A swap dealer is an entity that deals in swaps, and is defined in CEA Section 1a(47)(A) and the CFTC’s regulations.  An entity that engages in a notional amount of “dealing” swaps of at least $8 billion in notional amount over a rolling 12-month period is required to register with the CFTC and the NFA.  The de minimis threshold drops to a $25 million notional threshold for dealing swaps with “special entities,” which includes, for example, federal agencies, states, municipalities, etc.  Note that dealing swaps with utility special entities apply toward the general $8 billion notional threshold.

The hallmarks of swap “dealing” activity include an entity that (1) holds itself out as a dealer in swaps; (2) makes a market in swaps; (3) regularly enters into swaps with counterparties as an ordinary course of business; or (4) engages in an activity causing the person to be commonly known in the trade as a dealer or market maker in swaps.

Swap dealers are subject to extensive CFTC and NFA regulations, including, for example:

• Capital requirements.
• Collecting and posting margin for uncleared swaps.
• Appointing a chief compliance officer (CCO) and submitting an annual CCO report to the NFA and the CFTC.
• Adopting a risk management program.
• Complying with business conduct standards with customers.
• Establishing swap trading relationship documentation.
• Reporting swaps to a swap data repository.
• Extensive recordkeeping requirements.