Written By: James Bibbings and Nicole Kuchera–Last month Commissioner Bart Chilton of the Commodity Futures Trading Commission (CFTC) confirmed that the CFTC intends to extend the definition of swap to include retail rolling spot forex (FX) transactions (hereinafter, Rolling FX).
A Rolling FX transaction occurs when a net open position in the spot market is not physically delivered but is rather rolled forward until it is offset. The CFTC deems Rolling FX to be a swap due to the speculative nature of the product and the ability to exchange one asset or liability for a similar asset or liability to shift risk. In his announcement, Commissioner Bart Chilton stated that: “Rolling spot transactions are borne out of a desire to offer retail investors the ability to speculate on exchange rates, and what we’ve been telling people is that we interpret the rolling spot transactions with eligible contract participants (ECPs) as swaps, so they should be treated accordingly.”
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