[Federal Register Volume 76, Number 87 (Thursday, May 5, 2011)]
[Notices]
[Pages 25774-25782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10927]


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DEPARTMENT OF THE TREASURY


Determination of Foreign Exchange Swaps and Foreign Exchange 
Forwards Under the Commodity Exchange Act

AGENCY: Department of the Treasury, Departmental Offices.

ACTION: Notice of proposed determination.

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SUMMARY: The Commodity Exchange Act (``CEA''), as amended by Title VII 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(``Dodd-Frank Act''), authorizes the Secretary of the Treasury 
(``Secretary'') to issue a written determination exempting foreign 
exchange swaps, foreign exchange forwards, or both, from the definition 
of a ``swap'' under the CEA. The Secretary proposes to issue a 
determination that would exempt both foreign exchange swaps and foreign 
exchange forwards from the definition of ``swap,'' in accordance with 
the relevant provisions of the CEA and invites comment on the proposed 
determination, as well as the factors supporting such a determination.

DATES: Written comments must be received on or before June 6, 2011, to 
be assured of consideration.

ADDRESSES: Submission of Comments by mail: You may submit comments to: 
Office of Financial Markets, Department of the Treasury, 1500 
Pennsylvania Avenue, NW., Washington, DC 20220.

[[Page 25775]]

    Submission of Comments via regulations.gov: You are encouraged to 
submit comments electronically through the Federal eRulemaking Portal-- 
``Regulations.gov.'' Go to http://www.regulations.gov to submit or view 
public comments. The Regulations.gov home page provides information on 
using Regulations.gov, including instructions for submitting or viewing 
public comments, viewing other supporting and related materials, and 
viewing the docket.
    Please include your name, affiliation, address, e-mail address and 
telephone number(s) in your comment. In general, comments received will 
be posted on regulations.gov without change, including any business or 
personal information provided. Treasury will also make such comments 
available for public inspection and copying in Treasury's Library, Room 
1428, Department of the Treasury, 1500 Pennsylvania Avenue, NW., 
Washington, DC 20220, on official business days between the hours of 10 
a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect 
comments by telephoning (202) 622-0990. Comments received, including 
attachments and other supporting materials, are part of the public 
record and subject to public disclosure. Do not include any information 
in your comment or supporting materials that you consider confidential 
or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Office of Financial Markets, 1500 
Pennsylvania Avenue, NW., Washington, DC 20220, (202) 622-2730, 
[email protected]; Thomas E. Scanlon, Office of the General 
Counsel, 1500 Pennsylvania Avenue, NW., Washington, DC 20220, (202) 
622-8170.

SUPPLEMENTARY INFORMATION: Title VII of the Dodd-Frank Act \1\ amends 
the CEA, as well as Federal securities laws, to provide a comprehensive 
regulatory regime for swaps. Section 721 of the Dodd-Frank Act amends 
section 1a of the CEA, which, in relevant part, defines the term 
``swap'' under the CEA and includes foreign exchange swaps and foreign 
exchange forwards in the definition.\2\ Section 1a(47)(E) of the CEA 
authorizes the Secretary to make a written determination that ``foreign 
exchange swaps'' \3\ or ``foreign exchange forwards,'' \4\ or both-- 
(I) should not be regulated as swaps under the CEA; and (II) are not 
structured to evade the Dodd-Frank Act in violation of any rule 
promulgated by the Commodity Futures Trading Commission (``CFTC'') 
pursuant to section 721(c) of the Dodd-Frank Act.\5\
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    \1\ Pub. L. 111-203, title VII.
    \2\ 7 U.S.C. 1a(47).
    \3\ 7 U.S.C. 1a(25).
    \4\ 7 U.S.C. 1a(24).
    \5\ 7 U.S.C. 1(a)(47)(E)(i).
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    On October 28, 2010, the Department of the Treasury (``Treasury'') 
published in the Federal Register a Notice and Request for Comments 
(``October 2010 Notice'') to solicit public comment on a wide range of 
issues relating to whether foreign exchange swaps and foreign exchange 
forwards should be exempt from the definition of the term ``swap'' 
under the CEA.\6\ In addition, Treasury staff has engaged in a broad 
outreach to representatives from multiple market segments, as well as 
market regulators and the Federal regulatory agencies. After assessing 
the comments in response to the October 2010 Notice, consulting with 
Federal regulators, and preliminarily considering the factors set forth 
in section 1b(a) of the CEA, as discussed below, the Secretary believes 
that proposing a determination to exempt all ``foreign exchange swaps'' 
and ``foreign exchange forwards'' from the definition of the term 
``swap'' under the CEA is appropriate.
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    \6\ 75 FR 66,426 (Oct. 28, 2010). Thirty comments were submitted 
in response to the October 2010 Notice.
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    In making a determination pursuant to sections 1a(47)(E) and 1b of 
the CEA, the Secretary must consider the following factors:
    (1) Whether the required trading and clearing of foreign exchange 
swaps and foreign exchange forwards would create systemic risk, lower 
transparency, or threaten the financial stability of the United States;
    (2) Whether foreign exchange swaps and foreign exchange forwards 
are already subject to a regulatory scheme that is materially 
comparable to that established by the CEA for other classes of swaps;
    (3) The extent to which bank regulators of participants in the 
foreign exchange market provide adequate supervision, including capital 
and margin requirements;
    (4) The extent of adequate payment and settlement systems; and
    (5) The use of a potential exemption of foreign exchange swaps and 
foreign exchange forwards to evade otherwise applicable regulatory 
requirements.\7\
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    \7\ 7 U.S.C. 1b(a). In addition, section 1b(b) of the CEA 
provides that, ``[i]f the Secretary makes a determination to exempt 
foreign exchange swaps and foreign exchange forwards from the 
definition of the term `swap','' the Secretary must submit a 
separate ``determination'' to the appropriate committees of 
Congress, which contains (1) an explanation why foreign exchange 
swaps and foreign exchange forwards are ``qualitatively different 
from other classes of swaps'' such that foreign exchange swaps and 
foreign exchange forwards are ``ill-suited for regulation as swaps'' 
and (2) an ``identification of the objective differences of foreign 
exchange swaps and foreign exchange forwards with respect to 
standard swaps that warrant an exempted status'' (i.e., as a result 
of the underlying ``determination'').
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    Treasury is soliciting comment on this proposed determination,\8\ 
as set forth below, which would exempt any foreign exchange swap and 
foreign exchange forward from the definition of the term ``swap'' under 
the CEA, as permitted by section 1a(47)(E) of the CEA.
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    \8\ 5 U.S.C. 553(b).
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I. Summary of Proposed Determination

    The CEA, as amended by the Dodd-Frank Act, provides a comprehensive 
regulatory regime for swaps and derivatives, including a wide range of 
foreign exchange derivatives, such as foreign exchange options, 
currency swaps, or non-deliverable forwards (``NDFs''). Among other 
measures, this regulatory regime provides for clearing and exchange-
trading requirements that are designed to mitigate risks, promote price 
transparency, and facilitate more stable, liquid markets for derivative 
instruments. In general, the payment obligations on currency swaps, 
interest rate swaps, credit default swaps, commodity swaps and other 
derivatives fluctuate in response to changes in the value of the 
underlying variables on which those derivative contracts are based. As 
a result, for most types of swaps and derivatives, the counterparties 
do not know their payment obligations and the full extent of their 
exposure throughout the life of the contract. Moreover, as the length 
of a swap or derivative contract increases, a party generally is 
exposed to greater counterparty credit risk. Settlement of most types 
of swaps and derivatives involves only payments of net amounts (not 
gross amounts) that are based on the change in value of the underlying 
variables. Given the features of most derivatives, including some types 
of foreign exchange derivatives, the clearing and exchange-trading 
requirements under the CEA would mitigate the relevant risks, notably 
counterparty credit risks.
    Foreign exchange swaps and forwards generally are subject to the 
requirements of the CEA. For these instruments, the most significant 
requirements under the regulatory regime enacted by the Dodd-Frank Act 
would be the potential for mandatory central clearing and exchange 
trading,\9\ unless the Secretary

[[Page 25776]]

makes a determination that foreign exchange swaps and forwards ``(I) 
should not be regulated as swaps under [the CEA]; and (II) are not 
structured to evade [the Dodd-Frank Act] in violation of any rules 
promulgated by the [CFTC] pursuant to section 721(c) of the [Dodd-Frank 
Act].'' \10\
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    \9\ 7 U.S.C. 2(h)(1)-(2). In general, this section provides that 
the CFTC must act for each swap, or a category of swaps, to be 
required to be cleared. In addition, the CEA provides several 
exceptions to the clearing and trading requirements and authorizes 
the CFTC to impose conditions or limitations on these exceptions.
    \10\ 7 U.S.C. 1a(47)(E)(i).
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    The Secretary proposes to issue a determination to exempt foreign 
exchange swaps and forwards because of the distinctive characteristics 
of these instruments. As discussed below, unlike most other 
derivatives, foreign exchange swaps and forwards have fixed payment 
obligations, are physically settled, and are predominantly short-term 
instruments. This results in a risk profile that is different from 
other derivatives, as it is centered on settlement risk, rather than 
counterparty credit risk. Settlement risk in foreign exchange swaps and 
forwards already has been addressed through the extensive use of 
payment-versus-payment (``PVP'') settlement arrangements. Even though 
central clearing could reduce counterparty credit risk, that risk is 
relatively small in the foreign exchange swaps and forwards market. 
Imposing central clearing and trading requirements under the CEA on 
foreign exchange swaps and forwards would introduce risks and 
operational challenges to the current settlement arrangements that 
significantly outweigh the marginal benefits.

A. Foreign Exchange Swaps and Forwards Differ in Significant Ways From 
Other Swaps and Derivatives

    Under the CEA, a ``foreign exchange swap'' is narrowly defined as 
``a transaction that solely involves--(A) an exchange of 2 different 
currencies on a specific date at a fixed rate that is agreed upon on 
the inception of the contract covering the exchange'' and ``(B) a 
reverse exchange of [those two currencies] at a later date and at a 
fixed rate that is agreed upon on the inception of the contract 
covering the exchange.'' \11\ Likewise, the CEA narrowly defines a 
foreign exchange forward as ``a transaction that solely involves the 
exchange of 2 different currencies on a specific future date at a fixed 
rate agreed upon on the inception of the contract covering the 
exchange.'' \12\
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    \11\ 7 U.S.C. 1a(25).
    \12\ 7 U.S.C. 1a(24).
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    The Secretary's authority to issue a determination is limited to 
foreign exchange swaps and forwards and does not extend to other 
foreign exchange derivatives. Foreign exchange options, currency swaps, 
and NDFs may not be exempted from the CEA's definition of ``swap'' 
because they do not satisfy the statutory definitions of a foreign 
exchange swap or forward.
    The payment obligations on foreign exchange swaps and forwards are 
fixed and predetermined. While the mark-to-market value of a position 
in a foreign exchange swap or forward may vary based on changes in the 
exchange rate, the actual settlement amounts do not. These features 
make foreign exchange swaps and forwards more similar to funding 
instruments, such as repurchase agreements, which are not covered under 
the CEA. Businesses that sell goods in international trade, or that 
make investments in foreign countries, frequently ask their banks to 
arrange foreign exchange swaps and forwards to control the risk that 
their own country's currency will rise or fall against the other 
country's currency while the sale or investment is pending.
    Foreign exchange swap and forward participants know their own and 
their counterparties' payment obligations and the full extent of their 
exposure throughout the life of the contract, whereas the 
counterparties to other derivatives contracts do not. Moreover, foreign 
exchange swap and forward contracts have a very short average length 
and, therefore, relative to other swaps and derivatives, create 
significantly lower levels of counterparty credit risk.
    Settlement of foreign exchange swap and forward transactions 
requires the exchange of the full principal amount of the contract in 
two different currencies, whereas the payment obligations of most other 
derivatives are based on the incremental profit or loss on a 
transaction. The physical settlement requirement distinguishes foreign 
exchange swaps and forwards from other derivatives and contributes to a 
risk profile that is largely concentrated on settlement risk.

B. Settlement Risk Is the Main Risk and Already Is Effectively 
Mitigated

    Settlement of foreign exchange swap and forward transactions 
requires the exchange of the full principal amount of the contract in 
two different currencies.\13\ Settlement risk is the risk that one 
party to a foreign exchange swap or forward transaction will deliver 
the currency it owes its counterparty, but not receive the other 
currency from its counterparty. In contrast to other derivatives, 
including the other foreign exchange derivatives discussed above, 
parties' ultimate payment obligations on a foreign exchange swap or 
forward are known and fixed from the beginning of the contract and 
involve the actual exchange of a predetermined amount of principal at 
settlement. The physical settlement requirement distinguishes foreign 
exchange swaps and forwards from other derivatives and contributes to a 
risk profile that is largely concentrated on settlement risk.
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    \13\ By contrast, the payment obligations of most other 
derivatives are based on the incremental profit or loss on a 
transaction and either party's payment may be made with a common 
currency.
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    The foreign exchange swap and forward market relies on the 
extensive use of PVP settlement arrangements, which permit the final 
transfer of one currency to take place only if the final transfer of 
the other currency also takes place. These settlement arrangements do 
not guarantee the contract but prevent payment flows from occurring if 
either party defaults. CLS Bank International (``CLS''), the 
predominant PVP settlement system, currently provides settlement 
services for 17 currencies that represent 94 percent of the total daily 
value of foreign exchange swaps and forwards traded globally.
    Currently, roughly 75 percent of the entire foreign exchange market 
is estimated to settle without settlement risk to either party. This 
figure includes trades settled by PVP arrangements, as well as trades 
that are settled without settlement risk. (Transactions that are 
internally settled between corporate affiliates, cash settled, or 
settled across a single-bank's books for its clients are not subject to 
settlement risk.) In the foreign exchange swaps and forwards market in 
particular, CLS estimates that it settles more than 50 percent of 
foreign exchange swap and forward transactions that are subject to 
settlement risk. The use of CLS has also been growing steadily since 
its introduction in 2002, and CLS has announced plans to further expand 
its settlement services to include additional currencies, increase 
volume capacity and add additional settlement times.

C. Foreign Exchange Swaps and Forwards Are Subject to Less Counterparty 
Credit Risk Than Other Derivatives

    Counterparty credit risk is the risk of economic loss if either 
party defaults on a contract. Counterparty credit risk increases with 
the length of a contract because that increases the length of time 
during which a counterparty could suffer from adverse developments. 
Foreign exchange swap and forward contracts have a very short average

[[Page 25777]]

length. Sixty-eight percent of foreign exchange swap and forward 
contracts mature in less than a week, and 98 percent mature in less 
than a year. Other derivatives, such as interest rate swaps, generally 
have much longer maturity terms (e.g., between two and thirty years) 
than foreign exchange swaps and forwards, and thus pose significantly 
more counterparty credit risk than foreign exchange swaps and forwards.
    Central clearing could provide foreign exchange swap and forward 
participants with further protection against the risk of default by 
their counterparties (i.e., the replacement cost of a transaction if a 
counterparty fails to perform). However, imposing a central clearing 
requirement on the foreign exchange swaps and forwards market raises 
two concerns. First, requiring central clearing may lead to combining 
clearing and settlement in one facility, which would create large 
currency and capital needs for that entity due to: (i) The sheer size 
and volume of the foreign exchange swaps and forwards market; and (ii) 
the fact that the central clearing facility would be effectively 
guaranteeing both settlement and market exposure to replacement cost. 
We believe that it is unlikely a central counterparty (``CCP'') would 
be able to provide the settlement services required by this market, 
either directly or in conjunction with another service provider, such 
as CLS.
    In addition, providing central clearing separately from settlement 
presents the second concern, namely: required clearing would disrupt 
the existing settlement process by introducing additional steps between 
trade execution and settlement that pose significant operational 
challenges. The existing settlement process for this market functions 
well and has been critical to mitigating this market's main source of 
risk. The operational challenges and potentially disruptive effects on 
the foreign exchange swaps and forwards market associated with adding a 
central clearing requirement for these instruments thus significantly 
outweigh the marginal benefits that central clearing would provide.

D. Key Players Within the Foreign Exchange Market Already Are Subject 
to Oversight

    Unlike the derivatives markets, banks are the key players in the 
foreign exchange swaps and forwards market. Roughly 95 percent of 
foreign exchange swaps and forwards transactions occur between banks 
acting either on their own behalf or on behalf of their clients. Banks 
are subject to consolidated supervision, and supervisors regularly 
monitor their foreign exchange related exposures, internal controls, 
risk management systems, and settlement practices.
    The foreign exchange market itself also has long been subject to 
comprehensive and coordinated oversight, reflecting its unique 
characteristics and functioning. Since the introduction of floating 
exchange rates in the early 1970s, G10 central banks and regulators 
have undertaken strong and coordinated oversight measures for the 
foreign exchange market, given its critical role in monetary policy and 
the global payments system. This global strategy, which was launched in 
1996 by the Bank for International Settlements (``BIS''), resulted in 
the design and implementation of CLS and other PVP settlement 
arrangements. The Federal Reserve regularly conducts reviews of the 
risk management and operational processes of major foreign exchange 
market participants. These reviews inform Basel Committee on Banking 
Supervision (``BCBS'') and Committee on Payment and Settlement Systems 
(``CPSS'') updates to bank supervisory guidelines on managing foreign 
exchange settlement risk.

E. The Foreign Exchange Swaps and Forwards Market Already Is Highly 
Transparent and Traded Over Electronic Trading Platforms

    Foreign exchange swaps and forwards already trade in a highly 
transparent market. Market participants have access to readily 
available pricing information through multiple sources. Approximately 
41 percent and 72 percent of foreign exchange swaps and forwards, 
respectively, already trade across a range of electronic platforms and 
the use of such platforms has been steadily increasing in recent 
years.\14\ The use of electronic trading platforms provides a high 
level of pre- and post-trade transparency within the foreign exchange 
swaps and forwards market. Thus, mandatory exchange trading 
requirements would not significantly improve price transparency or 
reduce trading costs within this market.
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    \14\ BIS, Greenwich Associates, Oliver Wyman analysis.
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F. Foreign Exchange Swaps and Forwards Will Be Subject to Additional 
Oversight Under the CEA

    Even if the Secretary determines that foreign exchange swaps and 
forwards should not be regulated as ``swaps'' under the CEA, that 
determination would not affect the application of other provisions of 
the CEA that will prevent evasion by market participants and improve 
market transparency. Commenters who oppose an exemption argue that it 
would create a large regulatory loophole that exacerbates systemic 
risk. However, all foreign exchange transactions would remain subject 
to the CFTC's new trade-reporting requirements, enhanced anti-evasion 
authority, and strengthened business-conduct standards. Notably, the 
creation of a global foreign exchange trade repository, plans for which 
are already underway, will dramatically expand reporting to regulators 
and the market more broadly.

II. Background and Statutory Considerations

A. Overview

(i) Foreign Exchange Swaps and Forwards Distinguished From Other Swaps
    Foreign exchange swaps and forwards that would be exempt from the 
CEA's definition of ``swap'' under the determination are narrowly 
defined transactions that are qualitatively different from other 
derivatives. First, foreign exchange swaps and forwards involve the 
actual exchange of the principal amounts of the two currencies 
exchanged and are settled on a physical basis. Unlike many other 
derivative instruments (e.g., interest rate swaps) whose payment 
obligations fluctuate daily in response to changes in the values of 
underlying variables, such as interest rates, the payment obligations 
of foreign exchange swaps and foreign exchange forwards, as defined by 
the CEA, are fixed at the onset of the agreement and involve the actual 
exchange of full principal for settlement.
    Second, in stark contrast to other derivatives, over 98 percent of 
foreign exchange swaps and forwards mature in less than one year, and 
68 percent mature in less than one week. For example, interest rate 
swaps and credit default swaps generally have maturity terms between 
two and thirty years and five to ten years, respectively. Since 
counterparty credit risk increases as the length of a contract 
increases, foreign exchange swaps and forwards carry significantly 
lower counterparty credit risk.
    Third, the use of foreign exchange swaps and forwards is distinct 
from other derivatives. Because of their unique structure and duration, 
as outlined above, foreign exchange swaps and forwards are 
predominantly used as short-term funding instruments similar to 
repurchase agreements and other money market instruments and for

[[Page 25778]]

hedging foreign currency risks. Other derivatives, such as interest 
rate and currency swaps, are used for a broader range of purposes.
    Fourth, foreign exchange swaps and forwards already trade in a 
highly transparent and liquid market. Market participants have access 
to readily available pricing information through multiple sources.\15\ 
Approximately 41and 72 percent of foreign exchange swaps and forwards, 
respectively, already trade across a range of electronic platforms.\16\ 
As a result, mandatory exchange trading requirements under the CEA 
would be unlikely to improve price transparency significantly.
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    \15\ See, e.g., comment by Global FX Division of the Securities 
Industry and Financial Markets Assoc., Assoc. for Financial Markets 
in Europe, and the Asia Securities Industry and Financial Markets 
Assoc. (``Global FX Division''), at 11.
    \16\ BIS, Greenwich Associates, Oliver Wyman analysis.
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    These distinguishing characteristics of foreign exchange swaps and 
forwards result in a risk profile that is largely concentrated on 
settlement risk, rather than counterparty credit risk. Settlement risk 
is effectively addressed in the market for foreign exchange swaps and 
forwards by the extensive use of CLS and other PVP settlement 
arrangements. PVP is a foreign exchange settlement mechanism that 
ensures that a final transfer of one currency occurs only if a final 
transfer of the other currency (or currencies) takes place, thereby 
virtually eliminating settlement risk. CLS is a specialized settlement 
system that operates a multilateral PVP settlement system to reduce 
foreign exchange settlement risk (but not credit risk, which is 
mitigated by other measures). CLS, which began operations in September 
2002, is now the predominant global PVP settlement system. It currently 
provides settlement services for 17 currencies, which represent 94 
percent of the total daily value of currencies traded globally. CLS 
estimates that it settles 58 percent of global foreign exchange 
trading, through 60 settlement member banks and approximately 9,000 
third-party users. According to a September 2010 Foreign Exchange 
Committee (``FXC'') \17\ survey, roughly 75 percent of foreign exchange 
transactions are settled without settlement risk to either party. This 
figure includes trades settled by CLS, settled between affiliates of 
the same corporation, and settled across a single bank's books for its 
clients.
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    \17\ Formed in 1978 under the sponsorship of the Federal Reserve 
Bank of New York, the FXC is an industry group that produces best 
practice recommendations for the foreign exchange industry, 
addressing topics such as management of risk in operations and 
trading.
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(ii) Implications of a Determination to Exempt Foreign Exchange Swaps 
and Forwards From the Term ``Swap'' Under the CEA
    If the Secretary issues a written determination to exempt foreign 
exchange swaps or forwards, or both, from the definition of a ``swap'' 
under the CEA, these transactions, as well as certain parties that 
engage in these transactions, would not be subject to some requirements 
under the CEA, notably the clearing and exchange-trading requirements.
    However, even if the Secretary issues such a determination, foreign 
exchange swaps and forwards and the parties to such transactions would 
still be subject to trade reporting requirements, business conduct 
standards (including the anti-fraud provision) in section 4s(h) of the 
CEA and the rules promulgated thereunder by the CFTC, and anti-evasion 
requirements promulgated by the CFTC. In this regard, section (c) of 
the proposed determination--which reflects the language of section 
1a(47)(E)(iii)-(iv), 1b(c) of the CEA--would provide that, 
notwithstanding this determination, certain requirements under the CEA 
would apply to any foreign exchange swap or foreign exchange forward, 
or to any party engaged in such a transaction, to the extent provided 
by such requirements.
    In addition, Treasury notes that section 1a(47)(F) of the CEA 
contains two other provisions applicable to foreign exchange swaps and 
foreign exchange forwards. First, subparagraph (47)(F)(i) provides that 
``[a]ny foreign exchange swap and any foreign exchange forward that is 
listed and traded on or subject to the rules of a designated contract 
market or a swap execution facility, or that is cleared by a 
derivatives clearing organization, shall not be exempt from any 
provision of [CEA], or the amendments under [Title VII of the Dodd-
Frank Act] prohibiting fraud or manipulation.'' \18\ Second, 
``[n]othing in subparagraph (E) [which authorizes the Secretary to 
issue such a determination] shall affect, or be construed to affect, 
the applicability of [the CEA] or the jurisdiction of the [CFTC] with 
respect to agreements, contracts, or transactions in foreign currency 
pursuant to section 2(c)(2) [of the CEA].'' \19\
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    \18\ 7 U.S.C. 1a(47)(F)(i).
    \19\ 7 U.S.C. 1a(47)(F)(ii) (referring, in turn, to 7 U.S.C. 
2(c)(2)).
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(iii) Summary of Comments in Response to October 2010 Notice
    Commenters who support issuing an exemption generally argue that 
foreign exchange swaps and forwards are functionally different from 
other over-the-counter (``OTC'') derivatives because foreign exchange 
swaps and forwards, as defined by the CEA, involve an actual exchange 
of principal, are predominantly very short in duration and have high 
turnover rates. These commenters note that this market functions 
predominantly as a global payments market and is used significantly by 
end-users for hedging purposes.\20\ Many corporate participants 
expressed concern that the additional costs associated with clearing 
foreign exchange swaps and forwards would adversely impact their 
business activities and discourage hedging activity. These commenters 
also cautioned that imposing mandatory clearing and exchange trading 
requirements on the foreign exchange market would increase systemic 
risk by concentrating risk in one or more clearinghouses. They also 
noted that central clearing could negatively affect U.S. dollar 
liquidity and threaten the role of the dollar as the world's reserve 
currency, citing the potential that such requirements could push 
foreign exchange transactions further offshore and challenge the 
Federal Reserve's ability to conduct monetary policy.
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    \20\ See comment by 3M, Cargill Inc. et al., at 2.
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    Settlement risk, they argue, is the primary risk associated with 
foreign exchange swaps and forwards, and they state that the settlement 
of trades through CLS has largely addressed these concerns.\21\
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    \21\ See, e.g., comment by Global FX Division, at 12-14.
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    Given the short duration of foreign exchange swaps and forwards, 
most commenters emphasized that counterparty credit risk is not as 
significant a risk for these transactions (relative to other derivative 
transactions) and that the use of credit support annexes (``CSAs'') and 
standard ISDA documentation mitigates this risk.
    Moreover, commenters who favor an exemption maintain that foreign 
exchange swaps and forwards generally trade in a heavily liquid, 
efficient, and transparent inter-bank market, where bank regulators 
have substantial visibility and exercise strong regulatory oversight 
over the major market participants, which generally consist of either 
depository institutions or affiliates of depository institutions. A 
number of these commenters also stressed that the Federal Reserve has

[[Page 25779]]

ample authority to craft appropriate regulations governing systemically 
important financial market utilities and payment, clearing, and 
settlement activities under Title VIII of Dodd-Frank Act. These 
commenters also cite the effective functioning of the foreign exchange 
market during the financial crisis of 2008.
    In contrast to these views, commenters who oppose an exemption for 
foreign exchange swaps and forwards are primarily concerned that the 
exemption would create a large regulatory loophole, citing the large 
size of this market, as well as the lack of a fundamental economic 
difference, in their view, between foreign exchange swaps and forwards 
and other derivative products.\22\ In light of the recent financial 
crisis, these commenters argue that such loopholes can play a 
significant role in undermining financial stability by preserving an 
opaque, unregulated and under-capitalized market. Opponents also 
express concerns that an exemption could be used to mask complex 
transactions in an effort to avoid subjecting them to clearing and 
trading requirements.
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    \22\ See, e.g., comment by Council for Institutional Investors, 
at 1-2.
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B. Statutory Factors

    As discussed above, in considering whether to exempt foreign 
exchange swaps and forwards from the definition of the term ``swap,'' 
the Secretary must consider five factors. Treasury is continuing to 
consider each of these statutory factors and invites comment on the 
analysis of each of these factors, as follows.
(i) Systemic Risk, Transparency, Financial Stability
    Treasury has considered several factors to assess whether the 
required trading and clearing of foreign exchange swaps and foreign 
exchange forwards would create systemic risk, lower transparency, or 
threaten the financial stability of the United States. Treasury 
believes that, given the reduced counterparty credit risk profile of 
this market, the challenges of implementing central clearing within 
this market significantly outweigh the marginal benefits that central 
clearing and exchange trading would provide.
    Regulating foreign exchange swaps and forwards under the CEA would 
require insertion of a CCP into an already well-functioning and highly 
interconnected settlement process, which could result in unnecessary 
operational and settlement challenges. Other derivative transactions, 
such as interest rate swaps and credit default swaps, create settlement 
obligations that equal only the change in the market price of the 
notional value of the underlying instrument--not the full principal 
amounts--and, thus, result in much smaller daily payment obligations 
for those markets. While the existing CLS and other PVP settlement 
systems protect against the risk of principal loss in the foreign 
exchange swaps and forwards market, central clearing would further 
protect participants against the economic loss of profit on a 
transaction. However, combining these two functions in a market that 
involves settlement of the full principal amounts of the contracts 
would require massive capital backing in a very large number of 
currencies, representing a much greater commitment for a potential CCP 
than for any other derivatives market.
    To date, no CCP has developed a practical solution to guarantee the 
extraordinarily large volumes of transactions in foreign exchange swaps 
and forwards, including provision of or coordination with the 
settlement services that are essential to the foreign exchange swaps 
and forwards market. Introducing a central clearing facility without 
settlement capabilities would not improve market functioning; instead, 
requiring central clearing would raise unnecessary operational 
challenges by introducing additional steps between trade execution and 
settlement. Given that any risks created through the increased 
complexity would be magnified by the number of currencies involved, 
among other factors, Treasury believes that requiring the use of a CCP 
for clearing foreign exchange swaps and forwards is not warranted, 
particularly because existing settlement arrangements currently 
function well and address the main source of risk, settlement risk.
    In response to the October 2010 Notice, end-users of foreign 
exchange swaps and forwards have expressed significant concern that 
requiring centralized clearing would substantially increase the costs 
of hedging foreign exchange risks. Commenters argue that additional 
costs associated with collateral, margin, and capital requirements 
required by the CCP would potentially reduce their incentives to manage 
foreign exchange risks.\23\ Such additional costs borne by non-
financial end-users could lead to lower cash flows or earnings, which 
would divert financial resources from investment and discourage 
international trade, thereby limiting the growth of U.S. 
businesses.\24\ Several commenters also suggest that requiring 
centralized clearing of foreign exchange swaps and forwards could lead 
non-financial end-users to move production facilities overseas in order 
to establish ``natural hedges'' through the consistent use of local 
currencies and force them to reconsider the use of CLS in light of the 
additional costs associated with central clearing.\25\
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    \23\ See, e.g., comment by National Assoc. of Manufacturers, at 
4.
    \24\ See, e.g., comment by 3M, Cargill Inc. et al., at 6.
    \25\ See, e.g., comment by Coalition for Derivatives End-Users, 
at 16-17.
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    As noted above, the market for foreign exchange transactions is one 
of the most transparent and liquid global trading markets. Pricing is 
readily available through multiple sources and a large portion of 
foreign exchange trades currently are executed through electronic 
trading platforms.\26\
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    \26\ Furthermore, Treasury understands that plans are being made 
for the creation of at least one global foreign exchange trading 
repository pursuant to section 21 of the CEA (7 U.S.C. 24a, as added 
by section 728 of the Dodd-Frank Act), which will dramatically 
expand reporting coverage for swaps, including foreign exchange 
swaps and forwards, regardless of whether the Secretary issues a 
determination that these transactions should not be regulated as 
``swaps'' under the CEA. 75 FR 76,574 (Dec. 8, 2010). (In its 
proposed rule regarding swap data recordkeeping and reporting 
requirements, the CFTC explains that, for the purposes of reporting 
requirements, foreign exchange swaps and forwards would be included 
within the category of ``currency swap.'' Id. at 76,586. The CFTC 
also has proposed rules relating to the registration and regulation 
of swap data repositories that would adopt new part 49 of the CFTC's 
regulations, 17 CFR Part 49. See CFTC, Notice of Proposed 
Rulemaking: Swap Data Repositories, 75 FR 80898 (Dec. 23, 2010)).
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    In light of these and similar factors raised by the commenters, 
Treasury believes that mandating centralized clearing and exchange 
trading under the CEA for foreign exchange swaps and foreign exchange 
forwards actually would introduce significant operational challenges 
and potentially disruptive effects in this market which would outweigh 
any marginal benefits for transparent trading or reducing risk in these 
instruments.
(ii) Regulatory Scheme Comparable to That of the CEA
    Treasury has considered several factors to assess whether foreign 
exchange swaps and foreign exchange forwards are already subject to a 
regulatory scheme that is materially comparable to that established by 
the CEA for other classes of swaps.
    Since the introduction of floating exchange rates in the early 
1970s, central banks and regulators have undertaken strong and 
coordinated oversight measures for the foreign

[[Page 25780]]

exchange market because of the critical role this market plays in the 
conduct of countries' monetary policy. More specifically, in 1996, the 
Bank for International Settlements (``BIS'') launched a globally 
coordinated strategy on behalf of the G10 central banks, calling for 
specific actions by individual banks, industry groups and central banks 
to address and reduce risk in the foreign exchange market. This 
strategy has resulted in specific actions undertaken to address 
settlement risk, mitigate counterparty credit risk and develop global 
supervisory guidelines on managing foreign exchange risk. Largely as a 
result of these measures, many market observers note that the foreign 
exchange market was one of the few parts of the financial market that 
functioned effectively throughout the financial crisis.\27\
---------------------------------------------------------------------------

    \27\ See, e.g., comment by Global FX Division, at 11-12.
---------------------------------------------------------------------------

    One of the key goals of this work was to expand the use of PVP 
settlement systems. Such systems largely eliminate settlement risk, 
which is the predominant risk in a foreign exchange swap or forward. As 
noted, PVP settlement ensures that the final transfer of one currency 
occurs only if a final transfer of the other currency or currencies 
takes place, thereby virtually eliminating settlement risk. In order to 
support such PVP arrangements, central banks undertook significant 
actions by extending operating hours, providing cross-border access to 
central bank accounts and enhancing the legal certainty around such 
settlement arrangements.
    The creation of CLS was the most successful outcome of this work. 
As noted earlier, CLS is the predominant PVP settlement system, 
settling the majority of all global foreign exchange transactions in 17 
currencies, through 60 settlement member banks and approximately 9,000 
third party users.\28\
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    \28\ See, e.g., http://www.cls-group.com.
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    A comparable regulatory scheme applies to the settlement system 
conducted through CLS. While the Federal Reserve is the primary 
regulator for CLS, a CLS Oversight Committee \29\ consisting of 22 
central banks was established to provide coordinated oversight of CLS 
by all central banks whose currencies are settled through its system. 
As a result of this group's efforts, each participating central bank 
now maintains accounts for CLS and has created a window period during 
which real-time gross settlement systems are open to accommodate the 
funding necessary for the settlement of payment instructions. This 
group has also developed a set of risk management tests that CLS must 
apply to each instruction it submits for settlement to mitigate the 
associated credit, market and liquidity risks.
---------------------------------------------------------------------------

    \29\ Federal Reserve Board, ``Protocol for Cooperative Oversight 
Arrangement for CLS,'' Nov. 25, 2008, available at http://www.federalreserve.gov/paymentsystems/cls_protocol.html.
---------------------------------------------------------------------------

    In addition, Treasury notes that the established regulatory scheme 
also actively encourages the use of CSAs and master netting agreements 
to reduce counterparty credit exposures. Similar to changes made to 
enable the use of PVP settlement arrangements, central banks and 
governments worked to strengthen the legal foundations of bilateral and 
multilateral netting. Master netting agreements mitigate credit risk by 
enabling closeout netting in the event of a default or bankruptcy. CSAs 
can also be negotiated as a supplement to master agreements to further 
reduce and mitigate exposures to counterparties by collateralizing 
transactions.
(iii) Adequacy of Supervision
    Treasury also has assessed the extent to which bank regulators 
supervise participants in the foreign exchange market, including by 
imposing capital and margin requirements.
    The predominant participants in the foreign exchange swaps and 
forwards market are banks which have long been subject to prudential 
supervision. In fact, nearly all trading within the foreign exchange 
market involves bank counterparties. Roughly 95 percent of foreign 
exchange trading occurs between banks acting in the capacity of either 
principal or agent. Compared to non-bank entities, banks have distinct 
advantages to provide the liquidity and funding necessary to conduct 
foreign exchange swaps and forwards, which involve the exchange of 
principal, rather than variable cash flows. In conjunction with 
providing the liquidity and funding needs to conduct these 
transactions, banks are uniquely qualified to have access to CLS to 
settle transactions on a real-time basis, and thereby meet the payment 
and short-term funding needs of the end users. Prudential supervisors 
regularly monitor the activities, exposures, internal controls and risk 
management systems of these banks.\30\ In order to meet safety-and-
soundness requirements, banks have implemented monitoring systems, 
limits, internal controls, hedging techniques, and similar risk-
management measures. Counterparty credit risk management is a 
fundamental issue for banking supervisors and is extensively addressed 
in bank supervisory guidelines as well as under the Basel Accords. In 
addition, CLS itself is subject to comprehensive oversight by 22 
central banks whose currencies are settled through its system.
---------------------------------------------------------------------------

    \30\ See, e.g., supervisory and examination standards for 
wholesale payments systems developed by the Federal Financial 
Institutions Examination Council, available at http://ithandbook.ffiec.gov/it-booklets/ wholesale-payment-systems/ 
wholesale-payment-systems-risk-management .aspx.
---------------------------------------------------------------------------

    As an example of the continuing supervisory efforts in this market, 
the Federal Reserve will conduct an assessment of current risk 
management practices, in conjunction with other jurisdictions, in order 
to better inform the development of supervisory guidance covering the 
use of CLS, CSAs, and other systems and controls. Treasury understands 
that this process might ultimately highlight the need for any 
additional supervisory or regulatory action, including potential 
actions under Title VIII of the Dodd-Frank Act. This review will inform 
BCBS and CPSS updates to bank supervisory guidelines on managing 
foreign exchange settlement risk.
    In addition to the supervisory measures discussed above, the OTC 
Derivatives Supervisors Group, which includes market and banking 
regulators from the U.S., France, Germany, Japan, Switzerland and the 
U.K., has been securing commitments from market participants since 2005 
to strengthen market infrastructure, risk management practices, and 
transparency in the OTC derivatives market. This group is currently 
engaged with foreign exchange industry groups and market participants, 
such as the FXC, to secure and monitor new commitments that advance 
risk management in this market.
(iv) Adequacy of Payment and Settlement Systems
    Treasury also has assessed the extent of adequate payment and 
settlement systems for foreign exchange swaps and forwards. With 
respect to this factor, as noted, the G10 strategy successfully 
resulted in the establishment of PVP settlement systems to virtually 
eliminate the settlement risk associated with foreign exchange swaps 
and forwards, with CLS being the primary example of this work. Central 
banks undertook significant actions to support these robust PVP 
settlement arrangements. As a result, roughly 75 percent of notional 
foreign exchange is either settled through CLS or otherwise settled 
without risk, including trades that are settled between affiliates of 
the same corporation or across a single bank's

[[Page 25781]]

books for its clients. In the foreign exchange swaps and forwards 
market in particular, CLS estimates that it settles more than 50 
percent of foreign exchange swap and forward transactions that are 
subject to settlement risk. Furthermore, CLS has announced a multi-year 
strategic objective to expand settlement services to include additional 
currencies, increase volume capacity, and add additional settlement 
times. Treasury understands that the Federal Reserve and the CLS 
Oversight Committee are currently reviewing these plans, as well as 
encouraging the expansion of other PVP settlement services.
(v) Possible Use of Exemption to Evade Requirements
    Treasury has considered several factors to assess whether the use 
of an exemption for foreign exchange swaps and foreign exchange 
forwards could be used to evade otherwise applicable regulatory 
requirements. Treasury believes that the unique characteristics of 
foreign exchange swaps and foreign exchange forwards, as defined by the 
CEA, make it difficult for these products to be structured to replicate 
currency or interest rate swaps to evade regulatory requirements under 
the CEA.
    Unlike other types of swaps, foreign exchange swaps and forwards 
are distinct because, as defined by the CEA, these transactions must 
(1) involve the exchange of the principal amounts of the two currencies 
exchanged, as opposed to an additional set of cash flows based upon 
some floating reference rate (e.g. LIBOR), and (2) be settled on a 
physical basis.\31\
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    \31\ In this regard, Treasury notes that, in other swaps 
transactions, the parties may, by agreement, physically settle their 
obligations.
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    A ``swap'' regulated under the CEA, such as a currency swap, 
interest rate swap, or other derivative, generally involves a periodic 
exchange of a floating amount of cash flows between the counterparties 
based on some notional amount, whereas a foreign exchange swap (which 
would be exempt from the definition of ``swap'' under this 
determination) involves a simple exchange of principal at one point in 
time and a reversal of that exchange at some later date. For example, a 
user of a currency swap could seek funding advantages by obtaining 
financing in a foreign currency and swapping those cash flows back to 
the user's locally denominated currency. This would then entail paying 
or receiving a series of floating interest rate payments (i.e., based 
on prevailing interest rates) over the life of the transaction. This 
ability to receive periodic payments during the term of a transaction 
is a significant feature of ``swaps'' that will be regulated under the 
CEA, which is absent from a foreign exchange swap or foreign exchange 
forward.
    While there is a possibility that foreign exchange swaps could be 
used by some market participants to speculate on the short term path of 
interest rates, Treasury believes that the operational challenges and 
transaction costs associated with transforming these instruments to 
replicate currency or interest rate swaps significantly reduce the 
likelihood that market participants would actually do so in order to 
evade regulatory requirements under the CEA.
    To begin with, the transactions costs associated with replicating 
currency swaps through the use of foreign exchange swaps would likely 
be significant because a market participant would need to regularly 
roll over its foreign exchange swap position as it seeks to replicate a 
currency swap. For example, a participant would need to consider the 
costs associated with the series of separate bid-ask spreads 
accompanying each of the foreign exchange swap transactions, as well as 
the costs of monitoring those positions. Moreover, whether a 
participant would structure foreign exchange swap transactions in order 
to replicate other, non-exempt swaps that are subject to central 
clearing requirements would be highly dependent on the costs associated 
the operational or systems arrangements necessary to execute the 
foreign exchange swap transactions, relative to the costs imposed by 
CCPs to clear the other, non-exempt swap transactions (such as margin 
costs), which could vary among market participants.
    Importantly, a determination to exempt foreign exchange swaps and 
forwards from regulation as ``swaps'' under the CEA would not affect 
the application of other provisions that will prevent evasion by market 
participants and improve market transparency. Opponents of an exemption 
argue that such a determination would create a large regulatory 
loophole that exacerbates systemic risk. However, all foreign exchange 
swaps and forwards would remain subject to the CFTC's new trade-
reporting requirements, enhanced anti-evasion authority, and 
strengthened business-conduct standards for swaps dealers and major 
swap participants.\32\ Notably, the creation of global foreign exchange 
trade repositories, plans for one of which already are underway, will 
dramatically expand reporting to regulators and the market more 
broadly. This additional reporting will also provide regulators with 
information that can be used to detect attempts by market participants 
to use foreign exchange swaps or forwards to replicate other 
derivatives in order to evade regulatory requirements. Lastly, the 
Dodd-Frank Act amends the CEA and other laws to provide other measures 
to enhance oversight of key players in the swaps market, which will 
further reduce the risk that foreign exchange swaps and forwards could 
be used to evade regulatory requirements.
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    \32\ In addition, Treasury notes that section 753 of the Dodd-
Frank Act amends section 6(c) of the CEA to provide, in relevant 
part, that ``it shall be unlawful for any person, directly or 
indirectly, to manipulate or attempt to manipulate the price of any 
swap, or of any commodity in interstate commerce, or for future 
delivery on or subject to the rules of any registered entity.'' 7 
U.S.C. 9, 15.
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III. Procedural Analysis

A. Executive Order 12866 and Executive Order 13563

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires agencies to prepare a regulatory flexibility analysis unless 
the agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. It is hereby 
certified that this determination would not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the fact that entities that engage in foreign exchange swaps 
and forwards, as defined by the CEA and as described in this proposed 
determination, tend to be large entities. Accordingly, a regulatory 
flexibility analysis is not required. Notwithstanding this 
certification,

[[Page 25782]]

Treasury invites comments on the impact on small entities.

IV. Proposed Determination

    For the reasons set forth in sections I and II, which are 
incorporated into and made part of this section IV, the Secretary 
proposes to issue a determination, as follows:
    (a) Authority and purpose. This determination is issued under 
section 1a(47)(E) and 1b of the Act in order to implement the 
provisions of the Act relating to the treatment of foreign exchange 
swaps and foreign exchange forwards as swaps under the Act.
    (b) Findings and exemption--(1) Considerations. The Secretary has 
considered--
    (i) Whether the required trading and clearing of foreign exchange 
swaps and foreign exchange forwards would create systemic risk, lower 
transparency, or threaten the financial stability of the United States, 
and finds that the required trading and clearing of these instruments 
would introduce new challenges and could result in negative 
consequences, without improving transparency;
    (ii) Whether foreign exchange swaps and foreign exchange forwards 
are already subject to a regulatory scheme that is materially 
comparable to that established by this Act for other classes of swaps, 
and finds that the regulatory scheme for foreign exchange swaps and 
foreign exchange forwards applicable in the U.S., as well as the 
regulatory schemes in other jurisdictions, have required specific 
actions that address settlement risk, mitigate counterparty credit 
risk, and manage other risks associated with foreign exchange swaps and 
forwards;
    (iii) The extent to which bank regulators of participants in the 
foreign exchange market provide adequate supervision, including capital 
and margin requirements, and finds that regulators are adequately 
supervising these participants, in part by requiring the implementation 
of risk-management and operational processes, including the use of 
payment-versus-payment settlement arrangements for settling 
transactions and the adoption of credit support annexes with 
counterparties;
    (iv) The extent of adequate payment and settlement systems, and 
finds that these systems are adequate for foreign exchange swaps and 
foreign exchange forwards, particularly because a specialized 
settlement system, which is subject to Federal oversight, has proven 
capabilities to settle the majority of all global foreign exchange 
transactions in multiple currencies; and
    (v) The use of a potential exemption of foreign exchange swaps and 
foreign exchange forwards to evade otherwise applicable regulatory 
requirements, and finds that foreign exchange swaps and foreign 
exchange forwards, as defined under the Act, are distinguished from 
other derivatives, widely used by supervised banks for bona fide 
funding transactions, and not likely to be used to evade otherwise 
applicable regulatory requirements because of operational and 
transactions costs associated with potentially transforming these 
instruments into other derivatives that are subject to regulatory 
requirements under the Act.
    (2) Exemption. Upon consideration of each of the factors set forth 
in section 1b of the Act, the Secretary finds that--
    (i) Foreign exchange swaps and foreign exchange forwards should not 
be regulated as swaps under the Act; and
    (ii) Foreign exchange swaps and foreign exchange forwards are not 
structured to evade the requirements of the Dodd-Frank Act, in 
violation of any rule promulgated by the Commission, pursuant to 
section 721(c) of the Dodd-Frank Act (15 U.S.C. 8321)-- and, 
accordingly, hereby determines that any foreign exchange swap or 
foreign exchange forward hereby is exempt from the definition of the 
term ``swap'' under the Act.
    (c) Scope--As provided in sections 1a(47)(E) and 1b(c) of the Act--
    (1) Reporting. Notwithstanding this determination, all foreign 
exchange swaps and foreign exchange forwards shall be reported to a 
either a swap data repository or, if there is no swap data repository 
that would accept such swaps or forwards, to the Commission, pursuant 
to section 4r of the Act (7 U.S.C. 6r) within such time period as the 
Commission may by rule or regulation prescribe.
    (2) Business standards. Notwithstanding this determination, any 
party to a foreign exchange swap or forward that is a swap dealer or 
major swap participant (as such terms are defined under the Act or 
under section 721(c) of the Dodd-Frank Act (15 U.S.C. 8321)) shall 
conform to the business conduct standards contained in section 4s(h) of 
the Act (7 U.S.C. 6s(h)).
    (3) Effect of determination. This determination shall not exempt 
any foreign exchange swap or foreign exchange forward traded on a 
designated contract market or swap execution facility from any 
applicable antimanipulation provision of the Act.
    (d) Definitions. For the purposes of this determination, the 
following definitions apply:
    (1) Act means the Commodity Exchange Act.
    (2) Commission means the Commodity Futures Trading Commission.
    (3) Dodd-Frank Act means the Dodd-Frank Wall Street Reform and 
Consumer Protection Act.
    (4) Foreign exchange forward shall have the same meaning as in 
section 1a(24) of the Act.
    (5) Foreign exchange swap shall have the same meaning as in section 
1a(25) of the Act.
    (6) Swap shall have the same meaning as in section 1a(47) of the 
Act.

    Dated: April 29, 2011.
Alastair Fitzpayne,
Deputy Chief of Staff and Executive Secretary.
[FR Doc. 2011-10927 Filed 5-4-11; 8:45 am]
BILLING CODE 4810-25-P