RECEIVED
C.FT.C.

IW 3 MEBCMNEe @

OFC, OF THE SECRETARIAT ne Moore tare

20 South Wacker Drive
Chicago, It 60606-7499

www.cme.com.

June 3, 2005

Ms, Jean A. Webb

Office of the Secretariat

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21" Street, NW

Washington, DC 20581

RE: CME Rule 526 ("Block Trades") and CME Rule 536 ("Recordkeeping
Requirements for Pit, Globex, and Negotiated Trades")
Submission No. 05-60

Dear Ms. Webb:

Chicago Mercantile Exchange Inc. ("CME” or “Exchange") hereby notifies the
Commodity Futures Trading Commission ("CFTC" or "Commission") that the Exchange has
approved changes to Rule 526 (“Block Trades”) and Rule 536 (“Recordkeeping Requirements
for Pit, GLOBEX, and Negotiated Trades”) pursuant to the Commission's request. Subsequent
to the comprehensive revisions to Chapter 5 ("Floor Privileges — Trading Qualifications and
Practices”) of the CME Rulebook that became effective on April 1, 2005, CME was contacted by
the CFTC to discuss several of the changes. Upon further discussion with the Commission
concerning Rule 526 and Rule 536, the Exchange revised these rules as described below.

Rule 526

The April 2005 revisions to Rule 526.!. added language allowing commodity trading and
investment advisors exempt from registration to be considered the applicable entity in
determining eligibility to participate in block trades. The CFTC asked that CME add additional
language to Rule 526.1. clarifying that block trades made by these advisors be limited to
appropriate customers. Additionally, the CFTC asked that CME consider clarifying that the $25
million assets under management requirement applied to both commodity trading and
investment advisors, not solely commodity trading advisors. CME revised the rule to reflect the
changes requested by the CFTC and determined they should also be applicable to Section J.
dealing with foreign Person’s performing a similar role as the advisors described in Section I.

The amendments to Rule 526 are below, with additions underlined and deletions overstruck.
526. BLOCK TRADES

[Sections A. through H. of the rule are unchanged.]

(over)


A commodity trading advisor ("CTA") registered {or exempt from registration}
under the Commedity Exchange-Act, including, without limitation, any investment
advisor registered {or exempt from registration} under the Investment Advisors
Act of 1940, shall be the applicable entity for purposes of Sections A., B., C., and
D., provided such advisors havewith total assets under management exceeding
$25 million; and the block trade is suitable for the customers of such advisorspet

the CTA's-sust 7 hallt-be-th appl bh iby f¢ Purp Ff Secti s. As
J. A foreign Person performing a similar role or function to a CTA or investment

advisor as described in Section |, and subject as such to foreign regulation, shall
be the applicable entity for purposes of Sections A., B., C., and D., provides such
Persons havewith total assets under management exceeding $25 million; and the
block trade is s itable for the customers of such L Personsnet the foreign arsor's

Rule 536

The first change was made to clarify the requirement that floor brokers record their trading
symbol on the document used to record order executions. CFTC staff noted that the existing
language did not explicitly include this requirement.

The second change concerned the recent modification in the clearing firm back office audit
enforcement program threshold level from 15 to 25% for firms to pick up and timestamp cards
used by brokers that record the execution of orders received from other members. In order to
address the Commission's concern that the 25% threshold for non-compliance was excessively
high, the Exchange approved lowering the threshold level to 20%, bringing it in line with the
threshold level for the pick up and timestamping of local traders’ sequenced cards.

The amendments to Rule 536 appear on the next page, with additions underlined and deletions
overstruck.

536. RECORDKEEPING REQUIREMENTS FOR PIT, GLOBEX, AND NEGOTIATED

TRADES
536.A. Member Open Outcry Pit Trades
1. General Requirements
a. At the time of execution, it shall be the duty of every member to record

each trade made for an account the member owns or controls showing
the date, price, quantity, product, expiration month, bracket symbol,
opposite broker, opposite clearing member and, for options, put or call
and strike price. Floor brokers executing an order shall record their
trading symbol, price, quantity, bracket, opposite trader and clearing
member.

[The remainder of Section A. through Section C. is unchanged.]


536.D. CTR Enforcement Program and Sanction Schedule
CTR Monthly Enforcement Program

[This section is unchanged.]

CTR Clearing Member Back Office Audit Enforcement Program

The Market Regulation Department will conduct audits of CME clearing members in
order to verify the accurate recoding and submitting of required audit trail information.
The CTR audit threshold levels for the various firm deficiencies are as follows:

Deficiency Type Threshold Level
Failure to pick up

documents in accordance
with CME schedule for:

Sequenced Cards 20%
Verbal Order Cards 250%
Floor Orders 10%

[The remainder of the rule is unchanged.]

The Exchange certifies that these revisions neither violate nor are inconsistent with any
provision of the Commodity Exchange Act or of the rules and regulations thereunder.

If you have any questions regarding this matter, please call me at (312) 648-5422.

Sincerely,

/S/ Stephen M. Szarmack
Director and Associate General Counsel

‘SMS/elm/5330 SUB 05-60.doc