FIA Supports De Minimus Threshold

CFTC - Commodities Futures Trading CommissionIndustry leaders wrote a letter in support of the Commodities Futures Trading Commission’s proposal to keep a swap threshold in place.

The Futures Industry Association (FIA) wrote a letter this week in support of CFTC’s proposal to keep the swap de minimus at $8 billion.

“FIA supports the Commission’s proposal to establish a permanent swap dealer de minimis threshold of $8 billion. FIA believes the data presented in the Proposal would support a higher de minimis threshold than $8 billion.” FIA said in a letter dated August 13. “However, we also recognize that, as stated in the Proposal, ‘maintaining an $8 billion threshold would foster the efficient application of the [Swap Dealer] Definition by providing continuity and addressing the uncertainty associated with the end of the phase-in period.’ We therefore support maintaining the de minimis threshold at $8 billion, and, supported by the data presented in the Proposal, we are opposed to lowering the threshold.”

The de minimus threshold is the minimum in notional value that a firm must maintain before having to register as a swap dealer with the CFTC.

“The CFTC de minimis exception rules provide that market participants who exceed $8 billion in gross notional swap dealing activity over a twelve-month period are required to register with the Commission.” The CFTC said on its site.

The de minimus threshold was scheduled to be reduced to $3 billion at the end of 2019, but in June, the CFTC announced it would maintain the threshold at $8 billion permanently.

The Dodd-Frank Act directed the CFTC to require registration of swap dealers and to establish a de minimis exception to registration.


In further explaining its support, the FIA also noted in the letter: “FIA believes that swaps market participants need certainty regarding the amount of swap dealing activity that will require registration as a swap dealer, and an end to the twice-extended phase-in period. FIA urges the Commission to finalize this aspect of the Proposal as quickly as possible, and well in advance of year’s end, in order to relieve market participants of the need to change compliance policies and procedures, operational systems, and in some instances business plans, based on a $3 billion de minimis threshold.

Christopher Giancarlo
Christopher Giancarlo, CFTC chairman

When Giancarlo announced making the threshold permanent, he issued a statement which read in part: “Today, I believe the staff has had adequate time to analyze the most current and comprehensive trading data and arrive at a recommendation for the best path forward in terms of managing risk to the financial system.  The staff has provided Commissioners with full access to the data they have used in their analysis.  They have also conducted additional and specific data analyses requested by Commissioners.

“The data shows quite clearly that a drop in the de minimis definition from $8 billion to $3 billion would not have an appreciable impact on coverage of the marketplace.  In fact, any impact would be less than one percent – an amount that is truly de minimis.

“On the other hand, the drop in the threshold would pose unnecessary burdens for non-financial companies that engage in relatively small levels of swap dealing to manage business risk for themselves and their customers.  That would likely cause non-financial companies to curtail or terminate risk hedging activities with their customers, limiting risk-management options for end-users and ultimately consolidating marketplace risk in only a few large, Wall Street swap dealers.”