Enabling bypass Microsoft 365
If you are Secure Web Gateway (SWG) only customer but not Cloud Access Security Broker (CASB) and want to bypass Microsoft 365 domains when using the SmartEdge agent or Cloud SWG, then select the Bypass Microsoft 365 checkbox.
On the page, you can view the Bypass Microsoft 365.
When you select this checkbox, traffic from Microsoft 365 domains is bypassed on the SmartEdge agent proxy or Cloud SWG proxy and sent to internet directly.

An Admin log gets generated and the Explicit Proxy PAC file gets updated whenever you make changes to Bypass Microsoft 365 checkbox.
To bypass traffic from Microsoft 365 domains at Cloud SWG level or policy level, you should create SWG policies with the Microsoft 365 predefined custom URL category to provide authentication bypass or Secure Sockets Layer (SSL) Decryption bypass.