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

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