Community and regional banks welcome de minimis clarity

Author: John Crabb | Published: 7 Jun 2018

The Commodity Futures Trading Commission’s (CFTC) new proposal to amend the de minimis exception in the swap dealer definition of its regulations, has brought welcome clarity for the industry.

The regulator keeps the aggregate gross notional threshold at $8 billion, a move anticipated by the industry, despite the commission’s original intention to eventually sunset the number to $3 billion.

When the CFTC first adopted these rules in 2012, it wrote the sunset caveat into the regulation that would automatically drop the threshold to $3 billion at the end of 2017. They gave one year of reprieve, and recently extended that until 2019.

Gabriel Rosenberg, partner at Davis Polk, said the decrease to $3 billion would capture very little in the way of derivatives activity. However, it would take a number of regional banks and institutions that are not in the swaps dealing business, but for one reason or...