Will AEGIS SEF Create Conflicts With the Original Business Model?

Background

How is AEGIS making sure there aren’t any conflicts of interest?

AEGIS has taken critical steps to ensure its model is free of any conflicts

AEGIS Hedging Solutions ("AEGIS") has maintained a conflict-free model since its founding. As it understood the obligations and regulations related to SEF registration, AEGIS took some important actions that would need to be taken to maintain a conflict-free model.

We believe these actions are in line with the spirit of our model and consistent with customer expectations.

Organizational Actions

People Actions

Subsequent to the filing of our application to create AEGIS SEF, AEGIS established a subsidiary (AEGIS SEF, LLC) that will operate the SEF.

Further, AEGIS formed another subsidiary (AEGIS CTA, LLC) to separate the Commodity Trading Advisor activities, including hedge strategy and negotiation, that manage commodity price volatility for its customers. AEGIS SEF, LLC will be a service provider to AEGIS CTA, LLC.

We believe this structure clearly delineates responsibilities and removes any ability and incentive for AEGIS CTA to suggest unnecessary trades that might be recommended solely for the purpose of generating AEGIS SEF fees.

AEGIS moved Justin McCrann, one of its founders, to a 100% role as President of AEGIS SEF, LLC.

AEGIS SEF, LLC also has two full-time dedicated compliance resources focused on monitoring its activities and those of market participants for potential conflicts. Further, AEGIS SEF, LLC has a dedicated Board and Regulatory Oversight Committee that includes two public directors with no ownership in nor a material relationship with AEGIS.

AEGIS SEF, LLC Rulebook has Conflict of Interest regulations that expressly forbid AEGIS-SEF, LLC personnel from aiding any CTA, including AEGIS-CTA, LLC.

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. That said, we will work diligently to keep any conflicts of interest - real or perceived – out of the AEGIS delivery model. Multiple controls and policies are in place to avoid information sharing and related conflicts, including separate offices, and employee restrictions on certain business activities.

Reference (links)

		Which parties are involved in a hedge transaction?
		Are hedge advisors necessary?
		If hedge advisors must use SEFs, should I execute directly with the bank?
		Are SEF fees appropriate?

About the AEGIS SEF

AEGIS SEF (US) LLC, a subsidiary of AEGIS Hedging Solutions, is a Swap Execution Facility approved by the Commodity Futures Trading Commission (“CFTC”). AEGIS SEF operates markets for commodities, interest rate swaps and other instruments. AEGIS SEF offers a venue for trading in uncleared bilateral OTC swaps through a central limit order book (CLOB) and request for quote (RFQ) system. For more information, please go to https://aegis-hedging.com/swap-execution-facility. The AEGIS SEF is headquartered in The Woodlands, Texas.

Commodity interest trading involves risk and, therefore, is not appropriate for all persons; failure to manage commercial risk by engaging in some form of hedging also involves risk. Past performance is not necessarily indicative of future results. There is no guarantee that hedge program objectives will be achieved. Neither this trading advisor nor any of its trading principals offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. The Commodity Futures Trading Commission does not pass upon the adequacy or accuracy of this Advisor’s disclosure and has not reviewed or approved the contents of this webpage.