The CFTC may raise the swap dealer threshold to $3 billion, up from the $100 million threshold introduced in 2010. The increase would relieve agriculture and energy traders from swaps dealers’ increased capital requirements and hedging costs.
During 2008’s market crash, credit default swaps were blamed for pushing the economy into a recession. The CFTC first considered a threshold of $1 billion for swaps dealers, and then increased it to $2 billion. The rule, which is being harmonized with the Securities and Exchange Commission (SEC), has faced several delays. Officials at the CFTC became concerned that a $2 billion limit would capture those who hedge in the agriculture or energy markets, traders who do not pose a risk to the economy.
The $3 billion threshold could very well change again. The CFTC will vote on the final rule sometime this month. Votes have been delayed five times previously. When it is decided, the threshold will clarify which banks, energy companies, and other firms will be defined as swap dealers.