“If It Ain’t Broke, Don’t Fix It”: Treasury Exempts Foreign Exchange Swaps and Forwards from Dodd-Frank Swaps Regulation Requirements


Last Friday, the Secretary of the U.S. Treasury Department issued a formal determination (Determination) to exempt foreign exchange swaps and foreign exchange forward contracts from regulation as “swaps” under the Commodity Exchange Act (CEA), as amended by Title VII of the Dodd-Frank Act. The Secretary’s action, which was taken under sections 721 and 722 of the Dodd-Frank Act, is not unexpected but will be welcomed by the financial services industry.

The Statutory Framework -

Title VII of the Dodd Frank Act created a comprehensive regime for the regulation of over-the-counter swaps, including registration, regulatory, central clearing and trading requirements that the federal financial regulatory agencies have been implementing over the past two years. Section 721 of the Dodd-Frank Act amended the definition of “swap” to include foreign exchange swaps, forward and futures contracts, but gave the Secretary the authority, by specific determination, to exempt foreign exchange swaps and forward contracts from the definition of “swap” under the CEA and thus exclude such instruments from swaps regulation under the CEA.

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