Small fees enable regulatory compliance and modernized trading capabilities.
It is free for Participants and Dealers to participate; however, the winning Dealer in a transaction pays a small fee to cover technology and regulatory expenses. The complete schedule of AEGIS SEF fees can be found here.
Note: companies transacting through AEGIS CTA, LLC or any other CTA are paying for trade execution. As such, these companies WILL NOT incur fees from AEGIS SEF.
This document outlines why these fees are necessary, how they are determined, and what is included. It also speaks to the added value for all market participants.
Regulatory Background
SEFs have increased compliance, process, and technology obligations that promote a fair and efficient marketplace. Fees, though minimal, allow SEFs to meet each of these obligations. Per Part 37 Subpart N under Title 17 of the Federal Regulation on Swap Execution Facilities, AEGIS SEF must meet certain initial and ongoing financial thresholds to adequately support each responsibility of the swap execution facility.
Fixed Expenses are Covered by AEGIS SEF
Certain expenses exist regardless of whether a single hedge is executed due to the embedded costs of regulatory compliance and maintaining each market participant on the SEF platform, including but not limited to:
| 1. Meeting CFTC financial entity minimum requirements; 2. Establishing and maintaining user and company profiles; 3. Mapping commercial credit agreement (e.g., ISDA) relationships; 4. Maintenance and ongoing enhancement of the trading platform; 5. Cybersecurity monitoring; 6. Maintenance and production of NFA surveillance monitoring files; 7. Maintenance and production of multiple swap reporting files; 8. Preparing quarterly and annual regulatory filings; 9. Maintaining a Regulatory Oversight Committee, and 10. Administering the CFTC-mandated Rule Enforcement Program. |
While a monthly user access fee was originally contemplated for financial counterparties (Dealers), AEGIS SEF elected NOT TO charge these fees in order to limit any objections to participation. AEGIS SEF believes increased scale as transaction volumes Increase over time will offset these fixed expenses.
Variable Expenses are Covered by Dealers
Transaction Fees paid by the winning Dealer cover the variable costs driven by trading activity, including:
 | T+0 trade surveillance performed by AEGIS SEF; |
| T+1 surveillance performed by the National Futures Association (NFA); |
| Part 43 and 45 reporting to swap data repositories; |
| Part 16 reporting to the Commodity Futures Trading Commission; |
| Platform hosting for all trading functionality; |
| Issuance of all pre and post-trade communication; |
| Management of live bids/offers; |
| Recording and ongoing tracking of positions; |
| Maintaining a full audit trail for all transactions; and |
| Supporting ongoing issues and dispute resolution. |
Dealers build margin into each trade. As such, it is appropriate for a winning Dealer to contribute a small fraction of that margin to the SEFs variable costs.
For perspective:
1. A 10,000 barrel crude oil trade will cost $25. That is one-quarter of one penny ($.0025) per barrel;
2. A 100,000,000 cubic foot natural gas trade will also cost $25. That is one-fortieth of a penny ($.00025) per MMBtu.
Will Dealers attempt to pass SEF fees back to customers?
Possibly, however, AEGIS SEF expects a competitive marketplace to offset de minimis transaction fees. We strongly believe Dealers deserve to make a fair profit for providing credit/liquidity and taking the related risk. If the Dealer makes a $.25 spread on a barrel of crude oil, they are giving up 1% of the margin to transact on a modern and compliant marketplace.
Additional Value
In addition to the capabilities above, each market participant should take comfort in knowing:
 | Consistent and timely pre-trade communication ensures Dealers are notified on an impartial basis, as directed by the customer; |
| A published rulebook ensures each market participant is treated fairly and consistently throughout negotiations; |
| Bids and offers are collected simultaneously to facilitate true price discovery; |
| Sophisticated surveillance routines ensure market participants are not executing prohibited trading activities; |
| Full recording of bids and offers ensures each trade can be audited and fully reconstructed; and |
| Insightful analytics ensure every market participant can quickly assess how their counterparties are performing. |
Working Together
AEGIS is excited to modernize the execution of hedges through AEGIS SEF. The benefits of a fair and efficient marketplace are increasingly clear.
But the compliance and technology costs of operating a modern marketplace are real. As such, AEGIS SEF is focused on keeping costs to a minimum, allocating costs fairly, and delivering an integrated and compliant experience for all market participants.