August 10, 2018

Mr. Christopher Kirkpatrick
Secretary
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st St, N.W.
Washington, DC 20581

Re: De Minimis Exception to the Swap Dealer Definition; Notice of Proposed
Rulemaking

Dear Mr. Kirkpatrick:

The International Swaps and Derivatives Association, Inc. (“lSD A”) 1 and the Securities Industry and Financial Markets Association (“SIFMA”) 2 (together, the “Associations”) appreciate the opportunity to submit these comments on the Notice of Proposed Rulemaking regarding the De Minimis Exception to the Swap Dealer (“SD”) Definition (“Proposal”) 3 published by the U.S. Commodity Futures Trading Commission (“CFTC” or “Commission”). We support the Commission’s decision to seek public comment given the impact that any change or reduction in the size of the de minimis threshold would have on the swap markets and especially on regional and smaller banks and dealers that facilitate access of smaller commercial end-users to swaps.

I. De Minimis Threshold

The Associations support the Proposal to set the aggregate gross notional amount (“AGNA”) threshold at $8 billion in swap dealing activity. Maintaining the de minmis threshold is the right outcome to ensure that banks and dealers can continue meeting their clients’ risk management needs. As we have stated in the past, decreasing the size of the de minimis threshold would lead to a reduction in the number of swap market participants willing to engage in swap dealing activity with commercial end-users for fear of going above a lower threshold and triggering the SD registration requirement.

We note that the Commission’s focus on transaction count and counterparty count as alternatives to the AGNA are not appropriate indicators of swap dealing activity. We believe that using these alternatives as metrics for measuring swap dealing activity would be detrimental to swap dealers that transact with smaller firms. Smaller firms tend to enter into more transactions (but in smaller notional amounts per transactions) or tend to do business with a large number of counterparties in smaller notional amounts per transaction. In aggregate, however, such SDs are likely to have a lower systemic risk exposure. The CFTC SD De Minimis Exception Preliminary Report agreed with this view and indicated that neither one of the alternatives is a suitable measure of swap dealing activity. 4 More importantly, we appreciate that the Commission recognizes that any change to the current $8 billion threshold or calculation methodology would require firms to revise monitoring processes and internal systems, and amend policies and procedures tied to the current threshold, leading to increased costs, especially for smaller banks, dealers and end-users. 5

Accordingly, we agree that maintaining an $8 billion threshold would foster the efficient application of the SD definition by providing continuity and addressing the uncertainty associated with the end of the phase-in period. 6

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1 Since 1985, ISDA has worked to make the global derivatives markets safer and more efficient. Today, ISDA has over 900 member institutions from 68 countries. These members comprise a broad range of derivatives market participants, including corporations, investment managers, government and supranational entities, insurance companies, energy and commodities firms, and international and regional banks. In addition to market participants, members also include key components of the derivatives market infrastructure, such as exchanges, intermediaries,  clearing houses and repositories, as well as law firms, accounting firms and other service providers. Information about ISDA and its activities is available on the Association’s website: www.isda.org.

2 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly I million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.

3 De Minimis Exception to the Swap Dealer Definition, Notice of Proposed Rule making, 83 Fed. Reg. 27444 (June 12, 2018).

4 See Swap Dealer De Minimis Exception Preliminary StaffReport, 19-20 (Nov. 18, 2018) (acknowledging that “these two metrics are not determinative in identifying dealing activity”).

5 83 Fed. Reg. 27444, 27457.

6 Id.