# CFTC Letter No. 25-24: No-action letter stating that the Division will not recommend that the Commission commence an enforcement action against a swap execution facility (“SEF”) that does not satisfy the minimum trading functionality requir..

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/CFTC_L25_24

## Section

- **Citation:** CFTC Letter No. 25-24
- **Heading:** No-action letter stating that the Division will not recommend that the Commission commence an enforcement action against a swap execution facility (“SEF”) that does not satisfy the minimum trading functionality requir..
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** CFTC Staff Letters (2008-present) / No-action letter stating that the Division will not recommend that the Commission commence an enforcement action against a swap execution facility (“SEF”) that does not satisfy the minimum trading functionality requir...

## Text

Summary: No-action letter stating that the Division will not recommend that the Commission commence an enforcement action against a swap execution facility (“SEF”) that does not satisfy the minimum trading functionality requirement set forth in Commission regulation 37.3(a)(2) by offering an order book as defined in Commission regulation 37.3(a)(3) (an “Order Book”), in connection with swap transactions executed on the SEF that are not subject to the trade execution requirement in Commodity Exchange Act (“CEA” or “Act”) section 2(h)(8) (“Permitted Transactions”).

CFTC LETTER NO. 25-24 NO-ACTION JULY 30, 2025

Rahul Varma

Acting Director

Re:
No-Action Position with Respect to the Swap Execution Facility Minimum Trading
Functionality under Commission Regulation 37.3(a)(2)
The Division of Market Oversight (“Division”) of the Commodity Futures Trading Commission
(“Commission”) is issuing this letter in response to a request dated June 30, 2025 from LSEG
FX SEF, operated by Refinitiv US SEF LLC (“LSEG SEF”),1 pursuant to Commission
Regulation 140.99.2
LSEG SEF requested that the Division issue a no-action letter stating that the Division will not
recommend that the Commission commence an enforcement action against a swap execution
facility (“SEF”) that does not satisfy the minimum trading functionality requirement set forth in
Commission regulation 37.3(a)(2) by offering an order book as defined in Commission
regulation 37.3(a)(3) (an “Order Book”), in connection with swap transactions executed on the
SEF that are not subject to the trade execution requirement in Commodity Exchange Act
(“CEA” or “Act”) section 2(h)(8) (“Permitted Transactions”).3
I
satisfy the minimum trading functionality requirement set forth in
Commission regulation 37.3(a)(2) by offering an order book as defined in Commission
regulation 37.3(a)(3) (an “Order Book”), in connection with swap transactions executed on the
SEF that are not subject to the trade execution requirement in Commodity Exchange Act
(“CEA” or “Act”) section 2(h)(8) (“Permitted Transactions”).3
I.
Background
In 2013, the Commission issued final rules pursuant to section 5h of the CEA requiring entities
that satisfy the definition of a SEF to register with the Commission,4 and prescribing certain
requirements for registered SEFs, including the minimum trading functionality requirement set
forth in Commission regulation 37.3(a)(2) (“Minimum Trading Functionality
Requirement”).5 Commission regulation 37.3(a)(2) states that “A swap execution facility shall,

1 LSEG SEF, Request for Relief from Minimum Trading Functionality for Swap Execution Facilities (June 30,
2025) (“LSEG SEF Request Letter”).
2 17 C.F.R. § 140.99.
3 “Permitted transaction” is defined in Commission regulation 37.9(c)(1) as “any transaction not involving a swap
that is subject to the trade execution requirement in section 2(h)(8) of the Act.” 17 C.F.R. § 37.9(c)(1). “Required
transaction” is defined in Commission regulation 37.9(a)(1) as “any transaction involving a swap that is subject to
the trade execution requirement in section 2(h)(8) of the Act.” 17 C.F.R. § 37.9(a)(1).
4 A “swap execution facility” is defined in CEA section 1a(50) 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. 7 U.S.C. § 1a(50)
1a(50) 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. 7 U.S.C. § 1a(50).
5 Core Principles and Other Requirements for Swap Execution Facilities; Final Rule, 78 FR 33476 (June 4, 2013)
(the “SEF Final Rules”).
CFTC Logo, COMMODITY FUTURES TRADING COMMISSION, Three Layfette Centre, 1155 21st Street, NW, Washington, DC 20581; Telephone (202) 418-5000
Division of
Market Oversight

2

at a minimum, offer an Order Book as defined in paragraph (a)(3) of this section.”6 Commission
regulation 37.3(a)(3) defines an Order Book as:
(i) An electronic trading facility, as that term is defined in section 1a(16) of the
Act;7
(ii) A trading facility, as that term is defined in section 1a(51) of the Act;8 or
(iii) A trading system or platform in which all market participants in the trading
system or platform have the ability to enter multiple bids and offers, observe or
receive bids and offers entered by other market participants, and transact on such
bids and offers.9
In describing the purpose of the Minimum Trading Functionality Requirement, the Commission
stated in the adopting release for the SEF Final Rules that “the Commission believes that an
Order Book, as defined in final § 37.3(a)(3), is consistent with the SEF definition and promotes
the goals provided in section 733 of the Dodd-Frank Act,”10 and explained that those goals are to
“promote the trading of swaps on [SEFs] and to promote pre-trade price transparency in the
swaps market.”11 The Commission also stated that “[t]he order book requirement is designed to
ensure a base level of pre-trade transparency to all market participants by providing for live
executable bids and offers in Required Transactions.”12
In 2018, t
k Act,”10 and explained that those goals are to
“promote the trading of swaps on [SEFs] and to promote pre-trade price transparency in the
swaps market.”11 The Commission also stated that “[t]he order book requirement is designed to
ensure a base level of pre-trade transparency to all market participants by providing for live
executable bids and offers in Required Transactions.”12
In 2018, the Commission proposed amendments to the Final SEF Rules, including amendments
to eliminate the Minimum Trading Functionality Requirement.13 The Commission noted in the
proposing release that “market participants have rarely used Order Books to trade swaps on SEFs
despite their availability for all swaps listed by SEFs,” and that “other execution methods may be
better suited to maximizing participation and concentrating liquidity formation on SEFs in
episodically liquid swaps markets.”14 The Commission ultimately finalized certain aspects of the

6 17 C.F.R. § 37.3(a)(2).
7 An “electronic trading facility” is defined in CEA section 1a(16) as a trading facility that: (A) operates by means of
an electronic or telecommunications network; and (B) maintains an automated audit trail of bids, offers, and the
matching of orders or the execution of transactions on the facility. 7 U.S.C. § 1a(16).
8 Subject to specified exclusions, a “trading facility” is defined in CEA section 1a(51) as a person or group of
persons that constitutes, maintains, or provides a physical or electronic facility or system in which multiple
participants have the ability to execute or trade agreements, contracts, or transactions: (i) by accepting bids or offers
made by other participants that are open to multiple participants in the facility or system; or (ii) through the
interaction of multiple bids or multiple offers within a system with a predetermined non-discretionary automated
trade matching and execution algorithm. 7 U.S.C. § 1a(51).
9 17 C.F.R. § 37.3(a)(3).
10 SEF Final Rules at 33484.
11 Id. at 33484 fn.113.
12 Id
cepting bids or offers
made by other participants that are open to multiple participants in the facility or system; or (ii) through the
interaction of multiple bids or multiple offers within a system with a predetermined non-discretionary automated
trade matching and execution algorithm. 7 U.S.C. § 1a(51).
9 17 C.F.R. § 37.3(a)(3).
10 SEF Final Rules at 33484.
11 Id. at 33484 fn.113.
12 Id. at 33564.
13 Swap Execution Facilities and Trade Execution Requirement; Proposed Rule, 83 FR 61946 (Nov. 30, 2018)
(“2018 SEF Proposal”).
14 2018 SEF Proposal at 61964.

3

2018 SEF Proposal,15 but determined at the time not to finalize the elimination of the Minimum
Trading Functionality Requirement.16
II.
Requested No-Action Position
As noted above, the Commission has explained that the goals of the Minimum Trading
Functionality Requirement are to promote the trading of swaps on SEFs and to promote pre-trade
price transparency in the swaps market. LSEG SEF states that, while “well-intentioned,”17
requiring SEFs to maintain an Order Book for Permitted Transactions “has neither increased
trading on SEFs nor improved pre-trade price transparency, yet the requirement to offer and
maintain an Order Book for all products listed on a SEF imposes significant costs on SEFs.”18
LSEG SEF states that this, in turn, “diverts resources that could be used for developing new
technologies or methods of execution that participants will actually use, which would better
achieve the Commission’s stated goals of imposing the [Minimum Trading Functionality
Requirement].”19
LSEG SEF notes that the Commission believed in 2013 that requiring a SEF to offer an Order
Book for all products listed on the SEF “would have the tendency to shift liquidity from the
over-the-counter bilateral markets onto SEFs,”20 and that this belief was “based in part on
experiences with the securities and futures markets, where ‘order books attract participation from
new and alternate sources of liquidity, including participants using auto
that requiring a SEF to offer an Order
Book for all products listed on the SEF “would have the tendency to shift liquidity from the
over-the-counter bilateral markets onto SEFs,”20 and that this belief was “based in part on
experiences with the securities and futures markets, where ‘order books attract participation from
new and alternate sources of liquidity, including participants using automated trading
strategies’.”21 However, LSEG SEF argues that during the several years since SEFs have been
registered with the Commission, Order Books have not attracted liquidity onto SEFs, in part due
to differences between the securities and futures markets and the swaps market.22
LSEG SEF states that “Order Books are seldom used, particularly for Permitted Transactions.”23
In this regard, LSEG SEF represents that “during the entire time that LSEG SEF’s Order Book
has been operational (i.e., prior to obtaining temporary registration status in 2013), not a single
trade has been executed on, nor any orders submitted to, LSEG SEF’s Order Book.”24

15 See Exemptions From Swap Trade Execution Requirement; Final Rule, 86 FR 8993 (Feb. 11, 2021); and Swap
Execution Facilities; Final Rule, 86 FR 9224 (Feb. 11, 2021).
16 See Swap Execution Facilities and Trade Execution Requirement; Proposed Rule; Partial Withdrawal, 86 FR 9304
(Feb. 12, 2021).
17 LSEG SEF Request Letter at 2.
18 Id. at 1.
19 Id.
20 Id at 2. See also SEF Final Rules at 33565 (“These provisions will facilitate the shifting of trading to the
centralized SEF market structure from the bilateral OTC market structure. . . .”).
21 LSEG SEF Request Letter at 2, citing the SEF Final Rules at 33561.
22 LSEG SEF Request Letter at 2, fn. 6.
23 Id. LSEG SEF points, for example, to the 2018 SEF Proposal, which cited studies finding that “[d]epending on the
product involved .
(“These provisions will facilitate the shifting of trading to the
centralized SEF market structure from the bilateral OTC market structure. . . .”).
21 LSEG SEF Request Letter at 2, citing the SEF Final Rules at 33561.
22 LSEG SEF Request Letter at 2, fn. 6.
23 Id. LSEG SEF points, for example, to the 2018 SEF Proposal, which cited studies finding that “[d]epending on the
product involved . . ., order book trading typically ranges between ‘less than [one percent] to less than [three
percent] of total [credit default swap] transactions’ on SEFs, while order book trading constitutes between ‘less than
[one percent] to approximately [twenty percent] of total [interest rate swap] transactions.’” 2018 SEF Proposal at
61964. LSEG SEF further suggests that Order Book usage in other swap asset classes is likely even less due to the
lower levels of liquidity in such asset other classes. LSEG SEF Request at 2.
24 Id. at 2-3. LSEG SEF offers foreign exchange (“FX”) non-deliverable forwards (“NDFs”) and FX options for
trading on its SEF. SEF transactions in FX NDFs and FX options are Permitted Transactions.

4

Further, LSEG SEF argues that “the past 12 years’ of experience has shown that the [Minimum
Trading Functionality Requirement] makes SEF trading less efficient, thus disincentivizing SEF
trading.”25 LSEG SEF states that, while the costs to offer and maintain an Order Book vary,
creating an Order Book typically requires a significant outlay of resources, both in terms of
financial cost and staff hours.26 LSEG SEF additionally states that it expends significant
resources each year to maintain its Order Book.27 Moreover, LSEG SEF represents that “SEFs
must periodically upgrade the systems and hardware necessary to run an Order Book,” which is
also costly.28 As such, LSEG SEF submits that “the requirement to offer and maintain a seldom
(if ever) used Order Book requires SEF participants to effectively pay for systems that they will
rarely, if ever, use and restricts SEFs’ ability to d
Order Book.27 Moreover, LSEG SEF represents that “SEFs
must periodically upgrade the systems and hardware necessary to run an Order Book,” which is
also costly.28 As such, LSEG SEF submits that “the requirement to offer and maintain a seldom
(if ever) used Order Book requires SEF participants to effectively pay for systems that they will
rarely, if ever, use and restricts SEFs’ ability to develop new offerings that would attract
additional participants and actually encourage more trading on SEFs.”29
LSEG SEF argues that “the CEA … does not require SEFs to offer or maintain an Order
Book.”30 LSEG SEF states that while the definition of a “SEF” references the term “trading
facility,”31 which is generally understood to be an order book,32 “the SEF definition states only
that a SEF includes a trading facility that facilitates the execution of swaps and is not a
designated contract market[,]” thus indicating “that a SEF can have an Order Book but [is] not
required to do so.”33
Overall, LSEG SEF argues that “the [Minimum Trading Functionality Requirement] does not
result in greater transparency and has not contributed to shifting swaps-market liquidity onto
SEFs.”34 Instead, LSEG SEF believes that the Minimum Trading Functionality Requirement
“imposes significant costs on SEFs that divert time and resources away from efforts that could be
much more effective at accomplishing those goals.”35
III.
No-Action Position
Based on the foregoing – including the Commission’s observation in the 2018 SEF Proposal to
eliminate the Minimum Trading Functionality Requirement that “market participants have rarely
used Order Books to trade swaps on SEFs despite their availability for all swaps listed by
SEFs,”36 and that “other execution methods may be better suited to maximizing participation and
concentrating liquidity formation on SEFs in episodically liquid swaps markets”37 – and the
representations of LSEG SEF, the Division believes that a reconsideration should be undertaken

25 Id. at 3.
26 Id
used Order Books to trade swaps on SEFs despite their availability for all swaps listed by
SEFs,”36 and that “other execution methods may be better suited to maximizing participation and
concentrating liquidity formation on SEFs in episodically liquid swaps markets”37 – and the
representations of LSEG SEF, the Division believes that a reconsideration should be undertaken

25 Id. at 3.
26 Id.
27 Id.
28 Id.
29 Id.
30 Id at 3-4.
31 See note 4, supra.
32 See note 8, supra.
33 LSEG SEF Request Letter at 4.
34 Id.
35 Id.
36 2018 SEF Proposal at 61964. See also note 23, supra.
37 Id. Further, the 2018 SEF Proposal notes that the Commission in the SEF Final Rules “acknowledged that the
Order Book functionality does not have the requisite flexibility to serve as the ideal method of execution for a
variety of swaps, in particular those that feature lower levels of liquidity.” Id. (citing to SEF Final Rules at 33564-
65).

5

of the usefulness and effectiveness of the Minimum Trading Functionality Requirement in
connection with Permitted Transactions,38 and thus believes that a no-action position is
warranted until such time that such reconsideration is completed. Accordingly, the Division will
not recommend that the Commission commence an enforcement action against a SEF for failure
to satisfy the Minimum Trading Functionality Requirement in connection with Permitted
Transactions. This no-action position will continue until the adoption of a Commission action
addressing the Minimum Trading Functionality Requirement in connection with Permitted
Transactions.

IV.
Conclusion
This letter, and the positions taken herein, represent only the views of the Division, and do not
necessarily represent the positions or views of the Commission or of any other office or division
of the Commission. This letter and the no-action positions taken herein are not binding on the
Commission or other Commission staff
ment in connection with Permitted
Transactions.

IV.
Conclusion
This letter, and the positions taken herein, represent only the views of the Division, and do not
necessarily represent the positions or views of the Commission or of any other office or division
of the Commission. This letter and the no-action positions taken herein are not binding on the
Commission or other Commission staff. The positions provided in this letter do not excuse
persons relying on it from compliance with any other applicable requirements contained in the
Act, Commission regulations, or any other applicable laws (i.e., securities laws). Further, this
letter, and the positions taken herein, are based upon the facts and circumstances presented to
Division staff. Any different, changed, or omitted material facts or circumstances might render
this letter void. Finally, as with all staff letters, the Division retains the authority to condition
further, modify, suspend, terminate, or otherwise restrict the terms of the positions herein, in its
discretion.

If you have any questions concerning this correspondence, please contact Roger Smith, Division
of Market Oversight, at (202) 418-5344 or rsmith@cftc.gov, or Nora Flood, Division of Market
Oversight, at (202) 418-6059 or nflood@cftc.gov.

Sincerely,

____________________
Rahul Varma
Acting Director
Division of Market Oversight

38 Such as consideration of LSEG SEF’s argument that Minimum Trading Functionality Requirement for Permitted
Transactions should be eliminated. See LSEG Request Letter at 4 (“[e]liminating the [Minimum Trading
Functionality Requirement] for Permitted Transactions would therefore create efficiencies in SEF trading and
functionality without detriment to swap market participants or the Commission”).

## Nearby sections

- [CFTC Letter No. 08-03 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of Eight Futures Contracts Based on Security Indices Derived from the Dow Jones STOXX 600 Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_03.md)
- [CFTC Letter No. 08-05 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the RDXxt USD-RDX Extended Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_05.md)
- [CFTC Letter No. 08-11 Euronext Paris SAs request for no-action relief in connection with the offer and sale in the United States of its futures contracts based on the FTSE EPRA/NAREIT Europe Index and the FTSE EPRA/NAREIT Euro Zone Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_11.md)
- [CFTC Letter No. 08-13 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contracts Based on the SLI Swiss Leader Index, the Swiss Market Index Midcap, the Dow Jones Eur...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_13.md)
- [CFTC Letter No. 08-15 The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to lis...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_15.md)
- [CFTC Letter No. 08-17 DCIO received a request for guidance from the Joint Audit Committee concerning FCM regulatory reporting requirements for investments in a money market mutual fund. The fund had announced that its net asset value per s...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_17.md)
- [CFTC Letter No. 08-18 The Division of Market Oversight issued a letter granting no-action relief to permit the Brazilian Derivatives Exchange, BM&F Bovespa S.A. – Bolsa de Valores, Mercadorias e Futuros (BM&F), to make its electronic tradi...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_18.md)
- [CFTC Letter No. 08-19 Thailand Futures Exchange Pcls Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the SET50 Index Futures Contract.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_19.md)
- [CFTC Letter No. 08-21 The Division of Market Oversight issued a no-action letter to BNP Paribas confirming that the Division will not recommend that the Commission initiate enforcement action against BNP Paribas or Fortis Bank S.A./N.V., o...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_21.md)
- [CFTC Letter No. 09-02 The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affi...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_02.md)
- [CFTC Letter No. 09-06 The CPO of a commodity pool requested that DCIO agree to accept the Annual Report for the period from January 1, 2008 through October 31, 2008 as the Pool’s final annual report despite the fact that the Pool had not f...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_06.md)
- [CFTC Letter No. 09-07 The CPO of a commodity pool with a de minimus amount of its assets embroiled in a bankruptcy requested relief from the ongoing reporting requirements under Part 4. The CPO filed an Annual Report for the Pool for the 2...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_07.md)
- [CFTC Letter No. 09-11 The CPO of two commodity pools requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_11.md)
- [CFTC Letter No. 09-13 The CPO of commodity pool requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_13.md)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/CFTC_L25_24. Check the current official text before relying on it. Not legal advice.