Agricultural Commodities Definition Regulation
|FINAL RULE: The CFTC issued its final rule on the definition of agricultural commodities at its July 7, 2011 open meeting.|
|Proposal Date||Final Rule||Effective/Compliance Date|
|October 26,2010||July 13, 2011,||September 12, 2011|
|Final Rule Issue||Effective Date||No-action Deadline|
|August 10, 2011||December 31, 2011||December 31, 2012|
|Final Rule-Swaps||Effective Date - Swaps||Effective Date-Options|
|August 10, 2011||December 31, 2011||June 26, 2012|
On July 7, 2011, the CFTC held an open meeting to discuss five final rulemakings under the Dodd-Frank Act. Among the rules approved at the meeting was a final rule regarding the definition of agricultural commodities.
The final rule is divided into the following four categories:
- "Enumerated commodities" (those listed in section 1a of the Commodity Exchange Act, for example, wheat, corn, the "soy complex," livestock, cotton, coffee, etc;
- A general definition that includes "All other commodities that are, or once were, or are derived from, living organisms, including plant, animal and aquatic life, which are generally fungible, within their respective classes, and are used primarily for human food, shelter, animal feed, or natural fiber;"
- Products that are "agricultural in nature," but do not fit within Category 2 above, such as tobacco, horticulture, and other such commodities that the Commission may designate; and
- A provision applicable to: “Commodity-based indexes based wholly or principally on underlying agricultural commodities” - any index that is made up of more than 50 per cent of agricultural commodities.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) necessitates a formal definition of Agricultural Commodities for, among other things, new rules on position limits and in the trading of agricultural swaps. Prior to Dodd-Frank, neither the U.S. Congress nor the Commodity Futures Trading Commission (CFTC) had ever officially defined the term "Agricultural Commodity". At the CFTC Open Meeting, October 19, 2010 (the Second Series of Proposed Rules under the Dodd-Frank Act), the commission addressed Agricultural Swaps Regulation. In order to effectively address the issue, however, certain definitions needed to be established. Thus, the commission approved an advance notice of proposed rulemaking (ANPRM) regarding the definition of agricultural commodities.
An advance notice of proposed rulemaking (ANPRM) regarding agricultural swaps was also approved at the October 19, 2010 meeting. See Agricultural Swaps Regulation - ANPRM for documents related to this notice.
Related Documents: Fact Sheet, Q&A, and Final Rule as it Appeared in the Federal Register, July 13, 2011
- Open Meeting on Five Final Rule Proposals under the Dodd-Frank Act. CFTC. Retrieved on July 7, 2011.
- Final Rule Regarding the Definition of Agricultural Commodity. CFTC. Retrieved on July 7, 2011.