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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Proposed Rules adopt targeted rulemakings to address specific SEF issues or requirements.4
Issued in Washington, DC, on December 23, 2020, by the Commission.
Christopher Kirkpatrick, Secretary of the Commission.
Note: The following appendices will not appear in the Code of Federal Regulations.

Appendices to Swap Execution Facilities and Trade Execution RequirementCommission Voting Summary, Chairmans Statement, and Commissioners Statements Appendix 1Commission Voting Summary On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.

Appendix 2Statement of Support of Chairman Heath P. Tarbert Nearly two thousand years ago, the Stoic philosopher and statesman Seneca the Younger observed that every new beginning comes from some other beginnings end.
This remains as true today as it was then, and as it was in the 1990s when the band Semisonic built a song around it.
I vote today in support of withdrawing the remaining unadopted portions of the November 2018 Swap Execution Facilities SEF and Trade Execution Requirement proposal SEF Proposal. With the beginning of a new SEF landscape based on other rules we are announcing today, it is appropriate to bring that proposalwhich was itself a beginning of sortsto an end.
The SEF Proposal, which was championed by my predecessor Chairman Chris Giancarlo, was comprehensive in that it sought to codify staff no-action relief and otherwise resolve operational concerns of SEFs and market participants. It also set forth structural reforms to the SEF regime beyond these operational fixes. The SEF Proposal reflected a great deal of time, effort, and thought, and resulted in several rules ultimately adopted by the Commission. I am grateful indeed for Chairman Giancarlos thought leadership and the path that the SEF
Proposal set our agency upon.
4 Concurrently with this withdrawal, the Commission is adopting the Final Rules to implement various proposals from the NPRM. One of the Final Rules adopted two CEA section 4c exemptions from the trade execution requirement.
Specifically, this final rulemaking adopted proposed 36.1c and 36.1e, which were respectively re-numbered as 36.1b and 36.1c in the adopting release. See Exemption from Swap Execution Requirement, published in yesterdays issue of the Federal Register. The other adopted various proposals related to audit trail requirements for post-trade allocations, SEF financial resource requirements, and SEF chief compliance officer requirements. In particular, these final rules addressed the proposals for 37.205a and b2;
37.1301; 37.1302; 37.1303; 37.1304; 37.1305;
37.1306; 37.1307; and 37.1501. See Swap Execution Facilities, published in yesterdays issue of the Federal Register. This withdrawal does not impact or alter any of the Final Rules.

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In particular, our Commission yesterday adopted from the SEF Proposal: 1 Two exemptions, pursuant to Commodity Exchange Act CEA section 4c, from the trade execution requirement in CEA section 2h8; and 2 final rules related to audit trail requirements for post-trade allocations, SEF financial resource requirements, and SEF chief compliance officer requirements.
With respect to the unadopted portions of the SEF Proposal, the feedback received from market participants and the public made clear that moving forward would require significantly more work and a re-proposal of the rules. Therefore, I believe it is appropriate to withdraw those unadopted elements. Doing so is also consistent with our Commissions reasoning for withdrawing Regulation AT a few months agowe can start a new beginning only once we have ended the prior beginning.

Appendix 3Statement of Support of Commissioner Brian D. Quintenz I will vote in favor of withdrawing the unadopted provisions from the Commissions 2018 proposal comprehensively to amend the regulations applicable to swap execution facilities SEFs,1 but only because the Commission has already adopted many of these proposals, including in the areas of SEF
financial resources, audit trail data, and exceptions to the trade execution requirement, so that the SEF ruleset becomes more practical for market participants. I note that many of the finalized provisions are based on longstanding no-action relief that has taken over eight years and a Republican administration to rationalize the inadequate ruleset left by the Commissions prior leadership.
I regret significantly, however, that certain aspects of the 2018 proposal have not been acted upon or debated as a Commission since. In particular, the CEA as amended by Dodd Frank, legally allows SEFs greater flexibilityspecifically through any means of interstate commerce 2in which methods of execution they may offer for swaps subject to the trade execution requirement, than the overly prescriptive and government-knowsbest requirement that a SEF may only provide either a RFQ-to-3 or a Central Limit Order Book CLOB trading mechanism, as dictated by an existing CFTC rule.3 Indeed, such flexibility was recently requested by a wide range of market participants during the period of COVID-inspired market volatility and thin liquidity.4 If such trade execution flexibility is necessary to support liquidity in a stressed environment, why would it not benefit the markets more generally in normal environments? Additionally, such flexibility is absolutely consistent with the definition of a SEF set forth in the CEA, that establishes a SEF as a multiple-to-multiple trading system. 5
1 SEFs and Trade Execution Requirement, 83 FR
61946 Nov. 30, 2018.
2 Definition of SEF, sec. 1a50 of the CEA.
3 CFTC reg. 37.9a.
4 Comment letter from ISDA, dated May 22, 2020, in response to the Commissions February 2020
proposal on SEF and Real-Time Reporting requirements 85 FR 9407 Feb. 19, 2020.
5 Definition of SEF, sec. 1a50 of the CEA.

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Appendix 4Statement of Concurrence of Commissioner Rostin Behnam More than two years ago, in November 2018, the Commission voted to propose a comprehensive overhaul of the existing framework for swap execution facilities SEFs.1 Today, the Commission issues two rules finalizing aspects of the SEF Proposal and a withdrawal of the SEF Proposals unadopted provisions. This is the final step in a long road. Last month, the Commission finalized rules emanating from the SEF
Proposal regarding codification of existing no-action letters regarding, among other things, package transactions.2 Todays final rules and withdrawal complete the Commissions consideration of the SEF
Proposal.
Back in November 2018, I expressed concern that finalization of the SEF Proposal would reduce transparency, increase limitations on access to SEFs, and add significant costs for market participants.3 I
also noted that, while the existing SEF
framework could benefit from targeted changes, particularly the codification of existing no-action relief, the SEF framework has in many ways been a success. I pointed out that the Commissions work to promote swaps trading on SEFs has resulted in increased liquidity, while adding pre-trade price transparency and competition.
Nonetheless, I voted to put the SEF Proposal out for public comment, anticipating that the notice and comment process would guide the Commission in identifying a narrower set of changes that would improve the current SEF
framework and better align it with the statutory mandate and the underling policy objectives shaped after the 2008 financial crisis.4 More than two years and many comment letters later, that is exactly what has happened. The Commission has been precise and targeted in its finalization of specific provisions from the SEF Proposal that provide needed clarity to market participants and promote consistency, competitiveness, and appropriate operational flexibility consistent with the core principles.
In addition to expressing substantive concerns about the overbreadth of the SEF
Proposal, I also voiced concerns that we were rushing by having a comparatively short 75day comment period.5 In the end, the comment period was rightly extended, and the Commission has taken the time necessary to carefully evaluate the appropriateness of the SEF Proposal in consideration of its regulatory and oversight responsibilities and the comments received. I think that the consideration of the SEF Proposal is an example of how the process is supposed to 1 Swap Execution Facilities and Trade Execution Requirement, 83 FR 61946 Nov. 30, 2018 the SEF Proposal.
2 Swap Execution Facility Requirements Nov. 18, 2020, https www.cftc.gov/PressRoom/
PressReleases/8313-20.
3 Statement of Concurrence of Commissioner Rostin Behnam Regarding Swap Execution Facilities and Trade Execution Requirement, https www.cftc.gov/PressRoom/
SpeechesTestimony/behnamstatement110518a.
4 Id.
5 Id.

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