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CX Futures Exchange, L.P. 

Rule 40.2 New Contract Submission—Atlantic Named Storm Landfall Swaps Contract

Submission #2019-05

5/29/2019

CX Futures Exchange, L.P. (“CX” or “Exchange”) hereby certifies its listing of the following 

new contract: Atlantic Named Storm Landfall Swaps Contract. 

This submission is being made in accordance with Section 5c(c)(1) of the Commodity Exchange 

Act, as amended, 7 U.S.C. §1 et seq. (“Act”) and Commodity Futures Trading Commission 

(“Commission”) Rule 40.2 thereunder:

1. The text of the proposed contract terms and conditions is attached. 

2. The proposed listing date of the contract will be June 3, 2019.

3. Attached, please find a certification that: (1) the contract complies with the 

Commodity Exchange Act, and the Commission’s regulations thereunder; and (2) 

that CX posted on its website a notice of this pending product certification with 

the Commission and a copy of the submission, concurrent with the filing of this 

submission with the Commission.

4. A concise explanation and analysis of the product and its compliance with 

applicable provisions of the Act, including core principles, and the Commission's 

regulations thereunder, appears below.

5. Confidentiality for this submission is not requested.

CONCISE EXPLANATION AND ANALYSIS OF THE PRODUCT AND ITS 

COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ACT, INCLUDING 

CORE PRINCIPLES AND THE COMMISSION’S REGULATIONS THEREUNDER

Pursuant to Commission Rule 40.2(a)(3)(v), the following is a concise explanation and analysis 

of the product and its compliance with the Act and Commission rules. 

The Exchange’s rules currently provide for trading in the Atlantic Named Storm Swaps #2

Contract (the “ANS #2 Contract”), which relates to the location of landfall (or lack thereof) of 

named tropical cyclones in the eastern half of the continental United States. At this time, there 

are no contracts listed in the ANS #2 Contract and, therefore, there is no open interest in that 

contract. Accordingly, the ANS #2 contract will be delisted.

The ANS #2 Contract is being replaced by a new contact, the Atlantic Named Storm Landfall 

Swaps Contract (the “ANSLS Contract”).

Although there are some similarities between the new ANSLS Contract and the ANS #2 

Contract, such as both contracts provide that contracts will be listed for each named Atlantic 
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tropical storm, that market participants will choose Strike Codes based on US ZIP Code 

centroids, and that the 75-mile radius from a named storm landfall point is used to determine 

payment amounts, there are numerous differences in the new ANSLS Contract. These changes 

in the terms and conditions of the new contract are based upon observed trading in the ANS #2 

contract and are intended to increase the liquidity and usefulness of the new contract for risk 

mitigation purposes. Specifically, the ANSLS contract implements the following features not 

present in the ANS #2 contract:

 The ANSLS contract provides for payments in cases where an Atlantic named storm 

makes more than one landfall. This more fairly represents the economic risks associated 

with a tropical storm than the “first landfall location” utilized by the ANS #2 contract.

 The ANSLS contract does not make any payments to market participants unless a landfall 

occurs. This provision more closely aligns the economic risks of a tropical storm with 

contract positions than the “No Landfall” payout provisions of the ANS #2 contract. 

 Consistent with the above, if a named storm fails to make a landfall as defined in the 

contract, positions are automatically rolled forward into the next unnamed storm. This 

feature more closely approaches “seasonal coverage” sought by market participants and 

enables a hedger or other market participant to retain purchased coverage from one storm 

to another when no landfall occurred without re-entering a transaction in the market.

 The ANSLS contract utilizes 120, 96, 72, 48 and 36-hour forecasted locations provided 

by the National Hurricane Center to increase bid prices.
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To implement this feature of the contract, the Exchange is utilizing a similar 

methodology to that used to account for information asymmetry in its rain, snow, high 

extreme temperature and low extreme temperature contracts. In the chart example above, 

forecast zones 3 through 7 will require higher bid prices for Strike Codes with landfall 

points underlying the corresponding areas. This feature mitigates the information 

asymmetry and enables the contract to continue trading as a named storm approaches the 

U.S. coastline. This feature replaces the single fixed bid price of $1.00 in the ANS #2 

contract.

 Consistent with the above, the ANSLS contract will not permit trading if a Strike Code 

has a landfall point underlying the area around the 24-hour forecast location, 12-hour 

forecast location or current storm position. In the chart example above, Strike Codes with 

landfall locations underlying forecast zones 0 through 2 would be unavailable for 

additional bids. This feature enables market participants to have access to other Strike 

Codes as a named storm approaches the coast and enables the contract to continue trading 

up to and beyond its first landfall point.

 The ANSLS contract permits Strike Code switching in a manner that is consistent with 

the methodology used in the Exchange’s rain, snow, high extreme temperature and low 

extreme temperature contracts. This feature is expected to increase the liquidity and 

information value of the contract by allowing market participants to modify their Strike 

Codes as new storm track information becomes available. This feature replaces the ANS 

#2 contract’s “Secondary Trading Period” provision.

 The ANSLS contract utilizes the “Residual Bid Interest” concept to determine the 

contract’s final settlement price that is also used by the Exchange’s rain, snow, high 

extreme temperature and low extreme temperature contracts. This feature constrains 

contract payments in any Strike Code to the range of $0.01 to $249.99 and prevents 

extreme payments in the circumstance that a named storm makes landfall in a low 

likelihood Strike Code area.

The Exchange incorporates by reference its Rule 40.2 Submission #2016-5 of June 13, 2016, 

which describes the operation of the ANS Contract as consistent with, and in accordance with, 

the Core Principles of Section 5 of the Commodity Exchange Act and the rules thereunder.
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CERTIFICATIONS PURSUANT TO SECTION 5c OF THE COMMODITY 

EXCHANGE ACT, 7 U.S.C. §7A-2 AND COMMODITY FUTURES TRADING 

COMMISSION RULE 40.2, 17 C.F.R. §40.2

I hereby certify that:

(1) the Atlantic Named Storm Landfall Swaps Contract complies with the Commodity 

Exchange Act, and the Commodity Futures Trading Commission’s regulations 

thereunder; and

(2) concurrent with this submission, CX Futures Exchange, L.P. posted on its website: a 

notice of this pending product certification with the Commission and a copy of this 

submission, concurrent with the filing of this submission with the Commission.

_________________________

By: 

Title: 

Date: 

Nolan Glantz

COO

5/29/2019