Junely 7th3, 201922

To:	SwapEx Participants From:	SwapEx, LLC

# Re:	Advisory Notice 01-2219 - SwapEx Trading Procedures and Protocols (SwapEx CFTC Submission #01-2219)

SwapEx Rule 524 (Operation of the Trading System) provides a summary of the execution methods available on the Trading System, including the Order Book and Request for Quote (“RFQ”) functionalities. It also provides that a“[a]dditional information with respect to the operation of the Trading System, the execution methods and credit and risk functionality is provided in the applicable user guide and other specific information that the Company may make available to Participants, Authorized Traders and Authorized Users.” This Advisory Notice updates and amends information contained in the existing Advisory Notice 01-15 – “SwapEx Trading Procedures and Protocols” (as amended and restated by SwapEx CFTC Submission #09-15 and further amended and restated by SwapEx CFTC Submission 01-19), and supplements the information contained in SwapEx Rule 524. 

New Advisory Notice 01-1922, describes trading procedures and protocols of the Trading System and provides updated timing requirements related to Standard and Reverse RFQ Review Periods. This notice replaces the previous Advisory Notice 01-159, which will be considered no longer in force.

Capitalized terms used without definition herein shall have the meanings assigned to them in the SwapEx, LLC Rulebook (as amended from time to time, the “Rulebook”).

# Central Limit Order Book (CLOB) Overview

The Trading System offers central limit order book functionality (the “CLOB”) that is anonymous at the time of execution. The matching priority with respect to an acceptance of any price quote is based on price and, if prices are identical, ~~then firm orders will be given priority over indicative prices and~~ then on a “first in, first out” basis. All instruments listed in the product specifications set forth in Chapter 11 of the Rulebook are available for trading on the CLOB. For the most popular instruments, the CLOB supports continuous streaming liquidity (the “Standing CLOB”). For other instruments, the Trading System supports CLOB trading through user-initiated Indications of Interest (“IoI”), enabling CLOB functionality, as further detailed below, for more customized swap instruments.

Cleared Contracts executed over the CLOB will be delivered to supported Derivatives Clearing Organizations and names of the Participants, Authorized Traders and/or Customers who are party to the trade will not be revealed to the counterparty to the trade. In order for a Participant or Authorized Trader to participate in trading of Cleared Contracts, the applicable Participant must either be able to self-clear or the Participant or Authorized Trader must have authorization to submit swaps executed on the Trading System for clearing to at least one Clearing Firm.

For a Permitted Transaction that is not a Cleared Contract, the Trading System will only match an Order with quotes on the CLOB for such instrument from market participants if both market participants have indicated to the Company in writing they are willing to transact with each other and, if a credit relationship has been established as permitted under Rule 524(c) between market participants, they have available credit. The Trading System will only match an Order for a Cleared Contract, with quotes orders for such instruments from other market participants who have clearing arrangements at the same Derivatives Clearing Organization for such instrument and have available credit. For all transactions in Permitted Transactions that are not cleared Contracts that are executed on the CLOB, the Trading System will disclose to each participant and/or Authorized Trader that is counterparty to the trade, the name of the other counterparty to the trade after execution.   For Cleared Contracts that are executed on the CLOB, the Trading System will not disclose the name of any party to its counterparty before or after execution.

For an Order to be successfully submitted to the CLOB, the Authorized User needs to be properly authenticated and provide the information tagged as relevant for CLOB trading listed in Appendices 1 and

2. Certain of this information is stored as static data within the Trading System, while the remainder of this information must be entered by the Authorized User on an order by order basis.

# Standing CLOB

Market participants can access the Standing CLOB by using the front-end graphical user interface (GUI) made available by the Company or by making use of an application programming interface (API) enabling the Participant or Authorized Trader to customize its own interface for access to the Standing CLOB. All Orders on the Standing CLOB are delivered (pushed) in near real-time to all Authorized Users who are logged-in to the CLOB. Trades executed on the Standing CLOB are communicated via a ticker on the CLOB (the “CLOB Ticker”), which publishes all transactions executed on the CLOB (without identifying the parties thereto) in near real-time. Participants and Authorized traders can trade on the Standing CLOB book by ~~either taking liquidity (hitting/lifting bids and offers) or adding liquidity~~(placing orders into the book).

# Indication of Interest (“IoI”)

Market participants can access the IoI functionality on the CLOB by using the front-end graphical user interface (GUI) made available by the Company. Market participants can raise an IoI, which will be communicated to all Authorized Users who are logged-in to the CLOB via the GUI and simultaneously will establish a spontaneous CLOB instance accessible to Authorized Users who are logged-in to the CLOB via the GUI that will continue in existence until the end of the trading day. When submitting an IOI, an Authorized User can define the currency pair as well as the value date and fixing date. All Orders submitted via the IoI functionality are delivered (pushed) in near real-time to all Authorized Users who are logged-in to the CLOB via the GUI. Executed trades resulting from an Order submitted via the IoI functionality are communicated to all Authorized Users logged-in to the CLOB via the GUI via the CLOB Ticker. Once a spontaneous IoI has been created, all Authorized Users who are logged-in to the CLOB via the GUI may place orders onto the add liquidity in response to the IoI or, conversely, take liquidity on the CLOB generated by the IoI.

# Request for Quote (RFQ) Functionality Overview

The Trading System also supports two Request for Quote (“RFQ”) execution styles for Permitted Transactions: Standard RFQ and Reverse RFQ. All trading through the Standard RFQ functionality and Reverse RFQ functionality is done on a fully-disclosed, attributed basis (i.e., a market participant that is party to a trade will be identified to the other market participant who is counterparty to the trade prior to execution).

For a request to be successfully submitted on the Trading System, the Authorized User needs to be properly authenticated and provide the information tagged as relevant for Standard RFQ or Reverse RFQ trading listed in Appendices 1 and 2. Certain of this information is stored as static data within the Trading System, while the remainder of this information must be entered by the Authorized User on an order by order basis.

# Standard RFQ

Market participants can access the Standard RFQ functionality by using the front-end graphical user interface (GUI) made available by the Company or by making use of an application programming interface (API) enabling the Participant or Authorized Trader to customize its own interface for access to the Standard RFQ functionality. All instruments listed in the product specifications set forth in Chapter 11 of the Rulebook are available for trading via the Standard RFQ functionality. For Permitted Transactions that are not Cleared Contracts, a Taker (as defined below) may submit an RFQ composed of two Contracts for the same currency pair but with different fixing dates and maturity/valuation dates.

To initiate a Standard RFQ, an Authorized User must connect to the Trading System and select either the “Requests” tab (if the Authorized User is accessing the Trading System through a GUI) or submit a “Quote Request” (if the Authorized User is accessing the Trading System through an API).

Through the Standard RFQ functionality, a Person (the “Taker”) may submit an RFQ to certain other 

Persons (each a “Maker”) to which all such Makers may respond. A Taker may submit an RFQ for a Cleared Contract through the Standard RFQ functionality to any or all Participants and/or Authorized Traders who have indicated to the Company in writing that they intend to act as “RFQ Makers” on the Standard RFQ functionality for such Cleared Contract; provided that the Taker and each such Participant or Authorized Trader have clearing arrangements at the same Derivatives Clearing Organization for such Cleared Contract and have available credit. A Taker may submit an RFQ for a Permitted Transaction that is not a Cleared Contract through the Standard RFQ functionality to any or all Participants and/or Authorized Traders, provided that both the Taker and each such Participant or Authorized Trader have indicated to the Company in writing they are willing to transact with each other via the Standard RFQ functionality.  If a credit relationship has been established as permitted under Rule 524(c) (Credit and Risk Limits) between the Taker and a Participant or Authorized Trader, there must be available credit.

RFQs submitted through the Standard RFQ are filled on an all or none basis.

Makers ~~may choose to~~ submit ~~firm or~~ indicative quotes via the Standard RFQ functionality. A Maker who provides an indicative quote in response to an RFQ in the Standard RFQ functionality is provided the opportunity, after a Taker has accepted such indicative price quote, to confirm that it remains willing to execute a transaction at that quoted rate. The Maker generally has no more than one second (the “Standard RFQ Review Period”) in which to confirm or reject the acceptance of the transaction at the quoted rate. During the Standard RFQ Review Period: (1) the RFQ status will be set to “pending” and the Taker can no longer make any edits to it; and (2) the Maker Taker is not permitted to send the same price quote RFQ to any other market participant on the Trading System. If the quote provided is confirmed by the Maker prior to expiration of the applicable Standard RFQ Review Period, the status of the RFQ will be updated to reflect completion of the transaction at the quoted rate or, solely at the discretion of the Maker, a rate more favorable to the Taker than the quoted rate. If the Maker rejects or otherwise does not confirm acceptance of the transaction within the applicable Standard RFQ Review Period noted above: ~~(1)~~the Trading System will not execute a transaction between the Maker and Taker;. and (2) the RFQ will resume and the Taker can select another quoted rate to accept.

# Reverse RFQ

Market participants can access the Reverse RFQ functionality: (1) to stream quotes by making use of an application programming interface (API) enabling the Participant or Authorized Trader to customize its own interface for access to the Reverse RFQ functionality; or (2) to receive streamed quotes using the front-end graphical user interface (GUI) made available by the Company or by making use of an API enabling the Participant or Authorized Trader to customize its own interface for access to the Reverse RFQ functionality. The following instruments are available for Reverse RFQ Trading1:

SwapEx Advisory Notice 01-1922

Junely 7th3, 201922

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Information Classification: Limited Access

Through the Reverse RFQ functionality, a market participant (the “Sender”) may stream quotes for certain Permitted Transactions that are not Cleared Contracts to any or all Participants and/or Authorized Traders (each a “Recipient”) provided that both the Sender and each such Participant or Authorized Trader have indicated to the Company in writing they are willing to transact with each other via the Reverse RFQ functionality and, if a credit relationship has been established as permitted under Rule 524(c) between the Sender and a Participant or Authorized Trader, there is available credit. To initiate a Reverse RFQ, the Sender must identify those Recipients to whom it will send quotes. A Recipient may accept a quote from the Sender by either accessing and responding to the outstanding quotes under the “Markets” tab (if the Authorized User is accessing the Trading System through a GUI) or submitting an “order” (if the Authorized User is accessing the Trading System through an API). 

Such acceptance will be communicated to the Sender, who then will have the opportunity to confirm that it remains willing to execute a transaction at that quoted rate. The Sender generally has no more than 500 milliseconds for Reverse RFQ (the “Reverse RFQ Review Period”) in which to confirm or reject the acceptance of the transaction at the quoted rate. During the Reverse RFQ Review Period: (1) the RFQ status will be set to “pending” and the Recipient can no longer make any edits to it; and (2) the Sender is not permitted to stream the same price quote to any other market participant on the Trading Platform. If the quote provided is confirmed by the Sender prior to expiration of the applicable Reverse RFQ Review Period, the status of the RFQ will be updated to reflect completion of the transaction at the quoted rate. If the Sender rejects or otherwise does not confirm acceptance of the transaction within the applicable Reverse RFQ Review Period noted above, the Trading System will not execute a transaction between the Sender and the Recipient of the quote. RFQs submitted through the Reverse RFQ functionality may be partially filled.

Information Classification: Limited Access

Appendix 1 – Static Information for trading on the Trading System, by functionality type

Information Classification: Limited Access

Appendix 2 – Order Specific Information required to be entered into the system for trading on the Trading System, by functionality type

Information Classification: Limited Access

Information Classification: Limited Access

Information Classification: Limited Access

1 Optional field whose purpose is solely for transactions intended to be cleared.

2 If an Authorized User is permissioned to trade for multiple legal entities, such Authorized User must select the legal entity for which it is trading at the time the Authorized User submits the RFQ or order. The Trading System maintains, as static data, the list of legal entities for which a particular Authorized User is permissioned to trade.

3 Only required for transactions intended to be cleared. If an Authorized User is authorized to submit trades on behalf of a Participant, Authorized Trader or Customer for clearing to multiple Derivatives Clearing Organizations

and / or Clearing Firms, the Authorized User must select the applicable Derivatives Clearing Organization and/or Clearing Firm at the time the order is submitted. The Trading System maintains, as static data, the list of Derivatives Clearing Organizations to which a particular Authorized User is authorized to submit trades for clearing. Although the Company currently only offers instruments that are not intended to be cleared or are available for clearing at LCH.Clearnet Limited, it intends to support the trading of instruments cleared at other Derivatives Clearing Organizations in the future.

4 Reverse RFQ functionality currently does not support instruments that are intended to be cleared.

Information Classification: Limited Access

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