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.
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