Proposed Product Definitions Under Title VII of Dodd-Frank: CFTC and SEC Propose Rules and Guidance to Further Define the Terms, “Swap,” “Security-Based Swap,” and “Mixed Swaps”Sullivan & Cromwell LLP - May 12, 2011
The Commodity Futures Trading Commission (“CFTC”) and Securities and Exchange Commission (“SEC”, jointly with the CFTC, the “Commissions”) have issued a joint release proposing rules to define further certain terms in Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) relating to swaps, security-based swaps, mixed swaps, and security-based swap agreements, and proposing interpretive guidance with respect to those terms (the “Joint Proposed Rules”).
The release accompanying the Joint Proposed Rules (the “Release”) and the Joint Proposed Rules addresses, among other things:
- the regulatory treatment of insurance products;
- the exclusion of forward contracts from the swap and security-based swap definitions;
- the regulatory treatment of certain consumer and commercial contracts;
- the regulatory treatment of loan participations;
- the regulatory treatment of certain foreign-exchange related and other instruments;
- swaps and security-based swaps involving interest rates (or other rates) and yields;
- the application of the definition of “narrow-based security index” in distinguishing between certain indexed swaps and security-based swaps, including credit default swaps and index credit default swaps; and
- the specification of certain swaps and security-based swaps that are, and are not, mixed swaps.
The Commissions request comments on all aspects of these proposals, including comments that would suggest alternative approaches to defining the terms discussed in the proposing release. Comments are due within 60 days after their publication in the Federal Register, which is expected to occur shortly. For further background on Dodd-Frank provisions that these proposed rules would implement, please see our memoranda entitled “United States Adopts Historic Revision of Financial Services Regulation.”