DCM Exhibit L 

Exhibit L 

Exhibit L

Attach as Exhibit L, a narrative and any other form of documentation that may be provided under other Exhibits 

herein that describe the manner in which the Applicant is able to comply with each Core Principle. Such 

documentation must include a regulatory compliance chart setting forth each Core Principle and providing citations to 

the Applicant’s relevant rules, policies, and procedures that address each Core Principle. To the extent that the 

application raises issues that are novel, or for which compliance with a Core Principle is not self-evident, include an 

explanation of how that item and the application satisfy the Core Principles. Applicant must include a description of 

how it meets the definition of “Board of Trade” as defined in § 1a(6) of the CEA. 

Response:

The attached Exhibit L-1 demonstrates that the Exchange satisfies each of the applicable DCM Core Principles. 

The Exchange is a “trading facility” within the meaning of Section 1a(51) of the CEA inasmuch as its Trading Platform 

“constitutes, maintains or provides an electronic facility or system in which multiple participants have the ability to 

execute or trade agreements, contracts, or transactions – (i) by accepting bids or offers made by other participants 

that are open to multiple participants in the facility or system; or (ii) through the interaction of multiple bids or 

multiple offers within a system with a pre-determined nondiscretionary automated trade matching and execution 

algorithm.” The Trading Platform satisfies both of these tests. The Exchange, therefore, is a “trading facility” within 

the meaning of Section 1a(51) of the CEA (the exclusions from that definition in Section 1a(51)(B) are not relevant) 

and a “board of trade” within the meaning of Section 1a(6) of the CEA. 
DCM Exhibit L-1 
 DCM Exhibit L-1 

3 

DCM Core Principles Table 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Sec. 5(a) Applications - “A board of trade applying to the 

Commission for designation as a contract market shall submit an 

application to the Commission that includes any relevant materials 

and records the Commission may require consistent with the Act.” 

The attached narratives and documents constitute QCX LLC’s (the 

“Exchange”) application for designation as a contract market (“Form 

DCM”) and contain relevant materials and records as required by 

the Commission. 

Core Principle 1 - Designation as Contract Market:

(A) In General.—To be designated, and maintain a 

designation, as a contract market, a board of trade shall comply 

with— 

(i) any core principle described in this subsection; and 

(ii) any requirement that the Commission may impose by 

rule or regulation pursuant to section 8a(5). 

(B) Reasonable Discretion Of Contract Market.— Unless 

otherwise determined by the Commission by rule or regulation, a 

board of trade described in subparagraph (A) shall have reasonable 

discretion in establishing the manner in which the board of trade 

complies with the core principles described in this subsection. 

See the QCEX Rulebook (the “Rulebook”; each rule thereof, a “Rule”) 

(Exhibit M-1), the Employee Handbook (Exhibit O-1), the Market 

Oversight Manual (Exhibit O-2) and other Exhibits submitted as part 

of Form DCM. 
 DCM Exhibit L-1 

4 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 2 - Compliance with Rules: 

(A) In General.—The board of trade shall establish, monitor, 

and enforce compliance with the rules of the contract market, 

including— 

(i) access requirements; 

(ii) the terms and conditions of any contracts to be 

traded on the contract market; and 

(iii) rules prohibiting abusive trade practices on the 

contract market. 

(B) Capacity of Contract Market.—The board of trade shall 

have the capacity to detect, investigate, and apply appropriate 

sanctions to any person that violates any rule of the contract 

market. 

(C) Requirement of Rules.—The rules of the contract market 

shall provide the board of trade with the ability and authority to 

obtain any necessary information to perform any function described 

in this subsection, including the capacity to carry out such 

international information-sharing agreements as the Commission 

may require. 

See the Rulebook (Exhibit M-1), the Employee Handbook (Exhibit O1), the Market Oversight Manual (Exhibit O-2), and other Exhibits 

submitted with Form DCM, as follows: 

(A)(i) Access requirements can be found in Chapter III of the 

Rulebook. 

(A)(ii) Chapter IX of the Rulebook has been reserved detailing 

contract terms and conditions. 

(A)(iii) Rules prohibiting abusive trading are found in Chapter VI of 

the Rulebook. 

(B) The Exchange has entered into a Regulatory Services Agreement 

with the National Futures Association (“NFA”) (Exhibit N-1) to detect 

rule violations and can investigate, and sanction persons as provided 

in Chapter VII of the Rulebook. 

(C) Rule 2.10 provides for regulatory cooperation and authorizes the 

Exchange to enter in information sharing agreements as necessary. 
 DCM Exhibit L-1 

5 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 3 - Contracts Not Readily Subject to Manipulation: 

The board of trade shall list on the contract market only contracts 

that are not readily susceptible to manipulation.

The Exchange will submit contracts for self-certification under § 40.2 

with a narrative that addresses market structure and the reasons 

the Exchange believes the contract is not readily susceptible to 

manipulation. 

Similarly, any contract for which the Exchange seeks Commission 

approval under § 40.3 will also include a narrative that addresses 

market structure and the reasons the Exchange believes the 

contract is not readily susceptible to manipulation. 

In presenting its analysis, the Exchange will rely on guidance in 

Appendix C to Part 38 in meeting this Core Principle for new product 

listings. 

Core Principle 4 - Prevention of Market Disruption: 

The board of trade shall have the capacity and responsibility to 

prevent manipulation, price distortion, and disruptions of the 

delivery or cash-settlement process through market surveillance, 

compliance, and enforcement practices and procedures, including— 

(A) methods for conducting real-time monitoring of trading; 

and 

(B) comprehensive and accurate trade reconstructions. 

The Exchange will implement practices and procedures to monitor 

trading to prevent manipulation, price distortion and disruptions of 

trading and the settlement process. The Exchange intends to 

coordinate with the NFA to address market actions found to be a 

violation of the rules through the NFA’s ongoing trade practice 

surveillance activities. The Exchange has also developed and 

implemented a Market Oversight Manual (Exhibit O-2) with written 

policies and procedures to address protections against market 

disruptions. 

(A) The Exchange will staff a control desk to conduct real-time 

surveillance of trading during market hours as provided in the 

Market Oversight Manual’s “Market Supervision Procedures” 

chapter. 

(B) All orders placed by Participants (as defined in the Rulebook) 

and any subsequent trade executions are stored in the Exchange’s 

transaction database such that a complete history of orders and 

transactions may be reconstructed. 
 DCM Exhibit L-1 

6 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 5 - Position Limitations or Accountability: 

To reduce the potential threat of market manipulation or 

congestion (especially during trading in the delivery month), the 

board of trade shall adopt for each contract of the board of trade, as 

is necessary and appropriate, position limitations or position 

accountability for speculators. 

For any contract that is subject to a position limitation 

established by the Commission pursuant to section 4a(a), the board 

of trade shall set the position limitation of the board of trade at a 

level not higher than the position limitation established by the 

Commission. 

The Exchange will include position accountability thresholds with 

each contract filed under § 40.2 or § 40.3. These will be included in 

the terms and conditions of each contract. 

For any contract that is subject to a position limitation established 

by the Commission pursuant to § 6a(a), the Exchange shall set a 

position limit at a level not higher than the position limitation 

established by the Commission. The Exchange does not anticipate 

that any contracts to be listed initially will be subject to Commission 

position limits. 

The Exchange will monitor compliance with the position limits and 

reportable position thresholds. 

Core Principle 6 - Emergency Authority: The board of trade, in 

consultation or cooperation with the Commission, shall adopt rules 

to provide for the exercise of emergency authority, as is necessary 

and appropriate, including the authority— 

(A) to liquidate or transfer open positions in any contract; 

(B) to suspend or curtail trading in any contract; 

and 

(C) to require market participants in any contract to meet 

special margin requirements. 

Procedures and guidelines for the exercise of emergency authority 

by the Exchange are set forth in Rule 2.6, which authorizes the board 

or officers of the Exchange to act as they deem necessary to meet 

the emergency at hand. Among other things, Rule 2.6 requires the 

Exchange to notify the Commission of any emergency action taken, 

or proposed to be taken, and to document its decision-making 

process and reasons for using its emergency action authority. 
 DCM Exhibit L-1 

7 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 7 - Availability of General Information: The board of 

trade shall make available to market authorities, market 

participants, and the public accurate information concerning— 

(A) the terms and conditions of the contracts of the contract 

market; and 

(B) 

(i) the rules, regulations, and mechanisms for executing 

transactions on or through the facilities of the contract 

market; and 

(ii) the rules and specifications describing the operation 

of the contract market’s— 

(I) electronic matching platform; or 

(II) trade execution facility.

Rule 3.6(f) provides that the Rulebook, all amendments thereto and 

notices and policies thereunder, as well as the specifications for all 

contracts from time to time traded on the Exchange, will be publicly 

available on the Exchange’s website. 

Its web address will be www.qcex.com when it becomes 

operational. 

Core Principle 8 - Daily Publication of Trading 

Information: The board of trade shall make public daily information 

on settlement prices, volume, open interest, and opening and 

closing ranges for actively traded contracts on the contract market. 

Rule 4.10 requires that the Exchange shall make public daily 

information on pricing, current volume and open interest for 

actively traded contracts. This information will be published to the 

Exchange website, the address of which will be www.qcex.com. 

The Exchange will publish additional reports from time to time in 

accordance with, and as specified in, the applicable Contract Rules. 
 DCM Exhibit L-1 

8 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 9 - Execution of Transactions:

The board of trade shall provide a competitive, open, and 

efficient market and mechanism for executing transactions that 

protects the price discovery process of trading in the centralized 

market of the board of trade. 

The rules of the board of trade may authorize, for bona fide 

business purposes— 

(i) transfer trades or office trades; 

(ii) an exchange of— 

(I) futures in connection with a cash commodity 

transaction; 

(II) futures for cash commodities; or 

(III) futures for swaps; or 

(iii) a futures commission merchant, acting as principal 

or agent, to enter into or confirm the execution of a 

contract for the purchase or sale of a commodity for 

future delivery if the contract is reported, recorded, or 

cleared in accordance with the rules of the contract 

market or a derivatives clearing organization.

The Rulebook establishes trading rules to ensure fair and equitable 

trading, and equal access by all participants. 

All Participants and their Authorized Users (as defined in the 

Rulebook) will have equal access to the Exchange’s trading platform, 

including information regarding prices, bids and offers. Orders will 

be executed competitively and impartially in accordance with the 

principles set forth in Rule 4.4. 

Rule 6.1(r) provides that all pre-negotiated transactions that are not 

expressly permitted are prohibited. 

Chapter VI of the Rulebook also contains other rules to prevent 

trading-related abuses, such as wash trading, accommodation 

trades, and trading ahead. 

The NFA, pursuant to the Regulatory Services Agreement (Exhibit N1), will maintain systems and surveillance procedures to detect 

abuses such as wash trading, accommodation trades, trading ahead 

and other types of market manipulation or fraud. 

The Exchange does not expect to provide for negotiated offexchange transactions at the commencement of trading. To the 

extent that such transactions are introduced at a later time, the 

Rulebook will be amended to include provisions for regulating 

negotiated off-exchange transactions. 
 DCM Exhibit L-1 

9 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 10 - Trade Information: The board of trade shall 

maintain rules and procedures to provide for the recording and safe 

storage of all identifying trade information in a manner that enables 

the contract market to use the information— 

(A) to assist in the prevention of customer and market 

abuses; and 

(B) to provide evidence of any violations of the rules of the 

contract market.

The Exchange will comply with § 1.31 regarding document retention, 

including the requirement that all records which relate to the terms 

of transactions made or to be made on or subject to the Rules of the 

Exchange must be kept for a minimum of five years, or in the case of 

swaps, the life of the swap plus five years. 

In addition, the NFA, the Exchange’s Regulatory Services Provider, 

will record full data entry and trade details and safely store audit 

trail data to assist in the prevention of customer and market abuses 

and provide evidence of any violations of the rules of the contract 

market. 

The technical aspects of the capture and storage of information are 

discussed in Exhibit S. 
 DCM Exhibit L-1 

10 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 11 - Financial Integrity of Transactions: The board of 

trade shall establish and enforce— 

(A) rules and procedures for ensuring the financial integrity 

of transactions entered into on or through the facilities of the 

contract market (including the clearance and settlement of the 

transactions with a derivatives clearing organization); and 

(B) rules to ensure— 

(i) the financial integrity of any— 

(I) futures commission merchant; 

and 

(II) introducing broker; and 

(ii) the protection of customer funds.

All Contracts traded on the Exchange will be cleared by QC Clearing 

LLC (the “Clearinghouse”), an affiliated entity of the Exchange, 

pursuant to the Rulebook. 

Margin requirements for each contract, including Fully-Collateralized 

Contracts (as defined in the Rulebook), will be determined in 

accordance with the Rulebook and the relevant Contract Rules. 

Original margin shall, in all cases, be equal to or greater than an 

amount equal to the maximum loss amount a Participant could 

suffer upon liquidation or settlement of positions. 

Furthermore, all Participants are required to have the specified 

amount of funds necessary for full performance on deposit with the 

Clearinghouse prior to establishing any position. 

As a non-intermediated market, all Participant funds are held in the 

member property account of the Clearinghouse. These funds will be 

kept in an account appropriately titled as a member-funds account 

and kept separate from the proprietary funds of the Exchange and 

Clearinghouse. 

Core Principle 12 - Protection of Markets and Market Participants: 

The board of trade shall establish and enforce rules— 

(A) to protect markets and market participants from abusive 

practices committed by any party, including abusive practices 

committed by a party acting as an agent for a participant; and 

(B) to promote fair and equitable trading on the contract 

market. 

(A) Chapter VI of the Rulebook contains prohibitions against 

fraudulent acts and market manipulation. The NFA will provide 

surveillance practices and procedures to protect Participants and 

Authorized Users from abusive practices. The market is nonintermediated, and agency relationships are not permitted. 

(B) Rule 6.1 prohibits conduct that is contrary to fair and 

equitable principles of trade or the best interests of the market. 
 DCM Exhibit L-1 

11 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 13 - Disciplinary Procedures: The board of trade shall 

establish and enforce disciplinary procedures that authorize the 

board of trade to discipline, suspend, or expel members or market 

participants that violate the rules of the board of trade, or similar 

methods for performing the same functions, including delegation of 

the functions to third parties. 

Chapter VII of the Rulebook implements the disciplinary procedures 

required by this Core Principle. These procedures mirror those 

required by Appendix B to Part 38, and §§ 38.700 - 38.712. 

Core Principle 14 - Dispute Resolution: The board of trade shall 

establish and enforce rules regarding, and provide facilities for 

alternative dispute resolution as appropriate for, market 

participants and any market intermediaries. 

Chapter VIII of the Rulebook implements the dispute resolution 

procedures required by this Core Principle. 

Core Principle 15 - Governance Fitness Standards: The board of 

trade shall establish and enforce appropriate fitness standards for 

directors, members of any disciplinary committee, members of the 

contract market, and any other person with direct access to the 

facility (including any party affiliated with any person described in 

this paragraph).

Chapter II of the Rulebook implements the governance fitness 

standards required by this Core Principle. 

Core Principle 16 - Conflicts of Interest: The board of trade shall 

establish and enforce rules— 

(A) to minimize conflicts of interest in the decision making 

process of the contract market; and 

(B) to establish a process for resolving conflicts of interest 

described in subparagraph (A). 

Chapter II of the Rulebook implements the conflicts of interest 

standards required by this Core Principle. 

Core Principle 17 - Composition of Governing Boards of Contract 

Markets: The governance arrangements of the board of trade shall 

be designed to permit consideration of the views of market 

participants.

Chapter II of the Rulebook implements the conflicts of interest 

standards required by this Core Principle. Rule 2.1 requires that the 

board be composed of five members, at least two of whom are 

public directors. 
 DCM Exhibit L-1 

12 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 18 - Recordkeeping: The board of trade shall 

maintain records of all activities relating to the business of the 

contract market— 

(A) in a form and manner that is acceptable to the 

Commission; and 

(B) for a period of at least 5 years. 

The Exchange will maintain records of all activities related to its 

business for a period of five years and in accordance with § 1.31, 

and, with regard to swaps, for the life of the swap plus 5 years. 

Core Principle 19 - Antitrust Considerations: Unless necessary or 

appropriate to achieve the purposes of this Act, the board of trade 

shall not— 

(A) adopt any rule or taking any action that results in any 

unreasonable restraint of trade; or 

(B) impose any material anticompetitive burden on trading 

on the contract market. 

The Exchange believes that its Rules have been designed to avoid 

unreasonable restraints of trade or the imposition of any material 

anticompetitive burden on trading, as will the Contract Rules for 

each contract to be certified by the Commission for trading on the 

Exchange. 

Access to the Exchange will not require the acquisition of any equity 

interest but will be available to a broad range and potentially 

unlimited number of Participants, on a fair, equitable and timely 

basis. The Exchange will operate through precise and 

predetermined electronic algorithms, without discrimination among 

different users or user groups. Trade information will be 

disseminated both to Participants and to the public on a continuous 

basis. 
 DCM Exhibit L-1 

13 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 20 - System Safeguards: The board of trade shall: 

(A) establish and maintain a program of risk analysis and 

oversight to identify and minimize sources of operational risk, 

through the development of appropriate controls and procedures, 

and the development of automated systems, that are reliable, 

secure, and have adequate scalable capacity; 

(B) establish and maintain emergency procedures, backup 

facilities, and a plan for disaster recovery that allow for the timely 

recovery and resumption of operations and the fulfillment of the 

responsibilities and obligations of the board of trade; and 

(C) periodically conduct tests to verify that backup resources 

are sufficient to ensure continued order processing and trade 

matching, price reporting, market surveillance, and maintenance of 

a comprehensive and accurate audit trail. 

The Exchange demonstrates its compliance with this Core Principle 

in Exhibit V. 

Core Principle 21 - Financial Resources: 

(A) In General.—The board of trade shall have adequate financial, 

operational, and managerial resources to discharge each 

responsibility of the board of trade. 

(B) Determination of Adequacy. —The financial resources of the 

board of trade shall be considered to be adequate if the value of the 

financial resources exceeds the total amount that would enable the 

contract market to cover the operating costs of the contract market 

for a 1-year period, as calculated on a rolling basis. 

The Exchange demonstrates its compliance with this Core Principle 

in Exhibit I. 

Core Principle 22 - Diversity Of Board of Directors: 

The board of trade, if a publicly traded company, shall endeavor to 

recruit individuals to serve on the board of directors and the other 

decision-making bodies (as determined by the Commission) of the 

board of trade from among, and to have the composition of the 

bodies reflect, a broad and culturally diverse pool of qualified 

candidates. 

Not Applicable. 
 DCM Exhibit L-1 

14 

CONTRACT MARKET CORE PRINCIPLES EXPLANATIONS AND REFERENCES TO RELEVANT 

QCEX DOCUMENTS, RULES AND AGREEMENTS 

Core Principle 23 - Securities and Exchange Commission: The board 

of trade shall keep any such records relating to swaps defined in 

section 1a(47)(A)(v) open to inspection and examination by the 

Securities and Exchange Commission. 

Not Applicable.