December 9, 2021

BY ELECTRONIC FILING

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: BTNL 2021-007 - Self-Certification Pursuant to CFTC Regulation 40.6 –

Bitnomial Exchange, LLC Block Trade Rules

Dear Mr. Kirkpatrick:

Bitnomial Exchange, LLC (“Bitnomial” or the “Exchange”) hereby submits for self-certification 

to the Commodity Futures Trading Commission (the “Commission” or “CFTC”), under 

Commission regulation 40.6(a), the following plans to add Block Trade capabilities at the 

Exchange. The changes will become effective on December 23, 2021.

The purpose of adding Block Trades is to allow certain Participants the ability to trade larger orders 

without adversely affecting Bitnomial markets. Bitnomial’s Rulebook was updated to include a 

definition for Block Trades (Rule 101), to allow Block Trades on the Exchange (Rule 505), and to 

give the Exchange the ability to issue Block Trade-related summary fines (Rule 604). The 

minimum allowable size of Block Trades is 5 Contracts for BUS futures and 50 for BUI futures. 

The minimum allowable size of a Block Trade is listed on Bitnomial’s website and will be updated 

if necessary.

Core Principal Compliance

Bitnomial has concluded that its compliance with DCM Core Principles is not adversely affected 

by these changes. The Exchange will continue to comply with all DCM Core Principles. The 

Exchange has reviewed the Core Principles as set forth under Section 5 of the Commodity 

Exchange Act, as amended (the “Act”), and determined that the rule changes pertain to the 

following Core Principles:

Core Principle 4 - Prevention of Market Disruption: 

The Rulebook changes conform with Core Principle 4 and CFTC Regulation 38.251, which 

expressly provide that a DCM must adopt and implement rules governing market 

participants subject to its jurisdiction to prevent, detect, and mitigate market disruptions or 

system anomalies associated with electronic trading.

Core Principle 5 - Position Limitations or Accountability:

All Block Trades will be subject to each product’s and each Participant’s position 

limitations. Each Block Trade will be subject to the Exchange’s pre-trade and post-trade 

risk controls.
Core Principal 7 - Availability of General Information:

Notification of the Rulebook changes have been posted to https://bitnomial.com/regulation

in compliance with this Core Principal.

Core Principal 9 – Execution of Transactions:

The products included in the Rulebook changes are listed for trading in competitive, open,

and efficient markets. 

Core Principal 12 - Protection of Markets and Market Participants:

The Rulebook changes will have no effect on the Exchange’s duties to protect the its

markets and Market Participants from abusive, disruptive, fraudulent, noncompetitive and 

unfair conduct and trade practices.

Core Principal 18 – Recordkeeping:

The Exchange is committed to its duties to maintain records pertaining to the Rulebook 

changes in a manner that satisfies the relevant criteria set forth in §1.31 of the

Commission’s Regulations.

Certification

Pursuant to Section 5c(c) of the Act and CFTC Regulation 40.6(a), Bitnomial certifies that the 

Rulebook changes comply with the Act and regulations thereunder. Bitnomial is not aware of any 

opposing views to the these changes.

Bitnomial certifies that a copy of this submission has been concurrently posted on the Exchange’s 

website at https://bitnomial.com/regulation.

If you have any questions or require further information, please contact the undersigned at 

james.walsh@bitnomial.com.

Sincerely, /s/ 

James A. Walsh

Chief Regulatory Officer

Bitnomial Exchange, LLC
Bitnomial Exchange, LLC

Rulebook

August December 2021

BY ACCESSING, OR ENTERING ANY ORDER INTO, THE EXCHANGE, AND 

WITHOUT ANY NEED FOR ANY FURTHER ACTION, UNDERTAKING OR 

AGREEMENT, EACH PARTICIPANT, AUTHORIZED USER AND, CUSTOMER

AGREES: (I) TO BE BOUND BY, AND COMPLY WITH, THE RULES AND 

APPLICABLE LAW, IN EACH CASE TO THE EXTENT APPLICABLE TO IT, HIM OR 

HER, AND (II) TO BECOME SUBJECT TO THE JURISDICTION OF THE EXCHANGE 

WITH RESPECT TO ANY AND ALL MATTERS ARISING FROM, RELATED TO, OR 

IN CONNECTION WITH, THE STATUS, ACTIONS OR OMISSIONS OF SUCH 

PARTICIPANT, AUTHORIZED USER OR CUSTOMER.
2

TABLE OF CONTENTS

TABLE OF CONTENTS.............................................................................................................. 2

CHAPTER 1 DEFINITIONS AND INTERPRETATIONS......................................................... 7

Rule 101 Definitions. ............................................................................................................... 7

Rule 102 Scope and Interpretation. ........................................................................................ 14

CHAPTER 2 GOVERNANCE................................................................................................... 14

Rule 201 Ownership............................................................................................................... 14

Rule 202 Board....................................................................................................................... 14

Rule 203 Officers ................................................................................................................... 16

Rule 204 Qualifications of Directors; Eligibility/Fitness....................................................... 16

Rule 205 Standing Committees.............................................................................................. 17

Rule 206 Confidentiality ........................................................................................................ 18

Rule 207 Conflicts of Interest ................................................................................................ 19

Rule 208 Maintenance of Books and Records by the Exchange............................................ 20

Rule 209 Information-Sharing Arrangements........................................................................ 21

Rule 210 Regulatory Services Provider ................................................................................. 21

Rule 211 Use of Proprietary Data and Personal Information................................................. 22

Rule 212 Reporting Requirements......................................................................................... 22

CHAPTER 3 PARTICIPATION ................................................................................................ 22

Rule 301 Jurisdiction.............................................................................................................. 22

Rule 302 Participants.............................................................................................................. 23

Rule 303 Requirements for Participants................................................................................. 23

Rule 304 Compliance with Minimum Financial Requirements, Financial Reporting 

Requirements, and Requirements Relating to Protection of Customer Funds ....... 24

Rule 305 Duties and Responsibilities of Participants ............................................................ 26

Rule 306 Authorized Users .................................................................................................... 27
3

Rule 307 Duties and Responsibilities of Authorized Users................................................... 28

Rule 308 Clearing Members Accessing the Exchange .......................................................... 29

Rule 309 Required Notices..................................................................................................... 29

Rule 310 Account Administrators.......................................................................................... 30

Rule 311 Access Requirements and Terms............................................................................ 30

Rule 312 Dues and Fees......................................................................................................... 30

Rule 313 Inspections by the Exchange................................................................................... 30

Rule 314 Incentive Programs................................................................................................. 31

CHAPTER 4 BUSINESS CONDUCT AND TRADING PRACTICES .................................... 31

Rule 401 Business Conduct.................................................................................................... 31

Rule 402 General Trading Practices....................................................................................... 32

Rule 403 Pre-Arranged, Pre-Negotiated and Noncompetitive Trades Prohibited ................. 35

Rule 404 Disciplinary Procedures; Termination of Connection ............................................ 36

Rule 405 Position Limits........................................................................................................ 36

Rule 406 Position Accountability........................................................................................... 36

Rule 407 Reports of Large Positions...................................................................................... 37

Rule 408 Aggregation of Positions ........................................................................................ 37

Rule 409 Reporting Levels, Position Accountability Levels and Position Limits................. 37

Rule 410 Information Disclosure and Documentation........................................................... 37

Rule 411 Compliance ............................................................................................................. 37

CHAPTER 5 MARKET OPERATIONS.................................................................................... 38

Rule 501 Market Hours and Operation .................................................................................. 38

Rule 502 Contracts Offered.................................................................................................... 40

Rule 503 User IDs.................................................................................................................. 41

Rule 504 Exchange Trading................................................................................................... 42

Rule 505 Block Trades [Reserved] ........................................................................................ 44
4

Rule 506 Exchange for Related Position [Reserved]......................................................... 4544

Rule 507 Position Transfers............................................................................................... 4544

Rule 508 Trade Cancellations; Trade Reviews.................................................................. 4544

Rule 509 Settlement ........................................................................................................... 4644

Rule 510 Recordkeeping; Audit Trail ................................................................................ 4645

Rule 511 Information Regarding Orders............................................................................ 4645

Rule 512 Disaster Recovery; Business Continuity............................................................. 4745

Rule 513 Exchange Messaging Policy ............................................................................... 4746

Rule 514 Self-Match Prevention ........................................................................................ 4746

CHAPTER 6 DISCIPLINE AND ENFORCEMENT............................................................. 4746

Rule 601 Disciplinary and Enforcement Procedures – General......................................... 4846

Rule 602 Process Considerations....................................................................................... 4847

Rule 603 Disciplinary Matters ........................................................................................... 4948

Rule 604 Summary Actions ............................................................................................... 5655

Rule 605 Appeal from Hearing Panel Decisions and Summary Actions........................... 5958

Rule 606 Rights and Responsibilities After Suspension or Termination........................... 6159

Rule 607 Notice to the Respondent, the CFTC, and the Public. ........................................ 6160

CHAPTER 7 ARBITRATION ............................................................................................... 6160

Rule 701 In General ........................................................................................................... 6260

Rule 702 Exceptions........................................................................................................... 6261

Rule 703 Penalties.............................................................................................................. 6261

CHAPTER 8 CLEARING ...................................................................................................... 6361

Rule 801 Submission to Clearing House............................................................................ 6361

Rule 802 Clearing Members............................................................................................... 6361

Rule 803 Responsibility of Participants............................................................................. 6462

Rule 804 Clearing Services................................................................................................ 6462
5

Rule 805 Rules of the Clearing House ............................................................................... 6462

Rule 806 Notice of Arbitration........................................................................................... 6463

Rule 807 Additional Terms Applicable to Clearing........................................................... 6463

CHAPTER 9 [RESERVED] ................................................................................................... 6563

CHAPTER 10 MISCELLANEOUS ....................................................................................... 6563

Rule 1001 Trading by Exchange Officials Prohibited; Misuse of Material, Non-Public 

Information ......................................................................................................... 6563

Rule 1002 Market Data ........................................................................................................ 6664

Rule 1003 Recording of Communications........................................................................... 6766

Rule 1004 Confidentiality .................................................................................................... 6766

Rule 1005 Force Majeure ..................................................................................................... 6866

Rule 1006 Extension or Waiver of Rules............................................................................. 6867

Rule 1007 Effect of Amendment, Repeal or New Rule ....................................................... 6867

Rule 1008 Signatures............................................................................................................ 6867

Rule 1009 Governing Law; Legal Proceedings ................................................................... 6967

Rule 1010 LIMITATION OF LIABILITY; NO WARRANTIES....................................... 6968

CHAPTER 11 DIGITAL ASSET DELIVERY ...................................................................... 7270

Rule 1101 Digital Asset Delivery Definitions ..................................................................... 7270

Rule 1102 Participant and Clearing Member Delivery Obligations .................................... 7270

Rule 1103 Delivery Procedures............................................................................................ 7371

Rule 1104 Cost of Delivery.................................................................................................. 7472

Rule 1105 Delivery Infractions............................................................................................ 7472

Rule 1106 Digital Asset Delivery Eligibility ....................................................................... 7573

Rule 1107 Settlement Facility Reporting Requirements...................................................... 7573

CHAPTER 12 BITCOIN FUTURES AND OPTIONS.......................................................... 7674

Rule 1201 Bitcoin US Dollar Futures .................................................................................. 7674
6

Rule 1202 Deci Bitcoin US Dollar Futures.......................................................................... 7775

Rule 1203 Options on Bitcoin US Dollar Futures................................................................ 7876

Rule 1204 Bitcoin Futures and Options Price Bands and Price Limits................................ 7876

Rule 1205 Bitcoin Futures and Options Position Limits...................................................... 7977

Rule 1206 Bitcoin Futures and Options Settlement Price Computation.............................. 7977
7

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

CHAPTER 1

DEFINITIONS AND INTERPRETATIONS

Rule 101 Definitions.

The following terms as used in the Rules have the meanings set forth in this Chapter, unless 

otherwise specifically provided elsewhere in the Rules or required by the context.

“Account Administrator” means an officer or employee of a Participant appointed 

pursuant to Rule 310.

“Affiliate” means a Person who directly or indirectly, controls, is controlled by, or 

is under common control with another Person.

“API” means Application Programming Interface, a programmatic software

interface to the Exchange systems.

“Applicable Law” means, with respect to any Person, any statute, law, regulation, 

rule or ordinance of any governmental or self-regulatory authority applicable to such 

Person, including the CEA and CFTC Rules.

“Audit Trail” has the meaning set forth in Rule 510.

“Authorized User” means a natural person, authorized by the Exchange as an 

Authorized User in accordance with Rule 306, who is either employed by or is an agent of 

a Clearing Member or a Participant.

“Bitnomial Exchange” or “Exchange” means Bitnomial Exchange, LLC, a 

Delaware limited liability company designated by the CFTC as a contract market.

“Block Trade” means a privately negotiated transaction in a Contract that meets 

certain quantity thresholds and that is permitted to occur away from the Exchange and 

reported in accordance with Rule 505.

“Board” means the Board of Directors of Bitnomial Exchange, LLC.

“Board of Appeals” means a panel comprised of a chair and two individuals 

appointed by the Board to consider appeals under Chapter 6.

“Business Day” means any day on which the Exchange is open for trading.

“CEA” means the Commodity Exchange Act, as amended from time to time.

“CFTC” or “Commission” means the U.S. Commodity Futures Trading 

Commission or any successor agency.
8

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

“CFTC Rules” means the rules, regulations and orders of the CFTC, as amended 

from time to time.

“CPT” means Central Prevailing Time.

“Chairman” means the Chairman of the Board.

“Chief Executive Officer” means the individual appointed by the Board to serve as 

the Exchange’s chief executive officer.

“Chief Regulatory Officer” means the individual appointed by the Board to serve 

as the Exchange’s chief regulatory officer.

“Clearing House” means any clearing house registered with the CFTC as a 

Derivatives Clearing Organization with open access rules that the Exchange designates to 

provide clearing services with respect to any or all of the Contracts.

“Clearing Member” means an entity meeting the requirements of, and approved for, 

clearing membership at the Clearing House that is authorized pursuant to the Clearing 

House Rules to clear trades in any or all Contracts. Except for those Clearing Members that 

clear solely for their own proprietary accounts (each, an “Individual Clearing Member”),

all other Clearing Members must be registered with the CFTC as FCMs (each, an “FCM 

Clearing Member”).

“Compliance Department” has the meaning set forth in Rule 602.

“Contract” means any contract, agreement, or transaction approved for trading on 

the Exchange and pursuant to the Rules.

“Contract Specifications” means the descriptions of the contractual items for each 

Contract as set forth in the document available on the Bitnomial Exchange website. Items 

described in the Contract Specifications referenced in this Rulebook include “Last Trading 

Day,” “Daily Settlement Price,” and “Final Settlement Price.”

“Customer” means any Person for whom a Participant carries an account (other 

than such Participant or any of its affiliates) or from whom a Participant solicits or accepts 

an order. 

“Daily Settlement Price” has the meaning set forth in Rule 509.

“Director” means an individual serving on the Board.

“Disciplinary Action” has the meaning set forth in Rule 601.

“Disciplinary Committee” means a function of the Compliance Department to 

fulfill various adjudicative responsibilities and duties described in Rule 602.

“Emergency” means the occurrences or circumstances which, in the opinion of the 
9

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Board, require immediate action to be taken in accordance with Rule 501, and which 

threaten, or may threaten, the fair and orderly trading in, or the settlement or integrity of, 

any Contract, including, without limitation, the following:

(a) any circumstance that may materially affect the performance of a Contract, 

including failure of the Clearing House system;

(b) any action taken by any United States or foreign regulatory, self- regulatory, 

judicial, arbitral, or governmental (whether national, state or municipal) or 

quasi-governmental authority, or any agency, department, instrumentality, 

or sub-division thereof; or other Person exercising, or entitled to exercise 

any administrative, executive, judicial, legislative, police, regulatory or 

taxing authority or power; or any other contract market, clearing house, 

board of trade, or other exchange or trade association (foreign or domestic) 

that may have a direct impact on trading on the Exchange or the settlement 

legality or enforceability of any Contract;

(c) any actual, attempted or threatened corner, squeeze, congestion, 

manipulative activity or undue concentration of positions in a Contract;

(d) any circumstance that may have a severe, adverse effect upon the functions 

and facilities of the Exchange, including, but not limited to, acts of God, 

fire, flood or other natural disasters, bomb threats, acts of terrorism or war, 

severely inclement weather, or failure or malfunction of all or a portion of 

the Trading Platform, or other system breakdowns or interruptions such as 

power, computer, communication or transportation systems or the Internet;

(e) the bankruptcy or insolvency of any Clearing Member or the imposition of 

any injunction or other restraint by any government agency, clearing house, 

court or arbitrator upon a Clearing Member which may affect the ability of 

a Clearing Member to trade in or perform on a Contract;

(f) any circumstance in which it appears to the Board that a Clearing Member 

or any other Person:

i. has failed to perform on a Contract;

ii. is insolvent; or

iii. is in a financial or operational condition or is conducting business such 

that the Clearing Member or Person cannot be permitted to continue 

in business without jeopardizing the safety of Participants, other 

Clearing Members, the Exchange or the Clearing House; or

iv. any other unusual, unforeseeable or adverse circumstance as 

determined by the Exchange

“Exchange Official” means any Officer or employee of the Exchange and any 
10

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

member of the Board, a committee established by the Board, a Hearing Panel or Board of 

Appeals.

“Exchange Requirements” means the Rules; other requirements implemented by 

the Exchange pursuant to the Rules; each term of a Contract; and the participant 

documentation and other contractual obligations between a Participant (including its 

Authorized Users) and the Exchange.

“Exchange Transaction” means a Contract executed through the Trade Matching 

Engine.

“Exchange Website” means bitnomial.com.

“Expiry” means the Contract date of expiration.

“Final Settlement Price” means the price for each Contract supplied by the 

Exchange to the Clearing House as the final Settlement Price for the Expiry as specified in 

the Contract Specifications.

“FCM” means a futures commission merchant as defined in the CEA and CFTC 

Rules and registered with the CFTC as such.

“Governmental Authority” means any domestic or foreign government (or political 

subdivision), governmental or regulatory authority, agency, court, commission or other 

governmental or regulatory entity (including any Self-Regulatory Organization).

“Investigation Team” means a group within the Compliance Department, whose 

function is to fulfill the investigative and enforcement responsibilities described in Rule 

602.

“Insolvency” and “Insolvent” means the occurrence of any of the following events 

with respect to a Person:

(a) the Person is determined to be insolvent by a Government Agency or SelfRegulatory Organization;

(b) if the Person is a member of the Securities Investor Protection Corporation, 

a court of competent jurisdiction finds that the Person meets any one of the 

conditions set forth in clauses (A), (B), (C) or (D) of Section 5(b)(1) of the 

Securities Investor Protection Act of 1970;

(c) in the event of the entry or the making of a decree or order by a court, 

Government Agency or other supervisory authority of competent 

jurisdiction (i) adjudging the Person as bankrupt or insolvent, (ii) approving 

as properly filed a petition seeking reorganization, arrangement, liquidation, 

dissolution, adjustment or composition of or in respect of the Person under 

the Bankruptcy Code or any other applicable federal, state or other U.S. or 

non-U.S. law, including any bankruptcy, insolvency, reorganization, 
11

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

liquidation, dissolution or similar law, (iii) appointing a receiver, custodian, 

liquidator, provisional liquidator, administrator, provisional administrator, 

assignee, trustee, sequestrator or other similar official for the Person or for 

any substantial part of its property,

(d) ordering the winding up or liquidation of the Person’s affairs or (iv) 

consenting to the institution by the Person of proceedings to be adjudicated 

as a bankrupt or insolvent;

(e) the filing by the Person of a petition, or any case or proceeding, seeking 

reorganization or relief under the Bankruptcy Code or any other applicable 

federal, state or other U.S. or non-U.S. law, including any bankruptcy, 

insolvency, reorganization, liquidation, dissolution or similar law, or the 

consent by the Person to the filing of any such petition, case or proceeding 

or to the appointment of a receiver, custodian, liquidator, provisional 

liquidator, administrator, provisional administrator, assignee, trustee, 

sequestrator or other similar official for the Person or for any substantial 

part of its property, or the making by the Person of an assignment for the 

benefit of its creditors, or the admission by the Person in writing of its 

inability to pay its debts generally as they become due, or the taking of 

corporate or similar action by the Person in furtherance of the foregoing.

“Last Trading Day” is the last day a Contract may be traded and is defined in the 

Contract Specifications.

“LLC Agreement” means the Limited Liability Company Agreement of the 

Exchange as amended or restated from time to time.

“MGEX” means the Minneapolis Grain Exchange, LLC, a Clearing House.

“NFA” means the National Futures Association.

“Officer” has the meaning given to it in Rule 203.

“Order” means any order to buy or sell a Contract on or subject to the Rules of the 

Exchange.

“Participant” means an entity that has signed the Participant Agreement for 

purposes of entering into Transactions for its own account or accesses the Exchange on 

behalf of a Customer. In addition, an FCM Clearing Member who does not enter into

Transactions for its own account shall be deemed to be a Participant hereunder solely for 

the purpose of accessing the Exchange in order to liquidate Transactions and any resulting 

positions previously submitted to the Clearing House for the account of such FCM Clearing 

Member on behalf of a Participant that is in default for failure to perform its obligations to 

the Exchange or such FCM Clearing Member (to the extent applicable).

“Participant Agreement” means an agreement between Bitnomial Exchange and a 

Participant which must be signed in order for a Participant to have access to Bitnomial
12

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Exchange for the execution of trades involving commodity derivative products and related 

financial instruments.

“Person” has the meaning set forth in CEA Section 1a(38) and in the CFTC Rules.

“Position Transfer” means a transaction in a Contract(s) that is executed by 

Exchange personnel for administrative purposes outlined in Rule 507.

“Public Director” means a Director having the qualifications set out in Rule 202.

“Regulatory Services Agreement” means the agreement(s) between the Exchange 

and the Regulatory Service Provider(s) whereby certain functions mandated under the 

CEA, such as market monitoring and trade practice surveillance, are delegated to the 

Regulatory Services Provider(s).

“Regulatory Services Provider” means NFA and such other organizations, if any, 

that provide regulatory services to the Exchange, together with any such organization’s 

employees and agents.

“Respondent” means a Participant under investigation for alleged Rule violation(s) 

or against which charges have been filed.

“Rules” means any rule, interpretation, stated policy, or instrument corresponding 

to any of the foregoing, including these Rules, in each case as adopted from time to time 

by the Exchange.

“Self-Regulatory Organization” has the meaning given to such term in CFTC Rule

1.3(ee) and includes a derivatives clearing organization that is registered as such with the 

CFTC.

“Settlement Price” means the price for each Contract supplied by the Exchange to 

the Clearing House at the end of each trading day (Daily Settlement Price).

“Surveillance Team” means the group within the Compliance Department that is 

responsible for real-time and post-trade surveillance of the Exchange’s trading systems,

as described in Rule 602.

“Trade Matching Engine” means the set of algorithms through which orders are 

matched.

“Trading Account” means a trading account to be separately tracked and margined 

by a Participant’s Clearing Member.

“Trading Account ID” means an Exchange assigned ID that represents a Trading 

Account for use by the Clearing House and its Clearing Members.

“Trading Platform” means the electronic trading facility operated by Bitnomial 

Exchange to provide Participants with the ability to execute Exchange Transactions from 
13

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

the interaction of multiple bids and multiple offers within a predetermined, 

nondiscretionary automated trade matching and execution algorithm.

“Transaction” means an Exchange Transaction.

“Trade Risk Limit” has the meaning set forth in Rule 504 of these Rules.

“Trading Hours” means, for any Business Day, the hours specified on the trading 

calendar at the Exchange Website.

“Website” means the Exchange Website.
14

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 102 Scope and Interpretation.

As used in any Rule, terms in the singular include the plural and vice versa and references 

to the masculine, feminine or neuter gender includes each other gender, unless the context 

expresses a clear contrary intention. As used in any Rule, time references are to Central Standard 

Time.

CHAPTER 2

GOVERNANCE

Rule 201 Ownership

The Exchange is a Delaware limited liability company. The management and operation of 

the Exchange is governed by the LLC Agreement. All of the equity interests of the Exchange are 

owned by Bitnomial, Inc.

Rule 202 Board

(a) The Board shall manage the day to day business operations of the Exchange.

The Board has the power and authority to call for review, and to affirm, modify, suspend 

or overrule, any and all decisions and actions of standing committees or special committees 

of the Board or any panel of the Officers related to the day to day business operations of 

the Exchange.

(b) The Board may act only by the decision of an absolute majority in number 

of the Directors by vote at a meeting, by unanimous written consent without a meeting, or 

as otherwise set forth in the LLC Agreement.

(c) At all times, at least 35% of the Directors shall be Public Directors. Each

Director (including Public Directors) shall be appointed in accordance with the LLC

Agreement, and shall serve until his or her successor is duly appointed, or until his or her 

earlier resignation or removal, with or without cause.

(d) Each Director is entitled to indemnification pursuant to the LLC Agreement 

with respect to matters relating to the Exchange.

(e) To qualify as a Public Director, an individual must be found, by action of 

the Board, to have no material relationship with the Exchange. The Board must make such 

finding upon the nomination or appointment of the Director and as often as necessary in 

light of all circumstances relevant to such Director, but in no case less than annually. A 

“material relationship” is one that reasonably could affect the independent judgment or 

decision-making of the Director. The Board need not consider previous service as a 

Director of the Exchange to constitute a “material relationship.” A Director shall be 

considered to have a “material relationship” with the Exchange if any of the following 

circumstances exist or have existed within the past year:

(i) such Director is or was an Officer or an employee of the Exchange, or 
15

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

an officer or an employee of an Affiliate of the Exchange;

(ii) such Director is or was a Participant or material owner of the Exchange;

(iii) such Director is or was a director, an officer, or an employee of a 

Participant or owner of the Exchange;

(iv) such Director is or was an officer of another entity, which entity has a 

compensation committee (or similar body) on which any Officer of the 

Exchange serves;

(v) such Director, or an entity with which the Director is a partner, an 

officer, an employee, or a director, receives or has received more than 

$100,000 in combined annual payments for legal, accounting, or 

consulting services from the Exchange or its Affiliate, any Participant, 

or any Affiliate of such Participant. Compensation for services as a 

Director of the Exchange or as a director of an Affiliate thereof does not 

count toward the $100,000 payment limit, nor does deferred 

compensation for services rendered prior to becoming a Director, so 

long as such compensation is in no way contingent, conditioned, or 

revocable; or,

(vi) in the case of a Public Director that is a member of the Regulatory 

Oversight Committee or the Exchange Participant Committee, such 

Public Director accepts or has accepted, directly or indirectly, any 

consulting, advisory, or other compensatory fee from the Exchange or 

its Affiliate or any Participant or any Affiliate of such Participant, other 

than deferred compensation for service rendered prior to becoming a 

member of the Regulatory Oversight Committee or the Exchange 

Participant Committee, provided that such compensation is in no way 

contingent, conditioned, or revocable.

(vii) Any of the “material relationships” set forth above apply to the 

“immediate family” of such Director, i.e., spouse, parents, children, and 

siblings, in each case, whether by blood, marriage, or adoption, or any 

person residing in the home of the director or that of his or her 

immediate family.

(f) The compensation of the Public Directors and other non-executive members 

of the Board shall not be linked to the business performance of the Exchange.

(g) The Board shall have procedures, as may be further set forth in policies that 

the Exchange may adopt, to remove a member from the Board where the conduct of such 

member is likely to be prejudicial to the sound and prudent management of the Exchange.

(h) The Board shall establish arrangements to permit consideration of 

Participants in connection with the functioning of the Exchange and with additions or 

amendments to the Rules and shall make a description of such arrangements available to 
16

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

the public and to the CFTC.

Rule 203 Officers

(a) Subject to the oversight of the Board, the Exchange shall appoint from time 

to time one or more individuals to serve as the Chief Executive Officer, Chief Regulatory 

Officer and may further appoint such other officers of the Exchange or any subsidiary of 

the Exchange (each, an “Officer”) as deemed necessary or appropriate, with such titles, 

duties, and authority as the Exchange shall approve, to carry out the business of the 

Exchange or any subsidiary of the Exchange, and upon such terms and conditions as the 

Board shall determine.

(b) Any Officer may also be a director, officer, partner or employee of the 

Exchange or of any of its Affiliates.

(c) The Officers shall have such powers and duties in the management of the 

Exchange as the Board may prescribe from time to time, subject to the terms of the LLC 

Agreement.

(d) Each Officer is entitled to indemnification pursuant to the LLC with respect 

to matters relating to the Exchange.

Rule 204 Qualifications of Directors; Eligibility/Fitness

(a) An individual may not serve as a Board member, or serve on a committee 

established by the Board, the Hearing Panel, or a Board of Appeals, or hold a 10% or more 

ownership interest in the Exchange, if the individual:

(i) within the prior three (3) years has been found, by a final decision in 

any action or proceeding brought in a court of competent jurisdiction, 

the CFTC, or any Self-Regulatory Organization, to have committed a 

disciplinary offense;

(ii) within the prior three (3) years has entered into a settlement agreement 

in which any of the findings or, in the absence of such findings, any of 

the acts charged, included a disciplinary offense;

(iii) is currently suspended from trading on a Contract Market, is suspended 

or expelled from membership in a Self-Regulatory Organization, is 

serving any sentence or probation, or owes any portion of a fine or 

penalty related to either: (A) a finding of a disciplinary offense by a final 

decision in any action or proceeding brought in a court of competent 

jurisdiction, the CFTC, or any Self-Regulatory Organization; or (B) a 

settlement agreement in which any of the findings or, in the absence of 

such findings, any of the acts charged included a disciplinary offense;

(iv) is currently subject to an agreement with the CFTC or Self- Regulatory 

Organization not to apply for registration with the CFTC or for 
17

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

membership in the Self-Regulatory Organization;

(v) is currently, or within the past three (3) years has been, subject to a 

revocation or suspension of registration by the CFTC;

(vi) has been convicted of a felony listed in Section 8a(2)(D)(ii) through (iv) 

of the CEA; or

(vii) is currently subject to a denial, suspension or disqualification from 

serving on a disciplinary committee, arbitration panel or governing 

board of any Self-Regulatory Organization as that term is defined in 

Section 3(a)(26) of the Securities Exchange Act of 1934; or

(viii) is subject to a statutory disqualification pursuant to Section 8a(2) of the 

CEA.

(ix) For purposes of this Rule 204(a), the terms “disciplinary offense,” “final 

decision” and “settlement agreement” have the meaning given those 

terms in CFTC Rule 1.63(a).

(b) Prior to nomination to the Board, each individual shall certify he/she is not 

disqualified pursuant to Rule 204(a). Upon appointment, each member of the Board shall 

provide to the Exchange, where applicable, changes in registration information within 30 

days and certification of compliance accordingly. In addition, each member will certify on 

at least an annual basis regarding their continued compliance with Rule 204(a). The 

Exchange shall verify information supporting Board compliance with eligibility criteria.

(c) In addition, to serve as a member of the Board, an individual must possess 

the ability to contribute to the effective oversight and management of the Exchange, taking 

into account the needs of the Exchange and such factors as the individual’s experience, 

perspective, skills and knowledge of the industry in which the Exchange operates. This 

shall include sufficient expertise, where applicable, in financial services, risk management, 

and clearing services.

Rule 205 Standing Committees

(a) The Board shall have at least the three following standing committees: the 

Nominating Committee, the Exchange Participant Committee, and the Regulatory 

Oversight Committee, each with the roles and responsibilities set out below.

(b) Nominating Committee. The Nominating Committee of the Board shall 

consist of at least 51% Public Directors. The Nominating Committee reports to the Board 

and shall be chaired by a Public Director. The Nominating Committee shall have authority 

and responsibility to (i) identify individuals qualified to serve on the Board, consistent with 

the criteria that the Board require and any composition requirement that the Commission 

promulgates; and (ii) administer a process for the nomination of individuals to the Board.

(c) Exchange Participant Committee. The Exchange Participant Committee 
18

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

of the Board reports to the Board and shall consist of at least 35% Public Directors. The 

Exchange Participant Committee is responsible for (i) determining the standards and 

requirements for initial and continuing Participant eligibility, (ii) reviewing appeals of staff 

denials of Participant applications, and (iii) approving Rules that would result in different 

categories or classes of Participants receiving disparate access to the Exchange. The 

Exchange Participant Committee shall not, and shall not permit the Exchange to, restrict 

access or impose burdens on access in a discriminatory manner, within each category or 

class of Participants or between similarly-situated categories or classes of Participants.

(d) Regulatory Oversight Committee. The Regulatory Oversight Committee of 

the Board shall report to the Board and consist of 100% Public Directors. The Regulatory 

Oversight Committee shall oversee the Exchange’s regulatory program on behalf of the 

Board with the authority to (i) monitor the regulatory program of the Exchange for 

sufficiency, effectiveness, and independence and (ii) oversee all facets of the regulatory 

program, including:

(i) trade practice and market surveillance; audits, examinations, and other 

regulatory responsibilities with respect to Participants (including 

compliance with, if applicable, financial integrity, financial reporting, 

sales practice, recordkeeping, and other requirements); and the conduct 

of investigations;

(ii) reviewing the size and allocation of the regulatory budget and resources, 

and the number, hiring, termination, and compensation of regulatory 

personnel;

(iii) supervising the Chief Regulatory Officer of the Exchange, who will 

report directly to the Regulatory Oversight Committee;

(iv) recommending changes that would ensure fair, vigorous, and effective 

regulation; and

(v) reviewing all regulatory proposals prior to implementation and advising 

the Board as to whether and how such changes may impact regulation.

(e) In addition to the standing committees, the Board shall have the power and 

authority to create and terminate, in accordance with the LLC Agreement, special 

committees of the Board and designate their composition, responsibilities and powers.

Rule 206 Confidentiality

(a) No member of the Board or any committee established by the Board or by 

or pursuant to the Rules will use or disclose any material non-public information obtained 

in connection with such member’s participation in the Board or such committee for any 

purpose other than the performance of his or her official duties as a member of the Board 

or such committee.

(b) No officer, employee or agent of the Exchange will: (i) trade in any 
19

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

commodity interest if such officer, employee or agent obtained material non-public 

information concerning such financial instrument in connection with such employee’s, 

officer’s or agent’s employment or (ii) disclose to any other Person material non-public 

information obtained in connection with such employee’s, officer’s or agent’s 

employment, if such employee, officer or agent could reasonably expect that such 

information might assist another Person in trading any commodity interest.

Rule 207 Conflicts of Interest

(a) Named Party In Interest Conflict

(i) No member of the Board, the Hearing Panel, any Board of Appeals or 

any other disciplinary committee of the Exchange will knowingly 

participate in such body’s deliberations or voting in any matter 

involving a named party in interest where such member (A) is the named 

party in interest in the matter, (B) is an employer, employee or fellow 

employee of a named party in interest, (C) as any other significant, 

ongoing business relationship with a named party in interest, excluding 

relationships limited to Contracts, or (D) has a family relationship with 

a named party in interest.

(ii) Prior to consideration of any matter involving a named party in interest, 

each member of the deliberating body who does not choose to abstain 

from deliberations and voting will disclose to the Chief Regulatory 

Officer whether such member has one of the relationships listed in 

clause (i) above with a named party in interest.

(iii) The Chief Regulatory Officer will determine whether any member of 

the relevant deliberating body who does not choose to abstain from 

deliberations and voting is subject to a conflicts restriction under this 

paragraph (iii). Such determination will be based upon a review of the 

following information: (A) information provided by such member 

pursuant to clause (ii) above; and (B) any other source of information 

that is held by and reasonably available to the Exchange.

(b) Financial Interest in a Significant Action Conflict

(i) No member of the Board, the Hearing Panel, any Board of Appeals or

any other disciplinary committee of the Exchange will participate in 

such body’s deliberations and voting on any significant action if such 

member has a direct and substantial financial interest in the result of the 

vote, as determined pursuant to clause (iii) below.

(ii) Prior to consideration of any significant action, each member of the 

deliberating body who does not choose to abstain from deliberations and 

voting will disclose to the Chief Regulatory Officer any information that 

may be relevant to a determination of whether such member has a direct 
20

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

and substantial financial interest in the result of the vote.

(iii) The Chief Regulatory Officer will determine whether any member of 

the relevant deliberating body who does not choose to abstain from 

deliberations and voting is subject to a conflicts restriction under this 

paragraph (iii). Such determination will be based upon a review of the 

following information: (A) the most recent large trader reports and

clearing records available to the Exchange; (B) information provided by 

such member pursuant to clause (ii) above; and (C) any other 

information reasonably available to the Exchange, taking into 

consideration the exigency of the significant action being contemplated.

(iv) Any member of the Board, the Hearing Panel, any Board of Appeals or 

any other disciplinary committee of the Exchange who would otherwise 

be required to abstain from deliberations and voting pursuant to clause 

(i) above may participate in deliberations, but not voting, if the 

deliberating body, after considering the factors specified below, 

determines that such participation would be consistent with the public 

interest; provided, however, that before reaching any such 

determination, the deliberating body will fully consider the information 

specified in clause (ii) above which is the basis for such member’s 

substantial financial interest in the significant action that is being 

contemplated. In making its determination, the deliberating body will 

consider: (A) whether such member’s participation in the deliberations 

is necessary to achieve a quorum; and (B) whether such member has 

unique or special expertise, knowledge or experience in the matter being 

considered.

(c) The minutes of any meeting to which the conflicts determination procedures 

set forth in this Rule apply will reflect the following information:

(i) the names of all members of the relevant deliberating body who attended 

such meeting in person or who otherwise participated in such meeting;

(ii) the name of any member of the relevant deliberating body who 

voluntarily recused himself or herself or was required to abstain from 

deliberations or voting on a matter and the reason for the recusal or 

abstention, if stated;

(iii) the information that was reviewed for each member of the relevant 

deliberating body; and

(iv) any determination made in accordance with clause (iv) of Rule 207(b)

above.

Rule 208 Maintenance of Books and Records by the Exchange
21

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(a) The Exchange shall keep, or cause to be kept, complete and accurate books 

and records of accounts of the Exchange, including all books and records required to be 

maintained pursuant to the CEA, and the CFTC Rules, including CFTC Rule 38.707(a)(6).

(b) The Exchange shall retain all such books and records for at least five (5) 

years, and shall make such books and records readily accessible for inspection by the CFTC 

and the U.S. Department of Justice during the first two (2) years of such five-year period.

Rule 209 Information-Sharing Arrangements

(a) The Exchange may enter into information-sharing agreements or other 

arrangements or procedures to coordinate surveillance with other markets on which 

financial instruments related to the Contracts trade. As part of any information-sharing 

agreements or other arrangements or procedures adopted pursuant to this Rule, the 

Exchange may:

(i) provide market surveillance reports to other markets;

(ii) share information and documents concerning current and former 

Participants with other markets;

(iii) share information and documents concerning ongoing and completed 

investigations with other markets; or

(iv) require its current or former Participants to provide information and 

documents to the Exchange at the request of other markets with which 

the Exchange has an information-sharing agreement or other 

arrangements or procedures.

(b) The Exchange may enter into any arrangement with any Person or body 

(including the CFTC, the NFA, any Self-Regulatory Organization, any exchange, market, 

or clearing organization, or foreign regulatory authority) if the Exchange considers such 

arrangement to be in furtherance of the Exchange’s purpose or duties under the Rules or 

any law or regulation.

(c) The Exchange may provide information to a duly authorized foreign 

Governmental Authority, as directed by the CFTC, in accordance with an informationsharing agreement executed with the CFTC.

Rule 210 Regulatory Services Provider

(a) The Exchange may, in its sole discretion, contract with a Regulatory 

Services Provider to provide certain regulatory services to the Exchange pursuant to a 

Regulatory Services Agreement. In accordance with the relevant Regulatory Services 

Agreement, a Regulatory Services Provider may perform certain surveillance, 

investigative, and regulatory functions under the Rules and the Exchange may provide 

information to such Regulatory Services Provider in connection with the performance by 

such Regulatory Services Provider of those functions.
22

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(b) Any of the powers or functions of the Exchange under the Rules may be 

delegated to a Regulatory Services Provider pursuant to the relevant Regulatory Services 

Agreement in such manner and on such terms as the Exchange and such Regulatory 

Services Provider may mutually agree; provided, however, that the Exchange shall retain 

ultimate decision-making authority with respect to any powers or functions that are 

delegated to such Regulatory Services Provider.

Rule 211 Use of Proprietary Data and Personal Information

(a) The Exchange may not use for business or marketing purposes any

proprietary data or personal information collected or received, from or on behalf of any 

Person, for the purpose of fulfilling its regulatory obligations; provided, however, that the 

Exchange may use such data or information for such purposes with the consent of the 

Person from whom such data or information is collected or received.

(b) Notwithstanding the provisions of Rule 211(a), each Participant and 

Authorized User agrees that the Exchange may share such proprietary data and personal 

information with one or more registered entities (as such term is defined in CFTC Rules).

(c) Access to the Exchange may not be conditioned upon the use of proprietary 

data or personal information for business or marketing purposes.

Rule 212 Reporting Requirements

In the event the Board rejects a recommendation or supersedes an action of the Regulatory 

Oversight Committee or the Exchange Participant Committee, the Exchange shall submit a written 

report to the CFTC detailing: (1) the recommendation or action of the Regulatory Oversight 

Committee or the Participation Committee; (2) the rationale for such recommendation or action; 

(3) the rationale of the Board for rejecting such recommendation or superseding such action; and 

(4) the course of action that the Board decided to take contrary to such recommendation or action.

CHAPTER 3

PARTICIPATION

Rule 301 Jurisdiction

(a) Any Person initiating or executing a transaction on or subject to the Rules 

of the Exchange directly or through an intermediary, and any Person for whose benefit 

such a transaction has been initiated or executed, expressly consents to the jurisdiction of 

the Exchange and agrees to be bound by and comply with the Rules of the Exchange in 

relation to such transactions, including, but not limited to, rules requiring cooperation and 

participation in investigatory and disciplinary processes. Any FCM, Introducing Broker, 

Associated Person, or foreign Person performing a similar role that charges a commission 

or fee in connection with transactions on or subject to the Rules of the Exchange also 

expressly consent to the Exchange’s jurisdiction.

(b) Any Participant, Authorized User or Customer whose right to access the 

Exchange is revoked or terminated pursuant to these Rules will remain bound by the Rules 
23

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

and Applicable Law, in each case to the extent applicable, and subject to the jurisdiction 

of the Exchange with respect to any and all matters arising from, related to, or in connection 

with, the status, actions or omissions of such Participant or Authorized User prior to such 

revocation or termination.

Rule 302 Participants

(a) Each Participant will have the right to access the Exchange, including the 

right to place Orders for each of its proprietary accounts. The access rights of a Participant 

hereunder may not be transferred, assigned, sold or leased.

(b) A Participant will not become a partner, shareholder or limited liability 

company member of the Exchange and will not obtain any equity, ownership or other 

interest in the Exchange, including voting rights or rights to receive any dividends or other 

distributions, whether arising from a dissolution, merger or consolidation involving the 

Exchange or otherwise.

Rule 303 Requirements for Participants

(a) A Participant must be admitted to the Exchange and deliver an executed 

Participant Agreement. To be eligible for admission, the Participant must demonstrate to 

the Exchange that it:

(i) is of good reputation and business integrity;

(ii) complies with the financial responsibility, recordkeeping and reporting 

requirements set out in Rule 304;

(iii) is validly organized, in good standing, and authorized by its governing 

body and, if relevant, documents of organization, to trade Contracts;

(iv) is not Insolvent;

(v) is not prohibited from using the services of the Exchange for any reason 

whatsoever;

(vi) holds all registrations required under Applicable Law, if any, including 

any FCM, Supervisory Person and/or Associated Person registration, as 

applicable;

(vii) is not subject to statutory disqualification under Section 8a(2) of the 

CEA;

(viii) satisfies any other criteria that the Exchange may require from a 

Participant.

(b) As part of the application procedure, the Exchange may request such 

information and documentation as it may reasonably require in order to determine whether 
24

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

the Exchange’s eligibility requirements have been satisfied. Any Participant organized or 

located outside of the United States shall enter into a written agreement acceptable to the 

Exchange appointing a third party as its U.S. agent for service of process for purposes of 

CFTC Rule 15.05, and shall provide the Exchange with a copy of the agreement.

(c) The Exchange may deny, condition, suspend, or terminate Participant status 

of any entity that:

(i) is unable to satisfactorily demonstrate its ability to satisfy the eligibility 

criteria to become or remain compliant as a Participant;

(ii) is unable to satisfactorily demonstrate its capacity to adhere to all 

applicable Rules;

(iii) would bring the Exchange into disrepute as determined by the Exchange 

in its sole discretion; or

(iv) shows such other cause as the Exchange may reasonably determine.

(d) If the Exchange decides to deny or condition an applicant’s application, the 

Exchange shall promptly notify the applicant in writing to the address provided by the 

applicant on the Exchange application form.

(e) If the Participant is not itself a Clearing Member, the Participant must also 

be party to an agreement with a Clearing Member in accordance with Rule 802.

(f) A person approved as a Participant shall be subject to all of the Rules of the 

Exchange.

(g) Each applicant and each Participant agrees (i) promptly to provide, or 

procure the provision of, such information and documents as the Exchange may reasonably 

request, and (ii) that the Exchange, without being prevented by any duty of confidentiality 

by any holder of information, may obtain such information and documents from any 

Clearing Member or from the Clearing House.

(h) The Exchange shall grant access to independent software vendors that meet 

the requirements for Participants set out in this Rule 303.

Rule 304 Compliance with Minimum Financial Requirements, Financial Reporting 

Requirements, and Requirements Relating to Protection of Customer Funds

Participants and Clearing Members shall comply with Commission Regulations relating to 

minimum financial requirements, financial reporting requirements, and protection of customer 

funds, including Commission Regulations 38.605 and 1.52 and those Commission Regulations 

specified herein.

(a) Any Participant or Clearing Member subject to Commission Regulation 

1.10 - Financial Reports of Futures Commission Merchants and Introducing Brokers- that 
25

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

violates Commission Regulation 1.10 shall be deemed to have violated this Rule 304(a). A 

copy of any notice or written report that a Participant or Clearing Member is required to 

file with the Commission pursuant to Commission Regulation 1.10 must also be filed with 

the Exchange within the time periods proscribed for such filing or delivery in CFTC 

Regulation 1.10.

(b) Any Participant or Clearing Member subject to Commission Regulation 

1.11 – Risk Management Program for Futures Commission Merchants- that violates 

Commission Regulation 1.11 shall be deemed to have violated this Rule 304(b). 

(c) Any Participant or Clearing Member subject to Commission Regulation 

1.12 - Maintenance of Minimum Financial Requirements by Futures Commission 

Merchants and Introducing Brokers- that violates Commission Regulation 1.12 shall be 

deemed to have violated this Rule 304(c). A copy of any notice or written report that a 

Participant or Clearing Member is required to file with the Commission pursuant to 

Commission Regulation 1.12 must also be filed with the Exchange within the time periods 

proscribed for such filing or delivery in CFTC Regulation 1.12.

(d) Any Participant or Clearing Member subject to Commission Regulation 

1.17- Minimum Financial Requirements for Futures Commission Merchants and 

Introducing Brokers- that violates Commission Regulation 1.17 shall be deemed to have 

violated this Rule 304(d). 

(e) Any Participant or Clearing Member subject to Commission Regulation 

1.18- Records for and relating to Financial Reporting and Monthly Computation by 

Futures Commission Merchants and Introducing Brokers- that violates Commission 

Regulation 1.18 shall be deemed to have violated this Rule 304(e). 

(f) Any Participant or Clearing Member subject to Commission Regulation 

1.20 – Futures Customer Funds to Be Segregated and Separately Accounted For- that 

violates Commission Regulation 1.20 shall be deemed to have violated this Rule 304(f). 

(g) Any Participant or Clearing Member subject to Commission Regulation

1.21- Care of Money and Equities Accruing to Customers- that violates Commission 

Regulation 1.21 shall be deemed to have violated this Rule 304(g). 

(h) Any Participant or Clearing Member subject to Commission Regulation 

1.22- Use of Futures Customer Funds Restricted- that violates Commission Regulation 

1.22 shall be deemed to have violated this Rule 304(h).

(i) Any Participant or Clearing Member subject to Commission Regulation 

1.23- Interest of Futures Commission Merchants in Segregated Futures Customer Funds; 

Additions and Withdrawals- that violates Commission Regulation 1.23 shall be deemed to 

have violated this Rule 304(i). 

(j) Any Participant or Clearing Member subject to Commission Regulation 

1.24- Segregated Funds; Exclusions Therefrom- that violates Commission Regulation 1.24 

shall be deemed to have violated this Rule 304(j). 
26

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(k) Any Participant or Clearing Member subject to Commission Regulation 

1.25- Investment of Customer Funds- that violates Commission Regulation 1.25 shall be 

deemed to have violated this Rule 304(k). 

(l) Any Participant or Clearing Member subject to Commission Regulation 

1.26- Deposit of Instruments Purchased with Futures Customer Funds- that violates 

Commission Regulation 1.26 shall be deemed to have violated this Rule 304(l). 

(m) Any Participant or Clearing Member subject to Commission Regulation 

1.27- Record of Investments- that violates Commission Regulation 1.27 shall be deemed 

to have violated this Rule 304(m). 

(n) Any Participant or Clearing Member subject to Commission Regulation 

1.28- Appraisal of Instruments Purchased with Customer Funds- that violates Commission 

Regulation 1.28 shall be deemed to have violated this Rule 304(n). 

(o) Any Participant or Clearing Member subject to Commission Regulation 

1.29- Gains and Losses Resulting from Investment of Customer Funds- that violates 

Commission Regulation 1.29 shall be deemed to have violated this Rule 304(o).

(p) Any Participant or Clearing Member subject to Commission Regulation 

1.30- Loans by Futures Commission Merchants; Treatment of Proceeds- that violates 

Commission Regulation 1.30 shall be deemed to have violated this Rule 304(p). 

(q) Any Participant or Clearing Member subject to Commission Regulation 

1.31- Regulatory Records; Retention and Production- that violates Commission 

Regulation 1.31 shall be deemed to have violated this Rule 304(q).

(r) Any Participant or Clearing Member subject to Commission Regulation 

1.32- Reporting of Segregated Account Computation and Details Regarding the Holding 

of Futures Customer Funds- that violates Commission Regulation 1.32 shall be deemed to 

have violated this Rule 304(r).

Rule 305 Duties and Responsibilities of Participants

(a) Each Participant shall, and shall cause its Authorized Users to:

(i) access the Exchange in a responsible manner and not for any improper 

purpose;

(ii) access the Exchange only to conduct business that is subject to the Rules 

and the Exchange Requirements and in a manner consistent with the 

Rules and the Exchange Requirements;

(iii) comply with the Rules and the Exchange Requirements and act in a 

manner consistent with the Rules and the Exchange Requirements;

(iv) comply with the rules of the Clearing House that accepts for clearing a 
27

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Contract traded by the Participant on the Exchange, to the extent 

applicable to such Participant and such Contract;

(v) observe high standards of integrity, market conduct, commercial honor, 

fair dealing, and just and equitable principles of trade while conducting 

or seeking to conduct any business connected with or concerning the 

Exchange;

(vi) not knowingly mislead or conceal any material fact or matter in any 

dealings or filings with the Exchange or in connection with a 

Disciplinary Action;

(vii) cooperate promptly and fully with the Exchange in any investigation, 

inquiry, audit, examination or proceeding regarding compliance with 

the Rules or any Disciplinary Action or arbitration;

(viii) comply with any order issued by the Exchange;

(ix) employ practices to monitor and enforce compliance with risk limits 

(x) keep all User IDs, account numbers and passwords related to the 

Exchange confidential;

(xi) keep, or cause to be kept, complete and accurate books and records, 

including, without limitation, all books and records required to be 

maintained pursuant to the Applicable Law, for at least five (5) years, 

and make such books and records available for inspection by a 

representative of the Exchange, the CFTC or the U.S. Department of 

Justice; and

(xii) operate electronic trading systems and conduct activity on the Exchange 

in a manner that is reasonably intended to prevent, detect, and mitigate 

market disruptions or system anomalies associated with electronic 

trading.

(b) In addition to the requirements of Rule 305(a), each Participant shall employ 

practices to monitor and enforce compliance with its internal risk limits and shall be 

responsible for all Orders and Transactions effected on the Exchange by or for the account 

of such Participant, its Authorized Users or by any Person using its or their User IDs.

Rule 306 Authorized Users

(a) All Participants must have at least one Authorized User.

(b) A Participant who is not a natural Person must designate one of its 

employees as an Authorized User.

(c) By agreeing to become an Authorized User, an individual agrees to be 
28

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

bound by the duties and responsibilities of an Authorized User set out in Rule 307 and to 

be subject to, and comply with Applicable Law and the Rules.

(d) To designate an Authorized User, a Participant must follow the procedures 

established by the Exchange. The Exchange may establish criteria that individuals must 

fulfill to become an Authorized User. Without limiting the generality of the foregoing, each 

Participant will ensure on an ongoing basis that (i) none of its Authorized Users is subject 

to a disqualification pursuant to any Applicable Law (unless an appropriate exemption has 

been obtained with respect thereto) and (ii) each of its Authorized Users is technically 

proficient and conducts its business in a fair and equitable manner.

(e) The Exchange will promptly notify a Participant in writing of the approval 

of designated Authorized User(s) or if the Exchange declines to approve the nomination of 

an Authorized User.

(f) The Exchange will maintain a list of all designated Authorized Users for 

each Participant.

(g) The Exchange may, in its sole discretion and/or pursuant to CEA Section 

8a(2), revoke or suspend the designation of an individual as an Authorized User and shall 

promptly notify the Participant and its Clearing Member of such action.

(h) To request the termination of the designation of an individual as an 

Authorized User, the Participant must follow the procedures established by the Exchange. 

The Exchange may, in its sole discretion, refuse to accept a request to terminate the 

registration of an Authorized User or may postpone the effective date of the termination of 

registration if the Exchange considers it necessary for the protection of the Participant or 

in the Exchange’s best interest. Based on the information provided to, and other 

information gathered by, the Exchange regarding the request to terminate the registration 

of an Authorized User, the Exchange will determine whether to:

(i) accept the request to terminate such registration;

(ii) postpone the effective date of termination of the registration; and/or

(iii) impose any terms or conditions before or after the effective date of 

termination of the registration.

Rule 307 Duties and Responsibilities of Authorized Users

(a) By agreeing to act as an Authorized User, such Person agrees to be bound 

by the duties and responsibilities of an Authorized User and to be subject to, and comply 

with, the Rules.

(b) An Authorized User must:

(i) ensure that activity conducted under its User ID complies with 

Applicable Law and the Rules;
29

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(ii) have the authority, at the Exchange’s request, to adjust or withdraw any 

Order submitted under such User ID;

(iii) have and maintain during all necessary regulatory approvals and/or 

licenses to operate as an Authorized User;

(iv) cooperate promptly and fully with the Exchange in any investigation, 

inquiry, audit, examination or proceeding regarding compliance with 

the Rules or any Disciplinary Action or arbitration proceeding;

(v) comply with any order issued by the Exchange; and

(vi) agree to such other terms and conditions as may be established by the 

Exchange from time to time.

Rule 308 Clearing Members Accessing the Exchange

A Clearing Member may trade an account on behalf of a Participant hereunder solely for 

the purpose of liquidating Contracts and any resulting positions previously submitted to the 

Clearing House for the account of such Clearing Member on behalf of a Participant that has failed 

to perform its obligations to the Exchange or such Clearing Member (to the extent applicable).

Rule 309 Required Notices

(a) Each Participant shall immediately notify the Exchange upon becoming 

aware of any of the following events:

(i) any material changes to the information provided to the Exchange by 

the Participant;

(ii) any damage to, or failure or material inadequacy of, the systems, 

facilities or equipment of the Participant used to effect Transactions on 

the Exchange;

(iii) any refusal of admission to, or withdrawal by the Participant of any 

application for membership in, any Self- Regulatory Organization;

(iv) any denial or withdrawal of an application for registration or license by 

or from any Governmental Authority, and any revocation, suspension or 

conditioning of a registration or license granted by any Governmental 

Authority;

(v) the commencement of any judicial or administrative proceeding against 

the Participant by a Governmental Authority or the imposition of any 

fine, cease and desist order, denial of trading privileges, censure or other 

sanction or remedy (whether through an adverse determination,

voluntary settlement or otherwise) imposed by any Governmental 

Authority;
30

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(vi) the indictment or conviction of, or any confession of guilt or plea of 

guilty or nolo contendere by, the Participant or any of its officers for any 

felony or misdemeanor involving, arising from, or related to, the 

purchase or sale of any commodity, security, futures contract, option or 

other financial instrument, or involving or arising from fraud or moral 

turpitude; and

(vii) the Insolvency of the Participant or any of its Affiliates.

(b) Each Participant that is not a natural person shall notify the Exchange at 

least ten business days prior to any merger, sale or transfer of substantially all of its assets, 

acquisition, consolidation, combination, sale or other material change of ownership.

(c) Nothing in this Rule 309 is intended to substitute for or limit any other 

reporting obligations that a Participant may have to the Exchange or any regulatory agency 

or Self-Regulatory Organization.

Rule 310 Account Administrators

(a) Each Participant shall appoint at least one Account Administrator, who shall 

(i) be responsible for monitoring the Participant’s participation on the Exchange, the 

compliance of the Participant with the Rules and communication with the Exchange, and 

(ii) be entitled to access the Exchange for risk management, audit and other back-office 

purposes as specified by the Exchange from time to time.

(b) A Participant shall promptly notify the Exchange of a change in the identity 

of any of its Account Administrators.

Rule 311 Access Requirements and Terms

(a) Access to the Exchange will be Internet-based. Participant accounts will be 

issued User IDs, passwords, and digital certificates for secure access. The Participant is 

responsible for the security of these items, and any misuse is the responsibility of the 

Participant.

(b) Certificates, User IDs, and passwords are for the Participant’s use only and 

shall not be shared with other parties.

(c) A Participant must notify the Exchange immediately upon any suspicion of 

theft of a password, User IDs or certificate, or any unauthorized access.

Rule 312 Dues and Fees

Exchange dues and fees are posted at the Exchange Website, which may be amended

from time to time without advance notice to any person.

Rule 313 Inspections by the Exchange
31

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(a) The Exchange and the Regulatory Services Provider, if any, shall have the 

right, in connection with determining whether the Rules are being, will be, or have been 

complied with by the Participant, to:

(i) inspect systems, equipment and software operated by the Participant in 

connection with business that is or may be subject to the Rules, 

wherever located;

(ii) access the systems, equipment, software, and the premises on which the 

systems, equipment, and software are located, any data stored in any of 

the systems or equipment, during the regular business hours of the 

Exchange, without prior notice to the Participant; and/or

(iii) copy and/or reproduce any data to which the Exchange has access under 

this rule.

(b) Each Participant shall provide the Regulatory Services Provider with the 

same access as it would be required to provide to the Exchange.

(c) The Exchange may require a Participant to furnish such information 

concerning the Participant’s business that is subject to the Rules of the Exchange as the 

Exchange deems necessary to enable the Exchange to perform its obligations under 

Applicable Law, including information relating to (i) Contracts executed on the Exchange 

and in related derivatives markets, including in the products underlying those Contracts, 

and (ii) information requested by a Governmental Authority relating to the Exchange’s 

business as a designated contract market and/or the Exchange’s compliance with 

Applicable Law that the Exchange believes is maintained by, or otherwise in the possession 

of, a Participant.

Rule 314 Incentive Programs

At its discretion, Bitnomial Exchange may offer programs that provide incentives to 

Participants, Clearing Members, and Customers willing to increase market liquidity and promote 

robust markets. These programs may offer incentives, as determined by the Exchange.

CHAPTER 4

BUSINESS CONDUCT AND TRADING PRACTICES

Rule 401 Business Conduct

(a) Regulatory Compliance. No Participant or any of its Authorized Users shall 

engage in conduct that is a violation of the CEA or CFTC Rules, the Rules of the Exchange 

or the rules of the Clearing House and will conduct its business in accordance with all 

applicable laws, regulations, tariffs and rules, and in good faith, with a commitment to 

honest dealing.

(b) Fraud. No Participant or any of its Authorized Users shall engage or attempt 
32

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

to engage in any fraudulent act or engage or attempt to engage in any scheme to defraud, 

deceive, trick or mislead in connection with or related to any Exchange or Clearing House 

activity.

(c) Good Faith. No Participant or any of its Authorized Users shall knowingly 

enter, or cause to be entered, bids or offers into the system other than in good faith for the 

purpose of executing bona fide transactions.

(d) Transaction Integrity. Participants and their Authorized Users shall honor 

the terms and conditions of the Participant Agreement and will transact in Contracts only 

for legitimate business purposes, such as managing business risk or that otherwise have 

economic substance.

(e) Antitrust. No Participant or any of its Authorized Users shall collude with 

other market participants to affect the price or supply of any commodity or Contracts, or 

otherwise unlawfully restrain competition.

(f) Risk Management. Participants shall adopt, adhere to and enforce risk 

management and other policies and structures that are designed to ensure that trading 

activities are conducted in accordance with the Rules.

Rule 402 General Trading Practices

(a) Skills. Each Participant and Authorized User is responsible for 

understanding all factors that influence the markets in Contracts in order to maintain a high 

level of competence in its trading. 

(b) Rules. The Exchange will provide updates and amendments to these Rules 

and notices or advisories regarding the application and interpretation of these Rules. It is 

the obligation of each Participant and its Authorized User to ensure these documents are 

read and understood. It shall be prohibited for a Participant and its Authorized Users to 

violate any Rule or any agreement made with the Exchange, or to engage in fraud, 

dishonorable or dishonest conduct, or conduct which is inconsistent with just and equitable 

principles of trade, even where a Rule does not specifically reference “Participant” or 

“Authorized User.”

(c) Price Manipulation, Fictitious, Non-Competitive or Artificial Transactions.

No Participant or Authorized User shall (i) effect or induce (or attempt to effect or induce) 

the purchase or sale of any Contract for the purpose of creating or inducing a false, 

misleading, or artificial appearance of activity in such Contract, or for the purpose of 

unduly or improperly influencing the market price of such Contract or for the purpose of 

making a price which does not reflect the true state of the market in such Contract, (ii) 

effect or induce (or attempt to effect or induce) any conduct proscribed by CEA section 

9(a)(2) in any Contract. No Participant or Authorized User shall arrange and execute 

simultaneous offsetting buy and sell Orders in a Contract with the intent to artificially affect 

reported revenues, trading volumes or prices.
33

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(d) Market Manipulation. No Participant or Authorized User shall (i) attempt 

to manipulate or manipulate the market in any Contract or (ii) engage in any conduct 

proscribed by CEA section 9(a)(2). No Participant or Authorized User shall directly or 

indirectly participate in or have any interest in the profit of a manipulative operation or 

knowingly manage or finance a manipulative operation. This includes any pool, syndicate,

or joint account, whether in corporate form or otherwise, organized or used intentionally 

for the purposes of unfairly influencing the market price of any Contract.

(e) Market Disruption. Orders entered on the Exchange for the purpose of 

upsetting the equilibrium of the market in any Contract or creating a condition in which 

prices do not or will not reflect fair market values are prohibited, and any Participant or 

Authorized User who makes or assists in entering any such Order with knowledge of the 

purpose thereof or who, with such knowledge, in any way assists in carrying out any plan 

or scheme for the entering of any such Order, will be deemed to have engaged in an act 

detrimental to the Exchange.

(f) Disruptive Trading Practices.

(i) No Participant or Authorized User shall knowingly enter, or cause to be 

entered, bids, or offers into the Trading Platform other than in good 

faith for the purpose of executing bona fide transactions.

(ii) No Participant or Authorized User shall enter an order or market message, 

or cause an order or market message to be entered, with:

(A)The intent to cancel the order before execution, or modify the 

order to avoid execution;

(B) The intent to mislead other market participants;

(C) The intent to overload, delay, or disrupt the systems of the 

Exchange or other market participants;

(D)The intent to disrupt the orderly conduct of trading, or the fair 

execution of transactions; and/or

(E) Reckless disregard for the adverse impact of the order or market 

message.

(iii) No Participant or Authorized User shall knowingly enter any bid or offer 

for the purpose of making a market price which does not reflect the 

true state of the market, or knowingly enter, or cause to be entered 

bids or offers other than in good faith for the purpose of executing 

bona fide transactions.

(g) Prohibition on the Use or Attempted use of Manipulative and Deceptive 

Devices. No Participant or Authorized User shall:
34

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(i) use or employ, or attempt to use or employ, any manipulative device, 

scheme, or artifice to defraud;

(ii) make, or attempt to make, any untrue or misleading statement of a material 

fact or to omit to state a material fact necessary in order to make 

the statements made not untrue or misleading;

(iii) engage, or attempt to engage, in any act, practice, or course of business, 

which operates or would operate as a fraud or deceit upon any 

person; or

(iv) deliver or cause to be delivered, or attempt to deliver or cause to be delivered 

a false or misleading or inaccurate report concerning market 

information or conditions that affect or tend to affect the price of 

any commodity in interstate commerce, knowing, or acting in 

reckless disregard of the fact that such report is false, misleading 

or inaccurate. Notwithstanding the foregoing, no violation of this 

subsection shall exist where the person mistakenly transmits, in 

good faith, false or misleading or inaccurate information to a price 

reporting service.

(h) Gratuities. Except with the prior written approval of the Chief Regulatory 

Officer, no Participant or Authorized User shall, directly or indirectly, give or permit to be 

given anything of value, including gifts and gratuities, to an Exchange Official in an 

amount that exceeds the maximum value permitted by the Exchange’s gifts and 

entertainment policy.

(i) Rumors. No Participant or Authorized User shall knowingly circulate, in

any manner, rumors of a character which might affect market conditions in any Contract; 

provided, however, that this shall not prohibit discussion of unsubstantiated information, 

so long as its source and unverified nature are disclosed.

(j) False Reports. No Participant or Authorized User shall make any knowing 

misstatement of a material fact to the Exchange, any Exchange Official, or any Board 

committee or Exchange panel. 

(k) Wash Sales. No Participant or Authorized User shall place or accept buy 

and sell Orders in the same product and expiration month, where known or reasonably 

should know that the purpose of the Orders is to avoid taking a bona fide market position 

exposed to market risk (transactions commonly known or referred to as wash sales). Buy 

and sell Orders by Participants or Authorized Users that are entered with the intent to negate 

market risk or price competition shall be deemed to violate the prohibition on wash trades. 

Additionally, no Participant or Authorized User shall knowingly execute or accommodate 

the execution of such Orders by direct or indirect means.

(l) Financial Condition. No trading will be conducted for the purpose of 

misrepresenting the financial condition of a Participant or Authorized User.
35

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(m) Acts Detrimental to the Exchange. No Participant or Authorized User shall 

engage in any act that is detrimental to the Exchange. 

(n) Misuse of Bitnomial Exchange. No Participant or Authorized User shall 

permit the unauthorized use of the Exchange, to assist any Person in obtaining unauthorized 

access to the Exchange, to trade on the Exchange without an agreement and an established 

account with a Clearing Member, to alter the equipment associated with the Exchange 

(except with the Exchange’s consent), to interfere with the operation of the Exchange, to 

intercept or interfere with information provided thereby, or in any way to use the Exchange 

in a manner contrary to the Rules.

(o) Supervision. A Participant shall establish, maintain and administer 

reasonable supervisory procedures to monitor the compliance of Authorized Users and 

supervised persons with the Rules and any applicable provisions of the CEA and CFTC 

Rules and such Participant may be held accountable for the actions of such Authorized 

Users or supervised persons.

(p) Disclosing Order Information. No Participant or Authorized User shall 

disclose an Order to buy or sell, except to a designated Exchange Official or the CFTC or 

as necessary to efficiently execute the Order nor shall any Participant solicit or induce 

another Participant or Authorized User to disclose Order information. No Person shall take 

action or direct another to take action based on non-public Order information, however 

acquired. The mere statement of opinions or indications of the price at which a market may 

open or resume trading does not constitute a violation of this rule.

Rule 403 Pre-Arranged, Pre-Negotiated and Noncompetitive Trades Prohibited

(a) No Person shall prearrange or pre-negotiate any purchase or sale or 

noncompetitively execute any Transaction, except as provided in Rule 403(b).

(b) Participants and Authorized Users may engage in pre-execution 

communications with regard to transactions executed or to be executed on the Exchange if 

one party (the first party) wishes to be assured that a contra party (the second party) will 

take the opposite side of the first party’s Order, subject to the following restrictions:

(i) A party may not engage in pre-execution communications with other 

market participants on behalf of another party unless the party for whose 

benefit the trade is being made has previously consented to permit such 

communications.

(ii) Parties to pre-execution communications shall not disclose to a nonparty the details of such communications or enter an Order to take 

advantage of information conveyed during such communications except 

in accordance with this rule.

(iii) The first party’s Order must be entered into the Exchange first, and the 

second party’s Order may not be entered into the Exchange until a 
36

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

period of fifteen (15) seconds has elapsed from the time entry of the first 

Order.

Rule 404 Disciplinary Procedures; Termination of Connection

(a) All access denials, suspensions, expulsions and other restrictions imposed 

upon a Participant or any of its Authorized Users by the Exchange pursuant to a 

Disciplinary Action shall restrict with equal force and effect, access to, and use of, the 

Exchange.

(b) The Exchange, at its sole discretion, shall have the right to summarily 

terminate the connection of any Participant or the access of any Trading Account or User 

ID to the Exchange. Additionally, the Exchange, at its sole discretion, shall have the right 

to direct a Participant to immediately terminate access to the Exchange any of such 

Participant’s Authorized Users.

Rule 405 Position Limits

(a) The Exchange may adopt and require Participants to adhere to position 

limits for Contracts. If so adopted, the Exchange may, in its sole discretion, grant 

exemptions from position limits for bona fide hedging transactions and positions in 

accordance with CFTC Rules. A Person seeking an exemption from position limits must 

apply to the Compliance Department in the form and manner required by the Exchange.

(b) The CFTC may also from time to time establish position limits for Contracts 

traded pursuant to these Rules. For any such Contract subject to a position limit set by the 

CFTC, the Exchange shall not set its position limit at a level higher than the CFTC’s limit.

(c) The position limit levels for those Contracts with position limits are set forth 

in the product rules.

Rule 406 Position Accountability

A Person who holds or controls aggregate positions in a Contract in excess of the position 

accountability levels relating to that Contract set out in the product rules shall be subject to the 

following provisions:

(a) Such Person shall provide, in a timely manner upon request by the 

Compliance Department, information regarding the nature of the position, trading strategy, 

and hedging information if applicable.

(b) Such Person shall, if so ordered by the Compliance Department, acting in 

its discretion, liquidate or not increase further the positions which exceed such levels.

(c) Such positions must be initiated and liquidated in an orderly manner.

(d) This Rule shall not limit the jurisdiction of the Exchange to take action that 

it determines necessary or appropriate in respect of any positions on the Exchange.
37

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 407 Reports of Large Positions

(a) Upon request, Clearing Members must provide the Compliance Department 

with information, in a form and manner acceptable to the Compliance Department,

identifying the owner, any controlling parties and any additional required information for 

each reportable account.

(b) Each Clearing Member shall submit to the Exchange (i) a daily report of all 

positions that exceed the reportable position levels set forth in the product rules and (ii) a 

copy of the CFTC Form 102 filed by the Participant or Clearing Member with the CFTC 

for such Participant’s or Clearing Member’s Customers’ reportable accounts. The Form 

102 shall be submitted to the Exchange no later than the Business Day following the date 

on which the account becomes reportable.

(c) Positions in Exchange products at or above the reportable level set forth in 

the product rules trigger reportable status. For a Participant in reportable status, all 

positions, regardless of size, in relevant Exchange products must be reported to the 

Exchange, in addition to any regulatory obligations a Participant may have separate and 

apart from these Rules.

Rule 408 Aggregation of Positions

For purposes of Rule 405, Rule 406 and Rule 407, positions in Contracts shall be 

aggregated in accordance with CFTC Rules.

Rule 409 Reporting Levels, Position Accountability Levels and Position Limits

The reporting levels, position accountability levels and position limits for Contracts are 

found in the product rules.

Rule 410 Information Disclosure and Documentation

Markets depend on trust in the accuracy of market information provided by Participants 

and in the transparency of market behavior of all market participants.

Participant will act in accordance with these practices for information disclosure and 

documentation with regard to its Exchange activity:

(a) Provide information relating to Contracts to regulators in compliance with 

all applicable rules and requirements and continue to cooperate with regulators as 

reasonably necessary to assist in their understanding of the markets.

(b) Ensure that any information disclosed to the Exchange is accurate and 

consistent. No existing or prospective Participant shall make any false statements or 

misrepresentations in any application, report or other communication to the Exchange.

Rule 411 Compliance
38

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Each Participant will have a compliance program commensurate with the size and scope 

of its trading activities on the Exchange and designed to ensure appropriate, timely and ongoing 

review of trading practices and compliance with the Rules.

Participant will act in accordance with these practices for compliance and monitoring with 

regard to its Exchange activity:

(a) Provide for proper training of personnel on the provisions of the Rules.

(b) Maintain internal policies and procedures to promote compliance with the 

Rules.

(c) Promptly disclose to the Exchange the details of any violations of the Rules 

involving Participant’s activities on the Exchange or provision of market information to 

the Exchange or any of its Affiliates.

(d) Provide an environment that encourages employees within the Participant’s 

organization to engage in safe and confidential discussions and to disclose to senior 

management any trading practices that might violate the Rules.

(e) Require any consultant, contractor and/or subcontractor to disclose all 

financial affiliations and conflict of interests with Participants, the Exchange and its 

affiliates. Ensure that consultants, contractors or subcontractors do not cause any disclosure 

of information in violation of any Rule and that confidentiality agreements are in effect 

where appropriate.

(f) Establish clear lines of accountability for the Participant’s trading practices, 

including provisions relating to the responsibilities of corporate officers, with appropriate 

oversight by the Participant’s board of directors or other senior corporate management 

committee.

CHAPTER 5

MARKET OPERATIONS

Rule 501 Market Hours and Operation

(a) Market Hours. The Exchange will be open for trading on all business days 

during the market hours specified in the trading calendar, which is available at the 

Exchange Website.

(b) Procedures. With respect to trading on or through the Exchange, the 

Exchange may adopt, without limitation, procedures relating to Transactions in Contracts 

and trading on the Exchange, including procedures to:

(i) disseminate the prices of bids and offers and the prices of trades in 

Contracts;

(ii) record and account for Contracts;
39

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(iii) perform market surveillance and regulation on matters affecting 

Contracts;

(iv) establish limits on the number and/or size of Orders that may be 

submitted by a Participant or Authorized User to the Exchange;

(v) establish position limits on the number of Contracts that can be held by 

a Participant or customer on the Exchange;

(vi) establish limits on the number of messages a Participant can send to the 

Exchange for a Contract in a given time frame;

(vii) establish a limit on the maximum daily price fluctuations for any 

Contracts and provide for any related restriction or suspension of trading 

in such Contracts; and

(viii) require a suspended or expelled Participant, or a Participant with 

restricted trading rights, to cause Contracts to be executed for such 

Participant’s account to reduce or eliminate such Participant’s open 

positions.

(c) Market Suspension and Emergencies. The Exchange reserves the right to 

adjust Trading Hours and suspend market activities for all or a subset of Contracts in the 

case of extenuating market circumstances which include, but are not limited to, any 

occurrence or circumstance which threatens or may threaten such matters as the fair and 

orderly trading in, or the liquidation of or delivery pursuant to, any Contracts, and which 

is determined by the Exchange to require immediate action.

During an Emergency, the Board may implement temporary emergency procedures 

and rules (“Emergency Rules”), subject to the applicable provisions of the CEA and CFTC 

Rules. Emergency Rules may require or authorize the Exchange, the Board, any committee 

of the Board, the Chief Executive Officer or, in his or her absence, any other Officer to 

take actions necessary or appropriate to respond to the Emergency, including, but not 

limited to, the following actions:

(i) suspending or curtailing trading or limiting trading to liquidation only 

(in whole or in part);

(ii) extending or shortening the last trading date for Contracts;

(iii) providing alternative settlement mechanisms;

(iv) ordering the liquidation or transfer of Transactions, the fixing of a 

Settlement Price, or the reduction of positions;

(v) extending, limiting or changing the Trading Hours;

(vi) temporarily modifying or suspending any provision of the Rules;
40

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(vii) requiring Participants to meet special margin requirements;

(viii) imposing or modifying trading limits, price limits and/or position limits; 

and/or

(ix) any other action as directed by the CFTC.

Before any Emergency Rule may be adopted and enforced, a required vote of the 

Board must approve the enforcement of such Emergency Rule at a duly convened meeting. 

Directors may attend such a meeting by teleconference. If the Chief Executive Officer, or 

another authorized Officer, determines that Emergency Rules must be implemented with 

respect to an Emergency before a meeting of the Board can reasonably be convened, then 

the Chief Executive Officer or such Officer shall have the authority, without Board action,

to implement any Emergency Rules with respect to such Emergency that he or she deems 

necessary or appropriate to respond to such Emergency. In such circumstances, the Chief 

Executive Officer or such Officer must convene a meeting as soon as practicable.

Whenever the Exchange, the Board, any committee of the Board, the Chief 

Executive Officer or authorized Officer takes actions necessary or appropriate to respond 

to an Emergency a duly authorized representative of the Exchange, where possible, will 

post an announcement in a notice to Participants. When the Board, any committee of the 

Board, the Chief Executive Officer or other authorized Officer determines that the 

Emergency has been reduced sufficiently to allow the Exchange to resume normal 

functioning, any such actions responding to an Emergency will be terminated.

The Exchange will notify the CFTC prior to implementing, modifying or 

terminating an Emergency Rule. If such prior notification is not practicable, the Exchange 

will notify the CFTC at the earliest possible time after implementation, but in no event 

more than twenty-four hours after implementation.

Upon taking any action in response to an Emergency, the Exchange will document 

the decision-making process related to such action. Such documentation will be kept for at 

least five (5) years following the date on which the Emergency ceases to exist or to affect 

the Exchange, and all such documentation will be provided to the CFTC upon request.

Rule 502 Contracts Offered

(a) Contracts/Expiries. Contract Specifications are set forth on the Exchange 

website. Contract Specifications are subject to revision or amendment from time to time. 

Revised Contract Specifications may be listed for trading by self-certification in 

accordance with CFTC Rule 40.2, sent electronically to the CFTC for receipt by the open 

of business on the business day preceding the contract’s listing, which shall include: (i) a 

description of the Contract and its rules related to its terms and conditions, (ii) the intended 

listing date, (iii) certification by the Exchange that the Contract to be listed complies with 

the CEA and the CFTC Rules thereunder, (iv) a concise explanation and analysis of the 

product and its compliance with applicable provisions of the CEA, including core 

principles, and the CFTC Rules thereunder, including supporting documentation, and (v) 
41

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

certification that the Exchange posted a notice of pending product certification with the 

Commission on its website with a copy of the submission, with confidential treatment 

requests as appropriate. The Exchange will permit trading only in Contracts that are not 

readily susceptible to manipulation.

(b) To offer new products, the Exchange may request that the CFTC approve a 

new product prior to listing the product for trading. The submission to the CFTC shall be 

filed electronically in accordance with CFTC Rules 40.3 and include: (1) a description of 

the product with the rules that set forth the Contract’s terms and conditions, (2) an 

explanation and analysis of the product and its compliance with applicable provisions of 

the CEA, including core principles, and the CFTC Rules thereunder, including 

documentation relied upon to establish the basis for compliance with the applicable law, or 

incorporate information contained in such documentation, with appropriate citations to data 

sources, (3) description of any agreements or contracts entered into with other parties that 

enable the Exchange to carry out its responsibilities, (4) certification that the Exchange 

posted on its website a notice of its request for CFTC approval of the new product with a 

copy of the submission, (5) a request for confidential treatment as permitted under CFTC 

Rule 40.8, if appropriate, and (6) the filing fee required in accordance with CFTC Rules. If 

requested by CFTC staff, the Exchange will provide evidence, information or data 

demonstrating that the Contract meets, initially or on a continuing basis, the requirements 

of the CEA, or other requirements for designation or registration under the CEA or the 

CFTC Rules thereunder. The Exchange shall submit the requested information by the open 

of business on the date that is two business days from the date of request by CFTC staff, or 

at the conclusion of such extended period agreed to by CFTC staff after timely receipt of a 

written request from the Exchange.

Rule 503 User IDs

(a) Each Participant must request one or more Trading Account ID as needed 

to accommodate the nature and volume of the Participant’s business.

(b) Each Participant and its Authorized Users must have a unique, Exchangeassigned, registered User ID.

(c) Each Order entered will track to a User ID that identifies the Authorized 

User that entered the Order.

(d) No Person may use a User ID to place any Order except as permitted by 

these Rules, nor may any Person knowingly permit or assist the unauthorized use of a User 

ID. Each Participant and Authorized User shall ensure that no User ID is used by any 

Person not authorized by these Rules. Each Participant that is not an individual must have 

in place policies and procedures acceptable to the Exchange to ensure the proper use and 

protection of User IDs.

(e) Each Participant shall ensure the accuracy of the registration information of 

its Authorized Users at all times.
42

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(f) Each Participant shall be solely responsible for controlling and monitoring 

the use of all User IDs issued to it and its Authorized Users of the Exchange.

(g) Each Participant shall notify the Exchange promptly upon becoming aware 

of:

(i) any unauthorized disclosure or use of any User ID assigned to it or any 

of its Authorized Users and of any other reason for deactivating a User 

ID; and

(ii) any unauthorized access to the Exchange by any Authorized User or by 

any Person using a User ID assigned to such Participant or Authorized 

User.

(h) Each Participant and its Authorized Users shall be bound by any actions 

taken through the use of a User ID assigned to such Participant or Authorized User (other 

than any such actions resulting from the fault or negligence of the Exchange), including 

the submission of Orders and/or execution of Transactions, whether or not such actions 

were taken or authorized by such Participant or Authorized User, as the case may be.

(i) Each Participant must be able to identify all Orders submitted under an

Authorized User’s respective User ID at all times.

Rule 504 Exchange Trading

(a) Order Requirements. To be valid, an Order must consist of the following 

information:

(i) Contract: The Order must be submitted for a Contract for which Orders 

may be placed.

(ii) Order ID: Must be present for identification purposes.

(iii) Side: Must be either buy or sell.

(iv) Quantity: Number of Contracts to be traded. Must be a positive integer 

greater than zero and less than maximum Order Quantity as defined in 

Contract Specifications.

(v) Price: As defined by Contract Specification. 

(vi) Time-In-Force: Day or Immediate-or-Cancel (“IOC”). Day orders are 

cancelled at the end of the day’s trading session. IOCs are Orders that 

are immediately executed against resting Orders. If the Order cannot be 

fully filled, the remaining Quantity is cancelled

(b) Order Types. The following types of Orders are allowed on the 

Exchange.
43

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(i) Limit Order. Allows the buyer to define the maximum purchase Price

and the seller to define the minimum sale Price for a Contract. If any 

portion of the Order can be matched, it will be immediately executed. 

Buy Limit Orders will only be executed at or below the limit Price. Sell 

Limit Orders will only be executed at or above the limit Price. If a Limit 

Order is not immediately executed, it will remain in the book at the limit 

Price until the Order is either executed, cancelled, or expires at the end 

of the trading session.

(c) Submission. Submission of an Order to the Trading Platform constitutes a 

representation by the submitting Participant that it is acting as principal in respect of such 

Order. Orders may be submitted to the Trading Platform via the Bitnomial Exchange API.

The Exchange reserves the right to temporarily or permanently defer processing 

Orders that may interfere with the proper functioning of the Exchange. For previously 

submitted Orders, additional validation checks may be run to ensure that the Order contents 

are still valid and that the submitting Participant has not been suspended.

The Exchange may not offer all Contracts and Expiries in a particular Contract. 

(d) Order Modification. Previously submitted Orders can be modified at any 

time prior to the Order being fully filled. 

(e) Order Cancellation.

(i) Orders can be cancelled at any time prior to being fully filled. Once an 

Order has been fully filled, an Order cannot be cancelled.

(ii) Orders can be cancelled individually through the Bitnomial Exchange 

API.

(f) Order Submission Period. The Exchange will accept Orders in the time 

period defined in the respective Contract Specification. The Exchange reserves the right to 

modify this schedule. All submissions, modifications or cancellations will receive 

acknowledgement after Exchange processing if they have been accepted.

(g) Trade Matching. The Trade Matching Engine matches and fills Orders using 

a central limit order book (“CLOB”) and a price-time priority algorithm. In the event of 

matching Orders with identical prices, Quantity is filled on a first-in-first-out (FIFO) basis.

(h) Clearing. All matched trades generated by the Trade Matching Engine after 

the application of trade risk limits give rise to binding Exchange Transactions between the 

applicable Participants, which will be automatically submitted to the Clearing House for 

registration and novation, as described in Chapter 8 of these Rules. Further description of 

Clearing House procedures and rules can be found in the Clearing House rulebook. The 

Exchange reserves the right to cancel erroneous trades submitted to the Clearing House in 

accordance with Rule 508.
44

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(i) Trading Information. The Exchange shall make public daily information on 

settlement prices, volume, open interest, and opening and closing ranges for actively traded 

contracts on the contract market. Trading information will be published on the Exchange 

Website at the end of the day.

Rule 505 Block Trades 

(a) The Exchange shall designate the Contracts in which Block Trades shall be 

permitted and determine the minimum block size for such transactions. Block sizes will be 

posted on the Exchange’s website.

(b) The following rules shall govern Block Trades:

(i) A Block Trade must be for a quantity that is at or more than the 

applicable minimum threshold. Orders may not be aggregated to 

achieve the minimum transaction size unless expressly permitted 

under Applicable Law.

(ii) Each Participant entering into a Block Trade must be an Eligible 

Contract Participant, as defined by the CEA, and approved for 

Block Trading by the Exchange. Each Participant must have a 

separate and independent bona fide business purpose for entering a

Block Trade.

(iii) The price at which a Block Trade is executed must be fair and 

reasonable in light of (i) the size of the Block Trade, (ii) the prices 

and sizes of other transactions in the same contract at the relevant 

time, (iii) the prices and sizes of transactions in other relevant 

markets, including the underlying cash market and related futures 

markets, at the relevant time, and (iv) the circumstances of the 

markets or the Participants to the Block Trade.

(iv) Block Trades shall not affect Orders on the Exchange’s regular 

market.

(v) Parties to a Block Trade must ensure that each Block Trade is 

submitted without delay upon execution of the trade, in no event 

later than fifteen (15) minutes after execution via web platform. 

The submission must include the Contract(s), contract month(s), 

price, quantity of the Transaction, time of execution, the respective 

Clearing Member, as well as any other information that the 

Exchange may require. The Exchange shall promptly publish price 

and volume information separately from the reports of Exchange 

transactions.

(vi) Participants involved in the execution of Block Trades must 

maintain electronic records of all such Block Trades, including an 
45

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

electronic timestamp reflecting the date and time each such Order 

was received as well as an electronic timestamp reflecting the date 

and time such Order occurred or was cancelled.

(c) Trade Entry. Block Trades must be submitted via web platform, where both 

approved Participants must confirm the Block Trades, specifying the identical Expiry(s) to 

be traded, the quantity and price, and the buyer and seller.

(d) Modification and Cancelation. Block Trades submitted during the 

Exchange’s Trading Hours, and up to fifteen (15) minutes thereafter, are subject to 

immediate confirmation by the Exchange and may not be modified or cancelled. If 

erroneous information has been submitted as part of a Block Trade, the Exchange should 

be notified as soon as the error is detected. If appropriate, the Exchange will facilitate the 

modification of the trade on a discretionary basis; any trade modification the Exchange 

agrees to submit to the Clearing House will be done during normal Trading Hours.

(e) Risk Limit Validation and Clearing. All Block Trades will be subject to the 

Exchange’s risk controls. Upon verification, the Block Trade will be submitted to the 

Clearing House for novation. The Exchange will make available, via a web interface, 

confirmation that the Block Trade has been accepted.

Rule 505 [Reserved]

Rule 506 Exchange for Related Position [Reserved]

Rule 507 Position Transfers

The Exchange may permit transfer trades to move positions between Trading Accounts for 

administrative purposes (“Position Transfers”) where no change in ownership is involved. 

Participants and Clearing Members must obtain approval from the Exchange for a Position 

Transfer; such approval to be granted at the sole discretion of the Exchange. Position Transfers 

will not contribute to any reported volume, price, or trading range.

Rule 508 Trade Cancellations; Trade Reviews

(a) Trade Cancellation Authority. The Exchange may adjust trade prices or 

cancel (bust) trades when such action is necessary to mitigate market disrupting events 

caused by the improper or erroneous use of the Exchange or by system defects or 

malfunctions. Notwithstanding any other provision of this Rule 508(a), the Exchange may 

adjust trade prices or cancel any trade if the Exchange determines that allowing the trade 

to stand as executed may have a material, adverse effect on the integrity of the market. Any 

decision of the Exchange with respect to an adjustment or cancellation subject to this Rule 

508(a) shall be final.

(b) Review of Trades. The Exchange may review a trade based on its analysis 

of market conditions or a request for review by a user of the Exchange. A request for review 

must be made within five minutes of the execution of the trade. The Exchange shall 

promptly determine whether the trade will be subject to review, and upon deciding to 

review a trade, the Exchange will promptly issue an alert to all Participants on the Exchange 
46

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

indicating that the trade is under review. In the case of Contracts determined by the 

Exchange to be illiquid, the Exchange may initiate a review up to one hour after the 

execution of the trade, and has the authority, but not the obligation, to review trades 

reported more than one hour following execution if it determines that the trade price was 

significantly out of line with fair value. In the course of its review of any trade, the 

Exchange may, but is not obligated to, inform any of the parties to the trade of the identity 

and contact information of any other party to the trade.

Rule 509 Settlement

(a) Daily Settlement. The Exchange will provide the Clearing House with 

Settlement Prices once per day. The Daily Settlement price shall be determined at the end 

of the Daily Settlement Period as defined by the Contract Specification.

(b) Final Settlement. The Exchange will provide the Clearing House with the 

Final Settlement Prices at the end of the Final Settlement Period on the expiration day of 

the Contract. Settlement Prices will be calculated as defined by the Contract Specification. 

The Exchange reserves the right to adjust Daily and Final Settlement Prices as it 

deems necessary based on current market conditions or otherwise.

Rule 510 Recordkeeping; Audit Trail

(a) Each Clearing Member and Participant that accesses the Exchange 

electronically is responsible for maintaining or causing to be maintained a front-end audit 

trail for all electronic Orders, which shall include Order entry, modification, and 

cancellation (the “Audit Trail”) entered into the Bitnomial System by the Participant for 

which the Clearing Member is identified in the order or quote submission as the Clearing 

Member for the execution of the order or quote, including all related modifications and 

cancellations.

(b) Such Audit Trail shall include Orders submitted and the times of Order entry 

and of any Order modification or cancellation. Times that are so captured must not be 

capable of being modified by the Person entering the Order and must reflect all necessary 

data fields specified by the Exchange from time to time. For executed Orders, the Audit 

Trail must record the execution time of the trade along with all award information.

(c) Each Clearing Member and Participant shall maintain such Audit Trail 

information for a minimum of five (5) years and must have the ability to produce Audit 

Trail data in a standard format upon request of the Exchange. Notwithstanding anything to 

the contrary herein, each Participant is required to comply with the provisions of 

Commission Regulation §1.35 as applicable to that Participant.

Rule 511 Information Regarding Orders

(a) The Exchange will make information regarding Orders (including prices bid 

or offered), trades and any other matters it may deem appropriate available to Participants 
47

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

and other Persons at such times and in such manner (whether through the Exchange, 

financial information services or otherwise) as it may consider necessary or advisable from 

time to time.

(b) Each Participant or other Person receiving any such information referred to 

in Rule 511(a) above shall not redistribute such information other than to the extent and in 

the manner as may be expressly permitted by the Exchange in writing from time to time.

Rule 512 Disaster Recovery; Business Continuity

(a) Each Participant shall have written disaster recovery and business 

continuity policies and procedures in place to ensure it is able to perform certain basic 

operational functions in the event of a significant internal or external interruption to its 

operations. At a minimum, the following areas must be addressed in the Participant’s 

policies and procedures:

(i) the Participant must have procedures in place to allow it to continue to 

operate during periods of stress or to transfer accounts to another fully 

operational Participant with minimal disruption to the Exchange.

(ii) the Participant must perform periodic testing of disaster recovery and 

business continuity plans, duplication of critical systems at back up sites 

and periodic back-up of critical information and provide the Exchange 

with information regarding the foregoing upon request; and

(iii) the Participant must maintain and, at the request of the Exchange, 

provide accurate and complete information for its key personnel. A 

Participant must inform the Exchange in a timely manner whenever a 

change to its key personnel is made.

(b) The Exchange may prescribe additional and/or alterative requirements for 

a Participant’s compliance with this rule.

Rule 513 Exchange Messaging Policy

The Exchange enforces a Messaging Policy that limits the number of messages a 

Participant can submit to the Bitnomial Exchange API as defined by the Contract Specifications.

Rule 514 Self-Match Prevention

The Exchange enforces Self-Match Prevention (“SMP”) to protect against self-trading that 

violates the Exchange’s Wash Trade prohibition set out in Rule 402(j). SMP prevents the matching 

of orders with the same Trading Account ID. The Exchange reserves the right to change behavior 

of SMP from time to time.

CHAPTER 6

DISCIPLINE AND ENFORCEMENT
48

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 601 Disciplinary and Enforcement Procedures – General

 All Participants, their Authorized Users, and any Person for whose benefit a transaction has 

been initiated or executed, are subject to the Exchange’s jurisdiction. Any Participant or any other 

person using any of its User IDs that are alleged to have violated, to have aided and abetted a 

violation, to be violating, or to be about to violate, any Rule of the Exchange or applicable law for 

which the Exchange maintains disciplinary jurisdiction is subject to this Chapter 6. No Exchange 

Official will interfere with or attempt to influence the process or resolution of any inquiry, 

investigation, disciplinary proceeding, appeal from a disciplinary proceeding, summary imposition 

of fines, summary suspension or other summary action (collectively, “Disciplinary Action”), 

except to the extent provided under Exchange Rules with respect to a proceeding in which the 

director is a member of the relevant Board of Appeals. A Participant shall be entitled to appear 

personally and may be represented by counsel during any Disciplinary Action pursuant to this 

Chapter 6.

Rule 602 Process Considerations

(a) Compliance Department. The Compliance Department is appointed and 

authorized by the Chief Executive Officer of the Exchange to provide market surveillance,

investigation and enforcement of trading activities on the Exchange to ensure compliance 

with Exchange Rules and applicable laws. The Compliance Department has three primary

functions:

(i) The Surveillance Team is responsible for real-time and post-trade 

surveillance of the Exchange’s trading systems. Members of the 

Surveillance Team respond to real-time alerts to ensure the integrity of 

the markets. The Surveillance Team identifies actions or omissions that 

may indicate a possible basis for finding that a violation of Exchange 

Rules has occurred or will occur.

(ii) Investigations and enforcement are conducted by the Investigation 

Team. The Investigation Team is comprised of Exchange employees 

and/or persons hired on a contract basis, except for Exchange 

Participants or other persons whose interests conflict with enforcement 

duties. The Investigation Team may not operate under the direction or 

control of any person(s) with trading privileges. The Investigation 

Team is authorized, among other things, to:

1) initiate and conduct investigations;

2) prepare investigative reports and make recommendations 

concerning initiating disciplinary proceedings, including any 

charges to be issued;

3) participate in settlement discussions with respondents and

recommend settlement sanctions to the Disciplinary Committee; 
49

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

and

4) prosecute alleged violations within the Exchange’s disciplinary 

jurisdiction.

(iii) The Disciplinary Committee is appointed by the Board at the 

recommendation of the Chief Regulatory Officer and shall be comprised

of not less than three individuals from among Participants and other 

individuals with knowledge and experience in the financial markets, 

who are not involved in the conduct giving rise to the alleged Rule 

violations.

(b) Third-Party Enforcement. The Exchange may delegate any of its rights and 

responsibilities herein to a Regulatory Services Provider.

(c) Expense Liability. At the discretion of the Exchange, any Participant found 

in violation of the Rules may be required to pay to the Exchange any and all expenses 

incurred as a result of the investigation of the violation and prosecution of the Participant. 

This assessment is in addition to any monetary fines imposed for the Rule violation(s).

Rule 603 Disciplinary Matters

(a) Investigations. The Investigation Team will investigate any matter within 

the Exchange’s jurisdiction of which it becomes aware. The Investigation Team will 

commence an investigation upon the receipt of a request from Commission staff or upon 

the discovery or receipt of information by the Exchange that, in the judgment of the 

Surveillance Team, indicates a possible basis for a finding that a violation has occurred or 

will occur. The Investigation Team shall determine the nature and scope of its 

investigations in its sole discretion and will operate independently of the commercial 

interests of the Exchange. Absent mitigating circumstances, the Investigation Team must 

complete its investigation within twelve (12) months after the date the investigation is 

opened. Permissible mitigating circumstances include the complexity of the investigation, 

the number of firms or individuals involved in as potential respondents, the number of 

potential violations to be investigate and the volume of documentation and data that must 

be analyzed.

Upon request by a member of the Investigation Team, a Participant, Authorized 

User and Customer:

(i) is obligated to appear and testify and respond in writing to 

interrogatories within the specified time period in connection with:

1) the Rules;

2) any inquiry or investigation; or

3) any preparation by and presentation during a Disciplinary 

Action;
50

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(ii) is obligated to produce books, records, papers, documents or other 

tangible evidence in its, his or her possession, custody or control within 

the specified time period in connection with:

1) the Rules;

2) any inquiry or investigation; or

3) any preparation by and presentation during a Disciplinary 

Action;

(iii) may not impede or delay any Disciplinary Action.

(b) Reports of Investigations. The Investigation Team will submit a written 

report of each investigation to the Disciplinary Committee and maintain a log of all 

investigations and their disposition. The written report of the investigation (the 

“Investigation Report”) will include the reasons for initiating the investigation, all 

relevant facts and evidence gathered, analysis and conclusions, the Participant’s 

disciplinary history at the Exchange, and will consist of one of the following 

recommendations:

(i) closing the investigation without further action;

(ii) settlement;

(iii) summary action;

(iv) the preparation and service of a notice of charges for instituting a 

disciplinary proceeding; or

(v) resolving the investigation through an informal disposition, including 

the issuance of a warning letter. An informal disposition (including the 

issuance of a warning letter) will not constitute a finding of a violation 

or a sanction, however, the investigative report must include a copy of 

any warning letter and no more than one warning letter for the same 

potential violation may be issued to the same Participant during a rolling 

12-month period.

(c) Review of Reports of Investigations. The Disciplinary Committee will 

determine whether a reasonable basis exists to believe that a violation within the 

Exchange’s jurisdiction has occurred or is about to occur. The Disciplinary Committee will 

determine for each Respondent whether to authorize:

(i) the informal disposition of the investigation (by issuing a warning letter 

or otherwise) because disciplinary proceedings are unwarranted; or

(ii) the closing of the investigation without any action because no 

reasonable basis exists to believe that a violation within the Exchange’s 
51

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

jurisdiction has occurred or is about to occur; or,

(iii) the commencement of disciplinary proceedings because a reasonable 

basis exists to believe that a violation within the Exchange’s jurisdiction 

has occurred or is about to occur.

(d) Opportunity to Respond. At the discretionary authority of the Disciplinary 

Committee, the Compliance Department may notify the Respondent(s) that formal 

disciplinary charges are recommended and allow the Respondent to submit, within the

specified time period, an offer of settlement or a written statement explaining why 

disciplinary proceedings should not be instituted or why one or more of the charges should

not be brought.

(e) Service of Notice of Charges. Once the Disciplinary Committee authorizes 

disciplinary proceedings, the Compliance Department will prepare and serve a notice of 

charges that will provide as follows:

(i) state the acts, practices or conduct that the Respondent is alleged to have 

engaged in;

(ii) state the Exchange Rule or provision of applicable law alleged to have 

been violated or about to be violated;

(iii) state the proposed sanctions;

(iv) advise the Respondent of its right to a hearing;

(v) advise the Respondent that he or she has the right to be represented by 

legal counsel or any other representative of its choosing in all 

succeeding stages of the disciplinary process;

(vi) state the period of time within which the Respondent can request a 

hearing on the notice of charges, which will not be less than fourteen

(14) days after service of the notice of charges;

(vii) advise the Respondent that any failure to request a hearing within the 

period stated, except for good cause, will be deemed to constitute a 

waiver of the right to a hearing; and

(viii) advise the Respondent that any allegation in the notice of charges that 

is not expressly denied will be deemed to be admitted.

The service of notice upon the Respondent shall be deemed complete via email to 

the contact as it appears on the books and records of the Exchange or in the Participant 

Agreement.

(f) Answer to Service of Notice of Charges. If the Respondent decides to 

answer a notice of charges, the Respondent must file answers within fourteen (14) days 
52

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

after being served with such notice, or within such other time period as stated in such notice 

of charges. The Respondent must answer the notice of charges in writing as follows:

(i) specify the allegations that the Respondent denies or admits;

(ii) specify the allegations that the Respondent does not have sufficient 

information to either deny or admit;

(iii) specify any specific facts that contradict the notice of charges;

(iv) specify any affirmative defenses to the notice of charges; and

(v) sign and serve the answer on the Chief Regulatory Officer.

Failure by the Respondent to timely serve an answer to the notice of charges will 

be deemed to be an admission to the allegations in such notice. Any allegation in a notice 

of charges that the Respondent fails to expressly deny will be deemed admitted. A general

denial by the Respondent, without more, will not satisfy the requirements herein.

(g) Settlement Offers. At any time after a notice of charges has been issued, a 

Respondent may at any time submit to the Compliance Department a written offer of 

settlement related to anticipated or instituted disciplinary proceedings. The Disciplinary 

Committee may, in its discretion, permit the Respondent to settle disciplinary proceedings 

without admitting or denying the rule violations if the Respondent consents to the entry of 

findings and sanctions imposed. If an offer of settlement is accepted, the Disciplinary 

Committee shall issue a written decision specifying the rule violations it has reason to 

believe were committed and any penalties imposed. All offers of settlement that have been 

accepted by the Disciplinary Committee may not be appealed.

If the offer of settlement is not accepted by the Disciplinary Committee, or fails to 

become final, or is withdrawn by the Respondent, the matter will proceed as if the offer 

had not been made such that the Respondent shall not be deemed to have made any 

admissions by reason of the settlement offer and shall not be otherwise prejudiced by 

having submitted the settlement offer.

(h) Hearing Panel.

(i) Participants may request a formal hearing on charges denied in the 

Respondent’s answer to the notice of charges per Rule 603(f). The 

Hearing Panel, appointed by the Board at the recommendation of the 

Chief Regulatory Officer, shall be comprised of not less than three 

individuals from among Participants (consisting of one Public Director, 

one representative of the brokerage community and one representative 

of the trading community), and/or other individuals with knowledge and 

experience in the financial markets, who are not involved in the conduct 

giving rise to the alleged Rule violations. The individuals on the Hearing 

Panel will serve until the related proceedings are completed. The chair 

of the Hearing Panel will be an individual qualified to be a Public 
53

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Director.

(ii) The Respondent will be notified of the appointment of the Hearing Panel

and must respond within 10 days by serving notice to the Chief 

Regulatory Officer if the Respondent seeks to disqualify any individual 

names to the Hearing Panel for reasonable grounds including that such 

individual has a financial interest in the matter. Legal counsel, other than 

the Chief Regulatory Officer, will decide the merits of any request for 

disqualification within his or her sole discretion. Such decision will be 

final and not subject to appeal.

(iii) Prior to the commencement of the hearing, the Respondent will be given 

the opportunity to review all books, records, documents, transcripts of 

testimony and other tangible evidence in the possession or under the 

control of the Exchange to be used by the Compliance Department to 

support the allegations and proposed sanctions in the notice of charges, 

except for information protected by attorney-client privilege. The 

Compliance Department may redact, edit or code information that could 

adversely affect the competitive position of the person providing the 

information or if such information might compromise other 

investigations being conducted by the Compliance Department. 

However, the Compliance Department may not redact, edit or code 

information that would impair the Respondent’s ability to defend 

against allegations or proposed sanctions in the notice of charges.

(iv) The following rules shall apply in each case presented before the 

Hearing Panel:

1) The Compliance Department shall prosecute the case.

2) Formal rules of evidence do not apply.

3) The Respondent shall be entitled to appear personally at the 

hearing and have the choice of being represented by legal 

counsel or another representative. The Respondent’s 

representation is limited to two individuals.

4) The Respondent has the power to cross-examine witnesses and 

present documentary evidence.

5) The burden of proof is on the Compliance Department.

6) A majority vote of the Hearing Panel is needed to find a violation 

of the Rules.

(v) No Person shall serve on the Hearing Panel unless that Person has 

agreed in writing that he or she will not publish, divulge, or make known 

in any manner, any facts or information regarding the business of any 
54

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

person or any other information which may be obtained while serving 

as a member of the Hearing Panel, except for disclosures when reporting 

to the Board, the Compliance Department, upon request by the 

Commission or other Governmental Authority, or when compelled to 

testify in a judicial or administrative proceeding. Furthermore, no 

Person shall serve on the Hearing Panel if such Person has already been 

involved in the Disciplinary Action for any reason. The hearing will be 

conducted privately and confidentially. Notwithstanding the 

confidentiality of the hearings, the Hearing Panel may appoint an expert 

to attend any hearing and assist in deliberations if such expert agrees to

be subject to an appropriate confidentiality agreement.

(vi) The chair of the Hearing Panel shall conduct the hearing as he or she 

may deem appropriate. The chair of the Hearing Panel will determine 

all procedural and evidentiary matters, including the admissibility and 

relevance of any evidence proffered. Legal counsel, other than the Chief 

Regulatory Officer, will provide guidance to the chair of the Hearing 

Panel on the conduct of the hearing. At the hearing, the Hearing Panel

or the Compliance Department and each Respondent may:

1) present evidence and facts determined relevant and admissible 

by the chair of the Hearing Panel;

2) call and examine witnesses; and

3) cross-examine witnesses called by other parties.

(vii) If the Respondent fails to file an answer, has filed a general denial, or if 

any or all of the allegations in the notice of charges are not expressly 

denied in the Respondent’s answer, the chair of the Hearing Panel may 

limit evidence concerning any allegations not expressly denied in 

determining the sanctions to impose. If a Respondent fails to file an 

answer but appears at the hearing, the Respondent may not participate 

in the hearing (by calling or cross-examining witnesses, testifying in 

defense, presenting evidence concerning the notice of charges, or 

otherwise) unless the Hearing Panel determines that the Respondent had 

a compelling reason for failing to timely file an answer. If the Hearing 

Panel determines that the Respondent had a compelling reason for 

failing to timely file an answer, the Hearing Panel will adjourn the 

hearing and direct the Respondent to promptly file a written answer.

(viii) Reasonable notice, confirmed in writing, specifying the date, time, and 

place of the hearing will be given to persons entitled or required to 

appear before the Hearing Panel. The Hearing Panel may impose 

sanctions on any person that impedes or delays the progress of the 

hearing. Interlocutory appeals of rulings by the Hearing Panel or the 

chair of the Hearing Panel are not permitted.
55

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(ix) If the Respondent is found to have violated one or more Rules, the

written decision shall state the disciplinary action to be taken by the 

Exchange as well as the effective date thereof. The Hearing Panel may 

in such a case:

1) issue a warning letter;

2) issue a cease and desist order;

3) suspend the Participant’s rights to engage in Exchange 

Transactions;

4) expel the Participant from the Exchange; and/or

5) impose any other sanction deemed appropriate under the 

circumstances.

All decisions will be subject to CFTC Rules 38.708(a)-(f).

(x) The Respondent may appeal the Hearing Panel decision within fourteen

(14) days of receiving the order by filing a written notice of appeal 

pursuant to Rule 604. The order of the Hearing Panel’s decision will 

become final upon expiration of fourteen (14) days after the order is 

served on the Respondent.

(i) Settlement. At any time prior to the issuance of the written decision of the 

Hearing Panel, the Respondent may submit an offer of settlement to the Compliance 

Department for review. The Disciplinary Committee will determine whether to accept or 

reject the offer and forward the basis for its recommendation to the Hearing Panel for final 

determination. If the Hearing Panel agrees, the Chief Regulatory Officer will conditionally 

accept the settlement offer, which will become final upon the expiration of fourteen (14) 

days after the order of the Hearing Panel consistent with the terms of the settlement offer 

is served on the Respondent. The offer of settlement must detail the rule violations, 

including the basis for the Hearing Panel’s conclusions and any sanction to be imposed, 

which must include full customer restitution where customer harm is demonstrated. If 

applicable, the decision must also include a statement that the Respondent has accepted the 

sanctions imposed without either admitting or denying the rule violations. The acceptance 

of a settlement offer and the related final order by the Hearing Panel constitutes a waiver 

of the Respondent’s right to notice, opportunity for a hearing and review, and appeal under 

Exchange Rules. If the settlement offer is not accepted, fails to become final, or is 

withdrawn by the Respondent, the matter will proceed as if the offer had not been made 

and the offer and all documents related to it will not become part of the record.

(j) Sanctions. After notice and opportunity for hearing in accordance with 

Exchange Rules, the Exchange will impose sanctions if any Participant, Authorized User, 

Person using any of the Participant’s User IDs, or Customer is found to have violated or to 

have attempted to violate a Rule of the Exchange or provision of applicable law for which 

the Exchange possesses disciplinary jurisdiction. All sanctions must take into account the 
56

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Respondent’s disciplinary history. In the event of demonstrated customer harm, any 

sanction must also include full customer restitution. The Exchange may impose one or 

more of the following sanctions or remedies:

(i) censure;

(ii) limitation or restriction on trading privileges, access to the Exchange

and other activities, functions or operations;

(iii) suspension of trading privileges and access the Exchange;

(iv) fine;

(v) restitution;

(vi) disgorgement;

(vii) termination of trading privileges and access the Exchange; or

(viii) any other sanction or remedy deemed to be appropriate.

The Exchange may impose a fine of up to $1,000,000 for each violation of 

Exchange Rules or a provision of applicable law. If a fine or other amount is not paid within 

30 days of the date that it becomes payable, then interest will accrue on the sum from the 

date that it became payable at the quoted prime rate plus three percent. The Exchange has 

sole discretion to select the bank on whose quotations to base the prime rate. Participant 

will be responsible for paying any fine or other amount imposed on, but not paid by, any 

of its traders, supervisors, or Customers.

Rule 604 Summary Actions

(a) Summary Suspensions. At any time, the Chief Regulatory Officer, in 

consultation with the Regulatory Oversight Committee of the Board, may summarily 

suspend, revoke, limit, or condition a Participant’s privileges on the Exchange. The Chief 

Regulatory Officer must reasonably believe that the business, conduct or activities of the 

Participant in question is not in the best interest of the Exchange or the marketplace, based 

on relevant circumstances including (but not limited to) any of the following reasons:

(i) failure to satisfy applicable requirements under the CEA and/or the rules

of the CFTC;

(ii) failure to pay fees or fines or arbitration awards; and/or

(iii) there is a reasonable basis for believing the best interest of the public or 

the Exchange is at risk and immediate action is necessary.

(b) Notice of Suspension. Any Participant that is suspended by the Chief 

Executive Officer as a result of a summary action is to be notified at the earliest possible 
57

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

opportunity as appropriate considering the best interest of the marketplace. Such notice 

shall state:

(i) the exact action taken,

(ii) the reasons for the action, and

(iii) the time and date the action has or is to become effective as well as the 

duration of the action.

The Respondent may file a notice of appeal filed pursuant to Rule 604 seeking 

reinstatement within fourteen (14) days after the notice of action is served on the 

Respondent. Otherwise, the summary action becomes final fourteen (14) days after the 

notice of action is served on the Respondent. The Respondent shall have the right to be 

represented by legal counsel in all proceedings subsequent to summary action taken 

pursuant to Rule 604.

(c) Summary Imposition of Fines. The Compliance Department may 

summarily impose a fine, no less than $1,000 and no more than $15,000 for each violation, 

against any Participant for:

(i) failure to cooperate with the Compliance Department as required by 

Exchange Rules;

(ii) failure to make timely and accurate submissions to the Exchange of 

notices, reports or other information required by Exchange Rules; 

(iii) failure to keep any books and records required by Exchange Rules.

(d) Notice of Fines. The Compliance Department will give notice of any fine 

imposed that will specify:

(i) the violation of the Exchange Rule for which the fine is being imposed;

(ii) the date of the violation for which the fine is being imposed; and

(iii) the amount of the fine.

Within 14 days of the service of the notice of the fine imposed, the Participant may 

either pay the fine or file a notice of appeal pursuant to Rule 605(a). Unless timely notice 

of appeal is filed, the fine will become final upon expiration of 14 days after the notice of 

fine is served on the Participant. The Respondent shall have the right to be represented by 

legal counsel in all proceedings subsequent to summary action taken pursuant to Rule 604.

(e) Summary Fine Schedule. The following is a list of the rule violations subject 

to, and the applicable fines that may be imposed by the Exchange pursuant, this Rule 604:

(i) Failure to Comply with Minimum Financial Requirements, Financial 
58

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Reporting Requirements, and Requirements Relating to 

Protection of Customer Funds (Rules 304(a); 304(b); 304(c);

304(d); 304(e); 304(f); 304(g); 304(h); 304(i); 304(j); 304(k); 

304(l); 304(m); 304(n); 304(o); 304(p); 304(q); 304(r))

Number of Cumulative Violations in Any Twelve (12) Month Rolling 

Period

First Offense.....................................Letter of Caution

Second Offense................................$7,500

Third Offense...................................$15,000

Subsequent Offenses........................Referral to Disciplinary Committee

(ii) Failure to Comply with Notice Provisions for Position Accountability. 

(Rule 406(a))

Number of Cumulative Violations in Any Twelve (12) Month Rolling 

Period

First Offense.....................................Letter of Caution

Second Offense................................$7,500

Third Offense...................................$15,000

Subsequent Offenses........................Referral to Disciplinary Committee

(iii) Failure to Comply with Reporting Requirements for Ownership and 

Control Reports and Reportable Positions. (Rules 407(a); 407(b); 

407(c))

Number of Cumulative Violations in Any Twelve (12) Month Rolling 

Period

First Offense.....................................Letter of Caution

Second Offense................................$7,500

Third Offense...................................$15,000

Subsequent Offenses........................Referral to Disciplinary Committee

(iv) Failure to Enter Valid Orders. (Rule 504(a))

Number of Cumulative Violations in Any Twelve (12) Month Rolling

Period

First Offense.....................................Letter of Caution

Second Offense................................$2,500

Third Offense...................................$10,000

Subsequent Offenses........................Referral to Disciplinary Committee

(v) Failure to Comply with Block Trade Requirements. (Rules 505(b); 505(c); 

505(d))

Number of Cumulative Violations in Any Twelve (12) Month Rolling 

Period
59

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

First Offense..............................Letter of Caution

Second Offense...........................$2,500

Subsequent Offenses.....................$10,000

(v)(vi) Failure to Maintain Audit Trail Information. (Rules 510(a); 510(b); 

510(c))

Number of Cumulative Violations in Any Twelve (12) Month Rolling

Period

First Offense.....................................Letter of Caution

Second Offense................................$2,500

Third Offense...................................$10,000

Subsequent Offenses........................Referral to Disciplinary Committee

(vi)(vii) Failure to Cooperate with the Compliance Department; Failure to 

Provide Records Within Designated Time Frame. (Rule 603(a))

Number of Business Days Beyond Due Date of Request

Up Until 15 Business Days..............$1,000

Subsequent Offenses........................Referral to Disciplinary Committee

(vii)(viii) Failure to Properly Deliver. (Rules 1105(a); 1105(b))

Number of Cumulative Violations in Any Twelve (12) Month Rolling

Period

First Offense.....................................$5,000

Subsequent Offenses........................ Referral to Disciplinary Committee

Rule 605 Appeal from Hearing Panel Decisions and Summary Actions

(a) Appeal Procedures. A Respondent found by the Hearing Panel to have 

violated an Exchange Rule or applicable law or who is subject to any summary action 

imposed pursuant to Rule 604 may appeal the decision within fourteen (14) days of 

receiving the order of the Hearing Panel decision or notice of summary action by filing a 

notice of appeal with the Chief Regulatory Officer. Except for summary suspensions 

imposed pursuant to Rule 604(a) and (b), Hearing Panel decisions and summary imposition 

of fines shall be suspended while the appeal is pending.

The notice of appeal must state in writing the grounds for appeal, including the 

findings of fact, conclusions or sanctions to which the Respondent objects. The Respondent 

may give notice of appeal on the grounds that:

(i) the order or decision was arbitrary, capricious, an abuse of discretion, 

or not in accordance with Exchange Rules;

(ii) the order or decision exceeded the authority or jurisdiction of the 
60

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Hearing Panel, the Disciplinary Committee or the Exchange;

(iii) the order or decision failed to observe required procedures;

(iv) the order or decision was unsupported by the facts or evidence; or

(v) the imposed sanctions, remedies or costs are inappropriate or 

unsupported by the record.

The Chief Regulatory Officer will forward copies of any notice of appeal received 

by it to all parties to the disciplinary proceeding or summary action, as the case may be, 

except the appellant. On or before the 14th day after filing a notice of appeal, the appellant 

must file with the Chief Regulatory Officer and serve on the Compliance Department a 

brief supporting the notice of appeal and documents supporting the brief. On or before the 

14th day after the date on which the appellant serves supporting brief, the appellee must 

file and serve its brief in opposition with the Compliance Department.

Within 30 days after the last submission filed, the Board will appoint a Board of 

Appeals at the recommendation of the Chief Regulatory Officer, which shall be composed 

of not less than three individuals from among Participants (consisting of one Public 

Director, one representative of the brokerage community and one representative of the 

trading community), and/or other individuals with knowledge and experience in the 

financial markets, who did not participate in any prior stage of the disciplinary proceeding.

No member may serve on the Board of Appeals if such person or any person or firm with 

whom such person is affiliated has a financial, personal, or other direct interest in the 

matter. The individuals on the Board of Appeals will serve until the related proceedings 

are completed. The chair of the Board of Appeals will be an individual qualified to be a 

Public Director.

(b) Review by the Board of Appeals. The Board of Appeals will hold a hearing 

to allow parties to present oral arguments. Except for good cause shown, the review by the 

Board of Appeals shall only consider the record before the Disciplinary Committee, the 

written exceptions filed by the parties, and the oral and written arguments of the parties.

Upon completing its review, the Board of Appeals may affirm, modify or reverse 

the Hearing Panel decision or summary action under appeal. Modifications by the Board 

of Appeals may include increasing, decreasing or eliminating any sanction or remedy 

imposed, imposing any other sanction or remedy authorized by Exchange Rules, 

remanding the matter to the same or a different Hearing Panel for further disciplinary 

proceedings, or ordering a new hearing.

As promptly as reasonably possible following its review, the Board of Appeals will

issue a written decision based on the weight of the evidence before the Board of Appeals. 

The decision of the Board of Appeals will include a statement of findings of fact and 

conclusions for each finding, sanction, remedy and cost reviewed on appeal, including each 

specific Exchange Rule and provision of applicable law that the Respondent is found to 

have violated, if any, and the imposition of sanctions, remedies and costs, if any, and the 
61

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

effective date of each sanction, remedy or cost. The order by the Board of Appeals will be 

the final action of the Exchange and will not be subject to further appeal within the 

Exchange.

Rule 606 Rights and Responsibilities After Suspension or Termination

(a) When the Participant’s right to access the Exchange, or the association of

an Authorized User with a Participant, is suspended for a period of 12 months or less, none 

of its rights (including the right to hold oneself out to the public as a Participant; enter 

orders into the Exchange; and receive Participant rates for fees, costs, and charges) will 

apply during the period of the suspension, except for the right of the Participant or

Authorized User in question to assert claims against others as provided in the Rules. Any 

such suspension will not affect the rights of creditors under the Rules or relieve the 

Participant or Authorized User in question of its, his, or her obligations under the Rules to 

perform any Transactions entered into before the suspension, or for any Exchange fees, 

costs, or charges incurred during the suspension. The Exchange may discipline a suspended 

Participant or Authorized User under this Chapter 6 for any violation of Applicable Law 

committed by the Participant before, during, or after the suspension.

(b) When the Participant’s right to access the Exchange, or the association of 

an Authorized User with a Participant, is terminated, all of its rights will terminate, except 

for the right of the Participant or Authorized User in question to assert claims against 

others, as provided in the Rules. Any such termination will not affect the rights of creditors 

under the Rules. A terminated Participant or Authorized User may only seek to reinstate 

its right to access the Exchange by filing an application in accordance with Chapter 3 of 

the Rules. The Exchange will not consider the application of a terminated Participant or 

Authorized User if such Participant or Authorized User continues to fail to appear at 

Disciplinary Actions without good cause, or continues to impede the progress of 

Disciplinary Actions.

(c) A suspended or terminated Participant or Authorized User remains subject 

to the Rules and the jurisdiction of the Exchange for acts and omissions prior to the 

suspension of termination, and must cooperate in any inquiry, investigation, Disciplinary 

Actions, appeal of Disciplinary Actions, summary suspension, or other summary action as 

if the suspended or terminated Participant or Authorized User still had the right to access 

the Exchange, or was still associated with a Participant, as the case may be.

Rule 607 Notice to the Respondent, the CFTC, and the Public.

The Exchange will provide written notice of Disciplinary Actions to the parties and the 

CFTC consistent with CFTC Rules. Whenever the Exchange suspends, expels, fines, or otherwise 

disciplines, or denies any Person access to the Exchange, the Exchange will make the public 

disclosures required by CFTC Rules.

CHAPTER 7

ARBITRATION
62

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 701 In General

(a) Participants and Customers shall arbitrate through the NFA in accordance 

with the NFA’s Code of Arbitration and the NFA’s Member Arbitration Rules. All 

disputes, controversies or claims between or among themselves that relate to or arise out 

of any Contract or otherwise arise out of one or more Transactions made or to be made on 

the Exchange or subject to the Rules and that are based upon facts and circumstances that 

occurred at a time when the parties were Participants or Customers.

(b) Any arbitration filing must satisfy the timeliness requirements set forth in 

the NFA’s Code of Arbitration and the NFA’s Member Arbitration Rules.

(c) The arbitration will be conducted in Chicago, Illinois, by an arbitrator 

operating in accordance with the provisions of the NFA in effect at the time of filing of the 

claim for arbitration. The arbitrator shall have the authority to award any remedy or relief 

that a court of competent jurisdiction could order or grant, including the issuance of an 

injunction.

(d) The fees and expenses of such arbitration shall be borne by the nonprevailing Party, as determined by such arbitration, and in accordance with the NFA’s Code 

of Arbitration and the NFA’s Member Arbitration Rules.

(e) Except as necessary in court proceedings to enforce this arbitration 

provision or an award rendered hereunder, or to obtain interim relief, neither a Party nor an 

arbitrator may disclose the existence, content or results of any arbitration hereunder without 

the prior written consent of the Parties. For the purposes of this section, the NFA is not 

considered a Party.

Rule 702 Exceptions

This Chapter 7 does not apply to disputes between Participants that: (a) such Participants 

are required by the rules of a Self-Regulatory Organization to submit to the dispute resolution 

procedures of that Self-Regulatory Organization; or (b) that such Participants have, by valid and 

binding agreement, committed to negotiate or litigate in a forum other than the NFA.

Rule 703 Penalties

(a) Any failure on the part of a Participant to arbitrate a dispute subject to this 

Chapter 7, or the commencement by any such person of a suit in any court prior to 

arbitrating a case subject to this Chapter 7, violates the Rules and shall subject such 

Participant to Disciplinary Action pursuant to Chapter 6.

(b) The Exchange may summarily suspend, pursuant to Rule 604, a Participant 

that fails to timely satisfy an arbitration award rendered in any arbitration pursuant to this 

Chapter 7. If a case settles before an award has been issued, the Exchange will enforce the 

agreed upon settlement.
63

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

CHAPTER 8

CLEARING

Rule 801 Submission to Clearing House

(a) Exchange Transactions. Immediately upon execution of an Exchange 

Transaction as provided in Rule 504(h), such Exchange Transaction shall be discharged 

and novated in accordance with the rules of the Clearing House.

Rule 802 Clearing Members

(a) All Participants must be an Individual Clearing Member or have an 

agreement with an FCM Clearing Member that establishes an account for the Participant 

for the purpose of clearing the Participant’s Transactions through the Clearing House.

(b) A Clearing Member may at any time revoke any authorization granted and 

guarantee made by it to any Participant in accordance with the preceding paragraph, by 

providing written notice of such revocation to the Exchange. The guarantee will remain in 

effect until the Participant has liquidated or transferred its positions and funds to another 

Clearing Member.

(c) For clearing purposes, the Participant must specify Trading Accounts that 

it wishes to be separately tracked and margined by its Clearing Member. The Exchange 

will give each of these accounts a Trading Account ID for use by the Clearing House and 

its Clearing Members.

(d) The Clearing Member will set risk limits for each of the Participant’s 

Trading Account IDs, and has the right to suspend trading by a Participant on the Exchange.

(e) Each Clearing Member shall develop and implement a written compliance 

program approved in writing by senior management of such Clearing Member that is 

reasonably designed to achieve and monitor the Clearing Member’s compliance with all 

applicable requirements of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), the 

International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq. ) (“IEEPA”), the 

Trading with the Enemy Act (50 U.S.C. App. § 1 et seq.) (“TWEA”), and the Executive 

Orders and regulations issued pursuant thereto, including the regulations issued by the U.S. 

Department of the Treasury and, as applicable, the Commodity Futures Trading 

Commission. The compliance program shall, at a minimum:

(i) establish and implement policies, procedures and controls reasonably 

designed to assure compliance with all applicable provisions of the Bank 

Secrecy Act, IEEPA, TWEA, and all applicable Executive Orders and 

regulations issued pursuant thereto;

(ii) provide for independent testing for compliance to be conducted by 

Clearing Member personnel or by a qualified outside party;
64

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(iii) designate an individual or individuals responsible for implementing and 

monitoring the day-to-day operations and internal controls of the 

program; and

(iv) provide ongoing training for appropriate personnel.

Rule 803 Responsibility of Participants

Each Participant must assist its FCM Clearing Member, if any, and the Clearing House in 

the clearing of its Transactions in Contracts. Without limiting the generality of the foregoing, each 

Participant must: provide its FCM Clearing Member, if any, a telephone number so that such 

Participant may be reached at any time during the day in the event that there is a discrepancy in 

the clearing of its Transactions; If neither the Participant nor any such representative is present at 

the time specified above, such Participant’s FCM Clearing Member, if any, will be authorized to 

resolve any discrepancy in the manner it deems appropriate, but such resolution will not be relevant 

to the determination of the liability of any party to the trade.

Rule 804 Clearing Services

All Contracts shall be cleared through the Clearing House in accordance with Clearing 

House Rules and in conformity with all Exchange Rules.

Rule 805 Rules of the Clearing House

(a) The clearing services provided by the Clearing House with respect to any 

Contract, and the rights and obligations of purchasers and sellers under cleared Contracts 

(including rights and obligations in respect of clearing and settlement, variation payments 

and performance at maturity), will be governed by the Rules of the Clearing House, except 

as otherwise provided in the Rules or Notices issued from time to time by the Exchange.

(b) Open positions in any Contract may only be offset by opposite Transactions 

in the same Contract that are executed on the Exchange.

Rule 806 Notice of Arbitration

In any arbitration concerning an alleged failure of any Participant to honor a trade in any 

Contract, each party to such arbitration must promptly provide copies of all documents filed or 

received in such arbitration by such party to the Clearing Member that guaranteed such party’s 

Transactions in Contracts when the trade allegedly took place.

Rule 807 Additional Terms Applicable to Clearing

(a) The Clearing House shall have the right to reject Contracts that arise from 

Transactions and to suspend clearing of such Transactions without notice, in accordance 

with the rules of the Clearing House; and
65

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(b) A Clearing Member may transfer a Contract to another Clearing Member 

only upon notice to the Exchange and in accordance with the rules of the Clearing House.

CHAPTER 9

[RESERVED]

CHAPTER 10

MISCELLANEOUS

Rule 1001 Trading by Exchange Officials Prohibited; Misuse of Material, Non-Public

Information

(a) Terms used in this Rule 1001 and not otherwise defined in the Rules shall 

have the meanings set forth in CFTC Rules 1.3 and 1.59.

(b) No Exchange Official may trade, directly or indirectly, (i) any Contract

traded on or subject to the Rules or any related financial instrument, or (ii) any Contract or 

financial instrument where such Exchange Official has access to material nonpublic

information concerning such Contract or financial instrument.

(c) The Chief Regulatory Officer (or, in the case of the Chief Regulatory 

Officer, the Board) may grant exemptions from the provisions of paragraph (a) to Exchange 

Officials on a case-by-case basis under circumstances which are not contrary to the 

purposes of this rule and CFTC Regulation 1.59. Such circumstances may include, but are 

not necessarily limited to:

(i) participation in pooled investment vehicles where such Exchange 

Official has no direct or indirect control over Transactions effected by 

or for the account of the pool;

(ii) service by such Exchange Official as an executor or administrator of an 

estate;

(iii) service by such Exchange Official in any other fiduciary capacity, such 

as an officer of a charitable organization, in which such Exchange 

Official receives no pecuniary benefit from the trading of Contracts or 

other financial instruments;

(iv) trading in Contracts or financial instruments executed on or subject to 

the rules of a swap execution facility, a designated contract market or a 

national securities exchange under circumstances in which such 

Exchange Official’s access to material non-public information in 

respect of such financial instruments is sufficiently minimal or 

attenuated so as to be insignificant; and

(v) such other circumstances as the Chief Regulatory Officer (or, in the case 

of the Chief Regulatory Officer, the Board) may determine.
66

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(d) For the avoidance of doubt, participation by an Exchange Official in a 

retirement plan sponsored by the Exchange shall not be deemed to constitute trading 

directly or indirectly in a Contract or financial instrument, notwithstanding such plan’s 

trading of Contracts or financial instruments.

(e) Any Exchange Official that has received an exemption under Rule 1001(c)

must:

(i) furnish to the Exchange (or, in the case of the Chief Regulatory Officer, 

to the Board) account statements and other documents relevant to the 

trading activities that are so exempted; and

(ii) inform the Chief Regulatory Officer (or, in the case of the Chief 

Regulatory Officer, the Board) within one business day of any material 

change of information that may affect such Exchange Official’s 

qualification for such exemption.

(f) Exchange Officials, agents and independent contractors of the Exchange are 

prohibited from disclosing material non-public information obtained as a result of their 

employment, agency relationship or engagement with the Exchange where the Exchange 

Official, agent or independent contractor expected or should have reasonably expected that 

the information disclosed may assist a Person in trading any Contract, any Contract traded 

on another designated contract market or other market, or any related underlying 

commodity or security.

Rule 1002 Market Data

(a) Each Participant, on behalf of itself and each of its Affiliates, Authorized 

Users and other Persons affiliated with any of the foregoing, hereby acknowledges and 

agrees that the Exchange owns and shall retain all right, title and interest in and to the 

Exchange, all components thereof, including without limitation all related applications, all 

application programming interfaces, user interface designs, software and source code and 

any and all intellectual property rights therein, including, without limitation all registered 

or unregistered, as applicable (i) copyright, (ii) trade mark, (iii) service mark, (iv) trade 

secret, (v) trade name, (vi) data or database rights, (vii) design rights, (viii) moral rights, 

(ix) inventions, whether or not capable or protection by patent or registration, (x) rights in 

commercial information or technical information, including know-how, research and 

development data and manufacturing methods, (xi) patent, and (xii) other intellectual 

property and ownership rights, including applications for the grant of any of the same, in 

or to the Exchange and all other related proprietary rights of the Exchange and/or any of 

its Affiliates (together, with any and all enhancements, corrections, bug fixes, updates and 

other modifications to any of the foregoing and any and all data or information of any kind 

transmitted by means of any of the foregoing, including, without limitation, the market 

data, the “Proprietary Information”). Each Participant, on behalf of itself and each of its 

Affiliates, Registered Users and other Persons affiliated with any of the foregoing, further 

acknowledges and agrees that the Proprietary Information is the exclusive, valuable and 

confidential property of the Exchange. Each Participant acknowledges and agrees that it 
67

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

shall not and shall not permit its Affiliates, Authorized Users and other Persons affiliated 

with any of the foregoing to, reverse engineer, copy, bug fix, correct, update, transfer, 

reproduce, republish, broadcast, create derivative works based on or otherwise modify, in 

any manner, all or any part of the Exchange or the Proprietary Information. Each 

Participant, further agrees to and to cause each of its Affiliates, Authorized Users and other 

Persons affiliated with any of the foregoing to, keep the Proprietary Information 

confidential and not to transfer, rent, lease, loan, sell or distribute, directly or indirectly, all 

or any portion of the Exchange or any Proprietary Information.

(b) Notwithstanding any other provision of this Rule 1002, each Participant 

retains such rights as it may enjoy under applicable law with respect to market data solely 

in the form such market data was submitted to the Exchange by such Participant and its 

Authorized Users.

(c) Subject to the provisions of paragraph (a), all Participants, Authorized Users 

and other Persons affiliated with either of the foregoing hereby acknowledge and agree that 

the Exchange is the owner of all rights, title and interest in and to all intellectual property 

and other proprietary rights (including all copyright, patent, trademark or trade secret 

rights) in market data, and all derivative works based thereon, and further agree not to 

distribute, create derivative works based on, or otherwise use or commercially exploit 

market data and any such derivative works, provided that Participants, Registered Users 

and such other Persons may use market data for their own internal business purposes. 

Without limiting the generality of the foregoing, Participants, Authorized Users and other 

Persons affiliated with any of the foregoing may not distribute, sell or retransmit market 

data Exchange to any third party.

(d) Each Participant hereby grants the Exchange a non-exclusive, perpetual, 

freely transferable, world-wide and royalty-free license to use, distribute, sub-license, 

disclose and sell market data, in any manner, media and jurisdiction, for the benefit of the 

Exchange and/or its Affiliates; provided that, except as may otherwise be required by law 

or permitted by Rule 208 or in any written agreement between the Exchange and such 

Participant, the Exchange shall not disclose market data other than on an aggregated basis 

that does not directly or indirectly identify individual Participants.

Rule 1003 Recording of Communications

The Exchange or the Regulatory Services Provider may record conversations and retain 

copies of electronic communications between Exchange Officials and Participants, their 

Authorized Users or other agents. Any such recordings may be retained by the Exchange or the 

Regulatory Services Provider in such manner and for such periods of time as required by 

Applicable Law.

Rule 1004 Confidentiality

Except as provided in this Rule 1004, all information provided by a Participant to the 

Exchange shall be held in confidence and shall not be made known to any other Person except as 

follows:
68

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(a) with the consent of the Participant providing such information;

(b) to a Governmental Authority, if the Exchange is requested or legally 

required to do so by such government agency;

(c) pursuant to legal process;

(d) to a Clearing House of which such Participant is a member or in connection 

with the clearing of a Contract;

(e) subject to appropriate confidentiality requirements, to any Person providing 

services to the Exchange, including but not limited to the Regulatory Services Provider;

(f) to the Board, any committee, Exchange Officials, attorneys and auditors, 

and to agents and independent contractors that have been engaged by the Exchange who 

require such information in connection with the discharge of their duties to the Exchange; 

and

(g) as otherwise permitted under the Rules.

Rule 1005 Force Majeure

Notwithstanding any other provision of the Rules, the Exchange shall not be obligated to 

perform its obligations under the rules or any agreement with a Participant, or to compensate any

Person for losses occasioned by any delay or failure of performance, to the extent a delay or 

failure of performance is the result of circumstances that the Exchange determines, in its sole 

discretion, may have an adverse effect upon the functions and facilities of the Exchange, 

including, but not limited to, acts of God, fire or other natural disasters, inclement weather, 

embargos, bomb threats, pressure waves, disruption of electricity, communication outages or 

delays, acts or threats of terrorism, riots, commotions, strikes, war, invasions, hostilities (whether 

declared or not), and contaminations.

Rule 1006 Extension or Waiver of Rules

The Exchange may, in its sole discretion, waive, or extend the time period for performing, 

any act or acts designated by the rules, but only to the extent such waiver or extension is not 

inconsistent with Applicable Law.

Rule 1007 Effect of Amendment, Repeal or New Rule

The Exchange may, in compliance with the CEA and CFTC Rules, amend or repeal any 

rule and/or adopt new Rules. Any such amendment or repeal of a Rule or adoption of a new Rule, 

shall, upon the effective date of such amendment, repeal or adoption, as applicable, be binding 

on all Persons subject to the jurisdiction of the Exchange (regardless of when any such Person 

became subject to the Exchange’s jurisdiction) and all Contracts (regardless of whether any such 

contract was entered into before, on or after such effective date).

Rule 1008 Signatures
69

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rather than rely on an original signature, the Exchange may elect to rely on a signature

that is transmitted, recorded or stored by any electronic, optical, or similar means (including but 

not limited to telecopy, imaging, photocopying, electronic mail, electronic data interchange, 

telegram, or telex) as if it were (and the signature shall be considered and have the same effect 

as) a valid and binding original.

Rule 1009 Governing Law; Legal Proceedings

(a) The rules, and the rights and obligations of the Exchange and Participants 

under the rules, shall be governed by, and construed in accordance with, the laws of the 

State of Illinois applicable to contracts executed and performed wholly within the State of 

Illinois without regard to any provisions of Illinois law that would apply the substantive 

law of a different jurisdiction.

(b) Any action, suit or proceeding against the Exchange, its officers, directors, 

limited liability company members, employees, agents, or any member of any committee 

must be brought with in one (1) year from the time that a cause of action has accrued. Any 

such action, suit or proceeding shall be brought in the State or Federal courts located within 

the City of Chicago, Illinois. Each Participant expressly consents, for itself and its 

Authorized Users, to the jurisdiction of any such court, waives any objection to venue 

therein, and waives any right it may have to a trial by jury.

(c) In the event that a Participant or an Affiliate of such Participant who fails to 

prevail in a lawsuit or other legal proceeding instituted by such Participant or such Affiliate 

against (i) the Exchange or (ii) any Affiliate of the Exchange or any of their respective 

officers, directors, equity holders, employees, agents, or any member of any committee, 

and related to the business of the Exchange, such Participant shall pay to the Exchange all 

reasonable expenses, including attorneys’ fees, incurred by the Exchange in the defense of 

such proceeding. This paragraph (b) shall not apply to Exchange disciplinary actions, 

appeals thereof, or an instance in which the Board has granted a waiver of the provisions 

hereof.

Rule 1010 LIMITATION OF LIABILITY; NO WARRANTIES

PARTICIPANT’S USE OF THE SERVICES, THE SYSTEM, THE BITNOMIAL

EXCHANGE PROPERTY AND ANY OTHER INFORMATION AND MATERIALS 

PROVIDED BY BITNOMIAL EXCHANGE, IS AT PARTICIPANT’S OWN RISK, AND THE 

SERVICES, THE BITNOMIAL EXCHANGE PROPERTY AND ANY OTHER 

INFORMATION AND MATERIALS PROVIDED BY BITNOMIAL EXCHANGE

HEREUNDER ARE PROVIDED ON AN “AS IS” AND “AS AVAILABLE” BASIS, 

WITHOUT WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR 

IMPLIED, BY STATUTE, COMMON LAW OR OTHERWISE INCLUDING ALL IMPLIED 

WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE 

AND NON- INFRINGEMENT AND ANY WARRANTIES ARISING FROM A COURSE OF 

DEALING, USAGE OR TRADE PRACTICE. BITNOMIAL EXCHANGE DOES NOT 

GUARANTEE THAT (i) THE BITNOMIAL EXCHANGE PROPERTY OR THE SERVICES 

WILL OPERATE IN AN ERROR FREE, SECURE OR UNINTERRUPTED MANNER, OR (ii) 
70

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

ANY INFORMATION OR MATERIALS PROVIDED BY BITNOMIAL EXCHANGE OR 

ACCESSIBLE THROUGH THE BITNOMIAL EXCHANGE PROPERTY WILL BE 

ACCURATE, COMPLETE, RELIABLE, OR TIMELY, OR (iii) THE BITNOMIAL

EXCHANGE PROPERTY OR ANY ASPECTS OF THE SERVICES WILL BE FREE FROM 

VIRUSES OR OTHER HARMFUL COMPONENTS. NEITHER BITNOMIAL EXCHANGE 

NOR ITS AFFILIATES SHALL HAVE ANY LIABILITY FOR THE CREDITWORTHINESS 

OF ANY PARTICIPANT OR FOR THE ACTS OR ANY ASPECT OF THE SERVICES OR 

SYSTEM. PARTICIPANT IS SOLELY RESPONSIBLE FOR THE SECURITY AND 

INTEGRITY OF THE PARTICIPANT TECHNOLOGY. PARTICIPANT ACKNOWLEDGES 

THAT PARTICIPANT’S ACCESS TO THE SYSTEM AND THE SERVICES IS INTERNETBASED AND THAT BITNOMIAL EXCHANGE HAS NO CONTROL OVER THE 

INTERNET OR PARTICIPANT’S CONNECTIONS THERETO. PARTICIPANT FURTHER 

ACKNOWLEDGES THAT THE INTERNET, COMPUTER NETWORKS, AND 

COMMUNICATIONS LINKS AND DEVICES NECESSARY TO ENABLE PARTICIPANT 

TO ACCESS AND USE THE SYSTEM AND THE SERVICES ARE INHERENTLY 

INSECURE AND VULNERABLE TO ATTEMPTS AT UNAUTHORIZED ENTRY AND 

THAT NO FORM OF PROTECTION CAN ENSURE PARTICIPANT’S DATA, 

HARDWARE, OR SOFTWARE OR THE SYSTEM OR OTHER BITNOMIAL EXCHANGE 

PROPERTY WILL BE FULLY SECURE. FURTHERMORE, BITNOMIAL EXCHANGE 

SHALL HAVE NO OBLIGATION TO MONITOR OR VERIFY ANY INFORMATION 

DISPLAYED THROUGH THE SYSTEM.

EXCLUDING ANY LIABILITY FOR SUCH PARTY’S WILLFUL MISCONDUCT OR 

GROSS NEGLIGENCE, AND EXCLUDING, IN THE CASE OF PARTICIPANT, 

PARTICIPANT’S INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTION 11 OF 

THE PARTICIPANT AGREEMENT, EACH PARTY AGREES THAT IN NO EVENT SHALL 

EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY 

OR CONSEQUENTIAL DAMAGES, INCLUDING DAMAGES FOR LOSS OF PROFITS, 

LOSS OF REVENUE, LOSS OR CORRUPTION OF DATA, TRADING LOSSES OR 

BUSINESS INTERRUPTION AND THE LIKE, ARISING IN ANY MANNER 

WHATSOEVER OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY USE 

(WHETHER OR NOT AUTHORIZED) OR INABILITY TO USE THE BITNOMIAL

EXCHANGE PROPERTY OR ANY OTHER INFORMATION OR MATERIALS PROVIDED 

TO PARTICIPANT BY BITNOMIAL EXCHANGE OR ACCESSIBLE THROUGH THE 

SERVICES, INCLUDING THE ACCURACY, COMPLETENESS, RELIABILITY, 

TIMELINESS, QUALITY, SECURITY, PERFORMANCE, OR PRICING OF THE SERVICES 

OR ANY FAILURES, DEGRADATIONS OR DELAYS ASSOCIATED THEREWITH, 

REGARDLESS OF WHETHER SUCH DAMAGES ARISE IN TORT, CONTRACT, OR 

OTHERWISE, AND EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH 

DAMAGES. NOTWITHSTANDING THE FOREGOING, IF A COURT OR OTHER 

TRIBUNAL OF COMPETENT JURISDICTION SHOULD FIND BITNOMIAL EXCHANGE 

OR ANY OF ITS AFFILIATES LIABLE FOR ANY LOSS, DAMAGE OR EXPENSES 

UNDER THIS AGREEMENT, THE AGGREGATE LIABILITY OF BITNOMIAL

EXCHANGE OR ITS AFFILIATES UNDER THE AGREEMENT, REGARDLESS OF THE 

FORM OF ACTION, SHALL IN NO EVENT EXCEED THE GREATER OF (i) $10,000 AND 

(ii) THE TOTAL COMMISSIONS, FEES, OR OTHER AMOUNTS (EXCLUDING ANY 

APPLICABLE TAXES AND DUTIES) PAID TO BITNOMIAL EXCHANGE BY 
71

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

PARTICIPANT DURING THE SIX MONTHS PRECEDING THE DATE ON WHICH THE 

EVENTS GIVING RISE TO SUCH LIABILITY AROSE.

ANY CLAIM FOR REDRESS OR DAMAGES HEREUNDER SHALL BE FILED IN 

A COURT OF COMPETENT JURISDICTION WITHIN TWO (2) YEARS OF THE DATE ON 

WHICH SUCH CLAIM ALLEGEDLY AROSE. FAILURE TO INSTITUTE LITIGATION 

WITHIN SUCH TIME PERIOD SHALL BE DEEMED TO BE A WAIVER OF SUCH CLAIM 

AND THE CLAIM SHALL BE OF NO FURTHER FORCE OR EFFECT. THE 

ALLOCATIONS OF LIABILITY IN THIS RULE 1010 REPRESENT THE AGREED AND 

BARGAINED FOR UNDERSTANDING OF THE PARTIES, AND EACH PARTY 

ACKNOWLEDGES THAT THE OTHER PARTY’S RIGHTS AND OBLIGATIONS 

HEREUNDER REFLECT SUCH ALLOCATIONS. THE PARTIES AGREE THAT THEY 

WILL NOT ALLEGE THAT THIS REMEDY FAILS ITS ESSENTIAL PURPOSE.

PARTICIPANT FURTHER AGREES THAT THE PROVISIONS OF THE RULES OF 

THE CLEARING HOUSE LIMITING THE LIABILITY OF THE CLEARING HOUSE TO ITS 

MEMBERS SHALL APPLY TO PARTICIPANT AS FULLY AS IF PARTICIPANT WERE A 

MEMBER OF THE CLEARING HOUSE MUTATIS MUTANDIS.
72

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

CHAPTER 11

DIGITAL ASSET DELIVERY

Rule 1101 Digital Asset Delivery Definitions

“Blockchain” means a distributed ledger that records transactions between parties 

in a verifiable and permanent way.

“Delivering Participant” means the Participant that is required to deliver the 

underlying commodity through the Settlement Facility.

“Digital Asset” means Bitcoin, and any other “digital currency” which is a 

“commodity” under the Commodity Exchange Act, as amended. For this purpose, “digital 

currency” means any type of digital unit that is used as a medium of exchange or a form of 

digitally stored value (including digital units of exchange that (i) have a centralized 

repository or administrator, (ii) are decentralized and have no centralized repository or 

administrator, and/or (iii) may be created or obtained by computing or manufacturing 

effort).

“Digital Asset Delivery Address” means a unique identifier that serves as a virtual 

location where a Digital Asset can be sent.

“Receiving Participant” means the Participant that is required to take delivery of 

the underlying commodity through the Settlement Facility.

“Settlement Facility” means the Digital Asset delivery facility, Bitnomial 

Settlement, LLC1, or any successor organization authorized by the Exchange.

“Transfer” means transmission of a Digital Asset between the Settlement Facility

and a Delivering or Receiving Participant. Delivery shall be fully effected and transferred 

if reflected by a consensus of nodes on the Digital Asset Blockchain and after being 

confirmed as such by the Settlement Facility.

Rule 1102 Participant and Clearing Member Delivery Obligations

(a) A Participant and its respective Clearing Member carrying a position that is 

required to make or take delivery hereby guarantees and assumes full and unconditional 

responsibility for the performance of all delivery requirements set forth in the Rules.

(b) Participants are required to register accounts for the purpose of making or 

taking delivery with the Settlement Facility and MGEX at least 30 days before the start of 

 1 Bitnomial Settlement, LLC is authorized by the Exchange and not licensed, approved or 

registered with the CFTC.
73

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

the delivery period. A Participant may effect delivery only through the Settlement Facility. 

(c) In the event of a default or failure of a Clearing Member during the delivery 

period or process, the Clearing House shall not be obligated to make or take delivery of 

Digital Assets.

(d) Any Participant intending to make or take delivery of a Digital Asset 

pursuant to a Futures Contract shall maintain a valid Digital Asset Delivery Address on 

record with the Settlement Facility to deliver and/or receive and to hold the respective 

Digital Asset. 

(e) Any Participant intending to make delivery of a Digital Asset agrees to 

transfer control of that asset to the Settlement Facility in anticipation of delivery in 

accordance with Exchange Rules.

(f) Each Delivery Participant represents and warrants, to the best of its 

knowledge, to each Receiving Participant, the Exchange, the Clearing House, and the 

Settlement Facility that the Digital Asset subject to delivery is free and clear of all adverse 

claims, security interests, liens and encumbrances of any kind whatsoever. Each 

Participant acknowledges and agrees that the Exchange, the Clearing House, and the 

Settlement Facility provide no representation or warranty as to good or marketable title to 

any Digital Asset subject to delivery. Each Receiving Participant hereby waives any right 

to bring a claim, whether in law or equity, against the Exchange, the Clearing House, and 

the Settlement Facility with respect to any defect in, or lack or failure of, good or 

marketable title of any Digital Asset delivered to Receiving Participant.

(g) The rights and obligations of Clearing Members for contracts cleared by the 

Clearing House, including but not limited to rights and obligations regarding clearing and 

settlement, variation payments and performance at expiration, shall be as set forth in the 

By-Laws and Rules of the Clearing House.

(h) Clearing Members will not, under any circumstances, be required to own, 

hold, or control Digital Assets under Exchange Rules, but Clearing Members must ensure, 

through position monitoring and communication with their customers, as Participants, that 

such customers are able to satisfy their obligations regarding delivery and acceptance 

thereof under the applicable MGEX and Exchange Rules.

(i) Clearing Members must confirm that Delivering Participants deliver the 

appropriate amount of Digital Asset to the Settlement Facility during the Delivery Period.

(j) All Participants and their respective Clearing Members with obligations to 

make or take delivery are subject to the Clearing House Rulebook.

Rule 1103 Delivery Procedures

(a) Notice

The Clearing Member shall provide the Clearing House with a Delivery Notice in 
74

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

the form and manner specified by the Clearing House. Delivery Notices must be delivered 

to the Clearing House as set forth in the By-Laws and Rules of the Clearing House. The 

Delivery Notice is not transferable.

(b) Final Settlement Price

The final settlement price shall be the sole basis for delivery. 

(c) Final Delivery

Final delivery will be made in the manner specified by the Exchange.

(i) Upon instruction by the Clearing House to the Exchange, the delivery 

of Digital Assets pursuant to Futures Contracts shall be effected by the 

Settlement Facility by transferring the relevant amount of the Digital 

Asset from the Digital Asset Delivery Address of the Delivering 

Participant to the Digital Asset Delivery Address of the Receiving 

Participant on the Digital Asset's Blockchain. Delivery shall be fully 

effected and transferred if reflected by a consensus of nodes on the 

Digital Asset's Blockchain and after being confirmed as such by the 

Settlement Facility (a "Transfer"). 

(ii) Upon a Transfer of Digital Assets from the Digital Asset Delivery 

Address of the Delivering Participant to the Digital Asset Delivery 

Address of the Receiving Participant on the Digital Asset's Blockchain, 

each Participant hereby agrees that all title, ownership and control of 

such Digital Asset, and all risk of loss associated with the 

misappropriation or loss of such Digital Asset, shall reside solely with 

the Receiving Participant.

(iii) Neither the Exchange nor the Clearing House will have any 

responsibility or liability to any Person for the use of, or any failure, 

error, action or omission of, the Settlement Facility.

Rule 1104 Cost of Delivery

All transaction fees required to make delivery of Digital Assets through the Settlement 

Facility must be paid by the Participant that is seeking to make delivery in addition to the full 

delivery amount. All transaction fees required to take delivery of Digital Assets through the 

Settlement Facility must be paid by the Participant seeking to take delivery. The Settlement 

Facility is authorized to deduct the transaction fees from the delivery amount in the case of a 

Participant taking delivery.

Rule 1105 Delivery Infractions

(a) The failure of the Delivering Participant to deliver sufficient Digital Assets 

to the Digital Asset Delivery Address in a timely manner shall constitute a delivery failure 

by the Participant and subject them to disciplinary action. Clearing Members are financially 
75

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

liable for delivery failures of their accounts, including customer accounts, and must pay 

financial performance upon delivery failure. Clearing House rules stipulate “financial 

performance” means payment of commercially reasonable costs in US Dollars related to 

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

Payment of reasonable costs will be determined at the sole discretion of the Exchange based 

on the final settlement price of the contracts that should have been delivered.

(b) If a Participant is required to pay funds pursuant to Rule 1103, but fails to 

deposit such funds in order to make timely payment on the date required, the Exchange 

may, in its sole discretion, impose a fine upon the Participant pursuant to the schedule of 

fines listed in Chapter 6 and any other compensation due to the late or inaccurate delivery.

Rule 1106 Digital Asset Delivery Eligibility

(a) To qualify a Digital Asset as eligible for delivery, the Digital Asset sent 

through the Settlement Facility must be accepted as valid by the Digital Asset Blockchain 

consensus protocol and must be at a block depth acceptable to the Settlement Facility.

(b) New Digital Assets that are created as a result of a fork in the Digital Asset

protocol during the term of a futures or options contract are not eligible for contract delivery. 

New Digital Assets created as a result of a fork in the Digital Asset protocol while the 

Settlement Facility is in the process of delivery will not be delivered to the Participant taking 

delivery of the forked Digital Asset. The Settlement Facility will return the new Digital Assets 

created, less any transaction fees, to the Participant making delivery at a later date determined 

by the Exchange. In the case of a fork where it is not clear which is the new Digital Asset 

chain, the Exchange has sole discretion to determine which chain will be delivered and which 

will be returned.

Rule 1107 Settlement Facility Reporting Requirements

In connection with, and as a condition to, performing the functions assigned to it herein 

with respect to Digital Asset delivery, the Settlement Facility will maintain all books and records 

relating to Transfers of Digital Assets. Such records must be available for inspection by the 

Exchange and the CFTC and must be maintained in a form acceptable to the Exchange for a period 

of not less than 5 years from the date of the relevant transaction. Further, the Settlement Facility

shall maintain a set of operational procedures to which the Exchange shall access and shall keep 

the Commission informed of any material changes to such procedures.
76

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

CHAPTER 12

BITCOIN FUTURES AND OPTIONS

Rule 1201 Bitcoin US Dollar Futures

Product Name Bitcoin US Dollar Futures

Product Code BUS

Contract Size 1 Bitcoin

Price Quotation US Dollars per Bitcoin

Minimum Price Fluctuation $1 per Bitcoin ($1 per contract)

Trading Hours 8:30 Open to 14:30 Close CPT, Monday through Friday.

Trading Commencement 10 trading days prior to the last trading day six calendar months 

prior to expiry.

Trading Termination 9:30 CPT of the trading day two trading days prior to the last 

Friday of the expiry month.

Reportable Position Level 5 contracts

Margin US Dollars

Settlement Deliverable2

Settlement Price See Rule 1206

Listing The first two consecutive contracts in the March, June, 

September, and December quarterly cycle.

Deliver Rules Bitnomial Rulebook Chapter 11

Clearing and Delivery 

Timeline

See MGEX Rulebook Chapter 23: Bitnomial Exchange Clearing 

Rules.

 2 Bitnomial Settlement, LLC is authorized by the Exchange and not licensed, approved or registered with 

the CFTC.
77

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 1202 Deci Bitcoin US Dollar Futures

Product Name Deci Bitcoin US Dollar Futures

Product Code BUI

Contract Size 1⁄10Bitcoin

Price Quotation US Dollars per Bitcoin

Minimum Price Fluctuation $1 per Bitcoin ($0.10 per contract)

Trading Hours 8:30 Open to 14:30 Close CPT, Monday through Friday.

Trading Commencement 10 trading days prior to the last trading day six calendar months 

prior to expiry.

Trading Termination 9:30 CPT of the trading day two trading days prior to the last 

Friday of the expiry month.

Reportable Position Level 50 contracts

Margin US Dollars

Settlement Deliverable3

Settlement Price Settlement price is fixed to the BUS settlement price.

Listing

The first two consecutive contracts in the March, June, 

September, and December quarterly cycle.

Deliver Rules Bitnomial Rulebook Chapter 11

Clearing and Delivery 

Timeline

Please see MGEX Rulebook Chapter 23: Bitnomial Exchange 

Clearing Rules.

 3 Bitnomial Settlement, LLC is authorized by the Exchange and not licensed, approved or 

registered with the CFTC.
78

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Rule 1203 Options on Bitcoin US Dollar Futures

Product Name Options on Bitcoin US Dollar Futures

Product Code BUSO

Strike Price Listing

Minimum 40 strikes at $50 per contract strike increment above 

and below the at-the-money strike, the previous day’s 

settlement price of the underlying futures, then 20 strikes at $100 

per contract strike increment above and below the highest and 

lowest $50 increment strike then 10 strikes at $500 per contract 

strike increment above and below the highest and lowest $100 

increment strike.

Contract Size One BUS futures contract

Exercise Style European

At-The-Money Behavior Abandon Calls and Puts. Please see MGEX Rule 23.8.2: 

Options – Automatic Exercise

Underlying Product Code BUS

Minimum Price Fluctuation $0.10 per contract

Trading Hours 8:30 Open to 14:30 Close CPT, Monday through Friday.

Trading Commencement The next trading day following the trading commencement of the 

underlying.

Trading Termination

Trading in an option class shall terminate on the last Friday 

which preceded by at least two business days, the last business 

day of the month preceding the options contract month. If such 

Friday is not an Exchange business day, then trading shall 

terminate on the preceding business day.

Reportable Position Level 5 contracts

Margin Unit US Dollars

Settlement Deliverable into BUS futures contract.

Settlement Price See Rule 1106

Listing The first two consecutive contracts in the March, June, 

September, and December quarterly cycle.

Rule 1204 Bitcoin Futures and Options Price Bands and Price Limits
79

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

(a) Price Bands. Price Bands are a per-product price range for aggressive 

orders based on the latest top-of-book price. The initial Price Bands are based on the 

previous day settlement price +/- the Price Band Variation which is set by the Bitnomial 

Market Operations & Risk Team. The Price Band Variation range is continuously recalculated from top-of-book.

(b) Price Limits. Price Limits are a per product price range based on a 

percentage of the previous day settlement price. If a trade occurs at the Price Limit for a 

side, the matching engine triggers a timer. If the timer elapses and no trades occur inside 

of the Price Limit, the Price Limits are re-calculated and reset. The resultant Price Limits 

are outside the original Price Limits to allow for additional price movement. The Exchange 

Market Operations & Risk Team may adjust the daily Price Limits at its sole discretion 

based on market conditions.

Products Price Band Variation Price Limit (the greater of)

BUS $250 50% or $10,000

BUS-BUS $50 50% or $5,000

BUI $250 50% or $10,000

BUI-BUI $50 50% or $5,000

BUSO $50 50% or $5,000

Rule 1205 Bitcoin Futures and Options Position Limits

For purposes of aggregation, no market participant shall own or control any combination 

of futures and options contracts that exceeds twenty thousand (20,000) Bitcoin Futures-equivalent 

contracts net long or short in any single month, five thousand (5,000) of such contracts net long 

or short beginning on the first trading day of the delivery month, or two thousand (2,000) of such 

contracts net long or short beginning on the first day of the Delivery Period. In no case may a 

market participant own or control more than eighty thousand (80,000) Bitcoin Futures-equivalent 

contracts net long or short for all contract months. For aggregation purposes, ten (10) Deci Bitcoin 

Futures Contracts will convert into one (1) Bitcoin Futures Contract.

In determining whether any market participant has exceeded the position limits, all 

positions in accounts for which such market participant by power of attorney or otherwise directly 

or indirectly holds positions or controls trading will be included with the positions held by such 

market participant. Position limits will apply to positions held by two or more market participants 

acting pursuant to an expressed or implied agreement or understanding, the same as if the 

positions were held by a single market participant.

Rule 1206 Bitcoin Futures and Options Settlement Price Computation

(a) Settlement Times and Definitions

Daily Settlement Period Five minutes prior to Trading Close
80

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

Final Settlement Period Five minutes prior to Trading Termination

Settlement Period Daily or Final Settlement Period

Roll Period Five trading days prior to contract expiration day

Front Month Contract 

After Roll Period Next contract to expire

Deferred Month 

Contracts

All contracts yet to expire excluding the Front Month 

Contract

Pricing Contract Contract used for determining settlement prices

(b) Futures Pricing Contract Selection. Unless during the Roll Period, the 

Front Month Contract is the Pricing Contract for determining settlement prices. During the 

Roll Period, the next-to-expire Deferred Month Contract is used as the Pricing Contract.

(c) Futures Settlement Price Computation

(i) The settlement price of the Pricing Contract is the volume-weighted 

average price (VWAP) of all the trades during the Settlement Period.

(ii) If no trades occur during the Settlement Period, the settlement price is 

the time-weighted average price (TWAP) of the bid-ask spread 

midpoint during the Settlement Period.

(iii) If a bid-ask spread isn’t available during the Settlement Period, earlier 

market data or a composite spot price is used from spot markets 

deemed acceptable by Bitnomial.

(iv) All settlement prices are rounded to the nearest tick.

(d) Options Settlement Price Computation

(i) The settlement price of the Pricing Contract is the volume-weighted 

average price (VWAP) of all the trades during the Settlement Period.

(ii) If no trades occur during the Settlement Period, the settlement price is 

the time-weighted average price (TWAP) of the bid-ask spread 

midpoint during the Settlement Period.

(iii) If a bid-ask spread isn’t available during the Settlement Period, the 

settlement price is the output of the Black-Scholes model based on that 

day’s settlement price and 30-day volatility of the underlying contract.

(iv) All settlement prices are rounded to the nearest tick.

(e) Futures Non-Pricing Contract Settlement Prices. The settlement prices 
81

Copyright © 2021 Bitnomial Exchange, LLC. All rights reserved.

for non-Pricing Contracts are inferred from the quoted spread market relationships to the 

Pricing Contract settlement price, directly or indirectly.

(f) Futures Final Settlement. During the Final Settlement Period the Front 

Month Contract final settlement price is determined using the non-Pricing Contract 

settlement price procedure.

(g) Options Final Settlement. During the Final Settlement Period the Front 

Month Option Contract will settle based on the underlying Futures Contract.

(h) Sole Discretion. The Exchange has sole discretion to determine an 

alternative settlement price if the stated settlement procedure produces prices which are not 

representative of the fair value of the contract.