SEFs Required to Ensure Compliance with CFTC Amended Block Trade Definition

The Commodity Futures Trading Commission's Division of Market Oversight (DMO) reminds swap execution facilities (SEFs) that the block trade no-action relief will expire on May 25. Beginning that day SEFs are required to comply with the amended definition of "block trade".

Since 2014, DMO has provided no-action relief for SEFs that have rules and/or procedures to facilitate the execution of block trades for swaps that are intended-to-be-cleared (ITBC) through the SEF's non-order book trading systems or platforms, and thus were not compliant with the final rules definition of "block trade" which required block trades to occur away from a SEF's trading systems or platforms (Block Trade Relief).

On September 17, 2020, the Commission approved Final Rule: Part 43 Real-time Public Reporting Rules that amended certain real-time public swap reporting and dissemination requirements. In particular, the Part 43 Real-time Public Reporting Rules amended the definition of "block trade" to allow block trades for ITBC swap blocks to be executed on a SEF's non-order book trading systems or platforms codifying the Block Trade Relief.

In addition, the amended definition of "block trade" would also allow non-ITBC swap block trades to be executed on a SEF's non-order book trading systems or platforms. The Part 43 Real-time Public Reporting Rules' amendments to the “block trade” definition were effective on January 25, 2021, with a compliance date of May 25, 2022.

Beginning May 25, SEFs are required to comply with the amended definition of "block trade" in order to facilitate the execution of swap block trades through the SEF's non-order book trading systems or platforms.

SEFs may make non-substantive revisions, such as removing references to CFTC Staff Letter No. 20-35, to rules and/or procedures that facilitate the execution of ITBC swap block trades using non-order book trading systems or platforms. New rules and/or procedures, such as rules and/or procedures that facilitate the execution of non-ITBC swap block trades using a SEF's non-order book trading systems or platforms, must be self-certified or submitted for CFTC approval.

To avoid doubt, a SEF's compliance with the amended definition of "block trade" does not impact that SEF's ability to otherwise avail themselves of the reporting relief.