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Exhibit M: Rulebook

Small Exchange, Inc.

Rulebook

Updated 11/28/2018
 

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TABLE OF CONTENTS

CHAPTER 1: DEFINITIONS.......................................................................................................................................5

CHAPTER 2: EXCHANGE OWNERSHIP AND GOVERNANCE.................................................................................... 11

RULE 201. OWNERSHIP ......................................................................................................................................... 11

RULE 202. BOARD................................................................................................................................................ 11

RULE 203. INELIGIBILITY TO SERVE ON BOARDS AND COMMITTEES ................................................................................... 14

RULE 204. COMMITTEES........................................................................................................................................ 14

RULE 205. AUDIT COMMITTEE OF THE BOARD ............................................................................................................ 15

RULE 206. EXCHANGE MEMBER COMMITTEE.............................................................................................................. 16

RULE 207. REGULATORY OVERSIGHT COMMITTEE........................................................................................................ 17

RULE 208. CHIEF REGULATORY OFFICER .................................................................................................................... 19

RULE 209. OFFICERS............................................................................................................................................. 20

RULE 210. CONFLICTS OF INTEREST OF NAMED PERSONS ............................................................................................... 20

RULE 211. EMERGENCY ACTIONS ............................................................................................................................. 21

RULE 212. CONFLICTS OF INTEREST IN EMERGENCIES .................................................................................................... 22

RULE 213. INFORMATION-SHARING AGREEMENTS ....................................................................................................... 23

RULE 214. DISSEMINATION OF TRANSACTION DATA ..................................................................................................... 24

RULE 215. USE OF CERTAIN PROPERTY AND DATA........................................................................................................ 24

RULE 216. IMPROPER USE OR DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION.......................................................... 25

RULE 217. REGULATORY SERVICES AGREEMENT .......................................................................................................... 26

RULE 218. MAINTENANCE OF BOOKS AND RECORDS BY THE EXCHANGE............................................................................. 26

CHAPTER 3: MEMBERSHIP AND ACCESS............................................................................................................... 27

RULE 301: APPLICABILITY OF RULES; JURISDICTION....................................................................................................... 27

RULE 302: CRITERIA FOR BECOMING A MEMBER ......................................................................................................... 28

RULE 303: EXCHANGE MEMBERSHIP ........................................................................................................................ 29

RULE 304: AUTHORIZED TRADERS ............................................................................................................................ 30

RULE 305: APPLICATION FOR MEMBERSHIP AND TERMINATION OF STATUS ........................................................................ 32

RULE 306: WITHDRAWAL OF MEMBER...................................................................................................................... 33

RULE 307: USER ADMINISTRATORS FOR CLEARING AND CORPORATE MEMBERS .................................................................. 34

RULE 308: TRADING PRIVILEGES .............................................................................................................................. 35

RULE 309: DUES, ASSESSMENTS AND FEES ................................................................................................................. 35

RULE 310: GENERAL NOTICES TO PARTICIPANTS .......................................................................................................... 36

RULE 311: COMMUNICATIONS BETWEEN THE EXCHANGE AND MEMBERS .......................................................................... 36

RULE 312: RECORDING OF COMMUNICATIONS ............................................................................................................ 37

RULE 313: COMPLIANCE WITH THE COMMODITY EXCHANGE ACT..................................................................................... 37

RULE 314: LEGAL CERTAINTY FOR THE EXCHANGE TRADES ............................................................................................. 37

RULE 315: MARKET MAKER PROGRAM ..................................................................................................................... 37

RULE 316: INDEPENDENT SOFTWARE VENDOR ............................................................................................................ 38

CHAPTER 4: OBLIGATIONS OF MEMBERS............................................................................................................. 39

RULE 401: DUTIES OF MEMBERS ............................................................................................................................. 39

RULE 402: REQUIRED DISCLOSURES.......................................................................................................................... 41

RULE 403: RIGHT OF INSPECTION............................................................................................................................. 42

RULE 404: MINIMUM FINANCIAL AND RELATED REPORTING REQUIREMENTS ...................................................................... 43

RULE 405: MEMBER CONFIDENTIALITY OF FINANCIAL AND OTHER INFORMATION ................................................................ 43

RULE 406: AUTHORITY TO IMPOSE RESTRICTIONS ........................................................................................................ 43

RULE 407: CUSTOMERS ......................................................................................................................................... 43

RULE 408: MEMBER TREATMENT OF CUSTOMER FUNDS AND SECURITIES .......................................................................... 44

RULE 409: DISCLOSURE REQUIREMENTS .................................................................................................................... 44

RULE 410: INFORMATION REGARDING ORDERS ........................................................................................................... 44
 

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RULE 411: TRADING LIMITATIONS, TERMINATION AND SUSPENSION................................................................................. 45

RULE 412: ACCESS TO POSITION INFORMATION........................................................................................................... 45

RULE 413. RECORDKEEPING REQUIREMENTS OF MEMBERS ............................................................................................ 46

CHAPTER 5: TRADING PRACTICES......................................................................................................................... 47

RULE 501. SCOPE ................................................................................................................................................ 47

RULE 502. PROCEDURES ........................................................................................................................................ 47

RULE 503. SUPERVISION........................................................................................................................................ 48

RULE 504. EXCHANGE BUSINESS DAYS AND TRADING HOURS ......................................................................................... 48

RULE 505. CONTRACTS TRADED ON THE EXCHANGE...................................................................................................... 48

RULE 506. PRE-TRADE RISK CONTROLS ..................................................................................................................... 48

RULE 507. ACCEPTABLE ORDERS.............................................................................................................................. 48

RULE 508. SPREAD ORDERS.................................................................................................................................... 50

RULE 509. MODIFICATION AND CANCELLATION OF ORDERS............................................................................................ 50

RULE 510. WITHHOLDING ORDERS PROHIBITED .......................................................................................................... 50

RULE 511. DISCLOSING ORDERS PROHIBITED .............................................................................................................. 50

RULE 512. RESPONSIBILITY FOR CUSTOMER ORDERS..................................................................................................... 50

RULE 513. ORDERS OF OTHER CLEARING MEMBERS ..................................................................................................... 51

RULE 514. DISCRETIONARY ORDERS ......................................................................................................................... 51

RULE 515. ERRORS AND OMISSIONS IN HANDLING OF CUSTOMER ORDERS......................................................................... 51

RULE 516. EXCHANGE TRADING SYSTEM MATCHING ALGORITHM .................................................................................... 52

RULE 517. PRIORITY OF EXECUTION.......................................................................................................................... 53

RULE 518. MISUSE OF THE TRADING SYSTEM.............................................................................................................. 53

RULE 519. EXCHANGE TRADING SYSTEM ACCESS RESTRICTIONS....................................................................................... 53

RULE 520. IDENTIFICATION OF AUTHORIZED TRADERS AND RELATED PARTIES ..................................................................... 54

RULE 521. POSITION ACCOUNTABILITY ...................................................................................................................... 54

RULE 522. POSITION ACCOUNTABILITY LIMITS............................................................................................................. 54

RULE 523. REPORTS OF LARGE POSITIONS AND OWNERSHIP AND CONTROL REPORTING ........................................................ 54

RULE 524. RECORDKEEPING REQUIREMENTS FOR ENTERING ORDERS INTO THE EXCHANGE TRADING SYSTEM ............................. 55

RULE 525. TRADE CANCELLATIONS AND PRICE ADJUSTMENTS ......................................................................................... 57

CHAPTER 6: TRADING BUSINESS CONDUCT.......................................................................................................... 58

RULE 601. SCOPE ................................................................................................................................................ 58

RULE 602. ADHERENCE TO LAW .............................................................................................................................. 58

RULE 603. RULE VIOLATIONS .................................................................................................................................. 58

RULE 604. FRAUDULENT ACTS PROHIBITED ................................................................................................................ 58

RULE 605. NON-COMPETITIVE OR FICTITIOUS TRANSACTIONS PROHIBITED......................................................................... 58

RULE 606. MANIPULATION PROHIBITED .................................................................................................................... 59

RULE 607. DISRUPTIVE TRADING PRACTICES PROHIBITED............................................................................................... 59

RULE 608. ABUSIVE TRADING PRACTICES PROHIBITED................................................................................................... 59

RULE 609. PROHIBITION OF MISSTATEMENTS ............................................................................................................. 61

RULE 610. ACTS DETRIMENTAL TO THE WELFARE OF THE EXCHANGE PROHIBITED ................................................................ 61

RULE 611. PRIORITY OF CUSTOMER ORDERS............................................................................................................... 61

RULE 612. SIMULTANEOUS BUY AND SELL ORDERS FOR DIFFERENT BENEFICIAL OWNERS....................................................... 61

CHAPTER 7: DISCIPLINE AND ENFORCEMENT....................................................................................................... 62

RULE 701. GENERAL ............................................................................................................................................. 62

RULE 702. INVESTIGATIONS .................................................................................................................................... 64

RULE 703. REPORTS OF INVESTIGATIONS.................................................................................................................... 65

RULE 704. REVIEW OF INVESTIGATION REPORTS .......................................................................................................... 66

RULE 705. NOTICE OF CHARGES .............................................................................................................................. 68

RULE 706. OPPORTUNITY TO RESPOND ..................................................................................................................... 68
 

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RULE 707. SERVICE OF NOTICE OF CHARGES ............................................................................................................... 69

RULE 708. ANSWER TO NOTICE OF CHARGES; REPLY .................................................................................................... 69

RULE 709. DISCIPLINARY PANEL .............................................................................................................................. 70

RULE 710. SETTLEMENT ........................................................................................................................................ 71

RULE 711. HEARING (DISCIPLINARY PROCEDURES AND SANCTIONS) ................................................................................. 72

RULE 712. RESPONDENT REVIEW OF EVIDENCE ........................................................................................................... 72

RULE 713. CONDUCTING HEARINGS ......................................................................................................................... 73

RULE 714. DECISION OF DISCIPLINARY PANEL ............................................................................................................. 74

RULE 715. SANCTIONS .......................................................................................................................................... 75

RULE 716. APPEAL FROM HEARING PANEL DECISION, SUMMARY IMPOSITIONS OF FINES AND OTHER SUMMARY ACTIONS............. 76

RULE 717. SUMMARY IMPOSITION OF FINES ............................................................................................................... 78

RULE 718. SUMMARY SUSPENSIONS AND OTHER SUMMARY ACTIONS .............................................................................. 79

RULE 719. EFFECTIVE DATE OF PENALTIES.................................................................................................................. 80

RULE 720. RIGHTS AND RESPONSIBILITIES AFTER SUSPENSION OR TERMINATION.................................................................. 80

RULE 721. PUBLICATION AND WRITTEN NOTICE OF DISCIPLINARY ACTIONS ........................................................................ 81

CHAPTER 8: ARBITRATION ................................................................................................................................... 83

RULE 801. ARBITRATION REQUIREMENT .................................................................................................................... 83

RULE 802. INITIATING AN ARBITRATION CLAIM............................................................................................................ 85

RULE 803. CLAIMS RELATING TO TRADE CANCELLATIONS OR PRICE ADJUSTMENTS ............................................................... 85

RULE 804. FAILURE TO PAY AN ARBITRATION AWARD AND PENALTIES............................................................................... 85

CHAPTER 9: CLEARING ......................................................................................................................................... 86

RULE 901. CLEARING OF CONTRACTS ........................................................................................................................ 86

RULE 902. DCO RULES ......................................................................................................................................... 86

RULE 903. OTHER CLEARING ORGANIZATIONS ............................................................................................................ 86

RULE 904. SETTLEMENT PRICES ............................................................................................................................... 86

RULE 905. CLEARING FEES ..................................................................................................................................... 87

RULE 906. TRANSFER OF TRADES ............................................................................................................................. 87

RULE 907. CONCURRENT LONG AND SHORT TRANSACTIONS ........................................................................................... 88

CHAPTER 10: MISCELLANEOUS ............................................................................................................................ 89

RULE 1001. GOVERNING LAW ................................................................................................................................ 89

RULE 1002. LIMITATION ON LIABILITY ....................................................................................................................... 89

RULE 1003. LIMITATION ON DAMAGES ..................................................................................................................... 90

RULE 1004. INDEMNIFICATION................................................................................................................................ 93

RULE 1005. DISCLAIMER OF WARRANTIES ................................................................................................................. 93

RULE 1006. MARKET DATA.................................................................................................................................... 95

RULE 1007. SUSPENSION AND WAIVER OF RULES ........................................................................................................ 95

RULE 1008. FORMS; TRANSMISSION OF DATA ............................................................................................................ 95

RULE 1009. AMENDMENTS TO THE RULES ................................................................................................................. 96

RULE 1010. GRATUITIES AND GIFTS.......................................................................................................................... 96

RULE 1011. CONFIDENTIALITY................................................................................................................................. 96

APPENDIX A: ERROR TRADE POLICY..................................................................................................................... 98
 

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Chapter 1: Definitions

Except where the context requires otherwise, as used herein: (i) use of the singular shall include the plural 

and vice versa; (ii) the term "include" means "include without limitation"; (iii) reference to the masculine, 

feminine or neuter gender includes each other gender; (iv) any reference to a number of days shall mean 

calendar days unless Business Days are specified; (v) any reference to a time shall mean the local time in 

Chicago, IL unless otherwise specified; (vi) any reference to dollars, $ or USD shall mean U.S. dollars; (vii) 

any reference to a Rule, Chapter, Appendix or Exhibit refers to a Rule, Chapter, Appendix or Exhibit of 

these Rules; and (viii) any reference to these Rules, and the words herein, hereof, hereto and hereunder 

and words of similar import refer to these Rules as a whole and not to any particular Rule.

The following terms shall have the following meanings when used herein:

Account means a segmented ledger used to track Exchange trade related activity under a Member, 

Related Party or Participant for a particular purpose, Customer, strategy, or any other reason as desired 

by the Member.

Advisory Committees has the meaning set forth in Rule 204.

Affiliate means with respect to any Person, any Person who, directly or indirectly, Controls, is Controlled 

by, or is under common Control with such other Person.

Appeal Panel means a panel comprised of a chairperson and two individuals appointed by the Board in 

accordance with Rule 716 to consider appeals under Chapter 7.

Applicable Law means, with respect to any Person, any statute, law, regulation, rule or ordinance of any 

governmental or Self-Regulatory Organization applicable to such Person, including the CEA and CFTC 

Regulations.

Authorized Trader means a Person who is either employed or is an agent of a Member and who is 

authorized to access the Trading System under Rule 304.

Board means the Board of Directors of the Exchange, which manages the Exchange and is constituted 

from time to time in accordance with Exchange bylaws.

Business Day means any day which the Exchange is open for trading.

CEA or Commodity Exchange Act means the Commodity Exchange Act, as amended from time to time.

CFTC or Commission means the U.S. Commodity Futures Trading Commission or any successor regulatory 

body.

CFTC Regulations means the rules and regulations promulgated by the CFTC, as amended.

Clearing House means such Derivatives Clearing Organization or organizations as the Exchange has 

designated from time to time to provide clearing services with respect to any or all of its Contracts. To 

the extent that the Exchange designates multiple DCOs to provide clearing services at any given time, the 
 

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term Clearing House shall refer to any DCO designated to provide such services with respect to the 

Contract or Clearing Firm in question.

Clearing Member means an entity: (i) approved by the Exchange and the Clearing House for clearing 

membership at the Clearing House and is authorized pursuant to the Clearing House Rules to clear trades 

in any or all of the Exchange’s Contracts; and (ii) that meets the criteria prescribed for a Clearing Firm in 

Chapter 3.

Compliance Staff means Exchange staff responsible for internal compliance and oversight of Exchange 

employees and Exchange Members. Compliance is a part of the Regulatory Department.

Contract means any Future, Option or any other agreement approved for trading on the Trading System

pursuant to Exchange Rules.

CLOB (“Order Book”) means central limit order book and part of the Exchange Trading System.

Contract Specifications means the specified terms and conditions for each Contract.

Control means, the possession, direct or indirect, of the power to direct or cause the direction of the 

affairs or management of a Person, whether through the ownership of securities, as trustee, personal 

representative or executor, by Contract, credit arrangement or otherwise.

CRO or Chief Regulatory Officer means the individual appointed by the President as the Chief Regulatory 

Officer of the Exchange and approved by the Board.

CTI Code means the Customer type indicator described in CFTC Regulation 1.35(g), which identifies the 

type of Customer for which each Trade is executed. The CTI codes are described in Rule 524(d).

Customer means a Person that is a Customer, as defined in CFTC Regulation 1.3.

Daily Settlement Price means the official daily closing price for a Contract calculated each Business Day, 

as determined in accordance with Rule 904 and used for all open positions at the close of the daily 

settlement cycle.

DCM means a Designated Contract Market, which has the meaning set forth in CEA section 5.

DCO means Derivatives Clearing Organization and has the meaning set forth in CEA section 1a(9) and CFTC 

Regulation 39.5.

DCO Rules means the Certificate of Incorporation, the By-laws and any rule, interpretation, stated policy, 

or instrument corresponding to any of the foregoing, in each case as adopted or amended from time to 

time by the Clearing House.

Direct Market Access Participant means any associated party of a Member that is approved by the

Exchange and sponsored by the Member for direct trading access to the Exchange. Clearing Member 

assumes responsibility for the direct market access participant.

Director means any member of the Board.
 

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Disciplinary Action means a disciplinary proceeding, summary imposition of fines, summary suspension 

or any other summary action.

Disciplinary Panel means the panel appointed pursuant to Rule 709 to conduct hearings in connection 

with Disciplinary Action (other than summary impositions of fines pursuant to Rule 717), make findings, 

render decisions, and impose sanctions pursuant to Chapter 7 of the Rules. The Disciplinary Panel must 

meet the composition requirements set forth in Part 40 of the CFTC Regulations and the composition 

requirements set forth in Rule 709.

Emergency means any occurrence or circumstance that, in the opinion of the Board, or a Person or 

Persons duly authorized to issue such an opinion on behalf of the Board under circumstances and pursuant 

to procedures that are specified, requiresimmediate action and threatens or may threaten such things as 

the fair and orderly trading in, or the liquidation of or delivery pursuant to, any agreements, contracts, or 

Transactions or the timely collection and payment of funds including: (a) any manipulative or attempted 

manipulative activity; (b) any actual, attempted or threatened corner, squeeze, congestion or undue 

concentration of positions; (c) any circumstances which may materially affect the performance of 

agreements, contracts, or Transactions, including failure of the payment system or the bankruptcy or 

insolvency of any Member; (d) any action taken by any Governmental Agency, or any other registered 

entity, board of trade, market or facility which may have a direct impact on trading and settlement; and 

(e) any other circumstance which may have a severe, adverse effect upon the functioning of the Exchange.

Emergency Action means temporary emergency procedures and rules implemented pursuant to Rule 211.

Exchange means Small Exchange, Inc., or any successor thereto.

Exchange Official means any Director or Officer of, or individual employed, by the Exchange or any 

individual rendering similar services to the Exchange under an administrative or similar agreement.

Execution means an agreement by the parties (whether orally, in writing, electronically, or otherwise) to 

the terms of a Contract that legally binds the parties to such Contract terms under Applicable Law.

FCM or Futures Commission Merchant has the meaning set forth in CEA Section 1a(28) and CFTC 

Regulation 1.3(p).

Force Majeure Event means a delay or failure that is the result of an act of God, lightning, earthquake, 

fire, epidemic, landslide, drought, hurricane, tornado, storm, explosion, flood, nuclear radiation, act of a 

public enemy or blockade, insurrection, riot or civil disturbance, strike or labor disturbance, or any other 

cause beyond the Exchange's reasonable control (whether or not similar to any of the foregoing).

Future(s) means any Contract for the purchase or sale of a commodity for future delivery.

Government Agency or Regulatory Agency means any governmental entity (including the United States, 

a U.S. State, or a foreign government agency or instrumentality).

IB or Introducing Broker has the meaning set forth in CFTC Regulation 1.3(mm) and CEA Section 1a (31).

ISV means an independent software vendor.
 

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Joint Audit Committee means a voluntary, cooperative organization comprised of representatives of U.S. 

futures exchanges and regulatory organizations, including Small Exchange. The Joint Audit Committee's 

primary responsibility is to oversee the implementation and functioning of all terms and conditions of the 

Joint Audit Agreement and to determine the practices and procedures to be followed by each Designated 

Self-Regulatory Organization in the conduct of audits and financial reviews of FCMs.

Joint Compliance Committee or JCC means a committee comprised of senior compliance officials from all 

of the domestic futures exchanges and the NFA, formed to foster improvements and uniformity in their 

systems and procedures used for trade practice compliance.

Market Data means any and all price, quantity, and time data from any and all Orders submitted to, and 

trades executed by or through the Trading System, any data derived from the foregoing, the format and 

presentation of any such data or information, and the transmissions of such data or information to 

Participants, any party that has entered into an agreement with the Exchange to distribute the abovedescribed data or information or any other Person.

Member means any entity or individual that has been granted, and continues to have, Trading Privileges 

under Exchange Rules. Exchange Members include Clearing Members, Corporate Members and Individual 

Members. 

Member Documentation means any agreement or other documentation that the Exchange may require 

a Member to execute or provide to the Exchange in order to access the Exchange for purposes of executing 

Transactions, in the form specified by the Exchange from time to time.

Member ID means each unique identifier assigned to a Member by the Exchange for access to the Trading 

System.

Member User Administrator means the individual or individuals designated as such pursuant to Rule 307.

NFA means the National Futures Association. The NFA is also the regulatory service provider for the 

Exchange.

Notice to Members means a communication sent by or on behalf of the Exchange to all Members as 

described in Rule 310.

Obligation means each Exchange Rule, order or procedure issued by the Exchange, including Notice to 

Members, contractual obligations, and other requirements implemented by the Exchange under 

Exchange Rules.

Officer(s) means an individual approved by the Board in accordance with Exchange bylaws to manage the 

Exchange subject to Board direction. Exchange Officers may include but not limited to Chief Executive 

Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Regulatory Officer (“CRO”), Chief Compliance Officer 

(“CCO”), Chief Operating Officer (“COO”), and Chief Technology Officer (“CTO”).

Option means a Contract whereby one (1) party grants to another the right, but not the obligation, to buy 

or sell a Futures Contract.
 

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Order means any bid or offer.

Participant means any Person initiating or executing a Transaction on or subject to the Rules of the 

Exchange directly or through an intermediary, or any Person who is authorized to access or utilize the 

Exchange pursuant to the applicable Trading System requirements.

Person means any natural person, proprietorship, corporation, partnership, limited liability company or 

other organization.

President means the individual appointed by the Board as the Exchange President.

Public Director means a Director that has been found on the record by the Board to have no material 

relationship with the Exchange or any of its Affiliates and that satisfies the requirements for a “Public 

Director” as defined in Part 40 of the CFTC Regulations.

Public Person means an individual that is determined by the Board or Chief Regulatory Officer, as 

applicable, to have no “material relationship” with the Exchange, as such term is used in Rule 202.

Regulatory Department means all Exchange Officials, Market Regulation, Compliance staff and/or agents 

of the Exchange (including any Regulatory Services Provider) that assist the Exchange with the 

implementation, surveillance and enforcement of Exchange Rules and other Obligations.

Regulatory Services Provider means the organization, if any, which provides regulatory services to the 

Exchange pursuant to a Regulatory Services Agreement.

Related Party means, with respect to any Member: any partner, director, officer, branch manager, broker, 

supervised Person, employee or agent of such Member (or any Person occupying a similar status or 

performing similar functions); any Person directly or indirectly Controlling, Controlled by, or under 

common Control with, such Member; or any Associated Person of such Member.

Representatives mean an entity's directors, managers, officers, employees, members of any standing or 

ad hoc committee formed by that entity, shareholders, board members, agents, consultants and licensors.

Respondent means a Person against whom a claim is asserted.

Rules means all rules adopted by the Exchange, all Notices to Members published by the Exchange, 

Member Obligations, interpretations, Orders, advisories, statements of policy, decisions, manuals and 

directives of the Exchange and all amendments thereto.

SEC means the U.S. Securities and Exchange Commission or any successor regulatory body.

SRO or Self-Regulatory Organization shall, unless otherwise provided, have the meaning attributed to 

such term in CFTC Regulation 1.3(ee) and, in addition, shall include any DCO, DCM and registered futures 

association, such as the NFA.

Standing Committee has the meaning set forth in Rule 204.
 

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Trade, Trading Activity or Transaction means any purchase or sale of any Contract made on the Trading 

System or subject to the Rules.

Trading Access means the right granted to an Authorized Trader by a Member to place Orders and/or 

enter into Transactions for Contracts on the Trading System subject to the Rules.

Trading Hours means, for any Exchange Business Day, the hours during which Orders may be placed on 

the Trading System, as shall be established, and may be revised from time to time by the Exchange in 

accordance with these Rules.

Trading Privileges means the right granted to a Member to transmit Orders for certain Contracts through 

the Trading System. No Person may exercise Trading Privileges on behalf of a Member during any 

suspension of such Member's Trading Privileges or if a Person’s Member Documentation has not been 

executed and approved by the Exchange to be in effect.

Trading System means: (i) the electronic systems administered by or on behalf of the Exchange which 

perform the functions set out in the Rules of the Exchange, including controlling, monitoring and recording 

trading on the Exchange; (ii) any connectivity to the foregoing electronic systems that is administered by 

or on behalf of the Exchange; and (iii) the Exchange electronic trading facility, CLOB and interface operated 

by the Exchange as a Designated Contract Market.

User ID means a unique identifier issued to each Member and each Authorized Trader to enable such 

Member or Authorized Trader to access the Exchange and use the Trading System and which enables the 

Exchange to identify the individual entering Orders into the Exchange.

Violation means a violation of the Rules or other Applicable Law.

Warning Letter is a cautionary non-reportable letter that is considered an informal regulatory action. A 

Warning Letter will be considered for any future violation of similar conduct as being past regulatory 

history by the Member, Related Party or Participant.

Written or Writing means printed, lithography, photography, and other modes of representing or 

reproducing words or data in a visible form, including electronic transmissions.
 

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Chapter 2: Exchange Ownership and Governance

Rule 201. Ownership

Small Exchange, Inc., (“SMFE”, “Exchange”) is a registered C-Corporation in the State of Delaware effective 

October 13, 2017.

Rule 202. Board

(a) The business, property, and affairs of the Exchange shall be managed and controlled by the Board, 

which may exercise all such powers of the Exchange and do all such lawful acts and things as are 

not by Applicable Law or by the Exchange Bylaws prohibited or required to be exercised or done 

by the Exchange Members. The Board may adopt such Rules and procedures, not inconsistent 

with Applicable Law or the Exchange Bylaws, as it may deem proper and appropriate for the 

conduct of its meetings and the management of the Exchange. The responsibilities of the Board 

shall include, without implication of limitation, the following:

(i) Be the governing body of the Exchange;

(ii) Be constituted, and shall constitute its committees or subcommittees, to permit 

consideration of the views of Exchange Members;

(iii) Have charge and control of all property of the Exchange;

(iv) Provide, acquire and maintain adequate Exchange offices and facilities;

(v) Review, approve and monitor major strategic, financial and business activities, Exchange

budget, and financial performance;

(vi) Evaluate risks and opportunities facing the Exchange and propose options for addressing 

such issues; and oversee and review recommendations from Exchange committees and 

its Chief Regulatory Officer (“CRO”);

(vii) In consultation with the Exchange’s CRO, resolve any conflicts of interest that may arise 

and review the Exchange’s compliance with applicable laws, regulations and reviewing 

the overall adequacy of the Exchange’s regulatory program;

(viii) Fix, determine and levy all Member or other fees when necessary;

(ix) Review the contracts and the Contract specifications;

(x) Approve, adopt, amend and repeal any Rules, with the input of Officers and committees 

or subcommittees;

(xi) Have the power to act in emergencies as detailed in Rule 211;

(xii) Have the power to call for review, and to affirm, modify, suspend or overrule, any and all 

decisions and actions of the officers, committees or subcommittees related to the dayto-day business operations of the Exchange; 

(xiii) Approve significant Transactions and amendments to material contracts of the Exchange;
 

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(xiv) Review any Officer’s recommendation for the selection of the independent public 

accountants;

(xv) Determine the Exchange’s on-going and long-range strategy;

(xvi) Monitor the Exchange’s performance against its long-range plans and budgets and the 

financial and operating results of the Exchange;

(xvii) Hire and enter into employment arrangements with the CEO/Officers of the Exchange;

(xviii) Monitor actions relating to the evaluation of the performance of the CEO/President and 

such other Officers as needed, and take appropriate action, including removal, when 

warranted;

(xix) Review compensation and succession plans;

(xx) Designate one or more committees, subcommittees or panels, made up of one or more 

Directors, and each with such powers and authority as delegated by the Board;

(xxi) Review and monitor actions related to the adoption of policies relating to the integrity of 

the Exchange’s financial statements, accounting, reporting and financial practices; and

(xxii) Each Director is expected to comply with all Applicable Laws, Rules, Exchange policies, 

and promote a culture of compliance by the Exchange and all of its employees. The Board 

will discharge its responsibilities and exercise its authority in a manner, consistent with 

applicable legal and regulatory requirements, that promotes the sound and efficient 

operation of the Exchange and its DCM activities.

(b) Any authority or discretion by the Rules vested in any Officer or delegated to any committee, 

subcommittee or panels shall not be construed to deprive the Board of such authority or 

discretion and, in the event of a conflict, the determination of the matter by the Board shall 

prevail.

(c) A majority of the Directors serving on the Board, including at least one Public Director, shall 

constitute a quorum for the transaction of business of the Board. At all times when the Board is 

conducting business at a meeting of the Board, a quorum of the Board must be present at such 

meeting, and the Board may act only by the decision of a majority of the Directors constituting a 

quorum of the Board by vote at a meeting, by unanimous written consent without a meeting, or 

as otherwise set forth in Exchange bylaws.

(d) The Board shall comprise the number of Directors set forth in Exchange bylaws. Each Director 

(including Public Directors) shall be appointed in accordance with Exchange bylaws and shall serve 

until his or her successor is duly appointed, or until his or her earlier resignation or removal, with 

or without cause.

(e) At least thirty-five (35) percent of the Members of the Board shall be Public Directors. Among 

other things, Public Directors are persons who:

(i) are knowledgeable of trading or financial regulation or are otherwise capable of 

contributing to governing board deliberations;

(ii) are neither Exchange Members, Exchange employees nor primarily Exchange service 

providers other than serving on the Board of Directors;

(iii) are not officers, principals or employees of an Exchange Member; and
 

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(iv) may also serve as Directors of the Contract Market's Affiliate if they otherwise meet the 

definition of Public Director.

(f) To qualify as a Public Director, an individual must be found, by the Board and on the record, to 

have no material relationship, as defined below, with the Exchange or any of its Affiliates. The 

Board must make such finding at the time the Public Director is elected and as often as necessary 

in light of all circumstances relevant to such Public Director, but in no case less than annually. A 

material relationship is one that reasonably could affect the independent judgment or decisionmaking. The Board need not consider previous service as a Director of the Exchange to constitute 

a material relationship. A Director shall be considered to have a material relationship with the 

Exchange if any of the following circumstances exist or have existed within the past year:

(i) such Director is or was an Officer or an employee of the Exchange, or an Officer or an 

employee of an Affiliate of the Exchange;

(ii) such Director is or was a Member;

(iii) such Director is or was a Director, an Officer, or an employee of a Member;

(iv) such Director is or was an officer of another entity, which entity has a compensation 

committee (or similar body) on which any Officer of the Exchange serves;

(v) such Director, or an entity with which the Director is a partner, an officer, an employee, 

or a director, receives or has received more than $100,000 in combined annual payments 

for legal, accounting, or consulting services from the Exchange or its Affiliate, any 

Participant, or any Affiliate of such Participant. Compensation for services as a Director of 

the Exchange or as a director of an Affiliate thereof does not count toward the $100,000 

payment limit, nor does deferred compensation for services rendered prior to becoming 

a Director, so long as such compensation is in no way contingent, conditioned, or 

revocable;

(vi) in the case of a Public Director that is a member of the Regulatory Oversight Committee, 

Audit Committee or the Exchange Membership Committee, such Public Director accepts 

or has accepted, directly or indirectly, any consulting, advisory, or other compensatory 

fee from the Exchange or its Affiliate or any Participant or any Affiliate of such Participant, 

other than deferred compensation for service rendered prior to becoming a member of 

the Regulatory Oversight Committee, Audit Committee or the Exchange Membership 

Committee, provided that such compensation is in no way contingent, conditioned, or 

revocable; or

(vii) If any of the immediate family of a Director, i.e., spouse, parents, children, and siblings, 

in each case, whether by blood, marriage, or adoption, or any Person residing in the home 

of the Director or that of his or her immediate family have a material relationship as 

defined above, then that material relationship is deemed to apply to such Director.

(g) The Board shall have procedures, as may be adopted by the Board from time to time, to remove 

a Director where the conduct of such Director is likely to be prejudicial to the sound and prudent 

management of the Exchange.

(h) Each Director is entitled to indemnification pursuant to Exchange bylaws with respect to matters 

relating to the Exchange.

(i) The Board shall review its performance and that of its individual Directors annually and shall 

consider periodically using external facilitators for such review.
 

14

Rule 203. Ineligibility to Serve on Boards and Committees

No individual shall be eligible to serve on the Board or any Committee who:

(a) Was found within the prior three years by a final decision of a Self-Regulatory Organization, an 

administrative law judge, a court of competent jurisdiction or the Commission to have committed 

a disciplinary offense;

(b) Entered into a settlement agreement within the prior three years in which any of the findings or, 

in the absence of such findings, any of the acts charged included a disciplinary offense;

(c) Currently is suspended from trading on any Contract market, is suspended or expelled from 

membership with any Self-Regulatory Organization, is serving any sentence of probation or owes 

any portion of a fine imposed pursuant to either:

(i) A finding of a disciplinary offense by a final decision of a Self-Regulatory Organization, an 

administrative law judge, a court of competent jurisdiction or the Commission; or

(ii) A settlement agreement in which any of the findings or, in the absence of such findings, 

any of the acts charged included a disciplinary offense.

(d) Currently is subject to an agreement with the Commission or any Self-Regulatory Organization 

not to apply for registration with the Commission or membership in any Self-Regulatory 

Organization;

(e) Currently is subject to or has been subject within the prior three years a Commission registration 

revocation or suspension in any capacity for any reason, or has been convicted within the prior 

three years of any of the felonies listed in section 8a(2)(D) (ii) through (iv) of the Commodity 

Exchange Act; or

(f) Currently is subject to a denial, suspension or disqualification from serving on a Committee or 

governing board of any Self-Regulatory Organization as that term is defined in section 3(a)(26) of 

the Securities Exchange Act of 1934, as amended.

Rule 204. Committees

(a) The Exchange shall establish three (3) Standing Committees of the Board (“Standing 

Committees”): the “Audit Committee”, the “Member Committee” and the “Regulatory Oversight 

Committee”. The Board may from time to time constitute and appoint such additional Standing 

Committees as it may deem necessary or advisable.

(b) The Exchange may from time to time establish one or more Advisory Committees (“Advisory 

Committees”) as it may deem necessary or advisable. Each Advisory Committee may consist of

Directors, Officers, Representatives of Members and other Participants, as determined by the 

Exchange. Advisory Committees may make recommendations to the Board but will not be 

authorized to make decisions or act on behalf of the Exchange.

(c) Each member of a Standing Committee or Advisory Committee shall serve until the due 

appointment of his successor, or until his or her earlier resignation or removal, with or without 

cause, as a member of such committee.
 

15

(d) Committees shall meet on such schedules and with such frequency as may be established by the 

Board or, subject to any direction by the Board, by such committee itself.

(e) Each committee must have a charter approved by the Board.

Rule 205. Audit Committee of the Board

(a) Audit Committee Membership

(i) The Audit Committee is a committee of the Board of Directors. Members of the Audit 

Committee will be appointed by the Board and may be removed by the Board in its 

discretion. The Board shall designate a Chair of the Audit Committee.

(ii) At least thirty-five (35) percent of the Audit Committee shall qualify as a Public Director, 

but all Audit Committee members shall be independent of management. If there are 

three (3) or fewer members, then at least one (1) member shall be a Public Director.

(iii) The Chief Financial Officer of the Exchange shall present a report to the Audit Committee

annually.

(iv) At least one member of the Audit Committee shall be an Audit Committee financial 

expert, as determined by the Board in accordance with Applicable Law.

(v) No member of the Audit Committee may have participated in the preparation of financial 

statements of the Exchange.

(b) The Audit Committee is responsible for oversight of the Exchange’s financial responsibilities and 

reporting including:

(i) Accounting and financial reporting processes as well as the audit and integrity of the 

Exchange’s financial statements;

(ii) Qualifications, engagement, compensation, independence and performance of the 

Exchange’s independent auditors;

(iii) Performance of the Exchange’s internal controls;

(iv) Compliance with Applicable Law and other legal and regulatory requirements not covered 

under the Regulatory Oversight Committee; and

(v) Financial risk assessment and risk management.

(c) The Audit Committee responsibilities and authority are to:

(i) Select, hire, supervise, terminate and evaluate performance and independence of the 

independent auditor;
 

16

(ii) Approve audit and non-audit services and fees;

(iii) Review financial statements and footnotes;

(iv) Approve significant changes in audit plan;

(v) Resolve significant disagreements with management and the independent auditor;

(vi) Review reports and communications from the independent auditor;

(vii) Approve disclosure controls and procedures;

(viii) Approve internal controls;

(ix) Discuss major financial risk exposures and steps management has taken to monitor and 

control them; and

(x) Review Related Party Transactions.

(d) The Audit Committee shall meet as often as it may deem necessary and appropriate in its 

judgment, but in no event less than once each quarter and shall report directly to the Board and 

at least annually an internal audit report shall be provided to the Audit Committee.

Rule 206. Exchange Member Committee

(a) The members of the Member Committee shall be appointed by the Board, and the Board shall 

designate the Chair in accordance with the By-Laws of the Exchange.

(b) The Member Committee shall consist of such number of Persons as the Board shall determine 

from time to time, and at least thirty-five (35) percent of the members of the Member Committee 

shall qualify as Public Directors. If there are three (3) or fewer members, then at least one (1) 

member shall be a Public Director.

(c) Each member of the Member Committee and its Chair shall serve until his or her successor is 

appointed or until the earlier of his or her resignation or removal.

(d) The Exchange Member Committee shall have responsibility to:

(i) Determine the standards and requirements for initial and continuing Member, 

Participant, and Clearing Firm eligibility;

(ii) Review appeals of denials of applications in accordance with Rule 305;

(iii) Approve Rules that would result in different categories or classes of Members receiving 

disparate access to the Exchange; and

(iv) Review such other matters and perform such additional activities, within the scope of its 

responsibilities, as the Board deems necessary or appropriate.

(e) The Exchange Member Committee shall have authority to:

(i) Conduct its own inquiries;
 

17

(ii) Consult directly with staff of the Exchange;

(iii) Interview employees, officers, and Members of the Exchange;

(iv) Review all relevant documents;

(v) Exercise its independent analysis and judgment to fulfill its regulatory obligations; and

(vi) Ask Exchange management staff or others to attend the meeting and provide 

information.

(f) In reviewing appeals of staff denials of Member applications, the Exchange Member Committee 

may not uphold any staff denial if the relevant application meets the standards and requirements 

that such Committee sets forth.

(g) The Exchange Member Committee shall not, and shall not permit the Exchange to, restrict access 

or impose burdens on access in a discriminatory manner, within each category or class of 

Members or between similarly-situated categories or classes of Members.

(h) In the event that the Board rejects a recommendation or supersedes an action of the Exchange 

Member Committee, the Exchange shall submit a written report to the CFTC detailing:

(i) the recommendation or action of the Exchange Member Committee;

(ii) the rationale for such recommendation or action;

(iii) the rationale of the Board for rejecting such recommendation or superseding such action; 

and 

(iv) the course of action that the Board decided to take contrary to such recommendation or 

action.

Rule 207. Regulatory Oversight Committee

(a) The Regulatory Oversight Committee ("ROC") shall consist of members who qualify as Public 

Directors. The Regulatory Oversight Committee shall report to the Board.

(b) The Regulatory Oversight Committee shall oversee the regulatory program of the Exchange on 

behalf of the Board. The Board shall delegate sufficient authority, dedicate sufficient resources 

and allow sufficient time for the Regulatory Oversight Committee to fulfill its mandate.

(c) The Regulatory Oversight Committee shall:

(i) oversee all facets of the Exchange’s regulatory program, including trade practice and 

market surveillance, regulatory audits, examinations, and other regulatory 

responsibilities with respect to Members (including ensuring compliance with, if 

applicable, financial integrity, financial reporting, sales practice, recordkeeping and other 

requirements), and the conduct of investigations; and

(ii) review, at least on a quarterly basis, reports provided by vendors who handle regulatory 

functions for the Exchange;

(iii) hold regular meetings to discuss matters of regulatory concern and conduct periodic 

reviews of the services provided on the Exchange’s behalf, such reviews shall be 

adequately documented and made available to the CFTC on request;
 

18

(iv) assist the Board in minimizing potential conflicts of interests relating to the Exchange’s 

self-regulatory obligations;

(v) review the size and allocation of the regulatory budget and resources, and the number, 

hiring, termination, and compensation of regulatory personnel;

(vi) monitor the regulatory program of the Exchange for sufficiency, effectiveness and 

independence;

(vii) review the performance of the Chief Regulatory Officer (in accordance with Core Principle 

16 of section 5(d)CEA) and make recommendations with respect to such performance to 

the Board;

(viii) recommend changes that would ensure fair, vigorous and effective regulation;

(ix) review all regulatory or compliance proposals prior to implementation and advise the 

Board as to whether and how such changes may affect regulation or compliance, as 

applicable;

(x) review the Exchange Enterprise Risk Management ("ERM") policy and ensure compliance; 

and

(xi) prepare an annual report for the Board and the CFTC that assesses the Exchange

regulatory program. The report shall set forth the program’s expenses, describe its 

staffing and structure, catalogue investigations and disciplinary proceedings taken during 

the year, and review the Disciplinary Panel of the Exchange as established from time to 

time.

(d) If the Board rejects a recommendation or supersedes an action of the Regulatory Oversight 

Committee, the Exchange shall provide a written report to the CFTC detailing:

(i) the recommendation of or action proposed to be taken by such Committee;

(ii) the rationale for such recommendation or proposed action;

(iii) the rationale of the Board for rejecting such recommendation or superseding such action; 

and

(iv) the course of action that the Board decided to take contrary to such recommendation or 

action.

(e) The Regulatory Oversight Committee shall have the authority, discretion and necessary resources 

to:

(i) Conduct its own inquiries;

(ii) Obtain or retain independent consultants or advisors in consultation with the Board;

(iii) Consult directly with Exchange regulatory staff;

(iv) Review all relevant documents;
 

19

(v) Interview employees, Officers, and Members;

(vi) Otherwise exercise its independent analysis and judgment to fulfill its regulatory 

obligations; and

(vii) Ask Exchange management staff or others to attend meetings and provide information.

Rule 208. Chief Regulatory Officer

(a) The President shall appoint the Chief Regulatory Officer, (“CRO”), of the Exchange and the Board 

will approve the CRO. The CRO shall report to the Regulatory Oversight Committee. The Chief 

Regulatory Officer may only be removed by a majority of the Board. The Exchange shall notify 

the Commission within two (2) Business Days of appointing any new CRO, whether interim or 

permanent.

(b) The CRO shall have the authority and resources to develop and enforce policies and procedures 

necessary to perform his or her duties under these Rules and Applicable Law. The CRO shall have 

authority over all staff acting at his or her direction.

(c) The CRO shall be responsible for performing the following duties and functions:

(i) Overseeing and reviewing the Exchange’s compliance with Section 5h of the CEA and the 

related CFTC Regulations, including without limitation the Core Principles in Part 38 of the 

CFTC Regulations;

(ii) In consultation with the Board or the President, resolving any conflicts of interest that 

may arise, including: (A) conflicts between business considerations and compliance 

requirements; (B) conflicts between business considerations and the requirement that 

the Exchange provide fair, open and impartial access as set forth in Part 38 of the CFTC 

Regulations; and (C) conflicts between Exchange management and members of the 

Board;

(iii) Establishing and administering written policies and procedures reasonably designed to 

prevent violations of the CEA and CFTC Regulations;

(iv) Taking reasonable steps to ensure compliance with the CEA and CFTC Regulations;

(v) Establishing procedures for the remediation of issues identified by the CRO through 

compliance reviews, look-backs, internal or external audit findings, self-reported errors, 

or through validated complaints;

(vi) Establishing and administering a compliance manual designed to promote compliance 

with Applicable Law and a written code of ethics designed to prevent ethical violations 

and to promote honesty and ethical conduct;

(vii) Supervising the Exchange’s self-regulatory program with respect to trade practice 

surveillance, market surveillance, real-time market monitoring, compliance with audit 

trail requirements, enforcement and disciplinary proceedings, regulatory audits, 

examinations, and other regulatory responsibilities with respect to Members and 

Participants (including ensuring compliance with, if applicable, financial integrity, 

financial reporting, sales practice, recordkeeping and other requirements); and
 

20

(viii) Performing such other duties not inconsistent with the foregoing as may be designated

by the Board from time to time.

(d) The CRO will be required to meet with the Board at least annually and with the Regulatory 

Oversight Committee at least quarterly and shall provide any information regarding the 

Exchange’s self-regulatory program that is requested by the Board or such Committee.

(e) The CRO may not be disqualified from registration pursuant to CEA Sections 8a(2) or 8a(3). The 

CRO must have the background and skills appropriate for fulfilling the responsibilities of the 

position.

(f) Any compliance questions and concerns regarding the Exchange may be submitted to the CRO at 

the address specified by the Exchange.

(g) The Exchange will maintain the records relating to the compliance function required by CFTC 

Regulation 38.950.

Rule 209. Officers

(a) The Exchange will be managed by or subject to the direction of the Board and such Officers as are 

appointed or approved by the Board, in each case in accordance with Exchange bylaws. Without 

limiting the rights, powers, privileges and obligations of the Board as set forth in Exchange bylaws, 

the Board has the power to review, and to approve, modify, suspend or overrule, any and all 

decisions of Committees of the Exchange and any Officers, subject to Applicable Law. 

Qualifications for Officers will be as set forth in the Exchange bylaws and these Rules. No Director 

may be disqualified from registration pursuant to Sections 8a(2) or 8a(3) of the CEA.

(b) Any Officer may also be a Director, Officer, partner or employee of the Exchange or of any of its 

Affiliates, subject to disclosure and resolution of conflicts of interest.

(c) The Officers shall have such powers and duties in the management of the Exchange as the Board 

may prescribe from time to time, subject to any limitations set forth in Exchange bylaws.

(d) Each Officer is entitled to indemnification pursuant to Exchange bylaws with respect to matters 

relating to the Exchange.

(e) No Officer or employee of the Exchange shall be admitted as a Member.

Rule 210. Conflicts of Interest of Named Persons

(a) Definitions. For purposes of this Rule the following definitions shall apply:

(i) The term "Family Relationship" shall mean a Person's spouse, former spouse, parent, step 

parent, child, step child, sibling, step sibling, grandparent, grandchild, uncle, aunt, 

nephew, niece or in-law.

(ii) The term "Named Party" shall mean a Person that is identified by name as a subject of 

any matter being considered by the Board or a Committee.

(b) Prohibition. No member of the Board, any Committee which has authority to take action for and 

in the name of the Exchange (not including any Committee which is only authorized to make 

recommendations for action by the Board or some other Committee) or any Disciplinary Panel 
 

21

shall knowingly participate in such body's deliberations or voting in any matter involving a Named 

Party or has material interest where such member:

(i) is a Named Party or has material interest;

(ii) is an employer, employee or fellow employee of a Named Party;

(iii) is associated with a Named Party through a broker association;

(iv) has a Family Relationship with a Named Party; or

(v) has any other significant, ongoing business relationship with a Named Party, excluding 

relationships limited to executing Transactions opposite each other.

(c) Disclosure. Prior to consideration of any matter involving a Named Party or having material 

interest, each member of the deliberating body shall disclose to the CRO, or the CRO’s designee, 

whether such member has one of the relationships listed in paragraph (b) of this Rule with a 

Named Party.

(d) Procedure and Determination. The CRO shall determine whether any member of the deliberating 

body is subject to a conflict or restriction under this paragraph (d). Such determination shall be 

based upon a review of the following information:

(i) information provided by the member pursuant to paragraph (b) above; and

(ii) any other source of information that is maintained by and reasonably available to the 

Exchange.

(e) Ineligibility of the CRO. In the event that the CRO becomes aware that he or she may be subject 

to the prohibition under this Rule 210 for having a conflict of interest, the CRO will report the 

relevant conflict of interest to the Exchange President. If any other Officer, Director, employee 

or other Person subject to the jurisdiction of these Rules believes that the CRO may have a conflict 

of interest under this Rule, such Person should promptly inform the President of any relevant 

information by written or electronic means. In response to any notification that the CRO may 

have a conflict of interest, the President shall determine whether a conflict exists, and in the event 

that the President determines that one does, the President will appoint another Officer or 

employee of the Exchange to act in the CRO’s stead. In the event of a conflict between the CRO 

and President, the CRO will report any potential conflict to the ROC.

Rule 211. Emergency Actions

(a) During an Emergency, the Board may take temporary emergency action and/or implement 

temporary emergency procedures and rules ("Emergency Actions"), subject to Applicable Law. In 

the event that the Exchange is unable to convene a meeting of the Board reasonably promptly, 

the President or an Officer designated by the President may take Emergency Actions pursuant to 

this Rule ("Officer Emergency Action"). The Board will be notified in the case of a contemplated 

or implemented Emergency Action as soon as practicable. The Exchange shall convene a meeting 

of the Board as soon as practicable thereafter to ratify, modify or rescind such Officer Emergency 

Action.

(b) Emergency Action may require or authorize the Exchange, the Board, any Committee of the 

Board, or the President to take actions necessary or appropriate to respond to the Emergency, on 
 

22

its own or in coordination with another relevant Person, including but not limited to the following 

actions:

(i) imposing or modifying position accountability limits;

(ii) imposing or modifying price limits;

(iii) imposing or modifying intraday market restrictions;

(iv) imposing special margin requirements;

(v) ordering the liquidation or transfer of open positions in any Contract;

(vi) ordering the fixing of a settlement price;

(vii) extending or shortening the expiration date or the Trading Hours;

(viii) suspending or curtailing trading in any Contract;

(ix) transferring Contracts and the margin associated therewith as permitted by Applicable 

Law;

(x) altering any Contract's settlement terms or conditions;

(xi) limiting access to the Trading System by any Member, Participant or ISV; or

(xii) taking such other actions as may be directed by the CFTC or other regulatory authority.

(c) The Exchange will document the decision-making process related to any Emergency Action. The 

Exchange will promptly notify the CFTC of any Emergency Action, explaining the decision-making 

process, the reasons for taking such action, and how conflicts of interest were minimized. Such 

documentation will be maintained in accordance with Applicable Law.

Rule 212. Conflicts of Interest in Emergencies

Whenever any Emergency Action or other significant action which, in the judgment of the deliberating 

body, is likely to have a material effect upon the price of any Contract or might otherwise have a material 

impact on the market for such Contracts is being considered by the Board, any Committee which has 

authority to take action for and in the name of the Exchange (not including any Advisory Committee) or 

any Disciplinary Panel the following procedures shall apply:

(a) Disclosure. Prior to consideration of the matter, each member of the Board or Committee who 

participates in deliberations or voting on such action shall disclose to the Board or Committee

position information that is known to such member, with respect to any particular Contracts that 

are under consideration, and any other positions which the Board or Committee reasonably 

expects could be affected by the action under consideration. The size of positions shall be 

disclosed by reference to ranges as determined by the Board or Committee and shall be made 

with respect to the following categories:

(i) gross positions in Contracts carried in (1) accounts in which the member's ownership 

interest is ten (10) percent or greater; (2) “controlled accounts” as defined in CFTC 

Regulation 1.3(j); and (3) accounts of any individual with whom the Member has a “Family 

Relationship” as such term is defined in Rule 210;
 

23

(ii) gross positions in Contracts carried in proprietary accounts, as defined in CFTC 

regulations, at any Affiliated Member of such Member; and

(iii) any other types of positions, whether maintained in Contracts or otherwise, that the 

Board or committee reasonably expects could be affected by the action being considered.

To the extent that a member desires to make the required disclosures but does not know 

position information with respect to any of the foregoing categories, the President or his 

designee shall make the disclosure for such member to the extent that such information 

can be obtained from data and records readily available to the Exchange under the 

exigency of the action being contemplated.

(b) Disqualification. Any member who does not want to make position disclosures must withdraw 

from the meeting before disclosure by other Members begins and may not participate in the 

discussion of, or voting on, the matter under consideration. Any Member who has, or whose 

Affiliated Member has, a position required to be disclosed under paragraph (a)(i) of this Rule 212

(other than a position which the Board or Committee has determined to be de minimis) shall be 

disqualified from voting and must withdraw from the room before a vote is taken. If such 

withdrawal results in the lack of a quorum, the Board or Committee shall appoint an ad hoc 

Committee comprised of those Members who are not disqualified from voting and shall delegate 

to such ad hoc Committee all the powers of the Board or relevant Committee with respect to the 

matter under consideration. No member shall be disqualified from voting upon the appointment 

of an ad hoc Committee solely because of positions held by such member or an Affiliated Member 

of such member.

(c) Documentation. The minutes of any meeting at which Emergency or other significant action is 

considered shall reflect the following information:

(i) the names of all members who attended the meeting in person or by electronic means;

(ii) the name of any member who voluntarily recused himself or was required to abstain from 

deliberations or voting; and

(iii) information on the position disclosures made by each member.

Rule 213. Information-Sharing Agreements

(a) The Exchange may enter into information sharing arrangements, including the capacity to carry 

out international information-sharing agreements, as the Commission may require or as it 

determines necessary or advisable, to coordinate surveillance with other markets where financial 

products trade that may relate to Exchange products. As part of any information-share 

agreement, the Exchange may:

(i) share trade and market surveillance reports to other markets;

(ii) share completed and on-going investigations with other markets;

(iii) share information concerning current and former Participants with other markets; and/or

(iv) require current and former Participants to provide the Exchange information requested 

by other markets that are part of an information-share agreement with the Exchange.

(b) The Exchange may enter into any arrangement with any other Person or body (including, without 

limitation, any governmental authority, trading facility, Exchange, clearing organization, the Joint 
 

24

Audit Committee, or the Joint Compliance Committee) where the Exchange determines such 

arrangements exercises a legal or regulatory function under any Applicable Law or considers such 

arrangement to be in furtherance of the operation or duties of the Exchange under Applicable 

Law.

(c) The Exchange may disclose information to any Person or entity concerning or associated with a 

market Participant or other Person that the Exchange believes is necessary and appropriate in 

exercising a legal or regulatory function, whether or not a formal arrangement governing the 

disclosure exists or a request for information was made.

Rule 214. Dissemination of Transaction Data

The Exchange shall be entitled, in its sole discretion, to use Orders, bids, offers and other information 

concerning Transactions, including all information and content displayed or distributed on the Trading 

System or otherwise provided to the Exchange (collectively, the “Transaction Data”), to develop and 

compile market data that the Exchange, or a third-party service provider that the Exchange may utilize for 

such purpose (including an Affiliate of the Exchange) and may disseminate such Market Data to third 

parties (including through a Market Data feed) for business purposes without further consent of any 

Member or other Person, and the Exchange shall be entitled to any and all revenue derived therefrom. 

By its use of the Exchange, each Member and Participant consents to such use by the Exchange of 

Transaction Data. Any such market data disseminated by the Exchange, or its third-party service provider, 

shall be disseminated in an anonymous fashion and shall not identify the Members who provided or 

entered into such Orders, bids, offers or Transactions.

Rule 215. Use of Certain Property and Data

(a) All Members, Participants, and Related Parties and all employees, agents, vendors and other 

Persons affiliated with the foregoing understand and acknowledge that the Exchange has a 

proprietary interest in:

(i) the price and quantity data from each and every Transaction executed on the Exchange, 

including the time at which the Transaction was executed by, or submitted to, the Trading 

System;

(ii) the price and quantity data for each and every Order, bid, and offer submitted for entry 

into the Trading System, including the time at which the Order, bid, and/or offer was 

entered into the Trading System;

(iii) the Daily Settlement Price of each Contract;

(iv) any data and information derived from (i), (ii), and (iii) and the format and presentation 

thereof; and

(v) the transmissions and dissemination of the data and information to Participants any 

publisher of the data or information with whom the Exchange has a written agreement, 

and any other Persons.

(b) All Members, Participants and Related Parties agree not to:
 

25

(i) copy, modify, create derivative works from, reverse engineer, reverse assemble or 

reverse compile any technology provided by the Trading System, or the Transaction Data 

displayed on, accessed through or derived from the Trading System;

(ii) remove or alter any copyright, trademark, patent or other notices on the Exchange;

(iii) distribute, rent, sell, retransmit, redistribute, release or license the Trading System, 

Transaction Data, or any part thereof to any third party or otherwise allow access by a 

third party (other than to its Authorized Traders subject to and in strict accordance with 

the Rules);

(iv) take any action contrary or detrimental to the Exchange’s interest and to take reasonable 

measures to ensure that no such action is taken by any Person affiliated with them;

(v) take or authorize any action that could detrimentally interfere with the proper workings 

of the Trading System, use any robot, spider or other device or process to monitor or copy 

the Trading System, or knowingly transmit any virus or other potentially harmful device 

in connection with its use of the Trading System; or

(vi) assist or encourage any third party or Related Party in engaging in any activity prohibited 

under the Rules.

(c) Other than for its own internal use and in accordance with the Rules, a Member will not 

communicate, disclose, redistribute, or otherwise furnish (or permit to be communicated, 

disclosed, redistributed or otherwise furnished) all or any portion of the Transaction Data, in any 

format, to any third party (other than to its Authorized Traders subject to and in strict accordance 

with these Rules) for the purposes of constructing or calculating the value of any index or indexed 

products or for the purpose of creating any derivative works or to make any use whatsoever at 

any time of the Transaction Data that could compete with the business of the Exchange or its 

provision of the Trading System or any related services.

(d) Each Member will ensure that its Authorized Traders and Related Parties maintain sole control 

and possession of, and sole access to, Transaction Data obtained through the Member's access to 

the Trading System. Notwithstanding the foregoing, it is understood and agreed that any and all 

data submitted to the Trading System by a Member or its Authorized Traders (including but not

limited to Orders) and all information related to Transactions entered into by a Member or its 

Authorized Traders through the Trading System shall be the joint and exclusive property of the 

Exchange and such Member, and the Exchange shall have the right to use, sell, retransmit or 

redistribute such information, on an anonymous and aggregated basis, subject to the provisions 

of this Rule.

Rule 216. Improper Use or Disclosure of Material Non-Public Information

No member of the Board or of any Board Committee, no member of any other Committee of the 

Exchange, no Officer of the Exchange, no employee of the Exchange and no consultant to the Exchange

shall:

(a) trade for such Person's own Account, or for or on behalf of any other Account, in any commodity 

interest on the basis of any material, non-public information (as defined in CFTC Regulation 1.59) 

obtained through the performance of such Person's Exchange official duties;
 

26

(b) use or disclose, for any purpose other than the performance of such Person's Exchange official 

duties, any material, non-public information obtained by such Person as a result of such Person's 

official duties; provided, however, that this Section shall not prohibit disclosures made by such 

Person in the course of his or her Exchange official duties or disclosures made to the CFTC, any 

Self-Regulatory Organization, a court of competent jurisdiction or any agency or department of 

the federal or state government; or

(c) trade, directly or indirectly, in any Contract traded on the Exchange or in any “related commodity 

interest” as defined in CFTC Regulation 1.59 if such Person has access to material non-public 

information concerning such Contract or commodity interest.

Rule 217. Regulatory Services Agreement

The Exchange may contract a Regulatory Service Provider to provide certain regulatory services to the 

Exchange pursuant to a Regulatory Services Agreement. In accordance with such Agreement, the 

Regulatory Service Provider may perform certain surveillance, investigative and regulatory functions

under the Rules of the Exchange. The Exchange may provide information to the Regulatory Service 

Provider and also receive information from the Regulatory Service Provider in connection with the 

Regulatory Service Provider’s performance under such Regulatory Service Agreement.

Rule 218. Maintenance of Books and Records by the Exchange

(a) The Exchange will keep complete and accurate books and records of accounts of the Exchange, 

including, without limitation, all books and records required to be maintained pursuant to the 

CEA, the CFTC Regulations, or as otherwise required by regulatory authority.

(b) The Exchange shall retain all such books and records for at least five (5) years and shall make such 

books and records readily accessible for inspection by the CFTC and the United States Department 

of Justice and shall make such records readily accessible during the first two (2) years of such fiveyear period.
 

27

Chapter 3: Membership and Access

Rule 301: Applicability of Rules; Jurisdiction

(a) By becoming a Clearing Member, Corporate Member or Individual Member and by accessing, or 

entering any Order or submitting any Contract into the Trading System, and without any need for 

any further action, undertaking or agreement, a Member, and its Related Parties agree:

(i) to be bound by, and comply with, the Exchange Rules and Obligations, the Clearing House, 

Rules and Applicable Laws, in each case to the extent applicable to it;

(ii) to become subject to the jurisdiction of the Exchange and the DCO with respect to any 

and all matters arising from, related to, or in connection with, the status, actions or 

omissions of such Member or Persons;

(iii) that any Member or Person initiating or executing a Transaction on or subject to the Rules 

of the Exchange directly or through an intermediary, and any Member or Person for 

whose benefit such a Transaction has been initiated or executed, expressly consents to 

the jurisdiction of the Exchange and agrees to be bound by and comply with the Rules of 

the Exchange in relation to such Transactions, including, but not limited to, Rules requiring 

cooperation and participation in investigatory and disciplinary process; and

(iv) to assist the Exchange in complying with its legal and regulatory obligations, cooperate 

with the Exchange (and the Regulatory Service Provider, if applicable), and the CFTC in 

any inquiry, investigation, audit, examination or proceeding, and authorizes the Exchange 

to provide information to the Regulatory Services Provider, the CFTC or any U.S. SelfRegulatory Organization authorized by the SEC or CFTC.

(b) Any Member whose Trading Privileges and/or ability to otherwise access the Trading System are 

revoked or terminated shall remain bound by the Rules, the DCO Rules, and Applicable Law, in 

each case to the extent applicable to it, and subject to the jurisdiction of the Exchange and the 

DCO with respect to any and all matters arising from, related to, or in connection with, the status, 

actions or omissions of such Member and Related Parties prior to such revocation or termination.

(c) A Member and any Related Party who is suspended for any period remains subject to the Rules, 

the Obligations and the Exchange’s jurisdiction throughout the period of suspension. After 

revocation or termination, the Member and any Related Party will remain subject to the Rules, 

the Obligations and the jurisdiction of the Exchange for acts done and omissions made while 

registered.
 

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Rule 302: Criteria for Becoming a Member

(a) To be eligible for admission as a Member on the Exchange, an applicant must demonstrate to the 

satisfaction of the Exchange that the Member:

(i) is of good reputation and business integrity;

(ii) maintains adequate financial resources and credit;

(iii) is validly organized, in good standing, and authorized by its governing body and, if 

relevant, documents of organization, to trade Contracts (if an entity);

(iv) is not subject to statutory disqualification under Section 8a(2) of the CEA;

(v) holds all registrations, including any Introducing Broker, Futures Commission Merchant, 

Supervisory Person and/or Associated Person registration and meets the minimum 

financial standards required under Applicable Law, including, but not limited to the 

requirements set forth in 17 CFR 1.17 for any Introducing Broker, Futures Commission 

Merchant, Supervisory Person and/or Associated Person registration, as applicable if any; 

is not legally or otherwise prohibited from using the Exchange or entering into 

Transactions on the Exchange or subject to the Rules;

(vi) is not an Officer or employee of the Exchange;

(vii) is not an ISV;

(viii) complies with the applicable technical access standards, security protocols and technical 

specifications for connection to the Exchange electronic system as may be specified by 

the Exchange from time to time;

(ix) consents to the Exchange’ jurisdiction pursuant to Rule 301; and

(x) satisfies such other criteria as the Exchange may specify.

(b) Each Member must establish a clearing relationship with a Clearing Firm and will immediately 

notify the Exchange if the clearing relationship changes.

(c) Once admitted, the Member shall continue to comply with applicable eligibility criteria and 

immediately notify the Exchange of any material changes.
 

29

Rule 303: Exchange Membership

(a) Clearing Membership - Firms seeking a Clearing Membership must submit an application in the 

form prescribed by the appropriate Derivative Clearing Organization and continually satisfy such 

requirements as may be established by the Exchange and such Derivatives Clearing Organization 

from time to time. Clearing Membership Requirements and Obligations include but not limited 

to:

(i) Must be a member in good standing with the Clearing House;

(ii) Must be an FCM registered with the CFTC or a Non-US firm eligible and approved to clear 

Futures and Options on Futures with the DCO;

(iii) Qualify and maintain its NFA registration as an FCM under section 4f(a)(1) of the CEA;

(iv) Minimum Net Capital Requirement of $2.5 million or the Minimum Net Capital 

requirement prescribed by the DCO, whichever is greater;

(v) Clearing Member must have qualified staff and facilities to clear Futures and Options on 

Futures and interface with DCO;

(vi) On-Site visit by Exchange personnel and the review of systems, books and records and 

interview of operations and compliance staff;

(vii) Provide most recent 1FR and or FOCUS report or Certified Audited Financial Statement;

(viii) Provide resumes of staff including experience for those responsible for Finance, 

Operations, Compliance, and Risk;

(ix) Clearing Members are subject to periodic financial reporting requirements as well as 

Financial Surveillance performed by the Exchange Compliance Department, the Exchange 

Regulatory Service Provider and the DCO; 

(x) Maintain compliance with all Applicable Law regarding minimum net capital. Clearing 

Members are subject to CFTC notification requirements for minimum net capital pursuant 

to Applicable Law, failure to maintain early warning capital, failure to comply with 

accounting, reporting, financial and or operational requirements. Such notifications must 

also be sent to the Exchange.

(xi) Agree that it will be financially responsible for (i) any Transactions effected on the 

Exchange and for any use of the Trading System made by Clearing Firm, Clearing Firm’s 

Futures Participants and Member Firms for which they are the Clearing Firm at the 
 

30

Exchange (ii) all Member Orders that are entered using User IDs assigned by the Exchange 

and for clearing any trades that are matched as a result of such Orders. Clearing Firm will 

be responsible to clear such trades even if the Orders received via the Trading System: (a) 

exceeded Clearing Firm’s credit parameters, (b) were entered as a result of a failure in the 

security controls and/or credit controls, other than due to the gross negligence of the 

Exchange, (c) were entered by an unknown or unauthorized user.

(xii) Agree that it will accept full responsibility for any Transactions effected on the Exchange 

and for any use of the Trading System made by the Clearing Firm or Clearing Firm’s 

Members, Related Parties or Participants.

(xiii) Employ practices to monitor and enforce compliance with risk limits for Members and 

Participants that have Clearing and/or Guarantee Agreements with the Clearing Firm; and

(xiv) Provide such information and documentation as may be requested by the Exchange, and 

follow the rules and procedures established by the Exchange. Additionally, any Clearing 

Firm organized or located outside of the United States shall enter into a written 

agreement acceptable to the Exchange appointing a third party as its U.S. agent for 

service of process for purposes of CFTC Regulation 15.05 and shall provide the Exchange 

with a copy of the agreement.

(b) Corporate Membership- Firms seeking Corporate Membership must comply with such application 

procedures as the Exchange may adopt from time to time. Corporate Firms and Related Parties 

are subject to a Customeridentification process, criminal and regulatory background check, credit 

check, be of good moral character, good reputation, and not barred by any Self-Regulatory 

Organization, foreign or domestic, as a market participant for any reason whatsoever for one year 

prior to application for membership or subject to CFTC or SEC statutory disqualification. 

(c) Individual Membership- Natural Persons seeking membership with the Exchange must be at least 

18 years of age with adequate financial resources to assume responsibilities and privileges of 

membership. These individuals are subject to a Customer identification process, criminal and 

regulatory background check, credit check, financial review, be of good moral character, good 

reputation, and not be barred by any Self-Regulatory Organization foreign or domestic as a market 

participant for any reason whatsoever for one year prior to application for membership or subject 

to CFTC or SEC statutory disqualification. The Exchange is an intermediated market which means 

in order for individual members to gain trading access to the Exchange, there must be a clearing 

relationship established with a Clearing Member either directly or through an intermediary such 

as an IB or broker with a clearing relationship with an Exchange Clearing Member.

Rule 304: Authorized Traders

(a) A Corporate or Clearing Member that will trade must designate one or more Authorized Traders, 

who will be responsible for any Trading Activity on behalf of the Member.
 

31

(b) The Authorized Trader for an Individual Member is the Individual Member. An Individual Member 

may only have one User ID solely used by each Individual Member.

(c) Each Authorized Trader must:

(i) be a natural Person;

(ii) satisfy any other requirements as may be prescribed by the Exchange from time to time;

(iii) have a unique Member and Exchange authorized User ID;

(iv) hold all requisite registrations under Applicable Law; and

(v) not be statutorily disqualified under Applicable Law, or subject to any suspension or 

revocation of any registration or licensing requirement by any Governmental Agency or 

Self-Regulatory Organization.

(d) Without limiting the foregoing, each Authorized Trader will abide by Exchange Rules and 

Applicable Law, and each Member will ensure on an ongoing basis that:

(i) none of its Authorized Traders are subject to disqualification pursuant to these Rules or 

any Applicable Law;

(ii) each of its Authorized Traders will conduct business in a fair and equitable manner; and

(iii) each of its Authorized Traders will conduct business in accordance with the Exchange 

Rules.

(e) By agreeing to become an Authorized Trader, an individual agrees to be bound by the duties and 

responsibilities of an Authorized Trader under these Rules, and any other duties and 

responsibilities the Exchange may impose from time to time, and to be subject to, and comply 

with, the Exchange Rules and Obligations. Authorized Traders acknowledge and agree that all 

Trading Activity conducted under any User ID assigned to him or her is the responsibility of such 

Authorized Trader. An Authorized Trader must ensure that any Trading Activity conducted under 

his or her User ID complies with all Applicable Law and Exchange Rules and Obligations.

(f) The Exchange may terminate, revoke or suspend any Authorized Trader in accordance with the 

provisions of Chapter 6 of these Rules. Upon such termination, revocation or suspension, the 

Exchange will disable access of such Authorized Trader to the Exchange.
 

32

Rule 305: Application for Membership and Termination of Status

(a) A Person or Firm that wishes to become a Member must satisfy the following:

(i) Provide such information and documentation as may be requested by the Exchange or its 

Regulatory Services Provider acting on behalf of the Exchange;

(ii) Follow the application procedures designated by the Exchange;

(iii) Execute the applicable Member Documentation and any other documentation that may 

be required by the Exchange from time to time;

(iv) Designate one or more Member User Administrators, and such Member User 

Administrator shall identify to the Exchange, all Authorized Personnel;

(v) Establish and maintain a valid clearing relationship with a Clearing Firm in good standing 

at the Exchange;

(vi) Enter into any agreement required by the DCO, if applicable;

(vii) Any Member organized or located outside of the United States shall enter into a written 

agreement acceptable to the Exchange appointing a third party as its U.S. agent for 

service of process for purposes of CFTC Regulation 15.05 and shall provide the Exchange 

with a copy of the agreement; and

(viii) Agree in writing to abide by the Exchange Rules and Applicable Law.

(b) The Exchange and/or its Designated Regulatory Service Provider may conduct such investigations 

or inquiries as it determines appropriate in connection with an application to become a Member 

or Authorized Trader.

(c) If the Exchange determines to admit a Member, the Exchange shall promptly notify the applicant 

and specify the date as of which such status will be effective. The Exchange may accept a 

Member, subject to conditions as it determines and Applicable Law (in which case the Exchange 

shall notify the applicant Member of such conditions).

(d) If the Exchange denies an application for Membership, the Exchange shall promptly notify such 

Person or Party thereof in writing, stating the reasons for such denial. Within ten (10) Business 

Days thereafter, such Person may request the Exchange to reconsider such decision (and may 

provide any relevantstatements or information in connection therewith) and/or request that the 

Member Committee review such denial.
 

33

(e) The Exchange may deny, condition or terminate any membership to any applicant who:

(i) Does not meet the qualifications for membership, or is unable to satisfactorily 

demonstrate its ability to satisfy the eligibility criteria outlined in these Rules or 

established by the Exchange from time to time;

(ii) Is unable to satisfactorily demonstrate its capacity to adhere to all Applicable Laws;

(iii) Would bring the Exchange into disrepute as determined by the Exchange in its sole 

discretion;

(iv) Has been denied registration or whose registration has been revoked or is currently 

suspended by a Government Agency; or

(v) Fails to meet any other such condition or qualification as the Exchange may determine in 

its sole discretion.

(f) If the Exchange decides to decline or condition an application for admission as a Member, or 

terminate a Member’s status, the Exchange shall promptly notify the Member in accordance with 

Rule 311. The Member may, within seven (7) Business Days, request in writing that the Exchange 

provide the reasons for the denial, conditioning or termination of Member’s status. Within 

fourteen (14) Business Days after receiving such written request, the Exchange shall send a 

written response to the Member setting forth the reasons for the denial, conditioning or 

termination. Within fourteen (14) Business Days of receiving the Exchange’s written response, the 

Member may request in writing that the Exchange Member Committee reconsider the 

determination.

(g) Within thirty (30) Business Days of receiving either the request for reconsideration, the Exchange 

Member Committee shall either confirm, reverse or modify the denial, conditioning or 

termination of the Member, and shall promptly notify the Member in writing. The Exchange 

Member Committee may, within its discretion, schedule a hearing (in-person or by 

teleconference); request additional information from the Member; or, establish any other process 

that it believes is necessary and appropriate to consider the request for reconsideration.

(h) The Exchange Member Committee’s decision is the final action and is not subject to appeal.

(i) In the event of a default that occurs or has occurred in relation to a Member with open positions 

in any Contract in a proprietary or Customer Account, each Membershall cooperate with the DCO, 

on a best-efforts basis, to accept the transfer of positions in such Contracts.

Rule 306: Withdrawal of Member

(a) To withdraw from the Exchange, a Member must notify the Exchange following the procedures 

established by the Exchange.
 

34

(b) The Exchange may, in its reasonable discretion, refuse to accept a Member’s withdrawal request 

or may postpone the effective date of withdrawal of a Member if the Exchange considers it 

necessary for the protection of other Members or otherwise in the interests of the Exchange.

(c) Based on the information provided to, and other information gathered by, the Exchange regarding 

a Member’s withdrawal request, the Exchange will determine whether to: (i) accept the 

withdrawal request; (ii) postpone the effective date of the withdrawal; and/or (iii) impose any 

terms or conditions before or after the effective date of withdrawal.

(d) If the Exchange refuses to accept a Member’s withdrawal request or postpones the effective date 

of withdrawal of a Member, the Exchange may waive the obligation to pay some or all of the fees, 

costs and charges that the Exchange would have imposed during the period after the date on 

which the requested withdrawal would have otherwise taken effect.

(e) When the Exchange accepts the withdrawal of a Member, all rights and privileges of such Member 

terminate (including, without limitation, the Trading Privileges and ability to access the Trading 

System). The accepted withdrawal of a Member shall not affect the rights of the Exchange under 

the Rules or relieve the former Member of its Obligations under the Rules, to perform all contracts 

involving any Contracts entered into by such, or to pay any the Exchange fees, costs, or charges 

incurred, before the withdrawal, including any obligations by the Member for activity by its 

Authorized Traders. Notwithstanding the accepted withdrawal of a Member, the withdrawn 

Member remains subject to the Rules, the Obligations and the jurisdiction of the Exchange for 

acts done and omissions made while a Member and must cooperate in any Exchange proceeding 

as if the withdrawn Member were still a Member.

Rule 307: User Administrators for Clearing and Corporate Members

(a) Each Clearing and Corporate Member shall have at all times one or more natural Person’s 

identified to the Exchange as responsible for the Obligations outlined in this Rule. Individual 

Members will be the Member User Administrator, and responsible for the Obligations outlined in 

this Rule. The User Administrator shall be responsible for requesting User IDs for Authorized 

Traders and notifying the Exchange of the need to terminate any previously issued User IDs of 

Authorized Traders for that Member.

(b) The Member User Administrator shall be responsible for all communications between the 

Exchange and Member with respect to User IDs and access to the Trading System, and any notices 

or other communications sent to the Member User Administrator by the Exchange relating to 

User IDs and other related administrative matters shall be binding on the Member. The Member 

will promptly notify the Exchange in writing of any change in its Member User Administrators.

(c) Members acknowledges and agrees that it will be bound by any actions taken through the use of 

such Member’s User IDs including any of those User IDs issued to its Authorized Traders, whether 

or not such actions were actually authorized. In addition, Member acknowledges that the 
 

35

Exchange may rely upon, and will be fully released and discharged by Member for acting upon, 

any information, data, Transaction details, Orders, acknowledgements or instructions that are: (i) 

entered, imported, transmitted or otherwise communicated under its Authorized Trader’s User 

ID (whether or not such action was actually authorized by Member); or (ii) are otherwise 

reasonably believed by the Exchange to be genuine and to have been communicated or presented 

on behalf of Member by an Authorized Trader, whether via the Trading System or otherwise.

(d) In no event may a Member or Authorized Trader enter an Order or permit the entry of an Order 

by an individual using a User ID other than the individual’s own User ID. Member is solely 

responsible for controlling and monitoring the use of the User IDs. Member will immediately 

notify the Exchange in writing of any unauthorized disclosure, unauthorized use of the User ID, 

unauthorized access to the Trading System, or of the need to deactivate any User ID.

(e) Member agrees to provide the Exchange with information related to the Member’s and its 

Authorized Traders’ use of the Trading System upon the Exchange’s written request, in order to 

enable the Exchange to assess the identity of any Person that is accessing the Trading System

through a User ID of a Member.

Rule 308: Trading Privileges 

(a) Admission as a Member or Authorized Trader does not confer any right of ownership in, or right 

to direct the management of or attend or vote at meetings of, the Exchange or right to share in 

the profits or revenues of the Exchange.

(b) A Member or Authorized Trader shall not be entitled to assign or transfer its status as such without 

the prior written consent of the Exchange.

(c) All Trading Activity entered must be entered by an Authorized Trader designated by the Member, 

as applicable.

(d) All Members and Related Parties must comply with the Applicable Law, these Rules, and 

Obligation in the Members’ and Related Parties’ use of the Exchange.

Rule 309: Dues, Assessments and Fees

(a) The Exchange may establish the amounts and times of payments for any Transaction fees, clearing 

fees, dues, assessments or other charges (“Fees”) to be paid by Members. The Exchange will 

notify Members of changes in the Fees by Notice and/or updates on the Exchange’s website.

(b) Each Member shall be responsible for paying all such Fees, and to pay such Fees when due.
 

36

(c) The Exchange may deduct Fees at the time of Transaction(s) and/or may provide each Member 

an invoice of all such Fees on a monthly or other basis determined by the Exchange from time to 

time, which amounts shall be due and payable no later than thirty (30) days from the date of such 

invoice. Late payments shall bear an interest rate per annum equal to the Prime Rate (as 

published in the Wall Street Journal) plus 1.5%, to the extent that such rate shall not exceed the 

maximum rate allowed by Applicable Law from the date due until paid in full; provided, however, 

that if the published Prime Rate is less than zero, the interest rate will be calculated as being equal 

to zero per annum In addition and notwithstanding anything herein to the contrary, in the event 

of any failure by a Member to pay such Fees and without limitation of any other remedy, the 

Exchange may temporarily or permanently limit, suspend or terminate such Member’s Trading 

Privileges and/or access to the Exchange without prior notice to Member.

(d) The Exchange may suspend a Member’s Trading Privileges for failure to pay the Exchange Fees no 

later than thirty (30) days from the date of the invoice.

(e) Fee Disputes. All disputes concerning Fees assessed by the Exchange must be submitted to the 

Exchange in writing and must be accompanied by supporting documentation. All disputes related 

to Fees must be submitted to the Exchange no later than sixty (60) days after the date of the 

monthly invoice. All Exchange invoices are due in full on a timely basis and payable in accordance 

with this Rule. Any disputed amount resolved in the Member’s favor will be subsequently credited 

to the Clearing Member’s Account at the Clearing Corporation.

Rule 310: General Notices to Participants

The Exchange may issue notices to the Exchange Participants and Members generally (including matters 

arising under the Rules or the operation of the Trading System) from time to time in a form and manner 

reasonably designed to enable each Member to become aware of the matters set forth therein (“Notice 

to Members”. Without limiting the foregoing, the Exchange may provide such Notice to Members by way 

of a published circular posted on the Exchange website and/or electronic mail. Any Notice to Members 

shall also be deemed to have been made to and received by all Authorized Traders, Related Parties or 

Participants.

Rule 311: Communications Between the Exchange and Members

(a) The Exchange may send any notices hereunder (other than notices provided under Rule 310) to a 

specific Member, Related Parties or Participants in writing and be either: (i) hand-delivered or 

sent by registered or certified mail; or (ii) sent by electronic mail, in either case to the relevant 

address provided by such Person for such purpose. Each Member and Participant shall provide to 

the Exchange and maintain a current electronic mail address and a physical mailing address for 

the receipt of all such notices.

(b) All notices to the Exchange hereunder shall be sent by electronic mail to the following address: 

support@thesmallexchange.com or to such other address or by such other means as the 

Exchange may specify by notice from time to time.
 

37

Rule 312: Recording of Communications

The Exchange may record conversations and retain copies of electronic communications between the 

Exchange or Exchange staff, on one hand, and Members, Participants, and Related Parties on the other 

hand, to the extent allowed by Applicable Law. Any such recordings may be retained by the Exchange or 

the Regulatory Services Provider in such manner and for such periods of time as the Exchange may deem 

necessary or appropriate in accordance with Applicable Law and will be treated as proprietary records 

that belong to the Exchange. Each Member, Related Parties and Participants agree to the recording of 

communications with the Exchange at the time they make their application to the Exchange.

Rule 313: Compliance with the Commodity Exchange Act

All the Exchange Members, Related Parties and Participants shall comply with all relevant provisions of 

the CEA and the Rules and regulations duly issued pursuant thereto by the CFTC, including the filing of 

reports, maintenance of books and records, and permitting inspection and visitation by Authorized 

Representatives of the CFTC or Department of Justice.

Rule 314: Legal Certainty for the Exchange Trades

A Transaction entered pursuant to the Exchange Rules shall not be void, voidable, subject to rescission, 

otherwise invalidated, or rendered unenforceable unless granted by the Exchange’s Board as a result of: 

(i) a violation by the Exchange of the provisions of section 5h of the Act or CFTC Regulations;

(ii) any CFTC proceeding to alter or supplement a Rule, term, or condition under section 8a(7) 

of the CEA or to declare an emergency under section 8a(9) of the CEA; or

(iii) any other proceeding the effect of which is to:

(A) alter or supplement a specific term or condition or trading rule or procedure; or

(B) require the Exchange to adopt a specific term or condition, trading rule or 

procedure, or to take or refrain from taking a specific action.

Rule 315: Market Maker Program

The Exchange may adopt the implementation of a market maker or incentive program from time to time 

to which the program participant may be appointed and authorized to maintain two-sided markets. The 

terms and conditions of each individual program will be set forth in separate regulatory filings submitted 

to the CFTC. Any Member that is accepted into the Exchange market maker or incentive program shall be 

subject to Exchange Rules. Any market maker must be a Corporate Member in good standing. Any such 

program shall specify:
 

38

(i) The qualifications to participate in, and the procedures to apply to, the program;

(ii) The obligations which must be met;

(iii) The benefits that shall accrue to participants in the program; and

(iv) The consequences for failing to meet the program obligations.

Rule 316: Independent Software Vendor

For connections by ISVs to the Exchange, the Exchange will apply criteria governing such access that are 

impartial, transparent, and applied in a fair and nondiscriminatory manner. An ISV shall be permitted to 

connect to the Exchange if it meets the following conditions on a continuing basis:

(i) The ISV applies for connection privileges on such form and with such supporting 

documents as the Exchange may require;

(ii) The ISV shall be duly organized, existing and in good standing under the laws of its 

jurisdiction of organization;

(iii) The ISV will maintain and have current all applicable registrations or licenses to do 

business as an ISV, have good commercial standing and adequate financial resources and 

credit as reasonably determined by the Exchange;

(iv) The ISV shall have such operational capabilities as the Exchange shall reasonably 

determine are necessary and appropriate in the performance of ISV’s activities;

(v) The ISV shall meet any other criteria the Exchange may from time to time prescribe; and

(vi) The ISV shall pay such fees, and pay such fees when due, as established by the Exchange, 

such fees being comparable for all ISVs with comparable access to, or obtaining 

comparable services from, the Exchange.
 

39

Chapter 4: Obligations of Members

Rule 401: Duties of Members

(a) Each Member shall (and shall cause all of its Related Parties, Authorized Traders and Participants 

that directly or indirectly effect a Transaction on the Exchange) if applicable, to:

(i) use the Trading System in a responsible manner and not for any improper purpose;

(ii) use the Trading System only to conduct Exchange activity;

(iii) observe high standards of commercial integrity, market conduct, fair dealing and just 

equitable principles of trade while conducting any activity on the Exchange and subject 

to the Rules;

(iv) abide by the terms and conditions of any Contract traded on the Exchange and subject to 

the Rules;

(v) comply with Exchange Rules and Obligations and technical standards for access to the 

Trading System, including security protocols, and act in a manner consistent with each 

Rule and Obligation;

(vi) comply with all DCO Rules, to the extent applicable to it, and act in a manner consistent 

with the DCO Rules, to the extent applicable;

(vii) comply with all NFA Rules, to the extent applicable to it, and act in a manner consistent 

with the NFA Rules, to the extent applicable;

(viii) keep complete and accurate books and records, including without limitation, all books 

and records of its Exchange activity and his or her activity in the index or instrument used 

as a reference price, in the underlying commodity, and related derivatives markets, and 

all books and records required to be maintained pursuant to the CEA, CFTC Regulations 

and Exchange Rules, for the minimum of five (5) years and in the form and manner as 

required by Applicable Law, and make such books and records available for inspection by 

an authorized representative of the Exchange, the applicable Regulatory Service Provider 

(if any) and, if requested the CFTC;

(ix) employ practices to monitor and enforce compliance with risk limits;

(x) use Exchange pre-trade risk controls that enable the Clearing Firm to implement 

appropriate risk limits for Exchange Members and Participants;
 

40

(xi) be responsible for promptly informing the Exchange of any material changes to the 

information provided to the Exchange by the Member or Related Parties pursuant to 

Chapter 3;

(xii) not knowingly mislead or conceal any material fact or matter in any dealings or filings 

with the Exchange or in response to any Exchange proceeding;

(xiii) be fully liable for: all trading losses, all Orders, all Transactions in Contracts effected by 

Participants, all Transactions effected on the Trading System and for any use of the 

Trading System made by Members, Related Parties or Authorized Traders, and all trades 

even if the Orders received via the Trading System: (1) were entered as a result of a failure 

in the security controls and/or credit controls, other than due to the gross negligence of 

the Exchange; or (2) were entered by an unknown or unauthorized user; and

(xiv) keep the UserIDs, Account numbers and passwords of the Member(s) and Related Parties

confidential.

(b) Each Member’s Authorized Traders and Related Parties shall:

(i) use the Trading System in a responsible manner and not for any improper purpose;

(ii) use the Trading System only to conduct Exchange activity;

(iii) conduct all the Exchange activity in a manner consistent with Exchange Rules and 

Obligations;

(iv) comply with all Exchange Rules and Obligations and act in a manner consistent with each 

Rule of the Exchange, Obligation and all Applicable Law;

(v) comply with all DCO Rules, to the extent applicable to it, and act in a manner consistent 

with the DCO Rules, to the extent applicable;

(vi) comply with all NFA Rules, to the extent applicable to it, and act in a manner consistent 

with the NFA Rules, to the extent applicable;

(vii) observe high standards of integrity, market conduct, high commercial honor, fair dealing, 

and just and equitable principles of trade while conducting or attempting to conduct any 

Trading Activity, or any aspect of any business connected with or concerning the 

Exchange;
 

41

(viii) not knowingly mislead or conceal any material fact or matter in any dealings or filings 

with the Exchange or in response to any Exchange proceeding;

(ix) keep any User IDs, Account numbers and passwords related to the Trading System

confidential; and

(x) be responsible for promptly informing the Exchange of any material changes to the 

information provided to the Exchange by the Member or Related Party.

Rule 402: Required Disclosures

Members and Related Parties shall immediately notify the Exchange upon becoming aware of any of the 

following events:

(i) any material changes to the contact information provided to the Exchange by the 

Member;

(ii) any damage to, or failure or inadequacy of, the systems, facilities or equipment of the 

Member to effect Transactions pursuant to the Exchange Rules or to timely perform 

Member’s financial obligations under or in connection with any Contract of such Member;

(iii) any refusal of admission or involuntary withdrawal of the Member for membership in, 

any Self-Regulatory Organization, SEF, DCM or DCO;

(iv) any expulsion, suspension or fine in excess of $5,000 (whether through an adverse 

determination, voluntary settlement or otherwise) imposed on the Member by any SelfRegulatory Organization, SEF, DCM, DCO or, with respect to Futures Activity, any relevant 

Governmental Agency;

(v) any revocation, suspension or conditioning of any registration or license of a Member 

necessary to conduct Trading Activity granted by any Governmental Agency;

(vi) the commencement of any SRO judicial or administrative proceeding against the Member 

or the imposition of any fine, cease and desist order, denial of trading privileges, censure 

or other sanction or remedy (whether through an adverse determination, voluntary 

settlement or otherwise) imposed by any Governmental Agency;

(vii) any indictment or conviction of, or any confession of guilt or plea of guilty or nolo 

contendere by, any principals or senior officers of the Member or any Authorized Trader 

for any felony or misdemeanor involving, arising from, or related to, the purchase or sale 

of any commodity, futures Contract, swap, option, security, securities futures product or 

other financial instrument, or involving or arising from fraud or moral turpitude;
 

42

(viii) the Member or a ten (10) percent or greater owner of the Member becoming the subject 

of a petition for bankruptcy;

(ix) the appointment of a receiver, trustee or administrator for the Member or a ten (10) 

percent or greater owner of the Member;

(x) the presentment of a petition, or the passing of a resolution, for the Member or a ten (10) 

percent or greater owner of the Member’s termination or withdrawal of membership;

(xi) the commencement of proceedings for the Member’s or the ten (10) percent or greater 

owners of the Member dissolution; or

(xii) the occurrence of an event of insolvency with respect to the Member or any ten 

(10) percent owner or greater owner of the Member.

Rule 403: Right of Inspection

(a) Each Member and Related Party agrees that the Exchange (or its authorized representative, 

including the Regulatory Services Provider) shall be entitled to:

(xiii) inspect or examine the systems, equipment and software operated or used by Member 

in connection with Trading Activity or subject to the Rules;

(xiv) have access to the books and records of the Member;

(xv) have access to the systems, equipment and software operated or used by Member in 

connection with Exchange or any futures or related activity, and the premises where the 

same is located, and any data stored therein; and

(xvi) remove, copy or reproduce any data to which the Exchange has provided under this Rule.

(b) Upon request of the Exchange, a Member shall provide such information concerning the 

Member’s (and any of its Customers and Related Parties activities or use of exchange facilities) 

use of the Exchange Trading System or business conducted on or related to the Exchange in the 

manner and timeliness requested by the Exchange.

(c) Upon request of the Exchange, Regulatory Service Provider or DCO each Member shall provide 

evidence of its financial condition at such times and in such manner as shall be prescribed by the 

Exchange.
 

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Rule 404: Minimum Financial and Related Reporting Requirements

(a) Each Member, which includes each Clearing Firm, that is registered with any Government Agency, 

including the CFTC and the U.S. Securities and Exchange Commission, or a Self-Regulatory 

Organization shall comply with CFTC Regulation §1.17, applicable DCO Rules and other Applicable 

Law, including but not limited to the rules and regulations such Government Agency imposes on 

a Member, which includes each Clearing Firm, relating to minimum financial and related reporting 

and recordkeeping requirements. Upon request by the Exchange, Member shall produce such 

records related to this Rule.

(b) A copy of any notice or written report that a Member, which includes an FCM, IB or any Clearing 

Firm, is required to file with the CFTC pursuant to CFTC Regulations §1.10 and §1.12 shall be 

concurrently provided to the Exchange.

(c) The Exchange (or the Regulatory Service Provider) conducts surveillance and each Member and 

Related Party must respond timely to any request pursuant to a surveillance exception cited that 

involves the Member or Related Party.

(d) A Member or Related Party that violates any provision of Applicable Law (including CFTC 

Regulations) shall be deemed to have violated this Rule.

Rule 405: Member Confidentiality of Financial and Other Information

All information and data obtained or received by the Exchange from inspections of accounting and other 

records, quarterly balance sheets and declarations or reports on financial condition will be treated as 

confidential by the Exchange; however, this Rule does not supplant the Rules in Chapter 6, or any other 

requirement of Applicable Law or legal process.

Rule 406: Authority to Impose Restrictions

Whenever a Member or Related Party is subject to the early warning requirements set forth in CFTC 

Regulation § 1.12, the Exchange may impose such conditions or restrictions on the business and 

operations of such Member or as the Exchange may deem necessary or appropriate for the protection of 

Customers, other Members, or the Exchange.

Rule 407: Customers

(a) No Member shall carry an Account for or enter an Order in the name of a Customer unless the 

Member has entered into a written agreement with the Customer that is in compliance with 

Applicable Law and Exchange Rules including all applicable anti-money laundering requirements.
 

44

(b) Without prejudice to the generality of paragraph (a) of this Rule, each written agreement with a 

Customer must incorporate into every Contract carried for the Customer all the terms of the Rules 

insofar as they are applicable to that Contract.

(c) No Member shall engage in soliciting or accepting an Order for the Contract for a Member or 

Customer unless the Member has entered into a written agreement with the Member or 

Customer obtaining such terms as may from time to time be prescribed in these Rules.

Rule 408: Member Treatment of Customer Funds and Securities

Each Member that is required to be registered with any Government Agency, including the CFTC and the 

U.S. Securities and Exchange Commission, or Self-Regulatory Organization shall comply with the 

provisions of Applicable Law, including but not limited to the rules and regulations such Government 

Agency imposes on a Member relating to the treatment of Customer funds and the maintenance of books 

and records with respect thereto. Specifically, each Clearing Firm must comply with the regulations of the 

applicable Government Agency and the rules of the DCO, including, but not limited to rules related to the 

protection of Customer funds, including the segregation of Customer and proprietary funds, the custody 

of Customer funds, the investment standards for Customer funds, intermediary default procedures and 

related recordkeeping. This includes, but is not limited to, CFTC Regulations § 1.20(a) and § 1.25. The 

Exchange conducts surveillance related to this Rule, including through its membership in the Joint Audit 

Committee. Any Member that violates any of the aforementioned CFTC Regulations, DCO Rules, and other 

Applicable Law shall be deemed to have violated this Rule.

Rule 409: Disclosure Requirements

Each Member must comply with all disclosure requirements set forth in these Rules and applicable CFTC 

and NFA Rules and Regulations. If applicable, any such disclosure must be combined with a disclosure 

regarding the existence of financial interests held by the Member in the Exchange or any other exchange.

Rule 410: Information Regarding Orders

(a) The Exchange will make information regarding Orders (including prices bid or offered), trades, 

time and sales and any other matters it may deem appropriate available to Members and other 

Participants at such times and in such manner (whether through the Trading System, a ticker, 

financial information services or otherwise) as it may consider necessary or advisable from time 

to time.

(b) Each Member or other Participant receiving any such information through the Trading System

may redistribute such information only in accordance with these Rules and to such extent and in 

such manner as may be permitted by the Exchange from time to time.
 

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Rule 411: Trading Limitations, Termination and Suspension

(a) In accordance with, and subject to, the procedures provided in Chapter 5, the Exchange may, 

upon the occurrence of any of the following events, impose limitations, conditions and restrictions 

on a Member or Participant, as applicable, or suspend or terminate any such status if such Person:

(i) fails to satisfactorily demonstrate its ability to satisfy the eligibility criteria to become or 

remain a Member;

(ii) is unable to satisfactorily demonstrate its ability to adhere to all applicable Exchange 

Rules;

(iii) would bring the Exchange into disrepute as determined by the Exchange in its sole 

discretion; or

(iv) for such other cause as the Exchange may reasonably determine.

(b) When the Trading Privileges of a Member are terminated, all of a Member’s rights and Trading 

Privileges will terminate (including those of any Related Parties), except for the right of the 

Member in question to assert claims against others, as provided in Exchange Rules. Any such 

termination will not affect the rights of creditors under the Exchange Rules.

(c) A suspended or terminated Member, Related Party or Participant remains subject to Exchange 

Rules and the jurisdiction of the Exchange for acts and omissions prior to the suspension or 

termination, and must cooperate in any inquiry, investigation, or disciplinary proceeding, 

summary suspension or other summary action as if the suspended or terminated Member still 

had Trading Privileges. The Exchange may discipline a suspended Member or Participant under 

the Rules for any violation of a Exchange Rule, Obligation, or provision of Applicable Law 

committed by the Member or Participant before, during or after the suspension.

Rule 412: Access to Position Information

(a) Without limiting any provision of these Rules, the Exchange shall have the authority to obtain 

from any Member information with respect to positions of such Member or any Customer of such 

Member. This authority shall include the authority to obtain information concerning positions 

maintained at other firms, and it shall be the obligation of a Member receiving such an inquiry to 

obtain such information. In the event a Member fails to provide the requested information, the 

Exchange, in addition to any other remedy under these Rules, may order that the Participant 

liquidate the positions that are related to the inquiry.

(b) Members shall submit to the Exchange, upon request, such information as the Exchange may 

require with respect to the positions the Member or its Customer owns or controls on another 

venue, in such form and manner as may be specified by the Exchange.
 

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Rule 413. Recordkeeping Requirements of Members

Members are required to keep complete and accurate books and records, including without limitation, all 

books and records of its Trading Activity and his or her activity in the index or instrument used as a 

reference price, in the underlying commodity, and related derivatives markets, and all books and records 

required to be maintained pursuant to the CEA, CFTC Regulations and Exchange Rules, for the period 

required by Applicable Law, and make such books and records available for inspection by an authorized 

representative of the Exchange, the applicable Regulatory Service Provider (if any) or, upon request of the 

CFTC.
 

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Chapter 5: Trading Practices

Rule 501. Scope

Rules concerning trading practices while using the Exchange Trading System and facilities and applicable 

Orders and Transactions. 

Rule 502. Procedures

(a) With respect to trading on or through the Trading System, the Exchange may adopt, without 

limitation, procedures relating to Transactions in Contracts and trading on the Trading System, 

including procedures to:

(i) determine the daily settlement price of a Contract;

(ii) disseminate the prices of bids and offers on, and Trades in, Contracts; 

(iii) record Contracts and Trading Activity;

(iv) perform market surveillance and regulation on matters affecting Contracts and Trading 

Activity on the Exchange;

(v) establish limits on the number and/or size of Orders that may be submitted by a Member 

or Participant through the Trading System;

(vi) establish limits on the number of Contracts that may be held by a Member or Participant;

(vii) establish a limit on the maximum daily price fluctuations for any Contract and provide for 

any related restriction or suspension of trading in the Contract; and

(viii) require a suspended or expelled Member or Participant, or a Member or Participant with 

restricted Trading Privileges, to have Contracts executed for the Member or Participant

to reduce or eliminate any open position or exposure to price changes for the Member or 

Participant in any Contract.

(b) The Exchange may, in its discretion and at any time, amend any procedures adopted pursuant to 

Rule 502(a) in accordance with the applicable CFTC procedures, and will publish the amendments 

in a Notice to Members or in any other manner determined appropriate by the Exchange.
 

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Rule 503. Supervision

A Member shall be responsible for establishing, maintaining and administering reasonable supervisory

procedures to ensure that its Related Parties, Authorized Traders, partners, directors, officers, agents, 

contractors, representatives, and employees comply with Applicable Law and the Rules, and such Member

may be held accountable for the actions of such Related Parties, Authorized Traders, partners, directors, 

officers, agents, contractors, representatives, and employees with respect to the Exchange.

Rule 504. Exchange Business Days and Trading Hours

The Exchange will publish a Notice to Members listing Business Days and the Trading Hours that will be 

made available on the Exchange website.

Rule 505. Contracts Traded on the Exchange

The Exchange will determine which Contracts are available for trading subject to the Rules of the Exchange 

from time to time, and approve Rules containing the specifications for such Contracts; provided that 

certifications or applications with respect to such Rules shall be submitted to the Commission as required 

by the CEA and the CFTC Regulations thereunder. All trading in Exchange Contracts must occur on or 

through Exchange facilities and in accordance with Exchange Rules and Applicable Law.

Rule 506. Pre-Trade Risk Controls

(a) The Clearing Member must designate a natural Person as a risk manager, and such risk manager

shall be responsible for initially setting and thereafter adjusting, as appropriate, pre-trade risk 

controls to a level that is appropriate for the Trading Activity of a Member or Participant for which 

the Clearing Member Firm is the designated Clearing FCM. Members, Related Parties and 

Participants should employ other necessary pre-trade risk controls appropriate for such Person’s 

Trading Activity.

(b) When pre-trade risk parameters have been met or exceeded, the Exchange's Trading System:

(i) will reject all new Orders in their entirety; and

(ii) may accept new Orders if the Member or Participant cancelled existing Orders, but only 

to the extent that the pre-trade risk parameter was not met or exceeded.

Rule 507. Acceptable Orders

(a) At the discretion of the Exchange, any of the following types of Orders, as well as any other types 

that may be approved from time to time, may be entered into the Trading System with respect to 

any Contract:
 

49

(b) Market with Protection Order

(i) Market with Protection Orders are executed at the best price or prices available in the 

order book at the time the Order is received by the Trading System but will not execute 

outside a predefined range of prices referred to as the protected range. For bid Orders, 

protection points are added to the current best offer price in the order book to calculate 

the protection price limit. For offer Orders, protection points are subtracted from the 

current best bid price in the order book to calculate the protection price limit.

(c) Limit Order

(i) Limit Orders are Orders to buy or sell a stated quantity at a specified price or at a better 

price if obtainable. Unless otherwise specified, any residual volume from an incomplete 

limit Order is retained in the central order book until the end of the day.

(d) Stop with Protection Order

(i) The Stop Order type is an Order which, when accepted, does not immediately go on the 

book, but must be "triggered" by a trade in the market the price level submitted with the 

Order. Stop Orders with protection prevent stop Orders from being executed at extreme 

prices. A stop Order with protection is activated when the market trades at or through 

the stop trigger price and can only be executed within the protection range limit. The 

Order enters the order book as a market Order with the protection price limit equal to 

the trigger price plus or minus the pre-defined protection point range.

(e) Stop Limit Order

(i) The Stop Order type is an Order which, when accepted, does not immediately go on the 

Book, but must be "triggered" by a trade in the market the price level submitted with the 

Order. After the trigger price is traded in the market, the Order enters the Order Book as 

a limit Order at the Order limit price. The limit price is the highest/lowest price at which 

the stop Order can be filled. The Order can be filled at all price levels between the trigger 

price and the limit price. If any quantity remains unfilled, it remains on the Order Book 

as a limit Order at the limit price.

(f) Time in Force

(i) Day Order: An Order that expires automatically at the end of each day’s trading session.

(ii) Good Till Canceled Order (GTC): An Order which is valid until canceled by the Customer.

(iii) Immediate or Cancel (IOC): An Order to bid or offer that must be immediately filled and 

any unfilled portion of the Order is canceled.
 

50

(iv) Fill or Kill Order (FOK): An Order that demands immediate execution or cancellation. 

Typically involving a designation, added to an order, instructing the broker to offer or bid 

(as the case may be) one time only; if the Order is not filled immediately, it is then 

automatically cancelled.

Rule 508. Spread Orders

A spread Order is an Order to simultaneously buy and sell at least two different Contracts in a form 

permitted by the Exchange. Exchange spreads operate on a Central Limit Order Book and therefore accept 

a single price and quantity even though they are constructed as combinations of multiple Contracts.

Rule 509. Modification and Cancellation of Orders

Any Order that has been entered into the Trading System may be modified or cancelled, unless and until 

the Order has been fully executed, by any means allowed by the Trading System.

Rule 510. Withholding Orders Prohibited 

Any Member or Related Party entering Orders on the Exchange for its Customer shall not withhold or 

withdraw from the market any Order, or any part of an Order, for the benefit of any Person other than 

such Customer. A Member or Related Party must enter into the Trading System all Orders that are 

immediately acceptable as soon as practicable following receipt.

Rule 511. Disclosing Orders Prohibited 

No Member, Related Party or Participant shall disclose the terms of an Order prior to entry onto the 

Trading System except to a designated Exchange official or pursuant to a request by the applicable 

regulator, and no Membershall solicit or induce another Person to disclose Order information. No Person 

shall act or direct another to act based on non-public Order information, however acquired.

Rule 512. Responsibility for Customer Orders

(a) Standard of Responsibility

(i) A Member or Related Party shall exercise due diligence in the handling and execution of 

Customer Orders. Failure to act with due diligence shall constitute negligence. In the case 

of a dispute as to whether a Member has exercised due diligence, the appropriate 

arbitration or disciplinary committee is authorized to determine whether the Member 

was negligent and, if so whether an adjustment is due to the Customer.
 

51

(ii) A Member or Related Party is prohibited from directly or indirectly guaranteeing the 

execution of an Order or any of its terms such as the quantity or price. A Member or 

Related Party may only report an execution that has been affected through the Trading 

System. This Rule shall not be construed to prevent a Member or Related Party from 

assuming or sharing in the losses resulting from an error or the mishandling of an Order.

(b) Liability for Negligence: A Member, Related Party or Participant may not credit an adjustment of 

the price at which an Order was executed or be held responsible for executing or failing to execute 

an Order unless such Member, Related Party or Participant was negligent or is settling a bona-fide 

dispute regarding negligence. A Member may not compel an adjustment from another Member 

in the absence of a bona-fide dispute regarding negligence. Members and Clearing Members shall 

document all adjustments. Members and Clearing Members shall make and retain a record which 

contains the date the adjustment was received, the name of the Member making the adjustment, 

the Account to which the adjustment was credited, the amount of the adjustment, the Order

number and the reason for the adjustment. Such records must be provided to the Exchange upon 

request.

Rule 513. Orders of Other Clearing Members

No Clearing Member shall accept or submit any Order for or on behalf of another Clearing Member, 

without the prior written consent of such other Clearing Member. If such Order results in a Transaction, 

the Clearing Member accepting the Order must send promptly a duplicate confirmation of the Transaction 

to the Clearing Member from whom the prior written consent is required pursuant to this Rule.

Rule 514. Discretionary Orders

No Member, Related Party or Participant shall submit a discretionary Order to the Trading System for any 

Account of another Person, without the prior specific written consent of such other Person to the exercise 

of such discretion.

Rule 515. Errors and Omissions in Handling of Customer Orders

(a) A Member or Related Party who inadvertently, through error or omission, fails to execute an 

Order at the time it should have been executed may, upon discovery of such error or omission, 

execute such Order at the best obtainable price. Such Order shall be competitively executed and 

should be executed in the next available trading session for the applicable listed Contract, but in 

any event must be executed no later than the close of the next trading day and shall be reported 

to the Customer at the price at which the Order was actually executed. If such price is to the 

advantage of the Customer, the Customer shall receive the benefit thereof; if not, the Customer 

shall receive such monetary adjustment as will afford the Customer the equivalent of the price at 

which such Order should and could have been executed.

(b) Any Clearing Member receiving such report and adjustment with respect to an Order of a 

Customer shall report to such Customer the execution at the price reported on the Exchange to 
 

52

such Clearing Member and make the same monetary adjustment for the Account of such 

Customer. Full details of all Transactions consummated hereunder shall be promptly provided to 

the Exchange upon request.

Rule 516. Exchange Trading System Matching Algorithm

The Exchange Central Limit Order Book (“CLOB”) uses a Price/Time algorithm (also known as the First In, 

First Out or FIFO method). Under the Price/Time algorithm, Orders will be matched with the earliest bid 

or offer to arrive in the Trading System at the best price. If there are multiple bids and offers that have 

the same price, the earliest to arrive in the Trading System will be the bid or offer to which the Order is 

matched. If the Order exceeds the quantity of the bid or offer, the Participant will be filled at the next, 

best bid or offer for their Order.

(i) Except as provided in, and in accordance with, Rule 517, all Transactions on the Exchange 

will be matched and executed through the operation of the CLOB.

(ii) Trading on the CLOB remains open throughout the Exchange trading day unless a market 

is paused or halted by the Exchange. Executable Orders shall be displayed separately in 

the Order Book.

(iii) The CLOB matches Orders using an automated matching algorithm. Bids and offers are 

matched on the basis of price/time priority; that is, an Order at a better price will always 

have priority over an Order at an inferior price and older Orders will have priority over 

newer Orders at the same price.

(iv) Trading on the CLOB begins at the opening time set by the Exchange.

(v) A Trade is executed on the CLOB when the price of a bid (offer) equals or is greater (less) 

than the price of an offer (bid) for the same Contract and, if an option Order, the same 

strike price and option type.

(vi) Details of each Transaction executed on the CLOB or subject to Exchange Rules will be 

recorded by the Exchange, and confirmation of the Transaction will be displayed on the 

Trading System for each Member, Authorized Trader or Participant who is a party to the 

Transaction.

(vii) Failure of the Exchange to broadcast any message in respect of a Transaction on the 

Exchange or subject to the Rules shall not invalidate such Transaction.

(viii) In the event that the Trading System or any part of the Trading System fails, the 

Exchange’s determination that a Transaction has or has not been made shall be conclusive 

and binding.
 

53

Rule 517. Priority of Execution

Customer Orders received by a Member or Related Party shall be entered into the Trading System in the 

sequence received. Orders that cannot be immediately entered into the Trading System must be entered 

when the Orders become executable in the sequence in which the Orders were received.

Rule 518. Misuse of the Trading System

Misuse of the Trading System is strictly prohibited. It shall be deemed an act detrimental to the welfare 

of the Exchange to engage in unauthorized use of the Trading System, to assist any Person in obtaining 

unauthorized access to the Trading System, to trade on the Trading System without authorization by the 

Exchange and an agreement and an established Account with a Clearing Member, to alter the equipment 

associated with the Trading System, to interfere with the operation of the Trading System, to intercept or 

interfere with information provided thereby, or in any way to use the Exchange in a manner contrary to 

the Rules.

Rule 519. Exchange Trading System Access Restrictions

(a) All Members, Related Parties or Participants permissioned to connect to the Trading System, 

including direct connections of Members, to the extent permitted by the Exchange, must be 

guaranteed by a Clearing Member that assumesfinancial responsibility for Member. With respect 

to Trades transferred to other Clearing Members, such guarantee is effective only until such time 

that the other Clearing Member accepts the Trade. A Trade transferred to another Clearing 

Member will be deemed to have been accepted by such Clearing Member if the trade is not 

rejected by the close of business on the next Business Day following the trade date. The 

acceptance of a Trade by a Clearing Member shall not relieve any Member, Related Party, 

Participant or Clearing Member of the duty to act in accordance with the Rules and Applicable 

Law.

(b) Clearing Members shall assist the Exchange in any investigation into potential violations of the 

Exchange Rules or the CEA which occur through or with respect to a Trading System connection 

guaranteed by the Clearing Member. Such assistance must be timely and may include, but not be 

limited to, requiring any Member or Customer to produce documents, to answer questions from 

the Exchange, and/or to appear in connection with an investigation. Upon request by the 

Exchange, Clearing Members shall suspend or terminate a Member’s or Customer’s access if the 

Exchange determines that the actions of the Member or Customer threaten the integrity or 

liquidity of any Contract or violate any Exchange Rule or the CEA, or if the Customer fails to 

cooperate in an investigation.

(c) If a Clearing Member has actual or constructive notice of a violation of Exchange Rules in 

connection with the use of the Trading System by a Member or Customer for which it has 

authorized a direct connection and the Clearing Member fails to terminate the connection, the 

Clearing Member may be found to have committed an act detrimental to the Exchange.
 

54

Rule 520. Identification of Authorized Traders and Related Parties 

Each Authorized Trader and Related Party shall be identified to the Exchange, in the manner prescribed 

by the Exchange, and shall be subject to Exchange Rules. If User IDs are required to be registered with 

the Exchange, it is the duty of the Clearing Member to ensure that registration is current and accurate at 

all times. Each natural Person must use a unique User ID to access the Trading System. In no event may a 

Person enter an Order or permit the entry of an Order by an individual using a User ID other than the 

individual’s own unique User ID.

Rule 521. Position Accountability

(a) A Member or Participant who holds or controls, or a Member, Participant or Clearing Member 

that carries for another party, aggregate positions in excess of those specified in the position 

accountability table, shall:

(i) Provide, in a timely manner upon request by the Exchange, information regarding the 

nature of the position, trading strategy, and hedging information, if applicable.

(ii) Be deemed to have consented, when so ordered by the Exchange, not to further increase 

the positions which exceed the levels specified in the position accountability.

(iii) Initiate and/or liquidate such positions in an orderly manner upon request by the 

Exchange.

(b) For purposes of this Rule, all positions in Accounts for which a Member or Participant, by power 

of attorney or otherwise, directly or indirectly controls trading shall be included with the positions 

held by such Member. The provisions of this Rule shall apply to positions held by two or more 

Members or Participants acting pursuant to an expressed or implied agreement or understanding, 

the same as if the positions were held by or the trading of the positions was controlled by a single 

Member or Participant.

Rule 522. Position Accountability Limits

See Exchange website for current Position Accountability Limits.

Rule 523. Reports of Large Positions and Ownership and Control Reporting

(a) Large Trader Reporting

(i) Clearing and/or Corporate Members shall submit to the Exchange a daily report of all 

positions required to be reported as set forth in this Chapter.
 

55

(ii) All Large Trader Reports shall be submitted in a form acceptable to the Exchange. The 

Exchange may require that more than one (1) Large Trader Report be submitted daily. 

The Regulatory Oversight Committee or the Exchange may require reports from any 

Clearing and/or Corporate Members on a lesser number of positions than reflected in the 

Table in Rule 522.

(b) Ownership and Control Reporting

(i) Clearing and/or Corporate Members must provide the Regulatory Department of the 

Exchange with the required CFTC Form 102A and/or Form 102B identifying the owner, 

any controlling parties and any additional required information for each reportable 

Account. A reportable Account for the purposes of this Rule is an Account at or above the 

Reportable Futures Level as identified in the Table in Rule 522.

(ii) The applicable Form 102A and/or Form 102B must be submitted to the Regulatory

Department no later than 9:00 am Eastern Time on the Business Day following the date 

on which the Account becomes reportable. Additionally, Clearing and/or Corporate 

Members must submit a revised form reflecting any material changes to the information 

previously provided to the Regulatory Department within three (3) Business Days of such 

changes becoming effective. In the absence of any material changes, the Exchange may 

require electronic submission of a new Form 102A and/or Form 102B on an annual basis 

for the maintenance of accurate records.

Rule 524. Recordkeeping Requirements for Entering Orders into the Exchange

Trading System

(a) General Requirements:

(i) Each Member, Related Party or Participant entering Orders into the Trading System shall 

input for each Order the Exchange required fields for an Order to be accepted.

(ii) With respect to Orders received by an Authorized Trader that are capable of being 

immediately entered into the Trading System, no record other than that set forth above 

need be made. However, if an Authorized Trader receives an Order that cannot be 

immediately entered into the Trading System, the Authorized Trader must prepare a 

written Order and include the Account designation, date, an electronic timestamp 

reflecting the time of receipt and other information required pursuant to section (i),

above. The Order must be entered into the Trading System when it becomes executable.

(b) Electronic Audit Trail Requirements for Electronic Order Routing/Front-End Systems.

(i) Clearing Members must guarantee any connection allowed for access by a Member, 

Related Party or Participant to the Trading System and are responsible for maintaining or 
 

56

causing to be maintained the Order routing/front-end audit trail for all electronic Orders, 

including Order entry, modification, cancellation and responses to such messages 

(referred to as the “Electronic Audit Trail”), entered into the Trading System through any 

gateway to the Trading System for a period of five (5) years with two (2) years easily 

accessible.

(ii) The Electronic Audit Trail records must be maintained for a minimum of 5 years and 

Clearing, and/or Corporate Members must have the ability to produce this data in a 

standard format compliant with Applicable Law upon request of the Exchange. This 

Electronic Audit Trail must contain all Order receipt, Order entry, Order modification, and 

response/receipt times to the highest level of precision achievable by the operating 

system, but at least to the hundredth of a second. The times captured must not be able 

to be modified by the Person entering the Order as is required by Applicable Law for 

record retention. The data must also contain all FIX Tag information and fields which 

should include, but is not limited to the following: A record of all fields relating to Order

entry, including Transaction date, product, Exchange code, expiration month, quantity, 

Order type, Order qualifier, price, buy/sell indicator, stop/trigger price, Order number, 

unique Transaction number, Account number, session ID, operator ID, host Order

number, trader Order number, Clearing Member, type of action, action status code, 

Customer type indicator, origin, and timestamps. For executed Orders, the audit trail 

must record the execution time (including milliseconds) of the trade along with all fill 

information.

(iii) In the case where the guaranteeing Clearing Member has a direct connect Customer that 

is another Clearing Member, the Clearing Member may notify the Customer Clearing 

Member in writing that it is their obligation to maintain the Electronic Audit Trail. It shall 

be the duty of the Customer Clearing Member to maintain an Electronic Audit Trail 

pursuant to this Rule.

(c) Customer Type Indicator (CTI) Codes. Each Clearing Member must identify each Transaction 

executed on the Trading System on the record of Transactions submitted to the Exchange with 

the correct Customer type indicator (CTI) code. The CTI codes are as follows:

(i) CTI 1 - Transactions initiated and executed by an individual Member for his/her own 

Account, for an Account he/she controls or for an Accountin which he/she has ownership 

or financial interest.

(ii) CTI 2 - Transactions executed for the proprietary Account of a Clearing Member or nonclearing Member firm.

(iii) CTI 3 - Transactions where an individual Member or Authorized Trader executes for the 

personal Account of another individual Member, for an Account the other individual 

Member controls or for an Account in which the other individual Member has ownership 

or financial interest.
 

57

(iv) CTI 4 - Any Transaction that does not meet the definition of CTI 1,2 or 3. (These should be 

non-Member Customer Transactions.

Rule 525. Trade Cancellations and Price Adjustments

The Exchange, in its sole discretion, regardless of whether a request has been made, either cancel a 

transaction or adjust the execution price of a transaction.

See Rulebook Appendix A for the Exchange Error Trade Policy regarding trade cancellations and price 

adjustments.
 

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Chapter 6: Trading Business Conduct

Rule 601. Scope

This Chapter applies to all business conducted applicable to Exchange Trading, Order entry and 

Transactions effected on the Exchange.

Rule 602. Adherence to Law

No Member, Related Party or Participant shall engage in conduct that is a violation of the Exchange Rules 

or Applicable Law.

Rule 603. Rule Violations

(a) It shall be an offense for a Member, Related Party or any Participant to violate any Exchange Rules 

regulating the conduct or business of the Exchange, or any agreement made with the Exchange, 

or to engage in fraud, dishonorable or dishonest conduct, or in conduct which is inconsistent with 

just and equitable principles of trade.

(b) Members, Related Parties and Participants shall assist the Exchange in any investigation into 

potential Violations of the Exchange Rules or the CEA. Such assistance must be timely and may 

include, but not be limited to, producing documents, answering questions from the Exchange or 

its designee, and/or appearing in connection with an investigation.

(c) If a Member has actual or constructive notice of a violation of the Exchange Rules in connection 

with the use of the Exchange by a Member, Related Party or Participant and the Member fails to 

take appropriate action, the Member may be found to have committed an act detrimental to the 

interest or welfare of the Exchange.

Rule 604. Fraudulent Acts Prohibited

No Member, Related Party or any Participant that directly or indirectly effects a Transaction on the 

Exchange shall engage in any fraudulent act or engage in any scheme to defraud, deceive, trick or mislead 

in connection with or related to the Exchange and/or DCO or other markets that may impact activity on 

the Exchange.

Rule 605. Non-Competitive or Fictitious Transactions Prohibited

No Member, Authorized Trader or any Participant that directly or indirectly effects a Transaction on the 

Exchange shall create, place or accept fictitious Transactions, wash Transactions, or non- competitive 

Transactions except, in the case of non-competitive Transactions, as otherwise authorized by the 
 

59

Exchange Rules, or execute any such Order with knowledge of its nature as a fictitious Transaction, wash 

Transaction, accommodation trade or non-competitive Transaction.

Rule 606. Manipulation Prohibited

No Member, Related Party or any Participant that directly or indirectly effects a Transaction on the

Exchange shall attempt to manipulate the market in any Contract.

Rule 607. Disruptive Trading Practices Prohibited

(a) All orders must be entered for the purpose of executing bona fide Transactions. Additionally, all 

non-actionable messages must be entered in good faith for legitimate purposes.

(i) No Person shall enter or cause to be entered an Order with the intent, at the time of 

entry, to cancel the Order before execution or to modify the Order to avoid execution;

(ii) No Person shall enter or cause to be entered an actionable or non-actionable message or 

messages with the intent to mislead other market participants;

(iii) No Person shall enter or cause to be entered an actionable or non-actionable message or 

messages with the intent to overload, delay, or disrupt the Exchange Trading System or 

other market participants; and

(iv) No Person shall enter or cause to be entered an actionable or non-actionable message 

with the intent to disrupt, with reckless disregard for the adverse impact on, the orderly 

conduct of trading or the fair execution of Transactions.

(b) In connection with the placement of any Order or execution of any Transaction, it shall be a 

Violation of the Rules for any Person to engage in any trading practice or conduct that constitutes 

disruptive trading practices prohibited by the act or by the Commission pursuant to Commission 

regulation, including, but is not limited to, engaging in conduct that:

(i) Violates bids or offers;

(ii) Demonstrates intentional or reckless disregard for the Orderly execution of Transactions 

during the opening or closing periods; or

(iii) Spoofing, bidding or offering with intent to cancel the bid or offer before execution.

Rule 608. Abusive Trading Practices Prohibited

No Member, Related Party or Participant that directly or indirectly effects a Transaction on the Exchange

shall engage in any abusive trading practices or trading practices that the Exchange deems to be abusive, 
 

60

manipulative, disruptive or prohibited by CFTC Regulation 38.152, including, but not limited to the 

following types of Transactions as defined by CFTC Regulations:

(a) Wash Trading: entering into, or purporting to enter into, Transactions to give the appearance that 

purchases and sales have been made when such Transactions were entered, without incurring 

market risk or changing the trader’s market position. No Member, Related Party or Participant 

shall place or accept buy and sell Orders in the same product and expiration month, and, for a put 

or call Option, the same strike price, where the Person knows or reasonably should know that the 

purpose of the Orders is to avoid taking a bona fide market position exposed to market risk 

(Transactions commonly known, or referred to, as wash sales). Buy and sell Orders for different 

accounts with common beneficial ownership that are entered with the intent to negate market 

risk or price competition shall also be deemed to violate the prohibition on wash trades.

Additionally, no Person shall knowingly execute or accommodate the execution of such Orders by 

direct or indirect means.

(b) Pre-arranged Trading (except as otherwise permitted under the Rules): trading between 

authorized traders in accordance with an expressed or implied agreement or understanding in a 

form that is not permitted within the Commodity Exchange Act, CFTC Regulations or the Exchange 

Rules. No Member, Related Party or Participant shall prearrange or pre-negotiate any purchase 

or sale or noncompetitively execute any Transaction.

(c) Money Pass: non-competitive trading between authorized traders where a profit is passed from 

one trader to the other.

(d) Spoofing: bidding or offering with intent to cancel the bid or offer before execution.

(e) Trading Ahead of Customer Orders: taking a Futures or Futures Options position based upon nonpublic information regarding an impending Transaction by another Person in the same or related 

Exchange Contract.

(f) Trading Against Customer Orders: directly or indirectly taking the opposite side of a Customer’s 

Order into the Party’s own Account or into an Account in which the Party has an interest, without 

open and competitive execution of the Order on the Exchange.

(g) Improper Cross Trading: offsetting or noncompetitive match of the buy Order of one Customer or 

Account and the sell Order of another, a practice that is permissible only when executed in 

accordance with the Commodity Exchange Act, CFTC Regulations or Exchange Rules.

(h) Accommodation Trading: non-competitive trading entered into by a Party, usually to assist 

another with illegal trade.

(i) Front-Running: taking a Futures or Option position based upon non-public information regarding

an impending Transaction by another Person in the same or related Future or Option.
 

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Rule 609. Prohibition of Misstatements

No Member, Related Party or Participant shall knowingly make misstatements of material fact to the 

Exchange, any Exchange Authorized Representative or official, any Board Committee or the Exchange 

Committee or Panel, or the Regulatory Service Provider, the CFTC, the SEC or other Government Agency.

Rule 610. Acts Detrimental to the Welfare of the Exchange Prohibited

No Member, Related Party or Participant shall engage in any act that is detrimental to the Exchange.

Rule 611. Priority of Customer Orders

No Member, Related Party or Participant shall knowingly enter an Order into the Exchange for its own 

Account, an Account in which it has a direct or indirect financial interest or an Account over which it has 

discretionary trading authority, including, without limitation, an Order allowing discretion as to time and 

price when such Person is in possession of any competing Order for another Person that the Exchange is 

capable of accepting.

Rule 612. Simultaneous Buy and Sell Orders for Different Beneficial Owners

On the Exchange’s Trading System, opposite Orders for different beneficial owners that are 

simultaneously placed by a Member, Related Party or Participant with discretion over both accounts may 

be entered into the Trading System, provided that one Order is exposed for a minimum of five (5) seconds 

in the case of Futures Orders. An Order allowing for price and/or time discretion, if not entered 

immediately upon receipt, may be knowingly entered opposite another Order entered by the same firm 

only if this other Order has been entered immediately upon receipt and has been exposed on the Trading 

System for a minimum of five (5) seconds for Futures Orders.
 

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Chapter 7: Discipline and Enforcement

Rule 701. General

(a) Jurisdiction

(i) The Exchange, acting through its Regulatory Service Provider (“RSP”), Regulatory 

Department and Disciplinary Panels, shall have the authority to initiate and conduct 

investigations and enforce Violations committed by Members, Related Parties or any 

Participant that directly or indirectly effects a Transaction on the Exchange and to impose 

sanctions for such Violations as provided in the Rules.

(ii) Each Member, upon becoming a Member, shall file with the Exchange an address where 

notices may be served (“service address”). If a Member fails to designate a service 

address, Member consents to the Exchange using the Member’s physical address as the 

service address. Delivery thereof shall be deemed to have occurred as of the date of such 

mailing.

(iii) Upon becoming a Member and thereafter, the Member will, prior to any change of 

service, physical, or mailing address, file with the Exchange a notice, written or 

electronically through the Exchange’s website or as deemed acceptable by the Exchange,

designating an address for receiving service of documents. The service, physical, and

mailing address for service of documents is in addition to the Member’s obligation to 

maintain an updated email address with the Exchange at all times which is the default 

communication method.

(iv) The provisions of Chapter 7 shall not apply to or limit the authority of the Exchange to 

limit Trading Privileges or take other actions under Chapter 3 Rules or to take Emergency 

Actions.

(v) No Exchange Official, Director, or Officer will interfere with or attempt to influence the 

process or resolution of any inquiry, investigation, disciplinary proceeding, appeal of a 

disciplinary proceeding, summary imposition of fines, summary suspension or other 

summary action except to the extent provided under Exchange Rules with respect to a 

proceeding in which the Director, Exchange Official or Officer is a member of the relevant 

Appeal Panel or Compliance Staff.

(vi) Any Member, Related Party or Participant may be represented by counsel during any 

Disciplinary Action pursuant to this Chapter 7.

(b) Participant Liability - Individual and Joint Liability/Controlling Person Liability
 

63

(i) The Exchange may hold a Member or Participant liable for, and impose sanctions against 

such Member or Participant, for such Member or Participant’s own acts and omissions 

that constitute a violation as well as for the acts and omissions of each: (A) Authorized 

Trader authorized by such Member; (B) other Related Party of such Member; (C) other 

Person using a User ID of such Participant; or (D) other agent or representative of such 

Member, in each case, that constitute a violation as if such violation were that of the 

Member or Participant.

(ii) The Exchange may hold an Authorized Trader liable for and impose sanctions against such 

Authorized Trader, for such Authorized Trader’s own acts and omissions that constitute a 

violation as well as or for the acts and omissions of any other agent or representative of 

such Authorized Trader that constitute a violation as if such violation were that of the 

Authorized Trader.

(c) Ex Parte Communications.

(i) A Member, Related Party or Participant subject to a disciplinary proceeding or an appeal 

from a disciplinary proceeding (and any counsel or representative of such Member, 

Related Party or Participant) and the Regulatory Department (and any counsel or 

representative of the Regulatory Department) shall not knowingly make or cause to be 

made an ex parte communication relevant to the merits of a disciplinary proceeding or 

an appeal from a disciplinary proceeding to any member of the Disciplinary Panel or the 

Appeal Panel hearing such proceeding.

(ii) Members of a Disciplinary Panel or Appeal Panel shall not knowingly make or cause to be 

made an ex parte communication relevant to the merits of a disciplinary proceeding or 

an appeal from a disciplinary proceeding to any Member subject to such proceeding (and 

any counsel or representative of such Member, Related Party or Participant) and the 

Regulatory Department (and any counsel or representative of the Regulatory 

Department).

(iii) Any Member, Related Party or Participant who receives, makes or learns of any 

communication that is prohibited by this Rule shall promptly give notice of such 

communication and any response thereto to the Market Regulation Department and all 

parties to the proceeding to which the communication relates.

(iv) A Member, Related Party or Participant shall not be deemed to have violated this Rule if 

the Member, Related Party or Participant refuses an attempted communication 

concerning the merits of a proceeding as soon as it becomes apparent the communication 

concerns the merits.
 

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Rule 702. Investigations

(a) The Regulatory Department will investigate any matter within the Exchange’s jurisdiction of which 

it becomes aware. The Exchange will commence an investigation upon the receipt of a request 

from Commission staff or upon the discovery or receipt of information by the Exchange that, in 

the judgment of the Regulatory Department indicates a possible basis for finding that a violation 

has occurred or will occur. The Regulatory Department will determine the nature and scope of 

its inquiries and investigations and will function independently of any commercial interests of the 

Exchange.

(b) It shall be the duty of the CRO and the Exchange Regulatory Department personnel under the 

direction of the CRO to enforce the Rules. The Regulatory Department shall have the authority to 

inspect the books and records of all Members and Participants that directly or indirectly effect a 

Transaction on the Exchange and to require such persons to appear before it to answer questions 

regarding possible Violations.

(c) The Regulatory Department may delegate its authority under these Rules to initiate and conduct 

investigations and prosecute Violations to the Regulatory Services Provider.

(d) No member of the Regulatory Department shall be a Member, Related Party or Participant or 

operate under the direction or control of any Member, Related Party or Participant with Trading 

Privileges.

(e) The Regulatory Department has the authority to:

(i) initiate and conduct inquiries and investigations;

(ii) prepare investigation reports and make recommendations to the CRO concerning 

initiating disciplinary proceedings;

(iii) determine whether a reasonable basis exists for finding a Violation, and for authorizing 

the issuance of Notices of Charges against Respondents alleged to have committed 

Violations if the CRO believes the matter should be adjudicated;

(iv) prosecute alleged Violations within Exchange disciplinary jurisdiction; and

(v) represent the Exchange on appeal from any disciplinary proceeding, summary imposition 

of fines, summary suspension or summary action.

(f) Each Member, Related Party or Participant:

(i) is obligated to appear and testify and respond in writing to interrogatories within the time 

period required by the Regulatory Department in connection with:
 

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(A) any Exchange Rule;

(B) any inquiry or investigation; or

(C) any preparation by and presentation during a Disciplinary Action.

(ii) obligated to produce books, records, papers, documents or other tangible evidence in its, 

his or her possession, custody or control within the time period requested by the 

Regulatory Department in connection with:

(A) any Exchange Rule;

(B) any inquiry or investigation; or

(C) any preparation by and presentation during a Disciplinary Action; and

(iii) may not impede or delay any Disciplinary Action.

(g) The CRO, upon a good faith determination that there is a substantial reason to believe that such 

immediate action is necessary to protect the best interests of the Exchange, may order that any 

Member, Related Party or Participant be denied access to the Exchange for a period not to exceed 

sixty (60) Business Days. Notice shall promptly be given to the Member, Related Party or 

Participant subject to the access denial. Such notice shall state the reasons for the denial, the 

effective date, time and the duration of the denial and advise the Member, Related Party or 

Participant of their right to an expedited hearing before the Disciplinary Panel by filing a request 

with the CRO within ten (10) Business Days after receiving the notice. The Exchange shall 

immediately notify the CFTC of any denial of access under this Rule 702(g) in accordance with the 

requirements of CFTC Regulation 9.12(b).

Rule 703. Reports of Investigations

(a) The Regulatory Department will maintain a log of all investigations and their disposition. The 

Regulatory Department will prepare a written report of each investigation, regardless of whether 

the evidence gathered during any inquiry or investigation forms a reasonable basis to believe that 

a violation within the Exchanges’ jurisdiction has occurred or is about to occur or whether the 

evidence gathered results in closing the matter without further action or through summary action.

(b) Any written report of investigation (“Investigation Report”) will include the reasons for initiating 

the investigation (including a summary of the complaint, if any), all relevant facts and evidence 

gathered, Regulatory Department staff’s analysis and conclusions, the Member’s disciplinary 

history at the Exchange, and the recommendation of the Regulatory Department. For each 

potential Respondent, the Regulatory Department will recommend either:
 

66

(i) closing the investigation without further action;

(ii) settlement;

(iii) summary action;

(iv) the preparation and service of a Notice of Charges for instituting a disciplinary 

proceeding; or

(v) resolving the investigation through an informal disposition, including the issuance of a 

Warning Letter. An informal disposition (including the issuance of a Warning Letter) will 

not constitute a finding of a Violation or a sanction, however, the investigation report 

must include a copy of any Warning Letter and no more than one Warning letter for the 

same potential violation may be issued to the same Member, Related Party or Participant 

during a rolling twelve (12) month period.

(c) The Investigation Report will be provided to the CRO for a determination as to whether the 

Investigation Report is complete. The CRO will then provide the completed Investigation Report 

to the Review Panel of the Disciplinary Panel.

Rule 704. Review of Investigation Reports

(a) Review of Investigation Reports by the CRO

(i) Within sixty (60) Business Days of the receipt of a completed Investigation Report, the 

CRO will review the completed Investigation Report to determine whether a reasonable 

basis exists to believe that a violation within the Exchange’s jurisdiction has occurred or 

is about to occur.

(ii) If the CRO determines that additional investigation or evidence is needed to decide 

whether a reasonable basis exists to believe that a violation within the Exchange’s 

jurisdiction has occurred or is about to occur, the CRO will direct the Regulatory 

Department to conduct further investigation.

(iii) Upon receiving the completed Investigation Report or after receiving additional 

information upon the completion of an investigation, the CRO will determine for each 

potential Respondent whether to authorize:

(A) the informal disposition of the investigation (by issuing a Warning Letter or 

otherwise) because disciplinary proceedings are unwarranted in which case the 

CRO shall provide a written explanation to the Regulatory Services Provider;
 

67

(B) the closing of the investigation without any action because no reasonable basis 

exists to believe that a violation within the Exchange’s jurisdiction has occurred 

or is about to occur in which case the CRO shall provide a written explanation to 

the Regulatory Services Provider; or

(C) the commencement of disciplinary proceedings because a reasonable basis exists 

to believe that a violation within the Exchange’s jurisdiction has occurred or is 

about to occur.

(b) Review of Investigation Reports by the Review Panel of the Disciplinary Panel.

(i) After receiving a completed Investigation Report pursuant to this Rule, a Review Panel 

must promptly review the report and, within thirty (30) Business Days of such receipt, 

must take one of the following actions:

(A) If the Review Panel determines that additional investigation or evidence is 

needed, it must promptly direct the Regulatory Department to conduct further 

investigation;

(B) If the Review Panel determines that no reasonable basis exists for finding a 

violation or that prosecution is otherwise unwarranted, it may direct that no 

further action be taken. Such determination must be in writing and must include 

a written statement setting forth the facts and analysis supporting the decision 

and the CRO shall provide the written statement to the Regulatory Services 

Provider; or

(C) If the Review Panel determines that a reasonable basis exists for finding a 

violation and adjudication is warranted, it must direct that the Person or entity 

alleged to have committed the violation be served with a Notice of Charges and 

proceed in accordance with the Rules of Chapter 7.

(ii) A failure of the Disciplinary Panel to act within the time prescribed in this Chapter shall 

not prevent the CRO from acting pursuant to their duties hereunder. The CROshall inform 

the Regulatory Oversight Committee of any such failure of the Disciplinary Panel to act.

(iii) Any conflict between the actions of the CRO pursuant to this Chapter and the Disciplinary 

Panel shall be resolved by the Regulatory Oversight Committee.
 

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Rule 705. Notice of Charges

(a) If the CRO determines that a matter should be adjudicated in a formal hearing before a 

Disciplinary Panel, the Regulatory Department shall serve a Notice of Charges on the 

Respondent(s).

(b) Such Notice of Charges shall:

(i) State the acts, practices or conduct that the Respondent is alleged to have engaged in;

(ii) State the Rule or provision of Applicable Law alleged to have been violated or about to be 

violated;

(iii) State the proposed sanctions;

(iv) Advise the Respondent(s) has a right to a hearing;

(v) Advise the Respondent(s) has the right to be represented by counsel or any other 

representative of its choosing in all succeeding stages of the disciplinary process except 

by any member of the Board or disciplinary panel, any employee of the Exchange, or any 

Person substantially related to the underlying investigations, such as a material witness 

or Respondent;

(vi) State the period of time within which the Respondent can request a hearing on the Notice 

of Charges will not be less than twenty (20) Business Days after service of the Notice of 

Charges;

(vii) Advise the Respondent(s) that any failure to request a hearing within the period stated, 

except for good cause, will be deemed to constitute a waiver of the right to a hearing;

(viii) Advise the Respondent(s) that the failure of the Respondent to file an Answer within 

twenty (20) Business Days after service of the Notice of Charges will be deemed an 

admission of all of the allegations in the Notice of Charges; and

(ix) Advise the Respondent(s) that any allegation in the Notice of Charges that is not expressly 

denied will be deemed to be admitted.

Rule 706. Opportunity to Respond

(a) After completing its investigation report, the Regulatory Department may, upon approval of the 

CRO, notify each potential Respondent that the Regulatory Department has recommended formal 

disciplinary charges against the potential respondent.
 

69

(b) The Regulatory Department may allow a potential Respondent to propose a settlement of the 

matter or to submit a written statement explaining why a disciplinary proceeding should not be 

instituted or one or more of the potential charges should not be brought. The potential 

Respondent shall submit such written statement within the time limit established by the 

Regulatory Department.

Rule 707. Service of Notice of Charges

(a) Any Notice of Charges or other documents to be served pursuant to this Chapter 7 may be served 

upon the Respondent and service shall be deemed complete either personal delivery or by leaving 

the same at his or her place of business; by deposit in the United States mail, postage prepaid, via 

registered or certified mail addressed to the Respondent at the address as it appears on the books 

and records of the Exchange.

(b) Any Notice of Charges or other documents contemplated to be served pursuant to this Chapter 7 

may be served upon the Respondent and service shall be deemed complete via email to the email

address and/or physical mail at the physical or service address as it appears on the books and 

records of the Exchange.

Rule 708. Answer to Notice of Charges; Reply

(a) The Respondent shall serve the Regulatory Department a written answer (“Answer”) to the Notice 

of Charges and/or a written request for a hearing on the charges within twenty (20) Business Days

of the date of service of the Notice of Charges.

(b) An Answer shall be signed by the Respondent, or its representative, and contain a statement 

specifying the allegations that the Respondent:

(i) denies or admits; or

(ii) does not have sufficient information to either deny or admit.

(iii) if denied, specify any specific facts that contradict the Notice of Charges;

(iv) if denied, specify any affirmative defenses to the Notice of Charges; and

(v) sign and serve the answer to the CRO.

(c) Any failure by the Respondent to timely serve an Answer to a Notice of Charges will be deemed 

to be an admission to the allegations in such Notice of Charges. Any failure by the Respondent to 

Answer one or more allegations in a Notice of Charges will be deemed to be an admission of that 
 

70

allegation or those allegations. Any allegation in a Notice of Charges that the Respondent fails to 

expressly deny will be deemed to be admitted. A general denial by the Respondent, without 

more, will not satisfy the requirements of paragraph (b), above.

(d) The Regulatory Department may serve to the Respondent a reply to the Answer (“Reply”) within 

ten (10) Business Days of the date of service of the Answer. The Reply must be limited to the 

matters set forth in the Answer.

Rule 709. Disciplinary Panel

(a) The Disciplinary Panel shall function as a Review Panel and Hearing Panel. The Panels are put into 

place to minimize conflicts of interest.

(i) The Review Panel shall review completed Investigation Reports in order to determine 

whether a reasonable basis exists for finding a violation of the Exchange Rules and for 

authorizing the issuance of Notices of Charges against persons.

(ii) The Hearing Panel shall conduct hearings in connection with any disciplinary proceedings 

(except for summary impositions of fines pursuant to Rule 717), to make findings, render 

decisions, and impose sanctions pursuant to this Chapter 7.

(iii) The individuals on the Review Panel who determine that a violation has occurred shall 

not be the same individuals on the Hearing Panel who will adjudicate the mater.

(b) The CRO shall appoint the members of the Disciplinary Panel in consultation with the Board. The 

CRO or the Board may remove a member of a Disciplinary Panel for cause.

(c) The Disciplinary Panel will consist of three or five panelists. At least one member of any 

Disciplinary Panel must be someone who qualifies as a Public Person who is not an Exchange 

Member or Participant.

(d) Disciplinary Panels shall not include any members of the Exchange’s Regulatory Department or 

any Person involved in adjudicating any other stage of the same proceeding.

(e) Disciplinary Panels must meet any applicable composition requirements under Part 40 of the CFTC 

Rules.

(f) The Disciplinary Panel shall conduct hearings in connection with any disciplinary proceedings, to 

make findings, render decisions, and impose sanctions (other than summary fines under Rule 717) 

pursuant to this Chapter 7.

(g) No Person shall serve on a Disciplinary Panel unless that Person has agreed in writing that he or 

she will not publish, divulge, or make known in any manner, any facts or information regarding 
 

71

the business of any Person or any other information which may come to his attention in his official 

capacity as a member of the Disciplinary Panel, except when reporting to the Board or to a 

Committee concerned with such information or to the Regulatory Department, when requested 

by the CFTC or other governmental agency or when compelled to testify in any judicial or 

administrative proceeding.

(h) All information, records, materials and documents provided to the Disciplinary Panel and all 

deliberations, testimony, information, records, materials and documents related thereto shall be 

treated as non-public and confidential and shall not be disclosed, except as necessary to further 

an Exchange investigation or as required by State or Federal Law.

(i) No member of the Disciplinary Panel shall have a financial, personal, or other direct interest in 

the matter under consideration.

Rule 710. Settlement

(a) A Respondent may at any time propose to the Disciplinary Panel in writing by submitting an Offer 

of Settlement related to any anticipated or instituted disciplinary proceedings.

(b) Any Offer of Settlement must contain proposed findings and sanctions and be authorized and 

signed by the Respondent and submitted to the Disciplinary Panel presiding over the matter

(“Offer of Settlement”).

(c) A Respondent may offer to settle disciplinary proceedings without admitting or denying the 

findings contained in the order of the disciplinary proceedings (“Order”) but must accept the 

jurisdiction of the Exchange over the Respondent(s) and over the subject matter of the 

proceedings and consent to the entry of the findings and sanctions imposed.

(d) If a Respondent submits an Offer of Settlement in accordance with paragraph (a), above, the 

relevant Disciplinary Panel will forward the Offer of Settlement to the CRO. Any preliminary 

determination by the CRO to accept the Offer of Settlement shall be submitted for review to the 

Disciplinary Panel. If the Disciplinary Panel agrees to accept the Offer of Settlement, then the CRO 

shall conditionally accept an Offer of Settlement, and the Settlement will become final upon the 

expiration of twenty (20) Business Days after an order of the disciplinary proceedings consistent 

with the terms of the Offer of Settlement is served on the Respondent.

(e) If an Offer of Settlement is accepted by the Disciplinary Panel and the Respondent, the Disciplinary 

Panel accepting the Offer of Settlement must issue a written decision specifying the Violations it 

has reason to believe were committed, including the basis or reasons for the Disciplinary Panel’s 

conclusions, and any sanction to be imposed, which must include full Customer restitution where 

Customer harm is demonstrated. If applicable, the decision must also include a statement that 

the Respondent has accepted the sanctions imposed without either admitting or denying the Rule 

Violations.
 

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(f) If an Offer of Settlement is accepted by the Disciplinary Panel and the related order of disciplinary 

proceedings becomes final, the Respondent’s submission of the Offer of Settlement will be 

deemed to constitute a waiver of the right to notice, opportunity for a hearing and further review 

under the Rules.

(g) If the Offer of Settlement of a Respondent is not accepted by the Disciplinary Panel, fails to 

become final or is withdrawn by the Respondent prior to the Disciplinary Panel’s decision, the 

matter will proceed as if the Offer of Settlement had not been made and the Offer of Settlement 

and all documents relating to it will not become part of the record. Neither a Respondent nor the 

relevant Disciplinary Panel may use an unaccepted Offer of Settlement as an admission or in any 

other manner at a hearing of disciplinary proceedings. If the Offer of Settlement is rejected by 

the Disciplinary Panel, the rationale for the rejection will be documented.

Rule 711. Hearing (Disciplinary Procedures and Sanctions)

(a) A hearing will be conducted before members of the Disciplinary Panel.

(b) A hearing will be conducted privately and confidentially.

(c) Following receipt of an Answer from a Respondent, or failure of a Respondent to provide an 

Answer, the Disciplinary Panel will promptly convene a hearing to conduct the disciplinary 

proceedings with respect to such Respondent. Parties to a disciplinary proceeding include each 

Respondent and the Regulatory Department.

(d) The Chair of the Disciplinary Panel may continue, adjourn or otherwise conduct the hearing, as he 

or she may deem appropriate. The Chair of the Disciplinary Panel will determine all procedural 

and evidentiary matters and will not be bound by any evidentiary or procedural rules or law. Once 

admitted during the hearing, the Disciplinary Panel may consider, and attach the weight it believes 

appropriate to, evidence or other materials.

Rule 712. Respondent Review of Evidence

(a) Prior to the commencement of a Hearing, each Respondent will be given the opportunity to 

review all books, records, documents, papers, transcripts of testimony and other evidence in the 

possession or under the control of the Exchange that the Regulatory Department will use to 

support the allegations and proposed sanctions in the Notice of Charges or which the Chair of the 

Disciplinary Panel deems relevant to the disciplinary proceedings. Notwithstanding the foregoing, 

no Respondent will have the right to review, and the Exchange will have no obligation to disclose, 

any information protected by attorney-client privilege.

(b) If any books, records, documents, papers, transcripts of testimony, or other evidence contain 

information that could adversely affect the competitive position of the Person providing the 

information or if such information might compromise other investigations being conducted by the 
 

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Regulatory Department, the Regulatory Department may redact, edit or code such information 

before furnishing it to the Respondent.

(c) Notwithstanding anything in paragraph (b) above to the contrary, the Regulatory Department:

(i) will not redact, edit or code competitive or investigative information contained in 

documents in a manner that would impair the Respondent’s ability to defend against the 

allegations or proposed sanctions in the Notices of Charges, and

(ii) will provide the Respondent with access to the information and portions of the 

documents that the Regulatory Department intends to rely on to support the allegations 

or proposed sanctions in the Notice of Charges.

(d) For purposes of this Rule, information that could adversely affect competitive positions include 

positions in contracts currently held, trading strategies employed in establishing or liquidating 

positions, the identity of any Member or Authorized Trader and the personal finances of the 

Respondent or Person providing the information.

Rule 713. Conducting Hearings

(a) At a Hearing conducted in connection with any disciplinary proceedings, the Regulatory 

Department will present its case supporting the allegations and proposed sanctions in the Notice 

of Charges to the Disciplinary Panel.

(b) At a Hearing conducted in connection with any disciplinary proceedings, the Disciplinary Panel or 

the Regulatory Department and each Respondent may:

(i) present evidence and facts determined relevant and admissible by the Chair of the 

Disciplinary Panel;

(ii) call and examine witnesses; and

(iii) cross-examine witnesses called by other parties.

(c) Any Person entitled, or required or called upon, to attend a Hearing before a Disciplinary Panel 

pursuant to paragraph (b) above will be given reasonable notice, confirmed in writing, specifying 

the date, time and place of the Hearing, and the caption of the disciplinary proceedings. All 

Members, Related Parties or Participants that directly or indirectly effects a Transaction on the 

Exchange that are called as witnesses are required to appear at the Hearing and, where applicable, 

produce evidence. The Exchange will make reasonable efforts to secure the presence of all other 

Persons called as witnesses whose testimony would be relevant.
 

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(d) The Disciplinary Panel may summarily impose sanctions on any Member, Related Party or 

Participant that impedes or delays the progress of a hearing.

(e) If the Respondent has requested a hearing, a copy of the hearing request shall be made and shall 

become a part of the record of the proceeding. The record of the hearing shall not be required 

to be transcribed unless: the transcript is requested by Commission staff or the Respondent, the 

decision is appealed pursuant to the Rules, or the decision is reviewed by the Commission 

pursuant to Section 8c of the CEA or 17 C.F.R. Part 9. If a transcript is requested by the 

Respondent, the Respondent will be solely responsible for the cost of producing the transcript. In 

all other instances, a summary record of a hearing is permitted.

(f) The Exchange will arrange for any hearing conducted in connection with disciplinary proceedings 

to be recorded verbatim, or substantially verbatim, in a manner capable of accurate transcription. 

If the Respondent requests a copy of all or portions of the recording of a hearing, the Chair of the 

hearing panel may within his or her sole discretion require the Respondent to pay the costs for 

transcribing the recording of the Hearing.

(g) No interlocutory appeals of rulings of any Hearing Panel or Chair of the Hearing Panel are 

permitted.

(h) The Hearing will be fair and will be conducted before members of the Disciplinary Panel. This 

Hearing will occur promptly after reasonable notice to the Respondent.

Rule 714. Decision of Disciplinary Panel

(a) As promptly as is reasonable following a hearing, the Disciplinary Panel will issue a written order 

rendering its decision based on the weight of the evidence contained in the record of the 

disciplinary proceedings. A decision by a majority of the Disciplinary Panel will constitute the 

decision of the Disciplinary Panel.

(b) The Exchange will serve a copy of the order of the disciplinary proceedings to the Respondent and 

the Regulatory Department. The order will include:

(i) the Notice of Charges or summary of the allegations;

(ii) the Answer, if any, or a summary of the Answer;

(iii) a summary of the evidence introduced at the hearing or, where appropriate, 

incorporation by reference of the investigation report;

(iv) findings of fact and conclusions concerning each allegation, including a complete 

explanation of the evidentiary and other basis for such findings and conclusions with 

respect to each allegation;
 

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(v) each specific Rule and/or provision of Applicable Law that the Respondent is found to 

have violated;

(vi) the sanctions, if any, imposed including the basis for such sanctions and the effective date 

of each sanction; and

(vii) the availability to the Respondent under CFTC Regulation 9.11(b)(6) of review of any 

disciplinary action or denial of access.

(c) The order of the disciplinary proceedings will become final upon the expiration of twenty (20) 

Business Days after the order is served on the Respondent and provided to the Regulatory 

Department.

(d) The Rules do not permit any appeal of a determination by the Disciplinary Panel. Disciplinary 

actions and denials of access to the Trading System are subject to review by the CFTC in 

accordance with 17 C.F.R. Part 9.

Rule 715. Sanctions

(a) If the Disciplinary Panel determines that a Respondent has committed a Violation for which the 

Exchange has jurisdiction, the Disciplinary Panel may impose one or more of the following 

sanctions or remedies:

(i) censure or reprimand;

(ii) restriction, suspension or termination of Trading Privileges;

(iii) a Warning Letter, subject to the limitations in the applicable CFTC Regulations;

(iv) a cease and desist order;

(v) a fine;

(vi) restitution or disgorgement; or

(vii) any other sanction or remedy determined to be appropriate under the circumstances.

(b) The Exchange may impose a fine of up to $1,000,000 for each Violation not including any 

disgorgement amount levied, together with interest reasonably determined by the Exchange for 

the period from date such fine is imposed to the date of payment. Each Member shall be 
 

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responsible for paying any fine or other amount imposed on, but not paid by, any of its Related 

Parties or Participants.

(c) All disciplinary sanctions, including sanctions imposed pursuant to an accepted Offer of 

Settlement, shall take into account the Respondent’s disciplinary history. Sanctions shall be 

commensurate with the violations committed and sufficient to deter recidivism or similar 

violations by any other Member, Related Party or Participant that directly or indirectly violates an 

Exchange Rule.

(d) In the event of a Violation resulting in demonstrated harm, sanctions shall include full Customer 

restitution, except where the amount of the restitution or to whom it should be provided cannot 

be reasonably determined.

Rule 716. Appeal from Hearing Panel Decision, Summary Impositions of Fines and 

Other Summary Actions

(a) A Respondent found by the Disciplinary Panel to have violated (or, in the case of a Member whose 

Authorized Trader or other Person using its User ID was found to have violated) a Rule of the 

Exchange or a provision of Applicable Law or who is subject to any summary fine imposed 

pursuant to Rule 717 or any summary action imposed pursuant to Rule 718 may appeal the 

decision within twenty (20) Business Days of receiving the Order of the disciplinary proceedings 

or the Notice of Summary Action, as the case may be, by filing a Notice of Appeal with the CRO. 

While an Appeal is pending, the effect of the Order of disciplinary proceedings or the summary 

action (including any sanctions, remedies or costs imposed thereby) shall be suspended, except 

as provided in Rule 702(g) with respect to any denial or limit on Trading Privileges or ability to 

otherwise access the Trading System.

(b) The notice of appeal must state in writing the grounds for appeal, including the findings of fact, 

conclusions or sanctions to which the Respondent objects. A Respondent may appeal the order 

of disciplinary proceedings or any summary decision on the grounds that:

(i) the order or decision was arbitrary, capricious, an abuse of discretion, or not in 

accordance with the Rules;

(ii) the order or decision exceeded the authority or jurisdiction of the Disciplinary Panel, the 

CRO or the Exchange;

(iii) the order or decision was unsupported by the facts or evidence; or

(iv) the imposed sanctions, remedies or costs are inappropriate or unsupported by the record.

(c) The CRO will forward copies of any notice of appeal received by it to all parties to the disciplinary 

proceeding or summary action, as the case may be, except the Respondent. On or before the 
 

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20th Business Day after filing a notice of appeal, the Respondent must file with the CRO and serve 

to the Regulatory Department a brief supporting the notice of appeal and documents supporting 

the brief.

(d) In connection with any appeal, the Regulatory Department will furnish to the CRO and to the 

Respondent any transcript of the hearing, any exhibits introduced at the hearing, the notice of 

appeal and briefs filed to support and oppose the appeal.

(e) Within thirty (30) Business Days after the last submission filed pursuant to paragraph (c) above, 

the Board will appoint an Appeal Panel to consider and determine the appeal. The Board shall 

appoint individuals at the recommendation of the CRO to serve on the Appeal Panel for a term of 

one year, subject to reappointment by the Board, as potential participants on Appeal Panels. The 

CRO’s recommendation shall include Public Individuals. The term of an individual that has been 

selected as a member of an Appeal Panel will not expire until the related proceedings are 

completed. Individuals are prohibited from participating as a member of an Appeal Panel if such 

individual participated on a prior Disciplinary Panel or Appeal Panel proceeding in the same 

matter. The Exchange staff and Regulatory Services Provider staff are prohibited from serving on 

an Appeal Panel.

(f) The Chair of the Appeal Panel shall be a Public Individual, meaning an individual that satisfies the 

conditions of a Public Director.

(g) Within ten (10) Business Days of being notified of the appointment of the Appeal Panel, a 

Respondent may seek to disqualify any individual named to the Appeal Panel for the reasons 

identified in Rule 210 or for any other reasonable grounds, including, but not limited that such 

individual participated on a prior Disciplinary Panel or Appeal Panel proceeding in the same 

matter, by serving written notice on the CRO. By not timely filing a request for disqualification, 

the Respondent will be deemed to have waived any objection to the composition of an Appeal 

Panel. The Exchange will decide the merits of any request for disqualification.

(h) The Appeal Panel will hold a Hearing to allow parties to present oral arguments. Any Hearing will 

be conducted privately and confidentially. In determining procedural and evidentiary matters, 

the Appeal Panel will not be bound by evidentiary or procedural rules or law.

(i) The Appeal Panel will only consider on appeal the record before the Disciplinary Panel or, in the 

case of a summary action, the record considered by the CRO, the notice of appeal, the briefs filed 

in support and opposition of the appeal, and any oral arguments of the parties. The Appeal Panel 

may only consider new evidence when the Appeal Panel determines that good cause exists as to 

why the evidence was not introduced during the disciplinary proceeding or when imposing the 

summary action.

(j) After completing its review, the Appeal Panel may affirm, modify or reverse any order of the 

disciplinary proceedings or summary action under appeal, in whole or in part, including increasing, 

decreasing or eliminating any sanction or remedy imposed, imposing any other sanction or 
 

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remedy authorized by the Rules, remanding the matter to the same or a different Disciplinary 

Panel for further disciplinary proceedings, or ordering a new Hearing.

(k) As promptly as reasonably possible following its review, the Appeal Panel will issue a written 

decision based on the weight of the evidence before the Appeal Panel. The decision of the Appeal 

Panel will include a statement of findings of fact and conclusions for each finding, sanction, 

remedy and cost reviewed on appeal, including each specific Rule of the Exchange and provision 

of Applicable Law that the Respondent is found to have violated, if any, and the imposition of 

sanctions, remedies and costs, if any, and the effective date of each sanction, remedy or cost.

(l) The Appeal Panel’s written order will be the final action of the Exchange and will not be subject 

to appeal within the Exchange.

Rule 717. Summary Imposition of Fines

(a) The CRO may summarily impose a fine against a Member (on behalf of the Member or any of its 

Related Parties) or Authorized Traders for failing:

(i) to make timely payments of original or variation margin, Option premiums, fees, cost, 

charges or fines to the Exchange or the DCO;

(ii) to make timely and accurate submissions to the Exchange of notices, reports or other 

information required by the Rules; and

(iii) to keep any books and records required by the Rules.

(b) The Regulatory Department, acting on behalf of the CRO, will give notice of any fine imposed 

pursuant to this Rule 717 to each Member or Participant subject thereto. The notice will specify:

(i) the violations of the Rules for which the fine is being imposed;

(ii) the date of the violation for which the fine is being imposed;

(iii) the amount of the fine; and

(iv) the due date for the fine to be paid.

(c) Within twenty (20) Business Days of serving the notice of fine, the Member or Participant, as the 

case may be, must either pay or cause the payment of the fine or file notice of an appeal pursuant 

to Rule 716. Unless timely notice of appeal is filed pursuant to Rule 716, the fine will become final 

upon the expiration of twenty (20) Business Days after the Notice of Fine is served on the Member 

or Participant, as the case may be.
 

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(d) The Exchange will set the amount of any fines imposed pursuant to this Rule 717, with the 

maximum fine for each violation not to exceed $15,000. Summary imposition of fines pursuant 

to this Rule 717 will not preclude the Exchange from bringing any other action against the 

Member, Related Party or Participant, as the case may be.

Rule 718. Summary Suspensions and Other Summary Actions

(a) Notwithstanding anything in the Rules to the contrary, the CRO may, after consultation with the 

Regulatory Oversight Committee, if practicable, summarily suspend, revoke, limit, condition, 

restrict or qualify a Member or Participant’s Trading Privileges and/or ability to otherwise access 

the Trading System, and may take other summary action against any Member or Participant in 

accordance with the Rules(“Summary Action”); provided, however, that the CRO must reasonably 

believe that the business, conduct or activities of the Member or Participant in question is not in

the best interests of the Exchange or the marketplace, including based on any of the following:

(i) statutory disqualification from registration as provided in CEA Section 8a(2) or (3);

(ii) nonpayment of fees, costs, charges, fines or arbitration awards; or

(iii) the reasonable belief that immediate action is necessary to protect the public or the best 

interests of the Exchange.

(b) Whenever practicable, the Exchange shall provide prior written notice to the party against whom 

any action in accordance with paragraph (a) shall be taken. If prior notice is not practicable, the 

Exchange will give notice at the earliest possible opportunity to the Respondent against whom 

the action is brought.

(c) Unless timely notice of appeal is filed pursuant to Rule 716, the Summary Action will become final 

upon the expiration of twenty (20) Business Days after the Notice of Action is served on the 

Respondent.

(d) At the request of the Exchange, a Respondent against whom a Summary Action is brought 

pursuant to this Rule 718 must provide books and records over which the Respondent has access 

or control and must furnish information to, or appear or testify before, the Exchange in 

connection with the enforcement of any Exchange Rule.

(e) A Member, Related Party or Participant whose Trading Privileges and/or ability to otherwise 

access the Trading System are suspended, revoked, limited, conditioned, restricted or disqualified 

pursuant to this Rule 718 may apply for reinstatement by filing with the Regulatory Department 

a written request stating the party’s reasons for seeking reinstatement. The Regulatory 

Department will not consider a request for reinstatement if the Member: (i) owes any fines, fees, 
 

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charges or costs to the Exchange; (ii) continues to fail to appear at disciplinary proceedings 

without good cause; or (iii) continues to impede the progress of disciplinary proceedings.

(f) Within a reasonable period after the filing of a request for reinstatement, the Appeals Panel will 

conduct a Hearing to consider the request. At the Hearing for Reinstatement, the Member will 

present its, his or her case supporting the reinstatement and the Regulatory Department, acting 

on behalf of the CRO may, in its discretion, present its case opposing or supporting the 

reinstatement and each may present evidence and facts and call, examine and cross-examine 

witnesses. At the Hearing for Reinstatement, the Exchange may require any Member(s), Related 

Party(s) or Participant(s) to appear as a witness and produce evidence if the Appeals Panel 

determines that the evidence is relevant.

(g) As promptly as reasonably possible after a reinstatement Hearing, the Appeals Panel will issue an 

order reinstating, denying the reinstatement, or placing conditions on the reinstatement of the 

Trading Privileges and/or ability to otherwise access the Trading System of the Respondent. The 

order will include a brief summary of the evidence introduced at the reinstatement Hearing; and, 

if applicable, findings of fact and conclusions not contained in the notice of Summary Action 

issued pursuant to Rule 718(b) above. The Appeals Panel’s order may not be appealed.

Rule 719. Effective Date of Penalties

(a) If a Member enters into a settlement agreement with the Exchange, any penalty included as a 

part of such settlement agreement shall become final and effective on the date that the CRO 

approves such settlement agreement.

(b) Any decision (including any penalty) by a Disciplinary Panel shall be the final decision of the 

Exchange and shall become effective fifteen (15) Business Days, or such longer time as the 

Disciplinary Panel may specify, after a copy of the written decision of the Disciplinary Panel has 

been served on the Respondent and delivered to the Commission; provided, however, that, in any 

case where the Respondent has consented to the action taken and to the timing of its 

effectiveness, the Disciplinary Panel may cause the decision involving any disciplinary action 

(including any penalty) to become effective prior to the fifteen (15) Business Days period.

(c) If a Member, Related Party or Participant fails to pay any fine imposed by the Disciplinary Panel 

on or before the date on which such fine becomes due and payable, such Member, Related Party 

or Participant shall be suspended automatically without further action by the Exchange and shall 

remain suspended until such fine is paid in full and the Member, Related Party or Participant is 

reinstated by the Exchange; provided, however, that on written application received prior to such 

date, the Hearing Panel, in its sole discretion, may postpone the date when payment is due.

Rule 720. Rights and Responsibilities after Suspension or Termination

(a) When a Member or Participant’s Trading Privileges and/or ability to otherwise access the Trading 

System are suspended for a period of twelve (12) months or less, none of its rights (including the 
 

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right to hold oneself out to the public as a Member, enter Orders into the Trading System and 

receive Member rates for fees, costs, and charges and deposit margin at Member levels) will apply 

or be effective during the period of the suspension, except for the right of the Member or 

Participant in question to assert claims against others as provided in the Rules. Any such 

suspension will not affect the rights of creditors under the Rules or relieve the Member or 

Participant in question of its, his or her obligations under the Rules to perform any Contracts 

entered into before the suspension, or for any Exchange fees, costs, or charges incurred during 

the suspension. The Exchange may discipline a suspended Member or Participant under this 

Chapter 7 for any violation of a Rule or provision of Applicable Law committed by the Member or 

Participant before, during or after the suspension.

(b) When a Member’s or Participant’s Trading Privileges and/or ability to otherwise access the 

Trading System are terminated, all of its related rights will terminate, except for the right of the 

Member or Participant in question to assert claims against others, as provided in the Rules. Any 

such termination will not affect the rights of creditors under the Rules. A terminated Member or 

Participant may only seek to be reinstated by applying for Trading Privileges pursuant to Exchange 

Rules.

(c) The Exchange will not consider the application of a terminated Member or Participant if such 

Member or Participant, as the case may be, continues to fail to appear at disciplinary proceedings 

without good cause or continues to impede the progress of disciplinary proceedings.

(d) A suspended or terminated Member or Participant remains subject to the Rules and the 

jurisdiction of the Exchange for acts and omissions prior to the suspension of termination, and 

must cooperate in any inquiry, investigation, disciplinary proceeding, appeal of disciplinary 

proceedings, summary suspension or other summary action as if the suspended or terminated 

Member or Participant still had Trading Privileges or ability to otherwise access the Trading 

System.

(e) In the event of the suspension or revocation of a Member’s Trading Privileges and/or ability to 

otherwise access the Trading System, the Exchange shall seek to facilitate the transfer of any 

Customer Accounts held by such Member to other Members with Trading Privileges and/or ability 

to otherwise access the Trading System.

(f) In the event that the Exchange suspends, terminates or otherwise revokes a Member or 

Participant’s access to the Exchange, it will be the responsibility of Clearing and/or Corporate 

Members to enforce the suspension or termination of that Member or Participant from trading 

on the Exchange.

Rule 721. Publication and Written Notice of Disciplinary Actions

(a) A brief summary of the disposition of a finding by the CRO, or the Disciplinary Panel, and each 

Hearing, settlement, and each imposition of any penalty, shall be kept permanently in the 

Member, Related Party or Participant’s regulatory history file maintained by the Exchange. The 
 

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record of any Hearing, together with all related records, shall be retained for a period of five (5) 

years.

(b) All information, records, and documents provided to the Panel, as well as proceedings conducted 

before the Disciplinary Panel shall be confidential and shall not be disclosed to any Person except:

(i) as required by Applicable Law or by the Rules;

(ii) in any action or proceeding brought by or against the Exchange; and

(iii) as may be determined from time to time by the Board;

(c) In any case where:

(i) a Member, Related Party or Participant enters into any settlement agreement with the 

Exchange; or

(ii) the Disciplinary Panel renders a decision finding a Member, Related Party or Participant 

guilty of any Rule violation; and

(d) The Exchange shall make public its findings and the reason for its action, including any action 

taken or penalty ordered and written notice of any suspension, expulsion, disciplinary action or 

denial of access. All disciplinary actions shall be given to the CFTC and to the Member, Related 

Party or Participant who is suspended, expelled, disciplined or denied access within thirty (30) 

Business Days of the date such action becomes final, which notice shall include the reasons for 

the action in the form and manner the CFTC prescribes.
 

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Chapter 8: Arbitration

Rule 801. Arbitration Requirement

(a) Arbitration of Disputes Among Members, Related Parties and Participants.

(i) It is contrary to the objectives and policy of the Exchange for Members and Related 

Parties to litigate Exchange-related disputes. Members and Related Parties must arbitrate 

all disputes between or among themselves that are related to or arise out of any 

Transaction on or subject to Exchange Rules that are based upon facts and circumstances 

that occurred at a time when the Parties were Members or Related Parties. Arbitration 

will be administered through the National Futures Association Arbitration Program.

(ii) Notwithstanding the foregoing, this Rule does not require an employee of a Member, 

Related Party or Participant to submit to arbitration any claim that includes allegations of 

a violation of federal, state or local employment discrimination, sexual harassment, wage 

payment or benefits laws.

(iii) Any dispute, claim or controversy between Members or Participants for which arbitration 

is sought may be arbitrated in accordance with and subject to the NFA’s Code of 

Arbitration and subject to the NFA’s Member Arbitration Rules which may be found on 

the NFA website:

https://www.nfa.futures.org/arbitration/member-arbitration/index.html

(iv) Arbitration proceedings conducted pursuant to this Rule are administered for Members 

through the NFA pursuant to the NFA Member Arbitration Rules, as if each Member, 

Related Party or Participant that are party to such arbitration were an “NFA Member,” 

and references in such member arbitration rules to “Associates” of an “NFA Member” 

shall mean and include any Member, Related Party or Participant.

(v) The arbitration filing satisfies the timeliness requirements set forth in Section 5 and 6 of 

the NFA Arbitration Rules.

(vi) If the arbitration filing is initiated by a Member or Participant (including Related Parties) 

against a Customer; then, the requirements of CFTC Commission Rule 166.5, if applicable 

must be satisfied, or the Customer has consented to the arbitration. 

(b) Claims against the DCO must be pursued pursuant to the Rules of the DCO.

(c) Non-Permissible Arbitration
 

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(i) This Rule does not apply to disputes between or among Members, Related Parties or 

Participants in which: (i) such parties are required by the rules of a Self-Regulatory 

Organization other than the Exchange to submit to the dispute resolution procedures of 

that Self-Regulatory Organization; or (ii) that such parties have, by valid and binding 

agreement, committed to arbitrate or litigate in a forum other than the NFA.

(d) Permissive Arbitrations

(i) The following may be submitted for arbitration through the NFA Arbitration Program and, 

in the event such a claim is submitted against a Member, Related Party or Participant,

that Member, Related Party or Participant is required to arbitrate the dispute under these 

Rules, unless otherwise provided.

(A) Claims of a Customer against a Member, Related Party or Participant that relate 

to or arise out of any Transaction on or subject to Exchange Rules.

(B) Claims against a Member, Related Party or Participant pursuant to Exchange 

Rules.

(C) Claims of a Customer against a Clearing Firm responsible for the performance, 

clearance or settlement of a Contract on or subject to Exchange Rules; and

(D) At the discretion of the Chief Regulatory Officer, any claim involving the interests 

of the Exchange, its Members, its Participants, their business relations or 

commodity futures trading in general not otherwise arbitrable under these Rules, 

provided the Parties have consented to such arbitration.

(e) Waiver of Any Objection to Jurisdiction

(i) Any party who is not a Member or Participant who submits a claim or grievance to 

arbitration or any party who appeals any arbitration decision, or who takes any steps 

therein, shall be conclusively presumed to have voluntarily recognized and agreed to the 

jurisdiction of the National Futures Association to hear and determine the claim or appeal.

(f) Referral to the National Futures Association Arbitration Program

(i) In the event that a complaint is received by the Exchange from a Customer, it shall be 

referred to the Exchange Regulatory Department, which shall inform the Customer of the 

NFA Arbitration Program.

(g) The Exchange is adopting the NFA Code of Arbitration and Arbitration Rules as set forth in Rule 

801(a). Any violation of the NFA Code of Arbitration or the Arbitration Rules or related arbitration 

rules shall be a Violation of this Rule 801.
 

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Rule 802. Initiating an Arbitration Claim

(a) A claimant may initiate a claim by submitting the required documents and fees to the NFA 

Arbitration Program in a form and manner specifically permitted under the NFA Member 

Arbitration Rules.

(b) A claimant shall provide notice of such arbitration claim to the Exchange in a timely manner.

(c) The NFA shall maintain a record of the receipt of such notice and shall promptly provide such 

Person with notice of deficiencies, as applicable. Members shall accordingly be subject to a twoyear time period for filing of an arbitration claim consistent with NFA Member Arbitration Rules.

(d) The party filing a claim shall pay all applicable fees pursuant to the NFA Member Arbitration Rules. 

The arbitrators, in their discretion, may assess arbitration costs against any party or divide such 

costs among any or all parties. Fees shall be paid to the NFA in advance of the Hearing Panel

sessions to which they apply.

Rule 803. Claims Relating to Trade Cancellations or Price Adjustments

All claims relating to price adjustments or trade busts pursuant to Chapter 5 shall be arbitrated in 

accordance with this Chapter.

Rule 804. Failure to Pay an Arbitration Award and Penalties

(a) Any failure on the part of a Member, Related Party or Participant to arbitrate a dispute subject to 

this Chapter, or the commencement by any such Member, Related Party or Participant of a suit 

in any court prior to arbitrating a case subject to this Chapter, violates the Rules and shall subject 

such Person to Disciplinary Action pursuant to Chapter 7.

(b) The Exchange may summarily suspend, pursuant to Exchange Rules in Chapter 7, a Member, 

Related Party or Participant that fails to timely satisfy an arbitration award or settlement rendered 

in any arbitration pursuant to this Chapter.
 

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Chapter 9: Clearing

Rule 901. Clearing of Contracts

All Contracts shall be cleared through the Derivatives Clearing Organization in accordance with the DCO

Rules and in conformity with the Exchange Rules specifically provided in this Chapter.

Rule 902. DCO Rules

(a) The clearing services provided by the DCO with respect to any Contract, and the rights and 

obligations of purchasers and sellers under cleared Contracts (including without limitation rights 

and obligations in respect of clearing and settlement, variation payments and performance at 

maturity), shall be governed by the DCO Rules, as applicable.

(b) The DCO provides clearing and settlement services for the Contracts.

(c) The Exchange will establish performance bond requirements from time to time as published by 

the Exchange in a Notice to Members. Clearing Members must call for performance bonds from 

their Customers and post-performance bonds with the DCO as set forth in the DCO and CFTC 

Rules. All performance bond collateral must be in a form acceptable to the DCO pursuant to DCO 

Rules.

(d) The DCO Rules shall prevail in the event of any conflict or inconsistency between the Exchange 

Rules and the DCO Rules with respect to any Clearing Member’s responsibilities or obligations 

under the DCO Rules. All Clearing Members are bound by the DCO Rules.

Rule 903. Other Clearing Organizations

Whenever the Exchange designates a clearing organization other than the DCO for the clearance of 

Contracts with respect to which there are open positions, each Clearing Firm shall, as of the close of 

business on the second Business Day prior to the effective date of such designation, either become a 

Clearing Firm of such successor clearing organization, or cause any such open Contracts carried by it either 

to be transferred to a Clearing Firm of such successor clearing organization or to be liquidated.

Rule 904. Settlement Prices

(a) The Exchange, in conjunction with the DCO, will determine the settlement price for Contracts. For 

each Contract, the Exchange shall publish a daily settlement price and information regarding 

volume, open interest and opening and closing ranges. Any settlement price shall be determined 

by the Exchange in accordance with the DCO Rules. Notwithstanding the foregoing, the DCO may 

modify settlement prices in its discretion in accordance with DCO Rules.
 

87

(b) The daily settlement price of Exchange Contracts will be determined by a Volume Weighted 

Average Price, (“VWAP”), of the Futures Trades executed in the last minute of the trading day. 

The VWAP will be rounded to the nearest .01. In the event there are no Transactions in that 

timeframe, the simple average of the bid and ask prices at the close of trading will be used to

determine the daily settlement price. In the event there is no bid and ask prices, the Exchange 

reserves the right to use the cash index values to imply settlement.

Rule 905. Clearing Fees

Clearing fees shall be assessed against a Clearing Firm for each side of a Transaction cleared by or 

processed through the DCO as the DCO may from time to time prescribe. Such DCO related Clearing Fees 

will not be incorporated into Exchange Fees.

Rule 906. Transfer of Trades

(a) Subject to the limitations of Exchange Chapter 9, existing trades may be transferred either on the 

books of a Clearing Firm or from one Clearing Firm to another Clearing Firm provided:

(i) the transfer merely constitutes a change from one Account to another Account, provided 

the underlying beneficial ownership in said accounts remains the same; or

(ii) an error has been made in the clearing of a trade and the error is discovered and the 

transfer is completed within two (2) Business Days after the trade date.

(b) Subject to the limitations of Exchange Chapter 9, Exchange Officials may, upon request by the 

Clearing Firm(s), approve a transfer of existing trades either on the books of the same Clearing 

Firm, or from the books of one Clearing Firm to the books of another Clearing Firm if the transfer 

is in connection with, or as a result of, a merger, asset purchase, consolidation or similar nonrecurring Transaction between two or more entities where one or more entities become the 

successor in interest to one or more other entities.

(c) The Exchange Officials may, with the consent of the Clearing Firm(s) involved, permit the transfer 

of existing trades if, in the opinion of the Exchange Officials, the situation so requires, and such 

transfer is in the best interests of the Exchange.

(d) Provided that the transfer is permitted pursuant to Sections (a), (b) or (c) above, the Transactions 

must be recorded and carried on the books of the receiving Clearing Firm. Futures Transactions 

may be transferred using either the original trade price or the most recent settlement price; 

Options Transactions may be transferred using either the original trade price or a trade price of 

zero.
 

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(e) All transfers shall be reported to the DCO in a form acceptable to the DCO for the type of 

Transactions involved. The proper indicator must be included in the transfer such that the 

Transactions, including the Transaction(s) to reverse an error, clear as transfers. The Clearing 

Firms involved shall maintain a full and complete record of all Transactions together with all 

pertinent memoranda.

Rule 907. Concurrent Long and Short Transactions

Set forth below are the procedures that must be followed for concurrent long and short positions and 

hold-open accounts.

(a) Concurrent long and short positions in the same commodity and month may be held by a Clearing 

Firm at the direction of a Customer or on behalf of an omnibus Account; however, it shall be the 

duty of the Clearing Firm to ascertain whether such positions are intended for offset or to be held 

open prior to final transmission of position data to the DCO.

(b) Clearing Firms which, pursuant to this rule, carry concurrent long and short positions, must report 

to the Exchange both sides as open positions.

(c) The Exchange takes no position regarding the internal bookkeeping procedures of its Clearing 

Firms which, for the convenience of a Member or Customer, may “hold open” a position only on 

their books. However, the Clearing Firm must accurately report to the Exchange and the DCO, as 

appropriate, large trader positions, long positions eligible for delivery and open interest.
 

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Chapter 10: Miscellaneous

Rule 1001. Governing Law 

The law of the State of Illinois shall govern any dispute arising between the Exchange and a Member 

without giving effect to the provisions, policies or principles of any state law relating to choose or conflict 

of laws.

Rule 1002. Limitation on Liability 

(a) Except as otherwise set forth in this Rule, neither the Exchange nor any partner, Director, Officer, 

agent, contractors, representatives, employees, Affiliates or Affiliates’ representatives (“Covered 

Persons”) shall be liable to a Member or any Related Party of the Member, thereof, for any loss, 

damage, injury, delay, cost, expense, other liability or claim (including loss of profits, loss of use, 

direct, indirect, incidental or consequential or punitive damages) (Collectively, “Losses”) or claim 

whether in Contract, tort or restitution, or under any other cause of action, suffered by or made 

against them as a result of their use of some or all of the Trading System. By making use of the 

Trading System, such persons expressly agree to accept all liability arising from their use of same.

(b) Except as otherwise set forth in this Rule, neither the Exchange nor any of its Covered Persons 

shall be liable to a Member or any Related Party of the Member, thereof, for Losses or other 

liability or claim whether in contract, tort or restitution, or under any other cause of action, 

suffered by or made against them arising from: (a) any failure or non-availability of the Trading 

System; (b) any act or omission on the part of the Exchange or its Covered Persons including 

without limitation a decision of the Exchange to suspend, halt, or terminate trading or to void, 

nullify or cancel Orders or trades in whole or in part; (c) any errors or inaccuracies in information 

provided by the Exchange, its Covered Persons or the Trading System; (d) unauthorized access to 

or unauthorized use of the Trading System by any Person or entity; or (e) any Force Majeure Event 

affecting the Exchange. This limitation of liability will apply regardless of whether or not the 

Exchange, or its Covered Persons (or any designee thereof) was advised of or otherwise might 

have anticipated the possibility of such damages.

(c) No Member, or Related Party of the Member or any other Person shall be entitled to institute a 

lawsuit or other legal proceeding against the Exchange or its Covered Persons for actions taken 

or omitted to be taken in connection with the official business of the Exchange. This provision 

shall not apply to disciplinary actions by the Exchange, administrative appeals of Exchange actions 

or in any specific instance where the Board has granted a waiver of this provision.

(i) Any actions, suits or proceedings against the Exchange or its Covered Persons must be 

brought, within two years from the time they first arise, in a U.S. Federal Court located in 

Cook County, Illinois, or if the requirements for Federal subject matter jurisdiction are not 

met, in a State Court located in Cook County, Illinois. This provision shall in no way create 

a cause of action and shall not authorize an action that would otherwise be prohibited by 

the Rules of the Exchange.
 

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(ii) Any Member or Related Party of the Member that fails to prevail in a lawsuit or other 

legal proceeding instituted by such Person against the Exchange related to the business 

of the Exchange, shall pay to the Exchange all reasonable expenses, including attorneys’ 

fees, incurred by the Exchange in the defense of such proceeding to the extent that such 

expenses exceed fifty thousand dollars ($50,000.00).

(iii) This provision shall not restrict the right of such persons to apply for a review of a 

direction, order or decision of the Exchange by the CFTC. Notwithstanding any of the 

foregoing provisions, this Rule 1002 shall in no way limit the liability of any Person arising 

from any violation by such Person of the CEA or the Commission Regulations thereunder.

(d) The limitations on liability in this Rule shall not protect any party for which there has been a final 

determination (including exhaustion of any appeals) by a United States court or arbitrator to have 

engaged in willful or wanton misconduct or has acted in bad faith. Additionally, the foregoing 

limitations on liability of this rule shall be subject to the CEA and the regulations promulgated 

thereunder, each as in effect from time to time.

Rule 1003. Limitation on Damages

(a) The maximum aggregate liability of the Exchange, and its Covered Persons to any Member, or any 

Related Party of a Member, or any other Person, on an aggregate basis, for any and all claims 

made in relation to the use of or failure of the Trading System or any action or failure to act in any 

calendar year shall be one hundred thousand dollars ($100,000) to include any legal, court or 

attorney fees assessed against the Exchange or any Covered Persons, however that liability arises, 

including (without limitation) breach of contract, tort, misrepresentation or breach of statutory 

duty. This aggregate liability limit applies regardless of whether a claim is allowed under Exchange 

Rules or a U.S. court of competent jurisdiction to be invalid, unlawful, or unenforceable.

(b) Neither, the Exchange nor any Covered Persons, solely by reason of acting in such capacity 

(including a Person having more than one such capacity), shall be personally liable for any 

expenses, liabilities, debts or obligations of the Exchange, whether arising in contract, tort or 

otherwise.

(c) Except as otherwise provided, and except in instances where there has been a finding of fraud or 

wanton or willful misconduct, in which case the party found to have engaged in such conduct 

cannot avail itself of the protections in Exchange Rules, neither the Exchange nor its Covered 

Persons shall be liable to any other Person, including any Member or any Related Party for any 

Losses, arising from:

(i) any failure or malfunction of, including any inability to enter or cancel Orders, the Trading 

System or any Exchange services or facilities used to support the Trading System;
 

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(ii) any fault in delivery, delay, omission, suspension, inaccuracy or termination, or any other 

cause, in connection with the furnishing, performance, maintenance, use of or inability to 

use all or any part of the Trading System or any Exchange services or facilities used to 

support the Trading System; or

(iii) any action taken or omitted to be taken in respect to the business of the Exchange, except, 

in each case, to the extent that such Losses are attributable to the willful misconduct, 

gross negligence or criminal acts of the Exchange or its Covered Persons, acting within the 

scope of their respective authority. Without limiting the generality of the foregoing, and 

subject to the same exception, no Covered Person shall have any liability to any Person

for any Losses that result from any error, omission or delay in calculating or disseminating 

any current or closing value or any reports of Transactions in or quotations for contracts, 

including underlying securities. The foregoing shall apply regardless of whether a claim 

arises in contract, tort, negligence, strict liability or otherwise. The limitations of liability 

and disclaimers set forth in this Rule shall be in addition to, and not in limitation of, any 

limitations otherwise available under applicable law.

(d) Whenever custody of an unexecuted Order or a message or other data is transmitted by a 

Member or Related Party to the Exchange and the Exchange acknowledges receipt of and assumes 

responsibility for the transmission or execution of the Order or the processing of the Order, 

message or other data, the Exchange may, in its sole discretion, compensate the Member for the 

Losses of the Member or its Related Party alleged to have resulted from the failure to process the 

Order, message or other data correctly due to the acts or omissions of the Exchange or due to the 

failure of the Trading System or facilities (Each, a “Loss Event”), subject to the following limits and 

requirements:

(i) As to any one or more requests for compensation made by a single Member (including 

any Related Party of the Member) that arose on a single trading day, the Exchange may 

compensate the Member up to, but, not exceeding the larger of $100,000 or the amount 

of any recovery obtained by the Exchange under any applicable insurance maintained by 

the Exchange; and

(ii) As to the aggregate of all requests for compensation made by all Members (including any 

Related Party of the Members) that arose during a single calendar month, the Exchange 

may compensate the Members (including any Related Party of the Members) in the 

aggregate, up to but not exceeding the larger of $200,000 or the amount of the recovery 

obtained by the Exchange under any applicable insurance maintained by the Exchange.

(iii) Nothing in this Rule shall obligate the Exchange to seek recovery under any applicable 

insurance policy.

(iv) Notice of all requests for compensation pursuant to this Rule shall be in writing in a form 

and manner prescribed by the Exchange and must be submitted no later than 12:00 p.m. 

Chicago Time on the next Business Day following the Loss Event giving rise to such 

requests. All requests shall be in writing and must be submitted in a form and manner 
 

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prescribed by the Exchange along with supporting documentation by 5:00 p.m. Chicago 

Time on the third business day following the Loss Event giving rise to each such request.

(v) These submission time frames shall commence upon the later of the occurrence of the 

Loss Event or when the Member or Related Party of the Member submitting the request 

for compensation reasonably should have been aware of the occurrence of the Loss Event 

as determined by the Exchange. Additional information related to the request as 

requested by the Exchange is also required to be provided in a form and manner 

prescribed by the Exchange. The Exchange shall not consider requests for which timely 

notice and submission have not been provided as required under this paragraph (d).

(vi) If all of the granted requests submitted pursuant to paragraph (d) (i) above cannot be fully 

satisfied because in the aggregate they exceed the maximum amount of payments 

authorized in paragraph (d)(ii) above for a single calendar month, then such maximum 

amount shall be allocated among all such granted requests during that calendar month 

based upon the proportion that the amount of each such granted request bears to the 

sum of all such granted requests, except as provided in this Rule. Requests made pursuant 

to paragraph (c) above shall constitute a Member’s (including any Related Party’s) sole 

recourse to seek compensation from Covered Persons relating to a Loss Event.

(vii) All payments to Members (including any Related Party of the Member) pursuant to this 

Rule will be contingent upon the execution and delivery to the Exchange of a release by 

the Member (and any Related Party of the Member) of all claims by it or its Affiliates 

against the Exchange and its Covered Persons for Losses that arise out of, are associated 

with or relate in any way to the Loss Event or to any actions or omissions related in any 

way to the Loss Event.

(viii) Failure to provide the release within 14 calendar days of notification of the payment 

amount by the Exchange will void the Member’s (including any Related Party of the 

Member’s) eligibility to receive a payment pursuant to this Rule 1003 in determining 

whether to make payment of a request pursuant to paragraph (d) above. The Exchange 

may determine whether the amount requested should be reduced based on the actions 

or inactions of the requesting Member (or Related Party of the Member), including, 

without limitation, whether the actions or inactions of the Member (including by any 

Related Party of the Member) contributed to the Loss Event; whether the Member 

(including by any Related Party of the Member) made appropriate efforts to mitigate its 

Loss, whether the Member (including by any Related Party of the Member) realized any 

gains as a result of the Loss Event, whether there were Losses of the Member (including 

by any Related Party of the Member), if any, that were offset by hedges of positions either 

on the Exchange or on another affiliated or unaffiliated market, and whether the Member 

(including any Related Party of the Member) provided sufficient and appropriately 

recorded information to document the request submitted to the Exchange.

(ix) All determinations made pursuant to this Rule by the Exchange shall be final and not 

subject to appeal under Chapter 10 of these Rules or otherwise. Nothing in the Rules, nor 
 

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any payment pursuant to this Rule, shall in any way limit, waive, or proscribe any defenses 

a Covered Person may have to any claim, demand, liability, action or cause of action, 

whether such defense arises in law or equity, or whether such defense is asserted in a 

judicial, administrative, or other proceeding.

Rule 1004. Indemnification

(a) In the event any legal proceeding is brought by a third party against the Exchange which arises 

directly or indirectly from the use of the Trading System by a Member, and/or any Related Party 

of the Member; then, such Member or Related Party of the Member must undertake to hold the 

Exchange harmless in respect of, and to reimburse to the Exchange all costs related to same 

including all legal fees and expenses.

(b) Members and any Related Party of the Member shall indemnify and hold the Exchange and its 

Covered Persons harmless from and against all costs, including without limitation amounts paid 

to settle an action or to satisfy a judgment, legal and professional fees, expenses for attending 

trials, hearings and meetings, that the Exchange incurs in any civil, criminal or administrative 

action, suit, proceeding, investigation, inquiry, hearing, appeal, or review that is threatened or 

brought against the Exchange or its Covered Persons, or in respect of which the Exchange is 

compelled or requested to participate, in respect of any act committed or permitted by the 

Member and/or any Related Party of the Member.

(c) Any Member and/or any Related Party of the Member which institutes an action or proceeding 

against the Exchange or its Covered Persons , and which fails to prevail in such action or 

proceeding, shall reimburse the Exchange and/or its Covered Persons for any and all costs or 

expenses (including but not limited to attorneys’ fees, expenses of investigation and amounts paid 

by way of indemnifying any officers, Directors, employees or other persons by the Exchange) 

incurred in connection with the defense of such action or proceeding.

Rule 1005. Disclaimer of Warranties 

(a) The Exchange provides any licensed products, access to the Trading System, the equipment and 

any part or parts of the Trading System on an “as is” basis. The Trading System and all related 

services of the Exchange are being provided on an “as-is” basis at each Member’s and Related 

Party’s sole risk.

(b) There are no express or implied warranties or representations provided by the Exchange or its 

Covered Persons relating to the Trading System or any Exchange services or facilities used to 

support the Trading System, including warranties of merchantability and warranties of fitness for 

a particular purpose or use. Neither the Exchange nor any of its Covered Persons make any 

warranty with respect to, and no such party shall have any liability to any Member or Related 

Party for the accuracy, timeliness, completeness, reliability, performance or continued availability 

of the Trading System or the Exchange, for delays, omissions or interruptions therein or the 

creditworthiness of any other Member or Related Party of the Member. The Exchange and its 
 

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Covered Persons shall have no duty or obligation to verify any information displayed on the 

Trading System or otherwise verify any information displayed on the Trading System or otherwise.

(c) Each Member or Related Party of a Member acknowledges and agrees that the Exchange and its 

Covered Persons do not and shall not serve as the primary basis for any decisions made by any 

Member or Related Party of the Member and that the Exchange and its Covered Persons do not 

act as an Advisor or Fiduciary for any Member or Related Party of the Member.

(d) No index licensor with respect to any index underlying a Contract traded on the Exchange and no 

affiliate of such index licensor makes any warranty, express or implied, as to the results to be 

obtained by any Person from the use of such index, any opening, intra-day or closing value 

therefor, or any data included therein or relating thereto, in connection with the trading of any 

Contract based thereon or for any other purpose.

(e) The index licensor and its Affiliates shall obtain information for inclusion in, or for use in the 

calculation of, such index from sources they believe to be reliable, but the index licensor and its 

affiliates do not guarantee the accuracy or completeness of such index, any opening, intra-day or 

closing value therefor, or any date included therein or related thereto.

(f) The index licensor and its Affiliates hereby disclaim all warranties of merchantability or fitness for 

a particular purpose or use with respect to such index, any opening, intra-day, or closing value 

therefor, any data included therein or relating thereto, or any Contract based thereon.

(g) The index licensor and its affiliates shall have no liability for any damages, claims, losses (including 

any indirect or consequential losses), expenses, or delays, whether direct or indirect, foreseen or 

unforeseen, suffered by any Person arising out of any circumstance or occurrence relating to the 

Person’s use of such index, any opening, intra-day or closing value therefor, any data included 

therein or relating thereto, or any Contract based thereon, or arising out of any errors or delays 

in calculating or disseminating such index.

(h) For purposes of this Rule 1005, the term “index licensor” includes any Person that grants the 

Exchange a license to use an index in connection with the trading on the Exchange of a Contract

based on the index and any Person designated by the exchange as the source for calculating 

and/or reporting the level of an index underlying a Contract traded on the Exchange, and also 

includes, with respect to any index of which the Exchange or an affiliate of the Exchange is the 

proprietor or for which the Exchange or an affiliate of the Exchange calculates and/or reports 

levels of the index.

(i) For purposes of this rule 1005, references to the term “index” shall also be deemed to encompass 

and apply to any benchmark other than an index and to any value or price of a commodity.
 

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Rule 1006. Market Data

(a) All Members and all employees, agents, vendors, and other Persons affiliated with the foregoing 

understand and acknowledge that the Exchange has a proprietary interest in:

(i) the price and quantity data from each and every Transaction executed on the Trading 

System, including the time at which the Transaction was executed by, or submitted to, 

the Trading System;

(ii) the price and quantity data for each and every bid and offer submitted for entry into the 

Trading System, including the time at which the bid and offer was entered into the Trading 

System;

(iii) the Daily Settlement Price of each Contract;

(iv) any data and information derived from (i), (ii) and (iii) and the format and presentation 

thereof; and

(v) the transmissions and dissemination of the data and information to Member any 

publisher of the data or information with whom the Exchange has a written agreement, 

and any other Persons.

(b) Member may not distribute, sell or retransmit information displayed on the Trading System to 

any third party. Notwithstanding the foregoing, Members may distribute, sell or retransmit 

market data pursuant to a duly executed market data agreement.

(c) The Exchange does not guarantee the sequence, timeliness, accuracy or completeness of any of 

the Exchange’s or its Affiliate’s Transaction data or guarantee the accuracy, responsiveness or 

completeness of the Trading System, the Trading System software or the related documentation.

Rule 1007. Suspension and Waiver of Rules 

If necessary and expedient, the Exchange may, in its sole discretion, waive, or extend the time period for 

performing, any act or acts designated by the Rules, but only to the extent such waiver or extension is not 

inconsistent with Applicable Law.

Rule 1008. Forms; Transmission of Data 

(a) In connection with any Transaction or matter handled through, with or by the Exchange under or 

pursuant to the Rules, the form of any required list, notice or other document shall be as from 

time to time prescribed by the Exchange, and additions to, changes in and elimination of any such 

forms may be made by the Exchange at any time in its discretion.
 

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(b) A Member may execute any document to be delivered to the Exchange or to any other Member 

pursuant to these Rules by means of a mechanically or electronically reproduced facsimile 

signature of a representative of the Member; provided that the Member shall have complied with 

such requirements as may be prescribed by the Exchange in connection with the use of such 

facsimile signatures.

Rule 1009. Amendments to the Rules

The Exchange shall be authorized to amend these Rules and any related procedures or other documents 

from time to time with the approval of the Board and without the consent of any other Person, subject to 

Applicable Law, and in connection therewith to determine the effective date of any such amendment and 

whether, and how, any such amendment may apply to existing Contracts. Any proposed Rule changes 

will be sent to the CFTC for approval. The Exchange will notify Members of Rule changes by the Notice to 

Members. The Exchange will also update the website and anywhere the Rulebook is referenced publicly 

by the Exchange. Each Member, and Related Party of a Member shall be bound by any such amendment.

Rule 1010. Gratuities and Gifts

A Participant, Member and any Related Party may not give, directly or indirectly, to any employee of the 

Exchange any gratuities or gifts with an aggregate market value of one hundred dollars ($100) or more

within any twelve-month period.

Rule 1011. Confidentiality

(a) All non-public information provided by a Member or Authorized Trader to the Exchange shall be 

held in confidence and shall not be made known to any other Person except as follows:

(i) with the consent of the Member or Authorized Trader providing such information;

(ii) to a Governmental Body if the Exchange is requested or legally required to do so by such 

Governmental Body;

(iii) pursuant to a lawful discovery request;

(iv) subject to appropriate confidentiality requirements, to any Person providing services to 

the Exchange, including the Exchange’s Regulatory Services Provider;

(v) pursuant to an information sharing agreement or other arrangement or procedures in 

accordance with Exchange Rules or Applicable Law;
 

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(vi) subject to appropriate confidentiality requirements, to the Exchange employees, the 

Board, Board committees, Disciplinary Panels, the Exchange Officers, attorneys, auditors, 

and agents, independent contractors or other Persons that have been engaged by the 

Exchange, in each case, who require such information in connection with the discharge of 

their duties to Futures; and

(vii) as otherwise permitted under these Rules.

All information and data obtained or received by the Exchange from inspections of accounting 

and other records will be treated as confidential by the Exchange; However, this Rule does not 

supplant Emergency Actions and the Rules in Chapter 7 (Disciplinary Rules), or any other 

requirement of legal process or law.
 

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Appendix A: Error Trade Policy

Exchange Authority

Any request by a Member, Related Party or Participant to invoke the Error Trade Policy must be 

communicated to the Exchange Help Desk as soon as possible. If a potential error Trade is not brought to 

the Exchange Help Desk’s attention, with a phone call to the Help Desk, within eight (8) minutes after 

Trade occurred the Trade will stand except as noted in Part D (iv).

The Exchange has the authority to adjust trade prices or cancel trades when necessary to mitigate market 

disrupting events caused by malfunctions in the electronic trading platform(s) or errors in orders 

submitted by members and market participants.

All decisions of the Help Desk are final. The Exchange is not liable for any losses resulting from price 

adjustments or Trade cancelations.

Request for Review of Potential Error Trades

The Exchange Help Desk may determine to review a Trade based on analysis of market activity or at the 

request of an Exchange Member, Related Party or Participant. The request must be communicated to the 

Exchange Help Desk over the phone and within eight (8) minutes of the Trade execution. Any other form 

of communication with the Exchange will not be permitted as a request for review. The Exchange Help 

Desk will determine whether or not a Trade will be subject to review.

Price Adjustments and Trade Cancelations

The Exchange Help Desk will make a decision if the Trade in question will be subject to review. The 

Exchange will promptly issue an alert to all market participants if a Trade is under review. The Help Desk 

will first determine if the Trade price is inside the non-reviewable range. In deciding if the Trade price is 

in the non-reviewable range, the Help Desk will determine the fair value market price at the time the 

potential error occurred. In making the determination, the Exchange Help Desk may consider all relevant 

factors, including the last Trade price, a better bid or offer price, a more recent price in a different Contract 

month and the prices of related contracts trading on the Exchange or other markets.

A. Trade Price in Non-Reviewable Range

If the Exchange Help Desk determines the Trade price was inside the non-reviewable range, no further 

action will be taken, and the Trade will stand. The Exchange will issue an alert to all participants indicating 

the Trade in question will stand.

B. Trade Price outside Non-Reviewable Range

Futures Contracts: If the Exchange Help Desk determines that a Trade price is outside the Non-Reviewable 

Range for a Futures Contract (including Futures spread Transactions), the Trade price will be adjusted to 

a price that equals the fair value market price for that Contract at the time the Trade in review occurred, 

plus or minus the Non-Reviewable Range. In the event there are multiple parties, prices and/or Contracts 
 

99

involved in the Transactions in question, the Exchange Help Desk has the authority, to cancel rather than 

price adjust these Transactions. The Exchange Help Desk will alert all market participants to the decision.

Options Contracts: If the Exchange Help Desk determines that a Trade price is outside the applicable nonreviewable range for an option Contract, the Trade price shall be adjusted. In the case of a buy (sell) error, 

the price will be adjusted to the determined ask (bid) price set forth in the Bid/Ask reasonability allowance 

plus (minus) the non-reviewable Range. In the event there are multiple parties, prices and/or Contracts 

involved in the Transactions at issue, the Exchange Help Desk has the authority, but not the obligation, to 

bust rather than price adjust such Transactions. The Exchange Help Desk will alert all market Participants 

to the decision.

Any Trades that were price adjusted will be inserted into the Exchange’s official time and sales records at 

the adjusted Trade price. If any Trades are cancelled those Trades will be canceled and removed from the 

Exchange’s official time and sales records.

C. Contingency Orders Triggered by Error Trade

If an error Trade is busted, either by agreement of the parties thereto or by Exchange staff, the Help Desk 

will also: (a) bust all Trades that were triggered as a result of Contingency Orders being triggered by such 

Trade; and (b) cancel all bids and offers that were entered into the Trading System as a result of 

contingency Orders being triggered by such Trade. The Help Desk will notify the Participants responsible 

for the Trades so that the original Orders can be re-entered into the Trading System.

D. Alternative Resolution by Agreement of Parties

(i) With the approval of the Exchange Help Desk, parties to a Trade that is price adjusted 

may instead mutually agree to cancel the Trade. 

(ii) With the approval of the Exchange Help Desk, parties to a Trade that is busted may 

instead mutually agree to price adjust the Trade to a price consistent with the adjustment 

provisions in rule 3 (Price Adjustments and Trade Cancelations).

(iii) Subject to section (1) and (2), parties to a Trade that is cancelled, or price adjusted may 

mutually agree to a cash adjustment provided that such adjustments are reported to the 

Exchange Help Desk and the parties maintain a record of the adjustment.

(iv) An executed Trade may not be reversed via transfer except where such Trade is 

determined by the Exchange Help Desk to be outside of the non-reviewable range but not 

reported timely, subject to agreement of the parties and approval of the Exchange Help 

Desk. Any such transfer must occur at the original Trade price and quantity; however, the 

parties may mutually agree to a cash adjustment.

E. Liability for Losses Resulting from Price Adjustments or Cancelations

(i) A party entering an Order that results in a price adjustment or Trade bust shall be 

responsible for demonstrated claims of realized losses incurred by persons whose Trade 
 

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prices were adjusted or busted; provided, however, that a claimant shall not be entitled 

to compensation for losses incurred as a result of the claimant's failure to take reasonable 

actions to mitigate the loss.

(ii) A claim for a loss pursuant to this section must be submitted to the Exchange within one 

(1) Business Day of the event giving rise to the claim. The Exchange will reject any claim 

that is not filed in a timely manner, and such decisions shall be final. Eligible claims shall 

be forwarded by the Exchange to the party responsible for the Order(s) that resulted in a 

Trade bust or a price adjustment and to the Clearing Firm through which the Trade was 

placed. Such party, or the Clearing Firm on behalf of the party, shall, within ten (10) 

Business Days of receipt of the claim, admit or deny responsibility in whole or in part.

Failure to respond to the claim within ten (10) Business Days shall be considered a denial 

of liability.

(iii) To the extent that liability is admitted, payment shall be made within ten (10) Business 

Days. Unless otherwise agreed upon in writing by the parties, failure to make the 

payment within ten (10) Business Days shall be considered a denial of liability for purposes 

of this rule. A copy of any such written agreement must be provided to the Exchange.

(iv) To the extent that liability is denied, the party making the claim may submit the claim for 

Arbitration pursuant to the provisions of Chapter 8. Such claims must be submitted to 

the Market Regulation Department within ten (10) Business Days of the date the party 

was issued notification that liability was denied.