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Monday, August 27, 2012

ABA Requests ‘Eligible Contract Participant’ Definition

ABA wrote a letter requesting rulemaking, an interpretive letter, exemptive relief, or other guidance from the CFTC and SEC on the eligible contract participant (ECP) definition in the Commodity Exchange Act (CEA) Section 1a(18).
This definition is a key component of the new regulatory framework for the swaps markets. As a result of the Dodd-Frank Act, only ECPs will be able to enter into over-the-counter (OTC) swaps. While the definition of final swap dealer and security-based swap dealer provided some clarity on the ECP definition, it left some significant issues unaddressed.

[A]bsent clarity on some threshold issues, banks will be unnecessarily discouraged from offering swaps to customers if it is unclear whether those customers will qualify as ECPs. In many cases, this will limit the availability of credit to borrowers looking to finance their business operations.
Read the full letter.

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