CHAPTER 8
CLEARING HOUSE AND PERFORMANCE BONDS
GENERAL800.

CLEARING HOUSE

801.

MANAGEMENT802.

PROTECTION OF CLEARING HOUSE
802.A. Default by Clearing Member or Other Participating Exchanges
802.B. Satisfaction of Clearing House Obligations
802.C. Application of Funds to Avoid Clearing House Insolvency
802.D. Utilization of Remaining Base Collateral of Defaulted Clearing
Member; Restoration of Funds Following Final Determination of Losses
802.E. Rights of Exchange for Recovery of Loss
802.F. Guaranty Fund Contributions to be Restored
802.G. Default Management Across Account Classes
802.H. Base Cooling Off Period and Multiple Defaults

803.

LIMITATION OF LIABILITY

804.

SUBSTITUTION

805.

OPEN POSITIONS

806.

OFFSET PROCESS

807.

OPEN LONG POSITIONS DURING DELIVERY MONTH

808.

PROCEDURES FOR TRADE SUBMISSION ON CME CLEARPORT809.

TRADE DATA PROCESSING SYSTEM
809.A. Trade Data
809.B. Matched and Unmatched Trades
809.C. Trade Register and Clearing Reports
809.D. Reconciliation of Outtrades

810.

FALSE ENTRIES ON CLEARING MEMORANDA

811.

POSITION CHANGE DATA

812.

FINAL SETTLEMENT PRICE

813.

DAILY SETTLEMENT PRICE

814.

SETTLEMENTS, SETTLEMENT VARIATION PAYMENTS, AND OPTION
VALUE

815.

THIRD PARTY EXECUTION PLATFORMS FOR SWAPS816.

GUARANTY FUND DEPOSIT

817.

LIQUIDITY FACILITY

818.

CLOSE-OUT NETTING© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 1 of 38

819.

LIEN ON COLLATERAL

820.

PERFORMANCE BONDS

821.

EXCESS PERFORMANCE BOND OF CLEARED SWAPS CUSTOMERS

822.

LIQUIDITY RISK MANAGEMENT

823.

[RESERVED]

824.

ADDITIONAL PERFORMANCE BOND

825.

SEGREGATION OF PERFORMANCE BOND

826.

PROPRIETARY ACCOUNT MINIMUM LIQUIDATION PERIOD

827.

SECURITIES LENDING PROGRAM

828.

BASE FINANCIAL RESOURCES

829.

MEASURES TO MITIGATE PROCYCLICALITY

830.

CROSS-MARGINING
830.A. Definitions
830.B. Cross-Margining Programs
830.C. [RESERVED]
830.D. Performance Bonds for Cross-Margining Program
830.E. Close-Out of Cross-Margin Positions

831.

COMMINGLING OF ELIGIBLE BASE FUTURES AND SWAPS POSITIONS

832.

FOREIGN CURRENCY MARKET DISRUPTION

833.-849.

[RESERVED]MISCELLANEOUS
850.

FEES

851.

[RESERVED]

852.

SURCHARGES FOR ERRORS, DELAYS AND OMISSIONS

853.

TRANSFERS OF TRADES AND CUSTOMER ACCOUNTS

854.

CONCURRENT LONG AND SHORT POSITIONS

855.

OFFSETTING POSITIONS FOR DIFFERENT-SIZED CONTRACTS

856.

NORMALIZATION OF OTC FX SPOT, FORWARD, SWAP AND OPTIONSTRANSACTIONS FOR CLEARING

857.

POST-TRADE MULTILATERAL COMPRESSION© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 2 of 38

Chapter 8
Clearing House and Performance Bonds
GENERAL
0B

800.
2B

CLEARING HOUSEThe Exchange shall maintain and operate a Clearing House in order to protect market
participants and to maintain the integrity of the contracts traded on or processed through the
Exchange. Membership in the Clearing House shall be a right and privilege granted by the
Board of Directors which may, from time to time, establish such classes of membership in the
Clearing House, together with the duties, rights and privileges thereof, as it deems necessary.
Whenever these rules create a right in favor of the Clearing House, or impose a liability on the
Clearing House, it shall be construed as the right or liability of the Exchange, and shall be
enforced by or against the Exchange.
For purposes of these Chapter 8 rules and except as otherwise noted within a particular rule,
all references to requirements, conditions or procedures of the Clearing House, shall bedeemed to apply to contracts traded on or subject to the rules of an FBOT identified in Rule
8C04; the term “foreign futures” refers to futures and options on futures traded on or subject tothe rules of such FBOT; and such FBOT is not a Participating Exchange.
For purposes of these Chapter 8 rules, each of the following constitutes a separate accountclass: (i) futures positions executed on or subject to the rules of an exchange that is registeredwith the CFTC as a designated contract market and performance bond amounts or othercollateral held in an account consistent with section 4d(a) of the CEA and CFTC Regulations
thereunder, along with any swaps or foreign futures positions and performance bond amounts
or other collateral for such positions held in such account (“futures account class”); (ii) foreign
futures positions and performance bond amounts or other collateral held in an accountconsistent with the CFTC Part 30 Regulations (“foreign futures account class”); and (iii) swap
positions held in an account consistent with the CFTC Part 22 Regulations, along with any
futures positions or foreign futures positions and performance bond amounts or other collateralfor such positions held in such account (“cleared swaps account class”).
Each account class is further divided into a customer class and a proprietary class. The
Clearing House will hold customer positions of an FCM Clearing Member (i) in the futures
account class, in segregated accounts protected under CFTC Regulation 1.20; (ii) in theforeign futures account class, in accounts protected under CFTC Regulation 30.7 (“secured
accounts”); and (iii) in the cleared swaps account class, in cleared swaps customer accounts
protected under the CFTC Part 22 Regulations.

801.
3B

MANAGEMENT
The Board has governance and oversight responsibility of the safety and efficiency of the
Clearing House. With respect to the governance and oversight of the Clearing House, theresponsibilities of the Board include approving the appointments of the Global Head ofClearing & Post-Trade Services and Chief Risk Officer of the Clearing House. The Board also
has created the Clearing House Oversight Committee, which also has governance andoversight responsibility relating to the Clearing House as set forth in its written Charter. The
Global Head of Clearing & Post-Trade Services shall be responsible for the daily operation of
the Clearing House and the implementation of the rules applicable to the Clearing House. The
Chief Risk Officer shall be responsible for implementing the risk management framework andits procedures, policies and controls and for making appropriate recommendations to theBoard, the Clearing House Oversight Committee or relevant risk committees, as applicable,
regarding the Clearing House's risk management functions. The Global Head of Clearing &Post-Trade Services and the Chief Risk Officer of the Clearing House may also delegate
authority for certain aspects of their responsibilities to staff of the Clearing House. Clearing
House staff shall adopt, establish, publish and amend from time to time a Clearing House
Manual of Operations ("Manual"). This Manual shall contain, among other things, informationand directions for preparing trade data, completing prescribed memoranda and meeting other
Clearing House requirements. The Manual and amendments thereto shall constitute part of the© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 3 of 38

rules of the Exchange.

802.
4B

PROTECTION OF CLEARING HOUSE
802.A.
Default by Clearing Member or Other Participating Exchanges
The Clearing House shall establish a guaranty fund (the “Base Guaranty Fund”) for products
other than IRS Products and any positions commingled with IRS Contracts pursuant to Rule
8G831 (such products, the “Base Guaranty Fund Products” and each product, a “BaseGuaranty Fund Product Class”). Each clearing member shall contribute to the Base Guaranty
Fund in accordance with the requirements of Rule 816. A clearing member’s Base Guaranty
Fund contribution may be applied by the Clearing House in accordance with this Rule 802 to
mitigate a Loss (as defined below) to the Clearing House attributable to any cleared Base
Guaranty Fund Product Class regardless of the Base Guaranty Fund Product Classes aclearing member clears. However, in order to accommodate differences in time frames andprocesses associated with the liquidation of certain Base Guaranty Fund Product Classes,
Losses will be allocated among a set of Base Guaranty Fund tranches established to reflect
the relative contributions of different product classes to the total Base Guaranty Fund.
Notwithstanding this prioritization of the Clearing House’s recourse, ultimately the entire Base
Guaranty Fund will be available if necessary to satisfy all losses regardless of Base Guaranty
Fund Product Class.
1. Default by Clearing Member
If a clearing member of CME, CBOT, NYMEX, COMEX, or an OTC Clearing Member (i) fails
promptly to discharge any obligation to the Clearing House or (ii) becomes subject to any
bankruptcy, reorganization, arrangement, insolvency, moratorium, or liquidation proceedings,
or other similar proceedings under U.S. federal or state bankruptcy laws, any comparable nonU.S. laws, or other applicable law, the Clearing House may declare such clearing member tobe in default. The Clearing House will post notice of a default declaration on CME Group Inc.’spublic website. For purposes of this Rule 802, each default by a clearing member will beconsidered a separate default event, provided that if a clearing member has been declared in
default, subsequent failures to pay by such defaulting clearing member shall not be consideredseparate default events unless and until the original default has been fully resolved and suchclearing member has been restored to good standing.
2. Defaulting Clearing Member’s Collateral
Upon the default of a Base Clearing Member, Base Collateral shall be applied by the Clearing
House to discharge any loss to the Clearing House associated with such default (a “Loss”). A
Loss shall include, but shall not be limited to, costs associated with the liquidation, transfer andmanaging of Base Contracts of the defaulted clearing member, hedging costs and other costs
incurred by the Clearing House related to managing the risk surrounding the default of theclearing member. The defaulting clearing member shall take no action, including but not limited
to, attempting to obtain a court order that would interfere with the ability of the Clearing House
to so apply such assets and proceeds.
If the Base Guaranty Fund contribution, performance bond relating to Base Guaranty Fund
Products and other assets of a defaulted clearing member available to the Clearing House areinsufficient to satisfy all of its obligations to the Clearing House, including all claims against the
Clearing House by reason of its substitution for that clearing member pursuant to Rule 804 orRule 8F05, the Clearing House shall nonetheless pay all such claims, which payments by the
Clearing House shall be deemed a Loss to it (hereinafter “Loss”) and which shall be a liabilityof the defaulting clearing member to the Clearing House, which the Clearing House may
collect from any other assets of such clearing member or by process of law.
A Loss arising in the defaulted Base Clearing Member’s proprietary account class shall besatisfied from the Base Collateral. A Loss resulting from any cleared swaps customer’s
cleared swap position in a Base Product held in a cleared swaps account shall be satisfied byapplication of performance bond, excess performance bond, other collateral and settlement
variation gains held for the respective cleared swaps customer consistent with Part 22 of the
CFTC’s regulations (collectively, “Base Swap Customer Collateral”). A Loss resulting from any
customer’s position in any futures held in a futures segregated account, or any swap position
in a Base Product or foreign futures position that is commingled with such futures positions insuch segregated account, shall be satisfied by application of performance bond, excess
performance bond, other collateral and settlement variation gains held in the Base Clearing© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 4 of 38

Member’s customer account in a manner consistent with section 4d(a) of the CEA and CFTC
Regulation 1.20 (collectively, “Base Futures Customer Collateral”).
A Loss resulting from any customer’s position in any foreign futures held in a secured accountshall be satisfied by application of performance bond, excess performance bond, othercollateral and settlement variation gains held in the Base Clearing Member’s customer accountin a manner consistent with Commission Regulation 30.7 (collectively, “Base Futures 30.7
Customer Collateral”).
For purposes of this Rule, the positions in the cross-margin account of a Participating Clearing
Member or its Cross-Margining Affiliate at a Cross-Margining Clearing Organization, and theperformance bond thereon, shall be considered assets of the Participating Clearing Member
available to the Clearing House to the extent provided in the Cross-Margining Agreement
between the Clearing House and such Cross-Margining Clearing Organization. A clearing
member in default shall immediately make up any deficiencies in its Base Guaranty Fundcontribution resulting from such default and in any event no later than the close of business on
the banking day following demand by the Clearing House.
3. Default by Other Participating Exchanges or Partner Clearinghouses
If a Participating Exchange or Partner Clearinghouse fails to promptly discharge any obligation
to the Clearing House arising out of its obligations to the Exchange, such Participating
Exchange's or Partner Clearinghouse’s letters of credit, performance bonds and other assets
available to the Clearing House shall be applied by the Clearing House to discharge theobligation, pursuant to the procedures set forth below in Rule 802.A.5 with respect to adefaulting clearing member. If such resources are insufficient to satisfy the Participating
Exchange’s or Partner Clearinghouse’s obligations to the Clearing House, the deficiency shallbe considered a Loss that is subject to satisfaction pursuant to Rule 802.B.
4. Allocation of Base Guaranty Fund into Tranches
The Base Guaranty Fund shall be composed of the required Base Guaranty Fundcontributions of clearing members pursuant to Rule 816, or any comparable security deposit
contributions from a Participating Exchange or Partner Clearinghouse. The Clearing House
shall allocate the Base Guaranty Fund into tranches as follows:i. Base Tranche. Base Guaranty Fund Product Classes that are not associated with an
Alternate Tranche as described below shall comprise the Base Product Class. The first 80% ofBase Guaranty Fund amounts contributed with respect to the Base Product Class shall be the“Base Tranche”.
ii. [Reserved]
iii. Alternate Product Class Tranches. Any other product class approved by the Clearing
House Risk Committee to support a product-specific Base Guaranty Fund tranche hereundershall comprise an Alternate Product Class. The first 80% of Base Guaranty Fund amounts
contributed with respect to each such an Alternate Product Class shall be an “Alternate
Tranche”.
iv. Commingled Tranche. The remaining 20% of Base Guaranty Fund amounts contributedwith respect to all of the foregoing Product Classes shall be the “Commingled Tranche”.
As set forth below in 802.B, if the collateral of the defaulting clearing member, as described inRule 802.A.2, Participating Exchange or Partner Clearinghouse is insufficient to satisfy its
obligation to the Clearing House, the Tranche associated with a particular Base Guaranty Fund
Product Class will be the Tranche first applied to reimburse the Clearing House for Losses
attributable to that Base Guaranty Fund Product Class, as determined in accordance with Rule
802.A.5, (i.e., the Base Tranche will first be applied to Losses attributed to the Base Product
Class, and the Alternate Tranche will first be applied to Losses attributed to an Alternate
Product Class). The Base Guaranty Fund requirements of clearing members for purposes ofallocation of such amounts into the Tranches shall be the required amounts in effect for eachclearing member at the time of the default.
5. Apportionment Among Base Guaranty Fund Product Classes; Application of Defaulting
Clearing Member’s Collateral
Upon a default, the Clearing House shall apply the defaulting clearing member’s collateral tothe deficiency in accordance with the following procedures:i.
Initial Allocation of Assets to Base Guaranty Fund Product Classes. Subject to theprovisions of 802.G, as of the cycle in which the default occurs, the Clearing House shall© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 5 of 38

allocate assets of the defaulting clearing member to the different Base Guaranty Fund Product
Classes in which the clearing member has open positions as follows: (a) the defaulting clearing
member’s Base Guaranty Fund requirement associated with each Base Guaranty Fund
Product Class shall be attributed to such Class, (b) the defaulting clearing member’s required
performance bond amounts for each Base Guaranty Fund Product Class as of the priorclearing cycle shall be allocated to such Class, (c) any CME shares (whether common sharesor class B shares) or any cash posted in lieu of such shares, and (d) any of the defaulting
clearing member’s other assets held by, pledged to or otherwise available to the Clearing
House shall be divided among the Base Guaranty Fund Product Classes in proportion to thedefaulting clearing member’s Base Guaranty Fund requirement.
ii. Management of Obligations for Cycle of Default. As of the cycle in which the default
occurs, the Clearing House shall aggregate the following assets: any excess Base Guaranty
Funds, any excess performance bond from the prior clearing cycle for Base Guaranty Fund
Product Classes, any partial payment by the clearing member for the default cycle, and anyother available assets of the clearing member that are not specific to a Base Guaranty Fund
Product Class. Such unassigned assets shall be allocated first to any net settlement variation
payment obligation of the defaulting clearing member to the Clearing House relating to Base
Guaranty Fund Product Classes, pro rata across the customer and proprietary classes relative
to the net settlement variation payment obligation for each account class. If the unassigned
funds so allocated are sufficient to satisfy the clearing member’s immediate settlement
variation payment obligations for Base Guaranty Fund Product Classes, any remaining
unassigned funds shall be divided among the Base Guaranty Fund Product Classes, pro rata
in proportion to the size of the performance bond requirements for each Base Guaranty Fund
Product Class for the clearing cycle immediately prior to the default. If the unassigned funds
are not sufficient to satisfy the clearing member’s settlement variation payment obligations forBase Guaranty Fund Product Classes for the default cycle, then (i) the Clearing House shallapply the unassigned funds to such obligations, pro rata relative to the size of such obligations
on a per-Base Guaranty Fund Product Class basis, and within each Base Guaranty Fund
Product Class, pro rata across the customer and proprietary classes, and (ii) the remaining
settlement variation payment obligations for such clearing cycle shall be satisfied on a perBase Guaranty Fund Product Class basis only from the assets allocated to the relevant Base
Guaranty Fund Product Class pursuant to 802.A.5.i. If the Clearing House is unable to satisfy
a settlement variation payment obligation attributable to any Base Guaranty Fund Product
Class from such assets, the deficiency shall be a Loss that the Clearing House shall satisfy
pursuant to the procedures in Rule 802.B. For the avoidance of doubt, as set forth in 802.G,
the Clearing House shall not use performance bond amounts or other collateral in any
customer account class of the defaulting clearing member to satisfy a payment obligation to
the Clearing House in respect of the defaulting clearing member’s proprietary account.
iii. Payment Obligations as Losses are Finalized. During any subsequent clearing cycles inwhich the Clearing House is managing and/or liquidating open positions in respect of thedefaulting clearing member, the Clearing House shall satisfy any settlement variation payment
obligations owed by the defaulting Clearing member to the Clearing House, or other realized
losses of or expenses to the Clearing House with respect to the default, on a per-Base
Guaranty Fund Product Class basis, only from the assets allocated to the relevant Base
Guaranty Fund Product Class pursuant to 802.A.5.i. Any settlement variation gain to thedefaulting clearing member in any Base Guaranty Fund Product Class during such subsequent
clearing cycles shall be added to collateral allocated to such Product Class pursuant to
802.A.5.i. Any additional assets of the defaulting clearing member obtained by the Clearing
House during subsequent clearing cycles (including amounts from IRS Products madeavailable to Base Guaranty Fund Product Classes) shall be divided among the Base Guaranty
Fund Product Classes pro rata in proportion to the size of the performance bond requirements
for each Base Guaranty Fund Product Class for the clearing cycle immediately prior to thedefault. The Clearing House shall apply such collateral to such payment obligations for all
account classes, giving priority to customer account classes (i.e., customer accounts overproprietary accounts). If the Clearing House is unable to satisfy a settlement variation
payment obligation to the Clearing House, or other realized loss or expense to the Clearing
House, from the defaulting clearing member’s collateral as set forth in this paragraph, thedeficiency shall be a Loss that the Clearing House shall satisfy pursuant to the procedures inRule 802.B. For the avoidance of doubt, as set forth in 802.G, the Clearing House shall notuse performance bond amounts or other collateral in any customer account class of the© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 6 of 38

defaulting clearing member to satisfy a payment obligation to the Clearing House in respect ofthe defaulting clearing member’s proprietary account, and shall not use performance bondamounts or other collateral held in one account class for customers of the defaulting clearing
member to satisfy a payment obligation to the Clearing House in respect of another accountclass for customers of the defaulting clearing member.
iv. Final determination of gain or deficiency for each Product Class. When the Clearing
House determines the final net deficiency for a Base Guaranty Fund Product Class, it shallapply any remaining collateral of the defaulting clearing member with respect to such Base
Guaranty Fund Product Class to satisfy the deficiency. If the Clearing House achieves a final
gain, or if any excess collateral remains following satisfaction of a deficiency, the Clearing
House shall allocate such excess funds to the defaulting clearing member’s collateral for Base
Guaranty Fund Product Classes within the same account class as to which a final gain or
deficiency is yet to be determined, pro rata in proportion to the size of the performance bondrequirements for such Base Guaranty Fund Product Classes for the clearing cycle immediately
prior to the default. For the avoidance of doubt, as set forth in 802.G, the Clearing House shallnot use performance bond amounts or other collateral in any customer account class of thedefaulting clearing member to satisfy a payment obligation to the Clearing House in respect ofthe defaulting clearing member’s proprietary account. Any gains or excess collateral within asegregated customer account class following final determination of the defaulting clearing
member’s losses shall remain segregated to the relevant customer account class, where it
may be used to satisfy payment obligations arising from such account class in other Product
Classes, but shall not be added to the clearing member’s collateral generally.
Any remaining unsatisfied obligations of the defaulting clearing member shall become Losses
to the Clearing House that shall be satisfied as set forth below.
802.B.
Satisfaction of Clearing House Obligations
If the Clearing House is unable, using the defaulting clearing member’s collateral as set forth inRule 802.A, to satisfy all of the clearing member’s obligations to the Clearing House then suchobligations shall be met and made good promptly by the Clearing House pursuant to this Rule
802.B. Such obligations include, but shall not be limited to, costs associated with theliquidation, transfer and managing of positions, arising out of: 1) its substitution (pursuant toRule 804 or Rule 8F05) for a defaulting clearing member a defaulting Participating Exchange,
or a defaulting Partner Clearinghouse; 2) a shortfall in a cross-margining program; 3) the
failure of a depository, exchange or market apart from the Exchange but whose transactions
are cleared pursuant to the provisions of Chapters 8B, 8C or 8F; or 4) any other cause. All of
the foregoing shall be deemed Losses to the Clearing House, which shall be apportioned by
the Clearing House to Loss categories associated with the Base Guaranty Fund Product Class
producing the Loss. Losses that cannot readily be attributed to a specific Base Guaranty Fund
Product Class shall be apportioned by the Clearing House across all Base Guaranty Fund
Product Classes in proportion to relative size of the Tranches (excluding the Commingled
Tranche). Losses shall be satisfied by the Clearing House in the order of priority hereafter
listed. Non-defaulting clearing members shall take no actions, including but not limited toattempting to obtain a court order, that would interfere with the ability of the Clearing House tocollect and apply assets and proceeds in accordance with this Rule 802.B. For purposes of thisRule 802.B, a default by a Participating Exchange or a Partner Clearinghouse shall be
managed in the same manner as a default by a clearing member.
1. If Losses Are Limited to the Base Product Class
i. The corporate contribution of CME, which shall equal $100,000,000 (the “CMEContribution”).
ii. The Base Tranche.
iii. The Commingled Tranche.
iv. The Alternate Tranche.
v. The balance of any Losses remaining after the application of the above funds shall beassessed against all clearing members (excluding any insolvent or defaulting clearing
members). Each clearing member (excluding any insolvent or defaulting clearing member)shall be subject to an assessment up to an amount that does not exceed (A) a total of 275 percent of such clearing member’s Base Guaranty Fund requirements attributable to all Base
Guaranty Fund Product Classes at the time of the default with respect to Losses attributed to a

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 7 of 38

single defaulted clearing member and (B) a total of 550 per cent of such clearing member’sBase Guaranty Fund requirements attributable to all Base Guaranty Fund Product Classes at
the time of the default with respect to Losses attributed to all defaulted clearing members
during a Base Cooling Off Period. Assessed amounts shall be divided among clearing
members pro rata in proportion to the size of the Clearing House’s assessment authority withrespect to each clearing member.
2. [Reserved]
3. If Losses Are Limited to an Alternate Product Class:i. The CME Contribution.
ii. The Alternate Tranche.
iii. The Commingled Tranche.
iv. The Base Tranche and any other Alternate Tranche, pro rata in accordance with the relative
size of such Tranches.
v. The balance of any Losses remaining after the application of the above funds shall beassessed against all clearing members (excluding any insolvent or defaulting clearing
members). Each clearing member (excluding any insolvent or defaulting clearing member)shall be subject to an assessment up to an amount that does not exceed (A) a total of 275 percent of such clearing member’s Base Guaranty Fund requirements attributable to all Base
Guaranty Fund Product Classes at the time of the default with respect to Losses attributed to asingle defaulted clearing member and (B) a total of 550 per cent of such clearing member’sBase Guaranty Fund requirements attributable to all Base Guaranty Fund Product Classes at
the time of the default with respect to Losses attributed to all defaulted clearing members
during a Base Cooling Off Period. Assessed amounts shall be divided among clearing
members pro rata in proportion to the size of the Clearing House’s assessment authority withrespect to each clearing member.
4. If Losses Are Apportioned Among Multiple Product Classes:
Because of differences in the timeframes and processes associated with the liquidation ofcertain product types, the Clearing House may finalize Loss amounts associated with different
Base Guaranty Fund Product Classes at different points in time. Notwithstanding this, theClearing House will act with all possible speed to satisfy the Losses as they are finalized, in theorder of priority and per the schedule set forth below.
i. The CME Contribution shall be applied. The CME Contribution shall be divided by the
Clearing House into separate segments in proportion to the size of each Tranche except for
the Commingled Tranche. Each segment of the CME Contribution shall be applied first to
Losses associated with the applicable Base Guaranty Fund Product Class for such segment,
and only at such time as one or more Losses associated with such Tranche are finalized.
Subject to paragraph 802.C if any of the CME Contribution remains after such initial
application, such funds shall be reserved to be later applied to Losses associated with other
Product Classes as set forth in paragraph 802.B.4.v.
ii. The Base Tranche shall be applied to Losses associated with the Base Product Class andany Alternate Tranche shall be applied to Losses associated with the applicable Alternate
Product Class, in each case when one or more Losses associated with such Tranche are
finalized. Subject to paragraph 802.C, if the Tranche is not exhausted, any remaining funds
shall be held in such Tranche and may later be applied to other Losses as set forth inparagraph 802.B.4.v.
iii. The Commingled Tranche funds shall be applied to remaining Losses associated with any
Base Guaranty Fund Product Class immediately as such Losses are finally determined by the
Clearing House, in the order that the amounts of such Losses are finalized. Consequently, theapplication of Commingled Tranche funds to Losses associated with one Base Guaranty Fund
Product Class may occur prior to the finalization of Losses associated with other Base
Guaranty Fund Product Classes (i.e., prior to the completion of the processes set forth inparagraphs 802.B.4.i and 802.B.4.ii with respect to Losses associated with another Base
Guaranty Fund Product Class). If Losses associated with more than one Base Guaranty Fund
Product Class are to be finalized pursuant to auction processes being conducted concurrently,
then any remaining Commingled Tranche funds shall be divided and allocated to such auctions
during the auction process, pro rata in proportion to the relative sizes of the mark-to-market
losses for such Base Guaranty Fund Product Classes.
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 8 of 38

iv. Any Losses remaining after the application of the processes set forth above shall beassessed against all clearing members (excluding any insolvent or defaulting clearing
members) up to an amount that does not exceed (A) a total of 275 per cent of the aggregate
guaranty fund requirements across all clearing members (excluding any insolvent or defaulting
clearing members) at the time of the default with respect to the Base Guaranty Fund Product
Class with which the Loss is associated with respect to Losses attributed to a single defaulted
clearing member and (B) a total of 550 per cent of the aggregate guaranty fund requirements
across all clearing members (excluding any insolvent or defaulting clearing members) at thetime of the default with respect to the Base Guaranty Fund Product Class with which the Loss
is associated and all defaulted clearing members during a Base Cooling Off Period. Suchassessments shall occur on a per- Base Guaranty Fund Product Class basis as Losses
associated with each Base Guaranty Fund Product Class are finalized by the Clearing House.
Consequently, the application of an assessment against clearing members with respect toLosses associated with one Base Guaranty Fund Product Class may occur prior to thefinalization of Losses associated with other Base Guaranty Fund Product Classes. Assessedamounts shall be divided among clearing members pro rata in proportion to the size of the
Clearing House’s assessment authority with respect to each clearing member, without regard
to the Base Guaranty Fund Product Classes cleared by such clearing member or the
proportion to which such Base Guaranty Fund Product Classes contribute to such clearing
member’s maximum assessment exposure. (For example, a clearing member that clears only
Alternate Tranche products and that is subject to a maximum $1 billion assessment because ofthat clearing activity will be subject to assessment of up to $500 million for a Loss associatedwith the Base Product Class if 50% of the Clearing House’s aggregate assessment powers are
generated by Base Guaranty Fund requirements with respect to the Base Product Class.) Any
remaining unused assessment authority associated with Base Guaranty Fund Product Classes
as to which Losses are fully satisfied shall be reserved and later may be applied to Losses
associated with other Product Classes as set forth in paragraph 802.B.4.v below.
v. (a) Collateral of the defaulting clearing member, (b) the CME Contribution, (c) Base Tranche
funds or Alternate Tranche funds, and (d) assessment powers shall be applied to remaining
Losses as they are finalized with respect to each Base Guaranty Fund Product Class and insuch order, provided that if at the time of any such application, Losses associated with another
Base Guaranty Fund Product Class remain to be finalized, the Clearing House shall continue
to reserve a portion of such remaining funds or assessment powers, pro rata in proportion to
the size of the Tranches originally supporting such Base Guaranty Fund Product Classes, until
such remaining Losses are finalized. When all Losses have been finalized by the Clearing
House, any remaining reserved funds and assessment powers of any kind may be applied tosatisfy such Losses, pro rata relative to the size of the remaining losses for the Base Guaranty
Fund Product Classes.
5. Fedwire and Satisfaction of Assessment
All amounts assessed by the Clearing House against a clearing member pursuant to this Rule,during the hours in which the Federal Reserve's wire transfer system (Fedwire) is in operation,
shall be paid to the Exchange by such clearing member prior to the close of Fedwire on suchday (regardless of any local business hours or local holidays in a jurisdiction where a clearing
member is located); provided, however, that all amounts assessed within one (1) hour prior tothe close of Fedwire shall be paid to the Exchange within one (1) hour after Fedwire next
opens.
Any clearing member that does not satisfy an assessment, made pursuant to this paragraph
802.B.5 or paragraphs 802.B.1.v, 802.B.2.v, 802.B.3.v, 802.B.4.iv or 802.B.4.v above, shall bein default. Any Loss that occurs as a result of such default shall itself be assessed by the
Clearing House to non-defaulting clearing members pursuant to the applicable paragraph.
If a clearing member (i) has made payment of all amounts assessed against it pursuant to thisRule 802.B in connection with any single default and any related default by any other clearing
member with respect to its own assessment, (ii) has replenished any deficiency in its Base
Guaranty Fund contribution in accordance with Rule 802.D, and (iii) within five (5) businessdays after making such payments, has satisfied the other conditions for withdrawal set forth inRule 913.A, it may provide written notice of its application to withdraw from clearing
membership pursuant to Rule 913. Upon receipt of such notice, provided that the foregoingconditions have been satisfied, the withdrawing clearing member shall not be subject to any
residual assessment to cover Losses for defaults occurring after the related Base Cooling Off© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 9 of 38

Period. Further, the Base Guaranty Fund contribution that it has restored shall not be used orapplied towards meeting any claim or obligation of the Clearing House pursuant to Rule 802.B
that arises with respect to defaults occurring after the related Base Cooling Off Period, and thewithdrawing clearing member’s Base Guaranty Fund contribution shall be released inaccordance with Rule 913.
After payment of an assessment pursuant to Rule 802.B, a clearing member shall charge otherclearing members for whom it clears contracts or carries positions on its books to recover their
proportional share of the assessment. Such other clearing members shall promptly pay the
charge.
6. Details of Implementation
While adherence to the provisions of this Rule 802.B shall be mandatory, the detailed
implementation of the process of finalizing Losses with respect to a default, including theliquidation, auction or sale of positions or assets of the defaulting clearing member, shall be
conducted by the Clearing House in consultation with the Clearing House Risk Committee,
with the approval of the Board, and/or such other committee as the Board may designate.
In order to ensure that the process for liquidating open commodity contracts results incompetitive pricing, to the extent feasible under market conditions at the time of liquidation,liquidation of open commodity contracts held for a house account or customer account of a
defaulting clearing member may occur by one or more of the following methods: (a) book entry
that offsets open commodity contracts on the books of the defaulting clearing member; (b)liquidation in the open market; and/or (c) one or more private auctions amongst qualified
market participants invited by the Clearing House to submit confidential bids. The Clearing
House shall have discretion to select the best bid submitted for any portfolio in an auction,
based on the totality of the circumstances. All information received by a Clearing Member, itsaffiliate or customer in connection with the Clearing House’s liquidation and default
management processes shall be treated as confidential.
In the event that identical customer commodity contracts are liquidated in the open market on
the same date but cannot be liquidated at the same price, unless the Clearing House
determines that it would be inappropriate, a weighted average of the liquidation prices for suchcontracts shall be used in determining the value of the liquidated commodity contracts for eachsuch customer. In the event that open commodity contracts of multiple customers are
liquidated in a bulk auction, the net proceeds of such auction shall be allocated on a pro rata
basis amongst the affected customers based upon their applicable performance bondrequirements for the clearing cycle immediately prior to the default.
7. Modifications of Clearing House’s Obligations for Base Contracts(a) If at any time following a default of a Base Clearing Member, the assets available to cover
the default under the preceding sections of Rule 802 are insufficient to satisfy the Loss andobligations of the Clearing House to Base Clearing Members as a result of such default, thenthe Clearing House shall, in a manner that is consistent with the requirements of theCommodity Exchange Act and the regulations adopted thereunder, conduct its next settlement
cycle as described in Rule 802.B.7(b).
(b) The Clearing House shall issue a Clearing Advisory Notice and conduct a settlement cycle
to determine settlement prices for all Base Contracts and the net portfolio gain or loss for each
Base Clearing Member and its customers, in accordance with the following:(i) The net portfolio gain of a Base Clearing Member (a “collect”), or the net portfolio loss of aBase Clearing Member to the Clearing House (a “pay”) shall be determined separately:(A) For the Base Clearing Member’s proprietary positions in Base Contracts (the net portfolio
gain or net portfolio loss for such positions, “Proprietary Base Collects” or “Proprietary BasePays”),(B) For a Base Clearing Member that is an FCM, for (i) the futures positions of the Base
Clearing Member’s customers in Base Contracts held in a futures segregated account and (ii)any swap positions or foreign futures positions of such customers that are commingled withsuch futures positions in such account (the net portfolio gain or net portfolio loss for such
positions described in (i) and (ii) collectively, “Customer Futures Collects” or “Customer
Futures Pays”.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 10 of 38

(C) For a Base Clearing Member that is an FCM, for (i) the swap positions in Base Contracts ofeach customer of the Base Clearing Member held in a cleared swaps customer account forsuch customer and (ii) any Commingled Futures Positions (as such term is defined in Rule
8G831) for each customer (the net portfolio gain or net portfolio loss for such swap positions
and Commingled Futures Positions described in (i) and (ii) collectively, “Individual Customer
Swap Collects” or “Individual Customer Swap Pays”).
(D) For a Base Clearing Member that is an FCM, for the foreign futures positions of the Base
Clearing Member’s customers held in a secured account (the net portfolio gain or net portfolio
loss for such positions, also the “Customer Futures Collects” or “Customer Futures Pays,”provided, however, that the Clearing House will determine the Customer Futures Collects andCustomer Futures Pays separately for a Clearing Member’s futures account class and foreign
futures account class.
(ii) The Clearing House Oversight Committee (after considering any recommendation of theEmergency Financial Committee) may determine a maximum amount of position liquidation
payments that may be included in the Aggregate Base Collects, based upon then existing facts
and circumstances, that it deems appropriate to mitigate further disruptions to the markets.
(iii) The Clearing House shall notify each Base Clearing Member of the amount of its remaining
Base Assessments, Proprietary Base Pays, Customer Futures Pays and Individual Customer
Swap Pays and each Base Clearing Member shall pay all such amounts no later than the timerequired for the relevant settlement cycle. If a Base Clearing Member does not pay all suchamounts to the Clearing House, the Clearing House shall determine such Base Clearing
Member to be in default and may take any of the actions specified in Rule 802.A. with respect
to such Base Clearing Member and its customers.
(iv) If the amount of Aggregate Base Available Funds received by the Clearing House exceeds
the Aggregate Base Collects, the Clearing House shall calculate reimbursements of, anddistribute, the excess funds, in reverse order of the utilization of Base Priority of Payments.
(v) If the amount of the Aggregate Base Collects exceeds the amount of Aggregate Base
Available Funds received:(A) the Clearing House shall notify Base Clearing Members and provide an opportunity forBase Clearing Members and their customers to make voluntary contributions to the Clearing
House.
(B) If the amount of the Aggregate Base Collects continues to exceed the amount of Aggregate
Base Available Funds after the Clearing House adds any voluntary contributions from Rule
802.B.7(b)(v)(A) to the Aggregate Base Available Funds, then the Clearing House shall apply
Base Gains Haircuts (as defined below) to the Proprietary Base Collects, Customer Futures
Collects and Individual Customer Swap Collects for the current settlement cycle and eachsuccessor settlement cycle on the current Business Day and, unless a Bankruptcy Event has
occurred, each of the next two Business Days, in accordance with the following:
Proprietary Base Collects, Customer Futures Collects and Individual Customer Swap Collects
each shall be reduced on a pro rata basis according to the amount of such collects, to equal
the amount of Aggregate Base Available Funds received relative to Proprietary Base Collects,
Customer Futures Collects, and Individual Customer Swap Collects (such process, a “BaseGains Haircut”).
Customer Futures Collects shall be haircut by the Clearing House at the customer accountclass level of each Base Clearing Member. Each Base Clearing Member shall allocate thehaircut of its Customer Futures Collects pro rata among its customer with net portfolio gains forthe relevant settlement cycle;(C) The Clearing House Oversight Committee may instruct the Clearing House to extend or
reduce the number of days during which Base Gains Haircuts are applied by one or two
Business Days, provided that in no circumstance may the Clearing House conduct settlement
cycles in which Base Gains Haircuts are applied for longer than five Business Days. Before
providing such instruction, the Clearing House Oversight Committee must consider any
recommendation of the Emergency Financial Committee. Any recommendation of theEmergency Financial Committee and the decision of the Clearing House Oversight Committee,
each regarding adjusting the duration of settlement cycles with Base Gains Haircuts, must be
based upon then existing facts and circumstances, be in furtherance of the integrity of the
Clearing House and the stability of the financial system, and take into consideration thelegitimate interests of clearing members and market participants;© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 11 of 38

(D) For each settlement cycle conducted in accordance with this subparagraph (v), absent a
Bankruptcy Event, the Clearing House shall pay the haircut Proprietary Base Collects,
Customer Futures Collects, and Individual Customer Swap Collects to Base Clearing Members
as soon as practicable after receipt of the Aggregate Base Available Funds. Subject toapplicable law, the Clearing House will make arrangements to pay the customers of a
defaulted Base Clearing Member; and(E) If a Bankruptcy Event occurs following a default of a Base Clearing Member on a day
during which Base Gains Haircuts are applied to settlement cycles, on the day of the
Bankruptcy Event, the Clearing House shall conduct a final settlement cycle which shall be
subject to a Base Gains Haircut. The price determined in accordance with such settlement
cycle shall be used as the price for a Base Contract when netting and closing out pursuant toRule 818.
8. Base Partial Tear-Ups and Base Full Tear-Ups(a) The Clearing House may, at any time following a default of a Base Clearing Member, notify
Base Clearing Members and provide an opportunity for Base Clearing Members to voluntarily
agree to have their proprietary positions or, with a customer’s consent, to agree to have eachsuch customer’s positions, extinguished by the Clearing House.
(b) If proprietary or customer positions in Base Contracts of a defaulted Base Clearing Member
remain open (the “Remaining Open Base Positions”) following the last settlement cycle
conducted pursuant to Rule 802.B.7(b)(v), the Clearing House shall extinguish the Remaining
Open Base Positions through a partial tear-up process (“Base Partial Tear-Up”) or a full tearup process (“Base Full Tear-Up”) of proprietary and customer positions of non-defaulted Base
Clearing Members and non-defaulted customers of the defaulted Base Clearing Member inaccordance with the following:(i) The Clearing House Oversight Committee shall determine the appropriate scope of each
Base Partial Tear-Up or shall determine that a Base Full Tear-Up is appropriate. Before
making such determination, the Clearing House Oversight Committee must consider any
recommendation of the Emergency Financial Committee. Any recommendation of theEmergency Financial Committee and each determination of the Clearing House OversightCommittee made for purposes of this Rule 802.B.8 must:(A) be based upon then existing facts and circumstances;(B) be in furtherance of the integrity of the Clearing House and the stability of the financial
system;(C) take into consideration the legitimate interests of clearing members and market
participants; and(D) aim to extinguish Remaining Open Base Positions and any additional positions in BaseContracts deemed necessary to mitigate further disruptions to the markets affected by the
Remaining Open Base Positions.
(ii) A Base Partial Tear-Up may include, but need not be limited to, the following methods:(A) Line-by-Line Tear-Up Against the Remaining Open Base Positions.
Proportionately extinguish Base Contracts held by non-defaulted Base Clearing Members,
their non-defaulted customers and the non-defaulted customers of the defaulted Base Clearing
Member that are opposite to the Remaining Open Base Positions and relative to the size of theRemaining Open Base Positions; and(B) Tear-Up of All Positions in Base Contracts within a Product or Combination of Products.
Extinguish all open positions in Base Contracts for a product or combination of products.
(iii) A Base Full Tear-Up would involve the extinguishment of all open positions in BaseContracts.
(c) In connection with any settlement cycle with Base Gains Haircuts, the Clearing House
Oversight Committee may instruct the Clearing House to extinguish a portion of the Remaining
Open Base Positions through a Base Partial Tear-Up of proprietary and customer positions of
non-defaulted Base Clearing Members and non-defaulted customers of the defaulted Base
Clearing Member. The Clearing House Oversight Committee would determine the appropriate
scope of each such Base Partial Tear-Up in accordance with the procedures set forth in Rule
802.B.8(b)(i) and (ii), except that each reference to “Remaining Open Base Positions” shallmean the relevant portion of Remaining Open Base Positions.
9. Limited Recourse for Base Guaranty Fund Products© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 12 of 38

If a default occurs, Base Collateral, Base Customer Collateral and the Base Priority ofPayments shall be the sole source of payments to cover the Loss until the default is fully andfinally resolved, as applicable. In the event the Base Collateral, Base Customer Collateral andthe Base Priority of Payments are insufficient to cover the Loss, regardless of whether the
CME is able to require a Base Clearing Member to cure a deficiency in the Base Guaranty
Fund because of the occurrence of a Bankruptcy Event (as such term is defined in Rule
818.A.), Base Clearing Members and the holders of Base Contracts shall have no recourse to
any other funds or any other entity, including without limitation the guaranty funds that support
clearing of other products, CME, CME Group Inc. or any of its affiliates, other than any
amounts recovered as described in Rule 802.E.
10. No Claims Against the Exchange or Clearing House(a) Base Clearing Members, their affiliates and their customers shall have no claim against the
Exchange, CME Group Inc. or any affiliates of the Exchange or CME Group Inc., or any
directors, officers or employees of any of the foregoing, including but not limited to claims
against any other guaranty fund established by the Exchange, CME Group Inc. or any of its
affiliates with respect to losses suffered as a result of the application of any provision in thisRule 802.B. No beneficial holder of a Base Contract shall have any claim against its nondefaulted Base Clearing Member as a result of the application of this Rule 802.B. other than
any amounts recovered as described in Rule 802.E.
(b) Notwithstanding anything in subparagraph (a), Base Clearing Members, for both theirproprietary positions in Base Contracts and their customers’ positions in Base Contracts, andnon-defaulted customers of defaulted Base Clearing Members will have a claim on any
recovery from the defaulted Base Clearing Member or the estate of the defaulted Base
Clearing Member in the amount of the Base Gains Haircuts, in the aggregate, applied to such
positions (such amount with respect to all non-defaulted Base Clearing Members and theircustomers and the non-defaulted customers of the defaulted Base Clearing Member,“Aggregate Base Gains Haircuts”), as set forth more fully in Rule 802.E. If the recovery fromthe defaulted Base Clearing Member is less than the Aggregate Base Gains Haircuts, nondefaulted Base Clearing Members and their customers and the non-defaulted customers ofdefaulted Base Clearing Members will share pro rate in the recovery.
11. Non-Petition
No Clearing Member and no customer of a Clearing Member shall institute against, or join any
other person in instituting against, the Exchange any bankruptcy, reorganization, arrangement,
insolvency, moratorium, liquidation or examinership proceedings, or other similar proceedings
under U.S. federal or state bankruptcy laws or other applicable law arising out of any claimed
default by the Clearing House on a Base Contract as a result of the extinguishment of such
Base Contract and related payments in accordance with these Rules.
802.C.
Application of Funds to Avoid Clearing House Insolvency
Notwithstanding any requirements to reserve funds set forth in Rule 802.A or Rule 802.B, if at
any point following a default, the Clearing House will be unable to timely fulfill its obligations
following application of the funds described above in the priority described above, such that the
Clearing House is in imminent danger of defaulting on its obligations or being declaredinsolvent, then the Clearing House shall be entitled to apply to such obligation any available
funds reserved from the defaulting clearing member’s collateral, the CME Contribution or any
Tranche (other than the Commingled Tranche, which shall have been exhausted pursuant toparagraph 802.B.4.iii), in the foregoing order of priority, if necessary to avoid a default by the
Clearing House or a declaration of its insolvency. Such use of reserved funds may only bemade (i) if the Clearing House reasonably concludes that there is a reasonable expectationthat (A) the use of such funds will satisfy the immediate obligation and avoid a default or
insolvency and (B) that the remaining funds in the overall financial safeguards package(including assessment powers) will be sufficient to satisfy the finalized Losses with respect toall Base Guaranty Fund Product Classes, and (ii) the Clearing House reaches such conclusion
in consultation with the Clearing House’s primary regulator as to the specific facts,
circumstances and estimates of Losses supporting such conclusion. In such case, theClearing House shall restore the funds so employed to the reserved collateral segments, the
CME Contribution segments or Tranches from which they were drawn promptly following
receipt by the Clearing House of assessment payments or any other amounts that become
available to it in respect of obligations arising out of the defaulted clearing member’s default.
5B© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 13 of 38

802.D.

Utilization of Remaining Base Collateral of Defaulted Clearing Member;
Restoration of Funds Following Final Determination of Losses
1. After the default of a Base Clearing Member is finally resolved, excess Base Collateral of
the clearing member may be used by the Clearing house for losses to the Clearing House ofsuch clearing member for IRS Products on a pro rata basis based on the amount of any
unresolved losses for such product classes.
2. If after the default of a clearing member is finally resolved, the Clearing House determinesthat collateral of the defaulting clearing member, the CME Contribution, Tranche funds otherthan the Commingled Tranche, or assessment powers were employed in a manner different
from what would have occurred had all assets been secured and liquidated immediately and all
Losses finalized simultaneously, then the Clearing House shall make appropriate (i)distributions to the non-defaulting firms whose Base Guaranty Funds were applied or who
were assessed and/or (ii) rebalancing allocations among Base Guaranty Fund tranches.
802.E.
Rights of Exchange for Recovery of Loss
Losses caused by the default of a Base Clearing Member, Participating Exchange or Partner
Clearinghouse are amounts due to the Clearing House from such Base Clearing Member,Participating Exchange or Partner Clearinghouse and shall remain legal obligations thereof
notwithstanding the Clearing House’s recourse to the loss-mutualization provisions of this Rule
802, and the Clearing House shall take commercially reasonable steps to recover (including
claims submitted in an insolvency or resolution proceeding) such amounts. If any portion ofthese amounts is subsequently recovered by the Exchange, the net amount of such recovery
shall be credited to non-defaulted Base Clearing Members (whether or not they are stillclearing members at the time of recovery) in the following order on a pro rata basis based on(1) the amount of their (and their customers’, if applicable) voluntary contributions with respect
to such default, (2) the amount of their (and their customers’, if applicable) Aggregate Base
Gains Haircuts with respect to such default, (3) the amount of their Base Assessments utilized
by the Clearing House with respect to such default, and (4) the amount of their guaranty fundcontribution utilized by the Clearing House with respect to such default, each in the order
listed, and then to the Exchange for the amount of the CME Contribution utilized by the
Clearing House with respect to such default.
802.F.
Guaranty Fund Contributions to be Restored
In the event it shall become necessary to apply all or part of the Base Guaranty Fundcontributions to meet obligations to the Clearing House pursuant to this Rule 802, clearing
members shall restore their contribution to the Base Guaranty Fund to previously required
level prior to the close of business on the next banking day.
802.G.
Default Management Across Account Classes
The procedures set forth in 802.A and 802.B shall be conducted separately by the Clearing
House with respect to open positions and associated performance bond contributions fordifferent account classes (futures, foreign futures and cleared swaps). Upon a default, theClearing House may, in accordance with applicable law, act immediately to attempt to transfer
to alternate clearing members part or all customer positions and associated collateral withrespect to any customer account class in which there is no default on payment obligations or
shortfall in required collateral, and in such cases the Clearing House shall not apply
segregated customer collateral to any payment obligations or Losses arising from a default inany proprietary account or a different customer account class.
1. If a default occurs in a customer futures account, the Clearing House has the right toliquidate and apply toward the default all open positions and customer performance bonddeposits in the futures account class of the defaulting clearing member. Accordingly, positions
and performance bonds deposited by customers not causing the default are at risk if there is a
default in the futures account class of their clearing member. If the Clearing House liquidates
positions and/or collateral in the futures account class, any collateral remaining after
application to Losses in respect of such account class shall be reserved to the futures accountclass in order to satisfy the claims of non-defaulting customers in accordance with applicablelaw. If the Clearing House liquidates positions and/or collateral in the foreign futures accountclass, any collateral remaining after application to Losses in respect of such account classshall be reserved to the foreign futures account class in order to satisfy the claims of nondefaulting customers in accordance with applicable law.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 14 of 38

2. In order to minimize disruptions and loss to its public customers if a clearing member
defaults, each clearing member shall cause its cleared swaps customers to establish
arrangements to directly make all required performance bond and settlement variation
payments directly to the Clearing House and to keep current and on file with the Clearing
House any direction to transfer its open positions and collateral to another clearing member.
3. The Clearing House shall treat positions and collateral of the cleared swaps customers of aclearing member, which has been declared to be in default, in accordance with Part 22 of the
CFTC’s regulations. Immediately after the default of a clearing Member, the Clearing House
shall cease netting settlement variation among the cleared swaps customers of the defaulted
clearing member.
4. If the Clearing House ceases to net settlement variation margin of the customers of a
defaulted clearing member, the Clearing House will calculate the settlement variation margin
obligation owed to each cleared swaps customer (“collects”), and also calculate the settlement
variation margin obligation owed to the Clearing House by each cleared swaps customer(“pays”). The Clearing House will establish a holding account for settlement variation margin
collects owed to each cleared swaps customer or, subject to necessary approvals, pay such
settlement variation margin collects directly to each cleared swaps customer. The Clearing
House will collect cleared swaps customer settlement variation margin pays from the following
sources:(i) Directly from the obligated cleared swaps customer in accordance with the arrangements
established pursuant to 802.G.2 or by attaching any excess collateral attributable to that
customer;(ii) By means of liquidating the collateral supporting the cleared swaps customer’s position
attributed to a cleared swaps customer that fails to make a required settlement variation
payment when due. The proceeds of such liquidation shall be used to meet the cleared swaps
customer's settlement variation pay obligation to the clearing house. (If the collateral isliquidated, the positions supported by the collateral shall be promptly liquidated.);Any unmet cleared swaps customer obligation to the Clearing House will be a “Loss,” per802.A.2, and will be cured in accordance with the provisions of 802.B.
5. The Clearing House shall rely on its own books and records to identify the portfolio of rights
and obligations arising from the positions of each cleared swaps customer. To the extent the
Clearing House’s books and records are not available or the Clearing House determines thatits books and records are not accurate, the Clearing House shall rely on the information
provided by the defaulted clearing member to identify the portfolio of rights and obligations
arising from the positions for each of its cleared swaps customers.
6. Upon liquidating the defaulting clearing member’s proprietary account, any remaining
collateral may be applied by the Clearing House to Losses remaining in the defaulting clearing
member’s customer account classes, provided that such collateral shall be divided among the
Product Classes as described above. If the defaulting clearing member has more than one
customer account class that has been declared to have defaulted, proceeds from thedefaulting clearing member’s proprietary account for each relevant Product Class shall be
divided by the Clearing House pro rata among such customer account classes, based on theirapplicable performance bond requirements for the clearing cycle immediately prior to thedefault.
802.H.
Base Cooling Off Period and Multiple Defaults
The provisions set forth in Rule 802.A and 802.B shall apply with respect to each default by aclearing member. If more than one clearing member default occurs at a time or in closesequence, including a default that occurs by reason of a clearing member’s failure to satisfy anassessment demand, the Clearing House shall manage the defaults separately. Upon any
default, non-defaulted clearing members shall be subject to a maximum obligation during therelevant Base Cooling Off Period to contribute to the Base Guaranty Fund and to fundassessments as set forth in Rule 802.B. This maximum shall apply from the date of theoriginal default until the later of (i) the 5th Business Day thereafter and (ii) if another clearing
member defaults during the 5 Business Days following the initial or any subsequent default,
the 5th Business Day following the last such default (such period, the “Base Cooling Off
Period”), regardless of the number of defaults that occur during such Base Cooling Off Period.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 15 of 38

The aggregate maximum contribution for the Base Cooling Off Period shall be based uponeach clearing member’s Base Guaranty Fund requirement and assessment exposure in effectat the commencement of the Base Cooling Off Period. The maximum does not limit clearing
members’ obligations to restore their Guaranty Fund contributions as set forth in Rule 802.F,
except that if the clearing member’s required Guaranty Fund contribution would exceed suchmaximum, the clearing member’s Base Guaranty Fund requirement shall be reduced
accordingly for the remainder of the Base Cooling Off Period. Following a Base Cooling Off
Period, the Clearing House shall notify each clearing member of its Base Guaranty Funddeposit obligation and its assessment exposure.
The CME Contribution to the Base Guaranty Fund shall be limited to an aggregate maximumof $100,000,000 during the Base Cooling Off Period. The Board may, at its discretion,authorize additional funds be added to the CME Contribution during the Base Cooling Off
Period.

803.

LIMITATION OF LIABILITY
The liability of the Clearing House shall be limited to losses resulting from the substitution of
the Clearing House upon contracts between clearing members and to losses in connection
with substitution of another Participating Exchange for clearing members (i.e., the Mutual
Offset System), and to losses in connection with amounts due and owing from a Partner
Clearing House. The Clearing House shall not be liable for any other obligations, including but
not limited to, obligations of a non-clearing member, obligations of a clearing member to a nonmember, obligations of a clearing member to another member of the Clearing House who isacting for him as broker, or obligations to a customer by a clearing member; nor shall the
Clearing House become liable to make deliveries to or accept deliveries from a customer of its
clearing members.

804.
6B

SUBSTITUTIONF

Except with respect to trades made pursuant to Rules 526, 538 and 853, the Clearing House
shall, through the process of novation, be substituted as, and assume the position of, seller tothe buyer and buyer to the seller of the relevant number of Exchange or Marketplace contracts
upon the successful matching of trade data submitted to the Clearing House by the clearing
members on the long and short sides of a trade. With respect to contracts that are traded on
and matched by another exchange or market, the Clearing House shall be substituted as, andassume the position of, seller to buyer and buyer to seller of the relevant number of suchcontracts upon matching of trade data submitted to and accepted by the Clearing House.
Upon such substitution, each clearing member shall be deemed to have bought the contracts
from or sold the contracts to the Clearing House, as the case may be, and the Clearing House
shall have all the rights and be subject to all the liabilities of such member with respect to suchtransaction. Such substitution shall be effective in law for all purposes.
With regard to trades made pursuant to Rules 526, 538 and 853, the Clearing House shall be
substituted at the time payment of the first settlement variation and performance bond due forsuch trades pursuant to Rule 814 is confirmed by the appropriate settlement bank for both
members.

805.
7B

OPEN POSITIONSAll contracts for the purchase or sale of any product for future delivery shall remain open andin force, and shall continue to be binding upon the original parties until liquidated by offset asprovided in Rule 806 or by delivery or failure to perform as provided in Chapter 7.

806.
8B

OFFSET PROCESS
When a member buys and sells the same commodity for the same delivery month or a put orcall option with the same strike price and expiration month and such contracts are cleared
through the Clearing House, the purchases and sales are not automatically offset one against
the other. Transactions can only be offset against one another by complying with Rule 811,
and, once offset (closed-out), may not subsequently be re-opened at the Exchange.

807.
9B

OPEN LONG POSITIONS DURING DELIVERY MONTH
At such times and in such manner as shall be prescribed by the Manual, clearing members© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 16 of 38

shall submit a complete and accurate record of dates of all open purchases for use in making
deliveries. Clearing members shall be fully responsible for inventories submitted to theClearing House.
This rule shall not apply to trading in options contracts.

808.
9B

PROCEDURES FOR TRADE SUBMISSION ON CME CLEARPORT
808.A.
Scope of Rule
This Rule governs transactions not competitively executed on the Exchange ("Transactions")
that are submitted via CME ClearPort for clearing in connection with a contract that is listed on
the Exchange for clearing only or listed for trading and clearing on the Exchange. For purposesof this Rule, the two parties to the Transaction shall be referenced as the "Parties to theTransaction."
808.B.
Compliance with Regulatory Exemptions and Exclusions
Each of the Parties to the Transaction shall be responsible for ensuring that, where applicable,
the Transaction complies with CFTC regulatory requirements or, in the case of foreign futures,with regulatory requirements in the jurisdiction in which the exchange listing the contracts is
located.
808.C.
Block Trades or Exchange for Related Position Transactions
The process of submission of a block trade or an exchange for related position Transaction(“EFRP”) executed pursuant to Rules 526 or 538, as applicable, shall not be deemed to havebeen completed unless and until the Parties to the Transaction have successfully concluded
the submission of the Transaction to the Clearing House as a block trade or an Exchange of
Futures for Physical ("EFP"), an Exchange of Futures for Risk ("EFR") or an Exchange ofOptions for Options ("EOO"), as applicable, pursuant to the provisions of this Rule and therequirements of Rule 804.
808.D.
OTC Derivatives Transactions Submitted for Clearing
CME ClearPort allows for the submission of off-Exchange OTC derivatives Transactions that
the Exchange has designated as eligible for clearing only. Such Transactions are subject to
the Rules of the Exchange applicable to such cleared-only products.
808.E.
Trade Submission Procedures
All Transactions submitted to the Exchange pursuant to this Rule must be submitted inaccordance with the procedures established by the Exchange and the Clearing House for thispurpose, as amended from time to time. The Parties to the Transaction and any Party
authorized under Section F. of this Rule with brokering capability ("Broker" or "Brokers") tosubmit executed transactions on behalf of Parties to the Transaction to the Exchange shall be
responsible, both individually and jointly, for accurately confirming the details of theTransaction to the Exchange. Additionally, Brokers submitting Transactions on behalf ofParties to the Transaction remain responsible for ensuring that such Transactions areaccurately and timely submitted in accordance with the requirements of applicable Exchange
Rules and requirements of the Clearing House. Once submitted, such transactions may not be
modified except in accordance with Section H. of this Rule. The Exchange has no
responsibility with respect to the confirmation of trade terms for the Transactions, and theClearing Members carrying the account of the Parties to the Transaction shall only be
responsible for the confirmation required pursuant to Rule 957.
808.F.
CME ClearPort Registration Requirements
Each Clearing Member must register with the Exchange in the manner required for any
customer authorized by the Clearing Member to submit transactions to the Exchange pursuant
to this Rule, and must also register with the Exchange the applicable account numbers foreach such customer. For each such account, the Clearing Member carrying that account mustalso submit to the Exchange the name of any Broker(s) who has registered with the Exchange
for services provided by the Exchange, and who is authorized by the customer to act on its
behalf in the submission of executed Transactions to the Exchange. For any such Brokers
authorized by the customer and submitted to the Exchange by the Clearing Member, such
submission by the Clearing Member will not constitute an endorsement or ratification of thecustomer's authorization of the Broker. Moreover, submission of Brokers authorized by thecustomer will not mean that the Clearing Member is in privity with, has a relationship with

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 17 of 38

and/or is otherwise standing behind any of the customer's authorized Brokers, and theClearing Member will have no responsibility for any such Brokers selected by the customer
and no duty or obligation to supervise the activities of any such Brokers.
808.G.
Establishment of Authorized Commodities and Account Risk Limit(s)With the exception of Interest Rate Swap (“IRS”) Transactions, for each account number thathas been registered with the Exchange pursuant to Section F. of this Rule, a Clearing Member
must also input into the CME Account Manager system an authorization identifying the specificcommodities for which a Transaction may be submitted to the Exchange pursuant to this Ruleand the account risk limit(s) assigned by the Clearing Member for Transactions for that
account.
808.H.
Trade Deletion Procedures for Transactions Submitted via CME ClearPort
Following submission of the trade details by Broker (or by Exchange staff as mutually agreed
by the Parties to the Transaction), an e-mail will be transmitted to the Parties to theTransaction notifying them that they have been listed as counterparties in a Transaction thathas been submitted to the Exchange. Following such submission, a buyer or seller may notunilaterally reject the trade terms previously submitted to the Exchange. However, in order tocorrect an error resulting from the good faith actions of the Broker or Exchange staff, asapplicable, and upon mutual consent of the Parties to the Transaction, Broker or Exchange
staff, as applicable, may void the transaction provided, however, that this void response isreceived by the Exchange within three Business Days of the time of the initial submission of
the Transaction to the Exchange. Notwithstanding the provisions of this Section, the Parties to
the Transaction and any Broker authorized by the Parties to the Transaction pursuant to
Section E. of this Rule may be subject to sanctions pursuant to Rule 512 for the inaccurate,incomplete or untimely submission of the Transactions to the Clearing House.
808.I.
Entry of Transactions
For a Transaction submitted to the Exchange pursuant to this rule, such Transaction will firstbe routed to the Exchange's credit check system. The time of entry of a Transaction into the
Exchange's system will be recorded by the system and will be used by the Exchange as thetime that a credit check was conducted pursuant to Section J. below.
808.J.
Use of Credit Check System
The Exchange will conduct a credit check for each Transaction. The credit check will confirm
whether the Clearing Member carrying that account has authorized that account forTransactions submitted pursuant to this Rule in the commodity involved in the Transaction,and confirm whether the entry of the Transaction into clearing would fall within the account risk
limit(s) established by the Clearing Member. At all times until both sides (Buy and Sell) of theTransaction have successfully cleared the credit check and the Clearing House has been
substituted as the counterparty to the Transaction pursuant to Rule 804, a Transaction
submitted to the Exchange pursuant to this rule shall remain as an uncleared Transaction. In
the event that either side of the Transaction is rejected as a result of the credit check test, theParties to the Transaction and their respective Clearing Members will be informed accordingly.
Thereafter, any determination as to further action with respect to the Transaction will be thesole responsibility of the Parties to the Transaction.
808.K.
Trade Submission Deadlines
With the exception of IRS and FX Spot, Forward and Swaps Transactions, all otherTransactions that are submitted, confirmed and accepted for clearing, as further provided by
Section L. of this rule, prior to 5:15 p.m. New York time on an Exchange Business Day will be
included by the Exchange for clearing for that Business Day. The Exchange reserves the rightto modify these business hours without notice at any time. The CME ClearPort Facilitation
Desk will generally be available to assist users 24 hours a day on all Exchange Business
Days.
808.L.
Clearance by Both Sides of the Transactions of Credit Check
Upon clearance by both sides of the Transaction of the credit check, the Transaction shall bedeemed to have been accepted for clearing and will be routed automatically to the Exchange's
clearing system. Notwithstanding the above, a Clearing Member shall also be responsible for
accepting and clearing a position for a Transaction entered into the Exchange's clearing© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 18 of 38

system for clearing following any non-operation of the Exchange's credit check functionality forthe applicable account carried by the Clearing Member.

809.

TRADE DATA PROCESSING SYSTEM

12B

809.A.
Trade Data
Every clearing member must submit accurate trade data for the day's business to the Clearing
House no later than the time specified by the Clearing House.
809.B.
Matched and Unmatched Trades
The Clearing House shall process all trade data submitted by clearing members but shallaccept only those trade records (transactions) which are in agreement with the corresponding
trade records submitted by the opposite clearing members.
Trade records will be matched, to the extent the opposite trade information is consistent,
through the tiered matching process.
Resubmitted trade data will be processed by the Clearing House. Trades with unmatchedtrade information remaining after the tiered matching process will be rejected and outtrade
notices will be issued to clearing members.
Trades unreconciled after the final reconciliation must be submitted on the following business
day as "as-of-trades."809.C.
Trade Register and Clearing Reports
From the trade data cleared during each day's reconciliation, the Clearing House will produce
a trade register for each clearing member which will itemize by commodity and contract: theopening long and short position, the contracts bought and/or sold during the day, the prices atwhich executed, and the settlement amounts.
The Clearing House will also produce a recap ledger for each clearing member that will itemize
various position and financial information that includes but is not limited to, commodity
positions, settlement amounts and performance bond information.
809.D.
Reconciliation of Outtrades
It shall be the primary responsibility of the clearing member to see that all trades are clearedprior to the opening of the following day's open outcry market.
Each member, if applicable, and clearing member firm shall designate a person or persons
who will be available and responsible for reconciling the member or clearing member firm's
outtrades. The person or persons shall be qualified to resolve outtrades as the member orclearing member firm's designated outtrade representative. Failure to have a qualified
representative available, with all materials necessary to reconcile outtrades, at the time
specified above shall constitute negligence in the determination of responsibility for any
outtrades. If one firm cannot locate another firm's broker or representative for clearing
purposes during these time periods, it shall report such fact to the Global Head of Clearing &Post-Trade Services. If the Global Head of Clearing & Post-Trade Services or their designee
cannot find the broker or representative of the firm, fines will be assessed in the amounts of$1,000, $2,000 or $3,000 sequentially, for violations occurring within a 30-day period.
39B

40B

41B

42B

810.
13B

FALSE ENTRIES ON CLEARING MEMORANDA
No member shall place any false or inaccurate entries on any clearing memoranda, including,with respect to a Participating Clearing Member, the clearing memoranda of a Cross-Margining
Clearing Organization.

811.
14B

POSITION CHANGE DATA
Position change data must be submitted to the Clearing House each trading day not later than
the time specified by the Clearing House. Position change data will be in such form andcontain such information as prescribed by the Clearing House. When requested, theidentification of accounts will be made available to the Financial and Regulatory Surveillance
Department.

812.
15B

FINAL SETTLEMENT PRICE
Certain products, as described in the applicable product chapters, have procedures forestablishing a final settlement price that are distinct from the procedures for establishing the© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 19 of 38

daily settlement price for the product on the last day of trading. For such products, if a final
settlement price is unable to be determined or if the applicable procedures result in a clearlyaberrant final settlement price inconsistent with market value and alternative settlement
procedures are not otherwise specified in the relevant product chapter, then the Chief
Executive Officer or Chief Operating Officer, or their delegate, may establish a final settlement
price that reflects the true market value at the time of final settlement.
A payment in settlement of a delivery obligation (physical or cash settled) shall not be adjusted
after ten business days for any reason, including, without limitation, a calculation error or
erroneous and/or incomplete input.

813.

DAILY SETTLEMENT PRICE
Daily settlement prices shall be determined each business day for each product pursuant to
one or more of the procedures set forth below. The settlement price shall be a price consistent
with the minimum tick increment for the product; if the calculated settlement price is not a
standard tick increment, the calculated settlement price will be rounded either to the nearest
tick or to the tick closer to the previous day’s settlement price. The procedure used todetermine the settlement price of a product will depend on the product group, level of activity
and liquidity during the defined settlement period, and the trading venue(s) used to derive thesettlement. To the extent that any members participate in the creation of settlement prices,
they agree to assign and transfer to the Exchange any and all right, title and interest in and to
the settlement prices, including, but not limited to, all copyright in the settlement prices.
1. [Reserved]
2. Volume-Weighted Average Price (VWAP) of the Settlement Period: In products that use
this procedure, all outright trades that occur during the defined settlement period are utilized to
calculate the VWAP for specified contract months and the VWAP will be the settlement price. If
the open outcry venue is used to determine the settlement price, the VWAP may be estimated.
The calculated or estimated VWAP of relevant spread trades that occur during the settlement
period may be used to determine the settlement price of deferred or less actively traded
contract months in products that use this procedure.
3. Bid/Ask Midpoint at the Settlement or during the Settlement Period: In products that use
this procedure, the midpoint of the bid/ask at the defined settlement time or during the defined
settlement period will be the settlement price.
4. Option Settlements: Option settlements are derived from available market information
including, but not limited to, outright trades, bids or offers during the settlement period, relevant
spread trades, bids or offers during the settlement period, the settlement price of theunderlying future and relevant relationships based on option pricing theory using option pricing
models employed by the Exchange.
5. For all contract months not determined by one of the methods set forth above or pursuant
to Section 6 below, relevant spread relationships between contract months will be used toderive the settlement.
6. In the event the Exchange determines that the settlement price derived by one of themethods set forth above is not an accurate representation of the relevant market, theExchange may determine the settlement price based on other market prices, including
settlement prices for similar contracts trading on other exchanges.
7. For all products that are settled with the delivery of, or by reference to, the sameunderlying instrument but which are offered in alternative contract sizes (mini or micro), a
single settlement price will be applicable to all such contracts, with necessary adjustments
made to round to the nearest tradable price increment eligible in all such contracts.
8. For contracts cleared through ClearPort Clearing that are not otherwise settled by one of
the methods set forth above, staff shall determine settlement prices for such contracts based
upon a consideration of relevant market data, including, but not limited to, trading activity inrelevant OTC products, pricing data obtained from OTC market participants, the settlement
prices of related products and any other pricing data from sources deemed reliable by Staff.
9. Notwithstanding the above, if a settlement price in any product, as derived by the normal
methodology used for that product, is inconsistent with trades, bids or offers in othermonths/strikes during the settlement period, or other relevant market information, or if there is
no relevant market activity, an Exchange official may establish a settlement price that best

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 20 of 38

reflects the true market valuation at the settlement time or during the defined settlement
period.
10. For products cleared by the Clearing House on behalf of another entity, the settlement
price shall be determined according to the rules of such entity.
11. Notwithstanding the above, in the case of inaccuracy or unavailability of a settlement
price, or if a settlement price creates risk management concerns for the Clearing House, theClearing House reserves the right to calculate settlement variation using an alternate pricedetermined by the Clearing House.

814.
17B

SETTLEMENTS, SETTLEMENT VARIATION PAYMENTS, AND OPTION VALUE
When a clearing member or its customer is long or short any amount of any Commodity for asettlement cycle, as indicated by Clearing House records, settlement for any outstanding
exposure shall be made with the Clearing House. A settlement cycle shall be conducted atleast once each Business Day at such times as the Clearing House shall determine. The
Clearing House may establish different settlement cycles for different contracts. For purposesof this Rule 814, "outstanding exposure" shall mean the obligations to pay, as applicable, any
settlement variation payment and any other payments due in respect of a Commodity(including price alignment amount, coupon payments, option premiums and upfront fees and,for the avoidance of doubt, excluding any posting of performance bond).
Each clearing member for its proprietary and customer positions shall pay to, or collect from,the Clearing House any loss or profit for non-option Commodities as a settlement variation
payment, as the case may be, represented by the difference between (x) the settlement priceof the Commodity for such settlement cycle and (y) the settlement price of the Commodity forthe prior settlement cycle (or, for the first settlement cycle after the purchase/sale of such
Commodity, the price at which the Commodity was purchased or sold).
Except as otherwise specifically provided for in the contract chapters, for Commodities that are
options, the Clearing House will determine option value for each option and the net option
value of each portfolio. For a settlement cycle, (i) if the net option value of the portfolio is
positive, such amount may be used to satisfy performance bond requirements for the portfolio,(ii) if the net option value of a portfolio is negative, such amount will increase the performancebond requirements for the portfolio.
All payments in satisfaction of outstanding exposures must be paid in cash or any other form of
payment approved by the Clearing House Risk Committee; shall be settlement (within themeaning of CFTC Rule 39.14); and shall be final, irrevocable and unconditional no later thanwhen the correct Clearing House bank account at the relevant settlement bank is debited or
credited with the payment. Payments in satisfaction of outstanding exposures shall notconstitute "property, cash, securities or collateral deposited with the Clearing House" forpurposes of Rules 819 and 8F008 but, where such payments are retained by the Clearing
House at the instruction of the Clearing Member, such payments shall be deemed to beproperty held by the Clearing House within the meaning of Section 761(10) of the US
Bankruptcy Code.
For each of the Clearing House's classes of clearing (i.e., Base Guaranty Fund Products and
IRS Products), once all payments in satisfaction of outstanding exposure between a clearing
member and the Clearing House for a settlement cycle are final for any of the clearing
member's house account, its customer segregated account, its customer secured account or
its cleared swaps customer account, the outstanding exposure between the clearing member
and the Clearing House for all Commodities in such class of clearing in the respective accountsubject to that settlement cycle shall be settled, and the fair value of each such Commodity
shall then be reset to zero.
Notwithstanding the foregoing, the Clearing House shall not be required to pay any profit to a
Participating Clearing Member in the event that such member or its Cross-Margining Affiliate
fails to make any required settlement for that settlement cycle with a Cross-Margining Clearing
Organization.
If the market conditions or price fluctuations are such that the Clearing House deems it
necessary, it may call upon the clearing members, which in its opinion are affected, to pay
funds to the Clearing House by such time and in such amount as specified by the Clearing
House to meet such settlements as the Clearing House estimates may be necessary. The
Clearing House may pay out funds to those clearing members that, in the opinion of the© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 21 of 38

Clearing House, will have credit balances as a result of those same market conditions or pricefluctuations; except that in no instance may the Clearing House pay out funds to a clearing
member, other than at the regular settlement, in excess of the total original performance bonddeposits it holds for such clearing member. All payments made under this Rule shall be
subject to the procedures prescribed by the Clearing House and set forth in the Manual.

815.
18B

THIRD PARTY EXECUTION PLATFORMS FOR SWAPS
815.A.
Exclusivity of Clearing House Rules
The Clearing House Rules shall exclusively apply, and prevail to the extent there is any conflictwith any third party rules, to all swap trades, and resulting positions, from the time that a swap
trade, including a swap trade executed on a Swap Execution Facility (“SEF”) or other third
party execution platform for swaps (collectively, “Third Party Execution Platforms”), is
submitted for clearing. Notwithstanding the foregoing, if the Clearing House rejects a swap
trade for clearing, the Clearing House Rules shall cease to apply to that swap trade until suchswap trade is resubmitted for clearing.
815.B.
Clearing House Authority
The Clearing House will have the sole authority to:
1. determine whether any trade submitted for clearing will be accepted or rejected. For the
avoidance of doubt, Third Party Execution Platforms may not make a determination on clearing
acceptance or rejection and may only communicate the Clearing House’s determination ofwhether a trade has been accepted or rejected for clearing.
2. block or cancel any trades submitted for clearing by, or on behalf of, any Third Party
Execution Platforms if it determines that such trades were executed or submitted to theClearing House in error.
3. deny or terminate the connection of Third Party Execution Platforms to the Clearing Housedue to technical, operational or risk management issues at the Third Party Execution
Platforms.
4. determine whether it will accept any trade transaction counterparty risk.
5. determine whether contracts cleared by the Clearing House are economically equivalentand should be offset within the Clearing House pursuant to the Act.
815.C.
Voids and Price Adjustments
A void or price adjustment for any swap trade that has been accepted for clearing is not valid
without the consent of the Clearing House.
815.D.
Submission to Clearing House Rules and Access to Execution Platforms
All Third Party Execution Platforms that submit, or have submitted on their behalf, swap tradesfor clearing to the Clearing House shall be bound by Clearing House Rules, including, but notnecessarily limited to, the disciplinary Rules and the emergency Rules contained in Chapters2, 4, 8, and 8G and shall, at all times, provide the Clearing House with access to its execution
platform for risk management purposes.
815.E.
Compliance with Regulatory Standards
No Third Party Execution Platform may submit swap trades for clearing to the Clearing House
unless it has complied with all applicable CFTC regulations, standards and requirements
including, but not limited to, technological, operational and risk management standards.
815.F.
Transfer of Swap Positions
No swap positions may be transferred, including those resulting from an execution on Third
Party Execution Platforms, unless such transfer is made in accordance with the Clearing
House Rules.
815.G.
Applicability to Security-Based Swaps
Rule 815 does not apply to security-based swaps.

816.
19B

GUARANTY FUND DEPOSIT
Each clearing member shall make a Base Guaranty Fund deposit with the Exchange as
security for its obligations to the Clearing House. The minimum Base Guaranty Fund deposit of© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 22 of 38

a clearing member shall equal the greater of (a) $500,000 if clearing CME, CBOT, NYMEX or
COMEX futures and options on futures only, (b) $2,500,000 if clearing OTC spot, forward or
swaps contracts or (c) the clearing member's proportionate share of the "Aggregate Guaranty
Fund Deposit." This requirement is separate and distinct from the guaranty fund deposit
requirement for IRS Products as set forth in Chapter 8G of the CME Rulebook. The Aggregate
Guaranty Fund Deposit shall be an amount determined by the Clearing House.
Each clearing member's proportionate share of the Aggregate Guaranty Fund Deposit shallconsist of:(i) a specified percentage of the Aggregate Guaranty Fund Deposit multiplied by the clearing
member's proportionate share (including the total risk performance bond requirement inrespect of positions in its cross-margin accounts and any applicable short option value) of theaverage aggregate risk performance bond requirement (including the risk performance bondrequirement in respect of positions in all cross-margin accounts and any applicable short
option value) for the preceding three months; plus(ii) a specified percentage of the Aggregate Guaranty Fund Deposit multiplied by the clearing
member's proportionate share of the total number of contracts executed on the Exchange andany applicable exchange or market during the preceding three months; plus(iii) a specified percentage of the Aggregate Guaranty Fund Deposit multiplied by the clearing
member’s proportionate share of foreign currency settlements for the preceding three months.
The percentages in (i) through (iii) above shall be determined and modified by the Clearing
House Risk Committee as appropriate. Some contracts may be weighted more heavily thanothers in order to reflect the greater risk associated with those contracts. The average
aggregate risk performance bond requirement, the total number of contracts executed, thegross notional amount of open interest cleared and each clearing member's proportionate
share of each will be calculated by the Clearing House, and a report setting forth suchinformation and the clearing member's required Base Guaranty Fund deposit will be given to
the clearing member each month, and the Clearing House may provide such reports on aninterim basis at any time during the month as the Clearing House staff shall determine. If at
any time, such report indicates that the clearing member's current Base Guaranty Fund depositwith the Clearing House is smaller than the amount required, the clearing member shall
increase its amount within two business days. If such report indicates that the clearing
member's current Base Guaranty Fund deposit with the Exchange is larger than the amountrequired, the clearing member may withdraw the excess amount. If, prior to the issuance of themonthly report, the Clearing House determines that an increase in the Base Guaranty Funddeposit is necessary to protect the financial integrity of the Clearing House, the clearing
member, upon demand of the Clearing House, shall increase its Base Guaranty Fund deposit
amount within two business days. In the event that an interim report is issued within fivebusiness days prior to the regularly scheduled monthly report, the Clearing House may opt toforego the issuance of an additional month-end report, provided that the amount of resources
required has not changed substantially during this period.
A clearing member's Base Guaranty Fund deposit may be in a form as set forth in the Manual.
Such Base Guaranty Fund deposit forms and amounts shall be subject to the terms andconditions as approved by Exchange staff.

817.

LIQUIDITY FACILITY
The Exchange may enter into liquidity facilities (each a “Liquidity Facility”) to convert collateral
to cash in any case where the Clearing House can use the collateral, pursuant to Chapters 8,
8F, 8G, and 9 of the Rules of the Exchange, and use the cash proceeds to meet an obligation
to the Clearing House.
If a clearing member of CME, CBOT, NYMEX, COMEX or OTC Clearing Member (a) is unable
to promptly discharge any obligation to the Clearing House or (b) is suspended or becomessubject to any bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation orother similar proceedings under U.S. federal or state bankruptcy laws or other applicable law,collateral deposited by the clearing member in satisfaction of its performance bond andguaranty fund requirements may be used to obtain liquidity to satisfy the clearing member's
obligations to the Clearing House as follows: (1) performance bond collateral relating to aclearing member’s proprietary account may be used to obtain liquidity to meet obligations
relating to the clearing member’s proprietary account, customer segregated account, secured© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 23 of 38

account or cleared swaps customer account; (2) performance bond collateral relating to aclearing member’s customer segregated account may only be used to obtain liquidity withrespect to obligations of such account; (3) performance bond collateral relating to a clearing
members secured account may only be used to obtain liquidity with respect to obligations ofsuch account; (4) performance bond deposits relating to a clearing member’s cleared swaps
customer account may only be used to obtain liquidity with respect to such account; and (5)guaranty fund collateral may be used in the order prescribed by Rules 802.B, and 8G802.B.
In any case where the Rules of the Exchange permit the Clearing House to use guaranty fundcollateral deposited by clearing members who have not failed to meet an obligation to theClearing House, the Clearing House may convert collateral held in that Guaranty Fund to cashby means of a Liquidity Facility.
By delivering assets to the Exchange in satisfaction of guaranty fund deposit and performancebond requirements, each clearing member is hereby deemed: (i) to agree that its assets (or its
customers’ assets, as provided above) may be transferred by the Exchange to obtain liquidityfrom the Exchange's liquidity lenders and that its assets may become subject to a lien in favor of
the Exchange's liquidity lenders or otherwise guarantee the Exchange's obligations and; (ii) toauthorize the Exchange, and appoint the Exchange (such appointment being coupled) with aninterest as such clearing member's attorney-in-fact, to enter into agreements on its behalf inconnection with its assets (or its customers’ assets, as provided above) being transferred to the
Exchange's liquidity lenders: and (iii) to acknowledge that the obligations of the Exchange tothe Exchange’s liquidity lenders may be greater, and extend for periods of time longer,
than the obligations, if any, of such clearing member to the Exchange.
The Exchange, as each clearing member's attorney-in-fact, will have authority to enter into
agreements on behalf of each clearing member and in each clearing member's name for the
purpose of causing the clearing member's assets (or its customers’ assets, as provided above)
to be transferred to the Exchange's liquidity lenders. Any agreement entered into by the
Exchange on behalf of clearing members pursuant to this Rule 817 shall bind each clearing
member and will contain provisions, including representations, warranties and covenants,
required by lenders under any liquidity facility.
If there is a default under any such liquidity facility, the assets of clearing members transferredto the Exchange’s liquidity lenders may be foreclosed upon by such lenders and applied against
the obligations of the Exchange under the related liquidity facility. Clearing members shall takeno action, including but not limited to attempting to obtain a court order, that would interfere withthe ability of such liquidity lenders to receive the benefit of their contractual remedies inconnection with any such foreclosure or that would controvert or assert the invalidity of any
provision of these rules. Each clearing member agrees to sign any document or agreement
requested by the Exchange to further document the power of attorney set forth and establishedby these rules.
The foregoing provisions shall apply without regard to whether a clearing member has been
declared to be in default under the Rules.

818.

CLOSE-OUT NETTING

F

818.A.
Bankruptcy of the Exchange
If at any time the Exchange: (i) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditors’ rights, or a petition is presented for its winding up or
liquidation, and, in the case of any such proceeding or petition presented against it, suchproceeding or petition results in a judgment of insolvency or bankruptcy or the entry of an orderfor relief or the making of an order for the Exchange’s winding-up or liquidation, or (ii) approves
resolutions authorizing any proceeding or petition described in clause (i) above (collectively, a“Bankruptcy Event”), all open positions in the Clearing House shall be closed promptly.
818.B.
Default of the Exchange
If at any time the Exchange fails to comply with an undisputed obligation to pay money ordeliver property to a Clearing Member that is due and owing in connection with a transaction
on the Exchange or cleared by the Exchange, for a period of five Business Days from the datethat the Exchange receives notice from the Clearing Member of the past due obligation, theClearing Member’s open proprietary and customer (including, for this rule, CFTC Regulation© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 24 of 38

Section 30.7 customers and cleared swaps customers) positions at the Clearing House shall,at the election of that Clearing Member, be closed promptly. For the avoidance of doubt, any
modification to any Base Contract under Rule 802.B.7. or any IRS Contract under 8G802.B.3.
shall not be considered a failure by the Exchange to comply with an obligation to pay money ordeliver property.
818.C.
Netting and Offset
1. At such time as a Clearing Member's positions are closed:(i) the obligations of the Clearing House to such Clearing Member in respect of the Clearing
Member's proprietary positions, accounts, collateral and guaranty fund deposits shall be netted
against the obligations of such Clearing Member to the Clearing House and to the Exchange inrespect of its proprietary positions, accounts, collateral, guarantees of the performance of its
customers and any obligations to guarantee funds without respect to product category("Proprietary Netting");(ii) the obligations of the Clearing House to the Clearing Member in respect of such Clearing
Member's customers' futures positions, including foreign futures positions carried in the futures
account class, futures accounts, and futures collateral shall be netted against the obligations of
the Clearing Member to the Clearing House in respect of the futures positions, futures
accounts and futures collateral of such customers ("Futures Customer Netting"); and(iii) the obligations of the Clearing House to the Clearing Member in respect of such Clearing
Member's individual customers' swap positions, swap accounts, and swap collateral shall be
netted against the obligations of the Clearing Member to the Clearing House in respect of theswap positions, swap accounts and swap collateral of each individual customer, on an
individual customer by customer basis ("Swap Customer Netting"); and(iv) the obligations of the Clearing House to the Clearing Member in respect of such Clearing
Member's customers' foreign futures positions carried in the foreign futures account class,foreign futures accounts, and foreign futures collateral shall be netted against the obligations of
the Clearing Member to the Clearing House in respect of the futures positions, futures
accounts and futures collateral of such customers ("30.7 Futures Customer Netting").
Notwithstanding the foregoing, the amount of any proprietary or customer claim extinguished
as a result of the application of the terminating and netting procedures set forth in either Rule
802.B. (with respect to Base Products) or Rule 8G802.B (with respect to IRS Products), shallnot be available for netting in Proprietary Netting, Futures Customer Netting, Swap Customer
Netting or 30.7 Futures Customer Netting, as applicable. Proprietary Netting, Futures
Customer Netting, Swap Customer Netting and 30.7 Futures Customer Netting shall be
performed in accordance with the Bankruptcy Code, the Commodity Exchange Act and theregulations promulgated thereunder. Rule 818 shall be deemed to be (i) a master netting
agreement for Proprietary Netting; (ii) a master netting agreement for Futures Customer
Netting, (iii) a master netting agreement for Swap Customer Netting, and (iv) a master netting
agreement for 30.7 Futures Customer Netting.
2. After a Bankruptcy Event takes place, the authority of the Clearing House, pursuant toRule 802, to make new assessments and/or require a Clearing Member to cure a deficiency inits guaranty fund deposit arising after the Bankruptcy Event, shall terminate.
3. All positions open immediately before being closed in accordance with this Rule shall bevalued in accordance with the procedures of Paragraph D of this Rule.
818.D.
Valuation
As promptly as reasonably practicable, but in any event within thirty days of the: (i) Bankruptcy
Event, or (ii) if a Clearing Member elects to have its open positions closed in a default as
described in Paragraph B of this Rule, the date of the election, the Exchange shall, in amanner that is consistent with the requirements of the Commodity Exchange Act and theregulations adopted thereunder (including, without limitation) Part 190 of the Regulations, fix a
U.S. dollar amount (the “Close-out Value”) to be paid to or received from the Exchange by
each Clearing Member, after taking into account all applicable netting and offsetting pursuant
to paragraph C of this Rule.
The Exchange shall value open positions subject to close-out by using the market prices forthe relevant market (including without limitation, any over the counter markets) at the momentthat the positions were closed-out, assuming the relevant markets were operating normally atsuch moment. If the relevant markets were not operating normally at such moment, the© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 25 of 38

Exchange shall exercise its discretion, acting in good faith and in a commercially reasonable
manner, in adopting methods of valuation to produce reasonably accurate substitutes for thevalues that would have been obtained from the relevant market if it had been operating
normally at the moment that the positions were closed-out.
If a default of a Base Clearing Member or IRS Clearing Member has also occurred, if asettlement cycle was conducted pursuant to Rules 802.B. and 8G802.B. as applicable, and theClearing House has not fully liquidated (or ported) all of the clearing member’s proprietary andcustomer positions, the Exchange shall value open positions subject to close-out by using theprices that were determined pursuant to the final settlement cycle that was conducted pursuant
to Rules 802.B. and 8G802.B., as appropriate.
In determining a Close-out Value, the Exchange may consider any information that it deems
relevant. Amounts stated in a currency other than U.S. Dollars shall be converted to U.S.
Dollars at the current rate of exchange, as determined by the Exchange. If a Clearing Member
has a negative Close-out Value it shall promptly pay that amount to the Exchange.
818.E.
Interpretation in Relation to FDICIAThe Exchange intends that certain provisions of this Section be interpreted in relation to certain
terms (identified by quotation marks) that are defined in the Federal Deposit Insurance
Exchange Improvement Act of 1991 (“FDICIA”), as amended, as follows:
1.
The Exchange is a “clearing organization.”2.
An obligation of a Clearing Member to make a payment to the Exchange, or of the
Exchange to make a payment to a Clearing Member, subject to a netting agreement, is a“covered clearing obligation” and a “covered contractual payment obligation.”3.
An entitlement of a Clearing Member to receive a payment from the Exchange, or of the
Exchange to receive a payment from a Clearing Member, subject to a netting contract, is a“covered contractual payment entitlement.”
4.
The Exchange is a “member,” and each Clearing Member is a “member.”
5.
The amount by which the covered contractual payment entitlements of a Clearing
Member or the Exchange exceed the covered contractual payment obligations of such
Clearing Member or the Exchange after netting under a netting contract is its “net entitlement.”
6.
The amount by which the covered contractual payment obligations of a Clearing Memberor the Exchange exceed the covered contractual payment entitlements of such Clearing
Member or the Exchange after netting under a netting contract is its “net obligation.”
The By-Laws and Rules of the Exchange, including this Section, are a “netting contract.”

819.
2B

LIEN ON COLLATERAL
Each Clearing Member hereby grants to the Clearing House to secure obligations of such
Clearing Member to the Clearing House a first priority and unencumbered security interest andlien against any property, cash, securities or collateral deposited with, transferred or pledged
to, or otherwise where control is given to the Clearing House by such Clearing Member.
Clearing Members shall take any action that may be required by the Clearing House to create,preserve, perfect, validate or enforce any such security interest.

820.
23B

PERFORMANCE BONDS
Performance bond requirements will be as determined by Clearing House staff from time totime. Clearing Members must post performance bond to the Clearing House on a gross basis
for each of its omnibus customer accounts.
Subject to the terms and conditions as approved by Clearing House staff, the Clearing House
will accept as performance bond, cash, equity securities, shares of mutual funds, United States
Treasury and agency Securities, Letters of Credit, shares in CME's Interest Earning Facility 2
Program, permitted investments allowable under CFTC Regulation 1.25, “readily marketablesecurities” as defined by Securities and Exchange Commission Rules, as applicable, gold
warrants that are registered as deliverable for gold futures contracts traded on Commodity
Exchange, Inc., and “London Good Delivery” gold, as defined by the London Bullion Market
Association (as used in this Rule 820, such assets and any proceeds thereof are collectively
referred to as “Assets”), all of which must be and remain unencumbered. The Clearing House
may include other forms of collateral within the definition of “Assets” upon the approval of the
Clearing House Risk Committee and notice to clearing members.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 26 of 38

All performance bond collateral, as herein described, shall be placed to the credit of themember paying the same for its customers' trades or its own (so-called "house") trades as
designated by the clearing member. The Clearing House shall value performance bondcollateral as it deems appropriate. The clearing member shall transfer the performance bondcollateral to the Clearing House or to an approved depository for safekeeping in a Clearing
House account and the Clearing House shall retain control over such performance bondcollateral. Neither the Exchange nor the Clearing House shall have any obligation or
responsibility to preserve, protect, collect or realize upon, and under no circumstances shallthe Exchange or Clearing House be liable for, any loss or diminution in value or depreciation in
the performance bond collateral maintained pursuant to this rule. A clearing member who
maintains performance bond collateral for its benefit pursuant to this rule shall hold the
Exchange and Clearing House harmless from all liability, losses and damages which may
result from or arise with respect to the care and sale of such performance bond collateral. All
initial and additional performance bonds shall be retained by the Clearing House in whole or inpart, as Clearing House staff may deem necessary, until the trades for which such
performance bond collateral has been deposited, have been offset, cash settled, delivered orotherwise closed out as determined by Clearing House staff.
Each clearing member shall reimburse the Clearing House for all fees, expenses, charges andcosts assessed by a depository against the Clearing House with respect to all performancebond collateral maintained in its account, and shall make deposits as may be required by the
Clearing House by reason of any depreciation in the market value of such performance bondcollateral. If a clearing member defaults to the Clearing House with respect to performancebonds, the performance bond collateral maintained in its account pursuant to this rule shall betaken over by the Clearing House and sold without notice and the proceeds of the performancebond collateral deposited for customers' trades shall be applied against the performance bondrequirements for the clearing members' customers' accounts, and the proceeds ofperformance bond collateral deposited for the house trades shall be applied against therequirements for the clearing member's own (so-called "house") account.

821.
24B

EXCESS PERFORMANCE BOND OF CLEARED SWAPS CUSTOMERS
Pursuant to CFTC Regulation 22.13(c), the Clearing House will permit a Clearing Member totransmit performance bond of its cleared swaps customers in excess of the amount requiredby the Clearing House for such cleared swaps customers positions. Each Clearing Member
transmitting such excess shall identify each Business Day, for each cleared swaps customer,
the value of performance bond posted in excess of the amount required for such clearedswaps customer.

822.

LIQUIDITY RISK MANAGEMENT
In order to satisfy CFTC Regulations and prudential liquidity standards, the Clearing House isestablishing the following rules:
822.A.
Liquidity Rules
In the event the Clearing House needs liquidity for non-cash collateral of a clearing member or
its customers for same day settlement, the Clearing House will first attempt to obtain liquidity
for such collateral through asset sale, any uncommitted funding arrangements, its committedlines of credit and any committed repurchase agreements. In the event the Clearing House isunable to obtain same day settlement through such means, the Clearing House may declarethe occurrence of a Liquidity Event and in its sole discretion may take the following actions in
the following order to secure same day liquidity for such assets as follows:
1. Substitution of Guaranty Fund Casha. The Clearing House may substitute any cash deposited by clearing members in aguaranty fund with U.S. Treasuries deposited as performance bond or guaranty fund by aclearing member that is the subject of such Liquidity Event. The amount of cash substituted
hereunder shall be equal to the haircutted market value (determined by the Clearing House
as of the prior day’s close of business utilizing a recognized third party pricing source) of the
U.S. Treasuries that are substituted for such cash. Any assets transferred by this rule
shall be applied as guaranty fund deposit(s) of any such clearing member whose cash wassubstituted and will be allocated pro rata among any clearing members with cash deposits.
The substitution of U.S. Treasuries for the clearing member’s guaranty fund deposit(s) will be© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 27 of 38

limited to the size of the clearing member’s guaranty fund deposit(s) at the time of the Liquidity
Event. For any substitution of U.S. Treasuries for cash in a guaranty fund, the impacted
clearing member may, within 24 hours of substitution, request that the Clearing House
replace the cash for the substituted U.S. Treasuries, to the extent still on deposit, within 29
days of the date of substitution. Any clearing member requesting cash replacement will
receive the exact value in cash received by the Clearing House upon liquidation the U.S.
Treasuries.
b. The Clearing House may direct any clearing member that is a U.S. Government
Securities Broker-Dealer or has a U.S. Government Securities Broker-Dealer affiliate to
substitute its non-cash guaranty fund assets with cash within 60 minutes from the time ofnotification. Such directions will be made during the hours in which the Federal Reserve’s
securities wire transfer system is in operation, provided, however that is such directions are
given within 60 minutes prior to the close of the Federal Reserve’s securities wire, thesubstitution required hereunder shall be made within 60 minutes after the Federal
Reserve’s securities wire next opens. To the extent that a clearing member(s) fails to provide
cash within the deadlines specified above, the Clearing House may debit cash from thatclearing member’s settlement bank account in the amount of the clearing member’s non-cash
guaranty fund assets.
2. U.S. Treasury Sale to Meet Clearing House Settlement Variation Obligations
The Clearing House may offset its US dollar settlement variation obligations to any clearing
member that is a U.S. Government Securities Broker-Dealer or has a U.S. Government
Securities Broker-Dealer affiliate, up to the amount of that clearing member’s guaranty fundcontribution(s), by selling U.S. Treasuries valued based on the prior day’s closing prices withprevailing CME haircuts applied in exchange for US dollar cash from the clearing member.
The US dollar cash received by CME from the clearing member shall be in the form of thevariation margin obligation owed by CME and CME shall deliver the purchased U.S. Treasury
securities to the U.S. Government Securities Broker-Dealer.
822.B.
Transfer or Disbursement of Collateral as Compensation for Portfolio
Auction, Sale or Transfer with Notice in AdvanceTo the extent permitted by the terms of any auction, sale or transfer of a defaulted orsuspended clearing member’s or customer portfolio for which a payment is owed by the
Clearing House to an auction winner, purchaser or transferee, in lieu of satisfying suchpayment with cash, the Clearing House may satisfy any payment owed to such persons bytransferring Federal Reserve discount window eligible securities with a market value(determined by the Clearing House as of the prior day’s close of business utilizing arecognized third party pricing source) equal to the amount of such obligation.

823.

[RESERVED]

824.

ADDITIONAL PERFORMANCE BOND

25B

Whenever, in the opinion of the Clearing House Risk Committee, the President of Global
Operations, Technology & Risk or the Global Head of Clearing & Post-Trade Services or, in his
absence, his delegate, unstable conditions relating to one or more products exist, they may
from time to time, call for additional performance bond collateral from clearing members. Suchadditional performance bond calls may be as much as or more than the original performancebond collateral. The performance bond collateral thus called for may be for one or more
contract(s) from one or more clearing member(s) and on long positions, short positions or both.
In the event market conditions and price fluctuations at any time shall cause the Clearing
House Risk Committee, the President of Global Operations, Technology & Risk or the Global
Head of Clearing & Post-Trade Services or, in his absence, his delegate, to conclude that
additional performance bond collateral is required to maintain an orderly market in contracts
traded on the exchange or to preserve fiscal integrity the Clearing House Risk Committee, thePresident of Global Operations, Technology & Risk or the Global Head of Clearing & PostTrade Services or his delegate may call for additional performance bond collateral to bedeposited with the Clearing House during the next banking hour after demand therefor, or atsuch times as may be specified. Such additional performance bond collateral may be calledfrom the longs or the shorts or from both.
26B© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 28 of 38

When the Clearing House Risk Committee, the President of Global Operations, Technology &Risk or the Global Head of Clearing & Post-Trade Services or, in his absence, his delegate,
shall be of the opinion that any clearing member is carrying commitments or incurring risk in its
proprietary, customer and/or cross-margin accounts, that are larger than is justified by thefinancial condition of that clearing member, then the Clearing House Risk Committee, thePresident of Global Operations, Technology & Risk or the Global Head of Clearing & PostTrade Services or, in his absence, his delegate, may require additional performance bondcollateral of such clearing member which shall be deposited with the Clearing House during
the next banking hour after demand therefor, or at such time as may be specified, or a portionof the open positions of said clearing member may be required to be transferred to the booksof another clearing member.

825.

SEGREGATION OF PERFORMANCE BOND
The performance bond assets resulting from any rehypothecation, investment, pledge or
disposition of the original performance bond assets deposited by a clearing member that is nota defaulting or suspended clearing member, to the extent the Exchange is not required totransfer or pay out to third parties such resulting performance bond assets to meet the
Exchange’s obligations with respect to the clearing member pursuant to the Rules, shall beheld by the Exchange in the same manner in which the Exchange holds performance bondassets of the same form as the resulting performance bond assets.

826.

PROPRIETARY ACCOUNT MINIMUM LIQUIDATION PERIOD(a) With respect to clearing member proprietary positions, the Clearing House shall ensure
performance bond requirements are calculated and collected using a liquidation period of notless than two (2) days calculated on a net basis.
(b) Paragraph (a) of this Rule does not apply to positions in (i) agricultural commodity
derivatives contracts that meet the exclusion criteria established in Article 2 of the European
Commission’s equivalence determination dated February 24, 2016; or (ii) cleared-only OTC
products accepted for clearing by the Clearing House.

827.
27B

SECURITIES LENDING PROGRAM
United States Treasury Bills, Treasury Notes, Treasury Bonds, Treasury Bond Principal Strips,
Agency Securities, and other financial instruments approved by Exchange staff, (collectively,"Securities") that are deposited with the Clearing House by clearing members in satisfaction of
Guaranty Fund requirements or as performance bond for their own (i.e., "house") trades may
be loaned out by the Exchange pursuant to the Securities Lending Program. Clearing
members depositing Securities with the Exchange in satisfaction of guaranty fundrequirements or as performance bond for house trades that are loaned out pursuant to the
Securities Lending Program are deemed to agree that the lending of Securities underarrangements having safeguards consistent with generally accepted market practices will
constitute reasonable care of the Securities in the possession of the Exchange or its securities
lending custodian.

828.
28B

BASE FINANCIAL RESOURCES
The Clearing House shall maintain funded financial resources sufficient to enable the Clearing
House to meet its financial obligations to CME, CBOT, NYMEX and COMEX clearing members
notwithstanding a default by the two clearing members creating the largest combined loss to
the Clearing House in extreme but plausible market conditions. If a clearing member controls
another clearing member or is under common control with another clearing member, theaffiliated clearing members shall be deemed to be a single clearing member for financial
resources calculations under this rule.

829.

MEASURES TO MITIGATE PROCYCLICALITY(a) With respect to exchange traded derivatives contracts it clears, the Clearing House shallestablish performance bond requirements designed to limit the likelihood of procyclicalchanges in performance bond requirements and mitigate costly and disruptive adjustments toperformance bond requirements in periods of high market volatility. The Clearing House shallmaintain specific risk management procedures ensuring that performance bond is calculated
and collected on a basis that includes measures designed to limit procyclicality that areequivalent to at least one of the options listed in Article 28 (Procyclicality) of Delegated© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 29 of 38

Regulation (EU) No. 153/2013. Such anti-procyclicality measures shall include tools such as
extended lookback periods, seasonal volatility metrics, volatility floors, stress volatility metrics
and implied volatility.
The Clearing House shall regularly review the measures it utilizes to address procyclicality toensure they are appropriate in light of market conditions.
Further, the Clearing House’s anti-procyclicality measures shall be designed to ensure that its
policy for setting performance bond requirements delivers forward looking, stable,
conservative, and prudent performance bond requirements that limit procyclicality to the extent
that the soundness and financial security of the CCP is not negatively affected.
(b) Paragraph (a) does not apply to positions in agricultural commodity derivatives contracts
that meet the exclusion criteria established in the Article 2 of the European Commission’s
equivalence determination dated February 24, 2016.

830.

CROSS-MARGINING
830.A.
Definitions
1. Cross-Margining Affiliate: An affiliate of a Participating Clearing Member with which suchclearing member is cross-margining its positions at the Clearing House and a Cross-Margining
Clearing Organization.
2. Participating Clearing Member: A clearing member that is cross-margining its positions at
the Clearing House with its own or a Cross-Margining Affiliate's positions at a Cross- Margining
Clearing Organization.
3. Cross-Margining Clearing Organization: A clearing organization that has entered into a
Cross-Margining Agreement with the Exchange.
4. Joint Cross-Margining Program: A cross-margining program in which the Exchange andone or more Cross-Margining Clearing Organizations each hold a joint security interest in
positions, margin and other property of Participating Clearing Members and, if applicable, their
Cross-Margining Affiliates.
5. Guaranteed Cross-Margining Program: A cross-margining program in which a guaranty isprovided by and between the Exchange and one or more Cross-Margining Clearing
Organizations and each entity holds an individual security interest in positions, margin andother property of Participating Clearing Members and, if applicable, their Cross-Margining
Affiliate.
830.B.
Cross–Margining Programs
1. The Exchange may establish cross-margining programs as approved by the Clearing
House Risk Committee and the Board. A clearing member may become a Participating
Clearing Member to participate in a Joint Cross-Margining Program by establishing with theClearing House one or more cross-margin accounts for cross-margining positions with either
its own positions or those of a cross-margining affiliate at a Cross-Margining Clearing
Organization. In order to establish a cross-margin account, a clearing member shall enter into
the agreements required by the Exchange, including a Cross-Margined Account Agreement
and Security Agreement with the Exchange, the Cross-Margining Clearing Organization, and, if
applicable, the member's Cross-Margining Affiliate. That Agreement shall provide, among
other things, that the Exchange and the Cross-Margining Clearing Organization shall jointly
have a first lien on and security interest in all positions held in the cross-margin account, allrelated performance bond, and all proceeds of the foregoing, as security for the obligations of
the clearing member and, if applicable, its Cross-Margining Affiliate, to the Exchange and the
Cross-Margining Clearing Organization. Failure to comply with the terms of such Agreements
may constitute an act detrimental to the interest or welfare of the Exchange.
2. A clearing member may become a Participating Clearing Member in a Guaranteed CrossMargining Program by entering into a Cross-Margining Participant Agreement with the
Exchange, the Cross-Margining Clearing Organization, and, if applicable, the clearing
member's Cross-Margining Affiliate. That Agreement shall provide, among other things, that a
Participating Clearing Member shall immediately be obligated to reimburse the Exchange("Reimbursement Obligation") in the event the Participating Clearing Member or its CrossMargining Affiliate defaults in the payment of any obligation to a Cross-Margining Clearing
Organization and the Exchange is required to make a guaranty payment to such CrossMargining Clearing Organization. In addition, the Agreement shall provide that the Exchange
43B

4B© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 30 of 38

shall have a first lien and security interest in all positions held, all related performance bond,and all proceeds of the foregoing, as security for the obligations of the clearing member and, if
applicable, its Cross-Margining Affiliate, to the Exchange. Failure to comply with the terms ofsuch Agreement may constitute an act detrimental to the interest or welfare of the Exchange.
The provisions of this Rule 830 and the corresponding sections of the Clearing House Manual
shall apply to all CME–cleared positions held pursuant to a cross–margining program and shallsupersede all other provisions of the Rules to the extent inconsistent therewith. In addition, theExchange shall determine what positions will be eligible for cross-margining.
830.C.
[Reserved]
830.D.
Performance Bonds for Cross–Margining Program
Performance bond requirements for a Joint and Guaranteed Cross–Margining Program shallbe determined as set forth in the Cross-Margining Agreement, and that Agreement shall also
govern what forms of performance bond will be permitted and how such performance bond will
be held.
830.E.
Close–Out of Cross–Margin Positions
A Participating Clearing Member may be suspended if it or its Cross-Margining Affiliate, if any,
is in default in payment of any obligation, including a Reimbursement Obligation, with respect
to a Joint or Guaranteed Cross–Margining Program.
The cross-margin account of a clearing member participating in a Joint Cross–Margining
Program may be liquidated by the Clearing House at the request of a Cross-Margining
Clearing Organization whether or not the Exchange suspends, or is permitted under the Rules
to suspend, such clearing member. Upon the suspension of a Participating Clearing Member,or upon receiving notice from a Cross-Margining Clearing Organization of its suspension of a
Participating Clearing Member or its Cross-Margining Affiliate, the Clearing House shall havethe right to liquidate the positions in the cross-margin account, convert to cash theperformance bond therefor, and dispose of the proceeds thereof, all in accordance with theterms of the Cross-Margining Agreement.
The positions of a clearing member participating in a Guaranteed Cross-Margining Program
may be liquidated by the Clearing House in the event that the Participating Clearing Member or
its Cross-Margining Affiliate defaults in the payment of any obligation to the Clearing House ora Cross-Margining Clearing Organization. Upon the suspension of a Participating Clearing
Member, or upon receiving notice from a Cross-Margining Clearing Organization of its
suspension of a Participating Clearing Member or its Cross-Margining Affiliate, the Clearing
House may liquidate: the positions of the Participating Clearing Member; all related
performance bond; and all proceeds of the foregoing. The Exchange may then apply all suchliquidated proceeds to satisfy the Participating Clearing Member's obligations to the Exchange,
all in accordance with the terms of the Cross-Margining Agreement.
H

H

47B

831.
30B

COMMINGLING OF ELIGIBLE BASE FUTURES AND SWAPS POSITIONSThe Clearing House may identify non-swap Base Guaranty Fund Products that may becommingled with positions in swap Base Guaranty Fund Products in order to provide risk
offsets for customer positions if and only if the price risks with respect to such products are
significantly and reliably correlated (such products, “Base Eligible Products”). The price risks ofdifferent positions will only be considered to be significantly and reliably correlated if there is atheoretical basis for the correlation in addition to an exhibited statistical correlation. Upon such
identification, Base Clearing Members may elect that a customer’s positions in Base Eligible
Products be commingled in a cleared swaps account. If the Clearing House determines at any
time that any Base Eligible Products are non-risk reducing when commingled, the Clearing
House may either restrict the commingling of additional Base Eligible Product positions or
require moving or liquidating such positions.
List of eligible swaps:
View table here (XLS)

832.

FOREIGN CURRENCY MARKET DISRUPTIONIn the event a Foreign Currency Market Disruption impacts the ability of the Clearing Houseand its Clearing Members to meet settlement variation or final settlement obligations in any© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 31 of 38

non-U.S. dollar currency for any product cleared by the Clearing House (each, an “Impacted
Currency”), the Clearing House and its Clearing Members may transact settlement obligations
for each Impacted Currency in U.S. dollars.
The requirement to settle an Impacted Currency obligation in U.S. dollars shall be effective
upon notice from the Clearing House. Completion of settlement for an Impacted Currency
under the rules of this Chapter will fully discharge each of the Clearing Member’s and Clearing
House’s settlement obligations for that Impacted Currency and settlement cycle. The U.S.
dollar rate of exchange shall be based on exchange rates as determined by the Clearing
House with reference to exchange rates in the relevant market. The Clearing House will
publish the applicable exchange rate on CME Group’s website.
A Foreign Currency Market Disruption exists when (i) events not within the Clearing House’scontrol make it illegal or impossible to transact in a foreign currency, (ii) authoritative action
such as the adoption of capital controls, asset freezes, imposition of sanctions, nationalizationor any other similar action by any governmental entity impedes or is likely to impede theClearing House’s ability to effect settlement transactions in any foreign currency, or (iii) any
event with similar effect to the foregoing occurs.
Nothing in this Rule 832 shall in any way limit the authority of the Board, other committees, orother appropriate officials to act in an emergency situation as defined by these Rules.

833.-849.

[RESERVED]MISCELLANEOUS
1B

850.
31B

FEES
Exchange fees and/or any transaction surcharges shall be assessed against a clearing
member for each side of a transaction traded on, cleared by or processed through the
Exchange or the Clearing House as the Board or Exchange staff, as appropriate, may fromtime to time prescribe. Detailed information concerning these fees is set forth in the Exchange
Fee Schedule and applicable Fee Policy Bulletins available on the CME Group website.

851.

[RESERVED]

852.

SURCHARGES FOR ERRORS, DELAYS AND OMISSIONS

3B

Exchange staff may establish, and from time to time revise, schedules of surcharges to be
imposed upon clearing members for errors, delays and omissions with respect to trade dataand certain other information required to be provided to the Clearing House. These surcharges
are to be collected by the Clearing House and are in addition to any disciplinary sanctions that
may be imposed by Market Regulation or the BCC for the violation of Exchange rules.
Appeals of administrative surcharges in excess of $25,000 imposed herein shall be filed with
the Market Regulation Department within 10 business days. A written appeal that fails to
specify the grounds for the appeal and the specific error or impropriety of the original decision
shall be dismissed. The appeal shall be heard by a Panel of the Business Conduct Committee(“BCC Panel”) whose decision shall be final and not subject to Rule 411. The appellant shallbe entitled to be represented by counsel, appear personally before the BCC Panel and present
evidence that they may have in support of their appeal. The BCC Panel shall not set aside,modify or amend the appealed decision unless it determines, by a majority vote, that thedecision was:
1. Arbitrary, capricious, or an abuse of discretion; or
2. Based on a clearly erroneous application of Exchange rules.
Notwithstanding the provisions herein, Exchange staff may, at any time, refer matters to theChief Regulatory Officer where there is a reasonable cause to believe disciplinary action is
warranted.

853.
34B

TRANSFERS OF TRADES AND CUSTOMER ACCOUNTS© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 32 of 38

853.A.

Transfers of Trades

1. Subject to the limitations of Rule 854, existing trades may be transferred either on thebooks of a clearing member or from one clearing member to another clearing member
provided:i. The transfer results in the transfer of a trade(s) from one account to another account withidentical beneficial ownership; orii. An error has been made in the clearing of a trade(s) and the error is corrected via transfer
within three Business Days after the date on which the error occurred; oriii. The transfer trade is made to reconcile an error, omission or outtrade in accordance withthe requirements of Rule 770.
Notwithstanding the foregoing, a transfer may be approved by the Global Head of Clearing &Post-Trade Services or the Chief Compliance Officer of the Clearing House, or their respective
designees, in circumstances where it is determined that a transfer trade is the mostappropriate means to remedy an error that results from the good faith acts or omissions of any
party and the clearing member(s) consent to such transfer, provided that such approval does
not result in an impermissible transfer for offset pursuant to the provisions of Rule 854.B. Anyrequest for approval pursuant to this paragraph requires the clearing member(s) to fully
document the circumstances of the error and provide that documentation to the Clearing
House.
2. Subject to the limitations of Rule 854, the Chief Regulatory Officer or his designee may,
(and, with respect to cleared-only products, the Global Head of Clearing & Post-Trade
Services or their designee also may), upon request by the clearing member(s), approve atransfer of existing trades either on the books of the same clearing member, or from the booksof one clearing member to the books of another clearing member if the transfer is inconnection with, or as a result of, a merger, asset purchase, consolidation or similar nonrecurring transaction between two or more entities.
3. Subject to the limitations of Rule 854, the Chief Regulatory Officer or his designee may,
(and, with respect to cleared-only products, the Global Head of Clearing & Post-Trade
Services or their designee also may), upon request by the clearing member(s), approve atransfer of existing trades either on the books of a clearing member or from one clearing
member to another member if the transfer involves a partnership, investment fund orcommodity pool and the purpose of the transfer is to facilitate a restructuring or consolidationof such partnership, fund or pool, provided that i) the managing partner or pool operator
remains the same; ii) the transfer does not result in the liquidation of open positions; and iii) the
pro rata allocation of positions to the new account does not result in more than a de minimischange in the value of the interest of any party.
4. Notwithstanding the foregoing, the Chief Regulatory Officer or his designee may, (and,with respect to cleared-only products, the Global Head of Clearing & Post-Trade Services ortheir designee also may), with the consent of the clearing member(s) involved, permit thetransfer and/or offset of existing trades if, in his designee’s opinion, the situation so requires
and such transfer is in the best interests of the Exchange, which may include, but is not limited
to, the remedying of an error resulting from the good faith acts or omissions by a party as ameans of avoiding a market disruption. The foregoing does not relieve a clearing member of
its responsibility under the Rules for circumstances leading to such transfer and/or offset, andthe clearing member may be responsible for demonstrated claims of realized losses incurredby other parties as a result of such errors or omissions in accordance with the provisions of
Chapter 6. Additionally, notwithstanding permission for the transfer being granted by the Chief
Regulatory Officer or his designee, parties involved in the transfer remain responsible for any
violation of Exchange rules resulting from the transfer and may either be summarily sanctioned
in accordance with the provisions of Rule 512 or the matter may be referred to the Chief
Regulatory Officer for the consideration of charges.
5.

Provided that the transfer is permitted pursuant to Sections 1., 2., 3. or 4. above:i.

Transactions in all physically delivered futures contracts except for FX futurescontracts must be recorded and carried on the books of the receiving firm at theoriginal trade dates, with either the original trade price, the current Business Day’s
settlement price or the prior Business Day’s settlement price.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 33 of 38

ii.

All other futures and futures-style option transactions may be recorded and carried at:(1) the original trade date or the date the transfer is submitted to the Clearing House,
with either the original trade price, the current Business Day’s settlement price or
the prior Business Day’s settlement price; or(2) the Business Day prior to the date the transfer is submitted to the Clearing
House, with either the original trade price or the prior Business Day’s settlement
price.
iii. Premium-style options transactions may be recorded and carried at the original tradedate, the date the transfer is submitted to the Clearing House, or the Business Day
prior to the date the transfer is submitted to the Clearing House, with either theoriginal trade price, the current Business Day’s settlement price, the prior Business
Day’s settlement price or a trade price of zero.
Trades that have been confirmed at an average price pursuant to the provisions of Rule
553 may alternatively be transferred at the average price.
6. All transfers shall be reported to the Clearing House in a form acceptable to the Exchange
for the type of transactions involved. The proper indicator must be included in the transfer suchthat the transactions, including the transaction(s) to reverse an error, clear as transfers. The
clearing member(s) involved shall maintain a full and complete record of all transactions
together with all pertinent memoranda.
7. Any authority granted to the Global Head of Clearing & Post-Trade Services or the Chief
Compliance Officer of the Clearing House, or their respective designees, set forth in Section A.
will not extend to security-based swap products cleared by the Clearing House.
853.B.

Transfers of Customer Accounts

Subject to the limitations of Rule 853.A, after receipt of a signed instruction from a Clearing
Member (the “Carrying Clearing Member”) to transfer all or a portion of a customer account toanother Clearing Member (the “Receiving Clearing Member”), and provided that such
instruction contains the customer’s name and account number (and, if the transfer is not of theentire account, a description of which portion is to be transferred), and provided that theReceiving Clearing Member agrees to accept the account, the Exchange shall promptlytransfer the account (or the relevant portion thereof), without requiring any close-out or
rebooking of positions in connection with the transfer, provided that:
1. The transferred positions will satisfy Exchange performance bond requirements at theReceiving Clearing Member; and2. Any remaining positions in the customer account at the Carrying Clearing Member will
satisfy Exchange performance bond requirements.

854.
35B

CONCURRENT LONG AND SHORT POSITIONS
Set forth below are the procedures that must be followed for concurrent long and shortpositions and hold-open accounts.
A. Concurrent long and short positions in the same commodity and month may be held by aclearing member at the direction of a customer or on behalf of an omnibus account; however it
shall be the duty of the clearing member to ascertain whether such positions are intended for
offset or to be held open prior to final transmission of position data to the Clearing House.
B. Concurrent long and short positions in physically delivered contracts subject to spot monthposition limits that are held by the same owner during the time that spot month position limits
are in effect must be offset by transactions executed in the market, by allowable privately
negotiated transactions, or fulfilled through the normal delivery process, provided however that
trades may be offset via netting, transfer or position adjustment to correct a bona fide clericalor operational error on the day the error is identified and the quantity of the offset does not
represent more than two percent of the reported open interest in the affected futures contract
month.
Permissible Exceptions
Notwithstanding the foregoing:© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 34 of 38

1. Trades may be transferred for offset if the trade date of the position being transferred isthe same as the transfer date;
2. An account that becomes concurrently long and short as a result of a futures position that
results from an option assignment will be allowed one business day to net such positions; or,
3. Where the Chief Regulatory Officer or his designee determines, in their respective sole
discretion, that permitting an offset via netting, transfer or position adjustment in excess of two
percent of the reported open interest will not adversely impact either the affected market or any
persons holding open positions in the affected market.
C. Clearing members which, pursuant to this rule, carry concurrent long and short positions,must report to the Exchange both sides as open positions. When either side or both sides are
reduced, the open positions as reported to the Exchange must be reduced accordingly, and,pursuant to Rule 806, may not subsequently be re-opened at the Exchange.
D. The Exchange takes no position regarding the internal bookkeeping procedures of its
clearing members which, for the convenience of a customer, may "hold open" a position only
on their books. However, the clearing member must accurately report to the Exchange andthe Clearing House, as appropriate, large trader positions, long positions eligible for delivery
and open interest.
E. Violations of this Rule may result in summary sanctions in accordance with the provisionsof Rule 512 or the matter may be referred to the Chief Regulatory Officer for the considerationof charges.

855.
36B

OFFSETTING POSITIONS FOR DIFFERENT-SIZED CONTRACTS 1
F

With the consent of the account controller, a clearing member may offset long futures positions
against short futures positions, or short futures positions against long futures positions, held inthe same account in the ratios set forth in the Contracts Eligible for Offset Table (“Table”) at
the end of Chapter 8.
With the consent of the account controller, a clearing member may offset long options on
futures positions against short options on futures positions, or short options on futures
positions against long options on futures positions, held in the same account in the ratios set
forth in the Table, provided that the options to be netted have European exercise, the same
expiration date, and the same exercise price.
The clearing member shall notify the Clearing House of offsetting positions by submitting
reports to the Clearing House in such form and manner as the Clearing House shall specify.
The positions shall be offset at the previous day's settlement price for futures and at a price ofzero for options.
The positions being offset shall be transferred to a holding account at the Clearing House.
Offsetting positions in the same contract and contract month held in the holding account shallbe netted, thus reducing the number of open positions in such contract.

856.
36B

NORMALIZATION OF OTC FX SPOT, FORWARD, SWAP AND OPTIONSTRANSACTIONS FOR CLEARING2
For over-the-counter (OTC) foreign exchange (FX) transactions submitted for clearing and any
non-standard specification of the transaction as defined by the price format shall be normalized
by CME Group Clearing to standard or normal specifications by the following “normalization
process.”
Instrument: Currency 1/Currency 2 (CCY1/CCY2)
Generically, for spot and forward OTC FX transactions…
Standard or Normal: Buy (B)/Sell (S) CCY1 notional amount at CCY2 per CCY1 rate.
Non-standard or Non-normal: B/S CCY2 notional amount at CCY2 per CCY1 rate.
To normalize:
1. Convert B to S, or S to B
2. Convert CCY2 notional to CCY1: CCY2 amount divided by CCY2 per CCY1 rate to obtain
CCY1 amount.

1
2

Revised September 2008; March 2009; September 2010; December 2010; January 2013; December 2016; April 2019.
Adopted April 2011.

© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 35 of 38

For example, for Instrument: EUR/USD …
Standard:
EUR/USD- Quote USD per EUR; notional amount in EUR
Trade comes in as SELL €15 million at 1.350000 USD per EUR →BUY
$20,250,000 (€15 million x 1.350000 USD/EUR)
Non-standard: EUR/USD- Notional amount in USD, but quote still in USD per EUR.
Trade comes in as buy $20 million at 1.350000 USD per EUR →SELL€14,814,814.81 ($20 million / 1.350000 USD/EUR).
To normalize the non-standard EUR/USD transaction, CME Clearing shall:
3. Convert Buy to Sell, or Sell to Buy
4. Convert USD notional to EUR: USD amount divided by USD per EUR rate.
Example:The trade “BUY $20 million at 1.350000 SELL €14,814,814.81 ($20/1.350000)
at 1.350000 USD per EUR” shall be normalized and held in CME Clearing as:
The trade “SELL €14,814,814.81 ($20/1.350000) at 1.350000 USD per EURBUY $20 million at 1.350000.”
For swap OTC FX transactions, …
Standard or Normal: Leg 1 B/S CCY1 notional amount at CCY2t per CCY1 rate.
Leg 2 S/B CCY1 notional amount at CCY2t + n per CCY1 rate.
Non-standard or Non-normal:
Leg 1 B/S CCY2 notional amount at CCY2 t per CCY1 rate.
Leg 2 S/B CCY2 notional amount at CCY2t + n per CCY1 rate.
To normalize:
1. Convert B to S, or S to B
2. Convert CCY2 notional to CCY1: CCY2 amount divided by CCY2 per CCY1 rate to obtain
CCY1 amount.
For example, for instrument: EUR/USD…
Standard: Leg 1 EUR/USD- Quote USD per EUR; notional amount in EUR
Leg 2 EUR/USD- Quote USD per EUR; notional amount in EUR
Trade comes in as “Leg 1 BUY €20 million at 1.305000 SELL $26,100,000($20 million x 1.305000) at 1.305000 USD per EUR; Leg 2 SELL €20 million at
1.315000 USD per EUR (1.3050 + 0.0100 swap points)”
Non-Standard: Leg 1 EUR/USD- Notional amount in USD, but quote still in USD per EUR.
Leg 2 EUR/USD- Notional amount in USD, but quote still in USD per EUR.
Trade comes in as “Leg 1 SELL $26.1 million at 1.305000 BUY €20 million($26.1 million / 1.305000) at 1.305000 USD per EUR; Leg 2 BUY $26.3
million at 1.315000 USD per EUR (1.3050 + 0.0100 swap points).”
To normalize the non-standard EUR/USD transaction, CME Clearing shall:
3. Convert Buy to Sell, or Sell to Buy
4. Convert USD notional to EUR: USD amount divided by USD per EUR rate.
Example:The trade “Leg 1 SELL $26.1 million at 1.305000 BUY €20 million ($26.1
million / 1.305000) at 1.305000 USD per EUR; Leg 2 BUY $26.3 million at
1.315000 USD per EUR (1.3050 + 0.0100 swap points)” shall be normalized andheld in CME Clearing as:
The trade “Leg 1 BUY €20 million at 1.305000 SELL $26,100,000 ($20 million x
1.305000) at 1.305000 USD per EUR; Leg 2 SELL €20 million at 1.315000 USD
per EUR (1.3050 + 0.0100 swap points)”
For option OTC FX transactions, …
Standard or Normal:

B/S CCY1/CCY2 CALL (PUT) at STRIKE PRICE in units of
CCY2 per CCY1 for a notional amount of CCY1 for a premiumin CCY2 (CCY1 amount x premium price in CCY2 per CCY1,© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 36 of 38

that is, CCY2 pips) or % of CCY1 (CCY1 premium / CCY1
notional amount).
Non-standard or Non-normal: B/S CCY1/CCY2 CALL (PUT) at STRIKE PRICE in units of
CCY2 per CCY1 for a notional amount of CCY2 for a premiumin CCY1 (CCY2 amount / premium price in CCY2 per CCY1,
that is, CCY1 pips) or % of CCY2 (CCY2 premium / CCY2
notional amount).
To normalize:
1.
2.
3.

Retain B/S direction
Convert CCY2 Put to CCY1 Call, CCY2 Call to CCY1 Put
Convert CCY2 notional to CCY1: CCY2 amount divided by Strike Price expressed in
CCY2 per CCY1.
4. Process original premium amount and currency.
5. Take premium amount and divide by CCY1 notional to express price in CCY1 terms forreference purposes.
For example, for Instrument: EUR/USD …
Standard:
EUR/USD- Quote USD per EUR; notional amount in EUR, premium in either %of EUR notional (EUR premium) or USD pips (USD premium).
Trade comes in as BUY EUR/USD PUT at 1.350000 USD per EUR for a notionalamount of €20 million with premium of $100,000 (€20 million x option price of
0.0050 USD per EUR, that is, USD pips) or 1.0% of €20 million (€200,000
premium / €20 million) → SELL EUR/USD PUT at 1.350000 USD per EUR for anotional amount of €20 million with premium of $100,000 (€20 million x option
price of 0.0050 USD per EUR, that is, USD pips) or 1.0% of €20 million(€200,000 premium / €20 million).
Non-standard: EUR/USD- Notional amount in USD, but quote still in USD per EUR,
premium in either % of USD notional (USD premium) or EUR pips (EUR
premium).
Trade comes in as BUY EUR/USD PUT at 1.350000 USD per EUR for anotional amount of $20 million with premium of €170,100 ($20 million x option
price of 0.008505 EUR per USD, that is, EUR pips) or 1.0% of $20 million($200,000 premium / $20 million) → SELL EUR/USD PUT at 1.350000 USD per
EUR for a notional amount of $20 million with premium of €170,100 ($20 million
x option price of 0.008505 USD per EUR, that is, EUR pips) or 1.0% of $20
million ($200,000 premium / $20 million).
To normalize the non-standard EUR/USD transaction, CME Clearing shall:
6. Retain B/S direction
7. Convert USD Put to EUR Call, USD Call to EUR Put
8. Convert USD notional to EUR: USD amount divided by Strike Price expressed in USD per
EUR.
9. Process original premium amount and currency.
a. Take premium amount and divide by EUR notional to express price in EUR terms forreference purposes.
Example:Trade comes in as BUY EUR/USD PUT at 1.350000 USD per EUR for a notionalamount of $20 million with premium of €170,100 ($20 million x option price of
0.008505 EUR per USD, that is, EUR pips) or 1.0% of $20 million ($200,000
premium / $20 million) → SELL EUR/USD PUT at 1.350000 USD per EUR for anotional amount of $20 million with premium of €170,100 ($20 million x option
price of 0.008505 USD per EUR, that is, EUR pips) or 1.0% of $20 million($200,000 premium / $20 million) shall be normalized and held in CME Clearingas:
BUY EUR/USD CALL at 1.350000 USD per EUR for a notional amount of€14,814,814.81 ($20 million/1.350000 USD per EUR) with a premium of© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 37 of 38

€170,100 ($20 million x option price of 0.008505 EUR per USD, that is, EURpips) or 1.148% of €14,814,814.81 (€170,100 / €14,814,814.81).

857.

POST-TRADE MULTILATERAL COMPRESSION
The Clearing House may from time to time and in its absolute and sole discretion provide a
multilateral compression service under which eligible Exchange futures and options contracts
cleared through the Clearing House may be offset (closed-out) and, where relevant, replaced with
new Exchange futures and options contracts cleared through the Clearing House.
With the consent of the account controller, a Clearing Member, account controller or person duly
authorized by the Clearing Member or account controller may submit a list of positions in eligible
contracts which remain open at the Clearing House pursuant to Rule 805 and that the accountcontroller wishes to offset (close-out) and replace with new contracts via the multilateralcompression service in accordance with this Rule.
The specific products and contract months eligible for inclusion in the multilateral compression
service and the frequency and timing of providing such service will be determined by the Clearing
House in its absolute and sole discretion.
All contracts submitted to the Clearing House pursuant to this Rule must be submitted inaccordance with the procedures established by the Clearing House for this purpose as amended
from time to time.
Clearing Members participating in the multilateral compression service agree and acknowledge thatthe multilateral compression service may operate to offset (close-out) certain existing open
positions and establish new open positions for the benefit of the relevant account holder. Any
termination of or entry into replacement Exchange cleared futures and options contracts will takeplace in accordance with and subject to the terms of this Rule and such procedures and conditions
established by the Clearing House from time to time.
The Clearing House may utilize a third party approved by the Clearing House for the facilitation of
the multilateral compression service provided in accordance with this Rule, which may be anaffiliate of the Clearing House or CME Group Inc. or such other entity appointed by the Clearing
House from time to time and duly notified to participants (an “Authorized Compression Service
Provider”).
The Clearing House may in its absolute and sole discretion determine to suspend or terminate themultilateral compression service and any compression cycle at any time.
Positions in a customer account of a Clearing Member shall not be compressed pursuant to thisRule with positions in the proprietary account of the Clearing Member.

CONTRACTS ELIGIBLE FOR OFFSET TABLE
View table here (XLS)(End Chapter 8)© Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 38 of 38