CFTC Logo, Dodd/Frank

CFTC Sets De Minimus Threshold for SWAPs

Chris Giancarlo, CFTC Chair
Chris Giancarlo, CFTC Chair

The minimum threshold for swap activity required for reporting has been set by the Commodities Futures Trading Commission (CFTC).

The minimum threshold is referred to as the de minimus calculation; the CFTC finalized the rule at the CFTC’s Public Meeting on November 5, 2018.

The rule allows banks and other swap dealers to avoid registering if the amount of their swap deals is below this de minimus threshold.

“Pursuant to the Dodd-Frank Act’s requirement that the CFTC and SEC exempt from swap dealer registration any entity ‘that engages in a de minimis quantity’ of dealing ‘in connection with transactions with or on behalf of customers,’” the American Banker Association said on its site, explaining the rule, “the CFTC and SEC issued joint final rules that do not require an entity to register as a dealer if it does not exceed $8 billion or less of swap dealing activity over a rolling 12-month period.

“In addition, the CFTC provided a $25 million threshold for an entity’s dealing activity with counterparties that are ‘special entities,’ which include certain federal and state agencies, political subdivisions of states, and certain of their agencies, instrumentalities and pension plans.”

The CFTC kept the threshold at $8 billion permanently.

Many of the Commissioners and the Chair sounded happy in their statements, to go along with the announcement.

CFTC Chair Chris Giancarlo stated: “Today’s final rule on the numeric threshold for swap dealer de minimis will provide the market with certainty that the threshold will not fall from $8 billion to $3 billion.  I fully support the proposed final rule.

Brian Quintenz CFTC commissioner
Brian Quintenz CFTC commissioner

“The action before us is without prejudice to all other items in the Commission’s June 2018 NPRM.  That includes various proposed rule amendments and other topics for consideration.  Those proposals and considerations are clearly of wide-ranging interest as evidenced by the public comments received.  They remain under staff consideration pending further Commission action.”

Commissioner Brian Quintenz concurred.

“I support today’s final rule to rescind the de minimis threshold’s scheduled reduction to $3 billion of gross notional swap dealing activity.  Every iteration of data analysis completed by CFTC staff on this issue, from the 2015 Preliminary Report, to the 2016 Final Report, to the updated data and analysis in the 2018 June proposed rule, and to the data presented in this final rule, clearly and unequivocally supported eliminating this ill-conceived reduction.” Quintenz said. “I am pleased that today’s action will remove a large source of negative regulatory uncertainty for market participants in managing their swaps business and serving their customers.”

Commissioner Rohstin Behnam was not as pleased.

“Despite opposing the rule as proposed in June,[1] I am comfortable supporting today’s final rule because it is limited to establishing a clear and certain de minimis threshold.

“My gravest concern with the proposal for the de minimis exception was that the Commission may have been using the rulemaking to redefine swap dealing activity absent meaningful collaboration with the Securities and Exchange Commission (“SEC”), as required by the Dodd-Frank Act,[2] and to the detriment of market participants eager for regulatory certainty.”

Rohstin Behnam, CFTC Commissioner - Threshold for SWAPs
Rohstin Behnam, CFTC Commissioner

Behnam said many of his fears have been allayed: “In as much as I am pleased that the final rule is narrowly focused purely on the numerical setting of the AGNA threshold, I am concerned that the Commission has yet to resolve longstanding concerns with the IDI loan-related swap exclusion referred to in today’s final rule as the “IDI Swap Dealing Exclusion.”  The IDI Swap Dealing Exclusion codifies part of the statutory swap dealer definition in section 1a(49)(A) of the Commodity Exchange Act and was jointly adopted with the SEC as paragraph (5) to the regulatory swap dealer definition.  This is not to be confused with the proposed IDI De Minimis Provision, which would have established an alternative to the exclusion, absent SEC coordination, that would have in effect, revised the scope of activity that constitutes swap dealing.”

There were two other items on the agenda of this public meeting which was naturally open to the public and held at CFTC headquarters in Washington D.C.

  • Proposed Rule: Amendments to Regulations on Swap Execution Facilities and the Trade Execution Requirement
  • Request for Comment regarding the Practice of “Post-Trade Name Give-Up” on Swap Execution Facilities

Here is part of another CFTC press release announces the votes on all items.

“At an open meeting today, the Commodity Futures Trading Commission (Commission) voted unanimously to approve a final rule to amend the De Minimis Exception to the Swap Dealer Definition. The Commission also voted unanimously on a request for comment regarding the Practice of ‘Post-Trade Name Give-Up’ on Swap Execution Facilities.


“With a 4 to 1 vote, the Commission approved the proposed rule to amend to Regulations on Swap Execution Facilities and the Trade Execution Requirement.”