CHAPTER 9
CLEARING MEMBERS
GENERAL
900.

CATEGORIES OF CLEARING MEMBERS
900.A. CME Clearing Members
900.B. Financial Instrument Clearing Members

901.

GENERAL REQUIREMENTS AND OBLIGATIONS

902.

CLEARING MEMBERSHIP ASSIGNMENT REQUIREMENTS
902.A. Assignment Requirement
902.B. [RESERVED]
902.C. Assignment Process
902.D. Assignment Substitutions
902.E. Assignment Withdrawal Disputes
902.F. Lien on Memberships

903.

RESPONSIBILITY FOR QUALIFIED MEMBERS

904.

FUNDS IN TRADING ACCOUNTS CARRIED BY CLEARING MEMBERS

905.

CHOICE OF LAW

906-909.

[RESERVED]
APPLICATION PROCEDURES FOR CLEARING MEMBERS

910.

APPLICATION FORMS

911.

SCREENING PROCEDURES

912.

APPROVAL

913.

WITHDRAWAL FROM CLEARING MEMBERSHIP
913.A. Voluntary Withdrawal
913.B. Release of Guaranty Fund Deposit, Membership Proceeds andAssignments

914.-929.

[RESERVED]

ACCOUNT HOLDER PERFORMANCE BOND REQUIREMENTS
930.

PERFORMANCE BOND REQUIREMENTS: ACCOUNT HOLDER LEVEL
930.A. Performance Bond System
930.B. Performance Bond Rates
930.C. Acceptable Performance Bond Deposits
930.D. Acceptance of Orders
930.E. Calls for Performance Bond

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 1 of 30

930.F. Release of Excess Performance Bond
930.G. Loans to Account Holders
930.H. Aggregation of Accounts and Positions
930.I.

Risk Profile of Accounts

930.J. Omnibus Accounts
930.K. Liquidation of Accounts
930.L. Clearing House Authority to Require Additional Performance Bond
930.M. Failure to Maintain Performance Bond Requirements
930.N. OTC Derivatives Undermargined Capital Charge931.-948.

[RESERVED]

949.

CREDIT CONTROLSSALES PRACTICES AND CUSTOMER PROTECTION
950.

SUPERVISION

951.

DISCLOSURE REQUIREMENTS

952.

SALES COMMUNICATIONS

953.

PROMOTIONAL MATERIAL

954,

CUSTOMER COMPLAINTS

955.

ASSIGNMENT AND NOTIFICATION OF EXERCISE NOTICES

956.

DISCRETIONARY, CONTROLLED AND MANAGED ACCOUNTS
956.A. Requirements
956.B. Presumption of Authority
956.C. Supervision and Trading of Discretionary Trading Accounts
956.D. [RESERVED]
956.E. Exceptions

957.

CONFIRMATIONS TO CUSTOMERS

958.

BRANCH OFFICES, GUARANTEED INTRODUCING BROKERS, AND
ASSOCIATED PERSONS

959.

[RESERVED]OMNIBUS AND CARRYING BROKER ACCOUNTS960.

OMNIBUS AND CARRYING BROKER ACCOUNTS

961.-969.

[RESERVED]

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 2 of 30

FINANCIAL REQUIREMENTS AND FINANCIAL EMERGENCIES
970.

FINANCIAL REQUIREMENTS

971.

SEGREGATION, SECURED AND CLEARED SWAPS CUSTOMER ACCOUNTREQUIREMENTS

972.

REDUCTIONS IN CAPITAL

973.

CUSTOMER ACCOUNTS WITH THE CLEARING HOUSE

974.

[RESERVED]

975.

EMERGENCY FINANCIAL CONDITIONS976.

SUSPENSION OF CLEARING MEMBERS

977.

SUSPENSION OF OFFICERS OR PARTNERS

978.

OPEN TRADES OF SUSPENDED CLEARING MEMBERS

979.

SUSPENDED OR EXPELLED CLEARING MEMBERS

RECORDS AND REPORTS
980.

REQUIRED RECORDS AND REPORTS

981.

ANTI-MONEY LAUNDERING AND ECONOMIC SANCTIONS COMPLIANCE

982.

RISK MANAGEMENT

983.

DISASTER RECOVERY AND BUSINESS CONTINUITYTAX COMPLIANCE
990.

U.S. WITHHOLDING TAX

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 3 of 30

Chapter 9
Clearing Members
GENERAL
900.

CATEGORIES OF CLEARING MEMBERS
The Exchange may establish different clearing member categories, including but not limited to OTC
Clearing Member categories, and alter the rights and responsibilities of such categories.
900.A.
CME Clearing Members
CME Clearing Members shall have all applicable rights, responsibilities and privileges attendant thereto,subject to the provisions of these rules and shall be qualified to clear transactions for all CME products
and all Expanded-Access Products listed for trading by CBOT after July 12, 2007.
CME Clearing Members receive fees in conjunction with CME Rule 106.H. Trading Member Firms. CME
Clearing Members with shares are those clearing members that maintain CME Group Class A shares inaccordance with CME Rule 106.J. Equity Member Firm requirements in order to receive equity member
rates.
900.B.
Financial Instrument Clearing Members
A Financial Instrument Clearing Member (“FICM”) shall have the right to clear, for its own account, tradesin certain CME and CBOT interest rate products executed in connection with a cash versus futures trading
strategy.
The FICM must be guaranteed by a CME and/or CBOT Clearing Member that is entitled to clear all of the
products cleared by the FICM. The guarantor must be the clearing member for the FICM’s transactions
in U.S. Treasury Securities and report to the Clearing House, at appropriate intervals, the FICM’s open
positions in U.S. Treasury Securities. The guarantor shall assume complete responsibility for all of the
FICM’s obligations to the Exchange and Clearing House arising from its operations as a FICM. In theevent of a default by the FICM to the Clearing House in respect of any futures or options on futures, the
FICM shall be suspended by the Exchange and the open positions of the FICM shall be transferred to,owned by, and become the direct responsibility of the guarantor. In the event of a default by the FICM ora related entity to the guarantor clearing firm, the Exchange will, at the request of the guarantor clearing
firm, and upon due verification of the facts, facilitate the suspension of the FICM, in which case the open
positions of the FICM shall be transferred to, owned by, and become the direct responsibility of theguarantor.
The FICM shall be subject to applicable CME and CBOT Rules, including those contained in CME and
CBOT Rules Chapter 8 and Chapter 9, and including without limitation, CME Rule 802 (Protection of the
Clearing House, including the primary responsibility for the Clearing House assessment obligation
therein). The FICM shall comply with all of the requirements and obligations of a clearing member
pursuant to CME Rule 901 (General Requirements and Obligations) with the exception of the parent
guarantee requirement pursuant to CME 901(L).
The FICM must satisfy the following requirements:(i) Adjusted Net Capital of $500,000;(ii) Initial minimum guaranty fund deposit of $50,000 to be increased to reflect transaction volume, open
interest and risk;(iii) The assignment of one Full or two Associate Memberships for the privilege of clearing CBOT interest rate
products and two CME, two IMM, two IOM, and one GEM membership for the privilege of clearing CMEinterest rate products. Memberships may be independently assigned.
FICMs receive fees in conjunction with CME and/or CBOT Rule 106.H. Trading Member Firms asapplicable. FICMs that maintain CME Group Class A shares in accordance with CME Rule 106.J.
Equity Member Firm requirements are eligible to receive equity member rates.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 4 of 30

(iv) The applicant shall be engaged in or demonstrate immediate capacity to engage in U.S. Treasury/interest
rate futures spread trades and in order to maintain the status of a FICM, shall actively execute both sidesof U.S. Treasury/interest rate futures spread trades.
A FICM applicant shall execute and place on file with the Exchange the following documents:(i) An application for the FICM clearing membership;(ii) Globex System access documentation;(iii) Settlement bank account documents to permit the Clearing House to collect and disperse monies
directly to the FICM;(iv) An acknowledgement from the guarantor that it agrees to guarantee the performance and financial
obligations of the FICM to the Clearing House for certain identified interest rate products;(v) Authorization to the Clearing House to verify, at its discretion, the transactions and open positions of
the FICM in U.S. Treasury Securities;(vi) Authorization to the Clearing House to deliver the FICM’s trade register and recap ledger to the
FICM’s Clearing Member guarantor;(vii) A Clearing Member and FICM authorization pursuant to which the Clearing Member/guarantor will
be authorized to submit complete and accurate transaction and position information respecting the
U.S Treasury Securities of the FICM to the Clearing House; and(viii) Any additional documents or information requested by the Clearing House for risk management
purposes.
Exchange staff may grant exceptions to the requirements of Rule 900.B. for good cause if it is determinedthat such exceptions will not jeopardize the financial integrity of the Exchange.

901.

GENERAL REQUIREMENTS AND OBLIGATIONSMembership in the Clearing House is a privilege and license granted by the Board and may be withdrawn
by the Board for cause at any time. Clearing House staff may grant exemptions to the General
Requirements and Obligations set forth below for Clearing Members if it is determined that such an
exemption will not jeopardize the financial integrity of the Clearing House. Subject to such exemptions,each applicant for qualification as a clearing member must satisfy the following requirements:
A. It shall be a corporation (defined by the Rules of the Exchange to include a limited liability company),
partnership or other entity approved by Exchange staff. It shall agree to: 1) abide by all Exchange
Rules and to cooperate in their enforcement; 2) be responsible, even after it has withdrawn as aclearing member, for any violations of Exchange Rules committed by it while it was a clearing
member; and 3) continue to meet all requirements applicable to clearing members, including all
financial requirements provided by these rules;
B. It shall have an authorized representative (i.e., officer, principal, or partner) who shall represent theclearing member before the Exchange and its committees. Such authorized representative shall be
responsible to the Exchange for any representations made to the Exchange as if such person werea member as defined by Rule 400.
C. It shall be qualified to do business in the State of Illinois or the State of New York or have a valid
agency agreement with an entity qualified to do business in the State of Illinois or the State of New
York;1
D. It shall be engaged in or demonstrate immediate capacity to engage in the conduct of the businessof a clearing member;
E. It shall demonstrate such fiscal and moral integrity as would justify the Clearing House's assumptionof the risks inherent in clearing its trades;
F. It shall demonstrate financial capitalization commensurate with Exchange requirements as set by the
Clearing House Risk Committee;
G. If any person directly or indirectly controls, owns 10% or more of, or has the right to 10% or more of
the profits of two or more clearing members, then each such clearing member shall guarantee theobligations of the others to the Clearing House and shall execute a written guarantee to the Clearing

1

Revised December 2008.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 5 of 30

House on a form approved by the Clearing House.
It shall notify the Exchange prior to any significant business transaction or significant change inoperations which shall include, but is not limited to the following:
1. The merger, combination or consolidation between the clearing member and another person orentity;2. The assumption or guarantee by the clearing member of all or substantially all of the liabilities ofanother in connection with a direct or indirect acquisition of all or substantially all of that person's
or entity's assets;
3. The sale by the clearing member of a significant part of its business and/or assets to anotherperson or entity;
4. A change in the direct or indirect beneficial ownership of 20% or more of the clearing member;
5. Any change in the system provider used by the clearing member to process its trades; and6. A significant increase in the number of members that a clearing member qualifies.
Additionally, a clearing member that qualifies members must provide fifteen days notice to the
Exchange of any proposal to terminate such business or any material part of such business.
The relevant committee or Exchange staff, upon such notice, may disapprove or approve, subject tocertain conditions, such changes in structure or operations if it determines that the proposed change
could jeopardize the financial or operational integrity of the Exchange or the Clearing House. For
purposes of this Rule, the Clearing House Oversight Committee shall be the relevant committee withrespect to corporate organization and structure changes and the Clearing House Risk Committee
shall be the relevant committee with respect to all other changes.
I. It shall agree to guarantee and assume complete responsibility for the financial obligations attendant
to: 1) all trades and orders executed or accepted for execution by a member it qualifies, including
trades and orders executed, or which such member fails to execute, negligently, fraudulently or in
violation of Exchange rules; 2) an unpaid arbitration award issued by a panel of the Arbitration
Committee against a member it qualifies in circumstances where the dispute is related to a matterdescribed in number 1) above; 3) an unpaid restitution order issued against a member it qualifies bya panel of the Business Conduct Committee, or a hearing panel of the Board of Directors; and 4)
unpaid Exchange disciplinary fines imposed upon a member it qualifies if the member is also an
employee of the clearing member or its affiliate, subject to a determination by the sanctioning entity.
J. It shall notify the Financial and Regulatory Surveillance Department in a timely manner of any
material change in key personnel who are responsible to act on behalf of the clearing member.
K. [Reserved]
L. [Reserved]
M. It shall guarantee and assume financial responsibility for all trading activity routed through a Globex
portal, or routed through any other electronic trading system to CME for clearing of such transactions.
Such activity is guaranteed to CME by the clearing member via any connection, terminal, link,telecommunications hub or handheld unit provided by the clearing member to a third party as well as
any other applicable electronic trading systems and terminals that the clearing member provides toa third party to enter orders.
N. It shall be responsible for the acts of Globex terminal operators accessing the Globex system throughits connections, including direct connections or other connections that it provides to firms that areunder common ownership with it. It shall be the duty of the clearing member to supervise its
employees and agents acting as Globex terminal operators to ensure such employees and agentscomply with Exchange rules, and any violation of Exchange rules by such terminal operators shallbe considered a violation by the clearing member.
O. It shall agree to guarantee and assume complete responsibility for trades executed on Marketplaces
for which the Exchange provides clearing services.
P. Each clearing member shall use systems and appropriate procedures to track accurately, and toprovide to the Clearing House accurately, the positions and collateral of each of the cleared swaps
customers.
Q. Requirement to Establish Uncommitted Repo. Each clearing member that is a U.S. Government
H.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 6 of 30

R.
S.

T.

902.

Securities Broker-Dealer or has a U.S. Government Securities Broker-Dealer affiliate shall enter into(or arrange for such affiliate, or an affiliate that is a bank, to enter into) a master repurchaseagreement with CME on terms substantially similar to those set out by the Clearing House. Eachclearing member that has entered into such master repurchase agreement shall (or shall cause its
affiliate that has entered into such master repurchase agreement to) periodically test repurchasetransactions with the Clearing House when requested by the Clearing House.
Reserved
The obligation of a clearing member to pay settlement variation during each settlement cycle issatisfied when all required cash is credited as a settlement variation payment into the correct CMEbank account at the relevant settlement bank. The obligation of a clearing member to post
performance bond during each settlement cycle is satisfied when all required assets are depositedas performance bond into the correct CME bank account at the relevant custodial bank.
To clear transactions in futures or options on futures executed on or subject to the rules of a foreignboard of trade identified in Rule 8C04, the applicant must meet any other conditions that the Clearing
House may require.

CLEARING MEMBERSHIP ASSIGNMENT REQUIREMENTS
902.A.
Assignment Requirement
Subject to exemptions granted by Exchange staff, each CME clearing member shall have at least: two
CME memberships, two IMM memberships, two IOM memberships and one GEM membership assigned
to the Clearing House. A clearing member which was an IMM Class A clearing member on or prior to May
6, 1987, shall have at least one CME membership, three IMM memberships, two IOM memberships and
one GEM membership assigned to the Clearing House. A higher Division membership may be substituted
for a lower Division membership to satisfy these requirements.
At least one CME, one IMM, one IOM and one GEM membership required for clearing membershippursuant to this Rule must be owned by the clearing member or a person, including a parent company,
with an acceptable proprietary interest in such clearing member. One CME, one IMM, and one IOM
membership required for clearing membership may be independently assigned.
Upon default of a clearing member in meeting its obligations to the Clearing House or upon the Clearing
House Risk Committee's determination that a clearing member's financial position jeopardizes thefinancial integrity of the Clearing House, the Clearing House may direct the sale of any or all of the clearing
member's assigned CME memberships. The proceeds from the sale of the CME memberships shall be
used to satisfy Rule 110 obligations.
902.B.
[Reserved]
902.C.
Assignment Process
A membership may be assigned upon the completion of an Exchange-approved form. A membership may
be assigned on behalf of only one clearing member and may not be subject to any Rule 110 claims at thetime of assignment. Upon submitting an assignment form to the Membership Services Department, themembership shall be notified of the assignment. Parties will have ten days after the notification of theassignment to submit any Rule 110 claims against the membership being assigned. After all Rule 110
claims have been resolved to the satisfaction of the Exchange, the membership shall be assigned.
902.D.
Assignment Substitutions
A clearing member may substitute a membership for an assigned membership provided that the clearing
member continues to meet the assignment requirements of this Rule.
In the event a clearing member has a valid claim against a member that it qualifies and the member’s
membership is assigned to another clearing member, the clearing member utilizing the membership for
assignment shall have 10 business days to substitute another membership to fulfill the assignment
requirements of this Rule.
902.E.
Assignment Withdrawal Disputes
In the event a member wants to withdraw his assigned membership over the objection of the clearing
member to which the membership is assigned, such member must request permission to do so from
Clearing House staff. The request must be in writing with a copy delivered to the clearing member to

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 7 of 30

which the membership is assigned.
902.F.
Lien on Memberships
Each clearing member hereby grants to the Clearing House a first priority and unencumbered lien against
all memberships required for clearing membership by the Exchange.

903.

RESPONSIBILITY FOR QUALIFIED MEMBERSA.

A clearing member that qualifies a member thereby guarantees and assumes complete responsibility
for the financial obligations attendant to: 1) all trades and orders executed or accepted for execution
by such member, including trades or orders executed, or which such member fails to execute,negligently, fraudulently or in violation of Exchange rules; 2) an unpaid arbitration award issued by apanel of the Arbitration Committee against such member in circumstances where the dispute isrelated to a matter described in number 1) above; 3) an unpaid restitution order issued against suchmember by a panel of the Business Conduct Committee, or a hearing panel of the Board of Directors;
and 4) unpaid Exchange disciplinary fines imposed upon such member if the member is also an
employee of the clearing member or its affiliate, subject to a determination by the sanctioning entity.
B. To qualify traders, a clearing member must have established systems in place for trade submission,clearing, and settlement/banking with the Clearing House.
C. No member may be qualified by more than one clearing member at one time.
D. A member may not transfer his qualification unless he has obtained a written release from theclearing member last qualifying him. A release shall not be withheld unless a member has anunsatisfied indebtedness to the clearing member last qualifying him where the indebtedness is due
to a deficit arising from transactions on the Exchange or where the clearing member last qualifying
him is the guarantor under an existing valid guarantee of a loan which had been made to the member
exclusively for the purpose of financing the purchase of the member’s membership. A member who
believes his qualifying clearing member is unreasonably withholding a release necessary to permit
the member to be qualified by a different clearing member may request a hearing before a Panel ofthe Business Conduct Committee as provided in Rule 511. Any other disputes between the parties
shall be resolved, to the extent permitted by the rules, through the arbitration procedures set forth in
Chapter 6.
E. A clearing member may, without prior notice, revoke a member’s authorization to trade by written
revocation filed with the Shareholder Relations and Membership Services Department. Such
revocation shall be effective and the member’s qualification to trade shall terminate when notice ofthe disqualification is posted on the Exchange floor. A member shall not appear upon the floor of the
Exchange until he has been requalified.
F. A member shall place all trades, including trades for his own account or any account which hecontrols, on the books of his qualifying clearing member unless written authorization to the contraryfrom said clearing member has been filed with the Shareholder Relations and Membership Services
Department. Regardless of such authorization, a member in a deficit position with any clearing
member shall place trades only through his qualifying clearing member. Any non-qualifying clearing
member that carries a member’s account in a deficit position shall promptly notify the clearing
member that is qualifying such member.
G. No clearing member shall provide Globex access to, or clear any trade for, an employee, qualified
trader or other representative of another clearing member without the written consent of such clearing
member. No clearing member shall provide Globex access to, or clear any trade for, a person in apartnership with another clearing member without the written consent of all partners. Such writtenconsent shall be filed with the Shareholder Relations and Membership Services Department.
H. In the case of a member who has Globex access guaranteed by a clearing member other than his
qualifying clearing member, the qualifying clearing member may terminate the member’s ability toplace orders through Globex by notifying the clearing member providing the member access to
Globex. The clearing member providing the access to Globex will be responsible for ensuring thatthe member does not place orders through Globex.

904.

FUNDS IN TRADING ACCOUNTS CARRIED BY CLEARING MEMBERS
If a Member (as defined in Rule 400) trades in excess of written limits prescribed by his qualifying or
guaranteeing clearing member or a clearing member through which such
Member is authorized by

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 8 of 30

his qualifying clearing member to trade pursuant to Rule 511 without sufficient funds in his account tomargin the position, or if the Member is alleged to have engaged in reckless and unbusinesslike dealing
inconsistent with just and equitable principles of trade, and such trades are profitable, the disposition of
any and all funds in the applicable trading account(s) may be suspended by the carrying clearing member.
The claim of a carrying clearing member to such profits shall be submitted to arbitration pursuant to theprovisions of Chapter 6. The Member may request a hearing to be held as soon as practicable before
a Chairman of the Arbitration Committee to determine the amount of any profits that should remainsubject to a continued suspension pending an arbitration hearing on the full merits of the claim.

905.

CHOICE OF LAW(a) THE RULES OF THE EXCHANGE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TOITS CONFLICT-OF-LAW PRINCIPLES. EXCEPT AS OTHERWISE PROVIDED IN CHAPTERS 4,
5 AND 6 OF THE RULEBOOK, ANY ACTION, CLAIM, DISPUTE OR LITIGATION OF ANY KIND
BETWEEN THE CLEARING MEMBER AND THE EXCHANGE ARISING FROM THE CLEARINGMEMBER’S MEMBERSHIP IN THE EXCHANGE SHALL BE ADJUCIDATED IN A FEDERAL OR
STATE COURT IN CHICAGO, ILLINOIS. CLEARING MEMBERS CONSENT TO THEJURISDICTION OF SUCH COURT AND TO SERVICE OF PROCESS BY ANY MEANSAUTHORIZED BY ILLINOIS OR U.S. FEDERAL LAW, AND SHALL NOT SEEK TO TRANSFER
THE VENUE OF SUCH LITIGATION.
(b) EACH CLEARING MEMBER IRREVOCABLY WAIVES, WITH RESPECT TO ITSELF AND ITSREVENUES AND ASSETS, ANY IMMUNITY ON THE GROUND OF SOVEREIGNTY OR OTHERSIMILAR GROUNDS FROM SUIT, JURISDICTION OF ANY COURT, INJUNCTIVE RELIEF,
ORDER FOR SPECIFIC PERFORMANCE OR FOR RECOVERY OF PROPERTY, ATTACHMENTOF ASSETS, AND EXECUTION OR ENFORCEMENT OF ANY JUDGMENT TO WHICH IT OR ITSREVENUES OR ASSETS MIGHT OTHERWISE BE ENTITLED IN ANY PROCEEDINGS IN THE
COURTS OF ANY JURISDICTION, AND IRREVOCABLY AGREES THAT IT WILL NOT CLAIM ANY
SUCH IMMUNITY IN ANY PROCEEDINGS.

906-909.

[RESERVED]
APPLICATION PROCEDURES FOR CLEARING MEMBERS

910.

APPLICATION FORMS
Applicants for clearing membership shall submit an application, financial statements and otherdocumentation as Clearing House staff shall require.

911.

SCREENING PROCEDURES
Upon receipt of an application, the Financial and Regulatory Surveillance Department and the Clearing
and Post-Trade Services Department shall investigate the applicant's qualifications, which may include
an examination of the books and records of the applicant.

912.

APPROVAL
An applicant for clearing membership receiving a majority vote of the Clearing House OversightCommittee shall be approved effective immediately.
An applicant that fails to receive a majority vote shall be informed by the Clearing House OversightCommittee chairman and shall have 10 days thereafter to file an appeal to the Board seeking further
consideration. The Board may approve the applicant by a majority vote if it is satisfied that the Clearing
House Oversight Committee's decision was arbitrary, capricious or an abuse of the Clearing House
Oversight Committee’s discretion.

913.

WITHDRAWAL FROM CLEARING MEMBERSHIP
913.A.
Voluntary Withdrawal
A clearing member that intends to withdraw from clearing membership for Base Guaranty Fund Products
shall provide written notice of such intent to the Clearing House and the Clearing House OversightCommittee. A clearing member’s withdrawal shall be effective on the earlier of (i) the date Clearing House
Staff approves such withdrawal or (ii) the 10th Business Day following the date of the clearing cycle in

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 9 of 30

which the withdrawing clearing member liquidates or transfers to an appropriate clearing member all of
its open customer and house positions in Base Guaranty Fund Products (such earlier date, the “BaseWithdrawal Date”); provided that the withdrawing clearing member shall remain liable for Base Guaranty
Fund contributions and assessments in accordance with Rule 913.B. Promptly following the Base
Withdrawal Date, the Clearing House shall post a notice of the clearing member’s withdrawal.
913.B.
Release of Guaranty Fund Deposit, Membership Proceeds and Assignments
When a clearing member withdraws from clearing membership for Base Guaranty Fund Products(whether voluntarily or involuntarily), its Base Guaranty Fund deposit, the proceeds from the sale of its
memberships assigned for clearing qualification or any other deposits required by the Clearing House,
and any remaining assets available to the Clearing House associated with Base Guaranty Fund Products
including, but not limited to, memberships will be released when Clearing House staff determines that thefollowing has occurred: (1) all contracts and obligations with the Exchange have been settled and paid,(2) all sums owing to the Exchange have been paid, (3) all obligations to other members and customers
arising out of claims directly related to Base Guaranty Fund Products cleared on the Exchange have been
paid or otherwise provided for, (4) all obligations to other members and customers arising out of otherarbitration claims for Base Guaranty Fund Products filed pursuant to Chapter 6 have been paid orotherwise provided for and (5) the requisite liquidity providers for the Exchange have released the security
interest in such clearing member's "assets" associated with the clearing of Base Guaranty Fund Products
in accordance with the terms of the liquidity facility described in Rule 817; provided, however, that in theevent that Exchange staff determines that all of the foregoing other than (4) have occurred, the Clearing
House Risk Committee may in its discretion authorize the release of such property.
Generally, no such property shall be released prior to the 60th day following the posting of the notice ofthe clearing member's withdrawal. Notwithstanding the above, Clearing House staff may grant an
exemption to the above restriction for good cause shown. Further, for purposes of the paragraph above,
if the withdrawing clearing member will not remain a clearing member in any other capacity with the
Exchange, all obligations of the withdrawing clearing member to the Exchange, of whatever nature or
kind, shall be accelerated and become due and payable upon the effective date of withdrawal. If theclearing member will remain a clearing member for other product classes other than Base Guaranty Fund
Products, the foregoing sentence shall apply only to obligations related to the clearing of Base Guaranty
Fund Products.
For purposes of Rules 802 and 816, the Base Guaranty Fund contributions and assessments of a nondefaulted clearing member that has withdrawn shall not be accessible by the Clearing House to satisfy
any losses in respect of the default of another clearing member where such default occurred after theBase Cooling Off Period as of which the withdrawing clearing member had liquidated or transferred all of
its open customer and house positions in Base Guaranty Fund Products. For the avoidance of doubt, awithdrawing clearing member shall be subject to assessments for all defaults occurring during the Base
Cooling Off Period in which such clearing member withdraws.

914.-929.

[RESERVED]
ACCOUNT HOLDER PERFORMANCE BOND REQUIREMENTS

930.

PERFORMANCE BOND REQUIREMENTS: ACCOUNT HOLDER LEVEL
930.A.
Performance Bond System
The Standard Portfolio Analysis of Risk (“SPAN®”) Performance Bond System and SPAN 2 are theperformance bond systems adopted by the Exchange. SPAN and SPAN 2-generated performance bondrequirements shall constitute Exchange performance bond requirements. All references to performancebond within the rules of the Exchange shall relate to those computed by the SPAN or SPAN 2 systems,
except for cleared over-the-counter (“OTC”) foreign exchange (“FX”) and interest rate swap (“IRS”)
transactions, where the Historical Value at Risk (“HVaR”) Performance Bond System is used for cleared
OTC FX and IRS transaction performance bonds.
Performance bond systems other than the SPAN and SPAN 2 systems may be used to meet Exchange
performance bond requirements if the clearing member can demonstrate that its system will always

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 10 of 30

produce a performance bond requirement equal to or greater than the SPAN and SPAN 2 performancebond requirements.
930.B.
Performance Bond Rates
1. Non-Security Futures and OTC Derivatives
Exchange staff shall determine initial and maintenance performance bond rates used in determining
Exchange performance bond requirements. The Board reserves the right to change or modify any
performance bond levels determined by Exchange staff.
2. Security Futures
a. Initial and maintenance performance bond (or “margin”) rates used in determining Exchange
performance bond requirements applied to Security Futures on behalf of Customers, whether
effected on the Exchange or on a Marketplace apart from Exchange but cleared by the Clearing
House per Chapter 8B, and held in a futures account, shall be established at levels no lower
than those prescribed by CFTC Regulation Section 41.45; and, SEC Regulation 242.403,
including any successor Regulations.
b. As used in this Rule, the term “Customer” does not include (a) an “exempted person” as definedin CFTC Regulation 41.43(a)(9) and SEC Regulation 242.401(a)(9); or (b) Market Makers as
defined below.
A Person shall be a “Market Maker” for purposes of this Rule, and shall be excluded from therequirements set forth in CFTC Regulations 41.42 through 41.49; and, SEC Regulations 242.400
through 242.406 in accordance with CFTC Regulation 41.42(c)(2)(v) and SEC Regulation
242.400(c)(2)(v), with respect to all trading in Security Futures for its own account, if such Person
is an Exchange Member that is registered with the Exchange as a “Security Futures Dealer.”
Each Market Maker shall: (a) be a member of the Exchange; or, be registered as a dealer with
the SEC under Section 15(b) of the Exchange Act; (b) maintain records sufficient to prove
compliance with the requirements set forth in this Rule and CFTC Regulation 41.42(c)(2)(v) and
SEC Regulation 242.400(c)(2)(v), including without limitation, trading account statements andother financial records sufficient to detail activity and verify conformance with the standards set
forth herein; and (c) hold itself out as being willing to buy and sell Security Futures for its own
account on a regular or continuous basis.
A Market Maker satisfies condition (c) above if, at a minimum, any of the following threerequirements are fulfilled:(1) The Market Maker:(i)

Provides continuous two-sided quotations throughout the trading day for all delivery
months of Security Futures Contracts representing a meaningful proportion of thetotal trading volume of Security Futures Contracts on the Exchange, subject torelaxation during unusual market conditions as determined by the Exchange (such asa fast market in either a Security Futures Contract or a security underlying a Security
Futures Contract) at which times the Market Maker must use its best efforts to quotecontinuously and competitively; and(ii) When providing quotations, quotes with a maximum bid/ask spread no more than thegreater of $0.20 or 150% of the bid/ask spread in the primary market for the security
underlying each Security Futures Contract.
(2) The Market Maker:(i)

Responds to at least 75% of the requests for quotation for all delivery months of
Security Futures Contracts representing a meaningful proportion of the total trading
volume of Security Futures Contracts on the Exchange, subject to relaxation during
unusual market conditions as determined by the Exchange (such as a fast market ineither a Security Futures Contract or a security underlying a Security Futures Contract)
at which times the Market Maker must use its best efforts to quote competitively; and(ii) When responding to requests for quotation, quotes within five seconds with a maximum

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 11 of 30

bid/ask spread no more than the greater of $0.20 or 150% of the bid/ask spread in the
primary market for the security underlying each Security Futures Contract.
(3) The Market Maker:(i)

Is assigned to a group of Security Futures Contracts listed on the Exchange that iseither unlimited in nature (“Unlimited Assignment”); or, is assigned to no more that 20%of the Security Futures Contracts listed on the Exchange (“Limited Assignment”);(ii) At least 75% of the Market Maker’s total trading activity in Exchange Security Futures
Contracts is in its assigned Security Futures Contracts, measured on a quarterly basis;(iii) During at least 50% of the trading day the Market Maker has bids or offers in the market
that are at or near the best market, except in unusual market conditions as determinedby the Exchange (such as a fast market in either a Security Futures Contract or asecurity underlying a Security Futures Contract), with respect to at least 25% (in thecase of an Unlimited Assignment) or at least one (in the case of a Limited Assignment)of its assigned Security Futures Contracts; and(iv) The requirements in (ii) and (iii) above are satisfied on: (a) at least 90% of the trading
days in each calendar quarter by Market Makers who have undertaken an Unlimited
Assignment; or (b) at least 80% of the trading days in each calendar quarter by Market
Makers who have undertaken a Limited Assignment; or (c) on at least 80% of the
trading days in each calendar quarter by Market Makers who have undertaken either
an Unlimited Assignment or Limited Assignment but where the Exchange is listing four(4) or fewer Security Futures Contracts.

c.

d.

For purposes of clauses (1) and (2) above, beginning on the 181 st calendar day after thecommencement of trading of Security Futures Contracts on the Exchange, a “meaningfulproportion of the total trading volume of Security Futures Contracts on the Exchange” shall meana minimum of 20% of such trading volume.
Any Market Maker that fails to comply with the applicable Rules of the Exchange, CFTC
Regulations 41.41 through 41.49 and SEC Regulations 242.400 through 242.406 shall be
subject to disciplinary action in accordance with Chapter 4. Appropriate sanctions in the caseof any such failure shall include, without limitation, a revocation of such Market Maker’s
registration as a Security Futures Dealer.
The Exchange shall establish initial and maintenance performance bond requirements
applicable to Security Futures and held in a futures account, provided that the performance bondrequirement for any long or short position held by a clearing member on behalf of a Customer
shall not be less than 20% of the current market value of the relevant Contract; or, such otherrequirement as may be established by the CFTC and SEC for purposes of CFTC Regulation
41.45(b)(1) and SEC Regulation 242.403(b)(1) except as provided below.
Initial and maintenance performance bond requirements for offsetting positions involving
Security Futures and related positions are provided in the schedule below, for purposes of CFTC
Regulation 41.45(b)(2) and SEC Regulation 242.403(b)(2).

PERFORMANCE BOND (or “MARGIN”) REQUIREMENTS FOR OFFSETTING POSITIONS

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 12 of 30

SECURITYUNDERLYINGTHE SECURITY
FUTUREINITIAL MARGIN
REQUIREMENT

MAINTENANCE MARGIN
REQUIREMENT

Individual stock or
narrow-based
security index

20% of thecurrent market
value of the longsecurity future,plus pay for thelong put in full.

The lower of: (1) 10% of theaggregate exercise price ofthe put plus the aggregate put
out-of-the-money amount, ifany; or (2) 20% of the current
market value of the longsecurity future.

Short security future (orbasket of security
futures representing
each component of anarrow-based
securities index) andshort put option on thesame underlying
security (or index)

Individual stock or
narrow-based
security index

20% of thecurrent market
value of the shortsecurity future,plus theaggregate put inthe-money
amount, if any.
Proceeds fromthe put sale may
be applied.

20% of the current market
value of the short security
future, plus the aggregate put
in-the-money amount, if any.

Long security futureand short position in
the same security (orsecurities basket)
underlying the security
futureIndividual stock or
narrow-based
security index

The initial margin
required under
Regulation T forthe short stock orstocks.

5% of the current market
value as defined in Regulation
T of the stock or stocks
underlying the security future.

DESCRIPTION OF
OFFSETLong security future (orbasket of security
futures representing
each component of anarrow-based
securities index) andlong put option on thesame underlying
security (or index)

Long security future (orbasket of security
futures representing
each component of anarrow-based
securities index) andshort call option on thesame underlying
security (or index)

Long a basket of
narrow-based security
futures that together
tracks a broad-based
index and short a
broad-based security
index call option
contract on the sameindex

Individual stock or
narrow-based
security index

Narrow-based
security index

20% of thecurrent market
value of the longsecurity future,plus theaggregate call inthe-money
amount, if any.
Proceeds fromthe call sale may
be applied.
20% of thecurrent market
value of the longbasket of narrowbased security
futures, plus theaggregate call inthe-money
amount, if any.
Proceeds fromthe call sale may
be applied.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

20% of the current market
value of the long security
future, plus the aggregate callin-the-money amount, if any.

20% of the current market
value of the long basket of
narrow-based security futures,plus the aggregate call in-themoney amount, if any.

Page 13 of 30

DESCRIPTION OF
OFFSET

Short a basket of
narrow-based security
futures that together
tracks a broad-based
security index andshort a broad-based
security index put
option contract on thesame index
Long a basket of
narrow-based security
futures that together
tracks a broad-based
security index and longa broad-based security
index put option
contract on the same
index
Short a basket of
narrow-based security
futures that together
tracks a broad-based
security index and longa broad-based security
index call option
contract on the same
index

SECURITYUNDERLYINGTHE SECURITY
FUTUREINITIAL MARGIN
REQUIREMENT

MAINTENANCE MARGIN
REQUIREMENT

Narrow-based
security index

20% of thecurrent market
value of the shortbasket of narrowbased security
futures, plus theaggregate put inthe-money
amount, if any.
Proceeds fromthe put sale may
be applied.

20% of the current market
value of the short basket of
narrow-based security futures,plus the aggregate put in-themoney amount, if any.

Narrow-based
security index

20% of thecurrent market
value of the longbasket of narrowbased security
futures, plus pay
for the long put infull.

The lower of: (1) 10% of theaggregate exercise price ofthe put, plus the aggregate put
out-of-the-money amount, ifany; or (2) 20% of the current
market value of the longbasket of security futures.

Narrow-based
security index

20% of thecurrent market
value of the shortbasket of narrowbased security
futures, plus pay
for the long call in
full.

The lower of: (1) 10% of theaggregate exercise price ofthe call, plus the aggregate
call out-of-the-money amount,
if any; or (2) 20% of thecurrent market value of theshort basket of security
futures.

Long security futureand short security
future on the sameunderlying security (orindex)

Individual stock or
narrow-based
security index.

Long security future,long put option andshort call option. Thelong security future,long put and short callmust be on the sameunderlying security andthe put and call musthave the same
exercise price.
(Conversion)

Individual stock or
narrow-based
security index.

The greater of:
5% of the current
market value ofthe long security
future; or (2) 5%of the current
market value ofthe short security
future.
20% of thecurrent market
value of the longsecurity future,plus theaggregate call inthe-money
amount, if any,plus pay for theput in full.
Proceeds fromthe call sale may
be applied.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

The greater of: 5% of thecurrent market value of thelong security future; or (2) 5%of the current market value ofthe short security future.

10% of the aggregate exercise
price, plus the aggregate callin-the-money amount, if any.

Page 14 of 30

DESCRIPTION OF
OFFSETLong security future,long put option andshort call option. Thelong security future,long put and short callmust be on the sameunderlying security andthe put exercise pricemust be below the call
exercise price (Collar)
Short security futureand long position in thesame security (orsecurities basket)
underlying the security
futureShort security futureand long position in asecurity immediately
convertible into thesame security
underlying the security
future, without
restriction, including thepayment of money
Short security future (orbasket of security
futures representing
each component of anarrow-based
securities index) andlong call option or
warrant on the sameunderlying security (orindex)
Short security future,
Short put option andlong call option. The
short security future,
short put and long callmust be on the sameunderlying security andthe put and call musthave the same
exercise price.
(Reverse Conversion)

SECURITYUNDERLYINGTHE SECURITY
FUTUREINITIAL MARGIN
REQUIREMENT

MAINTENANCE MARGIN
REQUIREMENT

Individual stock or
narrow-based
security index.

20% of thecurrent market
value of the longsecurity future,plus theaggregate call inthe-money
amount, if any,plus pay for theput in full.
Proceeds fromcall sale may be
applied.

The lower of: (1) 10% of theaggregate exercise price ofthe put plus the aggregate put
out-of-the money amount, ifany; or (2) 20% of theaggregate exercise price ofthe call, plus the aggregate
call in-the-money amount, if
any.

Individual stock or
narrow-based
security index.

The initial margin
required under
Regulation T forthe long stock orstocks.

5% of the current market
value, as defined inRegulation T, of the long stock
or stocks.

Individual stock or
narrow-based
security index.

The initial margin
required under
Regulation T forthe long security.

10% of the current market
value, as defined inRegulation T, of the longsecurity.

Individual stock or
narrow-based
security index.

20% of thecurrent market
value of the shortsecurity future,plus pay for thecall in full.

The lower of: (1) 10% of theaggregate exercise price ofthe call, plus the aggregate
call out-of-the-money amount,
if any; or (2) 20% of thecurrent market value of theshort security future.

Individual stock or
narrow-based
security index.

20% of thecurrent market
value of the shortsecurity future,plus theaggregate put inthe-money
amount, if any,plus pay for thecall in full.
Proceeds fromput sale may be
applied.

10% of the aggregate exercise
price, plus the aggregate put
in-the-money amount, if any.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 15 of 30

DESCRIPTION OF
OFFSET

SECURITYUNDERLYINGTHE SECURITY
FUTUREINITIAL MARGIN
REQUIREMENT

MAINTENANCE MARGIN
REQUIREMENTLong (short) a basket
of security futures,
each based on a
narrow-based security
index that together
tracks the broad-based
index and short (long) a
broad-based index
futureNarrow-based
security index

5% of the current
market value forthe long (short)basket of security
futures.

5% of the current market
value of the long (short)basket of security futures.

Long (short) a basket
of security futures thattogether tracks anarrow-based index
and short (long) a
narrow-based index
futureLong (short) a security
future and short (long)an identical security
future traded on adifferent market.

Individual stock or
narrow-based
security index

Individual stock or
narrow-based
security index

The greater of:(1) 5% of thecurrent market
value of the longsecurity future(s);or (2) 5% of thecurrent market
value of the shortsecurity future(s).
The greater of:(1) 3% of thecurrent market
value of the longsecurity future(s);or (2) 3% of thecurrent market
value of the shortsecurity future(s).

The greater of: (1) 5% of thecurrent market value of thelong security future(s); or (2)5% of the current market
value of the short security
future(s).

The greater of: (1) 3% of thecurrent market value of thelong security future(s); or(2) 3% of the current market
value of the short security
future(s).

930.C.
Acceptable Performance Bond Deposits
1. Non-Security Futures and OTC Derivatives
Clearing members may accept from their account holders as performance bond cash currencies ofany denomination, readily marketable securities (as defined by SEC Rule 15c3-1(c)(11) andapplicable SEC interpretations), money market mutual funds allowable under CFTC Regulation 1.25,
bank–issued letters of credit, fully collateralized pass-through letters of credit allowable under
the Clearing House’s collateral acceptance programs, warrants, warehouse receipts andshipping certificates that are registered as deliverable for commodities traded on Chicago Mercantile
Exchange Inc., Chicago Board of Trade Inc., New York Mercantile Exchange, Inc. or Commodity
Exchange, Inc., and “London Good Delivery” gold, as defined by the London Bullion Market
Association.
Clearing members shall not accept as performance bond from an account holder securities that havebeen issued, sponsored or otherwise guaranteed by the account holder or an affiliate of the accountholder unless the clearing member files a petition with and receives permission from Clearing House
staff.
Unless permitted (either not restricted or specifically authorized) by the U.S. Department ofTreasury’s Office of Foreign Assets Control (“OFAC”) and/or any Sanctioning Body, as applicable,
Clearing members may not accept from their account holders as performance bond any debt or equity
security issued by Sanctioned Parties as defined in Rule 543, assets in which Sanctioned Parties
have an interest, or any other assets that are or would be subject to blocking restrictions or sectoral
sanction restrictions imposed by the OFAC or are subject to similar restrictions imposed by another
Sanctioning Body.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 16 of 30

Bank-issued letters of credit and fully collateralized pass through letters of credit must be in aform acceptable to the Clearing House. Such letters of credit must be drawable in the United States.
Clearing members shall not accept as performance bond from an account holder letters of credit
issued by the account holder, an affiliate of the account holder, the clearing member, or an affiliateof the clearing member.
All assets deposited by account holders to meet performance bond requirements must be and remain
unencumbered by third party claims against the depositing account holder.
Except to the extent that Clearing House staff shall prescribe otherwise, cash currency performancebond deposits shall be valued at market value. All other performance bond deposits other than lettersof credit, warrants, warehouse receipts and shipping certificates shall be valued at an amount not toexceed market value less applicable haircuts as set forth in SEC Rule 240.15c3-1. Warrants,
warehouse receipts and shipping certificates shall be valued at an amount not to exceed the market
value of the commodities represented by the warrants, warehouse receipts or shipping certificates,
less a deduction in the same amount as the inventory haircut specified in Commission Regulation
1.17(c)(5)(ii).
2. Security Futures
a. Clearing Members may accept from their Customers as performance bond (or “margin”) for
Security Futures held in a futures account, deposits of cash, margin securities (subject to thelimitations set forth in the following sentence), exempted securities, any other assets permitted
under Regulation T of the Board of Governors of the Federal Reserve System (as in effect fromtime to time) to satisfy a performance bond deficiency in a securities margin account, and any
combination of the foregoing, each as valued in accordance with CFTC Regulations 41.46(c)and 41.46(e); and, SEC Regulations 242.404(c) and 242.404(e). Shares of a money market
mutual fund that meet the requirements of CFTC Regulation 1.25 may be accepted as aperformance bond deposit from a Customer for purposes of this Rule.
b. A Clearing Member shall not accept as performance bond from any Customer securities thathave been issued by such Customer or an Affiliate of such Customer unless such Clearing
Member files a petition with and receives permission from the Exchange for such purpose.
c. All assets deposited by a Customer to meet performance bond requirements must be and remain
unencumbered by third party claims against the depositing Customer.
930.D.
Acceptance of Orders
Clearing members may accept orders for an account provided sufficient performance bond is on depositin the account or is forthcoming within a reasonable time.
For an account which has been subject to calls for performance bond for an unreasonable time, clearing
members may only accept orders that reduce the performance bond requirements of existing positions in
the account.
Clearing members may not accept orders for an account that has been in debit an unreasonable time.
930.E.
Calls for Performance Bond
1. Clearing members must issue calls for performance bond that would bring an account up to the initial
performance bond requirement: a) when performance bond equity in an account initially falls below
the maintenance performance bond requirement; and b) subsequently, when performance bondequity plus existing performance bond calls in an account is less than the maintenance performancebond requirement.
Such calls must be made within one business day after the occurrence of the event giving rise to thecall. Clearing members may call for additional performance bond at their discretion. Notwithstanding
the foregoing, a clearing member is not required to call for or collect performance bond for day trades.
2. Clearing members shall only reduce a call for performance bond through the receipt of performancebond deposits permitted under subsection C. of this rule. Clearing members may cancel a call for
performance bond through: a) the receipt of performance bond deposits permitted under subsection
C. of this rule only if such deposits equal or exceed the amount of the total performance bond call;or b) inter-day favorable market movements and/or the liquidation of positions only if performancebond equity in the account is equal to or greater than the initial performance bond requirement.
Clearing members shall reduce an account holder's oldest outstanding performance bond call first.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 17 of 30

3.

Clearing members must maintain written records of all performance bond calls issued and satisfied
in whole or in part.
930.F.
Release of Excess Performance Bond
Subject to exceptions granted by Exchange staff, clearing members may only release performance bonddeposits from an account if such deposits are in excess of initial performance bond requirements.
930.G.
Loans to Account Holders
Clearing members may not make loans to account holders to satisfy their performance bond requirements
unless such loans are secured as defined in CFTC Regulation 1.17(c)(3). The proceeds of such loansmust be treated in accordance with CFTC Regulation 1.30.
930.H.
Aggregation of Accounts and Positions2
Clearing members may aggregate and net positions in accounts under identical ownership within thesame classifications of customer segregated, customer secured, Cleared Swaps Customer, andnonsegregated for performance bond purposes. Clearing members may compute performance bondrequirements on identically owned concurrent long and short positions on a net basis.
930.I.
Risk Profile of Accounts
A Clearing Member must determine a risk profile for each account it carries, consistent with its risk
management policies and procedures and the requirements of Rule 982.A.7, and collect performancebond in an amount commensurate with the account’s risk profile. Each account that the Clearing Member
determines to have a heightened risk profile shall be subject to initial performance bond requirements
established by the Exchange. For each account that does not have a heightened risk profile the initial
performance bond requirement shall equal the maintenance performance bond requirement establishedby the Exchange. A Clearing Member may call for additional performance bond at its discretion as set
forth in this Rule.
930.J.

Omnibus Accounts

1. Clearing members shall collect performance bond on a gross basis for positions held in domestic andforeign omnibus accounts.
2. Clearing members shall obtain and maintain written instructions and/or documentation from domestic
and foreign omnibus accounts for positions which are entitled to available performance bond offsets or
credits.
930.K.
Liquidation of Accounts
1. Non-Security Futures and OTC Derivatives
If an account holder fails to comply with a performance bond call within a reasonable time (theclearing member may deem one hour to be a reasonable time), the clearing member may close out
the account holder's trades or sufficient contracts thereof to restore the account holder's account torequired performance bond status. Clearing members shall maintain full discretion to determine
when and under what circumstances positions in any account shall be liquidated.
2. Security Futures
If a Customer fails to comply with a performance bond (or “margin”) call within a reasonable periodof time (the clearing member may deem one hour to be a reasonable period of time), the relevant
clearing member shall take the deduction required with respect to an undermargined account incomputing its net capital under applicable CFTC and SEC Regulations.
If at any time there is a liquidating deficit in an account in which security futures are held, the clearing
member shall take steps to liquidate positions in the account promptly and in an orderly manner.
930.L.
Clearing House Authority to Require Additional Performance Bond3
The Clearing House, in its sole discretion, has the authority to require clearing members to collectadditional performance bond from specific account holders in circumstances deemed necessary by the
Clearing House.

2
3

Revised October 2010.
Revised December 2008.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 18 of 30

930.M.
Failure to Maintain Performance Bond Requirements4
If a clearing member fails to maintain performance bond requirements for an account in accordance withthis rule, the Exchange or the Clearing House may direct such clearing member to immediately liquidate
all or part of the account’s positions to eliminate the deficiency.
930.N.
OTC Derivatives Undermargined Capital Charge5
Clearing members must compute an OTC derivatives undermargined capital charge for customer andnoncustomer accounts containing cleared swap positions when performance bond calls on the accounts
have been outstanding for more than three business days. The OTC derivatives undermargined capitalcharge is calculated as the amount of funds required in such account to meet maintenance performancebond requirements less account equity and acceptable performance bond collateral. Provided, to theextent a deficit is excluded from current assets in the net capital computation, such amount shall not also
be deducted under this rule.

931.-948.
949.

[RESERVED]
CREDIT CONTROLS
Clearing Members shall comply with all credit control policies developed by the Exchange for customer
and proprietary transactions. Such credit control policies may include, but not be limited to, registrationof credit control administrators with the Exchange, definition of credit control limits, and maintenance of
written procedures verifying compliance with Exchange credit control requirements. For generalreference purposes, credit control functionality that may be developed for Globex is a system or service
pursuant to Rule 578. Any credit control functionality required by the Exchange shall be in addition to aclearing member’s internal risk monitoring and credit control procedures.

950.

SALES PRACTICES AND CUSTOMER PROTECTION
SUPERVISION
Each clearing member shall adopt and enforce written procedures pursuant to which it will supervise inaccordance with the requirements of these Rules and the CEA and CFTC Regulations thereunder, eachcustomer’s account(s). For purposes of this rule, the term “customer” does not include another futurescommission merchant.

951.

DISCLOSURE REQUIREMENTS
Each clearing member must comply with all disclosure requirements set forth in applicable CFTC andNFA Rules and Regulations.

952.

SALES COMMUNICATIONSNo clearing member shall make fraudulent or high-pressure sales communications relating to the offer
or sale of commodity futures and options.

953.

PROMOTIONAL MATERIALNo clearing member shall use any promotional material which is likely to deceive or mislead the public.
Each clearing member shall maintain a copy of all written and electronic promotional material at theclearing member’s principal place of business and shall make such promotional material available to the
Exchange upon request.

954.

CUSTOMER COMPLAINTS
Each clearing member shall retain all written customer complaints, and make and retain a record of thedate each complaint was received, the associated person who serviced the account, a general descriptionof the matter complained of, and what, if any, action was taken by the clearing member regarding thecomplaint. With respect to verbal complaints, each clearing member shall develop and implement a
written program approved by senior management that requires clearing member staff to direct individuals
with verbal complaints to place such complaints in written form and submit such complaints to theCompliance Officer of the clearing member. Such complaints and related records must be maintained at
the clearing member’s principal place of business.

4
5

Revised December 2008.
Adopted October 2010.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 19 of 30

955.

ASSIGNMENT AND NOTIFICATION OF EXERCISE NOTICES
A.
B.

956.

Each clearing member shall adopt written procedures pursuant to which it shall allocate option
exercise notices in a fair and non-preferential manner.
Upon notification from the Clearing House of assignment of an exercise notice, the clearing
member shall promptly notify the option grantor to whom the notice has been allocated.

DISCRETIONARY, CONTROLLED AND MANAGED ACCOUNTS
956.A.
Requirements
1. Power of Attorney
No clearing member shall accept or carry an account over which a person other than the accountowner exercises discretionary trading authority or control (hereinafter referred to as a discretionary,controlled, or managed account) without first obtaining a written power of attorney, trading
authorization, or similar document (hereinafter referred to as a power of attorney). Such power ofattorney must be signed and dated by the account owner and clearly designate the person to whom
discretionary trading authority has been granted.
2. Discretionary Account Listing
A clearing member must clearly identify each discretionary trading account it carries and promptly
provide the Exchange with a complete and accurate list of such accounts upon request.
956.B.
Presumption of Authority
Except where specifically indicated by the phrase “discretion not exercised” written on the order ticket,
and subsequently confirmed to the customer as such, every trade in a discretionary trading account shallbe presumed to have been made pursuant to the power of attorney and subject to the requirements ofthis rule.
956.C.
Supervision and Trading of Discretionary Trading Accounts
1. Discretionary Trading Account Activity
Each clearing member shall have a supervisory employee (other than the person granted
discretionary trading authority) supervising activity in discretionary trading accounts. The supervision
shall include, but is not limited to, a review of excessive trading in amount or frequency in relation toaccount equity. This requirement shall only apply to discretionary trading accounts controlled by an
employee of the clearing member or the clearing member’s guaranteed introducing brokers.
2. Floor Trading
No member shall execute a transaction in the trading pit for an account over which he has
discretionary trading authority unless the transactions are for a) family accounts as defined in Section
E.1. or b) another member of the Exchange for an account owned by such other member or
proprietary accounts of member firms as set forth in Section E.2.
956.D.
[RESERVED]
956.E.
Exceptions
The provisions of Sections B. and C.1. of this rule shall not apply to the following accounts:
1. Family Accounts
Accounts controlled or managed by persons for their own family. For purposes of this rule, membersof one’s family shall include a spouse, parent, child, grandparent, grandchild, brother, sister, aunt,
uncle, nephew, niece or in-law.
2. Member and Proprietary Accounts
Accounts of members or proprietary accounts as defined by CFTC Regulation 1.3(y).

957.

CONFIRMATIONS TO CUSTOMERS
A clearing member shall confirm to the customer every transaction made for the customer no later than
the following business day. Such confirmation shall be in electronic or written form and shall show facts
relevant to the economic terms of the transaction, such as the product bought or sold, the quantity, theprice, the expiration, maturity date or the contract month/year (as applicable), and, for options, strike price,
put or call and expiration.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 20 of 30

958.

BRANCH OFFICES, GUARANTEED INTRODUCING BROKERS, AND ASSOCIATEDPERSONS
A.

B.

C.
D.

959.

Each clearing member must maintain a complete and accurate list of all branch offices, guaranteed
introducing brokers, and the associated persons of the clearing member and its guaranteed
introducing brokers. Such list shall be promptly provided to the Exchange upon request.
Branch offices, guaranteed introducing brokers, and the associated persons of the clearing member
and its guaranteed introducing brokers must comply with Exchange rules. Each associated personof the clearing member or its guaranteed introducing brokers shall be bound by Exchange rules tothe same extent as if such person were a member.
Each clearing member must diligently supervise its branch offices, guaranteed introducing brokers,
and the associated persons of the clearing member and its guaranteed introducing brokers.
Each clearing member shall be responsible for the acts or omissions of its branch offices, guaranteed
introducing brokers, and the associated persons of the clearing member and its guaranteed
introducing brokers. Any violation of an Exchange rule by any such person may be considered aviolation by the clearing member.

[RESERVED]OMNIBUS AND CARRYING BROKER ACCOUNTS960.

OMNIBUS AND CARRYING BROKER ACCOUNTS
A.

B.

C.
D.

E.
F.

961.-969.

All clearing members must maintain a complete list of all omnibus and carrying broker accounts
maintained on their books. Such list shall be promptly provided to the Exchange upon request.
Information for each such account must include account name, number and address, andclassification of the account as either customer or house. Additionally, the identities and position of
the beneficial owners of any omnibus account must be immediately disclosed to the Exchange uponrequest.
A clearing member carrying an omnibus account shall have the responsibility for ensuring that each
person carried in the account does not exceed speculative limits unless granted an exemption
pursuant to Rule 559.
Each clearing member carrying an omnibus account must at all times reflect in its records the grosslong and short positions held in such omnibus account.
Clearing members may only carry omnibus accounts for entities that have received a notice from theclearing member (i) expressly prohibiting the omnibus account from acting for customers of the
Exchange, directly or indirectly, that are Sanctioned Parties as defined by Rule 543 and (ii) requiring
it to send a similar notice to its omnibus customers.
Each clearing member that maintains an omnibus account with another clearing member shall also
bear financial responsibility to the Exchange for that omnibus account.
Clearing members may only carry omnibus accounts for entities that have received a notice from theclearing member (i) notifying the omnibus account of the EU Retail Customer restrictions containedin Rule 570 and (ii) requiring it to send a similar notice to its omnibus customers.

[RESERVED]
FINANCIAL REQUIREMENTS AND FINANCIAL EMERGENCIES

970.

FINANCIAL REQUIREMENTS
A.

Subject to exemptions granted by Exchange staff, all clearing members, including non-FCMs, mustcomply with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17 and 1.18. This includes,
but is not limited to, the following:

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 21 of 30

1.

B.

C.

D.

Maintenance of minimum capital requirements of at least $5 million except that a clearing
member that is a bank must maintain minimum Tier I Capital (as defined in accordance withregulation applicable to the relevant bank) of at least $5 billion;
2.
Submission of a Form 1-FR, FOCUS Report or other requested information within the specified
period of time;3.
Notification requirements when a clearing member:a. Fails to maintain minimum capital requirements;
b. Fails to maintain early warning capital requirements;
c. Fails to maintain current books and records; ord. Determines the existence of a material inadequacy as specified in CFTC Regulation
1.16(d)(2);e. Changes its fiscal year; orf. Changes its public accountant;
In addition to the notifications required by CFTC regulations, all clearing members must provide
written notice to the Financial and Regulatory Surveillance Department of the above events.
4.
Completely and accurately computing and recording the balances in the net capital computation
including capital requirements;
5.
Subordination agreement requirements, including the filing of such agreements; and6.
Preparation of a monthly computation of adjusted net capital and minimum financial
requirements.
For non-FCMs, all filing, notification, and approval requirements set forth in CFTC Regulations 1.10,
1.12, 1.17 and 1.18 and in the rules of the Exchange must be submitted to or obtained from the
Financial and Regulatory Surveillance Department, if necessary, rather than the Commission. NonFCM clearing members shall make available to the CFTC, upon the CFTC’s request, copies offinancial reports required to be submitted to the Financial and Regulatory Surveillance Department
under this Rule.
In conjunction with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17, and 1.18,
clearing members must comply with the following requirements:
1.
Submit a monthly Form 1-FR or FOCUS Report and the Exchange Supplementary Information
schedule including an unaudited monthly Form 1-FR or FOCUS Report as of the clearing
member’s fiscal year-end, within the time requirements set forth in CFTC Regulation1.10. A
clearing member must include with its Form 1-FR or FOCUS Report a Statement of Income(loss) for the period between the date of the most recent financial statement or, at the option of
the clearing member, the most recent certified financial statement filed with the Financial andRegulatory Surveillance Department and the date for which the report is made.
2.
Submit a certified Form 1-FR or FOCUS Report as of the clearing member’s fiscal year-end
within the time requirements set forth in CFTC Regulation 1.10. A clearing member must
include with its certified Form 1-FR or FOCUS Report, a reconciliation from the certified Form
1-FR or FOCUS Report to the monthly Form 1-FR or FOCUS Report as of the same date or astatement that no differences were noted.
3.
A clearing member for which CME is the designated self-regulatory organization may request
the Financial and Regulatory Surveillance Department’s permission to change its fiscal year.
Such request will only be granted for good cause and in accordance with the requirements of
CFTC Regulation 1.10(e)(2). The Financial and Regulatory Surveillance Department’s grant of
the change in fiscal year will fulfill the approval requirements of CFTC Regulation 1.10(e)(2).
Exchange staff may prescribe additional accounting, reporting, and other financial and/or operational
requirements and clearing members must comply with such requirements. All clearing members must
provide notice to the Financial and Regulatory Surveillance Department of a failure to comply withthe additional accounting, reporting, financial, and/or operational requirements. The Financial andRegulatory Surveillance Department must receive immediate written notification when a clearing
member knows or should know of such failure.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 22 of 30

E.

F.

971.

Financial statement filing requirements under this Rule must be met through Exchange-approved
electronic transmissions, except for certified Form 1-FRs or FOCUS Reports.
Personal Identification Numbers (PINS) must be submitted by authorized signers of the Form 1-FRor FOCUS Report. The PIN will constitute and become a substitute for the manual signature of theauthorized signer to the electronically filed Form 1-FR or FOCUS Report. The PIN is a representationby the authorized signer that, to the best of his or her knowledge, all information contained in thestatement being transmitted under the PIN is true, correct and complete. The unauthorized use of a
PIN for electronic attestation by an unauthorized party is expressly prohibited.
Exchange staff may grant exceptions to the financial and reporting requirements of Rule 970 for goodcause if it is determined that such exceptions will not jeopardize the financial integrity of the
Exchange.

SEGREGATION, SECURED AND CLEARED SWAPS CUSTOMER ACCOUNTREQUIREMENTS
A.

B.

C.

D.

E.

All clearing members must comply with the requirements set forth in CFTC Regulations 1.20 through
1.30, 1.32, 1.49 and 30.7, and Part 22 of the CFTC Regulations. This includes, but is not limited to,the following:
1. Maintaining sufficient funds at all times in segregation, secured 30.7 and Cleared Swaps
Customer accounts;
2. Computing, recording and reporting completely and accurately the balances in the:a. Statement of Segregation Requirements and Funds in Segregation;b. Statement of Secured Amounts and Funds Held in Separate Accounts; andc. Statement of Segregation Requirements and Cleared Swaps Customer
Collateral Held in Cleared Swaps Customer Accounts.
3. Obtaining satisfactory segregation, secured 30.7 and Cleared Swaps Customer accountacknowledgment letters and identifying segregated, secured 30.7 and Cleared Swaps Customer
accounts as such; and4. Preparing complete and materially accurate daily segregation, secured 30.7 and Cleared Swaps
Customer amount computations in a timely manner.
All FCM clearing members must submit a daily segregated, secured 30.7 and Cleared Swaps
Customer amount statement, as applicable, through Exchange-approved electronic transmissions by
12:00 noon on the following business day.
In addition to complying with all applicable CFTC regulations, in order for each of an FCM clearing
member’s customer segregated, secured 30.7 and Cleared Swaps Customer accounts held at adepository to be included as segregated and secured 30.7 funds and Cleared Swaps Customer
Collateral in their respective origin and calculation:
1. The FCM clearing member must provide the Financial and Regulatory Surveillance Department
with access to the account information, in a form and manner prescribed by the Financial andRegulatory Surveillance Department; and2. The depository must allow the FCM clearing member to provide the Financial and Regulatory
Surveillance Department with access to the account information, in a form and mannerprescribed by the Financial and Regulatory Surveillance Department.
All FCM clearing members must submit a report of investments in a manner as prescribed throughExchange-approved electronic transmissions as of the 15 th of the month (or the following business
day if the 15th is a holiday or weekend) and last business day of the month by the close of businesson the following business day. The report of investments shall be prepared and shall identify
separately for segregated and secured 30.7 funds and Cleared Swaps Customer Collateral held:
1. The dollar amount of funds held in cash and each permitted investment identified in CFTC
Regulation 1.25(a); and2. The identity of each depository holding funds and the dollar amount held at eachdepository.
All disbursements not made for the benefit of a customer from a segregated, secured 30.7 or Cleared
Swaps Customer account which exceed 25% of the FCM clearing members excess segregated,

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 23 of 30

secured 30.7 or Cleared Swaps Customer of the respective origin must be pre-approved in writingby the clearing member’s Chief Executive Officer, Chief Financial Officer or their authorized
representative with knowledge of the firm’s financial requirements and position.
1. In determining if a disbursement exceeds the 25% level, such disbursement must be:a. Compared to the most recent calculation of excess segregated, secured 30.7 and Cleared
Swaps Customer amounts; andb. A single disbursement must be reviewed individually and in the aggregated with all otherdisbursements not made for the benefit of a customer of the respective segregated, secured
30.7 or Cleared Swaps Customer origin since the last calculation of excess funds.
2. Upon approval of a single disbursement or the disbursement which in the aggregated exceeds
the 25% level as defined in Rule 971.E.1., the FCM clearing member must provide immediate
notification to the Financial and Regulatory Surveillance Department through Exchangeapproved electronic transmissions. Such notification shall include:a. Confirmation that the FCM clearing member’s Chief Executive Officer, Chief Financial
Officer or authorized representative with knowledge of the firm’s financial requirements andposition pre-approved in writing the disbursement(s);b. The amount(s) and recipient(s) of such disbursement(s); andc. A description of the reasons for the single or multiple transaction(s) that resulted in the
disbursement(s).
3. The FCM clearing member’s Chief Executive Officer and Chief Financial Officer will remain
responsible for the pre-approvals by their authorized representative and for compliance with thisrule.
F. All clearing members must provide written notice to the Financial and Regulatory Surveillance
Department of a failure to maintain sufficient funds in segregation, secured 30.7 or Cleared Swaps
Customer accounts. The Financial and Regulatory Surveillance Department must receive immediate
written notification when a clearing member knows or should have known of such failure.
G. Each statement and report filing required under this Rule must be submitted by the Chief Executive
Officer, Chief Financial Officer or their authorized representative as approved by CME using theirassigned User Identification (“User ID”). The User ID will constitute and become a substitute for the
manual signature of the authorized signer to the electronically submitted daily segregated, secured
30.7 and Cleared Swaps Customer amount statements. The User ID is a representation by theauthorized signer that, to the best of his or her knowledge, all information contained in the statement
being transmitted under the User ID is true, correct and complete. The unauthorized use of a User
ID for electronic attestation by an unauthorized party is expressly prohibited.
H. Exchange staff may prescribe additional segregation, secured 30.7 and Cleared Swaps
Customer amount requirements.

972.

REDUCTIONS IN CAPITAL
A clearing member must provide written notice to the Financial and Regulatory Surveillance Department
as set forth below of any substantial reduction in capital as compared to the most recent filing of a financial
report.
1. If any event or series of events, including any withdrawal, advance, loan or loss would cause, on a
net basis, a reduction in net capital as reported on the Form 1-FR, or in tentative net capital asreported on the FOCUS Report for broker/dealers, of 20% or more, notice must be provided within
two business days of the event or series of events causing the reduction; and2. If equity capital of the clearing member or a subsidiary or a consolidated affiliate would be withdrawn
by action of a stockholder or a partner or by redemption or repurchase of shares of stock by any of
the consolidated entities or through the payment of dividends or any similar distribution, or an
unsecured advance or loan would be made to a stockholder, partner, sole proprietor, employee oraffiliates, such that the withdrawal, advance or loan would cause, on a net basis, a reduction inexcess net capital of 30% or more, notice must be provided at least two business days prior to thewithdrawal, advance or loan that would cause the reduction.
3. A clearing member that is a bank must provide notice if any event or series of events, including any
withdrawal, advance, loan or loss would cause, on a net basis, a reduction in Tier I capital as reported

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 24 of 30

on the most recent filing of a financial report, of 20% or more. Notice must be provided within fivebusiness days of the event or series of events causing the reduction or when the clearing member
knows or should know of the reduction in Tier I capital. 6
The foregoing shall not apply in the case of a reduction in capital resulting from (1) the repayment or
prepayment of subordinated liabilities for which notice has been given in accordance with Rule 970 or (2)any futures or securities transaction in the ordinary course of business between a clearing member andany affiliate where the clearing member makes payment to or on behalf of such affiliate for suchtransaction and then receives payment from such affiliate for such transaction within two business days
from the date of the transaction.

973.

CUSTOMER ACCOUNTS WITH THE CLEARING HOUSE7
All customer funds deposited with the Clearing House on behalf of customers protected by CFTC
Regulation 1.20 shall be held in accordance with the Commodity Exchange Act and CFTC Regulation
1.20 in an account identified as Customer Segregated. Such customer funds shall be segregated by the
Clearing House and treated as belonging to the customers of the clearing member. Pursuant to this rule,a clearing member shall satisfy the segregation acknowledgement letter requirement of CME Rule
971.A.3., the Commodity Exchange Act, and CFTC Regulation 1.20 for customer deposits held at the
Clearing House. A clearing member fully authorizes the Clearing House to comply with all requirementsof CFTC Regulation 1.20 with regards to its Customer Segregated account.
All Cleared Swaps Customer Collateral deposited with the Clearing House on behalf of Cleared Swaps
Customers shall be held in accordance with Part 22 of the CFTC Regulations in an account identified asa Cleared Swaps Customer Account. Such Cleared Swaps Customer Collateral shall be segregated by
the Clearing House and treated as belonging to such customers of the clearing member. Pursuant to thisrule, a clearing member shall satisfy the Cleared Swaps Customer Account acknowledgement letter
requirement of CME Rule 971.A.3, the Commodity Exchange Act, and CFTC Regulation 22.5 forcustomer deposits held at the Clearing House. A clearing member fully authorizes the Clearing House tocomply with all requirements of CFTC Regulation 22.5 with regards to its Cleared Swaps Customer
account.
All customer funds deposited with the Clearing House on behalf of customers protected by CFTC
Regulation 30.7 shall be held in a manner consistent with CFTC Regulation 30.7 in an account identified
as Customer Secured 30.7. Such customer funds shall be segregated by the Clearing House and treatedas belonging to such customers of the clearing member. Pursuant to this rule, a clearing member shallsatisfy the acknowledgement letter requirement of CME Rule 971.A.3., the Commodity Exchange Act,and CFTC Regulation 30.7 for customer deposits held at the Clearing House. A clearing member fully
authorizes the Clearing House to comply with all requirements of CFTC Regulation 30.7 with regards to
its Customer Secured 30.7 account.

974.
975.

[RESERVED]
EMERGENCY FINANCIAL CONDITIONS
If the Global Head of Clearing & Post-Trade Services determines that the financial or operational conditionof a clearing member or one of its affiliates is such that to allow that clearing member to continue its
operation would jeopardize the integrity of the Exchange, or negatively impacts the financial markets byintroducing an unacceptable level of uncertainty, volatility or risk, whether or not the clearing member
continues to meet the required minimum financial requirements, They may empanel the Chief Executive
Officer, the Chairman of the Board, a Chairman of the Clearing House Risk Committee, and the Global
Head of Clearing & Post-Trade Services. (“Emergency Financial Committee”) Such panel shall be duly
authorized and, upon a unanimous vote of the panel, be empowered to order (a) an immediate position
limitation, (b) an immediate suspension of the clearing member, (c) that all open trades of said clearing
member be for liquidation only, (d) the liquidation or transfer of all or a portion of the open positions of theclearing member, (e) additional performance bond to be deposited with the Clearing House and/or (f)any other action necessary to protect the financial integrity of the Clearing House. The clearing member
affected by action taken shall be notified and may request a hearing before the Board pursuant to theprocedures set forth in Rule 412. To the extent that the panel orders that all open trades of a clearing
member be for liquidation only, or the panel orders the liquidation or transfer of all of the open positions

6
7

Adopted May 2011.
Revised October 2010.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 25 of 30

of a clearing member, Rule 913.B. shall apply and the clearing member shall be treated as a withdrawing
clearing member.

976.

SUSPENSION OF CLEARING MEMBERS
If a clearing member becomes insolvent, the clearing member must immediately notify the Exchange ofsuch insolvency. The insolvency shall be announced by the Global Head of Clearing & Post-Trade
Services and thereupon such clearing member shall be deemed automatically suspended. If a memberof the Clearing House becomes insolvent, or for other reasons is suspended from the Clearing House,
the officers, owners or partners who are members of the Exchange may also be suspended from the
Exchange.
A clearing member shall be deemed insolvent:
1. If it files a voluntary petition in bankruptcy or is adjudicated as bankrupt;
2. If it fails to fulfill or promptly adjust all of its Exchange obligations; or
3. If satisfactory proof is made to the Clearing House Risk Committee that it is unable to pay its debts
as they fall due in the ordinary course of business.
A clearing member may be suspended by the Clearing House Risk Committee pursuant to Rule 403 if it
fails to meet the capital requirements of the Clearing House or the CFTC, or if its financial condition, or
the financial condition of one of its affiliates, is such that its continued operation would jeopardize theintegrity of the Exchange. Members and clearing members suspended in accordance with this rule shallbe notified and may request a hearing before the Board as provided in Rule 412.

977.

SUSPENSION OF OFFICERS OR PARTNERS
Whenever an officer, owner or partner of a clearing member is suspended or expelled, the respective
clearing member may be suspended or expelled for a like term. Members and clearing members affectedby this rule shall be notified and may request a hearing before the Board as provided in Rule 412.

978.

OPEN TRADES OF SUSPENDED CLEARING MEMBERS
When a clearing member, having open trades, is suspended or expelled, it may designate a clearing
member to close out such transactions through designated personnel and in a manner acceptable to theClearing House.
When a clearing member that has open positions, defaults to the Clearing House in the deposit of
performance bonds or settlements, or is suspended for insolvency, the Global Head of Clearing & PostTrade Services or their delegate may appoint a clearing member to which all such open positions shallbe transferred for liquidation, or may appoint a clearing member to liquidate such positions on behalf ofsuch defaulted or suspended clearing member. If open positions are transferred, all supporting
performance bond associated with the positions and any settlement payments due or collected must be
delivered to the Clearing House, to be entrusted to the clearing member designated to liquidate thepositions. The clearing member appointed to liquidate the positions shall have the right, under the
direction of the Global Head of Clearing & Post-Trade Services, to buy or sell for the account of thesuspended clearing member such contracts as may be necessary to clear the suspended clearing
member's contracts with the Clearing House; the clearing member shall also have the right under the
direction of the Global Head of Clearing & Post-Trade Services to make or take delivery.

979.

SUSPENDED OR EXPELLED CLEARING MEMBERS
In the event a clearing member has been suspended or expelled, the clearing member shall comply withall orders of the Board, the Clearing House Risk Committee, or the Global Head of Clearing & Post-Trade
Services.
In the event of refusal by a clearing member to comply with any order placed upon it, the Clearing House
may take whatever means necessary to effect the order.
A clearing member or any member suspended due to a clearing member’s insolvency may be reinstatedupon affirmative proof to the Clearing House Risk Committee of such clearing member’s financial
responsibility. A member may withdraw from the clearing member and may apply for reinstatement tomembership in the Exchange provided that the insolvency of the clearing member was not caused bysuch member’s willful, reckless or unbusinesslike conduct.

RECORDS AND REPORTS

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 26 of 30

980.

REQUIRED RECORDS AND REPORTS
A.

Each clearing member shall prepare, maintain and keep current those books and records requiredby the rules of the Exchange, the Commodity Exchange Act and the Regulations thereunder. Suchbooks and records shall be open to inspection and promptly provided to the Exchange upon request.
B. Each clearing member shall maintain an adequate accounting system, internal accounting controls,
and procedures for safeguarding customer and firm assets. This includes, but is not limited to, thefollowing:
1. Preparation and maintenance of complete and accurate reconciliations for all accounts;
2. Resolution of reconciling items in a timely manner; and3. Prevention of a material inadequacy as defined in CFTC Regulation 1.16(d)(2).
C. A clearing member must file any information requested by the Exchange within the time period
specified in the request.
D. Each clearing member shall maintain at all times the ability to provide to the Exchange in an
acceptable form a complete set of equity systems reports (including, at a minimum, the equity run,open position listing, day trade listing, cash adjustments listing and performance bond call and debit
equity listing). Such reports shall be available to the Exchange in Chicago no later than 8:00 a.m.
Chicago time on the business day following the report date.
E. Each clearing member shall maintain at all times the ability to provide to the Exchange a listing ofeach customer’s method of access to CME markets, including front end applications and network
connections.
F. Exchange staff may impose administrative fees upon clearing members for late submissions ofreports and other information required to be submitted to the Financial and Regulatory Surveillance
Department by Exchange Rules. The administrative fees permitted by this Rule 980.F. shall not
exceed $1,000 for the initial late submission, plus $1,000 for each additional business day that suchreport or information is not submitted. Where the late submission of reports or other information may
be due to insufficient internal accounting controls or procedures, the Business Conduct Committee
may impose disciplinary sanctions in lieu of, or in addition to, the administrative fees.
G. Each Clearing Member must submit daily reports that include all information required by the Clearing
House, including but not limited to legal entity identifiers, where available, and end-of-day grosspositions by each house origin, by each customer origin and by each individual customer-levelaccount within each customer origin. Daily reporting of individual customer-level account information
pursuant to this paragraph does not oblige a clearing FCM to look through an omnibus account thatit clears for a carrying broker to the underlying customer account.

981.

ANTI-MONEY LAUNDERING AND ECONOMIC SANCTIONS COMPLIANCE
Each clearing member shall develop and implement a written compliance program approved in writing bysenior management reasonably designed to achieve and monitor the clearing member’s compliance withall applicable requirements of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), the International
Emergency Economic Powers Act (50 U.S.C. § 1701 et seq. ) (“IEEPA”), the Trading with the Enemy Act(50 U.S.C. App. § 1 et seq.) (“TWEA”), and the Executive Orders and regulations issued pursuant thereto,
including the regulations issued by the U.S. Department of the Treasury and, as applicable, theCommodity Futures Trading Commission. That compliance program shall, at a minimum,
1. Establish and implement policies, procedures and internal controls reasonably designed to preventthe financial institution from being used for money laundering or the financing of terrorist activities
and to achieve compliance with all applicable provisions of the Bank Secrecy Act, IEEPA, TWEA,
and all applicable Executive Orders and regulations issued pursuant thereto;
2. Provide for independent testing for compliance to be conducted by clearing member personnel or by
a qualified outside party;
3. Designate an individual or individuals responsible for implementing and monitoring the day-to-day
operations and internal controls of the program;
4. Provide ongoing training for appropriate personnel; and5. Include appropriate risk-based procedures for conducting ongoing customer due diligence, including,but not limited to:

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 27 of 30

a. understanding the nature and purpose of customer relationships for the purpose of developing acustomer risk profile; andb. conducting ongoing monitoring to identify and report suspicious transactions, and, on a risk basis,
to maintain and update customer information, including the information regarding the beneficial
owners of legal entity customers.
Clearing members must also supervise and ensure that their guaranteed introducing brokers are incompliance with the provisions contained in this Rule.

982.

RISK MANAGEMENT
All clearing members must have written risk management policies and procedures in place to ensure they
are able to perform certain basic risk and operational functions at all times. At a minimum, the following
areas must be considered in the firm’s policies and procedures, depending on the firm’s size and its
business and product mix:
A. Trade Submission and Account Monitoring. Clearing members must have procedures in place todemonstrate compliance in the following areas for trades executed through both electronic platforms
and open outcry:
1. Monitoring the credit risks of accepting trades, including give-up trades, of specific customers.8
2. Monitoring the risks associated with proprietary trading.
3. Limiting the impact of significant market moves through the use of tools such as stress testingor position limits.
4. Maintaining the ability to monitor account activity on an intraday basis, including overnight. 9
5. Ensuring order entry systems include the ability to set automated credit controls or position limits
or requiring a firm employee to enter orders.
6. Defining sources of liquidity for increased settlement obligations.
7. Determining a risk profile for each account it carries, including whether such account presents aheightened risk profile.
B. Additional and/or Alternative Requirements. Exchange or Clearing House staff may prescribe
additional and/or alternative requirements in order for clearing members to comply with this Rule.
C. Each clearing member shall promptly provide to Clearing House staff, upon request, information anddocuments regarding its risk management policies, procedures and practices, including, without
limitation, information and documents relating to the liquidity of its financial resources, settlement
procedures and operational issues.
D. Each clearing member shall make information and documents regarding its risk management
policies, procedures and practices available to the CFTC upon the CFTC’s request.
In addition, all FCM clearing members must comply with the risk management requirements set forth in
CFTC Regulation 1.11: Risk Management Program for futures commission merchants.

983.

DISASTER RECOVERY AND BUSINESS CONTINUITY
All clearing members must have written disaster recovery and business continuity policies and proceduresin place to ensure they are able to perform certain basic operational functions in the event of a significant
internal or external interruption to their operations. At a minimum, the following areas must be consideredin the firm’s policies and procedures, depending on the firm’s size and its business and product mix:
A. Clearing members must have procedures in place to allow them to continue to operate during periodsof stress or to transfer accounts to another fully operational clearing member with minimal disruption
to either the Exchange or their customers. In order to satisfy this requirement, clearing members
must perform:
1. Periodic testing of disaster recovery and business continuity plans.
2. Duplication of critical systems at back up sites.
3. Periodic back-up of critical information.
B. Key Staff Contacts. Clearing members must maintain and, at the request of the Exchange, provide

8
9Revised December 2008.
Revised December 2008.

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 28 of 30

C.

accurate and complete information for their key personnel. Clearing members must inform the
Exchange in a timely manner whenever a change to their key personnel is made.
Additional and/or Alternative Requirements. Exchange staff may prescribe additional and/or
alternative requirements in order for clearing members to comply with this Rule.

TAX COMPLIANCE
990.

U.S. WITHHOLDING TAXA.

Beginning January 1, 2017, the date on which Section 871(m) of the Internal Revenue Code of 1986,
as amended (for purposes of this Rule 990, the “Code”), and related Treasury regulations and otherofficial interpretations thereof, first apply to any transactions on the Exchange:
1. No Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes
shall conduct any transaction in equity index products on the Exchange unless:a. such Clearing Member has entered into a qualified intermediary agreement with the Internal
Revenue Service (“IRS”) in which the Clearing Member has agreed to assume primary
responsibility for reporting, collecting and remitting withholding taxes imposed pursuant toChapters 3 and 4 of subtitle A, and Chapter 61 and Section 3406, of the Code with respect
to any income (including dividend equivalents, as such term is defined in Section 871(m)(2)of the Code and Treasury Regulations Section 1.871-15(c) or any successor thereto) arisingfrom transactions on the Exchange that are entered into by the Clearing Member as anintermediary, including transactions entered into on behalf of such Clearing Member’s
customers;b. (i) such Clearing Member has entered into a qualified intermediary agreement with the
IRS to become a qualified derivatives dealer (“Qualified Derivatives Dealer”) that
permits the Exchange to make payments of dividend equivalents (as such term isdefined in Section 871(m)(2) of the Code and Treasury Regulations Section 1.87115(c) or any successor thereto) or deemed payments, to such Clearing Member freefrom U.S. withholding taxes imposed pursuant to Chapters 3 and 4 of subtitle A, andChapter 61 and Section 3406, of the Code arising from transactions on the Exchangethat are entered into by the Clearing Member for its own account; and(ii) such transaction entered into by the Clearing Member is within the scope of the
exemption from withholding tax for dividend equivalents (as such term is defined in
Section 871(m)(2) of the Code and Treasury Regulations Section 1.871-15(c) or any
successor thereto) paid to Qualified Derivative Dealers pursuant to Chapters 3 and 4of subtitle A, and Chapter 61 and Section 3406, of the Code; andc. such Clearing Member has qualified under such procedures promulgated by the IRS as arein effect from time to time to establish an exemption from withholding under FATCA (asdefined below), such that the Exchange will not be required to withhold any amount withrespect to any payment made or deemed to be made to such Clearing Member under
FATCA. For purposes of this subparagraph c., “FATCA” means the provisions of Sections
1471 through 1474 of the Code, which were enacted as part of the Foreign Account Tax
Compliance Act (or any amendment thereto or any successor sections thereof), and related
Treasury Regulations and other interpretations thereof, as in effect from time to time, andthe provisions of any intergovernmental agreement to implement the FATCA as in effectfrom time to time between the United States and the jurisdiction of the relevant Clearing
Member’s residency.
2. Beginning on January 1, 2017, and on each anniversary thereafter, each Clearing Member thatis treated as a non-U.S. entity for U.S. federal income tax purposes and that conducts any
transaction in equity index products on the Exchange in accordance with Rule 990.A. 1. shallcertify to the Exchange that such Clearing Member satisfies the requirements of Rule 990.A.1.(a)through (c) by providing to the Exchange appropriate tax documentation attesting to such
Clearing Member’s federal income tax status, with the first such certification being delivered to
the Exchange no later than January 1, 2017. Each such Clearing Member is required to promptly

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 29 of 30

3.

4.

5.

update its certification to the Exchange if required by applicable law or administrative guidanceor if the certification is no longer accurate.
Beginning on January 1, 2017, and on each anniversary thereafter, each Clearing Member thatis treated as a non-U.S. entity for U.S. federal income tax purposes shall provide the Exchangewith information relating to the dividend equivalents (as such term is defined in Section 871(m)(2)of the Code and Treasury Regulations Section 1.871-15(c) or any successor thereto) the
Exchange pays or is deemed to pay such Clearing Member in sufficient detail and in a sufficiently
timely manner to enable the Exchange to report on IRS Forms 1042 and 1042-S (or any
successor forms) under Chapters 3 and 4 of subtitle A of the Code, the required amounts andother information relating to dividend equivalents (as such term is defined in Section 871(m)(2)of the Code and Treasury Regulations Section 1.871-15(c) or any successor thereto) andtransactions giving rise thereto between the Exchange and the Clearing Member.
Each Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes
shall promptly inform the Exchange in writing if it undergoes a change in circumstance that would
affect its compliance with this Rule 990, or otherwise knows or has reason to know that it is not,or will not be, in compliance with this Rule 990, but in each case, such writing must be delivered
to the Exchange no later than within two days of the Clearing Member’s knowledge thereof.
A Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes
shall indemnify the Exchange for any loss, liability or expense (including taxes and penalties)
sustained by the Exchange as a result of such Clearing Member failing to comply with therequirements of this Rule 990.

(End Chapter 9)

Copyright Chicago Mercantile Exchange, Inc. All rights reserved.

Page 30 of 30