SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested

Registered Entity Identifier Code (optional): ___________________________ 

Organization: ______________________________________________________________________

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

Filing Date (mm/dd/yy): ___________ Filing Description:

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: ________________________________________________ 

Rule Numbers: ______________________________________________________________________
1

March 28, 2023

Submitted via CFTC Portal and Email

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: SpectrAxe LLC – Commission Regulation 40.2 Certification of AUD/NZD Options

Dear Mr. Kirkpatrick:

SpectrAxe LLC (“SpectrAxe”) hereby notifies the Commodity Futures Trading Commission (the 

“Commission”), pursuant to Commission Regulations 40.2(a), of its intent to list AUD/NZD options 

for trading on SpectrAxe’s electronic trading system (the “SEF Platform”). SpectrAxe intends to 

list AUD/NZD options on April 10, 2023.

This submission letter contains the following attachments:

• The submission cover sheet;

• Attachment A, which provides a concise explanation and analysis of foreign currency

options (“FX Options”), such as AUD/NZD options;

• Attachment B, which provides the contract specifications for FX Options as published on

SpectrAxe’s website, in accordance with Rule 901 of the SpectrAxe Rulebook

(“Rulebook”);

• Attachment C, which provides a concise explanation and analysis of FX Options’

compliance with applicable provisions of the Commodity Exchange Act (the “Act”),

including the Core Principles and the Commission’s Regulations thereunder.

Based on the foregoing, SpectrAxe certifies that the AUD/NZD options comply with the Act and 

the Commission Regulations thereunder. Additionally, SpectrAxe certifies that it has concurrently 

posted a copy of this submission letter and attachments hereto on its website at 

www.spectraxesef.com. 

* * *
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

2 

Should you have questions regarding this submission, please do not hesitate to contact Cheryl L. 

Isaac, K&L Gates, LLP, at +1-202-778-9089 or Cheryl.Isaac@klgates.com, or the undersigned at 

+1-212-651-3186 or bflaster@spectraxe.com.

Very truly yours,

Brad Flaster

Chief Compliance Officer

SpectrAxe
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

3 

Attachment A

SpectrAxe intends to offer FX Options, including AUD/NZD options, on the SEF Platform.

An FX Option is a derivative financial instrument that gives the owner the right but not the 

obligation to buy or sell an agreed amount of one currency in exchange for an agreed amount of 

another currency at a specified exchange rate (the “strike price”).

There are two types of FX Options: call options and put options. A call option gives the owner 

the right to buy a currency at the strike price, while a put option gives the owner the right to sell 

a currency at the strike price.

FX Options traded on the SEF Platform will be settled physically, meaning that the owner 

actually buys or sells the underlying currency at the strike price. 

FX Options available on the SEF Platform may be traded with or without underlying delta hedges, 

which are used to mitigate the directional risk associated with price movements in an underlying 

asset. A delta hedge may be spot dated or forward dated. 

A Trade (as defined in the SpectrAxe Rulebook) involving FX Options can have a maximum of 

two vanilla options and up to two delta hedges.

For more information, the contract specifications for FX Options are attached as Attachment B.
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

4 

Attachment B

SpectrAxe Contract Specifications

DESCRIPTION

Deliverable foreign exchange options (FX Options) offer the right but not the 

obligation to buy or sell an agreed amount of one currency in exchange for an 

agreed amount of another currency at a specified exchange rate (strike price).

TRADE DATE The date the transaction is agreed between and becomes legally binding on the 

parties.

OPTION STYLE European Style (FX Option buyer may only exercise the FX Option on the Expiry 

Date).

EXPIRY DATE Between 1 day and 10 years, as agreed between the parties.

AUTOMATIC 

EXERCISE

Applicable, pursuant to the Rulebook.

STRIKE PRICE As agreed between the parties.

NOTIONAL 

AMOUNT

As agreed between the parties.

NOTIONAL 

AMOUNT MINIMUM

Dependent on the currency pair underlying the FX Option.

MINIMUM TICK Dependent on the currency pair underlying the FX Option.

OPTION TYPE

• Put - FX Option buyer has the right to sell an agreed amount of the base

currency at the agreed-upon strike price in exchange for a

predetermined amount of the foreign currency.

• Call - FX Option buyer has the right to buy an agreed amount of the

base currency at the agreed-upon strike price in exchange for a

predetermined amount of the foreign currency.

DELTA HEDGES

FX Options may be traded: 

• with an underlying delta hedge that is spot dated;

• with an underlying delta hedge that is forward dated; or

• without a delta hedge.

Maximum of two vanilla options with up to two hedges may be traded in a single 

transaction.

AVAILABLE 

TENORS

Dependent on the currency pair underlying the FX Option.

SETTLEMENT 

DATE

One or two business days after the Expiry Date, depending on the underlying 

currency pair, or as agreed between the parties.

SETTLEMENT TYPE Physical delivery.

PREMIUM AMOUNT As agreed between the parties. 
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

5 

PREMIUM 

PAYMENT DATE

Premium is valued before trade execution and may be paid spot or forward upon 

the settlement of the FX Option, as agreed between the parties.

TRADING HOURS As set forth in the SpectrAxe website.

HOLIDAY 

CALENDAR

As agreed between the parties and suitable to the currency's market standards.

CLEARING n/a - Not cleared.

BLOCK MINIMUM n/a - No block trading allowed on the SEF. 

REPORTABLE 

LEVELS

As set forth in CFTC Regulation 15.03.

POSITION LIMITS As set forth in Part 150 of the CFTC Regulations.

DEFINITIONS

Unless explicitly defined, all capitalized terms are defined in the Rulebook or the 

1998 ISDA FX and Currency Option Definitions, as updated. If there are any 

conflicts between definitions, the Rulebook shall prevail.

Available Currency Pairs:

AUD/CAD

AUD/CHF

AUD/JPY

AUD/NZD

AUD/USD

CAD/CHF

CAD/JPY

CHF/JPY

EUR/AUD

EUR/CAD

EUR/CHF

EUR/CNH

EUR/CZK

EUR/GBP

EUR/HUF

EUR/JPY

EUR/NOK

EUR/NZD

EUR/PLN

EUR/SEK

EUR/USD

GBP/AUD

GBP/CAD

GBP/CHF

GBP/JPY

GBP/NOK

GBP/NZD

GBP/SEK

GBP/USD

NOK/SEK

NZD/CAD

NZD/JPY

NZD/USD

USD/CAD

USD/CHF

USD/CNH

USD/CZK

USD/HUF

USD/ILS

USD/JPY

USD/MXN

USD/NOK

USD/PLN

USD/SEK

USD/SGD

USD/ZAR
6

Attachment C

SpectrAxe has determined that FX Options, including AUD/NZD options, bear upon the following 

Core Principles:

Core Principle 2 - Compliance with Rules

Trading in FX Options will be subject to the Rulebook, which prohibits abusive trading practices, 

including: acts detrimental to SpectrAxe (see Rule 609); acts that are inconsistent with just and 

equitable principles (see Rule 602); fraudulent acts (see Rule 603); fictitious or non-competitive 

transactions (see Rule 604); market manipulation (see Rule 606); disruptive trading practices (see 

Rules 605 and 607); misstatements (see Rule 608); wash sales (see Rule 613); and prenegotiated or non-competitive trades, such as money passes (see Rule 614).

As with all Swaps listed for trading on the SEF Platform (as such terms are defined in the 

SpectrAxe Rulebook), trading activity in FX Options will be subject to monitoring and surveillance 

by SpectrAxe’s Market Regulation Team. SpectrAxe has the authority to exercise its investigatory 

and enforcement powers where potential rule violations are identified. See Chapter 7 of the 

Rulebook.

Core Principle 3 - Swaps Not Readily Susceptible to Manipulation

FX Options will be based on SpectrAxe’s specified market exchange rates and are not readily 

susceptible to manipulation because wide dealer and industry support provides significant liquidity 

in all market conditions for the currency pairs available on the SEF Platform.

SpectrAxe anticipates that the five most liquid currencies that will be traded on the SEF Platform 

are, in order: (1) USD, (2) EUR, (3) JPY, (4) GBP and (5) AUD.

SpectrAxe anticipates that the five least liquid currencies that will be traded on the SEF Platform 

are, in order: (1) COP, (2) CLP, (3) HUF, (4) IDR and (5) CZK.

To demonstrate the level of liquidity for these currencies, the chart below represents the average 

daily turnover of OTC foreign exchange instruments in these currencies in April 2022, as reported

by the Bank of International Settlements:

Currency April 2022 daily average turnover*

USD $6,639 billion

EUR $2,292 billion

JPY $1,253 billion

GBP $968 billion

AUD $479 billion

CZK $29 billion

IDR $28 billion

HUF $26 billion

CLP $24 billion

COP $14 billion

* On a “net-net” basis, measured in USD
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

7 

Core Principle 4 - Monitoring of Trading and Trade Processing

All trading activity of FX Options on SpectrAxe is monitored on a real-time basis by the Market 

Control Center. The Market Control Center conducts real-time monitoring in order to observe any 

aberrant or atypical price volatility or volume volatility. Real-time monitoring enables SpectrAxe to 

cancel FX Option trades as a means of mitigating any errors or malfunctions in the operations of 

the SEF, given that any such adjustments are made transparent to the impacted Participants and 

PFIs in accordance with the Rulebook.

The Market Control Center may contact the Compliance Department on a real-time basis if it 

identifies instances of FX Options trading behavior that may be inconsistent with the Rules and 

may warrant contacting the Participant. In addition, the Compliance Department reviews the 

SEF’s audit trail on a T+1 basis to identify such instances.

The Compliance Department is authorized under Chapter 7 of the Rulebook to conduct 

investigations and disciplinary proceedings.

Core Principle 5 - Ability to Obtain Information

Pursuant to the Rulebook, SpectrAxe has the authority and ability to obtain sufficient information 

for each FX Option to allow SpectrAxe to fully perform its operational, risk management, 

governance and regulatory functions described in Section 5h of the Act and Part 37 of 

Commission Regulations (see, e.g., Rule 503).

Core Principle 6 - Position Limits or Accountability

SpectrAxe may adopt position limits or position accountability levels for FX Options if necessary 

and appropriate, pursuant to Rules 408 and 409. SpectrAxe continually assesses whether 

position limits or position accountability levels are necessary, appropriate, and should be adopted 

for FX Options to reduce the threat of market manipulation or congestion.

Note that SpectrAxe, as well as individual PFIs (as such term is defined in the SpectrAxe 

Rulebook), currently manages Participant risk through the use of credit limits.

Core Principle 7 - Financial Integrity of Transactions

SpectrAxe has established trade procedures, including the involvement of Participating Financial 

Institutions, pursuant to the Rulebook, to ensure the financial integrity of FX Options entered 

through the SEF Platform.

Core Principle 8 - Emergency Authority

Pursuant to the Rulebook, SpectrAxe’s Chief Compliance Officer (“CCO”), or any individual 

designated by the CCO and approved by SpectrAxe’s Board of Directors (“Board”), is authorized 

to place, with immediate effect, a temporary emergency addition to the Rulebook that may provide 

for the Board or any committee thereof to undertake various actions necessary or appropriate to 

respond to the emergency, including (i) imposing or modifying position limits, price limits or 

intraday market restrictions on FX Options; (ii) ordering the liquidation or transfer of open positions 

in any FX Option; (iii) ordering the fixing of a settlement price on any FX Option; (iv) extending, 

limiting or changing the trading hours or expiration date of an FX Option; (v) suspending or 

curtailing trading, or limiting trading to liquidation only, in an FX Option; (vi) transferring FX Option 
Mr. Christopher J. Kirkpatrick 

Commodity Futures Trading Commission 

March 28, 2023 

8 

contracts and associated margin, or altering any FX Option’s settlement terms or conditions; (vii) 

modifying or suspending any provision in the Rulebook; and/or (viii) taking market actions as may 

be directed by the Commission (see Rule 412(b)).

Core Principle 9 - Timely Publication of Trading Information

In accordance with Part 16 of Commission Regulations, SpectrAxe will publish daily market 

volume data reports for each Swap (or class of Swap) in terms of notional value. Further, 

SpectrAxe will publish for each trading day, by tenor of the Swap, the opening price and the high 

and low prices. 

SpectrAxe will submit electronic reports of all primary economic terms data for each Swap to a 

registered swap data repository immediately following execution of such Swap, pursuant to its 

Rulebook and Commission Regulations. All such reports will meet the standards put forth in the 

Commission Regulations, including the requirement in CFTC Regulation 45.5 to include a “Unique 

Transaction Identifier” for each Swap.

Core Principle 10 - Recordkeeping and Reporting

SpectrAxe keeps (or hires a third party to keep, on its behalf) all books and records regarding FX 

Options transactions required to be maintained under the Act and CFTC Regulations, including 

CFTC Regulations 37.1001 and 45.2(a). These books and records are retained for the life of the 

Trade and five years following the termination of the Trade, as required by Commission 

Regulations. Additionally, these books and records are readily accessible for inspection.