ABA, its ABA Securities Association subsidiary, and other trade groups asked Congress to clarify that non-deliverable forwards should be subject to the same regulation as other foreign exchange forwards.
In a letter to the Senate Agriculture Committee, which oversees commodity trading regulation, the groups explained that an unintentional oversight in the language of the Dodd-Frank Act resulted in NDFs being regulated more heavily than similar forwards.
An NDF is a type of foreign exchange forward contract that is settled in a single currency (usually U.S. dollars) due to difficulties in moving another currency outside the home country of one of the parties. Under Dodd-Frank, the Treasury Department exempted most foreign exchange forwards from regulation as swaps, but not NDFs; the groups said that “this result was unintended by Congress.”
Read the letter.