Hedge-to-Arrive Contracts: Jurisdictional Issues Under the Commodity Exchange Act

This article addresses the conflicting judicial and administrative agency interpretations of a recent innovation in agricultural merchandising known as Hedge-to-Arrive ("HTA") contracts. This article examines the first federal district court opinion upholding HTA contracts as forward contracts, exempt from the Commodity Exchange Act ("CEA") and regulation by the Commodity Futures Trading Commission ("CFTC"). The article also examines the CFTC's approach to regulating HTA contracts in its administrative forum. The CFTC has taken the position that HTA contracts marketed to the general public are illegal futures contracts.

A CFTC

Administrative Law Judge recently took the position that HTA contracts are not forward contracts, but rather illegal futures contracts under the CEA. The authors conclude that non-speculative HTA contracts between commercial agricultural operators, that provide for actual delivery of the commodity, should be exempt from the CEA and CFTC regulation.