Dodd-Frank

In the wake of the 2008 financial crisis the regulators in the U.S. enacted the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Title VII of the Dodd-Frank Act establishes a new regulatory framework for over-the-counter (OTC) derivatives (“swaps” and “security-based swaps”) and encompasses rules in regards to trade execution, clearing and reporting of these. It also defines and regulates new counterparty categories such as Swap Dealers and Major Swap Participants and introduces rigorous record keeping requirements. In Europe, corresponding regulation is currently being implemented though EMIR (clearing and reporting) and later on through MiFID II (trade execution).

The Dodd-Frank Act (Title VII – Wall Street Transparency and Accountability) amends the Commodity Exchange Act (CEA) and the Securities Exchange Act (SEA) by establishing new regulatory frameworks for swaps and security-based swaps. The new regulation encompasses:

  • Registration and comprehensive regulation of Swap Dealers and Major Swap Participants
  • Clearing and trade execution requirements on standardized derivatives products
  • Rigorous recordkeeping and data reporting regimes
  • Enhanced rulemaking and enforcement authorities

The Dodd-Frank Act is overseen by two federal U.S. agencies; the Securities Exchange Commission (the “SEC”) regulates security-based swaps and the Commodity Futures Trading Commission (the “CFTC”) regulates other swaps.

The Dodd-Frank Act stipulates that these rules also should apply to cross-border activities under certain conditions. The CFTC published its final guidance on the definition of the key term “U.S. Person” on July 12, 2013 with effect from October 9, 2013.

Nordea's current status under Dodd-Frank
Nordea is currently not a registered Swap Dealer or Security Based Swap Dealer and is therefore restricted, to the extent that follows from the Dodd-Frank Act, in doing swaps with US Persons. Nordea can however trade FX spot, physically settled FX forwards and FX swaps as these products are exempted under the Dodd-Frank Act. Nordea is not a SEC-registered broker-dealer.

Dodd-Frank supervisors
Dodd-Frank regulation