- BACKGROUND

The Dodd-Frank Act (the Act)1 requires persons who act as swap dealers and major swap participants to register as such with the Commodity Futures Trading Commission and/or the Securities and Exchange Commission and subjects these entities to, among other things, margin, capital and business conduct requirements. On April 18, the CFTC and the SEC (collectively, the Commissions) approved the long-awaited final rules further defining the terms “swap dealer” and “major swap participant” (the Final Rules). The Final Rules also clarify certain aspects of the definition of the term “eligible contract participant” (ECP)2 and adopt certain look-through provisions for commodity pools that engage in retail foreign exchange transactions.

The Final Rules have responded to the vast market commentary on the Commissions’ earlier proposed rules (the Proposed Rules) regarding entity definitions as evidenced by the significant increase in the de minimis threshold, as well as the elimination of the restrictions concerning the number of counterparties and swaps under the de minimis test. This advisory summarizes some of the more significant aspects of the Final Rules as set forth in the Commissions’ adopting release (the Adopting Release).