Dodd-Frank’s New Rules for Over-the-Counter Swap Transactions

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On July 21, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, significantly impacting how many Texas energy companies operate on a day-to-day basis. While the act makes a number of important changes, this article will focus on the new requirements Title VII of the act imposes for over-the-counter swap transactions.

Many Texas energy companies — including power generators, manufacturers, energy trading companies, and oil and gas producers — use swaps to hedge commodity price and other risks. A swap occurs when two parties exchange their payment obligations based on the price of something else. If the act governs a company’s swap, then the swap may be subject to the following key obligations: mandatory clearing, data reporting, position limits and record-retention requirements.

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