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Cantor Futures Exchange, L.P.

New Contract Submission 2017-6

Cantor Futures Exchange Bitcoin Swap Contract

December 1, 2017

1. The terms and conditions of the Cantor Futures Exchange, L.P. Bitcoin Swap Contract

(“Contract”) are attached as Attachment A.

2. The intended listing date will be within 60 days of the effective date of the terms and 

conditions of the Contract, but no less than one day following receipt by the Commission 

of this submission.

3. Attached, please find a certification that: (a) the Contract complies with the Act and 

Commodity Futures Trading Commission (“Commission” or “CFTC”) regulations 

thereunder; and (b) concurrent with this submission, Cantor Futures Exchange (“Cantor 

Exchange” or the “Exchange”) posted on its website: (i) a notice of pending certification 

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

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

provisions of the Act follows below.

5. Confidential Treatment is requested for related amendments to the Cantor Exchange 

Compliance Manual, which is attached as Attachment B and supporting exhibits.

EXPLANATION AND ANALYSIS OF THE CONTRACT’S COMPLIANCE WITH

APPLICABLE CORE PRINCIPLES AND COMMISSION REGULATIONS

As required by Commission Rule 40.2(a), the following analysis, in the form of narrative and

explanatory charts, demonstrates that the Contract is consistent with the requirements of the Act

(in particular, Core Principles 2—Compliance with Rules; Core Principle 3—Contracts Not 

Readily Susceptible to Manipulation; Core Principle 4—Prevention of Market Disruption; Core 

Principle 5—Position Limits or Position Accountability; Core Principle 7—Availability of 

General Information; Core Principle 9—Execution of Transactions; and Core Principle 11—

Financial Integrity of Transactions) and the Rules thereunder.

DESCRIPTION OF THE BITCOIN CASH MARKET AND PRICING SOURCES

Introduced as open source software in January 2009, bitcoin is a virtual currency that enables 

parties to transfer value over a shared public ledger called the blockchain. Virtual currencies 

such as bitcoin provide a digital representation of value not issued by a central bank, in contrast 

to “fiat” currencies, such as the coin and paper money of a sovereign nation. Bitcoin is also 

commonly referred to as a “cryptocurrency,” because it uses cryptography to control the creation 

and transfer of money. The Commission has stated that bitcoin and other virtual currencies are 

encompassed in the definition of “commodity” under Section 1a(9) of the Commodity Exchange 

Act, 7 U.S.C. § 1 et seq. (“Act”). 
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Bitcoins are created through a process called “mining,” through which users verify and record 

payments on the blockchain in exchange for transaction fees and newly minted bitcoins. As a 

general matter, mining involves the use of computer power to process transactions and secure the 

network.

The bitcoin market is both global and highly transparent, although as discussed below, subject to 

significant volatility. Every single bitcoin transaction is stored on the blockchain, a distributed 

ledger that allows market participants to keep track of all transactions without a single 

centralized authority. As new transactions in bitcoin are completed, new blocks are added to the 

permanent blockchain. The blockchain is designed so that any market participant can view 

complete information about different publicly-used bitcoin addresses and their balances, 

although the names of the owners of those addresses are withheld. Major financial institutions 

and other firms are exploring distributed ledger technology for a variety of commercial 

applications and as a means to simplify business operations.

Over the past several years, bitcoin has grown in popularity as a form of payment for products 

and services. As of July 2017, there are approximately 260,000 bitcoin transactions per day and 

the currency’s total value now exceeds $40 billion.1 A number of major retailers now accept 

bitcoin as a payment option. For example, online retailer Overstock.com allows its customers to 

pay for thousands of items with bitcoin;

2 Microsoft allows its users to purchase games, movies, 

and apps in the Windows and Xbox stores with bitcoin;

3

and satellite television provider Dish 

Network allows its 13 million subscribers to pay their monthly bills in bitcoin.

4

 Merchants have 

an incentive to accept bitcoin because transaction fees are lower relative to the 2 to 3 percent cost 

associated with processing a credit card transaction.

However, the bitcoin market has also been very volatile, particularly in recent years. As 

adoption of bitcoin expands, this volatility may decrease. Nevertheless, there is a critical need 

for derivatives that allow merchants, payment processors, and other market participants that 

accept or hold bitcoins to hedge their exposure to bitcoin’s volatile spot rate movements. The 

Contract is designed to allow market participants to manage this currency exchange price risk, as 

well as to promote price discovery.

Bitcoin is traded bilaterally and on cash exchanges. There are dozens of bitcoin exchanges 

headquartered around the world; major trading platforms include Bitstamp, Gemini, GDAX, and 

Kraken. There are widely different exchange fees, trading fees, and deposit/withdrawal fees 

across the various bitcoin exchanges. In order to facilitate trading, these platforms allow market 

participants to deposit and withdraw bitcoin directly to and from a user’s bitcoin wallet.

 

1 Paul Vigna, Bitcoin’s New Problem: High Fees, THE WALL ST. J, July 3, 2017.

2 Press Release, Overstock.com, “Overstock.com First Online Retailer to Accept Bitcoin,” Jan. 9, 2014, 

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1889670.

3 Press Release, Microsoft, “Now you can exchange bitcoins to buy apps, games and more for Windows, Windows 

Phone and Xbox,” Dec. 11, 2014, https://blogs.microsoft.com/firehose/2014/12/11/now-you-can-exchange-bitcoinsto-buy-apps-games-and-more-for-windows-windows-phone-and-xbox/.

4 Press Release, DISH Network, “DISH to Accept Bitcoin,” May 29, 2014, http://about.dish.com/pressrelease/products-and-services/dish-accept-bitcoin.
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Bitcoin exchanges also allow market participants to convert bitcoin to fiat currency, such as U.S. 

dollars. Similar to the way in which a foreign currency exchange operates, bitcoin exchanges 

allow market participants to purchase one currency by paying for it with another currency. 

Major bitcoin exchanges allow users to buy and sell bitcoin across various trading pairs, 

including U.S. dollars, Canadian dollars, Japanese yen, and euros, as well as into other virtual 

currencies. Some bitcoin wallet providers allow users to “cash out” bitcoin into local currency 

and have the proceeds deposited into a user’s bank account. In addition, there are many 

companies around the world that operate bitcoin ATMs, which allow users to purchase and 

redeem bitcoin for cash.

As noted above, bitcoin is considered a “cryptocurrency” because it uses cryptography to control 

the creation and transfer of bitcoin. From time to time the bitcoin cash market participants 

consider changes to the cryptographic software in use. Depending on the nature of those software 

changes, the bitcoin market may spin out new but related coins, fragment into different coins that 

are no longer fungible (a so-called “hard fork”), or simply be a software upgrade that has 

relatively little impact on existing bitcoin owners but may improve or modify the transaction and 

mining capability of bitcoin.

Generally speaking these cash market changes are discussed well in advance of any actual 

change in the cryptography being used for bitcoins. In certain circumstances, especially in the 

case of hard-forks, the value of bitcoin may be impacted substantially. However, because of the 

advanced discussion of any cryptographic change, cash market participants can adjust their 

positions in anticipation of such actions. As a result, it is reasonable to assume that forward dated 

instruments will respond to such discussions and, in certain circumstances, the Exchange will 

need to interpret, modify, or create rules to provide market transparency with regard to how such 

changes may (or may not) impact any contract’s cash settlement process. 

CORE PRINCIPLE 2—COMPLIANCE WITH RULES

Core Principle 2 requires that Designated Contract Markets (“DCMs”) have the capacity to 

detect, investigate, and apply appropriate sanctions to any person that violates any rule of the 

Exchange.5 This includes, among other requirements, that the Exchange have the capacity to 

enforce effectively its rules, including resources to supervise its market and the capacity to 

analyze data to determine whether a violation has occurred, maintenance of compliance staff and 

resources, deployment of an automated trade surveillance system, real time market monitoring 

and the authority to investigate instances of possible violations.

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Cantor Exchange has in place a robust system of rule enforcement. This includes both its own 

automated systems to review trading as well as the regulatory services provided by the National 

Futures Association (“NFA”), Cantor Exchange’s regulatory services provider. In addition, 

Cantor Exchange has a robust system of real-time market monitoring.

 

5 See CFTC Rule 38.150. 

6 See CFTC Rules 8.153, 18.155, 38.156 38.157 and 38.156.
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The new bitcoin Contract can be traded on Cantor Exchange under the Exchange’s existing rule 

enforcement procedures. Cantor Exchange trade practice surveillance systems are not 

commodity or contract specific; accordingly, they can be deployed for any new contract, 

including the Bitcoin Swap Contract. With regard to market surveillance, Cantor Exchange will 

deploy the resources necessary to surveil trading on its market to address any possibility of 

market manipulation. As a DCM, Cantor Exchange has the ability to share information with the 

Commission and other self-regulatory authorities, as appropriate.

Cantor Exchange is confident of its ability to continue to meet the requirements of Core Principle

2 as it adds this new contract to those that Cantor Exchange lists for trading. Cantor Exchange

has in place the systems, staff, and regulatory service provider services to meet fully the Core 

Principle 2 requirements with respect to the Contract. 

CORE PRINCIPLE 3—CONTRACTS NOT READILY SUSCEPTIBLE TO 

MANIPULATION

Compliance with Core Principle 3 is evidenced by a demonstration of the factors included in 

Appendix C to Part 38. Appendix B to Part 38 refers to futures contracts; however, Appendix B 

to Part 37 provides that “[t]he 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.” It continues that, 

“[f]or swaps that are settled by . . . cash settlement refer to the guidance in Appendix C to part 

38—Demonstration That a Contract is not Readily Susceptible to Manipulation, . . . section c(4),

respectively.” The relevant sections of Appendix C are discussed 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).

Calculation of Cash Settlement Price

The cash bitcoin market is highly fragmented. There are more than one dozen bitcoin exchanges 

that are recognized by bitcoin market participants as having sufficient volume and liquidity to be 

viable cash marketplaces. These exchanges are located in various jurisdictions around the globe 

and vary considerably in the degree of regulatory oversight that applies to each such 

marketplace. Notwithstanding the variety of regulatory oversight, bitcoin market participants in 
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the United States and elsewhere utilize these marketplaces to conduct their bitcoin acquisition 

and disposition strategies.

Unlike many other markets, there is limited bitcoin arbitrage occurring between the various cash 

exchanges. This is primarily because cash market bitcoin exchanges (1) charge relatively high 

fees when buying and selling bitcoins; (2) do not provide seamless universal settlement of 

bitcoins; and (3) generally do not facilitate short sales. As a result, transaction prices between 

cash bitcoin exchanges can vary substantially.

Given these realities, Cantor Exchange was especially sensitive to mitigate any characteristics of 

the bitcoin market that could result in distorted settlement prices when constructing the Bitcoin

Swap Contract and its cash settlement procedures.

Specifically, Cantor Exchange notes that bitcoin’s Internet roots make its real-time pricing one of 

the most transparent market prices of any asset. There are multiple websites that display (1) the 

most recent bitcoin prices from various sources; (2) provide tables of price discrepancies and 

theoretical arbitrage pricing possibilities between exchanges; and (3) aggregate full depth of 

book bids and offers among exchanges to provide a comprehensive view of bitcoin’s global 

valuation.

This universally available aggregation of exchange-based prices was a prime determinant in 

developing the Contract’s final settlement procedure, which provides that the Exchange will 

establish a Cash Market Reference Price (“Reference Price”) during the last 10 minutes of 

trading in an expiring contract that includes publicly available bitcoin price sources, market 

analytics such as bitcoin price arbitrage matrices and the Exchange’s own bids, offers and traded 

prices. In reviewing price inputs, Cantor Exchange:

 must act fairly in determining which markets or reporting services to survey;

 must weigh the prices and other factors based on market conditions and not on 

factors unrelated to market conditions;

 shall not divulge any information regarding its pricing determination to any 

participant prior to making it known to all participants;

 shall use its best efforts, acting in good faith, to disregard any prices that are 

outliers from the consensus view of prices.

Cantor Exchange will document its determination of the Reference Price as prescribed by an 

amendment to its Compliance Manual that incorporates explicit procedures. These amendments 

are attached as Attachment B.

The Exchange notes that this settlement price determination methodology intentionally differs 

from the survey procedures it currently uses to settle its foreign exchange based contracts, which 

aggregate market bids and offers, then overlay an Olympic scoring methodology to eliminate 

outlier values. Although the Bitcoin Swap Contract could be constructed using a similar 

Olympic survey methodology, the Exchange believes the proposed bitcoin methodology is 

superior because (1) potential manipulators do not explicitly know and therefore cannot target 

any one cash exchange or pre-identified list of exchanges to impact the Reference Price; (2) the 
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Reference Price cannot be directly impacted by placing a large volume trade on any one 

exchange; (3) the Reference Price can reflect other, aggregate metrics that are not easily 

incorporated from completed transactions; and (4) the Reference Price can be centered on the 

midpoint price that reflects the combined trading from a large number of cash markets.

In summary, Cantor Exchange believes that the structural realities of the bitcoin cash market do 

not inhibit the creation of a viable cash settlement market process and that the cash settlement 

procedures developed by Cantor Exchange are quite robust and are tailored to the specific 

structural features of the cash market, which includes a multiplicity of centralized cash markets 

with very transparent pricing, but which may lack liquidity and which may not be readily 

arbitraged. Cantor Exchange believes that this cash settlement methodology will result in a price 

that is an accurate and reliable indicator of prices in the underlying cash market, and which will 

be acceptable to commercial users of the commodity contract. 

Finally, as discussed with respect to Core Principle 2, Cantor Exchange has a robust market 

surveillance program that is effectively able to surveil this market, detect unusual activity, and 

investigate any such activity for signs of manipulation.

(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.

As described in Attachment B, the cash settlement price methodology will be rigorous and, 

because the Reference Price is determined by the Exchange, in its discretion, using a number of 

different price information sources, market participants have the reassurance that the Reference 
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Price is being formulated by a neutral self-regulatory organization and not a market participant. 

Moreover, Cantor Exchange includes several mechanisms that can correct for apparently nonbona fide activity. As stated above, market participants should be able to take comfort from the 

Cantor Exchange cash settlement procedures because (1) potential manipulators do not explicitly 

know and therefore cannot target any one cash exchange or pre-identified list of exchanges to 

impact the Reference Price; (2) the Reference Price cannot be directly impacted by placing a 

large volume trade on any one exchange; (3) the Reference Price can reflect other, aggregate 

metrics that are not easily incorporated from completed transactions; and (4) the Reference Price

can be centered on the midpoint price that reflects the combined trading from a large number of 

cash markets.

Cantor Exchange believes that commercial participants will accept its Bitcoin Swap Contract as 

a non-biased, fair, acceptable, and reliable indicator of market value, and that it will be relied 

upon in short order. Cantor Exchange believes that a cash settlement price determined in this 

manner, by a regulated DCM, with active trade practice and market surveillance programs, will 

be more readily accepted by market participants than prices that are provided by often 

unregulated or less-regulated trading venues. 

(3)(i) . . . .

 

(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 explanation of the method of calculation of the cash settlement above and the 

discussion of computational procedures below. 

(iii) The cash-settlement calculation should involve computational procedures that 

eliminate or reduce the impact of potentially unrepresentative data.

As discussed above, Cantor Exchange will also consult with a variety of publicly- and widelyavailable cash price sources. As discussed above, cash prices for bitcoin are widely published on 

the Internet and by widely-followed and reputable data providers, such as Reuters and 

Bloomberg. The Exchange will use these publicly available sources, in addition to data from 

Cantor Exchange itself, in determining the Reference Price. In this way, the Exchange will 

consider a variety of sources to understand that the price represents one that is generally 

accepted. 
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The cash-settlement calculation methodology includes mechanisms that will reduce the impact of 

potentially unrepresentative data. This is achieved by sampling a minimum number of cash 

markets over a 10-minute period, determining those prices that fall within a common range of 

prices that were observed on those markets, and taking the midpoint of that range. This process 

has the effect of diminishing (1) extreme price movements, (2) price impacts from above average 

market size trades, and (3) the concentration effect of any one cash market.

By not publicly specifying the list of sources used in its calculations, Cantor Exchange will not 

signal any potential manipulator in which cash market to concentrate his or her non-bona fide 

trading. Thus, the Exchange may simply choose not to consider prices that appear to be affected 

by non-bona fide activity or which are otherwise outliers.

These procedures establish a robust means of determining the cash settlement value of the 

contract. The Exchange is required to create and retain a written record of its determination and 

the basis therefore. This written record would be available to the Commission for review upon 

request.

(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.

The cash settlement price is derived through a robust determination methodology. In light of the 

many sources of pricing information relating to bitcoin prices, including many of them 

unregulated, or less-regulated venues, the Exchange expects that its price will become highly 

regarded by commercial users of the contract. 

(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 cash settlement price will be made publicly available on Cantor Exchange’s website on a 

timely basis. Notice of the Reference Price and Final Settlement Value(s) for all Contracts will 

be made available to all market participants.
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(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 Attachment A. A summary of these terms is as follows:

Contract Terms

Contract Overview The Bitcoin Swap Contract is a cash-settled swap priced with 

reference to the value in U.S. dollars of one bitcoin.

Reference Price Cantor Exchange Cash Market Reference Price

Quoting Convention

and Minimum Increment

The minimum price increment for each binary option bundle is one 

point, which is equivalent to one cent ($0.01) per contract.

Minimum Size Contracts will consist of up to 10,000 bundled binary options, with 

each individual binary option having a value of $0.01. Contracts 

may be traded with their component binary options set at a single 

strike price (e.g. $5,000) or over a range of strike prices (e.g. $0 to 

$10,000; $5,000 to $6,000; et al).

Expiration Date The Last Trading Day shall be the last Friday of the respective 

contract month.

Settlement Cash

Trading Hours Except as otherwise posted on the Exchange website, Contracts 

will be open for trading 24 hours per day, 7 days per week. On the 

Last Day of Trading for any Contract month, regular trading shall 

cease at 12:00 PM (Noon), New York Time.

Clearing The Contract will be cleared by Cantor Clearinghouse, L.P. 

(“Cantor Clearinghouse” or the “Clearinghouse”) and will be 

governed by the rules of the Clearinghouse. The Contract, as are 

all contracts cleared by the Clearinghouse, is margined for both 

buyers and sellers at 100% of the at-risk amount. 

Block Size No block trades are permitted.

Reportable Levels As set forth in the Commission’s Regulation § 15.03.

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

should describe the commodity underlying the contract.

The Contract is based on the value of bitcoin in U.S. dollars rounded to the nearest whole dollar

as determined by the Exchange in its discretion at contract expiration. Bitcoin has widelyaccepted and standardized characteristics. This is necessary for it to be used as a medium of 

commerce. As discussed in the Cash Market Overview, bitcoin is accepted by many major 

retailers and merchants, including Overstock.com, Microsoft, and the Dish Network, among 

others. The Bitcoin Swap Contract prices the standardized bitcoin, which is generally accepted 
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in commerce as a form of payment for services by merchants. There is no variation in 

commodity characteristics underlying the contract and therefore no premiums or discounts apply.

(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.

There is no standard size of futures contracts for bitcoin. One bitcoin is the standard size of the 

underlying commodity. Because the contract is cash-settled, any size of contract can be used. 

The use of individual binary options or a bundle of such options is a common means of trading 

futures contracts (and swaps) and enables hedgers to minimize basis risk by adjusting the number 

of contracts traded both to fractionalize their exposure and to trade in multiples of the value of a 

single binary option on bitcoin.

(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 it is reliable, acceptable, publicly 

available, and reported in a timely manner appears 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.

The minimum price increment for each binary option bundle is one cent ($0.01). There is no 

generally accepted minimum price fluctuation basis for a swap on bitcoin. However, making the 

minimum tick size one cent is readily acceptable by market participants as an easily used 

method. Moreover, the minimum tick size is not so large as to undermine the risk management 

uses of the Contract. To the contrary, insofar as bitcoin is used in commerce, it must be readily 

and easily translatable into fiat currency. The tick size of the contract should enable merchants 

to translate the contract into dollars, which also operates on a base of 10. Accordingly, the utility 

of the contract should be optimal in enabling market participants efficiently to establish and exit 

their hedges.

(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 
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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 at levels 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.

There are no price fluctuation limits proposed.

(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 thirdparty 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 is the maturity date of the Contract, which is the last Friday of the 

respective contract month. The Contract expires with the establishment of the Cash Market 

Reference Price which is then converted to each expiring contract’s Final Settlement Value 

based on that contract’s cap and floor characteristics.

(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.

Contracts shall be listed for trading for successive calendar months. The First Trading Day shall

be the first Business Day that is not more than 91 calendar days prior to the Last Trading Day for 

the respective contract month. As noted above, the Last Trading Day shall be the last Friday of 

the respective contract month. At this time, the Exchange has determined to list not more than 

91 calendar days in advance based upon its belief that there is little commercial interest in 

hedging beyond that time horizon. Insofar as hedging use of the contracts is likely to be by those 

engaged in merchandizing, a 90-day time horizon will be useful in hedging accounts receivable. 

Listing contracts in more deferred months is unlikely to attract much liquidity, at least initially.

There is no seasonality or other cyclical basis for listing contracts. Rather, the Exchange 

believes that the need for hedging bitcoin will be continual and therefore listing successive 

months will be most useful to potential hedgers.
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The last day of trading will not coincide with a non-trading day.

(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.

The Exchange has set a Position Accountability level that is any position that has an aggregate 

value of $10,000 net long or net short.

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

The reportable level is as provided under Rule 15.03. Cantor Exchange separately is requesting 

no-action relief from rule 15.03 in order to apply a higher reportable threshold which is in line 

with the threshold for other contracts with a very small overall notional value.

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

each trading day. 

The Contract is traded 24 hours per day, 7 days per week. 

CORE PRINCIPLE 4—PREVENTION OF MARKET DISRUPTION

Core Principle 4 is implemented through Commission Rules 38.250 through 38.258. Cantor 

Exchange meets Core Principle 4 though its systems for market surveillance discussed with 

respect to Core Principle 2. As discussed above, Cantor Exchange has a robust program of trade 

practice surveillance in furtherance of which it conducts real-time monitoring and maintains an 

automated system to reconstruct trades. As also discussed above, Cantor Exchange is assisted in 

this effort by its Regulatory Services Provider, the NFA. 

Cantor Exchange also conducts market surveillance and surveils the market activity of individual 

market participants for potential non-bona fide or manipulative trading. Cantor Exchange will 

monitor the settlement price process of the Contract and will take steps to address any 

conditions, including the terms and conditions, when there is a threat to orderly market 

conditions.

In addition to the current market surveillance activities, Cantor Exchange will share information 

with both the NFA and the Commission specific to Bitcoin Swaps trading. This information will 

include but is not limited to participant complaints and/or other relevant market commentary, 

large or aggressive orders relative to market conditions more routinely observed, and activity 

noted during periods around the Final Settlement time of each contract.

As part of this enhanced surveillance practice, Cantor Exchange will endeavor to enter into 

information sharing agreements with each cash market that it includes in its Approved Price 

Sources list in order to share information regarding trading on the underlying venues that may 

raise mutual concerns regarding manipulation of the price in either the cash or futures market, or 

other similar arrangements as may be acceptable to the Commission. Cantor Exchange notes

that not every cash exchange may be amenable to these arrangements, however, it will work with 
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the Commission and the other futures exchanges listing similar contracts to commonly share 

information and address our common interest of listing contracts that are not readily susceptible 

to manipulation.

CORE PRINCIPLE 5—POSITION LIMITS OR POSITION ACCOUNTABILITY

Cantor Exchange has proposed Position Accountability at the same threshold level that applies to 

the other contracts that it lists for trading.

CORE PRINCIPLE 7—AVAILABILITY OF GENERAL INFORMATION

The terms and conditions of the Contract will be available on the Cantor Exchange website. 

Cantor Exchange will also make available to participants and will make publicly available on its 

website the Final Settlement Value. 

Cantor Exchange believes that because it fully margins the amount at risk, the Contracts are 

subject to CFTC No-action Letter 17-32, and would not be required to be reported to a Swap 

Data Repository. 

CORE PRINCIPLE 9—EXECUTION OF TRANSACTIONS

Core Principle 9, as implemented by Commission Rule 38.500, provides that a DCM shall 

provide a competitive, open, and efficient market and mechanism for executing transactions that 

protect the price discovery process. Cantor Exchange provides that the Contract will be traded 

on the Exchange’s central limit order book, using price/time priority. Block trades and EFPs are 

not currently permitted.

CORE PRINCIPLE 11—FINANCIAL INTEGRITY OF TRANSACTIONS

The Contract will be cleared by Cantor Clearinghouse. Cantor Exchange Rule IX-4000(f) 

provides that buyers and sellers will be paid either zero or $0.01 per binary option. Accordingly, 

buyers and sellers have a limit on the amount that they can lose on each bitcoin Contract, which 

amount is posted in advance with Cantor Clearinghouse. 

In accordance with the requirements of Cantor Clearinghouse’s Order of Registration, Cantor 

Exchange Rule IX-4000(j) provides that buyers and sellers of Contracts shall post an amount that 

fully collateralizes their maximum at-risk amount. 

This aspect of the Contract’s pricing may be particularly appealing to commercial participants 

because of the current volatility associated with bitcoin. The Contract will enable participants to 

hedge their exposures, but at the same time be able to know that they will not be exposed to 

potential losses beyond the amount that they have deposited as original margin or the possible 

need to make variation margin payments. These provisions provide for the financial integrity of 

the transactions and meet the requirements of Core Principle 11.
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CONCLUSION

The foregoing demonstrates that the Cantor Exchange Bitcoin Swap Contract is in accordance 

with the applicable Core Principles of the Act relating to designated contract markets and 

regulations thereunder and may appropriately be certified under Commission Rule 40.2.

 
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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 Bitcoin Swap Contract complies with the Commodity 

Exchange Act, 7 U.S.C. §1 et seq. and regulations thereunder; and 2) concurrent with this 

submission, Cantor Exchange L.P. posted on its website: (a) a notice of pending certification of 

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

_________________________

By: 

Title: 

Date: December 1, 2017

Nolan Glantz

COO
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ATTACHMENT A

CANTOR FUTURES EXCHANGE, L.P.

CHAPTER IX

CONTRACTS

IX-4000 BITCOIN SWAP CONTRACT

(a) Scope and Underlying

These Contract Rules will govern the trading on the Cantor Futures Exchange, 

L.P. (the “Exchange”) of the Bitcoin Swap Contract (the “Contract”). Clearing of the Contract 

will be governed by the rules of the Cantor Clearinghouse, L.P. (the “Clearinghouse”). These 

Contract Rules are established pursuant to and constitute “Contract Rules” under Rule I-5 of the 

Rules of the Exchange and constitute “Contract Rules” Under Rule I-7 of the Rules of the 

Clearinghouse. Capitalized terms used, but not defined herein, have the meanings ascribed to 

them in the Rules of the Exchange or the Rules of the Clearinghouse, as applicable.

(b) Contract Description; Contract Size; Minimum Price Increment 

(i) All Contracts will be cash-settled to the Cantor Exchange Cash Market 

Reference Price, which represents the value of bitcoin in U.S. dollars rounded to the nearest 

whole dollar at expiration.

(ii) Contracts will consist of up to 10,000 bundled binary options, with each 

individual binary option having a value of $0.01. 

(iii) Contracts may be traded with their component binary options set at a 

single strike price (e.g. $5,000) or over a range of strike prices (e.g. $0 to $10,000; $5,000 to 

$6,000; et al).

(iv) Contract size is $0.01 times the number of binary options in each bundle, 

and is paid at Final Settlement as described in IX-4000(f) below.

(v) The minimum price increment for each binary option bundle is $0.01.

(c) Contract Months, First and Last Trading Day

(i) At least one Contract bundle shall be listed for Trading for each 

successive contract month.

(ii) For any listed bundle, the First Trading Day shall be the first Business Day 

that is not more than ninety-one (91) calendar days prior to the Last Trading Day for the 

respective contract month. 
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(iii) For each contract, the Last Trading Day shall be the last Friday of the 

respective contract month.

(d) Trading Hours for the Contract

(i) Except as otherwise posted on the Exchange website, Contracts will be 

open for trading 24 hours per day, 7 days per week.

(ii) On the Last Trading Day for any Contract month, regular trading shall 

cease at 12:00 PM, New York Time.

(iv) Abbreviated holiday trading schedules may apply and will be posted on 

the Exchange website.

(e) Final Settlement

(i) The Exchange shall determine the Cantor Exchange Cash Market 

Reference Price (“Reference Price”) for bitcoin on the Last Trading Day during the period from 

11:50 AM until 12:00 PM (noon) on such day as established by the Exchange under the 

procedures of IX-4000 (f) below.

(ii) Each long open position in the expiring Contract shall be cash settled such 

that each long contract holder shall receive (1) nothing for each underlying binary option whose 

strike price is below the Reference Price and (2) $0.01 for each underlying binary optionwhose 

strike price is at or above the Reference Price.

(iii) Each short open position in the expiring Contract shall be cash settled such 

that each short contract holder shall receive (1) $0.01 for each underlying binary option whose 

strike price is below the Reference Price and (2) nothing for each underlying binary optionwhose 

strike price is at or above the Reference Price.

(f) Cantor Exchange Cash Market Reference Price

(i) The Reference Price will be determined by the Exchange on the Last Trading Day 

of the expiring contract month in its sole and absolute discretion, using publicly available bitcoin 

prices from sources that may include but are not limited to:

(A) cryptocurrency cash exchanges that are widely followed and 

publicly available;

(B) aggregates, composites or indexes of bitcoin cash prices that are 

widely followed and publicly available.

(C) bids, offers and transactions in the expiring contract month traded 

on the Exchange;

(D) bids, offers and transactions in the non-expiring contract months 

traded on the Exchange; 
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For the avoidance of doubt, notwithstanding this section (g)(i), the Exchange may 

exercise its authority under Chapter IV-19 (Emergencies) to determine the Reference Price by 

any alternative bona fide method.

(ii) In reviewing price inputs, the Exchange

(A) must act fairly in determining which markets, reporting services or

market participants to consider;

(B) must weigh prices and other factors based on market conditions

and not on factors unrelated to market conditions;

(C) shall not divulge any information regarding its pricing

determination to any Participant prior to making it known to all Participants; and

(D) shall use its best efforts, acting in good faith, to disregard any

prices that are outliers from the most often shared view of prices.

(iii) The Exchange shall create and retain a written summary of its determination of 

the Final Settlement Value, including specifying each input upon which it relied and the reasons 

therefore.

(iv) The Reference Price shall be used in calculating the Final Settlement Value of the 

expiring Contract(s) in IX-4000 (f).

(g) Position Accountability Levels for the Contract

The position accountability level shall be any position that has an aggregate value of 

$10,000 net short or net long.

(h) Original Margin for the Contract

Original Margin shall be 100% of the at-risk amount as determined by the net underlying 

binary option position held in the Participant’s Clearing Account.