Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

Reuters has an interesting article about a no-action letter the CFTC issued to Southwest Airlines to permit a 15 calendar day delay in reporting oil derivative transactions.  Southwest apparently convinced the CFTC that rapid reporting caused markets to move against it, interfering with its ability to hedge.  According to the Reuters article, Southwest had long sought an exception, and it was the arrival of now CFTC Chair Tim Massad that apparently shook things loose. The article explains that the relief ultimately granted Southwest was narrower than what was originally sought.

You can find the no-action letter here.

So the question now becomes whether others will seek similar relief.

It looks like anyone asking for relief would have a high hurdle to surmount. In the Southwest no-action letter the CFTC noted:

The Division understands that Brent and WTI crude oil swap and swaption market with trading tenors 2 years or longer has few transactions and/or few market participants.

Accordingly, a shorter reporting timeline may increase the risk that the parties’ identities and their business transactions will be released, which may hinder the liquidity providers’ ability to lay off risk. The liquidity providers, in turn, are likely to build that risk into their transactions by imposing additional costs on their counterparties. The Division understands that these contracts are traded by or with Southwest.

The Division further understands that if two commercial end-users trade these contracts with each other, one or both sides to the transaction might be left with residual trades to execute in order to match their desired risk profile with their position. Once information on the original trade is released to the public, it is likely to be difficult for the end-user to execute the remainder of its desired trades. This may increase the costs of hedging to Southwest.


Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.