This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

50309 

Vol. 82, No. 209 

Tuesday, October 31, 2017 

1Public Law 111–203, 124 Stat. 1376 (2010). The 

text of the Dodd-Frank Act can be accessed on the 

Commission’s Web site, at www.cftc.gov. 

2See Dodd-Frank Act, sections 712(d) and 721. 

The definition of ‘‘swap dealer’’ can be found in 

section 1a(49) of the Commodity Exchange Act and 

as further defined in § 1.3(ggg). 7 U.S.C. 1a(49) and 

17 CFR 1.3(ggg). The Commodity Exchange Act is 

at 7 U.S.C. 1, et seq. (2014), and is accessible on 

the Commission’s Web site at www.cftc.gov. 

3 17 CFR 1.3(ggg). 

4See 17 CFR 1.3(ggg)(4). See also Further 

Definition of ‘‘Swap Dealer,’’ ‘‘Security-Based Swap 

Dealer,’’ ‘‘Major Swap Participant,’’ ‘‘Major 

Security-Based Swap Participant’’ and ‘‘Eligible 

Contract Participant’’, 77 FR 30596 (May 23, 2012). 

This Order does not impact the de minimis 

threshold for swaps with ‘‘special entities’’ as 

defined in the Commodity Exchange Act, section 

4s(h)(2)(C). 7 U.S.C. 6s(h)(2)(C). 

5Order Establishing De Minimis Threshold PhaseIn Termination Date, 81 FR 71605, 71607 (Oct. 18, 

2016). 6See 77 FR at 30634, 30640. 7See 17 CFR 1.3(ggg)(4)(ii)(B). 8See 17 CFR 1.3(ggg)(4)(ii)(C). 9Available at http://www.cftc.gov/idc/groups/ 

public/@swaps/documents/file/dfreport_

sddeminis_1115.pdf. 

10Available at http://www.cftc.gov/idc/groups/ 

public/@swaps/documents/file/dfreport_

sddeminis081516.pdf. 

11Final Report at 26. 

12 81 FR 71605; 17 CFR 1.3(ggg)(4)(ii)(C)(1). 

13 81 FR at 71607. 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

Order Establishing a New De Minimis 

Threshold Phase-In Termination Date 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Order. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is issuing an order (‘‘Order’’), 

pursuant to the Commission regulation 

establishing the de minimis exception to 

the swap dealer definition, to establish 

December 31, 2019 as the new de 

minimis threshold phase-in termination 

date. 

DATES: Issued by the Commission on 

October 26, 2017. 

FOR FURTHER INFORMATION CONTACT: 

Matthew Kulkin, Director, 202–418– 

5213, mkulkin@cftc.gov; Erik Remmler, 

Deputy Director, 202–418–7630, 

eremmler@cftc.gov; or Rajal Patel, 

Associate Director, 202–418–5261, 

rpatel@cftc.gov, Division of Swap Dealer 

and Intermediary Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘DoddFrank Act’’) 1 directed the CFTC and the 

U.S. Securities and Exchange 

Commission to jointly further define the 

term ‘‘swap dealer’’ and to include 

therein a de minimis exception.2 The 

CFTC’s further definition of swap dealer 

is provided in § 1.3(ggg).3 The de 

minimis exception therein provides that 

a person shall not be deemed to be a 

swap dealer unless its swap dealing 

activity exceeds an aggregate gross 

notional amount threshold of $3 billion 

(measured over the prior 12-month 

period), subject to a phase-in period 

during which the gross notional amount 

threshold is set at $8 billion.4 Absent 

further action by the Commission, the 

phase-in period is scheduled to 

terminate on December 31, 2018, at 

which time the de minimis threshold 

would decrease to $3 billion.5

When § 1.3(ggg) was adopted, 

establishing the $3 billion de minimis 

exception, the Commission explained 

that there was little swap dealing data 

available that could be used to guide it 

in setting a threshold level. The 

Commission expected that the 

implementation of swap data reporting 

may enable reassessment of the de 

minimis exception.6 Accordingly, in 

§ 1.3(ggg), the Commission directed 

CFTC staff to issue a report, after a 

specified period of time, on topics 

relating to the de minimis exception ‘‘as 

appropriate, based on the availability of 

data and information.’’ 7 Section 1.3(ggg) 

further provides that after giving due 

consideration to the report and any 

associated public comment, the 

Commission may by order establish a 

termination date for the phase-in period 

or propose through rulemaking 

modifications to the de minimis 

exception.8

Staff issued for public comment the 

Swap Dealer De Minimis Exception 

Preliminary Report on November 18, 

2015 (‘‘Preliminary Report’’).9 After 

consideration of the public comments 

received, and further data analysis, staff 

issued the Swap Dealer De Minimis 

Exception Final Staff Report 10 on 

August 15, 2016 (‘‘Final Report,’’ and 

together with the Preliminary Report, 

the ‘‘Staff Reports’’). The Staff Reports 

analyzed the available swap data in 

conjunction with relevant policy 

considerations to assess alternative de 

minimis threshold levels and other 

potential changes to the de minimis 

exception. The Staff Reports noted that 

the swap market data available, while 

much improved since § 1.3(ggg) was 

first adopted, was still somewhat 

limited in providing detailed 

information for assessing appropriate 

changes to the de minimis exception. 

For example, notional amounts could 

only be analyzed for the interest rate 

and credit default swap asset classes 

because, at the time, sufficient reliable 

notional data was not available for the 

other asset classes. As a further 

example, some of the data analyzed for 

the Staff Reports had significant quality 

issues. One of the ‘‘key issues’’ 

identified in the Final Report for 

Commission consideration was whether 

to delay reduction of the de minimis 

threshold to allow efforts to improve 

data quality to progress so that the 

Commission could better determine the 

appropriate de minimis threshold.11

In October 2016, the Commission 

issued an order, pursuant to 

§ 1.3(ggg)(4)(ii)(C)(1), establishing 

December 31, 2018 as the de minimis 

threshold phase-in termination date, 

thereby extending the original phase-in 

period by one year (‘‘October 2016 

Order’’).12 In the order, the Commission 

stated that the phase-in period 

extension provides additional time for 

further information to become available 

to more effectively reassess the de 

minimis exception.13 Given the twelve 

month lookback for calculating the swap 

dealing notional amount, a firm may 

need to start tracking its swap dealing 

activity on January 1, 2018 to determine 

whether its dealing activity would 

require it to register when the phase-in 

period ends on December 31, 2018. 


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50310 Federal Register / Vol. 82, No. 209 / Tuesday, October 31, 2017 / Rules and Regulations 

14The Commission also notes that the continuing 

efforts by the Division of Market Oversight to 

improve data quality have improved data analysis 

capabilities. 

15See Brian Quintenz Sworn In as a 

Commissioner of the U.S. Commodity Futures 

Trading Commission (Aug. 15, 2017), http://

www.cftc.gov/PressRoom/PressReleases/pr7602-17; 

Rostin Behnam Sworn In as a Commissioner of the 

CFTC (Sep. 6, 2017), http://www.cftc.gov/ 

PressRoom/PressReleases/pr7610-17. Additionally, 

there are currently two additional Commission 

vacancies that may be filled soon. 

16 44 U.S.C. 3501 et seq. 

17 7 U.S.C. 19(a). 

18 17 CFR 1.3(ggg)(4)(i). See generally 77 FR at 

30626–35. See also note 4, supra. 

19See 81 FR 71605. 

20See 77 FR at 30702–14 (discussing the costbenefit considerations with regard to the final swap 

dealer definition); 81 FR at 71607. 

21 77 FR at 30628–30, 30707–08. 

22 Id. at 30628–30, 30703, 30707–08. 

II. New Phase-In Termination Date 

As contemplated by the October 2016 

Order, significant strides are being made 

in updating, improving, and reassessing 

the available swap data regarding the 

swap marketplace in a more granular 

manner. Though this data analysis is 

ongoing, the Commission believes that it 

will in the near future have more 

detailed data analysis to inform its 

consideration of possible modifications 

to the de minimis exception.14 However, 

any such modifications, if implemented, 

would not become effective until some 

point in 2018, when the Commission 

completes the proposal, public 

comment, and final rule amendment 

process pursuant to the Administrative 

Procedure Act. 

This timing creates some uncertainty 

for currently unregistered swap dealers 

that may be subject to registration if the 

$3 billion de minimis threshold goes 

into effect on December 31, 2018. Such 

entities will not know what de minimis 

exception changes, if any, may become 

effective. Given this uncertainty, firms 

that might be subject to registration if 

the de minimis threshold decreases to 

$3 billion would need to start managing, 

and perhaps altering, their swap dealing 

activity starting in January 2018 to 

remain below the $3 billion threshold 

by December 31, 2018. Further, some 

firms might begin analyzing and 

adjusting their dealing activities prior to 

January 2018 if they do not want to be 

subject to registration. Such changes in 

behavior could lead to reduced 

competition, liquidity, and efficiency in 

the swap market, which may cause 

disruptions for the firms and their swap 

counterparties that might be 

unnecessary depending on the outcome 

of the continuing assessment of the de 

minimis exception. 

Additionally, the Commission notes 

that a year’s delay would provide 

additional time for the new 

Commissioners 15 and the new Director 

of the Division of Swap Dealer and 

Intermediary Oversight, all of whom 

only joined the Commission in the last 

two months, to better familiarize 

themselves with the issues relevant to 

the de minimis exception and results of 

the swap data analysis currently 

underway. 

Accordingly, the Commission believes 

that it is prudent to extend the phasein period by one year. This extension 

will provide additional time for 

Commission staff to conduct data 

analysis regarding the de minimis 

exception, give market participants 

further clarity regarding when they will 

need to begin preparing for a change, if 

any, to the de minimis exception, and 

provide additional time for new 

Commissioners and staff to become 

better apprised of issues relevant to this 

topic. 

III. Conclusion and Order 

For the reasons discussed above, and 

pursuant to its authority under 

§ 1.3(ggg)(4)(ii)(C)(1), the Commission is 

establishing December 31, 2019 as the 

new termination date for the de minimis 

threshold phase-in period. The 

Commission notes that prior to the 

termination of the phase-in period, the 

Commission plans to take further action 

regarding the de minimis threshold. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 16 imposes certain 

requirements on Federal agencies in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. This 

Order does not impose any new 

recordkeeping or information collection 

requirements, or other collections of 

information that require approval of the 

Office of Management and Budget under 

the PRA. 

B. Cost-Benefit Considerations 

Section 15(a) of the Commodity 

Exchange Act (‘‘CEA’’) requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders.17 Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (i) Protection of market 

participants and the public; (ii) 

efficiency, competitiveness, and 

financial integrity of futures markets; 

(iii) price discovery; (iv) sound risk 

management practices; and (v) other 

public interest considerations. In this 

section, the Commission considers the 

costs and benefits resulting from its 

determinations with respect to the 

Section 15(a) factors. 

1. Background 

As discussed above, § 1.3(ggg)(4)(i) 

provides an exception from the swap 

dealer definition for persons who 

engage in a de minimis amount of swap 

dealing activity. Currently, under 

§ 1.3(ggg)(4)(i), a person shall not be 

deemed to be a swap dealer unless its 

swap dealing activity exceeds an 

aggregate gross notional amount 

threshold of $3 billion (measured over 

the prior 12-month period), subject to a 

phase-in period during which the gross 

notional amount threshold is set at $8 

billion.18 The phase-in period would 

have terminated on December 31, 2018, 

and the de minimis threshold would 

have decreased to $3 billion, absent this 

Order.19 This would have required firms 

to start tracking their swap activity 

beginning January 1, 2018 to determine 

whether their dealing activity over the 

course of that year would require them 

to register as swap dealers. 

The $3 billion threshold, which, 

absent this Order, would be effective on 

December 31, 2018, sets the baseline for 

the Commission’s consideration of the 

costs and benefits of this Order.20

Accordingly, the Commission considers 

the costs and benefits that will result 

from extending the phase-in period. 

2. General Cost and Benefit 

Considerations 

There are several policy objectives 

underlying swap dealer regulation and 

the de minimis exception to the swap 

dealer definition. The primary policy 

objectives of swap dealer regulation 

include the reduction of systemic risk, 

increased counterparty protections, and 

market efficiency, orderliness, and 

transparency.21 Registered swap dealers 

are subject to a broad range of 

requirements, including, inter alia, 

registration, internal and external 

business conduct standards, reporting, 

recordkeeping, risk management, 

posting and collecting margin, and chief 

compliance officer designation and 

responsibilities. As noted in the 

§ 1.3(ggg) adopting release, generally, 

the lower the de minimis threshold, the 

greater the number of entities that are 

subject to these requirements, which 

could decrease systemic risk, increase 

counterparty protections, and promote 

swap market efficiency, orderliness, and 

transparency.22


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23 Id. at 30628–30, 30707–08. 

24Alternatively, the Commission notes that a 

lower de minimis threshold may lead to potential 

changes in market behavior, including, for example, 

product innovation. 

The Commission also considers 

policy objectives furthered by a de 

minimis exception, which include 

regulatory certainty, allowing limited 

ancillary dealing, encouraging new 

participants to enter the swap dealing 

market, and regulatory efficiency.23

Generally, the higher the de minimis 

threshold, the greater the number of 

entities that are able to engage in 

dealing activity without being required 

to register, which could increase 

competition and liquidity in the swap 

market.24 In addition, because 

competitive markets may be more 

efficient, a higher de minimis threshold 

might improve swap market efficiency. 

Further, the Commission notes that it 

has been suggested that a higher 

threshold could allow the Commission 

to expend its resources on entities with 

larger swap dealing activities warranting 

more oversight. An alternative view is 

that the de minimis threshold should be 

set based on policy independent of 

consideration of the Commission’s 

resources. 

Extending the phase-in period by one 

year will delay realization of the policy 

benefits associated with the $3 billion 

de minimis threshold, but will also 

extend the policy benefits associated 

with a higher de minimis threshold. The 

additional time to adjust to the $3 

billion de minimis threshold also would 

potentially increase regulatory certainty 

for some market participants. Given that 

the de minimis exception is subject to 

a 12-month look-back, extending the 

phase-in period to December 31, 2019 

would allow entities that would 

potentially have to register as swap 

dealers additional time to adjust their 

activities and prepare for the 

compliance obligations related to swap 

dealer registration. 

3. Section 15(a) 

Section 15(a) of the CEA requires the 

Commission to consider the effects of its 

actions in light of the following five 

factors. This Order will delay the 

potential costs and benefits discussed 

below by one year. 

(i) Protection of Market Participants and 

the Public 

Providing regulatory protections for 

swap counterparties who may be less 

experienced or knowledgeable about the 

swap products offered by swap dealers 

(particularly end-users who use swaps 

for hedging or investment purposes) is 

a fundamental policy goal advanced by 

the regulation of swap dealers. The 

Commission recognizes that the $3 

billion de minimis threshold may result 

in more entities being required to 

register as swap dealers compared to an 

$8 billion threshold, thereby extending 

counterparty protections to a greater 

number of market participants. Further, 

swap dealer regulation is intended to 

reduce systemic risk in the swap market 

because registered swap dealers are 

subject to a broad range of requirements, 

including, inter alia, requirements 

applicable to internal and external 

business conduct standards, reporting 

and recordkeeping, risk management, 

posting and collecting margin, and chief 

compliance officer designation and 

responsibilities. Pursuant to the DoddFrank Act, the Commission has 

proposed or adopted regulations for 

swap dealers—including margin and 

risk management requirements— 

designed to mitigate the potential 

systemic risk inherent in the swap 

market. Therefore, the Commission 

recognizes that a lower de minimis 

threshold may result in more entities 

being required to register as swap 

dealers, thereby potentially further 

reducing systemic risk. 

(ii) Efficiency, Competitiveness, and 

Financial Integrity of Markets 

Other goals of swap dealer regulation 

are swap market transparency, 

orderliness, and efficiency. These 

benefits are achieved through 

regulations requiring, for example, swap 

dealers to keep trading records and 

report trades, provide counterparty 

disclosures about swap risks and 

pricing, and undertake portfolio 

reconciliation and compression 

exercises. Accordingly, the Commission 

notes that a lower de minimis threshold 

may have a positive effect on the 

efficiency and integrity of the markets. 

However, the Commission also 

recognizes that the efficiency and 

competitiveness of the swap market may 

be negatively impacted if the de 

minimis threshold is set too low by 

potentially increasing barriers to entry 

that may stifle competition and reduce 

swap market efficiency. For example, if 

entities choose to reduce or cease their 

swap dealing activities so that they 

would not need to register if the de 

minimis threshold decreases to $3 

billion, the number or availability of 

market makers for swaps may be 

reduced, which could lead to increased 

costs for potential counterparties and 

end-users through having to pay higher 

spreads when undertaking swap 

transactions or foregoing the benefits of 

engaging in certain swap transactions 

that they would otherwise have 

undertaken. 

(iii) Price Discovery 

The Commission preliminarily 

believes that a $3 billion de minimis 

threshold may discourage participation 

of new swap dealers and ancillary 

dealing. If there are fewer entities 

engaged in dealing, there may be a 

negative effect on price discovery. 

(iv) Sound Risk Management 

The Commission notes that a $3 

billion de minimis threshold could lead 

to better risk management practices 

because a greater number of entities 

would be required by regulation to: (i) 

Develop and implement detailed risk 

management programs; (ii) adhere to 

business conduct standards that reduce 

operational and other risks; and (iii) 

satisfy margin requirements for 

uncleared swaps. 

(v) Other Public Interest Considerations 

The Commission has not identified 

any other public purpose considerations 

for this Order. 

C. Antitrust Considerations 

Section 15(b) of the CEA requires the 

Commission to take into consideration 

the public interest to be protected by the 

antitrust laws and endeavor to take the 

least anticompetitive means of 

achieving the objectives of the CEA, in 

issuing any order or adopting any 

Commission rule or regulation. The 

Commission does not anticipate that the 

Order discussed herein will result in 

anti-competitive behavior. 

V. Order 

In light of the foregoing, it is ordered, 

pursuant to the Commission’s authority 

under § 1.3(ggg)(4)(ii)(C)(1), that the de 

minimis threshold phase-in termination 

date shall be December 31, 2019. 

The Commission retains the authority 

to condition further, modify, suspend, 

terminate, or otherwise restrict any of 

the terms of the Order provided herein, 

in its discretion. 

Issued in Washington, DC, on October 26, 

2017, by the Commission. 

Christopher J. Kirkpatrick, 

Secretary of the Commission. 

Appendix to Order Establishing a New 

De Minimis Threshold Phase-In 

Termination Date—Commission Voting 

Summary 

On this matter, Chairman Giancarlo and 

Commissioner Quintenz voted in the 

affirmative. Commissioner Behnam voted in 

the negative. 

[FR Doc. 2017–23660 Filed 10–30–17; 8:45 am] 

BILLING CODE 6351–01–P 


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