CFTC Chairman Massad today announced that he will recommend a one-year extension of the date on which the swap dealer de minimis threshold will drop from $8 billion to $3 billion. Chairman Massad will recommend the Commission take this action through Commission order. If adopted, the Commission order would permit market participants to calculate their swap dealing activity based on the lower de minimis threshold beginning on January 1, 2018, as opposed to January 1, 2017.
Chairman Massad made the announcement during Keynote Remarks at an OTC derivatives conference in Washington D.C. His prepared remarks also outlined the CFTC’s progress on swaps reform and implementation of margin rules.
The swap dealer de minimis exception addresses the level of swap dealing activity that is considered “de minimis” and therefore does not require an entity to register as a swap dealer with the CFTC. As noted in our previous blog post on the Staff’s Final Report on the de minimis threshold, CFTC rules provide that the current de minimis threshold of $8 billion in aggregate gross notional swaps entered into for “dealing purposes” will fall to $3 billion at the end of 2017, unless the agency takes action to modify it. Because the de minimis calculation is based on the preceding 12-months, this scheduled drop would require entities wishing to avoid swap dealer registration to adjust their swap dealing activity to below the $3 billion threshold beginning in January 2017, unless there is an extension.
Commissioner Giancarlo’s statement on the Staff’s Final Report signaled that there would be a rulemaking on this issue. An order extending the drop in the de minimis threshold, as suggested by Chairman Massad, would provide the Commission with more time to undertake such a rulemaking.