UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

Asset Risk Management, LLC, 

Respondent.

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CFTC Docket No. 22-36

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (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 

from in or about September 2017 to the present (“Relevant Period”), Asset Risk Management, 

LLC (“Respondent”) violated Section 5h(a)(1) of the Commodity Exchange Act (“Act”), 7 

U.S.C. § 7b-3(a)(1), and Commission Regulation (“Regulation”) 37.3(a)(1), 17 C.F.R. § 

37.3(a)(1) (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 6(c) and (d) of the Commodity 

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

acknowledges service of this Order.1

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 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 they 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 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.
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II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

During the Relevant Period, Respondent operated an unregistered swap execution facility 

(“SEF”) that provided clients the ability to execute swaps by accepting bids and offers made by 

multiple participants on a trading system or platform in various swap tenors and volumes. 

B. RESPONDENT(S) 

Asset Risk Management, LLC (“ARM”) is a limited liability company organized under 

the laws of Delaware in 2011 with a U.S. headquarters in Houston, Texas. ARM has been 

registered with the Commission as a Commodity Trading Advisor since 2013. 

C. FACTS 

ARM is a Commodity Trading Advisor that specializes in advising oil and natural gas 

producers. During the Relevant Period, to assist its clients in mitigating commodity price risks 

in the energy distribution, transportation, and commercial industries, ARM often recommended 

that clients execute swap transactions in which the underlying commodity was natural gas, 

natural gas liquids, or crude oil. The types of swaps commonly recommended by ARM included 

fixed-for-float energy swaps, locational basis swaps, calendar spreads, trade differentials, quality 

differentials, options, and swaptions. 

ARM marketed its services through face-to-face meetings with clients and potential 

clients. When onboarding clients, ARM provided a list of potential swap counterparties with 

whom ARM had a relationship. If a client expressed interest, ARM would also introduce clients 

to counterparties so they could enter into enabling agreements, such as an International Swaps 

and Derivatives Association master agreement (“ISDA”), to allow them to enter into swap 

transactions with each other. 

From time to time during the Relevant Period, ARM provided additional services to 

clients to facilitate, negotiate, and ultimately execute swaps with counterparties. In a typical 

swap transaction, ARM received a request for swap pricing from a client and then submitted the 

pricing request (and sometimes other terms) to counterparties with whom the relevant client had 

in place an ISDA agreement. In certain circumstances, a client would ask that ARM obtain 

pricing from a specific potential counterparty. In other circumstances, ARM would approach 

multiple or all counterparties with whom the client has an ISDA in place. After potential swap 

counterparties responded to ARM with a proposed price, ARM would take one of two steps. If 

the client had provided ARM with the authority to do so, ARM would approve or reject a price 

based on the client’s pre-approved threshold, including by communicating “done” via chat or 

email, thus executing the swaps. ARM would then separately confirm the swap execution with 

the client. Alternatively, if ARM did not have authority to execute the swap on behalf of the 

client, ARM would typically join the client on a phone call with the relevant counterparty, during 

which ARM’s client would agree to the terms. 
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As of Spring 2022, ARM provided facilitated swap transactions for approximately 70 

clients and worked with 20 to 30 swap counterparties. In all these communications with clients 

and counterparties, ARM’s personnel used various means of interstate commerce including 

instant messaging, phone, and email. 

III. LEGAL DISCUSSION 

A. Section 5h(a)(1) of the Act and Regulation 37.3 Require SEF Registration 

Section 5h(a)(1) of the Act prohibits any person from operating 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 [“DCM”] . . . .” 7 U.S.C. § 7b-3(a)(1). Regulation 37.3(a)(1) 

similarly requires any “person operating a facility that offers a trading system or platform in 

which more than one market participant has the ability to execute or trade swaps with more than 

one other market participant on the system or platform” to register as a SEF or DCM. 17 C.F.R. 

§ 37.3(a)(1) (2021). Section 1a(47) of the Act defines “swap” to include energy swaps, which 

were products that clients of ARM could transact. 7 U.S.C. § 1a(47)(A)(iii). Whether a 

particular entity falls within the scope of 5h(a)(1) depends on all of the relevant facts and 

circumstances of the entity’s operation.2

B. The SEF Registration Requirement Applies to Multiple-to-Multiple Platforms 

Section 1a(50) of the Act, 7 U.S.C. § 1a(50), defines a SEF as: 

[A] trading system or platform in which multiple participants have the ability to execute 

or trade swaps by accepting bids and offers made by multiple participants in the facility 

or system, through any means of interstate commerce, including any trading facility, 

that— 

(A) Facilitates the execution of swaps between persons; and (B) is not a designated 

contract market. 

A trading system or platform meets the multiple-to-multiple prong of the SEF definition3

if multiple participants have the “ability to execute or trade swaps” with multiple participants. 

Id. (emphasis added). Thus, a trading system or platform may be required to register as a SEF 

even where: (i) multiple participants cannot simultaneously request, make, or accept bids and 

offers from multiple participants; or (ii) multiple participants can initiate a one-to-many 

communication. See Staff Advisory on Swap Execution Facility Registration Requirement, 

CFTC Letter No. 21-19 (Sept. 29, 2021) (“2021 Staff Advisory”). For example, a one-to-many 

system or platform on which the sponsoring entity is the counterparty to all swap contracts 

 

2 See Core Principles and Other Requirements for Swap Execution Facilities, 78 FR 33476, 33482 (June 

4, 2013) (“2013 Final Rule”). 

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 The portion of the SEF statutory definition that states “in which multiple participants have the ability to 

execute or trade swaps by accepting bids and offers made by multiple participants in the facility or 

system” is commonly referred to as the “multiple-to-multiple prong.” 
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executed through the system or platform, and thus the provision of liquidity is limited to a single 

liquidity provider (i.e., the sponsoring entity), does not provide the ability for participants to 

conduct multiple-to-multiple execution or trading. 2013 Final Rule at 33482. In contrast, a oneto-many system or platform like a request for quote (“RFQ”) system—where a single requestor 

initiates for each transaction a one-to-many communication by submitting an RFQ to multiple 

participants—will satisfy the multiple-to-multiple prong if more than one participant is able to 

submit an RFQ on the platform. Id. at 33497–98; 2021 Staff Advisory. 

During the Relevant Period, ARM facilitated, negotiated, and executed swaps between 

and among approximately 70 clients and a group of 20 to 30 swap counterparties. ARM’s 

services included: (i) obtaining requests for swap pricing from clients; (ii) transmitting those 

requests to multiple swap counterparties; (iii) where authorized, approving or rejecting 

counterparty pricing, including by communicating “done,” thus executing the swaps; and 

(iv) subsequently confirming the swap execution with the client. In certain cases, after obtaining 

pricing requests from clients and pricing offers from counterparties, ARM also joined the client 

and counterparty on a phone call during which they agreed to the terms. In all these 

communications with clients and counterparties, ARM’s personnel used various means of 

interstate commerce including instant messaging, phone, and email.4

C. ARM Violated Section 5h(a)(1) of the Act and Regulation 37.3 

During the Relevant Period, ARM operated a multiple-to-multiple trading system or 

platform designed to facilitate the execution of swaps. However, ARM did not register the 

platform as a SEF or DCM. Accordingly, ARM violated Section 5h(a)(1) of the Act and 

Regulation 37.3(a)(1).

IV. FINDINGS OF VIOLATIONS 

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

Respondent violated Section 5h(a)(1) of the Act, 7 U.S.C. § 7b-3(a)(1), and Regulation 

37.3(a)(1), 17 C.F.R. § 37.3(a)(1) (2021). 

V. OFFER OF SETTLEMENT 

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

and conclusions herein: 

A. Acknowledges 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; 

 

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 Section 1a(50) of the Act; see also 2013 Final Rule at 33501–02 (noting that a SEF may for purposes of 

execution and communication use ‘any means of interstate commerce,’ including, but not limited to, the 

mail, internet, email, telephone, instant messaging, squawk box, or some combination thereof). 
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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 Regulations, 17 C.F.R. 

pt. 148 (2021), 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, tit. II, §§ 201–253, 

110 Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), 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, including this Order; 

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; and 

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 Respondent violated Section 5h(a)(1) of 

the Act, 7 U.S.C. § 7b-3(a)(1), and Regulation 37.3(a)(1), 17 C.F.R. § 37.3(a)(1) 

(2021); 

2. Orders Respondent to cease and desist from violating Section 5h(a)(1) of the Act 

and Regulation 37.3(a)(1); 

3. Orders Respondent to pay a civil monetary penalty in the amount of two-hundred 

thousand dollars ($200,000), plus post-judgment interest; and 

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

undertakings consented to in the Offer and as set forth in Part VI of this Order. Upon 

consideration, the Commission has determined to accept the Offer. 
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VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Respondent shall cease and desist from violating Section 5h(a)(1) of the Act, 7 U.S.C. 

§ 7b-3(a)(1), and Regulation 37.3(a)(1), 17 C.F.R. § 37.3(a)(1) (2021). 

B. Respondent shall pay a civil monetary penalty in the amount of two-hundred thousand 

dollars ($200,000) (“CMP Obligation”), within ten days of the date of the 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 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. 

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 266 

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 Respondent and the name and 

docket number of this proceeding. The paying 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. 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 its agents and/or 

employees under its authority or control understand and comply with this 

agreement. 

2. 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. 

3. Change of Address/Phone: Until such time as Respondent satisfies in full its CMP 

Obligation as set forth in the Order, Respondent shall provide written notice to the 

Commission by certified mail of any change to its telephone number and mailing 

address within ten calendar days of the change. 

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

By the Commission. 

Christopher 

~t~ J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: September 26, 2022 

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