Treasury Issues Determination Exempting Foreign Exchange Forwards and Foreign Exchange Swaps: Secretary of the Treasury Exempts Foreign Exchange Forwards and Foreign Exchange Swaps from the Definition of “Swap” Under the Commodity Exchange Act, as Amended by Dodd-Frank

Sullivan & Cromwell LLP - November 20, 2012
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On November 20, 2012, the Secretary of the Treasury issued a determination that foreign exchange swaps and foreign exchange forwards should be exempted from the definition of “swap” in the Commodity Exchange Act, as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As a result, certain foreign exchange swaps and foreign exchange forwards will be exempted from many of the requirements of Title VII applicable to swaps, but they will remain subject to the swap reporting requirements and business conduct standards under Title VII, and may not be used to evade other rules promulgated by the Commodity Futures Trading Commission. The Secretary of the Treasury’s determination does not extend to foreign exchange options, cross-currency swaps or non-deliverable forwards, which will remain fully subject to Title VII. Market participants that enter into foreign exchange forwards and foreign exchange swaps covered by the Secretary of the Treasury’s determination will not be required to include these transactions in their swap dealer or major swap participant registration determinations or in their assessments as to whether they must register with the Commodity Futures Trading Commission as a commodity pool operator or commodity trading advisor.