CME Regulatory Advisory 06-06
September 11, 2006
Page 4 of 7

4.

if a trader enters manual orders, but also has an ATS, can all the orders be
entered under a single TAG 50?

No, there should be separate TAG 50s for the manual and ATS orders. There is one
exception as detailed in question #5 below.

Under what circumstances may a trader use a single TAG 50 for the entry of both
manual and automated orders?

Many front-end trading systems furnished by Independent Software Vendors supply
automated spreading functionality which gives traders the ability to automate spread
strategies. CME does not require a separate TAG 50 for this activity as long as the use
of the spreading software is primarily to augment manual trading. However, if the
automated spreading functionality is or becomes the primary source of order entry, or if
there is a large amount of order traffic from the operator, then a separate TAG 50 must
be assigned to distinguish the automated orders from the manual orders.

Does the TAG 50 need to be unique to the clearing firm?

Yes. The clearing firm that guarantees the connection point must ensure that each TAG
50 used through its connection point is unique to the firm and is not used by multiple
parties at the firm. Additionally, TAG 50s are not case sensitive at CME. Clearing firms
must ensure that uniqueness is achieved by means other than solely modifying the letter
case between different TAG 50s. For example, CME systems would view “ABC” and
“abc” as the same TAG 50.

How do | identify TAG 50s when more than one individual is
administering/monitoring the operation of the ATS?

For regulatory and operational needs it is important that CME have accurate information
regarding all individuals that are operating the automated system. CME recognizes that
ATSs are still developing, and that there are different models for administering these
systems. If you believe that your method of administering your ATS is unique and may
not fit the requirements of this FAQ, you may contact CME Market Regulation and apply
for a pre-approved variation on these requirements. Market Regulation may allow for
some flexibility if an arrangement can be reached which meets the needs of your
business and appropriately identifies the specific individuals who operate the ATS.

If an ATS administrator/monitor (employee, clerk, programmer) initiates, disables
or adjusts an ATS at the request of an account owner or an account controller
acting with discretion, who should be identified in the TAG 50 as the ATS
operator?

The ATS operator is an individual whose physical actions enable, disable, adjust or
actively monitor the ATS. In this example, the person who makes the physical change to
the system must be identified as the ATS operator in TAG 50 even though the change
was directed by the account owner.

How does TAG 50 assignment and registration work if one operator administers
multiple ATS systems or multiple ATS algorithms?

The clearing firm should give each ATS or ATS algorithm a separate TAG 50, and
register each of those TAG 50s in the Exchange Fee System (“EFS”) as required in #11
below.


CME Regulatory Advisory 06-06
September 11, 2006
Page 7 of 7

You can read more on the messaging policy on the CME Web site at
www.cme.com/messagingpolicy

20. How does the messaging policy apply to ATSs?

ATSs are treated like any other market participant and are subject to the messaging
policy which applies to all message flow except that of registered market makers which
may be subject to different volume ratio benchmarks depending on the product.

21. Who do | call for more information on the Messaging Policy?
Please contact CME Globex Account Management at
GlobexAccountManagement@cme.com, or 312/634.8700, or at 44-207-623-2550 in
Europe.

If you have any questions relating to this Advisory or FAQ, please contact Lou Abarcar at
312/648.3623, Nitu Khanna at 312/930.4571, James Moran at 312/930.8520 or Robert
Sniegowski at 312/648.5493. Fee-related questions should be directed to the EFS support line
at 312/648.5470.


CME Regulatory Advisory 06-06
September 11, 2006
Page 3 of 7

CME Rule 106.S. (“Family of Funds Transfers”) members, Asian Incentive Program (“AIP”)
participants, Emerging Market Partner Program (“EMPP”) participants, European Incentive
Program (“EIP”) participants, FX Bank Incentive Program (“BIP”) participants and CTA/Hedge
Fund Pilot Program participants.

The clearing firm must associate each ATS TAG 50 with the name of the person who is directly
responsible for controlling the trading of the ATS, and must select the ATS attribute on the
registration screen within EFS to indicate that the TAG 50 represents an ATS. Each ATS
operator must provide accurate and up-to-date information to their clearing firm concerning ATS
TAG 50s in accordance with the requirements described above. The TAG 50 that is registered
in EFS must exactly match the TAG 50 that is submitted on CME Globex orders entered
through CME iLink connections.

Clearing firms must ensure that all ATS TAG 50s which require registration are

appropriately registered in EFS and must correct any errors and make any necessary
updates to TAG 50 registrations. Failure to transmit TAG 50s to CME Globex in accordance

with this Advisory may result in a reassessment of trading fees and/or be deemed a violation of
CME rules and result in disciplinary action.

While every person or ATS entering orders through CME iLink connections must be identified by
a unique TAG 50, CME does not require the registration of TAG 50s in EFS for entities which
are not members or in other special fee programs. CME does, however, reserve the right to
require the registration of ATS operators in EFS if the ATS generates a large amount of order
traffic. EFS supports the registration of persons not eligible for discounted fees as an ATS
Operator in circumstances where such person wishes to or is directed to register in EFS.

ATS Identification, Registration and Messaging Frequently Asked Questions
General Information

1. With respect to CME Globex®, what is an Automated Trading System (“ATS”)?

An ATS is an electronic system or computer software that is programmed to generate
and route orders into CME Globex without a specific human action involved in sending
or verifying the orders. This type of system is often referred to as a “black box.”

2. Does CME require a workstation operator identifier for each ATS order?

Yes, each ATS order must be submitted with a unique workstation operator identifier that
identifies the person who operates and/or administers the ATS. Further, if the operator
is responsible for multiple trading models, algorithms, programs, or systems which trade
the same product, and which potentially could trade opposite one another, then each
model, algorithm, program or system must be assigned a unique workstation operator
identifier. The workstation operator identifier is most commonly referred to as the “TAG
50,” and will be referred to as such for the remainder of this document.

3. Why is the workstation operator identifier referred to as the TAG 507

It is known as a TAG 50 because the workstation operator identifier is submitted though
CME iLink® in FIX TAG 50. The TAG 50 can be up to 18 bytes long and is assigned by
the clearing firm, not CME.


CME Regulatory Advisory 06-06
September 11, 2006
Page 5 of 7

10.

11.

Is there a limit on the number of ATSs one clearing member or corporate member
firm may have?

There is no limit to the number of ATSs that a clearing member or corporate member
firm can use to trade its proprietary account. All ATS administrators must be employees
or contractors eligible to trade the proprietary account and receive the firm’s discounted
fees.

If you have questions on the eligibility of an ATS administrator to trade a proprietary
account at discounted rates, please contact the EFS support line at 312/648.5470.

Is there a limit on the number of ATSs one individual may have?

There is no specific limit to the number of ATSs that an individual can use to trade his
personal account. However, if an individual member has an ATS, and has other
individuals operating, administering, or monitoring the ATS, each of those individuals
must be identified with their own TAG 50. This may also have fee implications for the
individual member's activity. If you have questions about the possible fee implications,
please contact the EFS support line at 312/648.5470.

ATS Registration

12.

13.

14.

When does CME require registration of TAG 50s of ATSs?

CME requires that all ATS TAG 50s be registered in EFS if they are individual members
or employees of a member, a clearing member, a corporate member, or in any other
special programs offered by CME such as the Asian Incentive Program, the European
Incentive Program or the Emerging Market Partner Program. As a rule of thumb, if a
person is an individual member or an employee or independent contractor of an entity
that will receive member or special program discounted fees, they will be in a category
for which registration of the TAG 50 in EFS is required.

To register the ATS operator, CME Clearing Member Firms (“clearing firms”) must
select the corresponding ATS attribute on the registration screen within EFS. A

separate TAG 50 must be individually registered for each different model, algorithm,
program, or system.

If the ATS is being operated by a person not eligible for discounted fees, does the
TAG 50 of the ATS operator still need to be registered with the CME?

Currently, CME does not require the registration of ATS TAG 50s for entities which are
not members or in other special fee programs. However, CME may from time-to-time
request a count of ATSs not currently registered. Further, CME reserves the right to
require the registration of such ATS operators if the ATS generates a large amount of
order traffic.

Please be advised that EFS supports the registration of persons not eligible for
discounted fees as an ATS operator if you wish to or are directed to register these
individuals.

How do | register the TAG 50 of the ATS operator?

The clearing firm is responsible for registration of the ATS TAG 50s which is done by
using the registration functionality in EFS. Each trading entity must provide accurate
and up-to-date information to their clearing firm to allow for accurate entry of the


cmeé

Chicago Mercantile Exchange

20 South Wacker Drive
Chicago, IL 60606-7499
www.cme.com.

September 11, 2006

Ms. Eileen Donovan

Office of the Secretariat

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21" Street, N.W.

Washington, D.C. 20581

RE: CME Regulatory Advisory, RA-06-06 (supersedes RA-06-02)
Submission No. 05-78

Dear Ms. Webb:

Chicago Mercantile Exchange Inc. (“CME” or “Exchange") hereby notifies the Commission that
the Exchange has issued a regulatory advisory to CME members, Clearing Member Firms, employees
and CME Globex® users regarding updated requirements for workstation operator identifiers on CME
Globex orders entered through CME iLink connections. This advisory updates the previously issued
March 2006 advisory RA-06-02. A copy of this regulatory advisory is attached.

The Exchange certifies that this regulatory advisory neither violates nor is 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/5911 Sub No. 06-78


CME Regulatory Advisory 06-06
September 11, 2006
Page 6 of 7

information into EFS. All changes in personnel or entity structure that affect registrations
require prompt updates to be made in EFS.

Again, EFS supports the registration of persons not eligible for discounted fees as an
ATS operator if you wish or are directed to register these individuals.

15. What information is required when registering a TAG 50?

CME requires the person's date of birth, country of primary address, email address, and
last 4 characters of the person's tax ID or equivalent unique identification number from
the person's country of origin. The TAG 50 must be identified as an ID of an ATS
operator. If the individual is ina member or special fee category, EFS provides a drop
down menu allowing for selection of the appropriate category which must also be
indicated.

16. If a TAG 50 of an ATS operator is currently registered with CME but not identified
as an ATS, do | need to re-register or edit the TAG 50 registration?

Yes. Beginning in March 2006, CME discontinued use of the form that was previously
required for ATS registration and allowed for registrations of ATS TAG 50s in the EFS
system to make ATS registration easier. Clearing firms should check to make sure
that all ATS TAG 50s are appropriately registered and correct any errors and make
any necessary updates to TAG 50 registrations.

17. How will CME verify that ATSs have properly registered their TAG 50s?

The CME Audit Department conducts periodic audits of clearing firms to ensure that
Proper fees have been paid. CME Market Regulation conducts recordkeeping audits of
clearing firms and other trading entities to ensure that the recordkeeping rules and
policies have been followed.

Incorrect data recorded on trades may result in reassessment of trading fees or, if found
to violate CME rules, be subject to disciplinary action.

18. Whom do | contact if | have additional questions on the registration of ATSs and
the TAG 50s of ATS operators?

Questions relating to Regulatory requirements should be directed to Lou Abarcar at
312/648.3623, Nitu Khanna at 312/930.4571, James Moran at 312/930.8520 or Robert
Sniegowski at 312/648.5493. Fee-related questions should be directed to the EFS
support line at 312/648.5470.

ATS Messaging

19. How does CME monitor, measure, and control the amount of messaging sent in to
the CME Globex Platform?

CME has a messaging policy that is administered at the Class A clearing firm level. This
policy measures message quality and liquidity provided by calculating a “volume ratio.”
When the volume ratio exceeds a specified threshold, the firm is issued a surcharge.

Clearing firms are given reports which show the specific users and accounts which
caused the messaging surcharges and will generally pass those surcharges on to the
specific client.


cmesé

Chicago Mercantile Exchange

20 South Wacker Drive 312/930.1000 tel
Chicago, IL 60606-7499 312/466.4410 fax
www.cme.com
Regulatory Advisory
TO: All Members, Clearing Member Firms, Employees and CME RA-06-06
Globex® Users (supersedes
RA-06-02)
FROM: CME Market Regulation Department
DATE: September 11, 2006

SUBJECT: Updated Requirements for Workstation Operator Identifiers on CME
Globex Orders Entered through CME iLink® Connections

CME requires that every electronic order submitted to CME Globex contain information which
identifies the workstation operator. This Advisory, which supersedes Regulatory Advisory RA-
06-02, provides information concerning the requirements for identification and registration of
workstation operator identifiers on orders sent manually or by automated means to CME Globex
through CME iLink connections. Additionally, a set of Frequently Asked Questions (“FAQ”)
which provides more specific information on the requirements for registering and identifying
workstation operator identifiers is included in the final section of this Advisory, beginning on
page 3.

All market users should be aware that CME Rule 576 (“Identification of GLOBEX Terminal
Operators”) requires that terminal operators be identified to the Exchange in the manner
prescribed by the Exchange. CME Clearing Member Firms (“clearing members”) are reminded
that the rule also makes it “the duty of the clearing member to ensure that registration is current
and accurate at all times.”

The workstation operator identifier (also known as the senderSubID or TAG 50, and hereinafter
referred to as the TAG 50) is required on all orders entered through CME iLink connections.
The TAG 50 can be up to 18 bytes (characters) maximum length and should be transmitted in
FIX TAG 50. Accurate data in this FIX tag is necessary for regulatory purposes, and in some
circumstances is required for the proper fees to be applied. Failure to submit accurate data,
including TAG 50 data, into the Exchange Fee System (“EFS”) may be a violation of Rule 576.

The specific requirements for entering orders into CME Globex depending on whether such
orders are entered by an individual terminal operator or through an Automated Trading System
(‘ATS’) are described below:



CME Regulatory Advisory 06-06
September 11, 2006
Page 2 of 7

Manually Entered Orders

For manually entered orders, the TAG 50 must uniquely identify the person who entered the
instruction into the system. The clearing firm that guarantees the connection point to CME
Globex must ensure that the TAG 50 transmitted through its connection point is unique to the
clearing firm and is not shared with anyone else. This requirement applies to individual
members, employees of a clearing firm, customers, or anyone else entering an order on behalf
of another party.

Regardless of whether the TAG 50 is registered in EFS, clearing firms must be able to provide
Market Regulation with the identity of the person assigned a particular TAG 50 upon request,
and must maintain historical records for at least five years to identify each TAG 50. A person
entering manual orders should not have multiple TAG 50s within a particular front-end system.

Semi-Automated Functionality

Many front-end trading systems supply automated spreading functionality that gives traders the
ability to automate spread strategies. CME does not require a separate TAG 50 for this activity
as long as the use of the spreading software is primarily to augment manual trading. However,
if the automated spreading functionality is or becomes the primary source of order entry, or if
there is a large amount of order traffic from the operator, then a separate TAG 50 must be
assigned to distinguish the automated orders from the manual orders.

ATS (Automated Trading System)

An ATS is an electronic system or computer software that is programmed to generate and route
orders into CME Globex without a specific human action involved in sending or verifying the
orders. This type of system is often referred to as a “black box.” An ATS operator is a person
who operates, administers and/or monitors the ATS. Typically this is a person who initiates or
disables particular algorithms or strategies, or adjusts the parameters of the automated
program.

An ATS that does not require an individual to initiate or manually confirm the creation of a
specific instruction must be assigned and must transmit into CME Globex a unique TAG 50 that
identifies the person who operates, administers and/or monitors the ATS. if the ATS operator is
responsible for multiple trading models, algorithms, programs, or systems which trade the same
product, and which potentially could trade opposite one another, then each model, algorithm,
program or system must be assigned a unique TAG 50. Any deviation from this requirement
must be approved by CME Market Regulation before being implemented.

ATS TAG 50 Registration Requirements

CME requires clearing members to register all ATS TAG 50s in EFS if they represent individual
members or employees of a member, a clearing member, a corporate member, or a party
receiving preferential clearing fees as a result of participating in any special program offered by
CME. These membership categories and programs include CME Rule 106.H. (“Corporate
Member Firm Transfers”) members, CME Rule 106.1. (“Related Party Employee Transfers”)
members, CME Rule 106.R. (“Electronic Corporate Member Transfers”) members (“ECMs’),