CFTC Proposes Definitions for Swap Participants Under the Dodd-Frank Act

On December 1, 2010, the Commodity Futures Trading Commission (CFTC) held a public meeting to consider the issuance of proposed rulemaking under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In particular, the CFTC proposed rules that would clarify which types of swaps traders would be subject to the new derivatives regulations.

Title VII of Dodd-Frank, among other things, (i) divides regulatory authority over swaps between the Securities and Exchange Commission (SEC) and the CFTC (with the SEC having regulatory authority over security-based swaps, the CFTC having regulatory authority over all other swaps, and joint regulatory authority over mixed swaps), (ii) creates new categories for market participants who are subject to new registration, capital and margin requirements, record keeping, reporting and other regulatory requirements and (iii) requires that certain swaps be accepted by a clearing organization for clearing. Under