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ARTICLE · 17 OCTOBER 2022

CFTC Sanctions Registered CTA For Operating Unregistered SEF

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On September 26, the Commodity Futures Trading Commission ("CFTC") published an order settling charges against Asset Risk Management, LLC ("ARM"), a registered commodity trading advisor ("CTA")...

United StatesFinance and Banking
Peter Y. Malyshev
Peter Y. Malyshev
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On September 26, the Commodity Futures Trading Commission ("CFTC") published an order settling charges against Asset Risk Management, LLC ("ARM"), a registered commodity trading advisor ("CTA") headquartered in Houston, Texas, for failing to register as a swap execution facility ("SEF"). This order represents the CFTC's first attempt to sanction an otherwise CFTC-registered entity under its recently expanded interpretation of what constitutes a SEF. This broad interpretation was articulated in September 2021 in a controversial CFTC staff advisory, CFTC Staff Letter No. 21-19 ("Advisory"), which materially alters market understanding of what is a SEF.

Instead of providing greater certainty to the market, the Advisory has accomplished the opposite; additionally, the ARM enforcement action demonstrates an increased risk for CFTC-registered and unregistered swap market participants to be assessed against an overexpanding notion of a SEF and/or potentially face aiding

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