Section 1a(47)(E) of the Commodity Exchange Act (CEA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), empowers the Secretary of the Treasury (Treasury Secretary) to categorically exempt foreign exchange swaps and forwards from being regulated as “swaps” under the CEA, as amended by Dodd-Frank. On October 28, 2010, the Department of the Treasury (Treasury Department) published a Notice and Request for Comments (Notice) in the Federal Register seeking public input on whether foreign exchange swaps and/or forwards should be exempt from Dodd-Frank’s regulatory framework for swaps. The Notice puts forth a series of questions and also asks members of the public to comment on factors the Treasury Secretary should take into account in determining whether an exemption is necessary for foreign exchange swaps and forwards. Comments must be submitted electronically on or before November 29, 2010.

The CEA defines a foreign exchange swap as either: (A) a transaction that involves an exchange of two different currencies on a specific date at a fixed rate; or (B) the reverse exchange of the two currencies in (A) on a later date at a fixed rate. A foreign exchange forward is a transaction that solely involves the exchange of two different currencies on a specific future date at a fixed rate. Both foreign exchange swaps and forwards fall under the definition of a “swap” under Dodd-Frank.1 Accordingly, foreign exchange swaps and forwards will be subject to Dodd-Frank’s regulatory regime once Dodd-Frank’s reforms go into effect in July 2011.