On April 28, the Commodity Futures Trading Commission issued guidance on the calculation by designated contract markets (DCMs) and swap execution facilities (SEFs) of projected operating costs for purposes of complying with DCM Core Principle 21 and CFTC Regulation 38.1101(c), and SEF Core Principle 13 and CFTC Regulation 37.1303.

The guidance indicates that, for a calculation of a DCM or SEF’s projected operating costs to be reasonable, it must include the costs and expenses of such DCM or SEF’s compliance with the Commodity Exchange Act, CFTC regulations, and such DCM or SEF’s rulebook. The guidance also provides a list of other expenses that would be reasonable to exclude from such a calculation and addresses permitted proration of certain expenses (such as those expenses shared among affiliated entities).

Further, the guidance indicates that a DCM or SEF’s quarterly financial reports must identify and explain any expenses that were prorated or not included, and provide sufficient information for the CFTC to assess the reasonableness of any such calculation.

CFTC Staff Letter 17-25 is available here.