Summary

Situation Overview: The SEC’s temporary de minimis thresholds for security-based swap dealing activity ($8 billion for credit default swaps and $400 million for non-CDS) are scheduled to change following the expiration of the current phase-in period.

What: Unless the SEC acts, the thresholds will decrease to $3 billion for CDS and $150 million for non-CDS after the phase-in period ends on November 8, 2026. Agency review of the thresholds has been delayed due to the government shutdown.

Who: Firms engaged in security-based swap dealing or market-making activity that are currently tracking exposures against the SEC’s de minimis thresholds.

In Depth

Under the Securities and Exchange Commission’s (SEC) security-based swap dealer (SBSD) registration framework, firms must register with the SEC if their security-based swap (SBS) dealing activity exceeds the de minimis thresholds calculated over the prior 12 months. Currently, firms benefit from temporarily higher thresholds of $8 billion for credit default swaps (CDS) and $400 million for non-CDS SBS (e.g., single name equity derivatives) during an ongoing phase-in period. Unless extended or modified, these temporary thresholds are scheduled to change to the lower permanent levels of $3 billion for CDS and $150 million for non-CDS following the expiration of the phase-in period on November 8, 2026[1]. The 12-month lookback period for these lower thresholds would begin November 8, 2025. The $25 million threshold for SBS with special entities is permanent.

 

Regulatory Context and Comparison to the Commodity Futures Trading Commission (CFTC) Framework

The SEC’s current position closely mirrors the earlier trajectory of the CFTC’s de minimis phase-in process. The CFTC initially adopted its swap dealer definition and de minimis exception jointly with the SEC in May 2012, setting a temporary threshold of $8 billion with an automatic reduction to $3 billion scheduled for December 31, 2017. Over several years, CFTC staff published preliminary (November 2015) and final (August 2016) reports analyzing market data and seeking public commentary on whether to maintain or lower the threshold. To allow additional analysis, the CFTC issued two extensions (in October 2016 extending the $8 billion phase-in threshold to December 31, 2018, and again in October 2017 extending the $8 billion phase-in threshold to December 31, 2019), delaying the automatic reduction. Ultimately, after a June 2018 proposal, the CFTC unanimously adopted a final rule on November 5, 2018, permanently fixing the swap dealing de minimis threshold at $8 billion, concluding that most market participants were already captured at that level. The SEC faces a similar decision point now: whether to maintain current thresholds, issue no-action relief to extend the current phase-in threshold while SEC staff continues to study the issue or issue a rulemaking to make the higher thresholds permanent.

 

SEC Indications and Current Uncertainty

The SEC has acknowledged that the phase-in period warrants further evaluation, and SEC staff have begun preparing a report to analyze whether the thresholds and phase-in termination date remain appropriate. Following a review of that report and public comment, the SEC may determine to extend, modify, or maintain the current de minimis framework. However, as noted in the SEC’s recent public statement, staff work on this analysis has been paused due to the lapse in federal appropriations. Consequently, the SEC cannot take formal action, such as issuing a no-action letter, order, or rule proposal, until the government reopens. This creates a timing gap: if the government remains closed past November 8, 2025, the lookback period for the lower thresholds would begin automatically, even if the SEC ultimately intends to delay or modify the phase-in.

 

Does the Government Shutdown “Stop the Clock”?

From a regulatory standpoint, the government shutdown does not pause the compliance timeline established in the SEC’s rules. The phase-in expiration and 12-month lookback period are codified in regulation and, absent formal SEC action, take effect automatically. Accordingly, if the government remains closed and no relief or no-action position is issued, the lookback period will begin on November 8, 2025, as scheduled. Firms that exceed the lower de minimis thresholds during that period must apply for registration within two months after the end of the month in which the threshold is crossed. Continuing SBS dealing activity beyond that deadline without registration would constitute a violation of Exchange Act §15F(b)(1). How such situations might be treated if the SEC later issues retroactive relief remains an open question. In essence, the shutdown halts policymaking but does not freeze the rule’s operational timeline, creating a potential compliance risk window for firms that cross the lower thresholds before the SEC can act. Firms should therefore continue monitoring exposures and prepare for registration contingencies in the absence of timely SEC relief.

What Firms Should Be Considering Now

Firms that act as or hold themselves out as market makers in SBS and are tracking activity against the de minimis thresholds but are not currently registered as SBSDs should prepare for two potential outcomes as the phase-in period approaches. The SEC may provide relief through no-action guidance or rulemaking to extend or maintain the current higher thresholds; alternatively, if no action is taken before November 8, 2025, the lower thresholds of $3 billion for CDS and $150 million for non-CDS will apply automatically. In light of this uncertainty, non-registered firms should proactively review their SBS dealing activity and aggregation logic, calculate exposures under both threshold scenarios, and ensure governance monitoring processes are in place to address potential registration triggers if the lower thresholds take effect as scheduled.

Put Patomak’s Expertise to Work

While the SEC has signaled its intent to re-evaluate the phase-in, the timing of any action remains uncertain given the ongoing government shutdown. Patomak is closely tracking developments related to the de minimis threshold and any potential SEC action. Our team has extensive experience helping firms analyze, interpret, and implement SBS regulatory requirements under both SEC and CFTC frameworks. Patomak welcomes discussions with firms navigating this evolving landscape, engaging early allows firms to assess potential impacts, plan for multiple regulatory outcomes, and remain fully prepared for the 2025–2026 transition period. To learn more or discuss how Patomak can support your firm, please contact Sudhir Jain at sjain@patomak.com, Pamela Geraghty at pgeraghty@patomak.com, and Petar Lovric at plovric@patomak.com.

 

[1] Statement: Statement Regarding Phase-In Termination Date for the De Minimis Exception to the Security-Based Swap Dealer Definition, U.S. Securities and Exchange Commission (Oct. 29, 2025), available at https://www.sec.gov/newsroom/speeches-statements/atkins-102925-statement-regarding-phase-termination-date-de-minimis-exception-security-based-swap-dealer