SEF Settles Charges for Violating Swap Execution Delay Requirements

A registered swap execution facility ("SEF") settled CFTC charges relating to the requirement that certain swaps be exposed to a central order book for at least 15 seconds after entry.

In the Order, the CFTC found that due to a coding error in the SEF's execution software, the SEF was unable to prevent the execution of transactions that did not comply with the requirement that a SEF wait 15 seconds after executing one side of a transaction before executing the other. Additionally, the CFTC found that the SEF failed to timely identify and remediate the issue, which resulted in additional lapses in compliance.

As a result, the CFTC determined that the SEF violated CEA Section 5h(f)(1)(A) and Sections 5h(f)(2)(A)-(B) ("Swap execution facilities"), as well as CFTC Rule 37.9(b)(1) ("Methods of execution for required and permitted transactions"), Rules 37.200(a)-(b) ("Core Principle 2-Compliance with rules") and Rule 37.201(b) ("Operation of swap execution facility and compliance with rules").

To settle the charges, the SEF agreed to (i) cease and desist, (ii) pay a civil monetary penalty of $850,000 and (iii) initiate undertakings to investigate other potential violations and improve compliance.