# CFTC Letter No. 21-25: DMO will not recommend that the Commission take enforcement action against KRX with respect to the offer or sale of the Contracts to persons located within the United States while the Commission’s review of KRX’s fort..

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/CFTC_L21_25

## Section

- **Citation:** CFTC Letter No. 21-25
- **Heading:** DMO will not recommend that the Commission take enforcement action against KRX with respect to the offer or sale of the Contracts to persons located within the United States while the Commission’s review of KRX’s fort..
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** CFTC Staff Letters (2008-present) / DMO will not recommend that the Commission take enforcement action against KRX with respect to the offer or sale of the Contracts to persons located within the United States while the Commission’s review of KRX’s fort...

## Text

Summary: DMO will not recommend that the Commission take enforcement action against KRX with respect to the offer or sale of the Contracts to persons located within the United States while the Commission’s review of KRX’s forthcoming request for certification of the Contracts pursuant to Commission Regulation 30.13 is pending. ( KRX No-Action Request )

CFTC LETTER NO. 21-25 NO-ACTION NOVEMBER 23, 2021

Meghan Tente

Acting Director
Mr. Hyojae Cho
President, Derivatives Market Division
Korea Exchange, Inc.
40 Munhyeongeumyung-ro
Namgu, Busan 48400
Republic of Korea
Re:
Request for No-Action Letter Under Section 2(a)(1)(C)(ii) and (iv) of the Commodity
Exchange Act and CFTC Regulation 30.13
Dear Mr. Cho,
The Division of Market Oversight (“DMO”) of the Commodity Futures Trading Commission (the
“Commission” or “CFTC”) is issuing this letter in response to a request received from the Korea
Exchange, Inc. (“KRX”) pursuant to Commission Regulation 140.99(a)(2).1 In the letter, KRX
requested assurance that DMO will not recommend enforcement action against KRX with respect
to the offer or sale to persons located within the United States who are Qualified Institutional
Buyers (“QIBs”)2 of Korea Composite Stock Price Index (“KOSPI”) 200 Futures contracts or Mini
KOSPI 200 Futures contracts (collectively, the “Contracts”). KRX requests that this no-action
letter take effect on December 1, 2021 and continue until the Commission certifies the Contracts
pursuant to Commission Regulation 30.13.3
I.
Background
KRX is the sole securities and derivatives exchange operating in the Republic of Korea. It also
serves as the central counterparty for the futures and securities products KRX offers as well as
1 17 C.F.R. § 140.99(a)(2) (governing requests for no-action letters).
2 As defined in Rule 144A under the Securities Act of 1933
s the Contracts
pursuant to Commission Regulation 30.13.3
I.
Background
KRX is the sole securities and derivatives exchange operating in the Republic of Korea. It also
serves as the central counterparty for the futures and securities products KRX offers as well as
1 17 C.F.R. § 140.99(a)(2) (governing requests for no-action letters).
2 As defined in Rule 144A under the Securities Act of 1933.
3 In addition, KRX requested relief for registered futures commission merchants (“FCMs”), foreign futures and
options brokers, foreign persons that have received an exemption from registration as an FCM pursuant to
Commission Regulation 30.10, and persons located within the United States who are QIBs with respect to trading by
persons located within the United States who are QIBs, of the Contracts. This letter does not address this requested
relief but rather speaks only to the status of the Contracts. See 7 U.S.C. § 2(a)(1)(C)(ii).
Division of
Market Oversight

2

certain swaps.4 KRX’s derivatives market offers twenty-five futures and options contracts,
including the Contracts. Specifications for the Contracts are attached to this letter as Appendix A.
The KOSPI 200 Index is a capitalization-weighted securities index of 200 Korean stocks trading
on KRX’s securities market.

II.
Governing Law
Commodity Exchange Act (“CEA” or “Act”) Section 2(a)(1)(C)(iv) generally prohibits any person
from offering or selling a futures contract based on a security index in the U.S., except as permitted
under CEA Section 2(a)(1)(C)(ii) or CEA Section 2(a)(1)(D).5 CEA section 2(a)(1)(C)(ii) grants
the CFTC “exclusive jurisdiction with respect to accounts, agreements . . . and transactions
involving . . . [futures] contracts [on] a group or index of securities (or any interest therein or based
upon the value thereof) . . .” subject to three conditions. Specifically, Congress authorized the
CFTC to regulate a futures contract on a security index upon a finding by the CFTC that:
grants
the CFTC “exclusive jurisdiction with respect to accounts, agreements . . . and transactions
involving . . . [futures] contracts [on] a group or index of securities (or any interest therein or based
upon the value thereof) . . .” subject to three conditions. Specifically, Congress authorized the
CFTC to regulate a futures contract on a security index upon a finding by the CFTC that:

(1) the contract contains a cash settlement;

(2) trading of the contract is not readily susceptible to manipulation; and

(3) such group or index of securities does not constitute a narrow-based security index.6

Commission Regulation 41.1(c) defines a broad-based security index as any index of securities
that does not meet the definition of a narrow-based security index.7 CEA Section 1a(35)(A)
defines a narrow-based security index as an index:

• That has 9 or fewer component securities;

• In which a component security comprises more than 30% of the index’s weighting;

• In which the five highest weighted securities in aggregate comprise more than 60
percent of the index’s weighting; or

4 KRX is an exempt derivative clearing organization for the purpose of clearing certain swap transactions. See In
the Matter of the Petition of Korea Exchange, Inc. For Exemption from Registration as a Derivatives Clearing
Organization, Order Of Exemption From Registration (Oct. 26, 2015), available at
https://www.cftc.gov/sites/default/files/idc/groups/public/ @otherif/documents/ifdocs/krxdcoexemptorder10-26-
15.pdf.
5 7 U.S.C. § 2(a)(1)(C)(iv). CEA Section 2(a)(1)(D) governs the offer and sale of security futures products, which
are defined by CEA Section 1a(44) as based on a “single security or narrow-based security index,” and is not
applicable to the extent the Contracts involve a broad-based security index. 7 U.S.C. § 2(a)(1)(D); 7 U.S.C. §
1a(44)
if/documents/ifdocs/krxdcoexemptorder10-26-
15.pdf.
5 7 U.S.C. § 2(a)(1)(C)(iv). CEA Section 2(a)(1)(D) governs the offer and sale of security futures products, which
are defined by CEA Section 1a(44) as based on a “single security or narrow-based security index,” and is not
applicable to the extent the Contracts involve a broad-based security index. 7 U.S.C. § 2(a)(1)(D); 7 U.S.C. §
1a(44). By its terms, Section 2(a)(1)(C)(iv) applies to security index futures contracts traded on both domestic and
foreign boards of trade.
6 7 U.S.C. § 2(a)(1)(C)(ii).
7 17 C.F.R. § 41.1(c) (“[b]road-based security index means a group or index of securities that does not constitute a
narrow-based security index”); 17 C.F.R. § 41.1(e) (“[n]arrow-based security index has the same meaning as in
section 1a(35) of the Commodity Exchange Act”).

3

• In which the lowest weighted component securities comprising, in the aggregate,
25% of the index’s weighting have an aggregate dollar value of average daily
trading volume of less than $50,000,000 (or in the case of an index with 15 or more
component securities, $30,000,000). . ..8
Upon request, the Commission may certify that a futures contract on a broad-based security index
trading on a foreign board of trade conforms with CEA section 2(a)(1)(C)(ii).9 Commission
Regulation 30.13 sets forth the process to seek certification.10 Such submission must include data,
information, facts, and statements confirming that the subject contract conforms with section
2(a)(1)(C)(ii) of the Act.11

Commission Regulation 30.13 places no time limit on the Commission’s standard certification
review procedure
ade conforms with CEA section 2(a)(1)(C)(ii).9 Commission
Regulation 30.13 sets forth the process to seek certification.10 Such submission must include data,
information, facts, and statements confirming that the subject contract conforms with section
2(a)(1)(C)(ii) of the Act.11

Commission Regulation 30.13 places no time limit on the Commission’s standard certification
review procedure. Under certain circumstances, a contract may be eligible for expedited review
pursuant to Commission Regulation 30.13(e)-(f).12 The expedited review procedure takes place
over 45 days unless the Commission elects to extend its review for an additional 45 days if the
request raises novel or complex issues that require additional time for review.13 The foreign board
of trade may also request an extension of the review period.14

Indexes do not necessarily remain broad or narrow-based permanently – they may transition from
narrow-based to broad-based and then back to narrow-based. Pursuant to Commission Regulation
41.14(b), “an index that is a narrow-based security index that becomes a broad-based security
index for more than 45 business days over 3 consecutive calendar months shall continue to be a
narrow-based index for the following 3 calendar months,” providing market participants with time
to adjust to applicable CFTC regulations.15 Following this 3-month transition period, the index
becomes broad-based, and “a national securities exchange may continue to trade only in those
months in the security futures product that had open interest on the date the transition period
ended.”16 As noted above, pursuant to Commission Regulation 30.13, products based on a broad-
based security index trading on a foreign board of trade may receive Commission certification
when offered to persons located within the United States.17

8 7 U.S.C. § 1a(35)(A)
es product that had open interest on the date the transition period
ended.”16 As noted above, pursuant to Commission Regulation 30.13, products based on a broad-
based security index trading on a foreign board of trade may receive Commission certification
when offered to persons located within the United States.17

8 7 U.S.C. § 1a(35)(A). CEA Section 1a(35)(B) sets forth several exclusions from the definition of narrow-based
security index, none of which are relevant here. 7 U.S.C. § 1a(35)(B).
9 17 C.F.R. § 30.13(a).
10 17 C.F.R. § 30.13.
11 17 C.F.R. § 30.13(a)(2).
12 17 C.F.R. § 30.13(e)-(f).
13 17 C.F.R. § 30.13(g)-(h).
14 17 C.F.R. § 30.13(h)(2).
15 17 C.F.R. § 41.14(b)
16 Id.
17 17 C.F.R. § 30.13(a).

4

III.
The KOSPI 200 Index
Staff granted KRX a no-action letter on November 26, 2008, with respect to the offer and sale of
KOSPI 200 index futures contracts to persons in the United States.18 The Commission certified
the Mini KOSPI 200 futures contract under Commission Regulation 30.13(m) on August 1, 2017.19
At the time that staff issued such no-action letter, as well as at the time that the Commission made
such certification, the KOSPI 200 was a broad-based security index.

The KOSPI 200 became a narrow-based security index on April 1, 2020. As a result, staff
withdrew its no-action letter and the Commission withdrew its certification. Products based on
the KOSPI 200 became subject to joint regulation by the CFTC and the Securities and Exchange
Commission (“SEC”) as foreign security futures products. Pursuant to an SEC Order20 and related
CFTC Advisory,21 the only persons located within the United States permitted to trade the
Contracts as foreign security futures products are QIBs.

KRX has represented to DMO staff that the KOSPI 200 became broad-based for more than 45
days between June and August of 2021
Securities and Exchange
Commission (“SEC”) as foreign security futures products. Pursuant to an SEC Order20 and related
CFTC Advisory,21 the only persons located within the United States permitted to trade the
Contracts as foreign security futures products are QIBs.

KRX has represented to DMO staff that the KOSPI 200 became broad-based for more than 45
days between June and August of 2021. Therefore, the index’s transition period under
Commission Regulation 41.14(b) began on September 1, 2021 and is set to end on November 30,
2021. As a result, as of December 1, 2021, the index will be broad-based pursuant to 41.14(b).22

IV.
Requested No-Action Letter
KRX has noted that a lag may exist between expiration of the requisite transition period on
December 1, 2021, when the KOSPI 200 index fully-transitions to a broad-based security index,
and when KRX secures certification of the Contracts pursuant to Commission Regulation 30.13.
KRX has submitted this request for no-action to cover the period after December 1, 2021 until the
Commission issues the certification.

KRX has requested a no-action letter as follows:

18 CFTC Staff Letter No. 08-20 (November 26, 2008), available at https://www.cftc.gov/LawRegulation/
CFTCStaffLetters/letters.htm.
19 Prior to the adoption of Commission Regulation 30.13, Commission staff provided foreign boards of trade a staff
no-action letter confirming that the contract complied with CEA section 2(a)(1)(C)(ii). The substantive review
under Commission Regulation 30.13 is the same as the prior no-action process. Foreign Futures and Options
Contracts on a Non-Narrow-Based Security Index; Commission Certification Procedures, 76 Fed.Reg. 59241, 59242
(September 26, 2011), available at https://www.federalregister.gov/documents/2011/09/26/2011-24609/foreign-
futures-and-options-contracts-on-a-non-narrow-based-security-index-commission-certification
egulation 30.13 is the same as the prior no-action process. Foreign Futures and Options
Contracts on a Non-Narrow-Based Security Index; Commission Certification Procedures, 76 Fed.Reg. 59241, 59242
(September 26, 2011), available at https://www.federalregister.gov/documents/2011/09/26/2011-24609/foreign-
futures-and-options-contracts-on-a-non-narrow-based-security-index-commission-certification.
20 Order under Section 36 of the Securities Exchange Act of 1934 Granting an Exemption from Exchange Act
Section 6(h)(1) for Certain Persons Effecting Transactions in Foreign Security Futures and under Exchange Act
Section 15(a)(2) and Section 36 Granting Exemptions from Exchange Act Section 15(a)(1) and Certain Other
Requirements, (Release No. 34-60194; International Series Release No. 1311) (June 30, 2009), available at
https://www.sec.gov/rules/exorders/2009/34-60194.pdf.
21 Division of Clearing and Intermediary Oversight Advisory Concerning the Offer and Sale of Foreign Security
Futures Products to Customers Located in the U.S. (June 8, 2010), available at
https://www.cftc.gov/sites/default/files/idc/groups/public/@internationalaffairs/documents/ssproject/fsfpadvisory.pd
f.
22 See 17 C.F.R. § 41.14(b).

5

• Effective December 1, 2021 (Korea time), all KOSPI 200 futures contracts and Mini
KOSPI 200 futures contracts (regardless of contract month, including all contract
months listed before or after December 1, 2021) may be offered or sold to persons
located within the United States that are QIBs while the certification is pending at the
Commission. 23
As a condition of receiving the letter, KRX represented that it:

• would submit its request for expedited review and certification to the CFTC pursuant
to CFTC Regulation 30.13(e) on December 1, 2021.

KRX requested that the no-action letter expire upon the CFTC issuing a notice of certification of
the KOSPI 200 futures contracts and Mini KOSPI 200 futures contracts pursuant to Commission
Regulation 30.13.
V
iving the letter, KRX represented that it:

• would submit its request for expedited review and certification to the CFTC pursuant
to CFTC Regulation 30.13(e) on December 1, 2021.

KRX requested that the no-action letter expire upon the CFTC issuing a notice of certification of
the KOSPI 200 futures contracts and Mini KOSPI 200 futures contracts pursuant to Commission
Regulation 30.13.
V.
No-Action Letter
Based on the representations presented by KRX to DMO as discussed above, DMO will not
recommend that the Commission take enforcement action against KRX with respect to the offer
or sale of the Contracts to persons located within the United States while the Commission’s review
of KRX’s forthcoming request for certification of the Contracts pursuant to Commission
Regulation 30.13 is pending. This no-action letter is subject to the following conditions:

• KRX must submit a materially complete request for certification under Commission
Regulation 30.13 for the Contracts on December 1, 2021.

• KRX must promptly respond to DMO or Commission requests for additional information
regarding the Contracts.

• KRX will abide by all provisions of Commission Regulation 30.13 during the pendency of
its requests for certification, including, but not limited to, informing DMO staff of any
changes in the material facts and representations provided in the request for certification
pursuant to Commission Regulation 30.13(l).24
This letter will become effective on December 1, 2021
garding the Contracts.

• KRX will abide by all provisions of Commission Regulation 30.13 during the pendency of
its requests for certification, including, but not limited to, informing DMO staff of any
changes in the material facts and representations provided in the request for certification
pursuant to Commission Regulation 30.13(l).24
This letter will become effective on December 1, 2021.

This letter will remain in effect with respect to the Contracts during the pendency of certification
procedures under Commission Regulation 30.13, including any extensions of review under
Commission Regulation 30.13(h), until the earliest of the following events:

• The Contracts are certified pursuant to Commission Regulation 30.13(d) or (g);
• The Commission terminates its review of the request for certification of the Contracts
pursuant to Commission Regulation 30.13(b) or (i);

23 For avoidance of doubt, DMO understands this relief to include continued trading in contract months that had
open interest before December 1, 2021.
24 17 C.F.R. §30.13(l).

6
•
The Commission denies the request for certification of the Contracts pursuant to
Commission Regulation 30.13(j); or
•
December 31, 2022 (Korea time).
VI.
Conclusion
This letter, and the positions taken herein, represent only the views of DMO staff, and do not
necessarily represent the positions or views of the Commission or of any other office or division
of the Commission. This letter and the no-action positions taken herein are not binding on the
Commission.25 The positions provided in this letter do not excuse persons relying on it from
compliance with any other applicable requirements contained in the CEA, Commission
regulations, or any other applicable laws (i.e., securities laws). Further, this letter, and the positions
taken herein, are based upon the facts and circumstances presented to DMO staff
n herein are not binding on the
Commission.25 The positions provided in this letter do not excuse persons relying on it from
compliance with any other applicable requirements contained in the CEA, Commission
regulations, or any other applicable laws (i.e., securities laws). Further, this letter, and the positions
taken herein, are based upon the facts and circumstances presented to DMO staff. Any different,
changed, or omitted material facts or circumstances might render this letter void.
Finally, as with all staff letters, DMO retains the authority to condition further, modify, suspend,
terminate, or otherwise restrict the terms provided herein, in its discretion.
If you have any questions concerning this correspondence, please contact, Grey Tanzi, Assistant
Chief Counsel, DMO, at (312) 596-0635 or gtanzi@cftc.gov; or Rachel Kaplan Reicher, Chief
Counsel and Deputy Director, DMO, at (202) 418-6233 or rreicher@cftc.gov.
Sincerely,
____________________
Meghan Tente
Acting Director
Division of Market Oversight
25 See 17 CFR § 140.99(a)(2) (“A no-action letter binds only the issuing Division… and not the Commission or
other Commission staff.”).

## Nearby sections

- [CFTC Letter No. 08-03 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of Eight Futures Contracts Based on Security Indices Derived from the Dow Jones STOXX 600 Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_03.md)
- [CFTC Letter No. 08-05 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the RDXxt USD-RDX Extended Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_05.md)
- [CFTC Letter No. 08-11 Euronext Paris SAs request for no-action relief in connection with the offer and sale in the United States of its futures contracts based on the FTSE EPRA/NAREIT Europe Index and the FTSE EPRA/NAREIT Euro Zone Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_11.md)
- [CFTC Letter No. 08-13 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contracts Based on the SLI Swiss Leader Index, the Swiss Market Index Midcap, the Dow Jones Eur...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_13.md)
- [CFTC Letter No. 08-15 The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to lis...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_15.md)
- [CFTC Letter No. 08-17 DCIO received a request for guidance from the Joint Audit Committee concerning FCM regulatory reporting requirements for investments in a money market mutual fund. The fund had announced that its net asset value per s...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_17.md)
- [CFTC Letter No. 08-18 The Division of Market Oversight issued a letter granting no-action relief to permit the Brazilian Derivatives Exchange, BM&F Bovespa S.A. – Bolsa de Valores, Mercadorias e Futuros (BM&F), to make its electronic tradi...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_18.md)
- [CFTC Letter No. 08-19 Thailand Futures Exchange Pcls Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the SET50 Index Futures Contract.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_19.md)
- [CFTC Letter No. 08-21 The Division of Market Oversight issued a no-action letter to BNP Paribas confirming that the Division will not recommend that the Commission initiate enforcement action against BNP Paribas or Fortis Bank S.A./N.V., o...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_21.md)
- [CFTC Letter No. 09-02 The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affi...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_02.md)
- [CFTC Letter No. 09-06 The CPO of a commodity pool requested that DCIO agree to accept the Annual Report for the period from January 1, 2008 through October 31, 2008 as the Pool’s final annual report despite the fact that the Pool had not f...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_06.md)
- [CFTC Letter No. 09-07 The CPO of a commodity pool with a de minimus amount of its assets embroiled in a bankruptcy requested relief from the ongoing reporting requirements under Part 4. The CPO filed an Annual Report for the Pool for the 2...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_07.md)
- [CFTC Letter No. 09-11 The CPO of two commodity pools requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_11.md)
- [CFTC Letter No. 09-13 The CPO of commodity pool requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_13.md)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/CFTC_L21_25. Check the current official text before relying on it. Not legal advice.