On October 29, 2025, Paul Atkins, Chairman of the Securities and Exchange Commission (“SEC”), signaled that he will ask SEC staff to evaluate relief for certain firms who engage in a de minimis level of security-based swap (“SBS”) dealing. While the relief will not be issued as long as the government shutdown persists, his statement should be a welcome relief to those preparing for a November 8, 2025 deadline to reduce their SBS dealing activity.
Background
Under Section 15F of the Securities Exchange Act of 1934, as amended by the Dodd-Frank Act, a firm must register with the SEC as an SBS dealer if it engages in activity that constitutes “dealing” in SBS and that dealing activity is more than a de minimis amount. SEC Rule 3a71-2 creates a multipart framework for assessing the de minimis amount, in which (i) credit default swaps (“CDS”) that are SBS are subject to an $8 billion threshold over the prior 12 months for a phase-in period, which may drop to $3 billion over the prior 12 months after the phase-in period, (ii) non-CDS SBS are subject to a $400 million threshold over the prior 12 months for the phase-in period, which may drop to $150 million over the prior 12 months after the phase-in period, and (iii) SBS with special entities are subject to a $25 million threshold.
The phase-in period is scheduled to end on November 8, 2026, at which time the de minimis thresholds for CDS SBS dealing and non-CDS SBS dealing will drop to $3 billion and $150 million, respectively, unless the SEC takes action before that date. However, those thresholds are measured on a rolling 12-month basis, meaning that a firm would need to look back to November 8, 2025 to determine if it had breached either threshold and must register as an SBS dealer.
Atkins Statement
Chair Atkins explained that Rule 3a71-2 requires SEC staff to prepare a report using SBS transaction data that will, among other things, analyze the de minimis thresholds. Further, once the SEC reviews that report and related public comments, it may determine to propose rules to revise the de minimis thresholds and the phase-in termination date.
Given the current shutdown of the federal government, SEC staff are unable to prepare the required report. Therefore, the SEC cannot begin the process of assessing whether to propose rules to revise the de minimis thresholds and the phase-in termination date. This delay may disrupt the SBS markets if firms assume the lower thresholds will take effect on November 8, 2026, and therefore, reduce their SBS dealing activity starting November 8, 2025 to ensure that they are below the $3 billion and $150 million thresholds on November 8, 2026.
Chair Atkins stated that once the government shutdown ends, he will direct staff to evaluate whether relief from the phase-in termination date would be necessary or appropriate so that the lookback period for the $3 billion and $150 million thresholds would not apply before the SEC has had time to consider the staff report and associated public comments. While his statement alone has no effect on the November 8, 2026 phase-in date, it strongly suggests that the SEC will extend the phase-in period to account for the duration of the government shutdown and avoid market disruption. Hopefully this will provide sufficient comfort to firms that engage in de minimis amounts of SBS dealing to avoid market disruption later this month.
[View source.]
