The Dodd-Frank Act requires "swap dealers" to register with the Commodity Futures Trading Commission (CFTC) and to comply with a number of detailed and onerous regulations. The swap dealer registration regime is at the heart of the derivatives reforms brought about under Dodd-Frank. While every party entering into "swaps" transactions will have certain obligations under the CFTC's new regulatory regime, swap dealers bear the heaviest compliance burden.

Each swap dealer must invest substantial resources and time to put in place policies that comply with the maze of intricate new rules. For example, most swap reporting—which involves tracking and reporting on hundreds of data fields for every swap—must be handled by the swap dealer counterparty, and swap dealers must comply with complex rules governing the means by which they conduct swaps business and the disclosures they provide to their counterparties.

Given the central role that swap dealers play in this new regulatory regime, the definition of "swap dealer" is among the most important definitions under Dodd-Frank. Unfortunately, it is not always clear-cut. The CFTC does allow market participants to engage in a limited amount of swap dealing without registering as a swap dealer. However, some of the terminology in the definition is subject to interpretation, and the CFTC staff is currently considering changes in how it determines which entities are swap dealers.

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