G@ Tr + Ord £Orders-that when-takenin-th Kana
i) Fh yofany > ntakenin-the-ageregate;
id Il-bi ted4 lt in-Orders-bei Hed-as-deseribed in T¥_-40)-&
ably p sultin-Orders-being cancelled a 4x} ay

Gi} The third inst £ Orders-bei Hed +40 Rule IV-4th)-&

Gi} third instanee-of Order AeCa: p (h)-for-any
d9—Furth twithstand thing + Rules-te-th + ithin 180 -Tradi
3 Pur 2 anding- anything in-these Rules-to-th trary;

G) the -first-t Jat £this Rule T4 ey heask + +o-Chant

} t+ is Rule F4,a-summaryhearing pi o-Chapter

a
Pticloantawill-t "
Participan
Gi} —the fifth fa-violation-of this Rule H-4, a Participant-will-have-it
+ -occurrence-of a-vielation: + &-Participantwill haveits
Trading Privil ily ded iod- of 180-days-and
rading Jeges-summarily-susp p £4180-days:a

4) —1the sixth £a-vielation-of this Rule FV-4_a Participantwill-h "

4 arrence-of a-yielal + 8-Participantwillhe
Tradino Peisil A ed: ided-that-_unless determined-otheswvise-by-the-Board

ading ges-summariy rev P at unless-determined of y Board
its sole-discretion,a Participant shall ret be deemed-to-have-vielated-this rule 4 more-than
onetime for -vielations-that ithinthe-same-60-4minute-period.

V-8. Fraudulent or Misleading Communications

No Participant shall make, or attempt to make, any fraudulent or misleading communications
relating to the purchase or sale of any Contract.

VI-2. Fraudulent Acts

(a) No Participant, Authorized Trader or, if applicable, any other Supervised Persons shall
engage, or attempt to engage, in any fraudulent act or engage, or attempt to engage, in
any scheme to defraud, deceive or trick in connection with or related to any trade on or
other activity related to the Exchange or the Clearinghouse.

(b) Notwithstanding anything to the contrary in these Rules, neither the prohibitions on
trading described in Rule VI-12 nor any other provisions of these Rules will supersede
any applicable prohibitions on fraud and manipulation, whether such prohibitions are
prescribed by law, regulation or the Rules of the Exchange or the Rules of the
Clearinghouse. All such prohibitions on fraud and manipulation, including, but not
limited to, the antifraud provisions of the CEA and the antifraud rules promulgated by the
CFTC thereunder, will remain in full force and effect with respect to, and will be fully
applicable to, the trading of all Contracts. The Exchange and the Clearinghouse each.

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Attachment —Rule Amendment

(Additions are underlined, deletions are struck through)

IV-4_ Financial Requirements for Order Entry and Executions

(a) * * * e

(hy * * *
@** *
(ii) * * *

(iii) The credit check will “FAIL” if the funds immediately available in the applicable
Participant Clearing Account are less than the Original Margin required to establish the new
position or increase an existing position. In such case, the size of the matched trade shall be
reduced such that the minimum quantity of Contracts that would PASS the credit check, if any,
based on the level of Original Margin in the applicable Participant Clearing Account, will be
matched. Any remaining portion of the purchaser’s or seller’s Order that would have passed the
credit check had the purchaser or seller’s Order originally been limited to such amount shall be
(i) restored with its original price and time priority to the Master Order Book and, (ii) any
remaining portion of the purchaser’s or seller’s Order that failed the credit check shall be

cancelled. Forthe-aveidai doubt ifany-_partofan- Order “FAILS” under this Rule 44h),
th such Order-shall- bed. d-to-be-a-vielation-of this Rule forwhich 144
the-placing-of such deemed-to-be-a-v for-which-pena! ay

(i) If a standing Limit Order “FAILS”, as described in Rule IV-4(h) above, then the
Exchange will immediately notify the Participant of such event as soon as practicable in light
of the circumstances via email or another form of communication. andthe following —penalties

hall: diately—b d—by—_the-Exehai the—Parti twat) A tHefth:
sed—by Participant Clearing 4 tt
(ent $10 OO & b Order-that Hed. | ; |
4} sit # ‘der thatwas-Cancenecd na wnenr Apart—p
Gb $490 Contract Order Hed. hel ; t+ 5}
(44): tractin-each-Order-eat part-pris
Gi) $100.00-4£ Ord: +ofsuch Participant’s_rradine A £ Hed
(44-3 100-0044 -Oraer pect pt acing ALecount re-canceted
in-wheleert: em th £thelast 360-Eradine-D:
in-whele-oritpatt AP ‘AcE Days:
&). Notwithstandi +hing-in-these Ruiles-te-th: + } } ided-in- Rul.
&)- vithst Aganything Ht ttes-tett HEY BHA y-AS-p

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retain the right to take any appropriate disciplinary actions against Participants as
permitted by the Rules of the Exchange or the Rules of the Clearinghouse, as applicable.

VI-5. Market-Price Manipulation
Any-manipulation-of the-market in-any-Contract is-prehibited—It shall be a violation of this Rule

for any person to manipulate or attempt to manipulate the price of any Contract traded on or
subject to the rules of the Exchange.

VI-12. Disruptive Practices

It shall be a violation of this Rule for any person to engage in any trading, practice, or conduct on
or subject to the rules of the Exchange that:

(a) violates bids or offers:

(b) demonstrates intentional or reckless disregard for the orderly execution of transactions
during the closing period: or

(c) is, is of the character of, or is commonly known to the trade as, “spoofing” (bidding or
offering with the intent to cancel the bid or offer before execution).

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Cantor Futures Exchange, L.P.
Rule Amendment Submission 2017-4
September 29, 2017

1. The text of the rule changes to the Cantor Futures Exchange, L.P. Rulebook is attached.
Additions are underlined and deletions are stricken through. This rule has been approved by
Cantor Futures Exchange, L.P. Capitalized terms, unless otherwise defined herein shall possess
the meaning(s) ascribed in the Cantor Futures Exchange, L.P. Rulebook.

2) The proposed effective date is ten business days after receipt by the Commodity Futures
Trading Commission of this submission.

3. Attached, please find a certification that: (1) these rules comply with the Commodity
Exchange Act, and the Commission’s regulations thereunder; and (2) concurrent with this
submission, Cantor 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 OPERATION, PURPOSE, AND
EFFECT OF THE CERTIFIED RULE 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.

Chapters V-8, VI-2, and VI-5 of the Cantor Futures Exchange, L.P. (“CX”) Rulebook currently
prohibit fraudulent or misleading communications, fraudulent acts, and market manipulation.
CX proposes to amend these provisions, and to adopt new Chapter VI-12, as requested by
Commission staff. These rules are being amended in order to conform to and incorporate recent
amendments to the Commodity Exchange Act, 7 U.S.C. §1 et seq. (the “Act”). Among these is
section 4c(a)(5) of the Act, which prohibits several disruptive trading practices. These
prohibited practices include conduct that is commonly known to the trade as “spoofing” (bidding
or offering with the intent to cancel the bid or offer before execution).

Current CX Rule IV-4 is titled “Financial Requirements for Order Entry and Executions.” Under
paragraph (h), it is a violation to enter an Order that, if matched, cannot be executed due to
insufficient funds. This is known as a “Fail” under the rule. Paragraphs (i),(j) and (k) provide for
summary penalties to be assessed for violating Rule IV-4(h).

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The provision of paragraph 4(h) making it a violation to have an order that is a Fail and the
summary schedule of fines for such orders has been included in CX’s rules from its inception.
CX included these provisions in order to discourage traders from entering Orders that would not
be able to be executed if matched due to funding. This was intended to counter practices by
traders trying to game the matching engine through the aggressive use of the credit check
functionality. At the time, it was feared that traders might attempt to influence the direction of
prices through such aggressive trading activities. The summary penalty provision was thought to
be an appropriate means to discourage such conduct. Because this rule was adopted prior to the
adoption of section 4c(a)(5) of the Act, there was not a more direct means of addressing
“spoofing”-type activities involving the aggressive use of orders that were not executable.

Since it first adopted this rule, there have been few, if any, instances on CX where the rule has
been breached. In one instance, several “Fails” were caused by technological issues, rather than
the intentional, aggressive entry of orders to affect price. Moreover, the rule was written when
the notional value of CX contracts was much higher than currently. If the rule is revised to set
the fines at a level commensurate with the reduction in the size of the contracts, the fines would
be exceedingly small (less than $1) and would not operate as a meaningful deterrent. Leaving
the fines at the current level transforms the penalty from a summary fine to a significant penalty,
when compared against the size of contracts traded on CX today.

CX is removing the provision making it a violation to have a Failed transaction and the
accompanying summary penalty schedule in light of its simultaneous adoption of CX Rule VI-
12(c). This rule explicitly prohibits spoofing. CX believes that Rule VI-12(c) accomplishes the
goal of the removed provisions more directly and transparently. Accordingly, CX believes that
the adoption of Rule VI-12(c) and simultaneously removing of the last sentence of [V-4(h) and
IV-4(i), (j)and (k) will provide traders with clearer notice as to behavior that is prohibited under
the rules.

CX reviewed the Core Principles for Designated Contract Markets under section 5(d) of the Act.
Core Principle (2) (Compliance with Rules); Core Principle (9) (Execution of Transactions);
Core Principle (11) (Financial Integrity of Transactions) and Core Principle 12 (“Protection of
Markets and Market Participants”) are relevant. For the reasons discussed above, amended Rule
VI-12(c) is a more transparent prohibition, providing traders with better notice of prohibited
behavior. The exchange, as a self-regulatory organization, prefers that rules prohibiting conduct
be clear and that the rule itself address directly the prohibited conduct.

Removing the schedule of fines will not disadvantage traders either in their executions, the
financial integrity of the transactions or in their protection while trading. Occasional broken
trades are an accepted fact of trading. Where a trade is not consummated because the credit
requirement cannot be met, the innocent counterparty will end up being matched against the next
available counter-offer, usually at the same price as the failed order. Accordingly, it is not
expected that removal of this rule will result in significant disadvantage of the contra-parties to
the Failed trade. And, if. trader abuses the credit facility resulting in repeated orders that are not
executed or in a significant number of broken trades, the Exchange could bring a disciplinary
action under Rule VI-1 for “conduct which is inconsistent with just and equitable principles of
trade.” CX believes that this result is in accordance with its self-regulatory obligations and with
the Core Principles and Commission rules thereunder.

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CERTIFICATIONS PURSUANT TO SECTION Se 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 above comply with the Commodity Exchange Act, and the
Commodity Futures Trading Commission’s regulations thereunder; and

(2) concurrent with this submission, Cantor 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: ~ Gregor Buchberger
Title: Chief Regulatory Officer
Date: September 29, 2017

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