---
kind: "section"
citation: "15 U.S.C. § 78c–4"
title: "15"
title_heading: "Commerce and Trade"
number: "78c–4"
heading: "Security-based swap execution facilities"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/15/78c-4"
units:
  - "Chapter 2B — Securities Exchanges"
---

# §78c–4. Security-based swap execution facilities

- (a) **Registration—**
  - (1) **In general—** No [person](/usc/15/78c.md?p=a-9) may operate a [facility](/usc/15/78c.md?p=a-2) for the trading or processing of [security-based swaps](/usc/15/78c.md?p=a-68-A), unless the [facility](/usc/15/78c.md?p=a-2) is registered as a [security-based swap execution facility](/usc/15/78c.md?p=a-77) or as a national [securities](/usc/15/78c.md?p=a-10) [exchange](/usc/15/78c.md?p=a-1) under this section.
  - (2) **Dual registration—** Any [person](/usc/15/78c.md?p=a-9) that is registered as a [security-based swap execution facility](/usc/15/78c.md?p=a-77) under this section shall register with the [Commission](/usc/15/78c.md?p=a-15) regardless of whether the [person](/usc/15/78c.md?p=a-9) also is registered with the Commodity Futures Trading [Commission](/usc/15/78c.md?p=a-15) as a [swap](/usc/15/78c.md?p=a-69) execution [facility](/usc/15/78c.md?p=a-2).
- (b) **Trading and trade processing—** A [security-based swap execution facility](/usc/15/78c.md?p=a-77) that is registered under [subsection (a)](#a) may—
  - (1) make available for trading any [security-based swap](/usc/15/78c.md?p=a-68-A); and
  - (2) facilitate trade processing of any [security-based swap](/usc/15/78c.md?p=a-68-A).
- (c) **Identification of facility used to trade security-based swaps by national securities exchanges—** A national [securities](/usc/15/78c.md?p=a-10) [exchange](/usc/15/78c.md?p=a-1) shall, to the extent that the [exchange](/usc/15/78c.md?p=a-1) also operates a [security-based swap execution facility](/usc/15/78c.md?p=a-77) and uses the same electronic trade execution system for listing and executing trades of [security-based swaps](/usc/15/78c.md?p=a-68-A) on or through the [exchange](/usc/15/78c.md?p=a-1) and the [facility](/usc/15/78c.md?p=a-2), identify whether electronic trading of such [security-based swaps](/usc/15/78c.md?p=a-68-A) is taking place on or through the national [securities](/usc/15/78c.md?p=a-10) [exchange](/usc/15/78c.md?p=a-1) or the [security-based swap execution facility](/usc/15/78c.md?p=a-77).
- (d) **Core principles for security-based swap execution facilities—**
  - (1) **Compliance with core principles—**
    - (A) **In general—** To be registered, and maintain registration, as a [security-based swap execution facility](/usc/15/78c.md?p=a-77), the [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall comply with—
      - (i) the core principles described in this subsection; and
      - (ii) any requirement that the [Commission](/usc/15/78c.md?p=a-15) may impose by rule or regulation.
    - (B) **Reasonable discretion of security-based swap execution facility—** Unless otherwise determined by the [Commission](/usc/15/78c.md?p=a-15), by rule or regulation, a [security-based swap execution facility](/usc/15/78c.md?p=a-77) described in [subparagraph (A)](#d-1-A) shall have reasonable discretion in establishing the manner in which it complies with the core principles described in this subsection.
  - (2) **Compliance with rules—** A [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
    - (A) establish and enforce compliance with any rule established by such [security-based swap execution facility](/usc/15/78c.md?p=a-77), including—
      - (i) the terms and conditions of the [security-based swaps](/usc/15/78c.md?p=a-68-A) traded or processed on or through the [facility](/usc/15/78c.md?p=a-2); and
      - (ii) any limitation on access to the [facility](/usc/15/78c.md?p=a-2);
    - (B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means—
      - (i) to provide market [participants](/usc/15/78c.md?p=a-24) with impartial access to the market; and
      - (ii) to capture information that may be used in establishing whether rule violations have occurred; and
    - (C) establish rules governing the operation of the [facility](/usc/15/78c.md?p=a-2), including rules specifying trading procedures to be used in entering and executing orders traded or posted on the [facility](/usc/15/78c.md?p=a-2), including block trades.
  - (3) **Security-based swaps not readily susceptible to manipulation—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall permit trading only in [security-based swaps](/usc/15/78c.md?p=a-68-A) that are not readily susceptible to manipulation.
  - (4) **Monitoring of trading and trade processing—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
    - (A) establish and enforce rules or terms and conditions defining, or specifications detailing—
      - (i) trading procedures to be used in entering and executing orders traded on or through the [facilities](/usc/15/78c.md?p=a-2) of the [security-based swap execution facility](/usc/15/78c.md?p=a-77); and
      - (ii) procedures for trade processing of [security-based swaps](/usc/15/78c.md?p=a-68-A) on or through the [facilities](/usc/15/78c.md?p=a-2) of the [security-based swap execution facility](/usc/15/78c.md?p=a-77); and
    - (B) monitor trading in [security-based swaps](/usc/15/78c.md?p=a-68-A) to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.
  - (5) **Ability to obtain information—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
    - (A) establish and enforce rules that will allow the [facility](/usc/15/78c.md?p=a-2) to obtain any necessary information to perform any of the functions described in this subsection;
    - (B) provide the information to the [Commission](/usc/15/78c.md?p=a-15) on request; and
    - (C) have the capacity to carry out such international information-sharing [agreements](/usc/15/7a.md?p=2) as the [Commission](/usc/15/78c.md?p=a-15) may require.
  - (6) **Financial integrity of transactions—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall establish and enforce rules and procedures for ensuring the financial integrity of [security-based swaps](/usc/15/78c.md?p=a-68-A) entered on or through the [facilities](/usc/15/78c.md?p=a-2) of the [security-based swap execution facility](/usc/15/78c.md?p=a-77), including the clearance and settlement of [security-based swaps](/usc/15/78c.md?p=a-68-A) pursuant to [section 78c–3(a)(1) of this title](/usc/15/78c–3.md?p=a-1).
  - (7) **Emergency authority—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the [Commission](/usc/15/78c.md?p=a-15), as is necessary and appropriate, including the authority to liquidate or transfer open positions in any [security-based swap](/usc/15/78c.md?p=a-68-A) or to suspend or curtail trading in a [security-based swap](/usc/15/78c.md?p=a-68-A).
  - (8) **Timely publication of trading information—**
    - (A) **In general—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall make public timely information on price, trading volume, and other trading data on [security-based swaps](/usc/15/78c.md?p=a-68-A) to the extent prescribed by the [Commission](/usc/15/78c.md?p=a-15).
    - (B) **Capacity of security-based swap execution facility—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall be required to have the capacity to electronically capture and transmit and disseminate trade information with respect to transactions executed on or through the [facility](/usc/15/78c.md?p=a-2).
  - (9) **Recordkeeping and reporting—**
    - (A) **In general—** A [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
      - (i) maintain [records](/usc/15/78c.md?p=a-37) of all activities relating to the business of the [facility](/usc/15/78c.md?p=a-2), including a complete audit trail, in a form and manner acceptable to the [Commission](/usc/15/78c.md?p=a-15) for a period of 5 years; and
      - (ii) report to the [Commission](/usc/15/78c.md?p=a-15), in a form and manner acceptable to the [Commission](/usc/15/78c.md?p=a-15), such information as the [Commission](/usc/15/78c.md?p=a-15) determines to be necessary or appropriate for the [Commission](/usc/15/78c.md?p=a-15) to perform the duties of the [Commission](/usc/15/78c.md?p=a-15) under this chapter.
    - (B) **Requirements—** The [Commission](/usc/15/78c.md?p=a-15) shall adopt data collection and reporting requirements for [security-based swap execution facilities](/usc/15/78c.md?p=a-77) that are comparable to corresponding requirements for [clearing agencies](/usc/15/78c.md?p=a-23-A) and [security-based swap data repositories](/usc/15/78c.md?p=a-75).
  - (10) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, the [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall not—
    - (A) adopt any rules or taking[^1] any actions that result in any unreasonable restraint of trade; or
    - (B) impose any material anticompetitive burden on trading or clearing.
  - (11) **Conflicts of interest—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
    - (A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and
    - (B) establish a process for resolving the conflicts of interest.
  - (12) **Financial resources—**
    - (A) **In general—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall have adequate financial, operational, and managerial resources to discharge each responsibility of the [security-based swap execution facility](/usc/15/78c.md?p=a-77), as determined by the [Commission](/usc/15/78c.md?p=a-15).
    - (B) **Determination of resource adequacy—** The financial resources of a [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall be considered to be adequate if the value of the financial resources—
      - (i) enables the organization to meet its financial obligations to its [members](/usc/15/78c.md?p=a-3-A) and [participants](/usc/15/78c.md?p=a-24) notwithstanding a default by the [member](/usc/15/78c.md?p=a-3-A) or [participant](/usc/15/78c.md?p=a-24) creating the largest financial exposure for that organization in extreme but plausible market conditions; and
      - (ii) exceeds the total amount that would enable the [security-based swap execution facility](/usc/15/78c.md?p=a-77) to cover the operating costs of the [security-based swap execution facility](/usc/15/78c.md?p=a-77) for a 1-year period, as calculated on a rolling basis.
  - (13) **System safeguards—** The [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall—
    - (A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that—
      - (i) are reliable and secure; and
      - (ii) have adequate scalable capacity;
    - (B) establish and maintain emergency procedures, backup [facilities](/usc/15/78c.md?p=a-2), and a plan for disaster recovery that allow for—
      - (i) the timely recovery and resumption of operations; and
      - (ii) the fulfillment of the responsibilities and obligations of the [security-based swap execution facility](/usc/15/78c.md?p=a-77); and
    - (C) periodically conduct tests to verify that the backup resources of the [security-based swap execution facility](/usc/15/78c.md?p=a-77) are sufficient to ensure continued—
      - (i) order processing and trade matching;
      - (ii) price reporting;
      - (iii) market surveillance; and
      - (iv) maintenance of a comprehensive and accurate audit trail.
  - (14) **Designation of chief compliance officer—**
    - (A) **In general—** Each [security-based swap execution facility](/usc/15/78c.md?p=a-77) shall designate an individual to serve as a chief compliance officer.
    - (B) **Duties—** The chief compliance officer shall—
      - (i) report directly to the [board](/usc/15/78c.md?p=a-73) or to the senior officer of the [facility](/usc/15/78c.md?p=a-2);
      - (ii) review compliance with the core principles in this subsection;
      - (iii) in consultation with the [board](/usc/15/78c.md?p=a-73) of the [facility](/usc/15/78c.md?p=a-2), a body performing a function similar to that of a [board](/usc/15/78c.md?p=a-73), or the senior officer of the [facility](/usc/15/78c.md?p=a-2), resolve any conflicts of interest that may arise;
      - (iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
      - (v) ensure compliance with this chapter and the rules and regulations issued under this chapter, including rules prescribed by the [Commission](/usc/15/78c.md?p=a-15) pursuant to this section;
      - (vi) establish procedures for the remediation of noncompliance issues found during—
        - (I) compliance office reviews;
        - (II) look backs;
        - (III) internal or external audit findings;
        - (IV) self-reported errors; or
        - (V) through validated complaints; and
      - (vii) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
    - (C) **Annual reports—**
      - (i) **In general—** In accordance with rules prescribed by the [Commission](/usc/15/78c.md?p=a-15), the chief compliance officer shall annually prepare and sign a report that contains a description of—
        - (I) the compliance of the [security-based swap execution facility](/usc/15/78c.md?p=a-77) with this chapter; and
        - (II) the policies and procedures, including the code of ethics and conflict of interest policies, of the [security](/usc/15/78c.md?p=a-10)-based [security](/usc/15/78c.md?p=a-10)-based[^2] [swap](/usc/15/78c.md?p=a-69) execution [facility](/usc/15/78c.md?p=a-2).
      - (ii) **Requirements—** The chief compliance officer shall—
        - (I) submit each report described in [clause (i)](#d-14-C-i) with the appropriate financial report of the [security-based swap execution facility](/usc/15/78c.md?p=a-77) that is required to be submitted to the [Commission](/usc/15/78c.md?p=a-15) pursuant to this section; and
        - (II) include in the report a certification that, under penalty of law, the report is accurate and complete.
- (e) **Exemptions—** The [Commission](/usc/15/78c.md?p=a-15) may exempt, conditionally or unconditionally, a [security-based swap execution facility](/usc/15/78c.md?p=a-77) from registration under this section if the [Commission](/usc/15/78c.md?p=a-15) finds that the [facility](/usc/15/78c.md?p=a-2) is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading [Commission](/usc/15/78c.md?p=a-15).
- (f) **Rules—** The [Commission](/usc/15/78c.md?p=a-15) shall prescribe rules governing the regulation of [security-based swap execution facilities](/usc/15/78c.md?p=a-77) under this section.

## Footnotes

[^1]: So in original. Probably should be “take”.
[^2]: So in original.

## Source credit

(June 6, 1934, ch. 404, title I, § 3D, as added Pub. L. 111–203, title VII, § 763(c), July 21, 2010, 124 Stat. 1769.)

## Notes

### Editorial Notes

### References in Text

This chapter, referred to in subsec. (d)(9)(A)(ii), (10), (14)(B)(v), (C)(i)(I), was in the original “this title”. See References in Text note set out under section 78a of this title.

### Statutory Notes and Related Subsidiaries

### Effective Date

Section effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.