April 28, 2017

CFTC’s Division of Market Oversight Issues Guidance on the Calculation of Projected Operating Costs by Designated Contract Markets and Swap Execution Facilities

Washington, DC — The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (Division) today 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 reiterates that a DCM or SEF has reasonable discretion in determining the methodology used to calculate projected operating costs, but clarifies that a reasonable calculation must include all expenses for a DCM or SEF to discharge its responsibilities in compliance with the Commodity Exchange Act (CEA), the CFTC’s regulations, and the DCM’s or SEF’s rulebook. The Guidance also lists expenses the Division believes would be reasonable for a DCM or SEF not to include in its calculation. These costs include certain costs not related to compliance with the CEA, CFTC’s regulations, and the DCM’s or SEF’s rulebook. The Guidance addresses the pro-ration of expenses only partially attributable to the compliant operation of the DCM or SEF and the pro-ration of expenses attributable to and paid for by the DCM’s or SEF’s affiliated entities.

The Guidance also clarifies that an entity’s quarterly financial reports must identify and explain any expense that has not been included or has been pro-rated in making its calculation. The financial reports must also provide enough information for Division staff to determine, without additional requests for information, whether the entity has made a reasonable calculation. Division staff will work with DCMs and SEFs to provide additional clarity or address any questions or concerns regarding an entity’s calculation of its projected operating costs.

Last Updated: April 28, 2017