Financial derivatives are complex products of financial engineering. The interest rate swap is a very good example of widely used and very intricate two-way payments financial derivative. Interest rate swaps as other financial innovations posed a number of issues for legal systems and regulations. Among other problems there are problems of substance over form approach, the problem of classification for regulatory purposes, the issues of the replication of traditional financial instruments’ economics. The Application of regulations to interest rate swaps and other financial derivatives require the nature and context understanding of the transactions. It seems that separate transaction method is a prevailing approach to financial innovations. It implies that derivatives should be treated separately from underlying assets and obligations and should not be bifurcated to their economic components as well. Legal differences are not less important than economic similarities. The example of interest rate swap shows the opportunity for recharacterisation of transaction in cross-border situations for general civil law purposes (gambling, insurance), for regulatory and tax purposes.