On July 26, 2013, the US Commodity Futures Trading Commission (“CFTC”) published interpretive guidance (the “Guidance”) in the Federal Register regarding the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Act. In brief, the Guidance: (1) defines “US person” and “non-US person,” which are key for applying the CFTC’s extraterritorial framework; (2) establishes the calculation and aggregation methodologies used for determining whether non-US persons engage in swap transactions at levels that trigger swap dealer or major swap participant registration; (3) categorizes “Entity-Level Requirements” and “Transaction-Level Requirements” and describes their extraterritorial application; (4) discusses the CFTC’s “substituted compliance” framework; and (5) describes the requirements applicable to nonregistered swap participants. Many will regard the Guidance as retreating from the positions taken by the CFTC in its interim exemptive orders, e.g., its approach to aggregation of US and non-US affiliates and its definition of US person. The process for substituted compliance has not been clarified, although its timing has been delayed. Whether the CFTC will make further changes in the Guidance is uncertain, but for now all market participants must prepare to comply with the Guidance.
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