CFTC Issues Two Staff Letters and Amends Nadex DCO Registration Order (CFTC Letters 14-04 and 14-05)

The CFTC's Division of Clearing and Risk ("DCR") issued an exemptive letter and an interpretative letter to the North American Derivatives Exchange, Inc. ("Nadex") granting Nadex relief from certain CFTC rules applicable to derivatives clearing organizations ("DCOs"), as well as addressing the applicability of certain regulatory provisions to Nadex.

The letters are in response to a request submitted by Nadex on May 1, 2013, which was prompted by the CFTC's 2011 adoption of rules that implemented "core principles" for DCOs. The new rules address issues that arise in connection with a typical intermediated derivatives clearing model. However, Nadex's clearing model is different in that it features the non-intermediated clearing of transactions in fully collateralized products. Therefore, Nadex requested that the CFTC provide relief from compliance with rules inapplicable to Nadex's model, and additionally requested an interpretation regarding the applicability of compliance with other regulatory provisions.

CFTC Letter 14-04 exempts Nadex from the requirements of certain provisions of Rules 39.11, 39.12, 39.13, 39.15, and 39.21 regarding DCOs. Additionally, CFTC Letter 14-05 provides interpretive guidance regarding the application of these provisions to Nadex. The CFTC also approved an amended order of DCO registration for Nadex to "better align the terms and conditions of Nadex's registration order" with the CEA and CFTC rules.

See: CFTC Letter 14-04; CFTC Letter 14-05; Nadex Amended DCO Order.