On April 22, the Commodity Futures Trading Commission’s Division of Data, Division of Market Oversight and Division of Clearing and Risk (collectively, the Divisions) issued CFTC Letter No. 21-11, which (1) provides no-action relief to KalshiEX LLC (Kalshi), a designated contract market, and LedgerX, LLC (LedgerX), a derivatives clearing organization, from reporting to swap data repositories data for binary option transactions executed on or subject to the rules of Kalshi and cleared by LedgerX; and (2) exempts Kalshi and LedgerX from certain related recordkeeping requirements.
This relief is subject to certain conditions, including, but not limited to, the following:
- all binary options covered by the relief being fully collateralized, as the term is defined in CFTC regulations;
- Kalshi clearing all binary options through LedgerX and LedgerX clearing all of Kalshi’s binary options;
- Kalshi providing the CFTC with all transaction information as required in CFTC Regulation 16.02;
- Kalshi and LedgerX each complying with all remaining applicable reporting and recordkeeping requirements;
- no Kalshi participant is clearing a product covered by the relief through a third-party clearing member; and
- Kalshi and LedgerX continuing to keep records not included in the relief open to inspection upon request by any of several regulators, including the CFTC, and providing copies of such records on the request of such regulators, at the expense of Kalshi or LedgerX, as applicable.
The Divisions noted that this relief is similar to and consistent with prior no-action relief granted for binary options transactions in CFTC Letter Nos. 17-31 and 17-32.