An important date is quickly approaching in the timeline leading up to the regulation of swap transactions and swap dealers by the Commodity Futures Trading Commission (the "CFTC") under Title VII of the Dodd-Frank Act. October 12, 2012, is the date on which firms that qualify as swap dealers or major swap participants must register and comply with certain duties, including swap data reporting. However, the swap dealer regulation includes a de minimis threshold, and therefore an entity will not come within the definition of a swap dealer until it, together with its affiliates, engages in swap dealing activity in an aggregate amount of at least $8 billion and at least $25 million with "special entities" (generally, pension plans and governmental agencies). An entity that breaches the de minimis threshold will have two months after the end of the month during which the breach occurs to register as a swap dealer. This is generally interpreted to mean that compliance with many swap-related Title VII requirements will not be required until at least December 31, 2012, although some swap dealers may be expected to voluntarily register early.

For firms that engage in a large volume of foreign exchange swaps and forwards, there is still significant uncertainty surrounding whether these transactions will be counted for purposes of determining whether the de minimis threshold has been exceeded. The Dodd-Frank Act granted the Secretary of the Treasury the authority to exempt foreign exchange forwards and foreign exchange swaps from the definition of a swap, and on May 5, 2011, the Treasury Department issued its proposal to do just that. If the Treasury Secretary finalizes the determination regarding foreign exchange swaps and forwards as proposed, these products will not be considered swaps but will still be subject to certain CFTC regulations including reporting requirements and, for swap dealers party to such transactions, the CFTC's external business conduct standards. However, no action has yet been taken to actually implement the exemption. With the start date of October 12th looming, some firms now face the possibility of having to register and comply with the Title VII requirements in respect of swaps, and then learn that they are in fact exempt after the fact once the exemption is finally issued. It was initially expected that the Treasury Department would make foreign exchange swaps and forwards exempt before the regulations on swaps became effective, but the Wall Street Journal is reporting today that it may take until the end of this year to finalize the exemption, and in any event the Treasury Department is not likely to act prior to the November elections.