During the sculpting of Dodd-Frank (D-F), it was largely anticipated that Fx Forwards and Fx Swaps would not be defined as a “Swap” and therefore not be covered under D-F. As it became clear that the European Commission was not going to carve out any instruments and most regulatory agencies were inclined the same way, the exemption was killed in its final form of D-F. However, D-F did allow the Treasury the opportunity to come back and make its own determination on re-introducing D-F.
So without much fanfare the Assistant Secretary Mary John Miller announced that the Secretary’s office had made its determination to exempt Fx Forwards and Fx Swaps from the exchange trading and clearing requirements of D-F, but not the Swap Data Repository reporting or Business Code of Conduct requirements of D-F. This is a great win for both end-users of these instruments and Fx dealers as now end-users would not be faced with most of the potential increased costs associated if these instruments were held to the same regulatory requirements. Fx options or any other derivatives were not exempted.
There is a 30-day comment period, and my advice is not to rest easy but write in your comment supporting the determination as there still could be some proponents of getting Fx Forwards and Swaps back under D-F.
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