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March 25, 2019

CFTC’s Deregulatory Actions Today Create a Vast "De Maximus" Swap Dealer Exemption That is Illegal and Dangerous

Monday, March 25, 2019
Contact: Nick Jacobs, 202-618-6430 or

Washington, D.C.  –  Dennis Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement regarding the Commodity Futures Trading Commission’s (CFTC) creation of a new exemption for bank swaps dealing activities in violation of the law:

“Unregulated swaps dealing activities were key contributors to the devastating 2008 financial crisis, which is why the Dodd-Frank Act requires swaps and swap dealers to be comprehensively regulated and transparent to regulators and the public.The CFTC ha­­­s violated that law today in two key ways.First, it has determined to allow banks (called “IDIs”) to engage in virtually unlimited unregulated swaps dealing under an impermissibly expansive interpretation of the very narrow and limited de minimis exemption.In doing so, it has, in fact, created a vast “de maximus” exemption.Second, it has acted unilaterally when the law requires it to act jointly with the Securities and Exchange Commission (SEC).

“Adding insult to injury, the CFTC has engaged in blatant result-oriented rulemaking, misinterpreting and twisting words while violating clear statutory language, apparently for the purpose of letting some of the biggest banks in the country engage in lots of highly-profitable undisclosed and unregulated derivatives dealing.Worse, the CFTC is also allowing these newly unleashed bank swap dealers to police themselves.This is dangerously repeating the mistakes of­ the recent past.The 2008 crash proved that financial industry self-regulation and self-policing are oxymorons that will lead to short term profit maximization by bank swap dealers to the detriment of everyone else.

“The CFTC’s exemption today comes on top of an existing exclusion for banks that deal swaps in connection with customer loans.However, those swaps must be closely tied to loan terms and executed in close proximity to loan origination.The CFTC’s new exemption has de facto eliminated those conditions with banks now deciding for themselves whether a swap has a connection to a loan.Some banks relying on the exemption and engaging in unregulated swap dealing now will never be registered with the CFTC, while others may be CFTC-registered but choose to de-register.In either case, no one will have the data or ability to examine or determine the appropriateness of those decisions.

“Thus, the CFTC’s action will permit banks to engage in swaps dealing with customers in almost unlimited volumes without registering as swap dealers and, therefore, without appropriate regulation or transparency of their activities.That guts key parts of the Dodd-Frank registration framework for banks and is a clear violation of the Commodity Exchange Act.

“The CFTC’s pretext for today’s deregulatory actions is the de minimis exemption, but that is expressly limited to only a very small “quantity” of dealing and only if it is incidental to ordinary non-swaps business.The exemption the CFTC announced today is not limited solely to the quantity, much less a small quantity, of dealing and will open the floodgates for substantial unregulated and secret swaps dealing.

“Finally, this exemption is also a clear violation of the Dodd-Frank Act’s requirement that the CFTC and the Securities and Exchange Commission jointly issue rulemakings and guidance to define terms critical to regulation of the derivatives markets, including the term “swap dealer.”The CFTC’s expansive interpretation of the very limited de minimis exemption is nothing more than a de facto change to the swap dealer definition.This attempt to end-run the statutorily required process—and cut the SEC out of a rulemaking process that Congress required it to participate in—has no defensible legal basis.

“The US swaps markets are still insufficiently regulated and transparent; they also lack fair competition between regulated entities.The CFTC’s actions today are going to make that bad situation worse.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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