600108487 

Bloomberg SEF LLC 731 Lexington Avenue Tel +1 212 318 2000 

New York, NY 10022 bloombergsef.com 

September 30, 2014 

Submitted via Portal 

U.S. Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, N.W. 

Washington, D.C. 20581 

Re: Bloomberg SEF LLC – Rule Amendment – Amended Contract 2014-P-11A 

Dear Sir or Madam: 

Pursuant to Section 5c(c) of the Commodity Exchange Act (the “Act”) and Section 40.6(a) of the 

regulations of the Commodity Futures Trading Commission (the “Commission”), Bloomberg 

SEF LLC (“BSEF”) hereby notifies the Commission that it has amended the Contract associated 

with filing number 2014-P-11 (the “Contract”). The Contract has been amended to indicate that 

transactions in the Contract must be conducted with a minimum size of GBP 1000. The original 

filing of the Contract indicated that transactions may be conducted with a minimum size “as 

agreed by counterparties”. The amended Contract will become effective on October 16, 2014. 

A concise explanation and analysis of the Contract’s compliance with applicable core principles 

and commission regulations, including a certification by BSEF’s Chief Compliance Officer 

regarding compliance with Commission regulations and applicable notice and posting 

requirements, is attached hereto as Exhibit A. 

There were no substantive opposing views to the amendments to the Contract. 

A-1 

Exhibit A 

Explanation and Analysis 

[see attached] 
600064511.4 

Bloomberg SEF LLC 

New Contract Submission 2014-P-11A 

September 30, 2014 

1. The Contract’s terms and conditions are attached as Attachment A. 

 

2. The intended listing date is October 16, 2014. 

 

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

Commission regulations thereunder; and (b) concurrent with this submission, BSEF 

posted on its website: (i) a notice of pending certification of this Contract with the 

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

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 the form of 

narrative and explanatory charts, demonstrates that the Contract is consistent with the 

requirements of the Act and the Commission regulations and policies thereunder (in particular, 

Appendix B to Part 37 and Appendix C to Part 38, respectively). 

Appendix B to Part 37—Demonstration of Compliance That a Contract Is Not Readily 

Susceptible to Manipulation 

Core Principle 3 of Section 5h of the Act—Swaps Not Readily Susceptible to Manipulation. 

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 
2 

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. 

Calculation of LIBOR 

The reference rate for the floating leg of the swap is the “London InterBank Offered Rate” or 

(“LIBOR”), which is the average rate at which contributor banks perceive that they can obtain 

unsecured funding in the London interbank market for a given period and in a given currency. 

Currently, LIBOR is administered by BBA Libor Ltd. and the rate is calculated by Thomson 

Reuters, using specific guidelines. To calculate LIBOR, which is a “trimmed mean,” Thomson 

Reuters collects the perceived rate daily from each of the contributor banks, discards the highest 

and lowest contributions (the top and bottom quartiles), and then uses the middle two quartiles. 

Both BBA Libor Ltd. and Thomson Reuters are separately regulated by the Financial Conduct 

Authority (“FCA”). 

Recent Revisions to LIBOR 

Recently, concerns have been raised with respect to the reliability of LIBOR as a reference price. 

As a result, British regulators and BBA Libor Ltd., the current administrator of LIBOR, have 

taken steps to increase the robustness of the LIBOR process and inspire greater confidence in its 

reliability. These steps include: 

a. completion of a comprehensive review of LIBOR which resulted in a report with 

recommendations, entitled the “Wheatley Review of LIBOR” (“Wheatley 

Report”); 

b. establishment of an Interim LIBOR Oversight Committee (“ILOC”) to oversee 

the management of LIBOR, as required by the FCA regulations and 

recommended by the Wheatley Report; 

c. enactment of regulation which makes the administration of LIBOR a “regulated 

activity” under the Financial Services and Markets Act 2000; 

d. (ongoing) streamlining of the number of LIBOR currencies and maturities; 

e. initiation of the practice of publishing individual LIBOR submissions after three 

months in order to reduce the potential for submitters to attempt manipulation; 

f. establishment of the Hogg Tendering Advisory Committee (“Hogg Committee”) 

to recommend new institutions to oversee LIBOR; 

g. approval of an upcoming transfer of the administration of LIBOR to NYSE 

Euronext Rates Administration Limited, the bidder recommended by the Hogg 

Committee; 

h. confirmation by the FCA of the “Interim Code of Conduct for Contributing 

Banks” as Industry Guidance; and 
3 

i. establishment of a Whistleblowing Policy for LIBOR, as approved by the ILOC, 

which outlines how any concerns about perceived irregularities in conduct related 

to the administration of LIBOR and/or LIBOR submissions could be raised.1

As British regulators and the current LIBOR administrator make these and other changes to 

improve the robustness of LIBOR, LIBOR remains a widely used and relied upon benchmark. 

(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. 

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 of the Contract are attached as Attachment A, including the following: 

Contract Overview An agreement to exchange a stream of cash flows by applying a 

fixed and floating interest rate to a specified notional over a term 

to maturity. 

Ticker GBP Swap vs 6M [tenor] 

Currency GBP 

Floating Rate Index 6 Month GBP LIBOR 

Quoting Convention and 

Minimum Increment 

As agreed by counterparties 

Contract Size / Notional Fixed notional; as agreed by counterparties 

Minimum Size GBP 1000 

 

1

 A description of the ongoing developments in regard to LIBOR is available at BBA LIBOR Ltd.’s website, at 

http://www.bbalibor.com/news.
4 

Trading Conventions Buy = Pay Fixed, Receive Float. 

Sell = Receive Fixed, Pay Float. 

Swap Conventions Fixed Leg 

 Payment: Semi-Annual 

 Day Count Conventions: ACT/365F 

 Holiday Calendars: London, New York 

 Business Day Conventions: Modified Following with 

adjustment to period end dates 

Floating Leg 

 Payment/Resets: Semi-Annual 

 Day Count Conventions: ACT/365F 

 Holiday Calendars: London, New York 

 Business Day Conventions: Modified Following with 

adjustment to period end dates 

Swap Tenor 2, 3, 4, 5, 6, 7, 10, 15, 20 and 30 years 

Effective Date The date on which parties begin calculating accrued obligations 

such as fixed and floating interest rate payments. Also known as 

the start date of the swap. 

Maturity Date The final date on which the obligations no longer accrue and the 

final payment occurs. 

Periodic Settlement: 

Payment and Resets 

Fixed Leg: The payment amount of the Fixed Leg is based on the 

following: Notional, Payment Frequency, Day Count Convention and 

Fixed Interest Rate. 

Floating Leg: The payment amount of the Floating Leg is based on the 

following: Notional, Payment Frequency, Day Count Convention, 

Floating Interest Rate Index and Floating Reset Dates. 

Payments are settled in accordance with payment frequency of the 

swap. 

First Libor Fixing Date The first LIBOR Fixing Date is 2 London business days prior to the 

Effective Date. 

Trade Start Types Spot: a new swap where the Effective Date is T+0 from the trade date. 

Fixed Rate Par 

Settlement Procedure As determined by the Clearing Venue 

Trading Hours 00:01 - 24:00 Sunday-Friday Eastern Time 

Clearing Venue CME 

Block Size As set forth in Appendix F to Part 43 of the CFTC Regulations. 

Speculative Limits As set in Part 151 of the CFTC Regulations 

Reportable Levels As set in CFTC Regulation 15.03 

This combination of standard and flexible terms allows the contract to have a basic consistent 

form, while allowing counterparties to tailor the contract to their economic needs. The structure 

follows industry convention; the terms of the Contract match the terms of interest rate swaps that 

are commonly offered in the market. 

Contract Not Readily Susceptible to Manipulation 
5 

The Contract is not susceptible to manipulation for a number of reasons. First, as noted above, 

interest rate products are very liquid – the market is very large and deep, making manipulation 

very difficult to achieve. Second, BSEF has a robust market surveillance program that is 

effectively able to surveil this market, detect uncommon activity, and investigate any such 

activity for signs of manipulation. And third, the LIBOR rate, the reference rate upon which the 

Contract is based, is difficult for any entity or group of market participants to manipulate, 

especially given the recent changes (some of which are described above) and the enhanced 

public scrutiny. For this reason, while British regulators and the current LIBOR administrator 

are making changes to improve the robustness of the reference rate, LIBOR remains a widely 

used and relied upon benchmark. 

Calculation of Cash Settlement Price 

The cash settlement price will be calculated in the following manner: 

I. Fixed Leg – The payment amount is based on the following: Notional, Payment 

Frequency, Day Count Convention and Fixed Interest Rate. 

II. Floating Leg – The payment amount is based on the following: Notional, Payment 

Frequency, Day Count Convention, Floating Interest Rate Index and Floating Reset 

Dates. 

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

(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. 
6 

As noted above, 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 Contract (i.e., payment 

frequency, day count conventions, fixed interest rate, floating reset dates) and LIBOR. And as 

noted above, as British regulators and the current LIBOR administrator make changes to improve 

the robustness of LIBOR, LIBOR is still used in many, many transactions on a daily basis. The 

LIBOR rate is thus not only widely accepted by market participants, but timely LIBOR data is 

readily accessible through numerous news outlets. 

(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 is 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 procedures that 

eliminate or reduce the impact of potentially unrepresentative data. 
7 

(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. 

LIBOR rates are readily available via a number of sources. 

(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. 

As described above, the contract terms are attached as Attachment A. As noted above, while 

there are common terms such as the trading hours and the reference rate, many of the terms are 

flexible. Nevertheless, the terms are all within commonly accepted market norms. 

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

describe the commodity underlying the contract. 

The reference to LIBOR is included in the terms and conditions. 

(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 customary transactions size in the market. 
8 

(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 this 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 between 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 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. 

As agreed between 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 
9 

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. 

As noted above, payments are settled in accordance with the payment frequency of the Contract, 

which is a flexible term. 

(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. 

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

BSEF 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 traded twenty-four hours a day (00:01 – 24:00), Sunday to Friday Eastern Time. 

Attachment A 

Terms and Conditions 

[see attached] 
Bloomberg SEF LLC 

Contract Overview An agreement to exchange a stream of cash flows by applying a fixed and 

floating interest rate to a specified notional over a term to maturity. 

Ticker GBP Swap vs 6M [tenor] 

Currency GBP 

Floating Rate Index 6 Month GBP LIBOR 

Quoting Convention 

and Minimum 

Increment 

As agreed by counterparties 

Contract Size / 

Notional 

Fixed notional; as agreed by counterparties 

Minimum Size GBP 1000 

Trading Conventions Buy = Pay Fixed, Receive Float. 

Sell = Receive Fixed, Pay Float. 

Swap Conventions Fixed Leg 

 Payment: Semi-Annual 

 Day Count Conventions: ACT/365F 

 Holiday Calendars: London, New York 

 Business Day Conventions: Modified Following with adjustment 

to period end dates 

Floating Leg 

 Payment/Resets: Semi-Annual 

 Day Count Conventions: ACT/365F 

 Holiday Calendars: London, New York 

 Business Day Conventions: Modified Following with 

adjustment to period end dates 

Swap Tenor 2, 3, 4, 5, 6, 7, 10, 15, 20 and 30 years 

Effective Date The date on which parties begin calculating accrued obligations such as fixed 

and floating interest rate payments. Also known as the start date of the swap. 

Maturity Date The final date on which the obligations no longer accrue and the final payment 

occurs. 

Periodic Settlement: 

Payment and Resets 

Fixed Leg: The payment amount of the Fixed Leg is based on the following: 

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

Floating Leg: The payment amount of the Floating Leg is based on the 

following: Notional, Payment Frequency, Day Count Convention, Floating 

Interest Rate Index and Floating Reset Dates. 

Payments are settled in accordance with payment frequency of the swap. 

First Libor Fixing 

Date 

The first LIBOR Fixing Date is 2 London business days prior to the Effective 

Date. 

Trade Start Types Spot: a new swap where the Effective Date is T+0 from the trade date. 

Fixed Rate Par 

Settlement 

Procedure 

As determined by the Clearing Venue 

Trading Hours 00:01 - 24:00 Sunday-Friday Eastern Time 

Clearing Venue CME 

Block Size As set forth in Appendix F to Part 43 of the CFTC Regulations. 

Speculative Limits As set in Part 151 of the CFTC Regulations 

Interest Rate Swaps: 

MAT IRS GBP Swap vs 6M (CME)
Bloomberg SEF LLC 

Reportable Levels As set in CFTC Regulation 15.03