U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Facsimile: (202) 418-5521

www.cftc.gov

Division of Market Oversight

February 10, 2014

Division of Market Oversight Guidance on Swap Execution Facility Jurisdiction

The Division of Market Oversight (the “Division”) of the Commodity Futures Trading 

Commission (the “Commission”) is issuing guidance (“Guidance”) to swap execution facilities 

(“SEFs”) and applicants for SEF registration concerning consent by market participants to the

jurisdiction of a SEF. In response to a number of requests for clarification, the Division confirms

in this Guidance that under the Commodity Exchange Act (“Act”) and Commission regulations 

discussed herein, all market participants of a SEF must consent to the jurisdiction of that SEF. 

Section 5h(f)(2)(A) of the Act sets forth Core Principle 2 for SEFs and requires, among 

other things, that a SEF “establish and enforce compliance with any rule of the swap execution 

facility, including – (i) the terms and conditions of the swaps traded or processed on or through 

the swap execution facility; and (ii) any limitation on access to the swap execution facility.”1

To implement this core principle, the Commission promulgated regulations, including 

Regulation 37.202(b). Regulation 37.202(b) provides that “prior to granting any eligible contract 

participant access to its facilities, a swap execution facility shall require that the eligible contract 

participant consent to its jurisdiction.”2In the SEF Final Rule’s preamble discussion of 

Regulation 37.202(b), the Commission noted that “jurisdiction must be established by a SEF 

prior to granting eligible contract participants access to its markets in order to effectively 

investigate and sanction persons that violate SEF rules.”

3

In responding to a request to clarify 

that this section only applies to a SEF’s members and not to customers of members whose orders 

are executed on a SEF, the Commission clarified in the preamble that the scope of Regulation 

37.202(b) is not limited to members, but also encompasses all market participants of a SEF, as 

defined under Regulation 37.200.4 Notably, the Commission stated that “market participant,” 

when used with respect to a SEF, means a “person that directly or indirectly effects transactions 

on the SEF. This includes persons with trading privileges on the SEF and persons whose trades 

are intermediated.”

5

 

1

7 U.S.C. § 7b–3(f)(2)(A).

2

17 C.F.R. § 37.202(b). “Eligible contract participant” is defined in Section 1a(18) of the Act. 

Subject to meeting specified requirements, it includes entities that act for their own account, 

those acting as a “broker or performing an equivalent agency function on behalf of another 

person...”; investment advisers; and commodity trading advisors. 7 U.S.C. § 1a(18)(B)(i)-(ii). 

3

78 Fed. Reg. 33509.

4

Id.

5

Id. at 33506.
Division of Market Oversight Guidance

Page 2

Consistent with Section 5h(f)(2)(A) of the Act and Regulation 37.202(b), the Division

holds the position that all market participants on a SEF that either directly or indirectly effect 

transactions on the SEF must consent to the SEF’s jurisdiction as a prerequisite for access. The 

Division clarifies that while a SEF must obtain consent to its jurisdiction from all market 

participants that either directly or indirectly effect transactions on its facility, such consent need 

not be obtained by the SEF through an affirmative writing. Rather, at this time, a SEF may

comply with this requirement by providing in its rulebook that any person initiating or executing 

a transaction on or subject to the rules of the SEF directly or through an intermediary, and any 

person for whose benefit such a transaction has been initiated or executed, consents to the 

jurisdiction of the SEF.

This Guidance supersedes any previous guidance issued by the Division on these topics

to the extent that it is inconsistent with such guidance. This Guidance, and the positions taken 

herein, represent the views of the Division only and do not necessarily represent the views of the 

Commission or of any other office or division of the Commission. If you have any questions 

concerning this Guidance, please contact Nancy Markowitz, Deputy Director, Division of 

Market Oversight, at (202) 418-5453 or nmarkowitz@cftc.gov; or Jonathan Lave, Associate 

Director, Division of Market Oversight, at (202) 418-5983, or jlave@cftc.gov.

Sincerely,

_________________________

Vincent A. McGonagle

Director

Division of Market Oversight