On October 13, 2016, the Commodity Futures Trading Commission (CFTC) issued an order postponing until December 31, 2018, the lowering of the swap dealer de minimis threshold to $3 billion. The Dodd-Frank Act provided that, absent action by the CFTC, the swap dealer de minimis threshold — the gross notional amount of swap dealing activity a firm could engage in before the firm is considered a “swap dealer” — would automatically drop from $8 billion to $3 billion on December 31, 2017. Firms would also have been required to start tracking their swap activity on January 1, 2017 to determine their level of swap dealing activity, but the CFTC’s order means that firms do not have to begin tracking their swap activity until January 1, 2018.
The CFTC’s order follows a preliminary and final CFTC staff report on the effect of lowering the de minimis threshold. The analysis in the reports was limited due to a lack of available swap data, and ultimately the reports did not make any recommendations. However, what analysis the reports contained indicated that if the de minimis threshold dropped to $3 billion, over 80 additional entities would be required to register as swap dealers, but only about 1% more notional activity would be captured, raising questions about whether the increase in regulatory burden caused by lowering the threshold would be worth the minimal impact on regulatory coverage.
In explaining the decision to postpone the lowering of the de minimis threshold, the CFTC cited the lack of reliable swap data as well as the fact that it has yet to adopt a final rule on capital requirements for swap dealers, and that the final rule on margin for uncleared swaps for swap dealers is still being implemented.