LMX Labs, LLCd/b/a Coinbase Derivatives

June 13, 2023

VIA CFTC Electronic Portal

Mr. Christopher J. Kirkpatrick

Secretary of the Commission

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

Re: CFTC Regulation 40.6(a) Certification: Modifications to the Lead Market

Maker Program

Coinbase Derivatives Submission #2023-7

Dear Mr. Kirkpatrick:

Pursuant to Commodity Futures Trading Commission (“CFTC” or “Commission”) Regulation

40.6(a), LMX Labs, LLC, d/b/a Coinbase Derivatives (the “Exchange”) hereby notifies the

Commission that it plans to modify the Lead Market Maker Program (the “Program”). The

modifications to the Program will become effective on July 1, 2023.

Exhibit A sets forth the terms of the Program. Modifications appear below, with additions

underlined and deletions stricken-through.

Compliance with Core Principles

The Exchange has reviewed the designated contract market (“DCM”) core principles (“Core

Principles”) set forth in the Commodity Exchange Act and the CFTC rules thereunder and has

identified the following Core Principles that may be directly implicated by Program:

Core Principle 2 – Compliance with Rules and Core Principle 4 – Prevention of Market Disruption

All trading on the Exchange, including any trading and related activity by Participants under the

Program, is subject to the LMX Labs Rulebook (the “Rulebook”) including Chapter 5, which

prohibits fraud, non-competitive trading, market manipulation and abusive and disruptive trade

practices. Capitalized terms not otherwise defined herein are defined in the Rulebook. Additionally,

as with all trading on the Exchange, trading in the Program’s products will be subject to monitoring

and surveillance by the Market Regulation Department, which has the authority to investigate and

enforce Exchange rules, as described in Chapter 7.

FOIA CONFIDENTIAL TREATMENT REQUESTED BY LMX LABS LLC PURSUANT TO 17 C.F.R. PART 145
Core Principle 9 – Execution of Transactions

The Program’s products are listed for trading on the Exchange’s trading system, which provides for

efficient, competitive, and open execution of transactions pursuant to the Exchange Rulebook.

Core Principle 12 – Protection of Markets and Market Participants

Chapters 4 and 5 of the Rulebook require all market participants, including those participating in

the Program, to observe high standards of integrity, market conduct, commercial honor, fair

dealing, and just and equitable principles of trade and prohibits, among other things, fraud,

non-competitive trading, market manipulation, and abusive and disruptive trade practices. As with

all contracts traded on the Exchange, trading in the Program’s products will be subject to

monitoring and surveillance by the Market Regulation Department and compliance with the

Program will be monitored and enforced by the Exchange.

Core Principle 18 – Recordkeeping

Records related to the Program will be maintained by the Exchange in compliance with its

recordkeeping policies and the requirements of the Commodity Exchange Act and CFTC Rules.

Certification

The Exchange is not aware of any substantive opposing views to the Program. The Exchange

certifies that the Program complies with the Commodity Exchange Act and the rules and

regulations promulgated thereunder.

The Exchange certifies that this submission has been concurrently posted on the Exchange’s

website at: https://www.coinbase.com/derivatives/filings.

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

Jane.Downey@coinbase.com.

Sincerely,

/s/ Jane Downey

Chief Regulatory Officer

Attachment: Exhibit A

FOIA CONFIDENTIAL TREATMENT REQUESTED BY LMX LABS LLC PURSUANT TO 17 C.F.R. PART 145
EXHIBIT A

Lead Market Maker Program

(additions underlined; deletions stricken-through)

Program Purpose

The purpose of the Lead Market Maker Program (the “Program”) is to support the development of

the products listed below by increasing liquidity in the Exchange’s central limit order book and,

therefore, benefit all Participants in the market.

Product Scope

All cryptocurrency futures contracts available for trading on the Exchange.

Eligible Participants

In order to be considered, Participants must agree to make two-sided markets, have a

demonstrable ability to quote two-sided markets during all trading hours, have the technological

and operational ability to connect to the Exchange, and be ready to begin making two-sided

markets. In determining whether to accept a Participant, Exchange staff will take into account a

variety of factors, which may include among other things, industry reputation, the robustness of

the quoting obligations to which the Participant will commit, the likelihood the Participant will be

able maintain such obligations, demonstrated track record of being a top tier market maker in

related derivatives and/or spot markets, and commit to completing necessary connectivity and

testing to support the relevant products. The Exchange may add or subtract from the

aforementioned criteria as it deems necessary.

Program Term

The initial term of the Program shall be effective as of the date of certification (with quoting

requirements and rebates effective as of January 1, 2023 July 1, 2023) and shall end on June 30,

2023 December 31, 2023, unless otherwise extended by the Exchange.

Obligations

[REDACTED]

Monitoring and Termination of Status

The Exchange will monitor each Participant’s trading activity and performance and retains the right

to revoke Participant’s status if it determines that a Participant failed to meet the obligations of the

Program.

FOIA CONFIDENTIAL TREATMENT REQUESTED BY LMX LABS LLC PURSUANT TO 17 C.F.R. PART 145