June 11, 2017

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CFTC Issues Guidance on the Calculation of Projected Operating Costs by DCMs and SEFs

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.

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About this Author

Christian B. Hennion, Finance Attorney, Katten Muchin Law Firm
Associate

Christian B. Hennion concentrates his practice in financial services and asset management matters, including counseling fund managers, registered investment advisers and commodity trading advisors on both transactional and regulatory matters. Chris has advised a wide range of US and international managers, from start-ups to large institutions, regarding a variety of matters, including private fund launches and reorganizations, advisory engagements, Investment Advisers Act and Commodity Exchange Act compliance obligations, Securities and Exchange Commission (SEC) and Commodity Futures...

312-902-5521
Associate

Timothy Kertland concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, and commodity trading advisers.

While in law school, Timothy served as an editor of the Virginia Tax Review. As a first-year law student, he represented the University of Virginia School of Law at the National Transactional LawMeets Competition.

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