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CX Futures Exchange, L.P. 

Rule Amendments Submission #2021-2

May 5, 2021

1. The text of the rule changes to the CX Futures Exchange L.P. (“Exchange” or 

“CX”) Rulebook is attached. Additions are underlined and deletions are stricken 

through. This rule has been approved by the Exchange. Capitalized terms, unless 

otherwise defined herein shall possess the meaning(s) ascribed in Exchange 

Rulebook

2. The proposed effective date is June 1, 2021. 

3. Attached, please find a certification that: (1) these rules comply with the 

Commodity Exchange Act and the Commodity Futures Trading Commission’s

(“CFTC” or “Commission”) regulations thereunder; and (2) concurrent with this 

submission, CX Futures Exchange, L.P. posted on its website: (i) a notice of 

pending certification of the rule submissions with the Commission; and (ii) a copy 

of this submission.

4. A concise explanation and analysis of the operation, purpose, and effect of the 

amended rule appears below.

5. There were no opposing views expressed regarding these amended rules.

CONCISE EXPLANATION AND ANALYSIS OF THE PRODUCT AND ITS 

COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ACT, INCLUDING 

CORE PRINCIPLES AND THE COMMISSION’S REGULATIONS THEREUNDER

Pursuant to Commission Rule 40.6(a)(7)(vi), the following is a concise explanation and analysis 

of the operation, purpose, and effect of the amended rules. 

CX will list the first 2021 Atlantic Named Storm Landfall Swaps (“ANSLS”) contracts on June 

1, 2021. These contracts are designed to allocate a shared risk-pool among market participants 

such that participants purchasing contracts in locations that are not impacted by a tropical storm 

landfall are allocated a de minimis portion of the paid premiums and participants who have 

purchased contracts that are impacted by a tropical storm landfall are allocated virtually all of the 

premiums paid by market participants.

This contract design means that market participants have little incentive to purchase the first 

contracts since there are not yet funds in the extant risk pool for that contract. Therefore, the 

exchange has created a market maker incentive program entitled the “Automated Liquidity 

Provider” (“ALP”) to provide the initial market making liquidity for each ANSLS contract under

Exchange Rule V-10.
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In the past, CX has made payments directly to market participants that provided liquidity1. Due 

to the shared-risk-pool nature of the ANSLS contracts, CX has determined that a more efficient 

and equitable means of providing liquidity incentives would be to contribute an amount of 

$4,500 directly into the risk pool, which will then be available to any market participant who 

purchases contracts impacted by a tropical storm landfall.

CX determined that such a liquidity incentive program complies with the Core Principles by 

encouraging enhanced liquidity in the ANSLS contract in a manner designed to promote fair and 

equitable trading and, by being available to all participants, does not impose any restraint of 

trade or undue burden on competition.

Due to the shared-risk-pool nature of the ANSLS contract, CX determined that purchasing 

contracts directly in the marker for CX’s own account is the most transparent and equitable 

method of providing this initial liquidity to the market. Specifically, the incentive program rule 

requires that CX purchase 500 contracts at each of the nine landfall locations that were impacted 

by tropical storm landfalls in 2020. 

Furthermore, this rule does not permit trading these contracts through the strike code switching 

mechanism permitted under the contract rules. The effect of this requirement is that CX is 

behaving in the same manner as would a long-term hedger with a business or other fixed assets 

in a given location.

These positions have the potential for both gains and losses and are exposed to market risk the 

same as any other position in the market. Because these positions are placed into the risk pool 

on an equivalent basis as all other market participants, CX intends to report these purchased 

contracts in the normal course of volume, open interest, and other market information. 

This program will be available until the earlier of (1) the exhaustion of allocated funds or (2) the 

end of the 2021 tropical storm season as defined in the contract specifications. However, CX 

reserves the right to terminate this program with three days advance notice to Participants, 

provided however, that any contracts already purchased will be held, as required by ANSLS 

contract specifications, until contract settlement.

1 See the Daily Liquidity Incentive Program, Rule XI-101 initially filed on November 30, 2018 with an amendment 

filed on July 24, 2019
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CERTIFICATIONS PURSUANT TO SECTION 5c OF THE 

COMMODITY EXCHANGE ACT, 7 U.S.C. §7A-2 AND 

COMMODITY FUTURES TRADING COMMISSION RULE 

40.6, 17 C.F.R. §40.6

I hereby certify that:

(1) the amended Rules below comply with the Commodity Exchange Act, and the 

Commodity Futures Trading Commission’s regulations thereunder; and

(2) concurrent with this submission, CX Futures Exchange, L.P. posted on its 

website: (a) a notice of pending certification of the above Rules with the 

Commission; and (b) a copy of this submission. 

_________________________

By: Nolan Glantz

Title: Chief Operations Officer

Date: 
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...

CHAPTER XI

INCENTIVE PROGRAMS

...

XI-103. 2021 Automated Liquidity Provider (ALP) Program

a) This incentive program provides the initial liquidity for the Atlantic Named Storm 

Landfall Swaps contracts for the 2021 tropical storm season.

b) No direct payments to Participants will be made under this program.

c) The Exchange, using its own funds, will allocate an amount not to exceed $27,000 

for this program and such funds will be placed in a Participant Clearing Account for 

this purpose.

d) Using funds allocated for this program, the exchange will purchase 500 contracts at 

9 different locations upon the listing of each named storm contract, provided that:

i. the named storm is listed on or after June 1, 2021;

ii. at the time of listing, the purchase price of contracts is $1.00;

iii. the Participant Clearing Account has at least $4,500 of available funds to 

cover such purchases.

e) Contracts will be purchased at the zip codes closest to the 9 landfall locations of 

tropical storms during the 2020 tropical storm season. The locations are attached 

here as Schedule A.

f) Once purchased, contracts will be retained by the Exchange in a designated 

Participant Account for this program. Accordingly, all such contract purchases will 

be reported as volume and open interest in the normal course.

g) Contracts purchased will be held until settlement at the original strike code 

locations. This Participant Account will not engage in strike code switching, as 

permitted by contract rules.

h) Contracts will be settled in the normal course for each named storm. Any proceeds 

from settlements will be returned to the Exchange’s Participant Clearing Account in 

the normal course and, therefore, may continue to be used for the program.

i) At the end of the 2021 tropical storm season, the Exchange will close its account(s) 

and withdraw any remaining funds.

j) This program shall be in effect for the 2021 tropical storm season and may be 

terminated at any time by the Exchange in its absolute discretion upon three (3) 

days’ notice to Participants.

Initial effective date: June 1, 2021
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Schedule A

2020 Landfall Locations

• 39.5N 74.3W

• 26.8N 97.4W

• 33.9N 78.4W

• 29.8N 93.3W

• 29.0N 89.2W

• 30.3N 87.7W

• 28.5N 96.4W

• 29.8N 93.1W

• 29.2N 90.6W