Volume 17 | Issue 1 | Article 2

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Discussion Regarding the Commentary on Hedging "Event" Risk
Kathryn M. Trkla

The CFTC issued its Concept Release to solicit comment on the appropriate regulatory treatment of event contracts under the Commodity Exchange Act (CEA). [73 FR 25669 (May 7, 2008)] As a threshold matter, if the contract is a commodity future or commodity option, it is covered by the CEA and subject to the CFTC’s jurisdiction, with some exceptions. As the Commission notes, event contracts “can be designed to exhibit the attributes of either options or futures contracts.” [73 FR 25670] From a layman’s perspective, the obvious question is how, possibly, could events be considered commodities. As explained in the Concept Release and the Commentary by Philip McBride Johnson in this issue, the CEA contains a broad definition of “commodity” that covers events. Thus, events can be (and already are) the subject of CFTC-regulated futures or options trading. In the amendments to the CEA in 2000, Congress even included within the new definition of “excluded commodity” — a subset of the broader commodity definition — events where the occurrence of the event is “associated with a financial, commercial, or economic consequence” and is “beyond the control of the parties to the relevant contract.” [7 U.S.C. §1a(13)]