# CFTC Letter No. 17-32: Relief from swap reporting and recordkeeping requirements applicable to Cantor Futures Exchange, L.P. (CX), Cantor Clearinghouse, L.P. and CX’s market participants

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/CFTC_L17_32

## Section

- **Citation:** CFTC Letter No. 17-32
- **Heading:** Relief from swap reporting and recordkeeping requirements applicable to Cantor Futures Exchange, L.P. (CX), Cantor Clearinghouse, L.P. and CX’s market participants
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** CFTC Staff Letters (2008-present) / Relief from swap reporting and recordkeeping requirements applicable to Cantor Futures Exchange, L.P. (CX), Cantor Clearinghouse, L.P. and CX’s market participants

## Text

Summary: Relief from swap reporting and recordkeeping requirements applicable to Cantor Futures Exchange, L.P. (CX), Cantor Clearinghouse, L.P. and CX’s market participants

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000
Facsimile: (202) 418-5521
www.cftc.gov

CFTC Letter No. 17-32

No-Action
June 30, 2017
Division of Clearing and Risk
Division of Market Oversight

Re:
No-Action Relief from Commission Regulations 38.8(b), 38.10, 38.951 (in part) and
39.20(b)(2) and Parts 43 and 45 for Binary Options Traded on or Pursuant to the
Rules of Cantor Futures Exchange, L.P. (“CX”) and Cleared by Cantor
Clearinghouse, L.P. (“CC”)

Introduction

The Division of Market Oversight (“DMO”) and the Division of Clearing and Risk
(“DCR” and, together with DMO, the “Divisions”) of the Commodity Futures Trading
Commission (“CFTC” or “Commission”) are issuing this letter in response to a request from CX
and CC (“Request”).1 CX and CC requested relief from the swap data reporting and
recordkeeping requirements of Commission Regulations 38.8(b), 38.10, 38.951 and 39.20 and
Parts 43 and 45 of the Commission’s regulations (collectively, the “Specified Regulations”) with
respect to binary options traded on or pursuant to CX’s rules and cleared by CC (“CX Binary
Options”). CX and CC also requested relief from the requirements of Commission Regulations
45.3(e)(i)(B),2 45.5(d)(2) and 45.14(b) on behalf of CX’s participants. CX is a designated
contract market (“DCM”). CC is a registered derivatives clearing organization (“DCO”). The
Divisions have considered the Request and are granting no-action relief subject to conditions, as
described below.

Background

CX stated in the Request that it lists for trading binary options on foreign currency, gold,
and weather
) and 45.14(b) on behalf of CX’s participants. CX is a designated
contract market (“DCM”). CC is a registered derivatives clearing organization (“DCO”). The
Divisions have considered the Request and are granting no-action relief subject to conditions, as
described below.

Background

CX stated in the Request that it lists for trading binary options on foreign currency, gold,
and weather. CX describes its binary options in the Request as generally characterized at
expiration by “the payment of an absolute amount to the holder of one side of the option and no
payment to the counterparty, depending upon the value of the underlying commodity at contract
expiration compared to the strike price or strike value of the option[.]”3 Furthermore, CX stated

1 May 11, 2017 letter from Paul M. Architzel of WilmerHale, on behalf of CX and its participants, to DMO Director
Amir Zaidi, as amended and supplemented by June 5, 2017 letter from Paul M. Architzel, on behalf of CX, its
participants and CC to Amir Zaidi and DCR Acting Director John Lawton.
2 Because § 45.3(e)(i) has no paragraph “(B),” the Divisions considered the request a request for relief from §
45.3(e)(ii)(B) (duties of the reporting counterparty).
3 The Request noted that “[i]n CX’s FX and Metals markets, if the index value at expiry is exactly equal to the strike
level, then both sides split the payment evenly.”
s and CC to Amir Zaidi and DCR Acting Director John Lawton.
2 Because § 45.3(e)(i) has no paragraph “(B),” the Divisions considered the request a request for relief from §
45.3(e)(ii)(B) (duties of the reporting counterparty).
3 The Request noted that “[i]n CX’s FX and Metals markets, if the index value at expiry is exactly equal to the strike
level, then both sides split the payment evenly.”

CFTC Letter No. 17-32
June 30, 2017
Page 2
that “[t]he settlement obligation does not vary based upon the amplitude by which the price at
expiration exceeds the strike or strike price.”

As options, binary options fall within the Commission’s plenary options authority under
Commodity Exchange Act (“CEA”) § 4c(b).4 CEA § 4c(b), in relevant part, prohibits any person
from offering, entering into or confirming the execution of a transaction involving any
commodity regulated under the CEA that “is of the character of, or is commonly known to the
trade as, an ‘option’ . . .” contrary to any Commission rule prohibiting the transaction or allowing
it pursuant to specified terms and conditions. When promulgating Commission Regulation 32.2,
the Commission stated that “the swap definition . . . includes options . . . (whether or not traded
on a DCM)[.]”5 Commission Regulation 32.2 states, in relevant part, that commodity option
transactions must be conducted in compliance with the CEA and the Commission’s swap rules.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”)6
amended the CEA by adding a definition of “swap.”7 The Dodd-Frank Act required the
Commission and the Securities and Exchange Commission to further define jointly the term
“swap.” In jointly adopting such further definition, the Commissions stated that “the statutory
swap definition explicitly provides that commodity options are swaps[.]”8

Pursuant to the Dodd-Frank Act, the Commission promulgated various regulations
applicable to swaps, including the Specified Regulations
mission and the Securities and Exchange Commission to further define jointly the term
“swap.” In jointly adopting such further definition, the Commissions stated that “the statutory
swap definition explicitly provides that commodity options are swaps[.]”8

Pursuant to the Dodd-Frank Act, the Commission promulgated various regulations
applicable to swaps, including the Specified Regulations. The Specified Regulations impose
swap reporting and recordkeeping obligations on DCMs, DCOs and market participants.

Relief Requested

CX and CC requested that the Divisions not recommend that the Commission take
enforcement action against CC, CX or CX’s participants for failure to report CX Binary Options
to a swap data repository (“SDR”) or to fulfill any of the other requirements of the Specified
Regulations. In support of its position, CX and CC argued or represented, among other things,
that:

 the CX Binary Options are required to be fully margined;9

4 7 U.S.C. § 6c(b).
5 Commodity Options, 77 FR 25320, 25321, n.6 (Apr. 27, 2012).
6 Public Law 111–203, 124 Stat. 1376 (2010).
7 CEA § 1a(47), 7 U.S.C. § 1a(47).
8 Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement”; Mixed Swaps;
Security-Based Swap Agreement Recordkeeping, 77 FR 48207, 48236 (Aug. 13, 2012). See also CFTC v. Banc de
Binary Ltd., et al., Case No. 2:13-cv-00992-MMD-VCF at 18, ¶65, (D. Nev., Feb. 26, 2016) (Consent Order for
Permanent Injunction), available at
http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enforderbancdebinary02291
6.pdf (noting that “Dodd-Frank defined an option as a swap . . . .”).
9 The Request states that “all participants must be fully margined.” Request at 2.
., et al., Case No. 2:13-cv-00992-MMD-VCF at 18, ¶65, (D. Nev., Feb. 26, 2016) (Consent Order for
Permanent Injunction), available at
http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enforderbancdebinary02291
6.pdf (noting that “Dodd-Frank defined an option as a swap . . . .”).
9 The Request states that “all participants must be fully margined.” Request at 2.

CFTC Letter No. 17-32
June 30, 2017
Page 3
 CC provides, and is obligated to continue providing, DCR with daily margin and end-of-
day position information pursuant to Commission Regulation 39.19(c)(1);
 CX already makes publicly available on its web-site near-real-time transaction
information regarding each transaction on the exchange;
 if granted the relief requested, CX will continue to make transactional information
publicly available in near-real-time;
 CX provides transactional information to DMO pursuant to Commission Regulation
16.02 and as a condition of its DCM Designation Order; and
 these reporting obligations and undertakings provide information to the Commission (and
the public) similar, but not identical, to that currently required to be provided to an SDR
under Parts 43 and 45 of the Commission’s regulations.

No-Action Relief and Related Conditions

The Divisions have decided to grant part of the requested relief, subject to certain
conditions described below. Thus, the Divisions will not recommend that the Commission
initiate an enforcement action against CX, CX’s participants or CC, in each case for failure to
comply with Commission Regulations 38.8(b), 38.10, 38.951 (only to the extent it requires
compliance with Part 45 of the CFTC’s regulations)10 and 39.20(b)(2)11 and Parts 43 and 45 of
the CFTC’s regulations (the “Relevant Regulations”), each as applicable, or the related CEA
provisions pursuant to which the Relevant Regulations were promulgated, with respect to current
or future CX Binary Options, subject to the following conditions:12
38.10, 38.951 (only to the extent it requires
compliance with Part 45 of the CFTC’s regulations)10 and 39.20(b)(2)11 and Parts 43 and 45 of
the CFTC’s regulations (the “Relevant Regulations”), each as applicable, or the related CEA
provisions pursuant to which the Relevant Regulations were promulgated, with respect to current
or future CX Binary Options, subject to the following conditions:12

(1) CC and CX continue to require all CX Binary Options to be fully margined;13

10 Although the Request sought relief from § 38.951 in its entirety, § 38.951 requires DCMs to maintain certain
records in accordance with both § 1.31 and, if applicable, Part 45 of the CFTC’s regulations. The Divisions are
providing relief from § 38.951 only to the extent that it requires compliance with Part 45’s recordkeeping
requirements.
11 Although the Request sought relief from § 39.20 in its entirety, § 39.20(a) requires DCOs to maintain all records
related to its business as a DCO and specifies certain categories of such records by way of example, and §
39.20(b)(1) requires DCOs to maintain its records in accordance with § 1.31; § 39.20(b)(2) requires maintaining
swap data in accordance with Part 45. With respect to the aspect of the Request seeking relief from § 39.20, the
Divisions are providing relief only from § 39.20(b)(2). That is, CC must continue complying with the
recordkeeping requirements of § 39.20(a) and (b)(1).
12 Some of these conditions regarding no-action relief would constitute a collection of information, as that term is
defined in the Paperwork Reduction Act, 44 U.S.C. §§ 3501 et. seq. The Office of Management and Budget
(“OMB”)—in accordance with 44 U.S.C. § 3507(d) and 5 C.F.R. §§ 1320.8 and 1320.10—has approved
collection—3038-0049—entitled “Procedural requirements for requests for interpretative, no-action and exemptive
letters,” for such purposes
d constitute a collection of information, as that term is
defined in the Paperwork Reduction Act, 44 U.S.C. §§ 3501 et. seq. The Office of Management and Budget
(“OMB”)—in accordance with 44 U.S.C. § 3507(d) and 5 C.F.R. §§ 1320.8 and 1320.10—has approved
collection—3038-0049—entitled “Procedural requirements for requests for interpretative, no-action and exemptive
letters,” for such purposes. This collection would encompass collections made as part of exemptive or no-action
relief from the Commission. The public is not required to respond to a collection of information that does not have a
valid OMB control number.
13 For purposes of this relief, “fully margined” means CC and CX require, at all times, initial margin (called
“original margin” in the CC Rules and the CX Rules) in an amount not less than 100% of the at-risk amount for any
CX Binary Options that CC clears (both long and short positions), and CC otherwise complies with the terms of
condition (4) of CC’s DCO Registration Order, which states that:

CFTC Letter No. 17-32
June 30, 2017
Page 4
(2) CC continues to clear all of the CX Binary Options and clears only CX Binary
Options;

(3) CX continues to publish on its website the following information on all CX Binary
Options transactions promptly after execution thereof: trade timestamp; contract;
quantity; and price;14

(4) CX continues to provide DMO with transactional information as described in
Commission Regulation 16.02;

(5) CX and CC continue to comply with all swap reporting and recordkeeping
requirements of the CEA and Commission regulations applicable to each in their
respective capacities as a DCM or a DCO, other than the Relevant Regulations,
including, but not limited to, the applicable requirements of Parts 38 and 39 of the
CFTC’s regulations (the records required to be retained by this condition (5) are
referred to below as the “Required Records”);15

(6) no CX participant clears a CX Binary Option through a third party clearing member;
and
n their
respective capacities as a DCM or a DCO, other than the Relevant Regulations,
including, but not limited to, the applicable requirements of Parts 38 and 39 of the
CFTC’s regulations (the records required to be retained by this condition (5) are
referred to below as the “Required Records”);15

(6) no CX participant clears a CX Binary Option through a third party clearing member;
and

(7) CX and CC shall keep the Required Records open to inspection upon request by any
representative of the Commission, the United States Department of Justice, or the
Securities and Exchange Commission, or by any representative of a prudential
regulator as authorized by the Commission. Copies of all such records shall be
provided, at the expense of CX or CC, as applicable, to any representative of the
Commission upon request. CX and CC shall provide copies of the Required Records
either by electronic means, in hard copy, or both, as requested by the Commission,
with the sole exception that copies of records originally created and exclusively
maintained in paper form may be provided in hard copy only.

This letter expresses a staff position with respect to enforcement only and does not
purport to state any legal conclusion regarding CX Binary Options or the conduct of any person
covered by the no-action relief provided herein. This letter and the no-action position taken

Cantor shall require, at all times, initial margin in an amount not less than 100% of the at-
risk amount for any contract that it clears (both long and short positions); and Cantor
shall perform a real-time credit check to confirm the availability of funds in a
Participant's account each time the Participant has placed a bid or offer that is matched by
the Cantor Exchange, and Cantor shall not clear any transaction for which it is unable to
confirm the availability of adequate
the at-
risk amount for any contract that it clears (both long and short positions); and Cantor
shall perform a real-time credit check to confirm the availability of funds in a
Participant's account each time the Participant has placed a bid or offer that is matched by
the Cantor Exchange, and Cantor shall not clear any transaction for which it is unable to
confirm the availability of adequate funds[.]
See also, e.g., CX Rules IX-1000(h)(i), IX-2000(h)(i) and IX-3000(j) (each requiring posting 100% of the at-risk
amount as original margin).
14 CX currently publishes these data at https://trading.cantorexchange.com/reporting/trades.php.
15 This includes all information that CX represented in its application for contract market designation that it would
publish on its website. For example, CX states that it currently “publish[es] information regarding settlement prices,
volume, open interest and opening and closing ranges for actively traded Contracts on a timely basis on its website .
. .” at: http://www.cantorexchange.com/Rules---Regulatory-Info/Daily-Activity-Report.aspx.

CFTC Letter No. 17-32
June 30, 2017
Page 5
herein represent the views of the Divisions only, and do not necessarily represent the positions or
views of the Commission or of any other Commission division or office. This letter and the no-
action position taken herein also are not binding on the Commission.16 Except as explicitly
provided in this letter, the no-action positions taken herein do not excuse persons from
compliance with any applicable requirements of the CEA or Commission regulations. Further,
this letter, and the no-action position contained herein, is based upon the representations made to
the Divisions. Any different, changed, or omitted material facts or circumstances might render
this letter void
y
provided in this letter, the no-action positions taken herein do not excuse persons from
compliance with any applicable requirements of the CEA or Commission regulations. Further,
this letter, and the no-action position contained herein, is based upon the representations made to
the Divisions. Any different, changed, or omitted material facts or circumstances might render
this letter void. As with all no-action letters, the Divisions retain the authority to, in their
discretion, further condition, modify, suspend, terminate or otherwise restrict the terms of the no-
action relief provided herein. The Divisions expect to periodically review the relief provided and
the associated conditions.

If you have any questions concerning this letter, please contact: Dan Bucsa, Deputy
Director, DMO—Data and Reporting Branch (“DAR”) at (202) 418-5435 or dbucsa@cftc.gov;
David E. Aron, Special Counsel, DMO—DAR at (202) 418-6621 or daron@cftc.gov; Philip W.
Raimondi, Special Counsel, DMO—Office of the Chief Counsel at (202) 418-5717 or
praimondi@cftc.gov; or Andrea Musalem, Special Counsel, DCR at (202) 418-5167 or
amusalem@cftc.gov.

Sincerely,
____________________
_______________________
Amir Zaidi
John C. Lawton

Director
Acting Director

Division of Market Oversight
Division of Clearing and Risk

16 See Commission Regulation 140.99(a)(2) (stating that “[a] no-action letter binds only the issuing Division . . . and
not the Commission or other Commission staff.”).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/CFTC_L17_32. Check the current official text before relying on it. Not legal advice.