June 21, 2023

Submitted via CFTC Portal

Secretary of the Commission

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: TeraExchange, LLC – Regulation 40.2 Certification of France Consumer Price Index Excluding 

Tobacco Fixed for Floating Inflation Swaps

Ladies and Gentlemen:

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

“Commission”) of its intent to list France Consumer Price Index Excluding Tobacco Fixed for Floating 

Inflation Swaps (the “Contract”) on the TeraExchange swap execution facility. TeraExchange intends to list 

this Contract June 26, 2023.

Pursuant to Commission Regulation 40.2, this submission includes:

1. A copy of the submission cover sheet in accordance with the instructions provided in Appendix D to 

Part 40 of the Commission’s regulations, attached as Exhibit A.

2. The intended listing date is June 26, 2023.

3. A certification by TeraExchange that (a) the Contract complies with the Commodity 

Exchange Act, as amended (the “Act”), and the Commission regulations thereunder; and (b) 

concurrent with this submission, TeraExchange posted on its website (i) a notice of pending 

certification of the Contract and (ii) a copy of this submission, attached as Exhibit B;

4. The Contract’s terms and conditions, attached as Exhibit C; and

5. An explanation and analysis of the Contract’s compliance with applicable core principles 

and Commission regulations, attached as Exhibit D.

Questions regarding this submission should be directed to Todd Langdon, Chief Compliance Officer, at 908-

273-8277 or by e-mail at tlangdon@teraexchange.com.

Sincerely,

Christopher Rossman

Christopher Rossman

Chief Operating Officer
EXHIBIT A
EXHIBIT B

CERTIFICATIONS PURSUANT TO SECTION 5c OF THE COMMODITY 

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

COMMISSION REGULATION 40.2, 17 C.F.R. §40.2

TeraExchange, LLC (“TeraExchange”) hereby certifies that: a) the France Consumer Price

Index Excluding Tobacco Fixed for Floating Inflation Swaps Contract complies with the 

Commodity Exchange Act, 7 U.S.C. §1 et seq. and the Commodity Futures Trading 

Commission (the “Commission”) regulations thereunder; and b) concurrent with this 

submission, TeraExchange, posted on its website: (i) a notice of pending certification of the 

Contract with the Commission; and (ii) a copy of this submission.

TeraExchange, LLC

By: Christopher Rossman

Name: Christopher Rossman

Title: Chief Operating Officer

Date: June 21, 2023
EXHIBIT C

Terms and Conditions
EXHIBIT D

EXPLANATION AND ANALYSIS OF THE CONTRACT’S COMPLIANCE WITH 

APPLICABLE CORE PRINCIPLES AND COMMISSION REGULATIONS

As required by Commission Regulation § 40.2(a), the following analysis, in narrative form, demonstrates that 

the France Consumer Price Index Excluding Tobacco Fixed for Floating Inflation Swaps (the “Contract”) is

consistent with the requirements of the Commodity Exchange Act, as amended (the “Act”), and the 

Commission regulations and guidance thereunder (in particular, Appendix B to Part 37 and Appendix C to Part 

38).

Appendix B to Part 37

CORE PRINCIPLE 3 OF SECTION 5H OF THE ACT - SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION;

CORE PRINCIPLE 4 OF SECTION 5H OF THE ACT - MONITORING OF TRADING AND TRADE PROCESSING

The swap execution facility shall permit trading only in swaps that are not readily susceptible to

manipulation.

(a) Guidance.

(1) In general, a swap contract is an agreement to exchange a series of cash flows over a period of time 

based on some reference price, which could be a single price, such as an absolute level or a differential, 

or a price index calculated based on multiple observations. Moreover, such a reference price may be 

reported by the swap execution facility itself or by an independent third party. When listing a swap for 

trading, a swap execution facility shall ensure a swap’s compliance with Core Principle 3, paying special 

attention to the reference price used to determine the cash flow exchanges. Specifically, Core Principle 3 

requires that the reference price used by a swap not be readily susceptible to manipulation. As a result, 

when identifying a reference price, a swap execution facility should either: Calculate its own reference 

price using suitable and well-established acceptable methods or carefully select a reliable third-party 

index.

(2) The importance of the reference price’s suitability for a given swap is similar to that of the final 

settlement price for a cash-settled futures contract. If the final settlement price is manipulated, then the 

futures contract does not serve its intended price discovery and risk management functions. Similarly, 

inappropriate reference prices cause the cash flows between the buyer and seller to differ from the 

proper amounts, thus benefitting one party and disadvantaging the other. Thus, careful consideration 

should be given to the potential for manipulation or distortion of the reference price.

The reference rate for the floating leg of the Contract is the widely used France Consumer Price Index

Excluding Tobacco (“FRC-EXT-CPI”) benchmark and is not readily susceptible to manipulation. The FRCEXT-CPI is calculated using data collected by the National Institute of Statistics and Economic Studies 

(“INSEE”), the French national statistics bureau and the French branch of Eurostat, following harmonized 

standards and published by Eurostat, a Directorate-General of the European Commission and the statistical 

office of the European Union. Eurostat is responsible for developing harmonized definitions, classifications and 

methodologies for the production of European official statistics, in cooperation with national statistical 

authorities, and calculating aggregate data for the European Union and Eurozone.

The Contract, which trades in a large, well-established and highly liquid market, is not readily susceptible to 

manipulation. Price manipulation in such deep markets is exceedingly difficult to achieve. In addition, 

TeraExchange has established exchange rules and an enforcement infrastructure to prevent manipulation. 
TeraExchange staff conduct real-time market surveillance and perform comprehensive trade practice and 

market surveillance compliance review on a T+1 basis. 

Calculation of the France Consumer Price Index Excluding Tobacco (“FRC-EXT-CPI”)

The reference rate for the floating leg of the swap is the France Consumer Price Index Excluding Tobacco, part 

of the larger Harmonized Index of Consumer Prices (HICP), which gives comparable measures of inflation for 

the countries and country groups for which it is produced. The France Consumer Price Index Excluding 

Tobacco is an economic indicator that measures the change over time of the prices of consumer goods and 

services acquired by French households. 

HICPs are used for the assessment of the inflation convergence criterion as required under Article 121 of the 

Treaty of Amsterdam and by the European Central Bank for assessing price stability for monetary policy 

purposes. The ECB defines price stability on the basis of the annual rate of change of the euro area HICP being 

below 2%. HICPs are compiled on the basis of harmonized standards, binding for all EU Member States. 

Conceptually, the HICP are Laspeyres-type price indices and are computed as annual chain-indices allowing 

for weights changing each year. HICP are broken down by category of consumption expenditure using 

standardized classifications. HICP are produced and published using a common index reference period (2015 = 

100). Growth rates are calculated from published index levels. Indexes, as well as both growth rates with 

respect to the previous month (M/M-1) and with respect to the corresponding month of the previous year 

(M/M-12) are neither calendar nor seasonally adjusted.

HICP data collection is systematically monitored by Eurostat, the statistical office of the European Union, to 

ensure that the statistical practices used to compile the national HICP are compliant with the HICP 

methodological requirements and that good practices in the field of consumer price indices are being followed. 

The full set of HICP data is published each month on Eurostat’s free dissemination database according to a preannounced schedule, usually between 15 and 18 days after the end of the reference month. Each year, the 

January news release is published at the end of February to allow for the annual update of the weights of 

individual product groups and the relative country weights of Members States in the country-group aggregates. 

Additionally, a euro area HICP flash estimate is published on the last working day of the reference month or 

shortly after that and disseminated in a news release, in the Eurostat database and in a Statistics Explained 

article. In principle, no intermediate data updates are done outside the pre-agreed calendar update dates. INSEE 

also publishes French CPI data monthly in the Official Journal of French Republic.

The euro area (evolving composition) HICP index is used by the European Central Bank (ECB) as the main 

indicator for monetary policy management. The ECB and the European Commission’s Directorate-General for 

Economic and Financial Affairs (DG ECFIN) use the HICP for assessing price stability and price convergence 

required for entry into European Monetary Union. Other users, including National Central Banks, financial 

institutions, economic analysts, the media and the public at large use the HICP for economic analysis as well as 

for indexing commercial contracts, wages, social protection benefits or financial instruments. 

This Contract is specifically based on the France Consumer Price Index Excluding Tobacco (“FRC-EXTCPI”). For more information on how the HICPs and the FRC-EXT-CPI are calculated, please see the Eurostat 

website (www.ec.europa.eu/eurostat/en/) or the INSEE website (www.insee.fr).

(3) For swaps that are settled by physical delivery or by cash settlement refer to the guidance in 

appendix C to part 38 of this chapter—Demonstration of Compliance That a Contract is not Readily 

Susceptible to Manipulation, section b(2) and section c(4), respectively.

Please see below.
Appendix C to Part 38 - Demonstration of Compliance That a Contract Is Not Readily Susceptible to 

Manipulation

(c) Futures Contracts Settled by Cash Settlement. (1) Cash settlement is a method of settling certain 

futures or option contracts whereby, at contract expiration, the contract is settled by cash payment in 

lieu of physical delivery of the commodity or instrument underlying the contract. An acceptable 

specification of the cash settlement price for commodity futures and option contracts would include rules 

that fully describe the essential economic characteristics of the underlying commodity (e.g., grade, 

quality, weight, class, growth, issuer, maturity, source, rating, description of the underlying index and 

index’s calculation methodology, etc.), as well as how the final settlement price is calculated. In addition, 

the rules should clearly specify the trading months and hours of trading, the last trading day, contract 

size, minimum price change (tick size) and any limitations on price movements (e.g., price limits or 

trading halts).

Essential Economic Characteristics of the Contract Terms

The terms and conditions of the Contract, listed in Exhibit C, follow industry convention and match the terms 

of inflation swaps that are commonly offered in the market. 

Calculation of Cash Settlement Price

The cash settlement price will be calculated as follows:

• Fixed Leg: The payment amount is based on the following: Notional Amount, Compounding 

Frequency, Payment Frequency, Day Count Convention and Fixed Interest Rate.

• Floating Leg: The payment amount is based on the following: Notional Amount, Payment 

Frequency, Day Count Convention, Inflation Index and Floating Reset Dates.

All payments are settled in accordance with the payment frequency of the swap. The detailed settlement 

procedure will be determined by the clearing venue.

(2) Cash settled contracts may be susceptible to manipulation or price distortion. In evaluating the 

susceptibility of a cash-settled contract to manipulation, a designated contract market should consider 

the size and liquidity of the cash market that underlies the listed contract in a manner that follows the 

determination of deliverable supply as noted above in (b)(1). In particular, situations susceptible to 

manipulation include those in which the volume of cash market transactions and/or the number of 

participants contacted in determining the cash-settlement price are very low. Cash-settled contracts may 

create an incentive to manipulate or artificially influence the data from which the cash-settlement price 

is derived or to exert undue influence on the cash-settlement price's computation in order to profit on a 

futures position in that commodity.

The utility of a cash-settled contract for risk management and price discovery would be significantly 

impaired if the cash settlement price is not a reliable or robust indicator of the value of the underlying 

commodity or instrument. Accordingly, careful consideration should be given to the potential for 

manipulation or distortion of the cash settlement price, as well as the reliability of that price as an 

indicator of cash market values. Appropriate consideration also should be given to the commercial 

acceptability, public availability, and timeliness of the price series that is used to calculate the cash 

settlement price. Documentation demonstrating that the settlement price index is a reliable indicator of 

market values and conditions and is commonly used as a reference index by industry/market agents 

should be provided. Such documentation may take on various forms, including carefully documented 
interview results with knowledgeable agents.

The Contract operates in a very liquid market with numerous participants. Also, the cash settlement price is not 

easily susceptible to manipulation or distortion as the method of determining the price is based on factors that 

are fixed at the start of the particular Contract (i.e., payment frequency, day count conventions, fixed interest 

rate and floating reset dates) and the FRC-EXT-CPI. Additionally, FRC-EXT-CPI is widely accepted by 

market participants and readily available through numerous publicly available sources, including the Eurostat

and INSEE websites. 

(3) Where an independent, private-sector third party calculates the cash settlement price series, a 

designated contract market should consider the need for a licensing agreement that will ensure the 

designated contract market’s rights to the use of the price series to settle the listed contract.

(i) Where an independent, private-sector third party calculates the cash settlement price series, the 

designated contract market should verify that the third party utilizes business practices that minimize 

the opportunity or incentive to manipulate the cash-settlement price series. Such safeguards may include 

lock-downs, prohibitions against derivatives trading by employees, or public dissemination of the names 

of sources and the price quotes they provide. Because a cash-settled contract may create an incentive to 

manipulate or artificially influence the underlying market from which the cash-settlement price is 

derived or to exert undue influence on the cash-settlement computation in order to profit on a futures 

position in that commodity, a designated contract market should, whenever practicable, enter into an 

information-sharing agreement with the third-party provider which would enable the designated 

contract market to better detect and prevent manipulative behavior.

As described above, the cash settlement price will be calculated through a cash settlement method that is not 

easily susceptible to manipulation.

(ii) Where a designated contract market itself generates the cash settlement price series, the 

designated contract market should establish calculation procedures that safeguard against potential 

attempts to artificially influence the price. For example, if the cash settlement price is derived by the 

designated contract market based on a survey of cash market sources, the designated contract market 

should maintain a list of such entities which all should be reputable sources with knowledge of the cash 

market. In addition, the sample of sources polled should be representative of the cash market, and the 

poll should be conducted at a time when trading in the cash market is active.

Please see above.

(iii) The cash-settlement calculation should involve computational proceduresthat eliminate or reduce 

the impact of potentially unrepresentative data.

Please see above.

(iv) The cash settlement price should be an accurate and reliable indicator of prices in the underlying 

cash market. The cash settlement price also should be acceptable to commercial users of the commodity 

contract. The registered entity should fully document that the settlement price is accurate, reliable, 

highly regarded by industry/market agents, and fully reflects the economic and commercial conditions of 

the relevant designated contract market.

Please see above.

(v) To the extent possible, the cash settlement price should be based on cash price series that are 
publicly available and available on a timely basis for purposes of calculating the cash settlement price at 

the expiration of a commodity contract. A designated contract market should make the final cash 

settlement price and any other supporting information that is appropriate for release to the public, 

available to the public when cash settlement is accomplished by the derivatives clearing organization. If 

the cash settlement price is based on cash prices that are obtained from non-public sources (e.g., cash 

market surveys conducted by the designated contract market or by third parties on behalf of the 

designated contract market), a designated contract market should make available to the public as soon 

as possible after a contract month’s expiration the final cash settlement price as well as any other 

supporting information that is appropriate or feasible to make available to the public.

The FRC-EXT-CPI is widely available through numerous publicly available sources, including the Eurostat

and INSEE websites. Please see above regarding the calculation of the cash settlement price.

(4) Contract terms and conditions requirements for futures contracts settled by cash settlement.

(i) An acceptable specification of the terms and conditions of a cash-settled commodity contract will 

also set forth the trading months, last trading day, contract size, minimum price change (tick size) and 

daily price limits, if any.

Please see Exhibit C for the Contract’s terms and conditions.

(A) Commodity Characteristics: The terms and conditions of a commodity contract should describe the 

commodity underlying the contract.

The underlying reference rate FRC-EXT-CPI is included in the Contract’s terms and conditions. As noted 

above, the reference rate is widely used in the market and readily available.

(B) Contract Size and Trading Unit: An acceptable specification of the trading unit would be a contract 

size that is consistent with customary transactions in the cash market. A designated contract market may 

opt to set the contract size smaller than that of standard cash market transactions.

The size of the Contract is consistent with the customary transaction sizes in the market.

(C) Cash Settlement Procedure: The cash settlement price should be reliable, acceptable, publicly 

available, and reported in a timely manner as described in paragraphs (c)(3)(iv) and (c)(3)(v) of this 

appendix C.

The cash settlement procedure and an explanation of how, in the context of the Contract, it is not readily 

susceptible to manipulation, is described above.

(D) Pricing Basis and Minimum Price Fluctuation (Minimum Tick): The minimum price increment 

(tick) should be set a level that is equal to, or less than, the minimum price increment commonly 

observed in cash market transactions for the underlying commodity. Specifying a futures’ minimum tick 

that is greater than the minimum price increment in the cash market can undermine the risk 

management utility of the futures contract by preventing hedgers from efficiently establishing and 

liquidating futures positions that are used to hedge anticipated cash market transactions or cash market

positions.

As agreed by the counterparties.

(E) Maximum Price Fluctuation Limits: Designated contract markets may adopt price limits to: (1) 

Reduce or constrain price movements in a trading day that may not be reflective of true market 
conditions but might be caused by traders overreacting to news; (2) Allow additional time for the 

collection of margins in times of large price movements; and (3) Provide a “cooling-off” period for 

futures market participants to respond to bona fide changes in market supply and demand fundamentals 

that would lead to large cash and futures price changes. If price-limit provisions are adopted, the limits 

should be set atlevels that are not overly restrictive in relation to price movements in the cash market for 

the commodity underlying the futures contract. For broad-based stock index futures contracts, rules 

should be adopted that coordinate with New York Stock Exchange (“NYSE”) declared Circuit Breaker 

Trading Halts (or other market coordinated Circuit Breaker mechanism) and would recommence 

trading in the futures contract only after trading in the majority of the stocks underlying the index has

recommenced.

As agreed by the counterparties.

(F) Last Trading Day: Specification of the last trading day for expiring contracts should be established 

such that it occurs before publication of the underlying third-party price index or determination of the 

final settlement price. If the designated contract market chooses to allow trading to occur through the 

determination of the final settlement price, then the designated contract market should show that futures 

trading would not distort the final settlement price calculation.

The last trading day will be the maturity date of each contract, which is set by the individual counterparties.

(G) Trading Months: Trading months should be established based on the risk management needs of 

commercial entities as well as the availability of price and other data needed to calculate the cash 

settlement price in the specified months. Specification of the last trading day should take into 

consideration whether the volume of transactions underlying the cash settlement price would be unduly 

limited by occurrence of holidays or traditional holiday periods in the cash market. Moreover, a contract 

should not be listed past the date for which the designated contract market has access to use a 

proprietary price index for cash settlement.

Payments are settled at maturity.

(H) Speculative Limits: Specific rules and policies for speculative position limits are set forth in part 

150 and/or part 151, as applicable, of the Commission’s regulations.

None required by Parts 150 or 151 of the Commission’s regulations.

(I) Reportable Levels: Refer to § 15.03 of the Commission’s regulations.

TeraExchange will adhere to the applicable reporting levels set forth in §15.03 of the Commission’s 

regulations.

(J) Trading Hours: Should be set by the designated contract market to delineate each trading day.

The Contract is available to trade each day during the TeraExchange hours of operation, subject to any 

additional Clearing Venue Specifications or restrictions.