I support the Commission’s issuance of an Order of Registration (Order) regarding the TeraExchange, LLC’s (TeraExchange) Application for Reinstatement of Registration as a swap execution facility (SEF).  The record before us demonstrates that TeraExchange, subject to conditions set forth in the Order, has demonstrated compliance with the Commodity Exchange Act and the Commission’s regulations, and therefore its reinstatement of its registration as a SEF is appropriate.

The SEF Swap Confirmation Saga Sadly Continues

Sadly, we are here again. As I have written regarding the two most recent SEF registration applications,[1] the SEF Swap Confirmation Saga disappointingly continues.  Simply stated, the problem is that the provisions of Commission Rule 37.6(b)[2] and related regulations[3] that require a SEF to obtain documentation from the parties to an uncleared swap ahead of execution and to incorporate it into its confirmation remain unworkable.  This is a well-known defect in the Commission’s rules left on the books despite the Commission’s awareness since 2014, thus requiring work-arounds and no-action relief—the antithesis of regulatory clarity.

The Problem Remains Uncorrected and Has Become an Unwelcome Pattern

Specifically, as a result of the Commission’s failure to fix this unworkable rule: 1) our Staff has had to grant indefinite no-action relief regarding swap confirmations to currently-registered SEFs; and 2) the Commission has had to include bespoke conditions in registration orders for new SEFs in order to maintain a level playing field among all SEFs.  And so this unwelcome pattern now continues again with the TeraExchange Order.

This inaction by the Commission is unfair to market participants, undermines the integrity of the Commission’s regulatory framework, and runs counter to a Core Value of the Commission—clarity through transparency to market participants about our rules and processes.[4] We should promptly engage in comment-and-notice rulemaking to fix this unworkable SEF rule.