Federal Register, Volume 81 Issue 201 (Tuesday, October 18, 2016)

[Federal Register Volume 81, Number 201 (Tuesday, October 18, 2016)]

[Rules and Regulations]

[Pages 71605-71610]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 2016-25143]




17 CFR Part 1

Order Establishing De Minimis Threshold Phase-In Termination Date

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.


[[Page 71606]]

SUMMARY: With respect to the de minimis exception to the swap dealer

definition, the Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is issuing an order (``Order''), pursuant to the applicable

Commission regulation, to establish December 31, 2018 as the de minimis

threshold phase-in termination date.

DATES: Issued October 13, 2016.

FOR FURTHER INFORMATION CONTACT: Eileen T. Flaherty, Director, 202-418-

5326, [email protected]; Erik Remmler, Deputy Director, 202-418-7630,

[email protected]; Lauren Bennett, Special Counsel, 202-418-5290,

[email protected]; Margo Dey, Special Counsel, 202-418-5276,

[email protected]; or Rajal Patel, Special Counsel, 202-418-5261,

[email protected], Division of Swap Dealer and Intermediary Oversight,

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

Street NW., Washington, DC 20581.


I. Background

A. Statutory and Regulatory Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act

(``Dodd-Frank Act'') \1\ directed the CFTC and the U.S. Securities and

Exchange Commission (``SEC'' and together with the CFTC,

``Commissions'') 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 Regulation 1.3(ggg). 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.\3\ Absent further

action by the Commission, the phase-in period would terminate on

December 31, 2017, at which time the de minimis threshold would

decrease to $3 billion.\4\ This would require firms to start tracking

their swap activity beginning January 1, 2017 to determine whether

their dealing activity over the course of that year would require them

to register as swap dealers.


\1\ Public Law 111-203, 124 Stat. 1376 (2010). The text of the

Dodd-Frank Act can be accessed on the Commission's Web site, at


\2\ See 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 Regulation 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\ See 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).

\4\ See 17 CFR 1.3(ggg)(4)(ii)(D).


When the $3 billion de minimis exception was established, the

Commissions explained that the information then available regarding

certain portions of the swap market was limited in certain respects,

and that they expected that the implementation of swap data reporting

may enable reassessment of the de minimis exception.\5\ Accordingly,

the Commission adopted Regulation 1.3(ggg)(4), which 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.'' \6\ Regulation 1.3(ggg)(4)

further provides that after giving due consideration to the report and

any associated public comment, the Commission may issue an order to

establish a termination date for the phase-in period or propose through

rulemaking modifications to the de minimis exception.


\5\ See 77 FR at 30634, 30640.

\6\ SEC Regulation 240.3a71-2A similarly directs SEC staff to

prepare a report on the security-based swap dealer de minimis

exception. 17 CFR 240.3a71-2A.


B. Staff Reports

Staff issued for public comment a preliminary report concerning the

de minimis exception on November 18, 2015 (``Preliminary Report'').\7\

After consideration of the public comments received, and further data

analysis, staff issued the Swap Dealer De Minimis Exception Final Staff

Report \8\ on August 15, 2016 (``Final Report,'' and together with the

Preliminary Report, ``Staff Reports''). The Staff Reports analyzed the

available swap data \9\ in conjunction with relevant policy

considerations to assess alternative de minimis threshold levels and

other potential changes to the de minimis exception.


\7\ Swap Dealer De Minimis Exception Preliminary Report (Nov.

18, 2015), available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.

\8\ Swap Dealer De Minimis Exception Final Staff Report (August

15, 2016), available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis081516.pdf.

\9\ The data analysis broke down the data into the following

asset classes: Interest rate swaps (``IRS''); credit default swaps

(``CDS''); non-financial commodity (``Non-Financial Commodity'')

swaps; equity (``Equity'') swaps; and foreign exchange derivatives

(``FX Derivatives'').


C. Swap Data Analysis

As discussed in the Staff Reports, the lack of certain metrics

needed for evaluating different de minimis thresholds, as well as data

validity issues, limited the analysis of the potential impact of

changes to the current de minimis exception.\10\ The Final Report

further noted that, notwithstanding these data issues, the quality of

the swap data that is reported to the Commission appears to be

continually improving, and that the Commission is taking additional

steps to enhance swap data quality.\11\


\10\ See Preliminary Report at 12-21; Final Report at 4-6, 19-

20. For example, the data reported does not indicate whether either

counterparty to a swap is acting as a dealer, and there are

difficulties in calculating the notional amounts for certain types

of swaps in a uniform manner useful for data analysis.

\11\ See Final Report at 18-19. For example, in June 2016, the

Commission finalized amendments related to the reporting of cleared

swaps. See Amendments to Swap Data Recordkeeping and Reporting

Requirements for Cleared Swaps, 81 FR 41736 (June 27, 2016).


The data analysis in the Staff Reports provided some insights into

the effectiveness of the de minimis exception as currently implemented.

Staff analyzed the number of swap transactions involving at least one

registered swap dealer, which is indicative of the extent to which

swaps are subject to swap dealer regulation at the current $8 billion

threshold. Data reviewed for the Final Report indicated that

approximately 96% of all reported swap transactions involved at least

one registered swap dealer. When considering individual swap asset

classes, approximately 98% or more of swaps in each asset class, other

than the Non-Financial Commodity asset class, involved at least one

registered swap dealer. Approximately 89% of Non-Financial Commodity

swaps involved a registered swap dealer.\12\


\12\ See Final Report at 22.


However, as discussed above, the data available was not sufficient

to assess whether, and to what extent, specific changes to the de

minimis threshold levels would increase or decrease the coverage of

swaps by swap dealer regulation. In particular, the Staff Reports noted

that reliable notional amount data was not available for Non-Financial

Commodity, Equity, and FX Derivative swaps.

The Commission also notes that it has not yet adopted a regulation

on capital requirements for swap dealers, which is a significant

component of swap dealer registration. The Commission believes it

[[Page 71607]]

is prudent to finalize the capital rule before addressing the de

minimis threshold. In addition, the swap dealer requirements regarding

margin for uncleared swaps, another important component of swap dealer

registration, are currently being implemented. The Commission believes

that a year's delay would allow it to finalize the swap dealer capital

rule and assess the implementation of margin requirements for uncleared

swaps. Having information on these aspects associated with swap dealer

registration would be helpful in further assessing the impact of

changing the de minimis threshold.

Accordingly, the Commission believes that it is prudent to extend

the phase-in period by one year, which may provide additional time for

more information to become available to reassess the de minimis

exception. Adopting this Order at this time also provides clarity to

market participants regarding when they would need to begin preparing

for a change to the de minimis exception.

II. Conclusion and Order

For the reasons discussed above, and pursuant to its authority

under Regulation 1.3(ggg)(4)(ii)(C)(1), the Commission is establishing

December 31, 2018 as the 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 may take further action regarding

the de minimis threshold by rule amendment, order, or other appropriate



\13\ See 17 CFR 1.3(ggg)(4)(v).


III. Related Matters

A. Paperwork Reduction Act

The Paperwork Reduction Act (``PRA'') \14\ 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.


\14\ 44 U.S.C. 3501 et seq.


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.\15\

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.


\15\ 7 U.S.C. 19(a).


1. Background

As discussed above, Regulation 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 Regulation

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.\16\ The phase-in period would have

terminated on December 31, 2017, and the de minimis threshold would

have decreased to $3 billion, absent this Order.\17\ This would have

required firms to start tracking their swap activity beginning January

1, 2017 to determine whether their dealing activity over the course of

that year would require them to register as swap dealers.


\16\ 17 CFR 1.3(ggg)(4)(i). See generally 77 FR at 30626-35. See

also note 3, supra.

\17\ 17 CFR 1.3(ggg)(4).


The $3 billion threshold, which, absent this Order, would be

effective on December 31, 2017, sets the baseline for the Commission's

consideration of the costs and benefits of this Order.\18\ Accordingly,

the Commission considers the costs and benefits that will result from

an extended phase-in period.


\18\ See 77 FR at 30702-14 (discussing the cost-benefit

considerations with regard to the final swap dealer definition).


2. General Cost and Benefit Considerations

There are several policy objectives underlying swap dealer

regulation and the de minimis exception to swap dealer registration.

The primary policy objectives of swap dealer regulation include the

reduction of systemic risk, increased counterparty protections, and

market efficiency, orderliness, and transparency.\19\ 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 Regulation 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.\20\


\19\ Id. at 30628-30, 30707-08.

\20\ Id. at 30628-30, 30703, 30707-08.


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.\21\ 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.\22\

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



\21\ Id. at 30628-30, 30707-08.

\22\ Alternatively, the Commission notes that a lower de minimis

threshold may lead to potential changes in market behavior,

including, for example, product innovation.


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, 2018 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

[[Page 71608]]

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. Pursuant to the Dodd-Frank

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.

(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.

IV. Order

In light of the foregoing, it is ordered, pursuant to the

Commission's authority under Regulation 1.3(ggg)(4)(ii)(C)(1), that the

de minimis threshold phase-in termination date shall be December 31,

2018. Absent further action by the Commission, the phase-in period

would terminate on December 31, 2018, at which time the de minimis

threshold will be $3 billion.

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 13, 2016, by the


Christopher J. Kirkpatrick,

Secretary of the Commission.

Appendices To Order Establishing De Minimis Threshold Phase-In

Termination Date Pursuant to Commission Regulation

1.3(ggg)(4)(ii)(C)(1)--Commission Voting Summary, Chairman's Statement,

and Commissioner's Statement

Appendix 1--Commission Voting Summary

On this matter, Chairman Massad and Commissioners Bowen and

Giancarlo voted in the affirmative. No Commissioner voted in the


Appendix 2--Statement of Chairman Timothy G. Massad

I thank my fellow Commissioners for unanimously supporting this

order, which extends the phase-in of the de minimis threshold for

swap dealing by one year.

The de minimis threshold determines when an entity's swap

dealing activity requires registration with the CFTC. Registration

triggers capital and margin requirements as well as other

responsibilities, such as disclosure, recordkeeping, and

documentation requirements. In 2012, the CFTC set the threshold

initially at $8 billion in notional amount of swap dealing activity

over the course of a year, and provided that it would fall to $3

billion at the end of 2017.

This registration requirement is a pillar of the framework for

swap regulation mandated by the Dodd-Frank Act. Congress required

this framework because excessive risk related to over-the-counter

derivatives contributed to the intensity of the worst financial

crisis since the Great Depression, one which resulted in millions of

American families losing their jobs, their homes and their savings.

At the same time, Congress recognized that derivatives play an

important role in enabling businesses to hedge risk. Therefore,

getting this framework right is very important.

There are now more than 100 swap dealers provisionally

registered with the CFTC, which include most of the largest global

banking entities. Absent our action today, the threshold would have

dropped from $8 billion to $3 billion at the end of 2017. That means

firms would have been required to start determining whether their

activity exceeds that lower threshold just a few months from now--in

January of next year. Pushing back this date is a sensible and

responsible step for several reasons.

First, our staff has completed the study required by the rule on

the threshold. They estimated that lowering the threshold would not

increase significantly the percentage of interest rate swaps (IRS)

and credit default swaps (CDS) covered by swap dealer regulation,

but it would require many additional firms to register. This might

include some smaller banks whose swap activity is related to their

commercial lending

[[Page 71609]]

business. At the same time, the study notes that the data has

certain shortcomings, particularly when it comes to nonfinancial

commodity swaps. This market is very different than the IRS and CDS

markets, and I know there is much concern about the threshold with

respect to it. This delay will allow us to consider all these issues


In addition, I believe it makes sense to adopt a rule setting

capital requirements for swap dealers before addressing the

threshold. This rule, which is required by Dodd-Frank, is one of the

most important in our regulation of swap dealers, and I am hoping

the Commission can act on a reproposal of it soon. This one-year

delay will also allow us to more fully assess how the new margin

requirements are working.

These are just some of the reasons we have taken this action. I

thank the CFTC staff for their hard work on this order and on this

issue generally. And I again thank my fellow Commissioners for their


Appendix 3--Concurring Statement of Commissioner Sharon Y. Bowen

While we might disagree on the details of today's order, I think

we can all agree on one thing: Today's action is very important to

how the swaps industry operates and our system of financial

regulation functions. If we do not accurately and appropriately set

the mandatory level of trading for swap dealer registration, our

entire regulatory regime for the swaps market will be weakened.

I know that a great deal has been said about the subject of the

de minimis threshold, and I expect that just about everyone

reviewing today's decision to extend the current phase-in of the $3

billion threshold by one year is all-too familiar with its

substance. Yet, given the amount of prior actions that the

Commission has taken on this topic, I think we cannot fully consider

how to view today's action without first reviewing how we got here.

Following the 2008 financial crisis, which was exacerbated by the

absence of regulation of the swaps market, Congress passed the Dodd-

Frank Wall Street Reform and Consumer Protection Act. Among the many

things in that Act were a raft of robust regulatory requirements on

the swaps market, including mandatory clearing, a system of data

reporting, and a mandate to trade many products on Swap Execution

Facilities (SEFs).

Some of the most significant new regulatory requirements were

crafted for what we now call swap dealers, those entities which had

significant involvement in the swaps market.\1\ For instance, along

with major swap participants, swap dealers were at the heart of our

new regulation regarding margin for uncleared swaps and the related

cross-border rulemaking. Swap dealers will similarly be

substantially impacted by our upcoming rule proposal on capital.


\1\ See Dodd-Frank Wall Street Reform and Consumer Protection

Act (Dodd-Frank), section 721(49)(A), available at: http://www.cftc.gov/idc/groups/public/@swaps/documents/file/hr4173_enrolledbill.pdf. That provision states that the term ``swap

dealer'' means any person who holds itself out as a dealer in swaps;

makes a market in swaps; regularly enters into swaps with

counterparties as an ordinary course of business for its own

account; or engages in any activity causing the person to be

commonly known in the trade as a dealer or market maker in swaps,

with the proviso that, in no event shall an insured depository

institution be considered to be a swap dealer to the extent it

offers to enter into a swap with a customer in connection with

originating a loan with that customer.


Who has to register as a swap dealer is therefore one of the

linchpins of the entire swaps regulatory regime. If the level of

swap dealing activity is not sufficient to capture entities that

should be registered as swap dealers, then many of our other rules,

including margin and capital, will not apply to these entities, and

the markets may not be adequately protected. On the other hand, if

the level of swap dealing activity is too low, many entities, that

do not pose a meaningful risk to the financial system, will be

required to register as swap dealers, thereby unnecessarily

burdening markets.

It was with this concern in mind that Congress required that we

create a threshold for swap dealer registration. Dodd-Frank requires

that the Commission shall exempt from designation as a swap dealer

an entity that engages in a de minimis quantity of swap dealing in

connection with transactions with or on behalf of its customers. The

Commission shall promulgate regulations to establish factors with

respect to the making of this determination to exempt.\2\ We are

thus required to give entities an exemption from swap dealer

registration if the quantity of their swap transactions falls below

a certain level.


\2\ Dodd-Frank section 721(49)(D).


As required, the Commission set that level in 2012. As part of a

rulemaking released in May 2012, the Commission set the level of the

de minimis exemption at $3 billion, with a temporary phase-in level

of $8 billion during the first few years.\3\ The Commission also

agreed to release a report within the next few years as more data

from the various industry participants involved in the swaps market

was reported to the CFTC.\4\ The Commission further committed, once

nine months had passed after the report was published ``and after

giving due consideration to the report and any associated public

comment,'' to give itself three options for how to deal with the

threshold.\5\ First, we could terminate the phase-in period and have

the threshold immediately drop to $3 billion. Second, if we decided

it was ``necessary or appropriate in the public interest'' to

propose a new threshold limit, we could do so via our typical

rulemaking authority.\6\ Third, if we failed to pursue either the

first or second options before a date certain--December 31, 2017,

the phase-in period would automatically and immediately end, and the

threshold would simply be $3 billion.\7\


\3\ See 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), available at: http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2012-10562a.pdf.

\4\ Id. at 30756.

\5\ Id.

\6\ Id.

\7\ Id.


We have now published our final staff report on the de minimis

threshold and the nine month period of considering whether to change

the threshold has formally begun. I am grateful for the staff for

all their hard work and appreciate that it has not been an easy

undertaking. I am also grateful to market participants and the

public for the comments and opinions that they have provided on the

first and final drafts of the report. That said, it is clear from

the report that our staff does not have sufficient data to make a

fully informed decision.

Today, the Commission is augmenting our efforts to get better

data on this issue by extending the phase-in period of the threshold

by one year. Because of the Commission's action, the threshold will

continue to be at $8 billion until December 31, 2018. At that point,

absent additional action by the Commission, the phase-in period will

end and the threshold will be $3 billion.

I support this initiative to get additional data on this

subject, and I do not support changing the threshold at this time.

But I wish to make something clear: We need to see hard data backing

up the opinions we will receive during this delay about why we

should not just allow the threshold to be $3 billion as established

in the rule. I know that there is a great deal of disagreement about

this issue, and I do not think we will be able to reach a consensus

unless we have real economic analysis and evidence to back up

people's comments. If you believe the threshold should be changed to

$8 billion, or some other amount, because of market conditions,

please, provide us with supporting data. Or, if you believe that the

threshold should be even lower, as low as the $150 million threshold

that was once contemplated, please provide us with supporting data.

If we stay focused on hard, economic analysis and an objective view

about the state of the market, the final determination of the

threshold will be more understandable and transparent. Given the

years of existing discussion and analysis and the established

process the Commission has created, we would do both a disservice to

the industry and to the public to change the threshold now absent

strong evidence for doing so.

I am sympathetic to the concerns that there may be onerous

impacts on the market just because of this threshold. We know that

cleared swaps are safer than uncleared swaps, which is why we have

tried to encourage increased clearing of swaps. As such, I think

there is some merit to modifying the threshold in the future by

exempting cleared swaps from being counted in calculations of

whether a firm is above it. If market participants or observers have

strong thoughts on this idea or other ways that we might help make

the $3 billion threshold less arduous, I encourage you to reach out

to my office and my staff.

I believe we should receive empirical data that can justify

where the threshold number needs to be. I therefore expect that,

near the start of 2017, we will start to collect additional data

from market participants regarding those portions of the swaps

market for which we still lack full and detailed

[[Page 71610]]

information. Absent that, I will have no basis from which to change

the phase-in or move the threshold to something other than $3


[FR Doc. 2016-25143 Filed 10-17-16; 8:45 am]



Last Updated: October 18, 2016