On April 23, the Commodity Futures Trading Commission’s Division of Market Oversight (DMO) provided guidance to swap execution facilities (SEFs) regarding the calculation of projected operating costs and expenses for purposes of the financial resource requirements under SEF Core Principle 13 and CFTC Regulation 37.1303. SEF Core Principle 13 requires each SEF to have “adequate financial, operational, and managerial resources to discharge each responsibility” and further provides that the “financial resources of a SEF shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the SEF to cover the operating costs of the SEF for a one-year period, as calculated on a rolling basis.” Regulation 37.1303 requires a SEF to make a reasonable calculation every fiscal quarter of its projected operating costs over a 12-month period in order to determine the amount needed to meet the financial resources requirements.

DMO’s guidance clarifies that variable commissions paid to a SEF’s employee voice brokers are not required to be included in a SEF’s calculation of its projected operating costs. DMO reasoned that, unlike fixed salaries or compensation, variable commissions paid to employee voice brokers are not payable unless and until revenue is collected by the SEF.

CFTC Letter No. 15-26 is available here.