This Non-US Cleared Products Annex (as amended from time to time, this “Annex”) is an annex to the User Agreement (the “User Agreement”) that the related user has executed with respect to their usage of the communications software provided by Paradigm Connect, Inc.. DBA Paradigm (“Paradigm”) and relates to Non-US Cleared Products (as defined below). This Annex supplements and forms an integral part of the User Agreement with respect to Non-US Cleared Products. Capitalized terms used but not defined in this Annex have the meanings given to such terms in the User Agreement. Usage of the System to negotiate eligible Non-US Cleared Products that are then submitted for clearing on a relevant Clearing Organization for Non-US Cleared Products constitutes agreement by the User to the terms of this Annex, as amended from time to time.
“Clearing Organization” means, with respect to any Non-US Cleared Product, the relevant clearing organization for such Non-US Cleared Product.
“Non-US Cleared Product” means a future and option of a given venue as labeled “Non-US Cleared” that Paradigm supports, as listed on https://www.paradigm.co/help/products/derivatives/venues
a. No transactions in a Non-US Cleared Product may be negotiated through the System unless submitted to the relevant Clearing Organization through the System for clearance by such Clearing Organization.
b. A “futures contract” has the meaning given to such term under US law. As a general matter, a “futures contract” is a contract to buy or sell a given digital asset (including BTC and ETC, for example), in the future at a pre-agreed price or based on a reference point, where actual delivery does not occur. If a User has questions regarding whether a given transaction may constitute a “futures contract” or an option, they should contact their lawyer.
c. Paradigm does not list any of its own tradable contracts or securities. Paradigm simply provides a communication platform for the bilateral negotiation of terms for contracts specified in the above table.
d. All contract and other relevant specifications including but not limited to any exchange fees, minimum tick sizes, minimum quote sizes and corresponding margin requirements are set by and subject to agreements, rules and regulations set by the relevant Clearing Organization.
As listed with the “Non-US Cleared” label at: https://www.paradigm.co/help/products/derivatives/venues
a. Only Users that have signed and agreed to the Terms of Service or similar agreement with the relevant Clearing Organization, and have all other necessary contractual arrangements (such as give-up agreements and agreements with any applicable intermediary) are eligible to negotiate transactions in Non-US Cleared Products utilizing the System.
b. The following persons are not eligible to utilize the System to negotiate transactions in Non-US Cleared Products:
i. “U.S. Person,” which is defined under U.S. law as (A) any natural person who is a resident of the United States, including its territories and possessions; (B) any estate of a decedent who was a resident of the United States at the time of death; (C) any corporation, partnership, limited liability company, business, or other trust, association, joint stock company, fund or any form of enterprise similar to any of the foregoing that is organized or incorporated under the laws of a state or other jurisdiction in the United States or having its principal place of business in the United States, including its territories and possessions; (D) any pension plan for the employees, officers, or principals of any corporation, partnership, limited liability company, business, or other trust, association, joint stock company, fund or any form of enterprise similar to any of the foregoing, unless the pension plan is primarily for foreign employees of such entity; (E) any trust governed by the laws of a state or other jurisdiction in the United States if a court within the United States is able to exercise primary supervision over the trust; (F) any commodity pool, pooled account, investment fund or other collective investment vehicle that is majority-owned by one or more persons or entities described above, except for those investment vehicles that are publicly offered only to non-U.S. persons and not offered to U.S. persons; (G) any legal entity (other than a limited liability company, limited liability partnership, or similar entity where all of the owners have limited liability) that is directly or indirectly majority-owned by one or more persons described above and in which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity; and (H) any individual or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described above;
ii. Any person or entity that is located in or organized under the laws of a U.S. embargoed country, province, or region;
iii. Any person or entity listed on the U.S. Treasury Department’s list of Specially Designated Nationals or the U.S. Department of Commerce Denied Person’s List or Entity List; and
iv. Any person or entity not permitted under applicable law to utilize the System to negotiate futures or options transactions in the jurisdiction(s) in which they are located.
v. Any person or entity who is a resident of or located in a country, province, or region that is disallowed from accessing or utilizing services offered by the relevant Clearing Organization.
c. User Requirements
Users other than Residents of the United Kingdom or the European Economic Area:
In order to utilize the System, a User must (i) have a minimum financial instrument portfolio, including both cash deposits and financial instruments, in excess of 500,000 EUR (or equivalent in non-Euro currencies); (ii) the sophistication to understand the transactions that the User (or its Authorized Users) are negotiating themselves through the System; and (iii) otherwise satisfy all legal requirements to use the System (including the legal ability to enter into transactions) in the jurisdiction(s) in which they are located.
Residents of the United Kingdom or the European Economic Area:
Residents of the United Kingdom or the European Economic Area are only eligible to use the System if they elect to be treated as "Professional Clients". “Professional Clients” are defined under the following regulations: (i) Natural Persons: Section II of Annex II of Directive 2014/65/EU on markets in financial instruments ("MiFID II") entitled "Clients Who May Be Treated As Professionals On Request"; and under rule COBS 3.5.3 R of the rules of the UK Financial Conduct Authority (the “FCA”); and (ii) Legal Entities: Section I of Annex II of Directive 2014/65/EU (Markets in Financial Instruments Directive (MiFID)) entitled "CATEGORIES OF CLIENT WHO ARE CONSIDERED TO BE PROFESSIONALS" and under rule 3.5.2 of the rules of the FCA.
By entering into this User Agreement with Paradigm, a User that is a resident of the United Kingdom or the European Economic Area elects to be treated as a “Professional Client” with respect to the System, and makes the following representations and warranties on an ongoing basis to Paradigm for so long as they remain a User:
i. Natural Persons: The User (i) has a minimum financial instrument portfolio, including both cash deposits and financial instruments, in excess of 500,000 EUR (or equivalent in non-Euro currencies); (ii) has the sophistication to understand the transactions that the User (or its Authorized Users) are negotiating themselves through the System; (iii) either (A) has carried out transactions in significant size at an average frequency of 10 per quarter over the previous four quarters in digital assets markets OR (B) currently works or has worked in the financial sector for at least one year in a professional position which requires knowledge of digital assets transactions or services and (iv) otherwise satisfies all legal requirements to use the System (including the legal ability to enter into transactions) in the jurisdiction(s) in which they are located.
ii. Legal Entities:
(A) The User is one of the following types of entities: (1) an entity required to be authorised or regulated to operate in the financial markets, including a credit institution, an investment firm, any other authorised or regulated financial institution, an insurance company, a collective investment scheme or the management company of such a scheme, a pension fund or the management company of a pension fund, a commodity or commodity derivatives dealer or any other institutional investor; (2) a large undertaking meeting two of the following size requirements on a company basis: a balance sheet total of EUR 20,000,000, net turnover of EUR 40,000,000 or having funds of EUR 2,000,000; or (3) another institutional investor whose main activity is to invest in financial instruments and with a minimum financial instrument portfolio, including both cash deposits and financial instruments, in excess of 500,000 EUR (or equivalent in non-Euro currencies), AND
(B) The User (i) has the sophistication to understand the transactions that the User (or its Authorized Users) are negotiating themselves through the System; and (ii) otherwise satisfies all legal requirements to use the System (including the legal ability to enter into transactions) in the jurisdiction(s) in which they are located.
By usage of the System to negotiate transactions in Non-US Cleared Products, a User represents and warrants, on an ongoing basis, that it satisfies the eligibility criteria set forth above in the preceding paragraphs of this Section 3.
Each User agrees (i) not to use the System to engage in abusive trading practices, including in connection with any transactions that the User communicates about on the System (abusive trading practices include, but are not limited to, the following: wash trading, market manipulation, front-running, accommodation trading, or fraudulent trading); (ii) to only use the System for communication purposes and (iii) not to use the System in any way that would violate Paradigm’s agreements with the applicable Clearing Organization.
a. Request For Quote (RFQ) and Bilateral Price Negotiation/Agreement Process
i. To initiate bilateral negotiations between two Users, each User must first “approve” each other in their web-dashboard. Each User is responsible for their own KYC, AML or any other verification processes deemed necessary to be compliant with the User’s regulatory jurisdiction(s).
ii. Once approved, direct communication channels can be opened between Users wherein both Users (or their Authorized User) can exchange text based RFQs and come to a price agreement for the product/strategy requested. All communication for RFQs, responses, and price agreements can be automated through Paradigm buttons and “/” commands.
iii. All Users are solely responsible for all risks (including market, credit and process risks) related to or arising out of the transactions negotiated by themselves or their Authorized Users, and Paradigm is not responsible for any such risks.
b. Confirmation Process
An agreement is reached when the initiating counterparty (“Taker”) confirms, via the Trade Recap popup screen, the terms put forth in the RFQ by the responding counterparty (“Maker”). After an agreement is reached, all agreement details are (i) displayed within the conversation via a Trade Recap; (ii) displayed in each user’s in-app blotter; and (iii) summarized in a Trade Recap email to each user in the “Trade Channel.”
In the case of options strategies involving more than one leg, Paradigm will auto-generate individual leg prices based on the agreed total spread price. This Leg Price Assignment methodology can be found within the “Leg Pricing Methodology” pages of each supported venue from the following link: https://www.paradigm.co/help/products/derivatives/venues. Each User utilizing these option strategies agrees to the Leg Price Assignment Methodology as set by Paradigm.
In case of other transaction strategies, pricing will be as agreed between the applicable Users.
d. Settlement and Clearing Process
The System will submit affirmed (matched, dual-sided) price-agreement details to the relevant Clearing Organization along with complete account and party information (including Account Name and Entering Trader ID(s)) for both the buy side and sell side of the trade to be cleared by the relevant Clearing Organization. The relevant Clearing Organization will validate these trades for party, account, product and limits and acknowledges the submitter. If the trade fails any validations, the trade is rejected and a negative acknowledgement is sent to the submitter. The submitter should contact the relevant Clearing Organization if they have any questions regarding a rejected trade.
Disputes regarding transactions (including with respect to whether an agreement has been reached, the terms of that agreement, or the breach of that agreement) are solely subject to, and resolved in accordance with, the rules of the relevant Clearing Organization. To the extent a transaction is not subject to dispute resolution under the relevant Clearing Organization’s rules, such dispute must be directly resolved between the applicable Users. Paradigm will not be involved in any dispute resolution, and each User agrees to not hold Paradigm liable for any dispute with the other applicable User or clearing venue.