Ag Options . . . Uncertainty Remains

I was honored to join Don Heitman, CFTC Senior Counsel, and Bryan Dierlam, Director, Federal Government Affairs at Cargill, this week for a DC Bar event where ag swaps and options took center stage.  The CFTC issued its final rule on ag swaps but postponed a final determination on the treatment of ag options.   Quickly, we identified volumetric options as the subject in most need of greater clarity.

CMC applauded the Commission’s decision to treat ag swaps harmoniously with other swaps, but we continue to push the CFTC to provide clarity on the potential treatment of forward contracts with embedded options.  Particular clarity is required where the option allows delivered volume to fluctuate.  It appears we will be waiting for an answer.  The ag options rule will be synched with the product definitions (i.e., definition of a swap) and those are not expected to move prior to November.

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