Commodity Futures Trading Commission sets swaps deal limit at $8B

The Commodity Futures Trading Commission (CFTC) has voted in favor of a new definition for swaps dealers, according to Bloomberg.

The federal regulator determined that, for the time being, companies would be considered swaps dealers if the notional value of their swaps reaches $8 billion over the course of one year. That threshold should drop to $3 billion within five years.

This represents a major shift from earlier suggestions, which had ranged as low as $100 million.

The definition was a major concern for many energy companies, as those businesses designated as swaps dealers would be forced to hold a much higher proportion of their assets in reserve.

Platts reports that energy firms could still fall under greater scrutiny after the decision, since the CFTC chose not to distinguish between financial firms and commercial end users. However, the large scale required to be designated as a dealer, as well as exemptions for swaps between majority-owned affiliates, makes it less likely for energy companies to meet those standards.

The Securities and Exchange Commission has already approved a similar rule.

Information on derivatives in the energy market can be found at PennEnergy's Research area.

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