SEC Takes Initial Steps to End SBSD De Minimis "Phase-in" Period
The SEC set November 8, 2021 as the "data collection initiation date" marking the end of the "phase-in" period for the de minimis threshold for registration as a security-based swap dealer.
Under the definition of "security-based swap dealer" in SEA Rule 3a71-2 ("De minimis exception"), a person may avoid registration by keeping activity below specified thresholds. The amounts are subject to a phase-in period, after which they decline to lower levels. (For credit default swap activity, the current de minimis threshold is an aggregate gross notional amount of $8 billion currently, and $3 billion after the phase-in period. For non-credit default swaps, it is $400 million / $150 million.)
Pursuant to SEA Rule 3a71-2 and Rule 3a71-2A ("Report regarding the 'security-based swap dealer' and 'major security-based swap participant' definitions"), following the data collection initiation date, SEC staff may publish a report and end the phase-in period. In the absence of further SEC action, the phase-in will terminate on November 8, 2026.
Commentary
Five years can fly by quickly, but it would be an inconsistent result if the SEC were to let the registration threshold drop. The CFTC previously considered the issue and took action to leave $8 billion in place for "swap dealer" registration purposes.
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