Key takeaways

• The CFTC and the SEC have jointly issued a proposed interpretation clarifying the CFTC's existing interpretation concerning forward contracts with embedded volumetric optionality set forth in the agencies' rules defining the terms "swap" and "security-based swap".
• The proposed interpretation clarifies the conditions set forth in the existing interpretation for treating a transaction as an excluded forward notwithstanding that it contains embedded volumetric optionality.
• The first six conditions are unchanged from the existing interpretation, other than minor modifications to the fourth and fifth conditions to clarify that the CFTC’s interpretation applies to embedded volumetric optionality in the form of both puts and calls.
• The proposed interpretation modifies in several respects the seventh condition by clarifying certain terms as suggested by market participants.