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\Nest virginia oil marketers & grocers assoc.

November 24,2010

Delivered Via Email: dfarulemakings@cftc.gov

David A. Stawick, Secretary

Commodity Futures Trading Commission

Three Lafayette Center

1155 21 st Street, NW

Washington, DC 20581

Re: CFTC Rulemakings as Required.by the Dodd-Frank Wall Street Reform Act

Dear Mr. Stawick:

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I am writing to urge the Commission and its staffto consider the following comments on several

key areas requiring rulemakings under Title VII ofthe Dodd-Frank Wall Street Reform Act.

This legislation seeks to reverse irresponsible deregulation ofthe derivatives markets that has

occurred over the past two decades. This deregulation has resulted in opaque markets that cater

to the needs offinancial speculators rather than bona-fide hedgers and consumers for which

futures, options and swaps were created in the first place.

For energy companies like mine that serve thousands of consumers and playa vital role in the

health and growth ofthe American economy, deregulation and the absence oftransparency,

oversight and accountability has resulted in diminished confidence in these markets. The

resulting excess volatility and speculation in commodities, including energy (e.g., crude oil,

gasoline and home heating fuels), skews the price discovery function ofthese markets, unhinges

them from concrete economic fundamentals such as supply and demand, creates a difficult

environment for hedgers seeking to manage price risk and subjects their consumers to erratic and

unwarranted price spikes.

Robust implementation and vigorous enforcement ofthe regulatory initiatives under the DoddFrank Act is vital if the legislation is to have its desired effects, including increased confidence,

security and stability in the derivatives markets while preserving market liquidity, competition,

and hedging and price discovery functions.

I. Definitions

1. Commercial Risk

2506 Kanawha Blvd., East OJ Charleston, WV 25311 @ (304) 343-5500 @ Fax (304) 343-5810

Email: omega@omegawv.com OJ www.omegawv.com
The definition of "commercial risk" should be narrowly tailored to apply only to those entities

whose business activities expose them to risk from physical commodity price fluctuations.

"Commercial risk" should not include risks that are purely financial in nature, including balance

sheet risk.

2. Major Swap Participant

It was the intent of Congress to require that only large market participants be captured under this

definition. I am supportive ofthe exclusion for "positions held for hedging or mitigating

commercial risk," but again, this should not be defined so broadly as to create a new loophole for

financial speculators to avoid requirements under the new law.

3. Captive Finance Affiliates

The major swap participant definition also includes an exception for captive finance affiliates. I

similarly encourage the Commission not to allow the exception to be abused or too broadly

interpreted.

4. Swap

The legislative definition excludes forward delivery contracts (and options on such contracts) for

commodities that are intended to be "physically settled." Any exemption for forward delivery

contracts and options should be limited to benefit only bona fide commercial end-users.

II. Governance & Possible Limits on Ownership & Control - Swap Dealers

The CFTC must establish both a meaningful limit on individual ownership and a limit on

collective ownership ifthe proposed rule is to have the intended effect oflimiting conflict of

interest, assuring transparency and open competition, and preventing clearinghouses and

exchanges from catering to the interests of a few large participants in the financial community.

This requires both a cap on ownership for individual entities as well as a sector-wide aggregate

cap on banks.

III. End-User Exception

The end-user exception should remain narrowly tailored to those businesses that produce, refine,

process, market or consume an underlying commodity and counter-parties buying or selling a

position to an end-user. Purely financial risk, including broad terms such as "balance sheet

risk," should not be considered legitimate "commercial" risk.

Furthermore, for any entity that is not a legitimate end-user as described above, the exception

should be limited so that it is in direct proportion with their physical holdings, i.e. an investment

bank or hedge fund cannot claim to be an end-user and thereby obtain an exemption from

speculative position limits or other requirements or restrictions merely because it holds a few

hundred thousand barrels ofinventory.

IV. New Registration Requirements for Foreign Boards of Trade (FBOTs)
I support the requirement that FBOTs register with the CFTC and make their trading data

available as well as requiring that they adopt position limits and implement prohibitions on

manipulation and excessive speculation. They should also be subject to ownership caps as

described above.

V. Anti-Manipulation & Disruptive Trading Practices

I strongly support prohibitions on "insider trading" based on nonpublic information, strengthened

prohibitions on manipulation, and new authority provided to the CFTC under the Act that allows

them to identify swaps that are "abusive" by virtue of being potentially detrimental to either the

stability ofthe market or its participants. I urge the CFTC to be thorough in its interpretation and

enforcement ofthese new authorities.

I also encourage the Commission to scrutinize the use of computerized/algorithm-based trading

programs to determine iftheir application and use in the commodities markets has a disruptive

affect on market stability or function.

VI. Position Limits, Aggregate Position Limits & the Bona Fide Hedging Definition

I support enforcement ofthe strongest possible speculative position limits as required under the

Dodd Frank Act. Further, the Act requires that such limits be established and enforced within

180 days from enactment for exempt commodities (including energy commodities), not simply

that the commission promulgate formulae for such limits and then impose them at some later

date, as has been suggested.

Due to their passive approach to commodity trading, Exchange Traded Funds and Notes

(including index funds) treat finite commodities such as energy as an "asset class" and a longterm investment rather than as vital resources to American industries, businesses and consumers.

I believe the Commission should establish separate and more aggressive limits on the positions

ofExchange Traded Funds and Notes, including index funds.

I also have concerns regarding the bona fide hedging exemption that are similar to my concerns

regarding the definition of "commercial risk" and the end-user exemption. Too broad of a

definition would allow continued watering down ofthe hedging exemption and provide

additional incentives for financial speculators to enter the market under the guise oflegitimate

hedgers, thereby evading position limits and other requirements.

VI. Conclusion

American businesses and consumers are relying on CFTC Commissioners and their staffs to read

and vigorously enforce these rules in such a manner as to restore confidence, stability and

transparency to the derivatives markets - especially in the energy commodities markets.

Americans of all stripes are depending on you to protect energy consuming businesses and

individuals, as well as the broader economy, from fraud, manipulation, and disruptive/abusive

trading practices and from excessive volatility, speculation and unwarranted price spikes.
This legislation gives the Commission powerful tools in this regard, and I hope that you will use

them to their fullest extent.

Thank you in advance for your consideration.

Janet S. Vineyard, President

West Virginia Oil Marketers & Grocers Association