Guidance Relating to Consent to Jurisdiction on SEFs

The Asset Management Group of SIFMA (SIFMA AMG) provides comments to the Commodity and Futures Trading Commission requesting Interpretive Guidance relating to consent to jurisdiction on swap execution facilities (SEFs), CFTC Reg 37.202(b).

SIFMA AMG supports an orderly transition to swap execution on SEFs. In order to ensure that this transition is not disruptive to market participants, it is imperative that uncertainties relating to the rules of the road for swap execution are eliminated to the fullest extent possible.

However, with less than one month before execution on SEFs will become mandatory for some swaps, SIFMA AMG remains highly concerned about one particular rulebook issue that it has discussed with the CFTC in the past, the Jurisdiction Provision, as it relates to asset managers and their clients.

SIFMA AMG believes that the intention of this provision was to ensure a SEF has jurisdiction over persons accessing its markets and making trading decisions about entering into swaps on a SEF in order to effectively investigate and potentially sanction persons that may violate the SEF rules. Clients of an asset manager do not have “access” to trading on SEFs. They are neither authorized users of the SEFs nor do they directly engage in any trading activity on the SEF platforms. When a SEF is accessed by an asset manager (directly through an agent), it is the asset manager, and not its underlying clients, who is exercising discretion to enter into trades on the SEF.

Therefore, SIFMA AMG believes that it should be sufficient for the asset manager, and not every underlying client, to consent to the jurisdiction of the SEF.