The Commodity Futures Trading Commission has issued an order finding that the Henry Financial LD1 Fixed Price natural gas contract traded on the IntercontinentalExchange, Inc. (ICE) performs a “significant price discovery function.” As an exempt commercial market (ECM) under CFTC rules, ICE and contracts traded on ICE generally are subject to minimal regulation by the CFTC. However, ECM-listed contracts that the CFTC determines perform a significant price discovery function (significant price discovery contracts, or SPDCs) subject the listing ECM to many of the obligations that apply to designated contract markets, such as large trader reporting, publication of daily trading information, and the establishment of position limits or position accountability levels for SPDCs.  

In finding that the ICE contract was an SPDC, the CFTC considered the contract’s (i) high daily trading volume, (ii) price linkage with a contract listed on the New York Mercantile Exchange (NYMEX), and (iii) use by traders for pricing purposes. Because the ICE contract is ICE’s first SPDC, ICE will have a grace period of 90 days to come into compliance with applicable CFTC regulations.  

The CFTC press release announcing the order is available here.