CFTC Issues Foundational Definitions For New OTC Derivatives Regulation

On August 13, 2012, the U.S. Commodity Futures Trading Commission (“CFTC” or “Commission”) issued a joint final rulemaking in conjunction with the U.S. Securities and Exchange Commission (“SEC”) further defining the term “Swap” as required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in July 2010 in response to the 2008 financial crisis. Title VII of the Act established a new framework for the regulation of the over-the-counter (“OTC”) derivatives markets. The Act requires the CFTC and SEC to establish a number of new regulations to implement the requirements of the Act, including further definitions of what constitutes a “Swap,” as well as defining two new classes of market participants: Swap Dealers and Major Swap Participants. Together, these foundational definitions determine which market participants may be subject to more than 50-plus new CFTC regulations.

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