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

CFTC Letter No. 17-54

No-Action

October 31, 2017

Division of Market Oversight

Re: No-Action Relief for Swap Execution Facilities from Certain Audit Trail Requirements 

in Commission Regulation 37.205 Related to Post-Execution Allocation Information 

Ladies and Gentlemen:

This letter responds to a request from multiple parties1 that the Division of Market 

Oversight (the “Division”) of the Commodity Futures Trading Commission (the “Commission” 

or “CFTC”) extend the relief provided in CFTC Letter No. 15-68. The letter provides that, 

subject to certain conditions, the Division will not recommend enforcement action against a swap 

execution facility (“SEF”) which does not capture post-execution allocation information in its 

audit trail or conduct audit trail reviews of post-execution allocations, as required by 

Commission regulations 37.205(a) and (b)(2). Absent further action from the Division, the relief 

provided in CFTC Letter No. 15-68 will expire on November 15, 2017. 

The Division continues to assess audit trail requirements related to post-execution 

allocation information and will thus extend the no-action relief provided under CFTC Letter No. 

15-68 until 11:59 pm (Eastern Time) November 15, 2020. 

Background 

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 

“Dodd-Frank Act”)2 amended the Commodity Exchange Act (the “Act”)3 to establish a 

comprehensive new regulatory framework for swaps. Section 5h of the Act provides that to be 

registered and maintain registration, a SEF must comply with fifteen enumerated core principles 

and any requirements that the Commission may impose by rule or regulation.4 Among the core 

principle requirements for SEFs, Core Principle 25 requires a SEF to have the capacity to detect, 

investigate and enforce its rules, and to capture information in its audit trail that may be used in 

establishing whether violations of those rules have occurred. 

 

1 The requesting parties are: Chicago Mercantile Exchange, Inc.; Clear Markets, Inc.; GTX SEF, LLC; ICE Swap 

Trade LLC LatAm SEF, LLC; MarketAxess SEF Corporation; Seed SEF LLC; Thomson Reuters SEF LLC; trueEX 

LLC; and 360 Trading Networks, Inc. Each of the requesters is currently operating as a registered swap execution 

facility. 2 Pub. L. 111-203, 124 Stat. 1376 (2010). 3 7 U.S.C. 1, et seq. (2012).

4 Section 5h of the Act; 7 U.S.C. 7b-3. 5 Section 5h(f)(2) of the Act; 7.U.S.C. 7b-3(f)(2). 
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On June 4, 2013, the Commission published final regulations governing SEFs.6 Among 

the regulations promulgated under Core Principle 2, Commission regulation 37.205(a) requires 

SEFs to capture and retain all audit trail data necessary to detect, investigate, and prevent 

customer and market abuses. The audit trail data must be sufficient to reconstruct all indications 

of interest, requests for quotes, orders, and trades within a reasonable period of time and provide 

evidence of any violations of the SEF’s rules. In addition, the audit trail should enable the SEF 

to track an order from the time of receipt through fill, allocation, or other disposition. The 

requirement to capture allocation information in the audit trail is also addressed in Commission 

regulation 37.205(b)(2), which requires a SEF’s electronic transaction history database to 

include, among other things, “identification of each account to which fills are allocated.” 

Requested Relief

The requesting parties again note that SEFs are unable to capture post-execution

allocation information in their audit trail as trade allocations are made away from SEFs and 

typically occur between the clearing firm or the customer and the derivatives clearing

organization (“DCO”), or at the middleware provider. Thus, the requesting parties assert that 

SEFs typically do not have access to post-execution allocation information, and for the most part 

are unable to obtain such information from third parties, such as DCOs and swap data 

repositories (“SDRs”), due to confidentiality concerns. 

Even if SEFs could obtain the information from DCOs, SDRs or middleware providers, 

or alternatively, from the counterparties to the swap, the requesting parties note that the 

infrastructure necessary to securely transmit the post-execution allocation information, such as 

an application-programming interface or secure file transfer protocol site, is currently not in 

place. 

No-Action Relief for SEFs

The Division acknowledges the practical challenges that SEFs face in obtaining postexecution allocation information as these allocations occur away from the SEFs, after a trade has 

been executed. The Division is therefore extending the no-action relief granted by CFTC Letter

No. 15-68. The Division will not recommend that the Commission take enforcement action 

against any SEF that does not capture post-execution allocation information in its audit trail or 

conduct associated audit trail reviews of post-execution allocations, as required by Commission 

regulations 37.205(a) and (b)(2), subject to the following conditions: 

1. The SEF must have a rule which requires that market participants provide postexecution allocation information to the SEF for particular trades, if the SEF, at the 

request of the Commission or otherwise, requests such information; and

 

6 Core Principles and Other Requirements for Swap Execution Facilities, 78 Fed. Reg. 33,476 (June 4, 2013).
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2. In the course of a trade practice surveillance or market surveillance investigation into 

any trading activity involving post-execution allocations, upon such request pursuant 

to condition 1 above, the SEF must ascertain whether a post-execution allocation was 

made, and if so, the SEF must request, obtain and review the post-execution

allocation information as part of its investigation.

This no-action relief shall commence on the date of issuance of this letter and expire on 

11:59 pm (Eastern Time) November 15, 2020.

The no-action relief provided herein does not relieve SEFs of any other audit trail 

obligations under Commission regulation 37.205, including the audit trail obligations under 

Commission regulations 37.205(a) and (b)(2) that do not pertain to post-execution allocation 

information. Additionally, market participants should be aware that the no-action positions taken 

herein do not excuse affected persons from compliance with any other applicable requirements 

of the Act or the Commission’s regulations thereunder, in particular, the applicable 

recordkeeping requirements under Commission regulation 1.35. 

This letter, and the no-action position taken herein, represents the view of the Division 

only, and does not necessarily represent the positions or views of the Commission or of any other 

division or office of the Commission’s staff. As with all no-action letters, the Division retains 

the authority to condition further, modify, suspend, terminate or otherwise restrict the terms of 

the no-action relief provided herein, in its discretion. 

If you have any questions concerning this correspondence, please contact Nancy

Markowitz, Deputy Director, Division of Market Oversight, at (202) 418-5453 or 

nmarkowitz@cftc.gov, Rachel Berdansky, Deputy Director, Division of Market Oversight, at 

(202) 418-5429 or rberdansky@CFTC.gov, Jonathan Lave, Associate Director, Division of 

Market Oversight, at (202) 418-5983 or jlave@CFTC.gov, or Swati Shah, Special Counsel, 

Division of Market Oversight, at (202) 418-5042 or sshah@cftc.gov. 

Sincerely,

Amir Zaidi 

Director 

Division of Market Oversight