CFTC Issues No-Action Relief for SEFs on Order Book Obligations

In a marked departure from its position since 2013, the Commodity Futures Trading Commission (CFTC) issued No-Action Letter 25-24 on July 30, 2025 (Letter 25-24), stating that it will not recommend enforcement action against a swap execution facility (SEF) that does not offer a central limit order book, as required under CFTC Regulation 37.3(a)(2), with respect to swap transactions that are not subject to the trade execution requirement under Section 2(h)(8) of the Commodity Exchange Act (CEA).

This no-action relief reflects the CFTC’s recognition of how the swaps market has evolved over the past decade and signals a shift in regulatory posture. By moving away from a requirement that has seen little adoption in practice, the CFTC appears increasingly inclined to tailor its regulatory framework to reflect the operational realities of swap execution.

Background

The CFTC’s 2013 final rule establishing the SEF framework implemented key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.[1] A SEF is a CFTC-registered trading system or platform that facilitates the execution of swaps by bringing together multiple participants through regulated methods of execution and is a central mechanism through which the CFTC aims to enhance transparency, competition, and oversight in the swaps market. The rule sought to shift trading activity away from opaque, bilateral negotiations and toward more centralized and standardized execution protocols.

As part of this effort, the CFTC prescribed certain requirements for registered SEFs, including the minimum trading functionality requirement set forth in CFTC Regulation 37.3(a)(2). This provision obligates all SEFs to maintain an order book for each swap listed on the facility, regardless of whether the swap is subject to the trade execution mandate (i.e., order books are required for both “required transactions” and “permitted transactions”). 

An order book is defined as (i) an electronic trading facility, (ii) a trading facility, or (iii) a trading system or platform in which all market participants in the trading system or platform have the ability to enter multiple bids and offers, observe or receive bids and offers entered by other market participants, and transact on such bids and offers. In practice, an order book enables participants to post executable bids and offers visible to all other users of the platform, thereby facilitating real-time price discovery and promoting pre-trade transparency across the market. 

To balance these transparency objectives with execution flexibility, the 2013 SEF final rule also permits SEFs to offer request-for-quote (RFQ) systems in conjunction with order books. An RFQ system allows a participant to solicit price quotes from a minimum number of market participants (at least three for required transactions), enabling competition while accommodating products or trade sizes that may be ill-suited to order book trading. This framework was intended to foster broader participation and competition while reflecting the trading conventions across swap markets.

No-Action Letter

On July 30, the CFTC’s Division of Market Oversight (Division) issued a no-action letter stating that it would not recommend enforcement action against a SEF that does not offer an order book for permitted transactions (i.e., swaps not subject to the trade execution mandate and therefore not required to be executed on a SEF or designated contract market). 

The letter responded to a request from LSEG FX SEF, operated by Refinitiv US SEF LLC (LSEG SEF), which argued that its order book for permitted transactions had received no executable bids or offers since launch, and that maintaining the order book imposed ongoing technology, compliance, and staffing costs disproportionate to its use, minimal contribution to pre-trade transparency, and lack of regulatory benefit. LSEG SEF further noted that permitted transactions on its platform were consistently executed through the RFQ system, in line with long-standing market convention and client preference. The Division acknowledged that order books have seen little to no adoption for permitted transactions across the industry. The no-action relief aligns with prevailing market practice and echoes themes raised in the CFTC’s 2018 SEF reform proposal, which had contemplated eliminating the order book requirement for permitted transactions to better reflect actual market behavior.[2]

This relief applies only to permitted transactions and does not affect SEF obligations for required transactions. It will remain in effect unless and until the CFTC adopts a rule to the contrary.

Impact

SEFs that list permitted transactions stand to gain regulatory and operational efficiencies from no longer being required to maintain order books that have seen little or no use. For platforms that primarily rely on RFQ systems, removing this infrastructure can significantly reduce financial and compliance burdens.

More broadly, the no-action letter reflects the CFTC’s continued shift toward aligning regulatory requirements with the practical realities of swap execution and market practice. Although the 2013 SEF final rule envisioned wider adoption of centralized trading protocols, market participants have consistently favored RFQ systems, particularly for less liquid or bespoke swaps. By relaxing the order book requirement for permitted transactions, the CFTC has acknowledged this divergence while preserving its existing framework for required transactions. 

SEFs are not required to maintain an order book in the following circumstances, whether under existing CFTC rules or pursuant to the no-action relief:

• Swaps executed off-SEF;
• Unlisted swaps; and
• Permitted transactions executed via other methods pursuant to the instant no-action relief.

While the changes streamline SEF operations and reflect prevailing execution methods, they may also reinforce the market’s reliance on less transparent protocols. Unlike order books, RFQ systems do not display live bids and offers to the broader market, particularly when requests are sent to a limited set of counterparties. The continued dominance of RFQ systems for permitted transactions underscores the limited role of centralized trading in certain swap markets, raising questions about whether the original goals of standardized execution remain achievable for more bespoke products.

Conclusion

Letter 25-24 marks a meaningful step in the CFTC’s shift toward more practical SEF oversight. While it reduces compliance costs for permitted transactions, some market participants may view the move as a step back from transparency, raising concerns about limited price discovery and reduced visibility in certain segments of the swaps market. As permitted transactions increasingly occur through less visible execution methods, the challenge for regulators will be to strike an appropriate balance between operational efficiency and the public interest in maintaining accessible, transparent markets.
 

[1] Core Principles and Other Requirements for Swap Execution Facilities; Final Rule, 78 Fed. Reg. 33,476 (June 4, 2013), available at: http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2013-12242a.pdf.

[2] Swap Execution Facilities and Trade Execution Requirement, 83 Fed. Reg. 61,946 (Nov. 30, 2018), available at: https://www.govinfo.gov/content/pkg/FR-2018-11-30/pdf/2018-24642.pdf.