61085646 1

EXHIBIT L-1 – COMPLIANCE WITH CORE PRINCIPLES
61085646 2

360 Trading Networks Inc.

APPLICATION FOR SEF REGISTRATION

COMPLIANCE WITH SEF CORE PRINCIPLES

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

CORE PRINCIPLE 1

COMPLIANCE WITH CORE PRINCIPLES.—

(A) IN GENERAL.—To be registered, and 

maintain registration, as a swap execution 

facility, the swap execution facility shall comply 

with—

(i) the core principles described in this 

subsection; and

(ii) any requirement that the Commission may 

impose by rule or regulation pursuant to section 

8a(5).

(B) REASONABLE DISCRETION OF SWAP 

EXECUTION FACILITY.—Unless otherwise 

determined by the Commission by rule or 

regulation, a swap execution facility described 

in subparagraph (A) shall have reasonable 

discretion in establishing the manner in which 

the swap execution facility complies with the 

core principles described in this subsection.

Form SEF and Exhibits thereto The materials submitted with the Company’s 

application for SEF registration, including but not 

limited to the Rulebook (the “Rules”) satisfy this 

Core Principle.

Capitalized terms used in this Exhibit L-1 without 

definition have the meanings ascribed to such 

terms in the Rules.

CORE PRINCIPLE 2

COMPLIANCE WITH RULES.—A swap 

execution facility shall—

(A) establish and enforce compliance with any 

rule of the swap execution facility, including—

Exhibit M (Rulebook)

Chapter 3 (Trading System)

Chapter 4 (Business Conduct)

Chapter 5 (Trading Practices)

Operation of the SEF and Compliance with 

Rules

The Company has adopted Rules governing the 

operation of the Company’s Trading System. In 

particular, Rule 524 establishes that Permitted 

Transactions may be executed either through the 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

(i) the terms and conditions of the swaps traded 

or processed on or through the swap execution 

facility; and

(ii) any limitation on access to the swap 

execution facility;

(B) establish and enforce trading, trade 

processing, and participation rules that will 

deter abuses and have the capacity to detect, 

investigate, and enforce those rules, including 

means—

(i) to provide market participants with impartial 

access to the market; and 

(ii) to capture information that may be used in 

establishing whether rule violations have 

occurred; 

(C) establish rules governing the operation of 

the facility, including rules specifying trading 

procedures to be used in entering and 

executing orders traded or posted on the 

facility, including block trades; and 

(D) provide by its rules that when a swap dealer 

or major swap participant enters into or 

facilitates a swap that is subject to the 

mandatory clearing requirement of section 2(h), 

the swap dealer or major swap participant shall 

be responsible for compliance with the 

mandatory trading requirement under section 

2(h)(8).

Rule 601 (Block Trades)

Rule 602 (Time Stamp Requirements for 

Block Trades)

Chapter 7 (Disciplinary Rules)

Exhibit O (Compliance Manual)

Section 7.1 (Surveillance – Introduction)

Section 7.2 (Trade Practice Surveillance)

Section 7.3 (Market Surveillance)

Section 7.4 (Real-Time Market Monitoring)

Section 7.5 (Audit Trail Surveillance)

Section 8 (Investigations)

Section 10.3 (Third-Party Regulatory Service 

Provider)

Section 9.1 (Access Requirements)

Section 9.3 (Rule Enforcement and 

Inspections)

See also:

Core Principle 4 (Monitoring of Trading and 

Trade Processing)

Core Principle 5 (Ability to Obtain Information)

Core Principle 7 (Financial Integrity of 

Transactions)

Core Principle 8 (Emergency Authority)

Core Principle 12 (Conflicts of Interest)

Company’s central limit order book or through an 

RFQ functionality. Any person accessing the 

Trading System must have and use the unique 

User ID that has been assigned to them for that 

purpose. All Orders and Requests for Quote 

must contain the information required by the 

Company from time to time, including the data 

fields set out in Rule 528(d). The Company also 

permits entry into Block Trades, subject to 

compliance with the provisions of Rules 601 and 

602.

Appendix 1 to the Company’s Rulebook sets 

forth the terms and conditions of the Swaps 

traded on or processed through the Trading 

System. The Company has also adopted Rules 

relating to access to the Trading System by 

Participants, Authorized Traders and Authorized 

Users (see Chapter 3 of the Rules), business 

conduct and trade practice violations (see

Chapters 4 and 5 of the Rules), and disciplinary 

matters (see Chapter 7 of the Rules). Rule 

401(c) sets out the Company’s requirements 

regarding mandatory trading obligations. The 

Company’s audit trail arrangements are 

described in Rule 520 and in Section 7.5 of the 

Compliance Manual.

The Company will enforce its Rules impartially. 

See Rules 301(a) and (f); see also Rules 701(b)

and (c). All additions to or modifications of the 

Rules will be published on the Company’s 

website pursuant to Rule 308.

Access Requirements

The Rulebook establishes a robust framework 

ensuring that Participants, Authorized Traders 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Core Principle 15 (Designation of a Chief 

Compliance Officer)

and Authorized Users accessing the Trading 

System comply with the terms and conditions of 

the Swaps listed for trading on the Trading 

System as well as with the CEA and CFTC 

Regulations. See also Section 9.1 of the 

Compliance Manual The criteria for becoming a 

Participant or Authorized Trader are set out in 

Rules 302 and 304, respectively, including the 

requirement that each Participant and Authorized 

Trader qualify as an “eligible contract participant” 

as defined in the CEA and CFTC Rules. Each 

Participant and Authorized Trader must nominate 

at least one employee to serve as an Authorized 

User. An Authorized User may access the 

Trading System on behalf of its designating 

Participant or Authorized Trader, or, to the extent 

permitted by Applicable Law, the Customers of 

its designating Participant or Authorized Trader. 

See Rule 301, Rule 305. Each Participant and 

Authorized Trader must also designate one or 

more Designated Representatives to represent 

such Participant or Authorized Trader before the 

Company. See Rule 309.

Independent software vendors may access the 

Trading System provided they satisfy the 

Company’s technological integrity requirements. 

See Rule 306. Any Participant, Authorized 

Trader, Authorized User or Customer is subject 

to the Company’s jurisdiction. See Rule 310. 

Access to the Trading System by a Participant, 

Authorized Trader or Authorized User may be 

limited or revoked by the Company. See Rule 

307; Rule 717. 

The Company will apply Participant criteria in an 

impartial manner pursuant to an established 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

application process, which is further supported 

through oversight by a Participation Committee 

review process. See Rules 301(a) and 303.

A Participant may withdraw from the Company if 

the requirements of Rule 311 are met. Each 

Participant, Authorized Trader and Independent 

Software Vendor must pay dues, assessments 

and fees pursuant to Rule 312.

Rule Enforcement Program

The Company has adopted Rules that prohibit

abusive trading practices, including: acts 

detrimental to the Company or that are 

inconsistent with just and equitable principles of 

trade (Rule 503), fraudulent acts and abusive 

trading practices (Rule 504), fictitious or non-

competitive transactions (Rule 505), market 

manipulation (Rule 507), disruptive trading 

practices (Rule 508), misstatements (Rule 509), 

misuse of the trading system (Rule 510), wash 

sales (Rule 516), and pre-negotiated or non-

competitive trades, including money passes 

(Rule 517). The Company has also adopted 

Rules relating to protection of Customers. See 

Rules 512-513, 518, 519.

The Company has sufficient resources to ensure 

the maintenance and enforcement of its Rules, 

which is the responsibility of the Chief 

Compliance Officer (“CCO”), who supervises the 

Market Regulation Department. See also

Section 9.3 of the Compliance Manual. The 

CCO monitors the Company’s compliance with 

all regulatory, legal, and internal rules, policies 

and procedures and is also responsible for 

supervising the Company’s self-regulatory 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

obligations. See Core Principle 15 (Designation 

of a Chief Compliance Officer). The CCO also

enforces the Company’s Rules and has available 

to him or her the members of the Market 

Regulation Department and such other resources 

as may be necessary to conduct investigations of 

alleged rule violations and market conditions. 

The CCO reports to the Board as well as to the 

Regulatory Oversight Committee, which 

oversees the Company’s regulatory program on 

behalf of the Company’s Board of Directors. The 

Regulatory Oversight Committee has the 

authority, among other things, to (1) monitor the 

Company’s regulatory program for sufficiency, 

effectiveness, and independence and (2) 

oversee all facets of the regulatory program. See

Core Principle 12 (Conflicts of Interest). 

The Regulatory Services Provider provides 

certain regulatory services to the Company

pursuant to a Regulatory Services Agreement, 

including responsibility for the Company’s ongoing market surveillance functions. In particular 

the Regulatory Services Provider will perform 

trade practice and market surveillance activities 

using its automated trade surveillance system. 

Additional detail regarding this system is set out 

in Sections 7.1 – 7.3 of the Compliance Manual. 

Real-time market monitoring will be performed by 

the Company in accordance with the provisions 

of Section 7.4 of the Compliance Manual, which 

sets out procedures for addressing suspicious 

activities. 

The Company has the authority to enforce 

compliance with the provisions of its Rulebook, 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

including those Rules prohibiting fraudulent acts, 

market disruption, market manipulation and 

misstatements of material fact. The Company 

also has the power, at any time, to revoke, 

suspend, limit, condition, restrict, or qualify the 

trading privileges of any Participant either due to 

the occurrence of an enumerated “termination 

event” or the Company determines, in its sole 

discretion, such action is in the Company’s best 

interests. See Rule 405; Rule 717. The Company 

also has the sole power to revoke or suspend the 

designation of a Participant’s Authorized Trader.

The Market Regulation Department is 

responsible for investigating potential Rule 

violations and may conduct preliminary inquiries 

of potential irregularities or exceptions and 

request information from Participants. See 

Section 8.2 of the Compliance Manual. At the 

conclusion of an investigation, the Market 

Regulation Department will issue an investigation 

report and may recommend either closing the 

matter or propose other measures. The CCO will 

review the investigation report and determine 

whether further action is appropriate, including 

possibly submitting the investigation to a Review 

Panel to determine whether to file charges or 

having the Market Regulation Department file 

charges directly without going to a Review Panel. 

As described further below, the Company has 

enforcement and disciplinary procedures in place 

in the event that Participants or any of their 

Authorized Traders and Authorized Users do not 

comply with the Rules. 

Regulatory Services Provider
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Pursuant to Rule 720, the Company may 

delegate certain self-regulatory responsibilities to 

a Regulatory Services Provider. See also Section 

10.3 of the Compliance Manual. As described 

above, the Regulatory Services Provider 

provides certain regulatory services to the 

Company pursuant to a Regulatory Services 

Agreement, including responsibility for the 

Company’s on-going market surveillance 

functions. 

Although some investigatory functions may be 

delegated to the Regulatory Services Provider, 

the Company retains ultimate decision-making 

authority with respect to any functions that are 

delegated to the Regulatory Services Provider.

Audit Trail

The Company’s audit trail processes are set out 

in Rule 520 and Section 7.5 of the Compliance 

Manual. The audit trail is designed to capture 

trading information that is sufficient to allow the 

Company to determine whether Rule violations 

have occurred. The audit trail is based on 

original, unalterable and sequentially-identified 

records that are recorded in an electronic history 

database which includes all information input into 

the Trading System, the type of Participant for 

which a trade is executed, timing and sequencing 

data to permit trade reconstruction and the 

identity of the account for which each trade is 

executed. Audit trail data is maintained in 

accordance with the CFTC’s recordkeeping 

requirements and is organized such that the 

Chief Compliance Officer and/or the Regulatory 

Services Provider can search, sort and present 

the audit trail information to reconstruct trading 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

and identify potential violations. 

The Regulatory Services Provider conducts 

annual investigations of all members and market 

participants to verify compliance with the 

Company’s audit trail and recordkeeping 

requirements. The Company may sanction any 

member or market participant in connection with 

any deficiencies identified in these reviews.

Disciplinary Procedures and Sanctions

The Company’s disciplinary procedures are set 

out in Chapter 7 of the Rules, the Compliance 

Manual and in the Regulatory Services 

Agreement with the Regulatory Services 

Provider. 

The Rules set out detailed requirements relating 

to the Company’s disciplinary arrangements,

including the potential respondent’s right to 

respond to an investigative report (Rule 704), 

preparation and service of a notice of charges 

(Rules 706, 707), the respondent’s right to file an 

answer to a notice of charges (Rule 708), 

settlements (Rule 709), convening hearings of 

the Review Panel (Rule 710), the respondent’s 

right to review evidence (Rule 711), conducting 

hearings of the Disciplinary Panel (Rule 712), 

decisions of the Disciplinary Panel (Rule 713) 

and the imposition of sanctions (Rule 714). 

Orders of the Hearing Panel may be appealed to 

a three-member Appeals Panel, whose decision 

is final and may not be further appealed within 

the Company.

Sanctions on a Participant may include: inter alia

(1) censure; (2) limitation on Trading Privileges, 

ability to otherwise access the Trading System, 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

and/or other activities, functions or operations; 

(3) suspension of Trading Privileges and/or 

ability to otherwise access the Trading System; 

(4) fines of up to $100,000 per violation; (5) 

restitution or disgorgement; (6) termination of 

Trading Privileges and/or ability to otherwise 

access the Trading System; or (7) any other 

sanction or remedy deemed to be appropriate. 

The rights and responsibilities of a market 

participant after termination or suspension are 

set out in Rule 718.

In addition, the CCO has the power to impose 

summary fines and suspensions and may further 

summarily revoke, limit, condition, restrict or 

qualify a Participant’s Trading Privileges and/or 

ability to otherwise access the Trading System 

for certain Rule violations. See Rules 716, 717.

The composition of any Review Panel, 

Disciplinary Panel and Appeals Panel will meet 

the applicable requirements of the CFTC 

Regulations. 

The Company may provide notice of disciplinary 

proceedings in accordance with the requirements 

of Rule 719.

CORE PRINCIPLE 3

SWAPS NOT READILY SUSCEPTIBLE TO 

MANIPULATION.— The swap execution facility 

shall permit trading only in swaps that are not 

readily susceptible to manipulation.

Exhibit O (Compliance Manual)

Section 3.2.5 (Listing of Products Not 

Readily Subject to Manipulation)

The CCO will review compliance with Core 

Principle 3 in connection with the preparation of a 

product filing to the CFTC on the listing for 

trading of a new swap. This review will include 

discussions with business staff on the terms and 

conditions of the swap, with particular emphasis 

given to calculation of the reference price to be 

utilized for that swap. In addition, the CCO will 

conduct a similar review from time to time of the 

reliability of such reference prices for each swap 
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listed for trading. 

CORE PRINCIPLE 4

MONITORING OF TRADING AND TRADE 

PROCESSING.— The swap execution facility 

shall—

(A) establish and enforce rules or terms and 

conditions defining, or specifications detailing—

(i) trading procedures to be used in entering 

and executing orders traded on or through the 

facilities of the swap execution facility; and

(ii) procedures for trade processing of swaps on 

or through the facilities of the swap execution 

facility; and

(B) monitor trading in swaps to prevent 

manipulation, price distortion, and disruptions of 

the delivery or cash settlement process through 

surveillance, compliance, and disciplinary 

practices and procedures, including methods 

for conducting real-time monitoring of trading 

and comprehensive and accurate trade 

reconstructions.

Exhibit M (Rulebook)

Rule 401 (Duties and Responsibilities of 

Participants and Authorized Traders)

Rule 520 (Recordkeeping; Audit Trail)

Rule 906 (Information-Sharing Agreements)

Rule 912 (Emergencies)

Exhibit O (Compliance Manual)

Section 7 (Daly Market Surveillance)

Exhibit Q (Explanation of Trading System)

Exhibit S (Trading Data Maintenance)

Exhibit V (Technology Questionnaire)

See also:

Core Principle 2 (Compliance with the Rules)

Core Principle 8 (Emergency Authority)

In General

The Company will only allow authorized persons

to enter Orders or RFQs into the electronic 

Trading System. Any matched Orders or RFQs

will then be electronically executed by the 

Trading System following the workflows outlined 

in Exhibit Q, which will vary depending on the 

order and instrument types. After execution, the 

Swap will be electronically sent to a Derivatives 

Clearing Organization, if applicable, for 

processing.

As described above in the response to Core 

Principle 2 (Compliance with the Rules), the 

Company conducts real-time market monitoring 

of trading activity to detect anomalies in the 

Trading System. The market monitoring function 

allows the Company, acting through the Market 

Regulation Department, to modify or adjust 

prices or cancel trades to address errors or 

malfunctions in the Trading System. 

The Company also monitors trading through the 

use of the Regulatory Service Provider’s 

automated trade surveillance system, described 

in further detail above in the response to Core 

Principle 2 (Compliance with the Rules). See 

also Sections 7.1-7.3 of the Compliance Manual. 

In addition, the RSP’s automated trade 

surveillance system plays a key role in the 

Company’s audit trail procedures, which are 

described in more detail above in the response to 

Core Principle 2 (Compliance with the Rules). 

The Company conducts reviews not less than
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annually to assess compliance by members and 

market participants with these audit trail 

procedures. See also Rule 520; Section 5.2 of 

the Compliance Manual.

Physical-Delivery Swaps

The Company does not list Swaps for trading 

that are physically settled. To the extent that the 

Company does list a physically-settled Swap in 

the future, the Company (or the Regulatory 

Services Provider) will monitor the Swap’s terms 

and conditions in light of the underlying 

commodity market, the convergence of the price 

of the Swap with the price of the underlying 

commodity and the adequacy of deliverable 

supply of the underlying commodity.

Cash-Settled Swaps

In respect of each cash-settled Swap listed for 

trading on the Trading System, the Company (or 

the Regulatory Services Provider) will monitor 

the pricing of the index or other value against 

which the Swap will be settled. 

Ability to Obtain Information

Pursuant to Rule 906, the Company may enter 

into any information-sharing agreement in order 

to, among other things, coordinate surveillance 

with other trading platforms regarding Swaps and 

any related financial instruments. Each 

Participant, Authorized Trader and Authorized 

User is required pursuant to Rule 401(a)(8) to 

keep, or cause to be kept, complete and 

accurate books and records of their activity in the 

index or instrument used as a reference price, 

the underlying instrument and related derivatives 
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markets, and to make such books and records 

available for inspection by a representative of the 

Company (or of the Regulatory Services 

Provider).

Risk Controls for Trading

The CCO, or his or her designee, has the 

authority to pause or halt trading activity on the 

Trading System in response to an Emergency or 

to any condition that the CCO, or his or her 

designee, deems warrants such a pause or halt. 

See Section 7.7 of the Compliance Manual. See 

also Rule 912; Core Principle 8 (Emergency 

Authority).

CORE PRINCIPLE 5

ABILITY TO OBTAIN INFORMATION.—The 

swap execution facility shall—

(A) establish and enforce rules that will allow 

the facility to obtain any necessary information 

to perform any of the functions described in this 

section;

(B) provide the information to the Commission 

on request; and

(C) have the capacity to carry out such 

international information-sharing agreements as 

the Commission may require.

Exhibit M (Rulebook)

Rule 207 (Maintenance of Books and 

Records by the Company)

Rule 401 (Duties and Responsibilities of 

Participants and Authorized Traders)

Rule 402 (Required Notices)

Rule 403 (Inspections by the Company)

Rule 404 (Financial and Related Reporting 

Requirements)

Rule 904 (Confidentiality)

Rule 905 (Recording of Communications)

Rule 906 (Information-Sharing Agreements)

See also:

Core Principle 4 (Monitoring of Trading and 

The Rules ensure that the Company is able to 

obtain all information necessary to perform its 

regulatory obligations. Each Participant is 

obligated to provide the Company with copies of 

any financial reports submitted to such 

Participant’s regulator as well as to notify the 

Company immediately upon the occurrence of 

certain events that may have a material effect on 

such Participant’s ability to continue to meet the 

Company’s participant criteria. See Rule 402, 

Rule 404. The Company (or the Regulatory 

Services Provider) also has the right to conduct 

inspections pursuant to Rule 403.

The Company is required to keep, or cause to be 

kept, all books and records required to be 

maintained pursuant to the CEA and CFTC 

Regulations and to make such books and 

records available to the CFTC and the US 

Department of Justice. See Rule 207. In 

addition, each Participant, Authorized Trader and 

Authorized User is required to keep, or cause to 
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Trade Processing). be kept, complete and accurate books and 

records with respect to their activities on the 

Trading System and to make such books and 

records available to the Company or the 

Regulatory Services Provider. See Rule 401.

In addition, the Company:

• has the power to record conversations and 

retain copies of all electronic 

communications with Participants; and

• has the right to inspect and access all 

systems, equipment and software as well as 

the books and records of Participants.

The Rules permit the Company to share all 

information so obtained, as well as information 

relating to Orders and trades, with the CFTC 

staff. The rules also provide carve-outs from 

otherwise applicable confidentiality obligations to 

ensure that such information may be shared 

freely with the CFTC staff. See also Rule 904.

The Company (or the Regulatory Services 

Provider) may record conversations and retain 

copies of electronic communications between 

Company personnel and Participants, Authorized 

Traders, Authorized Users pursuant to Rule 905.

Finally, the Company is permitted under Rule

906 to enter into any information-sharing 

agreements or other arrangements or 

procedures, provided that the Company

considers such agreement or arrangement to be 

in furtherance of its purposes or duties or to 

comply with any law or regulation.

CORE PRINCIPLE 6 Exhibit M (Rulebook) The Company has position limit and 
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POSITION LIMITS OR ACCOUNTABILITY.—

(A) IN GENERAL.—To reduce the potential 

threat of market manipulation or congestion, 

especially during trading in the delivery month, 

a swap execution facility that is a trading facility 

shall adopt for each of the contracts of the 

facility, as is necessary and appropriate,

position limitations or position accountability for 

speculators.

(B) POSITION LIMITS.—For any contract that 

is subject to a position limitation established by 

the Commission pursuant to section 4a(a), the 

swap execution facility shall—

(i) set its position limitation at a level no higher 

than the Commission limitation; and

(ii) monitor positions established on or through 

the swap execution facility for compliance with 

the limit set by the Commission and the limit, if 

any, set by the swap execution facility.

Rule 521 (Position Limits; Exemptions)

Rule 522 (Position Accountability)

Rule 523 (Aggregation of Positions)

Rule 717 (Summary Suspensions and Other 

Summary Actions)

Exhibit O (Compliance Manual)

Section 7.3 (Market Surveillance)

Section 13 (Position Limits and Position 

Accountability)

accountability rules and utilizes these rules to 

restrict or assess the position size of a 

Participant or one or more of its Authorized 

Traders. See Rules 521 and 522. See also

Section 13 of the Compliance Manual. The 

Company also has the right under Rule 522 to 

request position and trading information in 

respect of a given Swap from any Person.

The Company’s real-time market monitoring and 

trade surveillance function identify certain events 

relating to open interest and large trading 

positions. See Section 7.3 of the Compliance 

Manual.

Failure of a Participant to abide by applicable 

position limits is subject to sanctions imposed by 

the Company as set out in Rule 714. 

CORE PRINCIPLE 7

FINANCIAL INTEGRITY OF TRANSACTIONS.—

The swap execution facility shall establish and 

enforce rules and procedures for ensuring the 

financial integrity of swaps entered on or 

through the facilities of the swap execution 

facility, including the clearance and settlement 

of the swaps pursuant to section 2(h)(1).

Exhibit M (Rulebook)

Rule 302 (Participant Eligibility 

Requirements)

Rule 304 (Authorized Traders)

Rule 305 (Authorized Users)

Rule 401 (Duties and Responsibilities of 

Participants and Authorized Traders)

Rule 404 (Financial and Related Reporting 

Requirements)

Rule 406 (Customers)

Rule 409 (Anti-Money Laundering 

The Company ensures the financial integrity of 

its Swaps through rules and procedures relating 

to the following:

• criteria that Participants, Authorized Traders 

and Authorized Users, must meet pursuant 

to Rules 302, 304 and 305;

• the Participant Committee;

• powers to limit or suspend access to trading; 

and

• clearing arrangements with one or more 

Derivatives Clearing Organizations.
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Obligations)

Exhibit O (Compliance Manual)

Section III.E (Financial Surveillance)

Section X.C(Financial Integrity)

Exhibit N(360 Trading Networks Inc.

Participant Agreement)

Exhibit T (Clearing Agreements)

See also:

Core Principle 4 (Monitoring of Trading and 

Trade Processing)

Core Principle 8 (Emergency Authority)

Core Principle 12 (Conflicts of Interest)

The Company’s Rulebook requires that each 

Participant, inter alia: (1) is an Eligible Contract 

Participant; (2) is not insolvent and has not filed 

for bankruptcy; (3) holds all required 

registrations; and (4) is not subject to a statutory 

disqualification under the CEA. In addition, each 

Participant and Authorized Trader is subject to 

certain anti-money laundering requirements set 

out in Rule 409.

In addition, all Participants must execute a 360 

Trading Networks Inc. Participant Agreement. 

See Exhibit N.

The Company’s Participant Committee is 

responsible for determining the standards and 

requirements for initial and continuing Participant 

eligibility and for reviewing appeals of denials of 

Participant applications. The Participant 

Committee is also responsible for approving

rules that would result in different categories or 

classes of Participants receiving disparate 

access to the Trading System. See Core 

Principle 12 (Conflicts of Interest).

The Company also has the power to revoke, 

suspend, limit, condition, restrict or qualify a 

Participant’s Trading Privileges and/or ability to 

access the Trading System, if in the sole 

discretion of the Company, such action is in the 

best interests of the Company. The Company 

may also, in the exercise of its emergency 

powers, impose additional restrictions on access 

to the Trading System. See Core Principle 8 

(Emergency Authority).

CORE PRINCIPLE 8 Exhibit M (Rulebook) Rule 912 and Section 7.7 of the Compliance 

Manual set out the procedures to be taken upon 
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EMERGENCY AUTHORITY.—The swap 

execution facility shall adopt rules to provide for 

the exercise of emergency authority, in 

consultation or cooperation with the 

Commission, as is necessary and appropriate, 

including the authority to liquidate or transfer 

open positions in any swap or to suspend or 

curtail trading in a swap.

Rule 101 (Definition of “Emergency”)

Rule 201 (Board)

Rule 912 (Emergencies)

Exhibit O (Compliance Manual)

Section 3.2.8 (Emergency Rule Certification)

Section 7.7 (Emergency Powers)

the occurrence of an Emergency, which is 

defined in Rule 101 to include any circumstance 

which, in the opinion of the Board, the Chairman 

or the Chief Executive Officer, requires 

immediate action and which threatens or may 

threaten the fair and orderly trading in, or the 

settlement or integrity of, any Swap traded on or 

through the Trading System. 

If an Emergency occurs, the Board may, subject 

to the CEA and the CFTC Regulations, adopt 

temporary emergency procedures and rules to 

authorise appropriate Officers, Directors or the 

Board itself (subject to appropriate conflict of 

interest considerations) to take such actions that 

are necessary or appropriate to address the 

emergency, including but not limited to:

• suspending or curtailing trading or limiting 

trading to liquidation only;

• extending, limiting or changing trading hours;

• temporarily modifying or suspending rules;

• imposing or modifying price limits; and/or

• imposing or modifying position limits.

Ordinarily Emergency Rules may only be 

authorized by majority vote of a duly constituted 

meeting of the Board, however the Chief 

Executive Officer may act without the vote of the 

Board, provided that the Board be convened as 

soon as practicable.

Participants shall be notified of any Emergency 

Rules taken through a Notice to Participants and 

the Company shall use all reasonable efforts to 

notify the CFTC prior to implementing, modifying 
61085646 18

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

or terminating an Emergency Rule. If practicable, 

Emergency Rules should be filed with the CFTC 

prior to their implementation, however where 

such prior filing is not possible, an Emergency 

Rule will be filed with the CFTC no later than 24 

hours after its implementation.

All actions taken in response to an Emergency 

shall be documented and maintained in 

accordance with the Company’s recordkeeping 

policies.

CORE PRINCIPLE 9

TIMELY PUBLICATION OF TRADING 

INFORMATION.—

(A) IN GENERAL.—The swap execution facility 

shall make public timely information on price, 

trading volume, and other trading data on 

swaps to the extent prescribed by the 

Commission.

(B) CAPACITY OF SWAP EXECUTION 

FACILITY.—The swap execution facility shall 

be required to have the capacity to 

electronically capture and transmit trade 

information with respect to transactions 

executed on the facility..

Exhibit M (Rulebook)

Rule 407 (Publication of Trade Information)

Rule 525 (Confirmation of Transactions)

Rule 528 (Swap Data Reporting)

Rule 529 (Updating Required Swap Creation 

Data)

Exhibit O (Compliance Manual)

Section 15 (Transaction Reporting)

See also:

Core Principle 4 (Monitoring of Trading and 

Trade Processing).

In accordance with Part 16 of the CFTC 

Regulations, the Company publishes daily 

market volume data reports for each Swap (or 

class of Swap) either by reference to the number 

of contracts traded, in the case of standard-sized 

Swaps, or in terms of notional value, for nonstandard-sized Swaps. In addition, the Company

publishes for each trading day, by tenor of the 

Swap, the opening price and the high and low

prices. See Section 15.2 of the Compliance 

Manual. In addition, the Company will publish a

settlement price for each such Swap except that, 

in the case of swaps listed for clearing by a 

derivatives clearing organization, the applicable 

settlement price will be the settlement price 

established by the Derivatives Clearing 

Organization and the Company’s website will 

contain a hyperlink to the relevant settlement 

information.

The Company submits electronic reports of all 

primary economic terms data for each Swap to a 

registered swap data repository immediately 

following execution of the swap. See Rule 529. 

All such reports meet the standards set out in 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

CFTC Regulation 45.3, including the requirement 

to produce a unique swap identifier for each 

transaction. These electronic reports discharge 

the Company’s requirement to provide real-time 

public dissemination of trades executed on the 

Trading System, however the Company retains 

the right to engage a third-party service provider 

to provide public dissemination of this trading 

information. The Company also issues 

confirmations of transactions pursuant to Rule 

525.

The Company has the ability to capture 

electronically and subsequently transmit trade 

information relating to transactions executed on 

the Trading System as part of its audit trail 

procedures. See Core Principle 4 (Monitoring of 

Trading and Trade Processing).

CORE PRINCIPLE 10

RECORDKEEPING AND REPORTING.—

(A) IN GENERAL.—A swap execution facility 

shall—

(i) maintain records of all activities relating to 

the business of the facility, including a complete 

audit trail, in a form and manner acceptable to 

the Commission for a period of 5 years;

(ii) report to the Commission, in a form and 

manner acceptable to the Commission, such 

information as the Commission determines to 

be necessary or appropriate for the 

Commission to perform the duties of the 

Commission under this Act; and

(iii) shall keep any such records relating to 

Exhibit M (Rulebook)

Rule 207 (Maintenance of Books and 

Records by the Company)

Rule 520 (Recordkeeping; Audit Trail) 

Rule 906 (Information-Sharing 

Arrangements)

Exhibit O (Compliance Manual)

Section 17.3 (Notifications)

Section 15 (Transaction Reporting)

Section 3.1.1 (SEF Compliance Information 

Reporting)

Section 16 (Recordkeeping Requirements)

Rule 207 requires the Company to keep, or 

cause to be kept, complete and accurate books 

and records required to be maintained pursuant 

to the CEA and CFTC Regulations. Such books 

and records shall be retained for at least 5 years 

and shall be made readily available to the CFTC 

or the Department of Justice for the first 2 years 

of such 5 year period. Rule 520 also imposes 

recordkeeping requirements on any Person 

submitting an Order or RFQ to the Trading 

System. The Rules authorize the Company to 

enter into information-sharing arrangements with, 

inter alia, the CFTC and to provide such 

information to the CFTC as the Company deems 

necessary and appropriate to exercise a legal or 

regulatory function. See Rule 906. 

Section 15 of the Compliance Manual sets out 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

swaps defined in section 1a(47)(A)(v) open to 

inspection and examination by the Securities 

and Exchange Commission.

(B) REQUIREMENTS.—The Commission shall 

adopt data collection and reporting 

requirements for swap execution facilities that 

are comparable to corresponding requirements 

for derivatives clearing organizations and swap 

data repositories.

Section 3.1.1 (Equity Transfers)

See also:

Core Principle 4 (Monitoring of Trading and 

Trade Processing)

Core Principle 9 (Timely Publication of Trading 

Information)

the Company’s policies relating to transaction 

reporting, including Part 16 reporting, real-time 

public reporting and swap data reporting. 

Section 16 of the Compliance Manual sets out 

the Company’s recordkeeping requirements. 

Section 17.3 of the Compliance Manual set out 

the Company’s material event reporting 

procedures and Section 3.1.1 obliges the 

Company to notify the CFTC in the event of 

certain equity transfers.

Section 3.1.1 of the Compliance Manual requires 

the Company to report to the CFTC, in the 

manner and form acceptable to the CFTC, any 

information that the CFTC determines is 

necessary or appropriate to perform its duties 

under the CEA. The Company, acting through 

the Market Regulation Department, has a similar 

right to obtain information from each Participant 

as deemed necessary to enable the Company to 

perform its obligations under the CEA and CFTC 

Regulations. 

The Company’s audit trail procedures ensure 

that all data gathered as part of the audit trail is 

maintained in accordance with the CFTC 

Regulations. See Core Principle 4 (Monitoring of 

Trading and Trade Processing). 

The Company also provides reports of primary 

economic data to a registered swap data 

repository and ensures real-time public 

dissemination of such trading data. See Core 

Principle 9 (Timely Publication of Trading 

Information).

CORE PRINCIPLE 11 Exhibit O (Compliance Manual) The Rules and the Company’s policies have 

been designed to avoid any unreasonable 
61085646 21

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

ANTITRUST CONSIDERATIONS.—Unless 

necessary or appropriate to achieve the 

purposes of this Act, the swap execution facility 

shall not—

(A) adopt any rules or taking any actions that 

result in any unreasonable restraint of trade; or

(B) impose any material anticompetitive burden

on trading or clearing.

Section 3.2.1 (Anti-Trust Considerations and 

Rule and Product Submissions)

See also:

Core Principle 2 (Compliance with Rules)

restraints on trade or the imposition of any 

material anticompetitive burden on trading. 

The Company will not restrict access or impose 

burdens on access to the Trading System in an 

anticompetitive manner between similarly 

situated market participants. 

CORE PRINCIPLE 12

CONFLICTS OF INTEREST.—The swap 

execution facility shall—

(A) establish and enforce rules to minimize 

conflicts of interest in its decision-making 

process; and 

(B) establish a process for resolving the 

conflicts of interest.

Exhibit A (Ownership and Control)

Exhibit B (Governance)

Exhibit C (Fitness Standards)

Exhibit M (Rulebook)

Rule 201 (Board)

Rule 203 (Qualifications of Directors, 

Officers, Committee Members, 

Disciplinary Panel Members, Review 

Panel Members and Appeal Panel 

Members

Rule 204 (Standing Committees)

Rule 205 (Additional Committees)

Rule 206 (Conflicts of Interest)

Rule 710 (Review Panel; Disciplinary Panel)

Rule 902 (Trading by Company Officials 

Prohibited; Misuse of Material, NonPublic Information)

The Rules have been drafted to ensure that the 

Company’s decision-making process includes 

independent perspectives through the inclusion 

of public directors. In particular, the Board of 

Directors must be composed of at least 35%, but 

no fewer than two, public directors. See Rule 

201. See also Section 19 of the Compliance 

Manual.

Public directors are also included in the 

Company’s three standing committees as follows

pursuant to Rule 204:

• the Regulatory Oversight Committee, which 

is responsible for overseeing the Company’s

regulatory program on behalf of the Board, 

shall be composed exclusively of public 

directors; 

• the Nominating Committee, which is 

responsible for identifying suitable 

candidates for the Board and administering 

the nominations process, must be composed 

of at least 51% public directors; and

• the Participant Committee, which is 

responsible for overseeing the admission 

and continuing eligibility of Participants, 
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CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

Exhibit O (Compliance Manual)

Section 19.6 (Annual Fitness Review)

Section 18.2.2 (Conflicts of Interest)

Section XII (Governance)

must be composed of at least 35%, but no 

fewer than two, public directors.

The CCO is responsible for undertaking a review 

at least annually to verify that board members 

serving as public directors continue to remain 

eligible to serve in that capacity. See Section 

19.6 of the Compliance Manual.

Rule 206 addresses conflicts of interest in 

decision-making, including means to determine 

whether an actual or potential conflict of interest 

exists as well as procedures for decision-making 

if a conflict of interest is present. Members of the 

Board are also subject to a Code of Conduct that 

includes provisions to mitigate conflicts of 

interest and an obligation to prevent the misuse 

or disclosure of confidential or otherwise nonpublic information. All employees must comply 

with a separate Code of Conduct containing 

similar obligations. The Company’s procedures 

for resolving conflicts of interest in its decisionmaking process are set out in Section 18.2.2 of 

the Compliance Manual.

In addition, Rule 902 limits the ability of certain 

“Covered Persons”, including Board members, 

Board committee members, and Disciplinary 

Panel and Appeals Panel Members, to trade 

directly or indirectly in a Swap or other 

commodity interest on the basis of material, nonpublic information obtained as a result of such 

individual’s responsibilities as a Covered Person.

To ensure that the Company exercises its 

disciplinary authority in an impartial manner, Rule 

710 requires the CCO to select as the chair of 

each Disciplinary Panel (i.e., each Hearing Panel 
61085646 23

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

and Review Panel) a person who would not be 

disqualified from serving as a public director and 

to ensure that the remaining members come 

from diverse industry groups so that no group or 

class of market participants dominates the 

Disciplinary Panel. A person serving on a 

Review Panel may not serve on the related 

Hearing Panel, and vice versa. The chairperson 

of any Appeal Panel must similarly be a person 

that would qualify as a public director.

CORE PRINCIPLE 13

FINANCIAL RESOURCES.—

(A) IN GENERAL.—The swap execution facility 

shall have adequate financial, operational, and 

managerial resources to discharge each 

responsibility of the swap execution facility.

(B) DETERMINATION OF RESOURCE 

ADEQUACY.—The financial resources of a 

swap execution facility shall be considered to 

be adequate if the value of the financial 

resources exceeds the total amount that would 

enable the swap execution facility to cover the 

operating costs of the swap execution facility for 

a 1-year period, as calculated on a rolling basis.

Exhibit I (Financial Information)

Exhibit O (Compliance Manual)

Section 14.2 (Financial Integrity/SEF 

Requirements)

The Company shall maintain financial resources 

that exceed the total amount needed to cover its

operating costs for a one-year period, as 

calculated on a rolling basis. The valuation of 

such resources will be adjusted to reflect market 

and credit risk. 

The Company’s financial resources will also 

include unencumbered, liquid assets equal to at 

least six months’ operating costs.

The CCO has established internal procedures to 

comply with the on-going financial reporting 

requirements of CFTC Rule 37.1306 so that the 

Company can calculate, on a quarterly basis, its 

anticipated operating costs for the next twelve 

months, and the value of its financial resources 

to cover those operating costs. See Section 14.2

of the Compliance Manual.

CORE PRINCIPLE 14

SYSTEM SAFEGUARDS.—The swap 

execution facility shall—

(A) establish and maintain a program of risk 

analysis and oversight to identify and minimize 

Exhibit M (Rulebook)

Rule 408 (Disaster Recovery; Business 

Continuity)

The Company has policies and procedures in 

place related to information technology, including 

system safeguards, which follows generallyaccepted standards and best practices with 

respect to the development, operation, reliability, 

security and capacity of automated systems. 
61085646 24

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

sources of operational risk, through the 

development of appropriate controls and 

procedures, and automated systems, that—

(i) are reliable and secure; and 

(ii) have adequate scalable capacity;

(B) establish and maintain emergency 

procedures, backup facilities, and a plan for 

disaster recovery that allow for—

(i) the timely recovery and resumption of 

operations; and 

(ii) the fulfilment of the responsibilities and 

obligations of the swap execution facility; and

(C) periodically conduct tests to verify that the 

backup resources of the swap execution facility 

are sufficient to ensure continued—

(i) order processing and trade matching; 

(ii) price reporting;

(iii) market surveillance and

(iv) maintenance of a comprehensive and 

accurate audit trail.

Exhibit O (Compliance Manual)

Section XI (Operational Requirements)

Exhibit S (Trading Data Maintenance)

Exhibit V (Technology Questionnaire)

Compliance with the technology policies is under 

the supervision of the Head of Technology and 

the CCO. The Company undertakes 

independent audits to assess compliance with 

the policies and procedures on an on-going

basis. 

The Company’s business, continuity and disaster 

recovery policies also require that a “mirror 

image” of all trade information is maintained at a 

separate data center. The Company’s systems 

reside with a managed hosting provider, and the 

ability to add new resources in terms of storage 

space, network bandwidth, and computing power 

will be constantly monitored and can be scaled 

up as needed. Additionally, all data will be 

backed up regularly to maintain integrity for all 

trade information required by law, regulation or 

internal policies and procedures to be maintained 

by the Company.

The Company intends to participate in industrywide business continuity and disaster recovery 

exercises organized by the Futures Industry 

Association. The Market Regulation Department 

will submit information to the Division of Market 

Oversight relating to material changes to the 

Company’s automated systems as part of the 

CFTC’s Market Continuity Program. 

The Company conducts periodic checks, no less 

than yearly, to assess sufficiency of systems 

back up resources.

Participants are required to have written disaster 

recovery and business continuity procedures in 

place and certain Participants that provide 

significant liquidity to the Trading System may be 
61085646 25

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

required to meet additional business continuity 

and testing requirements. See Rule 408.

CORE PRINCIPLE 15

DESIGNATION OF CHIEF COMPLIANCE 

OFFICER.—

(A) IN GENERAL.—Each swap execution 

facility shall designate an individual to serve as 

a chief compliance officer.

(B) DUTIES.—The chief compliance officer 

shall—

(i) report directly to the board or to the senior 

officer of the facility;

(ii) review compliance with the core principles in 

this subsection;

(iii) in consultation with the board of the facility, 

a body performing a function similar to that of a 

board, or the senior officer of the facility, 

resolve any conflicts of interest that may arise;

(iv) be responsible for establishing and 

administering the policies and procedures 

required to be established pursuant to this 

section;

(v) ensure compliance with this Act and the 

rules and regulations issued under this Act, 

including rules prescribed by the Commission 

pursuant to this section; and

(vi) establish procedures for the remediation of 

noncompliance issues found during compliance 

office reviews, look backs, internal or external 

audit findings, self-reported errors, or through 

Exhibit M (Rulebook)

Rule 202(a) (Officers)

Rule 203 (Qualifications of Directors, 

Officers, Committee Members, 

Disciplinary Panel Members, Review 

Panel Members and Appeal Panel 

Members

Rule 703 (Reports of Investigations)

Rule 705 (Review of Investigation Reports)

Rule 708 (Answer to Notice of Charges)

Rule 709 (Settlements)

Rule 710 (Review Panel; Disciplinary Panel)

Rule 714 (Sanctions)

Rule 716 (Summary Imposition of Fines) 

Rule 717 (Summary Suspension and Other 

Summary Actions)

Rule 718 (Rights and Responsibilities After 

Suspension or Termination)

Exhibit O (Compliance Manual)

Section 18 (Chief Compliance Officer)

Section 3.2 (Rule and Product Filings)

Section 18.3 (Annual Compliance Report)

Section 18.2.2 (Conflicts of Interest)

The Company has a CCO, who is responsible for 

taking reasonable steps to ensure compliance 

with the Act and the rules of the Commission

applicable to swap execution facilities. The CCO 

is appointed by a majority of the Board of the 

Company and must meet certain fitness 

standards, including that such person is not 

subject to a statutory disqualification under the 

CEA. See Rules 202, 203.

The duties and responsibilities of the CCO are 

primarily set out in Section 18 of the Company’s 

Compliance Manual and include the following: 

• resolving any conflicts of interest that arise in 

connection with the operations of the 

Company; 

• addressing instances of non-compliance by 

the Company’s directors, officers or 

employees with the Company’s own internal 

policies or procedures or with the 

requirements of the CEA or the CFTC 

Regulations applicable to swap execution 

facilities;

• generating a compliance manual that is 

designed to promote compliance by the 

Company and its directors, officers and 

personnel with the requirements of the CEA 

and CFTC Regulations applicable to the 

Company’s business activities;

• designing and administering a written code of 

conduct designed to promote ethical 

conduct by the Company and its directors, 
61085646 26

CORE PRINCIPLE RELATED RULES/DOCUMENTS APPLICANT COMMENTS

validated complaints.

(C) REQUIREMENTS FOR PROCEDURES.—

In establishing procedures under subparagraph 

(B)(vi), the chief compliance officer shall design 

the procedures to establish the handling, 

management response, remediation, retesting, 

and closing of noncompliance issues.

(D) ANNUAL REPORTS.—

(i) IN GENERAL.—In accordance with rules 

prescribed by the Commission, the chief 

compliance officer shall annually prepare and 

sign a report that contains a description of—

(I) the compliance of the swap execution facility 

with this Act; and

(II) the policies and procedures, including the 

code of ethics and conflict of interest policies, of 

the swap execution facility.

(ii) REQUIREMENTS.—The chief compliance 

officer shall—

(I) submit each report described in clause (i) 

with the appropriate financial report of the swap 

execution facility that is required to be 

submitted to the Commission pursuant to this 

section; and

(II) include in the report a certification that, 

under penalty of law, the report is accurate and 

complete.

officers and employees and to prevent 

ethical violations; 

• supervising key elements of the Company’s

self-regulatory program, including: (1) trade 

surveillance; (2) real-time market monitoring; 

(3) audit trail requirements; (4) enforcement 

and disciplinary proceedings, and (5) 

oversight of the Company’s Participants; and

• drafting, reviewing and approving submissions

to the CFTC in connection with listing any 

new swaps for trading or making any 

additions or amendments to the Rules.

The CCO is the officer in charge of the 

production of the Company’s Annual Compliance 

Report, including gathering relevant information, 

drafting, and ensuring that the report has been 

reviewed by the Regulatory Oversight Committee 

and the Board. The CCO is also responsible for 

ensuring that the Annual Report contains all 

information required by the CEA and CFTC 

Regulations and must certify that, under penalty 

of law, the report is accurate and complete. 

The CCO reports to the Board and may only be 

removed by a majority vote of the Board, in 

which case a replacement CCO, or temporary 

replacement CCO, must be appointed 

immediately. The appointment of the CCO, and 

of any replacement, must be notified to the CFTC 

within two (2) business days.

The CCO also plays a key role in the Company’s 

disciplinary procedures. See Rules 703, 705, 

708-10, 714, 716-18. See also Core Principle 2 

(Compliance with the Rules) 
61085646 27