December 16, 2022

Submitted via CFTC Portal

Secretary of the Commission

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: TeraExchange, LLC – Regulation 40.2 Certification of Foreign Exchange Non Deliverable Forward 

Contract – JPY/USD

Ladies and Gentlemen:

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

“Commission”) of its intent to list Foreign Exchange Non Deliverable Forward Contract – JPY/USD (the 

“Contract”) on the TeraExchange swap execution facility. TeraExchange intends to list the Contract on December

19, 2022.

Pursuant to Commission Regulation 40.2, this submission includes:

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

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

2. A certification by TeraExchange that the Contract complies with the Commodity Exchange 

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

TeraExchange has posted a notice of pending certification of the Contract and a copy of this

submission on its website concurrent with the filing of this submission with the Commission, 

attached as Exhibit B;

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

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

principles and Commission regulations, attached as Exhibit D.

Questions regarding this submission should be directed to Todd Langdon, Chief Compliance Officer, at 908-273-

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

Sincerely,

Christopher Rossman

Christopher Rossman

Chief Operating Officer
EXHIBIT A
EXHIBIT B

CERTIFICATIONS PURSUANT TO SECTION 5c OF THE COMMODITY 

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

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

TeraExchange, LLC (“TeraExchange”) hereby certifies that: a) the Foreign Exchange Non 

Deliverable Forward Contract – JPY/USD complies with the Commodity Exchange Act, 7

U.S.C. §1 et seq. and the Commodity Futures Trading Commission (the “Commission”) 

regulations thereunder; and b) concurrent with this submission, TeraExchange, posted on its 

website: (i) a notice of pending certification of the Contract with the Commission; and (ii) a 

copy of this submission.

TeraExchange, LLC

By: Christopher Rossman

Name: Christopher Rossman

Title: Chief Operating Officer

Date: December 16, 2022
EXHIBIT C

Terms and Conditions

Contract Overview

Reference Currency Description Settlement Currency Template Max Tenor

AUD Australian Dollar Non-EMTA Pair 5 Years

BRL Brazilian Real EMTA Pair 5 Years

CAD Canadian Dollar Non-EMTA Pair 2 Years

CHF Swiss Franc Non-EMTA Pair 5 Years

CLP Chilean Peso EMTA Pair 2 Years

CNY Chinese Yuan EMTA Pair 2 Years

COP Colombian Peso EMTA Pair 2 Years

DKK Danish Krone Non-EMTA Pair 2 Years

EUR Euro Non-EMTA Pair 5 Years

GBP British Pound Sterling United States Non-EMTA Pair 5 Years

HKD Hong Kong Dollar Dollar (USD) Non-EMTA Pair 2 Years

IDR Indonesian Rupiah EMTA Pair 2 Years

INR Indian Rupee EMTA Pair 2 Years

JPY Japanese Yen Non-EMTA Pair 5 Years

KRW Korean Won EMTA Pair 2 Years

MXN Mexican Peso Non-EMTA Pair 2 Years

MYR Malaysian Ringgit EMTA Pair 2 Years

NZD New Zealand Dollar Non-EMTA Pair 2 Years

NOK Norwegian Krone Non-EMTA Pair 2 Years

PEN Peruvian Sol EMTA Pair 2 Years

PHP Philippine Peso EMTA Pair 2 Years

RUB Russian Ruble EMTA Pair 2 Years

SEK Swedish Krona Non-EMTA Pair 2 Years

SGD Singapore Dollar Non-EMTA Pair 2 Years

TWD Taiwanese Dollar EMTA Pair 2 Years

ZAR South African Rand Non-EMTA Pair 2 Years

Reference Currency Buyer The party to which an amount denominated in the Reference Currency is owed on Settlement Date

Reference Currency Seller The party that owes an amount denominated in the Reference Currency on Settlement Date

Settlement Currency

Contract Rate

Minimum Order Size

Minimum Size Increment

Trading Conventions

Trading Hours

Trade Date

Valuation Date

Settlement Date

Settlement Type

Pricing Source

Settlement Procedure

Clearing Venue Specifications1

Block Size

Speculative Limits

Reportable Levels

Position Accountability

1Clearing specifications, including all applicable settlement procedures, are subject to amendment by the 

clearing venue. References to position limits, position accountability, or reportable levels in any clearing 

specification apply only for clearing venue purposes.

NON DELIVERABLE FOREIGN EXCHANGE FORWARD CONTRACTS

General

A Non Deliverable Forward ("NDF") is an outright forward in which counterparties settle the difference 

between the contracted NDF price or rate and the prevailing spot price or rate on an agreed upon notional 

amount, where settlement is performed in USD.

CME available at https://www.cmegroup.com/trading/fx/otc.html 

LCH available at https://www.lch.com/resources/rulebooks/lch-limited

00:01 - 24:00 Sunday to Friday Eastern Time

Buy or Sell, which refers to the contract size expressed in Reference Currency

Currency exchange rate expressed as the amount of Reference Currency per unit of Settlement Currency, as 

agreed by Participants

Notional amount, as agreed by Participants

$1,000

As agreed by counterparties, per EMTA Templates and Clearing Venue Specifications, as applicable

Bilateral settlement in USD, or as per Clearing Venue Specifications

As agreed by the Participants, the date on which counterparties enter into a contract

The date, no earlier than the Business Day following the Trade Date, upon which the difference between the 

prevailing market exchange rate and the agreed upon Contract Rate is calculated

Specified settlement or payment date no earlier than the date immediately following the Valuation Date, and 

no later than the Max Tenor plus two Business Days, in accordance with Clearing Venue Specifications. 

As may be determined and published by TeraExchange under CFTC Regulation 37.600(c)

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

United States Dollar (USD)

As set in Part 151 of the CFTC Regulations

As set forth in CFTC Regulation 15.03

Non Deliverable (Cash Settled in USD)
EXHIBIT D

EXPLANATION AND ANALYSIS OF THE CONTRACT’S COMPLIANCE WITH 

APPLICABLE CORE PRINCIPLES AND COMMISSION REGULATIONS

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

the Foreign Exchange Non Deliverable Forward Contract – JPY/USD (the “Contracts”) is consistent with the 

requirements of the Commodity Exchange Act, as amended (the “Act”), and the Commission regulations and 

guidance thereunder (in particular, Appendix B to Part 37 and Appendix C to Part 38).

Appendix B to Part 37

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

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

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

manipulation.

(a) Guidance.

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

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

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

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

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

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

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

a reference price, a swap execution facility should either: Calculate its own reference price using suitable 

and well-established acceptable methods or carefully select a reliable third-party index.

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

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

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

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

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

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

Non-deliverable forwards are cash-settled transactions between two counterparties and are typically used to either 

hedge or speculate against currencies where exchange controls in a particular country make it difficult to trade 

in the spot market directly. No exchange of the underlying currency occurs. Instead, the contracts are settled in a 

Settlement Currency agreed upon by the counterparties.

This Contract is typical of non-deliverable forwards, in that the counterparties arrange settlement by calculating 

the difference between the Contract Rate, which is agreed on between the counterparties at the start of the 

contract, and the prevailing applicable Spot FX Rate, incorporating all relevant EMTA, Inc. (“EMTA”) Template 

terms then in effect as recommended by EMTA or a recognized successor, on the Valuation Date. This difference 

is then multiplied by the notional amount, which is also determined at the start of the contract. As such, the 

reference price is the prevailing Spot FX Rate on the date / time in which the parties agree that the comparison 

will be made (i.e., Valuation Date). The source for the Spot FX Rate on the Valuation Date will be as 

predetermined in the EMTA Templates or non-EMTA NDF Contract Templates appropriate to the applicable 

currency pair, as bilaterally agreed to by the counterparties, and in the case of cleared NDFs, in accordance with 
the Clearing Venue Specifications and acceptance by the Calculation Agent. Some Spot FX Rates are determined 

by the relevant Central Bank of the issuing country, while others are an average of interbank prices published by 

WM/Reuters or other recognized commercial market data vendors. Regardless of their source, Spot FX Rates are

very reliable, well distributed and easily accessible to the public, and widely used and generally accepted by 

market participants.

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

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

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

Please see below.

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

Manipulation

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

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

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

the cash settlement price for commodity futures and option contracts would include rules that fully 

describe the essential economic characteristics of the underlying commodity (e.g., grade, quality, weight, 

class, growth, issuer, maturity, source, rating, description of the underlying index and index’s calculation 

methodology, etc.), as well as how the final settlement price is calculated. In addition, the rules should 

clearly specify the trading months and hours of trading, the last trading day, contract size, minimum price 

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

Essential Economic Characteristics of the Contract Terms

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

non deliverable forward contracts that are commonly offered in the market. 

Calculation of Cash Settlement Price 

As noted above and as is typical with non-deliverable forwards, the cash settlement price will be the difference 

between the agreed upon NDF Contract Rate and the prevailing Spot FX Rate multiplied by an agreed upon 

notional amount. Thus, the settlement will be based on the following: 

1. Reference Currency: As determined by the counterparties at the Trade Date (i.e., start of the Contract); 

available Reference Currencies are listed in the Contract’s terms and conditions (Exhibit C). 

2. Settlement Currency: The NDF Contract settles in United States Dollars (USD) (Exhibit C). 

3. Notional Amount: Amount agreed by counterparties at Trade Date. 

4. Contract Rate: Rate agreed by counterparties, expressed as Reference Currency per unit of Settlement 

Currency. 

5. Spot FX Rate: Exchange rate, expressed as Reference Currency per unit of Settlement Currency. The 

Spot FX Rate is determined on the Valuation Date by reference to the relevant EMTA Template for the 

applicable non-deliverable currency, or the WM/Reuters Closing Spot Rate for deliverable currencies, 

expressed in USD.

6. Valuation Date: Date, agreed by counterparties, on which the difference between the Spot FX Rate and 

the Contract Rate is calculated. 

7. Settlement Date: Date, agreed by counterparties, on which settlement payments will be made. 

On the Valuation Date, the parties will agree on the Spot FX Rate, which will be expressed as Reference Currency 

per unit of Settlement Currency. They will calculate the difference between the NDF Contract Price or Rate and 
the Spot FX Price or Rate and multiply that difference by the notional amount, to arrive at the cash settlement 

price. For cleared NDF Contracts, the Calculation Agent shall be the Clearing Venue. The cash settlement will 

be due on the Settlement Date. As noted, this method of calculating settlement for the Contract is a common, 

widely-used, and widely accepted method of calculating the cash settlement for non-deliverable forward 

contracts.

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

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

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

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

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

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

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

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

futures position in that commodity.

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

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

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

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

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

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

Documentation demonstrating that the settlement price index is a reliable indicator of market values and 

conditions and is commonly used as a reference index by industry/market agents should be provided. Such 

documentation may take on various forms, including carefully documented interview results with 

knowledgeable agents.

The Contract is not readily susceptible to manipulation for a number of reasons. First, the foreign exchange 

market is an extremely liquid market with massive volume, making manipulation very difficult to achieve. 

Second, as noted above, the method for calculating the cash settlement price – calculating the difference between 

the Spot FX Rate and the Contract Rate – is widely used and generally accepted by market participants. Third, 

as discussed above, the reference used for the Spot FX Rate is very reliable and widely available, and used by 

numerous market participants. And last, TeraExchange 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. 

(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 lockdowns, 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 informationsharing agreement with the third-party provider which would enable the designated contract market to 

better detect and prevent manipulative behavior.
As described above, the cash settlement price will be calculated through a cash settlement method that is not 

easily susceptible to manipulation.

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

contract market should establish calculation procedures that safeguard against potential attempts to 

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

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

a list of such entities which all should be reputable sources with knowledge of the cash market. In addition, 

the sample of sources polled should be representative of the cash market, and the poll should be conducted 

at a time when trading in the cash market is active.

Please see above.

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

the impact of potentially unrepresentative data.

(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 regarding the reliability and widespread acceptance of the method used to generate the cash 

settlement price.

(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.

Spot FX rates are widely available via a number of public sources including the websites of Central Banks, 

EMTA and WM/Reuters. Please see above regarding the calculation of the cash settlement price.

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

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

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

price limits, if any.

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

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

commodity underlying the contract.

The terms and conditions of the Contract note that the Contract is based on the applicable foreign exchange rates.
(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, which is determined by the counterparties, is consistent with the customary transaction 

sizes in the market.

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

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

appendix C.

The cash settlement procedure and an explanation of how it is reliable, accepted, publicly available, and reported 

in a timely manner is described above.

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

should be set a level that is equal to, or less than, the minimum price increment commonly observed in 

cash market transactions for the underlying commodity. Specifying a futures’ minimum tick that is greater 

than the minimum price increment in the cash market can undermine the risk management utility of the 

futures contract by preventing hedgers from efficiently establishing and liquidating futures positions that 

are used to hedge anticipated cash market transactions or cash market positions.

As agreed by the counterparties, the pricing basis is consistent with customary transactions in the market.

(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 tonews; (2) Allow additional time for the collection of margins 

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

to respond to bona fide changes in market supply and demand fundamentals that would lead to large cash 

and futures price changes. If price-limit provisions are adopted, the limits should be set atlevels that are 

not overly restrictive in relation to price movements in the cash market for the commodity underlying the 

futures contract. For broad-based stock index futures contracts, rules should be adopted that coordinate 

with New York Stock Exchange (“NYSE”) declared Circuit Breaker Trading Halts (or other market 

coordinated Circuit Breaker mechanism) and would recommence trading in the futures contract only after 

trading in the majority of the stocks underlying the index has recommenced.

As agreed by the counterparties.

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

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

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

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

trading would not distort the final settlement price calculation.

The last trading day is the Valuation Date, when the difference between the prevailing Spot FX Rate and the 

agreed upon Contract Rate is calculated.

(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.

The Contract will be entered into on the Trade Date, the settlement price will be determined on the Valuation

Date, and the settlement payments will be made on the Settlement Date. As is common with non-deliverable 

forwards, these dates will be set by the individual counterparties.

(H) Speculative Limits: Specific rules and policies for speculative position limits are set forth in part 150 

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

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

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

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

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

The Contract is available to trade twenty-four hours a day (00:01 – 24:00)(ET), Sunday to Friday.