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Tradition SEF, Inc. Senior Regulatory Counsel and Secretary
Legal Department

August 19, 2016

VIA E-MAIL (submissions@cftc.gov)

Mr. Christopher Kirkpatrick

Secretary

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: CFTC Regulation 40.6(a) Emergency Rule Certification.
Amendments to Tradition SEF, Inc.’s Trad-X Interest Rate Swap (IRS) Platform
Supplement.
Tradition SEF Submission No. 2016-05 (CONFIDENTIAL TREATMENT REQUESTED).

Dear Mr. Kirkpatrick:

Pursuant to Section Se(c) of the Commodity Exchange Act, as amended (the “Act”), and Commodity
Futures Trading Commission (“CETC” or the “Commission”) Regulation 40.6(a), Tradition SEF, Inc.
(“Tradition SEF”) hereby notifies the Commission that it is amending its Trad-X Interest Rate Swap
(IRS) trading platform supplement (the “Platform Supplement”), effective as of August 15, 2016.
Tradition SEF has simultaneously submitted a request for confidential treatment for the amendments and
certain other provisions of the Platform Supplement.

Tradition SEF has amended Appendix 3 (USD Interest Rate Products Minimum Order Size) of the
Platform Supplement to revise the minimum order sizes applied to USD interest rate swap semi bond
transactions in the Trad-X Platform. The flattening of the USD interest rate curve has caused a situation
where the underlying amounts mathematically necessary to enter into delta neutral USD IRS butterfly and
curve trades have, in certain instances, fallen below the minimum USD order sizes acceptable in the Trad-
X Platform. Such underlying amounts are currently based on a rounding model where implied orders
generated from implied butterfly or spread orders below minimum order size are rounded to market
accepted “social” transaction sizes (e.g., rounded to the nearest $5 million or $10 million increment).
Accordingly, the minimum order sizes applied to USD interest rate swap semi bond swaps in the Trad-X
Platform will no longer be rounded to social sizes.

Tradition SEF believes that changes to the minimum order sizes require immediate action to maintain fair
and orderly trading, and if unchanged would have a severe, adverse effect of the functioning of Tradition
SEF. Implied orders generated for butterfly and curve spread transactions that do not meet minimum size
requirements, due to the changed (reduced) hedge ratios calculated based on the flattened USD interest
rate curve, may not match in the Trad-X Platform with opposing orders because they may not meet
current minimum sizes. This may create a situation whereby markets are persistently locked on price, but
do not trade. Additionally, eliminating the rounding of orders to rounded social sizes to meet minimum
transaction sizes will allow for increased accuracy in matching hedge ratios for butterfly and curve
transactions.

Tradition SEF, Inc. 255 Greenwich Street, 4" floor, New York, NY 10007 F 2127914500 _ www.traditionsef.com


Pursuant to Commission Regulation 40.8, Tradition SEF hereby makes the Platform Supplement attached
hereto as Exhibit A publicly available. Tradition SEF has simultaneously submitted a request for
confidential treatment to the Commission for Appendix 3 of the Platform Supplement and certain
provisions that are identified on Exhibit A as “Redacted — Confidential Treatment Requested.” A copy of
that request for confidential treatment is included with this submission.

A notice detailing these minimum order size changes has been sent to Trad-X participants.

Tradition SEF continues to be in compliance with applicable provisions of the Act, including the Core
Principles. Tradition SEF hereby certifies that the rule amendments comply with the Commodity
Exchange Act and the Commission’s regulations thereunder. No substantive opposing views were
expressed that were not incorporated into the rule amendments. Tradition SEF hereby certifies that it has
posted a notice of pending certification with the Commission and a copy of the submission on its website
(see http:/Avww.traditionsef.com/regulatory/), concurrent with the filing of this submission with the
Commission.

Should you require additional information related to this submission, please contact the undersigned at
(212) 337-2337 or scot.halvorsen@tradition.com. Please reference Tradition SEF Submission No. 2016-

05 in any related correspondence.

Scot J. Halvorsen
Senior Regulatory Counsel and Secretary

Sincerely,


Exhibit A

Tradition SEF Trad-X Interest Rate Swap (IRS) Trading Platform Supplement