CFTC Seeks Comments on Eliminating SEF Order Book Requirement for Permitted Transactions

The Commodity Futures Trading Commission published a Notice of Proposed Rulemaking to remove the order book requirement for permitted transactions on swap execution facilities, part of what the agency frames as a shift toward lighter-touch derivatives market oversight.

The proposal targets Commission regulation 37.3(a)(2) and would allow SEFs to cease offering order books specifically for permitted transactions, a subset of swaps that can be executed outside the standard clearing framework. The CFTC states order books for permitted transactions have been rarely used by market participants despite their availability on all swaps SEFs list for trading.

SEFs would retain the flexibility to determine how to allocate resources and choose alternative execution methods better suited to the products they list, according to the agency's announcement. CFTC Chairman Michael S. Selig stated the action continues the Commission's commitment to prescribing the minimum effective dose of regulation and that by removing excessive requirements from the rulebook, the agency is remaining true to its principles-based regulatory approach.

The CFTC distinguishes the proposed change from order book requirements for required transactions, which remain in place. Permitted transactions are a narrower category and operate under different execution rules.

Public comments will be accepted for 30 days following publication in the Federal Register. The announcement does not specify the exact publication date or the start and end dates of the comment window.