CFTC Staff Letter 17-54: No-Action Relief for SEFs from Post-Execution Allocation Audit Trail Requirements

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000
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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.