How does the CFTC determine which bullion products are deliverable against regulated futures contracts (RFCs)?
Executive summary
The Commodity Futures Trading Commission (CFTC) determines which bullion products are deliverable against regulated futures contracts (RFCs) by approving specific “forms and qualities” — including weight, fineness, and unit of delivery — that exchanges may call for in their contract specifications, and by relying on market standards (e.g., LBMA “good delivery” standards) and rulemaking that define deliverable supply and contract units [1] [2] [3]. That approval is operationalized through exchange contract filings, staff letters (such as CFTC Letter No. 97‑01), and the agency’s published lists and regulations; where an item meets the CFTC‑approved form and quality it can be deliverable even if real‑world practice involves minimum delivery quantities [4] [1].
1. How “form and quality” defines deliverability — the technical gatekeeper
The CFTC’s core test for whether a bullion product can be delivered against an RFC is whether the product’s form and fineness meet the standards the Commission has approved for use in a contract: that means explicit description of acceptable weights, unit sizes, and purity (fineness) in the contract or in referenced market standards; these specifications convert a physical metal into a legally fungible deliverable commodity [1] [3]. Agency guidance and historical staff letters make clear the distinction: an item that matches the approved description — for example a bar of specified fineness and weight or a coin of a CFTC‑listed form — is considered deliverable even if dealers normally trade it with numismatic premiums or in smaller quantities [1] [4].
2. Market certifications and industry standards — LBMA, COMEX, and the practical how‑to
The CFTC often points to established market “good delivery” regimes — such as the London Bullion Market Association standards or exchange‑level deliverable specifications — when assessing deliverable supply, so approved contracts may incorporate those externally‑set standards by reference; historical COMEX filings and CFTC staff documents show reliance on such market frameworks to ensure a consistent deliverable unit [2] [5]. Those external standards address weight tolerances, acceptable refiners, and issuer reputation, which the CFTC treats as practical evidence that a commodity is suitably fungible for delivery against a contract [2].
3. Contract design and exchange filings — the formal route to approval
Exchanges draft RFC contract terms that specify the deliverable unit, and those filings are subject to CFTC review under the Commodity Exchange Act and Commission regulations; the CFTC therefore approves the specific contract language that defines what physical items are acceptable at delivery [3] [6]. The agency’s review can include analysis of the size and concentration of deliverable supply and whether the contract’s delivery rules are likely to function in practice — an element regulators have linked to safe‑harbor product tests and market integrity considerations [7] [3].
4. Tax reporting and the practical consequence of CFTC approval
Because the IRS ties certain information‑reporting obligations to CFTC approvals, items the CFTC approves for delivery against RFCs become reportable commodities for tax purposes; guidance and secondary reporting analysis note that a single coin that meets a CFTC‑approved form can trigger reporting even if typical contracts call for larger minimum delivery lots [1] [8]. Conversely, popular retail bullion that is not enumerated in CFTC‑approved lists (or does not meet approved form/fineness) — for example many commemorative or collector‑grade coins — is generally excluded from that deliverable/ reportable category [9] [8].
5. Where ambiguity and controversy live — what the sources do not fully disclose
Public filings and staff letters set principles but do not disclose a simple checklist that the CFTC applies line‑by‑line; existing sources describe contract‑level approvals, reliance on market standards, and considerations of deliverable supply, but they do not publish a single, transparent administrative “how‑to” for markets or consumers beyond those mechanisms [1] [4] [7]. That gap creates room for interpretive disputes — for example whether a modern U.S. bullion coin is “CFTC‑approved” depends on the specific contract language or list in force, meaning consumer guides and tax analyses can legitimately differ while citing the same underlying CFTC materials [8] [9].
6. Incentives and the hidden agenda — why formality matters to both exchanges and dealers
Exchanges seek clear deliverable definitions to preserve contract fungibility and avoid delivery squeezes; refiners and large bullion dealers benefit when their products are recognized as deliverable because it reduces basis and liquidity frictions, while small‑scale or collectible coin markets may be excluded—sometimes drawing criticism from retail sellers who argue common‑sense liquidity is ignored [2] [9]. Regulators, exchanges, and market incumbents thus share an incentive to keep deliverable lists conservative and tied to established market standards, which can perpetuate status quo advantage for LBMA‑grade bars and exchange‑specified coin forms [2] [5].