Via Portal Submission February 10, 2023

 MGEX Submission No. 23-4

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); Amendments 

to MGEX Rules Chapter 21

Dear Mr. Kirkpatrick:

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

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

(“MGEX” or “Exchange”) hereby submits this self-certification of amendments to MGEX 

Rules 2109.5., 2110.00., and 2113.00. related to Clearing Member security deposit

replenishments and assessments (the “Amendments”). The Exchange intends to 

implement the amendments ten business days following the filing of this submission. All 

capitalized terms used but not defined herein have the meaning assigned to them in the 

MGEX Rules.

Overview of Amendments

Chapter 21 of MGEX’s Rules provide financial safeguards and describe the assessment 

authority of the Exchange. MGEX is proposing the following Rule amendments to better 

clarify non-defaulting Clearing Member’s security deposit replenishment obligations in the 

event of a default of one or more Clearing Members and to slightly lower total potential 

assessments. Overall, the purpose of these amendments is to provide Clearing Members 

Rules and assurances that a non-defaulting Clearing Member’s potential assessment and 

security deposit replenishment exposure is capped during a default event. These 

amendments also lower the maximum assessment amounts that non-defaulting Clearing 

Members are subject to during a single or multiple default event. 
MINNEAPOLIS GRAIN EXCHANGE, LLC

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

612-321-7101

mgex.com

Feedback Considered

In the development of these amendments, the Exchange considered views expressed by 

stakeholders on the desire for greater clarity regarding the maximum security deposit 

replenishment liability of Clearing Members during a single or multiple default event. The 

Exchange evaluated opinions expressed directly to it from Clearing Members via email, 

phone calls, and in-person conversations and meetings.

DCO Core Principles

In connection with updating these MGEX Rules, 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 G – Default Rules and Procedures: Core Principle G requires 

DCOs to maintain clear rules and procedures to allow for efficient, fair, and safe 

default management. The Amendments address and add clarity to and slightly 

lower the total assessment and replenishment obligations of non-defaulting 

Clearing Members during a single or multiple Clearing Member default in 

compliance with this core principle and CFTC Regulation 39.35.

• 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 and 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, thereby further ensuring that the information available to the 

public is accurate, clear, and comprehensive. These Amendments add clarity and

will allow Clearing Members to better measure the potential impact to them if a 

default 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. The Amendments 
MINNEAPOLIS GRAIN EXCHANGE, LLC

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

612-321-7101

mgex.com

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 3.1., 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 expressed regarding the Amendments or this filing. MGEX further 

certifies that, concurrent with this filing, a copy of the submission was posted on the 

Exchange website at the following link: http://www.mgex.com/regulation.html. If there are 

any questions regarding this submission, please contact me at (612) 321-7144 or

mleisen@mgex.com. Thank you for your attention to this matter.

Sincerely, 

Matt Leisen

Corporate Counsel, MGEX Clearing
MINNEAPOLIS GRAIN EXCHANGE, LLC

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

612-321-7101

mgex.com

EXHIBIT A

The following MGEX Regulations are to be amended. Additions are underlined

while deletions are marked through.

2109.05. COLLATERAL TO BE RESTORED.

In the event it shall become necessary to apply all or part of a Clearing Member’s security deposits 

or margins and performance bonds to meet obligations of MGEX pursuant to MGEX Rules, the 

Clearing Member shall immediately make goodreplenish any such deficiency in security deposits 

to the previously required level as well as any deficiency in or margins and performance bonds to 

the required level, by wire or other acceptable method, within two (2) hours of notice of any 

deficiency being delivered to Clearing Members. If a Clearing Member replenishes such 

contributionspays 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. In the event of the insolvency or default 

of a depository or settlement bank, Clearing Members shall comply with any further instructions 

provided by MGEX regarding the restoration of such collateral.

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 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 maximum assessment amount of up to an 

amount that does not exceed (i) a total of threetwo and a half (2.53) 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 five and a half (5.56) 

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). A Clearing Member that has provided the 

maximum assessment amount in respect of a Cooling Off Period pursuant to this Rule shall not 

be liable for any further assessment contributions in respect of any default(s) occurring or 

declared during such Cooling Off Period. A Clearing Member that has replenished its security 

deposit pursuant to Rule 2109.05. up to a maximum of one (1) times such Clearing Member’s 

total security deposit requirement at the time of the default (maximum replenishment amount) 

shall not be liable for any further security deposit replenishments during the Cooling Off Period, 

regardless of how many additional defaults take place in such Cooling Off Period. Non-defaulting 
MINNEAPOLIS GRAIN EXCHANGE, LLC

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

612-321-7101

mgex.com

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 non-defaulting Clearing Member has made payments of all assessed amounts, has 

replenished any deficiency in its security deposits or margin and performance bonds in 

accordance with Rule 2109.05., and has satisfied all other conditions of withdrawal set forth in 

Rule 2100.04., it may withdraw as a Clearing Member. A withdrawing Clearing Member will be 

subject to assessments, and its security deposits may be utilized, for all defaults and any Losses 

occurring before and during the Cooling Off Period in which such Clearing Member submitted its 

Withdrawal Notice and/or continues to have open positions, as well as any Losses stemming from 

such default(s) regardless of when the Loss is realized by MGEX. For the avoidance of doubt, 

even after a Clearing Member has submitted its Withdrawal Notice and liquidated or transferred 

all of its open customer and house positions, it will continue to be subject to assessments, and its 

security deposits may be utilized, for all Losses from additional default(s) that occur during the 

Cooling Off Period after submission of a Withdrawal Notice and the liquidation or transfer of all 

open positions. However, the withdrawing Clearing Member will not be subject to future 

assessments that are assessed to cover Losses for defaults that occur after the Cooling Off Period 

during which the Clearing Member provided its Withdrawal Notice and liquidated or transferred 

all of its open customer and house positions has concluded even if the Exchange has yet not 

provided written approval of such withdrawal. In addition, the Exchange will not apply such 

Clearing Member’s replenished security deposit to Losses for defaults that occur after the 

conclusion of the Cooling Off Period during which the Clearing Member provided its Withdrawal 

Notice and liquidated or transferred all of its open customer and house positions even if the 

Exchange has yet not provided written approval of such withdrawal. For purposes of this Rule, 

MGEX will consider the liquidation or transfer of all open positions by a Clearing Member effective 

after completion of the Business Day’s settlement cycle during which all positions were closed.

2113.00. COOLING OFF PERIOD AND MULTIPLE DEFAULTS.

The provisions set forth in this Chapter apply with respect to each default by a Clearing Member. 

If more than one Clearing Member Default occurs at a time or in close sequence, including a 

default that occurs by reason of a Clearing Member’s failure to satisfy an assessment demand, 

the Clearing House shall manage the defaults separately. Upon any default, during the Cooling 
MINNEAPOLIS GRAIN EXCHANGE, LLC

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

612-321-7101

mgex.com

Off Period, non-defaulted Clearing Members shall be subject to a maximum assessment amount 

and maximum replenishment amountobligation to pay assessments as set forth in Rule 2110.00. 

These maximums assessment amounts and maximum replenishment amounts shall apply from 

the date of the original default until the later of (i) the fifth Business Day thereafter and (ii) if another 

Clearing Member defaults during the five (5) Business Days following the initial or any subsequent 

default, the fifth Business Day following the last such default (such period, the “Cooling Off 

Period”), regardless of the number of defaults that occur during such Cooling Off Period. 

The aggregate maximum contribution that may be required pursuant to Rule 2110.00. for the 

Cooling Off Period shall be based upon each Clearing Member’s total security deposit 

requirement in effect at the commencement of the Cooling Off Period. The maximum does not 

limit Clearing Members’ obligations to restore replenish their security deposit contributions or 

restore margins and performance bonds as set forth in Rule 2109.05. Following a Cooling Off 

Period, the Clearing House shall notify each Clearing Member of its security deposit obligation 

and its assessment exposure. 

Nothing in this Rule shall limit MGEX’s right to call for margin from any Clearing Member. In 

addition to any margin otherwise required by MGEX under the Rules, if during the Cooling Off 

Period a Clearing Member has provided contributions up to the maximum assessment amount or 

maximum replenishment amount, then such Clearing Member shall transfer to MGEX additional 

initial margin in an amount determined by the Exchange for such Clearing Member based on the 

amount of additional initial margin needed for MGEX to maintain compliance with applicable 

minimum regulatory financial resources requirements during the remainder of the Cooling Off 

Period.