Legal Alert: CFTC and SEC Finally Issue Product Definitions


Yesterday, the Commodity Futures Trading Commission (CFTC) approved final rules and interpretative guidance (Final Rules) to (1) further define the terms “swap,” “security-based swap” and “security-based swap agreement,” (2) prescribe regulations regarding “mixed swaps” and (3) establish books and records requirements for “security-based swap agreements.” The Final Rules are a joint rulemaking with the Securities and Exchange Commission (SEC) and were approved by the SEC on July 6 by seriatim (i.e., without an open meeting).1

Market participants have been generally aware of the types of instruments that fall within the “swap” and “security-based swap” definitions due to the detailed definitions of those terms in the Dodd-Frank Act. The Final Rules serve to clarify the scope of the “swap” and “security-based swap” definitions with respect to, among other things, insurance, consumer and commercial transactions, and foreign exchange (FX) swaps and forwards. The Final Rules also provide guidance with respect to the forward exclusion from the swap definition for non-financial commodities and clarify the relationship between swaps and security-based swaps.

The Final Rules are a key component of the new regulatory regime imposed on the over-the-counter derivatives market by the Dodd-Frank Act. The effective date of the Final Rules, which will be 60 days after the publication of the Final Rules in the Federal Register, will trigger the effective dates of a number of final CFTC rules. As a result, market participants should anticipate having to comply with some of the new Dodd-Frank Act regulatory requirements as early as this fall.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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