Treasury has just released a “proposed determination” exempting foreign exchange forwards and foreign exchange swaps from the bulk of the regulations under the Dodd-Frank Act. This is a proposal only, but if finalized, this determination by the Treasury would mean that FX forwards and FX swaps will not be subject to clearing, trading, and margin requirements set forth by the new law. However, FX options, cross-currency swaps, non-deliverable forwards, and other FX derivative products are still subject to regulation and must be cleared by financial entities, including all private funds, banks and others entities that are predominantly financial in nature.

The Dodd-Frank Act, passed last year, granted the Treasury Secretary the authority to exempt FX forwards and FX swaps from regulation under the new law. Treasury has carefully weighed this exemption in connection with its own research, consultation with market regulators, and Federal regulatory agencies. In addition, Treasury sought commentary from market participants including the Coalition for Derivatives End-Users, of which Chatham is an active member. This proposed determination is currently open to comment by the public for 30 days from the time it is published in the Federal Register. Chatham will continue to keep you informed of all pertinent developments related to derivatives regulations. If you have questions, please contact your Chatham consultant.