Comment Letters

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June 23, 2021

Re: Taskforce on Scaling Voluntary Carbon Markets Phase II Consultation Report Response

NFA is the industrywide, self-regulatory organization for the U.S. derivatives industry. NFA's mission is to safeguard the integrity of the derivatives markets and protect investors, and we have a successful track record of regulating the derivatives markets, which cover a broad variety of asset classes. Derivatives markets play a critical role in the global economy, providing price discovery on a wide variety of goods and commodities. These markets also provide important hedging mechanisms for businesses to manage a wide variety of risks attendant to their operations. NFA wishes to thank the Taskforce on Scaling Voluntary Carbon Markets {the Taskforce) for bringing together stakeholders from around the globe to solicit feedback regarding the Taskforce's Phase II Public Consultation Report, which focuses on recommendations related to a market governance body and legal principles for the market.

Feedback related to umbrella governance body proposals

As the Taskforce notes, successful use of carbon credits will depend on defining and adopting high-integrity standards while ensuring a robust, transparent and liquid market. NFA encourages the Taskforce to consider the derivatives markets' success in creating high-integrity markets for a multitude of asset classes. For example, the listed derivatives markets were successfully developed under the oversight of the U.S. Commodity Futures Trading Commission, the various derivatives exchanges and NFA. Together, we form a strong regulatory framework that identifies and adopts standards for particular asset classes, as well as the market participants engaging in derivatives transactions covering a broad variety of asset classes. Similarly, many foreign jurisdictions have oversight frameworks that are also intended to ensure the integrity of their local markets. We recommend that the Taskforce, in scoping its role and focus with respect to carbon-related derivatives products, defer to and rely on this existing regulatory framework and the authorities and self-regulatory bodies that currently oversee the well-regulated derivatives markets. In relying on the existing structure, the Taskforce will be able to leverage prevailing global standards and regulatory coordination that already exist for these markets.

NFA appreciates the opportunity that we previously had engaging with the Taskforce about governance and we would be happy to provide further information about NFA's self-regulatory framework. Moreover, in the future, we look forward to establishing linkages with the governing body as appropriate given NFA's role in the derivatives' regulatory framework.

Very truly yours,
Carol A. Wooding
Senior Vice President & General Counsel

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