CFTC and SEC Propose Definitions for Major Swap Participants and Major Security-Based Swap Participants

Introduction

The Commodity Futures Trading Commission ("CFTC") and Securities and Exchange Commission ("SEC") on December 1, 2010 and December 3, 2010, respectively, held open meetings to propose for public comment a joint rulemaking (individually and collectively "Proposed Rules"),¹ to provide further definition to the terms "swap dealer," "securitybased swap dealer," "major swap participant," "major security-based swap dealer," and "eligible contract participant."² The Dodd-Frank Act added these terms (other than eligible contract participant) to the Commodity Exchange Act as amended ("Commodity Act") and Securities Exchange Act of 1934 as amended ("Exchange Act") as part of a Congressional mandate to the two agencies to regulate swaps and security-based swaps. During its debates, Congress concluded that entities with large swap positions, which do not qualify as swap dealers or security-based swap dealers, might nevertheless have a significant negative impact on