Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 8315 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5An Index Fund Share is a security ‘‘(i) that is 

issued by an open-end management investment 

company based on a portfolio of stocks or fixed 

income securities or a combination thereof, that 

seeks to provide investment results that correspond 

generally to the price and yield performance or total 

return performance of a specified foreign or 

domestic stock index, fixed income securities index 

or combination thereof; (ii) that is issued by such 

an open-end management investment company in 

a specified aggregate minimum number in return for 

a deposit of specified numbers of shares of stock 

and/or a cash amount, a specified portfolio of fixed 

income securities and/or a cash amount and/or a 

combination of the above, with a value equal to the 

next determined net asset value; and (iii) that, when 

aggregated in the same specified minimum number, 

may be redeemed at a holder’s request by such 

open-end investment company which will pay to 

the redeeming holder the stock and/or cash, fixed 

income securities and/or cash and/or a combination 

thereof, with a value equal to the next determined 

net asset value.’’ See Exchange Rule 14.11(c). 

6See the Trust’s Registration Statement for the 

Fund on Form N–1A, dated December 16, 1999 

(File Nos. 333–92935 and 811–09729) (‘‘Registration 

Statement’’). 

7The Index Provider, MSCI, Inc., is not a brokerdealer or fund advisor. The Exchange notes that 

pursuant to the Exchange’s rules ‘‘any advisory 

committee, supervisory board, or similar entity 

* * * that makes decisions on the index or 

portfolio composition, methodology and related 

matters, must implement and maintain, or be 

subject to, procedures designed to prevent the use 

and dissemination of material non-public 

information regarding the applicable index.’’ See 

Rule 14.11(c)(3)(B)(i) and (iii). 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NASDAQ–2012–022 and should be 

submitted on or before March 6, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3334 Filed 2–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66357; File No. SR–BATS– 

2012–004] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the Listing 

and Trading of Shares of the iShares®

MSCI Denmark Capped Investable 

Market Index Fund 

February 8, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

24, 2012, BATS Exchange, Inc. 

(‘‘Exchange’’ or ‘‘BATS’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the iShares® MSCI 

Denmark Capped Investable Market 

Index Fund as Index Fund Shares 

pursuant to Exchange Rule 14.11(c). 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade shares (‘‘Shares’’) of the following 

fund of the iShares Trust (‘‘Trust’’): 

iShares® MSCI Denmark Capped 

Investable Market Index Fund (‘‘Fund’’) 

pursuant to Exchange Rule 14.11(c) 

related to Index Fund Shares.5

According to the registration statement,6

the Fund seeks investment results that 

correspond generally to the price and 

yield performance, before fees and 

expenses, of the MSCI Denmark IMI 25/ 

50 Index (‘‘Index’’). The Index is 

sponsored by MSCI, Inc. (‘‘Index 

Provider’’),7 which is independent of 

the Fund, and BlackRock Fund Advisors 

is the investment adviser to the Fund. 

The Index Provider determines the 

composition and relative weightings of 

the securities in the Index and publishes 

information regarding the market value 

of the Index. The Index is a custom, free 

float-adjusted market capitalization 

weighted index designed to measure the 

performance of equity securities of 

companies whose market capitalization 

represents the top 85% of companies in 

the Danish securities market. The Index 

consists of stocks traded primarily on 

the Danish stock market, NASDAQ 

OMX Copenhagen. Component 

companies include financial, health 

care, and industrial companies. 

The Exchange is submitting this 

proposed rule change because the Index 

for the Fund does not meet all of the 

‘‘generic’’ listing requirements of 

Exchange Rule 14.11(c) applicable to the 

listing of Index Fund Shares based on 

international or global indexes. The 

Index meets all such requirements 

except for those set forth in Rule 

14.11(c)(3)(A)(ii)(b). Specifically, the 

Index fails to meet the requirement that 

component stocks that in the aggregate 

account for at least 90% of the weight 

of the index or portfolio each shall have 

a minimum worldwide monthly trading 

volume during each of the last six 

months of at least 250,000 shares. As of 

January 13, 2012, 83.22% of the Index 

weight had at least 250,000 shares 

traded during each of the previous six 

months. Accordingly, the Index only 

narrowly misses satisfaction of the 

monthly trading volume requirement of 

Rule 14.11(c)(3)(A)(ii)(b). The Exchange 

notes that other products have become 

immediately effective based on 

mstockstill on DSK4VPTVN1PROD with NOTICES

8316 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 

8See, e.g., Securities Exchange Act Release No. 

59471 (March 6, 2009), 74 FR 9862 (February 27, 

2009) (SR–NYSEArca–2009–13). 

9 17 CFR 240.10A–3. 

10The Exchange may obtain information for 

surveillance purposes via the Intermarket 

Surveillance Group (‘‘ISG’’) from other exchanges 

who are members of ISG. The Exchange notes that 

the Index component stocks are listed and traded 

on NASDAQ OMX Copenhagen A/S, which is a 

member of the ISG. For a list of the current 

members of ISG, see www.isgportal.org. 

11See Securities Exchange Act Release No. 65225 

(August 30, 2011), 76 FR 55148 (September 6, 

2011). 

12 15 U.S.C. 78f(b). 

13 15 U.S.C. 78f(b)(5). 

14 17 CFR 240.10A–3. 15 15 U.S.C. 78f(b)(5). 

relatively narrow misses that are similar 

in nature.8 The Exchange also notes that 

average volumes exceeded 250,000 

shares for 90.73% of the Index weight 

when volumes are considered as an 

average over the past 6 months rather 

than looking at each of the past 6 

months individually. 

The Exchange represents that: (1) The 

Shares of the Fund currently satisfy all 

of the generic listing standards for Index 

Fund Shares except for the volume 

requirement under Rule 

14.11(c)(3)(A)(ii)(b), as described above; 

(2) the continued listing standards 

under Exchange Rule 14.11(c)(9)(B) 

applicable to Index Fund Shares shall 

apply to the Shares; and (3) the Trust is 

required to comply with Rule 10A–3 

under the Act for the initial and 

continued listing of the Shares.9 In 

addition, the Exchange represents that 

the Shares will comply with all other 

requirements applicable to Index Fund 

Shares including, but not limited to, 

requirements relating to the 

dissemination of key information such 

as the Index value and intraday 

indicative value, the rules governing the 

trading of equity securities, trading 

hours, trading halts, surveillance,10 and 

the Information Circulars to members of 

the Exchange, as set forth in Exchange 

rules applicable to exchange traded 

funds (Index Fund Shares) and in the 

Commission’s order approving the 

generic listing rules applicable to the 

listing and trading of exchange traded 

funds (Index Fund Shares).11 Detailed 

descriptions of the Fund, the Index, the 

Index Provider, procedures for creating 

and redeeming Shares, transaction fees 

and expenses, risks, dividends, 

distributions, taxes, and reports to be 

distributed to beneficial owners of the 

Shares can be found in the Trust’s 

Registration Statement and/or on the 

Web site for the Fund (http:// 

www.ishares.com), as applicable. 

2. Statutory Basis 

The rule change proposed in this 

submission is consistent with the 

requirements of the Act and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the 

Act.12 Specifically, the proposed change 

is consistent with Section 6(b)(5) of the 

Act 13 because it is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices and is generally 

designed to protect investors and the 

public interest in that the Shares will be 

listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in Exchange Rule 

14.11(c). As noted above, the Shares of 

the Fund currently satisfy all of the 

generic listing standards for Index Fund 

Shares except for the volume 

requirement under Rule 

14.11(c)(3)(A)(ii)(b), which the Index 

only narrowly misses. The Exchange 

also reiterates that the continued listing 

standards under Exchange Rule 

14.11(c)(9)(B) applicable to Index Fund 

Shares shall apply to the Shares, and the 

Trust is required to comply with Rule 

10A–3 under the Act for the initial and 

continued listing of the Shares.14 In 

addition, the Exchange represents that 

the Shares will comply with all other 

requirements applicable to Index Fund 

Shares including, but not limited to, 

requirements relating to the 

dissemination of key information such 

as the Index value and intraday 

indicative value, the rules governing the 

trading of equity securities, trading 

hours, trading halts, surveillance, and 

the Information Circulars to members of 

the Exchange, as set forth in Exchange 

rules applicable to exchange traded 

funds (Index Fund Shares) and in the 

Commission’s order approving the 

generic listing rules applicable to the 

listing and trading of exchange traded 

funds (Index Fund Shares). The 

Exchange has in place surveillance 

procedures that are adequate to properly 

monitor trading in the Shares in all 

trading sessions and to deter and detect 

violations of Exchange rules and 

applicable federal securities laws. The 

Exchange may obtain information via 

ISG from other exchanges that are 

members of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement. The Exchange notes that the 

Index component stocks are listed and 

traded on NASDAQ OMX Copenhagen 

A/S, which is a member of the ISG. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that a large amount of 

information is publicly available 

regarding the Fund and the Shares, 

thereby promoting market transparency. 

The Consolidated Tape Association will 

disseminate real time trade and quote 

information for the Shares. In addition, 

the current Index value will be widely 

disseminated by one or more major 

market data vendors at least every 60 

seconds during the Exchange’s regular 

market session. Moreover, prior to the 

commencement of trading, the Exchange 

will inform its Members in an 

Information Circular of the special 

characteristics and risks associated with 

trading the Shares. The Exchange will 

halt trading in the Shares in accordance 

with Exchange Rules. The grounds for a 

halt include a halt because the intraday 

indicative value of the security and/or 

the value of its underlying index are not 

being disseminated as required, a halt 

for other regulatory reasons or due to 

other conditions or circumstances 

deemed to be detrimental to the 

maintenance of a free and orderly 

market. In addition, as noted above, 

investors will have ready access to 

information regarding the Fund, the 

current Index value, the intraday 

indicative value, and quotation and last 

sale information for the Shares. 

The Exchange believes that the 

proposed rule change is designed to 

remove impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system in that the 

listing and trading of the Fund on the 

Exchange will enhance competition 

among market participants, which the 

Exchange believes will benefit investors 

and the marketplace. The Exchange is 

commencing a listings business at a 

time when there are two dominant 

primary listing venues, the New York 

Stock Exchange and Nasdaq. Because 

the proposal will allow the Fund to list 

and trade on the Exchange, and without 

the proposal the Fund would likely be 

listed on another market, the Exchange 

believes that the proposal will provide 

companies with another option for 

raising capital in the public markets, 

thereby promoting the aforementioned 

principles discussed in Section 6(b)(5) 

of the Act.15 In addition, as noted above, 

investors will have ready access to 

information regarding the Fund’s 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 8317 

16 15 U.S.C. 78s(b)(3)(A)(iii). 

17 17 CFR 240.19b–4(f)(6). 

18The Commission notes that the Exchange has 

satisfied this requirement. 

19 15 U.S.C. 78s(b)(3)(A). 

20 17 CFR 240.19b–4(f)(6). 

21 17 CFR 240.10A–3. 

22 17 CFR 240.19b–4(f)(6)(iii) 

23 15 U.S.C. 78s(b)(3)(A). 

24 17 CFR 240.19b–4(f)(6). 

25For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

holdings, the current Index value, the 

intraday indicative value, and quotation 

and last sale information for the Shares. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Changes and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 16 and Rule 

19b–4(f)(6) thereunder.17 Because the 

foregoing proposed rule does not (i) 

significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, provided that the selfregulatory organization has given the 

Commission written notice of its intent 

to file the proposed rule change at least 

five business days prior to the date of 

filing of the proposed rule change or 

such shorter time as designated by the 

Commission,18 the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 19 and 

Rule 19b–4(f)(6) thereunder.20

The Commission believes that the 

proposed rule change is properly 

designated as ‘‘non-controversial’’ under 

Rule 19b–4(f)(6) because the Index for 

the Fund fails to meet the requirements 

set forth in Rule 14.11(c)(3)(A)(ii)(b) by 

a small amount, and the Shares of the 

Fund currently satisfy all of the other 

applicable generic listing standards 

under Rule 14.11(c)(3)(A)(ii) and all 

other requirements applicable to Index 

Fund Shares, as set forth in the 

Exchange’s rules. As described above, 

83.22% of the Fund is comprised of 

component stocks with over 250,000 

shares traded in each of the last six 

months. The Exchange represents that 

the Shares of the Fund currently satisfy 

all of the generic listing standards for 

Index Fund Shares except for the 

volume requirement under Rule 

14.11(c)(3)(A)(ii)(b), the continued 

listing standards under Exchange Rule 

14.11(c)(9)(B) applicable to Index Fund 

Shares shall apply to the Shares, and the 

Trust is required to comply with Rule 

10A–3 under the Act 21 for the initial 

and continued listing of the Shares. In 

addition, the Exchange represents that 

the Shares will comply with all other 

requirements applicable to Index Fund 

Shares including, but not limited to, 

requirements relating to the 

dissemination of key information such 

as the Index value and intraday 

indicative value, the rules governing the 

trading of equity securities, trading 

hours, trading halts, surveillance, and 

the Information Circulars to members of 

the Exchange, as set forth in Exchange 

rules applicable to Index Fund Shares 

and in the Commission’s order 

approving the generic listing rules 

applicable to the listing and trading of 

Index Fund Shares. 

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing. However, Rule 19b– 

4(f)(6)(iii) 22 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has asked that the 

Commission waive the 30 day operative 

delay so that the proposed rule change 

may become immediately effective in 

accordance with Section 19(b)(3)(A) of 

the Act 23 and Rule 19b–4(f)(6) 

thereunder.24 The Commission believes 

that waiver of the operative delay is 

consistent with the protection of 

investors and the public interest. The 

Commission notes that the Index 

narrowly misses only one component of 

the criteria applicable to Index Fund 

Shares and that the Shares of the Fund 

currently satisfy all of the other generic 

listing standards under Exchange Rule 

14.11(c) and all other requirements 

applicable to Index Fund Shares, as set 

forth in Exchange rules and prior 

Commission orders approving the 

generic listing rules applicable to the 

listing and trading of Index Fund 

Shares. The Commission believes that 

the listing and trading of the Shares do 

not present any novel regulatory issues 

or impose any significant burden on 

competition, and that waiving the 30- 

day operative delay would benefit the 

market and investors by providing 

market participants with additional 

investing choices. For these reasons, the 

Commission designates the proposal 

operative upon filing.25

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BATS–2012–004 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549. 

All submissions should refer to File 

Number SR–BATS–2012–004. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

mstockstill on DSK4VPTVN1PROD with NOTICES

8318 Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Notices 

26 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The text of the proposed changes does not 

appear in CME’s rulebook but is available on CME’s 

Web site at http://www.cmegroup.com/rulebook/ 

files/s_6105_otc_fx_pai_cash_mk_to_mkt_ser_

020112_revised.pdf. 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BATS– 

2012–004 and should be submitted on 

or before March 6, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3331 Filed 2–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66354; File No. SR–CME– 

2012–03] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange, Inc.; 

Notice of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change to Amend Certain 

Aspects of the Performance Bond 

Regime Applicable to Cleared Only 

OTC FX Swaps 

February 8, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

30, 2012, the Chicago Mercantile 

Exchange Inc. (‘‘CME’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I and II 

below, which items have been prepared 

primarily by CME. The Commission is 

publishing this Notice and Order to 

solicit comments on the proposed rule 

change from interested persons and to 

approve the proposed rule change on an 

accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of Terms of Substance of the 

Proposed Rule Change 

CME proposes to make certain 

changes that are related to its current 

cleared-only OTC foreign currency 

(‘‘FX’’) product offering. The proposed 

rule changes 3 would add Price 

Alignment Interest (‘‘PAI’’) functionality 

to current ‘‘cash mark-to-market’’ 

performance bond regime that applies to 

CME’s cleared-only OTC FX offering. 

A description of the revised 

performance bond regime with the 

addition of PAI is included below: 

* * * * * 

CME Forwards With Cash Mark-ToMarket 

In accordance with customer demand 

CME has begun clearing privatelynegotiated transactions in forwards with 

cash mark-to-market. 

Until October 18, 2011, all forwards 

cleared by CME had a collateralized 

mark-to-market. Each day, for each open 

forward trade, mark-to-market is 

calculated, from original trade price to 

the current end-of-day settlement price. 

These amounts are netted together and 

‘‘collateralized’’. In other words, if a 

negative number (a loss), they increase 

the initial margin (performance bond) 

requirement, thereby increasing the 

amount of collateral that must be posted 

to meet that margin requirement. If a 

positive number (a gain), they decrease 

the initial margin requirement. 

With cash mark-to-market 

implemented on October 18, 2011, the 

mark-to-market value for the previous 

clearing business date is subtracted from 

the mark-to-market amount for the 

current clearing date. These amounts are 

netted down and become part of the 

total banked cash flow for the currency 

in which they are denominated. It is a 

very simple change for this cash markto-market as opposed to collateralized 

mark-to-market. 

There is an additional feature for FX 

forwards, and in particular for nondeliverable forwards (NDF’s)—forwards 

where one currency of the pair is not 

bankable. We call this a forward where 

the cash mark-to-market is flipped, or 

inverted. 

Take for example a forward on the 

exchange rate between the US Dollar 

(USD) and the Chilean Peso (CLP). The 

quantity is specified in USD, and the 

price is quoted as a specified amount of 

CLP per one USD. Normally, the markto-market amount would be 

denominated in CLP, also referred to as 

the contra currency. But with the 

flipped mark-to-market, the amount is 

converted to USD by dividing by today’s 

end-of-day settlement price for the 

contract. 

Calculating Mark-to-Market and 

Change in Mark-to-Market 

In the normal case, the mark-tomarket amount for a forward is 

calculated as: 

• Subtract the original trade price 

from the end-of-day settlement price. 

• Express the trade quantity as a 

positive number for a buy or a negative 

number for a sell. 

• Take the product of the price 

difference, the trade quantity, the 

contract value factor, and the discount 

factor. 

• Round normally to the normal 

precision of the currency in which the 

mark-to-market amount is denominated. 

(the contra currency for an FX forward) 

In other words: 

(S ¥ T) * Q * CVF * DF 

Where: 

S is the end-of-day settlement price 

T is the original trade price 

Q is the trade quantity 

CVF is the contract value factor 

DF is the discount factor 

In the inverse case, the mark-tomarket amount is calculated in the exact 

same way, except that it includes a 

division by the daily settlement price: 

• Subtract the original trade price 

from the end-of-day settlement price. 

• Express the trade quantity as a 

positive number for a buy or a negative 

number for a sell. 

• Take the product of the price 

difference, the trade quantity, the 

contract value factor, and the discount 

factor. 

• Divide this result by the end-of-day 

settlement price. 

• Round normally to the normal 

precision of the currency in which the 

mark-to-market amount is denominated. 

(the primary currency for an FX 

forward) 

In other words: 

[(S ¥ T) * Q * CVF * DF]/S 

In either case, the settlement variation 

amount to be banked is calculated by 

subtracting the mark-to-market amount 

for the previous clearing business date 

from the amount for the current 

business date. 

Cash-Settled and Physically-Delivered 

Forwards 

At maturity, forwards with cash markto-market can be either cash-settled or 

physically-delivered, exactly as for 

forwards with collateralized mark-tomarket. 

For a cash-settled forward, at contract 

maturity (end-of-day on the ‘‘clearing 

settlement date’’): 

• The mark-to-market amount is set to 

zero. 

• We then calculate the settlement 

variation amount to be banked exactly 

as on any other day—by subtracting the 

previous day’s value for mark-to-market 

from the current day’s (zero) value. 

• The mark-to-market amount is then 

calculated one final time—from original 

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