulp, paper or cardboard, nor 

would it include raw rubber, turpentine 

or rosin. Although derived from living 

organisms—trees—and generally 

fungible, none of these products are 

used primarily for human food, shelter, 

animal feed or natural fibers. On the 

other hand, maple syrup and maple 

sugar, also derived from trees, would be 

‘‘agricultural commodities.’’ Rayon, 

which is a fiber derived from trees or 

other plants, falls out of category two 

because it is not a natural fiber—i.e., it 

must be chemically processed from 

cellulose before it becomes fiber. 

Category two would include high 

fructose corn syrup, but not corn-based 

products such as polylactic acid (a corn 

derivative used in biodegradable 

packaging), butanol (a chemical derived 

from cornstarch and used in 

plasticizers, resins, and brake fluid) or 

other plant-based industrial products. 

Category two would include pure 

ethanol, which is derived from living 

organisms (corn and other plants), is 

generally fungible, and may be used for 

human food (as an ingredient of 

alcoholic beverages). However, it would 

not include denatured ethanol, which is 

used for fuel and for other industrial 

uses, because denatured ethanol cannot 

be used for human food. Likewise, 

neither would Category 2 include other 

plant or animal based renewable fuels, 

such as methane or biodiesel. Fertilizer 

and other agricultural chemicals, even 

though they are used almost exclusively 

in agriculture, would not fall within the 

definition because they would not fit 

into the food, shelter, animal feed or 

natural fiber category. 

Category Three—Other Agricultural 

Commodities 

Category three would include 

commodities that do not readily fit into 

the first two categories, but would 

nevertheless be widely recognized as 

commodities of an agricultural nature. 

Such commodities would include, for 

example, tobacco, products of 

horticulture (e.g., ornamental plants), 

and such other commodities used or 

consumed by animals or humans as the 

Commission may by rule, regulation or 

order designate after notice and 

opportunity for hearing. The 

Commission would determine the status 

of any such other commodities for 

purposes of the Act and CFTC 

regulations on a case-by-case basis as 

questions arise in the context of specific 

markets or transactions. 

Category Four—Commodity-Based 

Contracts 

The term, ‘‘agricultural commodity,’’ 

also covers contracts that are based 

wholly or principally on a single 

underlying agricultural commodity. 

Such contracts do not necessarily 

involve the potential for physical 

delivery of the underlying agricultural 

commodity—for example basis swaps, 

calendar swaps or crop yield swaps. The 

commodity-based contracts category 

would also include an index based 

wholly or principally on a single 

underlying agricultural commodity. 

Thus, for example, the Minneapolis 

Grain Exchange (‘‘MGE’’) wheat, corn 

and soybean price index contracts 38

would be considered agricultural 

commodities. Also, any index made up 

of more than 50% of any single 

agricultural commodity, since it is based 

principally on a single underlying 

agricultural commodity, would be 

considered a commodity-based contract 

for purposes of including it within the 

agricultural commodity definition. 

For purposes of the commodity-based 

contract category, the soybean complex 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Proposed Rules 65591 

39See the Agricultural Swaps ANPRM. 

40New § 1a(19)(iii) as renumbered under the 

Dodd-Frank Act. 

41 7 U.S.C. 13–1. 

42See Agricultural Swaps, Advance Notice of 

Proposed Rulemaking and Request for Comment, 75 

FR 59666 (September 28, 2010). 

43The Commission is required to adopt 

speculative position limits for agricultural 

commodities within 270 days of the adoption of the 

Dodd-Frank Act. 

would be considered a single 

commodity, so that an index based on 

the prices of soybeans, soybean meal 

and soybean oil would be an 

agricultural commodity under this 

provision. Likewise, for purposes of this 

provision, wheat would be considered a 

single commodity, so that an index 

based on the prices of Chicago Board of 

Trade (‘‘CBT’’) soft red winter wheat, 

Kansas City Board of Trade (‘‘KCBT’’) 

hard red winter wheat and MGE hard 

red spring wheat would be an 

agricultural commodity under the 

commodity-based contract provision. 

On the other hand, a contract based 

on an index of the prices of multiple 

agricultural commodities would not be 

based wholly or principally on a single 

agricultural commodity and would not 

fall within the commodity-based 

contract category. Thus, for example, 

under the commodity-based contract 

provision, a swap contract based on a 

price index of equal parts wheat, corn 

and soybeans, or even a swap based on 

a price index of 50% corn and 50% 

wheat, would not be based wholly or 

principally on a single underlying 

agricultural commodity and so would 

not fall within the agricultural 

commodity definition. Therefore, such 

index-based swaps would not be subject 

to special rules (if any) that might be 

adopted for agricultural commodity 

swaps.39

The definition of an ‘‘excluded 

commodity’’ in current CEA 

§ 1a(13)(iii) 40 could be read to include 

any index of agricultural commodities. 

That definition provides that ‘‘excluded 

commodity’’ means, among other things, 

‘‘any economic or commercial index 

based on prices, rates, values, or levels 

that are not within the control of any 

party to the relevant contract, 

agreement, or transaction.’’ However, 

such a reading would frustrate the 

requirement in Dodd-Frank that swaps 

in agricultural commodities be 

permitted only pursuant to a § 4(c) order 

of the Commission. For example, a swap 

contract based on a price index of solely 

wheat should reasonably be considered 

as a swap in agricultural commodity. 

Applying a mechanical interpretation of 

the definition of excluded commodity 

could permit ‘‘gaming’’ by allowing an 

index based principally, or even 

overwhelmingly, on one agricultural 

commodity to evade the limitations on 

trading agricultural swaps that are 

found in the Dodd-Frank Act. For this 

reason, the definition proposed herein 

would include an index based wholly or 

principally on a single underlying 

agricultural commodity. 

Onions 

Onions present a unique case in that 

onions are the only agricultural product 

specifically excluded from the 

enumerated commodities list in current 

§ 1a(4). Also, Public Law 85–839 

prohibits the trading of onion futures on 

any board of trade in the United 

States.41 Nothing in the definition 

proposed herein affects the prohibition 

on onion futures trading. 

In defining an agricultural 

commodity, given the foregoing 

statutory history, as well as the Act’s 

grammatical construction, it would 

appear that ‘‘agricultural commodity’’ is 

a subset of ‘‘commodity’’ and, since 

onions are excluded from the definition 

of ‘‘commodity,’’ onions cannot be 

considered an ‘‘agricultural commodity.’’ 

However, under the Dodd-Frank Act, 

the definition of ‘‘swap’’ in new § 1a(47) 

of the CEA is not limited to transactions 

based upon ‘‘commodities’’ as defined in 

current § 1a(4) of the Act. Therefore, 

under the CEA as amended by DoddFrank, a swap may be based upon an 

item that is not defined as a 

‘‘commodity.’’ Thus, onion swaps would 

seem to be permissible, but would not 

be considered to be swaps in an 

‘‘agricultural commodity’’ under the 

definition proposed herein. 

C. Effects of Applying the Definition 

It is also important to consider the 

uses to which the definition will be 

put—i.e., what would be the practical 

effect of a commodity being classified as 

an ‘‘agricultural commodity’’ under the 

definition proposed herein? One effect 

is that the commodity would be covered 

by any rules the Commission ultimately 

adopts for agricultural swaps. If, based 

on the comments received on the 

Agricultural Swaps ANPRM,42 it is 

determined that agricultural swaps 

should be treated the same as other 

physical commodity swaps, the 

definition will have no effect in the 

agricultural swaps context. 

The other significant effect of a 

commodity being classified as an 

‘‘agricultural commodity’’ is that the 

commodity would be subject to the 

speculative position limits for 

agricultural commodities,43 rather than 

the speculative limits for exempt 

commodities. Again, the classification 

of a given commodity as ‘‘agricultural’’ 

vs. ‘‘exempt’’ should have no practical 

effect on the commodity or how it is 

traded in the speculative limits context 

because: (1) The definition will only 

apply to commodities that are the 

subject of actual swaps or futures 

trading; and (2) the speculative limits 

for any such commodities will be based 

not on any general across-the-board 

definition or principle, but on the 

individual characteristics of each 

commodity, its swaps/futures market 

and its underlying cash market. 

Also, as noted above, during the 

interim period until §§ 2(g) and 2(h) are 

repealed, any commodities falling 

within the new ‘‘agricultural 

commodity’’ definition could not legally 

be traded pursuant to either section 

(although Part 35 would still be 

available to commodities/contracts 

meeting its requirements). 

Part III—Request for Comments 

Regarding the Proposed Definition 

The Commission requests comments 

on any aspect of the agricultural 

commodity definition proposed herein, 

and also on the following specific 

questions: 

(1) Are there any commodities that do 

not fit within the terms of the definition 

proposed herein, but which 

nevertheless should be considered to be 

‘‘agricultural commodities’’ for purposes 

of the CEA and Commission 

regulations? If so, why, and what 

undesirable effects, if any, might result 

from omitting such commodities from 

the definition? 

(2) Are there any commodities that do 

fit within the terms of the definition 

proposed herein, but which 

nevertheless should not be considered 

to be ‘‘agricultural commodities’’ for 

purposes of the CEA and Commission 

regulations? If so, why, and what 

undesirable effects, if any, might result 

from including such commodities in the 

definition? 

(3) Does the definition’s proposed 

treatment of commodity-based 

contracts, including index contracts, for 

purposes of the agricultural commodity 

definition constitute an appropriate 

mechanism for classifying such 

contracts? If not, what other treatment 

would be a better alternative? 

(4) Are biofuels, such as methane and 

biodiesel, appropriately excluded from 

the agricultural commodity definition? 

If not, why should such products be 

included in the definition and what 

undesirable effects, if any, might result 

from omitting them from the definition? 

(5) Under the proposed definition, 

lumber, plywood and other products of 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
65592 Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Proposed Rules 

44 44 U.S.C. 3501 et seq. 45 5 U.S.C. 601 et seq. 

trees used in human shelter would fall 

within the agricultural commodity 

definition, whereas products of trees 

used as industrial inputs, such as wood 

pulp, paper, raw rubber and turpentine, 

would fall outside the definition. Does 

this formulation draw an appropriate 

dividing line between the products of 

trees that are covered by the agricultural 

commodity definition and those that are 

not? 

(6) As noted above, if the definition of 

an agricultural commodity is made 

effective upon the publication of a final 

rule, it would provide clarity as to what 

swaps are or are not eligible for the 

exemptions found in current CEA 

§§ 2(g) and 2(h) until the point at which 

their repeal by the Dodd-Frank Act 

becomes effective. Is there any reason 

not to make the definition of 

agricultural commodity effective upon 

the publication of a final rule? Are there 

swaps currently being transacted under 

§ 2(g) or § 2(h) that would be considered 

transactions in an agricultural 

commodity (and thus potentially, 

temporarily illegal) under the definition 

proposed herein? If so, should the 

effective date of the definition be 

postponed until the repeal of current 

CEA §§ 2(g) and 2(h), for all purposes 

other than for the setting of speculative 

position limits, which will become 

effective prior to the repeal? 

Part IV—Related Matters 

A. Paperwork Reduction Act 

The proposed rule will not impose 

any new recordkeeping or information 

collection requirements, or other 

collections of information that require 

approval of the Office of Management 

and Budget under the Paperwork 

Reduction Act.44 The Commission 

invites public comment on the accuracy 

of its estimate that no additional 

recordkeeping or information collection 

requirements or changes to existing 

collection requirements would result 

from the rules proposed herein. 

B. Cost Benefit Analysis 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before issuing new 

regulations under the Act. Section 15(a) 

does not require the Commission to 

quantify the costs and benefits of new 

regulations or to determine whether the 

benefits of adopted regulations 

outweigh their costs. Rather, section 

15(a) requires the Commission to 

consider the costs and benefits of the 

subject regulations 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 the market for listed derivatives; 

(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 of concern and may, 

in its discretion, determine that, not 

withstanding its costs, a particular 

regulation is necessary or appropriate to 

protect the public interest. 

Defining an agricultural commodity 

for purposes of the CEA would seem to 

have limited immediate practical 

effects. However, the definition will be 

necessary for later substantive 

rulemakings, such as setting speculative 

position limits for exempt and 

agricultural commodities under § 737 of 

the Dodd-Frank Act and determining 

the permissibility of trading agricultural 

swaps under § 723(c)(3) and § 733 of the 

Dodd-Frank Act. Accordingly, this 

analysis will focus on the prospective 

costs/benefits of defining ‘‘agricultural 

commodity.’’ 

As noted above, § 737(a) of the DoddFrank Act amends CEA § 4a(a) to direct 

the Commission to adopt speculative 

position limits for futures, exchangetraded options, and swaps that are 

economically equivalent to futures and 

exchange-traded options within 180 

days of the date of enactment of the 

Dodd-Frank Act for exempt 

commodities and within 270 days of the 

date of enactment of the Dodd-Frank 

Act for agricultural commodities. Under 

CEA § 4a(a)(3), the Commission in 

setting position limits must balance the 

goals of: (1) Diminishing, eliminating, or 

preventing excessive speculation; (2) 

deterring and preventing market 

manipulation, squeezes, and corners; (3) 

ensuring sufficient liquidity for bona 

fide hedgers; and (4) ensuring that the 

price discovery function of the 

underlying market is not disrupted. If 

speculative position limits for exempt 

and agricultural commodities are set at 

an inappropriate level, it could have the 

consequence of not achieving the 

optimum blend of these important goals 

and could be detrimental to the 

competitiveness and financial integrity 

of these markets. 

As noted above, § 723(c)(3) of the 

Dodd-Frank Act contains a general rule 

that ‘‘no person shall offer to enter into, 

or confirm the execution of, any swap 

in an agricultural commodity (as 

defined by the [CFTC]).’’ Section 

723(c)(3) contains an exception to that 

general rule that provides that a swap in 

an agricultural commodity may be 

permitted pursuant to the Commission’s 

exemptive authority under CEA § 4(c), 

‘‘or any rule, regulation, or order issued 

thereunder (including any rule, 

regulation, or order in effect as of the 

date of enactment of this Act) by the 

[CFTC] to allow swaps under such terms 

and conditions as the Commission shall 

prescribe.’’ 

Also as noted above, § 733 of the 

Dodd-Frank Act adds a new § 5h to the 

CEA that governs the registration and 

regulation of swap execution facilities. 

New CEA § 5h(b)(2) provides that a 

swap execution facility ‘‘may not list for 

trading or confirm the execution of any 

swap in an agricultural commodity (as 

defined by the Commission) except 

pursuant to a rule or regulation of the 

Commission allowing the swap under 

such terms and conditions as the 

Commission shall prescribe.’’ 

Both § 723 and § 733 require the 

Commission to define an agricultural 

commodity if agricultural swaps 

(beyond those currently allowed under 

CEA § 4(c) exemptions) are to be traded. 

If the Commission decides to 

promulgate a rule permitting additional 

types of agricultural swaps to trade, 

such a rule could enhance price 

discovery and improve risk management 

for the agricultural commodities 

involved. 

The Commission invites public 

comments on its cost-benefit 

considerations. Commenters also are 

invited to submit any data or other 

information that they may have 

quantifying or qualifying the costs and 

benefits of the proposal with their 

comment letters. 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 45 requires that agencies 

consider whether the rules they propose 

will have a significant economic impact 

on a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact. The rules proposed by the 

Commission provide a definition that 

will largely be used in future 

rulemakings and which, by itself, 

imposes no significant new regulatory 

requirements. Accordingly, the 

Chairman, on behalf of the Commission, 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed rules will not 

have a significant impact on a 

substantial number of small entities. 

List of Subjects in 17 CFR Part 1 

Definitions, Agriculture, Agricultural 

commodity. 

In consideration of the foregoing, and 

pursuant to the authority contained in 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Proposed Rules 65593 

1United States Postal Service Request for 

Temporary Waivers from Periodic Reporting of 

Service Performance Measurement, October 1, 2010 

(Request); see also Order Establishing Final Rules 

Concerning Periodic Reporting of Service 

Performance Measurements and Customer 

Satisfaction, May 25, 2010, at 22–24 (Order No. 

465). 

the Commodity Exchange Act and, in 

particular, sections 2(a)(1), 5h, and 8a 

thereof, 7 U.S.C. 2, 7b–3, and 12a, and 

pursuant to the authority contained in 

section 723(c)(3) of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act, Public Law 111–203, 

124 Stat. 1376 (2010), the Commission 

hereby proposes to amend Chapter 1 of 

Title 17 of the Code of Federal 

Regulations as follows: 

PART 1—GENERAL REGULATIONS 

UNDER THE COMMODITY EXCHANGE 

ACT 

1. The authority citation for Part 1 is 

revised to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a–6p, 7, 

7a, 7b, 7b–3, 8, 9, 12, 12a, 12c, 13a, 13a–1, 

16, 16a, 19, 21, 23 and 24, unless otherwise 

noted. 

2. Section 1.3 is amended by adding 

paragraph (zz) to read as follows: 

§ 1.3 Definitions. 

* * * * * 

(zz) Agricultural commodity. As used 

in the Act and CFTC regulations, this 

term means: 

(1) The following commodities 

specifically enumerated in the 

definition of a ‘‘commodity’’ found in 

section 1a of the Act:Wheat, cotton, rice, 

corn, oats, barley, rye, flaxseed, grain 

sorghums, mill feeds, butter, eggs, 

Solanum tuberosum (Irish potatoes), 

wool, wool tops, fats and oils (including 

lard, tallow, cottonseed oil, peanut oil, 

soybean oil and all other fats and oils), 

cottonseed meal, cottonseed, peanuts, 

soybeans, soybean meal, livestock, 

livestock products, and frozen 

concentrated orange juice, but not 

onions; 

(2) All other commodities that are, or 

once were, or are derived from, living 

organisms, including plant, animal and 

aquatic life, which are generally 

fungible, within their respective classes, 

and are used primarily for human food, 

shelter, animal feed or natural fiber; 

(3) Tobacco, products of horticulture, 

and such other commodities used or 

consumed by animals or humans as the 

Commission may by rule, regulation or 

order designate after notice and 

opportunity for hearing; and 

(4) Commodity-based contracts based 

wholly or principally on a single 

underlying agricultural commodity. 

Issued in Washington, DC, on October 19, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Statement of Chairman Gary Gensler 

Agriculture Commodity Definition 

October 19, 2010 

I support the proposal to publish for 

comment a definition of the term, 

‘‘agricultural commodity.’’ This is 

necessary as the Dodd-Frank Act 

includes two provisions that apply to 

swaps in an agricultural commodity, as 

defined by the CFTC. First, the 

definition will be used to fulfill the 

Dodd-Frank Act’s requirement that 

swaps in an ‘‘agricultural commodity’’ 

be prohibited unless permitted under 

the Commission’s general exemptive 

authority. An Advance Notice of 

Proposed Rulemaking seeking comment 

on the appropriate conditions, 

restrictions or protections to be 

included in any rules governing 

agricultural swaps is currently out for 

comment. Second, the Dodd-Frank Act 

directs the Commission to adopt 

speculative position limits for 

‘‘agricultural commodities’’ within 270 

days of the enactment of Dodd-Frank. 

I believe the proposed agricultural 

commodity definition draws a good line 

between agricultural and nonagricultural commodities, though I am 

very interested to hear the public’s 

views on this definition. 

[FR Doc. 2010–26951 Filed 10–25–10; 8:45 am] 

BILLING CODE P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3020 

[RM2011–1; Order No. 552] 

Periodic Reporting 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice of temporary waiver 

request. 

SUMMARY: The Commission is 

establishing a docket to address a recent 

Postal Service request for approval of a 

temporary waiver of rules requiring it to 

provide periodic reports on service 

performance for certain market 

dominant postal services. The Postal 

Service’s request reflects the expectation 

that a transition period likely would be 

needed before full compliance with new 

reporting rules could be accomplished. 

This notice informs the public about the 

Postal Service’s interest in obtaining a 

temporary waiver and invites comments 

that will inform the Commission’s 

decision on the request. 

DATES: Comments Due: October 29, 

2010. 

Reply Comments Due: November 15, 

2010. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section for 

information on filing alternatives. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 or 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: On 

October 1, 2010, the Postal Service filed 

a request for temporary waivers from 

periodic reporting of service 

performance measurement for various 

market dominant postal services, or 

components of postal services, pursuant 

to Commission Order No. 465.1

Order No. 465 established a process 

for the Postal Service to achieve full 

compliance with all periodic service 

performance reporting requirements by 

the filing date of the FY 2011 Annual 

Compliance Report. Order No. 465 at 

18–24. As part of the process, the 

Commission directed the Postal Service 

to seek temporary waivers where it 

cannot immediately comply with 

specific reporting requirements. As a 

condition of granting any waiver, the 

Commission directed the Postal Service 

to develop and present implementation 

plans addressing each reporting 

requirement for which the Postal 

Service cannot provide the required 

information. The ‘‘plans at a minimum 

should provide an explanation of why a 

reporting requirement cannot be 

complied with, the steps necessary to 

come into compliance, and a timeline of 

events necessary to achieve compliance. 

Interim milestones shall be included in 

the plans where applicable such that 

both the Postal Service and the 

Commission can evaluate progress being 

made.’’ Id. at 23. 

In the instant Request, the Postal 

Service seeks temporary waivers for 

First-Class Mail Flats at the district 

level, non-retail First-Class Mail Parcels, 

all categories of Standard Mail, Outside 

County Periodicals, non-retail Media 

Mail, Library Mail, Bound Printed 

Matter Parcels, and Stamp Fulfillment 


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