SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested 

 

 

 

 

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: ______________________________________________________________________ 

 

New Product

✔

Basis Swap - USD SOFR vs. Fed Funds

Registered Entity Identifier Code (optional): ___________________________

Organization: _

R_T__X F_in__te_ch___& Re___sea___rch___LLC__________________________________________________

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

Filing Date (mm/dd/yy): 08/27/23___________ Filing Description:
RTX Fintech & Research LLC

90 Broad Street, Suite 402

New York, NY 10004

August 27, 2023

By Upload to CFTC Portal

Secretary of the Commission

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

Re: Class Certification of Interest Rate Swaps Under 17 CFR 40.2(d)

Dear Secretary Kirkpatrick:

On August 24, 2023, RTX Fintech & Research LLC (“RTX SEF”) submitted its class certification 

of interest rate products (“IRS Products”) that it intended to list, in accordance with 17 CFR 40.2(d), 

on August 28, 2023. The IRS Products only included cleared products at LCH Ltd. or CME Inc. for 

USD, EUR, GBP, and JPY fixed/floating IRS or basis swaps. At the request of CFTC Staff, RTX 

SEF has withdrawn the submission to break out the single filing into separate submissions, which 

include:

• Fixed-for-Floating IRS—USD SOFR

• Fixed-for-Floating IRS—EUR EURIBOR

• Fixed-for-Floating IRS—EUR EuroSTR

• Fixed-for-Floating IRS—GBP SONIA

• Fixed-for-Floating IRS—JPY TONA

• Basis Swap—USD SOFR vs. Fed Funds

• Basis Swap—EUR EURIBOR vs. EuroSTR

This submission covers the following product: Basis Swap—USD SOFR vs. Fed Funds (the

“Product”).

RTX SEF hereby notifies the Commodity Futures Trading Commission (“CFTC”) that it intends to 

list the product identified above in accordance with 17 CFR 40.2(d). RTX SEF intends to list the 

Product on Tuesday, August 29, 2023.

In accordance with 17 CFR 40.2, this submission includes the following:

• the certifications required under 17 CFR 40.2(d);

• a copy of the submission cover sheet required under 17 CFR 40.2(a)(3)(i); and

• the certifications required under 17 CFR 40.2(a)(iv) and 17 CFR 40.2(a)(vi).
In addition, in accordance with 17 CFR 40.2(a)(1), RTX SEF is filing this submission electronically 

in the format and manner specified by the Secretary of the Commission with the Secretary of the 

Commission. As required under 17 CFR 40.2(a)(2), the CFTC has received the submission (in its 

original form) by the open of business on the business day preceding the Product’s listing on August 

29, 2023.

The attachments to this letter, which include additional items than those referenced above, are listed 

below.

List of Attachments

Atachment Descripton

Atachment A Certfcatons

Atachment B Terms and Conditons of Product

Please direct questions about this submission to Glenn Chaleff, RTX SEF’s CCO, at (917) 694-4856 

or glenn@rtxfintech.com.

Sincerely,

Glenn Chaleff, 

Chief Compliance Officer, RTX SEF
Atachment A

Certifications Required Under 17 CFR 40.2(d), 17 CFR 40.2(a)(iv), and 17 CFR 40.2(a)(vi)

RTX Fintech & Research LLC (“RTX SEF”) hereby certifies the following:

17 CFR 40.2(d)

• that each particular swap within the certified class of swaps is based upon an excluded 

commodity specified in 17 CFR 40.2(d)(1);

• that each particular swap within the certified class of swaps is based upon an excluded 

commodity with an identical pricing source, formula, procedure, and methodology for 

calculating reference prices and payment obligations;

• that the pricing source, formula, procedure, and methodology for calculating reference prices 

and payment obligations in each particular swap within the certified class of swaps is 

identical to a pricing source, formula, procedure, and methodology for calculating reference 

prices and payment obligations in a product previously submitted to the CFTC and certified 

or approved pursuant to 17 CFR 40.2 or 17 CFR 40.3; 

• that each particular swap within the certified class of swaps is based upon an excluded 

commodity involving an identical currency or identical currencies;

17 CFR 40.2(a)(iv)

• that the products to be listed comply with the Commodity Exchange Act and CFTC 

regulations thereunder; and

17 CFR 40.2(a)(vi)

• that, concurrent with this submission, RTX SEF posted on its website (1) a notice of 

pending certification of the products with the CFTC and (2) a copy of this submission.

RTX Fintech & Research LLC

Glenn Chaleff

Chief Compliance Officer

August 27, 2023
Atachment B

Product Terms and Conditions
& BASIS SWAP—USD SOFR VS. FED FUNDS

6 Basis Swap—USD SOFR vs. Fed Funds

6.1 Discussion: Contracts Not Readily Susceptible to Manipulation

The interest rate swap (IRS) market is considered the largest derivative market in the world,

with an estimated &#" trillion in notional principal outstanding as of June "*"" according to

the Bank for International Settlements.

!(

IRS are cash-settled, so there is no deliverable supply to be manipulated. IRS are widely used

by corporations, insurance companies, banks, and governments to transfer and manage interest

rate risk. Interest-rate-linked financial instruments (e.g., bonds, loans, government interestbearing instruments, and interest-rate-sensitive instruments) are not easily susceptible to manipulation because of the size and liquidity of the cash market for such instruments. Furthermore, IRS-associated interest rate futures contracts, loans, cleared swaps, and cash and futures

markets for government debt securities offer a deep liquidity pool to hedge and risk-manage

swaps based on such rates indexes.

RTX SEF will monitor trading in these swaps. RTX SEF has a comprehensive surveillance

program and rules to prevent RTX SEF Participants from engaging in manipulative activity

and possesses discretion to impose fines and disciplinary sanctions on its Participants.

6.1.1 Discussion of Index Reference Prices: SOFR & Fed Funds

RTX SEF limits the indexes underlying its interest rate swap offerings to well-established,

publicly available third-party interest rate market benchmarks. Some are published by central

banks (such as the United States Federal Reserve Secured Overnight Financing Rate (SOFR)

rate), while others are calculated and published by reliable independent providers (such as trade

associations, exchanges, or other third parties). The interest rate reference prices underlying

swaps on RTX SEF are the timeliest, most widely recognized, and reliable benchmarks for interest rates in their respective markets. The index levels are readily available and commercially

acceptable as benchmarks for borrowers, lenders, investors, portfolio managers, governments,

and public policy makers.

The New York Federal Reserve Bank describes the SOFR as a broad measure of the cost of

borrowing cash overnight collateralized by Treasury securities. The SOFR includes all trades

in the Broad General Collateral Rate!) plus bilateral Treasury repurchase agreement (repo)

transactions cleared through the Delivery-versus-Payment (DVP) service offered by the Fixed

Income Clearing Corporation (FICC), which is filtered to remove a portion of transactions

considered “specials.”

!(https://www.bis.org/publ/otc_hy!!"".pdf !)https://www.newyorkfed.org/markets/reference-rates/bgcr

#!
& BASIS SWAP—USD SOFR VS. FED FUNDS

SOFR was identified by the Alternative Reference Rates Committee (ARRC)

"* as its recommended alternative to U.S. dollar LIBOR for use in certain new U.S. dollar derivatives and

other financial contracts.

"! The New York Fed began publication of the SOFR on April #,

"*!(. In the production of the Treasury SOFR repo reference rates, the New York Fed has

endeavored to adopt policies and procedures consistent with best practices for financial benchmarks, including the IOSCO Principles for Financial Benchmarks.

""

The USD-Federal Funds-H.!%-OIS-COMPOUND is the rate for the reset date (i.e., the rate

of return of a daily compound interest investment). The reference rate for the calculation of

interest is the daily effective federal funds rate determined by the Federal Reserve Bank of

New York as the volume-weighted median of transaction-level data collected from depository institutions reported in the FR "$"* Report of Selected Money Market Rates. The FR

"$"* is a transaction-based report that collects daily liability data on federal funds, Eurodollars,

certificates of deposit and time deposits, and selected deposits from (!) domestically chartered

commercial banks and thrifts that have $!( billion or more in total assets, or $% billion or more

in assets and meet certain unsecured borrowing activity thresholds, and (") U.S. branches and

agencies of foreign banks with total third-party assets of $".% billion or more. The Federal Reserve Bank of New York calculates and published the rate each New York business day. The

rate is widely available and unbiased. The calculation formula may be found in “Supplement

number & to the "*** ISDA Definitions and Annex to the "*** ISDA Definitions.”"#

RTX SEF believes that the large number of participants in each market and the calculation

of each index by well-known, independent third parties further limits the susceptibility of

manipulation of these indexes. RTX SEF believes that such benchmark indexes (many of which

also underlie liquid interest rate futures contracts on major Designated Contract Markets) are

not readily susceptible to manipulation due to the large number of index participants, ubiquity,

and broad-market nature.

6.2 MAT Contracts: Swaps Subject to the Trade Execution Requirement

For interest rate swaps that are Made Available Trade (MAT)—that is, subject to the Trade

Execution Requirement under CEA section "(h)(()—see the industry filings posted on the

CFTC’s website.

"$

"*https://www.newyorkfed.org/arrc/index.html "!https://www.newyorkfed.org/medialibrary/microsites/arrc/files/!#"$/ARRC-press-release-Jun-!!-!#"$.pdf ""https://www.bankofengland.co.uk/markets/transition-to-sterling-risk-free-rates-from-libor "#https://www.isda.org/book/supplements-to-the-!###-isda-definitions-and-annex-to-the-!###-isdadefinitions/ "$https://www.cftc.gov/IndustryOversight/IndustryFilings/index.htm

#"
& BASIS SWAP—USD SOFR VS. FED FUNDS

6.3 Product Description

Participants can trade the product below as of August "), "*"#.

P!"#$%& C$!!'(%) I(#'* A$&+"!,-'# DCO

Basis Swap, Floating/Floating USD SOFR, Fed Funds LCH Ltd./CME Inc.

An IRS is where two parties agree to exchange interest rate cash flows, based on a specified

notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to

another for a predetermined term. In a Basis Swap IRS, one party pays a floating rate for the

term of the IRS indexed to a floating reference rate. The other party will also pay a floating

rate indexed to a reference rate in a different tenor. For example, in a "-year term IRS, Party

A pays SOFR in a particular tenor, Party B pays Fed Funds to the same or a different tenor.

Generally payments of the SOFR will be compounded and offset on the coupon dates.

6.4 Clearing Required

The listed specifications for this product represent the customary attributes of the swap agreements. Because RTX SEF only permits trading in cleared products, all attributes must conform

to the specifications of the authorized DCOs.

##
& BASIS SWAP—USD SOFR VS. FED FUNDS

6.5 General Definitions

Unless stated otherwise in the product specifications or terms and conditions, below are the

general definitions for products listed on RTX SEF.

I!"# D"$%&'(!')*

Swap Transaction Any transaction that is a rate swap, basis swap, or similar transaction

(and any combination thereof ).

Fixed-Rate Payer A party obligated to make payments calculated by reference to a fixed

rate.

Floating-Rate Payer A party obligated to make payments calculated by reference to a floating rate.

Floating-Rate Index Depends on currency and as agreed by Participants.

Quoting Convention/Min. Increment Depends on Currency, Index, and Tenor for Electronic Order Book

or as agreed by Participants for Voice Order Book.

Min. Size Depends on Currency, Index, and Tenor for Electronic Order Book

or as agreed by Participants for Voice Order Book.

Confirmation Documents or other confirming evidence exchanged between the

counterparties that confirm all the terms of the Swap Transaction.

Business Day A day on which banks settle payments.

Day-Count Convention The convention used for adjusting any relevant date that would otherwise fall on a non-Business Day. Day count will be specific to the

individual product specification.

Holiday Calendar Applied in accordance with the country currency denoted for the instrument.

Term (Tenor) The total period of the Swap Transaction, starting on the Effective

Date and ending on the Termination Date.

Notional Types Bullet = notional remains constant over term of swap; amortizing = notional declines over term of swap; accreting = notional increases over

term of swap.

Effective (Start) Date The first date of the Term of the Swap Transaction, Spot or Forward

starting, subject to the agreed Day-Count Convention.

Termination Date The last day of the Term of the Swap Transaction.

Maturity Date Start Date + Term (Tenor).

First Fixing Date The first Index Fixing Date is zero, one, or two business days (depends

on that Currency’s market standard and according to agreed Holiday

calendars) prior to the Start Date of the Swap.

#$
& BASIS SWAP—USD SOFR VS. FED FUNDS

I!"# D"$%&'(!')*

Trade Types The following swap types may be executed: Outright (Spot and Forward starting),

Curve (tenor) Spreads, Butterflies, Spreads between different floating Indices, Spreads

to Futures, Spreads to Treasuries, and combinations thereof.

Trade Start Types Spot = a swap where the Effective Date is T+# (e.g., GBP), T+! (e.g., USD, EUR,

JPY) from the trade date, depending on Currency and floating Index market standard;

forward = a swap where the Effective Date is after the Effective Date for a Spot Starting

swap of that Currency and floating Index.

Settlement Procedure As determined by the Clearing Organization.

Block Trades Block Trades may be submitted pursuant to RTX SEF Rule &"#.

Position Limits Parts "&# and "&" of the Commission’s regulations, as applicable, set forth the Commission’s rules regarding speculative position limits. The CFTC does not require speculative position limits for IRS.

Trading Hours The operating hours of RTX SEF, published on RTX SEF’s website.

Table: General Definitions Cont’d

#%
& BASIS SWAP—USD SOFR VS. FED FUNDS

6.6 Product Specifications & Terms and Conditions

I!"# D"$%&'(!')*

Contract Definition An agreement to exchange two streams of floating cash flows on a

specified notional over a term to maturity.

Basis Spread A spread between two Floating Rate Indices (SOFR & Fed Funds)

of the same currency (USD).

Basis Spread Types 'v", 'v( or (v', 'v"!, (v"! or other combinations of floating indices as agreed by Participants.

Specific Trade Types The following swap types may be executed: Outrights (Spot and

Forward starting), Curve (tenor) Spreads, Butterflies.

Trade Start Dates Spot or Forward Start Date or as agreed by the Participants, subject

to DCO rules.

Swap Term (Tenor) As agreed by the Participants. A contract can have a Tenor from '

months to &" years.

Trading Conventions Buy/pay = Pay Floating Fed Funds Index Flat, Receive Floating

SOFR Index + Basis; spread sell/receive = Receive Floating Index Fed

Funds Flat, Pay Floating SOFR Index + Basis Spread; basis spread

price quoted in increments of fractions or decimals of a basis point.

Leg " is usually the longer underlying index tenor (e.g., 'v" rather

than "v'). Thus the 'M index is paid flat and the spread is added

to the "m index. The shorter index can be compounded, i.e. Q/Q

= 'm index vs " quarterly payment consisting of ' compounded

"m index settings OR the shorter index can be ' separate monthly

payments.

S+,( C)*-"*!')*$

Floating Legs ! & "

Index As agreed by Participants and suitable to the Currency’s market

standards (SOFR and Fed Funds).

Payment/Resets Annual, Semi-Annual, Quarterly, Monthly, Daily or as agreed by

Participants.

Day-Count Conventions As dictated by market standard for each Index (e.g., Act/'(#,

Act/'(&, etc.).

Holiday Calendar As agreed by Participants and suitable to the Currency’s market

standards.

Fixing Calendar As agreed by Participants and suitable to the Currency’s market

standards.

Business Day Conventions Modified Following with adjustment to period end dates or as

agreed by Participants and suitable to each Currency’s market standards.

P"&').'% S"!!/"#"*! P,0#"*!/R"$"!$

Floating Legs " & ! The payment amount of the Floating Leg is based on: Notional,

Payment Frequency, Day Count Convention, Floating Interest

Rate Index, and Floating Reset Dates. Payments are settled in accordance with the payment frequency of the swap.

#&