Title VII of the Dodd-Frank Act (DFA) amended the Commodity Exchange Act (CEA) to impose reporting, record-keeping, clearing, margining, and other compliance obligations on certain types of transactions. The Commodity Futures Trading Commission (CFTC) is the primary Title VII regulator.2

Congress excluded most energy sector participation while drafting DFA.3 Despite causal remoteness from the 2008 financial crisis, and vigorous participation in CFTC rule-makings, the energy sector ended up with new regulatory compliance burdens. This chapter provides information about some of these.

Energy commodity transactions

The CFTC groups energy commodity transactions involving future delivery or settlement obligations4 into several broad categories. First are futures contracts and options on futures contracts, which are defined by and traded on CFTC-regulated exchanges (e.g., the Henry Hub Natural Gas contract traded on NYMEX). Second are forward contracts, such as fixed-price commodity purchase and sale agreements, which are excluded from regulation as swaps5 but still subject to anti-fraud, anti-manipulation and market abuse laws and regulations.6 Third are swaps.7 The CFTC includes within the term 'swaps' physically settled commodity options and forward contracts with certain types of 'embedded optionality'.8 A fourth category of physical energy transactions are those the CFTC has found that Congress did not intend to regulate as swaps9 and 'customary commercial arrangements'.

Renewable power purchase agreement compliance

The CFTC's position is that its swaps jurisdiction includes some – but not all – contracts for the future physical delivery of energy commodities with variable volumes. Therefore, all physically settled commodity transactions, even those between commercial end users,10 should be analysed by their parties for potential regulatory coverage as swaps if the transaction provides for optionality in deliveries or volumes.

A contract can have embedded optionality that does not make it a swap, such as a contract for all a generating facility's power,11 or a right to change delivery time and delivery points.12 The consequences of a right to change delivery quantities vary under the various CFTC interpretations and guidances. Optionality to change volumes to take advantage of market price movements would be interpreted by the CFTC as a swap; changing volumes in response to physical or regulatory requirements driving the buyer to need different volumes would not.13 An intermittent solar resource only generates when the sun shines. That solar resource could be interconnected near many other solar resources and, without integrated energy storage, each would deliver a lot of energy on a sunny day, potentially causing negative real-time prices because of congestion. The party bearing that negative price risk may want the contractual right to curtail energy deliveries during periods of this kind. That right could be interpreted by the CFTC as an embedded volumetric option, subjecting the transaction to regulation as a swap, but not necessarily, because it is exercised in response to physical factors, namely sunny weather, that drive the negative pricing.14

The CFTC excludes from swaps regulation customary commercial arrangements that the CFTC has interpreted Congress did not intend to regulate as swaps but that could have otherwise been captured by the CFTC's expansive interpretation of its jurisdiction.15 These include ordinary retail consumer transactions16 and probably certain regulatory compliance transactions, such as those for California Resource Adequacy capacity.17 Since at a gas station an energy commodity customer can choose whether to buy one gallon or fill her tank, visiting a gas station could be a transaction with an embedded commodity option. Purchasing groceries online for delivery next week could be a forward contract and orders could embed swap-like optionality in that forward contract. These transactions would be swaps but for the customary commercial arrangement exception, which is separate from the forward contract exclusion, trade options exemption and other CFTC exemptions regarding energy commodity transactions. Unfortunately, the full scope of each of these is often unclear.

There is no single CFTC regulation, nor indeed any combination of regulations, that delineates compliance requirements. The CFTC provided a complex three-part test18 and seven-part test,19 which it followed with final regulations,20 interim final regulations,21 proposed regulations,22 no-action letters,23 proposed interpretations,24 staff interpretations,25 final interpretations,26 proposed guidances,27 guidance and policy statements28 and undated frequently asked questions (or FAQs).29 It is unclear which of the two contracting parties to a transaction confirms the legal interpretation, or whose potentially differing application of the various CFTC guidances controls.30 Under Chairman Massad, the CFTC revised rules31 and provided additional interpretations and guidances32 that in general make it less likely that most commercial users will run afoul of the CFTC's swap regulations and interpretations, which somewhat reduces the risks to those who do not perform, perhaps not knowing the need to perform, the requisite analysis.

A very important compliance issue is the distinction between a commodity option and a trade option.33 Parties must first filter transactions through the CFTC's tests to determine whether they have a commodity option. Next, if the parties to the option, the commodity underlying the option, and the consequences upon exercise of the option all meet conditions in the trade option exemption rule,34 it is considered a 'non-financial commodity trade option' and is regulated as DFA-lite.35 If not, it is considered a commodity option and subject to the full panoply of DFA regulation as a swap.

The trade option rule refers to an 'offeree' and an 'offeror' of the option, which do not necessarily mean buyer (or holder) and seller. The offeree must be, and seem to be, a commercial user.36 The offeror must be a commercial user or 'eligible contract participant'.37 Since it is unclear which is which, it helps a contract to be a trade option or DFA-lite swap (good) – and not a commodity option or full DFA swap (bad) – if the parties each are, and represent that they are, eligible contract participants.

Eligible contract participant

The definition of 'eligible contract participant' (ECP),38 and the related definition of 'eligible commercial entity',39 are long and involved status and net-worth tests. The ECP representation can be made by a just-formed renewable facility project entity that will satisfy the rule by the commercial operation date, even if it has no assets when signing a power purchase agreement, because the CFTC allows 'anticipatory ECPs'.40 Further, under the Products Release,41 a recourse guarantee of a swap is a swap,42 and therefore the guarantor of a commodity option (bad), must also be an ECP because it is the guarantor of a swap,43 while the guarantor of a trade option (good) need not be.44

Renewable energy certificates

'Renewable energy certificates' (RECs) is a common term for the commodified and tradable 'renewableness' of renewable energy.45 The CFTC originally proposed to regulate environmental commodities, such as RECs and carbon allowances, as swaps, by changing the regulatory meaning of 'physical' to 'tangible'.46 This would also have brought under CFTC jurisdiction all other intangibles, such as patents and hunting licences. The CFTC backed off and in the Products Release found that environmental commodities as intangible commodities that are capable of physical delivery and 'can be consumed' qualify as 'non-financial commodities',47 and that straightforward sales of environmental commodities settled by transfer, such as RECs transferred using the applicable generation information system, are not swaps but rather excluded forward contracts.48 Had the CFTC regulated RECs as swaps as it proposed, it could have decimated renewable energy in the United States; margin rules were unclear at the time and developers and their financiers would have risked massive collateral posting requirements for long-term agreements for renewable energy, which include RECs.49 Physically settled environmental commodities, including RECs, are subject to CFTC anti-fraud and anti-manipulation rules.50

Virtual power purchase agreement compliance

A virtual power purchase agreement (VPPA) is an energy price swap typically tied to an identified renewable resource, with a corporate or other energy consumer as the fixed-price payor. A VPPA also usually includes a transfer to the fixed-price payor of the RECs created by that (or another) generating facility. VPPAs are a popular tool for companies to participate in the development of renewable energy while hedging energy costs with a fixed-for-floating price swap that is tied to the volumetric production of the identified renewable generation resource. These are generally documented as custom agreements or as 'long-form' confirmations under an ISDA Master Agreement.51 VPPA transactions are generally interpreted to be swaps,52 invoking all applicable DFA swap regulations and requirements.

Some companies add bells and whistles to VPPAs, such as replacing actual performance with theoretical performance, using embedded weather swap or insurance products, the costs of which the buyer ultimately bears. However, in the absence of energy storage, neither the actual nor theoretical output of an intermittent renewable resource is likely to match the steady load profile of a factory, office building or data centre. A corporate purchaser using retail energy should also ensure the wholesale energy price being hedged bears a long-term relationship to its retail cost of energy.

Obligation to report

DFA requires that one party to every off-facility uncleared swap report it to a swap data repository.53 CFTC rules set out a hierarchy of the parties that must report and, as a term of the swap, entities at the same level in the hierarchy must agree which party reports.54 The reporting obligation does not end with the initial report; there are obligations to report continuation events, valuations and even party organisational changes.55 The International Energy Credit Association (IECA) makes freely available forms for parties to allocate reporting obligations.56 It is not uncommon to see the meat of these forms copied into VPPAs; the IECA allows this. If doing so, note that regulatory definition citations changed when the CFTC alphabetised its definitions,57 the CFTC somewhat ameliorated trade option regulation in 2014, and ongoing CFTC rule-makings and guidances that could affect requirements under long-term transactions should be monitored.


Parties to swaps, including commercial end users, must 'keep full, complete, and systematic records, together with all pertinent data and memoranda' of each swap,58 although the CFTC 'does not believe that it should specifically delineate the meaning of “all pertinent data and memoranda”'.59 Therefore, parties must retain records in a manner that interprets and anticipates the CFTC's expectations, as those expectations may change over time.

Special entities

There is a de minimis threshold of US$8 billion in swap transactions over the course of a year that an entity can enter into before being required to register with the CFTC as a 'swap dealer'. Exceeding the de minimis threshold mandates an expensive new business model – regulation by the CFTC as a swap dealer.60 The US$8 billion threshold is lowered to US$25 million for swaps with counterparties that are 'special entities',61 which include government instrumentalities such as state general service administrations. The complexity of long-term transactions involving energy commodities, and the ambiguity as to which transactions (or embedded parts of a transaction) may be considered swaps, mandate taking great care when transacting with special entities. For example, a transmission-basis swap embedded in what would otherwise be a physical forward power purchase agreement could count towards the de minimis threshold. 'Utility operations-related swaps' with 'utility special entities' are not subject to the lower US$25 million sub-threshold.62 Parties may rely on representations from the utility special entity, but CFTC record-keeping requirements for such a representation are different from those for the rest of the transaction documents.63

Some don'ts

Do not (mis)use savings clauses in forward contracts.

Fear that a forward transaction might be a swap has sometimes led market participants to include ill-advised 'savings clauses' in agreements. Some such clauses purport to require a meet and confer if the transaction is 'found to be' a swap and 'amend' the agreement to avoid the swap designation. Such clauses should be avoided. There is no good-faith safe harbour for determining whether an energy commodity transaction is a swap;64 the determination must be made, one way or the other, and correctly, when the transaction is signed.65 If the transaction is a swap, or a forward contract with an embedded option that does not meet the commodity trade option exemption conditions, and does not fit another CFTC exemption, it must be reported almost immediately to a swap data repository.66 One cannot safely report a transaction that might be a swap but really is not, 'out of an abundance of caution', as companies have been fined by the CFTC for over-reporting.67 Although the CFTC encouraged parties to 'seek an interpretation from the Commissions as to whether the agreement, contract or transaction is a swap',68 the only published response to such a request took the CFTC four months – and the CFTC declined to answer.69

Entering into a physical forward contract instead of a swap is not evasion.70 But modifying what should have been reported as a swap after it has been executed to avoid the reporting obligation might be prohibited evasion and, in that case, the CFTC will continue to interpret the transaction as a swap.71 Agreeing in advance to modify a transaction that should have been reported, to avoid reporting or the consequences of not reporting, could be interpreted as conspiracy to commit evasion.

One could analogise to securities laws. Securities must be either registered or exempt from registration before sale. Few securities practitioners would write into an agreement, 'we do not think this is a security, so we are not registering it, but if this turns out to be a security, we will try to amend it so that it is not'.

Do not call it a CfD

VPPAs are sometimes improperly called 'contracts for difference' (CfDs). This usage should be avoided in favour of the term 'swap'. Swaps are generally legal, while CfDs that are not swaps are generally illegal.

Starting in the nineteenth century, unscrupulous operators pretended to be commodity or stock brokers entering trades on behalf of retail investors on margin. Rather than actually enter the trade on a regulated securities or commodity exchange, the operator served as the undisclosed counterparty and 'bucketed', or threw away, the trade.72 About two dozen states outlaw bucket shops.73 In New York and California, CfDs are felonies.74 Until federal preemption beginning in the 1990s, swaps enforceability was jeopardised by state anti-bucket shop and gambling laws.75

The CFTC has exclusive jurisdiction over trading in non-exempt swaps, preempting state anti-bucket shop laws.76 The protection of being an exempt swap that preempts state laws can be withdrawn by the CFTC or Congress for particular types of transactions.77 The CFTC has noted that CfDs can be excluded from the definition of a swap.78 Even though most financial derivatives are swaps subject to CFTC regulation, state laws against CfDs are only federally preempted for swaps, so it would be wise to call any derivative by the lawful name of 'swap', rather than the unlawful name of 'CfD'. Saying 'swap' rather than 'CfD' could be likened to calling lawful vegetation management a 'controlled burn' rather than arson.


1 Jeremy D Weinstein is the principal of Law Offices of Jeremy D Weinstein, PC. The author gratefully acknowledges the review and comments of Patricia Dondanville, K C Hairston, Geoff Heffernan, Phil Lookadoo, Steve Mickelson, Julie Morris, Ginger Price, Bobby Singh and Chris York, and takes sole responsibility for content.

2 The Securities and Exchange Commission regulates 'security-based swaps.'

3 Statement by (currently CFTC Commissioner) Rostin Benham, then on the U.S. Senate Agriculture Committee Staff – Senator Stabenow, Panel on The Effect of Wall Street Reforms on Energy Markets, Virginia Governor's First Biennial Natural Resource Law Symposium, Sept. 23, 2013.

4 Those with current delivery or delivery during the 'spot' period are part of the 'cash market' for the commodity, and subject to CEA anti-fraud, anti-manipulation and market abuse laws and regulations but not CFTC regulation as futures contracts or swaps.

5 CEA §1a(47)(B)(ii), and Joint Final Rule; . . . Further Definition of 'Swap,' . . ., 77 Fed. Reg. 48208 at 48227-44 (Aug. 13, 2012) (the 'Products Release').

6 CEA §6(c), §9(a)(2); 17 C.F.R. §§180.1 and 180.2.

7 CEA §1a(47)(A).

8 77 Fed. Reg. at 48236-37.

9 e.g., CFTC, Final Order in Response to a Petition From Certain Independent System Operators . . . . . ., 78 Fed. Reg. 19880 (Apr. 2, 2013); CFTC, Final Order Regarding Southwest Power Pool, Inc. Application . . ., 81 Fed. Reg. 73062 (Oct. 24, 2016); CFTC, Order Exempting . . . Certain Transactions Between Entities . . ., 78 Fed. Reg. 19670 (Apr. 2, 2013).

10 CFTC Division of Market Oversight Responds to Frequently Asked Questions Regarding Commodity Options, fn. 10 (undated).

11 77 Fed. Reg. at 48239.

12 77 Fed. Reg. at 48240.

13 See CFTC, Final Interpretation, Forward Contracts with Embedded Volumetric Optionality, 80 Fed. Reg. 28239 (May 18. 2015); see also CFTC, Proposed Guidance, Certain Natural Gas and Electric Power Contracts, 81 Fed. Reg. 20583 (Apr. 8, 2016).

14 See 77 Fed. Reg. at 48238 fn. 341; CFTC, Final Interpretation, Forward Contracts with Embedded Volumetric Optionality, 80 Fed. Reg. 28239 (May 18, 2015).

15 See 77 Fed. Reg. at 48246-50; e.g., the CFTC said it would not regulate the sale of patents or trademarks as swaps at 77 Fed. Reg. 48247 col. 1 para. 7. The CFTC noted 'new types of agreements' may be 'evaluated' for the customary commercial arrangement exemption and encouraged parties to 'seek an interpretation from the Commissions as to whether the agreement, contract or transaction is a swap,' 77 Fed. Reg. 48248, although the CFTC has yet to publish one.

16 The CFTC listed such transactions at 77 Fed. Reg. at 48246-47, and expanded on the criteria at 81 Fed. Reg. at 20585, col. 3. The CFTC noted, 77 Fed. Reg. at 48246 fn. 433, that although these might not be 'considered swaps,' they could be subject to other CEA provisions or CFTC Regulations. The CFTC has anti-fraud jurisdiction under CEA §6(c)(1) over transactions in commodities, including 'customary commercial arrangements,' that use instrumentalities of interstate commerce. CFTC v. Monex, 931 F.3d 966 (9th Cir. 2019).

17 CFTC, Proposed Guidance, Certain Natural Gas and Electric Power Contracts, 81 Fed. Reg. 20583 at 20584-86 (Jun. 22, 2015), citing IECA comment letter I co-wrote; see also 77 Fed. Reg. at 48238 fn. 340, citing comment letter I co-wrote as Pacific Gas & Electric's attorney (Aug. 13, 2012).

18 77 Fed. Reg. at 48237.

19 77 Fed. Reg. at 48237-40.

20 Products Release; CFTC, Final Rule, Adaptation of Regulations to Incorporate Swaps, 77 Fed. Reg. 66288 (Nov. 2, 2012); CFTC, Trade Options Final Rule, 81 Fed. Reg. 14966 (Mar. 21, 2016); 7 C.F.R. §§32.2, 32.3; 17 C.F.R. §45.2.

21 CFTC, Commodity Options Final and Interim Final Rules, 77 Fed. Reg. 25320 (Apr. 27, 2012), superseded by 81 Fed. Reg. 14966.

22 CFTC, Notice of Proposed Rulemaking, Trade Options, 80 Fed. Reg. 26200 (May 7, 2015).

23 CFTC Letter No. 13-08 (Apr. 5, 2013); CFTC, Staff Interpretations and No-Action Relief Regarding ECP Status: Swap Guarantee Arrangements, CFTC Letter No. 12-17 No-Action and Interpretation (Oct. 12, 2012), Office of General Counsel.

24 CFTC, Proposed Interpretation, Forward Contracts With Embedded Volumetric Optionality, 79 Fed. Reg. 69073 (Nov. 20, 2014); superseded by 80 Fed. Reg. 28239.

25 CFTC Staff Letter No. 12-17.

26 CFTC, Final Interpretation, 80 Fed. Reg. 28239 (May 18, 2015).

27 CFTC, Proposed Guidance, 81 Fed. Reg. 20583 (Apr 8, 2016).

28 CFTC, Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations, 78 Fed. Reg. 45292 (July 26, 2013).

29 CFTC Division of Market Oversight Responds to Frequently Asked Questions Regarding Commodity Options -Commodity Options FAQs (possibly withdrawn, but avail. at https://web.archive.org/web/20170421203524/https://forms.cftc.gov/_layouts/PublicForms/Docs/TradeOptionsFAQ.pdf); Response to Frequently Asked Questions Regarding Certain Physical Commercial Agreements for the Supply and Consumption of Energy, http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/leaselike_faq.pdf.

30 e.g., 17 C.F.R. §45.14. The CFTC also invented a dual intent test for trade options, using the word 'both parties', 77 Fed. Reg. at 25326 col. 3, that the CFTC seems to have backed away from in the final rule, 81 Fed. Reg. 14967 col. 1.

31 17 C.F.R. §32.3; CFTC, Trade Options Final Rule, 81 Fed. Reg. 14966 at 14969 (Mar 21, 2016).

32 e.g., '“physical factors” should be construed broadly to include any fact or circumstance that could reasonably influence supply of or demand for the nonfinancial commodity [that] . . . could include not only environmental factors, such as weather or location, but [also] broader social forces, such as changes in demographics or geopolitics. . . . [I]f the embedded volumetric optionality is primarily intended, at contract initiation, to address concerns about price risk . . ., the seventh element would not be satisfied absent an applicable regulatory requirement . . . to obtain or provide the lowest price (e.g., the buyer is an energy company regulated on a cost-of-service basis).' 80 Fed. Reg. at 28241-42. See also potentially helpful language for supply transactions at 81 Fed. Reg. at 20586, col. 2-3, that is possibly too hedged to be definitive. Although Chairman Geinsler's CFTC specifically excluded good faith determinations for swap characterisation, 77 Fed. Reg. at 2170; 77 Fed. Reg. at 48297, Chairman Massad's CFTC allowed good faith determinations, 80 Fed. Reg. at 28242, col. 3, text at fn. 33, and reliance on counterparty representations, 80 Fed. Reg. at 28242, col. 1, text at fn. 25, at least for the seventh element of the seven part test.

33 A compliance map is available at Jeremy Weinstein, CFTC Regulation of Trade Options: Unfinished Project KISS Business, 39 Fut. and Derivs. L.Rep. (Nov. 2019) (avail. at http://bit.ly/tradeoptionsarticle).

34 17 C.F.R. §32.2.

35 17 C.F.R. §32.3; 81 Fed. Reg. at 14966-67. CFTC position limits proposed rules now exclude trade options from limits. CFTC, Proposed Rule, Position Limits, 85 Fed. Reg. 11596 at 11621, col. 1 (Feb. 27, 2020); CFTC, Reproposal, Position Limits, 81 Fed. Reg. 96704 at 96735 col. 2 (Dec. 30, 2016). Trade options (but not commodity options) are excluded from the swap dealer de minimis threshold. 81 Fed. Reg. at 14967 fn. 18 (Mar. 21, 2016); 77 Fed. Reg. at 25326, fn. 39 (Apr. 27, 2012).

36 17 C.F.R. §§32.3(a)(1), 32.3(a)(2).

37 17 C.F.R. §32.3(a)(1). CEA §2(e) provides that it is 'unlawful for any person, other than an eligible contract participant, to enter into a swap unless the swap is entered into on, or subject to the rules of, a board of trade designated as a contract market . . . .'

38 CEA §1a(18); 17 C.F.R. §1.3.

39 CEA §1a(17).

40 CFTC, Staff Interpretations and No-Action Relief Regarding ECP Status: Swap Guarantee Arrangements; . . . and 'Anticipatory ECPs' CFTC Letter No. 12-17 No-Action and Interpretation, pp. 11-13 (Oct. 12, 2012), Office of General Counsel.

41 See footnote 5.

42 See 77 Fed. Reg. at 48226. In fn. 189, the CFTC makes a so-far unfulfilled promise to issue reporting requirements for guaranties of swaps.

43 CFTC Letter No. 12-17. pp. 2-5.

44 CFTC Letter No. 12-17, p. 3, cl. 3 at fn. 15.

45 RECs are also claims to have brought the benefits of renewable energy to the electric grid, and so are also federally regulated for truth in advertising. Federal Trade Commission, Final Rule, Guides for the Use of Environmental Marketing Claims, 77 Fed. Reg. 62122 at 62124 and 62131-32, 16 C.F.R. §260.15.

46 CFTC, Notice of proposed rulemaking, Adaptation of Regulations to Incorporate Swaps, 76 Fed. Reg. 33066 at 33069 cols. 2-3; 33069 fn. 31 (June 7, 2011); CFTC and SEC, Joint Proposed Rules, Further Definition of 'Swap,' . . ., 76 Fed. Reg. 29818 at 29867 col. 3 (May 23, 2011); see comment letter of Environmental Marketing Association, that I co-wrote (avail. at https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=47883&SearchText=); Jeremy Weinstein & Christopher Berendt, The Nature of the Thing, Environmental Finance (Jun. 2011) pp. 20-21 (avail. at http://docsjweinsteinlaw.com/pdfs/EF0611_pp,20-21.pdf). After failure of a bill that would have established a Carbon market under CFTC jurisdiction (H.R. 2454, Waxman-Markey, Title III, Subtitles D and E), the CFTC sought to assert itself in environmental commodities; e.g., CFTC¸ Notice of Intent, 74 Fed. Reg. 42052 (Aug. 20, 2009); CFTC, Order, 75 Fed. Reg. 23686 (April 28, 2010) (citing my comment letter). DFA included many provisions rooted in Waxman-Markey, but did not give the CFTC 'swaps' jurisdiction over Carbon or other environmental markets; e.g. DFA §750 merely established a study group.

47 77 Fed. Reg. 48233 col. 1.

48 77 Fed. Reg. at 48233-35. The CFTC's interpretation of the new term 'nonfinancial commodity' used in the DFA definition of swap in the forward contract exclusion at CEA §1a(47)(B)(ii), means a commodity that can be physically delivered and that is an 'exempt' commodity or an 'agricultural' commodity. Unlike 'excluded' commodities, which generally are financial, exempt and agricultural commodities generally are nonfinancial, e.g. natural gas, nuclear fuels, energy, coal, metals and environmental products. 77 Fed. Reg. at 48232. Emissions allowances issued by the EPA may also be excluded from the definition of 'swap' as an obligation of the federal government, CEA §1a(47)(B)(ix), although the CFTC has 'declined to address' this view. 77 Fed. Reg. at 48235.

49 California Public Utilities Commission and California Energy Commission staff, who should have sought to protect the California Renewables Portfolio Standard, declined to do so, despite being fully and repeatedly briefed. Fortunately, Environmental Protection Agency staff and others successfully pressed this point with the CFTC. 77 Fed. Reg. 48233-35 (citing comment letters I co-wrote); CFTC, Final Rule, Adaptation of Regulations to Incorporate Swaps, 77 Fed. Reg. 66288 at 66293-94 (Nov. 2, 2012) (citing comment letters I co-wrote).

50 77 Fed. Reg. at 48234, fn. 281; CEA §6(c), §9(a)(2); 17 C.F.R. §§180.1 and 180.2; 17 C.F.R. §32.3(d).

51 Published by the International Swaps and Derivatives Association, Inc, the ISDA Master Agreement is the standard contract used for over-the-counter derivatives transactions.

52 Another potential, but not market-standard, approach is to structure the transaction as a REC sale with the price of the RECs determined by the difference between a fixed and floating price.

53 17 C.F.R. §45.3.

54 17 C.F.R. §45.8.

55 17 C.F.R. §45.4(d)(2)(ii) requires quarterly valuation of the VPPA by the reporting party, although the CFTC has proposed to eliminate this for commercial end users. CFTC, Proposed Rule, 85 Fed. Reg. 21578 (Apr. 17, 2020).

56 https://www.ieca.net/education-resources/resource-library; also available from the author. The IECA also provides market-accepted forms of bilateral agreement substituting for adhering to the ISDA August and March Protocols, and other ISDA sponsored DFA-resultant form documents, written to protect the interests of its energy company members, pre-negotiated with representatives of ISDA and major banks.

57 CFTC, Interim Final Rule, Definitions, 83 Fed. Reg. 7979 (Feb. 23, 2018).

58 17 C.F.R. §45.2.

59 77 Fed. Reg. 2141 col. 3. In 2019 the CFTC said the phrase is 'an expansive requirement.' 84 Fed. Reg. 21057 fn. 118. The CFTC used the phrase in pre-DFA regulation, e.g., 62 Fed. Reg. at 59637 col. 3 (1997).

60 17 C.F.R. §1.3 'swap dealer' (4)(i)(A).

61 CEA §4s(h)(2)(C).

62 17 C.F.R. §1.3 'swap dealer' (4)(i)(B)(1); CFTC, Final Rule, Exclusion of Utility Operations-Related Swaps With Utility Special Entities From De Minimis Threshold for Swaps With Special Entities, 79 Fed. Reg. 57767 (Sept. 26, 2014).

63 'The person must keep such representation in accordance with [CFTC Regulation] §1.31.' 17 C.F.R. §1.3 'swap dealer' (4)(i)(B)(4). 17 C.F.R. §1.31 requirements differ from 17 C.F.R. §45.2(e)(2). 79 Fed. Reg. at 57776 col. 2. The IECA provides a form, available on its website or from the author, that can be used as a stand-alone documentation of the representation that can be kept both with and independently of the underlying agreement, in order to meet the two different CFTC requirements.

64 CFTC, Final Rule, Swap Data Recordkeeping and Reporting Requirements, 77 Fed. Reg. 2136 at 2170 (Jan. 13, 2012).

65 77 Fed. Reg. at 48297.

66 17 C.F.R. §45.3.

67 e.g., Strumpf, CFTC Fines Futures Firm Over Reports, Wall Street Journal (Jan. 10, 2012) (CFTC fined Newedge US$700,000 for overreporting trading positions).

68 77 Fed. Reg. 48248.

69 CFTC, Commission Statement Concerning a Request for an Interpretation as to Whether a Particular Agreement Is a Swap . . ., 82 Fed. Reg. 27044 (Jun. 13, 2017).

70 77 Fed. Reg. at 48235 at fn. 297; 77 Fed. Reg. at 48299-301. Jeremy Weinstein, Quicksand in the Hedges, 31 Fut. & Derivs. L. Rep., Nov. 2011 (avail. at http://docsjweinsteinlaw.com/pdfs/Weinstein-Quicksand in the Hedges.pdf) criticised the proposed rule, which seemed to say entering into a forward contract to avoid entering into a swap constituted evasion.

71 17 C.F.R. §1.3 'swap' (6)(i), (iv), (v); 17 C.F.R. §1.6.

72 See Thomas A. Hieronymus, Economics of Futures Trading pp. 89-93 (Commodity Research Bureau, 1971); Joshua C. Tate, Gambling, Commodity Speculation, and the 'Victorian Compromise', 19 Yale J.L. & Human. 97 (2007); John Hill, Jr., Gold Bricks of Speculation, (Chicago 1904).

73 e.g., Ariz. Rev. Stat. Ann. §44-1651; Cal. Corp. Code §§29008, 29100; Mass. Gen. Laws Ann. ch. 271, §§35-38; N.C. Gen. Stat. 16-3; N.Y. Cons. Laws Art. 23, §351; Or. Rev. Stat. Ch. 59.710-740; 18 Pa. Cons. Stat. Ann. §§7316, 7319; Tex. Rev. Civ. Stat. Ann. Tit. 132, Art. 8653-54.

74 Cal. Corp. Code §29100: 'Any person who makes . . . any contract constituting bucketing under [§]29008 . . . is guilty of a felony.' Cal. Corp. Code §29008(c): ''Bucketing' [includes] . . . any contract respecting the purchase or sale of any . . . commodities, wherein both parties . . . intend . . . a settlement of the contract based upon the differences in the public market quotations of prices . . . .' N.Y. Cons. Laws Art. 23 - 351: 'Any person, . . . or corporation, whether acting in his . . . or its own right or as the officer . . . of another, who . . . 3. Makes . . . any contract respecting the purchase or sale . . . [of] commodities, . . . intending a settlement of such contract based upon the difference in such public market quotations . . . shall be guilty of a felony.'

75 Practicing Law Institute, Advanced Swaps and Derivative Financial Products 52-73, 162-176 (1991). Federal preemption was settled with the Futures Trading Practices Act of 1992, §502(a); Thrifty Oil Co. v. Bank of Am., 310 F.3d 1188, 1207 (9th Cir. 2002); Commodity Futures Modernization Act of 2000, §408(c); and DFA.

76 DFA moved federal preemption to §§2(a)(1)(A) and 2(d) from CEA §12(e). See excellent discussion in Barry Taylor-Brill, Cracking The Preemption Code: The New Model For OTC Derivatives, 13 Virginia L.& Bus. Rev. 1 (2019).

77 e.g., a DFA progenitor bill would have specifically rescinded federal preemption of state anti-bucket shop and anti-gaming laws for credit-default swaps. H.R. 2454, Waxman-Markey, p. 1070 of 1428, proposed §355(b), Elimination Of Preemption Of State Bucketing Laws Regarding Naked Credit Default Swaps.

78 77 Fed. Reg. at 48260 col. 1.