How to Become a Designated Contract Market

Applications should be filed with the CFTC either via mail to its Washington, DC headquarters office or electronically via email to secretary@cftc.gov. Potential applicants are encouraged to contact CFTC staff for guidance and assistance in preparing an application for designation and to submit draft documents to the CFTC for review and feedback by the staff prior to submission of a formal application. Questions may be submitted via email to secretary@cftc.gov, fax to 202-418-5527, or telephone to 202-418-5260.

Except as provided under the 90-day review procedures described below, the Commission will review an application for designation as a contract market pursuant to the 180-day time frame and procedures specified in Section 6(a) of the Commodity Exchange Act (CEA), 7 USC 8(a). The Commission will approve or deny the application or, if deemed appropriate, designate the applicant as a contract market subject to conditions.

An applicant must demonstrate compliance with the criteria for designation (set forth in Section 5(b) of the CEA, 7 USC 7(b)), the core principles for operation (set forth in Section 5(d) of the CEA, 7 USC 7(d)), and the provisions of Part 38 of the CFTC's regulations, 17 CFR Part 38.

Appendix A to Part 38 provides guidance to applicants on how the specific conditions for initial designation may be met by an applicant.
Appendix B to Part 38 provides guidance to applicants on how designated contract markets can remain in compliance with the core principles.

An application for contract market designation under Part 38 should include:

• A statement that the applicant is applying to become a designated contract market pursuant to Part 38;
• A copy of the applicant's rules, as defined in CFTC Regulation 40.1, and any technical manuals, other guides or instructions for users of, or participants in, the market, including minimum financial standards for members or market participants;
• A description of the trading system, algorithms, security and access limitation procedures with a timeline for an order from input through settlement, and a copy of any system test procedures, tests conducted, test results, and contingency or disaster recovery plans. At a minimum, this description should include all information requested in the Operational Capability Technology Questionnaire;
• A copy of any documents describing the applicant’s legal status and governance structure, including fitness information;
• A signed copy of any agreements or contracts entered into by the applicant, including partnership or limited liability company, third-party regulatory service, or member or user agreements, that enable or empower the applicant to comply with a designation criterion or core principle (a final draft copy of such agreements may be submitted with the application; however, signed copies of such documents must be submitted prior to designation);
• A copy of any manual or other document describing, with specificity, the manner in which the applicant will conduct trade practice, market, and financial surveillance;
• A regulatory chart or other document that describes the manner in which the applicant shall comply with each designation criterion and core principle (sample regulatory chart);
• To the extent that any aspect of the application raises issues that are novel, or for which compliance with a designation criterion or a core principle is not self-evident, an explanation as to how the designation criteria or core principles are satisfied; and
• A detailed description of any information in the application for which confidential treatment is requested.

An applicant may request that its application be reviewed on an expedited basis and that the applicant be designated as a contract market not later than 90 days after the date of receipt of the application. The 90-day period begins on the first business day (during the business hours as defined in CFTC Regulation 40.1) that the Commission is in receipt of the application.

Unless the Commission notifies the applicant during the 90-day period that the expedited review has been terminated as described below, the Commission will designate the applicant as a contract market during the 90-day period. If deemed appropriate by the Commission, the designation may be subject to such conditions as the Commission may stipulate.

To receive expedited review, an applicant must demonstrate compliance with the criteria for designation of Section 5(b) of the CEA, the core principles for operation of Section 5(d) of the CEA, and the provisions of Part 38. The application must include the necessary information and documents related to the items listed above, and the applicant must not amend or supplement the application, except as requested by the Commission or for correction of typographical errors, renumbering or other non-substantive revisions, during the 90-day review period.

The Commission may terminate expedited review and review the application under the 180-day time period and procedures of Section 6(a) of the CEA. Such action may be taken if it appears to the Commission that the application: (i) is materially incomplete, (ii) fails in form or substance to meet the requirements of this part, (iii) raises novel or complex issues that require additional time for review, or (iv) is amended or supplemented in a material manner that has not been requested by the Commission. In addition, the Commission shall terminate expedited review if requested in writing to do so by the applicant. If expedited review is terminated, the Commission will provide a written notification to the applicant specifying the reasons for this action.