**IV. PROPOSED TERMS AND CONDITIONS FOR THE ALUMINUM OPTIONS CONTRACTS**

**Rule XX.01 TRADING MONTHS OF ALUMINUM OPTIONS**

Trading in aluminum options contracts shall be conducted in the months
as shall be determined by the Board of Directors. Trading shall commence
on the day fixed by resolution of the Board of Directors.

**Rule XX.02 STRIKE PRICES FOR ALUMINUM OPTIONS**

\(A\) Strike prices for aluminum options shall be listed in the
following increments per pound of aluminum:

\(1\) for strike prices of less than or equal to forty cents (\$0.40),
the strike price increments shall be one cent (\$0.01);

\(2\) for strike prices greater than forty cents (\$0.40) and up to and
including one dollar and twenty cents (\$1.20), the strike price
increments shall be two cents (\$0.02); and

\(3\) for strike prices greater than one dollar and twenty cents
(\$1.20), the strike price increments shall be five cents (\$0.05).

\(B\) Trading in puts and calls on the first day of a new option
contract month shall be at the following thirteen strike prices: (i) the
previous day's settlement price for aluminum futures price in the
corresponding delivery month rounded off to the nearest strike price
unless such settlement price is precisely midway between strike prices,
in which case it shall be rounded off to the higher price and (ii) the
six strike prices which are the six increments higher than the strike
price described in (i) of this Rule XX.02 (B), and (iii) the six strike
prices which are the six increments lower than the strike price
described in (i) of this Rule XX.02 (B).

\(C\) Whenever the settlement price for aluminum futures contracts in
the delivery month corresponding to an option contract month is equal to
or greater than (i) the seventh highest strike price for that option
contract month plus (ii) one-half the increment between the seventh
highest strike price and the sixth highest strike price, one or more new
strike prices for both puts and calls shall be introduced on the
following business day, at the increments set forth in paragraph (A)
above, so that at all times there will be at least six strike prices
above the at-the-money strike price.

\(D\) Whenever the settlement price for aluminum futures contracts in
the delivery month corresponding to an option contract month is less
than (i) the seventh lowest strike price for that option contract month
minus (ii) one-half the increment between the seventh lowest strike
price and the sixth lowest strike price, one or more new strike prices
for both puts and calls shall be introduced on the following business
day, at the increments set forth in paragraph (A) above, so that at all
times there will be at least six strike prices below the at-the-money
strike price.

\(E\) No new strike prices shall be introduced in the option contract
month of the aluminum options next due to expire after the third
business day prior to the Expiration Date for such options.

**Rule XX.03 PRICE MULTIPLES FOR ALUMINUM OPTIONS**

Prices for aluminum options shall be in multiples of five one-hundredths
of one cent per pound of aluminum represented by the underlying futures
contract, except that a trade may be exercised at a price of one four
hundred fortieth of one cent per pound (\$1.00 a contract) if the trade
will result in the liquidation of positions for both parties to the
trade.

**Rule XX.04 PRICE LIMITS AND CESSATION OF TRADING IN ALUMINUM OPTIONS**

Trades in aluminum options shall not be subject to price limits. Should
trading in aluminum futures cease after reaching the applicable price
limit set forth in Rule XX.08, however, trading in aluminum options will
halt until trading in aluminum futures resumes.

**Rule XX.05 PAYMENT OF PREMIUM**

\(A\) The purchaser of an aluminum option shall pay the full premium
therefore to the Clearing Association not later than the time which the
Clearing Association requires on the business day following the purchase
of the option.

\(B\) The grantor of an aluminum option shall receive the full premium
therefore from the Clearing Association not later than the close of
business on the business day following the sale of the option.

**Rule XX.06 EXPIRATION AND EXERCISE OF ALUMINUM OPTIONS**

\(A\) An aluminum option shall expire at the close of trading four
business days prior to the end of the month preceding the underlying
futures delivery contract month.

\(B\) An option which is subject to automatic exercise shall be
exercised in accordance with the rules of the Clearing Association. All
other options shall expire unless Notice of Exercise is given to a
Clearing Member not later than 4:00 p.m. on the option's Expiration
Date.

**Rule XX.07 NOTICE OF EXERCISE**

\(A\) A Notice of Exercise for an aluminum option in the form prescribed
in Rule XX.07 (E) or (F) shall be effective if it is received by a
Clearing Member from a customer not later than 3:00 p.m. on any business
day on which the option contract month is trading, other than the
Expiration Date, and not later than 4:00 p.m. on the Expiration Date.
For purposes of this Rule XX.07 (A), "customer" shall include
proprietary accounts, as defined by Commission Regulation Section 1.3
(y).

\(B\) Notice of Exercise of an option shall be presented to the Clearing
Association in accordance with such rules as the Clearing Association
may adopt.

\(C\) On the same day the Clearing Association receives a notice of
exercise of an option or automatically exercises an option, the Clearing
Association shall allocate exercised option in accordance with its
rules. On the following business day the Clearing Association shall
notify clearing members which of its short options were exercised.

\(D\) Clearing members shall make every effort to notify prior to 9:00
a.m. (New York time) on the following business day the grantor of any
option who is allocated an exercised option. Clearing members shall,
also, make every effort to notify prior to 9:00 a.m. (New York time) on
the business day following the expiration of an option the grantor of
any in-the-money option who is not allocated an exercised option.

\(E\) A Notice of Exercise for an aluminum call option shall be in the
following form:

NOTICE OF EXERCISE OF AN ALUMINUM CALL OPTION

New York, \_\_\_\_\_\_\_\_\_\_\_ 19\_\_

\[0:00 o'clock\]

To \[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\]

Take notice that effective upon the opening of aluminum trading on
\_\_\_\_\_\_\_\_\_\_\_19\_\_ we shall purchase from you and you sell to
us one Commodity Exchange, Inc. Futures contract for 44,000 pounds of
aluminum at a price of \_\_\_\_\_\_\_\_\_ cents per pound (the strike
price of the option) for delivery between the first and last delivery
days of \_\_\_\_\_\_\_\_ (the option contract month).

Signed\[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\]

\(F\) A Notice of Exercise for an aluminum put option shall be in the
following form:

NOTICE OF EXERCISE OF AN ALUMINUM PUT OPTION

New York,\_\_\_\_\_\_\_\_\_\_\_\_\_19\_\_

\[0:00 o'clock\]

To \[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\]

Take notice that effective upon the opening of aluminum trading on
\_\_\_\_\_\_\_\_\_\_\_19\_\_ we shall sell to you and you shall purchase
from us one Commodity Exchange, Inc. Futures contract for 44,000 pounds
of aluminum at a price of \_\_\_\_\_\_\_\_\_ cents per pound (the strike
price of the option) for delivery between the first and last delivery
days of \_\_\_\_\_\_\_\_ (the option contract month).

Signed\[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\]

\(G\) A Notice of Exercise of an aluminum option cannot be transferred
or assigned. A member receiving a Notice of Exercise of an aluminum call
option shall be entered as the seller of an aluminum futures contract
for delivery in the month corresponding to the option contract month at
the strike price of the aluminum call option and a member receiving a
Notice of Exercise of a put option shall be entered as the purchaser of
an aluminum futures contract for the delivery month corresponding to the
option contract month at the strike price of the aluminum put option.

**Rule XX.08 FORM OF ALUMINUM OPTIONS**

All Aluminum Options shall be in the following form:

COMMODITY EXCHANGE, INC.

ALUMINUM OPTION

New York, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_19\_\_

A.B. has this day sold to C.D. and agreed to honor on timely notice of
Exercise a \[call\]

\[put\]

aluminum options, exercisable on or before 4:00 p.m. New York City time
on the fourth business day prior to the end of the month preceding the
underlying futures delivery contract month for aluminum for the delivery
month stated below occurs, to \[purchase\] one contract of

\[sell\]

44,000 pounds of aluminum for delivery in the\[option contract month\]
at a price of \_\_\_\_\_\_\_ cents per pound (the strike price). Upon
the Notice of Exercise, the buyer and seller of this option shall become
the buyer and seller, respectively, if the option is a call option, or
the seller