Secretary of the Commission 

December 16, 2015 

Page 4 

EXHIBIT B

Terms and Conditions 

Contract Overview: An agreement to buy or sell protection on a basket of 

liquid North America based entities with a high yield 

credit rating (CDX.NA.HY) or an investment grade 

credit rating (CDX.NA.IG). 

Index: CDX.NA.HY: Series 8 to current. 

CDX.NA.IG: Series 8 to current. 

Currency: USD 

Quoting Convention and Minimum Increment: As agreed by counterparties. 

Minimum Size: As agreed by counterparties. 

Trading Conventions: Buy = Buy Protection, the buyer of protection pays a 

premium to the seller in case of a credit event occurring. 

Credit events include Bankruptcy, Failure to Pay and 

Restructuring. 

Sell = Sell Protection, the seller of protection receives 

the premium payments from the protection buyer. The 

Seller owns the credit risk of the instrument. 

High Yield indices such as the CDX.NA.HY are traded 

on price. 

Investment Grade indices such as the CDX.NA.IG are 

traded on spread. 

Swap Conventions: For CDX.NA.HY, fixed coupon payments are calculated 

at a spread of 500 bps and exchanged on a quarterly 

basis. 

For CDX.NA.IG, fixed coupon payments are calculated 

at a spread of 100 bps and exchanged on a quarterly 

basis. 

Swap Tenor: 3Y, 5Y, 7Y and 10Y or as otherwise agreed by the 

parties. 

Tranching: Transactions may have only one tranche, where all 

losses are allocated to the protection seller, starting with 

the first dollar of loss and ending only when the entire 

notional of the transaction has been exhausted or the 

Transaction itself expires. 

Transactions may also be tranched in a way in which 

losses are allocated to the protection seller only after a 

certain amount of losses have occurred on the Index (the 

“attachment point”) and cease being allocated to the 

protection seller after a certain additional amount of 

losses have occurred on the Index (the “detachment 

point”). 

In the case of tranched transactions in the CDX.NA.HY, 

the tranches include: 
Secretary of the Commission 

December 16, 2015 

Page 5 

Attachment Point Detachment Point 

 0 10% 

 0 15% 

 10% 15% 

 15% 25% 

 25% 35% 

 35% 100% 

 In the case of tranched transactions in the CDX.NA.IG, 

the tranches include: 

Attachment Point Detachment Point

 0 3% 

 3% 7% 

 7% 10% 

 7% 15% 

 10% 15% 

 15% 30% 

 15% 100% 

 In addition to the customary tranches enumerated above, 

the parties may agree to custom attachment and 

detachment points. 

Effective Date: The date on which parties begin calculating accrued 

obligations such as fixed 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. 

Trade Types: The following swap types may be executed on the tpSEF 

Inc.: 

 Outrights 

 Roll Trades 

 Curve Trades 

Settlement: Contingent payment - Payments related to credit event 

settlement will be determined pursuant to the relevant 

ISDA Definitions (see below). 

Fixed Quarterly cash payments - reflected in basis points 

and paid by the protection buyer to the protection seller. 

Upfront fee payment - The upfront fee is a portion of the 

payments, expressed in percentage points of the 

notional, which is present valued and paid immediately 

to the seller. 
Secretary of the Commission 

December 16, 2015 

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Swaptions on the Above 

Swaptions: The SEF is also listing Physically-Settled Swaptions on 

each of the CDX.NA.HY and CDX.NA.IG on the terms 

described herein. 

Swaption Option Style: European; the Swaptions may be exercised only on 

expiration. 

Swaption Tenor: The tenor of the Swaptions will be selected by the 

parties and will be no shorter than three months and no 

longer than three months less than the Swap Tenor. 

Settlement: The Swaption will be Physically Settled and, if 

exercised, will result in the parties entering into a swap 

on the Index on the terms described herein. 

Tranching: Swaptions may be written on tranched or untranched 

transactions. 

ISDA Definitions (2003 v. 2014 Credit Derivatives 

Definitions) 

2014/2003 Definitions: ISDA has published 2014 Credit Derivatives 

Definitions, which alter the treatment accorded certain 

events, particularly as relates to sovereigns and 

financials and certain “orphan” CDS (Reference Entities 

with no deliverable obligations). 

Index Sponsor: Markit, which sponsors the Index, has published 

information on treatment of both legacy and future 

indices. 

The parties should consult Markit’s documentation to 

determine the exact treatment. It is the SEF’s 

understanding that, in general, all CDS index trades will 

convert to the 2014 Definitions, with individual 

components being excluded if they would be impacted 

by the differences between the two. 

Cleared Transactions: Transactions intended to be cleared will use the 

Definitions required by the relevant DCO selected by the 

parties. 

The parties should consult the relevant DCO’s 

documentation to determine the exact treatment. It is the 

SEFs understanding that the DCOs will be converting all 

trades to the 2014 definitions, with individual 

component excluded as describe above. 

Choice of Definitions: The parties can elect which Definitions to use as part of 

their Confirmation process. However, this may limit 

clearability and result in creation of a bespoke Index 

transaction. 
Secretary of the Commission 

December 16, 2015 

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EXHIBIT C

EXPLANATION AND ANALYSIS OF THE CONTRACTS’ COMPLIANCE WITH 

APPLICABLE CORE PRINCIPLES AND COMMISSION REGULATIONS 

As required by Commodity Futures Trading Commission (“Commission”) Regulation 40.2(a), the 

following analysis, in narrative form, demonstrates that CDS Index Contract – North America Investment 

Grade High Yield Swaps and Swaptions (collectively, the “Contract”) 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 wellestablished 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. 

Reference Indices: CDX.NA.HY and CDX.NA.IG 

The reference indices used to determine the exchange of cash flows for the Contract are Markit Group 

Limited’s (“Markit’s”) (a) “North American Investment Grade CDX Index” or the CDX.NA.IG Index 

(Series 8 to Current) (the “IG Index”) or (b) “North American High Yield CDX Index” or the 

CDX.NA.HY Index (Series 8 to Current) (the “HY Index” and, together with the IG Index, the “CDX 

Indices”). These well-established indexes track the one hundred (HY Index) or one hundred twenty-five 

(IG Index) most liquid North American corporate, municipal and sovereign debt bonds and/or loans, with 

high yield (HY Index) or investment grade (IG Index) credit ratings. The CDX Indices are based on 

comprehensive, well-established and transparent rules that outline, among other things, the selection of 

index constituents (“Reference Entities”), the selection of the constituents’ loans or bonds (“Reference 
Secretary of the Commission 

December 16, 2015 

Page 8 

Obligations”), and the removal/addition of entities to the related index. The CDX Indices are widely 

accepted by market participants as a reliable index.1

Selection of Reference Entities 

Markit constructs the list of Reference Entities in accordance with methodologies outlined in its rules 

(i.e., the “Index Roll Process”). As part of this process, Markit creates a Liquidity List based on the semiannual report published by DTCC, entitled “6 Month Analysis Top 1,000 Single Names.”2

 One of the 

factors considered in determining which entities are added to the list is the long-term credit rating 

assigned to such entity by select rating agencies (or if that information is not available, the long-term 

credit rating assigned by select rating agencies to the entity’s associated Reference Obligation).3

Markit’s process for generating the list of Reference Entities for the CDX Indices has several other welldefined, thoroughly-documented steps, including: (i) in the case of the IG Index (a) determining which 

entities must be removed from the existing IG Index; (b) determining which new entities should be added 

to the preliminary index; (c) removing the entities that have the lowest ranking in the IG Liquidity 

Rankings (if, after the processes described in (a) and (b), the number of entities on the index exceeds 

125); (d) adding appropriate entities to the preliminary index (if, after the processes described in (a) and 

(b), the number of entities on the index is less than 125); (e) publicly disseminating a provisional list of 

Reference Entities for comment (no later than seven (7) days prior to the “Roll Date” (described below)); 

(f) engaging in a final review of the constituent list; and (g) publishing the final IG Index on the Roll 

Date4

; and (ii) in the case of the HY Index (a) determining which entities must be removed from the 

existing HY Index; (b) determining which new entities should be added to the preliminary index in the 

stead of those removed based on the eligible Reference Entities with the highest HY Liquidity Rankings; 

(c) publicly disseminating a provisional list of Reference Entities for comment (no later than seven (7) 

days prior to the “Roll Date” (described below)); (d) engaging in a final review of the constituent list; and 

(e) publishing the final HY Index on the Roll Date. 5

Selection of Reference Obligations 

After the relevant CDX Index list has been finalized, typically, Markit identifies a single Reference 

Obligation for each entity, senior in priority of payment, based on data in its Reference Entity Database 

(“RED”).6

Reference Index is Not Readily Susceptible to Manipulation 

The CDX Indices are not readily susceptible to manipulation. First, as noted above, it is a broad index – 

containing 125 (IG Index) or 100 (HY Index) entities. Second, all of the entities have equal or 

approximately equal weightings, so that no entity disproportionately dominates the weighting of the 

index.7

 Third, as noted above, (a) the IG Index is a highly liquid index as it is comprised of the 125 most 

liquid North American corporate, municipal and sovereign debt bonds and/or loans, with investment 

grade credit ratings and (b) the HY Index is a highly as it is comprised of the 100 liquid North American 

corporate, municipal and sovereign debt bonds and/or loans, with sub-investment grade credit ratings, 

 

1

 Comprehensive descriptions of Markit’s administration of the IG Index and the HY Index are found in “Markit CDX High Yield & Markit CDX 

Investment Grade Index Rules (March 2013)” (“Markit Rules”) and “Markit Credit Indices: A Primer (November 2008)” (“Markit Primer”). 2

 “Markit Rules,” at 10. 

3 Id. at 14 (both CDX Indices). 4 Id. at 10-13 (IG Index). 5 Id. at 7-9 (HY Index). 6 Id. at 14 (both CDX Indices) 7 Id. at 5.
Secretary of the Commission 

December 16, 2015 

Page 9 

selected for inclusion on the basis of liquidity and with the potential for exclusion for decline in liquidity. 

And last, as noted above, the development and management of the IG Index is rules-based, therefore 

making it difficult for individuals or entities to change selection practices for purposes of manipulation. 

(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 match the terms of the North American Investment Grade and 

High Yield CDS Index contracts and are listed in Exhibit B. 

Some terms of the Contract are fixed (i.e., currency, attachment and detachment points (in the case of 

tranched transactions), while other terms are flexible and determined by the counterparties (i.e., effective 

date and maturity date). This combination of standard and flexible terms allows the contract to have a 

basic consistent form, while allowing counterparties to tailor some aspects of the Contract to their 

economic needs. This structure follows industry convention; the terms of the Contract match the terms of 

credit default swaps and swaptions, tranched and untranched, that are commonly offered in the market. 

Calculation of Cash Settlement Price 

The cash settlement process for the Contract includes the following payments: 

 Fixed Quarterly Cash Payments - These payments are reflected in basis points and paid by the 

protection buyer to the protection seller. 

 Upfront Fee Payment -This fee is a portion of the payments, which is expressed in percentage 

points of the notional. The fee is present valued and paid immediately to the seller. 

 Contingent Payment - If there is a credit event (bankruptcy or failure to pay), payments related to 

the credit event settlement will be determined pursuant to the relevant ISDA Credit Derivatives 

Definitions. 
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December 16, 2015 

Page 10 

This cash settlement method for credit default swaps is often used for credit default swaps and thus 

widely accepted by market participants. 

(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. Cashsettled 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 underlying 

market for the Contract has considerable depth and liquidity, making manipulation very difficult to 

achieve. The CDX Indices are used by numerous market participants, and basing credit default swaps and 

swaptions on the CDX Indices have been a longstanding, widely accepted practice. Second, as noted 

above, the method for calculating the cash settlement price – involving upfront fee payments, fixed 

quarterly cash payments, and (in the case of a credit event) a contingent payment – is widely used and 

generally accepted by market participants. Finally, tpSEF Inc. (“tpSEF”) 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 (note that the foregoing also demonstrates compliance with Core 

Principle 4). 

 
Secretary of the Commission 

December 16, 2015 

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(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 cashsettled 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 cashsettlement 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. 

Please see above regarding the calculation of the cash settlement price. 

(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 regarding the calculation of the cash settlement price. 

(iii) The cash-settlement calculation should involve computational procedures that 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 availability, reliability and widespread acceptance of the method 

used to generate the cash settlement price. 

 
Secretary of the Commission 

December 16, 2015 

Page 12 

(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. 

Information on the CDX Indices is available on Markit.com. 

(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. 

The terms and conditions of the Contract include the essential economic terms of the Contract. Also as 

noted in the attached, the counterparties will begin calculating accrued obligations from the effective date 

to the maturity date (i.e., “last trading day”) of each contract – dates which are set by the counterparties. 

(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 basket of liquid North 

America based entities with investment grade rating that comprise the CDX.NA.IG (Series 8 to Current) 

or basket of liquid North America based entities with sub-investment grade rating that comprise the 

CDX.NA.HY (Series 8 to Current).

(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 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, acceptable, publicly available, and 

reported in a timely manner appears above. 

 
Secretary of the Commission 

December 16, 2015 

Page 13 

(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 is the maturity date of the contract, in the case of credit default swaps, or its 

expiration date, in the case of swaptions, which is set by the 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 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. 

If there is no credit event (or, in the case of tranched transactions, such credit events are too small to reach 

the contract’s attachment point), the protection buyer will pay the protection seller fixed quarterly cash 

payments on the credit default swaps. Prior to exercise into credit default swaps, there are no ongoing 

payments on the swaptions. 

 
Secretary of the Commission 

December 16, 2015 

Page 14 

(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. 

tpSEF 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-three hours a day from Sunday to Friday Eastern Time. The Contract is not 

traded between 5:30 p.m. and 6:30 p.m. Eastern Time. 
Secretary of the Commission 

December 16, 2015 

Page 15 

EXHIBIT D

Terms and Conditions (Marked Against October 30, 2014 Version) 

Contract Overview: An agreement to buy or sell protection on a basket of liquid North 

America based entities with a high yield credit rating (CDX.NA.HY) 

or an investment grade credit rating (CDX.NA.IG). 

Index: CDX.NA.HY: Series 8 to current. 

CDX.NA.IG: Series 118 to current. 

Currency: USD 

Quoting Convention and Minimum 

Increment: 

As agreed by counterparties. 

Minimum Size: As agreed by counterparties. 

Trading Conventions: Buy = Buy Protection, the buyer of protection pays a premium to the 

seller in case of a credit event occurring. Credit events include 

Bankruptcy and, Failure to Pay and Restructuring. 

Sell = Sell Protection, the seller of protection receives the premium 

payments from the protection buyer. The Seller owns the credit risk 

of the instrument. 

High Yield indices such as the CDX.NA.HY are traded on price.

Investment Grade indices such as the CDX.NA.IG are traded on 

spread. 

Swap Conventions: For CDX.NA.HY, fixed coupon payments are calculated at a spread 

of 500 bps and exchanged on a quarterly basis.

FixedFor CDX.NA.IG, fixed coupon payments are calculated at a 

spread of 100 bps and exchanged on a quarterly basis. 

Swap Tenor: 3Y, 5Y, 7Y and 10Y or as otherwise agreed by the parties.

Tranching: Transactions may have only one tranche, where all losses are 

allocated to the protection seller, starting with the first dollar of loss 

and ending only when the entire notional of the transaction has been 

exhausted or the Transaction itself expires.

Transactions may also be tranched in a way in which losses are 

allocated to the protection seller only after a certain amount of losses 

have occurred on the Index (the “attachment point”) and cease being 

allocated to the protection seller after a certain additional amount of 

losses have occurred on the Index (the “detachment point”).

In the case of tranched transactions in the CDX.NA.HY, the tranches 

include:

Attachment Point Detachment Point

0 10%

0 15%

10% 15%

15% 25%

25% 35%
Secretary of the Commission 

December 16, 2015 

Page 16 

35% 100%

In the case of tranched transactions in the CDX.NA.IG, the tranches 

include:

Attachment Point Detachment Point

0 3%

3% 7%

7% 10%

7% 15%

10% 15%

15% 30%

15% 100%

In addition to the customary tranches enumerated above, the parties 

may agree to custom attachment and detachment points.

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

as fixed 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. 

Trade Types: The following swap types may be executed on the tpSEF Inc.: 

 Outrights 

 Roll Trades 

 Curve Trades 

Settlement: Contingent payment - Payments related to credit event settlement 

will be determined pursuant to the 2009 ISDA Credit Derivatives 

Determination Committees and Auction Settlement Supplement, 

(i.e., the Big Bang Protocolrelevant ISDA Definitions (see below). 

Fixed Quarterly cash payments - reflected in basis points and paid 

by the protection buyer to the protection seller. 

Upfront fee payment - The upfront fee is a portion of the payments, 

expressed in percentage points of the notional, which is present 

valued and paid immediately to the seller. 

Swaptions on the Above 

Swaptions: The SEF is also listing Physically-Settled Swaptions on each of the 

IndexCDX.NA.HY and CDX.NA.IG on the terms described herein. 

Swaption Option Style: European; the Swaptions may be exercised only on expiration. 

Swaption Tenor: The tenor of the Swaptions will be selected by the parties and will be 

no shorter than three months and no longer than three months less 

than the Swap Tenor. 

Settlement: The Swaption will be Physically Settled and, if exercised, will result 

in the parties entering into a swap on the Index on the terms 

described herein. 

Tranching: Swaptions may be written on tranched or untranched transactions.

ISDA Definitions (2003 v. 2014 Credit 
Secretary of the Commission 

December 16, 2015 

Page 17 

Derivatives Definitions) 

2014/2003 Definitions: ISDA has published 2014 Credit Derivatives Definitions, which alter 

the treatment accorded certain events, particularly as relates to 

sovereigns and financials and certain “orphan” CDS (Reference 

Entities with no deliverable obligations). 

Index Sponsor: Markit, which sponsors the Index, has published information on 

treatment of both legacy and future indices. 

The parties should consult Markit’s documentation to determine the 

exact treatment. It is the SEF’s understanding that, in general, all 

CDS index trades will convert to the 2014 Definitions, with 

individual components being excluded if they would be impacted by 

the differences between the two. 

Cleared Transactions: Transactions intended to be cleared will use the Definitions required 

by the relevant DCO selected by the parties. 

The parties should consult the relevant DCO’s documentation to 

determine the exact treatment. It is the SEFs understanding that the 

DCOs will be converting all trades to the 2014 definitions, with 

individual component excluded as describe above. 

Choice of Definitions: The parties can elect which Definitions to use as part of their 

Confirmation process. However, this may limit clearability and 

result in creation of a bespoke Index transaction.