CFTC Swap Dealer De Minimis Exception Threshold Calculation–Possible Alternatives: CFTC Report Analyzes Possible Alternatives for the Swap Dealer De Minimis Exception Threshold Computation, Including the Impact of Excluding On-Venue and Cleared Swaps

Sullivan & Cromwell LLP - July 18, 2019

On July 8, 2019, the Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission issued a report that evaluates alternative metrics for the computation of the swap dealer de minimis exception threshold.  This Report was compiled and issued in response to then-Chairman J. Christopher Giancarlo’s November 2018 request that CFTC staff study alternative ways to calculate the threshold for the swap dealer de minimis exception. While the Report itself does not analyze the policy ramifications of its results, CFTC Commissioner Brian Quintenz issued a statement in conjunction with the Report, in which he draws two conclusions based on the Report’s findings: first, that the removal of on-venue and cleared swaps from the de minimis exception calculation would not result in a reduction of regulatory coverage and second, that notional value is a poor measure of the level of a dealer’s activity and not the appropriate basis for determining the threshold for triggering swap dealer registration.  Given the results of the Report and Commissioner Quintenz’s accompanying remarks, it seems likely that the CFTC may issue additional guidance or a notice of proposed rulemaking regarding the swap dealer de minimis exception threshold in the near future.