ISDA leads industry effort opposing Feinstein derivatives amendment

NEW YORK, NY, April 9, 2002 — The International Swaps and Derivatives Association (ISDA) today joined with over 50 entities representing trade associations, energy companies, and financial services entities in signing an industry letter opposing Senator Feinstein’s energy and metals derivatives amendment pending to energy legislation (S.517) before the U.S. Senate.

ISDA is concerned that the amendment would:
* significantly undermine the legal certainty achieved in the Commodity Futures Modernization Act of 2000 (the “CFMA”) and once again require market participants, in determining their own regulatory status and the regulatory status of derivative transactions, to rely on distinctions that have proven untenable in the past
* affect the enforceability of transactions in a range of products that are not limited to electricity and natural gas and thus go well beyond issues raised by the California energy crisis and the Enron bankruptcy
* also potentially regulate categories of market participants, including non-dealers, that have not previously been subject to regulation under the Commodity Exchange Act (the “CEA”) or otherwise, and for which there is no demonstrated need for regulation.
* regulate systems that are not trading facilities, potentially including corporate procurement systems, used to enter into transactions in a range of products
* establish unclear jurisdictional divisions between the Commodity Futures Trading Commission (the “CFTC”) and the Federal Energy Regulatory Commission (the “FERC”) that are likely to consume significant resources in inter-agency jurisdictional disputes.
ISDA is the global trade association representing participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 550 member institutions from 42 countries on six continents.

These members include most of the world’s major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association’s web site:

The April 8, 2002 text of the letter follows:

The Honorable Tom Daschle and the Honorable Trent Lott:
The Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve, the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission oppose adoption of the Feinstein energy derivatives amendment. These expert financial regulators have stated that enactment of the amendment would be premature given the lack of opportunity for full review of the amendment by the relevant committees of jurisdiction, its implications for energy and other derivatives activity, and the absence of a determination that energy derivatives played a role in the collapse of Enron or the California energy crisis.
The undersigned organizations urge you to consider the views of the Treasury, SEC, CFTC and the Federal Reserve and oppose Senator Feinstein’s amendment to S.517.


American Electric Power
AIG Trading Group Inc.
American Bankers Association
ABA Securities Association
Aquila, Inc.
Association for Financial Professionals
Bank of America
The Bank of New York
Barclays Capital, Americas
Blackbird Holdings, Inc.
Coral Energy
The Bond Market Association
Credit Suisse First Boston
Duke Energy
Edison Electric Institute
Electric Power Supply Association
Entergy-Koch L.P.
The Financial Services Roundtable
FleetBoston Financial
Futures Industry Association
Gold Institute
Goldman, Sachs & Co.
Intercontinental Exchange
International Swaps and Derivatives Association
J.P. Morgan Chase
Koch Industries
Managed Funds Association
Merrill Lynch & Co., Inc.
Mellon Financial Corporation
Morgan Stanley
National Association of Manufacturers
National Mining Association
PNC Financial Services Group, Inc
Royal Bank of Canada (NY Branch)
Securities Industry Association
Southern Company
Sun Trust
Tractebel Energy Marketing
Tractebel Power Development, Inc.
Tullett & Tokyo Liberty Inc.
UBS Warburg
U.S. Chamber Of Commerce
Weather Risk Management Association
The Williams Companies


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