On February 20, 2020, the Commodity Futures Trading Commission (CFTC) unanimously approved a proposed rule that would revise certain reporting requirements for financially-settled offtake contracts that qualify as “swaps” under the Commodity Exchange Act (as amended by the Dodd-Frank Act), such as proxy revenue swaps, fixed-volume price swaps and certain virtual PPAs. Many counterparties to these kinds of agreements — such as project companies that sell renewable energy – are considered “end-users” under Dodd-Frank, and, in certain cases, bear a transaction reporting burden under parts 43 and 45 of CFTC regulations.
For example, under the proposal end-users would have an additional day to comply with certain reporting obligations under §45.3 of CFTC regulations , such that the transaction would need to be reported on or before the second business day after the date of execution, instead of within 24 hours from execution as provided under the current rule. In his statement, CFTC Chairman Heath Tarbert recognized that that “[e]nd users often lack the reporting infrastructure of big banks, and may be unable to report data as quickly as swap dealers and financial institutions.” The proposed rule also explained that “[t]his extended deadline reflects the [CFTC’s] interest in relieving some of the swap data reporting burdens previously imposed on end users in a way that should also help improve data quality.” These acknowledgments are a welcome shift for end-users, which do not necessarily have the same level of operational resources devoted to swap data reporting as swap dealers or other financial entities.
If you have any questions regarding how the CFTC’s swap reporting regulations apply to cash-settled offtake contracts, please do not hesitate to reach out to your Stoel Rives LLP contacts.