On August 13, 2012, the Commodity Futures Trading Commission published for comment an interpretation to clarify the circumstances in which a contract that provides for variations in delivery amount (i.e., embedded volumetric optionality) is considered a forward contract. The CFTC has proposed to revise its previously issued interpretation to clarify that the embedded volumetric optionality must be primarily intended, at the time that the parties enter into the agreement, contract or transaction, to address physical factors or regulatory requirements that reasonably influence demand for, or supply of, a nonfinancial commodity. 

The CFTC is seeking public comment on its proposal, which must be received by December 22. 

The CFTC’s proposed interpretation is available here.