The Dodd-Frank Wall Street Reform and Consumer Protection Act: Changes to the Regulation of Derivatives and their Impact on Agribusiness

The Dodd-Frank Wall Street Reform and Consumer Protection Act makes significant changes to Federal regulation of the U.S. over-the-counter (OTC) derivatives markets. With the goals of improving market transparency and reducing systemic default risk, the act calls for swaps to be centrally cleared and traded on an exchange or execution facility and for dealers and major participants that trade these derivatives to be subject to collateral requirements. Although the act exempts certain types of swaps and traders from these clearing, collateral, and trading venue requirements in order to preserve market efficiency, all swaps will be subject to new recordkeeping and reporting rules. In this article, we review some important features of the new law and discuss their potential impact on agribusiness, much of which will depend on how the rules are written and implemented by regulators.