Comment Text:
August 11, 2011
Mr. David A. Stawick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
RE: Adaptation of Regulations to Incorporate Swaps, Federal Register, Vol. 76, No. 10, June 7, 2011
Dear Mr. Stawick:
The Minnesota Grain and Feed Association, which consists of over 400 Minnesota based grain elevators and feed mills, appreciates the opportunity to provide comments on this proposed rule. We respectfully request that the Commission narrow and clarify its proposal, specifically with regard to amendments to Regulation 1.35, to avoid unnecessary regulation of cash grain transactions that explicitly have been exempted from regulation by the Commodity Futures Trading Commission (CFTC). We would like to associate our organization with National Grain and Feed Association’s comment letter and urge the Commission to revise its proposal along those lines.
The element of the proposal of greatest concern would require all members of a designated contract market (DCM) to “…record all oral communications that lead to the execution of transactions in a commodity interest or cash commodity.” Further, the proposal would require that these records be maintained for five years and be identifiable by counterparty and transaction.
Many grain companies and feed manufacturers, are members of DCMs where grain contracts are traded, like the Chicago Board of Trade and Minneapolis Grain Exchange. Taken as written, this proposal would extend broadly into cash grain markets and would require that employees at many grain handling facilities record telephone conversations with producers from whom they are purchasing cash grain. These same grain handling facilities would be required to preserve and maintain all e-mail, facsimile and phone communications with agricultural producers. While some larger firms already do record phone conversations related to contract purchases, the estimated $15,000 to $20,000 price tag to install such a system would place a heavy financial burden on many of the affected grain handling firms. Even though the proposal only applies to firms that are members of a DCM, the action would set a bad precedent and run counter to CFTC’s own position on cash sales and cash contracts being exempt from CFTC regulation.
We believe strongly that such regulation of the cash marketplace was not intended by Congress nor, perhaps, by the Commission. Again, cash transactions, including cash forward contracts, explicitly have been exempted from CFTC regulation, but a literal reading of the proposal would seem to contradict this well-established concept. We urge the Commission to reconsider and amend the wording of the proposed rule to fully recognize the regulatory-exempt status of cash commodity sales and cash forward contracts.
Sincerely,
Bob Zelenka, Executive Director
Minnesota Grain and Feed Association
3470 Washington Drive Suite 200
Eagan, MN 55122
Phone: 651-454-8212
Fax: 651-454-8312
E-Mail: [email protected]
Website: www.mgfa.org
