This bill changes the process by which exemptions are granted to rules that prevent financial institutions from making transactions with their affiliates.
Such an exemption would only be allowed if the affiliate enters into an exchange to mitigate the risk of the parties who aren’t considered financial entities. This requirement aims to protect shareholders and owners of the affiliate institution.
The requirement that an affiliate enters into a swap would apply if the mitigation of risk — or hedge — can be addressed by entering to a swap with either:
A swap dealer or major swap participant.
A security-based swap with a security-based swap dealer, or a major security-based swap participants.
"a contract that calls for an exchange of cash between two participants, based on an underlying rate or index or the performance of an asset."