New York 

Mercantile Exchange 

Mr. David Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21 51 St. N.W. 

Washington, D.C. 20581 

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February 7, 2008 

COMMENT 

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Re: 

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ICE Clear and ICE Futures Exemption Requests and Request for Reli~ 

Pursuant to Section 4(C): 72 F.R. 68862 (December 6, 2007) rr1 

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The New York Mercantile Exchange, Inc. ("NYMEX" or "Exchange") appreciates the opportunity 

to comment on the Commodity Futures Trading Commission's ("CFTC" or "Commission") Federal 

Register Release dated December 6, 2007 ('the Release"). 1 ICE Clear is proposing to offer 

clearing services for agricultural swaps that will be executed off-exchange and then novated and 

replaced with a position in a contract to be listed by ICE Clear on a "clearing-only'' basis. NYMEX 

is a for-profit corporation organized under the laws of the State of Delaware. It is the chief 

operating subsidiary of NYMEX Holdings, Inc., ("NYMEX Holdings"). As a designated contract 

market and a registered derivatives clearing organization, NYMEX is the largest exchange in the 

world for the trading and clearing of futures and options contracts on energy and metals 

commodities. 

NYMEX Support for OTC Clearing 

NYMEX is a strong advocate of the provision of clearing services for transactions executed offexchange in OTC trading venues. The Exchange was one of the first DCOs to begin providing 

this service to OTC market participants. NYMEX presumes for purposes of this comment letter 

that the benefits of such clearing services that are currently enjoyed by other commodity 

categories also would apply to agricultural products as well and generally supports making OTC 

clearing services available for agricultural swaps. The balance of the comment letter will consider 

a few points that warrant clarification. 

1 The CFTC requested comment on whether to extend the exemption granted under Part 35 of the Commission's 

regulations to certain agricultural over-the-counter ("OTC") swaps that do not meet the requirements of Commission 

Regulation 35.2. This exemption was requested by ICE Clear U.S., Inc. ("ICE Clear"), a derivatives clearing organization 

("DCO"). The CFTC also requested comment on whether ICE Futures U.S., Inc. ("ICE Futures U.S.") floor traders and 

floor brokers who are registered with the Commission, when trading for their own accounts, may be determined to be 

eligible swap participants ("ESPs") and permitted to enter into certain specified OTC swap transactions. This exemption 

was requested by ICE Futures U.S., a designated contract market. It appears that the relief for both petitions is proposed 

to be addressed pursuant to the CFTC's authority under Section 4(c) of the Commodity Exchange Act ("Act"). Section 

4(c) generally authorizes the Commission to exempt "any agreement, contract, or transaction (or class thereof) that is 

otherwise subject to subsection (a) of Section 4 from any requirements of the Act (excepting certain specified provisions). 

Although Section 4(c) by its terms appears to apply only to exemptions from statutory provisions, the broader question for 

the Commission may be whether it is an appropriate exercise to in effect create an exemption to an exemption. As an 

alternative, the CFTC may wish to consider undertaking a rulemaking to amend Part 35 so that the relief may be of 

broader application. 

New York Mercantile Exchange, Inc. 

World Financial Center 

One North End Avenue 

New York, NY 10282-1101 

(212) 299-2000 

The New York Mercantile Exchange, Inc., is composed of two divisions. 

The NYMEX Division offers trading in crude oil, heating oil, unleaded gasoline, 

natural gas, electricity, coal, propane, platinum, and palladium. The COMEX Division 

offers trading in gold, silver, copper, and aluminum. 
Review of OTC Clearing Proposal 

A number of agricultural commodities have experienced a significant run-up in price over the last 

twelve to eighteen months along with a measure of increased volatility at the higher price levels. 

That market activity in and of itself should not be a basis for exclusion of these types of products 

from OTC clearing services. Rather, in the interest of a level and competitive playing field, the 

CFTC needs to maintain uniform standards across product types regarding the conditions and 

requirements that will be applicable to the provision of OTC clearing services. Thus, the CFTC 

should clarify the extent to which the liquidity and volatility of the underlying commodity is material 

in weighing the appropriateness of OTC clearing for a particular product or commodity. The 

CFTC also should clarify the extent to which routine monitoring tools, such as large trader 

reporting and position accountability levels and/or position limits are appropriate for OTC clearing 

generally. Substantive process, fairness and policy consistency concerns all support the creation 

of consistent standards and conditions applicable to the clearing of agricultural swaps relative to 

other commodities that are eligible for OTC clearing. 

Review of ESP Relief 

The Release sets forth several conditions that would apply for ICE Futures US floor members 

becoming ESPs and then observes that the list of conditions is "substantially similar" to previous 

CFTC orders that permit floor members to be eligible contract participants. Yet, the Commission 

previously has required that the clearing member providing a financial guarantee to a floor 

member must maintain capitalization of a certain size in order to be able to issue such 

guarantees. That requirement is not included in the list of conditions to be applied to ICE Clear, 

and the Release does not provide any policy rationale for the standards for ESP relief to be 

different from the standards applicable to orders for ECP status. Absent the articulation of such 

a rationale, the Commission should clarify the uniform conditions that would be applicable to a 

request for relief for CFTC registrants either to obtain ESP or ECP status. 

Request for Section 4(c) Relief 

The CFTC additionally should identify any remaining applicability of requirements concerning 

standardized terms or the credit-worthiness of a counterparty. Finally, the CFTC should also 

confirm the continuing vitality of the requirement that the swap is not "entered into and traded on 

or through a multilateral transaction execution facility." In that connection, as this type of facility 

does not appear to be defined by CFTC regulation, the Commission should further clarify the 

scope of this facility relative to terms that are defined, such as the term "trading facility" as that 

term is used in the Act. 

Conclusion 

We support allowing OTC clearing services to be made available for agricultural swaps. We also 

strongly believe that there should be a level playing field across product types with regard to the 

requirements and conditions imposed upon DCOs generally offering OTC clearing services. A 

commitment to regulatory parity is an inherent requirement for just and equitable treatment, 

regulatory fairness and substantive due process under the law. 

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Should you require any additional information or have any comments or questions regarding this 

comment letter, please do not hesitate to contact me at any time. 

cc: Walt Lukken, Acting Chairman 

Michael Dunn, Commissioner 

Jill E. Sommers, Commissioner 

Bart Chilton, Commissioner 

Ananda Radhakrishnan 

Rick Shilts 

David Van Wagner 

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Very truly yours, 

Jh~r£ fJcwsCJ--rfJr< 

James E. Newsome 

President and Chief Executive 

Officer