Submitted via: CFTC Portal 

2022.08.12

August 12, 2022

Christopher Kirkpatrick 

Office of the Secretariat 

U.S. Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street NW 

Washington, DC 20581 

RE: Clear Markets North America, Inc.: Physically Settled Swap

Dear Mr. Kirkpatrick: 

Pursuant to Commodity Futures Trading Commission (“CFTC” or “Commission”) Regulation 40.6(a), 

Clear Markets North America, Inc. (“CMSEF”) hereby notifies the Commission pursuant to 

Commission Regulation 40.2, of its product listing of CMSEF Physically Settled Swaps (“CMSEF 

Physically Settled Swaps”) on CMSEF beginning August 24, 2022 (the “Submission”). 

The Submission contains the following: 

1. A summary of the terms of the CMSEF Physically Settled Swaps specifications; 

2. The listing date of the CMSEF Physically Settled Swaps; 

3. An explanation and analysis of the CMSEF Physically Settled Swaps’ compliance with the 

relevant Core Principles for Swap Execution Facilities (“SEF Core Principles”) as set forth by 

section 5h of the Commodity Exchange Act; 

4. A certification that, concurrent with the filing of the Submission, CMSEF posted on its website a 

notice of pending certification of the CMSEF Physically Settled Swaps with the Commission. 

I. Summary of Terms of the CMSEF Physically Settled Swaps

Swap Rate Exchange rate expressed as the amount of 

Reference Currency per unit of Settlement 

Currency. Rate negotiated at the time of 

execution

Maturity / Tenor Determined by the Participants

Business Day Convention Modified Following, Following, Preceding, None

Holiday Calendar New York, Tokyo, London, None 

Cleared No, Uncleared
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Settlement Date / Expiry Determined by Participants

Settlement Physical BTC or ETH

Settlement Time Determined by Participants

Settlement Method Determined by Participants in conformity with 

CMSEF Rulebook Rule 303A, which requires all 

Participants to represent to CMSEF in writing 

that they have entered into the necessary 

documentation in their trading and credit support 

bilateral agreements to address:

a) liabilities caused by an event that delays 

settlement of the Swap;

b) settlement of a Swap where the settlement 

occurs in a Cryptocurrency that has been subject

to a Hard Fork; and

c) when Settlement Finality occurs.

Contract Size Determined by Participants

Trading Hours M-F (9AM – 5PM) New York (may be extended 

upon request at discretion of CMSEF) 

Block Trades Yes (minimum 5 BTC or 5 ETH) 

Position Limits Set by: Part 151 of CFTC Regulations; CMSEF 

Rule 413A 

Position Accountability and Reporting Set by: Part 15 of CFTC Regulations; CMSEF 

Rule 413B 

II. Listing Date

The intended listing date of the CMSEF Physically Settled Swaps is August 24, 2022. 

III. Analysis of Compliance with Core Principles

We have reviewed the SEF Core Principles and have identified that the listing of CMSEF Physically

Settled Swaps may have bearing on SEF Core Principle 3: Swaps Not Readily Susceptible to Manipulation. 

For the reasons stated below we believe that the listing of CMSEF Physically Settled Swaps complies 

with the Commodity Exchange Act and SEF Core Principle 3. 

A. The Underlying Bitcoin and Ethereum Markets are not Readily Susceptible to 

Manipulation 

Bitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology 

in a 2008 white paper. The Bitcoin network went live in 2009. 

The network’s native cryptocurrency token is bitcoin. According to Coinmarketcap.com 
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(https://coinmarketcap.com/), the market cap for all digital assets is over $921 BN. Bitcoin is the largest 

cryptocurrency by market capitalization, estimated to be $389 BN as of July 7, 2022. The 24-hour trading 

volume in bitcoin for July 7, 2022, was $21.6 BN. Bitcoin is traded against many other crypto pairs (e.g., 

Ether) and in a number of fiat currency pairs. 

Ethereum was conceived in 2013 by Vitalik Buterin and the network went live on July 30, 2015. Ethereum 

allows anyone to deploy permanent and immutable decentralized application onto it, with which users can 

interact. A series of upgrades called Ethereum 20 includes a transaction to a proof of stake and aims to 

increase transaction throughput by using sharding. 

The network’s native cryptocurrency token is Ether. Ether is the second largest cryptocurrency by market 

capitalization, estimated to be $143.9 BN as of July 7, 2022. The 24-hour trading volume in bitcoin for 

July 7, 2022, was $13 BN. Ether is traded against many other crypto pairs (e.g., Bitcoin) and in a number 

of fiat currency pairs. 

Every transaction involving Bitcoin or Ethereum is tracked on their respective network ledgers which are

public and permissionless. Unlike a bank’s ledger, the Bitcoin and Ethereum blockchains are distributed 

across their entire network. No company, country, or third party is in control of them; and anyone can 

become part of their networks.

Several Bitcoin and Ether futures and options have already been listed on various designated contract 

markets (DCMs) and SEFs. Further, while bitcoin is not a currency, in many ways it is traded and used 

like a currency. Therefore, physically-settled USD/BTC and USD/ETH Swaps would share many features 

with FX Swaps.

B. Conditions that Prevent the CMSEF Physically-Settled Swaps from Being Readily 

Susceptible to Manipulation 

Clear Markets has established rules and an enforcement infrastructure to prevent the manipulation of the 

Contract. The contract specifications for the Physically-Settled Swaps were drafted to conform with the 

guidance and/or acceptable practices in appendix B of Part 37 of the CFTC Regulations and appendix C 

to part 38 of the CFTC Regulations. 

C. Settlement Procedure 

The settlement of CMSEF Physically Settled Swaps occurs off-SEF in accordance with the terms of the 

trading relationship between the parties subject to CMSEF Rule 303A. CMSEF may use its records 

request authority to ensure that the proper settlement of CMSEF Physically Settled Swaps occurs, 

particularly in the first six months of operation. This additional layer of protection is warranted due to the 

novelty of the CMSEF Physically Settled Swaps contract, settlement of which requires the transfer of a 

digital asset, and CMSEF’s obligation to ensure the financial integrity of transactions on its platform. 

IV. Position Limits or Accountability

Clear Markets has established the following large trader reporting for CMSEF Physically Settled Swaps: 
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Reportable at 25,000 BTC or 20,000 ETH across all tenors, consistent with market practice. 

V. Certification 

CMSEF hereby certifies that: 

The CMSEF Physically Settled Crypto Swaps comply with the Commodity Exchange Act, 7 U.S.C. §1 

et seq. and the regulations thereunder. 

This Submission has been concurrently posted on CMSEF’s website at http://www.clear-markets.com/. 

* * * * * 

If you have any questions regarding the above, please contact me at shawn@clearmarkets.io or +1-704-

906-8277. 

Respectfully submitted, 

Shawn A Dorsch

Chief Executive Officer

Clear Markets North America, Inc.