SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested. 

Registered Entity Identifier Code (optional): ICAP-2014-R-9

Organization: ICAP SEF (US) LLC

Filing as a: DCM SEF DCO SDR Please note – only ONE choice allowed.

Filing Date (mm/dd/yy): 08/07/2014 Filing Description:

Delisting of certain Credit Derivatives contracts based on Markit iTraxx Indices

SPECIFY FILING TYPE Please note only ONE choice allowed per Submission.

Organization Rules and Rule Amendments

Certification § 40.6(a)

Approval § 40.5(a)

Notification § 40.6(d)

Advance Notice of SIDCO Rule Change § 40.10(a)

SIDCO Emergency Rule Change § 40.10(h)

Rule Numbers: 

New Product Please note only ONE product per Submission.

Certification § 40.2(a)

Certification Security Futures § 41.23(a)

Certification Swap Class § 40.2(d)

Approval § 40.3(a)

Approval Security Futures § 41.23(b)

Novel Derivative Product Notification § 40.12(a)

Swap Submission § 39.5

Official Product Name: 

Product Terms and Conditions (product related Rules and Rule Amendments)

Certification § 40.6(a)

Certification Made Available to Trade Determination § 40.6(a)

Certification Security Futures § 41.24(a)

Delisting (No Open Interest) § 40.6(a)

Approval § 40.5(a)

Approval Made Available to Trade Determination § 40.5(a)

Approval Security Futures § 41.24(b)

Approval Amendments to enumerated agricultural products § 40.4(a), § 40.5(a)

“Non-Material Agricultural Rule Change” § 40.4(b)(5)

Notification § 40.6(d)

Official Name(s) of Product(s) Affected: iTraxx based Credit Derivative Indices, iTraxx based Credit Derivatives 

Tranches, all Credit Derivatives Options

Rule Numbers: Rule 802(1), (2) and (3)

3

Exhibit A

Explanation and Analysis

1. SEF Rules 802(1), (2) and (3) currently set forth the specifications for Credit Derivative Indices, 

Credit Derivative Tranches and Credit Derivative Options. SEF Rules 801(1) and (2) will be 

amended to delete all references to “iTraxx” and the iTraxx Contracts, but will otherwise remain 

unchanged because the rules also govern Credit Derivative Indices and Credit Derivative 

Tranches based on indices other than iTraxx indices. SEF Rule 801(3) will be deleted in its 

entirety to reflect the delisting of all Credit Derivative Options, each of which was based on iTraxx 

indices. There is currently no open interest in the iTraxx Contracts submitted for delisting, and 

therefore there will be no market disruption related to their delisting. Furthermore, ICAP SEF will 

publicly make available this submission detailing the delisting of the iTraxx Contracts and will 

amend ICAP SEF Rule 802 to reflect the delisting of the iTraxx Contracts. 

The amendments to Rule 802 are consistent with Core Principle 2. 
Exhibit B

SEF Rule 802

Credit Derivatives Product Descriptions
Products — Rule 802

• Credit Derivatives Indices

• Credit Derivatives Tranches

• [Reserved]

• IOS Index Credit Default Swaps 

• iBoxx Total Return Swaps

• iBoxx Liquid Leveraged Loans Total Return Swaps
Product Specifications

Rule 802(1) — Credit Derivatives Indices

A credit default swap index is a credit derivative used to hedge credit risk or to take a position on a basket 

of credit entities (a CDS index is a portfolio of actively traded liquid names in a particular sector of the 

market). A credit default swap index is standardized, therefore highly liquid and trades on a very small 

bid-offer spread. This makes it is a primary market vehicle for gaining diversified credit exposure.

A new series of CDS indices are issued every six months and attributed a Series indicator by Markit 

Partners (previously issued series continue to be traded until their expiry date). Prior to the 

announcement of each series a group of investment banks is polled to determine the credit entities that 

will form the constituents of the new issue. On the day of issue a fixed coupon is decided for the each 

index based on the credit spread of the entities in the index. Once this has been decided the index 

constituents and the fixed coupon are published, and the indices can be actively traded. They are traded 

according to set rules, which cannot be altered. For example, each series has its own set of expiry dates.

The index is based on the below CDX indices. CDX indices contain North American and Emerging 

Market companies and are administered by CDS Index Company (CDSIndexCo) and marketed by Markit 

Group.

• New series are determined on the basis of liquidity every 6 months.

Indices Tenors

CDX.NA.IG 3Y, 5Y, 7Y, 10Y

CDX.NA.HY 5Y

CDX.EM 5Y

CDX.LatAm.Corp 3Y, 5Y

Currencies

USD

EUR

JPY

CDX.NA.HY Index is composed of one hundred liquid constituents with high yield credit rating. The 

index is further divided into sub indices:

• CDX.NA.HY.BB

• CDX.NA.HY.B

Each HY Index and related sub-indices will begin on September 27 (or the Business Day immediately 

thereafter in the event that September 27 is not a Business Day) and March 27 (or the Business Day 

immediately thereafter in the event that March 27 is not a Business Day) of each calendar year (each such 

date, a “Roll Date”).

CDX.NA.IG Index is composed of one hundred and twenty five liquid constituents with investment grade 

credit rating. The index is further divided into sub indices:

• Consumer: CDX.NA.IG.CONS

• Energy: CDX.NA.IG.ENRG

• Financials: CDX.NA.IG.FIN

• Industrial: CDX.NA.IG.INDU

• Telecom, Media and Technology: CDX.NA.IG.TMT

• Hi Volatility CDX.NA.IG.HVOL
Each IG Index and related sub-indices will begin on September 20 (or the Business Day immediately 

thereafter in the event that September 20 is not a Business Day) and March 20 (or the Business Day 

immediately thereafter in the event that March 20 is not a Business Day) of each calendar year (each such 

date, a “Roll Date”).

CDX.EM Index is composed of fourteen sovereign issuers from the following regions: Latin America, 

Middle East, Eastern Europe, Africa and Asia. The EM Index rolls every six months on 

September 20th and March 20th.

Index Specifications

• Trading conventions

• Buyer (Payer). This is the party to a CDS contract which pays a premium for 

protection in case a credit event occurs. The Protection Buyer can also speculate 

that the cost of protection will rise and profit from selling the CDS contract at a 

higher price than was paid

• Seller (Receiver). This is the party to a CDS contract receiving the premium 

payments, and who is exposed to the credit risk of the reference entity.

• Swap Leg conventions

• Business Day count: Actual/360

• Business day convention: Following

• Business Day calendar: follow the currency calendar

• EUR: London and TARGET Settlement Day

• USD: London and New York

• Credit Event: Failure to pay, Bankruptcy, (Modified) Restructuring

• Term/Tenor: Refers to the duration of a Credit Default Swap Index contract. Indices are traded 

at 3, 5, 7 and 10-year maturities and a new series is determined on the basis of liquidity every 

6 months.

• Maturity Date: Unadjusted date that falls on the 20th of Mar and Sep

• Coupon Payments: Each coupon is equal to (actual/360), (# of days in accrual period). The 

accrual period always stretches from (previous coupon payment date) through (this coupon 

payment date-1), inclusive; except a contract’s last accrual period, which ends with (and 

includes) the unadjusted maturity date.

• Coupon Payment Dates: Business day adjusted date that falls on 20th of Mar, 

Jun, Sep, and Dec and accrue on a Actual/360. The date will be adjusted to the 

next business day if 20th falls on a weekend.

• The first coupon payment date is determined by the trade date, for example:

Example (Table 1): Consider a 1y $36mm 100bp standard CDS traded in Feb09, maturing 20Mar10:

Coupon Accrual Start Accrual End # Days Payment Payment Date

1st Mon 22Dec08 Thu 19Mar09 88 $88k Fri 20Mar09

2nd Fri 20Mar09 Sun 21Jun09 94 $94k Mon 22Jun09

3rd Mon 22Jun09 Sun 20Sep09 91 $91k Mon 21Sep09

4th Mon 21Sep09 Sun 20Dec09 91 $91k Mon 21Dec09

5th (final) Mon 21Dec09 Sat 20Mar10 90 $90k Mon 22Mar10

• Coupon Rates: 25bp, 100bp, 500bp, 1000bp
• Rolling dates: CDS Index roll semi-annually in March and September.

• Recovery rate — Estimate of percentage of par value bondholders will receive after a credit 

event. CDS for investment grade bonds generally assume a 40% recovery rate. However, CDS 

for lower rated bonds are more dynamic and often reflect lower estimated recovery rates.

• Trade types. CDS Index instruments can be traded either on an outright basis, or as a switch.

• Outrights: An agreement between two parties whereby one party pays the other 

party periodic payments for the specified life of the agreement

• Rolls/Switches/Spreads: A switch is a single Transaction that results in a 

simultaneous buy and sell of two or more underlying outright contracts. CDS 

indices are traded either in spread or in price terms, a generic term describing the 

difference, generally in basis points, between the levels of two reference values.

• Settlement: if a credit event occurs then CDS Index contracts are cash settled.

• Cash settlement: The protection seller pays the buyer the difference between par 

value and the market price of a debt obligation of the reference entity.

• Upfront payments: upfront payments are made at initiation of the trade. It incorporates the 

difference between the traded level and the index coupon, as well as accrued interest.

• Order size: A minimum order size can be defined at the time of order entry.

• Clearing House: ICE and LCH. The choice of clearing house is determined at the time of 

order entry and is based on qualification of each participant’s clearing firm.

For more information on these instruments, including detailed specifications, please see 

http://www.markit.com/HYandIG and http://www.markit.com/EM.

Additionally, please see clearable contract definitions at https://www.theice.com/cdx.
Rule 802(2) — Credit Derivatives Tranches

Some of the credit indices are also available in a tranched format, which allows investors to gain exposure 

on a particular portion of the index loss distribution. Tranches are defined by attachment and detachment 

points. Defaults affect the tranches according to the seniority of the tranche in the capital structure.

Indices Tranches

CDX.NA.HY 0-10, 10-15, 15-25, 25-35, 35-100

CDX.NA.IG 0-3, 3-7, 7-15, 15-100

LCDX 0-5, 5-8, 8-12, 12-15, 15-100

Currencies

USD

EUR

Tranche Mechanics

The protection buyer of a tranche makes quarterly coupon payments to the protection seller and receives a 

payment in case there is a credit event in the underlying portfolio. Upfront payments are made at 

initiation and close of the trade to reflect the change in price. Coupon payments (500bps or 100bps per 

annum) are made until the notional amount of the tranche gets fully written down due to a series of credit 

events or until maturity whichever is earlier. Payments are made by the protection seller as long as the 

losses are greater than the attachment point and less than the detachment point for that tranche. Once the 

total loss reaches the detachment point, that tranche notional is fully written down. The premium 

payments are made on the reduced notional after each credit event.

For more information on these instruments, please see http://www.markit.com.
Rule 802(3) — [Reserved]
Rule 802(4) — IOS Index Credit Default Swaps

Contract 

Specification

Details

Product Description An agreement to buy or sell protection on a synthetic total return swap index of 30-

year, fixed-rate Fannie Mae mortgage pools.

Index Name Markit IOS Index

Quotation Contract prices are quoted in dollars and cents per contract.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Contingent payment - Payments related to credit event settlement 

will be determined pursuant to the 2009 ISDA Credit Derivatives 

Determination Committees and Auction Settlement Supplement, 

(i.e., the Big Bang Protocol). 

Fixed Quarterly cash payments - reflected in basis points and paid 

by the protection buyer to the protection seller. 

Upfront fee payment - The upfront fee is a portion of the 

payments, expressed in percentage points of the notional, which is 

present valued and paid immediately to the seller.

Swap Conventions Fixed coupon payments are calculated at a spread of 100 bps and exchanged on a 

quarterly basis. 

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to by the parties. 

Contract Size As agreed to by the parties

Effective Date As agreed to by the parties.

Maturity Date As agreed to by the parties. The Maturity Date may also be referred to as the 

Termination Date or End Date.

Tenor The duration of the time from the Effective Date to the Maturity Date.

Trade Types IOS Index CDS can be traded as one of the following trade type:

a) Outright

b) Roll trades

c) Curve trades

Last Trading Day As agreed to by the parties.
Contract 

Specification

Details

Trading Months All months.

Trading Hours 00:01 – 24:00 (ET) Sunday to Friday

Trading 

Conventions

a) Buy = Buy protection. The buyer pays a premium to the seller in case of a 

credit event occurring. Credit events include bankruptcy and failure to pay.

b) Sell = Sell protection. The seller of protection receives the premium 

payments from the protection buyer. The seller owns the credit risk of the 

instrument. 

Investment grade indices are traded on spread.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.
Rule 802(5) — iBoxx Total Return Swaps

Contract 

Specification

Details

Product Description The Contract is a total return swap where one party (the “Buyer”) is obliged to pay 

a predetermined set rate, fixed or variable, to the other party (the “Seller”) in 

exchange for the notional-based return performance of one of the following 

indices:

Markit iBoxx EUR Corporates

Markit iBoxx EUR Liquid HY

Markit iBoxx GBP Corporates

Markit iBoxx USD Domestic Corporates

Markit iBoxx USD Liquid HY

Quotation As agreed to between the parties.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Terms Cash settled.

a) Buyer (Payer): receives appreciation and income of the index; pays depreciation 

of, if any, the index; pays a fixed rate of interest of a rate of interest plus a 

differential on the underlying notional amount of the contract, as agreed to between 

the parties.

b) Seller (Receiver): pays appreciation and income of the index; receives 

depreciation of, if any, the index; receives a fixed rate of interest or a rate of 

interest plus a differential on the underlying notional amount of the contract, as 

agreed to between the parties.

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to between the parties. 

Settlement Price The settlement price will be the price agreed at the commencement of the contract, 

measured in increments of the applicable minimum price fluctuation.

Contract Size 1 contract, incremental size is 1 contract.

Effective Date As agreed to between the parties.

Maturity Date The Maturity Date may also be referred to as the Termination Date or End Date; as 

agreed to between the parties.

Tenor The duration of the time from the Effective Date to the Maturity Date; as agreed to 

between the parties.

Trade Types Contracts can be traded as one of the following trade type:
Contract 

Specification

Details

a) Outright

b) Spread (calendar and/or between indices)

Last Trading Day Trading terminates at the close of business on the last business day of each contract 

month.

Trading Months All months.

Trading Hours 07:00 – 16:00 (ET) Monday to Friday

Swap Leg a) Payment Frequency: Monthly, Quarterly, Semi-Annually, or Annually

Conventions b) Holiday Calendar: New York and London

c) Business Day Convention: Modified Following.

d) Business Days: If settlement is in GBP or EUR, London and TARGET2, and 

if USD, New York.

d) Set Rate: The agreed rate of the product traded.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.
Rule 802(6) — iBoxx Liquid Leveraged Loans Total Return Swaps

Contract 

Specification

Details

Product Description The Contract is a total return swap where one party (the “Buyer”) is obliged to pay 

a predetermined set rate, fixed or variable, to the other party (the “Seller”) in 

exchange for the notional-based return performance of the Markit iBoxx USD 

Liquid Leveraged Loans Index.

Quotation As agreed to between the parties.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Terms Cash settled.

a) Buyer (Payer): receives appreciation and income of the index; pays depreciation 

of, if any, the index; pays a fixed rate of interest of a rate of interest plus a 

differential on the underlying notional amount of the contract, as agreed to between 

the parties.

b) Seller (Receiver): pays appreciation and income of the index; receives 

depreciation of, if any, the index; receives a fixed rate of interest or a rate of 

interest plus a differential on the underlying notional amount of the contract, as 

agreed to between the parties.

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to between the parties. 

Settlement Price The settlement price will be the price agreed at the commencement of the contract, 

measured in increments of the applicable minimum price fluctuation.

Contract Size 1 contract, incremental size is 1 contract.

Effective Date As agreed to between the parties.

Maturity Date The Maturity Date may also be referred to as the Termination Date or End Date; as 

agreed to between the parties.

Tenor The duration of the time from the Effective Date to the Maturity Date; as agreed to 

between the parties.

Trade Types Contracts can be traded as one of the following trade type:

a) Outright

b) Spread (calendar and/or between indices)

Last Trading Day Trading terminates at the close of business on the last business day of each 

contract month.

Trading Months All months.

Trading Hours 07:00 – 16:00 (ET) Monday to Friday
Contract 

Specification

Details

Swap Leg a) Payment Frequency: Monthly, Quarterly, Semi-Annually, or Annually

Conventions b) Holiday Calendar: New York and London

c) Business Day Convention: Modified Following.

d) Business Days: If settlement is in GBP or EUR, London and TARGET2, and 

if USD, New York.

d) Set Rate: The agreed rate of the product traded.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.

ACTIVE 202865842v.5
Exhibit C

SEF Rule 802

Credit Derivatives Product Descriptions
Products — Rule 802

(1) Credit Derivatives Indices

(2) Credit Derivatives Tranches

(3) Credit Derivatives Options[Reserved]

(4) IOS Index Credit Default Swaps 

(5) iBoxx Total Return Swaps

(6) iBoxx Liquid Leveraged Loans Total Return Swaps
Product Specifications

Rule 802(1) — Credit Derivatives Indices

A credit default swap index is a credit derivative used to hedge credit risk or to take a position on a basket 

of credit entities (a CDS index is a portfolio of actively traded liquid names in a particular sector of the 

market). A credit default swap index is standardized, therefore highly liquid and trades on a very small 

bid-offer spread. This makes it is a primary market vehicle for gaining diversified credit exposure.

A new series of CDS indices are issued every six months and attributed a Series indicator by Markit 

Partners (previously issued series continue to be traded until their expiry date). Prior to the 

announcement of each series a group of investment banks is polled to determine the credit entities that 

will form the constituents of the new issue. On the day of issue a fixed coupon is decided for the each 

index based on the credit spread of the entities in the index. Once this has been decided the index 

constituents and the fixed coupon are published, and the indices can be actively traded. They are traded 

according to set rules, which cannot be altered. For example, each series has its own set of expiry dates.

There are two main families ofThe index: is based on the below CDX -indices. CDX indices contain 

North American and Emerging Market companies and are administered by CDS Index Company 

(CDSIndexCo) and marketed by Markit Group.

• iTraxx - iTraxx indices contain companies from the rest of the world and are managed by the 

International Index Company (IIC). New series are determined on the basis of liquidity every 6 

months.

Indices Tenors

CDX.NA.IG 3Y, 5Y, 7Y, 10Y

CDX.NA.HY 5Y

CDX.EM 5Y

CDX.LatAm.Corp 3Y, 5Y

iTraxx Europe 5Y, 10Y

iTraxx Europe Crossover 3Y, 5Y, 7Y, 10Y

iTraxx Financials Sen 3Y, 5Y, 7Y, 10Y

iTraxx Financials Sub 3Y, 5Y, 7Y, 10Y

iTraxx Europe HiVol 3Y, 5Y, 7Y, 10Y

Markit iTraxx Asia 3Y, 5Y, 7Y, 10Y

Markit iTraxx Australia 3Y, 5Y, 7Y, 10Y

Markit iTraxx CEEMEA 3Y, 5Y, 7Y, 10Y

Markit iTraxx Japan 3Y, 5Y, 7Y, 10Y

Currencies

USD

EUR

JPY

CDX.NA.HY Index is composed of one hundred liquid constituents with high yield credit rating. The 

index is further divided into sub indices:

• CDX.NA.HY.BB

• CDX.NA.HY.B

Each HY Index and related sub-indices will begin on September 27 (or the Business Day immediately 

thereafter in the event that September 27 is not a Business Day) and March 27 (or the Business Day 
immediately thereafter in the event that March 27 is not a Business Day) of each calendar year (each such 

date, a “Roll Date”).

CDX.NA.IG Index is composed of one hundred and twenty five liquid constituents with investment grade 

credit rating. The index is further divided into sub indices:

• Consumer: CDX.NA.IG.CONS

• Energy: CDX.NA.IG.ENRG

• Financials: CDX.NA.IG.FIN

• Industrial: CDX.NA.IG.INDU

• Telecom, Media and Technology: CDX.NA.IG.TMT

• Hi Volatility CDX.NA.IG.HVOL

Each IG Index and related sub-indices will begin on September 20 (or the Business Day immediately 

thereafter in the event that September 20 is not a Business Day) and March 20 (or the Business Day 

immediately thereafter in the event that March 20 is not a Business Day) of each calendar year (each such 

date, a “Roll Date”).

CDX.EM Index is composed of fourteen sovereign issuers from the following regions: Latin America, 

Middle East, Eastern Europe, Africa and Asia. The EM Index rolls every six months on September 20th

and March 20th.

Index Specifications

• Trading conventions

o Buyer (Payer). This is the party to a CDS contract which pays a premium for 

protection in case a credit event occurs. The Protection Buyer can also speculate 

that the cost of protection will rise and profit from selling the CDS contract at a 

higher price than was paid

o Seller (Receiver). This is the party to a CDS contract receiving the premium 

payments, and who is exposed to the credit risk of the reference entity.

• Swap Leg conventions

o Business Day count: Actual/360

o Business day convention: Following

o Business Day calendar: follow the currency calendar

• EUR: London and TARGET Settlement Day

• USD: London and New York

• Credit Event: Failure to pay, Bankruptcy, (Modified) Restructuring

• Term/Tenor: Refers to the duration of a Credit Default Swap Index contract. Indices are traded 

at 3, 5, 7 and 10-year maturities and a new series is determined on the basis of liquidity every 6 

months.

• Maturity Date: Unadjusted date that falls on the 20th of Mar and Sep

• Coupon Payments: Each coupon is equal to (actual/360), (# of days in accrual period). The 

accrual period always stretches from (previous coupon payment date) through (this coupon 

payment date-1), inclusive; except a contract’s last accrual period, which ends with (and 

includes) the unadjusted maturity date.

o Coupon Payment Dates: Business day adjusted date that falls on 20th of Mar, 

Jun, Sep, and Dec and accrue on a Actual/360. The date will be adjusted to the 

next business day if 20th falls on a weekend.

o The first coupon payment date is determined by the trade date, for example:
Example (Table 1): Consider a 1y $36mm 100bp standard CDS traded in Feb09, maturing 20Mar10:

Coupon Accrual Start Accrual End # Days Payment Payment Date

1st Mon 22Dec08 Thu 19Mar09 88 $88k Fri 20Mar09

2nd Fri 20Mar09 Sun 21Jun09 94 $94k Mon 22Jun09

3rd Mon 22Jun09 Sun 20Sep09 91 $91k Mon 21Sep09

4th Mon 21Sep09 Sun 20Dec09 91 $91k Mon 21Dec09

5th (final) Mon 21Dec09 Sat 20Mar10 90 $90k Mon 22Mar10

o Coupon Rates: 25bp, 100bp, 500bp, 1000bp

• Rolling dates: CDS Index roll semi-annually in March and September.

• Recovery rate — Estimate of percentage of par value bondholders will receive after a credit 

event. CDS for investment grade bonds generally assume a 40% recovery rate. However, CDS 

for lower rated bonds are more dynamic and often reflect lower estimated recovery rates.

• Trade types. CDS Index instruments can be traded either on an outright basis, or as a switch.

o Outrights: An agreement between two parties whereby one party pays the other 

party periodic payments for the specified life of the agreement

o Rolls/Switches/Spreads: A switch is a single Transaction that results in a 

simultaneous buy and sell of two or more underlying outright contracts. CDS 

indices are traded either in spread or in price terms, a generic term describing the 

difference, generally in basis points, between the levels of two reference values.

• Settlement: if a credit event occurs then CDS Index contracts are cash settled.

o Cash settlement: The protection seller pays the buyer the difference between par 

value and the market price of a debt obligation of the reference entity.

• Upfront payments: upfront payments are made at initiation of the trade. It incorporates the 

difference between the traded level and the index coupon, as well as accrued interest.

• Order size: A minimum order size can be defined at the time of order entry.

• Clearing House: ICE and LCH. The choice of clearing house is determined at the time of 

order entry and is based on qualification of each participant’s clearing firm.

For more information on these instruments, including detailed specifications, please see 

http://www.markit.com/HYandIG, http://www.markit.com/EMhttp://www.markit.com/HYandIG and 

http://www.markit.com/iTraxxEM.

Additionally, please see clearable contract definitions at https://www.theice.com/cdx.
Rule 802(2) — Credit Derivatives Tranches

Some of the credit indices are also available in a tranched format, which allows investors to gain exposure 

on a particular portion of the index loss distribution. Tranches are defined by attachment and detachment 

points. Defaults affect the tranches according to the seniority of the tranche in the capital structure.

Indices Tranches

CDX.NA.HY 0-10, 10-15, 15-25, 25-35, 35-100

CDX.NA.IG 0-3, 3-7, 7-15, 15-100

iTraxx Europe 0-3, 3-6, 6-9, 9-12, 12-22, 22-100

iTraxx Europe Crossover 0-10, 10-15, 15-25, 25-35, 35-100

iTraxx Europe Japan 0-3, 3-6, 6-9, 9-12, 12-22

iTraxx Asia 0-3, 3-6, 6-9, 9-12, 12-22

iTraxx Australia 0-3, 3-6, 6-9, 9-12, 12-22

LCDX 0-5, 5-8, 8-12, 12-15, 15-100

Currencies

USD

EUR

Tranche Mechanics

The protection buyer of a tranche makes quarterly coupon payments to the protection seller and receives a 

payment in case there is a credit event in the underlying portfolio. Upfront payments are made at 

initiation and close of the trade to reflect the change in price. Coupon payments (500bps or 100bps per 

annum) are made until the notional amount of the tranche gets fully written down due to a series of credit 

events or until maturity whichever is earlier. Payments are made by the protection seller as long as the 

losses are greater than the attachment point and less than the detachment point for that tranche. Once the 

total loss reaches the detachment point, that tranche notional is fully written down. The premium 

payments are made on the reduced notional after each credit event.

For more information on these instruments, please see http://www.markit.com/iTraxx.
Rule 802(3) — Credit Derivatives Options[Reserved]

A Credit Default Swap Option is an option to buy protection (payer option) or sell protection (receiver 

option) as a credit default swap on a specific reference credit with a specific maturity. The option is 

usually European, exercisable only at one date in the future at a specific strike price defined as a coupon 

on the credit default swap.

Credit default options on single credits are extinguished upon default without any cash flows, other than 

the upfront premium paid by the buyer of the option. Therefore buying a payer option is not a good 

protection against an actual default, only against a rise in the credit spread. This may explain why such 

options are very illiquid. They may also feature quite high implied volatilities. However options on 

credit indices such as iTraxx and CDX include any defaulted entities in the intrinsic value of the option 

when exercised.

Index Options

iTraxx Crossover Options

iTraxx Europe Options

iTraxx Financial Senior Options

iTraxx Financial Sub Options

iTraxx Hi Vol Options

Currencies

USD

GBP

EUR

JPY

AUD

CHF

SEK

PLN

TRY

Option Specifications

• Trading conventions

• o Buyer (payer). This is the party to a CDS option contract where the buyer has the right 

but not the obligation to buy or sell an underlying asset or instrument at a specified price on 

or before a specified date.

• o Seller (Receiver). This is the party to a CDS option contract where the seller has the 

obligation to sell or buy the underlying asset or instrument, if the owner elects to “exercise” 

the option prior to expiration.

• Swap Leg conventions

• o Option Style: This determines when, how and under what circumstances, the option 

holder may exercise its right to buy or sell its options.

 European - European-style option contracts may only be exercised at the 

option’s expiration date. Thus they can never be worth more than an 

American-style option with the same underlying, strike price and 

expiration date.
 American - American-style option contracts can be exercised at any time 

up to the option’s expiration. Under certain circumstances (see below) 

early exercise may be advantageous to the option holder.

• o Option Exercise Type: This determines what rights the option holder would have if a 

credit event occurs.

 Knockout Upon Default

 No Knockout Upon Default

• o Earliest Exercise Date

• o Expiration Date - The last day that an options contract is valid, giving the buyer of the 

option the right to sell or buy the underlying asset or instrument on or before the expiration 

date.

• Underlying asset or Instrument Conventions

• o Credit Event: Failure to pay, Bankruptcy, Restructuring, Repudiation, Obligation 

acceleration and obligation default

• o Term/Tenor: Refers to the duration of a Credit Default Swap Index contract. Indices are 

traded at 3, 5, 7 and 10-year maturities and a new series is determined on the basis of 

liquidity every 6 months.

• o Maturity Date: Unadjusted date that falls on the 20th of Mar, Jun, Sep and Dec

• o Coupon Payments: Each coupon is equal to (actual/360), (# of days in accrual period). 

The accrual period always stretches from (previous coupon payment date) through (this 

coupon payment date-1), inclusive; except a contract’s last accrual period, which ends with 

(and includes) the unadjusted maturity date.

 Coupon Payment Dates: Business day adjusted date that falls on 20th of 

Mar, Jun, Sep, and Dec and accrue on a Actual/360. The date will be 

adjusted to the next business day if 20th falls on a weekend.

 The first coupon payment date is determined by the trade date, for 

example:

Example (Table 1): Consider a 1y $36mm 100bp standard CDS traded in Feb09, maturing 20Mar10:

Coupon Accrual Start Accrual End # Days Payment Payment Date

1st Mon 22Dec08 Thu 19Mar09 88 $88k Fri 20Mar09

2nd Fri 20Mar09 Sun 21Jun09 94 $94k Mon 22Jun09

3rd Mon 22Jun09 Sun 20Sep09 91 $91k Mon 21Sep09

4th Mon 21Sep09 Sun 20Dec09 91 $91k Mon 21Dec09

5th (final) Mon 21Dec09 Sat 20Mar10 90 $90k Mon 22Mar10

 Coupon Rates: 25bp, 100bp, 500bp, 1000bp

• o Upfront payments: upfront payments are made at initiation and close of the trade to 

reflect the change in price.

• Trade types:

• o Payer (Call): A call is an option contract that gives the owner the right to buy the 

underlying stock at a specified price (its strike price) for a certain, fixed period (until 

expiration). For a call option writer or seller, the contract represents an obligation to sell 

the underlying stock if the option is assigned.

• o Receiver (Put): A put is an option contract that gives the owner the right to sell the 

underlying stock at a specified price (its strike price) for a certain, fixed period (until 
expiration). For the writer or seller of a put option, the contract represents an obligation to 

buy the underlying stock from the option owner if the option is assigned.

• Settlement: if a credit event occurs then CDS contracts can either be physically settled or cash 

settled.

• o Physical settlement: The protection seller pays the buyer par value, and in return takes 

delivery of a debt obligation of the reference entity.

• o Cash settlement: The protection seller pays the buyer the difference between par value 

and the market price of a debt obligation of the reference entity.

• Order size: A minimum order size can be defined at the time of order entry.

• Strike Price: The strike price is the price at which an option holder can purchase (call) or sell 

(put) the underlying stock, sometimes called striking price, strike or exercise price.

• Clearing House: ICE and LCH. The choice of clearing house is determined at the time of 

order entry and is based on qualification of each participant’s clearing firm.

For more information on these instruments, please see http://www.markit.com/iTraxx.

ACTIVE 202865842v.45
Rule 802(4) — IOS Index Credit Default Swaps

Contract 

Specification

Details

Product Description An agreement to buy or sell protection on a synthetic total return swap index of 30-

year, fixed-rate Fannie Mae mortgage pools.

Index Name Markit IOS Index

Quotation Contract prices are quoted in dollars and cents per contract.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Contingent payment - Payments related to credit event settlement 

will be determined pursuant to the 2009 ISDA Credit Derivatives 

Determination Committees and Auction Settlement Supplement, 

(i.e., the Big Bang Protocol). 

Fixed Quarterly cash payments - reflected in basis points and paid 

by the protection buyer to the protection seller. 

Upfront fee payment - The upfront fee is a portion of the 

payments, expressed in percentage points of the notional, which is 

present valued and paid immediately to the seller.

Swap Conventions Fixed coupon payments are calculated at a spread of 100 bps and exchanged on a 

quarterly basis. 

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to by the parties. 

Contract Size As agreed to by the parties

Effective Date As agreed to by the parties.

Maturity Date As agreed to by the parties. The Maturity Date may also be referred to as the 

Termination Date or End Date.

Tenor The duration of the time from the Effective Date to the Maturity Date.

Trade Types IOS Index CDS can be traded as one of the following trade type:

a) Outright

b) Roll trades

c) Curve trades

Last Trading Day As agreed to by the parties.
Contract 

Specification

Details

Trading Months All months.

Trading Hours 00:01 – 24:00 (ET) Sunday to Friday

Trading 

Conventions

a) Buy = Buy protection. The buyer pays a premium to the seller in case of a 

credit event occurring. Credit events include bankruptcy and failure to pay.

b) Sell = Sell protection. The seller of protection receives the premium 

payments from the protection buyer. The seller owns the credit risk of the 

instrument. 

Investment grade indices are traded on spread.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.
Rule 802(5) — iBoxx Total Return Swaps

Contract 

Specification

Details

Product Description The Contract is a total return swap where one party (the “Buyer”) is obliged to pay 

a predetermined set rate, fixed or variable, to the other party (the “Seller”) in 

exchange for the notional-based return performance of one of the following 

indices:

Markit iBoxx EUR Corporates

Markit iBoxx EUR Liquid HY

Markit iBoxx GBP Corporates

Markit iBoxx USD Domestic Corporates

Markit iBoxx USD Liquid HY

Quotation As agreed to between the parties.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Terms Cash settled.

a) Buyer (Payer): receives appreciation and income of the index; pays depreciation 

of, if any, the index; pays a fixed rate of interest of a rate of interest plus a 

differential on the underlying notional amount of the contract, as agreed to between 

the parties.

b) Seller (Receiver): pays appreciation and income of the index; receives 

depreciation of, if any, the index; receives a fixed rate of interest or a rate of 

interest plus a differential on the underlying notional amount of the contract, as 

agreed to between the parties.

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to between the parties. 

Settlement Price The settlement price will be the price agreed at the commencement of the contract, 

measured in increments of the applicable minimum price fluctuation.

Contract Size 1 contract, incremental size is 1 contract.

Effective Date As agreed to between the parties.

Maturity Date The Maturity Date may also be referred to as the Termination Date or End Date; as 

agreed to between the parties.

Tenor The duration of the time from the Effective Date to the Maturity Date; as agreed to 

between the parties.

Trade Types Contracts can be traded as one of the following trade type:
Contract 

Specification

Details

a) Outright

b) Spread (calendar and/or between indices)

Last Trading Day Trading terminates at the close of business on the last business day of each contract 

month.

Trading Months All months.

Trading Hours 07:00 – 16:00 (ET) Monday to Friday

Swap Leg a) Payment Frequency: Monthly, Quarterly, Semi-Annually, or Annually

Conventions b) Holiday Calendar: New York and London

c) Business Day Convention: Modified Following.

d) Business Days: If settlement is in GBP or EUR, London and TARGET2, and 

if USD, New York.

d) Set Rate: The agreed rate of the product traded.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.
Rule 802(6) — iBoxx Liquid Leveraged Loans Total Return Swaps

Contract 

Specification

Details

Product Description The Contract is a total return swap where one party (the “Buyer”) is obliged to pay 

a predetermined set rate, fixed or variable, to the other party (the “Seller”) in 

exchange for the notional-based return performance of the Markit iBoxx USD 

Liquid Leveraged Loans Index.

Quotation As agreed to between the parties.

Units of Trading Contract(s)

Expiration Date Trading shall cease at the end of the last day of the contract designated settlement 

period.

Settlement Terms Cash settled.

a) Buyer (Payer): receives appreciation and income of the index; pays depreciation 

of, if any, the index; pays a fixed rate of interest of a rate of interest plus a 

differential on the underlying notional amount of the contract, as agreed to between 

the parties.

b) Seller (Receiver): pays appreciation and income of the index; receives 

depreciation of, if any, the index; receives a fixed rate of interest or a rate of 

interest plus a differential on the underlying notional amount of the contract, as 

agreed to between the parties.

Minimum Price 

Fluctuation/Price 

Tick Size

As agreed to between the parties. 

Settlement Price The settlement price will be the price agreed at the commencement of the contract, 

measured in increments of the applicable minimum price fluctuation.

Contract Size 1 contract, incremental size is 1 contract.

Effective Date As agreed to between the parties.

Maturity Date The Maturity Date may also be referred to as the Termination Date or End Date; as 

agreed to between the parties.

Tenor The duration of the time from the Effective Date to the Maturity Date; as agreed to 

between the parties.

Trade Types Contracts can be traded as one of the following trade type:

a) Outright

b) Spread (calendar and/or between indices)

Last Trading Day Trading terminates at the close of business on the last business day of each 

contract month.

Trading Months All months.

Trading Hours 07:00 – 16:00 (ET) Monday to Friday
Contract 

Specification

Details

Swap Leg a) Payment Frequency: Monthly, Quarterly, Semi-Annually, or Annually

Conventions b) Holiday Calendar: New York and London

c) Business Day Convention: Modified Following.

d) Business Days: If settlement is in GBP or EUR, London and TARGET2, and 

if USD, New York.

d) Set Rate: The agreed rate of the product traded.

Speculative Limits No speculative limits are currently required.

Reportable Levels No reportable levels are currently applicable.

ACTIVE 202865842v.5