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Commodity Exchange Act Exemption Status

Commodity Exchange Act Exemption Status. Mark Ruane ERCOT Vice President of Credit and Enterprise Risk Management TAC December 1 st 2011 ERCOT Public. Summary. ERCOT is in the process of preparing an application for a Commodity Exchange Act exemption with the CFTC.

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Commodity Exchange Act Exemption Status

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  1. Commodity Exchange Act Exemption Status Mark Ruane ERCOT Vice President of Credit and Enterprise Risk Management TAC December 1st 2011 ERCOT Public

  2. Summary ERCOT is in the process of preparing an application for a Commodity Exchange Act exemption with the CFTC. • ERCOT is awaiting additional clarification with the CFTC with respect to the scope and terms of an exemption. • The filing date is not yet known. TAC

  3. Expected CFTC Conditions for CEA Exemption TAC

  4. Expected CFTC Conditions for CEA Exemption TAC

  5. Criteria for Market Participation • A draft Other Binding Document will shortly be under stakeholder review. The draft document addresses: • Market participation criteria, including capitalization requirements • Annual Officer Certification process and certification form • Process for verification of risk management capabilities • Proposed criteria are broadly similar, but not identical, to those advanced by other ISO/RTOs. TAC

  6. Criteria for Market Participation • Market participation criteria: • Expertise in markets with appropriately trained traders • Appropriate operational capabilities to respond to ERCOT communication • Capitalization requirements • Adequate risk management capabilities • Requirement for annual officer certification of compliance with the criteria above • Certification due no later than 120 days after the close of the fiscal year of the Counter-Party or its guarantor TAC

  7. Criteria for Market Participation • Proposed capitalization criteria: • Capitalization must be supported by audited financial statements. • ERCOT may require Independent Amount rather than minimum capital requirement in the event of material adverse changes in financial status. TAC

  8. Risk Management Capability Verification • Proposed mandatory annual verification for Counter-Parties that: • Have had CRR PtP Obligation exposure in the year prior to the date of the Officer Certification, and • Are ineligible for unsecured credit under the ERCOT Creditworthiness Standard • Other Counter-Parties may also be verified. • Provision for cure periods for Counter-Parties with deficiencies. • Verification may be contracted to a third party. • Any material provided in support of the risk management capability verification process will be confidential. • ERCOT may, in its sole discretion, accept verifications performed by other ISOs. TAC

  9. Questions TAC

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