After great delay since its passage in 2010, this fall energy companies and other companies that use swaps as hedges, like insurance, to mitigate commodity risk associated with their businesses (“End Users”) must start complying with The Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The mechanics of the compliance process are becoming clearer and end users are being asked to evaluate whether they will be eligible for the commercial end user exception to clearing. For End Users that are not “financial entities,” the first step is to consider whether their swaps “hedge or mitigate commercial risk.”
A paper on the subject, titled “What Does 'Hedge or Mitigate Commercial Risk' Mean? How Will Energy Producers and Consumers Prove They Are 'Commercial End Users' Under the Dodd-Frank Act?” has been recently updated based on the final regulations and is available here. The original paper is available here.