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Cadwalader: CFTC Concludes Certain Natural Gas Transportation Agreements May be Swaps

Natural gas traders should note that the CFTC has concluded that the definition of swap (which includes commodity options) includes the right to use gas transportation via the payment of a demand charge or reservation fee if the exercise of the right to use the transportation requires the payment of an additional usage fee. Gas transportation agreements probably can be characterized as trade options with physical settlement, upon exercise, taking the form of providing the transportation service. Trade options are not included in the determination of whether an entity is a swap dealer and are exempt from many, but not all, of the regulations applicable to swaps.

For more information, please contact one of the following Cadwalader attorneys:

Paul J. Pantano, Jr.
+1 202 862 2410

Doron Ezickson
+1 202 862 2430

Anthony Mansfield
+1 202 862 2321

Athena Eastwood
+1 202 862 2294


This memorandum has been prepared by Cadwalader, Wickersham & Taft LLP for informational purposes only and does not constitute advertising or solicitation and should not be used or taken as legal advice. Those seeking legal advice should contact a member of the Firm or legal counsel licensed in their state. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. Confidential information should not be sent to Cadwalader, Wickersham & Taft LLP without first communicating directly with a member of the Firm about establishing an attorney-client relationship.

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