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The Commodity Futures Trading Commission has proposed removing a requirement that swap execution facilities maintain an order book for transactions that are not subject to the Commodity Exchange Act’s trade execution mandate.
The August 20 proposal would let SEFs stop offering that functionality for permitted transactions when other execution methods better match how customers trade. Rules governing swaps classified as required transactions would remain unchanged.
SEFs Could Drop Rarely Used Order Books for Permitted Transactions
CFTC Regulation 37.3(a)(2) currently requires every swap execution facility to offer an order book as its minimum trading functionality. That requirement dates to the SEF rules adopted in 2013.
Permitted transactions already can use other execution methods offered by a SEF because they are not subject to the mandatory trade execution requirement. The proposed amendment would remove the separate obligation for the venue to maintain an order book even when customers do not use it.
The CFTC has previously found that market participants rarely use order books for swaps on SEFs. Chair Michael Selig said in March that more than a decade of experience showed participants “almost never” use them for permitted transactions.
Required Swaps Keep Existing Order Book and RFQ Rules
The proposal does not eliminate order books from the SEF framework or change the execution rules for required transactions.
Swaps subject to the trade execution requirement would continue to follow prescribed execution methods, including an order book or a qualifying request-for-quote system.
The amendment instead targets the minimum-functionality rule for permitted transactions, defined as transactions that do not involve a swap subject to the trade execution requirement under Section 2(h)(8) of the Commodity Exchange Act.
Proposal Would Replace July 2025 Staff No-Action Relief
The proposed amendment follows CFTC Letter 25-24, issued by the Division of Market Oversight on July 30, 2025.
That letter said staff would not recommend enforcement against a SEF solely for failing to provide an order book for permitted transactions. The relief remains in place until the Commission adopts an action addressing the requirement, although staff retains authority to modify or terminate it.
If adopted, the new rule would replace reliance on that staff position with a formal Commission regulation.
No rule change takes effect immediately. Interested parties will have 30 days after the proposal is published in the Federal Register to submit comments before the CFTC decides whether to finalize or revise the amendment.
