CFTC proposes to eliminate mandatory SEF order book requirements

The CFTC proposes to eliminate order-book requirements for some swaps

The U.S. Commodity Futures Trading Commission (CFTC) proposes to eliminate an order-book requirement that has been in place for 13 years that involves specific swaps. The public comment period will begin after the proposal is published in the Federal Register and will last for 30 days.

Highlights

The Swap Execution Facility (SEF) will no longer require order book services to allow transactions. For swaps classified as essential transactions, order book requirements will remain unchanged. The CFTC stated that although relevant order book functions are available, traders rarely use them. After the proposal enters the Federal Register, the public consultation period is 30 days.

The CFTC said in a regulatory notice issued on August 20 that it was seeking comments on amending Rule 37.3(a)(2). The rule specifies the minimum trading functions that a swap execution facility must provide.

Under the proposal, swap execution facilities will no longer need to provide order books for allowed transactions. This change will not prevent the platform from retaining while customers use the service, but each SEF can decide for itself whether it is worth investing costs and resources. Current rules require all registered SEFs to maintain an order book for all swaps listed on their platforms, including products that traders can execute through other means. The committee noted that although the orderbook function is available, market participants rarely choose to use it when making permitted transactions.

CFTC Chairman Michael Selig said: "Today's action continues the agency's commitment to developing the most effective minimum regulation for market participants. He added that removing so-called "excessive requirements" would align the committee with its principles-based approach to derivatives regulation.

The CFTC plans to establish rules for cryptocurrencies regardless of the progress of the Digital Asset Markets Clarification Act

The CFTC proposal divides swap transactions into two categories

Allowed transactions refer to swaps that are not subject to the transaction execution requirements of Section 2(h)(8) of the Commodity Exchange Act. Federal regulations allow SEF to provide any enforcement method for these products, giving traders more options when completing transactions. Necessary transactions are subject to a different set of rules. Unless exemptions apply, participants must execute the relevant swaps through an order book or an inquiry system that complies with CFTC requirements.

The August 20 proposal only applies to the minimum order book function in Rule 37.3(a)(2). According to documents released by the agency, the proposal will not eliminate the orderbook framework for necessary transactions, nor will it change which swaps must be traded through designated execution methods.

Order books allow market participants to submit multiple bid and ask prices, view prices submitted by other users, and trade based on available quotes. When the CFTC finalized the SEF rules in 2013, the committee asked the platform to provide orderbook functionality to allow transactions, although users could choose other execution methods offered by the venue.

After more than a decade of trading activity, regulators have begun to question whether every SEF still needs to support this feature. In its proposal, the committee said that allowing limited use of trade order books suggests that this mandatory requirement may require the platform to maintain infrastructure that is inconsistent with customers 'trading habits.

SEF can choose transaction resource allocation direction

Removing mandatory requirements will allow SEF to allocate employee, technical and operational resources among execution systems used on its platform. The CFTC stated that venues can still retain order book services when the order book is suitable for the listed products or when the customer requests that transaction form. At the same time, the committee said greater flexibility could support the development of enforcement methods that are more suitable for specific swaps. The agency did not specify a preferred alternative and did not require SEF to terminate any existing services.

This notice will not bring immediate compliance changes because the committee has not yet adopted the final rule. Proposals must be published in the Federal Register, when a 30-day public comment period will begin. Stakeholders may express their views on the proposed amendment, its costs, potential benefits and possible impact on SEF transactions. After reviewing the submissions, the CFTC may adopt the text as proposed, amend it, or maintain existing rules unchanged.

This SEF measure follows another regulatory plan released two days ago. On August 18, it was reported that the committee's CPO and CTA proposals would provide registration exemptions for some SEC-registered investment advisers and increase the exemption threshold for small funds from $400,000 to $800,000.

Unlike the 30-day comment period for the SEF proposal, comments on Part 4 amendments will be open for 45 days after publication in the Federal Register. The two procedures involve different regulatory groups, but are both part of Selig's stated effort to remove requirements that the committee deems duplicate or incompatible with current market activity.

U.S. swap rules remain different from spot regulation of cryptocurrencies

For U.S. market participants, the SEF proposal involves regulated swaps rather than ordinary transactions of buying and selling crypto assets on a spot exchange. The CFTC currently regulates commodity derivatives, including futures, options and swaps related to digital assets, while its regular powers over the bitcoin spot market are more limited.

Congress is considering expanding the regulator's digital asset responsibilities through the Digital Asset Markets Clarification Act. Under pending legislation, eligible digital goods will be regulated by the CFTC, while the U.S. Securities and Exchange Commission will retain authority over assets and transactions governed by federal securities laws. Selig said on August 20 that if Congress fails to complete legislation, the committee is ready to move forward with cryptocurrency market proposals under its existing powers. His statement did not specify completed proposals or provide release dates.

Existing powers already allow the agency to formulate rules for registered derivatives trading venues and intermediaries. However, under the CFTC's statutory framework, Congress needs to grant the committee regular regulatory powers over cryptocurrency spot exchanges as envisioned in the Digital Asset Markets Clarification Act. The House passed a version of the bill in July 2025, while the Senate Banking Committee advanced its text in May 2026. Senate Majority Leader John Thun subsequently filed a motion to end debate, setting a procedural test for September 15, requiring 60 votes.

Negotiators have yet to resolve disputes involving decentralized finance, ethical restrictions on public officials, and rewards for stablecoin balances. At a White House event on August 19, President Donald Trump urged Congress to approve a "fair version" of the bill and said legislation was needed to safeguard the government's digital asset policy.

CFTC advisers discuss cryptocurrencies, artificial intelligence and forecasting markets

In addition to formal rulemaking, the CFTC held its first meeting of the Innovation Advisory Committee in Washington on August 20 from 1 p.m. to 4 p.m. EDT. The meeting agenda includes digital assets, artificial intelligence in financial markets, and forecasting markets. Its cryptocurrency meetings cover customer protection, market integrity, overlapping federal powers and the committee's ability to act under existing laws. Committee participants include representatives from cryptocurrency companies, traditional financial institutions, academic organizations and market infrastructure providers. Depending on the committee's responsibilities, members can recommend policy measures, but cannot pass regulations or expand the committee's legal powers. The public can submit written statements related to the meeting before August 27. The CFTC said eligible submissions must identify the Innovation Advisory Committee and will become part of the committee's public records.