changes in the employment status of any of its employees who are Exchange Members
and/or registered with the Exchange as trading floor personnel, in partners, whether
general or limited, or in officers or directors.

(D) | Each Member Firm shall give prior notice, in writing, to the Membership
Department of any proposed merger, acquisition, consolidation, or sale of the Member
Firm, whether into or by the Member Firm or otherwise. Such prior notice shall be
supplemented by such documents or information as requested by the Vice President,
Member Services.

Rule 2.50. TRANSFER OF MEMBERSHIPS

(A) A Member may transfer ownership of his membership only to another
Member or Member-elect in the same Division and shall be permitted upon: (i) a sale of a
membership as provided in Rule 2. 52; or (ii). cither the effective date or termination of an

asa result of a bona fide gift where ‘the
donor and the donee are members of the ‘same family (a spouse, parent, child, sibling,
grandparent, or grandchild); oF (iii) by operation of law; or (iv) as a result of a sale where
the seller and purchaser are members of the same family (a spouse, parent, child, sibling,
grandparent, or grandchild). The transfer in ownership of a membership shall be effective
upon the execution of an assignment of registration to the transferee on the membership
records of the Exchange.

(B) A Member may retain ownership of his membership and transfer, via lease
or ABC Agreement, those rights and obligations specifically provided for in the lease or

ABC Agreement. The transfer of such rights and obligations shall be concurrent with the
effective and/or termination date of the lease or ABC Agreement

(C) The Exchange shall treat the person in whose name a membership is
registered on the membership records of the Exchange as the sole owner of the
membership, notwithstanding the terms and conditions of an ABC Agreement pursuant to
which the person holds such membership, and, except as provided in the By-Laws and
Rules, shall not be bound to recognize any claim to, or interest in, such membership, by
any other person, whether or not the Exchange has notice of such purported claim or
interest.

Rule 2.51. ©. PROCEDURE FOR TRANSFER OF MEMBERSHIPS

(A) _ If a Member desires to transfer ownership of a membership, the transferor
shall deliver to the Membership Department notification of intention to transfer, executed by
the transferor or his legal representative. The notice of intention to transfer shall include
the seat identification number, the date on which the transfer is intended to become
effective and the name of the proposed transferee. The Membership Department, upon
receipt of a Member's notice of intention to transfer a membership, shall promptly notify the
membership of the Exchange, by posting for a period of ten (10) days the notice of

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(B) Each Member Firm and Clearing Member Firm must maintain capital in
excess of that required by Rule 2.14 and 2.15 ef 9.24 for each financial guarantee
issued and allowed by Subsection (A), beyond a base of four quarantees per Division

as follows:

(i) NYMEX Division: $50,000
(ii) | COMEX Division: $25,000

Rule 2.32. DUTIES OF GUARANTORS AND QUALIFYING PRIMARY CLEARING
MEMBERS

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(iii) An A-B-C Agreement must terminate upon the occurrence of any
one of the following events:

(a) ___ the Member Firm ceases to be, or gives notice of intention to
cease to be, a Member Firm; or

(b)_ _ the Member ceases to be an employee of the Member Firm;

(iv) _ An A-B-C Agreement shall not become effective until approved by
the Membership Committee;

(v)___ An A-B-C Agreement shall set forth in detail all arrangements

regarding the disposition of the membership upon termination of the A-B-C agreement;
and;

(vi) _ An A-B-C Agreement shall provide that any and all controversies

arising out of or in connection with the agreement, its negotiation, interpretation or

termination shall be arbitrated in accordance with the provisions of Chapter 5 of the
Rules.

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{G}—A sole proprietorship upon which the Member firm privileges of
fnembership are conferred may not obtain membership in the Clearing House of the
Exchange.

Rule 2.12. COOPERATIVE ASSOCIATIONS

(A) — Subject to the approval of the Board, the privileges of Membership may be
conferred upon a cooperative association of producers of the kind referred to in
Commodity Exchange Act § 5(C). As a condition of obtaining and maintaining Member
Eirm privileges, the association shall be required to own and or have conferred upon it
two (2) Exchange memberships in each Division in which it desires Member Firm
privileges. The firm shall also be required to designate one or two individuals as its
“conferring Members”. Conferring Members may individually own the membership(s)
and or hold such memberships via ABC Agreement—by-one-Memberwhoe-owns-and

(B) In the case of one conferring Member, such Member shail be a duly
authorized representative of such association.

(C) In the case of two conferring Members, both conferring Members shall be
duly authorized representatives of the association.

Rule 2.13. APPLICATIONS FOR MEMBER FIRMS

Firms wishing to apply for membership privileges shall file an application in the
form approved by the Board along with the following documents:

(A) | anopinion, acceptable to the Exchange, of counsel to the Firm that the
Firm is: (1) duly and validly organized and existing under the laws of the jurisdiction in
which it was organized; (2) qualified to transact business under the laws of the
jurisdiction in which it has its principal place of business; and (3) qualified to transact
business in the State of New York or that such qualification is unnecessary;

(B) acopy of a resolution, duly certified by the Secretary or other authorized
officer or partner of the Firm, designating an agent for service of process concerning

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intention to transfer.

(B) | NoMember may transfer ownership of a membership or lease to another the
trading privileges associated therewith unless and until the following conditions have been
met:

(i) Alldues, assessments, fines, penalties and any other monies (including,
but not limited to, booth fees, office rent and phone charges) due and payable to the
Exchange shall have been paid:

(ii) ¢a) All claims of Members that: (1) arise out of, or in connection with,
the transaction of business on the Exchange, and (2) are filed with the Membership
Department within ten (10) days after the Exchange gave the membership notice efthe
receipt-ofthe-netice of intention to transfer have been settled or discharged.

ty (iii) Payment by the transferee to the Exchange of a transfer fee in an
amount to be fixed, from time to time, by the Board; provided, however, that a Member who
purchases a membership in order to transfer it to another Member or to Member-elect and
files a notice of intention to transfer the membership to such other Member or to such
Member-elect shall not be required to pay a transfer fee upon transfer to such other
Member or Member-elect.

(C) A transfer of ownership of a membership may be effected, notwithstanding
the provisions of Sections (A) and (B) hereof provided that:

(i) the transferor owns and holds more than one full membership in the Division
of the transferred membership; provided, however, that the claim shall be less than the
then current value of a membership; or,

(ii) the transferor deposits with the Exchange a certified check, payable to the
Exchange, in an amount equal to the amount of the claim, including a reasonable amount
for costs and attorney fees, for liquidated claims or such amount as may be determined by
the Exchange for unliquidated claims provided that such amount shall be no higher ef than
the price atwhich a membership last sold. orat which amembership was bid and,-files-with

Rule have been satisfied, The Exchange shall retain such deposit until the earlier of ten
(10) days after receipt of a notice of intention to transfer is- received or all claims filed within
ten (10) days of posting such notice have been resolved, or until the transferor, as
specified above, has deposited with the Exchange an amount equal to the total of all

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. lessor shall neither be liable for nor shall the leased membership be used to satisfy any
and all claims against the lessee which have not been satisfied by the lessee and/or the
lessee's guarantor(s). Lessees shall have continuing personal liability for any claims which
accrued during the term of the lease which were not satisfied by the lessee’s guarantor(s);
for the payment of disciplinary fines assessed against the lessee which were not otherwise
satisfied; and for any other financial obligations to the Exchange and or its Members that
were not otherwise satisfied.

Rule 2.71. TERMS OF LEASE AGREEMENT

(A) _Amembership lease agreement must, and shall be deemed to, include the
following minimum provisions:

(i) upon the death of the lessee, the expiration of the term stated in the
agreement or any other event of termination, the agreement shall terminate and the parties
shall immediately give written notice thereof to the Membership Department;

(ii) neither the lessor nor the lessee shall be permitted to sell or transfer
the leased membership during the term of the lease agreement unless it is specifically
provided otherwise in this agreement;

(iii) the agreement shall not be effective until the lessee is elected to
membership;

(iv) _ the rights and obligations associated with the lease of a membership
shall automatically be transferred back to the lessor from the lessee upon termination of
the agreement or any event of termination not withstanding any restrictions to such transfer
pursuant to the terms of Rule 2.51;

(v) during the term of the lease, the lessor and lessee shall be entitled to
only those rights of membership as are set forth in Rule 2.70;

(vi) any and all controversies arising out of, or in connection with the lease,
its negotiation, interpretation or termination shall be arbitrated in accordance with the
provisions of Chapter 5 of the Rules; and

(vii) Claims of the Exchange, its Members; and Member Firms that arise
out of the transaction of business on the same Division as the leased membership that
remain unsatisfied shall have no effect on the automatic transfer of the rights and
obligations associated with the leased membership to the lessor from the lessee.

Rule 2.72. NOTICES REQUIRED OF LESSOR AND LESSEES AND DUTIES OF
COMEX DIVISION LESSORS DURING NOTICE PERIOD

(A) The lessor shall give to the Membership Department written notice of any

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with Subsection (C)(ii) of this Rule shall not be distributed until resolution of any claim as
provided in By-Law §858.

Rule 2.56. Exchange Financed Class A and COMEX Memberships

(A) Up to sixt¥{60) eighty (80) percent of the cost of acquisition of the first Class
A membership purchased by an individual who has-been is a Class A member via lease

or ABC. Agreement ora COMEX Division Member Gt Pork Holder on the Exahange-or

- TO obtain such financing,

an mn individual must complete and file with the Office of the Secretary Membership
Department an application together with such documents, in support of the application.
as required approved by the Exchange. Eligibility determination and approvals shall be
made by the Beard Loan Review
Committee. All Board Committee decisions shall be final.

(B) Upon Beard Committee approval and issuance of a loan certificate, the
borrower shall execute a financing agreement and related documentation on forms
approved by the Exchange.

Rule 2.60. Employee-Financed Membership A-B-C AGREEMENTS

(A) | A-B-C Agreements - A Member Firm may finance the cost of acquisition of
a membership of a bona fide employee or principal of such Member Firm. The
financing arrangement must be made pursuant to an A-B-C agreement, which must be
approved by the Membership Committee and which must be filed with the Membership
Department.

(B) _The A-B-C Agreement must contain, at a minimum, the following terms
and conditions:

(i) The Member Firm shall subordinate any and all claims to the

membership to the valid and proven claims of all other Members and Member Firms;

The Member holding the membership must agree not to sell.

transfer or otherwise encumber the membership except with the consent of the

financing Member Firm; and, must agree that the proceeds of any authorized sale of
the membership shall be considered as assets of the financing Member Firm;

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Rule 2.41. RESPONSIBILITY OF MEMBERS AND MEMBER FIRMS FOR
ACTIONS OF EMPLOYEES

(A) — An individual or entity maintaining any membership status on the
Exchange 4 FA d G 6 der shall be
responsible for, and subject to disciplinary action asa result of, the acts or omissions
and for the breaches or violation of the By-Laws and Rules of its employees.

(B) Every Member Firm shall be responsible for, and subject to, disciplinary
action as a result of, the acts and omissions, and for the breaches or violations of the
By-Laws and Rules of its partners, directors, or officers.

Rule 2.42. NOFICES REQUIRED NOTICES OF MEMBERS, MEMBER FIRMS,
PERM HOLDERS, ELECTRONIC FRADERS AND NYMEX ACCESS®
OPERATORS

(A) Each individual or entity maintaining any membership status on the
Exchange f mA FA A NY¥M
ACCESS® Operator shall notify the Exchange ir in ‘writing ‘immediately upon the
occurrence of any of the following events:

(i) Any material adverse change in financial condition;

(ii) Any material change in the Member's,Rermit Holder's, Electronic
Fraders-or NYMEX AGCESS® Operator's individual or entity's relationship with the

guarantor or with a Primary Clearing Member;

(iii) | Any refusal of admission to, withdrawal of any application for
membership in, any suspension, expulsion, bar, fine, censure, denial of membership,
registration or license, withdrawal of any application for registration, cease and desist
order, temporary or permanent injunction, denial of trading privileges, or any other
sanction or discipline through an adverse determination, voluntary settlement or
otherwise, by any commodity or securities exchange, related clearing organization, the
National Futures Association, the National Association of Securities Dealers, Inc., or
any self-regulatory organization or other business or professional association;

(iv) | Any refusal of admission to, withdrawal of any application for
membership in, any suspension, expulsion, bar, fine, censure, denial of membership,
registration or license, withdrawal of any application for registration, cease and desist
order, temporary or permanent injunction, denial of trading privileges or any other
sanction or discipline through an adverse determination, voluntary settlement or

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(B)@) the Exchange has given to Members at least ten (10) days written
notice of the withdrawalofthe Member Firm's intent to relinquish or inactivate its

privileges; and
(C) @) the Member Firm andthe-conferring Member delivers to the

Exchange a written statement that all claims arising out of Exchange transactions
against the Member Firm have been settled or discharged; and

(D) (4)no Member or Member Firm has filed a claim against the withdrawing
Member Firm and/or any Members or non-Members it guarantees_ifitis-a RGM, orits
conferring Member.

Rule 2.18. TERMINATION OF MEMBER FIRM PRIVILEGES

(A) | Member Firm privileges shall be suspended or terminated automatically
as set forth below,

(1) _ If any the sole conferring Member dies or ceases to be an-executive
officer, general partner, representative, limited partner or employee of the
Member Firm, or sells-ortransfers-his membership, the Member Firm's privileges
shall be terminated ninety (90) days after the date of the occurrence of any such
event unless a new conferring Member is approved for the Member Firm prior to
such termination.

(2) Ifa sole conferring Member shall be suspended or expelled for any
reason, such suspension or expulsion shall apply to the Member Firm.

(B) Member Firm privileges may be suspended, or terminated by the action of the
Exchange in accordance with the By-Laws and the Rules.

Rule 2.21. QUALIFICATIONS GUARANTEE BY PRIMARY CLEARING MEMBER

(A) | Each Floor Member must be guaranteed to trade on the floor by a Primary
Clearing Member (“PCM”). To guarantee a Floor Member, the PCM must execute such
guarantees and other documents as required by the Exchange. No Floor Trader may
be guaranteed by two (2) PCMs at the same time.

(B) In order to guarantee a Floor Member, the PCM shall:

(1) agree to accept and clear all trades executed by the guaranteed Floor
Member which are not otherwise accepted for clearance;

(2) agree to accept financial responsibility for the trades held in an account in
the record name and for the benefit of the guaranteed Floor Member which have

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accountant. Such report is to be filed within ninety (90) days after the close of the
Member Firm's fiscal year.

(C) | Each Member Firm that issues a financial “lease” guarantee under Rule
2.30 and/or Electronic -Hrader guarantee under Rule-44.05 shall file with the Financial
Surveillance. Section of the Compliance Department a financial report for the first six (6)
months of its fiscal year, which report shall be executed by the conferring members and
by the president of the Member Firm or by another appropriate official of the Member
Firm. Such report shall be filed within forty-five (45) days after the close of the second
quarter of the fiscal year of such Member Firm.

(D) | Unless exempted from Subsection (A), if, for any reason, the net
assets of a Member Firm decline below the level specified in this Rule 2.14 or decline
by a factor of from the last report to the Exchange, the Member Firm shall give written
notice of such event to the Financial Surveillance Section of the Compliance
Department within 10 days of its occurrence. This “Notice of Capital Impairment”
should state the date of and the applicable reason for the decline of the Member Firm's
working capital. For any Member Firm that has been exempted from Section (A)
pursuant to Section (F), if the financial measurement used by the Board or its designee
as an alternate measure of financial soundness declines below the specified level or
declines by a factor of twenty percent (20%) from the last report to the Exchange, such
Member Firm also shall give written notice of that fact to the Financial Surveillance
Section of the Compliance Department within ten days.

(3) Any planned reduction of a Member Firm's working capital, as defined
by Rule 2.14(1) (A), of 30% or more from that last reported to the Exchange shall be
prefaced at least two business days in advance of its occurrence by a formal written
notice of such event(s) to the Financial Surveillance Section of the Compliance
Department. Such notification should state the date of and applicable reason for the
planned reduction of the Member Firm’s working capital.

{F) The Board of Directors or its designee may exempt a Member Firm from the
working capital requirement set forth in Section (A) if, in its sole discretion, an alternate
measure of the financial soundness of such Member Firm, such as a minimum level of
net worth, is more appropriate.

(F) Extension of Time for Submission of Financial Statements

A Member Firm may request an extension of time for the submission of a
financial statement to the Exchange by filing a written request with the Vice President of
the Exchange’s Financial Surveillance Division prior to the date for which such financial
statement is due to be submitted. The request should be signed by the Member Firm’s

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and limited to the Exchange-related activities and business of the Member Firm and/or
employees of the Member Firm.

(C) acopy of a resolution, duly certified by the Secretary or other authorized
officer or partner of the Firm, or by the governing body of the Firm, authorizing the
application for membership privileges and the execution of the documents referred to
above;

(D) with respect to partnerships, a statement describing the business in which
it is engaged and a certified copy of its current partnership agreement. The Firm shall
also file certified copies of any and all documents filed in the State of New York
authorizing the partnership to conduct business in New York. All amendments to the
partnership agreement shall be filed immediately with the Membership Department;

(E) acopy of the applicant firm's most recent financial statement verifying
compliance with the minimum capital requirements of Rule 2.14. In addition, applicant

firms registered as a Futures Commission Merchant must also submit their certified
financial statement prepared as of the most recent fiscal year end; and

(F) each application for membership privileges shall be accompanied by
payment of a non-refundable application fee in an amount to be fixed, from time to time,
by the Board.

Rule 2.14. | FINANCIAL AND REPORTING REQUIREMENTS FOR MEMBER
FIRMS:-REPORTS;-FEES;- AND CAPITALIMPAIRMENT
NOTIFICATION

(A) | Unless exempted by the Board of Directors or its designee pursuant to
Section (F), each Member Firm shall have and maintain working capital, (computed in
accordance with generally accepted accounting principles), of not less than one

hundred thousand dollars ($100, 000). ‘computing working capita’ for the purpesse-of

provided further_thata A A Member Firm which provides a financial “lease” guarantee for
its employee pursuant to Rule 2.23(C) shall meet the special financial requirements of
Rule 2.30(B).

(B) | Each Member Firm that issues a financial “lease” guarantee under Rule
2.30 and/or Electrenic_traderguarantee-under Rule-+4.06 shall file with the Financial
Surveillance Section of the Compliance Department a financial report for each fiscal
year. The report shall be prepared in accordance with generally accepted accounting
and auditing principles and certified by an independent certified or licensed public

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otherwise by:

(a) the Securities and Exchange Commission, the Commission
or the securities commission or equivalent authority of any state, territory, the District of
Columbia or foreign country; or

(b) any federal court, state court, or regulatory agency not
mentioned above, quasi-governmental body;

(v) any conviction, finding of guilt, confession of guilt, plea of guilty or
nolo contendere to a felony or misdemeanor charging misrepresentation, fraud, deceit,
theft, embezzlement, gambling, conversion, abuse of a fiduciary relationship or other
such act;

(vi) the commencement, by the issuance of a formal order of
investigation (or its equivalent), or by the issuance or service or a written complaint (or
its equivalent), of any judicial, administrative or self-regulatory proceeding, as the case
may be, against such member by the Commission, the Securities and Exchange
Commission, the securities commission or equivalent authority of any state, territory,
the District of Columbia or foreign country, or any commodity or securities exchange or
related clearing organization, or any registered futures or securities association, or any
self-regulatory organization or other business or professional association.

(vii) any change in a Member Firm's liaison designated pursuant to
Section (B) hereof; or

(viii) ia Member, Permit Holder, Electronic Trader or NYMEX

Member Fim or Electronic Trader, any revocation of such person's any “guarantee and

any material change in the-status-of such_person's employment, including without

limitation any termination, voluntary or otherwise, of his employment by such Member,
Mi Fi E ic Trader.

(B) Each
AGCESS®-Operator, individual maintaining any membership ‘status on the. Exchange
sHall file with the Membership Department (i) a written notice consenting to the
designation of the Exchange's Assistant Secretary and/or Vice President Member
Services as the Members_Membe S rmitHolde ectre de
NYMEX ACCESS@ Operators, his or its his. or its gent for service of process concerning and
limited to the b FA
ACCESS@ Operator's Exchange-related activities ‘and business: and (ii) if a "Member
Firm, a written notice designating an officer, employee or partner as the Exchange
liaison, whom the Exchange may contact in order to obtain additional information or
documentation in connection with any matter whatsoever provided in the Rules.

(C) Each Member Firm shall give written notice to the Exchange of all

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(3) Any planned reduction of a Member futures commission
merchant's “Excess Net Capital” (defined as Net Capital per CFTC Regulation
1.17(c)[1]or “Excess Net Capital” of a Member Broker-Dealer, less the minimum capital
required by Rule 2.15(1)(A) of 30% or more from that last reported to the Exchange shall
be prefaced, at least two business days in advance of its occurrence, by a formal
written notice of such event(s) to the Financial Surveillance Section of the Compliance
Department. Such notification should state the date of an applicable reason for the
planned reduction of the member futures commission merchant's excess net capital.

Rule 2.16. LIMITATIONS ON CONFERRING MEMBERS

(A) Member may not confer membership privileges on more than one Member Firm
at the same time unless each of the following conditions are met:

(1) there is a direct ownership relationship between the Member Firms;

(2) separate seat(s) are used to confer such privileges;

(3) the Member conferring privileges concurrently maintains, for each of the
Member Firms, the requisite qualifications for conferring privileges
otherwise prescribed by the Rules of the Exchange; and

(4) the firms can demonstrate, to the satisfaction of the Exchange’s
Compliance Department, that such conference does not constitute a
conflict of interest.

(B) |AMember who confers membership privileges on a Member Firm agrees
to make the proceeds of the sale of his memberships available for settlement of any
and all claims against such Member, and Member Firm.

Rule 2.17. CANCELLAHON CESSATION AND INACTIVATION OF FIRM
PRIVILEGES

{A) A Member Firm may relinquish or inactivate its privileges maybe-canceled-by
the-conferring Member-orby the-Member Firm provided that:

(A) the Exchange has received written notice of the Member Firm’s
intention to cance} relinquish or inactivate its privileges, including the identity of any
empleyee-or principal name of each Member guaranteed by the Member Firm pursuant
to Exchange Rules 2.21 and/or 2.23(G)}-executed-by the-corporation-or by the Member,
is-given-tothe Exchange; and the name and number of each non-Member account
guaranteed by the Member Firm pursuant to Rule 9.04(B).

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Rule 2.70. LEASES OF MEMBERSHIPS’ TRADING PRIVILEGES

(A) | AMember may lease a membership’s trading privileges to another Member
or to a Member-elect pursuant to an agreement in a form prescribed by the Exchange;
provided that, memberships subject to outstanding seat financing agreements under Rule
2.56 shall not be leased. A copy of the lease must be delivered to the Membership
Department and to the lessee’s PCM.

(B) Except as provided in Rules 2.60, a lease includes any transfer of a
membership by a Member where the transferring Member: retains the ownership interest in
the membership; retains a right to appreciation or depreciation (or both) in the value of the
membership; and retains a right to reacquire the membership.

(C) Deleted.

(D) A Member who, with respect to his last or sole membership, has leased to
another his trading privileges ("lessor") shall not be entitled to member rates for trades
executed for his account A Member who, with respect to his last or sole membership on
the NYMEX Division, has leased to another his NYMEX trading privileges shall not be
entitled to: (i) serve on the Board of Directors, except as otherwise provided for in the by-
laws or charter, (ii) receive any life insurance and/or disability insurance benefits bestowed
upon NYMEX Members; however, a NYMEX Member who has leased to another any or all
of his trading privileges with respect to any of his memberships shall be entitled to receive
the pro rata share of any other distribution of: (i) the revenues, assets and proceeds of the
Exchange; and (2) the assets of the Exchange in the event of any liquidation, dissolution or
winding up the affairs of the Exchange. A Member of either Division who, with respect to
his last or sole membership, has leased to another his trading privileges ("lessor") shall not,
while present on the respective Division(s) trading floor, be entitled to place orders,
directly with any floor member or floor clerk, for the execution of any futures or options
contracts (except that, if properly registered as a clerk, such person may transmit customer
orders for execution).

(E) Notwithstanding anything to the contrary in Section (D), during the term of a
lease of regular trading privileges on the NYMEX Division the lessee of those privileges
("lessee of regular trading privileges") shall be entitled to serve on the Board of Directors,
receive any life insurance and/or disability insurance benefits bestowed upon NYMEX
Division Members, and member rates for any trades executed for his account during any

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suid

esl WW Ze Lee

VIA FACSIMILE AND E-MAIL
Office of the Secretariat

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: Rule Certifications. New York Mercantile Exchange, Inc. Submission

#05.197: Consolidation of NYMEX and COMEX Membership Requirements
Dear CFTC Commissioners:

The New York Mercantile Exchange, Inc. (“Exchange”) is notifying the Commodity Futures
Trading Commission (“Commission”) that it is amending various rules in NYMEX Chapter 2 in connection
with consolidation of NYMEX and COMEX membership requirements. Pursuant to Section 5c(c) of the
Commodity Exchange Act (“Act”) and CFTC Rule 40.6, the Exchange hereby certifies that the attached

amendments of these rules comply with the Act, including regulations under the Act; these rule changes
will be made effective on November 2, 2005.

Should you have any questions concerning the above, please contact the undersigned at (212)
299-2207.

Very truly yours,

Brian J. Regan
Vice President and Counsel

Att.



(A) There shall be no minimum financial requirements for either NYMEX or

COMEX Division Floor Members other than for those individuals obtaining their

membership privileges via a lease agreement or an Exchange-issued Floor Trading
Permit as noted in subsection (B) below.

(B) Unless a formal guarantee is obtained as noted in Subsection (C) below, and
filed with the Membership Department, each Floor Member obtaining his membership
privileges via a lease agreement or an Exchange-issued, Floor Trading Permit must
maintain, at all times, a minimum equity balance in a trading account with his Primary
Clearing Member as follows:

(i) NYMEX Division Floor Member: $50,000
(ii) | COMEX Division Floor Member: $25,000

(C) Floor Members obtaining their membership privileges via a lease agreement
or an Exchange-issued trading Permit may be exempt from maintaining the minimum

equity balance with their Primary Clearing Member, as required in Subsection (B)
above, if a formal guarantee is obtained from a Member Firm of which he is a bona-fide,

full time employee. Such guarantee shall obligate the Member Firm to:

1) Indemnify the Floor Member's PCM for payment any amount paid
and/or incurred as a result of and allowable pursuant to its quarantee of the
individual;

(2) Assume any and all unsatisfied financial obligations of the lessee or
Permit Trader to the Exchange and its Members arising out of the individual's
conduct of business on the Exchange; and

(3) Comply with the capital requirements of Rule 2.30 and reporting
requirements of Rule 2.14 (B).

Rule 2.30. GUARANTEES AND-QUALIFICATIONS ADDITIONAL CAPITAL

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been accepted for clearance by another Clearing Member authorized by the
PCM to clear trades for the Floor Member pursuant to Rule 2.31, provided that
the other clearing member has notified the PCM and the Compliance
Department of any deficit in the guaranteed floor member's account by 12:00
P.M. on the next trading day after the deficit arose;

(3) agree to accept financial responsibility for all trades determined through the
Exchange adjudication or arbitration process to have been executed by the
guaranteed Floor Member, whether for his own account or for the accounts of
others;

(4) execute such guarantees and other documents as the Exchange shall
require in connection with the PCM's guarantee of a Floor Member and shall file
said documents with the Membership Department; and

(5) comply with the financial requirements for guarantors as set forth in Rule
2.30 and in Rule 9.21.

(C) |The guarantee shall be in writing, filed by the PCM with the Membership
Department and may only be withdrawn by means of a written notice of revocation filed
with the Exchange in accordance with the provisions of Section (A) (“Regular Trading
Hours”) of Rule 2.33.

Rule 2.23. FINANCIAL REQUIREMENTS OF FLOOR MEMBERS

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Chief Financial Officer and state, in reasonable detail, the reasons for and the length of
time necessary for such extension. Each such request submitted pursuant to this Rule
will be reviewed for adequacy and granted or denied accordingly.

(G) Additional Financial Statements

The Exchange, at its discretion, may from time to time, request additional
financial information and/or statements from Member Firms.

Rule 2.15. FINANCIAL AND REPORTING REQUIREMENTS FOR MEMBER

FUTURES COMMISSION MERCHANTS; REPORTS; FEES; CAPITAL
IMPAIRMENT NOTIFICATION

(A) | Each Member and Member Firm registered with the Commission as a
futures commission merchant shall maintain an adjusted net capital equal to erin
dd $400,006} the amount

prescribed i in 1 Commission Regulation 1 47.

(B) Each Member and Member Firm registered with the Commission as a
futures commission merchant shall file with the Financial Surveillance Section of the
Compliance Department such reports and other documents as are required by
Commission Regulation §1.10 or otherwise or by the Exchange at such time as
required by such regulation or by the Exchange.

(1) _ If, for any reason, the “Adjusted Net Capital’, as defined by CFTC
Regulation 1.17 (c)(5), of a Member or Member Firm registered as a futures
commission merchant declines below the minimum required by Rule 2.15(I)(A), the
Member or Member Firm futures commission merchant shall give immediate telephonic
notice, to be confirmed by written notice of the fact by telegraphic or facsimile
transmission, to the Financial Surveillance Section of the Compliance Department as
noted within By-Law Section 851 (Duty to Report Emergency Event).

(2) _ If, for any reason, the “Net Capital”, as defined by CFTC Regulation
1.17(c)(1), of a Member Firm registered as a futures commission merchant_or
“Tentative Net Capital” of a Member Firm also registered as a Broker-Dealer, declines
by a factor of 20% or more from that last reported to the Exchange, the Member or
Member Firm futures commission merchant shall give formal written notice of such
event to the Financial Surveillance Section of the Compliance Department within two
business days of its occurrence. This “Notice of Capital Impairment” should state the
date of the decline and an applicable reason for the decline of the Member futures
commission merchant's net capital.

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claims filed within ten (10) days notice of such notice.

{E}-A lessee-whe Member and/or Member firm that is the subject of any disciplinary

proceeding or investigation by the Exchange may transfer the ownership and/or rights and

obligations granted pursuant to the lease or A-B-C Agreement of a-membership-backte-atesser
uponthetennination- of tease notwithstanding the existence of the disciplinary action however and
subjectie the following-provisions:

(i) such /essee Member and/or Member firm shall remain subject to Exchange
jurisdiction and be personally liable for any fines assessed in connection with the proceeding or
investigation;

(ii) the #essee Member and/or Member firm shall be deemed to have consented to the
jurisdiction of the courts of the State of New York in New York County for the purpose of any action
brought by the Exchange to enforce its rights against such Member and/or Member firm lessee;

(iii) in the event that the lessee satisfied the financial requirements of Rule 2.23
by maintaining the required trading account equity such funds: (1) shall be frozen until the
investigation is closed or proceeding concluded; (2) shall be paid to the Exchange in full or
partial satisfaction of any fine; and (3) shall be released only upon written approval to the
lessee's Glearing- Member PCM from the Exchange's Compliance Department.

{G\(F) Notwithstanding Section ¢£) (D), the lessee may receive all of the funds in his
trading account at the time of the seat transfer, provided that he deposits in the
Membership Department a certified check, or a check drawn on a Clearing Member's.
account, payable to the Exchange in the amount of $50,000 for NYMEX Division lessees
and $25,000 for COMEX Division lessees.

AG) A membership that has been sold in accordance with Rule 2.52 may be
transferred to the purchaser free from any claims notwithstanding that a claim may have
been made under Section (B) hereof. The portion of the proceeds required in accordance

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proposed lease agreement or renewal thereof at least ten (10) business days prior to
filing the initial lease agreement or any renewal thereof.

(B) A lessor or lessee of a membership who does not intend to renew the
lease agreement shall give to the Membership Department and to the lessee or lessor
(as appropriate) written notice of that fact at least ten (10) business days prior to the
termination of the lease agreement.

Rule 2.73, LEASE OF SOLE MEMBERSHIP

(A) A membership actively being used for conferring purposes may not be leased

at any time.

(Rules 2.81-2.87 pertain to COMEX Option Members)
Rule 2.81 OPTION MEMBER TRADING PRIVILEGES.

An Option Member shall be authorized to trade the following contracts on
the COMEX Division of the Exchange: gold options; silver options; copper options; and
aluminum futures. In addition, if and when such contracts are listed on NYMEX
ClearPort(sm) Trading NYMEX AGGESS®- an Option Member shall be authorized to
trade such contracts on NYMEX ClearPort(sm) Trading. NYMEX AGGESS®.

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(F) __ Firms that are registered, or required to be registered as commodity pool

operators, under the Commodity Exchange Act and related Regulations, or operate as

commodity pools but are exempt from registration, shall not be eligible for Member Firm

status.

Rules 2.11A. SOLE PROPRIETORSHIPS

(A) Subject to the approval of the Board, the privileges of membership may be
conferred upon a sole proprietorship by one Member who owns and holds two (2)
memberships.

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(A) Monitoring of Guaranteed Members

Each PCM shall affirmatively monitor the financial condition of each Floor
Member guaranteed to determine that Floor Member's compliance with the terms and

financial requirements of Rule 2.23 (lease members) and- Rulet4.05-(electronic traders)
and shall take steps to terminate its guarantee upon non-compliance with such

requirements.

(B)_ __ Retention of Account Equity

A PCM shall retain the account equity that comprises, for purposes of Rule 2.23,
the net liquidating equity, if any, required by these Rules to be maintained in a Floor
Member's trading account for the greater of ten (10) days or until any and all pending
claims by Members and Member Firms have been resolved.

Rule 2.33. TERMINATION OF GUARANTEES AND-QUALIFICATIONS

(A) __ A Member Firm or Clearing Member or PCM that has quaranteed Floor

Member may revoke the financial “lease” quarantee or PCM guarantee, as
applicable, by submitting a written Notice of Revocation during regular business
hours. Such notice shall indicate the desired effective date and time of
termination. Such termination of a guarantee by a PCM shall become effective

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Exchange attesting to the fact that no event has occurred, since the
submission of his application to the Division where he is currently a
member, which would require notification pursuant to Rule 2.42;

(3) | The applicant shall pay the cost for the Exchange to perform an
independent investigation as-+required-under Rule-2.05(); and

(4) The applicant shall meet all financial requirements of the Division
where the applicant is seeking membership privileges.

(B) . The report required under Subsection (A) (3) shall be reviewed by the
Chairman of each Division’s Membership Committee and the Vice President, Member
Services. Satisfactory applications that have been reviewed shall be submitted for
approval to the Board. In the event that the independent investigation required under
Subsection (A)(3) does not confirm the attestation submitted by the applicant, the
matter will be referred to the © Compliance Department and the-application wi be

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(C) The applicant's financial statement may be verified by an independent
inquiry of all banks scheduled as holding the applicant's assets and by requiring each
applicant to brovide copies of appropriate supporting documentation; provided:

Rule 2.10. CORPORAHONS MEMBER FIRM PRIVILEGES

(A)___Each firm, as a condition of obtaining and maintaining Member Firm
privileges, shall be required to own and or have conferred upon it two (2) Exchange
memberships in each Division in which it desires Member Firm privileges. The firm
shall also be required to designate one or two individuals as its “conferring Members”.
Conferring Members may individually own the membership(s) and or hold such
memberships via ABC Agreement.

(B) _ In the case of one conferring Member, such Member shall be an executive
officer, general partner or an executive officer of a corporate general partner of the firm

corporation.

(C) &xeeptas-previded forin Rule-9.02(K}, In the case of two conferring
Members, at least one member shall be an executive officer, general partner or an
executive officer of a corporate general partner of the firm Cerperation; the other
conferring Member may need only be an-executive-officer, officer directorer a bona
fide full time employee of the firm cerperation.

{&}As used in this Rule 2.10, an executive officer, general partner or an
executive officer of a corporate general partner must have the power to direct the affairs
of the firm serperation with respect to transactions executed on the Exchange or shall
be the senior commodity officer of the firm cerperation.

E Trades done for the account of any parent, subsidiary, affiliate, etc. of a

Member Firm, if not itself a Member Firm shall be at non-Member rates; only the firm
obtaining Member Firm status hereunder may receive Member rates.

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Regular Trading Hours trading session and any other trading session, as the Board may,
from time to time, determine

(F) (Reserved) Section (F) applies only to COMEX Division lessees.

During the term of a lease of regular trading privileges on the COMEX Division the
lessee of those privileges ("lessee of regular trading privileges") shall be entitled to receive
member rates for any trades executed for his account during any Regular Trading Hours
trading session, subject to all applicable surcharges as set forth in this Rule 2.70. The
lessee of reqular trading privileges shall not be entitled to receive any life insurance and/or
disability insurance_benefits bestowed upon Members, to vest_and participate in any
distributions from the Member Retention and Retirement Plan, or the right to vote that is
set forth in the COMEX By-Laws.

In addition to the dues and assessments permitted under Section (1) of this Rule
2.70, the following fees shall be charged to the lessee of reqular trading privileges on the
COMEX Division:

(i)_there shall be a surcharge. of twelve and one-half cents ($0.125) (twenty-five
cents ($0.25) per round-turn) on each futures contract and each option contract purchased
or sold for the personal account of a lessee or for an account controlled by the lessee

(customer type indicator CTl# 1). This surshatae- shall apply te-trades-exesuied- by-al

{ii)_ there shall be a surcharge of fifty cents ($0.50) (one dollar ($1.00) per
round-turn) on each futures contract and each option contract bought or sold by a lessee
for the house account of the lessee’s clearing member (CTI 2), for the account of another
member present on the floor or an account controlled by such other member (CT1 3), or for
the account of any other type of customer (CTI 4), provided that such surcharge shall not
apply to contracts traded by a lessee who is one of no more than two bona fide employees
of a member firm leasing memberships for the purpose of executing trades for the account
of the member firm and/or its customers.

(G) Lessors and lessees may serve on Exchange committees to the extent
allowed by the By-Laws and Rules and as determined by the Board of Directors.

(H) All lessors and lessees shall be subject to such dues and assessments as
are from time-to-time determined by the Board of Directors.

(0) Lessees of regular trading privileges shall not be entitled to any other rights

of membership not specifically set forth or addressed elsewhere in this Rule 2.70. Unless
A s; The lessee's guarantor(s)
shall have no a right of indemnification against the lessor for any and all claims against the
lessee which have been satisfied in accordance with the terms of the guarantee. The

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NOTIFICATION OF AMENDMENTS TO NYMEX CHAPTER 2 (“MEMBERSHIP”)
(Additions are underscored and strike-outs are deletions.)

CHAPTER 2
MEMBERSHIP RULES

Rule 2.01 MEMBER-FINANCIAL REQUIREMENTS

Rule 2.02. SPONSORSHIP

To be eligible for election as a Member, an applicant for membership must be
sponsored by two (2) Members of either the COMEX or NYMEX membership Division.

Rule 2.04. NOTICE OF APPLICATION; OBLIGATIONS OF MEMBERS

(A) | The names of each applicant, his sponsors and employer shall be_posted
on the Exchange premises and on the Exchange's website and distributed
electronically, where possible, givento-alt Members at least ten (10) days prior to the
meeting of the Membership Committee at which such application will be considered.

(B) | Each Member has the affirmative obligation to keep informed of all
applications for membership and to provide the Membership Committee any adverse
firsthand knowledge or information relating to an applicant's character and to an
applicant's financial or business history. Any Member who willfully fails to provide the
Membership Committee with such information shall have committed a major offense
against the Exchange.

Rule 2.05. PROCEDURES FOR DETERMINING FITNESS OF APPLICANTS FOR
EXCHANGE MEMBERSHIP

(A) | The Exchange shall refer each application for membership for an
independent investigation to determine and report to the Exchange any past or pending
criminal actions, disciplinary proceedings or investigations.

(B) The references listed on the application, who must be Members of the
Exchange, may be contacted independently for a confidential evaluation of the
applicant.

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REQUIRED FOR EMPLOYEE GUARANTEES

(A) Both Member Firms and Clearing Member Firms may issue certain financial
guarantees of bona-fide full time employees which, when properly prepared and filed

with the Vice President of the Exchange’s Membership Department, will exempt such
employees from the requirement that lease members and permit holders—and-electronic
traders maintain minimum equity balances with their respective Primary Clearing
Member.

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only after occurrence of all of the following events:

(1) receipt by the Membership Department of such written Notice of Revocation;

(2) notice by the PCM to the quaranteed Floor Member by providing that Floor

Member with a copy of the Notice of Revocation filed with the Membership
Department;

(3) posting notice of such revocation by the Membership Department; and

(4) removal of the Floor Member's trading symbol from the clearing system of the
Exchange.

A PCM shall use due diligence to obtain the Trading Badge of a Floor Member whose
guarantee has been terminated by that PCM.

(B) The Notice of Termination shall indicate whether the Member Firm or
Clearing Member or PCM is asserting against the guaranteed Member any claims that
arising out of the transaction of business on the Exchange.

(C) The suspension, expulsion, or other termination of the privileges of a
Member Firm or Clearing Member or PCM shall operate to terminate all guarantees
issued by such Member Firm or Clearing Member or PCM.

(D) The Membership Department promptly shall give notice to the membership
of the termination of any guarantee.

Rule 2.36. APPLICATIONS FOR MEMBERSHIP BY A MEMBER OF ANOTHER
DIVISION

(A) | Any Member of either the NYMEX Division or the COMEX Division shall
be automatically eligible for membership in the other Division upon the filing of an
application, subject to the following:

(1) | The applicant must be a Member in good standing of the Division
where he presently holds membership privileges at the time of the
application through the time that it is considered by the Board of
Directors. For the purposes of this Rule 2.36, the term "Member"
shall mean an individual who currently holds a membership in his
name by direct ownership, ABC agreement or lease agreement. In
addition, an individual who leases his only seat shall be considered
to hold a membership in his name for the purposes of this Rule
2.36.

(2) The applicant must sign a statement on a form prescribed by the

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