Swap Execution Facility

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A swap execution facility (SEF) is an organized marketplace for swaps that is regulated by the U.S. Commodity Futures Trading Commission (CFTC). The Commodity Exchange Act requires that any facility that allows buyers and sellers to trade swaps must first be approved by the CFTC. SEFs must comply with 15 core principles established by the Commodity Exchange Act and with CFTC regulations. [1][2]

The concept of a swap execution facility was instituted by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

For legal and regulatory purposes, the Dodd-Frank Act defined all derivatives contracts on commodities subject to the CFTC's jurisdiction as swaps except for contracts that are futures or options on futures. The legislative definition of swap includes options and forwards on commodities.[3] TeraExchange, which applied to the CFTC for registration as a SEF, was permitted to certify its bitcoin swap contract and list it for trading in 2014. TeraExchange was registered permanently on May 26, 2016.[4] In August 2015, the CFTC accepted applications from LedgerX to be registered as both a SEF in order to trade bitcoin options and a derivatives clearing organization in order to clear bitcoin options. LedgerX was registered for both trading and clearing physically delivered bitcoin swaps in July 2017.[5] Seed CX, which was registered to operate as a SEF in 2016, disclosed its intention to list bitcoin and other cryptocurrency swaps as its first products in the first quarter of 2019.[6]

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