The CFTC Division of Data, Division of Market Oversight and Division of Clearing and Risk (collectively, the "Divisions") granted conditional no-action relief from certain swap reporting and recordkeeping requirements for fully collateralized "binary options" transactions executed by KalshiEX LLC ("Kalshi"), a designated contract market, and cleared by LedgerX, LLC ("LedgerX"), a derivatives clearing organization. (A "binary option" is an option on an event in which the purchaser of the option receives either a fixed amount or zero, depending on whether the event occurs. It is generally analogous to a bet on the outcome of a game.)
The Divisions granted no-action relief to Kalshi and LedgerX from swap data reporting and recordkeeping requirements under CFTC Rules 38.8(b) ("Listing of swaps on a designated contract market"), 38.10 ("Reporting of swaps traded on a designated contract market"), and 39.20(b)(2) ("Recordkeeping") and certain provisions under CFTC Rule 38.951 ("Additional sources for compliance"), as well as Parts 43 ("Real-Time Public Reporting") and 45 ("Swap Data Recordkeeping and Reporting Requirements").
The Divisions granted the reporting relief subject to conditions, including the following:
- Kalshi will promptly publish the trade, time, quantity and price of each transaction on its website;
- Kalshi will submit to the CFTC all transactional information as required under CFTC Rule 16.02 ("Daily trade and supporting data reports"); and
- Kalshi and LedgerX will maintain all records required under all other swap reporting and recordkeeping CFTC and CEA regulations such that they are available for inspection upon request by interested U.S. regulators.
The CFTC noted that it had twice previously granted similar trade reporting relief for binary options in CTC Letter 17-31 and CFTC Letter 17-32.
Primary Sources
- CFTC Letter 21-11: No-Action Relief from Commission Regulations 38.8(b), 38.10, 38.951 (In Part), and 39.20(b)(2), and Parts 43 and 45, for Binary Options Traded On or Pursuant to the Rules of KalshiEX LLC and Cleared by LedgerX, LLC
- CFTC Press Release: CFTC Staff Issues Conditional Relief from Reporting Fully Collateralized Binary Option Data to Swap Data Repositories
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
