NGSA: Swap dealer definition could harm some producers

A definition of swap dealer that the US Commodity Futures Trading Commission is expected to announce on Feb. 23 could hinder oil and gas producers and others using over-the-counter risk management tools, the Natural Gas Supply Association and National Corn Grows Association jointly said.

“A broad swap dealer definition appears imminent, given recent CFTC draft orders that progressively expand CFTC purview into physical commodity contracts used by commodity producers to hedge business risk inherent in the production of commodities,” the two associations said in a Feb. 9 letter to White House Chief of Staff Jacob Lew and National Economic Council Director Gene B. Sperling.

The groups questioned the definition’s breadth because entities designated as swap dealers cannot use the Dodd-Frank Law’s enduser protections and will be subject to increased levels of margin and other collateral requirements and significant administrative burdens.

“If firms that are predominantly hedgers and traders are treated as dealers, $600 billion in capital currently at work in the economy as job creating investments by businesses with strong balance sheets and assets in the ground will be needlessly sidelined as collateral,” NGSA and NCGA said in their letter.

Jenny Fordham, NGSA’s vice president for markets, said that as current envisioned, the CFTC’s swap dealer definition would sweep producers and other businesses that use the OTC market to hedge into an unwieldy regulatory process that limits their access to risk management tools.

“Ultimately these costs will find their way to consumers or come at the expense of business investment and growth,” she suggested.

NGSA Pres. R. Skip Horvath said he was dismayed “that the CFTC is considering an action that is the exact opposite of what Congress intended when it created the Dodd-Frank Act.

“Rather than protecting consumers and reducing market risk, the CFTC will be raising market risk and raising consumer costs without any significant benefit to the U.S. financial system.”

Contact Nick Snow at nicks@pennwell.com

Related Articles

Market watch: Energy futures prices rose slightly Friday

05/06/2002 Crude oil futures prices rose slightly Friday amid lingering uncertainty about a possible disruption of Middle East supplies, although tensions in ...

Gulf of Mexico oil service sector showing signs of an upturn

05/06/2002 The Gulf of Mexico oil service sector is experiencing the signs of an upturn, analysts with Simmons & Co. International, UBS Warburg LLC, and RBC D...

OTC: Industry, national agencies need to work together to make FPSOs work in the gulf

05/06/2002 Over the coming years, the oil and gas industry will have to keep an open line of communication with national agencies such as the US Coast Guard a...

Market watch: Energy futures prices fall as Iraq lifts embargo

05/07/2002 Crude oil futures prices fell Monday after Iraq announced plans to lift a self-imposed export embargo with exports expected to resume by Wednesday.

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected