The Commodity Futures Trading Commission today approved final guidance regarding the listing for trading of voluntary carbon credit derivative contracts.”
The guidance applies to designated contract markets (DCMs), which are CFTC-regulated derivatives exchanges, and outlines factors for DCMs to consider when addressing certain Core Principle requirements in the Commodity Exchange Act (CEA) and CFTC regulations that are relevant to the listing for trading of voluntary carbon credit derivative contracts,” the CFTC said in a news release.
“The guidance also outlines factors for consideration when addressing certain requirements under the CFTC’s Part 40 Regulations that relate to the submission of new derivative contracts, and contract amendments to the CFTC.”
The guidance will be published in the Federal Register.
CFTC Chairman Rostin Behnam said in a news release, “The commission’s final guidance for designated contract markets (DCMs or Contract Markets) that list derivatives on voluntary carbon credits (VCCs) as the underlying commodity is a critical step in support of the development of high-integrity voluntary carbon markets (VCMs).”
“For the first time ever, a U.S. financial regulator is issuing regulatory guidance for contract markets that list financial contracts aimed at providing tools to manage risk, promote price discovery, and foster the allocation of capital towards decarbonization efforts.
“The publication of this final guidance marks the culmination of over five years of work with a diverse group of market participants, including agricultural stakeholders, ranchers, foresters, landowners, commercial end users, energy market stakeholders, emission-trading focused entities, carbon-credit rating agencies, crediting programs, CFTC-registered exchanges and clearinghouses, public interest groups, academics, and others.”This guidance also represents a whole-of-government approach in coordination with our partners across the U.S. federal complex,” Behnam said.
Commissioner Summer Mersinger issued a statement of dissent from the guidance. “Today’s non-binding guidance to designated contract markets regarding listing of voluntary carbon credits derivative contracts is a solution in search of a problem,” Mersinger said.”The Commodity Futures Trading Commission has no shortage of topics that warrant our immediate attention. But instead of addressing those, we are issuing guidance on an emerging class of products that have very little open interest and comprise a miniscule percentage of trading activity on CFTC-regulated DCMs,” Mersinger said.
Chuck Conner, president and CEO of the National Council of Farmer Cooperatives, said in a news release, “I would like to applaud the CFTC for its efforts to provide voluntary carbon markets with a framework for transparency and integrity.””This guidance will provide valuable direction as the carbon markets continue to develop by helping ensure that those exchange traded contracts are credible and effective price discovery tools. I would particularly like to thank Chairman Behnam for his leadership on this issue and for fostering a collaborative approach that has been open to feedback from all stakeholders.”
–The Hagstrom Report
