Co-authored by Blake J. Brockway 

The Commodity Futures Trading Commission and Securities and Exchange Commission have adopted final rules further defining swap, security-based swap, security-based swap agreement, and mixed swap. The final rules also include provisions governing the maintenance of books and records for security-based swap agreements. The compliance dates for many other rules promulgated pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) are based on the effective date of these rules.


The Dodd-Frank Act adopted a comprehensive definition of the term swap, which includes interest rate swaps, commodity swaps, equity swaps and credit default swaps. The final rules clarify that the following transactions fall within the definition of swap: foreign exchange forwards, foreign exchange swaps, foreign currency options (not traded on a national securities exchange), non-deliverable forward contracts involving foreign exchange, currency swaps, cross-currency swaps, forward rate agreements, contracts for differences, and certain combinations and permutations of (or options on) swaps and security-based swaps.

The CFTC and SEC also clarified that the following products are not considered swaps or security based swaps: (1) traditional insurance products that meet specified product and provider criteria; (2) certain consumer transactions that are entered into for personal, family or household purposes; (3) commercial transactions that involved customary business arrangements; and (4) loan participations. The CFTC also issued an interpretation clarifying the scope of the forward contract exclusion for non-financial commodities.

The final rules provide guidance on classifying particular agreements, contracts, or transactions as swaps, security-based swaps, or mixed swaps. Swap instruments based on interest rates, other monetary rates (such as money market rates, government target rates, general lending rates, and rates from indexes), government debt obligations, and exchange-traded futures contracts are classified as swaps. Swap instruments based on yields (where yield is a proxy for the price or value of a debt security, loan or narrow-based security index), total return swaps on a single security, loan or narrow-based security index, security futures, and certain equity swaps are classified as security-based swaps. Mixed swaps, such as a total return swap with embedded interest-rate optionality and a non-securities component, are classified as both swaps and security-based swaps.

In addition, the final rules clarified that the CFTC’s rules governing books and records for swaps also apply to security-based swap agreements.

To view the final rule related to the end-user exception, click here.

To view more information, including a webcast of the CFTC adopting meeting, Commissioner’s statements, and links to fact sheets related to the final rules, click here.