The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) recently adopted final rules defining the types of entities that will be required to register as swap dealers, security-based swap dealers, major swap participants (MSPs) and major security-based swap participants (MSSPs) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. These entities will be required to register with the CFTC or the SEC and adhere to a wide variety of new requirements with respect to their derivatives trading, including capital, margin, reporting and business conduct requirements. The CFTC and the SEC defined “swap dealer” and “security-based swap dealer” narrowly, thereby including for the most part only traditional dealers in the over-the-counter derivatives market and excluding most hedge funds and other buy-side participants who are not undertaking traditional dealing activities. The final rules also set a high bar for the MSP and MSSP categories, excluding most hedge funds and hedge fund advisers from the requirement to register as an MSP or an MSSP. The CFTC also adopted a revised definition of “eligible contract participant” (ECP). The final rule exempts most hedge funds from the requirement that each investor in the fund be an ECP in order for the fund to be able to enter into off-exchange foreign currency transactions without satisfying certain requirements under the CFTC’s retail foreign exchange rules. In a guest article, Leigh Fraser and Molly Moore, Partner and Associate, respectively, in the Hedge Funds group of Ropes & Gray LLP, provide a detailed analysis of the final rules and their application to hedge funds and hedge fund managers.