On 5 August 2021, United States (US) Senate Finance Committee Chairman Ron Wyden introduced the Modernization of Derivatives Act (MODA), which would change the tax treatment of financial derivative transactions. Senator Wyden has previously introduced similar bills.BackgroundFinancial derivatives instruments (Derivatives, as defined under MODA) are contracts that have a value based on underlying property or benchmarks. The most common types of Derivatives are options, forwards, futures, and notional principal contracts (NPCs or "swaps").The current tax rules governing Derivatives were developed in a piecemeal fashion over time, in tandem with the development of new financial derivative instruments. This piecemeal development resulted...