Derivatives Insight -

On October 11, the Division of Swap Dealer and Intermediary Oversight (the "Division") published two interpretative letters inrelation to the regulation of commodity pool operators. The first letter, addressed to the National Association of Real Estate Investment Trusts ("NAREIT"), discussed whether "equity" REITS are within the statutory definition of commodity pools (the "REIT Letter"). The second letter (the "Securitization Letter"), addressed to both the Securities Industry and Financial Markets Association ("SIFMA") and the American Securitization Forum ("ASF") concerned whether the operators of securitization vehicles are required to register as commodity pool operators or commodity trading advisors.

The REIT Letter In September 2012, NAREIT requested that the Division interpret the definition of commodity pool in Section 1a(10) of the Commodity Exchange Act (the "CEA") to exclude certain REITs. The letter addressed only "equity" REITS and not "mortgage" REITS. In response to that request, the REIT Letter provides that REITs that primarily derive their income from the ownership and management of real estate and that use derivatives for the limited purpose of mitigating exposure to changes in interest rates or currency fluctuations are outside the scope of the commodity pool definition as long as the following criteria are met...

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