53724 Federal Register / Vol. 74, No. 201 / Tuesday, October 20, 2009 / Notices 

5 17 CFR Part 36, Appendix A. 

6 44 U.S.C. 3507(d). 

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

1The acronym ‘‘Phys’’ indicates physical delivery 

of natural gas. 

2The acronym ‘‘BS’’ indicates that the contract is 

a cash-settled basis swap. 

Henry Hub physically-delivered natural 

gas futures contract for the same 

specified calendar month. The size of 

the SCL contract is 2,500 million British 

thermal units (‘‘mmBtu’’), and the unit 

of trading is any multiple of 2,500 

mmBtu. The SCL contract is listed for 

up to 120 calendar months commencing 

with the next calendar month. 

Based upon a required quarterly 

notification filed on July 27, 2009 

(mandatory under Rule 36.3(c)(2)), the 

ICE reported that, with respect to its 

SCL contract, the total number of trades 

was 8,102 in the second quarter of 2009, 

resulting in a daily average of 126.6 

trades. During the same period, the SCL 

contract had a total trading volume of 

612,452 contracts and an average daily 

trading volume of 9,569 contracts. 

Moreover, the open interest as of June 

30, 2009, was 417,121 contracts. 

It appears that the SCL contract may 

satisfy the material liquidity, price 

linkage, and material price reference 

factors for SPDC determination. With 

respect to material liquidity, trading in 

the SCL contract averaged more than 

9,000 contracts on a daily basis, with 

more than 100 separate transactions 

each day. In addition, the open interest 

in the subject contract was substantial. 

In regard to price linkage, the final 

settlement of the SCL contract is based, 

in part, on the final settlement price of 

the NYMEX’s physically-delivered 

natural gas contract, where the NYMEX 

is registered with the Commission as a 

designated contract market (‘‘DCM’’). In 

terms of material price reference, the 

ICE maintains exclusive rights over IPI’s 

bidweek price indices. As a result, no 

other exchange can offer such a basis 

contract based on IPI’s Socal bidweek 

index. While other third-party price 

providers produce natural gas price 

indices for a variety of trading centers, 

those indices may not be the same in 

value or quality as IPI’s price indices; 

each company’s bidweek indices are 

based on transactions that are 

consummated during the last five days 

of the month prior to delivery and are 

voluntarily submitted by traders. In 

addition, the 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, the ICE offers 

‘‘West Gas End of Day’’ and ‘‘OTC Gas 

End of Day’’ with access to all price data 

or just 12, 24, 36, or 48 months of 

historical data. 

III. Request for Comment 

In evaluating whether an ECM’s 

agreement, contract, or transaction 

performs a significant price discovery 

function, section 2(h)(7) of the CEA 

directs the Commission to consider, as 

appropriate, four specific criteria: Price 

linkage, arbitrage, material price 

reference, and material liquidity. As it 

explained in Appendix A to the Part 36 

rules,5 the Commission, in making 

SPDC determinations, will apply and 

weigh each factor, as appropriate, to the 

specific contract and circumstances 

under consideration. 

As part of its evaluation, the 

Commission will consider the written 

data, views, and arguments from any 

ECM that lists the potential SPDC and 

from any other interested parties. 

Accordingly, the Commission requests 

comment on whether the ICE’s SCL 

contract performs a significant price 

discovery function. Commenters’ 

attention is directed particularly to 

Appendix A of the Commission’s Part 

36 rules for a detailed discussion of the 

factors relevant to a SPDC 

determination. The Commission notes 

that comments which analyze the 

contract in terms of these factors will be 

especially helpful to the determination 

process. In order to determine the 

relevance of comments received, the 

Commission requests that commenters 

explain in what capacity are they 

knowledgeable about one or several of 

the subject contracts. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 6 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 final 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 7 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 such an order or to determine 

whether the benefits of such an order 

outweigh its costs; rather, it requires 

that the Commission ‘‘consider’’ the 

costs and benefits of its action. 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 bulk of the costs imposed by the 

requirements of Commission Rule 36.3 

relate to significant and increased 

information-submission and reporting 

requirements adopted in response to the 

Reauthorization Act’s directive that the 

Commission take an active role in 

determining whether contracts listed by 

ECMs qualify as SPDCs. The enhanced 

requirements for ECMs will permit the 

Commission to acquire the information 

it needs to discharge its newlymandated responsibilities and to ensure 

that ECMs with SPDCs are identified as 

entities with the elevated status of 

registered entity under the CEA and are 

in compliance with the statutory terms 

of the core principles of section 

2(h)(7)(C) of the Act. The primary 

benefit to the public is to enable the 

Commission to discharge its statutory 

obligation to monitor for the presence of 

SPDCs and extend its oversight to the 

trading of SPDCs. 

Issued in Washington, DC, on October 14, 

2009 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E9–25192 Filed 10–19–09; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Notice of Intent, Pursuant to the 

Authority in Section 2(h)(7) of the 

Commodity Exchange Act and 

Commission Rule 36.3(c)(3), To 

Undertake a Determination Whether 

the (1) Phys, BS, LD1 (US/MM), AB–NIT 

Contract, et al., Offered for Trading on 

the Natural Gas Exchange, Inc., 

Perform Significant Price Discovery 

Functions 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of action and request for 

comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) is undertaking a review 

to determine whether the (1) Phys,1 BS,2


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Federal Register / Vol. 74, No. 201 / Tuesday, October 20, 2009 / Notices 53725 

3The acronym ‘‘LD1’’ indicates the final 

settlement price of the New York Mercantile 

Exchange (NYMEX) physically-delivered Henry 

Hub Natural Gas futures contract for the 

corresponding contract month, which is expressed 

in US dollars and cents per million British thermal 

units (mmBtu). 

4The acronym ‘‘AB–NIT’’ refers to the Alberta, 

Canada, and Nova Inventory Transfer hub. 

5 ‘‘Union-Dawn’’ refers to the Union Gas, Ltd.’s, 

Dawn hub, which is located in Canada across the 

U.S. border from Detroit, Michigan. 

6The acronym ‘‘FP’’ refers to fixed-price 

contracts. 

7The abbreviation CA/GJ refers the Canadian 

dollars per gigajoule, which is a unit of measure for 

energy. One GJ is equal to 0.9478 mmBtu. 

8The acronym ‘‘ID’’ refers to index contracts. 

9The term ‘‘7a’’ refers to a price index that is 

computed as a volume-weighted average of 

transactions that occur on the NGX trading platform 

during a particular calendar month. Such 

transactions specify the physical delivery of natural 

gas at the AB–NIT hub in the following calendar 

month. 

10 74 FR 12178 (Mar. 23, 2009); these rules 

became effective on April 22, 2009. 

11The Commission may commence this process 

on its own initiative or on the basis of information 

provided to it by an ECM pursuant to the 

notification provisions of Commission rule 

36.3(c)(2). 12Where appropriate, the Commission may 

choose to interview market participants regarding 

their impressions of a particular contract. Further, 

while they may not provide direct evidentiary 

support with respect to a particular contract, the 

Commission may rely for background and context 

on resources such as its October 2007 Report on the 

Oversight of Trading on Regulated Futures 

Exchanges and Exempt Commercial Markets (‘‘ECM 

Study’’). http://www.cftc.gov/stellent/groups/ 

public/@newsroom/documents/file/pr5403– 

07_ecmreport.pdf. 13 7 U.S.C. 2(h)(7)(C). 

LD1 3 (US/MM), AB–NIT4 (‘‘Alberta 

Basis’’); (2) Phys, BS, LD1 (US/MM), 

Union-Dawn 5 (‘‘Union-Dawn Basis’’); 

(3) Phys, FP,6 (CA/GJ),7 AB–NIT 

(‘‘Alberta Fixed-Price’’); (4) Phys, FP, 

(US/MM), Union-Dawn (‘‘Union-Dawn 

Fixed-Price’’); and (5) Phys, ID,8 7a 9

(CA/GJ), AB–NIT (‘‘Alberta Index’’) 

contracts, offered for trading on the 

Natural Gas Exchange, Inc. (‘‘NGX’’), an 

exempt commercial market (‘‘ECM’’) 

under Sections 2(h)(3)–(5) of the 

Commodity Exchange Act (‘‘CEA’’ or the 

‘‘Act’’), perform significant price 

discovery functions. Authority for this 

action is found in section 2(h)(7) of the 

CEA and Commission rule 36.3(c) 

promulgated thereunder. In connection 

with this evaluation, the Commission 

invites comment from interested parties. 

DATES: Comments must be received on 

or before November 4, 2009. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

• Follow the instructions for 

submitting comments. Federal 

eRulemaking Portal: http:// 

www.regulations.gov. 

• E-mail: secretary@cftc.gov. Include 

Phys, BS, LD1 (US/MM), AB–NIT 

(‘‘Alberta Basis’’) Contract; Phys, BS, 

LD1 (US/MM), Union-Dawn (‘‘UnionDawn Basis’’) Contract; Phys, FP, (CA/ 

GJ), AB–NIT (‘‘Alberta Fixed-Price’’) 

Contract; Phys, FP, (US/MM), UnionDawn (‘‘Union-Dawn Fixed-Price’’) 

Contract; and/or Phys, ID, 7a (CA/GJ), 

AB–NIT (‘‘Alberta Index’’) Contract in 

the subject line of the message, 

depending on the subject contract(s) to 

which the comments apply. 

• Fax: (202) 418–5521 

• Mail: Send to David A. Stawick, 

Secretary, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581 

• Courier: Same as mail above. 

All comments received will be posted 

without change to http:// 

www.CFTC.gov/. 

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 

On March 16, 2009, the CFTC 

promulgated final rules implementing 

provisions of the CFTC Reauthorization 

Act of 2008 (‘‘Reauthorization Act’’) 10

which subjects ECMs with significant 

price discovery contracts (‘‘SPDCs’’) to 

self-regulatory and reporting 

requirements, as well as certain 

Commission oversight authorities, with 

respect to those contracts. Among other 

things, these rules and rule amendments 

revise the information-submission 

requirements applicable to ECMs, 

establish procedures and standards by 

which the Commission will determine 

whether an ECM contract performs a 

significant price discovery function, and 

provide guidance with respect to 

compliance with nine statutory core 

principles applicable to ECMs with 

SPDCs. These rules became effective on 

April 22, 2009. 

In determining whether an ECM’s 

contract is or is not an SPDC, the 

Commission will evaluate the contract’s 

material liquidity, price linkage to other 

contracts, potential for arbitrage with 

other contracts traded on designated 

contract markets or derivatives 

transaction execution facilities, use of 

the ECM contract’s prices to execute or 

settle other transactions, and other 

factors. 

In order to facilitate the Commission’s 

identification of possible SPDCs, 

Commission rule 36.3(c)(2) requires that 

an ECM operating in reliance on section 

2(h)(3) promptly notify the Commission 

and provide supporting information or 

data concerning any contract: (i) That 

averaged five trades per day or more 

over the most recent calendar quarter; 

and (ii) (A) for which the ECM sells 

price information regarding the contract 

to market participants or industry 

publications; or (B) 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 agreement. 

II. Determination of an SPDC 

A. The SPDC Determination Process 

Commission rule 36.3(c)(3) 

establishes the procedures by which the 

Commission makes and announces its 

determination on whether a specific 

ECM contract serves a significant price 

discovery function. Under those 

procedures, the Commission will 

publish a notice in the Federal Register 

that it intends to undertake a 

determination as to whether the 

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.11

After prompt consideration of all 

relevant information,12 the Commission 

will, within a reasonable period of time 

after the close of the comment period, 

issue an order explaining its 

determination. Following the issuance 

of an order by the Commission that the 

ECM executes or trades an agreement, 

contract, or transaction that performs a 

significant price discovery function, the 

ECM must demonstrate, with respect to 

that agreement, contract, or transaction, 

compliance with the core principles 

under section 2(h)(7)(C) of the CEA 13

and the applicable provisions of Part 36. 

If the Commission’s order represents the 

first time it has determined that one of 

the ECM’s contracts performs a 

significant price discovery function, the 

ECM must submit a written 

demonstration of its compliance with 

the core principles within 90 calendar 

days of the date of the Commission’s 

order. For each subsequent 

determination by the Commission that 

the ECM has an additional SPDC, the 


cprice-sewell on DSKGBLS3C1PROD with NOTICES
53726 Federal Register / Vol. 74, No. 201 / Tuesday, October 20, 2009 / Notices 

14NOVA Gas Transmission, Ltd., owns the 

natural gas transmission infrastructure known as 

the Alberta System. The Alberta System is a 

network comprising 14,100 miles of pipeline that 

gathers natural gas for use both in Alberta and for 

delivery to provincial border points for export to 

North American markets. The Alberta System is one 

of the largest natural gas transmission systems in 

North America and gathers 66 percent of natural gas 

produced in Western Canada. 

15For comparative purposes, the size of the 

NYMEX’s physically-delivered Henry Hub natural 

gas futures contract is 10,000 mmBtu. 

16Union Gas, Ltd., is a major Canadian natural 

gas storage, transmission, and distribution company 

based in Ontario, Canada. Union Gas offers 

premium storage and transportation services to 

customers at the Dawn hub, which the largest 

underground storage facility in Canada and one of 

the largest in North America. The Dawn hub offers 

customers an important link for natural gas moving 

from Western Canadian and U.S. supply basins to 

markets in central Canada and the northeast United 

States. 

ECM must submit a written 

demonstration of its compliance with 

the core principles within 30 calendar 

days of the Commission’s order. 

B. Phys, BS, LD1 (US/MM), AB–NIT 

Contract 

The Alberta Basis contract is a 

monthly contract that calls for physical 

delivery of natural gas based on the final 

settlement price for NYMEX’s Henry 

Hub physically-delivered natural gas 

futures contract for the specified 

calendar month, plus or minus the price 

differential (basis) between the Alberta 

delivery point 14 and the Henry Hub. 

There is no standard size for the Alberta 

Basis contract, although a minimum 

volume of 100 mmBtu is required in 

increments of 100 units per day. The 

Alberta Basis contract is listed for 60 

consecutive calendar months. 

Based upon a required quarterly 

notification filed on August 25, 2009 

(mandatory under Rule 36.3(c)(2)), the 

NGX reported that, with respect to its 

Alberta Basis contract, the average 

number of trades each day for the 

nearby contract month was 23.2 in the 

second quarter of 2009. During the same 

period, the Alberta Basis nearby 

contract had an average daily trading 

volume of 5,869,800 million British 

thermal units (mmBtu).15 Moreover, the 

net open interest as of June 30, 2009, for 

the nearby contract month was 

150,213,600 mmBtu. For delivery two 

months out, the open interest was 

10,112,200 mmBtu. 

It appears that the Alberta Basis 

contract may satisfy the material 

liquidity, price linkage, and material 

price reference factors for SPDC 

determination. With respect to material 

liquidity, trading in the Alberta Basis 

contract was nearly 6,000,000 mmBtu 

on a daily basis, with more than 20 

separate transactions each day. In 

addition, the open interest in the subject 

contract was substantial. In regard to 

price linkage, the final settlement of the 

Alberta Basis contract is based, in part, 

on the final settlement price of the 

NYMEX’s physically-delivered natural 

gas futures contract, where the NYMEX 

is registered with the Commission as a 

designated contract market (‘‘DCM’’). 

With respect to material price 

reference, the NGX forged an alliance 

with the IntercontinentalExchange, Inc., 

(ICE) to use the ICE’s matching engine 

to complete transactions in physical gas 

contracts traded on NGX. In return, the 

NGX agreed to provide the clearing 

services for such transactions. As part of 

the agreement, NGX provides the ICE 

with transaction data, which are then 

made available to market participants 

on a paid basis. The ICE offers the NGX 

data in several packages, which vary in 

terms of the amount of available 

historical data. For example, the ICE 

offers the ‘‘OTC Gas End of Day’’ data 

packages with access to all historical 

data, or the option of accessing 12, 24, 

36, and 48 months of past data only. 

C. Phys, BS, LD1 (US/MM), Union-Dawn 

Contract 

The Union-Dawn Basis contract is a 

monthly contract that calls for physical 

delivery of natural gas based on the final 

settlement price for NYMEX’s Henry 

Hub physically-delivered natural gas 

futures contract for the specified 

calendar month, plus or minus the price 

differential (basis) between the Dawn 

delivery point 16 and the Henry Hub. 

There is no standard size for the UnionDawn Basis contract, although a 

minimum volume of 100 mmBtu is 

required in increments of 100 units per 

day. The Union-Dawn Basis contract is 

listed for 60 consecutive calendar 

months. 

Based upon a required quarterly 

notification filed on August 25, 2009 

(mandatory under Rule 36.3(c)(2)), the 

NGX reported that, with respect to its 

Union-Dawn Basis contract, the average 

number of trades each day for the 

nearby contract month was 8.3 in the 

second quarter of 2009. During the same 

period, the Union-Dawn Basis nearby 

contract had an average daily trading 

volume of 1,332,400 mmBtu. Moreover, 

the net open interest as of June 30, 2009, 

for the nearby contract month was 

28,203,800 mmBtu. For delivery two 

months out, the open interest was 

12,908,400 mmBtu. 

It appears that the Union-Dawn Basis 

contract may satisfy the material 

liquidity, price linkage, and material 

price reference factors for SPDC 

determination. With respect to material 

liquidity, trading in the Union-Dawn 

Basis contract was more than 1,000,000 

mmBtu on a daily basis, with more than 

eight separate transactions each day. In 

addition, the open interest in the subject 

contract was substantial. In regard to 

price linkage, the final settlement of the 

Union-Dawn Basis contract is based, in 

part, on the final settlement price of the 

NYMEX’s physically-delivered natural 

gas futures contract, where the NYMEX 

is registered with the Commission as a 

designated contract market (‘‘DCM’’). 

With respect to material price 

reference, the NGX forged an alliance 

with the IntercontinentalExchange, Inc., 

(ICE) to use the ICE’s matching engine 

to complete transactions in physical gas 

contracts traded on NGX. In return, the 

NGX agreed to provide the clearing 

services for such transactions. As part of 

the agreement, NGX provides the ICE 

with transaction data, which are then 

made available to market participants 

on a paid basis. The ICE offers the NGX 

data in several packages, which vary in 

terms of the amount of available 

historical data. For example, the ICE 

offers the ‘‘OTC Gas End of Day’’ data 

packages with access to all historical 

data, or the option of accessing 12, 24, 

36, and 48 months of past data only. 

D. Phys, FP, (CA/GJ), AB–NIT Contract 

The Alberta Fixed-Price contract calls 

for physical delivery of natural gas over 

a number of different time periods. This 

contract allows delivery of natural gas 

during the following day, Friday plus 

two or three days, Saturday plus three 

or four days, Sunday plus two days, the 

remainder of the month, throughout the 

nearby calendar month, and during a 

specific future calendar month. Each 

delivery period is considered to be a 

separate contract, and market 

participants value each delivery period 

separately. However, overlapping 

delivery days are considered fungible, 

and, thus, may be offset by traders. 

There is no standard size for the Alberta 

Fixed-Priced contract, although a 

minimum volume of 94.78 mmBtu is 

required in increments of 100 units per 

day. The NGX lists the Alberta FixedPrice contract for 60 calendar months. 

Based upon a required quarterly 

notification filed on August 25, 2009 

(mandatory under Rule 36.3(c)(2)), the 

NGX reported that, with respect to its 

Alberta Fixed-Price contract, the average 

number of trades daily for each delivery 

period was greater than five in the 

second quarter of 2009. In this regard, 

the average number of trades each day 

was 122.1, 36.0, 7.0, 30.1, 7.4, 68.6, and 

12.8 trades for the following delivery 

periods—following day, Friday plus two 

days, Friday plus three days, Saturday 


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17The open interest for other delivery periods 

was significantly smaller than for the nearby and 

second-nearby contracts. 18 17 CFR Part 36, Appendix A. 

plus three days, Saturday plus four 

days, Sunday plus two days, remainder 

of the month, nearby calendar month, 

and any single future calendar month, 

respectively. During the same period, 

the Alberta Fixed-Price contract had an 

average daily trading volume of 

1,209,505 mmBtu; 821,565 mmBtu; 

223,874 mmBtu; 754,175 mmBtu; 

672,568 mmBtu; 6,634,030 mmBtu; and 

1,233,958 mmBtu for the following 

delivery periods—next day, Friday plus 

two days, Friday plus three days, 

Saturday plus three days, Saturday plus 

four days, Sunday plus two days, 

remainder of the month, nearby 

calendar month, and any single future 

calendar month, respectively. Moreover, 

the net open interest as of June 30, 2009, 

was 96,003,450 mmBtu for next-month 

delivery. For delivery two months out, 

the open interest was 54,456,997 

mmBtu.17

It appears that the Alberta Fixed-Price 

contract may satisfy the material 

liquidity and material price reference 

factors for SPDC determination. With 

respect to material liquidity, trading in 

the nearby month of the Alberta FixedPrice contract was close to 7,000,000 

mmBtu on a daily basis, with nearly 70 

separate transactions each day. In 

addition, the open interest in the subject 

contract was substantial. 

With respect to material price 

reference, the NGX forged an alliance 

with the IntercontinentalExchange, Inc., 

(ICE) to use the ICE’s matching engine 

to complete transactions in physical gas 

contracts traded on NGX. In return, the 

NGX agreed to provide the clearing 

services for such transactions. As part of 

the agreement, NGX provides the ICE 

with transaction data, which are then 

made available to market participants 

on a paid basis. The ICE offers the NGX 

data in several packages, which vary in 

terms of the amount of available 

historical data. For example, the ICE 

offers the ‘‘OTC Gas End of Day’’ data 

packages with access to all historical 

data, or the option of accessing 12, 24, 

36, and 48 months of past data only. 

E. Phys, FP, (US/MM), Union-Dawn 

Contract 

The Union-Dawn Fixed-Price contract 

calls for physical delivery of natural gas 

over two different time periods: the 

following day and Saturday plus three 

days. Each delivery period is considered 

to be a separate contract, and the market 

participants value each delivery period 

separately. However, overlapping 

delivery days are considered fungible, 

and, thus, may be offset by traders. 

There is no standard size for the UnionDawn Fixed-Priced contract, although a 

minimum volume of 100 mmBtu 

required in increments of 100 units per 

day. The NGX lists the Union-Dawn 

Fixed-Price contract for 60 calendar 

months. 

Based upon a required quarterly 

notification filed on August 25, 2009 

(mandatory under Rule 36.3(c)(2)), the 

NGX reported that, with respect to its 

Union-Dawn Fixed-Price contract, the 

average number of trades each day was 

114.1 trades and 23.9 trades for next-day 

delivery and delivery Saturday plus the 

next three days, respectively. During the 

same period, the Union-Dawn FixedPrice contract had an average daily 

trading volume of 812,800 mmBtu and 

458,000 mmBtu for the delivery periods 

next day and Saturday plus three days, 

respectively. Moreover, the net open 

interest as of June 30, 2009, was 

2,241,600 mmBtu for next-day delivery. 

It appears that the Union-Dawn FixedPrice contract may satisfy the material 

liquidity and material price reference 

factors for SPDC determination. With 

respect to material liquidity, trading 

activity in the next-day Union-Dawn 

Fixed-Price contract was over 800,000 

mmBtu on a daily basis, with over 100 

separate transactions each day. In 

addition, the open interest in the subject 

contract was substantial. 

With respect to material price 

reference, the NGX forged an alliance 

with the IntercontinentalExchange, Inc., 

(ICE) to use the ICE’s matching engine 

to complete transactions in physical gas 

contracts traded on NGX. In return, the 

NGX agreed to provide the clearing 

services for such transactions. As part of 

the agreement, NGX provides the ICE 

with transaction data, which are then 

made available to market participants 

on a paid basis. The ICE offers the NGX 

data in several packages, which vary in 

terms of the amount of available 

historical data. For example, the ICE 

offers the ‘‘OTC Gas End of Day’’ data 

packages with access to all historical 

data, or the option of accessing 12, 24, 

36, and 48 months of past data only. 

F. Phys, ID, 7a (CA/GJ), AB–NIT 

Contract 

The Alberta Index contract calls for 

physical delivery of natural gas during 

the specified calendar month. When 

trading this contract, market 

participants price the difference 

between the anticipated value of natural 

gas at the time of delivery and the 

average of actual trades on the NGX 

system. The average of transactions on 

the NGX system is reported as a volumeweighted average price index in the first 

publication of the delivery month of 

Canadian Enerdata, Ltd.’s Canadian Gas 

Price Reporter. At the time of delivery, 

the negotiated price premium or 

discount is added or subtracted to the 

published index price. There is no 

standard size for the Alberta Index 

contract, although a minimum volume 

of 94.78 mmBtu is required in 

increments of 100 units per day. The 

NGX lists the Alberta Index contract for 

60 calendar months. 

Based upon a required quarterly 

notification filed on August 25, 2009 

(mandatory under Rule 36.3(c)(2)), the 

NGX reported that, with respect to its 

Alberta Index contract, the average 

number of trades each day was 10.9. 

During the same period, the Alberta 

Index contract had an average daily 

trading volume of 2,438,627 mmBtu. 

Moreover, the net open interest as of 

June 30, 2009, was 6,287,794 mmBtu for 

delivery in the following month. 

It appears that the Alberta Index 

contract may satisfy the material 

liquidity and material price reference 

factors for SPDC determination. With 

respect to material liquidity, trading in 

the nearby month of the Alberta Index 

contract was over 2,000,000 mmBtu on 

a daily basis, with over 10 separate 

transactions each day. In addition, the 

open interest in the subject contract was 

substantial. 

With respect to material price 

reference, the NGX forged an alliance 

with the IntercontinentalExchange, Inc., 

(ICE) to use the ICE’s matching engine 

to complete transactions in physical gas 

contracts traded on NGX. In return, the 

NGX agreed to provide the clearing 

services for such transactions. As part of 

the agreement, NGX provides the ICE 

with transaction data, which are then 

made available to market participants 

on a paid basis. The ICE offers the NGX 

data in several packages, which vary in 

terms of the amount of available 

historical data. For example, the ICE 

offers the ‘‘OTC Gas End of Day’’ data 

packages with access to all historical 

data, or the option of accessing 12, 24, 

36, and 48 months of past data only. 

III. Request for Comment 

In evaluating whether an ECM’s 

agreement, contract, or transaction 

performs a significant price discovery 

function, section 2(h)(7) of the CEA 

directs the Commission to consider, as 

appropriate, four specific criteria: price 

linkage, arbitrage, material price 

reference, and material liquidity. As it 

explained in Appendix A to the Part 36 

rules,18 the Commission, in making 


cprice-sewell on DSKGBLS3C1PROD with NOTICES
53728 Federal Register / Vol. 74, No. 201 / Tuesday, October 20, 2009 / Notices 

19 44 U.S.C. 3507(d). 20 7 U.S.C.19(a). 

1 74 FR 12178 (Mar. 23, 2009); these rules became 

effective on April 22, 2009. 

SPDC determinations, will apply and 

weigh each factor, as appropriate, to the 

specific contract and circumstances 

under consideration. 

As part of its evaluation, the 

Commission will consider the written 

data, views, and arguments from any 

ECM that lists the potential SPDC and 

from any other interested parties. 

Accordingly, the Commission requests 

comment on whether the subject 

contracts perform significant price 

discovery functions. Commenters’ 

attention is directed particularly to 

Appendix A of the Commission’s Part 

36 rules for a detailed discussion of the 

factors relevant to a SPDC 

determination. The Commission notes 

that comments which analyze the 

contracts in terms of these factors will 

be especially helpful to the 

determination process. In order to 

determine the relevance of comments 

received, the Commission requests that 

commenters explain in what capacity 

are they knowledgeable about one or 

several of the subject contracts. 

Moreover, because five contracts are 

included in this notice, it is important 

that commenters identify to which 

contract(s) their comments apply. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 19 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 final 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 20 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 such an order or to determine 

whether the benefits of such an order 

outweigh its costs; rather, it requires 

that the Commission ‘‘consider’’ the 

costs and benefits of its action. 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 bulk of the costs imposed by the 

requirements of Commission Rule 36.3 

relate to significant and increased 

information-submission and reporting 

requirements adopted in response to the 

Reauthorization Act’s directive that the 

Commission take an active role in 

determining whether contracts listed by 

ECMs qualify as SPDCs. The enhanced 

requirements for ECMs will permit the 

Commission to acquire the information 

it needs to discharge its newlymandated responsibilities and to ensure 

that ECMs with SPDCs are identified as 

entities with the elevated status of 

registered entity under the CEA and are 

in compliance with the statutory terms 

of the core principles of section 

2(h)(7)(C) of the Act. The primary 

benefit to the public is to enable the 

Commission to discharge its statutory 

obligation to monitor for the presence of 

SPDCs and extend its oversight to the 

trading of SPDCs. 

Issued in Washington, DC, on October 14, 

2009 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E9–25183 Filed 10–19–09; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Notice of Intent, Pursuant to the 

Authority in Section 2(h)(7) of the 

Commodity Exchange Act and 

Commission Rule 36.3(c)(3), To 

Undertake a Determination Whether 

the Fuel Oil-180 Singapore Swap 

Contract, Offered for Trading on the 

IntercontinentalExchange, Inc., 

Performs a Significant Price Discovery 

Function 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of action and request for 

comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) is undertaking a review 

to determine whether the Fuel Oil—180 

Singapore Swap (‘‘SZS’’) contract, 

offered for trading on the 

IntercontinentalExchange, Inc. (‘‘ICE’’), 

an exempt commercial market (‘‘ECM’’) 

under Sections 2(h)(3)–(5) of the 

Commodity Exchange Act (‘‘CEA’’ or the 

‘‘Act’’), perform a significant price 

discovery function. Authority for this 

action is found in section 2(h)(7) of the 

CEA and Commission rule 36.3(c) 

promulgated thereunder. In connection 

with this evaluation, the Commission 

invites comment from interested parties. 

DATES: Comments must be received on 

or before November 4, 2009. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

• Follow the instructions for 

submitting comments. Federal 

eRulemaking Portal: http:// 

www.regulations.gov. 

• E-mail: secretary@cftc.gov. Include 

Fuel Oil—180 Singapore Swap (SZS) 

Contract in the subject line of the 

message. 

• Fax: (202) 418–5521 

• Mail: Send to David A. Stawick, 

Secretary, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581 

• Courier: Same as mail above. 

All comments received will be posted 

without change to http:// 

www.CFTC.gov/. 

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 

On March 16, 2009, the CFTC 

promulgated final rules implementing 

provisions of the CFTC Reauthorization 

Act of 2008 (‘‘Reauthorization Act’’) 1

which subjects ECMs with significant 

price discovery contracts (‘‘SPDCs’’) to 

self-regulatory and reporting 

requirements, as well as certain 

Commission oversight authorities, with 

respect to those contracts. Among other 

things, these rules and rule amendments 

revise the information-submission 

requirements applicable to ECMs, 

establish procedures and standards by 

which the Commission will determine 

whether an ECM contract performs a 

significant price discovery function, and 

provide guidance with respect to 

compliance with nine statutory core 

principles applicable to ECMs with 


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