The US Commodity Futures Trading Commission (CFTC) clarified its position on commodity trade options earlier this month by finalising amendments that recognise trade options should not be subject to the same regulatory requirements that apply to swaps under the Dodd-Frank reforms. This will enable companies to address commercial risk more effectively, says the CFTC. The final rule established by the CFTC took effect from 21 March 2016. Trade options are mainly used by agricultural, energy and manufacturing businesses.

The amendments eliminate any potential obligation of commercial participants, who are not swap dealers (SD) or major swap participants (MSP), to report trade options to a swap data repository.

These changes will reduce burdens and costs for trade option counterparties that are not SDs or MSPs and, in particular, for smaller end-users.

CFTC chairman Timothy Massad in a statement called this: “another important step to address the concerns of commercial end-users who rely on the derivatives markets to hedge risk—and who, we should always remember, did not cause the financial crisis.”

The regulator has also eliminated Form TO and has ended the swap-related record keeping requirements for end-users of trade options.