A more thorough explanation:

Introduction: Title VII is a part of the Dodd-Frank Act that regulates swap markets. It gives the Commodity Futures Trading Commission (CFTC) the power to regulate swaps, except for security-based swaps, which are regulated by the Securities and Exchange Commission (SEC). Title VII also requires certain swaps to be cleared by a clearinghouse and executed on an electronic execution facility. It also imposes registration requirements on dealers and major participants.

Purpose: Title VII aims to increase transparency and promote market integrity in swap and security-based swap transactions. It also lowers the levels of risk inherent to such transactions by ensuring that any risk of loss caused by a defaulting counterparty is absorbed by large, independent institutions. Regulators will be able to make well-informed decisions because they will have increased access to data on swap and security-based swap markets provided by swap and security-based swap data repositories. Increased reporting requirements and the availability of pricing information will also lead to greater price efficiencies in swap markets.

Provisions: Title VII grants the CFTC regulatory authority over swaps, except for security-based swaps, which are regulated by the SEC. It also imposes new registration requirements on “swap dealers,” “security-based swap dealers,” “major swap participants” and “major security-based swap participants.” Title VII creates electronic swap and security-based swap execution facilities, which serve as trading venues for swaps or security-based swaps. If the CFTC or the SEC determines that a swap or a security-based swap should be cleared, it must be cleared by clearinghouses. Title VII also imposes business conduct, capital and margin requirements on dealers and major participants. Dealers and major participants must now submit swap and security-based swap transaction data to regulated and registered swap and security-based swap data repositories.

Example: A company wants to hedge against the risk of a rise in interest rates. It enters into a swap agreement with a bank, where the bank agrees to pay the company a fixed interest rate, and the company agrees to pay the bank a floating interest rate. The swap agreement is subject to Title VII regulations, and the bank must register as a swap dealer. The swap agreement must also be cleared by a clearinghouse and executed on an electronic execution facility. The bank must comply with business conduct, capital and margin requirements, and submit swap transaction data to a regulated and registered swap data repository.