The Federal Reserve on April 4 issued a final rule that sets standards for bank and savings and loan holding companies and Federal Reserve member banks that engage in certain types of foreign exchange transactions with retail customers. The rule, issued pursuant to the Dodd-Frank Act, establishes requirements for risk disclosures to customers, recordkeeping, business conduct and documentation for retail foreign exchange transactions. The rule will become effective on May 13, 2013.

Nutter Notes: Institutions regulated by the Federal Reserve that are engaging in retail foreign exchange transactions will be required to notify the Federal Reserve and to be well capitalized. Such institutions will also be required to collect margin for retail foreign exchange transactions. The types of transactions covered by the rule include foreign exchange transactions that are futures or options on futures, over-the-counter options on foreign currency and so-called rolling spot transactions.