130 Grain Exchange Building 400 South 4th Street Minneapolis, MN 55415-1413 

lhopkins@mgex.com 800.827.4746 612.321.7143 Fax: 612.321.7196 equal opportunity employer

 

Via Portal Submission July 14, 2020 

 MGEX Submission No. 20-25 

Mr. Christopher Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street NW 

Washington, DC 20581 

RE: Rule Certification Submission Pursuant to Regulation 40.6(a); Updates to 

MGEX Rules 

Dear Mr. Kirkpatrick: 

Pursuant to Commodity Exchange Act (“CEAct”) Section 5c and Commodity Futures 

Trading Commission (“CFTC”) Regulation 40.6(a), the Minneapolis Grain Exchange, Inc. 

(“MGEX” or “Exchange”) hereby certifies that amendment of the attached MGEX Rules 

complies with the CEAct and the CFTC regulations promulgated thereunder. MGEX 

further certifies that the submission and pending changes to the MGEX Rules have been 

posted on the Exchange website at the following link: 

http://www.mgex.com/regulation.html. All capitalized terms used but not defined herein 

have the meanings assigned to them in the MGEX Rules. 

Overview of Amendments 

Pursuant to an agreement between the parties, MGEX will provide clearing services for 

derivative contracts traded on Bitnomial Exchange, LLC (“Bitnomial”). In preparation to 

begin clearing Bitnomial contracts, MGEX has made certain additions and amendments 

to Chapters 1, 21, and 23 of the MGEX Rules, as described herein. The additions to 

Chapter 1 of MGEX’s Rules include several new defined terms relating to Bitnomial and 

Digital Assets. Chapter 21 provides financial safeguards and sets forth the Exchange’s 

default waterfall and recovery tools, and MGEX amended these Rules to address how 

the Exchange would manage a default arising from a Clearing Member approved to clear 

Bitnomial contracts. More information on these changes is set forth below (see Feedback 

Considered). Finally, MGEX added new Chapter 23 to its Rules to cover all other aspects 

of clearing Bitnomial contracts, including setting forth requirements imposed on Clearing 

Members and market participants, stating relevant deadlines and reports, and describing 
 

delivery requirements and procedures. The primary goal of all the amendments is to 

enhance transparency and help maintain systemic stability. 

Feedback Considered 

In finalizing the amendments, the Exchange engaged with its regulators and Clearing 

Members and incorporated feedback received. MGEX publicly posted the proposed 

Rules on its website and invited Clearing Members to submit comments. As a result, 

multiple phone conversations occurred to discuss the Rules and written feedback was 

provided, giving MGEX valuable perspective on the amendments from the point of view 

of clearing firms. The Rules set forth in this submission are a product of much discussion 

and industry feedback. 

Upon evaluating opinions expressed from Clearing Members, MGEX made two additional 

changes to its Rules of particular note. First, while the Exchange had already proposed 

to create two separate tranches within its guaranty fund (default waterfall), additional 

changes were made to further attempt to isolate losses by contract to the extent possible 

based upon Clearing Member comments. MGEX believes the resulting Rules, which 

initially isolate security deposits contributed from Clearing Members based on Bitnomial 

and MGEX products separately, offer Clearing Members only clearing one product a 

degree of protection while maintaining a pre-funded pool of mutualized resources that 

would cover losses associated with an extreme, but plausible, market event. Second, 

MGEX made similar changes to its assessment Rule 2110.00. in response to Clearing 

Member feedback. As amended, MGEX would first assess only those Clearing Members 

in the tranche (whether MGEX or Bitnomial) experiencing a Loss before assessing all 

Clearing Members. 

DCO Core Principles 

The Exchange has reviewed the core principles for derivatives clearing organizations 

(“DCO Core Principles”) and has determined that the amendments comply with the 

requirements of such principles. During the review, MGEX identified the following DCO 

Core Principles as potentially being impacted: 

 DCO Core Principle C – Participant and Product Eligibility: Core Principle C 

requires a DCO to establish admission and continuing eligibility standards for its 

members. New Rule 23.2. clarifies and establishes requirements for Clearing 

Member eligibility as it relates to Members seeking approval to clear Bitnomial 

contracts in compliance with Core Principle C. 

 DCO Core Principle G – Default Rules and Procedures: The amendments to Rules 

2109.03., 2110.00., and 2119.00. address the actions the Exchange would take 

and allow following a Clearing Member default and thus augment MGEX’s default 

rules and procedures. These actions and tools were already in place, but the Rules 

have been amended to establish two separate tranches within the guaranty fund, 

thereby allowing MGEX to better isolate Clearing Members that only wish to clear 
 

MGEX or Bitnomial products. 

 DCO Core Principle H – Rule Enforcement: As codified in CFTC Regulation 39.17, 

Core Principle H requires a DCO to have the authority and ability to discipline the 

activities of a Clearing Member due to a violation by the Clearing Member of the 

DCO’s rules. New Chapter 23 includes Rules that explicitly allow MGEX to 

discipline and/or fine Clearing Members violating Rules. 

 DCO Core Principle L – Public Information: Core Principle L requires DCOs to 

provide market participants with sufficient information to enable them to identify 

and evaluate accurately the risks and costs associated with using the services of 

the DCO and to have clear, comprehensive rules and procedures. The 

amendments enhance transparency with respect to the procedures MGEX will 

follow in various circumstances and will be incorporated into MGEX’s publicly 

available Rulebook, thus further ensuring that the information available to the 

public is accurate, clear, and comprehensive. In addition, these Rules will allow 

Clearing Members to better measure the impact to them if a Loss occurs. 

 DCO Core Principle R – Legal Risk: Core Principle R requires DCOs to operate 

pursuant to a well-founded, transparent, and enforceable framework that describes 

the steps a DCO would take to address a default of a Clearing Member and other 

significant aspects of a DCO’s risk management procedures. As explained above, 

the amendments further address the actions the Exchange will take and allow 

following a default of a Clearing Member, thereby enhancing the overall 

transparency of MGEX’s legal framework. 

Pursuant to MGEX Bylaw 204.01., the MGEX Board of Directors unanimously approved 

the attached amendments to the MGEX Rules. There were no substantive opposing 

views expressed by the Board of Directors, nor is the Exchange aware of any substantive 

opposing views with respect to this filing. The attached amendments are to be effective 

when incorporated into MGEX’s Rules on its website, which will be at least 10 business 

days following the date of this submission. If there are any questions regarding this 

submission, please contact me at (612) 321-7143 or lhopkins@mgex.com. Thank you 

for your attention to this matter. 

 

Sincerely, 

 

Lindsay R. Hopkins 

Clearing House Counsel 

 
 

EXHIBIT A 

The following MGEX Rules are to be amended. Additions are underlined while 

deletions are marked through. 

 
 

CHAPTER 1 

DEFINITIONS 

BITNOMIAL EXCHANGE: Bitnomial Exchange, LLC, a Delaware limited liability company. 

BITNOMIAL EXCHANGE CONTRACTS: The Bitnomial Bitcoin Futures Contract, Bitnomial Deci 

Bitcoin Futures Contract, and Bitnomial Bitcoin Options Contract, each as described in Chapter 

12 of Bitnomial Exchange rules. 

DEPOSITORY: The Digital Asset delivery facility, system, or process authorized and operated by 

Bitnomial Exchange and associated with the trading of Bitnomial Exchange Contracts. The 

Depository is not licensed, approved, or registered with the CFTC. 

DIGITAL ASSET: Bitcoin and any other digital currency that is a “commodity” under the 

Commodity Exchange Act. For this purpose, “digital currency” means any digital representation 

of value or digital unit of account used as a medium of exchange and which are generally validated 

and logged through a network of computers on a distributed ledger. 

 
 

CHAPTER 21 

CLEARING HOUSE RULES 

2100.00. Scope of Chapter and Requirements For Clearing 

2100.01. Electronic Trading System Clearing 

2100.02. Clearing Privileges 

2100.03. Clearing Member Risk Management 

2101.00. Settlement Banks Available For Use 

2102.00. Acceptance Of Give-Up Trades 

2103.00. Order Of Delivery 

2104.00. Deadlines, Fees And Fines 

2104.01. Clearing Fee 

2105.00. Security Deposit 

2105.01. Funded Financial Resources 

2106.00. Margins 

2106.01. Protection Of Customer Funds 

2106.02. Proprietary Account Minimum Liquidation Period 

2106.03. Measures to Mitigate Procyclicality 

2107.00. Finality Of Settlement 

2108.00. Liquidity Event 

2108.01. Requirement To Establish Uncommitted Repurchase Agreement 

2109.00. Clearing Member Financial Emergency 

2109.01. Clearing Member Insolvency 

2109.02. Protection Of Clearing House: Default By A Clearing Member 

2109.03. Losses Borne By MGEX: Application of Funds 

2109.04. Management of Default And Subsequent Clearing Cycles 

2109.05. Collateral To Be Restored 

2110.00. Clearing Members: Assessments 

2110.01. Memberships: Assessments And Issuance 

2111.00. Voluntary Contributions 

2112.00. Haircut Settlement Cycles 

2113.00. Cooling Off Period And Multiple Defaults 

2114.00. Partial Tear-Ups 

2115.00. Termination of Contracts 

2116.00. Details of Implementation And Auctions 

2117.00. Use Of Customer Gross Margin Files 

2118.00. No Action; Limitation Of Liability 

2119.00. Recovery of Loss 

2120.00. Limited Recourse And Non-Petition 

2121.00. Close-Out Netting And Offset 

 
 

CHAPTER 21 

CLEARING HOUSE RULES 

2100.00. SCOPE OF CHAPTER AND REQUIREMENTS FOR CLEARING.

For purposes of these Chapter 21 Rules, unless specifically stated otherwise, all relevant 

requirements and procedures set forth by the Exchange herein will apply to all contracts cleared 

by the Clearing House, including those executed on a different designated contract market. 

All Futures or Options transactions shall be submitted to the Clearing House to be cleared. The 

Clearing House shall, through the process of novation, be substituted as, and assume the position 

of, seller to the buyer and buyer to the seller of the relevant number of Exchange or marketplace 

contracts upon the successful matching of trade data submitted to the Exchange by the Clearing 

Members on the long and short sides of a trade. Upon such substitution, each Clearing Member 

shall be deemed to have bought the contracts from or sold the contracts to the Clearing House, 

as the case may be, and the Clearing House shall have all the rights and be subject to all the 

liabilities of such Member with respect to such transaction. Transactions can only be offset against 

one another through position/trade reporting by a Clearing Member to the Clearing House. 

It shall be the duty of each Clearing Member initiating, accepting or executing a transaction for 

Futures or Options under MGEX Rules to submit each such transaction using “TEMS” to the 

Clearing House. Transactions shall be submitted at times determined by the Exchange (see Res. 

2101.00.C.). The transactions shall be in a format approved by the Exchange and shall contain, 

at a minimum, the following information: 

A. Date of transaction. 

B. Clearing Member code (two-digit alpha as assigned by the Exchange). 

C. Type of account or origin (Regular (R) or Segregated (S)). 

D. Customer type indicator (CTI) as defined below: 

CTI 1. Transactions initiated and executed by an individual 

member for his/her own account, for an account 

he/she controls, or for an account in which he/she 

has ownership or financial interest. 

CTI 2. Transactions executed for the proprietary account of 

a Clearing Member. 

CTI 3. Transactions where an individual member or 

nonmember executes for the personal account of 

another individual member, for an account the other 

member controls or for an account in which the other 

individual member has ownership or financial 

interest. 

CTI 4. Any transaction not meeting the definition of CTI 1, 

2 or 3. 
 

E. Quantity, commodity, contract month or expiration month, price or 

premium, whether the transaction involved a put or a call, strike 

price, buy or sell. 

F. Both the buying and selling Market Participant’s identifier (trader 

ID/Member mnemonic for electronic trades, Broker ID for open 

outcry trades) and the opposite Clearing Member's symbol. 

G. Transaction time to the minute. 

H. Indicators for the following types of transactions: (C) cash 

exchange; (T) office transfer*; (S) spread; (D) delivery; (E) exercise; 

(R) risk exchange. 

 *For office transfers, open and close information for the position 

(open (O), close (C)) must be submitted. 

I. Account number and identification. (For initial set-up and new 

accounts, provide a listing of account name, type, and position. 

This information will be available to the President and designated 

MGEX personnel only.) 

J. Any other information required by the Clearing House. 

The Clearing House shall match the trades as submitted and shall list for each Clearing Member 

its cleared trades and unmatched trades. A recapitulation statement shall be produced, showing 

updated contract positions and settling all matched trades to the official MGEX settling prices. 

After completion of the clearing process, the Exchange shall notify each Clearing Member as to 

the net pay or collect amounts due by account (Regular and/or Segregated). Such amounts shall 

be submitted by wire transfer of funds or other acceptable method. Amounts due to the Exchange 

shall be submitted at times determined by the Exchange (see Res. 2101.00.C.). All clearing 

statements shall be disseminated by the Exchange to each Clearing Member’s designated 

contact. 

If the report of a trade by a Market Participant does not correspond to the report of the other party 

to the trade, the Clearing House shall reject the trade and notify both Clearing Members showing 

the discrepancy of the reports. The Clearing Members must thereafter submit corrections to the 

Clearing House at times determined by the Exchange (see Res. 2101.00.C.). 

It shall be the primary responsibility of the Clearing Member to see that all trades are resolved. 

Each Clearing Member shall designate a person or persons to be available and responsible for 

reconciling the Clearing Member's unmatched trades. Failure to have a qualified representative 

available shall constitute negligence in the determination of responsibility for any unmatched 

trades. 

If a Clearing Member, or one of its Affiliated Entities, has access to the Federal Reserve discount 

window, it shall notify the Clearing House if such access has been suspended, revoked, removed, 

terminated, or otherwise limited in any way as soon as practicable. 

2109.03. LOSSES BORNE BY MGEX: APPLICATION OF FUNDS. 
 

The Exchange will establish and maintain one guaranty fund with two separate tranches that 

reflect relative contributions from different product classes to the guaranty fund. Each Clearing 

Member that is approved by MGEX to clear products traded on the Exchange (such products, the 

“MGEX Products”) must make a deposit as security for its obligations to the Clearing House in 

accordance with the requirements of Rule 2105.00. to the MGEX tranche of the guaranty fund 

(the “MGEX Tranche”). In addition, when required by MGEX, each Clearing Member that is 

approved by MGEX to clear products traded on Bitnomial Exchange (such products, the 

“Bitnomial Products”) must make a deposit as security for its obligations to the Clearing House in 

accordance with the requirements of Rule 2105.00. to the Bitnomial tranche of the guaranty fund 

(the “Bitnomial Tranche”). Such security deposits will be in an amount determined by the Clearing 

House. The Clearing House will give each Clearing Member a report setting forth such Clearing 

Member’s proportionate share in each tranche, as applicable. 

Should MGEX bear a loss resulting from the insolvency or Default of a Clearing Member, then 

such loss shall be met by applying the funds listed below. In addition and for the avoidance of 

doubt, Clearing Members are responsible for bearing any loss of funds or collateral associated 

with the failure or insolvency of a depository or settlement bank, and should a Clearing Member 

Default as a result of such bank failure or insolvency, MGEX will use the funds listed below. For 

the avoidance of doubt, any such default will be a default to the Clearing House regardless of 

product class. 

If the security deposits, margins, performance bonds, guarantees and other assets of a Defaulting 

Clearing Member are insufficient to satisfy all of its obligations to MGEX, including all claims 

against the Exchange by reason of its substitution for that Clearing Member pursuant to Rule 

701.00., the Exchange shall nonetheless pay all such claims, which shall be deemed a loss 

(hereinafter “Loss”) to it and which shall be a liability of the Defaulting Clearing Member to the 

Exchange, which the Exchange may collect from the assets of such Clearing Member available 

to it or by process of law. A Loss may also be an uncovered credit loss. The definition of a Loss 

includes, but is not limited to, any amounts associated with the liquidation, transfer, and other 

costs related to managing the Default of a Clearing Member. 

Following the insolvency or Default of a Clearing Member, if the collateral of the Defaulting 

Clearing Member is insufficient to satisfy the Loss associated with the default, the Clearing House 

will first attempt to isolate the Loss to the associated tranche, if applicable, as set forth below. 

However, in the event the Defaulted Clearing Member is approved to clear both MGEX Products 

and Bitnomial Products, the assets of both tranches will be accessible by the Clearing House, as 

detailed below. MGEX will use funds from the following sources, in the order of priority hereafter 

listed, with each source of funds to be completely exhausted, to the extent practical, before the 

next following source is applied. While such application of funds shall be mandatory, the detailed 

implementation of this Rule shall be the responsibility of the Exchange. 

If the Defaulted Clearing Member is only approved to clear MGEX Products:

A. Excess funds of the Defaulting Clearing Member, including any partial payment 

amounts, settlement funds, or variation gains. 

B. Security deposits of the Defaulting Clearing Member. 

C. Margins and performance bonds of the Defaulting Clearing Member on deposit 

with MGEX, payments made by a guarantor of the Defaulting Clearing Member, 

and any other assets of the Defaulting Clearing Member. 
 

D. Such assets of the MGEX Clearing House reserve fund. 

E. Security deposits of non-defaulting Clearing Members made to the MGEX Tranche 

shall be applied toward meeting a loss in direct proportion to the total security 

deposit requirement of each Clearing Member to the MGEX Tranche. 

F. Such surplus funds of the Exchange as may be in excess of funds necessary for 

normal business operations. No such surplus shall be assumed until approved by 

the Executive Committee or the Board. 

If the Defaulted Clearing Member is only approved to clear Bitnomial Products: 

A. Excess funds of the Defaulting Clearing Member, including any partial payment 

amounts, settlement funds, or variation pays. 

B. Security deposits of the Defaulting Clearing Member. 

C. Margins and performance bonds of the Defaulting Clearing Member on deposit 

with MGEX, payments made by a guarantor of the Defaulting Clearing Member, 

and any other assets of the Defaulting Clearing Member. 

D. Such assets of the Clearing House reserve fund approved by the Board. 

E. Security deposits of non-defaulting Clearing Members made to the Bitnomial 

Tranche shall be applied toward meeting a loss in direct proportion to the total 

security deposit requirement of each Clearing Member to the Bitnomial Tranche. 

Notwithstanding the prioritization of funds being applied in the order listed above, should the funds 

of one tranche be insufficient to cover a Loss, the funds in the remaining tranche will be available, 

in their entirety, to the Clearing House to satisfy the Loss. 

If the Defaulted Clearing Member is approved to clear both MGEX Products and Bitnomial 

Products: 

A. Excess funds of the Defaulting Clearing Member, including any partial payment 

amounts, settlement funds, or variation pays. 

B. Security deposits of the Defaulting Clearing Member. 

C. Margins and performance bonds of the Defaulting Clearing Member on deposit 

with MGEX, payments made by a guarantor of the Defaulting Clearing Member, 

and any other assets of the Defaulting Clearing Member. 

D. Such assets of the MGEX Clearing House reserve fund. 

E. Security deposits of non-defaulting Clearing Members shall be applied toward 

meeting a loss in direct proportion to the total security deposit requirement of each 

Clearing Member for each tranche. MGEX will first apply security deposits from 

each tranche to the loss calculated for the products within that tranche. Should the 

loss in one tranche exceed the security deposits available within the same tranche, 
 

MGEX will apply the remaining security deposits of any tranche to the remaining 

loss. 

F. Such surplus funds of the Exchange as may be in excess of funds necessary for 

normal business operations. No such surplus shall be assumed until approved by 

the Executive Committee or the Board. 

In the event that a Clearing Member Default necessitates the application of these funds, Clearing 

Members must immediately make good any deficiency in security deposits or margins and 

performance bonds pursuant to the requirements and deadlines set forth in MGEX Rule 2109.05.

The Exchange may borrow such funds or draw such funds as necessary against any line of credit 

at any time for such purposes under this Rule to cover any obligations or losses of the Exchange. 

Any borrowing of funds shall not relieve any Clearing Member from their obligations under this 

and other Rules or from the application of their security deposits. 

The Exchange may obtain and maintain any default insurance. Such insurance shall inure to and 

shall be for the sole benefit of the Exchange. Proceeds from any default insurance, and the right 

to any proceeds, shall be paid to and belong solely to the Exchange. 

If the security deposits, margins, performance bonds, guarantees and other assets of a Defaulting 

Clearing Member are insufficient to satisfy all of its obligations to MGEX, including all claims 

against the Exchange by reason of its substitution for that Clearing Member pursuant to Rule 

701.00., the Exchange shall nonetheless pay all such claims, which shall be deemed a loss 

(hereinafter “Loss”) to it and which shall be a liability of the Defaulting Clearing Member to the 

Exchange, which the Exchange may collect from the assets of such Clearing Member available 

to it or by process of law. A Loss may also be an uncovered credit loss. The definition of a Loss 

includes, but is not limited to, any amounts associated with the liquidation, transfer, and other 

costs related to managing the Default of a Clearing Member. 

2109.04. MANAGEMENT OF DEFAULT AND SUBSEQUENT CLEARING CYCLES. 

As of the clearing cycle in which a default occurs, the Clearing House shall aggregate the following 

assets: any partial payment amounts, settlement funds, variation pays, any excess security 

deposits, any excess margins and performance bond from the prior clearing cycle, and any other 

available assets of the insolvent or Defaulted Clearing Member. Such assets shall be allocated 

first to any net settlement variation payment obligation of the Defaulting Clearing Member to the 

Clearing House. If the funds are not sufficient to satisfy the Clearing Member’s settlement 

variation payment obligations for the default cycle, then the Clearing House shall apply the funds 

to such Clearing House obligations, pro rata relative to the size of such Clearing House 

obligations. If the Clearing House is unable to satisfy a settlement variation payment obligation 

from such assets, the deficiency shall be a Loss that the Clearing House shall satisfy pursuant to 

the procedures set forth in this Chapter 21. Any excess margin, if applicable, and variation pays 

to the Defaulting Clearing Member during subsequent clearing cycles shall be added to the 

available funds, and the Clearing House shall apply such collateral to the Defaulting Clearing 

Member’s payment obligations. For the avoidance of doubt, the Clearing House shall not use 

customer funds and margins to satisfy a payment obligation to the Clearing House in respect of 

the Defaulting Clearing Member’s proprietary account. 
 

2110.00. CLEARING MEMBERS: ASSESSMENTS.

Losses (as defined in Rule 2109.03.) shall first be satisfied by applying the funds in the order of 

priority listed in Rule 2109.03. The balance of any Losses remaining, in any tranche, after the 

application of such funds shall be assessed against all Clearing Members (excluding any 

Insolvent or Defaulting Clearing Members) in direct proportion to the Clearing Members’ total 

security deposit requirement for that tranche. Should the Loss in one tranche exceed the 

assessments to Clearing Members in the tranche producing the Loss, the remaining Loss will be 

assessed to Clearing Members from any remaining tranche. Each Clearing Member (excluding 

any Insolvent or Defaulting Clearing Member) shall be subject to an assessment in direct 

proportion to the Clearing Members’ total security deposit requirementof up to an amount that 

does not exceed (i) a total of three (3) times such Clearing Member’s total security deposit 

requirement at the time of the default with respect to Losses that are attributed to the default of a 

single Clearing Member and (ii) a total of six (6) times such Clearing Member’s total security 

deposit requirement at the time of the default with respect to Losses that are attributed to the 

default of multiple Clearing Members during a Cooling Off Period (as defined in Rule 2113.00.

below). Non-defaulting Clearing Members shall take no actions, including but not limited to, 

attempting to obtain a court order that would interfere with the ability of the Clearing House to 

collect and apply such assessments. 

 

Each Clearing Member shall pay any assessment made pursuant to this Rule by wire or other 

method acceptable to MGEX within two (2) hours of the notice of the assessment being delivered 

to Clearing Members. If a Clearing Member pays such assessment by wire and the wire transfer 

service is not open or operational at the time notice is sent, payment is due within one (1) hour 

on the next business day that the wire transfer service is open and operational. Any Clearing 

Member that does not satisfy an assessment shall be in default, and any Loss that occurs as a 

result of such default shall itself be assessed by MGEX to non-defaulting Clearing Members. In 

the event that the amount of assessments received exceeds the amount of the Loss, the Clearing 

House will return such excess funds as soon as practicable. 

If a Clearing Member has made payments of all assessed amounts and has replenished any 

deficiency in its security deposits or margin and performance bonds in accordance with Rule 

2109.05., it may withdraw from Membership by giving written notice to and receiving approval 

from the Exchange. 

2112.00. HAIRCUT SETTLEMENT CYCLES. 

If one or more Clearing Members Default and the assets available to cover the default, including 

the funds described in the preceding Rules, are insufficient to satisfy the Loss (as defined in Rule 

2109.03.) and obligations of the Clearing House as a result of such default, then the Board of 

Directors may approve of and direct the Clearing House to modify settlement cycles in accordance 

with this Rule and CFTC regulations. 

Following Board approval, the Clearing House shall issue a notice and conduct a settlement cycle 

for all MGEX contracts to determine settlement prices for allsuch contracts and the net portfolio 

gain or loss for each house and customer portfolio: 

A. The net portfolio gain of a Clearing Member (a “collect”), or the net portfolio loss of 

a Clearing Member to the Clearing House (a “pay”), shall be determined separately 

for (i) its proprietary positions in MGEX contracts cleared by the Exchange (a 
 

“Proprietary Collect” or a “Proprietary Pay”), and (ii) the net positions of its 

customers in MGEX contracts cleared by the Exchange (collectively, a “Customer 

Collect” or a “Customer Pay”). 

B. The Clearing House shall determine and calculate the sum of (i) the amount of 

each non-defaulted Clearing Member’s remaining payment obligations, if any, with 

respect to assessments levied by MGEX; (ii) any other remaining available funds 

or collateral; (iii) all Proprietary Pays to be received by MGEX; and (iv) all Customer 

Pays to be received by MGEX, and deduct the amount of any uncovered Loss (the 

resulting amount, the “Aggregate Available Funds”). 

C. The Clearing House shall then notify each Clearing Member of the amount of its 

remaining assessments (if any), Proprietary Pay, and Customer Pay, and each 

Clearing Member shall pay all such amounts no later than the time required for the 

relevant settlement cycle. If a Clearing Member does not make such payment to 

the Clearing House, such Clearing Member will be in default and the Exchange 

may take any of the actions specified elsewhere in the MGEX Rules with respect 

to such Clearing Member and its customers. 

D. If the amount of Aggregate Available Funds received by the Clearing House 

exceeds the sum of all Proprietary Collects and Customer Collects, the Clearing 

House shall calculate reimbursements of, and distribute, the excess funds to 

Clearing Members in the reverse order funds were previously paid to the 

Exchange, provided the Loss (as defined in Rule 2109.03.) has been fully 

addressed. Such reimbursements will be distributed pro rata to Clearing Members. 

The Clearing House may also determine a maximum amount to pay back for 

closed positions that may be included in the aggregate collects, based upon 

existing facts and circumstances that it deems appropriate to mitigate further 

disruptions to the markets. 

E. If the sum of all Proprietary Collects and Customer Collects exceeds the amount 

of Aggregate Available Funds received, including any voluntary contributions 

received, then the following procedures will apply: 

1. The Clearing House shall haircut the amount of each Proprietary Collect 

and Customer Collect on a pro rata basis for the current, and each 

successive, settlement cycle for the next two (2) Business Days, unless a 

Bankruptcy Event (as defined in Rule 2121.00.) has occurred, to equal the 

amount of Aggregate Available Funds received relative to the Proprietary 

Collect and Customer Collect (such process, a “Variation Margin Gains 

Haircut”). The Clearing House will haircut Customer Collects at the 

customer account level of each Clearing Member, and each Clearing 

Member will allocate such haircut pro rata among its customers with net 

portfolio gains for the relevant settlement cycle. 

2. After considering the existing facts and circumstances and the interests of 

MGEX’s Clearing Members and customers, the Risk Management 

Committee, in consultation with MGEX’s Risk Team, may instruct the 

Clearing House to extend or reduce the number of days during which 

Variation Margin Gains Haircuts are applied by one or two Business Days. 
 

In no event may the Clearing House conduct Variation Margin Gains 

Haircuts for longer than five (5) Business Days. 

3. Absent a Bankruptcy Event, for each settlement cycle conducted in 

accordance with these procedures, the Clearing House shall pay the 

haircutted Proprietary Collects and Customer Collects as soon as 

practicable after receipt of the Aggregate Available Funds. 

4. If a Bankruptcy Event occurs following a Clearing Member Default on a day 

during which Variation Margin Gains Haircuts are applied to settlement 

cycles, then on such day, the Clearing House will conduct a final settlement 

cycle which will also be subject to a Variation Margin Gains Haircut. The 

price determined in accordance with such settlement cycle will be used as 

the price for close-out netting in MGEX Rule 2121.00. 

2115.00. TERMINATION OF CONTRACTS.

In the event that the Board of Directors mandates a full tear-up of contracts or if, after taking any 

or all of the measures allowed in this Chapter to address a Clearing Member Default or Insolvency, 

the Clearing House determines that it still will not be able to satisfy all Losses (as defined in Rule 

2109.03.) or cover a settlement variation payment obligation when due (without expectation of 

accessing funds that would permit it to cover such payment obligation), then the Clearing House 

will terminate all contracts in accordance with these procedures. As soon as reasonably 

practicable and in a manner consistent with the Commodity Exchange Act and the regulations 

adopted thereunder (including, without limitation Part 190 of the Regulations, if applicable), the 

Exchange will fix a U.S. dollar amount to be paid to or received from the Clearing House in respect 

of all contracts to be terminated by conducting a haircut settlement cycle (as described in Rule 

2112.00.) to determine a final settlement price for all open contracts. 

Upon the completion of payments, all MGEX contracts shall be extinguished, and the Clearing 

House shall have no further access to funds or collateral with respect to such contracts or clearing 

activity of a non-Defaulting Clearing Member. Clearing Members, their affiliates, and their 

customers shall have no claim against the Exchange with respect to losses suffered as a result 

of the application of MGEX Rules, nor shall any beneficial holder of an MGEX contract have any 

claim against its non-defaulting Clearing Member. 

2119.00. RECOVERY OF LOSS.

If the Exchange later recovers any amounts accessed or contributed to cover a Loss (as defined 

in Rule 2109.03.), the net amount of such recovery shall be credited to non-defaulted Clearing 

Members (whether or not they are Clearing Members at the time of recovery) and Market 

Participants, as applicable, in the following order on a pro rata basis based on: (i) the amount of 

such Clearing Members and Market Participants’ voluntary contributions made pursuant to Rule 

2111.00.; (ii) the amount of such Clearing Members’ (and their customers’ if applicable) aggregate 

Variation Margin Gains Haircuts made pursuant to Rule 2112.00.; (iii) the amount of such Clearing 

Members’ assessments utilized by the Exchange pursuant to Rule 2110.00.; and (iv) the amount 

of such Clearing Members’ security deposits utilized by the Exchange pursuant to Rule 2109.03.

(in the reverse order accessed and if necessary, on a pro rata basis). 
 

Any remaining amount remaining after making the above reimbursements may be utilized first to 

repay any line of credit funds previously accessed. Any other remaining funds will be credited to 

the Exchange for the amount of the MGEX Clearing House reserve fund utilized with respect to 

the default. 

2120.00. LIMITED RECOURSE AND NON-PETITION.

If a Bankruptcy Event occurs (as defined in Rule 2121.00.), Clearing Members and Market 

Participants will have no recourse to any other funds or any other entity, including without 

limitation the Exchange and its Clearing House or any of its directors, officers, or employees. 

Notwithstanding the foregoing, Clearing Members, for both their proprietary positions and their 

customers’ positions, and non-defaulted customers of Defaulted Clearing Members may have a 

claim on any recovery from the Defaulted Clearing Member in the amount of the aggregate 

Variation Margin Gains Haircuts applied to such positions. If recovery from the Defaulted Clearing 

Member is less than the aggregate Variation Margin Gains Haircuts applied, non-defaulted 

Clearing Members and their customers and the non-defaulted customers of the Defaulted 

Clearing Member will share pro rata in any recovery. 

No Clearing Member and no customer of a Clearing Member shall institute against, or join any 

other person in instituting against, the Exchange any bankruptcy, reorganization, arrangement, 

insolvency, moratorium, liquidation or examinership proceedings, or other similar proceedings 

under U.S. federal or state bankruptcy laws or other applicable law arising out of any claimed 

default by the Clearing House on an MGEX contract as a result of the termination of such contract 

and related payments in accordance with these Rules. 

 
 

CHAPTER 23 

BITNOMIAL EXCHANGE CLEARING RULES 

23.1. Scope of Chapter and Priority of Rules 

23.2. Clearing Members 

23.2.1. Market Participant Access 

23.3. Market Participants 

23.4. Clearing Fees 

23.5. Clearing House Procedures 

23.6. Futures – Final Settlement 

23.7. Daily Settlements 

23.8.1. Options – Last Trading Day and Expiration 

23.8.2. Options – Automatic Exercise 

23.9. Deadlines and Summary Fines 

23.10. Disciplinary Actions 

23.11. Transfer Trades and Offsets 

23.12.1. Delivery of Underlying Digital Asset – Clearing Member & Market Participant Duties 

23.12.2. Accounts Eligible for Delivery 

23.12.3. Deliverable Instruments 

23.12.4. Delivery Procedures and Reporting 

23.13. Management of Default and Losses 

23.14. Force Majeure 

23.15. Physical Emergencies 

23.16. Limitation of Liability 

 
 

23.1. SCOPE OF CHAPTER AND PRIORITY OF RULES. 

This chapter governs procedures related to the clearing, settlement, delivery, and guarantee of 

trades executed on Bitnomial Exchange. Specifically, MGEX provides clearing services for 

Bitnomial Exchange Contracts. 

If not specifically covered herein, the Rules of the Exchange, and Chapter 21 in particular, shall 

govern. For purposes of this Chapter, all requirements, conditions, or procedures of the Exchange 

and the Clearing House will apply specifically to Bitnomial Exchange Contracts. 

To the extent that the provisions of this Chapter conflict with any other MGEX Rules, this Chapter 

supersedes such Rules. MGEX Rules pertaining to the clearing of Bitnomial Exchange Contracts 

shall have precedence over the rules of Bitnomial Exchange unless expressly and specifically 

stated otherwise. 

23.2. CLEARING MEMBERS. 

This Chapter applies to Clearing Members approved by the Exchange to submit Bitnomial 

Exchange Contracts to the Clearing House for clearing. Clearing privileges may be granted and 

retained only if a clearing firm is a Clearing Member of the Exchange and when the terms and 

conditions set forth in Rule 2100.02. have been met. The Clearing House has no obligation to 

accept Bitnomial Exchange Contracts for clearing unless the Clearing Member complies with all 

MGEX requirements for becoming a Clearing Member of the Exchange and remains in Good 

Standing, including those requirements set forth in this Chapter. Clearing Members must have 

the ability to comply with the requirements set forth by Bitnomial Exchange, and both MGEX and 

Bitnomial Exchange must grant approval of Clearing Members allowed to clear contracts traded 

on Bitnomial Exchange. For the avoidance of doubt, Clearing Members will not, under any 

circumstances, be required to own, hold, or control Digital Assets under these Rules or Bitnomial 

Exchange rules (unless the Clearing Member holds positions requiring delivery in its own 

proprietary account), but Clearing Members are responsible for ensuring their customers are able 

to satisfy or satisfy their obligations regarding delivery and acceptance thereof under the 

applicable MGEX and Bitnomial Rules. 

A Clearing Member guarantees and assumes financial responsibility for all orders it places and 

receives, and all contracts it clears and delivers. 

23.2.1. MARKET PARTICIPANT ACCESS.

After a Clearing Member grants a Market Participant access to trade or use Bitnomial Exchange 

systems, such Clearing Member will be fully responsible for the actions and transactions of any 

and all users that are provided access to the Bitnomial Exchange match engine by such Market 

Participant or any other user approved by the Market Participant. Clearing Members acknowledge 

that an approved Market Participant will have the ability to designate its own users directly with 

Bitnomial Exchange without receiving separate Clearing Member approval. For the avoidance of 

doubt, Clearing Members guarantee and assume financial responsibility for all transactions 

placed and executed on Bitnomial Exchange by a Market Participant approved by the Clearing 

Member and all additional users authorized directly or indirectly by a Market Participant, including 

unknown users. 

23.3. MARKET PARTICIPANTS. 
 

All participants approved to trade on Bitnomial Exchange must establish an account with an 

Exchange Clearing Member (or be properly authorized by a Clearing Member approved 

participant), and if involved with delivery, must satisfy the delivery prerequisites set forth by 

Bitnomial Exchange Rule 1102(b). Market Participants seeking to make or take delivery must 

meet the requirements set forth by Bitnomial Exchange and applicable MGEX Rules. Bitnomial 

Exchange and MGEX must grant approval to any Market Participant prior to participating in the 

delivery process of a Futures Contract traded on Bitnomial Exchange. 

23.4. CLEARING FEES. 

Clearing fees for Bitnomial Exchange Contracts, and the manner of payment thereof, shall be 

determined by the Clearing House. 

23.5. CLEARING HOUSE PROCEDURES. 

The Clearing House may immediately adopt, modify, or cancel procedures, including but not 

limited to, reporting, submission times, the deadlines set forth in Rule 23.9., settlement process, 

settlement times, margin and variation payments means and methods, give up procedures, 

confirmations, closing, product listing procedures and coding, and recordkeeping. The Exchange 

may incorporate into its Rules, as appropriate, such clearing procedures, including those noted 

above determined necessary for effective clearing. 

23.6. FUTURES – FINAL SETTLEMENT. 

Bitnomial Exchange Futures positions open as of the contract’s close of business on the last 

trading day will be settled in accordance with Bitnomial Exchange’s settlement procedures. 

23.7. DAILY SETTLEMENTS. 

Bitnomial Exchange is solely responsible for determining and providing daily settlement values 

and data for all Bitnomial Exchange Contracts to the Clearing House and is responsible for the 

accuracy of such final settlement values and data. The Exchange shall not be liable for the 

settlement prices received for such contracts. 

23.8.1. OPTIONS – LAST TRADING DAY AND EXPIRATION. 

The last trading day will be the Friday that precedes by at least two (2) Business Days, the last 

Business Day of the month preceding the option month. If such Friday is not a Business Day, the 

last trading day shall be the preceding Business Day. 

The contractual rights and obligations arising from the option contract expire on the last day of 

trading.

23.8.2. OPTIONS – AUTOMATIC EXERCISE. 

The Exchange will automatically exercise all in-the-money options unless notice to cancel 

automatic exercise is given to the Clearing House. Such options will be exercised into Futures 

Contracts and settled as part of the Futures process. 

Notice to cancel automatic exercise shall be given to the Clearing House in accordance with the 

deadline set forth below on the last day of trading except that such notice must be given to the 
 

Clearing House prior to 4:30 p.m. Central Time on the expiration date: 

A. to correct errors or mistakes made in good faith; 

B. to take appropriate action as the result of unreconciled MGEX Option 

transactions; 

C. in exceptional cases involving a customer’s inability to communicate to the 

Clearing Member exercise instructions or the Clearing Member’s inability 

to receive such instructions prior to such time as determined by the 

Exchange on the last day of trading. 

23.9. DEADLINES AND SUMMARY FINES.

The schedule of deadlines is subject to change at any time by the Exchange. The Exchange has 

adopted the following schedule of reporting deadlines (all times shall conform to Central Time): 

7:30 a.m. Position reports 

9:00 a.m. Settlement and margin payment 

11:00 a.m. Trading directive for same day collateral pledges*

Trading directive for same day collateral pledge release*

11:15 a.m. Weekly account position updates 

11:30 a.m. Intraday variation payment 

4:10 p.m. Unmatched trade adjustments 

4:15 p.m. Last submission of trades 

 Give-up execution 

4:20 p.m. Give-up acceptance 

4:30 p.m. Auto-Exercise Cancellation Notices 

Options position reports on expiration day 

5:10 p.m. Bitnomial delivery files 

7:30 p.m. Customer gross margin files 

*Submitting a Trading directive to the Exchange does not guarantee same day transfers of 

a security. MGEX is not responsible for delays caused by the inaccuracy or untimely 

submission of information by a Clearing Member required to facilitate the transfer of 

securities to or from MGEX’s safekeeping accounts. 

Any unresolved unmatched trades may be suspended pending possible resolution the following 

Business Day as an "as of" trade. "As of" trades can be carried no longer than one Business Day. 

All give up trades properly entered by the executing Clearing Member by four fifteen o’clock (4:15) 

p.m. must be accepted by the carrying Clearing Member by four twenty o’clock (4:20) p.m. 
 

In addition to the deadlines set forth above, the Exchange has adopted delivery specific deadlines 

(see Rule 23.12.4.). 

Any deadline or submission listed herein that is missed, late, inaccurate or incomplete, may result 

in a summary fine or other disciplinary action, including but not limited to, the matter being referred 

to the Disciplinary Committee as determined by the Exchange. 

Trading session submissions must be submitted accurately and in accordance with the deadlines 

set forth in this Rule. All submissions received after the respective deadlines are subject to a 

warning letter or fine. The schedule is as follows: 

 1st Offense: Warning Letter 

 2nd Offense: $1,000 fine 

 3rd Offense: $2,500 fine 

 4th Offense: $5,000 fine 

The 5th offense and every subsequent offense will be referred to the Disciplinary Committee. 

Offenses and fines shall be based upon events occurring within a rolling twelve (12) month period. 

The Exchange may determine whether a warning letter or a fine is warranted based on the facts 

and circumstances, and may take further disciplinary action, increase the fine amount, or present 

the matter to the Disciplinary Committee. 

In the event a fine is imposed, the Exchange will issue a notice of the offense and fine amount to 

the offending party. Any fines must be paid within thirty (30) days of issuance unless otherwise 

stated by the Exchange. 

23.10. DISCIPLINARY ACTIONS. 

Notwithstanding any provision of the rules of Bitnomial Exchange, all Clearing Members are 

subject to the jurisdiction of the Exchange. In the event a Clearing Member violates the 

requirements of any rule, report, submission, deadline, or other obligation, the Exchange may 

impose a fine on the Clearing Member or take other disciplinary action including, but not limited 

to, referring the matter to the Disciplinary Committee. In addition, a Clearing Member that violates 

or is alleged to have violated any delivery requirement or deadline herein will be subject to the 

disciplinary procedures set forth in Chapter 12. 

23.11. TRANSFER TRADES AND OFFSETS. 

Transfer trades involving contracts or positions traded on Bitnomial Exchange will be governed in 

accordance with the rules of Bitnomial Exchange. All transfers in physically delivered Futures 

Contracts must be recorded and carried on the books of the receiving Clearing Member at the 

original trade dates. All other contracts may be recorded and carried at either the original trade 

date or the transfer date. 

“Transfer” trades involving the transfer of a customer’s positions and related collateral from an 

account on the books of one Clearing Member to another Clearing Member shall not require the 

close-out and re-booking of the positions prior to the requested transfer; PROVIDED, the 

following conditions are met: (1) The customer instructed the carrying Clearing Member to make 

the transfer, and (2) the receiving Clearing Member has consented to the transfer. 
 

MGEX Rules 718.01. and 718.02. shall govern transfer trades and offsets and the associated 

reporting requirements. 

23.12.1. DELIVERY OF UNDERLYING DIGITAL ASSET – CLEARING MEMBER & MARKET 

PARTICIPANT DUTIES. 

Any Clearing Member carrying an account of a Market Participant that is required to make or take 

delivery agrees to guarantee and assume full responsibility that its customers, as Market 

Participants, will comply with all delivery obligations set forth in MGEX and Bitnomial Exchange 

Rules including Rules requiring that Digital Assets be delivered by Market Participants during the 

Delivery Period in accordance with the Bitnomial Exchange delivery rules. For purposes of these 

Rules, the “Delivery Period” means the period beginning two Business Days before the last 

trading day and ending on the delivery day. Clearing Members must file all required forms and 

reports by the deadlines established by MGEX, including but not limited to final open positions 

and delivery reports. 

Clearing Members are responsible for ensuring that their customers, as Market Participants, that 

have an obligation or desire to make delivery have the operational ability to, and ultimately satisfy, 

their full delivery obligation and that such customers have made deliverable Digital Assets 

available to deliver with the Depository by 9:30 a.m. on the last trading day in accordance with all 

applicable Rules. Should a customer fail to deliver Digital Assets in accordance with applicable 

requirements and the Clearing Member of such customer financially satisfies such obligation, the 

opposite customer who failed to receive the Digital Assets may still file an arbitration claim against 

the non-performing customer in accordance with Bitnomial Exchange Rules. 

In the event a Clearing Member fails to perform its delivery obligations to the Clearing House, 

MGEX may deem such failure a default pursuant to this Rule and take any of the actions against 

the Clearing Member authorized in this or other MGEX Rules. For the avoidance of doubt, 

Clearing Members will not, under any circumstances, be required to own, hold, or control Digital 

Assets under these Rules or Bitnomial Exchange rules (unless the Clearing Member holds 

positions requiring delivery in its own proprietary account), but Clearing Members are responsible 

for ensuring their customers, as Market Participants, are able to satisfy or satisfy their obligations 

regarding delivery and acceptance thereof under the applicable MGEX and Bitnomial Rules. 

In a Clearing Member default that involves a delivery failure, the Clearing House will ensure the 

financial performance to the Clearing Member whose actions or omissions did not cause or 

contribute to the delivery failure (the “Affected Clearing Member”). The Clearing House powers 

will include, but are not limited to, the right to sell or liquidate the Digital Asset subject to delivery 

and to distribute the proceeds as appropriate and access the funds and collateral available in a 

default in accordance with Rule 2109.03. For purposes of this Rule, “financial performance” 

means payment of commercially reasonable costs of the Affected Clearing Member related to 

replacing the failed delivery but does not include physical performance or legal fees. For the 

avoidance of doubt, payment of reasonable costs will be based on the price of the Digital Asset 

when delivery should have been made, and the Clearing House is not obligated to make or accept 

delivery of the actual Digital Asset. 

An Affected Clearing Member seeking financial performance must provide prompt notice to the 

Clearing House and to Bitnomial Exchange of the delivery failure and a good faith estimate of any 

financial performance being sought within one (1) hour of the delivery deadline set forth in Rule 

23.12.4. for the product. This deadline may be extended by the Exchange for extenuating 

circumstances in its sole discretion. An Affected Clearing Member seeking financial performance 
 

must provide the Clearing House with a detailed statement with supporting documentation of the 

amount sought, as well as any other documentation requested by the Clearing House. 

MGEX shall not, under any circumstances, be responsible or liable for any losses, damages, or 

other costs arising out of a failure, malfunction, error, omission, delay, suspension, inaccuracy, or 

other event related in any way to the storing, transfer, delivery transfer, or movement of Digital 

Assets in association with Bitnomial Exchange Contracts. 

23.12.2. ACCOUNTS ELIGIBLE FOR DELIVERY.

Only accounts approved for delivery shall be eligible for delivery and allowed to maintain open 

positions during the delivery month of an expiring Bitnomial Exchange Contract. 

Any positions held in an account not approved for delivery must be liquidated by the first business 

day of the delivery month by an MGEX Clearing Member. The Clearing House or Bitnomial 

Exchange will not be liable for any loss associated with such liquidation. In addition, a Clearing 

Member that is carrying any position not held in an account approved for delivery at any time 

during the delivery month will be subject to Exchange disciplinary action, including, but not limited 

to, fines or referring the matter to the Disciplinary Committee. 

23.12.3. DELIVERABLE INSTRUMENTS.

To qualify as a Digital Asset eligible for contract delivery, the Digital Asset must meet the 

requirements of Bitnomial Exchange Rule 1103(c) and product descriptions. 

23.12.4. DELIVERY PROCEDURES AND REPORTING. 

Unless stated otherwise, the Clearing House will electronically issue notices and reports to 

relevant Clearing Members. 

Delivery of a Bitnomial Exchange Contract is based upon open positions after contract expiration. 

The delivery process, as set forth below, consists of the following requirements and deadlines (all 

references to days are Business Days and times are noted in Central time): 

T-5 5 Days Prior to 

Last Trading Day 

All end of day positions (long and short) must 

be margined at full notional value in USD with 

the MGEX Clearing House. 

5:10 p.m. Clearing Members file Bitnomial delivery files 

and all other requested information at the end 

of each day with the Clearing House. 

T-2 2 Days Prior to 

Last Trading Day 

(start of Delivery 

Period) 

5:00 p.m. Depository opens to delivering Market 

Participants. 

T Last Trading Day 

of Contract 

9:30 a.m. Clearing Members are responsible for ensuring 

all Market Participants making delivery deliver 

underlying asset through Depository. 
 

5:10 p.m. Clearing Members file Bitnomial delivery files 

with the Clearing House, which will serve as a 

binding Delivery Notice to MGEX. 

8:45 p.m. Clearing House issues final Delivery Report 

and corresponding payment information. 

T+1 Delivery Day 11:30 a.m. All payments for delivery are due to the 

delivering Clearing Member. 

12:30 p.m. Clearing Member notification to Bitnomial 

Exchange and Clearing House regarding 

receipt of final payment is due. 

By 7:00 

p.m. 

Delivery process and movement of 

corresponding Digital Assets is completed. 

T+2 Release of Margin By 9:00 

a.m. 

Provided that notification of delivery has been 

received by the applicable Delivery Day 

deadlines, MGEX will release margins. 

Any discrepancies or material reporting errors may result in MGEX disciplinary action. 

23.13. MANAGEMENT OF DEFAULT AND LOSSES. 

Should MGEX bear a Loss resulting from the Default of a Clearing Member or from the failure or 

insolvency of a settlement or depository bank that precipitates a Clearing Member Default, the 

procedures set forth in Chapter 21 of the Exchange Rules shall govern. 

23.14. FORCE MAJEURE 

Notwithstanding any other Rule or provision, the Exchange and Clearing House will not be 

obligated to perform its obligations under the Rules, or to compensate any Clearing Member for 

losses occasioned by any delay or failure of performance, to the extent such delay or failure is 

the result of a condition or event constituting Force Majeure, including but not limited to acts of 

God, fire or other natural disasters, acts of terrorism, war, or severely inclement weather. In such 

event, the Exchange will give notice to affected Clearing Members as soon as reasonably 

practicable and will attempt to remediate the condition. 

23.15. PHYSICAL EMERGENCIES. 

If the Bitnomial Exchange trading platform, the Depository, or the Clearing House experience a 

full or partial disruption or breakdown in any area, the Exchange may, without prior notice, 

immediately modify or suspend clearing operations and procedures involving Bitnomial Exchange 

Contracts until the problem has been resolved. 

23.16. LIMITATION OF LIABILITY. 
 

Neither the Exchange, the Board of Directors, its committees, nor any of its officers, directors, or 

employees, shall be liable for any losses, damages, or costs, including direct, indirect, special, 

incidental or consequential damages, and lost profits, regardless of whether any of them had been 

advised or otherwise made aware of the possibility of such damages, arising out of the services 

provided by the Exchange as it pertains to the clearing of Bitnomial Exchange Contracts or as it 

pertains to the use or performance of the Bitnomial Exchange platform or Depository or any 

component(s) thereof; any fault, failure, malfunction, or other alleged defect in any such contract 

or platform; or any error, omission, delay, suspension, or inaccuracy made by Bitnomial 

Exchange. The Exchange shall not be liable for any damages or losses caused in whole or in part 

by the malfunction, unexpected function, or unintended function of the Depository or any attacks 

or cybersecurity breach, fraud or other illegal activity directed at the Depository. The Clearing 

House shall not be liable for any connectivity or communication fault, delay, or breakdown, 

including but not limited to, any failure to delay in transmission, disruption of common carrier lines, 

loss of power, acts or failures to act of any third party, natural disasters, or any and all other 

causes. The Exchange does not guarantee continuous, uninterrupted, or secure access to the 

Clearing House. 

Each Market Participant assumes all risks of trading on the Bitnomial Exchange platform and use 

of the Depository and waives any right to assert any claim against the Exchange that access or 

information was not provided by the Exchange or that access or information provided by the 

Exchange was improper, inaccurate, or inadequate. Further, such Market Participant will not use 

the Exchange to contest the validity or enforceability of any trade executed on the Bitnomial 

Exchange platform. 

Neither the Exchange, the Board of Directors, its committees, nor any of its officers, directors, or 

employees make any express or implied warranties or representations relating to the Bitnomial 

Exchange platform, including but not limited to, warranties of merchantability and warranties of 

fitness for a particular purpose or use. 

Notwithstanding any other provision of the Exchange Rules, in no event will any Person bring any 

legal action, regardless of whether liability is based on breach of contract, tort, restitution, breach 

of statutory duty, breach of warranty or otherwise, and regardless of whether the claim is brought 

directly or as a third-party claim for indirect, special, incidental, consequential, or punitive 

damages of any kind, however suffered or incurred, and regardless of whether the party from 

whom such damages would be sought has been advised of the possibility of such damages or 

whether such damages otherwise could have been foreseen or prevented.