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Swap Execution Facilities (SEFs)
European Union Electricity Market Glossary




Swap Execution Facilities (SEFs) are swap trading platforms authorised in the USA, which operate on a multilateral basis.


Legally binding requirements for SEFs are set forth in the Commodity Exchange Act (CEA) in the form of a principles-based legal framework.


SEFs operate under Section 5h of the CEA, which was added by Section 733 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the trading and processing of swaps.


Section 5h of the CEA sets out 15 Core Principles for SEFs.


In order to obtain and maintain registration with the CFTC, SEFs must comply with the 15 Core Principles.


A SEF must also comply with CFTC regulations applicable to SEFs on an initial and ongoing basis.



Authorisation, supervision and enforcement



In order to operate as a SEF, an applicant must obtain registration with the CFTC and demonstrate compliance with appli­ cable provisions under the CEA as well as the CFTC regulations.


The CFTC has regulatory oversight authority over SEFs, respectively, pursuant to Sections 5 and 5h of the CEA, 7 USC 7 and 7 USC 7b-3.


In order to be registered with the CFTC, a SEF must comply with the 15 SEF Core Principles, under the CEA and any requirements that the CFTC may impose by rule or regulation.


SEFs must provide eligible contract participants with impartial access to their markets and services and are required to have access criteria that are impartial, transparent and applied in a fair and non-discriminatory manner.


SEFs are also subject to or­ganisational requirements with regards to corporate governance, conflicts of interest policy, risk management, fair and orderly trading, trading system resilience, clearing and settlement arrangements, admission to trading and compliance monitoring, all of which must be complied with on an ongoing basis.


SEFs must establish rules governing their operations, including rules prohibiting abusive trade practices and enforce compliance with these rules.


These rules and any amendments thereto are assessed by the CFTC to ensure consistency with the CEA and CFTC regulations.


SEFs must have the capacity to detect, investigate and apply appropriate sanctions to any person that violates any DCM or SEF rule.


SEFs are permitted to use regulatory services of a third party for assistance in complying with applicable requirements under the CEA and CFTC regulations.


SEFs remain responsible for compliance with their statutory and regulatory obligations, even when using such a third party to provide regulatory services.


The CFTC also has ongoing oversight and enforcement responsibilities with respect to SEFs.


Section 8(a)(1) of the CEA gives the CFTC broad power to conduct investigations to ensure compliance with the CEA and the CFTC regulations.


Pursuant to CEA Sections 5e, 6(b), 6b and 6c(a) the CFTC may also bring civil enforcement actions to enjoin violations of the CEA or CFTC regulations and obtain other equitable relief and monetary sanctions: bring administrative enforcement proceedings, suspend or revoke the registration of a SEF, and make and enter against a SEF a cease and desist order from violating the CEA or CFTC regulations.


Section 6(c) of the CEA gives the CFTC power to administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of books, correspondence, memoranda and other records, for the purposes of enforcing the CEA or for purposes of any investigation or proceeding.






IMG 0744




Commission Implementing Decision (EU) 2017/2238 of 5 December 2017 on the equivalence of the legal and supervisory framework applicable to designated contract markets and swap execution facilities in the United States of America in accordance with Regulation (EU) No 600/2014 of the European Parliament and of the Council















Last Updated on Tuesday, 02 January 2018 10:53


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