Guide to Eligible Contract Participant Definition

After October 12, 2012, only Eligible Contract Participants (“ECPs”) are permitted by law to enter into OTC derivatives transactions. Non-ECPs will no longer be able to use the line of business exemption. Eligible Contract Participants generally include:

- Entities with $10 million in total assets

- Entities with a guarantor that is an entity with $10 million in assets

- Entities with a net worth of at least $1 million and are hedging

- Individuals with “amounts invested on a discretionary basis” that exceed $10 million, or $5 million if hedging

If an entity by itself does not qualify as an ECP, it may nonetheless qualify IF all of the following conditions are met:

- it must be entering into a swap (i.e., an interest rate, FX or commodity derivative and not a credit or equity derivative);

- it must be using the swap for hedging commercial risk;

- all of its owners must qualify as ECPs; and

- the entity and its owners in aggregate must have $1mm in net worth

Guide to Eligible Contract Participant Definition