U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5260

Facsimile: (202) 418-5527

Division of

Market Oversight

CFTC Letter No. 13-54

No-Action

September 27, 2013

Division of Market Oversight

Kenneth M. Rosenzweig 

Katten Muchin Rosenman LLP

525 W. Monroe Street

Chicago, IL 60661-3693

Re: No-Action Relief with Regard to Commission Regulation 40.2(a)(2)

Dear Mr. Rosenzweig:

This is in response to your letter dated September 19, 2013 (“Letter”), to the Division of 

Market Oversight (“DMO”) of the Commodity Futures Trading Commission (“Commission”). 

In the Letter, you request, on behalf of Nodal Exchange, LLC (“Nodal”), that DMO will not 

recommend that the Commission take enforcement action against Nodal if it lists futures 

contracts for trading by certification pursuant to Commission Regulation 40.2 on the date on 

which it commences operating as a designated contract market (“DCM”) and makes those 

contracts available for trading on such date without waiting one business day, as otherwise 

required by Regulation 40.2(a)(2). 

Nodal has been operating as an exempt commercial market (“ECM”) in compliance with 

Section 2(h)(3)-(7) of the Commodity Exchange Act (“CEA”) (as that provision was in effect 

prior to July 16, 2011). Since the repeal of those provisions by the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Nodal has continued to operate as an ECM pursuant to 

applicable Commission exemptive orders and staff no-action letters. Nodal applied for 

designation as a contract market on October 11, 2012 and the Commission is expected to 

designate Nodal as such, effective on September 30, 2013. Immediately upon such designation 

as a contract market, Nodal proposes to list the approximately 1,231 futures contracts that are 

currently offered on its ECM. Commission Regulation 40.2(a)(2) requires a DCM that proposes 

to list a new product pursuant to the self-certification procedures set forth in that regulation to 

provide notice and a copy of the terms and conditions of the futures contract one business day in 

advance of making the contract available for trading. 

Nodal, however, has offered and continues to offer its contracts for trading while 

operating as an ECM, and substantial open interest currently exists in those contracts, which are 

cleared by LCH.Clearnet Limited (“LCH”). Therefore, DMO recognizes that applying the 
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requirements of Commission Regulation 40.2(a)(2) to Nodal would potentially disrupt Nodal’s 

market operations and impact the ability of LCH and Nodal participants to manage the risks 

associated with those open positions in a material and detrimental manner. 

In light of the unique circumstance in applying Commission Regulation 40.2 to Nodal, 

DMO believes that no-action relief is necessary to prevent such market interruption and to ensure 

continuity in operations as Nodal transitions from operating as an ECM to operating as a DCM. 

Accordingly, DMO will not recommend that the Commission initiate an enforcement action 

against Nodal if it lists products for trading by certification under Commission Regulation 

40.2(a)(2) on the first day it operates as a DCM, and offers those products for trading on that 

date. This relief is provided to Nodal based on its submission of draft versions of the terms and 

conditions of those futures contracts in advance to Division staff, such that the terms and 

conditions will be available for review by DMO upon Nodal’s first date of operation as a DCM. 

DMO further notes that Nodal is the only ECM with open interest that will be designated as a 

contract market between now and October 1, 2013, and that therefore other similarly situated 

trading platforms may not avail themselves of this relief. 

This letter, and the no-action position taken herein, represents the views of DMO only, 

and does not necessarily represent the positions or views of the Commission or of any other 

division or office of the Commission’s staff. The no-action positions taken herein do not excuse 

Nodal from compliance with any other applicable requirements of the CEA or the Commission’s 

regulations thereunder. As with all no-action letters, DMO retains the authority to condition 

further, modify, suspend, terminate or otherwise restrict the terms of the no-action relief 

provided herein, in its discretion. 

If you have any questions concerning this correspondence, please contact Duane 

Andresen, Associate Director, at (202) 418-5492, or Jasmine Lee, Attorney Advisor, at (202) 

418-5226.

 

Sincerely,

David Van Wagner

Chief Counsel, Division of Market Oversight

Nancy Markowitz

Deputy Director, Division of Market Oversight