SwapEx, LLC: Swap Execution Facility Application For Registration

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Exhibit L – Compliance with core 

principles

Total Pages (including this one): 30
SwapEx, LLC: Swap Execution Facility Application For Registration

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COMPLIANCE WITH SEF CORE PRINCIPLES

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

CORE PRINCIPLE 1

COMPLIANCE WITH CORE PRINCIPLES.—

(A) IN GENERAL.—To be registered, and maintain 

registration, as a swap execution facility, the swap 

execution facility shall comply with—

(i) the core principles described in this subsection; 

and

(ii) any requirement that the Commission may 

impose by rule or regulation pursuant to section 

8a(5).

(B) REASONABLE DISCRETION OF SWAP 

EXECUTION FACILITY.—Unless otherwise 

determined by the Commission by rule or regulation, 

a swap execution facility described in subparagraph 

(A) shall have reasonable discretion in establishing 

the manner in which the swap execution facility 

complies with the core principles described in this 

subsection.

Form SEF and Exhibits thereto The materials submitted with the Company’s 

application for SEF registration, including but not 

limited to the Rulebook (the “Rules”) satisfy this Core 

Principle.

Capitalized terms used in this Exhibit L without 

definition have the meanings ascribed to such terms in 

the Rules.

CORE PRINCIPLE 2

COMPLIANCE WITH RULES.—A swap execution 

facility shall—

(A) establish and enforce compliance with any rule 

of the swap execution facility, including—

(i) the terms and conditions of the swaps traded or 

Exhibit M-1 (SwapEx, LLC Rulebook)

Chapter 3 (Trading System)

Chapter 4 (Business Conduct)

Chapter 5 (Trading Practices)

Rule 601 (Block Trades)

Rule 602 (Time Stamp Requirements for Block 

Operation of the SEF and Compliance with Rules

The Company has adopted Rules governing the 

operation of the Company’s Trading System. In 

particular, Rule 524 establishes that Required 

Transactions may be executed either through the 

Company’s order book or through an RFQ 

functionality. Any person accessing the Trading 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

processed on or through the swap execution facility; 

and

(ii) any limitation on access to the swap execution 

facility;

(B) establish and enforce trading, trade processing, 

and participation rules that will deter abuses and 

have the capacity to detect, investigate, and enforce 

those rules, including means—

(i) to provide market participants with impartial 

access to the market; and 

(ii) to capture information that may be used in 

establishing whether rule violations have occurred; 

(C) establish rules governing the operation of the 

facility, including rules specifying trading 

procedures to be used in entering and executing 

orders traded or posted on the facility, including 

block trades; and 

(D) provide by its rules that when a swap dealer or 

major swap participant enters into or facilitates a 

swap that is subject to the mandatory clearing 

requirement of section 2(h), the swap dealer or 

major swap participant shall be responsible for 

compliance with the mandatory trading requirement 

under section 2(h)(8).

Trades)

Chapter 7 (Disciplinary Rules)

Rule 901 (Contract Specifications)

Rule 1005 (Rules of the Derivatives Clearing 

Organization)

Exhibit O (SwapEx, LLC Compliance Manual)

Section III.A (Surveillance – Introduction)

Section III.B (Trade Practice Surveillance)

Section III.C (Market Surveillance)

Section III.D (Real-Time Market Monitoring)

Section III.F (Audit Trail Surveillance)

Section III.G (Inquiries, Investigations and 

Warning Letters)

Section III.H (Third-Party Regulatory Service 

Provider)

Section VII.A (Access Requirements)

Section VII.B (Rule Enforcement and 

Inspections)

Exhibit N-1 (Regulatory Services Agreement with 

National Futures Association)

See also:

Core Principle 4 (Monitoring of Trading and Trade 

System must have and use the unique User ID that has 

been assigned to such person for that purpose. All 

Orders, Indications of Interest and Requests for Quote 

must contain the information required by the 

Company from time to time, including the data fields 

set out in Rule 528(e). See also Rule 518. At present, 

while SwapEx has established rules in its rules book 

governing the appropriate procedures for Block 

Trades SwapEx does not have the systems 

functionality to permit a market participant to 

designate a transaction in any of SwapEx’s listed 

instruments as a Block Trade and therefore SwapEx is 

not currently allowing the execution of Block Trades 

on our SEF. 

The Company has adopted Rule 901 regarding the 

terms and conditions of the Contracts traded on or 

processed through the Trading System. The Company 

has also adopted Rules relating to access to the 

Trading System by Participants, Authorized Traders 

and Authorized Users (see Chapter 3 of the Rules), 

business conduct and trade practice violations (see

Chapters 4 and 5 of the Rules), and disciplinary 

matters (see Chapter 7 of the Rules). Rule 401(c) sets 

out the Company’s requirements regarding the 

mandatory trading obligations set out in Section 

2(h)(8) of the CEA. The Company’s audit trail 

arrangements are described in Rule 518 and in Section 

III.F of the Compliance Manual.

The Company will enforce its Rules impartially. See 

also Rules 701(b), (c) and (d). All additions to or 

modifications of the Rules will be published on the 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Processing)

Core Principle 5 (Ability to Obtain Information)

Core Principle 7 (Financial Integrity of 

Transactions)

Core Principle 8 (Emergency Authority)

Core Principle 12 (Conflicts of Interest)

Core Principle 15 (Designation of a Chief 

Compliance Officer)

Exhibit Q-1

Exhibit Q-2

Exhibit Q-3

Company’s website pursuant to Rule 308.

Access Requirements

The Rulebook establishes a robust framework 

ensuring that Participants, Authorized Traders and 

Authorized Users accessing the Trading System 

comply with the terms and conditions of the Contracts 

listed for trading on the Trading System as well as 

with the CEA and CFTC Regulations. See also 

Section VII.A of the Compliance Manual The criteria 

for becoming a Participant or Authorized Trader are 

set out in Rules 302 and 304, respectively, including 

the requirement that each Participant and Authorized 

Trader qualify as an “eligible contract participant” as 

defined in the CEA and CFTC Rules. Each 

Participant and Authorized Trader must nominate at 

least one employee to serve as an Authorized User. 

An Authorized User may access the Trading System 

on behalf of its designating Participant or Authorized 

Trader, or, to the extent permitted by Applicable Law, 

the Customers of its designating Participant or 

Authorized Trader. See Rule 301, Rule 305. Each 

Participant and Authorized Trader must also designate 

one or more Designated Representatives to represent 

such Participant or Authorized Trader before the 

Company. See Rule 309.

Independent software vendors may access the Trading 

System provided they satisfy the Company’s 

technological integrity requirements. See Rule 306. 

Any Participant, Authorized Trader, Authorized User 

or Customer is subject to the Company’s jurisdiction. 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

See Rule 310. Access to the Trading System by a 

Participant, Authorized Trader or Authorized User 

may be limited or revoked by the Company. See Rule 

307; Rule 717. 

The Company will apply Participant criteria in an 

impartial manner pursuant to an established 

application process, which is further supported 

through oversight by a Participant Committee review 

process. See Rule 303.

A Participant may withdraw from the Company if the 

requirements of Rule 311 are met. Each Participant, 

Authorized Trader and Independent Software Vendor 

must pay dues, assessments and fees pursuant to Rule 

312.

Rule Enforcement Program

The Company has adopted Rules that prohibit abusive 

trading practices, including: acts detrimental to the 

Company or that are inconsistent with just and 

equitable principles of trade (Rule 503), fraudulent 

acts (Rule 504), fictitious or non-competitive 

transactions (Rule 505), market manipulation (Rule 

506), disruptive trading practices (Rule 507), 

misstatements (Rule 508), misuse of the trading 

system (Rule 509), wash sales (Rule 514), and prenegotiated or non-competitive trades, including 

money passes (Rule 515). The Company has also 

adopted Rules relating to protection of Customers. 

See Rules 511-513, 516, 517. Each Participant must 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

also comply with the rules of the applicable 

Derivatives Clearing Organization. See Rule 1005.

The Company has sufficient resources to ensure the 

maintenance and enforcement of its Rules, which is 

the responsibility of the Chief Compliance Officer

(“CCO”), who supervises the Market Regulation 

Department. See also Section VII.B of the 

Compliance Manual. The CCO monitors the 

Company’s compliance with all regulatory, legal, and 

internal rules, policies and procedures and is also 

responsible for supervising the Company’s selfregulatory obligations. See Core Principle 15 

(Designation of a Chief Compliance Officer). The 

CCO also enforces the Company’s Rules and has 

available to him or her the members of the Market 

Regulation Department and such other resources as 

may be necessary to conduct investigations of alleged 

Rule violations and market conditions. 

The CCO reports to the Board and the most senior 

officer of the Company (at the Company’s discretion), 

as well as to the Regulatory Oversight Committee, 

which oversees the Company’s regulatory program on 

behalf of the Company’s Board of Directors. The 

Regulatory Oversight Committee has the authority, 

among other things, to (1) monitor the Company’s 

regulatory program for sufficiency, effectiveness, and 

independence and (2) oversee all facets of the 

regulatory program. See Core Principle 12 (Conflicts 

of Interest). 

The Company has entered into a Regulatory Services 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Agreement with the National Futures Association 

(“NFA”), pursuant to which NFA will act as the 

Regulatory Services Provider and provide certain 

regulatory services to the Company, including 

responsibility for the Company’s on-going market 

surveillance functions. In particular, the Regulatory 

Services Provider will perform trade practice and 

market surveillance activities using its automated 

system known as the Sophisticated Warning Analysis 

Profiling System, or “SWAPS.” Additional detail 

regarding SWAPS is set out in Sections III.A-III.C of 

the Compliance Manual. 

Real-time market monitoring will be performed by the 

CCO, or his or her designee, in accordance with the 

provisions of Section III.D of the Compliance 

Manual, which also sets out procedures for addressing 

suspicious activities and for adjusting prices and/or 

cancelling trades. See also Rule 526.

The Company has the authority to enforce compliance 

with the provisions of its Rulebook, including those 

Rules prohibiting fraudulent acts, market disruption, 

market manipulation and misstatements of material 

fact. The Company also has the power, at any time, to 

revoke, suspend, limit, condition, restrict, or qualify 

the trading privileges of any Participant either due to 

the occurrence of an enumerated “termination event” 

or if the Company determines, in its sole discretion, 

that such action is in the Company’s best interests. See

Rule 405; Rule 717. The Company also has the power 

to revoke or suspend the designation of a Participant’s 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Authorized Trader.

The Market Regulation Department is responsible for 

investigating potential Rule violations. The Market 

Regulation Department (or the Regulatory Service 

Provider on its behalf) may conduct preliminary 

inquiries of potential irregularities or exceptions and 

request information from Participants. See Section 

III.G of the Compliance Manual. See also Rule 702. 

At the conclusion of an investigation, the Market 

Regulation Department (or the Regulatory Service 

Provider) will issue an investigation report and may 

recommend either closing the matter or propose other 

measures. The CCO will review the investigation 

report and determine whether further action is 

appropriate, including having the Market Regulation 

Department file charges directly, without going to a 

Review Panel, or submitting the investigation to a 

three-member Review Panel to determine whether to 

file charges. 

As described further below, the Company has 

enforcement and disciplinary procedures in place in 

the event that Participants or any of their Authorized 

Traders and Authorized Users do not comply with the 

Rules. 

Regulatory Services Provider

Pursuant to Rule 720, the Company may delegate 

certain self-regulatory responsibilities to a Regulatory 

Services Provider. See also Section III.H of the 

Compliance Manual. As described above, the 

Regulatory Services Provider provides certain 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

regulatory services to the Company pursuant to a 

Regulatory Services Agreement, including 

responsibility for the Company’s on-going market 

surveillance functions. 

Although some investigatory functions may be 

delegated to the Regulatory Services Provider, the 

Company retains ultimate decision-making authority 

with respect to any functions that are delegated to the 

Regulatory Services Provider. In particular, the 

Company always remains responsible for prosecuting 

violations of the Rules. 

Audit Trail

The Company’s audit trail processes are set out in 

Rule 518 and Section III.F of the Compliance Manual. 

The audit trail is designed to capture trading 

information that is sufficient to allow the Company to 

determine whether Rule violations have occurred. 

The audit trail is based on original, unalterable and 

sequentially identified records that are recorded in an 

electronic history database which includes all 

information input into the Trading System, the 

Participant for which a trade is executed, timing and 

sequencing data to permit trade reconstruction and the 

identity of the account for which each trade is 

executed. Except as noted below, audit trail data is 

generally maintained in accordance with the CFTC’s 

recordkeeping requirements and is organized such that 

the CCO and/or the Regulatory Services Provider can 

search, sort and analyze the audit trail information to 

reconstruct trading and identify potential violations. 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

SwapEx is moving toward a solution to address 

reporting of information in connection with the 

Indication of Collateralization data field for uncleared 

swap transactions, which will be in line with evolving 

industry practice for FX NDF products on this data 

field. 

The Regulatory Services Provider conducts annual 

investigations of all Participants to verify compliance 

with the Company’s audit trail and recordkeeping 

requirements. The Company may sanction any 

Participant in connection with any deficiencies 

identified in these reviews.

Disciplinary Procedures and Sanctions

The Company’s disciplinary procedures are set out in 

Chapter 7 of the Rules, the Compliance Manual and in 

the Regulatory Services Agreement with the 

Regulatory Services Provider. 

The Rules set out detailed requirements relating to the 

Company’s disciplinary arrangements, including the

potential respondent’s right to respond to an 

investigative report (Rule 704), preparation and 

service of a notice of charges (Rules 706, 707), the 

respondent’s right to file an answer to a notice of 

charges (Rule 708), settlements (Rule 709), 

composition of the Disciplinary Panel (Rule 710), the 

respondent’s right to review evidence (Rule 711), 

conducting hearings of the Disciplinary Panel (Rule 

712), decisions of the Disciplinary Panel (Rule 713) 

and the imposition of sanctions (Rule 714). Orders of 

the Disciplinary Panel may be appealed to a three-
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

member Appeals Panel, whose decision is final and 

may not be further appealed within the Company.

Sanctions on a Participant may include: inter alia (1) 

censure; (2) limitations on Trading Privileges, ability 

to otherwise access the Trading System, and/or other 

activities, functions or operations; (3) suspension of 

Trading Privileges and/or ability to otherwise access 

the Trading System; (4) fines of up to $100,000 per 

violation; (5) restitution or disgorgement; (6) 

termination of Trading Privileges and/or ability to 

otherwise access the Trading System; or (7) any other 

sanction or remedy deemed to be appropriate. The 

rights and responsibilities of a market participant after 

termination or suspension are set out in Rule 718.

In addition, the CCO has the power to impose 

summary fines and suspensions and may further 

summarily revoke, limit, condition, restrict or qualify 

a Participant’s Trading Privileges and/or ability to 

otherwise access the Trading System for certain Rule 

violations. See Rules 716, 717.

The composition of any Review Panel, Hearing Panel 

and Appeals Panel will meet the applicable 

requirements of CFTC Regulations. 

The Company may provide notice of disciplinary 

proceedings in accordance with the requirements of 

Rule 719.

CORE PRINCIPLE 3

SWAPS NOT READILY SUSCEPTIBLE TO 

Exhibit O (SwapEx, LLC Compliance Manual)

Section IV.A(1) (Product Not Readily Subject to 

The CCO will review compliance with Core Principle 

3 in connection with the preparation of a product 

filing with the CFTC or the listing for trading of a 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

MANIPULATION.— The swap execution facility 

shall permit trading only in swaps that are not 

readily susceptible to manipulation.

Manipulation) new swap. This review will include discussions with 

business staff on the terms and conditions of the swap, 

with particular emphasis given to calculation of the 

reference price to be utilized for that swap. In 

addition, the CCO will conduct a similar review from 

time to time of the reliability of such reference prices 

for each swap listed for trading.

In general, the Company intends to permit trading only 

in Swaps based on underlying markets such as those 

for currencies, that can be substantial in size and that 

generally feature liquid products. All Swaps that will 

be traded on the SEF at least initially will be cashsettled, and cleared Swaps thus will be settled in cash 

by the DCO. Although the Company will be 

independently reviewing proposed new Swaps before 

listing them on the System, the Market Regulation 

Department in the case of reviewing a Swap that is 

listed for clearing by one or more DCOs will review 

and consider the CFTC filings and due diligence 

reviews made by the DCO(s) in connection with the 

Company’s own product reviews.

The Company also takes note of ongoing 

developments in the underlying markets for OTC 

derivatives products that are intended to move in the 

direction of providing more autonomous and 

independent assessments of benchmark reference 

prices 

CORE PRINCIPLE 4

MONITORING OF TRADING AND TRADE 

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 401 (Duties and Responsibilities of 

In General

The Company will only allow authorized persons to 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

PROCESSING.— The swap execution facility 

shall—

(A) establish and enforce rules or terms and 

conditions defining, or specifications detailing—

(i) trading procedures to be used in entering and 

executing orders traded on or through the facilities 

of the swap execution facility; and

(ii) procedures for trade processing of swaps on or 

through the facilities of the swap execution facility; 

and

(B) monitor trading in swaps to prevent 

manipulation, price distortion, and disruptions of the 

delivery or cash settlement process through 

surveillance, compliance, and disciplinary practices 

and procedures, including methods for conducting 

real-time monitoring of trading and comprehensive 

and accurate trade reconstructions.

Participants and Authorized Traders)

Rule 518 (Recordkeeping; Audit Trail)

Rule 717 (Summary Suspensions and other 

Summary Actions)

Rule 907 (Information-Sharing Agreements)

Rule 913 (Emergencies)

Exhibit O (SwapEx, LLC Compliance Manual)

Section III (Surveillance Activity)

Exhibit Q (Explanation of Trading System)

Exhibit S (Trading Data Maintenance)

Exhibit V (Technology Questionnaire)

See also:

Core Principle 2 (Compliance with the Rules)

Core Principle 8 (Emergency Authority)

enter Orders, Indications of Interest or RFQs into the 

electronic Trading System. Any matched Orders or 

RFQs will then be electronically executed by the 

Trading System following the workflows outlined in 

Exhibit Q, which will vary depending on the order and 

instrument types. After execution, the Contract will 

be electronically sent to a Derivatives Clearing 

Organization, if applicable, for processing.

As described above in the response to Core Principle 

2 (Compliance with the Rules), the Company

conducts real-time market monitoring of trading 

activity to detect anomalies in the Trading System. 

The market monitoring function allows the Company, 

acting through the Market Regulation Department, to 

modify or adjust prices or cancel trades to address

errors or malfunctions in the Trading System. 

The Company also monitors trading through the use 

of the Regulatory Service Provider’s SWAPS 

automated trade surveillance system, described in 

further detail above in the response to Core Principle 

2 (Compliance with the Rules). See also Sections 

III.A-III.C of the Compliance Manual. 

In addition, the SWAPS automated trade surveillance 

system plays a key role in the Company’s audit trail 

procedures, which are described in more detail above 

in the response to Core Principle 2 (Compliance with 

the Rules). The Company conducts reviews not less 

than annually to assess compliance by Participants

with these audit trail procedures. See also Rule 518; 

Section III.F of the Compliance Manual. 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Physical-Delivery Swaps

The Company does not list Contracts for trading that 

are physically settled. To the extent that the Company 

does list a physically settled Contract in the future, the 

Company (or the Regulatory Services Provider) will 

monitor the Contract’s terms and conditions in light of 

the underlying commodity market, the convergence of 

the price of the Contract with the price of the 

underlying commodity and the adequacy of 

deliverable supply of the underlying commodity.

Cash-Settled Swaps

In respect of each cash-settled Contract listed for 

trading on the Trading System, the Company (or the 

Regulatory Services Provider) will monitor the pricing 

of the index or other value against which the Contract 

will be settled. 

Ability to Obtain Information

Pursuant to Rule 907, the Company may enter into 

any information-sharing agreement in order to, among 

other things, coordinate surveillance with other 

trading platforms regarding Contracts and any related 

financial instruments. Each Participant, Authorized 

Trader and Authorized User is required pursuant to 

Rule 401(a)(8) to keep, or cause to be kept, complete 

and accurate books and records of its activity in the 

index or instrument used as a reference price, the 

underlying instrument and related derivatives markets, 

and to make such books and records available for 

inspection by a representative of the Company (or of 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

the Regulatory Services Provider).

Risk Controls for Trading

The Company has the authority to pause or halt 

trading activity on the Trading System in response to 

an Emergency or to any condition that the CCO, or his 

or her designee, deems warrants such a pause or halt. 

See Section III.D of the Compliance Manual. See 

Rule 717; Rule 913; Core Principle 8 (Emergency 

Authority).

CORE PRINCIPLE 5

ABILITY TO OBTAIN INFORMATION.—The 

swap execution facility shall—

(A) establish and enforce rules that will allow the 

facility to obtain any necessary information to 

perform any of the functions described in this 

section;

(B) provide the information to the Commission on 

request; and

(C) have the capacity to carry out such international 

information-sharing agreements as the Commission 

may require.

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 207 (Maintenance of Books and Records 

by the Company)

Rule 401 (Duties and Responsibilities of 

Participants and Authorized Traders)

Rule 402 (Required Notices)

Rule 403 (Inspections by the Company)

Rule 404 (Financial and Related Reporting 

Requirements)

Rule 905 (Confidentiality)

Rule 906 (Recording of Communications)

Rule 907 (Information-Sharing Agreements)

Exhibit O (SwapEx, LLC Compliance Manual)

Section III.G (Collecting Information)

The Rules ensure that the Company is able to obtain 

all information necessary to perform its regulatory 

obligations. Each Participant is obligated to notify the 

Company immediately upon the occurrence of certain 

events that may have a material effect on such 

Participant’s ability to continue to meet the 

Company’s participant criteria. See Rule 402, Rule 

404. The Company (or the Regulatory Services 

Provider) also has the right to conduct inspections 

pursuant to Rule 403.

The Company is required to keep, or cause to be kept, 

all books and records required to be maintained 

pursuant to the CEA and CFTC Regulations and to 

make such books and records available to the CFTC 

and the US Department of Justice. See Rule 207. In 

addition, each Participant, Authorized Trader and 

Authorized User is required to keep, or cause to be 

kept, complete and accurate books and records with 

respect to their activities on the Trading System and to 

make such books and records available to the 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

See also:

Core Principle 4 (Monitoring of Trading and Trade 

Processing).

Company or the Regulatory Services Provider. See

Rule 401. See also Section III.G of the Compliance 

Manual.

In addition, the Company has the right to inspect and 

access all systems, equipment and software as well as 

the books and records of Participants and Authorized 

Traders as necessary to monitor for compliance with 

the requirements of the Company’s recordkeeping and 

audit trail requirements.

The Rules permit the Company to share all 

information so obtained, as well as information 

relating to Orders and trades, with the CFTC staff. 

The rules also provide carve-outs from otherwise 

applicable confidentiality obligations to ensure that 

such information may be shared freely with the 

CFTC. See also Rule 905.

The Company (or the Regulatory Services Provider) 

may record conversations and retain copies of 

electronic communications between Company 

personnel and Participants, Authorized Traders, 

Authorized Users and Clearing Firms pursuant to Rule 

906.

Finally, the Company is permitted under Rule 907 to 

enter into any information-sharing agreements or 

other arrangements or procedures, provided that the 

Company considers such agreement or arrangement to 

be in furtherance of its purposes or duties or to 

comply with any law or regulation.
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

CORE PRINCIPLE 6

POSITION LIMITS OR ACCOUNTABILITY.—

(A) IN GENERAL.—To reduce the potential threat 

of market manipulation or congestion, especially 

during trading in the delivery month, a swap 

execution facility that is a trading facility shall adopt 

for each of the contracts of the facility, as is 

necessary and appropriate, position limitations or 

position accountability for speculators.

(B) POSITION LIMITS.—For any contract that is 

subject to a position limitation established by the 

Commission pursuant to section 4a(a), the swap 

execution facility shall—

(i) set its position limitation at a level no higher than 

the Commission limitation; and

(ii) monitor positions established on or through the 

swap execution facility for compliance with the limit 

set by the Commission and the limit, if any, set by 

the swap execution facility.

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 519 (Position Accountability)

Rule 520 (Position Limits)

Rule 521 (Position Information)

Rule 522 (Aggregation of Positions)

Rule 523 (Position Limits and Position 

Accountability Levels)

Rule 717 (Summary Suspensions and Other 

Summary Actions)

Exhibit O (SwapEx, LLC Compliance Manual)

Section III.C (Market Surveillance)

Section VIII (Position Limits and Position 

Accountability)

The Company has the right to establish position limit 

and position accountability rules. See Rules 519, 520

and 523. See also Section VIII of the Compliance 

Manual. The Company also has the right under Rule 

521 to request position and trading information in 

respect of a given Contract from any Participant, 

Authorized Trader, Authorized User or Customer with 

a position in such Contract in excess of the level set 

by the Company. See also Rules 522; 523. The

Market Regulation Department and the Regulatory 

Services Provider are responsible for, if applicable, 

monitoring for positions that meet or exceed position 

accountability levels. See Section III.C of the 

Compliance Manual. 

The Company’s real-time market monitoring and 

trade surveillance function identify certain events 

relating to open interest and large positions. See

Section III.C of the Compliance Manual.

Failure of a Participant to abide by position limits, if 

applicable, is subject to sanctions imposed by the 

Company as set out in Rule 717. 

CORE PRINCIPLE 7

FINANCIAL INTEGRITY OF TRANSACTIONS.—

The swap execution facility shall establish and 

enforce rules and procedures for ensuring the 

financial integrity of swaps entered on or through 

the facilities of the swap execution facility, 

including the clearance and settlement of the swaps 

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 302 (Participant Eligibility Requirements)

Rule 304 (Authorized Traders)

Rule 305 (Authorized Users)

Rule 401 (Duties and Responsibilities of 

Participants and Authorized Traders)

The Company ensures the financial integrity of its 

Contracts through rules and procedures relating to the 

following:

 criteria that Participants, Authorized Traders and 

Authorized Users, must meet pursuant to Rules 

302, 304 and 305;

 the Participant Committee;
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

pursuant to section 2(h)(1). Rule 404 (Financial and Related Reporting 

Requirements)

Rule 406 (Customers)

Rule 409 (Anti-Money Laundering Obligations)

Chapter 10 (Clearing)

Exhibit O (SwapEx, LLC Compliance Manual)

Section III.E (Financial Surveillance)

Section X.C (Financial Integrity)

Exhibit N-2 (Form SwapEx Participant Agreement)

Exhibit N-3 (Form SwapEx User License 

Agreement)

Exhibit N-4 (CME ClearPort® Developer Utility 

Agreement (with the Chicago Mercantile Exchange 

Inc.))

Exhibit N-11 (Limited Clearing Services Agreement 

with Chicago Mercantile Exchange Inc.) 

Exhibit N-12-C (Clearing Services Agreement with 

LCH.Clearnet Limited)

 powers to limit or suspend access to trading; and

 clearing arrangements with one or more 

Derivatives Clearing Organizations.

The Company’s Rulebook requires that each 

Participant, inter alia: (1) is an Eligible Contract 

Participant; (2) if trading Contracts that are intended 

to be cleared by a Derivatives Clearing Organization, 

is a member of a registered Derivatives Clearing 

Organization or has arrangements in place with a 

Clearing Firm for clearing of such Contracts; (3) is 

not insolvent and has not filed for bankruptcy; (4)

holds all required registrations; and (5) is not subject 

to a statutory disqualification under the CEA. The 

Company’s procedures for monitoring that its 

members retain their Eligible Contract Participant 

status are set out in Section III.E of the Compliance 

Manual. See also Section X.C of the Compliance 

Manual. In addition, each Participant and Authorized 

Trader is subject to certain anti-money laundering 

requirements set out in Rule 409.

In addition, all Participants must execute the SwapEx 

Participant Agreement and SwapEx User License 

Agreement. See Exhibits N-2 and N-3.

The Company’s Participant Committee is responsible 

for determining the standards and requirements for 

initial and continuing Participant eligibility and for 

reviewing appeals of denials of Participant 

applications. The Participant Committee is also 

responsible for approving any rules that would result 

in different categories or classes of Participants 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

See also:

Core Principle 4 (Monitoring of Trading and Trade 

Processing)

Core Principle 8 (Emergency Authority)

Core Principle 12 (Conflicts of Interest)

receiving disparate access to the Trading System. See

Core Principle 12 (Conflicts of Interest).

The Company may also, in the exercise of its 

emergency powers, impose additional restrictions on 

access to the Trading System. See Core Principle 8 

(Emergency Authority).

All Contracts that are required to be cleared pursuant 

to Section 2(h) of the CEA or that are voluntarily 

cleared by the counterparties to a Contract must be 

submitted for clearing through a Derivatives Clearing 

Organization. See Rule 1002. Participants that are 

not themselves Clearing Firms are required to cause 

each of their Clearing Firms to execute a Clearing 

Firm Authorization, pursuant to which each such 

Clearing Firm agrees to, subject to such Clearing 

Firm’s credit limits and/or risk controls, guarantee to 

the relevant Derivatives Clearing Organization the 

transactions in Cleared Contracts executed for the 

account(s) of the Participant, its Authorized Trader(s) 

and/or its or their Customer(s), as applicable. See

Schedule 2 to the SwapEx Participant Agreement. 

See also Rule 1003. Participants and Authorized 

Traders are required pursuant to Rule 1004 to assist 

their Clearing Firm and Derivatives Clearing 

Organization in the clearing of their Contracts. The 

Company has also entered into agreements for 

clearing services with Chicago Mercantile Exchange 

Inc., and LCH.Clearnet Limited. See Exhibits N-11, 

N-12-C and T.
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

CORE PRINCIPLE 8

EMERGENCY AUTHORITY.—The swap 

execution facility shall adopt rules to provide for the 

exercise of emergency authority, in consultation or 

cooperation with the Commission, as is necessary 

and appropriate, including the authority to liquidate 

or transfer open positions in any swap or to suspend 

or curtail trading in a swap.

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 101 (Definition of “Emergency”)

Rule 201 (Board)

Rule 913 (Emergencies)

Exhibit O (SwapEx, LLC Compliance Manual)

Section IV.C.3 (Emergency Rules and Rule 

Amendments)

Section X.B (Emergency Authority)

Rule 913 and Section X.B of the Compliance Manual 

set out the procedures to be taken upon the occurrence 

of an Emergency, which is defined in Rule 101 to 

include any circumstance which, in the opinion of the 

Board, the Chairman or the Chief Executive Officer, 

requires immediate action and which threatens or may 

threaten the fair and orderly trading in, or the 

settlement or integrity of, any Contract traded on or 

through the Trading System. 

If an Emergency occurs, the Board may, subject to the 

CEA and the CFTC Regulations, adopt temporary 

emergency procedures and rules to authorize 

appropriate Officers, Directors or the Board itself 

(subject to appropriate conflict of interest 

considerations) to take such actions that are necessary 

or appropriate to address the emergency, including but 

not limited to:

 suspending or curtailing trading or limiting 

trading to liquidation only;

 extending, limiting or changing trading hours;

 temporarily modifying or suspending rules;

 imposing or modifying price limits; and/or

 imposing or modifying position limits.

Ordinarily Emergency Rules may only be authorized 

by majority vote of a duly constituted meeting of the 

Board, however the Chief Executive Officer may act 

without the vote of the Board, provided that the Board 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

be convened as soon as practicable.

Participants shall be notified of any Emergency Rules 

taken through a Notice to Participants and the 

Company shall use all reasonable efforts to notify the 

CFTC prior to implementing, modifying or 

terminating an Emergency Rule. If practicable, 

Emergency Rules should be filed with the CFTC prior 

to their implementation, however where such prior 

filing is not possible, an Emergency Rule will be filed 

with the CFTC no later than 24 hours after its 

implementation. See Section IV.C.3 of the 

Compliance Manual.

All actions taken in response to an Emergency shall 

be documented and maintained in accordance with the 

Company’s recordkeeping policies.

CORE PRINCIPLE 9

TIMELY PUBLICATION OF TRADING 

INFORMATION.—

(A) IN GENERAL.—The swap execution facility 

shall make public timely information on price, 

trading volume, and other trading data on swaps to 

the extent prescribed by the Commission.

(B) CAPACITY OF SWAP EXECUTION 

FACILITY.—The swap execution facility shall be 

required to have the capacity to electronically 

capture and transmit trade information with respect 

to transactions executed on the facility.

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 407 (Publication of Trade Information)

Rule 525 (Confirmation of Transactions)

Rule 528 (Swap Data Reporting)

Rule 529 (Updating Required Swap Creation 

Data)

Exhibit N-5 (Repository User Agreement with 

DTCC Data Repository (U.S.), LLC)

Exhibit O (SwapEx, LLC Compliance Manual)

Section IX (Transaction Reporting)

In accordance with Part 16 of the CFTC Regulations, 

the Company publishes daily market volume data 

reports for each swap (or class of swap) either by 

reference to the number of contracts traded, in the 

case of standard-sized swaps, or in terms of notional 

value, for non-standard-sized swaps. In addition, the 

Company publishes for each trading day, by tenor of 

the swap, the opening price and the high and low

prices. See Section IX of the Compliance Manual. In 

addition, the Company will publish a settlement price 

for each such swap. See Rule 407. 

The Company submits electronic reports of all 

primary economic terms data for each swap to a 

registered swap data repository immediately following 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

See also:

Core Principle 4 (Monitoring of Trading and Trade 

Processing).

execution of the swap. See Rule 528. All such 

reports meet the standards set out in CFTC Regulation 

45.3, including the requirement to produce a unique 

swap identifier for each transaction. These electronic 

reports discharge the Company’s requirement to 

provide real-time public dissemination of trades 

executed on the Trading System, however the 

Company retains the right to engage a third-party 

service provider to provide public dissemination of 

this trading information. The Company also issues 

confirmations of transactions pursuant to Rule 525.

The Company has the ability to capture electronically 

and subsequently transmit trade information relating 

to transactions executed on the Trading System as part 

of its audit trail procedures. See Core Principle 4 

(Monitoring of Trading and Trade Processing).

CORE PRINCIPLE 10

RECORDKEEPING AND REPORTING.—

(A) IN GENERAL.—A swap execution facility 

shall—

(i) maintain records of all activities relating to the 

business of the facility, including a complete audit 

trail, in a form and manner acceptable to the 

Commission for a period of 5 years;

(ii) report to the Commission, in a form and manner 

acceptable to the Commission, such information as 

the Commission determines to be necessary or 

appropriate for the Commission to perform the 

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 207 (Maintenance of Books and Records by 

the Company)

Rule 518 (Recordkeeping; Audit Trail) 

Rule 907 (Information-Sharing Arrangements)

Exhibit O (SwapEx, LLC Compliance Manual)

Section IV.E (Material Event Notification to 

RSP on Rule and Product Filings to CFTC)

Section V (Other Material Event Notifications)

Rule 207 requires the Company to keep, or cause to 

be kept, complete and accurate books and records 

required to be maintained pursuant to the CEA and 

CFTC Regulations. Such books and records shall be 

retained for at least 5 years and shall be made readily 

available to the CFTC or the Department of Justice for 

the first 2 years of such 5-year period. Rule 518 also 

imposes recordkeeping requirements on any 

Participant submitting an Order, Indications of 

Interest or RFQ to the Trading System or providing 

access to connectivity to the Trading System for 

others. The Rules authorize the Company to enter 

into information-sharing arrangements with, inter 

alia, the CFTC and to provide such information to the 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

duties of the Commission under this Act; and

(iii) shall keep any such records relating to swaps 

defined in section 1a(47)(A)(v) open to inspection 

and examination by the Securities and Exchange 

Commission.

(B) REQUIREMENTS.—The Commission shall 

adopt data collection and reporting requirements for 

swap execution facilities that are comparable to 

corresponding requirements for derivatives clearing 

organizations and swap data repositories.

Section IX (Transaction Reporting)

Section X.A(2) (SEF Compliance Information 

Reporting)

Section X.H (Recordkeeping Requirements)

Section X.J (Equity Transfers)

See also:

Core Principle 4 (Monitoring of Trading and Trade 

Processing)

Core Principle 9 (Timely Publication of Trading 

Information)

CFTC as the Company deems necessary and 

appropriate to exercise a legal or regulatory function. 

See Rule 907. 

Section IX of the Compliance Manual sets out the 

Company’s policies relating to transaction reporting,

including Part 16 reporting, real-time public reporting 

and swap data reporting. Section X.H of the 

Compliance Manual sets out the Company’s 

recordkeeping requirements. Sections IV.E and V of 

the Compliance Manual set out the Company’s 

material event reporting procedures and Section X.J

obliges the Company to notify the CFTC in the event 

of certain equity transfers.

Section X.A(2) of the Compliance Manual requires 

the Company to report to the CFTC, in the manner 

and form acceptable to the CFTC, any information 

that the CFTC determines is necessary or appropriate 

to perform its duties under the CEA. The Company, 

acting through the Market Regulation Department, has 

a similar right to obtain information from each 

Participant as deemed necessary to enable the 

Company to perform its obligations under the CEA 

and CFTC Regulations. 

The Company’s audit trail procedures ensure that, 

except as noted previously with regard to the 

Indication of Collateralization data field, all data 

gathered as part of the audit trail is maintained in 

accordance with the CFTC Regulations. See Core 

Principle 4 (Monitoring of Trading and Trade 

Processing). 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

The Company also provides reports of primary 

economic terms data to a registered swap data 

repository and ensures real-time public dissemination 

of such data. See Core Principle 9 (Timely Publication 

of Trading Information).

CORE PRINCIPLE 11

ANTITRUST CONSIDERATIONS.—Unless 

necessary or appropriate to achieve the purposes of 

this Act, the swap execution facility shall not—

(A) adopt any rules or taking any actions that result 

in any unreasonable restraint of trade; or

(B) impose any material anticompetitive burden on 

trading or clearing.

Exhibit O (SwapEx, LLC Compliance Manual)

Section IV.D (Anti-trust Considerations and Rule 

and Product Submissions)

See also:

Core Principle 2 (Compliance with Rules)

The Rules and the Company’s policies have been 

designed to avoid any unreasonable restraints on trade 

or the imposition of any material anticompetitive 

burden on trading. 

CORE PRINCIPLE 12

CONFLICTS OF INTEREST.—The swap execution 

facility shall—

(A) establish and enforce rules to minimize conflicts 

of interest in its decision-making process; and 

(B) establish a process for resolving the conflicts of 

interest.

Exhibit A (Ownership)

Exhibit B (Directors and Officers)

Exhibit C (Director Fitness Standards)

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 201 (Board)

Rule 203 (Qualifications of Directors, Officers, 

Committee Members, Disciplinary Panel 

Members and Appeal Panel Members

Rule 204 (Standing Committees)

Rule 205 (Additional Committees)

The Rules have been drafted to ensure that the 

Company’s decision-making process includes 

independent perspectives through the inclusion of 

public directors. In particular, the Board of Directors 

must be composed of at least 35%, but no fewer than 

two, public directors. See Rule 201. See also Section 

XII of the Compliance Manual.

Public directors are also included in the Company’s 

three standing committees pursuant to Rule 204 as 

follows:

 the Regulatory Oversight Committee, which is 

responsible for overseeing the Company’s

regulatory program on behalf of the Board, is 

composed exclusively of public directors; 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Rule 206 (Conflicts of Interest)

Rule 710 (Disciplinary Panel)

Rule 903 (Trading by Company Officials 

Prohibited; Misuse of Material, Non-Public 

Information)

Exhibit G-4 (State Street Standard of Conduct)

Exhibit O (SwapEx, LLC Compliance Manual)

Section II.G (Overview on Conflicts of Interest)

Section VI.E (Annual Fitness Review)

Section X.D (Annual Review of Director’s 

Certifications)

Section X.G (Conflicts of Interest)

Section XII (Governance)

Appendix IX (Board Code of Ethics)

 the Nominating Committee, which is responsible 

for identifying suitable candidates for the Board 

and administering the nominations process, is 

composed of at least 51% public directors; and

 the Participant Committee, which is responsible 

for overseeing the admission and continuing 

eligibility of Participants, is composed of at least 

35%, but no fewer than two, public directors.

The CCO is responsible for undertaking a review at 

least annually to verify that Board members serving as 

public directors continue to remain eligible to serve in 

that capacity. See Sections VI.E and X.D of the 

Compliance Manual.

Rule 206 addresses conflicts of interest in decisionmaking, including means to determine whether an 

actual or potential conflict of interest exists as well as 

procedures for decision-making if a conflict of interest 

is present. Members of the Board are also subject to a 

Code of Ethics that includes provisions to mitigate 

conflicts of interest and an obligation to prevent the 

misuse or disclosure of confidential or otherwise nonpublic information. See Appendix IX of Compliance 

Manual. All employees must comply with a separate 

Standard of Conduct containing similar obligations. 

See Exhibit G-4. The Company’s procedures for 

resolving conflicts of interest in its decision-making 

process are set out in Sections II.G and X.G of the 

Compliance Manual.

In addition, Rule 903 prohibits certain “Covered 

Persons,” including Board members, Board committee 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

members, and Disciplinary Panel and Appeals Panel 

Members, from trading directly or indirectly in a 

Contract or other commodity interest on the basis of 

material, non-public information obtained as a result 

of such individual’s responsibilities as a Covered 

Person.

A person serving on a Review Panel may not serve on 

the related Hearing Panel, and vice versa. 

CORE PRINCIPLE 13

FINANCIAL RESOURCES.—

(A) IN GENERAL.—The swap execution facility 

shall have adequate financial, operational, and 

managerial resources to discharge each 

responsibility of the swap execution facility.

(B) DETERMINATION OF RESOURCE 

ADEQUACY.—The financial resources of a swap 

execution facility shall be considered to be adequate 

if the value of the financial resources exceeds the 

total amount that would enable the swap execution 

facility to cover the operating costs of the swap 

execution facility for a 1-year period, as calculated 

on a rolling basis.

Exhibit I (Financial Information)

Exhibit O (SwapEx, LLC Compliance Manual)

Section X.A(1) (Financial Reporting)

The Company shall maintain financial resources that 

exceed the total amount needed to cover its operating 

costs for a one-year period, as calculated on a rolling 

basis. The valuation of such resources will be 

adjusted to reflect market and credit risk. 

The Company’s financial resources will also include 

unencumbered, liquid assets equal to at least six 

months’ operating costs.

The Company has established internal procedures to 

comply with the on-going financial reporting 

requirements of CFTC Rule 37.1306 so that the 

Company can calculate, on a quarterly basis, its 

anticipated operating costs for the next twelve months, 

and the value of its financial resources to cover those 

operating costs. See Section X.A(1) of the 

Compliance Manual.

CORE PRINCIPLE 14

SYSTEM SAFEGUARDS.—The swap execution 

facility shall—

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 408 (Disaster Recovery; Business 

Continuity)

The Company has policies and procedures in place 

related to information technology, including system 

safeguards, that form part of the wider program of risk 

analysis and oversight policies and procedures in 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of 

operational risk, through the development of 

appropriate controls and procedures, and automated 

systems, that—

(i) are reliable and secure; and 

(ii) have adequate scalable capacity;

(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery 

that allow for—

(i) the timely recovery and resumption of operations; 

and 

(ii) the fulfilment of the responsibilities and 

obligations of the swap execution facility; and

(C) periodically conduct tests to verify that the 

backup resources of the swap execution facility are 

sufficient to ensure continued—

(i) order processing and trade matching; 

(ii) price reporting;

(iii) market surveillance and

(iv) maintenance of a comprehensive and accurate 

audit trail.

Exhibit O (SwapEx, LLC Compliance Manual)

Section XI (Operational Requirements)

Exhibit S (Trading Data Maintenance)

Exhibit V (Technology Questionnaire)

place at State Street Bank and Trust Company, which 

follows generally accepted standards and best 

practices with respect to the development, operation, 

reliability, security and capacity of automated 

systems. Compliance with the technology policies is 

under the supervision of the Chief Technology Officer 

and the CCO. The Information Technology Risk 

department undertakes independent audits to assess 

compliance with those policies and procedures on an 

on-going basis. See also Section XI of the 

Compliance Manual.

The Company’s business, continuity and disaster 

recovery policies also require that a “mirror image” of 

all trade information is maintained at a separate data 

center. The Company’s systems reside with a 

managed hosting provider, and the ability to add new 

resources in terms of storage space, network 

bandwidth, and computing power will be constantly 

monitored and can be scaled up as needed. 

Additionally, all data will be backed up regularly to 

maintain integrity for all trade information required by 

law, regulation or internal policies and procedures to 

be maintained by the Company.

The Company intends to participate in industry-wide 

business continuity and disaster recovery exercises 

organized by the Futures Industry Association. The 

Market Regulation Department will submit 

information to the Division of Market Oversight 

relating to material changes to the Company’s 

automated systems as part of the CFTC’s Market
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Continuity Program. 

The Company’s chief information security officer

conducts periodic checks, no less than yearly, to 

assess sufficiency of systems back-up resources.

Participants are required to have written disaster 

recovery and business continuity procedures in place. 

See Rule 408.

CORE PRINCIPLE 15

DESIGNATION OF CHIEF COMPLIANCE 

OFFICER.—

(A) IN GENERAL.—Each swap execution facility 

shall designate an individual to serve as a chief 

compliance officer.

(B) DUTIES.—The chief compliance officer shall—

(i) report directly to the board or to the senior officer 

of the facility;

(ii) review compliance with the core principles in 

this subsection;

(iii) in consultation with the board of the facility, a 

body performing a function similar to that of a 

board, or the senior officer of the facility, resolve 

any conflicts of interest that may arise;

(iv) be responsible for establishing and 

administering the policies and procedures required 

to be established pursuant to this section;

(v) ensure compliance with this Act and the rules 

Exhibit M-1 (SwapEx, LLC Rulebook)

Rule 202(a) (Officers)

Rule 203 (Qualifications of Directors, Officers, 

Committee Members, Disciplinary Panel 

Members and Appeal Panel Members

Rule 703 (Reports of Investigations)

Rule 705 (Review of Investigation Reports)

Rule 708 (Answer to Notice of Charges)

Rule 709 (Settlements)

Rule 710 (Disciplinary Panel)

Rule 714 (Sanctions)

Rule 716 (Summary Imposition of Fines) 

Rule 717 (Summary Suspension and Other 

Summary Actions)

Rule 718 (Rights and Responsibilities After 

Suspension or Termination)

The Company has a CCO, who is responsible for 

taking reasonable steps to ensure compliance with the 

Act and the rules of the Commission applicable to 

swap execution facilities. The CCO is appointed by 

the Board of the Company and must meet certain 

fitness standards, including that he or she is not 

subject to a statutory disqualification under the CEA. 

See Rules 202, 203.

The duties and responsibilities of the CCO are 

primarily set out in Sections II, IV, VI, and X.G of the 

Company’s Compliance Manual and include the 

following: 

 resolving any conflicts of interest that arise in 

connection with the operations of the Company; 

 addressing instances of non-compliance by the 

Company’s directors, officers or employees with 

the Company’s own internal policies or 

procedures or with the requirements of the CEA 

or the CFTC Regulations applicable to swap 

execution facilities;

 generating a compliance manual that is designed 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

and regulations issued under this Act, including 

rules prescribed by the Commission pursuant to this 

section; and

(vi) establish procedures for the remediation of 

noncompliance issues found during compliance 

office reviews, look backs, internal or external audit 

findings, self-reported errors, or through validated 

complaints.

(C) REQUIREMENTS FOR PROCEDURES.—In 

establishing procedures under subparagraph (B)(vi), 

the chief compliance officer shall design the 

procedures to establish the handling, management 

response, remediation, retesting, and closing of 

noncompliance issues.

(D) ANNUAL REPORTS.—

(i) IN GENERAL.—In accordance with rules 

prescribed by the Commission, the chief compliance 

officer shall annually prepare and sign a report that 

contains a description of—

(I) the compliance of the swap execution facility 

with this Act; and

(II) the policies and procedures, including the code 

of ethics and conflict of interest policies, of the swap 

execution facility.

(ii) REQUIREMENTS.—The chief compliance 

officer shall—

(I) submit each report described in clause (i) with the 

appropriate financial report of the swap execution 

Exhibit O (SwapEx, LLC Compliance Manual)

Section II (Market Regulation Department and 

the Chief Compliance Officer)

Section IV (Listing New Swaps and Implementing 

New Rules and Rule Amendments)

Section VI (Annual Report)

Section X.G (Conflicts of Interest)

to promote compliance by the Company and its 

directors, officers and personnel with the 

requirements of the CEA and CFTC Regulations 

applicable to the Company’s business activities;

 designing and administering a written code of 

conduct designed to promote ethical conduct by 

the Company and its directors, officers and 

employees and to prevent ethical violations; 

 supervising key elements of the Company’s selfregulatory program, including: (1) trade 

surveillance; (2) real-time market monitoring; (3) 

audit trail requirements; (4) enforcement and 

disciplinary proceedings; and (5) oversight of the 

Company’s Participants; and

 drafting, reviewing and approving submissions to 

the CFTC in connection with listing any new 

swaps for trading or making any additions or 

amendments to the Rules.

The CCO plays a key role in the Company’s 

disciplinary procedures. See Rules 703, 705, 708-10, 

714, 716-18. See also Core Principle 2 (Compliance 

with the Rules).

The CCO is the officer in charge of the production of 

the Company’s Annual Compliance Report, including 

gathering relevant information, drafting, and ensuring 

that the report has been reviewed by the Regulatory 

Oversight Committee and the Board. The CCO is also 

responsible for ensuring that the Annual Report 

contains all information required by the CEA and 
SwapEx, LLC: Swap Execution Facility Application For Registration

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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

facility that is required to be submitted to the 

Commission pursuant to this section; and

(II) include in the report a certification that, under 

penalty of law, the report is accurate and complete.

CFTC Regulations and must certify that, under 

penalty of law, the report is accurate and complete. 

The CCO reports to the Board or the most senior 

officer of the Company (at the Company’s discretion), 

and may only be removed by a majority vote of the 

Board, in which case a replacement CCO, or 

temporary replacement CCO, must be appointed 

immediately. The appointment of the CCO, and of 

any replacement, must be notified to the CFTC within 

two (2) business days.