Ledger Holdings Inc

February 6, 2019

VIA COMMISSION PORTAL

Christopher J. Kirkpatrick

Secretary, Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: Commission Regulation 40.2(a) – Certification of BTC Block Height Options

LedgerX LLC Submission No. [2019-04]

Dear Mr. Kirkpatrick:

LedgerX LLC (“LedgerX”) hereby amends the Certification of BTC Block Height Options 

(Submission No. [2019-04]) in order to provide additional explanation, provide a revised no earlier 

than date, to provide specificity on the Expiration Date, and to provide an Expiration Time. 

LedgerX will list the Exchange Contract no earlier than February 18, 2019, which is amended from 

the previous submission which stated no earlier than February 11, 2019.

* * * *

Please contact the undersigned at (917) 267-2381 or juthica@ledgerx.com with any questions.

Sincerely,

Juthica Chou

Chief Risk Officer

LedgerX LLC
Ledger Holdings Inc

Exhibit A

Below is a concise explanation of the Exchange Contract:

The Exchange Contract is an option contract on whether bitcoin has reached a particular block 

height before a specific date and time. The Exchange Contract will provide a purchaser, in 

exchange for a premium, the payoff if the bitcoin blockchain has reached the block height before 

the expiration of the contract. The Exchange Contract will provide the purchaser no payoff if the 

bitcoin blockchain has not reached the block height before the expiration of the contract. 

The Exchange Contract will be fully-collateralized, and Participants shall have such collateral on 

deposit with LedgerX prior to entering the order. For the option purchaser, the Participant shall 

have the full premium on deposit with LedgerX prior to purchasing the option. For the option 

seller, the Participant shall have the full maximum payoff on deposit with LedgerX prior to 

selling the option. 

The seller of the Exchange Contract will collect the premium at the time of trade. If the bitcoin 

blockchain has reached the block height of the contract before the expiration of the contract, the 

seller will deliver the full payoff amount. If the bitcoin blockchain has not reached the block 

height before the expiration of the contract, the seller will receive the collateral back. 

Bitcoin block height options are important to LedgerX’s market participants whose businesses 

and profitability often depend on factors such as when the mining reward will be reduced by 

half. Block height options provide a way for participants to hedge their exposure to these types 

of risks that are inherent to bitcoin. While the mining reward halving is one blockchain-based 

event that market participants need to manage, there may be others. For example, if the difficulty 

is expected to change significantly, this could affect miners and other participants. 

LedgerX currently determines USD-BTC option tenors based on risks and events that 

participants need to hedge. LedgerX will take a similar approach with block height options, 

listing tenors based on participant risk profiles. LedgerX will initially list tenors surrounding the 

expected halving of the bitcoin mining reward in May 2020. 

For more information, the Exchange Contract’s contract specifications are attached as Exhibit B.
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Exhibit B

Rule 12.5 BTC Block Height Options

A. Bitcoin. Bitcoin is a computer network and protocol that allows digital currency to be 

stored and transferred in a distributed manner without the need for a central intermediary. 

The Bitcoin network is a form of blockchain, which allows consensus to be built and 

maintained on a distributed, decentralized basis by parties with no inherent reason to trust 

one another. Each individual bitcoin transaction is validated by the network of 

decentralized parties, or nodes, over a period of time and then added to a “block”, which 

is then cryptographically linked to the immediately preceding block (over time, creating a 

chain, or a “blockchain”). 

B. Bitcoin Block Height. The block number as part of the bitcoin blockchain. The Bitcoin 

Block Height shall be specified by the Exchange for the Exchange Contract. 

C. Trading Hours. The Trading Hours of the Exchange’s Swap Execution Facility that are 

applicable to the BTC Block Height Options described in this Rule 12.5 will be as stated 

in Rule 5.6; provided, that, with respect to a BTC Block Height Options, the Exchange 

may establish different Trading Hours by providing notice to participants on its Website 

and by Participant Notice. 

D. Currency. The currency applicable to BTC Block Height Options will be United States 

dollars, expressed as dollars and cents per bitcoin.

E. Underlying. The BTC Block Height Options underlying will be Bitcoin Block Height.

F. Position Limits. As of any date of determination, no person will own or control positions 

in excess of 100,000 options. 

G. Collateral. All Exchange Contracts will be fully-collateralized. Each Participant must 

post the maximum potential loss on an Exchange Contract prior to executing an 

Exchange Contract. 

H. Expiration Date. The Expiration Date shall be a Friday specified by the Exchange.

I. Expiration Time. 4:00pm ET on the Expiration Date.

J. Settlement Date. The Settlement Date shall be the earlier of the date on which the 

Bitcoin Block Height is reached, or the Expiration Date. 

K. Payout Criterion. If the Bitcoin Block Height has been reached prior to the Expiration 
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Time on the Expiration Date, the Exchange Contract shall payout the Payout Value at 

such time that the Block Height has reached 6 confirmations. 

L. Payout Value. $100.00.
Ledger Holdings Inc

Exhibit C

LedgerX has determined that the Exchange Contract certified herein relate to the following Core 

Principles:

Core Principle 2 – Compliance with Rules

Trading in the Exchange Contract will be subject to the LedgerX Rulebook (the “Rules”), which 

prohibits abusive trading practices, including, but not limited to, the following: fraudulent trading 

(Rule 8.3.C); spoofing or any other conduct that constitutes a disruptive trading practice or is 

otherwise prohibited under CEA Section 4c(a)(5) or applicable CFTC Regulations (Rules 8.3.J, 

8.3.N and 8.9); any manipulation proscribed under CEA Section 9(a)(2) or CFTC Regulations 

180.1(a) or 180.2 (Rules 8.3.K and 8.9); making fictitious bids or offers (Rules 8.3.M and 8.9); or 

any other activity that tends to impair the welfare, reputation, integrity or good name of LedgerX 

(Rule 8.5).

As with all swaps listed for trading on LedgerX’s SEF, trading activity in the Exchange Contract 

will be subject to monitoring and surveillance by LedgerX’s Compliance Department. LedgerX 

has the authority to exercise its investigatory and enforcement power where potential Rule 

violations are identified. See Chapter 9 of the Rules.

Core Principle 3 – Swaps Not Readily Susceptible to Manipulation

LedgerX’s market for block height option contracts is inherently not susceptible to manipulation 

because the contracts are not tied to any specific settlement price. LedgerX’s contracts settle 

based on the bitcoin blockchain which is an open, decentralized blockchain with a wide range of 

participation. The contracts settle only after the block height has received 6 confirmations on the 

bitcoin blockchain, ensuring that the block has been sufficiently validated by the bitcoin 

network. 

LedgerX block height option contracts are fully-collateralized, preventing participants from

accumulating exposure for which there is insufficient capital to cover the maximum potential 

loss. Additionally, LedgerX imposes position limits which necessarily disincentivize and prevent 

participants from attempting to manipulate the contract. 

Core Principle 4 – Monitoring of Trading and Trade Processing

Rule 8.9 prohibits traders from attempting to manipulate, or manipulating the market, in any swap 

listed on LedgerX’s SEF, including any manipulation or attempted manipulation of the swap’s 

underlying. This prohibition would include manipulation and attempted manipulation of the 

Exchange Contract and the underlying for the Exchange Contract. This Rule is enforced by 

LedgerX in accordance with Chapter 9 of the Rules.
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Core Principle 5 – Ability to Obtain Information

Pursuant to the Rules, LedgerX has the ability and authority to obtain sufficient information for 

the Exchange Contract to allow LedgerX to fully perform its operational, risk management, 

governance and regulatory functions and requirements under Part 37 of Commission Regulations.

Core Principle 6 – Position Limits or Accountability

Rules 8.15 and 8.16 allow LedgerX to adopt position limits or position accountability levels for 

swaps listed on LedgerX’s SEF. LedgerX has elected to set position limits as described above 

in Exhibit A in order to (i) add a further layer of protection for market participants by mitigating 

the risk of market manipulation and (ii) prevent excess speculation in the Underlying. 

Core Principle 7 – Financial Integrity of Transactions

Rule 6.1.A describes the process by which LedgerX verifies sufficient funds and/or collateral prior 

to accepting an order in any swap, including an order in the Exchange Contract. Specifically, upon 

submission of an order, LedgerX will conduct a review of the relevant participant’s collateral 

account to ensure that the participant can fully collateralize the order prior to entering into the 

Exchange Contract. If the relevant participant’s collateral account does not have the necessary 

funds and/or collateral for the order, LedgerX will not accept the order. Once orders in the 

Exchange Contract have been successfully matched, LedgerX’s derivatives clearing organization 

will immediately clear the Exchange Contract in accordance with Rule 6.1.B.

Core Principle 8 – Emergency Authority

Pursuant to Rule 2.12, LedgerX may take necessary or appropriate actions in response to an 

emergency affecting trading or open positions in the Exchange Contract, including the following: 

(i) suspend or curtail trading in, or limit trading to liquidation, for the Exchange Contract; (ii) 

extend or shorten the last trading date for the Exchange Contract; (iii) provide alternative 

settlement mechanisms for the Exchange Contract (including by altering the settlement terms or 

conditions or fixing the settlement price) or suspend the transfer of the underlying; (iv) order the 

transfer or liquidation of open positions in the Exchange Contract under certain circumstances; (v) 

extend, shorten or change the trading hours or the expiration date of the Exchange Contract; (vi) 

require participants to meet special margin requirements; (vii) order the transfer of positions in the 

Exchange Contract and the associated margin or alter the Exchange Contract’s settlement terms or 

conditions; or (viii) impose or modify position limits, price limits, and intraday market restrictions.

Core Principle 9 – Timely Publication of Trading Information

In accordance with Rule 2.17, LedgerX will publish daily information on the Exchange Contract 

regarding settlement prices, volume, and open interest.

LedgerX will submit electronic reports of all reportable swap data for each executed Exchange 

Contract to a registered swap data repository immediately following execution of the Exchange 
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Contract. See Rule 6.17. All such reports will meet the standards set out in Parts 43 and 45 of

Commission Regulations.