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Non-Deliverable Forwards

Non-Deliverable Forwards (NDFs) are used by a variety of end-users and are an important tool to facilitate trade and investment between the U.S. and developing market countries.

ABA Position

ABA believes that public policy considerations and legislative history strongly suggest that NDFs were unintentionally excluded from the definition of “forward exchange forward” in the Commodity Exchange Act (CEA), and therefore NDFs were not subject to the U.S. Treasury’s determination to exempt foreign exchange swaps and forwards from certain regulatory requirements. ABA believes this legislative oversight should be corrected in a way that clearly subjects NDFs to the same level of regulation as other foreign exchange forwards. To accomplish this, ABA recommends that, through the legislative process, the CEA’s definition of “foreign exchange forward” be amended to include NDFs or the CFTC issue exemptive relief for NDFs.

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Ananda Radhakrishnan

VP, Center for Bank Derivatives Policy, Center for Securities, Trust & Investments

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