U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Facsimile: (202) 418-5521

www.cftc.gov

CFTC Letter No. 15-53

No-Action 

September 29, 2015

Division of Clearing and Risk 

Division of Market Oversight

Division of Swap Dealer and Intermediary Oversight

Joseph W. Ghormley

Senior Attorney

Southwest Power Pool, Inc.

201 Worthen Drive

Little Rock, Arkansas 72223-4936

Re: Extension of Time-Limited No-Action Relief with Respect to Certain Commodity 

Exchange Act Provisions That May Apply to Southwest Power Pool, Inc. and/or Its 

Participants

Dear Mr. Ghormley:

The purpose of this letter is to inform you that the Division of Clearing and Risk, 

Division of Market Oversight, and the Division of Swap Dealer and Intermediary Oversight 

(“Divisions”) of the Commodity Futures Trading Commission (“Commission” or “CFTC”) are 

extending the expiration date of the no-action relief previously granted to Southwest Power Pool, 

Inc. (“Southwest Power Pool” or “SPP”) (“No-Action Relief”).1

On February 20, 2014, the Divisions granted time-limited No-Action Relief to Southwest 

Power Pool. In CFTC Letter No. 14-18, the Divisions stated that they would not recommend 

that the Commission take enforcement action against Southwest Power Pool, its members, or 

certain market participants for failure to comply with certain provisions of the Commodity 

Exchange Act (“CEA”) and the implementing regulations thereunder (“Commission 

regulations”), as applicable,

2 with respect to: (1) contracts, agreements and transactions for the 

purchase or sale of certain “transmission congestion rights,” “energy transactions,” and 

 1 See CFTC Letter Nos. 14-18 (Feb. 20, 2014), 14-109 (Aug. 22, 2014) and 15-05 (Feb. 27, 2015), available at:

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-18.pdf,

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-109.pdf, and

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-05.pdf, respectively.

2 The No-Action Relief excluded from its scope the Commission’s general anti-fraud and anti-manipulation 

authority, and scienter-based prohibitions under sections 2(a)(1)(B), 4(d), 4b, 4c(b), 4o, 4s(h)(1)(A), 4s(h)(4)(A), 

6(c), 6(d), 6(e), 6c, 6d, 8, 9, and 13 of the CEA, and any implementing regulations promulgated under these sections 

including, but not limited to, Commission regulations 23.410(a) and (b), 32.4, and part 180 (collectively, the 

“Enforcement Provisions”). The Enforcement Provisions still apply during the No-Action Relief period. 
Joseph W. Ghormley

September 29, 2015

Page 2

“operating reserve transactions,” if such transactions are offered or entered into pursuant to a 

Federal Energy Regulatory Commission (“FERC”) approved tariff (“Subject Transactions”); and 

(2) certain preliminary activities related to Southwest Power Pool’s transmission congestion right 

market necessary to support the launch of its Integrated Marketplace.3 The initial No-Action 

Relief was scheduled to expire on the earlier of August 31, 2014 or the date on which the 

Commission took final action on Southwest Power Pool’s application for an exemption under 

section 4(c)(6) of the CEA and section 712(f)(4) of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (“Dodd-Frank Act”).

4

 Subsequently, the Divisions extended the NoAction Relief to February 28, 2015,5 and then further extended the No-Action Relief to 

September 30, 2015.6

Statement of Facts

Southwest Power Pool is a Regional Transmission Organization (“RTO”) approved by 

FERC. On October 1, 2013, Southwest Power Pool submitted an initial exemption application 

(“Initial Application”) to the Commission requesting that the Commission exercise its authority 

under section 4(c)(6) of the CEA and section 712(f)(4) of the Dodd-Frank Act to exempt the 

Subject Transactions, as each term is defined in the Initial Application, from the provisions of 

the CEA and Commission regulations, with the exception of the Enforcement Provisions, as well 

as any persons (including SPP, its members, and its market participants) offering, entering into, 

rendering advice, or rendering other services with respect to such transactions.7 In its Initial 

Application, Southwest Power Pool represented that it had requested exemptive relief that was 

substantially similar to the exemptive relief granted by the Commission to certain RTOs and 

independent system operators (“ISOs”) in April 2013 (“RTO-ISO Final Order”).

8

 Southwest 

 3 CFTC Letter No. 14-18.

4 CFTC Letter No. 14-18.

5 CFTC Letter No. 14-109.

6 CFTC Letter No. 15-05.

7 In the Matter of the Application for an Exemptive Order Under Section 4(c) of the Commodity Exchange Act by 

Southwest Power Pool, Inc. (filed on Oct. 17, 2013).

8 Final Order in Response to a Petition From Certain Independent System Operators and Regional Transmission 

Organizations To Exempt Specified Transactions Authorized by a Tariff or Protocol Approved by the Federal 

Energy Regulatory Commission or the Public Utility Commission of Texas From Certain Provisions of the 

Commodity Exchange Act Pursuant to the Authority Provided in the Act, 78 Fed. Reg. 19,880, Apr. 2, 2013. 

Notably, the RTO-ISO Final Order does not provide an exemption from the Enforcement Provisions. 

Under the RTO-ISO Final Order, a transaction may be exempt so long as the transaction falls within the definitions 

of “Financial Transmission Rights,” “Energy Transactions,” “Forward Capacity Transactions,” or “Reserve or 

Regulation Transactions,” is offered or sold in a market administered by one of the petitioning RTOs or ISOs 

pursuant to a tariff or protocol that has been approved or permitted to take effect by FERC or the Public Utility 

Commission of Texas, and complies with all other enumerated terms and conditions in the RTO-ISO Final Order. 

Id. For example, the RTO-ISO Final Order requires that, to be eligible for the exemption, the transactions must be 

entered into by persons who are: (1) “appropriate persons,” as defined in section 4(c)(3)(A) through (J) of the CEA; 

(2) “eligible contract participants,” as defined in section 1a(18) of the CEA and in Commission regulation 1.3(m); or 

(3) in the business of (i) generating, transmitting, or distributing electric energy, or (ii) providing electric energy 
Joseph W. Ghormley

September 29, 2015

Page 3

Power Pool further represented that its markets and the associated Subject Transactions were 

substantially similar to those of the RTOs and ISOs that are subject to the RTO-ISO Final 

Order.9 SPP represented that the terms “transmission congestion right,” “energy transactions,” 

and “operating reserve transactions” are SPP’s equivalent of the following terms set forth in the 

RTO-ISO Final Order: “Financial Transmission Right,” “Energy Transactions,” and “Reserve or 

Regulation Transactions,” respectively.10 SPP also averred that the Subject Transactions were 

defined in the Initial Application in a manner consistent with the terms set forth in the RTO-ISO 

Final Order.11 However, SPP noted that its definition of “transmission congestion right” was 

narrower in scope than the definition of “Financial Transmission Right,” because it did not 

include transmission congestion right options whereas the RTO-ISO Final Order’s definition of 

“Financial Transmission Right” does include financial transmission rights in the form of 

options.12 Southwest Power Pool also represented that FERC had accepted its tariff revisions 

which require a market participant to demonstrate to Southwest Power Pool that such participant 

meets the Appropriate Persons Requirement in order to be eligible to participate in the Integrated 

Marketplace. These revisions became effective on March 1, 2014.13

Following extensive discussions with Commission staff, Southwest Power Pool filed an 

amended exemption application on August 1, 2014 (“Amended Application”).14 The Amended 

Application states that the Integrated Marketplace commenced operations on March 1, 2014, and 

includes, among other things, information about Southwest Power Pool’s Integrated Marketplace 

as well as the representations set forth in the Initial Application and described above.15

On May 21, 2015, the Commission published a notice of proposed order and request for 

comment on SPP’s Amended Application (“Proposed Order”).16 The Proposed Order would 

exempt agreements, contracts and transactions for the purchase and sale of the Subject 

Transactions from the provisions of the CEA and Commission regulations, other than the 

Enforcement Provisions.17 In order to qualify for the exemption as set forth in the Proposed 

 services that are necessary to support the reliable operation of the transmission system (collectively, “Appropriate 

Persons Requirement”). Id. at 19,913.

9 Initial Application at 2.

10 See Initial Application at 4, 11-13.

11 See Initial Application at 11-13.

12 See Initial Application at 11 n. 48. SPP noted, moreover, that the RTO-ISO Final Order includes “Forward 

Capacity Transactions” within its scope, but such transactions are not currently offered on SPP’s Integrated 

Marketplace. Id. at 10 n. 45.

13 See Sw. Power Pool, Inc., FERC Letter Order, Nov. 22, 2013.

14 In the Matter of the Application for an Exemptive Order Under Section 4(c) of the Commodity Exchange Act by 

Southwest Power Pool, Inc. (amended on Aug. 1, 2014).

15 See Amended Application at 1, 2, 4-6, 12-15, 21.

16 80 Fed. Reg. 29490, May 21, 2015. 

17 80 Fed. Reg. 29516-17.
Joseph W. Ghormley

September 29, 2015

Page 4

Order, the agreements, contracts and transactions for the purchase and sale of the Subject 

Transactions must be offered or sold pursuant to SPP’s FERC-approved Tariff, and each party to 

the agreement, contract or transaction must be SPP, its members, or other market participants 

who meet the Appropriate Persons Requirement.18

The Commission solicited comments on the Proposed Order over a 30-day comment 

period, which closed on June 22, 2015. 

Discussion and Extension of Grant of No-Action Relief

To allow adequate time for consideration of comments on the Proposed Order, the 

Divisions are further extending the No-Action Relief. Moreover, the Divisions note that 

Southwest Power Pool has represented that its Integrated Marketplace and the transactions 

covered thereon will fit within the scope of the RTO-ISO Final Order. Thus, the Divisions 

believe it is appropriate to continue to limit this No-Action Relief, in a manner consistent with 

the scope of the RTO-ISO Final Order, to Southwest Power Pool and all of its members and 

other market participants who meet the Appropriate Persons Requirement (each an “Exempted 

Person”). 

Accordingly, effective on the date hereof (the “Effective Date”), the No-Action Relief

will expire on the earlier of December 31, 2015 or the date on which the Commission takes final 

action on the Proposed Order (the “Termination Date”). 

During the period between the Effective Date and the Termination Date, the Divisions 

will not recommend that the Commission take enforcement action against any Exempted Person, 

with respect to any of the Subject Transactions and associated Integrated Marketplace activities

for failure to comply with any of the provisions of the CEA and Commission regulations, other 

than the Enforcement Provisions.

Conclusion

This letter, and the positions taken herein, represent the views of the Divisions only, and 

do not necessarily represent the positions or views of the Commission or of any other office or 

division of the Commission. The relief issued by this letter concerns enforcement action only 

and does not excuse persons relying on this letter from compliance with any other applicable 

requirements contained in the CEA or in the Commission regulations issued thereunder. Further, 

this letter, and the relief contained herein, is based upon the representations made to the 

Divisions. Any different, changed, or omitted material facts or circumstances might render this 

No-Action Relief void. As with all no-action letters, the Divisions retain the authority to 

condition further, modify, suspend, terminate, or otherwise restrict the terms of the No-Action 

Relief provided herein, in their discretion. In addition, this No-Action Relief is without

prejudice to any decision by the Commission to take final action on the Proposed Order that is, in 

 18 80 Fed. Reg. 29517.
Joseph W. Ghormley

September 29, 2015

Page 5

any respect, the same as, narrower than, or broader than, that which was in the RTO-ISO Final 

Order.

Should you have any questions, please do not hesitate to contact Alicia Lewis at 

alewis@cftc.gov or (202) 418-5862 or Riva Spear Adriance at radriance@cftc.gov or (202) 418-

5494.

Very truly yours,

__________________ 

Jeffrey Bandman

Acting Director, DCR 

_________________

Eileen T. Flaherty

Director, DSIO 

__________________ 

Vincent McGonagle

Director, DMO