United States: CFTC Adopts Final Rules And Interpretations Further Defining Products And Final End-User Clearing Exception Rule; Proposes Clearing Exception For Swaps Entered Into By Certain Cooperatives

Last Updated: July 16 2012
Article by Lary Stromfeld, Scott A. Cammarn and Steven D. Lofchie

Most Read Contributor in United States, December 2018

The Commodity Futures Trading Commission ("CFTC") held an open meeting yesterday, July 10, 2012, to consider Final Rules and Interpretations (i) further defining the terms "swap," security-based swap," "security-based swap agreement,"(ii) regarding mixed swaps, and (iii) governing books and records for security-based swap agreements (the "Final Product Rules") pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act").1 The CFTC promulgated the Final Product Rules jointly with the Securities and Exchange Commission ("SEC"). The CFTC also voted to adopt the Final Rule on End-User Exception to Mandatory Clearing of Swaps (the "Final End-User Exception"). Finally, the CFTC issued a proposed rule to exempt from the mandatory clearing requirement, certain swaps executed by cooperatives that are financial entities with assets in excess of $10 billion ("Proposed Rule").

Although the text of the Final Rules and Proposed Rule are not yet available, below is a summary of the main provisions based primarily on the fact sheets issued by the CFTC and the discussions at the CFTC Open Meeting yesterday.


The Commission adopted the Final Product Rules by a 4-1 vote, with Commissioner Chilton voting against the Rules. The effective date is 60 days after the publication of the Final Rules in the Federal Register. Once published in the Federal Register, the Final Rules will trigger the compliance date for many of the Commission's substantive Dodd-Frank Regulations, such as: position limits,2 external and internal business conduct standards for swap dealers ("SD") and major swap participants ("MSP"),3 real-time reporting of swaps,4 swap data recordkeeping and reporting,5 and mandatory registration.6

A. Forward Contract Exclusion

The Final Product Rules are expected to clarify the scope of the forward contract exclusion for nonfinancial commodities in the statutory swap definition, including to:

  • interpret the forward contract exclusion consistently with the forward contract exclusion for futures contracts;7
  • limit the definition of nonfinancial commodity to commodities that can be physically delivered and that are exempt or agricultural commodities;
  • specify that environmental commodities (such as offsets, allowances, and RECs) are nonfinancial commodities;
  • clarify that the principles underlying the "Brent Interpretation" regarding "book outs" that fall within the forward contract exclusion from the definition of "future delivery" also apply to the forward contract exclusion from the swap definition. The Commissioners also noted that the rule would supersede the 1993 Energy exemption, but clarified that the alternative delivery procedures (netting, etc.) addressed in the Energy Exemption would continue to apply; and
  • provide an interpretation regarding forwards with embedded volumetric optionality. These instruments will be subject to a seven-part test to determine if they constitute a forward contract or a swap.

With regard to the seven-part test for forwards with volumetric optionality, we have heard that the Commission will continue to rely on its 1985 Interpretation concerning embedded options to determine if a forward contract with embedded optionality qualifies as a forward contract. Under this prior guidance, such options:

  • may be used to adjust the price of a forward contract;
  • cannot eliminate the delivery obligation – the predominant feature of the contract must be actual delivery; and
  • cannot be severed and marketed separately from the forward contract in which it is embedded

The Commission is also proposing new conditions, including:

  • the seller and the buyer must intend, when the option is made, to make and take, respectively, delivery of the volumetric quantity if exercised;
  • both parties must be commercial parties with the ability to make and take delivery of the underlying commodity;
  • the volumetric optionality of the contract must be based solely on physical factors, or regulatory supply requirements, that are outside of the control of the parties to the contract and that influence demand for the nonfinancial commodity; and
  • the contract must permit more than a nominal amount, or no amount, of the commodity to be delivered.

Set forth below is what we have heard about the treatment of specific types of embedded options:

Forward Contract


Full requirements contract

"Peaking" contract with no or nominal minimum delivery amount

Delivery contract with a renewal or extension term

\ \ \

Delivery contract with an evergreen provision that automatically renews the contract

\ \ \

Contract with embedded optionality re delivery points and delivery dates

\ \ \

Tolling Agreements provided that they are tied to the use of a specific facility and payment is for the exclusive use of all or part of the facility(can include scheduling power transmission, gas transportation and injection of gas into storage), not an option to use it

Contract for the right to use a specified facility through the payment of a demand charge or reservation fee, but exercise of right requires payment of additional fees for storage, usage, etc.

The Commission is requesting comment regarding the scope of the exclusion and the appropriateness of the seven-part test. The comment period will extend for 60 days after the Final Product Rules are published in the federal register.

Finally, in order to coordinate the request for comments on forwards with embedded volumetric optionality with the interim final rules for trade options, the Commission staff intends to provide no-action relief to extend the compliance date for the trade options rule to December 31, 2012.8

B. Insurance

The Final Product Rules provide safe harbor exclusions from the definition of swap for issuance contracts, consumer and commercial transactions, and loan participants. The Final Product Rules provide that particular products ("product test") between certain entities ('provider test") constitute insurance and the Commissions do not consider these transactions to be swaps or security based swaps. Transactions that meet both the product and provider test fall within a safe harbor that the Commissions believe constitute insurance and not swaps or security-based swaps. In addition, the Final Product Rules include a list of "enumerated products" that the Commissions consider to be insurance (and not swaps or security-based swaps) if the products satisfy the provider test. The product and provider tests, as well as the enumerated list, constitute a non-exclusive safe harbor from the definition of swap or security-based swap. As such, contracts that are not on the enumerated list, or products that fail the provider or product test would be subject to a facts and circumstances determination as to whether the transaction is a swap, security-based swap or insurance.

1. Requirements for the Contract ("Product Test")

The product test includes four requirements, and the instrument must satisfy each requirement to satisfy the product test. These requirement include that:

  • the beneficiary must have an insurable interest that is the subject of the contract and thereby carry the risk of loss with respect to that interest continuously throughout the duration of the contract;
  • the loss must occur and be proved, and any payment or indemnification for the loss must be limited to the value of the insurable interest;
  • the contract must not be traded, separately from the insured interest, on an organized market or over-the-counter; and
  • with respect to financial guaranty insurance only, in the event of a payment default or insolvency of the obligor, any acceleration of payments under the policy must be at the sole discretion of the insurer.

2. Person Providing the Contract Must be One of the following ("Provider Test")

If an instrument satisfies the product test, then the transaction will qualify under the insurance safe harbor if the person providing the contract satisfies the provider test (and vice versa). Under the provider test, the provider of the contract must be one of the following:

  • A person that is subject to supervision by the insurance commissioner (or similar official or agency) of any state or by the United States or an agency or instrumentality thereof, and such agreement, contract, or transaction is regulated as insurance under applicable state law or the laws of the United States;
  • Directly or indirectly by the United States, any State or any of their respective agencies or instrumentalities, or (ii) pursuant to a statutorily authorized program thereof;
  • In the case of reinsurance only, by a person to another person that satisfies the Provider Test, provided that:
    • such person is not prohibited by applicable state law or the laws of the United States from offering such agreement, contract, or transaction to such person that satisfies the Provider Test;
    • the agreement, contract, or transaction to be reinsured satisfies the Product Test or is one of the Enumerated Products (defined below); and
    • except as otherwise permitted under applicable state law, the total amount reimbursable by all reinsurers for such agreement, contract, or transaction may not exceed the claims or losses paid by the cedant; or
  • In the case of non-admitted insurance by a person who: is located outside of the United States and listed on the Quarterly Listing of Alien Insurers as maintained by the International Insurers Department of the National Association of Insurance Commissioners or meets the eligibility criteria for non-admitted insurers under applicable State law.

3. Enumerated Products

As noted above, certain enumerated products provided by an entity that satisfies the provider test are specifically enumerated in the Final Product Rules and automatically qualify under the insurance safe harbor. The enumerated products include:

  • surety bonds; fidelity bonds; life insurance; health insurance; long-term care insurance; title insurance; property and casualty insurance; annuities; disability insurance; insurance against default on individual residential mortgages (commonly known as private mortgage insurance, as distinguished from financial guaranty of mortgage pools); and reinsurance (including retrocession) of any of the foregoing, so long as that reinsurance or retrocession is not accomplished by entering into swaps or security-based swaps.

4. Grandfather of existing transactions

The Final Product Rules include a grandfather provision for transactions entered on or before the effective date of the Rules. Specifically, if at the time the transaction was entered, the transaction was provided in accordance with the provider test, then the Commissions will treat the transactions as insurance.

C. Guarantees of Swaps and Security Based Swaps

In the Final Product Rules, the CFTC interprets a guarantees of a swap to be a swap to the extent that a counterparty to a swap position would have recourse to the guarantor in connection with the position. The SEC also interprets a guarantee of a security-based swap to be a security under the federal securities laws. Both the CFTC and the SEC plan to address the practical implications of this interpretation, including applicable reporting requirements in a separate release.

D. Consumer and Commercial Transactions; Loan Participations

Under the Final Product Rules, certain consumer and commercial transactions that have not previously been considered swaps are excluded from the definitions of swap and security based swaps. To meet the consumer transactions exclusion, the transactions must be entered by consumers (limited to natural persons) as principals (or by their agents) primarily for personal, family or household purposes. For commercial transactions, the interpretation excludes from the definition of swap customary business arrangements such as employment contracts, the sale lease or transfer of real property and other agreements.

The Final Product Rules list specific consumer and commercial transactions that qualify under each exclusion, but similar to the insurance safe harbor, non-enumerated transactions may qualify under the consumer and commercial transaction safe harbor subject to a facts and circumstances analysis. According to the limited material made available by the Commissions, the final rules also include factors the Commissions will consider to determine if a transaction constitutes a consumer or commercial transactions, or a swap or security based swap.

The Final Product Rules also provide that loan participations are not swaps or security-based swaps if the purchaser is acquiring a current or future direct or indirect ownership interest in the related loan or commitment and if certain other conditions are met.

E. Foreign Exchange ("FX") Forwards and FX Swaps

The Commissions also issued an interpretation that FX forwards and FX swaps fall within the definition of swap, subject to a determination by the Secretary of the Treasury to exempt such products. However, even if the Secretary exempts these products, certain requirements will continue to apply, including reporting and business conduct standards. The Final Product Rules also note that certain products are outside of the Treasury Secretary's determination, including: foreign currency options, non-deliverable forwards in foreign exchange, and currency swaps and cross-currency swaps. Forward rate agreements are also classified as swaps unless otherwise excluded in the statute.

In addition, the Final Product Rules provides that certain FX spot transactions are not FX forwards under the CEA. These transactions include certain foreign currency trades made in connection with a foreign securities transaction that is settled within the settlement cycle for the associated securities transaction. Further, the rule provides that options on swaps or security-based swaps, forward swaps or security-based swaps, and certain contracts for differences are swaps or security-based swaps. However, the CFTC considers foreign currency options that are described in Section 2(c)(2)(B) of the CEA to not be swaps.

F. Relationship between Swaps and Security Based Swaps

The Final Product Rules also address whether particular agreements, contracts or transactions that are subject to Title VII of the Dodd-Frank Act (which are referred to as "title VII instruments" in the release) are swaps, security-based swaps or both (i.e., mixed swaps). Market participants are to make this determination prior to execution, but no later than when the parties offer to enter into the title VII instrument, and this characterization remains throughout the life of the instrument unless the instrument is materially modified or amended.

With regard to interest rates and other monetary rates, the final rules provide that these instruments are swaps. Further, title VII instruments on "yields," where "yield" is a proxy for the price or value of a debt security, loan or narrow-based security index, are security-based swaps, except in the case of certain government debt obligations. Title VII Instruments on rates or yields of U.S. Treasuries and other exempted securities (other than municipal securities) are swaps and are not security-based swaps.

For total return swaps ("TRS"), a TRS on a single security, loan, or narrow-based security index generally would be a security-based swap. Where counterparties embed interest-rate optionality or a non-securities component into the TRS (e.g., the price of oil or a currency hedge), it would be a mixed swap. In addition, quanto equity swaps with certain characteristics are security-based swaps, and TRSs based on broad-based security indexes or on two or more loans are swaps subject to CFTC regulation.

Finally, title VII instruments based on futures are swaps, whereas title VII instruments on security futures are security-based swaps. Further, title VII instruments on futures on foreign sovereign debt exempted by the SEC for purposes of futures trading under Rule 3a12-8 are swaps subject to regulation by the CFTC if certain conditions are met.

G. Narrow-Based Security Index and Issuers of Securities in a Narrow-Based Security Index in the Security Based Swap Definition

The statutory definition, as well as past guidance of the CFTC/SEC in the context of security futures regarding volatility and debt indexes, applies to swaps and security-based swaps. The Final Product Rules and interpretations of the Commissions address several issues regarding the terms "narrow-based security index" and "issuers of securities in a narrow-based security index" in the security-based swap definition, including:

  • the applicability of past guidance of the Commissions regarding criteria for distinguishing broad from narrow-based security indexes to title VII instruments;
  • new criteria for determining whether a CDS where the underlying reference is a group or index of entities or obligations of entities (typically referred to as an "index CDS") is based on an index that is a narrow-based security index;
  • the meaning of the term "index";
  • a tolerance period rule governing title VII instruments traded on trading platforms where the security index temporarily moves from broad-based to narrow-based or vice versa; and
  • a grace period rule governing title VII instruments on trading platforms where the security index moves from broad-based to narrow-based or vice versa and the move is not temporary.

Specifically with regard to index credit default swaps ("CDS"), the Final Product Rules provide that the Commissions are:

  • Adopting a new test for determining whether an index underlying an index CDS is broad or narrow, building on the 2006 joint SEC/CFTC rules for debt indexes, but tailored to index CDS.
  • Clarifying that Loan Index CDS are to be evaluated under these rules.
  • Adjusting the definition of "control" for purposes of determining affiliation under the rules.

For security indexes and portfolios, the Commissions explain that:

  • Where parties to a title VII instrument directly or indirectly have discretion to change the composition and weighting of securities in a portfolio, the title VII instrument is a security-based swap.
  • Where there is an underlying security index for which there are predetermined criteria or a self-executing formula for adjusting the security index that is not subject to change or modification, a title VII instrument on the index would be a swap or security-based swap depending on composition and weighting of the index, unless the predetermined criteria or self-executing formula would cause the index to become narrow-based or vice-versa, in which case it would be a mixed swap. A clarification in response to a comment is made in the release with respect to indexes that may, but not necessarily, move from broad-based to narrow-based or vice versa.

With regard to indexes that "Migrate" from broad to narrow or vice versa, the final rules provide that:

  • The rule that the determination of a Title VII Instrument as a swap or security-based swap is made prior to execution, but no later than when the parties offer to enter into the instrument, and that its characterization does not change throughout its life, applies to Title VII Instruments based on indexes of securities, regardless of whether the Title VII Instrument was entered into bilaterally or was executed on a trading platform.
  • With regard to title VII instruments based on indexes listed on trading platforms:
  • A market participant who enters into a title VII instrument on a trading platform on a broad-based or narrow-based security index that migrates from broad-based to narrow-based or vice versa may hold that position until the expiration of the instrument, without any change in regulatory responsibilities, requirements, or obligations.
  • In order to avoid market disruption, where market participants seek to offset or enter into new swaps (or security-based swaps) where the underlying index has migrated from broad to narrow (or vice versa), the tolerance period and grace period rules applicable to futures trading will apply.

Finally, in addressing the settlement of broad-based index CDS, the final rules provides that:

  • If a broad-based index CDS requires mandatory physical settlement, it will be a mixed swap.
  • If a broad-based index CDS requires cash settlement or auction settlement, it will be a swap, and will not be considered a security-based swap or a mixed swap solely because the determination of the cash price to be paid is established through a securities or loan auction.

H. Mixed Swaps

Mixed swaps are both swaps and security-based swaps. In the final rule, the Commissions explain their belief that the scope of the mixed swap definition is, and was intended to be, narrow. The Commissions also are adopting two rules regarding the regulation of mixed swaps:

  • The first rule provides compliance obligations for parties to bilateral uncleared mixed swaps, where at least one of the parties is dually registered with both Commissions, will need to comply. Under the Final Products Rule, in order to facilitate the trading of these instruments in appropriate circumstances, certain key provisions of the CEA and related CFTC rules as well as the requirements of the federal securities laws will apply to such mixed swaps.
  • For all other mixed swaps, the second rule establishes a process for persons to request that the Commissions issue a joint order permitting such persons (and any other person that subsequently lists, trades, or clears that class of mixed swap) to comply, as to parallel provisions only, with specified parallel provisions of either the CEA or the Exchange Act, and related rules and regulations, instead of being required to comply with parallel provisions of both the CEA and the Exchange Act.

I. Security Based Swap Agreement

The Final Product Rules address Security-based swap agreements ("SBSAs"), which are swaps involving securities over which the CFTC has regulatory and enforcement authority, but for which the SEC also has antifraud and certain other authority. According to the limited information made available by the Commissions, the final rule includes guidance regarding the types of products that are SBSAs, which include:

  • Swaps on broad-based security indexes; and
  • Swaps on exempted securities (other than municipal securities), such as U.S. Treasury bonds.

In addition, the products rule provides that the books and records requirements for SBSAs are limited to the CFTC rules governing books and records for swaps that are also SBSAs.

J. Process for Requesting Interpretations: Swaps, Security Based Swaps and Mixed Swaps

The Final Product Rules designate a process for interested persons to request a joint interpretation by the Commissions regarding whether a particular title VII instrument (or class of title VII instruments) is a swap, a security-based swap, or a mixed swap. The process includes a deadline for a decision, as well as a requirement that if the Commissions do not issue a joint interpretation within the prescribed time period, each Commission must publicly provide the reasons for not having done so.

K. Anti-Evasion

Pursuant to the CFTC's anti-evasion authority in the Dodd-Frank Act, the CFTC's final rule defines transactions willfully structured to evade the provisions of Title VII as swaps. In addition to this general application, the CFTC establishes specific provisions regarding currency and interest rate swaps that are willfully structured as FX forwards or swaps to fall within a determination by the Secretary of Treasury to exempt such products. The final rule also addresses the products of a bank that is not under the regulatory jurisdiction of an appropriate Federal banking agency and that are willfully structured as identified banking products to evade the new regulatory regime for swaps. Finally, the CFTC addresses anti-evasion in the context of activity outside of the United States.


Section 723 of the Dodd-Frank Act added Section 2(h)(1) to the CEA, which makes it "unlawful for any person to engage in a swap unless that person submits such swap for clearing to a derivatives clearing organization that is registered under [the CEA] or a derivatives clearing organization that is exempt from registration under [the CEA] if the swap is required to be cleared." This prohibition generally is referred to as the "mandatory clearing requirement."

The Dodd-Frank Act also added Section 2(h)(7) to the CEA, which provides an exception from the mandatory clearing requirement where one of the counterparties to a swap:

  • is not a "financial entity;"
  • is using swaps to "hedge or mitigate commercial risk;" and
  • notifies the Commission, in a manner set forth by the Commission, how it generally meets its financial obligations associated with entering into non-cleared swaps.

This provision commonly is referred to as the "end-user exception" to mandatory clearing. Commission staff indicated during the hearing that limited designation swap dealers would be eligible to elect the end-user exception for swaps for which the swap dealer is not designated as a swap dealer.

A. Definition of "Financial Entity"

The definition of "financial entity" in CEA Section 2(h)(7)(C) specifically includes swap dealers, security-based swap dealers, major swap participants, major security-based swap participants, commodity pools, private funds, certain employee benefit plans, and entities engaged in activities that are "financial in nature" under Section 4(k) of the Bank Holding Company Act.9 "Financial entities" may not utilize the end-user exception.

The Final End-User Exception is expected to exempt banks, savings associations, farm credit system institutions, and credit unions with total assets of $10 billion or less (collectively, "small financial institutions") from the definition of "financial entity," making small financial institutions eligible for the end-user exception.10

The carve-out from the definition of "financial entity" for "captive finance affiliates" in the Final End- User Exception is expected to track the statutory provision provided in CEA Section 2(h)(7)(C)(iii). Accordingly, under the Final Rule, an entity will be eligible for the end-user exception if its "primary business is providing financing, and uses derivatives for the purpose of hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company."11 Chairman Gensler indicated that the "Commission agrees that the word, 'facilitates' as used in Section 2(h)(7)(C)(iii) should be interpreted broadly to include financing that might indirectly help to facilitate the purchase or lease of products."12

B. Definition of "Hedging or Mitigating Commercial Risk"

The End-User Exception establishes criteria for determining whether a swap is "hedging or mitigating commercial risk" and therefore eligible for the end-user exception. These criteria (which have not yet been released) are expected to be substantially (but apparently not exactly) the same as the criteria used in the definition of "hedging or mitigating commercial risk" under the "major swap participant" ("MSP") definition.13

The final definition of MSP applies a facts and circumstances test to determine whether, at the time a swap is entered into, and taking into account an entity's overall hedging and risk mitigation strategies, a swap "hedges or mitigates commercial risk."14 The definition encompasses any swap position that:

  • qualifies as a bona fide hedge under the CFTC's rules;
  • qualifies for hedging treatment under Financial Accounting Standards Board Statement No. 133 or Governmental Accounting Standards Board Statement 53, Accounting and Financial Reporting for Derivative Instruments; or
  • is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise, where the risks arise in the ordinary course of business from:
    • a potential change in the value of (x) assets that a person owns, produces, manufactures, processes, or merchandises, (y) liabilities that a person incurs, or (z) services that a person provides or purchases;
    • a potential change in value related to any of the foregoing arising from foreign exchange rate movements; or
    • a fluctuation in interest, currency, or foreign exchange rate exposures arising from a person's assets or liabilities.

The definition of "hedging or mitigating commercial risk" as used in the MSP definition does not encompass any swap position that is held for "speculation, investing or trading," which would include positions executed primarily to take an outright view on market direction or to obtain an appreciation in value of the position itself, including positions held for short term resale, or to obtain arbitrage profits.15 Positions held primarily for the purpose of generating profits directly upon the closeout of a swap, and not to hedge or mitigate underlying commercial risk, are considered to be speculating or investing, and thus, not hedging or mitigating commercial risk. In contrast, swaps executed for the purpose of offsetting potential future increases in the price of inputs that an entity reasonably expects to purchase for commercial activities serve to hedge a commercial risk.16

C. Notification Requirement

To implement the notification requirement under CEA Section 2(h)(7)(iii), the Final End-User Exception requires the reporting counterparty to report to a swap data repository ("SDR") (or, if no SDR is available, to the Commission) the following information for each swap for which the end-user exception is elected:

  • notice of the election of the exception; and
  • the identity of the electing counterparty (i.e., the counterparty eligible to elect the end-user exception) to the swap.

The electing counterparty may choose to provide the additional information required to be reported under the Rule either in an annual filing under the Rule or on a swap-by-swap basis. This information includes:

  • whether the electing counterparty is a "financial entity" electing the exception on behalf of an affiliate or as a "small financial institution;"
  • whether the swap for which the exception is being elected is used to "hedge or mitigate commercial risk;"
  • information regarding how the electing counterparty generally meets its financial obligations associated with entering into non-cleared swaps; and
  • if the electing counterparty is an "SEC Filer," whether its board of directors has approved generally the decision to enter into swaps that are exempt from the clearing and trading requirements.17


In addition to finalizing the end-user exception, the Commission issued a proposal to allow cooperatives that do not qualify for the end-user exception to elect not to clear certain swaps entered for the benefit of their members, provided the individual members would qualify for the exception. The Commission is proposing this rule because certain cooperatives whose members are eligible for the end-user exception may be "financial entities" with assets in excess of $10 billion. Such a classification would preclude those cooperative s from relying on the end-user exception, even though such cooperatives act in the financial markets on behalf of their members to enter into swaps for the benefit of members.

Under the proposed rule, a cooperative can claim the "cooperative exemption" if all of its members are either: (1) non-financial entities; (2) financial entities to which the small financial institution exemption applies; or (3) cooperatives themselves, each of whose members fall into one of the first two categories. In addition, the Commission limited the proposed exemption to swaps entered into with cooperative members in connection with originating loans for members or swaps that hedge or mitigate risks associated with member loans or member loan-related swaps. Finally, the proposed rule also includes certain reporting requirements related to claiming the cooperative exemption, which are similar to the reporting requirements for parties who claim the end-user exception.


1 Pub. L. No. 111–203, 124 Stat. 1376 (2010).

2 See Position Limits for Futures and Swaps, 76 Fed. Reg. 71626 (Nov. 18, 2011).

3 See Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap Dealer, Major Swap Participants, and Futures Commission Merchants, 77 Fed. Reg. 20128 (April 3, 2012); and Business Conduct standards for Swap Dealers and Major Swap Participants, 77 Fed. Reg. 9734 (Fed. 17, 2012).

4 See Real-Time Public Reporting of Swap Transaction Data, 77 Fed. Reg. 1182 (Jan. 9, 2012) .

5 See Swap Data Recordkeeping and Reporting Requirements, 77 Fed. Reg. 2136 (Jan. 13, 2012).

6 See Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 Fed. Reg. 54538 (Sept. 1, 2011).

7 See Commodity Exchange Act ("CEA") section 1a(27).

8 See Commodity Options, 77 Fed. Reg. 25320 (Apr. 27, 2012).

9 CEA Section 2(h)(7)(C).

10 CEA § 2(h)(7)(C)(ii).

11 CEA § 2(h)(7)(C)(iii) (emphasis added).

12 Commission staff indicated that, in interpreting whether an entity "facilitated" such transactions, "[w]e would look to the final act of actually putting the product together and not that the parent corporation needs to manufacture 90% of all components." Transcript of Hearing on Final Rules (July 10, 2012).

13 17 C.F.R. § 1.3(kkk).

14 "Hedging" definitions include the definition of "hedging or mitigating commercial risk" in Part 1.3(z), the definition of "bona fide hedge" in CFTC Rule 151.5(a), the definition of "hedging or mitigating commercial risk" for purposes of the exclusion from dealing activity, and the definition of "hedging or mitigating commercial risk" under proposed CFTC Rule 39.6(c) for purposes of electing to use the end-user clearing exception.

15 See Final Entities Definitions at 30676.

16 Id.

17 The requirement for board approval that is applicable to publicly reporting issuers arises under Section 2(j) of the Securities Exchange Act of 1934.


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Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions