CFTC Staff Issues No-Action Letter Regarding Electricity Binary Options

WASHINGTON — The Commodity Futures Trading Commission’s Division of Market Oversight and the Division of Clearing and Risk today announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations for binary options in response to a request from Electron Exchange DCM LLC, a designated contract market, and Electron Exchange DCO LLC, a derivatives clearing organization.  In the request, Electron Exchange DCM LLC represented that it intends to list cash-settled binary options with underlying commodities relating to electricity and/or power markets.

The divisions will not recommend the CFTC initiate an enforcement action against either entity or their participants for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions executed on or subject to the rules of Electron Exchange DCM LLC and cleared through Electron Exchange DCO LLC, subject to the terms of the no-action letter. 

The no-action letter applies only in narrow circumstances and is comparable to no-action letters issued for other similarly situated designated contract markets and derivatives clearing organizations.