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    LedgerX Amended Order 09-02-2020 Signed

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    MichaelPatrickMcSweeney
    The Commodity Futures Trading Commission (CFTC) issued an amended order granting LedgerX registration as a derivatives clearing organization (DCO). The original order from 2017 allowed LedgerX to clear fully collateralized digital currency swaps; the amended order expands this to also allow clearing of futures and options on futures without the "digital currency" limitation. The CFTC found the amended request was consistent with regulatory requirements but identified additional terms to ensure LedgerX's compliance, including treatment of member funds, risk disclosure, and compliance with relevant laws.

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    LedgerX Amended Order 09-02-2020 Signed

    Uploaded by

    MichaelPatrickMcSweeney
    106K views4 pages
    The Commodity Futures Trading Commission (CFTC) issued an amended order granting LedgerX registration as a derivatives clearing organization (DCO). The original order from 2017 allowed LedgerX to clear fully collateralized digital currency swaps; the amended order expands this to also allow clearing of futures and options on futures without the "digital currency" limitation. The CFTC found the amended request was consistent with regulatory requirements but identified additional terms to ensure LedgerX's compliance, including treatment of member funds, risk disclosure, and compliance with relevant laws.

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    Source: https://www.cftc.gov/PressRoom/PressReleases/8230-20

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    The Commodity Futures Trading Commission (CFTC) issued an amended order granting LedgerX registration as a derivatives clearing organization (DCO). The original order from 2017 allowed LedgerX to clear fully collateralized digital currency swaps; the amended order expands this to also allow clearing of futures and options on futures without the "digital currency" limitation. The CFTC found the amended request was consistent with regulatory requirements but identified additional terms to ensure LedgerX's compliance, including treatment of member funds, risk disclosure, and compliance with relevant laws.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    106K views4 pages

    LedgerX Amended Order 09-02-2020 Signed

    Uploaded by

    MichaelPatrickMcSweeney
    The Commodity Futures Trading Commission (CFTC) issued an amended order granting LedgerX registration as a derivatives clearing organization (DCO). The original order from 2017 allowed LedgerX to clear fully collateralized digital currency swaps; the amended order expands this to also allow clearing of futures and options on futures without the "digital currency" limitation. The CFTC found the amended request was consistent with regulatory requirements but identified additional terms to ensure LedgerX's compliance, including treatment of member funds, risk disclosure, and compliance with relevant laws.

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    © All Rights Reserved
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    of 4

    UNITED STATES OF AMERICA

    Before the
    COMMODITY FUTURES TRADING COMMISSION
    _______________________________________
    In the Matter of the Application of
    LedgerX, LLC
    For Registration as a Derivatives Clearing Organization
    _______________________________________

    AMENDED ORDER OF REGISTRATION

    On July 24, 2017, the Commodity Futures Trading Commission (the “Commission”)

    issued an order (“Original Order”) pursuant to Section 5b of the Commodity Exchange Act (the

    “Act”), 7 U.S.C. § 7a-1, granting LedgerX LLC (“LedgerX”) registration as a derivatives

    clearing organization (“DCO”) for the clearing of “fully collateralized digital currency swaps.”

    On January 22, 2020, LedgerX requested that the Commission amend the product scope

    of the Original Order to permit LedgerX to also clear futures and options on futures. On June 23,

    2020, LedgerX amended its request to additionally ask the Commission to remove the “digital

    currency” limitation in the product scope. The Commission has reviewed the request, along with

    supporting information, and finds that the requested amendment is consistent with the

    requirements of the Act and applicable regulations thereunder, but has identified additional terms

    and conditions necessary to ensure LedgerX’s compliance with the Act and applicable Part 39

    regulations.

    In light of the foregoing, IT IS ORDERED, pursuant to Section 5b of the Act,

    7 U.S.C. § 7a-1, that the Original Order is superseded and LedgerX is granted registration as a

    DCO, subject to the terms and conditions specified herein:

    (1) Cleared Products. LedgerX is permitted to clear, in its capacity as a DCO, fully

    collateralized futures, options on futures, and swaps. A contract cleared by LedgerX will be

    considered fully collateralized if LedgerX holds, at all times, funds sufficient to cover the

    1
    maximum possible loss a counterparty could incur upon liquidation or expiration of the contract,

    in the form of the required payment.

    (2) Treatment of Funds. Funds held in the Proprietary Accounts (as this term is

    defined in 17 C.F.R. § 1.3) shall be considered member property, as that term is defined in the

    Bankruptcy Code. LedgerX shall at all times maintain funds of its clearing members separate

    and distinct from its own funds.

    (3) Restriction on FCM Participants. This order does not permit any FCM participant

    to clear on behalf of any customer at LedgerX. Prior to permitting any FCM participant to clear

    on behalf of any customer, LedgerX shall submit all rules applicable to customer clearing to the

    Commission pursuant to Commission Regulation 40.5 or 40.6.

    (4) Insurance. LedgerX shall obtain and endeavor to maintain to the extent

    commercially reasonable insurance coverage for theft or loss of participant digital asset

    collateral.

    (5) Risk Disclosure. LedgerX shall fully disclose to any potential clearing member,

    in plain language, material risks associated with the clearing of fully collateralized digital asset

    contracts, including, without limitation, the theft, loss, or hacking of the underlying digital asset.

    The disclosure may include a discussion of any mitigating insurance or similar policies so long

    as the scope and limitations of any policy are clearly explained.

    (6) Digital Asset Audit. LedgerX shall engage an independent certified public

    accountant to audit LedgerX’s digital asset balances and issue an opinion on the accounting

    treatment of digital assets held by LedgerX on an annual basis.

    (7) Digital Asset Third-Party Service Providers. LedgerX shall obtain and provide to

    the Division, as available to LedgerX, a copy of any SOC 1 – Type I or Type II audit report of

    2
    any third-party service provider used in the custody or storage of any digital assets held on behalf

    of clearing members.

    (8) Compliance with Certain Statutes. LedgerX shall comply with the Bank Secrecy

    Act (31 U.S.C. § 5311 et seq.), the International Emergency Economic Powers Act (50 U.S.C.

    § 1701 et seq.), the Trading with the Enemy Act (50 U.S.C. § 4301 et seq.), and the executive

    orders and regulations issued pursuant thereto, including the regulations issued by the U.S.

    Department of the Treasury and, as applicable, the Commission, as if LedgerX were a covered

    “financial institution” within the meaning of 31 C.F.R. § 1010 et seq.

    (9) Compliance with the Act and Commission Regulations. LedgerX shall comply,

    and shall demonstrate compliance as requested by the Commission, with applicable provisions of

    the Act, including the core principles set forth in Section 5b of the Act (“Core Principles”), and

    Commission regulations, as may be amended or adopted from time to time. LedgerX shall fulfill

    each of the representations it has made to the Commission relating to compliance with the Core

    Principles and Commission regulations.

    (10) Self-Regulatory Function. LedgerX shall ensure the performance of all self-

    regulatory functions required of it as a registered DCO under the Act and Commission

    regulations, including, without limitation: monitoring and enforcing clearing member

    compliance with LedgerX admission and continuing eligibility standards; and enforcing clearing

    member compliance with the terms of all other LedgerX rules, regulations, and procedures.

    (11) New Regulations. Should the Commission promulgate or amend a regulation

    addressing or otherwise affecting any aspect of this order, then such regulation will apply and

    supersede the applicable term(s) in this order.

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