CHI:2222558.7

Chicago Mercantile Exchange Inc. – Exhibit L (revised February 10, 2016)

Attach as Exhibit L, a narrative and any other form of documentation that may be provided under other Exhibits herein, that describes the manner 

in which the Applicant is able to comply with each core principle. Such documentation must include a regulatory compliance chart setting forth 

each core principle and providing citations to the Applicant’s relevant rules, policies, and procedures that address each core principle. To the 

extent that the application raises issues that are novel or for which compliance with a core principle is not self-evident, include an explanation of 

how that item and the application satisfy the core principles.

COMPLIANCE WITH CORE PRINCIPLES

Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Sec. 5h Applications – “No person may 

operate a facility for the trading or 

processing of swaps unless the facility 

is registered as a swap execution facility 

or as a designated contract market under 

this section.” 

CME SEF is submitting a FORM SEF and exhibits thereto (each an 

“Exhibit” and collectively, the “Exhibits”) in accordance with Commodity 

Exchange Act § 5h and Appendix A to 17 C.F.R. Part 37, as its application 

for registration as a swap execution facility (the “Application”).

All materials submitted with the 

Application

Sec. 5h(f) CORE PRINCIPLES FOR 

SWAP EXECUTION FACILITIES

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—

(1) All core principles described in

See generally the Application and this Exhibit L. All materials submitted with the 

Application
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Section 5h of the Act; and

(2) Any requirement that the

Commission may impose by rule or

regulation pursuant to Section 8a(5) of

the Act.

(b) Reasonable discretion of a swap

execution facility. Unless otherwise

determined by the Commission by rule

or regulation, a swap execution facility

described in paragraph (a) of this

section shall have reasonable discretion

in establishing the manner in which the

swap execution facility complies with

the core principles described in section

5h of the Act.

See generally the Application. Exhibit M–CME SEF Rulebook

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 the terms and

conditions of the swaps traded or

processed on or through the swap

execution facility and any limitation on

access to the swap execution facility;

The CME Inc. Board of Directors (“Board”) adopted Rules, and from 

time to time adopts amendments and supplements to such Rules, to 

promote a free and open market on CME SEF, to maintain appropriate 

business conduct and to provide protection to the public in its dealings 

with CME SEF and its Participants. See Chapter 4 (Enforcement of 

Rules), Rule 400 (General Provisions). CME SEF shall publish a notice 

with respect to each addition to, modification of, or clarification of, the 

SEF Rules or any action to implement any SEF Rules, at the very least 

on CME SEF’s website. See Rule 109 (Notices to Participants).

Any person initiating or executing a transaction on or subject to the 

Rules of CME SEF directly or through an intermediary, and any person 

for whose benefits such transaction has been initiated or executed,

expressly consents to be bound by and comply with the Rules of CME 

SEF in relation to such transactions, including, but not limited to, rules 

requiring cooperation and participation in investigatory and disciplinary 

Rule 109 (Notices to 

Participants)

Rule 112 (Withdrawal of a 

Participant)

Rule 114 (Disclosures and 

Supervision)

Chapter 4 (Enforcement of 

Rules)

Rule 400 (General Provisions)

Rule 418 (Consent to CME SEF 

Jurisdiction)
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

processes. See Rule 418 (Consent to CME SEF Jurisdiction). 

Participants who withdraw from CME SEF shall remain bound by the 

SEF Rules, the Clearing House Rules and Applicable Law, in each case 

to the extent applicable to it, and subject to the jurisdiction of CME SEF 

and the Clearing House with respect to any and all matters arising from, 

related to, or in connection with, the status, actions or omissions of such 

Participant prior to withdrawal. See Rule 112 (Withdrawal of a 

Participant).

The Board created committees to which it has delegated responsibility 

for the investigation and imposition of penalties for violations of CME 

SEF Rules. See Chapter 4 (Enforcement of Rules), Rule 400 (General 

Provisions). In addition, the Board also delegated responsibility, as set 

forth in the Rules, for the investigation and imposition of penalties for 

violations of CME SEF Rules, to the Market Regulation Department. 

See Chapter 4 (Enforcement of Rules), Rule 400 (General Provisions). 

Each Participant shall be responsible for establishing, maintaining, and 

administering reasonable supervisory procedures to ensure that its 

Authorized Traders, Supervised Persons, and Authorized Brokers 

comply with Applicable Law, the SEF Rules and Clearing House Rules. 

See Rule 114 (Disclosures and Supervision). 

No Participant shall provide or allow to be provided direct access to 

CME SEF to any Customer or non-Participant. All Orders, quotes and 

Trades must be entered into CME SEF by Authorized Traders using 

assigned Trader IDs. See Rule 515 (Direct Access by Customers NonParticipants Prohibited). All trading in CME SEF products must occur 

on or through CME SEF facilities and in accordance with CME SEF 

Rules. See Rule 520 (Trading Confined to CME SEF Facilities). CME 

SEF may provide various execution methods for Permitted Transactions. 

See Rule 521 (Required Transactions), Rule 523 (Permitted 

Transactions).

Rule 515 (Direct Access by 

Customers, Non-Participants 

Prohibited)

Rule 520 (Trading Confined to 

CME SEF Facilities)

Rule 521 (Required 

Transactions)

Rule 523 (Permitted 

Transactions)
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Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

The terms and conditions of Swaps will be included as product chapters 

in the SEF Rulebook, which will be publicly posted.

(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 to

provide market participants with

impartial access to the market and to

capture information that may be used in

establishing whether rule violations

have occurred; 

The Board adopted Rules to promote a free and open market on CME 

SEF, to maintain appropriate business conduct and to provide protection 

to the public in its dealings with CME SEF and its Participants. See 

Chapter 4 (Enforcement of Rules), Rule 400 (General Provisions). In 

furtherance of these objectives, Rule 432 (General Offenses) lists

examples of prohibited conduct, including, but not limited to: (D) to 

create or report a false or fictitious trade; (H) to engage in, or attempt to 

engage in, the manipulation of prices of CME SEF products or to 

purchase or sell, or offer to purchase or sell CME SEF products or any 

underlying commodities or securities, for the purpose of upsetting the 

equilibrium of the market or creating a condition in which prices do not 

or will not reflect fair market values; (N) to comply with all disclosure 

requirements set forth in applicable SEF Rules, CFTC, SEC, and NFA 

Rules and Regulations; (O) for a Participant to permit the use of facilities 

or privileges in a manner that is detrimental to the interest or welfare of 

CME SEF or results in a violation of CME SEF Rules or the CEA; and 

(P) for a Participant to fail to maintain minimum financial requirements.

CME SEF will provide its services on a fair, open, equal and nondiscriminatory basis to all market participants that meet its transparent 

eligibility criteria for access to CME SEF. See generally Chapter 1 

(Access); see also Rule 101 (Eligibility and Participant Qualification); 

Rule 102 (Continued Eligibility); Rule 103 (Authorized Brokers or 

Authorized Managers); Rule 104 (Authorized Traders); Rule 105 

(Participant Application Process); Rule 107 (Customers). Dues, 

assessments and fees are generally applicable. See Rule 108 (Dues, 

Rule 101 (Eligibility and 

Participant Qualification)

Rule 102 (Continued 

Eligibility)

Rule 103 (Authorized Brokers 

or Authorized Managers)

Rule 104 (Authorized Traders)

Rule 105 (Participant 

Application Process)

Rule 107 (Customers)

Rule 108 (Dues, Assessments 

and Fees)

Rule 112 (Withdrawal of 

Participant)

Rule 114 (Disclosures and 

Supervision)

Chapter 4 (Enforcement of 
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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Assessments and Fees); see also Exhibit K. 

In addition, Chapter 5 (Qualifications for Execution and Trading 

Practices) explicitly prohibits several trading and trade processing 

abuses, including, but not limited to Withholding Orders (Rule 529), 

Subordinating Priority of Customers’ Orders (Rule 530), Trading 

Against Customers’ Orders (Rule 531), Disclosing Orders (Rule 532), 

Simultaneous Buy and Sell Orders for Different Beneficial Owners (Rule 

533), Wash Trades (Rule 534), and Pre-arranged, Pre-Negotiated, and 

Non-competitive trades, in general. (Rule 539).

Each Participant shall be responsible for establishing, maintaining, and 

administering reasonable supervisory procedures to ensure that its 

Authorized Traders, Supervised Persons, and Authorized Brokers 

comply with Applicable Law, the SEF Rules and Clearing House Rules. 

See Rule 114 (Disclosures and Supervision). Any person initiating or 

executing a transaction on or subject to the Rules of CME SEF directly 

or through an intermediary, and any person for whose benefits such 

transaction has been initiated or executed, expressly consents to be 

bound by and comply with the Rules of CME SEF in relation to such 

transactions, including, but not limited to, rules requiring cooperation 

and participation in investigatory and disciplinary processes. See Rule 

418 (Consent to CME SEF Jurisdiction). Participants who withdraw from 

CME SEF shall remain bound by the SEF Rules, the Clearing House 

Rules and Applicable Law, in each case to the extent applicable to it, and 

subject to the jurisdiction of CME SEF and the Clearing House with 

respect to any and all matters arising from, related to, or in connection 

with, the status, actions or omissions of such Participant prior to 

withdrawal. See Rule 112 (Withdrawal of a Participant).

In addition, the Board created committees to which it has delegated 

responsibility for the investigation and imposition of penalties for 

violations of CME SEF Rules. See Chapter 3 (CME SEF Committees); 

Rules)

Rule 400 (General Provisions)

Rule 406 (Probable Cause

Committee)

Rule 407 (Investigation, 

Assignment for the Hearing 

and Notice of Charges)

Rule 408 (Conduct of 

Hearings)

Rule 409 (Letters of Warning)

Rule 411 (Appeal to a 

Hearing Panel of the Board of 

Directors)

Rule 413 (Summary Access 

Denial Actions)

Rule 414 (Investigations by 

Other Self-Regulatory 

Organizations)

Rule 432 (General Offenses)

Chapter 5 (Trading Practices)

Rule 529 (Withholding Orders 
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Chapter 4 (Enforcement of Rules), Rule 400 (General Provisions). The 

Board also delegated responsibility, as set forth in the Rules, for the 

investigation and imposition of penalties for violations of CME SEF 

Rules to the Market Regulation Department. See Chapter 4 (Enforcement 

of Rules), Rule 400 (General Provisions), Rule 407 (Investigation, 

Assignment for Hearing and Notice of Charges).

Upon conclusion of an investigation, the Market Regulation Department 

may issue a warning letter to any party as a result of the investigation. 

Such letter shall not constitute either the finding of a Rule violation or a 

penalty. See Rule 407 (Investigation, Assignment for Hearing and Notice 

of Charges), Rule 409 (Letters of Warning). When the Market 

Regulation Department has reasonable cause to believe an offense has 

occurred, it shall produce an investigation report to the Probable Cause 

Committee (“PCC”). See Rule 406 (Probable Cause Committee), Rule 

407 (Investigation, Assignment for Hearing and Notice of Charges). The 

PCC shall try to review the Market Regulation investigation report 

deemed complete within thirty (30) days of receipt. See Rule 406 

(Probable Cause Committee). Following its review, the PCC shall take 

one of the following actions: A) issue charges where it determines that a 

reasonable basis exists for finding that a violation of a CME SEF Rule 

may have occurred which warrants disciplinary action; B) direct a 

warning letter to be issued where it determines that a reasonable basis 

exists for finding that a violation of a CME SEF Rule may have 

occurred, but that the issuance of charges is unwarranted; C) direct that 

no further action be taken where it determines that no reasonable basis 

exists for finding that a violation of CME SEF Rules may have occurred;

or D) direct the Market Regulation Department to investigate the matter 

further. See Rule 406 (Probable Cause Committee). The Market 

Regulation Department may request an appeal to a hearing panel of the 

Board (“Appellate Panel”) regarding any refusal by the PCC to issue 

those charges requested by the Market Regulation Department. See Rule 

Prohibited)

Rule 530 (Priority of 

Customers’ Orders)

Rule 531 (Trading Against 

Customers’ Orders 

Prohibited)

Rule 532 (Disclosing Orders 

Prohibited)

Rule 533 (Simultaneous Buy 

and Sell Orders for Different 

Beneficial Owners)

Rule 534 (Wash Trades 

Prohibited)

Rule 539 (Pre-arranged, Prenegotiated and Noncompetitive Trades 

Prohibited)

Exhibit N-CME SEF User 

Agreement
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

411 (Appeal to a Hearing Panel of the Board of Directors).

Where the PCC has issued charges for an alleged Rule violation, the 

Market Regulation Department shall issue a charging memorandum to 

the respondent with a brief statement of factual allegations that identifies 

the charged Rule violation(s). See Rule 407.B. (Notice of Charges; 

Opportunity for Hearing). The notice of charges shall advise the 

respondent that the matter will be heard by a Business Conduct 

Committee (“BCC”) Panel and of the time and place of the hearing. See 

Rule 407.C. (Notice of Charges; Opportunity for Hearing). The 

Respondent shall have 21 days after notice to submit a written answer to 

the charges. See Rule 407.C. (Answer to Charges). 

A respondent that is the subject of an investigation or who is charged 

with a Rule violation(s) may submit for consideration by the Panel a 

written offer of settlement in disposition of such investigation or charges. 

See Rule 408.C. (Offers of Settlement). In submitting an offer of 

settlement, the respondent waives his right to a contested hearing and to 

appeal the Panel’s decision if the offer is accepted; the respondent also 

waives any claim of bias or prejudgment on the part of the Panel. See 

Rule 408.C. (Offers of Settlement).

If the offer of settlement is accepted, the BCC’s decision shall be final on 

the date it is signed by the Hearing Panel Chair. See Rule 408.C. (Offers 

of Settlement). If not, then, promptly following a hearing, the 

respondent shall be issued a written decision of the Panel’s findings, 

which shall include: the notice of charges (or a summary thereof); the 

answer to the charges, if any (or a summary thereof); a brief summary of 

the evidence produced at the hearing; a statement of findings and 

reasoned conclusions with respect to each charge, including the specific 

Rules which the respondent is found to have violated; a declaration of 

any penalty imposed and the effective date of such penalty; and the 

availability, if any, of an appeal of the decision within the CME Group or 
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

to the Commodity Futures Trading Commission. See Rule 408.E. 

(Decisions). In general, a Participant found guilty of an offense or 

otherwise aggrieved by a final decision of the BCC, may request an 

appeal to an Appellate Panel provided that the decision assesses a 

monetary sanction greater than $10,000 and/or an access denial or 

suspension of any Participant privileges for greater than five business 

days against the Participant. See Rule 411 (Appeal to a Hearing Panel of 

the Board of Directors).

The Chief Regulatory Officer or his delegate, upon a good faith 

determination that there are substantial reasons to believe that such 

immediate action is necessary to protect the best interests of CME SEF, 

may order that: 1) any party be denied access to any or all CME Group 

markets, including CME SEF; 2) any party be denied access to the 

Globex platform; 3) any party be denied access to any other electronic 

trading or clearing platform owned or controlled by CME Group; or (4) 

any Participant be immediately removed from any trading floor owned or 

controlled by CME Group. See Rule 413.A. (Authority to Deny Access).

If a self-regulatory organization that is a party to an information sharing 

agreement with CME SEF requests assistance in connection with an 

investigation, the Chief Regulatory Officer may direct a party subject to 

the jurisdiction of CME SEF pursuant to Rule 418 to submit to an 

examination by the requesting self-regulatory organization and to 

produce information pertinent to that investigation. See Rule 414 

(Investigations by Other Self-Regulatory Organizations)

(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

Chapter 1 of the CME SEF rulebook establishes access criteria. Chapter 2 

of the CME SEF rulebook establishes the powers and duties of the Board 

of Directors, including the establishment of emergency powers and the 

ability to establish facility rules for access. Chapter 4 (Enforcement of 

Rules) provides CME SEF with the authority to adopt rules, investigate 

business conduct, trading practices, sales practices, trading ethics or other 

Exhibit M–SEF Rules

Exhibit N–Regulatory Services 

Agreement

Exhibit N-CME SEF User 
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actions that threaten the integrity of CME SEF. CME SEF has the 

authority to conduct inquiries, investigations and impose sanctions on 

persons subject to CME SEF jurisdiction. 

Chapter 5 of the CME SEF rulebook outlines the trading qualifications and 

regulations (Rules 512–516), trading practice rules (Rules 520–562), 

including block trades (Rule 526), and Globex and CME Direct electronic 

trading system rules (Rules 574–580). 

Chapter 6 of the CME SEF rulebook provides for arbitration of disputes 

between persons subject to the jurisdiction of CME SEF. Chapter 7 

establishes a force majeure provision for the operation of CME SEF. 

Chapter 8 establishes certain rules and procedures related to the clearing 

of transactions related to CME SEF. 

Agreement

Exhibit O–Compliance Manual

Exhibit P–Disciplinary and 

Enforcement Protocols

Exhibit Q–Trading Systems 

Overview

Exhibit R–Trade Practice Rules

Exhibit S–Trade Data Retention

(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) of the Act, 

the swap dealer or major swap 

participant shall be responsible for 

compliance with the mandatory trading 

requirement under section 2(h)(8) of the 

Act.

When a Swap Dealer or Major Swap Participant enters into or facilitates a 

swap that is subject to the mandatory clearing requirement of CEA § 2(h), 

the Swap Dealer or Major Swap Participant shall be responsible for 

compliance with the mandatory trading requirement under Section 2(h)(8) 

of the Act. See Rule 115 (Additional Duties and Responsibilities of Swap 

Dealers and Major Swap Participants)

Rule 115 (Additional Duties 

and Responsibilities of Swap 

Dealers and Major Swap 

Participants)

Core Principle 3 

Swaps Not Readily Susceptible to 

Manipulation –

“The swap execution facility shall 

permit trading only in swaps that are not 

readily susceptible to manipulation.”

Swaps listed for trading on CME SEF will conform to the requirements 

set forth at Appendix C to Part 38 of CFTC Regulations. Swaps listed 

for trading on CME SEF will be reviewed by the CFTC under CFTC 

Regulation 39.5 and Part 40 Regulations, as applicable, prior to listing.

Exhibit O–Compliance Manual
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Core Principle 4 

Monitoring of Trading and Trade 

Processing –

The swap execution facility shall:

(a) Establish and enforce rules or

terms and conditions defining, or

specifications detailing:

(1) Trading procedures to be used in

entering and executing orders traded on

or through the facilities of the swap

execution facility; and

(2) Procedures for trade processing of

swaps on or through the facilities of the

swap execution facility; and

Establish trading procedures – The following rules establish trading 

procedures to be used in entering and executing orders traded on or 

through the facilities of CME SEF:

Rule 104 (Authorized Traders) requires Participants to designate an 

Authorized Trader(s), who will conduct all CME SEF Activity on behalf 

of the Participant. Rule 515 (Direct Access by Customers, NonParticipants Prohibited) restricts direct access to CME SEF to Authorized 

Traders using assigned Trader IDs. Rule 520 (Trading Confined to CME 

SEF Facilities) requires trading of CME SEF products on or through 

CME SEF Facilities. Rule 521 (Required Transactions) lists the methods 

prescribed for executing Required Transactions.

CME SEF may provide various execution methods for Permitted 

Transactions. A Permitted Transaction submitted into CME SEF and in 

compliance with all written record requirements established by CME 

SEF shall be deemed to have been executed on CME SEF and subject to 

all SEF Rules insofar as applicable. See Rule 523 (Permitted 

Transactions). Rule 526 (Block Trades) sets parameters for the execution 

of Block Trades. Rule 533 (Simultaneous Buy and Sell Orders for 

Different Beneficial Owners) sets exposure parameters for execution of 

simultaneous buy and sell Orders. Rule 536 (Recordkeeping 

Requirements for Globex or CME Direct, and Negotiated Trades)

establishes recordkeeping requirements for each part of Order execution.

Rule 547 (Discretionary Orders) generally limits the parameters of an 

Order to price and time at execution. Rule 548 (Priority of Execution) 

generally requires Non-discretionary Customer Orders to executed in 

order of receipt. Rule 559 (Position Limits and Exemptions) lists 

exemptions to the position limits established in the Position 

Accountability and Reportable Level Table. Rule 560 (Position 

Accountability) requires generally requires persons who own or control 

contracts traded on CME SEF to maintain records of their activity.

Rule Chapter 4

Rule Chapter 5

Exhibit O; Compliance Manual

Exhibit N–CME SEF User 

Agreement

Exhibit N–Regulatory Services 

Agreement

Exhibit Q; Trading Systems 

Overview

Exhibit S; Trade Data Retention
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Enforce trading procedures – The following rules enforce trading 

procedures to be used in entering and executing orders traded on or 

through the facilities of CME SEF:

Rule 512 (Reporting Infractions) requires complete and timely 

submission of data, records, and other information required by the CME 

SEF Rules. It also outlines a procedure for the imposition of summary 

fines. Rule 527 (Errors and Mishandling of Customer Orders) assigns 

responsibility for remedial actions or losses caused by erroneous or 

mishandled Orders to the offending Participant. Rule 540 (Responsibility 

for Customer Orders) imposes an obligation of due diligence on 

Participants or Authorized Brokers, who execute Customer Orders. Rule 

561 (Reports of Large Positions) states the required content and format 

for reports on large positions. Rule 562 (Position Limit Violations)

defines a position limit violation and lists circumstantial exceptions. Rule 

400 (General Provisions) states that the Board adopted Rules and 

delegated responsibility to committees for the investigation, hearing, and 

imposition of penalties for Rule violations. Rule 401 (Chief Regulatory 

Officer) provides CME SEF with the right to inspect or access systems 

used by Participants in connection with SEF Activity. Rule 432 (General 

Offenses) requires minimum financial, recordkeeping and reporting. All 

Participants are under a duty to continue to meet eligibility requirements 

in order to access CME SEF. See Rule 102 (Continued Eligibility) 

If the Market Regulation Department detects any trading abuses, it will 

conduct a preliminary investigation and confer with CME SEF to 

determine appropriate enforcement action to be taken in accordance with 

CME SEF Rules. See Chapter 4 (Enforcement of Rules) – Rule 400 

(General Provisions), Rule 407 (Investigation, Assignment for Hearing 

and Notice of Charges). CME SEF has the authority to enforce 

compliance with all CME SEF rules, including trade practice and antimanipulation rules. Rule 418 (Consent to CME SEF Jurisdiction) ( 
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specifying that by becoming a Participant or by accessing, or entering an 

Order or submitting a Swap on the SEF Platform, a Person consents to 

submit to the jurisdiction of CME SEF); Rule 432 (General Offenses) 

(stating that it is an offense to violate any CME SEF Rule). Position limit 

violations are addressed in Rule 562. 

Separately, CME SEF has the ability, at any time, to revoke, suspend, 

limit, condition, restrict, or qualify the trading privileges of any 

Participant if CME SEF determines such action necessary or appropriate 

to protect CME SEF, the Clearing House, Clearing Members or a 

Contract Market. See Rule 106 (Access Privileges of a Participant). CME 

SEF also may, in its sole discretion, revoke or suspend the designation of 

an Authorized Trader of the Participant. See Rule 501 (Authorized 

Traders); and Rule 114 (Disclosure and Supervision) (requiring 

Participants to monitor their Authorized Traders Supervised Persons and 

Authorized Brokers to ensure they comply with the SEF Rules, Clearing 

House Rules, NFA Rules and Applicable Law). 

Establish procedures for trade processing – The following rules 

establish procedures for trade processing of swaps on or through the 

facilities of CME SEF:

Rule 501 (Authorized Traders) requires Participants to designate an 

Authorized Trader(s), who will conduct all CME SEF Activity on behalf 

of the Participant, in accordance with Rule 104. Rule 576 (Identification 

of Globex or CME Direct Terminal Operators) requires the use of unique 

user IDs to access Globex or CME Direct. Rule 579 (Global Command 

Center) outlines the scope and accessibility of support provided by the 

GCC. Rule 580 (CME Globex or CME Direct Trade Matching 

Algorithms) provides a link to information about trade matching 

algorithms. Rule 588 (Trade Cancellations and Price Adjustments)

outlines the scope of the Global Command Center’s authority to review 
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trades, make price adjustments, and cancel trades.

Enforce procedures for trade processing – The following rules enforce 

procedures for trade processing of swaps on or through the facilities of 

CME SEF:

Rule 400 (General Provisions) states that the Board adopted Rules and 

delegated responsibility to committees for the investigation, hearing, and 

imposition of penalties for Rule violations. CME will provide market 

regulation services that include the use of computerized surveillance 

programs to monitor and detect the following types of trading abuses: 

(A) trading ahead and pre-arranged trading; (B) wash trades; (C) abusive 

trading at the high or low; (D) fraudulent trading; (E) abusive cross 

trades; and (F) certain other categories of trading abuses as requested by 

CME SEF. Only eligible participants may directly access CME SEF. See 

Rule 574 (Globex or CME Direct Access Restrictions). Rule 523 

(Permitted Transactions) gives CME SEF discretion in providing 

execution methods for Permitted Transactions. Rule 524 (Uncleared 

Swaps) requires Participants to enter written agreements governing the 

execution of uncleared Swaps prior to Order. Rule 526 (Block Trades)

sets parameters for the execution of Block Trades. Rule 527 (Errors and 

Mishandling of Customer Orders) assigns responsibility for remedial 

actions or losses caused by erroneous or mishandled Orders to the 

offending Participant. Rule 536 (Recordkeeping Requirements for 

Globex or CME Direct and Negotiated Trades) establishes recordkeeping 

requirements for each part of Order execution.

Trade practice violations are established in Rules 529 through 534, 

specifically: Withholding Orders Prohibited (Rule 529); Priority of 

Customers’ Orders over Participant’s (Rule 530); Trading Against 

Customers’ Orders Prohibited (Rule 531); Disclosing Orders Prohibited 

(Rule 532); Simultaneous Buy and Sell Orders from Different Beneficial 
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Owners (Rule 533); and Wash Trades Prohibited (Rule 534).

Each Participant, Authorized Broker or Customer, and employees of the 

foregoing must keep full, complete and systematic records, including 

records created or transmitted electronically, together with all pertinent 

data and memoranda, of all transactions relating to its business of dealing 

in swap and options transactions in accordance with CFTC Regulation 

1.35. Such records must be retained for a minimum of five years in 

permanent form, and shall at all times be open to inspection by CME 

SEF staff or any representative of the CFTC or the United States 

Department of Justice, and to the Securities and Exchange Commission 

in regard to swaps as defined in section 1a(47)(A)(iv) of the Act.

CME SEF may require a Participant to furnish (periodically or on a 

particular occasion) information concerning the Participant’s SEF 

Activity or open trading positions, swaps to which the Participant is a 

party, or other information related to SEF Activity. See Rule 536.F. 

(Retention of Records). CME SEF may contract with and provide 

information to a Regulatory Services Provider in connection with the 

performance of its functions. See Rule 589 (Regulatory Services 

Provider)

It shall be an offense for a Participant to permit the use of facilities or 

privileges in a manner that is detrimental to the interest or welfare of 

CME SEF or results in a violation of CME SEF Rules or the CEA – See 

Rule 432.O. (General Offenses) – or to commit an act which is 

detrimental to the interest or welfare of CME SEF or to engage in any 

conduct which tends to impair the dignity or good name of CME SEF –

See Rule 432.Q. (General Offenses).
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

(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.

CME SEF Rules broadly prohibit fraudulent acts, market disruption, 

market manipulation and misstatements of material fact, and CME SEF 

has mechanisms in place for surveillance of the contract market and 

enforcement of the CME SEF Rules. Chapter 5 (Qualifications for 

Execution and Trading Practices) establishes CME SEF’s power to 

investigate suspected violations of SEF Rules, take enforcement actions 

or impose sanctions against Participants, and refer violations to the 

CFTC. 

Prohibited acts include withholding orders (Rule 529), front-running 

(Rule 530), trading against customer orders (Rule 531), disclosing orders 

without permission (Rule 532), wash trades (Rule 534), prearranged 

trades that do not meet an exemption (Rule 539)

CME will monitor and analyze open positions and trading to guard 

against manipulative, disruptive, dishonest or distortive practices. 

Additionally, CME will monitor position limits and collect, assemble, 

and monitor large trader positions for concentrations of ownership and 

potential collusive or concerted activity by Participants. CME also will 

monitor for compliance with CME SEF Rules relating to position limits

and position accountability, whereby Participants must disclose 

information regarding aggregate positions it holds. See Rule 559

(Position Limits and Exemptions), Rule 560 (Position Accountability).

CME has the ability to actively monitor trading activity and Participants 

in order to prevent market manipulation, and has requirements to ensure 

that Participants maintain and make available information regarding their 

trading activity. See Rule 300 (Committees), Rule 536 (Recordkeeping 

Requirements for GLOBEX and CME DIRECT, and Negotiated Trades); 

describing the requirement that the Board maintain books and records of 

CME SEF in accordance with CEA and CFTC Regulations); Rule 415

Exhibit N–Regulatory Services 

Agreement

Exhibit O–Compliance Manual 

Ch. 5

Rule 106 (Access Privileges of 

a Participant)

Rule 114 (Disclosures and 

Supervision)

Rule 300 (Committees)

Chapter 4 (Enforcement of 

Rules)

Rule 400 (General Provisions)

Rule 401 (The Chief 

Regulatory Officer)

Rule 407 (Investigation, 

Assignment for Hearing and 

Notice of Charges)

Rule 415 (Cooperation with 

Other Exchanges, Swap 

Execution Facilities and 

Clearing Organizations and 
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

(Cooperation with Other Exchanges, Swap Execution Facilities and 

Clearing Organizations and International Government InformationSharing Agreements); describing CME SEF’s ability to enter into 

Information-Sharing Agreement with outside entities in order to 

coordinate market surveillance). Rule 514 (Recording of 

Communications) authorizes CME SEF to record communications 

between CME SEF and Participants, Clients and Customers.

International Government 

Information-Sharing 

Agreements)

Rule 418 (Consent to CME SEF 

Jurisdiction)

Rule 432 (General Offenses)

Chapter 5 (Qualifications for 

Execution and Trading 

Practices)

Rule 514 (Recording of 

Communications)

Rule 536 (Recordkeeping 

Requirements for GLOBEX 

and CME DIRECT, and 

Negotiated Trades)

Rule 559 (Position Limits and 

Exemptions)

Rule 560 (Position 

Accountability)

Core Principle 5 

Ability to Obtain Information –

Rule 415 (Cooperation with Other Exchanges, Swap Execution Facilities 

and Clearing Organizations and International Government InformationSharing Agreements) requires a Participant to provide any necessary 

information to CME SEF to perform any of its functions under Section 5h 

Exhibit S–Trade Data Retention

Exhibit N–Regulatory Services 
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

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 section 5h of 

the Act;

of the CEA, to the Commission upon request, or to carry out international 

information-sharing agreements as the Commission may require. 

Participants are required to maintain, or cause to be maintained, complete 

and accurate books and records in accordance with the CEA, CFTC 

Regulations, and SEF Rules and must make such books and records 

available for inspection by CME SEF, the CFTC, SEC or Department of 

Justice. See Rule 536.F (Retention of Records).

All Participants or Persons who access CME SEF consent to be bound by 

SEF Rules and subject to its jurisdiction. See Rule 418 (Consent to CME 

SEF Jurisdiction). Such Persons further agree to assist CME SEF win 

complying with its legal and regulatory obligations. 

Participants are responsible for supervising Authorized Traders, 

Supervised Persons and Authorized Brokers to ensure compliance with 

Applicable Law and the SEF Rules, and may be held liable for the actions 

of such Persons. See Rule 114 (Disclosure and Supervision). 

Participants must immediately notify CME SEF in the event of certain 

enumerated occurrences at Rule 442 (Notification of Significant Events). 

These notifications will enable CME SEF to determine whether the 

Participant will remain eligible to access CME SEF under the SEF Core 

Principles. Rule 401 (The Chief Regulatory Officer) provides that Chief 

Regulatory Officer may inspect or access the Participants’ systems, 

equipment and software to ensure compliance with SEF Rules. Each 

Participant that is registered with a SRO must provide minimum financial 

and related reporting and recordkeeping requirements, and concurrently 

provide filings required by the CFTC with CME SEF. Rule 432 (General 

Offenses)

During an investigation, a Participant is required to produce books and 

records requested by the Regulatory Oversight Department. See Rule 407 

Agreement

Rule 114 (Disclosures and 

Supervision)

Rule 401 (The Chief 

Regulatory Officer)

Rule 407 (Investigation, 

Assignment for Hearing and 

Notice of Charges)

Rule 415 (Cooperation with 

Other Exchanges, Swap 

Execution Facilities and 

Clearing Organizations and 

International Government 

Information-Sharing 

Agreements)

Rule 418 (Consent to CME SEF 

Jurisdiction)

Rule 432 (General Offenses)

Rule 442 (Notification of 

Significant Events)

Rule 536 (Recordkeeping 

Requirements for GLOBEX 

and CME DIRECT, and 

Negotiated Trades)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

(Investigation, Assignment for Hearing and Notice of Charges). Rule 560 (Position 

Accountability)

(b) Provide the information to the

Commission on request; and Rule 536 (Recordkeeping Requirements for GLOBEX and CME

DIRECT, and Negotiated Trades) includes provisions that CME SEF shall 

keep complete and accurate records of all activities related to the business 

of CME SEF for at least five years and shall make all such records readily 

accessible for inspection by the CFTC and the Department of Justice 

during the first two years of the five year period. 

Rule 432.N (General Offenses) requires each Participant to comply with 

applicable disclosure requirements under CFTC, SEC, NFA and CME 

SEF Rules. 

Rule 432 (General Offenses)

Rule 536 (Recordkeeping 

Requirements for GLOBEX 

and CME DIRECT, and 

Negotiated Trades)

(c) Have the capacity to carry out such

international information-sharing

agreements as the Commission may

require.

CME SEF may enter into information-sharing agreements or other 

arrangements to coordinate surveillance with other markets on which 

contracts or financial instruments related to the Swaps trade. See Rule 415 

(Cooperation with Other Exchanges, Swap Execution Facilities and 

Clearing Organizations and International Government Information-Sharing 

Agreements). Additionally, CME SEF may enter into any arrangement 

with any person or body that exercises or enforces a legal or regulatory 

function. See id.

Rule 415 (Cooperation with 

Other Exchanges, Swap 

Execution Facilities and 

Clearing Organizations and 

International Government 

Information-Sharing 

Agreements)

Core Principle 6 

Position Limitations 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 

In order to diminish potential problems arising from excessively large 

speculative positions, and to facilitate orderly liquidation of expiring 

futures contracts, the CME SEF Rules set forth position limits that are in 

accordance with the general criteria set forth in Appendix B to Part 37 of 

the Commission Regulations. See Rule 559 (Position Limits and 

Exemptions); Rule 560 (Position Accountability). 

Participants are obligated under SEF Rules to comply with position 

limitations and accountability levels. See Rule 432 (General Offenses)

Rule 559 (Position Limits and 

Exemptions)

Rule 560 (Position 

Accountability)

Rule 432 (General Offenses)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

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)

of the Act, the swap execution facility 

shall:

(1) Set its position limitation at a level

no higher than the Commission

limitation; and

(2) 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.

CME SEF or its Regulatory Services Provider will monitor for compliance 

with CME SEF Rules relating to position limits. See Rule 559 (Position 

Limits and Exemptions). A Participant may apply to the Market 

Regulation Department to seek an exemption from the position limits. The 

Market Regulation Department may grant exemptions from the position 

limits for positions qualifying as bona fide hedge positions, for risk 

management positions, or arbitrage and spread positions. See id. Any 

positions in excess of those permitted under the rules of CME SEF shall be 

generally deemed position limit violations. See Rule 562 (Position Limit 

Violations). Market participants and clearing members may also be 

required to produce any additional account information under Rule 561

(Reports of Large Positions). 

Exhibit O–Compliance Manual, 

Ch. 3

Rule 559 (Position Limits and 

Exemptions)

Rule 561 (Reports of Large 

Positions)

Rule 562 (Position Limit 

Violations)

Exhibit N–Regulatory Services 

Agreement

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 pursuant to

section 2(h)(1) of the Act.

Transactions on CME SEF are cleared through the CME Clearing House 

in accordance with the Clearing Services Agreement (the “CSA”) and 

CME SEF Rules. See Exhibit T; Rule 800. CME Clearing House is a 

registered derivatives clearing organization. See Rule 800 (Clearing 

House). Clearing firms clearing CME SEF transactions are expressly 

bound by the applicable Clearing House rules. See Rule 801 (Clearing 

Members). All trades in Cleared Swaps executed or submitted for clearing 

pursuant to CME SEF Rules must be guaranteed by a Clearing Member. 

See Rule 802 (Cleared Swaps). 

CME SEF requires that its Participants be of good reputation and business 

integrity and maintain adequate financial resources and credit, among 

other requirements designed to ensure the financial integrity of the CME 

Exhibit I–Financial Statements 

and Resources

Exhibit T–Clearing 

Organization Information

Exhibit N–CME Clearing 

Services Agreement

Rule 101 (Eligibility)

Rule 102 (Continued 

Eligibility)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

SEF. Rule 101 (Eligibility) requires that prior to being granted Execution 

Privileges on CME SEF, each Participant must demonstrate that it is an 

ECP (101(1)), maintains adequate financial resources and credit 

(101(1)(iii)), has not filed for bankruptcy (101(1)(iv)), continues to 

comply with all applicable eligibility criteria including financial resources 

requirements (Rule 102 (Continued Eligibility), must either be a Clearing 

Member, guaranteed by a Clearing Member, or an Authorized Broker 

(Rule 103 (Authorized Brokers) and if an Authorized Broker must ensure 

each of its Clients has established a Clearing Member Guarantee (Rule 103 

(Authorized Brokers), Rule 104.B. (Clearing Requirements)). Participants 

that fail to meet these criteria are prohibited from accessing CME SEF. See 

Rule 105 (Participant Application Process). Participants have a duty to 

monitor orders and trades to ensure they are conducted by ECPs, see Rule 

102.C. (Continued Eligibility), Rule 114 (Disclosures and Supervision), 

and CME SEF has a duty to monitor Participants to ensure they continue 

to qualify as ECPs, see Rule 102.B. (Continued Eligibility). 

Participants are required to notify CME SEF when there are material 

changes to the Participant’s finances or in an instance of bankruptcy or 

insolvency. See Rule 102.A. (Continued Eligibility). Participants are 

required to concurrently provide CME SEF with copies of any reports 

required to be filed with the SRO or the CFTC. Rule 432 (General 

Offenses).

All Participants that are not Clearing Members or Authorized Brokers 

must establish a clearing account with a Clearing Member prior to 

conducting any SEF Activity. See Rule 513 (Clearing Accounts).

A Participant that conducts a customer business is required to enter into a 

written agreement with the customer and comply with applicable law 

relating to the treatment of customer funds and the maintenance of books 

and records with respect thereto. See Rule 107 (Customers). Further, all 

Customers must expressly consent to be bound by CME SEF Rules in 

Rule 103 (Authorized Brokers)

Rule 104 (Clearing 

Requirements)

Rule 107 (Customers)

Rule 114 (Disclosures and 

Supervision)

Rule 513 (Clearing Accounts)

Rule 800 (Clearing House)

Rule 801 (Clearing Members)

Rule 802 (Cleared Swaps)
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

relation to SEF Activity. See id. 

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. 

The CME SEF Rules set forth have clear procedures and guidelines for 

decision-making regarding emergency intervention in the market. See 

Rule 402.C (Emergency Actions); Rule 230.k (General). These

procedures and guidelines address the avoidance of conflicts of interest 

while addressing emergencies. See 234.B (Avoiding Conflicts of Interest 

in Significant Actions)

The measures available to CME SEF in the case of an emergency include 

the ability to suspend or modify any SEF services, impose or modify 

position limits, impose or modify price limits, impose or modify intraday 

market restrictions, impose special margin requirements, order the 

liquidation or transfer of open positions in any Swap, order the fixing of a 

settlement price, extend or shorten the expiration date or the trading 

hours, suspend or curtail trading in any Swap, transfer customer contracts 

and the margin, alter any contract’s settlement terms or conditions, or

provide for the carrying out of such actions though its agreements with 

any third-party provider of clearing or regulatory services. See Rule 

230.k(i)–(xii) (General). 

CME SEF will use reasonable efforts to notify the Commission prior to 

implementing, modifying, or terminating an Emergency Rule and will 

comprehensively document the decision-making process related to any 

action in response to an Emergency. See Rule 230.k. (General). 

Rule 230.k (General)

Rule 234.B (Avoiding Conflicts 

of Interest in Significant 

Actions)

Rule 402.C. (Emergency 

Actions)

Core Principle 9

Daily Publication of Trading 

Information –

(a) In general. The swap execution

facility shall make public timely

CME SEF will comply with Section 16.01 (Trading volume, open 

contracts, prices, and critical dates) of the CFTC Regulations. CME SEF 

will comply with Part 43 (Real-Time Public Reporting) of the CFTC 

Regulations, to the extent applicable. 

CME SEF will comply with Part 45 (Swap Data Recordkeeping and 

Reporting Requirements) to the extent applicable, including reporting 

Rule 528 (Price Reporting)
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Swap Execution Facility Criteria For 

Registration

CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

information on price, trading volume,

and other trading data on swaps to the

extent prescribed by the Commission.

trade date, accepted block trades and applicable requirements under Part 

16 of the CFTC Regulations to a Swap Data Repository. See Rule 528 

(Price Reporting).

(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. 

CME SEF will maintain an audit trail for on-SEF activity that includes, at 

a minimum, the user ID, the price, quantity, product, expiration month, 

CTI Code and account number associated with the transaction. See Rule 

536.A (Globex or CME Direct Order Entry); see also Exhibit Q; Exhibit 

S. CME SEF will capture and transmit necessary trade information to a 

swap data repository. Rule 528 (Price Reporting).

All trades executed on or submitted to CME SEF are subject to minimum 

recordkeeping requirements. See Rule 521 (Required Transactions); Rule 

523 (Permitted Transactions); Rule 524 (Uncleared Swaps); Rule 536.D 

(Negotiated Trades); Rule 536.E (Recordings). All terminal operators 

must be identified to CME SEF. Rule 576 (Identification of Globex or 

CME Direct Terminal Operators). 

Exhibit O–Compliance Manual

Exhibit Q–Trading Systems 

Overview

Exhibit S–Trade Data Retention

Rule 521 (Required 

Transactions)

Rule 523 (Permitted 

Transactions)

Rule 524 (Uncleared Swaps)

Rule 528 (Price Reporting)

Rule 536 (Recordkeeping 

requirements for GLOBEX or 

CME DIRECT, and Negotiated 

Trades)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

Core Principle 10 

Recordkeeping – (a) In general. A swap 

execution facility shall:

(1) 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;

(2) 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 duties of the Commission

under the Act; and

(3) Keep any such records relating to

swaps defined in section 1a(47)(A)(v) 

of the Act open to inspection and

examination by the Securities and

Exchange Commission. 

In accordance with § 1.31 and part 45 of CFTC Regulations, CME SEF 

shall keep, or cause to be kept, complete and accurate records of all 

activities relating to the business of CME SEF, including but not limited 

to an audit trail for all Cleared Swaps, all investigatory files, all 

disciplinary files and all other records required to be maintained pursuant 

to the CEA, CFTC Regulations and the Delaware Limited Liability 

Company Act, and any successor statute, as amended. CME SEF shall 

retain all such records for at least five (5) years, and shall make such 

records readily accessible for inspection by the CFTC and the United 

States Department of Justice during the first two (2) years of such fiveyear period. See Rule 536.F (Retention of Records). Each Participant is 

obliged to maintain all requisite books and records for in accordance with 

Commission Regulations. Rule 432 (General Offenses).

CME SEF will review all Participants at least annually to verify their 

compliance with audit trail and recordkeeping requirements. Rule 536

(Recordkeeping Requirements for GLOBEX or CME DIRECT, and 

Negotiated Trades). 

Exhibit S–Trade Data 

Retention;

Rule 432 (General Offenses)

Rule 536 (Recordkeeping 

Requirements for GLOBEX or 

CME DIRECT, and Negotiated 

Trades)

Rule 536.F (Retention of

Records)

(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.

N/A
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

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 take any

actions that result in any unreasonable

restraint of trade; or

The Board has adopted Rules, and from time to time adopts amendments 

and supplements to such Rules, to promote a free and open market on 

CME SEF, to maintain appropriate business conduct and to provide 

protection to the public in its dealings with CME SEF and its Participants. 

The Board of Directors Code of Ethics acknowledges the directors’ 

obligation to acknowledge restraint of trade considerations and antitrust 

laws in discharge of the Board’s duties. 

CME SEF will provide its services on a fair, open, equal and nondiscriminatory basis to all market participants that meet its transparent 

eligibility criteria for access to CME SEF. See generally Chapter 1 

(Access); see also Rule 101 (Eligibility and Participant Qualification); 

Rule 102 (Continued Eligibility); Rule 103 (Authorized Brokers or 

Authorized Managers); Rule 104 (Authorized Traders); Rule 105 

(Participant Application Process); Rule 107 (Customers). Dues, 

assessments and fees are generally applicable. See Rule 108 (Dues, 

Assessments and Fees); see also Exhibit K. 

The Chief Compliance Officer of CME SEF will review CME SEF's 

compliance with this Core Principle as part of its annual review. See 

Compliance Manual, Ch. 1. 

Exhibit O–Compliance Manual

Exhibit K–Fee Schedule

Exhibit N-CME SEF User 

Agreement

Board of Directors Code of 

Ethics

Rule 101 (Eligibility and 

Participant Qualification)

Rule 102 (Continued 

Eligibility)

Rule 103 (Authorized Brokers 

or Authorized Managers)

Rule 104 (Authorized Traders)

Rule 105 (Participant 

Application Process)

Rule 107 (Customers)

Rule 108 (Dues, Assessments 

and Fees)

(b) Impose any material

anticompetitive burden on trading or 

clearing. 

It shall be an offense to engage in conduct or proceedings inconsistent 

with just and equitable principles of trade. See Rule 432.B.2. (General 

Offenses). It shall also be an offense to engage in, or attempt to engage 

in, the manipulation of prices of CME SEF products or to purchase or 

Rule 432 (General Offenses)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

sell, or offer to purchase or sell CME SEF products or any underlying 

commodities or securities, for the purpose of upsetting the equilibrium of 

the market or creating a condition in which prices do not or will not 

reflect fair market values. See Rule 432.H. (General Offenses). It shall 

also be an offense to engage in dishonorable or uncommercial conduct. 

See Rule 432.T. (General Offenses).

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

CME Group and CME have established, and will enforce, policies and 

procedures to minimize conflicts of interest in CME SEF's decisionmaking process. See generally Chicago Mercantile Exchange Inc. 

Bylaws (addressing interested directors); CME Group Director Conflict of 

Interest Policy (addressing interested directors); CME Group Categorical 

Independence Standards (addressing Board determinations of director 

independence); CME Group Code of Conduct, p. 6-9 (addressing 

conflicts of interest by any employee of Chicago Mercantile Exchange, 

Inc. or a subsidiary thereof) and p. 20 (establishing a procedure for 

disclosure by an employee of CME SEF of a potential conflict of 

interest); CME Group Corporate Governance Principles (requiring the 

Board be composed of at least a majority of independent directors), CME 

Group Code of Ethics (requiring Directors to disclose any potential to 

receive any private benefit in connection with a matter before the Board). 

Further, CME SEF Rules address policies and procedures in regard to 

conflicts of interest. Rule 300.F (Use or Disclosure of Material, Nonpublic Information) prohibits any Director or member of a Committee 

from using or disclosing material non-public information obtained as a 

result of participation on the Board or Committee.

A member of any committee must abstain from both the deliberations and 

voting by such committee on any Significant Action, as defined in CME 

SEF Rules, if the member knowingly has a direct and substantial financial 

interest in the result of the vote based upon either CME SEF or non-CME 

SEF positions that could reasonably be expected to be affected by the 

CME Bylaws

CME Group Code of Ethics

CME Group Director Conflicts 

of Interest Policy

CME Group Code of Conduct

CME Group Corporate 

Governance Principles

CME Group Categorical 

Independence Standards

Rule 234 (Avoiding Conflicts 

of Interest in Significant 

Actions)

Rule 300.F (Use or Disclosure 

of Material, Non-public 

Information)
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

action or is otherwise conflicted based on existing CME SEF policy. See 

Rule 234.C (Determination Whether Abstention Required). Prior to the 

consideration of any Significant Action, each member of the committee 

must disclose to the appropriate CME SEF staff the following position 

information to the extent known to him: (a.) Gross positions held at CME 

SEF in the member's personal accounts or controlled accounts, as defined 

in CFTC Regulation 1.3(j); (b.) Gross positions held at CME SEF in 

proprietary accounts of the Member’s Affiliated Firm; (c.) Gross positions 

held at CME SEF in accounts in which the member is a principal; (d) Net 

positions held at CME SEF in customer accounts at the Member’s 

Affiliated Firm; and (e.) Any other types of positions, at CME SEF or 

elsewhere, held in the member's personal accounts or the proprietary 

accounts of the Member’s Affiliated Firm that could reasonably be 

expected to be affected by the Significant Action. CME SEF staff will 

independently determine what positions are held based on a review of the 

most position reports and trading records available to CME SEF and any 

other source of information that is held by and reasonably available to 

CME SEF, taking into consideration the exigency of the Significant 

Action. See Rule 234 (Avoiding Conflicts of Interest in Significant 

Actions). 

(b) Establish a process for resolving

the conflicts of interest.

Rule 234.C (Determination Whether Abstention Required) requires any 

director with a material conflict of interest to abstain from participation in 

matters in which the director has a conflict. Rule 230.k (General) states 

that where possible, the Chief Compliance Officer should be consulted 

prior to a decision pursuant to emergency authority that involves an actual 

or potential conflict of interest and that the CFTC shall be notified as soon 

as reasonably practicable thereafter.

CME- and CME Group-level policies applicable to CME SEF govern 

additional procedures regarding the resolution of conflicts of interest. 

Rule 234.C (Determination 

Whether Abstention Required)

Rule 230.k (General)

CME Group Director Conflicts 

of Interest Policy

CME Group Code of Conduct

Core Principle 13 Exhibit E describes personnel qualifications for CME SEF key staff, 

including requirements for work experience and skills. Exhibit F analyzes 

Exhibit E; Personnel 

Qualifications
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Swap Execution Facility Criteria For 

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CME SEF (“CME SEF”) Application Relevant CME SEF

Documents, Rule or 

Agreements

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. 

the staffing requirements for, and resources available to, CME SEF

operations. Exhibit I includes an analysis of CME SEF’s expenses and the 

financial resources allocated for operation. 

Exhibit F; Staffing 

Requirements

Exhibit I ; Financial Statements 

and Resources

(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 

one-year period, as calculated on a 

rolling basis.

Exhibit I provides an estimated projection of CME SEF’s 12-month 

operating expenses. Exhibit I-2 demonstrates the account arrangements 

for CME SEF’s financial resources. 

Exhibit I–Financial Statements 

and Resources

Exhibit I-2–CME SEF 

Financial Resources

Core Principle 14

System Safeguards–

The swap execution facility shall:

(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:

(1) Are reliable and secure; and

(2) Have adequate scalable capacity;

As set forth in section 2 of Exhibit V, CME SEF has established and 

maintains a program of risk analysis and oversight. Reliability and 

security of CME SEF’s automated systems are established though the 

controls and procedures set forth in Sections 2.d through 2.e of Exhibit V. 

Adequate capacity is addressed in Section 7 of Exhibit V. 

Exhibit V, Sections 2 and 7
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(b) Establish and maintain emergency

procedures, backup facilities, and a plan

for disaster recovery that allow for:

(1) The timely recovery and

resumption of operations; and

(2) The fulfillment of the

responsibilities and obligations of the

swap execution facility; and

CME SEF has established and maintains emergency procedures, 

geographically diverse backup facilities and a plan for disaster recovery 

plan that provides for that allows for the timely recovery and resumption 

of operations. 

Exhibit V, Section 8

(c) Periodically conduct tests to verify

that the backup resources of the swap

execution facility are sufficient to

ensure continued:

(1) Order processing and trade

matching; 

(2) Price reporting;

(3) Market surveillance; and

(4) Maintenance of a comprehensive

and accurate audit trail.

CME Group conducts periodic system capacity tests, identifies the 

objectives of the tests, and reviews the results. These operational tests 

enable CME Group to estimate and plan for future system capacity, 

identify potential weak points and reduce the risk of system failures and 

threats to system integrity.

Exhibit V, Section 8

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.

Chapter 1 of the Compliance Manual requires the Board to appoint a 

Chief Compliance Officer. 

Exhibit O–Compliance Manual

(b) Duties. The chief compliance

officer shall:

(1) Report directly to the board or to the 

senior officer of the facility;

(2) Review compliance with the core

principles in this subsection;

The duties and responsibilities of the Chief Regulatory Officer are outlined 

at Rule 401 (The Chief Regulatory Officer) and in Chapter 1 of the 

Compliance Manual. It shall be the duty of the Chief Regulatory Officer 

to enforce CME SEF Rules, and he shall have available to him at all times 

the resources of the Market Regulation Department and such other 

resources as may be necessary to conduct investigations of potential or 

Exhibit O–Compliance Manual

Exhibit P–CME Group Code of 

Conduct, Director Conflict of 

Interest Policy and Board of 

Directors Code of Ethics
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(3) 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;

(4) Be responsible for establishing and

administering the policies and

procedures required to be established

pursuant to this section;

(5) Ensure compliance with the Act

and the rules and regulations issued

under the Act, including rules

prescribed by the Commission pursuant

section 5h of the Act; and

(6) 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.

alleged Rule violations and market conditions. The Chief Regulatory 

Officer shall have the authority to inspect the books, records, systems, 

equipment and software of all parties subject to the jurisdiction of CME 

SEF pursuant to Rule 418 and the authority to require any such Participant 

to appear before him and produce his or its books and records, and provide 

access to systems, equipment, software, data stored in any such systems, 

equipment or software, and the premises upon which such information is 

accessible, and answer questions regarding alleged violations of CME SEF 

Rules, at the time, place and in the manner he designates. The Chief 

Regulatory Officer may also delegate his authority to staff of the Market 

Regulation Department. The Chief Regulatory Officer shall also have the 

duties and responsibilities of a swap execution facility Chief Compliance 

Officer.

Rule 401 (The Chief 

Regulatory Officer)

(c) Requirements for procedures. In

establishing procedures under paragraph 

(b)(6) of this section, the chief

compliance officer shall design the

procedures to establish the handling,

management response, remediation,

retesting, and closing of noncompliance

issues.

It shall be the duty of the Chief Regulatory Officer to enforce CME SEF 

Rules, and he shall have available to him at all times the resources of the 

Market Regulation Department and such other resources as may be 

necessary to conduct investigations of potential or alleged Rule violations 

and market conditions. The Chief Regulatory Officer shall have the 

authority to inspect the books, records, systems, equipment and software 

of all parties subject to the jurisdiction of CME SEF pursuant to Rule 418 

and the authority to require any such Participant to appear before him and 

produce his or its books and records, and provide access to systems, 

equipment, software, data stored in any such systems, equipment or 

software, and the premises upon which such information is accessible, 

and answer questions regarding alleged violations of CME SEF Rules, at 

Exhibit O–Compliance Manual

Rule 401 (The Chief 

Regulatory Officer)
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the time, place and in the manner he designates. The Chief Regulatory 

Officer may also delegate his authority to staff of the Market Regulation 

Department. The Chief Regulatory Officer shall also have the duties and 

responsibilities of a swap execution facility Chief Compliance Officer. 

See generally Exhibit O–Compliance Manual Ch. 1. 

(d) Annual reports –(1) 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 the Act; and

(ii) The policies and procedures,

including the code of ethics and conflict

of interest policies, of the swap

execution facility.

(2) Requirements. The chief

compliance officer shall:

(i) Submit each report described in

Paragraph (d)(1) of this section with the 

appropriate financial report of the swap 

execution facility that

is required to be submitted to the

Commission pursuant to section 5h of 

the Act; and 

(ii) Include in the report a

certification that, under penalty of law,

the report is accurate and complete.

It shall be the duty of the Chief Regulatory Officer to enforce CME SEF 

Rules, and he shall have available to him at all times the resources of the 

Market Regulation Department and such other resources as may be 

necessary to conduct investigations of potential or alleged Rule violations 

and market conditions. The Chief Regulatory Officer shall have the 

authority to inspect the books, records, systems, equipment and software 

of all parties subject to the jurisdiction of CME SEF pursuant to Rule 418 

and the authority to require any such Participant to appear before him and 

produce his or its books and records, and provide access to systems, 

equipment, software, data stored in any such systems, equipment or 

software, and the premises upon which such information is accessible, 

and answer questions regarding alleged violations of CME SEF Rules, at 

the time, place and in the manner he designates. The Chief Regulatory 

Officer may also delegate his authority to staff of the Market Regulation 

Department. The Chief Regulatory Officer shall also have the duties and 

responsibilities of a swap execution facility Chief Compliance Officer

Exhibit O–Compliance Manual

Rule 401 (The Chief 

Regulatory Officer)