On August 23, the Commodity Futures Trading Commission issued an interpretation of the phrase “actual delivery” as it relates to the CFTC’s jurisdiction over retail commodity transactions. Section 2(c)(2) of the Commodity Exchange Act (CEA) grants the CFTC jurisdiction over retail commodity transactions, which are effectively defined as any agreement, contract or transaction in any commodity that is entered into with, or offered to, a person that is not an eligible contract participant or eligible commercial entity on a leveraged, margined or counterparty-financed basis. The CEA provides an exception for contracts that result in actual delivery within 28 days.  

The interpretive statement indicates that the CFTC will employ a functional approach to determining whether a particular contract, agreement or transaction is actually delivered. The CFTC stated that, instead of relying solely upon the language used by the parties, it will examine how an agreement, contract or transaction is marketed, managed and performed by considering the following factors: ownership, possession, title and physical location of the commodity purchased or sold, both before and after execution, including all related documentation; the nature of the relationship between the buyer, seller and possessor of the commodity purchased or sold; and the manner in which the purchase or sale is recorded and completed. 

The CFTC’s interpretation is available here.