Under Title VII of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank), dealers who execute a notional amount of swaps that exceeds a de minimis threshold must register with the Commodity Futures Trading Commission. That threshold is currently $8 billion as a phase-in matter, but in accordance with CFTC Regulation 1.3(ggg)(4)(ii)(A), it is scheduled to drop from $8 billion to $3 billion on December 31, 2017 unless the CFTC acts to change that outcome. The CFTC has published two reports discussing issues relating to reduction of the de minimis threshold, but neither report contains a specific recommendation as to what the de minimis amount should be.
In a speech delivered on September 15, CFTC Chairman Timothy Massad signaled that the CFTC needs more time to consider the issues raised in the reports, stating, “The de minimis threshold was set in 2012 by the CFTC and the SEC jointly. At that time, the agencies had limited data on the market. They set the threshold at $3 billion in notional amount of swap dealing activity over the course of a year, but with a phase-in period, during which the threshold is $8 billion. Unless the Commission takes action, at the end of 2017 the threshold will automatically drop from $8 billion to $3 billion. This means that firms must start tracking their activity as of January 1, 2017 to determine whether they must register.
Today, I am announcing that I will recommend to my fellow commissioners a one-year extension of the date on which the swap dealer de minimis threshold is scheduled to drop. This will be proposed through a Commission order. Adopting this order will give us more time to consider this critical issue. Given its importance, a delay is the sensible and responsible thing to do—and doing it now will provide much-needed certainty to market participants.”
The text of Massad’s speech is available here.