CFTC Issues Preliminary Report on ‘De Minimis’ Swap Dealer Threshold

The Commodity Futures Trading Commission today released a preliminary report on the “de minimis” exception for swap dealers to register with the CFTC. The current rule requires a bank to register with CFTC as a swap dealer if it deals in more than $8 billion in notional swaps per year. This level is set to drop to $3 billion in December 2017 unless the CFTC takes further action.

Although the staff report published today does not make recommendations on the appropriate de minimis level, it stated that its analysis of the data for the review period found “a wide range in the size of banks that routinely engaged in [interest rate swaps] and [credit default swaps] activity.” The report found that the majority of interest rate swap and credit default swap activity within the banking sector, as measured by notional amount, appears to be concentrated in larger bank enterprises.

CFTC Commissioner Christopher Giancarlo released a statement taking issue with the “arbitrary” de minimis threshold. “There is no policy basis whatsoever for the current threshold of $8 billion and no policy basis for lowering it to $3 billion,” he said. “The report provides no reason to believe that the threshold has anything to do with optimizing the safety, soundness, liquidity or vibrancy of U.S. swaps markets.”

Comments on the report are due by Jan. 19. For more information, or to join a working group that will inform ABA’s response, contact Jason Shafer.