UNITED STATES OF AMERICA 

BEFORE THE 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

tpSEF, INC., 

Respondent.

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CFTC Docket No. 22-49

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTIONS 6b, 6(c), AND 6(d), OF THE COMMODITY EXCHANGE ACT, MAKING 

FINDINGS, AND IMPOSING REMEDIAL SANCTIONS 

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe that 

between October 2016 and July 2020 (the “Relevant Period”), tpSEF, Inc. (“tpSEF”) 

(“Respondent”) violated Sections 5h(f)(1)(A) and 5h(f)(2)(A) and (B) of the Commodity 

Exchange Act (“Act”), 7 U.S.C. §§ 7b-3(f)(1)(A),7b-3(f)(2)(A), (B), and Commission 

Regulations (“Regulations”) 37.9(b)(1), 37.200(a) and (b), and 37.201(b), 17 C.F.R. §§ 

37.9(b)(1), 37.200(a), (b), 37.201(b) (2021). Therefore, the Commission deems it appropriate 

and in the public interest that public administrative proceedings be, and hereby are, instituted to 

determine whether Respondent engaged in the violations set forth herein and to determine 

whether any order should be issued imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondent has 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondent consents to 

the entry of this Order Instituting Proceedings Pursuant to Section 6b of the Commodity 

Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”) and acknowledge 

service of this Order.1

1

 Respondent consents to the use of the findings of fact and conclusions of law in this Order in this proceeding and 

in any other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees 

that it shall be taken as true and correct and be given preclusive effect therein, without further proof. Respondent 

does not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole basis for any 

other proceeding brought by the Commission or to which the Commission is a party or claimant, other than: a 

proceeding in bankruptcy or receivership; or a proceeding to enforce the terms of this Order. Respondent does not 
2 

II. FINDINGS 

The Commission finds the following: 

A. Summary 

During the Relevant Period, tpSEF violated Sections 5h(f)(1)(A) and 5h(f)(2)(A) and (B) 

of the Act, 7 U.S.C. §§ 7b-3(f)(1)(A), 7b-3(f)(2)(A), (B), and Regulations 37.9(b)(1), 37.200(a) 

and (b), and 37.201(b), 17 C.F.R. §§ 37.9(b)(1), 37.200(a), (b), 37.201(b) (2021), by failing to 

prevent Participants2 on tpSEF from executing 301 pre-arranged or pre-negotiated swap 

transactions through the SEF’s Order Book that did not comply with the 15-second delay 

required under Regulation 37.9(b)(1) and tpSEF’s own Rule 4011, and by failing to enforce 

compliance with its Rule 4011 in connection with these transactions. 

In accepting Respondent’s Offer, the Commission recognizes the cooperation of 

Respondent with the Division of Enforcement’s investigation of this matter. 

B. Respondent 

tpSEF Inc. is a registered Swap Execution Facility (“SEF”) located in Jersey City, New 

Jersey. It was granted temporary registration in September 2013, became operational in October 

2013, and was granted full registration in January 2016. 

C. Facts 

tpSEF provides execution services in a full range of asset classes, including interest rate 

swaps and credit default swaps. The majority of swaps executed on tpSEF involve transactions 

in which a Participant acts as a broker of two customers’ orders against each other. 

Trading on tpSEF is governed by tpSEF’s Rulebook. As a self-regulatory organization, 

tpSEF has oversight obligations for conduct on the SEF and is required to enforce its rules. 

Regulation 37.9, 17 C.F.R. § 37.9 (2021), governs methods of execution of any 

transaction involving a swap that is subject to the trade execution requirement in Section 2(h)(8) 

of the Act, 7 U.S.C. § 2(h)(8). These transactions are known as “Required Transactions.” 

Regulation 37.9(b)(1) requires a time delay for certain Required Transactions as follows: 

A swap execution facility shall require that a broker or dealer who 

seeks to either execute against its customer's order or execute two of 

its customers' orders against each other through the swap execution 

facility's Order Book, following some form of pre-arrangement or 

pre-negotiation of such orders, be subject to at least a 15 second time 

delay between the entry of those two orders into the Order Book, 

such that one side of the potential transaction is disclosed and made 

 

consent to the use of the Offer or this Order, or the findings or conclusions in this Order, by any other party in any 

other proceeding. 

2

 tpSEF’s Rulebook defines a Participant as any person who has been admitted by, and has trading privileges on, 

tpSEF. 
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available to other market participants before the second side of the 

potential transaction, whether for the broker's or dealer's own 

account or for a second customer, is submitted for execution. 

tpSEF’s Rulebook mirrors this requirement in its Rule 4011: 

(a) With respect to Required Cross Transactions3

, the following 

conditions must be satisfied: 

(1) in the case of an execution by a Participant as principal/dealer 

against a customer Order, the customer Order shall be entered into 

the Order Book as a firm quote and exposed to the market for at least 

15 seconds before the Participant’s Order may be entered, and 

(2) in the case of an execution by a Participant acting as broker of 

two customers’ Orders against each other, one side of the potential 

Transaction (the “Displayed Order”) shall be entered into the Order 

Book as a firm quote and exposed to the market for at least 15 

seconds before the second side of the potential Transaction (the 

“Waiting Order”) may be entered. 

During the Relevant Period, as a result of a coding error that occurred when tpSEF upgraded the 

software that operates its Order Book, tpSEF failed to prevent Participants from executing 301 

transactions through tpSEF’s Order Book that did not comply with the 15-second delay required 

under Regulation 37.9(b)(1) and tpSEF Rule 4011. All 301 of these transactions involved 

instances in which a Participant was acting as a broker of two customers’ orders against each 

other. tpSEF did not take adequate steps to timely detect and remedy the coding error, and 

thereby, did not adequately enforce compliance with its Rule 4011 in connection with these 

transactions. 

Of these 301 transactions, seven involved credit default swaps and two hundred 

and ninety-four (294) involved interest rate swaps. These transactions fall into the 

following categories: 

 Two hundred sixty-two (262) transactions involved instances in which: (1) 

multiple separate Displayed Orders, which were packaged as one transaction, 

were entered onto the SEF’s Order Book seconds apart; (2) a Waiting Order was 

entered that executed against the combined total of the Displayed Orders 

previously entered; and (3) although the Waiting Order executed against the first 

Displayed Order more than 15 seconds after it was entered, it executed against 

the subsequent Displayed Order(s) in less than 15 seconds after it was entered. 

All of these transactions involved interest rate swaps. 

 Twenty-seven (27) transactions involved instances in which: (1) a Displayed 

Order was entered onto the SEF’s Order Book; (2) the Displayed Order’s 

 

3

 tpSEF’s Rulebook defines a Required Cross Transaction as “a Required Transaction (other than a Block Trade or 

Package Transaction (Order Book Exempt)) (x) in which a Participant acting as a broker or dealer seeks to either 

execute against its customer’s Order or execute two of its customers’ Orders against each other, and (y) that is 

submitted for execution on the Order Book, either directly or via an Execution Specialist, following some form of 

permitted pre-arrangement or pre-negotiation.” 
4 

amount was subsequently modified; and (3) the modified Displayed Order was 

then executed against within less than 15 seconds of the modification being 

entered. All of these transactions involved interest rate swaps. 

 Twelve (12) transactions in which a Displayed Order was executed against in 

less than 15 seconds after it was entered onto the SEF’s Order Book. Of these 

transactions, 5 involved interest rate swaps and 7 involved credit default swaps. 

III. LEGAL DISCUSSION 

A. tpSEF Violated Regulation 37.9(b)(1) 

Regulation 37.9(b)(1), 17 C.F.R. § 37.9(b)(1) (2021), imposes a 15-second time delay on 

certain Required Transactions executed through a SEF’s Order Book. As the Commission noted 

at the time of the promulgation of the regulation: 

[T]he purpose of the time delay requirement is to ensure a minimum 

level of pre-trade price transparency for Required Transactions on a 

SEF’s Order Book by allowing other market participants the 

opportunity to join or participate in a trade where a broker or dealer 

engages in some form of pre-arrangement or pre-negotiation of a 

transaction and then attempts, through the SEF’s Order Book, to 

either internalize the order by executing opposite a customer or cross 

two customer orders. 

Core Principles and Other Requirements for Swap Execution Facilities, 78 FR 33475 at 33503 

(June 4, 2013). 

By its terms, Regulation 37.9(b)(1) imposes the responsibility for ensuring this time delay 

on the SEF itself, stating that the SEF shall require that the execution of a Required Transaction 

on the SEF’s Order Book shall be subject to at least a 15-second delay between the entry of each 

side of the transaction. By allowing Participants to execute 301 transactions which did not 

comply with the 15-second delay, tpSEF violated Regulation 37.9(b)(1). 

B. tpSEF Violated Sections 5h(f)(1)(A) and 5h(f)(2)(A) and (B) of the Act and 

Regulations 37.200(a) and (b), and 37.201(b) 

 Section 5h(f)(1)(A) of the Act, 7 U.S.C. §§ 7b-3(f)(1)(A), provides that a SEF shall 

comply with any requirement that the Commission may impose by rule or regulation. By its 

failure to comply with Regulation 37.9(b)(1), as set forth above, tpSEF violated Section 

5h(f)(1)(A) of the Act. 

 Section 5h(f)(2)(A) of the Act, 7 U.S.C. §§ 7b-3(f)(2)(A), states that a SEF shall establish 

and enforce compliance with any rule of the SEF, including the terms and conditions of 

the swaps traded or processed on or through the SEF (emphasis added). Section 5h(f)(2)(B) of 

the Act, 7 U.S.C. §§ 7b-3(f)(2)(B), states that a SEF shall 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 
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impartial access to the market, and to capture information that may be used in establishing 

whether rule violations have occurred (emphasis added). The language of these statutory 

provisions is mirrored in Regulation 37.200(a) and (b), 17 C.F.R. § 37.200(a) and (b) (2021). 

Regulation 37.201(b), 17 C.F.R. § 37.201(b) (2021), further states that a SEF shall establish and 

impartially enforce compliance with the rules of the SEF, including, but not limited to the terms 

and conditions of any swaps traded or processed on or through the SEF (emphasis added). By 

failing to enforce Rule 4011 with respect to the 301 transactions described in this Order, tpSEF 

violated Sections 5h(f)(1)(A) and 5h(f)(2)(A) and (B) of the Act and Regulations 37.200(a) and 

(b), and 37.201(b). 

IV. FINDINGS OF VIOLATION 

Based on the foregoing, the Commission finds that, during the Relevant Period, tpSEF 

violated Sections 5h(f)(1)(A) and 5h(f)(2)(A) and (B) of the Act, 7 U.S.C. §§ 7b-3(f)(1)(A), 7b3(f)(2)(A), (B), and Regulations 37.9(b)(1), 37.200(a) and (b), and 37.201(b), 17 C.F.R. §§ 

37.9(b)(1), 37.200(a), (b), 37.201(b) (2021). 

V. OFFER OF SETTLEMENT 

Respondent has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges receipt of service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504 and 28 U.S.C. § 2412, and/or the rules promulgated by the 

Commission in conformity therewith, Part 148 of the Commission’s Regulations, 

17 C.F.R. §§ 148.1-30, relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, §§ 201-253, 110 Stat. 
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847, 857-868 (1996), as amended by Pub. L. No. 110-28, § 8302, 121 Stat. 112, 

204-205, relating to, or arising from, this proceeding; and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief. 

D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondent has consented in the Offer; 

E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that tpSEF violated Sections 5h(f)(1)(A) and 

5h(f)(2)(A) and (B) of the Act, 7 U.S.C. §§ 7b-3(f)(1)(A), 7b-3(f)(2)(A), (B), and 

Regulations 37.9(b)(1), 37.200(a) and (b), and 37.201(b), 17 C.F.R. §§ 37.9(b)(1), 

37.200(a), (b), 37.201(b) (2021); 

2. Orders Respondent to cease and desist from violating Sections 5h(f)(1)(A) and 

5h(f)(2)(A) and (B) of the Act, and Regulations 37.9(b)(1), 37.200(a) and (b), and 

37.201(b); 

3. Orders Respondent to pay a civil monetary penalty (“CMP”) in the amount of 

eight hundred fifty thousand dollars ($850,000), plus any post-judgment interest, 

within ten days of the date of the entry of the Order; 

4. Orders Respondent and its successors and assigns to comply with the conditions 

and undertakings consented to in Section VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Respondent shall cease and desist from violating Sections 5h(f)(1)(A) and 5h(f)(2)(A) 

and (B) of the Act, 7 U.S.C. §§ 7b-3(f)(1)(A), 7b-3(f)(2)(A), (B), and Regulations 

37.9(b)(1), 37.200(a) and (b), and 37.201(b), 17 C.F.R. §§ 37.9(b)(1), 37.200(a), (b), 

37.201(b) (2021). 

B. Respondent shall pay a CMP in the amount of eight hundred fifty thousand dollars 

($850,000) (“CMP Obligation”) within ten days of the date of entry of this Order. If the 

CMP Obligation is not paid in full within ten days of the date of entry of this Order, then 

post-judgment interest shall accrue on the unpaid portion of the CMP Obligation 

beginning on the date of entry of this Order and shall be determined by using the 

Treasury Bill rate prevailing on the date of entry of this Order pursuant to 28 U.S.C. 

§ 1961. 
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Respondent shall pay the CMP Obligation and any post-judgment interest by 

electronic funds transfer, U.S. postal money order, certified check, bank cashier’s 

check, or bank money order. If payment is to be made other than by electronic 

funds transfer, then the payment shall be made payable to the Commodity Futures 

Trading Commission and sent to the address below: 

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

6500 S. MacArthur Blvd. 

HQ Room 226 

Oklahoma City, OK 73169 

9-amc-ar-cftc@faa.gov

If payment is to be made by electronic funds transfer, Respondent shall contact Tonia 

King or her successor at the above address to receive payment instructions and shall fully 

comply with those instructions. Respondent shall accompany payment of the CMP 

Obligation with a cover letter that identifies the paying party and the name and docket 

number of this proceeding. Respondent shall simultaneously transmit copies of the cover 

letter and the form of payment to the Chief Financial Officer, Commodity Futures 

Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 

20581. 

C. Respondent and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. tpSEF shall undertake to review all Required Transactions executed on the SEF 

for the period August 2020 to the date of this Order to determine whether those 

transactions warrant further investigation for possible violations of tpSEF Rule 

4011, and shall report to the Commission’s Division of Enforcement within 180 

days of the date of this Order its findings and any actions undertaken pursuant 

thereto. 

2. tpSEF shall undertake to review its policies and procedures designed to deter and 

detect violations of, and enforce compliance with, tpSEF Rule 4011, and shall 

report to the Commission within 180 days of the date of this Order the results of 

such review and any changes to its policies and procedures implemented as a 

result thereof. 

3. Public Statements: Respondent agrees that neither it nor any of its successors and 

assigns, agents, or employees under its authority or control shall take any action 

or make any public statement denying, directly or indirectly, any findings or 

conclusions in this Order or creating, or tending to create, the impression that this 

Order is without a factual basis; provided, however, that nothing in this provision 

shall affect Respondent’s: (i) testimonial obligations; or (ii) right to take legal 

positions in other proceedings to which the Commission is not a party. 

Respondent and its successors and assigns shall comply with this agreement, and 

shall undertake all steps necessary to ensure that all of the agents and/or 
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5. 

employees under its authority or control understand and comply with this 

agreement. 

Partial Satisfaction: Respondent understands and agrees that any acceptance by 

the Commission of any partial payment of Respondent's CMP Obligation shall 

not be deemed a waiver of its obligation to make further payments pursuant to this 

Order, or a waiver of the Commission's right to seek to compel payment of any 

remaining balance. 

Until such time as Respondent satisfies in full its CMP Obligation, upon the 

commencement by or against Respondent of insolvency, receivership or 

bankruptcy proceedings, or any other proceedings for the settlement of 

Respondent's debts, all notices to creditors required to be furnished to the 

Commission under Title 11 of the United States Code or other applicable law with 

respect to such insolvency, receivership bankruptcy or other proceedings, shall be 

sent to the address below: 

Secretary of the Commission 

Office of the General Counsel 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street N.W. 

Washington, DC 20581 

* * * 

The provisions of this Order shall be effective as of this date. 

By the Commission. 

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Christopher J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: September 29, 2022 

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