1 

Aristotle Exchange DCO – Exhibit A-1 

General Information/Compliance 

Attach as Exhibit A-1, a regulatory compliance chart setting forth each Core Principle and providing citations to the Applicant’s relevant 

rules, policies, and procedures that address each Core Principle, and a brief summary of the manner in which Applicant will comply with 

each Core Principle. 

Core Principle or Other Requirement Aristotle Exchange DCO Rule, Policy 

or Procedure 

Relevant Exhibit(s) 

Core Principle A – Compliance 

(i) General. To be registered and to maintain 

registration as a derivatives clearing organization, a 

derivatives clearing organization shall comply with 

each core principle described in this paragraph and 

any requirement that the Commission may impose 

by rule or regulation pursuant to section 8a(5). 

(ii) Discretion of Derivatives Clearing Organization. 

Subject to any rule or regulation prescribed by the 

Commission, a registered derivatives clearing 

organization shall have reasonable discretion in 

establishing the manner by which it complies with 

each core principle. 

(iii) Chief Compliance Officer. Each derivatives 

clearing organization shall establish the position of 

chief compliance officer, designate an individual to 

serve as the chief compliance officer, and provide 

the chief compliance officer with the full 

responsibility and authority to develop and enforce 

appropriate compliance policies and procedures. 

Aristotle Exchange DCO (“Aristotle 

DCO”) is applying for registration as a 

derivatives clearing organization 

(“DCO”) by submitting Form DCO (the 

“Application”). Once registered, 

Aristotle DCO will comply with the 

DCO Core Principles. As demonstrated 

in this Application, Aristotle DCO had 

drafted its Rules, Compliance Manual, 

Business Continuity and Disaster 

Recovery Plan, Enterprise Risk 

Management Plan, and has designed 

Aristotle DCO’s clearing operations to 

be compliant with the DCO Core 

Principles and the Commodity 

Exchange Act, as amended, and other 

applicable Commission regulations 

promulgated thereunder. 

This Application, including all exhibits and 

attachments. 
2 

(iv) Enterprise risk management. A derivatives 

clearing organization shall have an enterprise risk 

management program that identifies and assesses 

sources of risk and their potential impact on the 

operations and services of the derivatives clearing 

organization. 

Core Principle B – Financial Resources 

(i) General. A derivatives clearing organization shall 

have adequate financial, operational, and managerial 

resources, as determined by the Commission, to 

discharge each responsibility of the derivatives 

clearing organization. 

(ii) Minimum Financial Resources. At a minimum, 

each derivatives clearing organization shall possess 

financial resources that exceed the total amount that 

would: (1) Enable the derivatives clearing 

organization to meet its financial obligations to its 

clearing members notwithstanding a default by the 

clearing member creating the largest financial 

exposure for the derivatives clearing organization in 

extreme but plausible market conditions; and (2) 

Enable the derivatives clearing organization to 

cover its operating costs for a period of at least one 

year, calculated on a rolling basis. A derivatives 

Aristotle DCO maintains sufficient 

financial resources by operating a fullycollateralized DCO and by collecting an 

appropriate level of fees from 

Participants. Aristotle DCO plans to 

rely on relief previously granted to 

Nadex, LedgerX, and Eris Clearing, 

which explains that full collateralization 

is one way to protect against a clearing 

member default. 

Aristotle DCO has calculated its 

financial resource requirements, which 

equate to 30% of applicable DCM 

expenses. Those assumptions are 

presented in the financial report. Once 

operational, the Aristotle DCO projects 

its annual operating expenses necessary 

Exhibits B-1, B-2, B-3 and B-4 

Financial Resources Requirements 

Pro Forma Financial Report 

Financial Commitment Letter 

Bank Statement 

Projected Operating Costs 

Aristotle DCM Inc. Aristotle DCO Inc. 

Management Fee Arrangement Agreement 
3 

clearing organization shall identify and adequately 

manage its general business risks and hold sufficient 

liquid resources to cover potential business losses 

that are not related to clearing members' defaults, so 

that the derivatives clearing organization can 

continue to provide services as a going concern. 

to maintain a Commission-compliant 

DCO to equal approximately $1.03 

million for the first 12 months after 

launch (or approximately $86,000 per 

month). Based on the Aristotle DCO’s 

projected operating expenses, there is 

sufficient runway to ensure it is able to 

fund its first day of operations as a 

DCO.

Core Principle C – Participant and Product Eligibility 

(i) General. A derivatives clearing organization 

shall have (1) appropriate admission and continuing 

participation requirements for clearing members of 

the derivatives clearing organization that are 

objective, publicly disclosed, and risk-based; and 

(2) appropriate requirements for determining the 

eligibility of agreements, contracts, or transactions 

submitted to the derivatives clearing organization 

for clearing, taking into account the derivatives 

clearing organization's ability to manage the risks 

associated with such agreements, contracts, or 

transactions. 

(ii) Required Procedures. A derivatives clearing 

organization shall have procedures to verify, on an 

ongoing basis, the compliance of each clearing 

member with each participation requirement of the 

derivatives clearing organization. 

(iii) Requirements. The participation 

and membership requirements of each 

derivatives clearing organization shall: (1) be 

objective; (2) be publicly disclosed; and (3) permit 

fair and open access. 

Aristotle DCO has established 

transparent and objective Participant 

eligibility criteria that allow for open 

access. Rule 4(c) details the specific 

eligibility requirements to become a 

clearinghouse participant. Rule 4(d) 

provides the application approval 

process. 

Given the full collateralization model, 

clearing member positions will always 

be fully collateralized. Members will 

not be able to enter into positions on the 

designated contract market without 

adequate financial resources at the time 

of trading. 

Exhibits C-1 and C-2 

Participant Agreement and Disclosures 

Liquidity Provider Agreement 

User Agreement 

Aristotle DCO Rules 
4 

Core Principle D – Risk Management 

(i) General. A derivatives clearing organization 

shall ensure that it possesses the ability to manage 

the risks associated with discharging the 

responsibilities of the derivatives clearing 

organization through the use of appropriate tools 

and procedures. 

(ii) Measurement of Credit Exposure. A derivatives 

clearing organization shall: (1) Measure its credit 

exposure to each clearing member and mark to 

market such clearing member's open house and 

customer positions at least once each business day; 

and (2) Monitor its credit exposure to each clearing 

member periodically during each business day. 

(iii) Limitation of Exposure to Potential Losses from 

Defaults. A derivatives clearing organization shall 

limit its exposure to potential losses from defaults 

by its clearing members through margin 

requirements and other risk control mechanisms 

reasonably designed to ensure that: (1) The 

operations of the derivatives clearing organization 

would not be disrupted; and (2) Non-defaulting 

clearing members would not be exposed to losses 

that non-defaulting clearing members cannot 

anticipate or control. 

(iv) Margin Requirements. A derivatives clearing 

organization shall have initial margin requirements 

that are commensurate with the risks of each 

product and portfolio, including any unusual 

characteristics of, or risks associated with, particular 

products or portfolios. 

The Risk Management Framework 

details the processes and those 

responsible for identifying and 

managing risks associated with 

clearinghouse operations. 

Aristotle DCO employs a fullycollateralized model which requires 

each market participant must provide 

Aristotle DCO with collateral sufficient 

to cover the maximum potential loss of 

the contract before a position will be 

accepted for clearance. 

Procedures for collecting the collateral 

necessary to fully-collateralize each 

trade are set forth in the Compliance 

Manual. The Enterprise Risk 

Management Policy describes the way 

in which Aristotle DCO will manage its 

risks and any potential risks that could 

threaten the security of Aristotle DCO. 

The Calculation of Margin 

Requirements includes examples to 

illustrate that the calculations are 

conducted in a way to ensure that the 

participant does not violate Aristotle 

DCO’s rule for full collateralization on 

the part of each participant in all 

transactions. 

Exhibits D-1, D-2, D-3 and D-4 

Enterprise Risk Management Policy 

Compliance Manual 

Aristotle DCO Rules 

Risk Management Framework 

Calculation of Margin Requirements 
5 

(v) Requirements Regarding Models and 

Parameters. Each model and parameter used in 

setting initial margin requirements shall be riskbased and reviewed on a regular basis.

Core Principle E – Settlement Procedures

(i) Daily Settlement. A derivatives clearing 

organization shall effect a settlement with each 

clearing member at least once each business day, 

and shall have the authority and operational capacity 

to effect a settlement with each clearing member, on 

an intraday basis, either routinely, when thresholds 

specified by the derivatives clearing organization 

are breached, or in times of extreme market 

volatility. 

(ii) Settlement Banks. A derivatives clearing 

organization shall employ settlement arrangements 

that eliminate or strictly limit its exposure to 

settlement bank risks, including the credit and 

liquidity risks arising from the use of such bank(s) 

to effect settlements with its clearing members. 

(iii) Settlement Finality. A derivatives clearing 

organization shall ensure that settlements are final 

when effected 

All clearinghouse activity is settled in 

real time, that is, at the time of match 

and acceptance for clearing. This is 

irrespective of market conditions. Daily 

settlement procedures are for deposits 

and withdrawals; collateral is not 

collected on a variation margin basis. 

Aristotle DCO’s settlement bank is 

EagleBank, which is further detailed in 

the Bank Services Agreement attached 

to Exhibit F-1. 

When it is determined that the outcome 

of the underlying event has occurred per 

the market and the market is closed, the 

funds are assigned to the participants 

holding the contracts. Any applicable 

funds for contracts that were deemed to 

be in the money for the event are then 

immediately available in the 

Participant’s account balance, less 

associated transaction fees. 

Exhibits E-1, E-2 and E-3 

Aristotle DCO Rules 

Banking Relationship Analysis 

Core Principle F – Treatment of Funds 

(i) Required Standards and Procedures. A 

derivatives clearing organization shall establish 

standards and procedures that are designed to 

protect and ensure the safety of funds and assets 

belonging to clearing members and their customers. 

Aristotle DCO will keep all Member 

Property in a segregated account at 

EagleBank. Pursuant to Section 2(II) of 

the Enterprise Risk Management Policy 

Manual, the Chief Risk Officer is 

responsible for monitoring all approved 

Exhibits F-1, F-2 and F-3 

Aristotle DCO Rules 

Member Property Letter 

Aristotle Banking Relationship Guidelines 

Bank Services Agreement 

Enterprise Risk Management Policy Manual 
6 

(ii) Holding of Funds and Assets. A derivatives 

clearing organization shall hold funds and assets 

belonging to clearing members and their customers 

in a manner which minimizes the risk of loss or of 

delay in the access by the derivatives clearing 

organization to such funds and assets. 

(iii) Permissible Investments. Funds and assets 

belonging to clearing members and their customers 

that are invested by a derivatives clearing 

organization shall be held in instruments with 

minimal credit, market, and liquidity risks. 

banks and recommending additional 

banks as appropriate. 

Rule 6(b) requires Aristotle DCO to at 

all times account for, segregate, and 

maintain at a settlement bank all funds 

held in participant clearing accounts. 

The arrangement with the settlement 

bank is documented as an attachment to 

Exhibit F-1, which stipulates how the 

bank will handle and safeguard the 

funds. 

Rule 6(k) requires that all member 

property that is invested by the 

clearinghouse shall be held in 

instruments that comply with 

Commission Regulations 1.25 and 

39.15(e).

Core Principle G – Default Rules and Procedures 

(i) General. A derivatives clearing organization shall 

have rules and procedures designed to allow for the 

efficient, fair, and safe management of events 

during which clearing members become insolvent or 

default on the obligations of such clearing members 

to the derivatives clearing organization. 

(ii) Default Procedures. A derivatives clearing 

organization shall: (1) Have procedures that would 

permit the derivatives clearing organization to take 

timely action to contain losses and liquidity 

pressures and to continue meeting its obligations in 

the event of a default on the obligations of a 

clearing member to the derivatives clearing 

organization; (2) Have rules that set forth its default 

Aristotle DCO operated a fullycollateralized DCO . By requiring 

100% of the funds necessary to fully 

collateralize a Participant’s position to 

be on deposit before an order may be 

entered or a trade is executed, Aristotle 

DCO is not exposed to the risk of 

default by Participants. Accordingly, by 

adhering to the full collateralization 

clearing model, Aristotle DCO 

demonstrates compliance with the 

Commission’s default rules and 

procedures requirements. 

Exhibit G 

Compliance Manual 

Aristotle DCO Rules 
7 

procedures; and (3) Make its default rules publicly 

available.

Core Principle H – Rule Enforcement 

A derivatives clearing organization shall: (1) 

Maintain adequate arrangements and resources for 

the effective monitoring and enforcement of 

compliance with the rules of the derivatives clearing 

organization and the resolution of disputes; (2) Have 

the authority and ability to discipline, limit, 

suspend, or terminate the activities of a clearing 

member due to a violation by the clearing member 

of any rule of the derivatives clearing organization; 

and (3) Report to the Commission regarding rule 

enforcement activities and sanctions imposed 

against clearing members. 

Aristotle DCO has the authority and 

ability to enforce Aristotle DCO Rules. 

Pursuant to Chapter 8, any person that 

directly or indirectly effects a 

transaction on Aristotle DCO or any 

participant or authorized trader shall be 

subject to Aristotle DCO’s jurisdiction 

for matters of discipline and rule 

enforcement. 

As set forth in Chapter 7, violations of 

any of the provisions may result in 

temporary or permanent suspension of 

trading privileges for a participant. If 

the Compliance Department initiates an 

investigation in which any Affiliate of 

Aristotle Exchange is a subject, the 

Chief Regulatory Officer shall notify 

the Commission. At the conclusion of 

any such investigation, the Chief 

Regulatory Officer shall provide the 

Commission with a copy of the 

documentation. 

Exhibit H 

Compliance Manual 

Aristotle DCO Rules 

Core Principle I – System Safeguards 

(i) General. A derivatives clearing organization shall 

establish and maintain a program of risk analysis 

and oversight with respect to its operations and 

automated systems to identify and minimize sources 

of operational risk through the development of 

appropriate controls and procedures automated 

systems that are reliable, secure, and have adequate 

scalable capacity.

Aristotle DCO reviews and promulgates 

the manuals, rules, policies, procedures 

and processes covering all aspects of 

the technology used. The COO is 

required to establish the clearinghouse’s 

operational requirements, including the 

approval of technical specifications and 

system acceptance, financial workflows 

Exhibit I 

Technology Questionnaire 

Information Security Access Control Policy 

Information Security Access Control 

Procedure 

Capacity Management Policy 

Capacity Management Procedure 

Critical Services Resources Policy
8 

(ii) Business Continuity and Disaster Recovery. A 

derivatives clearing organization shall establish and 

maintain a business continuity and disaster recovery 

plan, emergency procedures, and physical, 

technological, and personnel resources sufficient to 

enable the timely recovery and resumption of 

operations and the fulfillment of each obligation and 

responsibility of the derivatives clearing 

organization, including, but not limited to, the daily 

processing, clearing, and settlement of transactions, 

following any disruption of its operations. 

(iii) Testing. A derivatives clearing organization 

shall conduct regular, periodic, and objective testing 

and review of its automated systems to ensure that 

they are reliable, secure, and have adequate scalable 

capacity and its business continuity and disaster 

recovery capabilities, using testing protocols 

adequate to ensure that the derivatives clearing 

organization's backup resources are sufficient

and related reporting, and day-to-day 

activities, including managing and 

training personnel. 

Aristotle DCO has established a 

Business Continuity and Disaster 

Recovery Plan. Section 2 of the 

Enterprise Risk Management Policy 

requires Aristotle DCO to conduct a 

business continuity test at least once per 

year. 

The Technology Questionnaire 

describes the automated system 

components and the distribution of 

personnel who oversee the automated 

systems. 

Business Continuity and Disaster Recovery 

Plan 

Enterprise Risk Management Plan 

Event Log Management and Audit Policy 

Software Development Process 

Security Policy 

Risk Management Procedure 

Valley Forge Data Center Specification 

Sheet and 

Coresite Datacenter Specifications 

Critical Service Resource List 

Quality Assurance Policies and Procedures 

Technology Questionnaire 

Enterprise Technology Risk Assessment 

Management Policy 

External Penetration Testing Process 

Patch Management Policy 

Problem and Incident Management 

Procedures 

Core Principle J – Reporting 

A derivatives clearing organization shall provide to 

the Commission the information specified in this 

section and any other information that the 

Commission determines to be necessary to conduct 

oversight of the derivatives clearing organization. 

Aristotle DCO will submit required 

reports, including, but not limited to, 

daily trade data reports, investigation 

reports, annual volume reports, and 

event-specific reporting. Additionally, 

the Commission will be promptly 

notified of any electronic trading halts 

or interruptions, significant system 

malfunctions, cybersecurity incident 

that jeopardize automated system 

operations, any activation of the 

business continuity-disaster recovery 

plan, and any planned changes to 

Exhibit J 

Compliance Manual 
9 

automated systems that may impact 

reliability or any risk analysis program. 

Core Principle K – Recordkeeping 

A derivatives clearing organization shall maintain 

records of all activities related to its business as a 

derivatives clearing organization for not less than 5 

years and in in a form and manner that is acceptable 

to the Commission. 

Section VI of the Compliance Manual 

sets forth Aristotle DCO’s 

recordkeeping policy. The maintenance 

and retention for exchange records of 

trade is further detailed in the Event 

Log Management and Audit Policy. 

Exhibit K 

Compliance Manual 

Event Log Management and Audit Policy 

Core Principle L – Public Information 

(i) General. A derivatives clearing organization shall 

provide to market participants sufficient information 

to enable the market participants to identify and 

evaluate accurately the risks and costs associated 

with using the services of the derivatives clearing 

organization. 

(ii) Availability of Information. A derivatives 

clearing organization shall make information 

concerning the rules and the operating and default 

procedures governing the clearing and settlement 

systems of the derivatives clearing organization 

available to market participants. 

(iii) Public Disclosure. A derivatives clearing 

organization shall make the following information 

readily available to the general public, in a timely 

manner, by posting such information on the 

derivatives clearing organization's website: (1) The 

terms and conditions of each contract, agreement, 

and transaction cleared and settled by the 

derivatives clearing organization; (2) Each clearing 

and other fee that the derivatives clearing 

organization charges its clearing members; (3) 

Information concerning its margin-setting 

Aristotle DCO makes various 

information publicly available on its 

website, including current copies of the 

Rulebook, contract specification, 

settlement prices, volume, open interest, 

and Participant notices. 

Exhibit L 

Aristotle DCO Rules 

Public Information Procedure 
10 

methodology; (4) The size and composition of the 

financial resource package available in the event of 

a clearing member default; (5) Daily settlement 

prices, volume, and open interest for each contract, 

agreement, or transaction cleared or settled by the 

derivatives clearing organization; (6) The 

derivatives clearing organization's rulebook; (7) A 

current list of all clearing members; (8) A list of all 

swaps that the derivatives clearing organization will 

accept for clearing; and (9) Any other information 

that is relevant to participation in the clearing and 

settlement activities of the derivatives clearing 

organization.

Core Principle M – Information Sharing 

A derivatives clearing organization shall enter into, 

and abide by the terms of, each appropriate and 

applicable domestic and international informationsharing agreement, and shall use relevant 

information obtained from each such agreement in 

carrying out the risk management program of the 

derivatives clearing organization. 

Aristotle DCO does not anticipate 

entering into any information-sharing 

agreements at the current time. 

However, the clearinghouse recognizes 

its obligation to share information with 

any other Commission-registered DCO 

or foreign entity fulfilling that role and 

will do so if any appropriate and 

applicable domestic or international 

information-sharing agreements will 

facilitate carrying out the risk 

management program of the 

clearinghouse.

Exhibit M 

Aristotle DCO Rules 

Core Principle N – Antitrust Considerations 

Unless necessary or appropriate to achieve the 

purposes of the Act, a derivatives clearing 

organization shall not adopt any rule or take any 

action that results in any unreasonable restraint of 

trade, or impose any material anticompetitive 

burden. 

Aristotle DCO has designed rules to 

avoid unreasonable restraints of trade or 

the imposition of any material anticompetitive burden on trading. Further, 

Participants are prohibited from 

entering a non-competitive transaction 

into the system under Aristotle DCO 

Rule 5(c).

Exhibit N 

Aristotle DCO Rules 
11 

Core Principle O – Governance 

(i) Governance Arrangements. A derivatives 

clearing organization shall have written governance 

arrangements that are clear and transparent, and 

that: (1) Reflect the legitimate interests of clearing 

members, customers of clearing members, and other 

relevant stakeholders; (2) Are disclosed, as 

appropriate; (3) Clearly specify the roles and 

responsibilities of the board of directors and its 

committees; (4) Describe procedures pursuant to 

which the board of directors oversees the chief risk 

officer, risk management committee, and material 

risk decisions; and (5) Assign responsibility and 

accountability for risk decisions, including in crises 

and emergencies. 

(ii) Fitness Standards. A derivatives clearing 

organization shall establish and enforce appropriate 

fitness standards for: (1) Directors; (2) Members of 

any disciplinary Committee; (3) Members of the 

derivatives clearing organization; (4) Any other 

individual or entity with direct access to the 

settlement or clearing activities of the derivatives 

clearing organization; and (5) Any other party 

affiliated with any individual or entity described in 

this paragraph.

Aristotle DCO has established 

governance arrangements that are 

designed to place a high priority on the 

Clearinghouse’s safety and efficiency. 

Pursuant to Section 1 of the Aristotle 

DCO Enterprise Risk Management 

Policy, the Board of Directors meets 

with the Chief Risk Officer at least 

annually to review the clearinghouse’s 

compliance with Commission 

regulations. 

Aristotle DCO has set eligibility 

standards to ensure that Aristotle DCO 

rules and decisions reflect the legitimate 

interests of its members and 

stakeholders. Pursuant to Rule 3 that 

prior to nomination to the Board of 

Directors, each individual must certify 

that they are not disqualified pursuant to 

the DCO’s rules. 

Exhibit O 

Compliance Manual 

Aristotle DCO Rules 

Enterprise Risk Management Policy 

Core Principle P – Conflicts of Interest 

A derivatives clearing organization shall: (1) 

Establish and enforce rules to minimize conflicts of 

interest in the decision-making process of the 

derivatives clearing organization; (2) Establish a 

process for resolving such conflicts of interest; and 

(3) Describe procedures for identifying, addressing, 

and managing conflicts of interest involving 

members of the board of directors. 

Aristotle DCO maintains policies 

related to conflicts of interest, including 

a conflicts of interest policy for 

directors. Rule 3(g) describes the 

procedures to which a director must 

adhere in the event such directors has an 

interest or relationship with a named 

party in interest or a direct and 

substantial financial interest in any 

Exhibit P 

Compliance Manual 

Aristotle DCO Rules 
12 

matter that is before the Board for 

deliberation.

Core Principle Q – Composition of Governing Boards 

A derivatives clearing organization shall ensure that 

the composition of the governing board or boardlevel committee of the derivatives clearing 

organization includes market participants and 

individuals who are not executives, officers, or 

employees of the derivatives clearing organization 

or an affiliate thereof. 

Aristotle DCO ensures that the views of 

the public and market participants are 

incorporated into the its governance 

structure. Pursuant to Rule 3(b) at least 

two of whom shall be Public Directors, 

provided that the number of Public 

Directors shall at all times equal no less 

than 35% of the entire Board of 

Directors, or such higher percentage as 

the Commission may require. 

Exhibit Q 

Compliance Manual 

Aristotle DCO Rules 

Core Principle R – Legal Risk 

(i) Legal Authorization. A derivatives clearing 

organization shall be duly organized, legally 

authorized to conduct business, and remain in good 

standing at all times in the relevant jurisdictions. 

(ii) Legal Framework. A derivatives clearing 

organization shall operate pursuant to a wellfounded, transparent, and enforceable legal 

framework that addresses each aspect of the 

activities of the derivatives clearing organization. 

Aristotle DCO has established an 

effective and enforceable legal 

framework. Pursuant to the Exchange 

Risk Oversight Committee Policy, DCO 

Exhibit B-4d, the General Counsel shall 

review and report not less than quarterly 

to the Risk Oversight Committee any 

legal and regulatory matters that may 

have a material impact on the 

clearinghouse’s compliance programs 

and policies. 

Aristotle DCO can lawfully enforce the 

Rules against Participants. Pursuant to 

Rule 4(d), each applicant to become a 

participant expressly consents to be 

bound by the Rules of Aristotle DCO. 

An applicant to become a participant 

executes the Participant Agreement, and 

pursuant to such agreement, the 

applicant represents that the Participant 

Agreement is duly and validly 

Exhibit R 

Participant Agreement 

Core Principle R Memorandum 
13 

authorized and executed, and that the 

Participant Agreement is a legal, valid 

and binding agreement.