No-action position with respect to Part 43 and Part 45 reporting, as well as related sections of Parts 38 and 39, for binary options executed on or pursuant to the rules of Electron Exchange DCM, LLC and cleared throu...

Summary: No-action position with respect to Part 43 and Part 45 reporting, as well as related sections of Parts 38 and 39, for binary options executed on or pursuant to the rules of Electron Exchange DCM, LLC and cleared through Electron Exchange DCO, LLC.

CFTC LETTER NO. 25-35 NO-ACTION SEPTEMBER 30, 2025

1

Division of Market Oversight

Division of Clearing and Risk

Re:

Request for No-Action Relief from Commission Regulations 38.8(b), 38.10, 38.951

(in Part), 39.20(b)(2) and Parts 43 and 45 for Binary Options Traded on or

Pursuant to the Rules of, and Cleared by, ElectronX

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 Electron Exchange

DCM, LLC (“ElectronX DCM”) and Electron Exchange DCO, LLC (“ElectronX DCO,” and

together with ElectronX DCM, “ElectronX”). ElectronX requested a no-action position, on their

own behalf and on behalf of their participants (the “Request”),1 with respect to the swap data

reporting and recordkeeping requirements of sections 38.8(b), 38.10, and 38.951 (only to the extent

it requires compliance with Part 45 of the Commission’s regulations), 39.20(b)(2), along with Parts

43 and 45 of the Commission’s regulations (collectively, the “Relevant Regulations”). ElectronX

requests a no-action position with respect to binary options contracts with the features described

in this letter traded and cleared pursuant to ElectronX’s rules. ElectronX DCM is a designated

contract market (“DCM”) and ElectronX DCO is a registered derivatives clearing organization

(“DCO”).

Background

ElectronX DCM is designated as a DCM and ElectronX DCO is registered as a DCO

X

requests a no-action position with respect to binary options contracts with the features described

in this letter traded and cleared pursuant to ElectronX’s rules. ElectronX DCM is a designated

contract market (“DCM”) and ElectronX DCO is a registered derivatives clearing organization

(“DCO”).

Background

ElectronX DCM is designated as a DCM and ElectronX DCO is registered as a DCO.

ElectronX stated in the Request that ElectronX lists for trading “Contracts consisting of cash-

settled binary options with underlying commodities relating to electricity and/or power markets

(the “ElectronX Contracts”).2 ElectronX stated that its “binary options contracts have a binary

outcome that pay[s] a fixed dollar amount of either $0 or $100, depending on whether the price for

1 MWh of power settles above or below the previous day’s day ahead market value for a particular

1 Letter from D. Hoban to the Division of Market Oversight and the Division of Clearing and Risk re: Request for No-

Action Relief from Commission Regulations 38.8(b), 38.10, 38.951, 39.20(b)(2) and Parts 43 and 45 for Binary

Options Traded on or Pursuant to the Rules of, and Cleared by, ElectronX (Sept. 18, 2025).

2 Request at 1-2. ElectronX stated that it “also intends to list other contracts outside the scope of [its] request for

relief, including but not limited to bounded futures contracts with underlying commodities relating to electricity and/or

power markets.” Id. at 2 n.3.

CFTC Logo

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

www.cftc.gov

at it “also intends to list other contracts outside the scope of [its] request for

relief, including but not limited to bounded futures contracts with underlying commodities relating to electricity and/or

power markets.” Id. at 2 n.3.

CFTC Logo

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

www.cftc.gov

2

hourly time period.”3 ElectronX Contracts are fully-collateralized, as “[m]arket participants are

not permitted to enter a bid for a Contract unless they deposit and maintain sufficient collateral to

fully collateralize (i.e., completely cover) any loss that could be incurred in connection with the

Contract resulting from the pairing of any such bid. Collateral transfers made by a market

participant are irrevocable and unconditional when effected except in the case of funds transferred

to a market participant in the event of fraud or error.”4

In the Request, ElectronX states that the ElectronX Contracts are “swaps because they are

binary options that provide for a payment that is dependent on the occurrence, nonoccurrence, or

the extent of the occurrence of an event or contingency associated with a potential financial,

economic, or commercial consequence.”5

CEA section 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.6 When promulgating Commission regulation 32.2, the Commission stated that “the

swap definition . . . includes options . .

n 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.6 When promulgating Commission regulation 32.2, the Commission stated that “the

swap definition . . . includes options . . . (whether or not traded on a DCM).”7 Commission

regulation 32.2 states, in relevant part, that commodity option transactions must be conducted in

compliance with the CEA and the Commission’s regulations related to swaps.8

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”)9

amended the CEA by adding a definition of “swap.”10 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[.]”11

Pursuant to the Dodd-Frank Act, the Commission promulgated various regulations

applicable to swaps, including the Relevant Regulations. The Relevant Regulations apply swap

reporting and recordkeeping obligations to DCMs, DCOs, and other market participants.

No-Action Position Requested

ElectronX requested that the Divisions not recommend the Commission take enforcement

action against ElectronX or its participants for failure to report ElectronX Contracts to an SDR or

3 Request at 2.

4 Id. at 2.

5 Id.

6 7 U.S.C. § 6c(b).

7 Commodity Options, 77 Fed. Reg. 25320, 25321, n.6 (Apr. 27, 2012).

8 17 C.F.R. § 32.2.

9 Public Law 111–203, 124 Stat. 1376 (2010).

10 7 U.S.C. §1a(47).

11 Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement;” Mixed Swaps;

Security-Based Swap Agreement Recordkeeping, 77 Fed. Reg. 48207, 48236 (Aug. 13, 2012). See also In re:

Blockratize, Inc. d/b/a Polymarket.com, CFTC Dkt. No

Fed. Reg. 25320, 25321, n.6 (Apr. 27, 2012).

8 17 C.F.R. § 32.2.

9 Public Law 111–203, 124 Stat. 1376 (2010).

10 7 U.S.C. §1a(47).

11 Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement;” Mixed Swaps;

Security-Based Swap Agreement Recordkeeping, 77 Fed. Reg. 48207, 48236 (Aug. 13, 2012). See also In re:

Blockratize, Inc. d/b/a Polymarket.com, CFTC Dkt. No. 22-09, at 2, 7 (Jan. 3, 2022) (“binary options . . . constitute

swaps under the CFTC’s jurisdiction, and therefore can only be offered on a registered exchange in accordance with

the Act and Regulations”).

3

to fulfill any of the other requirements of the Relevant Regulations. ElectronX states that it

requests a no-action position that is comparable to the no-action positions concerning reporting of

similar contracts provided in CFTC Letters Nos. 17-31, 17-32, 21-11, and 24-09.12 ElectronX

made the following representations:

• The ElectronX Contracts will be fully collateralized as defined under Commission

Regulation 39.2 and without intermediation;

• ElectronX will publish time and sales data for all transactions in the ElectronX Contracts

on its website promptly after execution of the transactions;

• ElectronX will fully comply with Part 16 of Commission regulations, including providing

transactional information to the Commission pursuant to Commission Regulation 16.02;

• ElectronX DCM will clear all ElectronX Contracts through ElectronX DCO and

ElectronX DCO will clear all ElectronX Contracts;

• ElectronX will comply with all reporting and recordkeeping requirements of the CEA and

Commission regulations applicable to it in its respective capacities as a DCM and a DCO,

other than the Relevant Regulations, including, but not limited to, the applicable

requirements of Parts 38 and 39 of Commission regulations (the records required to be

retained by this condition are referred to below as the “Required Records”); and

• ElectronX shall keep the Required Records open to inspection upon request

ons applicable to it in its respective capacities as a DCM and a DCO,

other than the Relevant Regulations, including, but not limited to, the applicable

requirements of Parts 38 and 39 of Commission regulations (the records required to be

retained by this condition are referred to below as the “Required Records”); and

• ElectronX 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 ElectronX to any representative of the Commission upon request. ElectronX

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.

No-Action Position and Related Conditions

The Divisions have decided to take a no-action position consistent with ElectronX’s

Request, subject to certain conditions described below, based on ElectronX’s representations and

statements in support of the Request. The Divisions note that this no-action position is similar to

previous no-action positions taken with respect to reporting certain binary options transactions and

similar transactions.13 The Divisions will not recommend that the Commission initiate an

12 See CFTC Letter No. 17-31 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-31/download; CFTC Letter

No. 17-32 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-32/download; CFTC Letter No. 21-11 (Apr. 22,

2021), available at https://www.cftc.gov/csl/21-11/download; CFTC Letter No. 24-09 (July 12, 2024), available at

https://www.cftc.gov/csl/24-09/download.

13 See CFTC Letter No. 17-31 (Jun

No. 17-31 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-31/download; CFTC Letter

No. 17-32 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-32/download; CFTC Letter No. 21-11 (Apr. 22,

2021), available at https://www.cftc.gov/csl/21-11/download; CFTC Letter No. 24-09 (July 12, 2024), available at

https://www.cftc.gov/csl/24-09/download.

13 See CFTC Letter No. 17-31 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-31/download; CFTC Letter

No. 17-32 (Jun. 30, 2017), available at https://www.cftc.gov/csl/17-32/download; CFTC Letter No. 21-11 (Apr. 22,

2021), available at https://www.cftc.gov/csl/21-11/download; CFTC Letter No. 24-09 (July 12, 2024), available at

4

enforcement action against ElectronX or its participants for failure to comply with Commission

regulations 38.8(b), 38.10, 38.951 (only to the extent that regulation 38.951 requires compliance

with Part 45 of the Commission’s regulations), 39.20(b)(2), as well as the applicable provisions of

Parts 43 and 45 of the Commission’s regulations, or the requirements of the relevant CEA

provisions pursuant to which the Relevant Regulations were promulgated, with respect to

ElectronX Contracts, subject to the following conditions:14

1)

ElectronX will require all ElectronX Contracts to be fully collateralized positions,

as defined by Commission regulation 39.2;15

2)

ElectronX DCM will clear all ElectronX Contracts through ElectronX DCO and

ElectronX DCO will clear all ElectronX Contracts;

3)

ElectronX will publish on its website the following information for all transactions

in ElectronX Contracts promptly after execution thereof: trade timestamp, contract

quantity, and price;

4)

ElectronX will provide the Commission with all transactional information as

described in Commission regulation 16.02;

5)

ElectronX will comply with all reporting and recordkeeping requirements of the

CEA and CFTC regulations applicable to it in its respective capacities as a DCM

and a DCO, other than the Relevant

ter execution thereof: trade timestamp, contract

quantity, and price;

4)

ElectronX will provide the Commission with all transactional information as

described in Commission regulation 16.02;

5)

ElectronX will comply with all reporting and recordkeeping requirements of the

CEA and CFTC regulations applicable to it in its respective capacities as a DCM

and a DCO, other than the Relevant Regulations, including, but not limited to, the

applicable requirements of Parts 38 and 39 of the Commission’s regulations (the

records required to be retained by this condition (5) are referred to below as the

“Required Records”);

6)

No ElectronX market participant clears an ElectronX Contract through a third party

clearing member; and

https://www.cftc.gov/csl/24-09/download;

CFTC

Letter

No.

24-12

(Sept.

3,

2024),

available

at

https://www.cftc.gov/csl/24-12/download;

CFTC

Letter

No.

24-15

(Oct.

4,

2024),

available

at

https://www.cftc.gov/csl/24-15/download;

CFTC

Letter

No.

25-02

(Jan.

31,

2025),

available

at

https://www.cftc.gov/csl/25-02/download;

CFTC

Letter

No.

25-23

(Jul.

22,

2025),

available

at

https://www.cftc.gov/csl/25-23/download;

CFTC

Letter

No.

25-26

(Aug.

7,

2025),

available

at

https://www.cftc.gov/csl/25-26/download; and CFTC Letter No. 25-28 (Sept. 3, 2025), available at

https://www.cftc.gov/csl/25-28/download.

14 Some of these conditions regarding the no-action position may 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 positions from

the Commission or its staff

e 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 positions from

the Commission or its staff. The public is not required to respond to a collection of information that does not have a

valid OMB control number.

15 Commission regulations define “fully collateralized position” as “a contract cleared by a derivatives clearing

organization that requires the derivatives clearing organization to hold, at all times, funds in the form of the required

payment sufficient to cover the maximum possible loss that a party or counterparty could incur upon liquidation or

expiration of the contract.” 17 C.F.R. § 39.2.

5

7)

ElectronX keeps 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 ElectronX to any representative of the Commission

upon request. ElectronX 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 only with respect to enforcement of the Relevant

Regulations

pon request. ElectronX 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 only with respect to enforcement of the Relevant

Regulations. This letter does not state any legal conclusion regarding the characteristics or legality

of ElectronX Contracts or the conduct of any person covered by the no-action position.16 This

letter and the no-action position taken 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 are not binding on the

Commission.17 Except as explicitly provided in this letter, the no-action position taken herein does

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, are based upon the

representations made to the Divisions. Any different, changed, or omitted material facts or

circumstances may 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 position provided herein.

If you have any questions concerning this letter, please contact Alicia Viguri, Division of

Market Oversight, at (202) 418-5219 or aviguri@cftc.gov; Paul Chaffin, Division of Market

Oversight, at (202) 418-5185 or pchaffin@cftc.gov; Owen Kopon, Division of Market Oversight,

at (202) 418-5360 or okopon@cftc.gov; or Brian Baum, Division of Clearing and Risk, at

bbaum@cftc.gov, 202-418-5654

n.

If you have any questions concerning this letter, please contact Alicia Viguri, Division of

Market Oversight, at (202) 418-5219 or aviguri@cftc.gov; Paul Chaffin, Division of Market

Oversight, at (202) 418-5185 or pchaffin@cftc.gov; Owen Kopon, Division of Market Oversight,

at (202) 418-5360 or okopon@cftc.gov; or Brian Baum, Division of Clearing and Risk, at

bbaum@cftc.gov, 202-418-5654.

Sincerely,

____________________

Rahul Varma

Acting Director

Division of Market Oversight

____________________

Richard Haynes

Acting Director

Division of Clearing and Risk

16 For the avoidance of doubt, this letter is not intended to address whether any of the ElectronX Contracts are

consistent with any statutory or regulatory requirement, including with respect to the requirements of CEA section

5c(c)(5)(C) or Commission regulation 40.11. 17 C.F.R. § 40.11.

17 See 17 C.F.R. § 140.99(a)(2) (“A no-action letter binds only the issuing Division . . . and not the Commission or

other Commission staff.”).