Washington D.C. 17 August 2009 

CFTC Seeks Public Comment on its Notice of Intent to Determine Whether the Carbon Financial Instrument Listed for Trading by the Chicago Climate Exchange, Inc., Performs a Significant Price Discovery Function. 

The U.S. Commodity Futures Trading Commission (CFTC) recently issued a Notice of Intent, pursuant to the authority in Section 2(h)(7) of the Commodity Exchange Act (Act) and Commission Rule 36.3(c)(3), to undertake a determination whether the Carbon Financial Instrument (CFI) listed for trading on the Chicago Climate Exchange, Inc., (CCX) performs a significant price discovery function.

“The CFTC’s significant price discovery function authority helps to promote transparency and guard against fraud, manipulation and other abuses,” CFTC Chairman Gary Gensler said. “This is the second use of our new authority, and we will continue using it to promote market integrity.”

The Commission is undertaking this review based upon its initial evaluation of information provided by CCX, which indicates that the CFI contract appears to satisfy several of the statutory criteria for a significant price discovery determination. Following issuance of an order determining that a contract traded on an exempt commercial market (ECM) such as CCX performs a significant price discovery function, the ECM must within a prescribed time period, with respect to that contract, come into compliance with core principles mandated by Section 2(h)(7)(C) of the Act and other statutory provisions applicable to registered entities. These provisions would subject the ECM’s contract and market participants to the Commission’s position limit and emergency authorities and large trader reporting requirements, among others.

Commission Rule 36.3(c)(3) became effective on April 22, 2009 and establishes the procedures under which the Commission will make and issue its determination whether a specific transaction, contract or agreement traded on an ECM serves a significant price discovery function. Those procedures specify that the Commission will publish notice in the Federal Register that it intends to undertake a determination whether a particular contract serves a significant price discovery function and to receive written data, views and arguments relevant to its determination from the ECM and other interested persons. After prompt consideration of all relevant information, the Commission will issue an order announcing and explaining its determination.

Comments are due no later than 15 days from the date of publication of the Commission’s Notice of Intent in the Federal Register.

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