On September 20, 2024, the Commodity Futures Trading Commission (CFTC) released final guidance (the Guidance) applicable to designated contract markets (DCMs) regarding requirements for listing voluntary carbon credit (VCC) derivatives contracts on CFTC-regulated exchanges. The purpose of the Guidance is not to create new requirements for DCMs or to amend or replace existing CFTC guidance for regulated exchanges, but instead to address applicability of certain provisions of the Commodity Exchange Act (CEA) and related CFTC regulations (the CFTC Regulations) to the design and listing of VCC derivatives contracts.
The Guidance will also assist participants in derivatives markets in understanding the relative utility of hedging risks or seeking opportunistic returns with these instruments, given the Guidance’s focus on the nature of the VCCs themselves. This Client Alert provides a brief background of VCCs, an overview of the Guidance, and a summary of Commissioner Summer K. Mersinger’s dissenting statement.
