CFTC Gears Up for De Minimis Review
Speaking before the House Agriculture Committee, Commodity Futures Trading Commission Chairman Christopher Giancarlo testified that the regulator finally looks to address the de Minimis exception and a position-limit rule.
“The level of the de Minimis threshold is a critically important issue,” he said. “Getting it right requires thoughtful analysis of the latest and most complete data to inform the best path forward in terms of managing risk to the financial system. Currently, work is actively being done by the Division of Swap Dealer and Intermediary Oversight (DSIO) under a new division director.”
Additional delay in ironing out the swap deal de minimus rule will only serve to prolong market uncertainty and create market risk agreed Commissioner Rostin Behnam in response to Giancarlo’s testimony.
“Instead of kicking this critical issue into the future again, the Commission should take further action now or let the current rule take effect,” he added.
Although, Commissioner Brian Quintenz also agreed that is time to address the exception, he voiced his concern that lowering the threshold too far would have damaging economic consequences.
“Some have described the current de minimis threshold of $8 billion in notional value as a ‘loophole,’” he explained. “In reality, its scheduled reduction to $3 billion would create a “black hole,” sucking in community banks and end-users who pose zero systemic risks.”
US and EC regulators reach a rule-harmonization milestone.
Harmonized rules do not necessarily mean identical rules.
The industry body suggests regulators use a risk-based to make their determinations.
The clearinghouse will continue clearing rates and fx swaps.
The regulator heads back to the chalkboard.