EXHIBIT L

Core Principles

Attach as Exhibit L, a narrative and any other form of documentation that may be provided under other Exhibits herein, that describes the manner in which the Applicant 

is able to comply with each core principle. Such documentation must include a regulatory compliance chart setting forth each core principle and providing citations to 

the Applicant’s relevant Rules, policies, and procedures that address each core principle. To the extent that the application raises issues that are novel or for which 

compliance with a core principle is not self-evident, include an explanation of how that item and the application satisfy the core principles.

All capitalized terms used in this Exhibit L and not defined have the meanings ascribed in the Rulebook, which is included as Exhibit M to this Application. All 

references to “Rules” contained in this Exhibit are references to the Rules of the Exchange’s Rulebook.

DESIGNATED CONTRACT MARKET 

REGISTRATION REQUIREMENTS THE ENVIRONMENTAL EXCHANGE, INC. (“TEX”) APPLICATION RELEVANT TEX APPLICATION MATERIALS

Sec. 5(a) Applications – “A board of trade 

applying to the Commission for designation as 

a contract market shall submit an application 

to the Commission that includes any relevant 

materials and records the Commission may 

require consistent with the Act.”

The Environmental Exchange, Inc. (“TEX”) is submitting Form DCM 

and exhibits thereto (the “Exhibits”) dated April 17, 2023 in accordance 

with 17 C.F.R. Part 38, Appendix A as an application for designation as 

a contract market (the “Application”). 

All materials submitted with the 

Application.

Sec. 5(d) Core Principles for Contract Markets

Core Principle 1 – Designation as 

Contract Market: (a) In general. To be 

designated, and maintain a designation, as a 

contract market, a board of trade shall comply 

with:

(1) Any core principle described in section 

5(d) of the Act, and

(2) Any requirement that the Commission 

may impose by rule or regulation pursuant to 

section 8a(5) of the Act.

(b) Reasonable discretion of the contract 

market. Unless otherwise determined by the 

Commission by rule or regulation, a board of 

trade described in paragraph (a) of this section 

shall have reasonable discretion in establishing 

the manner in which the board of trade 

TEX is applying for registration as a Designated Contract Market 

(“DCM”) by submitting Form DCM (the “TEX Application”). Once 

registered, TEX will comply with the DCM Core Principles. As 

demonstrated in this Application, TEX has drafted its Rulebook and 

Market Supervision Manual, and has designed TEX’s operations to be 

compliant with the DCM Core Principles and the Commodity Exchange 

Act, as amended (“CEA”) and other applicable Commodity Futures 

Trading Commission (“CFTC”) Regulations promulgated thereunder.

TEX Application, including all 

attachments and Exhibits.
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complies with the core principles described in 

this subsection.

Core Principle 2 – Compliance with 

Rules: (a) In general. The board of trade shall 

establish, monitor, and enforce compliance 

with the rules of the contract market, including:

(1) Access requirements;

(2) The terms and conditions of any 

contracts to be traded on the contract market; 

and

(3) Rules prohibiting abusive trade 

practices on the contract market.

(b) Capacity of contract market. The board 

of trade shall have the capacity to detect, 

investigate, and apply appropriate sanctions to 

any person that violates any rule of the 

contract market.

(c) Requirement of rules. The rules of the 

contract market shall provide the board of 

trade with the ability and authority to obtain any 

necessary information to perform any function 

described in this section, including the capacity 

to carry out such international informationsharing agreements, as the Commission may 

require.

The front cover of the Rulebook clearly sets forth, and Rule 301 

repeats, that any Person who directly or indirectly accesses the 

Platform agrees to be bound by the Rulebook and be subject to the 

jurisdiction of the Exchange. The term “Person” broadly encompasses 

all Market Participants and their traders. Rule 601 clearly states that 

all Persons subject to the jurisdiction of the Exchange are subject to 

the disciplinary rules in Chapter 6. The authority of the Exchange 

Compliance Department to investigate matters within its jurisdiction 

and the obligations of each Person to cooperate with such 

investigations are set forth in Rule 602. Chapter 4 sets forth 

Obligations of Participants and other Subject Persons, which include 

certain disclosure obligations to the Exchange pursuant to Rule 402.

Under Rule 403, the Exchange may examine the systems, data and 

books and records of a Subject Person (which is either a Participant or 

a Sponsored Access Customer), or of any Person that is the subject of 

an investigation by the Exchange. 

Access to the Exchange will be granted in an impartial manner as 

described in connection with Core Principle 19 (Antitrust 

Considerations). The Board will review eligibility determinations and 

amendments to the Rules so as to prevent unfair discrimination 

among Participants. See also Core Principle 17 (Composition of 

Governing Boards of Contract Markets). The Chief Regulatory Officer

(“CRO”) in consultation with the Regulatory Oversight Committee 

(“ROC”) will resolve potential conflicts of interest, as provided in Rule 

209. See also Core Principle 16 (Conflicts of Interest). Rule 305

addresses requirements for access by Independent Software Vendors 

(“ISVs”).

Under Rule 310, fee information will be made available on the Web 

Site. The Exchange will not privately negotiate fees for access to its 

Platform and will set non-discriminatory fee classes in order to meet 

the impartial access requirement. The Exchange intends to implement 

a market maker program, which again will not discriminate against 

Exhibit K (Dues, Fees, and Other 

Charges) 

Exhibit M (Rulebook) 

Exhibit N (Agreements/Contracts) 

Exhibit O (Market Supervision 

Manual)

Exhibit P (Disciplinary and 

Enforcement Procedures, Alternative 

Resolution Dispute) 

Exhibit R (Rules Prohibiting Trade 

Practice Violations)
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entities all meeting the same requirements. Any fees and market 

maker programs will be submitted for self-certification under CFTC 

Regulation 40.6 prior to being implemented.

Chapter 5 of the Rulebook imposes an extensive set of restrictions 

designed to protect users of the Exchange from forms of abusive, 

disruptive, fraudulent, noncompetitive and unfair conduct and trade 

practices. See Core Principle 12 (Protection of Markets and Market 

Participants). Prohibited conduct and trade practice violations include:

• Rules 504 and 510 are catch all rules that make it a violation to 

engage in fraud, dishonorable or dishonest conduct, or in conduct 

which is inconsistent with just and equitable principles of trade 

(Rule 504), and Rule 510 prohibits acts detrimental to the 

Exchange.

• Rule 505 prohibits engaging or attempting to engage in 

fraudulent acts, engaging in or attempting any scheme or device 

to defraud, deceive, trick or mislead in connection with or related 

to any activity on or through the Exchange or any activity related 

to any Clearing House.

• Rule 506 prohibits fictitious transactions, wash transactions or 

non-competitive transactions, or executing any Order with 

knowledge of its nature as a fictitious transaction, wash, or noncompetitive transaction (e.g. money passes). 

• Rule 507 prohibits disruptive trading practices. 

• Rule 508 prohibits directly or indirectly manipulating or 

attempting to manipulate, the price of any Contract. Corners and 

attempted corners are prohibited. 

• Rules 516, 517 and 527 prohibit withholding or trading ahead of 

Customer Orders.

• Rule 518 prohibits trading against Customer Orders. 

• Rule 519 prohibits disclosing Customer Orders. 

• Rules 520 and 524 prohibit improper cross trading, pre-arranged 
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trading (pre-execution communication), accommodation trading.

• Rule 521 prohibits wash trading. 

Suspected misconduct and trade practice violations will be 

investigated and prosecuted as summarized in connection with Core 

Principle 4 (Prevention of Market Disruption). As described in 

connection with Core Principle 4 (Prevention of Market Disruption), 

Chapter 6 of the Rulebook and Exhibit P sets forth the procedures and 

sanctions used in enforcing compliance with the rules of the Exchange 

and other obligations (including those under the CEA and regulations 

promulgated by the CFTC).

The Exchange Compliance Department will have resources to detect 

and investigate rule violations. The Exchange intends to license the 

Validus software from Eventus to conduct market surveillance on a 

T+1 basis. Details regarding the capabilities and alert generation of 

this system can be found in Exhibit O (Market Supervision Manual).

The ROC will prepare an annual report assessing, for the Board and 

CFTC, the regulatory program of the Exchange under Rule 208. This 

report will: (i) describe the self-regulatory program of the Exchange; (ii) 

set forth the expenses of the regulatory program; (iii) describe the 

staffing and structure of the same; (iv) catalogue Investigations and 

disciplinary actions taken during the year; and (v) review the 

performance of disciplinary committees and panels. The Exchange

Compliance Department will perform automated trade surveillance

and real-time market monitoring as described in connection with Core 

Principle 4 (“Prevention of Market Disruption”), below. 

The decision as to whether to cancel an executed trade or adjust the 

price of such a trade is addressed in Rule 541. The decision as to 

whether to initiate an Investigation will be made by the Exchange 

under Rule 605. The decision as to whether to impose sanctions and if 

so, the form such sanctions should take will be made by the Exchange 

under Rules 614 and 615. The decision as to whether to deny, revoke, 

or condition an application for Trading Privileges, or to become a 

Participant will be made by the Exchange under Rule 306. The Board 

will have the authority to review appeals of staff denials, and at its 
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discretion, may appoint a committee for such purpose.

Under Rule 602, the Exchange Compliance Department 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 Exchange Compliance Department, indicates a 

possible basis for finding that a violation has occurred or will occur.

Under Rule 605, each Investigation will be completed in a timely 

manner, and absent mitigating circumstances, each Investigation will 

be completed within 12 months of being initiated. Under Rule 603, an 

Investigative Report will be prepared for every Investigation. Under 

Rule 603, an Investigation may be resolved through an informal 

disposition (including the issuance of a warning letter); such 

disposition 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 Subject Person during a rolling 

12-month period.

Rule 216 permits the Exchange to enter into information sharing 

agreements to coordinate surveillance with other markets as the 

Commission may require, as the Exchange determines necessary or 

advisable, or where the Exchange determines such arrangements 

exercise a legal or regulatory function under any Applicable Law or 

considers such arrangement to be in furtherance of the operation or 

duties of the Exchange under Applicable Law. TEX intends to join the 

Joint Compliance Committee (“JCC”) upon designation. The JCC is a 

voluntary committee of Self-Regulatory Organizations. The JCC 

operates through its members to protect market integrity within and 

across the members’ markets. It provides a forum to share 

information and ideas on regulatory topics of interest, as well as 

identify issues within the industry or elsewhere that may impact their 

markets, members or self-regulatory responsibilities.
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Core Principle 3 – Contracts Not Readily 

Susceptible to Manipulation: The board of 

trade shall list on the contract market only 

contracts that are not readily susceptible to 

manipulation.

The Exchange will initially offer trading in Contracts that are cash 

settled (as per the Clearing Services Agreement in Exhibit N). The 

Exchange also intends to offer Contracts that are settled by physical 

delivery, only after further negotiant with the DCO that will clear for 

TEX. . 

Prior to the self-certification of any Contract for listing on the 

Exchange pursuant to CFTC Regulation 40.2, the Exchange will 

perform a review and analysis of the factors enumerated in Appendix 

C to Part 38 – Demonstration that a Contract is Not Readily 

Susceptible to Manipulation when designing both cash settled and 

physically settled contracts. 

All activity in the Contracts that will be listed for trading on the 

Exchange will be subject to monitoring and surveillance by the 

Exchange Compliance Department using Validus software licensed 

from Eventus. Specifically, the Exchange Compliance Department will

monitor for market manipulation and various disruptive trading 

practices as indicated in Chapter 5 of the Rulebook and Exhibit O.

Further, the Exchange will monitor and enforce position limits 

pursuant to Rule 532. 

Finally, the Rulebook restricts trading on the basis of non-public 

information. In particular, Rule 214 prohibits insiders (e.g., direct or 

indirect owners of the Exchange, its directors, officers, committee 

members, and employees) from trading in Contracts or related 

contracts absent prior written consent from the Exchange; and Rule 

519 prohibits Persons from acting directly or indirectly on the basis of 

non-public Order information.

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual)

Core Principle 4 – Prevention of Market 

Disruption: The board of trade shall have the 

capacity and responsibility to prevent 

manipulation, price distortion, and disruptions 

of the delivery or cash-settlement process 

through market surveillance, compliance, and 

enforcement practices and procedures, 

including:

Pursuant to Rule 208, the ROC will have the authority to monitor 

trading on the Exchange and the Exchange’s regulatory program for 

sufficiency, effectiveness and independence, and to oversee all facets 

of the Exchange’s regulatory program, including (A) trade practice and 

market surveillance; audits, examinations, and other regulatory 

responsibilities with respect to Clearing Firms and Participants, 

Sponsored Access Customers and their Supervised Person, and other 

agents of Participants (including ensuring compliance with, if 

applicable, financial integrity, financial reporting, sales practice, 

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual) 

Exhibit R (Rules Prohibiting Trade 

Practice Violations)
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(a) Methods for conducting real-time 

monitoring of trading; and

(b) Comprehensive and accurate trade 

reconstructions.

recordkeeping, and other requirements); and the conduct of 

Investigations; (B) reviewing the size and allocation of the regulatory 

budget and resources, and the number, hiring, termination, and 

compensation of regulatory personnel; (C) supervising the CRO of the 

Exchange, who will report directly to the ROC; (D) recommending 

changes that would ensure fair, vigorous, and effective regulation; and 

(E) reviewing all regulatory proposals prior to implementation and 

advising the Board as to whether and how such changes may impact 

regulation.

Chapter 5 of the Rulebook sets forth prohibited trading practices and 

business conduct. See itemization of these practices in Exhibit R. 

Subject to the oversight of the ROC, the CRO will oversee the

monitoring, surveillance and other enforcement functions of the 

Exchange with the support of the Exchange Compliance Department 

pursuant to Rule 209. The Exchange Compliance Department will 

initially consist of the CRO, with additional supporting surveillance and 

compliance staff as deemed necessary. These functions will be 

supported by the Exchange’s technology, which will collect, array and 

transmit bid, offer and trade data to Eventus. This will be supervised 

by the CRO. The Exchange Compliance Department will be responsible 

for trade practice and market surveillance, and will monitor trading on 

a real-time basis, with support from the exchange operations staff.

The Platform has an application that allows the Market Operations 

team to monitor the market in real-time. Staff can view unaggregated 

order book data with detailed order information and an alert 

dashboard showing anomalous behaviors by Participants. Staff can 

view detailed history of orders from order entry in the system to the 

delivery of executed trades associated with the order to the clearing 

house. The TEX Market Oversight Manual further describes how the 

Exchange Compliance Department will enforce compliance with laws, 

regulations, and other obligations applicable to Clearing Firms, 

Participants, their representatives and other Persons subject to the 

jurisdiction of the Exchange.

Chapter 6 of the Rulebook sets forth the disciplinary and enforcement 

process, which includes steps to inquire into, investigate, adjudicate 

and sanction potential rule violations within the disciplinary 
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jurisdiction of the Exchange. The CRO, with assistance from the 

Exchange Compliance Department, the Disciplinary Panels and Appeal 

Panels, will take part in the prosecution and adjudication of potential 

violations of the Rules as described in Chapter 6.

Under Rule 605, the CRO and a Review Panel will each decide whether 

a Notice of Charges should be issued on the basis of a completed 

Investigative Report. In the event there is a disagreement between the 

CRO and the Review Panel, it will be resolved by the ROC. If a Notice of 

Charges is issued, it will be served on the relevant respondent or its 

Authorized Representative and the Exchange will provide a statement 

of the obligation(s) violated by such respondent(s), the underlying 

facts, proposed sanctions, and the respondent’s procedural rights 

pursuant to Rule 606. The Respondent will be able to answer a Notice 

of Charges pursuant to Rule 607 and/or seek a settlement pursuant to 

Rule 609. Charges that are not resolved through settlement will be 

resolved through a hearing in front of a Hearing Panel pursuant to 

Rules 611 and 613. Decisions of a Hearing Panel are to be issued 

based on the weight of evidence contained in the record pursuant to 

Rule 614 and may be appealed pursuant to Rule 616. If a violation is 

found, sanctions may be imposed pursuant to Rule 615. The Exchange 

also has authority to summarily impose fines pursuant to Rule 617 and 

institute emergency disciplinary actions (including suspensions) 

pursuant to Rule 618.

In addition, the Exchange will provide a range of risk management 

functionalities. Prior to the Exchange granting access to its Platform

to any Participant, the trades of such Participant must be guaranteed 

by a Clearing Firm pursuant to Rule 806. Such Clearing Firm must 

establish an initial set of risk limits for such Participant (and its 

Customers/Clients, if applicable). The Exchange provides an interface 

to each Clearing Firm that allows each such firm to administer the risk 

level and type of Contracts that the Clearing Firm will guarantee for its 

Participants and monitor its Participants’ positions and trading 

activity. All Orders submitted to the Platform are subject to satisfying 

applicable risk controls prior to their acceptance by the Platform. 

Furthermore, the Platform contains configurable risk controls that can 

be placed on inbound orders to protect the integrity of the market.

These include price limits/price banding, order size limits, self-trade 
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DESIGNATED CONTRACT MARKET 

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prevention, user validation and message throttling. The Exchange, 

together with its Technology Services Provider, will determine 

appropriate risk controls to implement prior to launch.

Core Principle 5 – Position Limitations or 

Accountability: To reduce the potential threat 

of market manipulation or congestion 

(especially during trading in the delivery 

month), the board of trade shall adopt for each 

contract of the board of trade, as is necessary 

and appropriate, position limitations or position 

accountability for speculators. For any contract 

that is subject to a position limitation 

established by the Commission, pursuant to 

section 4a(a), the board of trade shall set the 

position limitation of the board of trade at a 

level not higher than the position limitation 

established by the Commission.

Position limits and position accountability requirements will be 

imposed by the Exchange for speculators as necessary and 

appropriate under Rules 529 and 530. Rule 529 includes exemptions 

for certain qualified hedging transactions and sets forth applicable 

aggregation rules. 

The Exchange will have a number of tools to track traders’ positions. 

These include reporting obligations applicable to large traders under 

Rule 531, as well as the monitoring of outstanding resting orders and 

accumulated positions by Contract by the Platform. 

The Exchange will sanction Market Participants for violating their 

obligations to observe position limits pursuant to Chapter 6. Such 

sanctions include revocation of Trading Privileges as provided for in 

Rule 306, or a Person’s ability to otherwise access the Platform.

Exhibit M (Rulebook)

Core Principle 6 – Emergency Authority:

The board of trade, in consultation or 

cooperation with the Commission, shall adopt 

rules to provide for the exercise of emergency 

authority, as is necessary and appropriate, 

including the authority:

(a) To liquidate or transfer open positions 

in any contract;

(b) To suspend or curtail trading in any 

contract; and

(c) To require market participants in any 

contract to meet special margin requirements.

The Rulebook sets forth procedures for decision-making and 

emergency intervention in the market. Rule 212 of the Rulebook 

permits the ROC (or the CRO, if he or she determines that an 

Emergency Rule must be implemented before a meeting of the ROC 

may be reasonably convened) to adopt Emergency Rules that 

authorize or require the Exchange, Board, any Committee of the Board, 

or an Officer to take certain Emergency Actions. Such Emergency 

Actions include those under: 

• Rule 212(a)(iv), which satisfies subsection (a) of Core Principle 

6 by granting authority to liquidate or transfer open positions in 

any Contracts; 

• Rule 212(a)(i), which satisfies subsection (b) of Core Principle 6 

by granting the authority to suspend or curtail trading in any 

Contract; and 

Exhibit M (Rulebook)
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• Rule 212(a)(vii), which satisfies subsection (c) of Core Principle 

6 by granting the authority to require Participants to meet 

special margin requirements. 

Other Emergency Actions under Rule 212 provide for authority to: 

• extend or shorten the last trading date for a Contract; 

• provide alternative settlement mechanisms for any Contract 

(including by altering the settlement terms or conditions or 

fixing settlement price); 

• extend, shorten or change the trading hours or expiration date 

of any Contract; or 

• temporarily modify or suspend any provision of the 

Obligations. Emergency Actions under Rule 212 may be taken 

directly or through third party providers of clearing or 

regulatory services.

Under Rule 212(d), the Exchange is required to use reasonable efforts 

to notify the CFTC prior to implementing, modifying or terminating any 

Emergency Rule, and where prior notification is not possible or 

practicable, is required to notify the CFTC as soon as is possible or 

reasonably practicable. Under Rule 212(e), any decision to take 

Emergency Action shall be documented by the Exchange (and this 

documentation will describe the process for minimizing conflicts of 

interest applied to the decision and reasons for exercising emergency 

authority under Rule 212).

In addition, certain circumstances may require disciplinary actions that 

do not conform to the full set of procedures provided for in Chapter 6.

Such disciplinary actions (including suspensions) may be conducted 

under Rule 618 when the CRO reasonably believes that such 

Emergency Disciplinary Action is necessary to protect the best interest 

of the marketplace served by the Exchange.

Emergency Actions taken pursuant to Rule 212 and Emergency 

Disciplinary Actions taken pursuant to Rule 618 are subject to 

Conflicts of Interest provisions in Rule 213.
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Core Principle 7 – Availability of General 

Information: The board of trade shall make 

available to market authorities, market 

participants, and the public accurate 

information concerning:

(a) The terms and conditions of the 

contracts of the contract market; and

(b)(1) The rules, regulations and 

mechanisms for executing transactions on or 

through the facilities of the contract market, 

and

(2) The rules and specifications describing the 

operation of the contract market's (i) Electronic 

matching platform, or (ii) Trade execution 

facility.

Under Rule 310, the Rulebook as amended from time to time, notices, 

advisories, and policies will be publicly available on the Exchange 

Website. The Exchange will publish all such information, including any 

non-confidential material associated with regulatory filings relating to 

Rules and products at the time TEX submits the filings to the CFTC as

required by Part 40 of the CFTC Regulations. 

Rule 539 and the Market Supervision Manual (Exhibit O) includes a 

description of the matching algorithm employed by the Platform, and 

Order Types that may be submitted to the Platform. 

A detailed description of the trade matching algorithm and examples 

of how that algorithm works in various trading scenarios involving 

various Order Types is provided in Exhibit Q.

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual)

Exhibit Q (Trading System) 

Core Principle 8 – Daily Publication of Trading 

Information: The board of trade shall make 

public daily information on settlement prices, 

volume, open interest, and opening and closing 

ranges for actively traded contracts on the 

contract market.

The Exchange will publish information on volume, pricing (open, close, 

high, low), settlement price, open interest and other information for 

actively traded Contracts required by CFTC Regulation 16.01 after the 

end of the trading day on its Web Site and will transmit this data to the 

CFTC, within the time frames prescribed in CFTC Regulation 16.01. 

Time and sales data, and other order and transaction data will be 

transmitted to the CFTC as required by CFTC Regulation 16.02.

Part 16 requirements are addressed in Rule 905.

Exhibit M (Rulebook)

Core Principle 9 – Execution of 

Transactions: The board of trade shall provide 

a competitive, open, and efficient market and 

mechanism for executing transactions that 

protects the price discovery process of trading 

in the centralized market of the board of trade. 

The rules of the board of trade may authorize, 

for bona fide business purposes:

The Platform provides Participants with the ability to execute 

transactions from the interaction of multiple bids and multiple offers 

within a predetermined, nondiscretionary automated trade matching 

and execution algorithm. Additional detail on the Platform and 

matching algorithm can be found in Exhibit Q. The Exchange will 

conduct periodic objective testing of the Platform and the trade 

environment generally, pursuant to the provisions contemplated in 

Exhibit V – the CFTC Technology Questionnaire. Contracts trade under 

the terms publicly provided for in the Contract Specifications, and as 

certified pursuant to CFTC Regulation 40.2. 

Exhibit M (Rulebook)

Exhibit Q (Trading System)

Exhibit V (Technology Questionnaire)
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(a) Transfer trades or office trades;

(b) An exchange of:

(1) Futures in connection with a cash 

commodity transaction;

(2) Futures for cash commodities; or

(3) Futures for swaps; or

(c) A futures commission merchant, acting as 

principal or agent, to enter into or confirm the 

execution of a contract for the purchase or sale 

of a commodity for future delivery if the 

contract is reported, recorded, or cleared in 

accordance with the rules of the contract 

market or a derivatives clearing organization.

Rule 804 allows the transfer of trades from one Clearing Member to 

another upon notice to the Exchange and in accordance with the Rules 

of the DCO. An FCM can act as principal or agent on such trades, 

subject to the Rules of the Exchange and DCO.

Block Trades are addressed in Rule 542.

Core Principle 10 – Trade Information:

The board of trade shall maintain rules and 

procedures to provide for the recording and 

safe storage of all identifying trade information 

in a manner that enables the contract market 

to use the information:

(a) To assist in the prevention of 

customer and market abuses; and

(b) To provide evidence of any violations 

of the rules of the contract market.

The Platform will maintain all information with respect to each Order 

(whether or not such Order results in a Transaction) and each 

Transaction, as all other information relating to the trade environment 

that determines the matching and clearing of trades. Because all 

information relating to Orders submitted to the Platform and relevant 

environmental parameters will be retained, any Order could be tracked 

from the time it is entered into the Platform to the time it is matched, 

expires or is otherwise disposed of. The Exchange may adopt further 

procedures to record and account for Contracts and Exchange Activity 

pursuant to Rule 502. 

Rule 522 requires users of the Platform to enter all information 

necessary to process an Order pursuant to the Rules when placing an 

Order on the Exchange and provides that the Exchange shall maintain 

such information. 

Audit trail data will be stored in a manner that protects it from 

unauthorized alteration as well as from accidental erasure or other 

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual) 

Exhibit S (Trading Data)

Exhibit V (Technology Questionnaire). 
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loss. Audit trail data will be maintained as described in the Technology 

Questionnaire included in Exhibit V and also in Exhibit S. 

The Exchange Compliance Department will perform audit trail reviews 

at least annually. Under Rule 522(b), each Participant is required to 

maintain a front-end audit trail, which stores data related to Orders 

placed by such Participant or any of its Sponsored Access Customers. 

Such data is accessible to the Exchange pursuant to Rule 403. Using

sampling techniques, the Exchange Compliance Department will 

review the front-end audit trail data retained by Participants at least 

annually to the extent required under Rule 522(c). Such review will 

include examination of :

(i) the process by which user identifications are assigned and 

user identification records are maintained, 

(ii) usage patterns associated with user identifications to 

monitor for violations of user identification rules, and 

(iii) account numbers and CTI codes in trade records to ensure 

that they are accurate and being properly used. Furthermore, 

the Exchange will review compliance with recordkeeping 

obligations at least annually. 

In addition to retaining front-end audit trail data, the Exchange will 

retain books and records and Participants will be required to retain 

their books and records for at least five years pursuant to Rules 215 

and 401(l), respectively. Recordkeeping and data retention 

requirements apply to trades conducted outside the Platform, if any,

under Rule 544.
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Core Principle 11 – Financial Integrity of 

Transactions: The board of trade shall 

establish and enforce:

(a) Rules and procedures for ensuring the 

financial integrity of transactions entered into 

on or through the facilities of the contract 

market (including the clearance and settlement 

of the transactions with a derivatives clearing 

organization); and

(b) Rules to ensure:

(1) The financial integrity of any:

(i) Futures commission merchant, and

(ii) Introducing broker; and

(2) The protection of customer funds.

Under Rule 801(d), all Contracts traded on the Exchange must be 

cleared through a Clearing House by a Clearing Firm. Chapter 8 

governs the clearing of Contracts. Specific rules and procedures 

applicable to the execution and clearing of Contracts that are cleared 

by a Derivatives Clearing Organization (DCO) are to be developed 

between TEX and the DCO as part of their final agreement.

Only Subject Persons (which are Participants and Sponsored Access 

Customers) will be permitted to submit Orders to the Exchange. Each 

Participant must be a Clearing Firm or itself and/or its Customers 

must establish a clearing relationship with a Clearing Firm under Rule 

534(b). A clearing relationship must also be established for any 

Person initiating or execution a Transaction on the Exchange pursuant 

to Rule 806. Eligibility requirements for Participants are provided in

Chapter 3 and for Clearing Firms in Chapter 8. See also Core Principle 

15 (Governance Fitness Standards). Under Rule 303, each Participant 

is responsible for the actions of its Authorized Traders (and each 

Participant is responsible for the actions of its Sponsored Access 

Customers). Similarly, under Rule 535 and 536, each Participant and 

Authorized User is responsible for actions taken under its User ID.

Clearing Firms are responsible under CFTC Regulation 1.73 for 

establishing risk limits and screening orders for compliance with 

those risk-based limits. An Order will not be allowed on the Platform if 

it has not been screened. The Platform will have other risk controls 

(e.g. fat finger) that will be applied once an Order is transmitted to the 

Platform as described in Core Principle 4 (Prevention of Market 

Disruption). If a risk limit is nevertheless exceeded, responsibility for 

the resulting Transaction will lie with the relevant Clearing Firm and 

other Subject Person in accordance with the terms of agreements 

between them. It the Persons involved in the Transaction are 

amenable to it, the Exchange may consider reviewing the trade 

pursuant to Rule 541 (Trade Cancellation and Adjustments) provided 

that the provisions of this rule are met. 

The Board will be responsible for reviewing the Rules governing the 

eligibility of Participants and ensuring that such rules do not restrict 

access or impose burdens on access in a discriminatory manner.

Exhibit M (Rulebook)

Exhibit N (Agreements/Contracts)

Exhibit O (Market Supervision 

Manual) 
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Rules 302 and 304 subject Participants to disciplinary measures for 

violating applicable registration requirements, including those 

imposed on Introducing Brokers and Futures Commission Merchants.

Similarly, Rule 404 incorporates into the Rulebook a requirement that 

each Participant comply with its obligations as a registered entity with 

any Government Agency or Self-Regulatory Organization (including 

obligations applicable to Futures Commission Merchants and 

Introducing Brokers) and provides for the submission of reports to be 

provided to the CFTC under CFTC Regulations 1.10 and 1.12 to the 

Exchange, which allows the Exchange to assess its Participants’ and 

Clearing Firms’ compliance with minimum financial requirements 

applicable to Futures Commission Merchants and Introducing Brokers, 

as well as obligations to protect customer funds. Rule 406 grants the 

Exchange authority to impose restrictions on the business or 

operations of a Participant that becomes subject to the notice 

requirements of CFTC Regulation 1.12, which provides for such notice 

in the event of a futures commission merchant’s insufficient capital, 

failure to maintain records, and inadequate segregation of customer 

funds. As described in Exhibit O, the Exchange Compliance 

Department will review financial statements of any Participants and 

Clearing Firms that are FCMs or IBs to ensure they comply with 

applicable regulations. 

The Exchange will rely on the DCO to conduct intraday monitoring of 

the obligations of Clearing Firms created by the positions of its 

Customers and Clients as required by CFTC Regulation 38.604. This is 

addressed in the clearing agreement between the DCO and the 

Exchange.
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Core Principle 12 – Protection of 

Markets and Market Participants: The board of 

trade shall establish and enforce rules:

(a) To protect markets and market 

participants from abusive practices committed 

by any party, including abusive practices 

committed by a party acting as an agent for a 

participant; and

(b) To promote fair and equitable trading 

on the contract market.

Pursuant to Chapters 4 and 5 of the Rulebook and Exhibits Q and R, 

the Exchange has established various Rules designed to protect the 

markets and Market Participants from abusive, disruptive, fraudulent, 

non-competitive, and unfair conduct and trade practices. TEX has 

licensed Validus software from Eventus for market surveillance to 

assist the Compliance Department to monitor the market on a T+1 

basis, coupled with real-time tools on the Exchange Trading Platform 

provided by the Exchange’s Technology Services Provider to assist the 

Exchange in identifying and prosecuting any abusive trading practices.

Improper conduct and trade practice violations will be investigated 

and adjudicated as described in Chapter 6 of the Rulebook and Exhibit 

P. Further detail regarding how the Compliance Department conducts

these surveillance activities can be found in Exhibit O.

Exhibit M (Rulebook)

Exhibit N (Agreements/Contracts)

Exhibit O (Market Supervision 

Manual)

Exhibit P (Disciplinary and 

Enforcement Procedures)

Core Principle 13 – Disciplinary Procedures:

The board of trade shall establish and enforce 

disciplinary procedures that authorize the 

board of trade to discipline, suspend, or expel 

members or market participants that violate 

the rules of the board of trade, or similar 

methods for performing the same functions, 

including delegation of the functions to third 

parties.

Chapter 6 of the Rulebook sets forth the Rules for disciplinary 

procedures that allow TEX to discipline, suspend, expel or otherwise 

sanction Market Participants that violate the Rules. The jurisdiction of 

the Exchange is set forth in Rule 301.

The Compliance Department will monitor the market for any of the 

trade practice violations enumerated in Chapter 5 of the Rulebook. The 

Compliance Department will investigate all such potential Rule

violations and determine if the facts of the investigation warrant 

formal Disciplinary Action pursuant to Chapter 6 of the Rulebook. 

The Exchange’s CRO will oversee the Compliance Department. The

Compliance Department, pursuant to Rule 602, can initiate and 

conduct investigations when the information obtained indicates a 

possible Rule violation. The Compliance Department will determine the 

nature and scope of its inquiries and investigations and will function 

independently of any commercial interests of the Exchange. The 

Compliance Department has the authority to (i) inspect the books and 

records of all Participants; (ii) require Persons to appear before it and 

answer questions regarding possible Rule violations; (iii) prepare 

Investigative Reports; (iv) make recommendations to the CRO 

concerning initiating disciplinary proceedings; (v) authorize issuance 

of Notices of Charges against Respondents alleged to have violated 

the Rules (if the CRO believes the matter should be adjudicated; and 

(vi) prosecute alleged Rule violations within the Exchange’s

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual)
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disciplinary jurisdiction. 

Rule 610 sets forth the functions and make-up of the Disciplinary 

Panel. If the CRO determines that a matter should be adjudicated in a 

formal hearing before the Disciplinary Panel, the Compliance 

Department will be instructed to serve a Notice of Charges.

The Notice of Charges delivered to the Respondent will provide a 

timeline for response to the allegations. In accordance with Rule 613, 

the hearing will be fair and conducted before the members of the 

Hearing Panel. As stated in Rule 614, as promptly as is reasonable 

following a hearing, the Hearing Panel will issue a written order 

rendering its decision based on the weight of the evidence contained 

in the record of the disciplinary proceedings. A decision by a majority 

of the Hearing Panel will constitute the Decision of the Hearing Panel.

Pursuant to Rule 313, when the Exchange accepts the withdrawal of a 

Participant, all rights and privileges of such Participant terminate 

(including, without limitation, the Trading Privileges and ability to 

access the Exchange Trading Platform). The accepted withdrawal of a 

Participant shall not affect the rights of the Exchange under the Rules 

or relieve the former Participant of its obligations under the Rules, to 

perform all obligations involving any Contracts entered into by such, or 

to pay any Exchange fees, costs, or charges incurred, before the 

withdrawal, including any obligations by the Participant for activity by 

its Authorized Users. Notwithstanding the accepted withdrawal of a 

Participant, the withdrawn Participant remains subject to the Rules, 

the obligations, and the jurisdiction of the Exchange for acts done and 

omissions made while a Participant and must cooperate in any 

Exchange Proceeding as if the withdrawn Participant were still a 

Participant.

Rule 619 states that when the Trading Privileges of a Participant are 

terminated, all a Participant’s rights and Trading Privileges will 

terminate (including those of any Authorized User), except for the right 

of the Participant 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 suspended or terminated Participant 

remains subject to the Rules and the jurisdiction of the Exchange for 

acts and omissions prior to the suspension or termination, and must 
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cooperate in any inquiry, investigation, or disciplinary proceeding, 

summary suspension or other summary action as if the suspended or 

terminated Participant still had Trading Privileges. The Exchange may 

discipline a suspended Participant under the Rules for any violation of 

a Rule or provision of Applicable Law committed by the Participant 

before, during, or after the suspension.

Core Principle 14 – Dispute Resolution: The 

board of trade shall establish and enforce 

disciplinary procedures that authorize the 

board of trade to discipline, suspend, or expel 

members or market participants that violate 

the rules of the board of trade, or similar 

methods for performing the same functions, 

including delegation of the functions to third 

parties.

Chapter 7 of the Rules establishes rules concerning alternative dispute 

resolution, which provide for the resolution of disputes between or 

among Participants through the American Arbitration Association.

Under Chapter 7, arbitration is available for all disputes, controversies, 

or claims among all market participants that relate to activities on or 

subject to the rules of the Exchange

Exhibit M (Rulebook)

Core Principle 15 – Governance Fitness 

Standards: The board of trade shall establish 

and enforce appropriate fitness standards for 

directors, members of any disciplinary 

committee, members of the contract market, 

and any other person with direct access to the 

facility (including any party affiliated with any 

person described in this paragraph).

Persons involved in the governance and Persons using the Exchange 

will be subject to fitness and eligibility criteria, respectively, under the 

Rulebook. More specifically, Directors, and individuals serving as 

members of Committees, Disciplinary Panels and Appeal Panels will 

be subject to fitness standards under Rule 204; Participants will be 

subject to eligibility standards specified in Rule 302, and Authorized 

Traders will be subject to eligibility standards provided in Rule 303. 

Furthermore, acquiring and retaining Trading Privileges will be subject 

to eligibility standards provided in Rule 304 and may be denied, 

revoked or conditioned based on criteria specified in Rule 304(b). In 

addition, pursuant to Rule 801(c), Clearing Firms will be subject to 

eligibility standards provided in Rule 302.

Exhibit C provides a narrative of the fitness standards applicable to 

Directors. Each non-executive Director will be required to complete a 

Director Questionnaire, which will be used in evaluating whether such 

prospective Director would meet applicable fitness standards. It is 

expected that executive directors will be vetted through the 

employment process.

Furthermore, in addition to required self-disclosure, the Exchange 

Compliance Department will review the standing of Participants and 

Exhibit C (Board Fitness) 

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual)
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Sponsored Access Customer by conducting a search of NFA’s BASIC

system, as well as other relevant searches, as part of the onboarding 

process.

Core Principle 16 – Conflicts of Interest:

The board of trade shall establish and enforce 

rules:

(a) To minimize conflicts of interest in the 

decision-making process of the contract 

market; and

(b) To establish a process for resolving 

conflicts of interest described in paragraph (a) 

of this section. 

Rule 213 of the Rulebook establishes rules to minimize conflicts of 

interest and a process for resolving conflicts of interest. In addition, 

Rule 214 limits the use and disclosure of material non-public 

information gained through the performance of official duties by 

Exchange Officials, consultants, members of Committees, members 

of Disciplinary Panels and Appeal Panels, the Compliance Department, 

and other employees of the Exchange.

As described in more detail in Rule 208 and with respect to Core 

Principle 17 (Composition of Governing Boards of Contract Market) 

below, the Exchange will have a ROC that is composed of 100% Public 

Directors. The ROC will oversee the Exchange’s regulatory program on 

behalf of the Board, which role includes assisting the CRO in 

minimizing actual and potential conflicts of interest under Rule 209.

Disciplinary Panels involved in the enforcement and adjudication 

process described in connection with Core Principle 4 above are 

subject to rules regarding composition as to preclude any group or 

class of industry participants from dominating or exercising 

disproportionate influence under Rule 609. Under that Rule, each 

Disciplinary Panel will be chaired by a Public Individual and may 

include additional Public Individuals.

Rule 616 provides for appeal of a Hearing Panel’s decision to an 

Appeal Panel. Under that Rule, an Appeal Panel will be chaired by a 

Public Individual and may include additional Public Individuals.

See also Core Principle 4 (Prevention of Market Disruption); Core 

Principle 17 (Composition of Governing Boards of Contract Market).

Exhibit M (Rulebook)

Core Principle 17 – Composition of Governing 

Boards of Contract Markets: The governance 

arrangements of the board of trade shall be 

designed to permit consideration of the views 

of market participants.

Organizational documents, including the Bylaws of TEX are provided in 

Exhibit G. The Rulebook summarizes relevant governance 

arrangements of the Exchange in Chapter 2. In accordance with Rule 

202, at least 35% of the Directors shall be Public Directors. 

The Board will delegate authority to one standing committee: the ROC 

Exhibit B (Officer and Director 

Information)

Exhibit C (Board Fitness)
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as described in Rule 208. Pursuant to Rule 208, the ROC will be 

composed entirely of Public Directors. The ROC oversees TEX’s 

regulatory program on behalf of the Board. It makes 

recommendations to the Board that will, in its judgment, best promote 

the interests of the Exchange. Likewise, the ROC assists TEX in 

minimizing actual and potential conflicts of interest. The ROC will 

prepare annual reports that assess for the Board and the CFTC the 

regulatory program of the Exchange. 

The Board will be responsible for ensuring compliance with certain 

requirements that might otherwise be delegated to a board 

committee. Most notably, the Board shall be responsible for the 

impartial access requirements of the Exchange, including ensuring 

that the fee structure is non-discriminatory. The Board will (i) 

determine the standards and requirements for initial and continuing 

Participant eligibility; (ii) review appeals of staff denials of 

applications; and (iii) approve rules that would result in different 

categories or classes of Participants receiving disparate access to the 

Exchange, including the fee structure.

TEX may, from time to time, establish one or Exchange Panels (ie

advisory committees) as it may deem necessary or advisable. Each 

such panel may consist of Exchange Officials, representatives of 

Participants, and market participants as determined by the Exchange. 

Exchange Panels may make recommendations to the Board but will 

not be authorized to make decisions or act on behalf of the Exchange.

Exhibit G (Formation Documents)

Exhibit M (Rulebook)

Core Principle 18 – Recordkeeping:

The board of trade shall maintain records 

of all activities relating to the business of the 

contract market:

(a) In a form and manner that is 

acceptable to the Commission; and

(b) For a period of at least 5 years.

The Exchange will maintain records of all activities related to its 

business for a period of five years and in accordance with 

Commission Regulation 1.31. See Rule 215, Exhibit O and Exhibit S. 

Exhibit M (Rulebook)

Exhibit O (Market Supervision 

Manual) 

Exhibit S (Trading Data)
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Core Principle 19 – Antitrust Considerations:

Unless necessary or appropriate to achieve the 

purposes of this Act, the board of trade shall 

not:

(a) Adopt any rule or taking any action 

that results in any unreasonable restraint of 

trade; or

(b) Impose any material anticompetitive 

burden on trading on the contract market.

The Exchange’s Rules have been designed to avoid unreasonable 

restraints of trade or the imposition of any material anticompetitive 

burden on trading, as will the specifications for each Contract 

approved for trading on the Exchange.

In particular, access to the Exchange will not require the acquisition of 

any equity interest but will be available to a broad range and 

potentially unlimited number of participants, on a fair, equitable and 

timely basis. The Board and ROC will have authority to approve rules 

that would result in different categories or classes of Participants 

receiving disparate access to the Exchange and will be mandated not

to 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. Under Rule 539, the Exchange will operate through 

precise and predetermined electronic algorithms, without 

discrimination among different users or user groups as described in 

detail in Exhibit Q. Trade information will be disseminated to the public 

daily.

Exhibit M (Rulebook)

Exhibit K (Dues, Fees, and Other 

Charges) 

Exhibit Q (Trading System)

Core Principle 20 – System Safeguards

Each designated contract market shall:

(a) Establish and maintain a program of 

risk analysis and oversight to identify and 

minimize sources of operational risk, through 

the development of appropriate controls and 

procedures, and the development of automated 

systems, that are reliable, secure, and have 

adequate scalable capacity;

(b) Establish and maintain emergency 

procedures, backup facilities, and a plan for 

disaster recovery that allow for the timely 

recovery and resumption of operations and the 

fulfillment of the responsibilities and 

obligations of the board of trade; and

(c) Periodically conduct tests to verify 

The Exchange has developed a program of risk analysis and oversight 

to identify and minimize sources of operational risk, through the 

development of appropriate controls and procedures, and the 

development of automated systems that are reliable, secure, and to 

have adequate scalable capacity as described in Exhibit V.

This program is described in Exhibit V, which includes information 

regarding the security of those systems, the Exchange’s risk 

assessment reviews, internal controls for operations, functional 

testing, security testing and capacity planning and testing.

Exhibit V describes the Exchange’s emergency plan and includes a 

description of the back-up systems and emergency procedures that 

include recovery time objectives. Under the emergency plan, the 

Exchange has procedures to conduct failover tests to ensure that 

backup resources are sufficient to ensure continued order processing 

and trade matching, price reporting, market surveillance, and 

maintenance of a comprehensive and accurate audit trail. In addition, 

during an emergency, Exchange Rule 212 authorizes the Exchange to 

Exhibit M (Rulebook)

Exhibit Q (Trading System)

Exhibit V (Technology Questionnaire) 
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that backup resources are sufficient to ensure 

continued order processing and trade 

matching, transmission of matched orders to a 

designated clearing organization for clearing, 

price reporting, market surveillance, and 

maintenance of a comprehensive and accurate 

audit trail.

implement temporary emergency procedures and Rules. See also Core 

Principle 6.

TEX shall review the viability of backup resources in tandem with 

resource evaluations and technology refreshes of its production 

facilities. Along with industry wide testing, the Exchange will conduct 

periodic internal testing of its own backup systems, in coordination 

with all critical regulatory and technology service providers. See 

Exhibit V for more details. 

The Exchange will conduct periodic objective testing of the Platform, 

and trade environment generally, pursuant to the provisions 

contemplated in the CFTC Technology Questionnaire (Exhibit V) and 

CFTC Regulation 38.1051. The Exchange will also periodically conduct 

tests and assessments, including: vulnerability testing, penetration 

testing, controls testing, security incident response plan testing and

enterprise technology risk assessment. 

Core Principle 21 – Financial Resources: 

(a) In General. The board of trade shall 

have adequate financial, operational, and 

managerial resources to discharge each 

responsibility of the board of trade.

(b) Determination of adequacy. The 

financial resources of the board of trade shall 

be considered to be adequate if the value of 

the financial resources exceeds the total 

amount that would enable the contract market 

to cover the operating costs of the contract 

market for a 1-year period, as calculated on a 

rolling basis.

The Exchange will maintain financial resources that exceed the total 

amount that would enable the contract market to cover the operating 

costs sufficient to enable it to perform its functions in compliance 

with the core principles for DCMs for a twelve-month period, as 

calculated on a rolling basis, and liquid financial assets that exceed 

projected operating costs for a six-month period, as calculated on a 

rolling basis. At its inception, and until such time TEX has adequate 

revenue and cash flow, TEX will be funded, as needed, with funds from 

its parent company, IncubEx Inc. See Exhibit I.

The Exchange will follow the Guidance on Calculating Projected 

Operating Costs By DCMs and SEFs, as required by CFTC Letter 17-25. 

The financial requirements and other materials required by this Core 

Principle will be submitted to the CFTC quarterly in the time period 

required by this Core Principle.

Exhibit I (Financial Information)

Core Principle 22 – Diversity of Board of 

Directors: The board of trade, if a publicly 

traded company, shall endeavor to recruit 

individuals to serve on the board of directors 

and the other decision-making bodies (as 

TEX is not a publicly traded company; therefore, this Core Principle is

not applicable.

N/A
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determined by the Commission) of the board of 

trade from among, and to have the 

composition of the bodies reflect, a broad and 

culturally diverse pool of qualified candidates.

Core Principles 23 – Securities and Exchange 

Commission: 

The board of trade shall keep any such records 

relating to swaps defined in section 

1a(47)(A)(v) of the Act open to inspection and 

examination by the Securities and Exchange 

Commission.

TEX does not offer any security-based contracts; therefore, this Core 

Principle is not applicable.

N/A