CFTC Staff Issues No-Action Relief for Electricity Binary Options Traded on Electron Exchange

The Commodity Futures Trading Commission's (CFTC) Division of Market Oversight and Division of Clearing and Risk have announced a no-action position regarding swap data reporting and recordkeeping regulations for binary options. The regulatory relief was issued in response to a request submitted by Electron Exchange DCM LLC, a designated contract market, and Electron Exchange DCO LLC, a derivatives clearing organization. Electron Exchange DCM stated its intention to list cash-settled binary options based on underlying commodities in the electricity and power markets. Under the terms outlined in the no-action letter, the CFTC divisions will not recommend enforcement action against either Electron Exchange entity or their market participants for failure to comply with certain swap recordkeeping requirements. Additionally, the relief covers the failure to report transaction data to swap data repositories for binary options executed on or subject to the rules of Electron Exchange DCM and cleared through Electron Exchange DCO. The CFTC stated that the no-action position applies exclusively within narrow circumstances and aligns with previous relief granted to other similarly situated designated contract markets and derivatives clearing organizations.