Derivative end-user regulatory update: Foreign exchange forwards and foreign exchange swaps are exempt from clearing and exchange-trading requirements
27 November 2012Financial Institutions Group Alert
On November 16, 2012, the Secretary of the U.S. Department of the Treasury (the “Secretary”) issued its final determination that foreign exchange forwards and foreign exchange swaps are exempt from the definition of the term “swap” and should not be regulated as swaps under the Commodities Exchange Act (the “Act”), as amended by the Dodd-Frank Act. The final determination closely follows the Notice of Proposed Determination issued by the Treasury in April 2011. As a result, foreign exchange forwards and foreign exchange swaps are not required to be cleared or traded on an exchange. Foreign exchange forwards and foreign exchange swaps remain subject to reporting requirements, recordkeeping requirements and business conduct standards. The determination does not extend to other foreign exchange derivatives (e.g., foreign exchange options and non-deliverable forwards).