The Dodd-Frank Act became law in July 2010, establishing the Commodity Futures Trading Commission (CFTC) as a major new energy regulator. Energy companies that transact in energy commodities must reassess their practices because CFTC rules will affect hedging, risk management, and derivatives transacting activities.
Overlapping regulatory agency requirements will be a challenge. Not all new rules are final. Title VII of Dodd-Frank deals with over-the-counter derivatives, and will likely have the most significant effects for energy trading firms. Those entities categorized as a swap dealer or major swap participant will face new capital, margin, and reporting requirements, as well as increased regulatory scrutiny. Those companies not categorized as a swap dealer or major swap participant, but who transact in swaps, will also face increased obligations including position limits, end-user exception reporting, and potentially increased record keeping and reporting. Compliance will require planning and assessment of current capabilities as well as new or modified processes, systems, and tools. As rules become final and deadlines start to arrive, energy company management attention should address these new obligations.