DCM Exhibit M

Exhibit M 

Exhibit M

Attach as Exhibit M, a copy of the Applicant’s rules (as defined in § 40.1 of the Commission’s regulations) and any 

technical manuals, other guides or instructions for users of, or participants in, the market, including minimum 

financial standards for members or market participants. Include rules citing applicable federal position limits and 

aggregation standards in Part 150 or 151, as applicable, of the Commission’s regulations and any exchange set 

position limit rules. Include rules on publication of daily trading information with regards to the requirements of Part 

16 of the Commission’s regulations. The Applicant should include an explanation, and any other forms of 

documentation the Applicant thinks will be helpful to its explanation, demonstrating how its rules, technical manuals, 

other guides or instructions for users of, or participants in, the market, or minimum financial standards for members 

or market participants as provided in this Exhibit M help support the designated contract market’s compliance with 

the Core Principles. 

Response:

The Rulebook is attached as Exhibit M-1 (the “Rulebook”; and each rule therein, a “Rule”). 

Please also see Exhibit L-1 with regard to compliance with each of the Core Principles. 
DCM Exhibit M-1 

QCEX RULEBOOK 

BY ACCESSING, OR ENTERING ANY ORDER INTO, THE QCEX DIRECT SYSTEM, AND 

WITHOUT ANY NEED FOR ANY FURTHER ACTION, UNDERTAKING OR AGREEMENT, 

A PARTICIPANT, AND ITS AUTHORIZED USERS AGREE (I) TO BE BOUND BY, AND 

COMPLY WITH, THE RULES OF THE EXCHANGE, THE RULES OF THE 

CLEARINGHOUSE, ANY APPLICABLE CONTRACT RULES AND APPLICABLE LAW, IN 

EACH CASE TO THE EXTENT APPLICABLE TO IT OR THEM, AND (II) TO BECOME 

SUBJECT TO THE JURISDICTION OF QCEX WITH RESPECT TO ANY AND ALL 

MATTERS ARISING FROM, RELATED TO, OR IN CONNECTION WITH, THE STATUS, 

ACTIONS OR OMISSIONS OF SUCH PARTICIPANT AND/OR ITS AUTHORIZED USERS. 
DCM Exhibit M-1 

 -iTABLE OF CONTENTS 

Page 

 DEFINITIONS ...........................................................................................................1

1.1. Defined Terms .........................................................................................................1

1.2. Rules of Interpretation .............................................................................................5

1.3. Effect of Titles .........................................................................................................6

1.4. Amendment of Rules ...............................................................................................6

1.5. Contract Rules ..........................................................................................................6

 GOVERNANCE .......................................................................................................6

2.1. Authority of the QCEX Board of Directors .............................................................6

2.2. Standing Committees ...............................................................................................7

2.3. Regulatory Oversight Committee ............................................................................8

2.4. Officers ....................................................................................................................8

2.5. Eligibility .................................................................................................................9

2.6. Emergency Rules ...................................................................................................10

2.7. Restrictions on Certain Persons Who Possess Material, Non-Public 

Information ............................................................................................................12

2.8. Conflicts of Interest................................................................................................12

2.9. Indemnification of Members of the Boards of Directors, Officers, and 

Others .....................................................................................................................13

2.10. Regulatory Cooperation .........................................................................................13

2.11. Regulatory Services Agreement with the NFA .....................................................14

 PARTICIPANTS ...................................................................................................14

3.1. Participant Eligibility .............................................................................................14

3.2. Participant Applications .........................................................................................16

3.3. Participant Accounts ..............................................................................................16

3.4. Authorized Users ...................................................................................................16

3.5. Amounts Payable by Participants ..........................................................................18

3.6. Participant Obligations...........................................................................................18

3.7. Responsible Agents ................................................................................................21

3.8. Incentive Programs ................................................................................................22

3.9. Limitation of Liability............................................................................................22

3.10. ISV Access .............................................................................................................24

 TRADING PLATFORM AND METHODOLOGY .............................................25

4.1. Contracts Traded and Cleared on QCEX ...............................................................25

4.2. Participants and Authorized User Access ..............................................................25

4.3. Orders .....................................................................................................................26

4.4. Execution and Confirmation Process .....................................................................27

4.5. Permitted Order Types ...........................................................................................28

4.6. Trade Confirmations ..............................................................................................28

4.7. Errors......................................................................................................................28

4.8. [Reserved] ..............................................................................................................29
DCM Exhibit M-1 

 -ii4.9. Position Limits and Position Accountability .........................................................29

4.10. Public Data .............................................................................................................30

 CLEARING ............................................................................................................30

5.1. Submission and Acceptance of Trades for Clearing ..............................................30

5.2. Procedures for Deposits and Withdrawals from Accounts ....................................31

5.3. Settlement of Contracts ..........................................................................................32

5.4. Investment and Use of Clearing Participant Account Assets ................................33

5.5. Transfers of Positions ............................................................................................33

 PARTICIPANT CONDUCT .................................................................................33

6.1. Prohibited Activities ..............................................................................................33

 RULE ENFORCEMENT .....................................................................................36

7.1. Market Surveillance ...............................................................................................36

7.2. General ...................................................................................................................36

7.3. Inquiries and Investigations ...................................................................................37

7.4. Notice of Charges and Opportunity to Respond ....................................................39

7.5. Settlements .............................................................................................................41

7.6. Disciplinary Panel ..................................................................................................41

7.7. Respondent Review of Evidence ...........................................................................42

7.8. Hearings .................................................................................................................43

7.9. Decision of Disciplinary Panel ..............................................................................44

7.10. Sanctions ................................................................................................................45

7.11. Costs .......................................................................................................................45

7.12. Appeals ..................................................................................................................46

7.13. Summary Imposition of Fines ................................................................................48

7.14. Summary Suspensions and Other Summary Actions ............................................49

7.15. Publication of Disciplinary Action ........................................................................51

 DISPUTE RESOLUTION ..................................................................................51

8.1. General ...................................................................................................................51

 CONTRACT RULES ............................................................................................52

9.1. Contract Specifications ..........................................................................................52

9.2. Contract Modifications ..........................................................................................52
DCM Exhibit M-1 

1 

DEFINITIONS 

1.1. Defined Terms

Unless otherwise specifically provided in the Rules or the context otherwise 

requires, the terms defined in this Rule 1.1 shall for all purposes of the Rules have the meanings 

specified herein. 

“Account” shall have the meaning ascribed to it in Rule 3.3. 

“Affiliate” an “Affiliate” of, or a Person “Affiliated” with, another Person is a 

Person who, directly or indirectly, Controls, is Controlled by, or is under common Control with, 

such other Person. 

“API” means an application programming interface, which is a set of programming 

code that queries data, parses responses, and sends instructions between one software and another. 

“Appeals Panel” means a panel comprised of 3 individuals from the Regulatory 

Oversight Committee, with one individual acting as chairman, which will consider appeals in 

accordance with Chapter 7. 

“Applicable Law” means, with respect to any Person, any statute, law, regulation, 

Rule or ordinance of any governmental or self-regulatory authority applicable to such Person, 

including without limitation the CEA, CFTC Regulations, and the NFA rules. 

“Authorized User” means any natural person who is authorized by a Participant to 

place Orders on its behalf. Without limitation, an Authorized User may include an employee of a 

Participant that is an entity, and an advisor authorized by a Participant to trade on its behalf. 

“Board of Directors” means the Board of Directors of QCEX. 

“Business Day” means any day other than a Saturday, Sunday or any other day on 

which banking institutions in New York, New York are authorized or required by law, regulation 

or executive order to be closed. 

“CEA” means the Commodity Exchange Act as in effect from time to time. 

“CFTC” means the Commodity Futures Trading Commission, and includes any 

successor agency or authority. 

“CFTC Regulation” means any rule, regulation, order or directive and any 

interpretation thereof or guidance thereon issued from time to time by the CFTC. 

“Chief Compliance Officer” means the individual appointed by the Board of 

Directors from time to time to serve as chief compliance officer of QCEX. For the avoidance of 

doubt, the Chief Compliance Officer shall serve as, and the responsibilities of the Chief 
DCM Exhibit M-1 

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Compliance Officer shall include, the responsibilities of the chief regulatory officer under Part 38 

and the responsibilities of a chief compliance officer under Part 39 of the CFTC Regulations. 

“Chief Executive Officer” means the individual appointed by the Board of 

Directors from time to time to serve as chief executive officer of QCEX. 

“Chief Financial Officer” means the individual appointed by the Board of 

Directors from time to time to serve as chief financial officer of QCEX. 

“Chief Risk Officer” means the individual appointed by the Board of Directors 

from time to time to serve as chief risk officer of QCEX. 

“Clearinghouse” means QC Clearing LLC, a Delaware limited liability company. 

“Clearing Privileges” means the ability of the Participant to clear transactions 

through the Clearinghouse. 

“Closed Contract Position” shall mean (a) any combination of long and short 

Open Contract Positions that have been offset against each other or (b) any Open Contract Position 

that has been offset by the tendering or receipt (as applicable) of a notice of payment. 

“Compliance Department” means the Officers and employees of QCEX who are 

responsible for maintaining the compliance integrity of the Exchange and the Clearinghouse. 

“Contracts” means any contracts or transactions that QCEX may approve from 

time to time for trading on the QCEX Exchange and clearing through the QCEX Clearinghouse. 

“Contract Rules” means the rules with respect to a particular Contract that govern 

the terms of, and the applicability of these Rules to, trading in such Contract. 

“Control” means the power to exercise a controlling influence over the 

management or policies of a Person. Any Person who owns beneficially, directly or indirectly, 

more than 20% of the voting power in the election of directors of a corporation (or the election or 

appointment of the governing body of an Entity that is not a corporation), or more than 25% of the 

voting power in the election of directors of any other corporation (or other governing body) which 

directly or through one or more Affiliates owns beneficially more than 25% of the voting power 

in the election of directors of such corporation (or other governing body), shall be presumed to 

control such corporation or other entity absent a determination that it does not exercise a 

controlling influence. The terms “controlling” or “controlled” shall have meanings correlative to 

the foregoing. 

“Director” means a member of QCEX’s Board of Directors. 

“Disciplinary Panel” shall have the meaning ascribed to it in Rule 7.6. 

“Entity” means on a specified date any Person other than a natural person (e.g., a 

corporation, partnership, sole proprietorship or trust). 
DCM Exhibit M-1 

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“Exchange” means QCX LLC, a Delaware limited liability company. 

“Expiration Time” means, in the case of a Fully-Collateralized Contract, the date 

specified time on a specified designated date established by QCEX as the expiration, or 

termination, of such Fully-Collateralized Contract. “Fully-Collateralized Contracts” means 

Contracts with respect to which each party’s obligations are fully paid at the time the Contracts 

are entered into, and with respect to which no further amounts are due, either for margin, settlement 

amounts or otherwise. 

“Incentive Program Participant” means any Participant that has been appointed 

by QCEX to perform certain market-making functions or otherwise to provide liquidity with 

respect to one or more specified Contracts pursuant to an agreement between such Participant and 

QCEX. 

“ISV” means an independent software vendor. 

“Marketable Limit Order” means a Contract executed when entered to the extent 

that there is an opposite Standing Limit Order open in the QCEX Direct System. 

“NFA” means the National Futures Association, and includes any successor 

organization. 

“Novation” means the process by which a party to a transaction transfers all of its 

rights, liabilities, duties and obligations under the transaction to a new legal party other than the 

counterparty to the transaction. The transferee accepts all of the transferor’s rights, liabilities, 

duties and obligations under the transaction. A Novation is valid as long as the transferor and the 

remaining party to the transaction are given notice, and the transferor, transferee and remaining 

party to the transaction consent to the transfer. 

“Officer” shall have the meaning ascribed to it in Rule 2.4. 

“Open Contract Positions” shall mean any Contract submitted by a Participant to 

the Clearinghouse, and accepted by the Clearinghouse, for clearing that has not been designated 

as a Closed Contract Position, including (a) any long or short position in such Contract without a 

matching position that such first position can be offset against, (b) any long or short position in 

such Contract with a matching position that such first position can be offset against but that is held 

open by such Participant under an approved hedge program and (c) any long or short position in 

such Contract with a matching position that such first position can be offset against but that is held 

open under the applicable Contract Rules which defer offset until Contract expiration or another 

specified date. 

“Order” means any order to buy or sell a Contract on or subject to the Rules. 

“Original Margin” means the amount and type of assets required to be on deposit 

with the Clearinghouse pursuant to the applicable Contract Rules, in order to establish a position 

in the relevant Contract. 
DCM Exhibit M-1 

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“Participant” means any Person that has been granted, and continues to have, 

Trading Privileges and/or Clearing Privileges, or otherwise remains subject to the jurisdiction of 

the Exchange and/or the Clearinghouse under these Rules. 

“Payout Condition” means that the condition to the obligation of a Seller to pay 

the Settlement Amount under a Fully-Collateralized Contract has occurred on the Expiration Time. 

“Person” means any natural person, association, partnership, limited liability 

company, joint venture, trust or corporation. 

“Position Accountability Level” means the size of positions in a Contract above 

which a Participant holding the positions is required to submit reports to the Exchange. 

“Public Director” has the meaning ascribed to it in Rule 2.5(b), provided that such 

definition shall be amended from time to time as may be necessary to conform to any amendments 

or modifications to the term “Public Director” set forth in CFTC Regulations as the CFTC may 

adopt from time to time. 

“Purchaser” means the Participant that is the purchaser under a Contract. The 

Purchaser is the holder of a long position in such Contract. 

“QCEX” means the Exchange and Clearinghouse, collectively. 

“QCEX Direct System” means the proprietary order entry and execution system 

used by the Exchange for the placement and execution of Orders or the collection and transmission 

of information relating to Contracts. Participants (and their Authorized Users) will access the 

QCEX Direct System directly via the internet. 

 “Regulatory Services Agreement” shall have the meaning ascribed to it in Rule 

2.11. 

“Regulatory Oversight Committee” means the committee of the Board of 

Directors constituted in accordance with Rule 2.3. 

“Responsible Agent” shall have the meaning ascribed to it in Rule 3.7(a). 

“Rulebook” means the QCEX Rulebook. 

“Rules” means the QCEX rules, as outlined in this Rulebook and as may be 

amended from time to time. 

“Seller” means the Participant that is the seller under a Contract. The Seller is the 

holder of a short position in such Contract. 

“Settlement Amount” means, in the case of a Fully-Collateralized Contract, the 

fixed amount required to be paid by the Seller to the Purchaser on the Settlement Date if the Payout 

Condition is satisfied. 
DCM Exhibit M-1 

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“Settlement Bank” means a depository approved by QCEX as an acceptable 

location for depositing and holding Participant funds. 

“Settlement Date” means the date established under the terms of a Contract as the 

date on which settlement of amounts owed with respect to such Contract must be paid. 

“Standing Limit Order” means a Contract that will be executed when entered to 

the extent that there is an opposite Order open in the QCEX Direct System. 

“Trading Day” means any day on which the Exchange is open and available for 

the trading of Contracts and the Clearinghouse is open and available for the clearing of Contracts. 

“Trading Hours” means, with respect to any Contract, the hours during which the 

Exchange is regularly open for the trading of such Contract. 

“Trading Privileges” means the ability of the Participant to enter into transactions 

on the Exchange. 

“Underlying” means the index, asset, rate, risk, measure, instrument, differential, 

indicator, value, contingency, occurrence, or extent of an occurrence that shall determine the 

amount payable or deliverable under a Contract traded on the Exchange. 

“USD” means United States dollar. 

“User ID” shall have the meaning ascribed to it in Rule 4.2. 

“Variation Margin” shall means the amount of cash or other collateral that a 

Participant is required to pay to the Clearinghouse based on fluctuations in the value of a Contract. 

1.2. Rules of Interpretation 

For all purposes of these Rules, except as otherwise expressly provided herein or 

unless the context otherwise requires: 

(a) the terms defined in these Rules include the plural as well as the singular 

and vice versa; 

(b) words importing gender include all genders; 

(c) any reference to a Chapter or Rule refers to a Chapter or Rule of these Rules; 

(d) any reference to these Rules refers to these Rules, including all Appendices 

hereto, and the words herein, hereof, thereto, hereto and hereunder and words of similar import 

refer to these Rules and their appendices as a whole and not to any particular Chapter, Rule or any 

other subdivision; 

(e) references to days, months and years refer to calendar days, months and 

years, respectively; 
DCM Exhibit M-1 

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(f) all references herein to “including” shall be deemed to be followed by the 

words “without limitation”; 

(g) any term used herein that is defined in the CEA or CFTC Regulations shall 

have the meaning assigned to it therein; and 

(h) all references herein to a time of day refer to local time in The City of New 

York. 

1.3. Effect of Titles 

The titles of these Rules have been inserted for convenience of reference only and 

shall not affect the meaning of these Rules. 

1.4. Amendment of Rules 

New Rules may be adopted, and existing Rules may be amended or repealed, by 

the Board of Directors. All such new Rules, amendments or repeals shall become effective on such 

date (after any required filing with, or approval thereof by, the CFTC) as may be determined by 

QCEX. 

1.5. Contract Rules 

Notwithstanding any provision of these Rules to the contrary, the Contract Rules 

with respect to a particular Contract shall govern the applicability of these Rules to trading in such 

Contract and, in the event of any conflict between these Rules and the Contract Rules, the Contract 

Rules shall govern with respect to trading in the relevant Contract. 

GOVERNANCE 

2.1. Authority of the QCEX Board of Directors 

There will be a single Board of Directors of QCEX, which will serve as the Board 

of each of the Exchange and the Clearinghouse and will have the authority to take actions either 

collectively or separately with respect to the Exchange and the Clearinghouse. The Board of 

Directors of QCEX has the power and authority to manage and direct the business and activities 

of QCEX including but not limited to the power to establish the standards for Participant eligibility 

and access to the secure portions of QCEX’s website, the power to amend, adopt, or repeal these 

Rules, and the power to oversee the business conduct of Participants and impose penalties for 

violation of these Rules. The business and affairs of QCEX shall be managed by the Board of 

Directors in accordance with Applicable Law and the Board of Directors shall have all power and 

authority provided to a Board of Directors under Applicable Law. Notwithstanding the foregoing, 

the Board of Directors may, from time to time, delegate any or all aspects of the management of 

the day-to-day business and affairs of QCEX to the Chief Executive Officer. 

The number of directors on the Board of Directors shall be five, at least two of 

whom shall be Public Directors (or such other percentage of the Board of Directors as may be 
DCM Exhibit M-1 

7 

required by CFTC Regulations, as amended from time to time, provided that the number of Public 

Directors shall at all times equal no less than 35% of the entire Board of Directors). Any vote made 

by the Board of Directors that results in a tie will require that the Board of Directors reconvene to 

reconsider the matter until such tie is broken. The number of directors may be increased or 

decreased from time to time by a vote of the Board of Directors, provided that there are at all times 

at least five Directors. 

The Board of Directors has the power and authority to call for review, and to affirm, 

modify, suspend or overrule, any and all decisions and actions of standing committees of the Board 

of Directors formed pursuant to Rule 2.2(a) and officers of QCEX appointed pursuant to Rule 2.4 

(other than the Regulatory Oversight Committee). 

2.2. Standing Committees 

(a) Unless otherwise determined by the Board of Directors, the Board of 

Directors shall initially have one standing committee: the “Regulatory Oversight Committee”. The 

Regulatory Oversight Committee shall have the authority granted to a regulatory oversight 

committee under Applicable Law and by the Board of Directors. The Board of Directors may 

create such additional standing committees of the Board of Directors as it may from time to time 

deem necessary or advisable. Members of such committees must be members of the Board of 

Directors. Each standing committee shall assist in the supervision, management and control of the 

affairs of QCEX within its particular area of responsibility and shall have the scope and authority 

granted to it by the Board of Directors. 

(b) Except as otherwise specifically provided in these Rules, the members of 

standing committees shall be appointed by the chairperson of the Board of Directors, subject to 

approval by the Board of Directors. Each appointee shall serve for one year or until the due 

appointment of his or her successor or his or her resignation or removal, with or without cause, by 

a majority vote of the Board of Directors. Subject to approval by the Board of Directors, the 

chairperson of the Board of Directors shall designate the chairperson of each standing committee. 

(c) Subject to the authority of the Board of Directors, each standing committee 

shall determine the manner and form in which its proceedings shall be conducted, and may act at 

a meeting or without a meeting, and through a quorum composed of a majority of all its members 

then in office, inclusive of ex officio members. Except as otherwise specifically provided in these 

Rules, the decision of a majority of those present at a meeting at which a quorum is present, or the 

decision of a majority of those participating when at least a quorum participates, shall be the 

decision of the standing committee. Any or all members of any standing committee may participate 

in any meeting thereof by telephone or video conference or similar communications equipment by 

means of which all members participating in such meeting can hear and, if applicable, see each 

other. 

(d) In the event of the absence or disqualification of any member of a standing 

committee from any meeting thereof, each of the following individuals, in the order of their 

availability, may appoint another qualified individual to act at the relevant meeting in the place of 

any such absent or disqualified member: (i) the chairperson of the Board of Directors or (ii) the 

chairperson of the standing committee in question. 
DCM Exhibit M-1 

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(e) QCEX may create additional committees or panels, for such purposes as 

may be necessary or advisable, as determined by the Board of Directors from time to time. 

Members of each such committee may be members of the Board of Directors, Participants, 

Authorized Users or such other individuals as may be qualified to serve on such committee. At 

least 35% of the members of each such committee designated by the Board of Directors shall be 

Public Directors (or individuals that would qualify as Public Directors if they were directors of 

QCEX). Any such committee or panel may serve indefinitely or for specified, limited periods of 

time, as determined by the Board of Directors. 

2.3. Regulatory Oversight Committee 

The Regulatory Oversight Committee of the Board of Directors shall consist solely 

of Public Directors, who shall be members of the Board of Directors, and shall be appointed from 

time to time by the chairperson of, and approved by, the Board of Directors. The Regulatory 

Oversight Committee shall oversee QCEX’s regulatory compliance program on behalf of the 

Board of Directors. It shall make such recommendations to the Board of Directors as will, in its 

judgment, best promote the interests of QCEX, provided that, for the avoidance of doubt, any 

dissenting opinions from one or more members of the Regulatory Oversight Committee shall be 

reported to the Board of Directors along with any such recommendation. The Regulatory Oversight 

Committee shall also have such other powers and perform such other duties as the Board of 

Directors may delegate to it from time to time. 

Without limiting the generality of the foregoing, the Regulatory Oversight 

Committee shall have authority to: (a) monitor QCEX’s regulatory program for sufficiency, 

effectiveness and independence, (b) oversee all facets of QCEX’s regulatory program, including 

trade practice and market surveillance; audits, examinations, and other regulatory responsibilities 

with respect to Participants (including ensuring compliance with financial integrity, financial 

reporting, sales practice, recordkeeping, and other requirements); and the conduct of 

investigations, (c) review the size and allocation of the regulatory budget and resources; and the 

number, hiring and termination, and compensation of regulatory personnel, (d) supervise QCEX’s 

Chief Compliance Officer, who will report directly to the Regulatory Oversight Committee, (e) 

prepare an annual report assessing QCEX’s self-regulatory program for the Board of Directors and 

the CFTC, which sets forth the regulatory program’s expenses, describes its staffing and structure, 

catalogues disciplinary actions taken during the year, and reviews the performance of disciplinary 

committees and panels, (f) recommend changes that would ensure fair, vigorous, and effective 

regulation, (g) review regulatory proposals and advise the Board of Directors as to whether and 

how such changes may impact regulation, and (h) exercise any other functions expressly assigned 

to it in these Rules or under Applicable Law. 

2.4. Officers 

(a) QCEX has appointed a Chief Executive Officer, Chief Compliance Officer and 

Chief Financial Officer and may appoint other such officers from time to time as determined by 

the board of directors (each individually an “Officer”). These Officers are appointed and may be 

dismissed (with or without cause) by majority vote of the Board of Directors. An individual may 

hold multiple Officer positions simultaneously, as determined by the Board of Directors. 
DCM Exhibit M-1 

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(b) The Chief Executive Officer of QCEX may be (but shall not be required to be) a 

Director of QCEX. In the absence of the chairperson, the Chief Executive officer will perform the 

chairman’s duties. In the event of a disagreement between the Chief Executive Officer and the 

Board of Directors or the chairperson as to a QCEX matter, the chairperson and/or Board of 

Directors shall control. Subject to the direction of the Board of Directors, the Chief Executive 

Officer will manage the overall business of QCEX. 

(c) The Chief Compliance Officer of QCEX will be responsible for managing the dayto-day regulatory compliance functions of QCEX. The Chief Compliance Officer will also keep 

the minutes of the meetings of the of Directors. 

(d) The Chief Financial Officer of QCEX will be responsible for all funds and other 

financial assets of QCEX and in general perform all duties incident to the office of Chief Financial 

Officer and such other duties as from time to time may be assigned by the Chief Executive Officer 

or the Board of Directors. If the function of the office of the Chief Financial Officer is outsourced 

to a service provider, the Chief Executive Officer shall be responsible for oversight of this function. 

(e) The Board of Directors of QCEX may also appoint a Chief Risk Officer. The Chief 

Risk Officer of QCEX will be responsible for managing the Clearinghouse’s risk management 

operations. 

2.5. Eligibility 

(a) No Person may serve as an Officer or Director of QCEX, or serve on any 

disciplinary committee, arbitration panel or oversight panel of QCEX or as the Chief Compliance 

Officer if such Person: 

(i) was found within the past three years by a final decision of a selfregulatory organization, an administrative law judge, a court of competent jurisdiction or 

the CFTC to have committed a violation of Applicable Law; 

(ii) entered into a settlement agreement within the past three years in 

which any of the findings or, in absence of such findings, any of the acts charged included 

a violation of Applicable Law; 

(iii) is currently suspended from trading on any contract market, is 

suspended or expelled from membership from any self-regulatory organization, is serving 

any sentence of probation or owes any portion of a fine imposed pursuant to either: 

(A) a finding by a final decision of a self-regulatory 

organization, an administrative law judge, a court of competent jurisdiction 

or the CFTC that such person committed a disciplinary offense; or 

(B) a settlement agreement in which any of the findings or, in 

the absence of such findings, any of the acts charged included a violation of 

Applicable Law; 
DCM Exhibit M-1 

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(iv) is currently subject to an agreement with the CFTC or any selfregulatory organization not to apply for registration with the CFTC or membership in any 

self-regulatory organization; 

(v) is currently subject to or has had imposed on him or her within the 

past three years a CFTC registration revocation or suspension in any capacity for any 

reason, or has been convicted within the past three years of any of the felonies listed in 

section 8a(2)(D)(ii) through (iv) of the CEA; 

(vi) is currently subject to a denial, suspension or disqualification from 

serving on the disciplinary committee, arbitration panel or governing board of any selfregulatory organization as that term is defined in section 3(a)(26) of the Securities 

Exchange Act of 1934; or 

(vii) is subject to a statutory disqualification under sections 8a(2) and 

8a(3) of the CEA. 

(b) To qualify as a “Public Director”, an individual must be found, by action 

of the Board of Directors, on the record, to satisfy the requirements of a “public director” under 

Appendix B to Part 38 of the CFTC Regulations. 

(c) In addition to the requirements of Rule 2.5(a) and (b), the Chief Compliance 

Officer appointed by QCEX must be an individual who (i) is knowledgeable about futures trading 

and futures market operations as well as CFTC Regulations and (ii) reports directly to the 

Regulatory Oversight Committee. 

2.6. Emergency Rules 

(a) In the event of an Emergency, as described in paragraph (c) of this Rule 2.6, 

the Chief Executive Officer or any individual designated by the Chief Executive Officer may place 

into immediate effect a temporary emergency rule, which may remain in effect for up to thirty (30) 

calendar days, to undertake actions necessary or appropriate to respond to the Emergency, 

provided that, as soon as reasonably practicable within such thirty (30) calendar day period, the 

Board of Directors considers and approves such action and, if it disapproves such action, the 

temporary emergency rule shall be terminated. Should the Emergency persist for longer than thirty 

(30) calendar days, such temporary emergency rules may be extended for additional thirty (30) 

calendar day periods, so long as there is: (1) an affirmative vote of two-thirds of the members of 

the Board of Directors at a meeting at which a quorum is present; or (2) there is a written 

authorization and acknowledgement signed by at least two Officers of QCEX, provided that, as 

soon as reasonably practicable within such thirty (30) calendar day period, the Board of Directors 

considers and approves such action and, if it disapproves such action, the temporary emergency 

rule shall be terminated. In any event, the rationale for invoking such emergency authority should 

be documented by the Board of Directors as soon as reasonably practicable. 

(b) Any temporary emergency rule adopted under this Rule may authorize QCEX to 

act as the Board of Directors or Officers deem necessary or appropriate to meet the Emergency, 

and those actions may adversely affect the ability to trade on the Exchange or clear transactions 

through the Clearinghouse. Therefore, the possibility of an Emergency, and of QCEX taking 
DCM Exhibit M-1 

11 

emergency action, is one of the risks that Participants should consider when deciding whether to 

trade and clear transactions on QCEX. 

(c) An “Emergency” may include any of the following circumstances, subject to the 

determination of the Board of Directors: 

(i) any trading activity that constitutes manipulation or attempted 

manipulation of the Exchange or Clearinghouse; 

(ii) any actual, attempted, or threatened corner, squeeze, or undue 

concentration of positions; 

(iii) any circumstance that may materially affect the performance of the 

Contracts traded on QCEX, including failure of the payment system or bankruptcy 

or insolvency of any participants; 

(iv) any action taken by the United States, any foreign government, any 

state or local governmental body, any other contract market or board of trade, or 

any other exchange, market, facility, or trade association (foreign or domestic) that 

may have a direct and material impact on trading on or clearing through QCEX; 

(v) any circumstances that may have a severe, adverse impact upon the 

functions or operation of QCEX including, for example, natural disasters such as 

fire or flood, terrorist acts such as bomb threats, physical plant breakdowns such as 

plumbing, heating, or air conditioning problems, system breakdowns such as 

power, telephony, cable, trading systems, or computer systems failures or 

interruptions to communications, the network, or the Internet; 

(vi) the imposition of any injunction or other restraint by any 

government agency, court, or arbitrator that may affect the ability of a Participant 

to perform on Contracts; 

(vii) any circumstance in which it appears that a Participant or any other 

person is in such operational condition, or is conducting business in such a manner, 

that such person cannot be permitted to continue in business without jeopardizing 

the safety of Participants or QCEX itself; and 

(viii) any other unusual, unforeseeable, and adverse circumstance which, 

in the opinion of the governing board, requires immediate action and threatens or 

may threaten such things as the fair and orderly trading in, or the liquidation of or 

delivery pursuant to Contracts traded on QCEX. 

(d) If deemed necessary to combat perceived market threats caused by an Emergency, 

a QCEX official authorized to do so may suspend trading on the Exchange and clearing through 

the Clearinghouse during the duration of the emergency or take any other action that the official 

thinks is necessary or appropriate. The official will order an end to the action taken in response to 

the emergency as soon as the official determines that the emergency has sufficiently abated to 

permit QCEX to function properly. 
DCM Exhibit M-1 

12 

(e) QCEX will make every effort practicable to notify the Director of the Division of 

Market Oversight of the CFTC, the Director’s delegates, and/or other persons designated by the 

CFTC’s Regulations that QCEX intends to implement, modify, or terminate a temporary 

emergency rule pursuant to Rule 2.6(a) or an action in response to an emergency pursuant to Rule 

2.6(d) prior to the implementation, modification, or termination of the rule or action. If it is not 

possible to notify the CFTC prior to the implementation, modification, or termination of the rule 

or action, QCEX will notify the CFTC of the implementation, modification, or termination of the 

rule or action at the earliest possible time, and in no event more than 24 hours after implementation, 

modification, or termination. 

2.7. Restrictions on Certain Persons Who Possess Material, Non-Public 

Information 

(a) No Officer, Director, employee, or agent of QCEX, and no member of any 

committee established by the Board of Directors of QCEX, shall use or disclose any material, nonpublic information obtained in connection with the performance of his or her official duties, for 

any purpose other than the performance of his or her official duties. 

(b) No Officer, Director, employee or agent of QCEX, and no member of any 

committee established by the Board of Directors of QCEX, shall disclose to any other Person 

material, non-public information, however obtained (including, without limitation, material nonpublic information obtained by an employee or agent of QCEX in connection with such employee 

or agent’s employment or agency, as the case may be), if such Person could reasonably expect that 

such information might assist another Person in trading any Contract or related contract or 

financial instrument. 

(c) No Officer, Director, employee or agent of QCEX, and no member of any 

committee established by the Board of Directors of QCEX, shall trade in any Contract. Any 

Director that is affiliated with a Participant shall not be permitted to trade in Contracts on behalf 

of such Participant and shall, when and to the extent necessary or appropriate, recuse himself or 

herself from any Board deliberations on any matter related to the relevant Participant, or such 

Participant’s trading activity. 

(d) For purposes of this Rule 2.7, the terms “material information,” “non-public 

information” and “commodity interest” shall have the meanings ascribed to them in CFTC 

Regulation 1.59. 

(e) Notwithstanding the foregoing, the restrictions of this Rule 2.7 do not apply 

to Affiliates of QCEX. 

2.8. Conflicts of Interest 

 QCEX is subject to and will ensure compliance with CFTC Regulation 1.69, which 

prohibits members of the Board of Directors or any disciplinary or oversight committee or 

subcommittee from taking part in any deliberations or voting on any matter in which members of 

the Board of Directors, committee, or subcommittee member have an interest or have a relationship 

with a named party in interest. CFTC Regulation 1.69 also requires disclosure by members of the 

Board of Directors, committee, or subcommittee of interests and relationships in certain 
DCM Exhibit M-1 

13 

circumstances. Consequently, members of the Board of Directors, committee, and subcommittee 

members shall not participate in the deliberations regarding, or vote on, any matter in which 

members of the Board of Directors, committee, or subcommittee have an interest or have a 

relationship with a named party in interest, all as defined in CFTC Regulation 1.69, and shall 

disclose such interests in accordance with, and otherwise comply with, CFTC Regulation 1.69. 

2.9. Indemnification of Members of the Boards of Directors, Officers, and Others 

 QCEX will indemnify to the full extent authorized by law any person who was or 

is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, 

or proceeding, whether civil, criminal, administrative, or investigative in nature, by reason of the 

fact that such person is or was a Director, Officer, employee, or agent of QCEX or is or was serving 

at the request of QCEX as a Director, Officer, employee, or agent of QCEX against expenses, 

including attorneys’ fees, judgments, fines, and amounts paid in connection with such action, suit, 

or proceeding. Such indemnification shall not be deemed exclusive of any other rights to which a 

person may be entitled under any agreement or as a matter of law or otherwise. QCEX may 

purchase and maintain insurance on behalf of any person who is or was a Director, Officer, 

employee, or agent of QCEX against any liability asserted against such person and incurred by 

such person in any such capacity, or arising out of such person’s status as such, whether or not 

QCEX would have the power to indemnify such person against such liability under the provisions 

of this Rule 2.9. However, no person shall be indemnified from liability for fraud, bad faith, willful 

misconduct, or gross negligence. Further, no person shall be indemnified against a civil penalty 

imposed by the CFTC under section 6b of the CEA. 

2.10. Regulatory Cooperation 

(a) QCEX may from time to time enter into such agreements with domestic or 

foreign self-regulatory organizations, associations, boards of trade and their respective regulators 

providing for the exchange of information and other forms of mutual assistance for financial 

surveillance, routine audits, market surveillance, investigative, enforcement and other regulatory 

purposes as QCEX may consider necessary or appropriate or as the CFTC may require. 

(b) The Chief Executive Officer or their delegate is authorized to provide 

information to an exchange or clearing organization that is a party to an information sharing 

agreement with QCEX, in accordance with the terms and conditions of such agreement. 

(c) All information received by QCEX with respect to any information sharing 

agreement, shall be held in confidence by QCEX and shall not be provided to any of its 

nonregulatory departments or divisions or any other person (including to any affiliate of QCEX), 

except as follows: 

(i) to the governmental authority(ies) responsible for regulating 

financial instruments in the home jurisdiction of the requesting information sharing 

agreement member, 

(ii) pursuant to an order of a court or other lawful process, or 
DCM Exhibit M-1 

14 

(iii) as it may be necessary for conducting any investigation or 

disciplinary proceeding. 

2.11. Regulatory Services Agreement with the NFA 

QCEX has contracted with the NFA to provide certain regulatory services to the 

Exchange pursuant to a regulatory services agreement (the “Regulatory Services Agreement”). 

In accordance with the Regulatory Services Agreement, the NFA may perform certain 

surveillance, investigative, and regulatory functions under the Rules and the Exchange may 

provide information to the NFA in connection with the performance by the NFA of those functions. 

Without limitation of the foregoing, any of the powers or functions of the Exchange under these 

Rules may be delegated to the NFA pursuant to the Regulatory Services Agreement in such manner 

and on such terms as the Exchange and the NFA may mutually agree. 

PARTICIPANTS 

3.1. Participant Eligibility 

(a) To be eligible to trade on the Exchange and clear transactions through the 

Clearinghouse, Participants must: (i) satisfy all requirements generally applicable to Participants 

and Authorized Users under these Rules; (ii) satisfy such financial criteria as may be prescribed 

by QCEX from time to time; (iii) have sufficient technical and operational capabilities to fulfill 

any other obligations applicable to Participants or their Authorized Users as may from time to time 

be required by QCEX; and (iv) satisfy such other requirements or criteria as may from time to time 

be adopted by QCEX. 

(b) If the Participant is not a natural person applying for a personal account, the 

Participant must satisfy the following criteria, and must represent to QCEX that it does so: 

(i) It is duly organized, validly existing and in good standing under the 

laws of the jurisdiction in which it is organized and has all licenses necessary to carry on 

its business as now being conducted; 

(ii) It has the legal authority and is duly authorized and empowered to 

become a Participant and to effect transactions in Contracts on the Exchange, or to effect 

transactions in any other relevant contracts, agreements or transactions, cleared through the 

Clearinghouse; 

(iii) It is not subject to a statutory disqualification under sections 8a(2) 

or 8a(3) of the CEA; 

(iv) It has a mechanism that is acceptable for transferring funds to and 

receiving funds from the Participant’s Account; 

(v) It has appointed one or more Authorized User(s) pursuant to Rule 

3.4; and 
DCM Exhibit M-1 

15 

(vi) It satisfies such other requirements or criteria as may from time to 

time be adopted by QCEX. 

(c) If the Participant is a natural person applying for a personal account, the 

Participant must satisfy the following criteria and represent that it: 

(i) Is at least 18 years of age and has attained the age of majority in 

their state and/or country of residence; 

(ii) Is not subject to a statutory disqualification under sections 8a(2) or 

8a(3) of the CEA; 

(iii) Has a mechanism that is acceptable for transferring funds to and 

receiving funds from the Participant’s Account; and 

(iv) Satisfies such other requirements or criteria as may from time to 

time be adopted by QCEX. 

(d) Notwithstanding anything in the foregoing paragraphs (c) or (d) to the 

contrary, in considering any applicant for status as a Participant or an Authorized User of a 

Participant, QCEX may request additional information, or employ such other means that it deems 

desirable or appropriate, to ascertain relevant facts bearing on the applicant’s qualifications; and 

(e) QCEX in its sole discretion may deny (or may condition) the grant of 

Trading Privileges and/or Clearing Privileges of any Participant or any Authorized User if such 

Person is unable satisfactorily to demonstrate a capacity to adhere to all applicable Rules and 

CFTC Regulations, or for such other causes as QCEX may determine from time to time. 

(f) QCEX in its sole discretion may condition or revoke a Participant’s Trading 

Privileges and/or Clearing Privileges or, in the case of an Authorized User, condition or revoke its 

ability to trade and clear on behalf of a Participant, if any of the circumstances specified in the 

preceding paragraph (e) exist with respect to such Participant or Authorized User, or such 

Participant or Authorized User: 

(i) fails to meet any of the qualification requirements for Trading 

Privileges and/or Clearing Privileges or status as an Authorized User; 

(ii) fails to meet any condition placed by QCEX on such Trading 

Privileges and/or Clearing Privileges or status as an Authorized User; 

(iii) is obligated to submit a notice to QCEX under Rule 3.6(h); or 

(iv) violates any agreement with QCEX, any Rule or any provision of 

Applicable Law. 

(g) Futures commission merchants or other brokers or intermediaries shall not 

be permitted to submit trades in Contracts for execution on behalf of customers. Only Participants 

and Authorized Users authorized to execute trades in Contracts on behalf of Participants may 
DCM Exhibit M-1 

16 

submit Orders for transactions in Contracts, and only subject to the conditions and requirements 

set forth in the Rules. 

3.2. Participant Applications 

(a) Each application to become a Participant shall be in such form as may from 

time to time be prescribed by QCEX. Each applicant to become a Participant shall promptly update 

the application materials if any of the information provided therein becomes inaccurate or 

incomplete. QCEX shall act upon, and approve or disapprove, any such application without 

unreasonable delay. 

(b) Each applicant to become a Participant shall: 

(i) submit to QCEX executed forms of the Participant Agreement and 

all application documents; and 

(ii) agree in written or electronic form to abide by these Rules and 

Applicable Law. 

(c) Upon QCEX’s approval of an applicant’s Participant application and upon 

QCEX’s confirmation that the initial fee payable by the applicant has been paid to QCEX, the 

applicant shall become a Participant and obtain Trading Privileges and Clearing Privileges. 

(d) If QCEX denies an applicant’s Participant application, the applicant may 

appeal the decision by filing with the Compliance Department a petition for review of such 

application denial or trading limitation. The petition should describe in detail the reasons why the 

application should be granted. The petition must be filed within thirty (30) Business Days from 

the date upon which notice of the denial of the applicant’s Participant application was provided by 

QCEX. The decision of the Compliance Department will be final. An applicant whose Participant 

application has been denied by the Compliance Department will not be eligible for reapplication 

during the six months immediately following such denial. 

3.3. Participant Accounts 

(a) QCEX will establish an account on its books and records in the name and 

on behalf of the Participant (each such Account referred to herein as the “Account”). The 

Participant will be responsible for all Orders, transactions and other activity in or through its 

Account and for all amounts due with respect to any such Orders, transactions or other activity, 

including but not limited to required amounts of margin and premiums. Each Participant and its 

Authorized Users shall have the right to access the QCEX Direct System, including the right to 

place Orders for the Participant’s Account. 

(b) By virtue of obtaining Trading Privileges, a Participant shall not obtain any 

equity or other interest in QCEX, including voting rights or rights to receive any dividends or other 

distributions, whether arising from a dissolution, merger, consolidation involving QCEX or 

otherwise. 

3.4. Authorized Users 
DCM Exhibit M-1 

17 

(a) Each Participant that is an Entity shall be required to appoint one or more 

individuals to act as its Authorized User or Authorized Users, as applicable. Participants that are 

natural persons may act as their own Authorized User or may appoint a third party as his or her 

Authorized User, pursuant to a power of attorney or other instrument, in a form prescribed or 

approved by QCEX, providing such third party with discretionary or non-discretionary trading 

authority with respect to the Participant’s Account. The third party to which an individual 

Participant grants trading authority may be a related person of the Participant, or any unaffiliated 

party. 

(b) Each Authorized User with discretionary trading authority with respect to 

the Participant’s Account (i) must be a natural person and (ii) must satisfy any other requirements 

as may be prescribed by QCEX from time to time. 

(c) Without limiting the foregoing, each Authorized User must consent, in a 

form satisfactory to QCEX, to abide by the Rules and Applicable Law prior to accessing the QCEX 

Direct System, and each Participant will ensure on an ongoing basis that (i) none of its Authorized 

Users is subject to a disqualification pursuant to any Applicable Law (unless an appropriate 

exemption has been obtained with respect thereto), (ii) each of its Authorized Users will be 

technically proficient, (iii) each of its Authorized Users will conduct its business in a fair and 

equitable manner, and (iv) each of its Authorized Users will conduct its business in accordance 

with the Rules. 

(d) QCEX may withdraw or suspend the registration of any Authorized User if 

QCEX determines that: 

(i) an Authorized User has failed, or has caused the Participant to fail, 

to comply with the Rules of QCEX; 

(ii) an Authorized User is not properly performing the responsibilities 

of an authorized representative of a Participant; 

(iii) an Authorized User has failed to comply with the conditions set 

forth in paragraph (c) of this Rule; or 

(iv) it is in the best interests of maintaining a fair and orderly market to 

do so. 

(e) If the Participant withdraws or QCEX suspends the registration of any Authorized 

User, the Participant must ensure that such Authorized User does not submit any quotes or Orders 

into the QCEX Direct System. 

(f) The registration of an Authorized User will be withdrawn upon the written request 

of either the Authorized User or the Participant for which an Authorized User is registered. Such 

written request shall be submitted in a manner prescribed by QCEX. Until such written request is 

received and processed by QCEX, or an Authorized User’s registration is suspended or withdrawn 

pursuant to paragraph (d) of this Rule, a Participant will be responsible for all activity of such 

Authorized User(s) related to QCEX. 
DCM Exhibit M-1 

18 

3.5. Amounts Payable by Participants 

(a) QCEX shall have the sole authority to establish the amounts of any fees to 

be paid by Participants, and the timing of payment of such fees, and such fees shall be paid when 

due. In addition, QCEX shall have the sole authority to impose minimum withdrawal amounts, 

fees for inactivity or other fees as it deems appropriate. QCEX may post an updated fee schedule 

on its website from time to time. Participants are deemed to have notice of any changes made to 

such fee schedule that are posted on the QCEX website. 

(b) Unless QCEX, at its discretion, elects not to do so in any particular instance, 

QCEX will withdraw the relevant fees directly from each Participant’s Account. The Participant 

agrees to pay, and authorizes QCEX to withdraw from its Account: (a) any fees or charges 

associated with any transactions executed or cleared on QCEX for its Account at such rate as is 

posted on QCEX’s website; (b) any costs or expenses incurred by QCEX in connection with its 

Account, including, but not limited to, any non-sufficient funds charges or charges imposed by 

QCEX’s settlement bank; (c) any other charges agreed upon between the Participant and QCEX; 

and (d) any other fines or penalties that may be imposed by QCEX from time to time. 

(c) If a Participant fails to pay when due any QCEX fees or other amounts due 

by such Participant, and such payment obligation remains unsatisfied for thirty (30) Business Days 

after its due date, QCEX as it deems necessary or appropriate, may suspend, revoke, limit, 

condition, restrict or qualify the Trading Privileges and/or Clearing Privileges of such Participant 

and its Authorized Users. Moreover, QCEX may submit any amounts owed by a Participant in 

excess of thirty (30) Business Days to a third party collection agency. QCEX reserves the right to 

pursue any and all allowable legal action, whether criminal or civil, against the Participant to 

recover losses incurred as the result of fraud or misconduct, including attorney’s fees and other 

legal expenses, and any other remedies permitted by law. 

3.6. Participant Obligations 

(a) By accessing, or entering any Order into, the QCEX Direct System, and 

without any need for any further action, undertaking or agreement, a Participant and its Authorized 

Users agree (i) to be bound by, and comply with, the Rules and Applicable Law, and (ii) to submit 

to the jurisdiction of QCEX with respect to any and all matters arising from, related to, or in 

connection with, the status, actions or omissions of such Participant and its Authorized Users. Any 

Participant and its Authorized Users whose Trading Privileges and/or Clearing Privileges are 

revoked or terminated shall remain bound by the Rules and Applicable Law and subject to the 

jurisdiction of QCEX with respect to any and all matters arising from, related to, or in connection 

with, the status, actions or omissions of such Participant and its Authorized Users prior to such 

revocation or termination. 

(b) Each Participant shall be required to satisfy such minimum financial 

requirements as may be established from time to time by the Exchange or the Clearinghouse. 

(c) All Participant communications with QCEX, including keystrokes entered 

by the Participant on QCEX, emails and telephone calls, may be recorded without further notice, 

and such recordings may be provided to regulatory authorities (subject to and in compliance with 
DCM Exhibit M-1 

19 

Applicable Laws) and used as evidence in the event of any dispute. Such recordings will be and 

remain the sole property of QCEX and will, in the absence of manifest error, be accepted by the 

Participant as evidence of the communications so recorded. The period of retention of such 

recordings shall be as required by Applicable Law or any such longer period as may be determined 

by QCEX in its sole discretion. Further, such recordings may be used for QCEX’s own purposes 

(including, without limitation, for purposes of monitoring levels of activities in categories of 

transactions) and not for the Participant’s benefit. 

(d) Each Participant and any Authorized User(s) thereof must also cooperate 

promptly and fully with QCEX, its agents, and/or the CFTC in any investigation, call for 

information, inquiry, audit, examination, or proceeding. Such cooperation shall include providing 

QCEX with access to information on the activities of such Participant and/or Authorized User in 

any referenced or related market that provides the underlying prices for any QCEX Contract or 

that is otherwise related to the pricing or trading of any Contract. 

(e) Each Participant consents to allow QCEX to provide all information QCEX 

has in its possession or control regarding the Participant, including the Participant’s trading 

activity, to the CFTC or any other regulatory agency, law enforcement authority, or judicial 

tribunal, including (as may be required by information sharing agreements or other contractual, 

regulatory, or legal provisions) foreign regulatory or self-regulatory bodies, law enforcement 

authorities, or judicial tribunals. 

(f) The Rulebook, all amendments thereto and notices and policies thereunder, 

as well as the specifications for the Contracts from time to time traded and cleared on QCEX, will 

be publicly available on the QCEX website. Each Participant and each Participant’s Authorized 

Users(s) will be automatically bound by any notices, interpretations, guidance, Rule changes or 

other material posted by QCEX on its website, without any further action by the Participant or 

Authorized User(s). Each Participant and Authorized User is required to review the “Notices” 

section of the QCEX website to make themselves aware of material changes to these Rules or other 

notices that may affect their rights and obligations as a Participant of QCEX. As mentioned above, 

QCEX shall publish a notice with respect to each addition to, modification of, or clarification of, 

the Rules, any action to implement any Rules, or any notices, interpretations or guidance, in a form 

and manner that is reasonably designed to enable each Participant to become aware of and familiar 

with, and to implement any necessary preparatory measures to be taken by it with respect to, such 

material, prior to the effective date thereof; provided that any failure of QCEX to so publish a 

notice shall not affect the effectiveness of the material in question. For purposes of publication in 

accordance with the first sentence of this Rule 3.6, it shall be sufficient (without limiting the 

discretion of QCEX as to any other reasonable means of communication) if a notice is published 

on QCEX’s website. 

(g) Each Participant must provide QCEX with the current electronic mail 

address for each of its Authorized Users and immediately (and in any event within 24 hours) update 

each such address whenever it changes. All communications between QCEX and the Participant 

(and its Authorized Users) will be transmitted by email and/or posted on the QCEX website. 

(h) Each Participant must immediately notify QCEX in writing upon 

becoming aware: 
DCM Exhibit M-1 

20 

(i) that the Participant, any of the Participant’s officers, employees or 

any of the Participant’s Authorized Users has had access or trading privileges or clearing 

privileges suspended, or participant status is denied, in any commodity, futures, 

securities, or swaps exchange, or any other trading platform or regulatory self-regulatory 

agency; 

(ii) that the Participant, any of the Participant’s officers, employees or 

any of the Participant’s Authorized Users has been convicted of, pled guilty or no contest 

to, or entered a plea agreement to, any felony in any domestic, foreign or military court; 

(iii) that the Participant, any of the Participant’s officers, employees or 

any of the Participant’s Authorized Users has been convicted of, plead guilty or no 

contest to, or entered a plea agreement to a misdemeanor in any domestic, foreign or 

military court which involves: 

(1) embezzlement, theft, extortion, fraud, fraudulent conversion, 

forgery, tax evasion, counterfeiting, false pretenses, bribery, gambling, 

racketeering, or misappropriation of funds, securities or properties; or 

(2) any transaction in or advice concerning swaps, futures, options on 

futures, leveraged transactions or securities; 

(iv) that the Participant, any of the Participant’s officers, employees or 

any of the Participant’s Authorized Users has been subject to, or associated with a firm 

that was subject to regulatory proceedings before any governmental or regulatory agency; 

(v) that the Participant, any of the Participant’s officers, employees or 

any of the Participant’s Authorized Users is currently a party to any investigation or 

proceeding, the resolution of which could result in an event described in Rule 3.6(h)(i)-

(iv); 

(vi) of any other material change in any information contained in the 

Participant’s application to become a Participant on QCEX; 

(vii) of becoming subject to early warning reporting under CFTC 

Regulation 1.12; 

(viii) of becoming the subject of a bankruptcy petition, receivership 

proceeding, or the equivalent, or being unable to meet any financial obligation as it 

becomes due; or 

(ix) of information that concerns any financial or business 

developments that may materially affect the Participants’ ability to continue to comply 

with participation requirements. 

Upon the receipt of such notice, QCEX may take any action it determines to be 

appropriate, in its sole discretion with respect to such Participant, including but not 
DCM Exhibit M-1 

21 

limited to the revocation of such Participant’s Trading Privileges and/or Clearing 

Privileges. 

(i) Each Participant must diligently supervise all activities of the Participant’s 

employees and/or agents, including all Authorized Users, relating to transactions effected on 

QCEX. Any violation of these Rules by any employee of a Participant may constitute a violation 

of the Rules by such Participant. 

(j) A Participant is not required to engage in trading activity or maintain a 

minimum balance in its Account after initial funding. Notwithstanding the foregoing, QCEX has 

the authority to impose minimum withdrawal amounts or fees for inactivity, which will, if 

imposed, be posted on the QCEX website from time to time. 

(k) Recordkeeping 

(i) Each Participant must maintain audit trail information as required 

by the CEA and CFTC Regulations, including, but not limited to, CFTC Regulations 1.31 

and 1.35 if applicable, and must be able to produce this data in a standard format upon 

request from QCEX. 

(ii) Each Participant which holds a position that is in excess of the 

Position Accountability Levels of any Contract must prepare, maintain, keep current and 

retain those books and records for the life of each Contract, including records of the 

instrument used as a reference price, underlying commodities and related derivatives for 

five years following the termination of such Contract, and any other books and records 

required by these Rules, the CEA and CFTC Regulations for the time period required by 

these Rules, the CEA and CFTC Regulations. 

(iii) The books and records required to be kept under subparagraphs (i) 

and (ii) above shall be readily available for inspection, at any time, on a routine or nonroutine basis and promptly provided to QCEX, the NFA, the CFTC, the SEC or the U.S. 

Department of Justice, upon request, in each case in the form and manner required under 

these Rules, and/or the CEA and CFTC Regulations. 

3.7. Responsible Agents 

(a) Each Participant that is an Entity shall at all times have at least one 

employee or agent (each, a “Responsible Agent”) designated as its administrator with respect to 

the use of the QCEX Direct System by the Authorized Users of such Participant. Each Participant 

that is a natural person shall serve as its own Responsible Agent. QCEX may prescribe such 

qualification standards for Responsible Agents as it may from time to time determine necessary or 

advisable. Among other things, each Responsible Agent shall (i) have full control over access to 

the QCEX Direct System by the Participant (including its Authorized Users) represented by such 

Responsible Agent and (ii) be able to access, and, if required, modify and withdraw, any and all 

Orders placed, or purported to be placed, by the Authorized Users of such Participant. The 

Responsible Agent(s) of any Participant shall also be solely responsible for any and all 

communications between QCEX and such Participant, and any and all notices or other 

communications sent to such Responsible Agent(s) by QCEX shall be binding on such Participant. 
DCM Exhibit M-1 

22 

Each Participant shall notify QCEX promptly of any change regarding any of its Responsible 

Agents. 

(b) Each Participant shall (i) be solely responsible for controlling and 

monitoring the use of all User IDs and passwords to access the QCEX Direct System (issued to its 

Authorized Users and Responsible Agent(s) by QCEX, (i) provide such User IDs and passwords 

only to its Authorized Uses and Responsible Agent(s), and (iii) shall notify QCEX promptly upon 

becoming aware of any unauthorized disclosure or use of the User IDs or passwords or access to 

QCEX or of any other reason for deactivating User IDs or passwords. Each Participant, on behalf 

of itself and its Authorized Users, shall be bound by any actions taken through the use of its User 

IDs and passwords (other than any such actions resulting from the fault or negligence of QCEX), 

including the execution of transactions, whether or not such actions were authorized by such 

Participant or any of its supervised persons or executed by anyone other than an Authorized User 

of such Participant. 

(c) Notwithstanding anything to the contrary in Rule 3.7(b), each Authorized 

User shall have his or her own unique User IDs and passwords that may be used only by such 

Authorized User and solely for the purpose of submitting Orders in respect of the Account for 

which the Authorized User has Trading Privileges. 

3.8. Incentive Programs 

QCEX may from time to time adopt one or more programs under which one or 

more Participants or Authorized Users may be designated as Incentive Program Participants with 

respect to one or more Contracts, and may be granted certain benefits in return for assuming 

obligations in order to provide liquidity and orderliness in the market or markets for such Contract. 

Any such program may provide for any or all of the following: 

(a) qualifications, including any minimum net capital requirements, that any 

such Incentive Program Participant must satisfy; 

(b) the procedure by which Participants or Authorized Users may seek and 

receive designation as Incentive Program Participants; 

(c) the obligations of such Incentive Program Participants, including any 

applicable minimum bid and offer commitments; and 

(d) the benefits accruing to such Incentive Program Participants, including 

priority in the execution of transactions effected by Participants or Authorized Users in their 

capacity as Incentive Program Participants, reduced transaction fees or the receipt of compensatory 

payments from QCEX. 

3.9. Limitation of Liability 

EXCEPT AS OTHERWISE PROVIDED IN THESE RULES, AND EXCEPT IN 

INSTANCES WHERE THERE HAS BEEN A FINDING OF WILLFUL MISCONDUCT OR 

GROSS NEGLIGENCE, IN WHICH CASE THE PARTY FOUND TO HAVE ENGAGED IN 

SUCH CONDUCT CANNOT AVAIL ITSELF OF THE PROTECTIONS IN THIS RULE 3.9, 
DCM Exhibit M-1 

23 

NEITHER QCEX (INCLUDING ITS AFFILIATES AND ANY CONTRACTORS AND SUBCONTRACTORS PROVIDING SERVICES TO QCEX) NOR ANY OF ITS RESPECTIVE 

DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS SHALL BE LIABLE TO ANY OTHER 

PERSON, INCLUDING ANY PARTICIPANT OR PERSON ASSOCIATED WITH A 

PARTICIPANT (INCLUDING ANY AUTHORIZED USERS), FOR ANY LOSSES, 

DAMAGES, COSTS OR EXPENSES (INCLUDING LOSS OF PROFITS, LOSS OF USE, 

DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES), ARISING FROM 

(A) ANY FAILURE OR MALFUNCTION OF THE QCEX DIRECT SYSTEM OR ANY 

EXCHANGE SERVICES OR CLEARINGHOUSE SERVICES OR FACILITIES USED TO 

SUPPORT THE QCEX DIRECT SYSTEM, OR (B) 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 QCEX DIRECT SYSTEM OR ANY 

EXCHANGE SERVICES OR CLEARINGHOUSE SERVICES OR FACILITIES USED TO 

SUPPORT THE QCEX DIRECT SYSTEM. THE FOREGOING SHALL APPLY 

REGARDLESS OF WHETHER A CLAIM ARISES IN CONTRACT, TORT, NEGLIGENCE, 

STRICT LIABILITY OR OTHERWISE. FURTHERMORE, THERE SHALL BE NO 

LIABILITY BASED UPON, OR IN CONNECTION WITH, ANY QUOTE OR OTHER 

INFORMATION IF NO CORRELATIVE PURCHASE OR SALE OF A CONTRACT IS MADE, 

AND IF A CORRELATIVE PURCHASE OR SALE OF A CONTRACT IS MADE, ANY 

LIABILITY SHALL BE LIMITED IN AMOUNT TO THE AGGREGATE PRICE OF THE 

CONTRACTS PURCHASED OR SOLD. 

THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OR 

REPRESENTATIONS PROVIDED BY QCEX (INCLUDING ITS AFFILIATES AND ANY 

CONTRACTORS AND SUBCONTRACTORS PROVIDING SERVICES TO QCEX), 

RELATING TO THE QCEX DIRECT SYSTEM OR ANY EXCHANGE SERVICES OR 

CLEARINGHOUSE SERVICES OR FACILITIES USED TO SUPPORT THE QCEX DIRECT 

SYSTEM, INCLUDING WARRANTIES OF MERCHANTABILITY AND WARRANTIES OF 

FITNESS FOR A PARTICULAR PURPOSE OR USE. THE SERVICES OF THE EXCHANGE 

AND THE CLEARINGHOUSE ARE BEING PROVIDED ON AN “AS IS” BASIS AT THE 

SOLE RISK OF THE PARTICIPANT AND ANY PERSON ASSOCIATED WITH THE 

PARTICIPANT (INCLUDING ANY AUTHORIZED USER). NEITHER QCEX (INCLUDING 

ITS AFFILIATES AND ANY CONTRACTORS AND SUBCONTRACTORS PROVIDING 

SERVICES TO QCEX) NOR ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS, 

EMPLOYEES OR AGENTS MAKE ANY WARRANTY WITH RESPECT TO, AND NO SUCH 

PARTY SHALL HAVE ANY LIABILITY TO ANY PARTICIPANT OR ANY PERSON 

ASSOCIATED WITH A PARTICIPANT (INCLUDING ANY AUTHORIZED USER) FOR, 

THE ACCURACY, TIMELINESS, COMPLETENESS, RELIABILITY, PERFORMANCE OR 

CONTINUED AVAILABILITY OF THE QCEX DIRECT SYSTEM OR THE EXCHANGE OR 

THE CLEARINGHOUSE, DELAYS, OMISSIONS OR INTERRUPTIONS IN EXCHANGE 

SERVICES OR CLEARINGHOUSE SERVICES OR THE CREDITWORTHINESS OF ANY 

OTHER PARTICIPANT OR ANY PERSON ASSOCIATED WITH A PARTICIPANT 

(INCLUDING ANY AUTHORIZED USER). QCEX SHALL HAVE NO DUTY OR 

OBLIGATION TO VERIFY ANY INFORMATION DISPLAYED ON THE QCEX DIRECT 

SYSTEM OR OTHERWISE. EACH PARTICIPANT AND EACH PERSON ASSOCIATED 

WITH A PARTICIPANT (INCLUDING ANY AUTHORIZED USER) ACKNOWLEDGES 
DCM Exhibit M-1 

24 

AND AGREES THAT QCEX (INCLUDING ITS AFFILIATES AND ANY CONTRACTORS 

AND SUBCONTRACTORS PROVIDING SERVICES TO QCEX) DOES NOT AND SHALL 

NOT SERVE AS THE PRIMARY BASIS FOR ANY DECISIONS MADE BY SUCH 

PARTICIPANT OR PERSON ASSOCIATED WITH A PARTICIPANT (INCLUDING ANY 

AUTHORIZED USER), AS THE CASE MAY BE, AND IS NOT AN ADVISOR OR 

FIDUCIARY OF SUCH PARTICIPANT OR PERSON ASSOCIATED WITH A PARTICIPANT 

(INCLUDING ANY AUTHORIZED USER), AS THE CASE MAY BE. 

EXCEPT AS OTHERWISE PROVIDED IN THESE RULES, ANY LIABILITY 

OF QCEX (OTHER THAN LIABILITY THAT IS EXCLUDED PURSUANT TO THE 

PRECEDING TWO PARAGRAPHS OF THIS RULE 3.9) WILL BE LIMITED TO DIRECT, 

OUT-OF-POCKET LOSSES DIRECTLY CAUSED BY THE ACTS OR OMISSIONS OF QCEX 

OR ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS; PROVIDED THAT THE 

TOTAL COMBINED AGGREGATE LIABILITY OF QCEX AND ITS DIRECTORS, 

OFFICERS, EMPLOYEES OR AGENTS TO ANY ONE PARTICIPANT SHALL NOT, TAKEN 

TOGETHER WITH ANY LIABILITY OF THE CLEARINGHOUSE TO SUCH PARTICIPANT 

RESULTING FROM THE ACTS OR OMISSIONS OF THE CLEARINGHOUSE OR ITS 

DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, EXCEED $2,500 FOR ALL LOSSES 

FROM ALL CAUSES SUFFERED ON A SINGLE CALENDAR DAY; $5,000 FOR ALL 

LOSSES SUFFERED FROM ALL CAUSES IN A SINGLE CALENDAR MONTH; AND 

$50,000 FOR ALL LOSSES SUFFERED FROM ALL CAUSES IN A SINGLE CALENDAR 

YEAR. 

ANY PARTICIPANT OR PERSON ASSOCIATED WITH A PARTICIPANT 

(INCLUDING ANY AUTHORIZED USER) WHO FAILS TO PREVAIL IN A LAWSUIT OR 

OTHER LEGAL PROCEEDING INSTITUTED BY SUCH PERSON AGAINST QCEX 

(INCLUDING ITS AFFILIATES) OR ANY OF ITS DIRECTORS, COMMITTEE MEMBERS, 

OFFICERS, EMPLOYEES, AGENTS OR CONTRACTORS, AND RELATED TO THE 

BUSINESS OF QCEX, WILL PAY TO QCEX ALL REASONABLE EXPENSES, INCLUDING 

ATTORNEYS’ FEES, INCURRED BY QCEX IN THE DEFENSE OF SUCH PROCEEDING 

TO THE EXTENT THAT SUCH EXPENSES EXCEED FIFTY THOUSAND USDs $50,000.00. 

THIS PROVISION WILL NOT APPLY TO DISCIPLINARY ACTIONS BY QCEX, 

ADMINISTRATIVE APPEALS OF QCEX ACTIONS OR IN ANY SPECIFIC INSTANCE 

WHERE THE BOARD OF DIRECTORS HAS GRANTED A WAIVER OF THIS PROVISION. 

NOTWITHSTANDING ANY OF THE FOREGOING PROVISIONS, THIS 

RULE 3.9 SHALL IN NO WAY LIMIT THE LIABILITY OF ANY PERSON ARISING FROM 

ANY VIOLATION OF SUCH PERSON OF THE CEA OR CFTC REGULATIONS 

THEREUNDER. 

3.10. ISV Access 

QCEX will provide ISVs with access to its trading platform and its data in a fair 

and nondiscriminatory manner; provided, however, that each ISV shall comply with QCEX’s 

criteria governing such access. Such access criteria shall be impartial and transparent. 
DCM Exhibit M-1 

25 

TRADING PLATFORM AND METHODOLOGY 

4.1. Contracts Traded and Cleared on QCEX 

The Exchange and the Clearinghouse shall determine which Contracts are available 

for trading and clearing subject to the Rules from time to time and approve rules containing the 

specifications for such Contracts, provided that certifications or applications with respect to such 

Contracts shall be submitted to the CFTC as required by the CEA and CFTC Regulations. 

4.2. Participants and Authorized User Access 

(a) During the Participant application process, an applicant, to become a 

Participant, will be required to register a user identification (“User ID”) and password. 

(b) The Participant will be required to enter the User ID and password to log 

onto and access secure portions of the QCEX website, including the QCEX Direct System. Each 

time the Participant submits its unique User ID and password to QCEX in order to log onto the 

QCEX Direct System, the Participant affirms that it understands, and agrees to be bound by, these 

Rules and other policies and procedures of QCEX, as amended. 

(c) Each Authorized User shall maintain a unique User ID and password, 

distinct from the User ID and password of the Participant but identified as related to the Participant 

with which the Authorized User is associated. The Participant will only provide the User IDs to its 

employees or agents who are designated as, and authorized as, Authorized Users. QCEX reserves 

the right to revoke or modify a User ID at any time without prior notice. 

(d) The Participant will be responsible for protecting its User IDs and 

passwords, and with respect to itself, the ID(s) and password(s) of its Authorized User(s), from 

improper disclosure. In addition, a Participant may not knowingly or negligently permit any Person 

not authorized by QCEX and by the Participant to use the User ID and password to access the 

secure portion of the QCEX website, including the QCEX Direct System. The Participant is 

required to immediately notify QCEX if it knows, or has reason to believe, that its User ID or the 

User ID and/or password of any Authorized User have been disclosed to any Person not authorized 

by QCEX and the Participant to use such User ID and/or password. 

(e) The Participant authorizes QCEX to rely upon any instruction received 

through use of its User IDs without further inquiry, and QCEX shall not be liable to the Participant 

for any actions taken based on instructions received through such User IDs, even if such 

instructions were not authorized by the Participant. The Participant will be liable for any and all 

costs, expenses, losses or other amounts that may result from actions taken, including transactions 

executed on QCEX, by any person, authorized or not, using its User ID and password or the ID 

and/or password of any Authorized User. QCEX will not be responsible in any way for 

unauthorized transactions in a Participant’s Account. 

(f) The Participant is responsible for contracting with an internet service 

provider through which it will access the QCEX website and for having a backup service provider 

if reasonably necessary. The Participant is also responsible for maintaining an internet connection 
DCM Exhibit M-1 

26 

speed adequate for its needs. QCEX will not be responsible in any way for any Orders delayed or 

trades missed or not executed in a timely fashion because of failure of the Participant’s internet 

service provider or slowness of its internet connection speed. No communication from a 

Participant will be deemed to have been received by QCEX until that communication is logged by 

the QCEX server. 

4.3. Orders 

(a) The Authorized Users of each Participant shall enter Orders by electronic 

transmission to, and shall be required to provide the information required on the Order entry page 

of the QCEX Direct System. The Exchange shall maintain an electronic record of those entries. 

Each Participant shall be responsible for any and all Orders in its Account to be entered by any of 

its Authorized Users. 

(b) Order rate limiter functionality may cap the maximum number of Orders 

that may be submitted to the Exchange per second (or per a specific time period expressed in 

seconds) per Participant or Authorized User of a Participant, in order to prevent a risk of harm to 

the Exchange. Similarly, QCEX may limit the number of messages submitted to the Exchange for 

the same purpose. 

(c) Any Participant submitting Orders, or any other messages to the Exchange, 

including but not limited to messages related to the cancellation or amendment of an Order, 

whether manually or via automated functionality, must ensure adequate controls are in place to 

prevent excessive messaging or other activity that may be deemed detrimental or disruptive to the 

Exchange. 

(d) Participants are prohibited from entering Orders on the QCEX Direct 

System if there are insufficient funds in the Participant’s Account to satisfy such Orders if they are 

executed. QCEX may, in its discretion, impose penalties and take such other action against a 

Participant if the circumstances warrant should the Participant violate this Rule 4.3(d). 

(e) QCEX’s Direct System will maintain an electronic record of all Orders to 

trade Contracts, and all executed Contracts. 

(f) The Exchange may make information regarding Orders (including prices 

bid or offered), trades and any other matters it may deem appropriate available to Participants, 

Authorized Users and other Persons at such times and in such manner (whether through the QCEX 

Direct System, a ticker, financial information services or otherwise) as it may consider necessary 

or advisable from time to time. 

(g) Each Participant, Authorized User or other Person receiving any such 

information through the QCEX Direct System is expressly prohibited from redistributing such 

information unless expressly permitted by the Exchange. Employees and agents of the Exchange 

shall have access to the offices of any Participant and each of its Authorized Users during regular 

business hours in order to observe the compliance by such Participant and its Authorized Users 

with the immediately preceding sentence. 
DCM Exhibit M-1 

27 

(h) The Exchange shall comply with the requirements of paragraphs (a) through 

(h) of CFTC Regulation 17.00 as they apply to trading in any Contracts that qualify as “exclusively 

self-cleared contracts” within the meaning of CFTC Regulation 15.00. 

(i) The Exchange may establish a maximum Order size for the Account of each 

Participant based upon the Participant’s available funds, the Participant’s trading behavior, and 

any other factors that the Exchange deems relevant. 

(j) Any Standing Limit Order that has been entered into the QCEX Direct 

System may be cancelled unless and until it has been executed or has otherwise expired. QCEX 

will attempt to cancel an existing Order as soon as possible after a Participant enters a cancellation 

instructions. However, the Order may be executed before QCEX is able to cancel it. If an Order 

has been filled in whole or in part, a Participant may cancel only that portion of the Order (if any) 

that has not been executed. Such cancellation will become effective upon the issuance of an 

acknowledgement by the QCEX Direct System of the cancellation of the Order, as the case may 

be. 

(k) As a CFTC registrant, QCEX has the authority to adjust trade prices or 

cancel transactions when necessary to mitigate market disrupting events caused by malfunctions 

in its electronic trading platform(s) or errors in Orders submitted by Participants, and QCEX will 

utilize this authority when, in its sole discretion, it deems such action necessary or appropriate. 

4.4. Execution and Confirmation Process 

Orders to buy or sell any Contract are subject to any margin or settlement 

requirements as imposed from time to time by the Clearinghouse. All Orders are matched with 

each other and executed electronically through the QCEX Direct System in accordance with an 

algorithm that gives first priority to Orders at the best price and priority among Orders entered at 

the same price based on their time of entry into the QCEX Direct System, with the Order first 

entered receiving first priority. Without limiting the generality of the foregoing, the algorithm to 

match Orders entered in the QCEX Direct System is based upon the following principles: 

(a) An Order at a better price will always have priority over Orders at inferior 

prices. As among Orders at the same price, an Order with time priority will be executed before 

Orders that have been entered after the Order with time priority. 

(b) Time priority will be assigned to the first Order at a price that betters the 

best price prevailing when the Order is received. Only one buy Order and one sell Order can have 

time priority at any given time. Orders with time priority will be matched first regardless of their 

respective sizes. 

(c) An Order will not lose time priority with respect to Orders at the same price 

if and when an Order at a better price is entered, but it will lose price priority. 

(d) Once an Order with time priority has been filled, the algorithm described 

herein will be applied to the remaining Orders at the same price. Thus, the Order received 

immediately after the Order that initially had time priority will be assigned time priority and be 

the next Order to be executed at such price. 
DCM Exhibit M-1 

28 

Notwithstanding anything in these Rules to the contrary, the Exchange may at any 

time use a different matching algorithm for a particular Contract by giving notice of such algorithm 

to all Participants at least ten (10) Trading Days before such algorithm is implemented. 

4.5. Permitted Order Types 

(a) Except as otherwise provided in Rule 4.5, all Orders must be entered and 

executed on the QCEX Direct System. 

(b) Standing Limit Orders may be subject to minimum contract quantity 

requirements and will be executed when entered, in whole or part, to the extent that there are 

opposite Orders open in the QCEX Direct System, with any balance to remain as an open Order 

until it is executed, cancelled, expires, or is replaced by a Standing Limit Order with price priority. 

(c) Marketable Limit Orders may be for one or more contracts and will be 

executed when entered, in whole or part, to the extent that there is an opposite Standing Limit 

Order open in the QCEX Direct System, with any balance immediately cancelled. 

4.6. Trade Confirmations 

 A printable record of all of the terms of each trade entered into on the Exchange 

or pursuant to the Rules will be available on the QCEX Direct System interface on the Participant’s 

activity page immediately upon execution. Such record shall legally supersede any previous 

agreement and serve as a confirmation of each such trade. The QCEX Direct System may send 

confirmation messages to Members upon execution of a trade via the API, mobile application, 

and/or website, if such Participant is online at the time. However, please note that if such 

Participant is not online at the time of execution, the confirmation(s) will be provided when such 

Participant next logs on to the QCEX Direct System interface. The contract type, size, execution 

time and execution method for each trade will be made available on the website to all Participants 

after successful execution of any trade. 

4.7. Errors 

(a) Upon receipt of an error notification, either internally generated or from a 

Participant, the Exchange will review its electronic audit trail to determine, in its sole discretion, 

if the Exchange incorrectly rejected or processed an Order: 

(i) On the same Business Day if the request was received prior to 12:00 

Noon on a Business Day. 

(ii) By the end of the following Business Day if such request was 

received after 12:00 Noon on a Business Day or on any day that is not a Business Day. 

(b) The determination of the Exchange in its absolute and sole discretion is 

final. 
DCM Exhibit M-1 

29 

(c) If the review reveals that the Order was correctly processed by the 

Exchange, then the Exchange in its sole discretion may resolve the Participant’s review request as 

follows: 

(i) If the system behavior is due to any fault of the Participant or the 

Authorized User, make no adjustments. 

(ii) if the system behavior could not reasonably be anticipated or is due 

to no fault by the Participant or the Authorized User, the Exchange in its sole and absolute 

discretion may make a monetary adjustment from its own funds, that the Exchange in its 

sole and absolute discretion believes represents a fair and equitable resolution of the 

Order’s handling, provided that the Exchange shall have no obligation to do so. 

(iii) No adjustments to another Participants’ positions shall be 

undertaken. 

(d) If the review reveals that the Order was incorrectly handled by the 

Exchange, then the Exchange in its sole and absolute discretion may resolve the Participant’s error 

by: 

(i) cancelling such trade in the Accounts of all directly affected 

Participants. 

(ii) making a monetary adjustment, which in the sole and absolute 

discretion of the Exchange and from its own funds, that the Exchange in its sole and 

absolute discretion believes represents a fair and equitable resolution of the Order’s 

handling, provided that the Exchange shall have no obligation to do so. 

4.8. [Reserved] 

4.9. Position Limits and Position Accountability 

(a) Position Limits 

(i) Position limits may be established by the Exchange from time to 

time for any Contract. 

(ii) The maximum position will be set forth in the Contract Rules of any 

Contract with such limits. 

(iii) No Person shall be permitted to enter into any transaction on the 

Exchange that would cause such Person to exceed any position limit, except that: 

(A) Upon application from a Participant, for hedging or other 

good cause shown, the Exchange in its sole discretion may exempt the 

Participant from limit on temporary or permanent basis. 

(B) Any exemption may include new limits. 
DCM Exhibit M-1 

30 

(C) The Exchange shall have the authority to review and rescind 

any exemption. 

(iv) For purposes of this Rule 4.9(a), the Exchange will aggregate the 

Accounts for all Participants as provided by CFTC Regulation 150.4. 

(b) Position Accountability 

(i) The Exchange may, at any time, require a Participant and its 

Authorized Users who own or control positions in contracts traded on the Exchange to 

provide information relating to the nature and size of such person’s position; the trading 

strategy employed with respect to the position; information supporting a determination of 

the hedging nature of the position; and such other position information as may be requested. 

(ii) The Exchange may order the reduction of any such position of a 

Participant who fails to provide the information as directed, or in its discretion, order that 

a position above the position accountability threshold not be increased. 

4.10. Public Data 

 The Exchange will post on its website the pricing, current volume and open interest 

for all active Contracts on each Trading Day. The Exchange will also post on its website any other 

information as required by CFTC Regulation 16.01. 

CLEARING 

5.1. Submission and Acceptance of Trades for Clearing 

(a) Participants are required to have sufficient funds on deposit with the 

Clearinghouse such that any executed Orders will be accepted by the Clearinghouse. 

(b) To facilitate compliance with this Rule the Exchange, in its sole discretion 

and from its own funds, may advance funds for immediate use to a Participant’s Account provided 

that it shall have no obligation to do so and provided further that: 

(i) Such advance is administrative in nature due to the normal course 

timing of banking transactions and is not a loan. 

(ii) Such Participant has submitted a bona-fide funds deposit request. 

(iii) Such funds deposit request is being processed in the normal course 

of banking transactions by the Clearinghouse. 

(iv) Such advanced amount shall not exceed the lesser of the funds 

deposit request or US$1,000. 
DCM Exhibit M-1 

31 

(c) Upon submission of an Order, QCEX will automatically review the 

Participant’s Account to ensure that the Participant can fully margin or collateralize the transaction 

resulting from the Order, and pay any premiums or other amounts due upon execution or settlement 

of such transaction, prior to execution of the transaction. If the Participant’s Account does not have 

the necessary funds and/or collateral for the Order, QCEX will not accept the Order. 

(d) Upon the successful matching of Orders, QCEX’s Clearinghouse shall 

immediately, through the process of Novation, be substituted as and assume the position of Seller 

and Purchaser. Upon such substitution, the Seller and Purchaser shall have no obligations to each 

other, and such Participants shall be deemed to have bought the Contract from or sold the Contract 

to the Clearinghouse, as the case may be, and the Clearinghouse shall have all the rights and be 

subject to all the liabilities of such Participants with respect to such transactions. Such substitution 

shall be effective in law for all purposes. The Participants of the Contract are deemed to consent 

to the Novation by entering the applicable Orders on the QCEX Direct System and the 

Clearinghouse consents to the Novation by accepting the Orders on the QCEX Direct System. 

(e) Contracts with the same terms and conditions submitted to the 

Clearinghouse for clearing are economically equivalent within the Clearinghouse and may be 

offset with each other within the Clearinghouse. 

(f) Upon acceptance of a Contract by the Clearinghouse for clearing: 

(i) The original transaction is extinguished; 

(ii) The original Contract is replaced by an equal and opposite Contract 

between the Clearinghouse and each Participant; 

(iii) All terms of a cleared Contract must conform to the Contract 

specifications; and 

(iv) The Clearinghouse is irrevocably authorized to transfer premiums 

and/or Settlement Amounts to the appropriate Participants in accordance with the 

applicable Contract Specifications and this Rulebook. 

(g) All payments to Participants and collections from Participants in connection 

with the clearing and settlement of Contracts are irrevocable and any and all amounts paid to the 

Clearinghouse in satisfaction of the obligations of Participants in connection with Contracts are 

unconditionally deposited with the Clearinghouse and exclusively within the control of the 

Clearinghouse. 

(h) If a Contract is rejected for clearing by the Clearinghouse for any reason, 

such Contract is void ab initio. 

(i) All positions will be carried on a gross basis by the clearinghouse until such 

time as the clearinghouse, in its sole discretion, determines to provide offset at the earlier of an 

end-of-day netting process or at position settlement. 

5.2. Procedures for Deposits and Withdrawals from Accounts 
DCM Exhibit M-1 

32 

(a) Procedures for Deposits 

(i) A Participant must submit a deposit notification through the QCEX 

Direct System before the Participant may deposit funds with QCEX. A Participant must 

deposit funds on the same day as the Participant submits a deposit notification to QCEX. 

Only USD will be accepted in satisfaction of Participants’ obligations in connection with 

Contracts executed on and cleared through QCEX. 

(ii) Deposits occur, and funds are available for use with respect to 

Trading Privileges and Clearing Privileges, no later than three (3) Settlement Bank 

Business Days after a Participant submits a deposit notification and deposits funds with 

QCEX in accordance with this Rule 5.2(a), unless QCEX has made an advance pursuant 

to Rule 5.1(b). 

(iii) Participants are responsible for all transfers of funds to their 

Accounts. 

(b) Withdrawals from Accounts 

(i) Participants may only withdraw amounts in excess of the amounts 

required to be on deposit in connection with open Contracts or Orders to execute 

transactions in Contracts. 

(ii) Only a Participant or its Authorized User(s) may submit a 

withdrawal notification through the QCEX Direct System before QCEX transfers funds to 

a Participant. Upon receipt of a withdrawal notification, QCEX no longer permits funds in 

the amount listed in the withdrawal notification to be used for Trading Privileges and 

Clearing Privileges. 

(iii) Participants are responsible for providing accurate account numbers 

to allow QCEX to effect transfers to the Participants. 

(iv) Withdrawals occur, and funds are available, no later than three (3) 

Settlement Bank Business Days after a Participant has submitted a withdrawal notification 

if the Participant submits a withdrawal notification during Trading Hours. 

(v) If a Participant fails to adhere to the withdrawal procedures set forth 

herein, as applicable, QCEX will take reasonable measures to effect the withdrawal; 

however, if QCEX is unable to effect the withdrawal, the Participant’s collateral may 

become the sole property of QCEX, to the extent permitted by Applicable Law and 

pursuant to the procedures and disclosures posted on the QCEX website. QCEX may apply 

the collateral against the Participant’s obligations. 

5.3. Settlement of Contracts 

(a) The Clearinghouse shall maintain, on its system, a record of each 

Participant’s account balances and Contracts. 
DCM Exhibit M-1 

33 

(b) On the Settlement Date, QCEX will notify all Participants of the Settlement 

Amount. 

(c) After the notice period on the last Trading Day of expiring Contracts that 

are options, the Clearinghouse will delete all such Contracts that have not been exercised from 

each Participant’s Account. 

5.4. Investment and Use of Clearing Participant Account Assets 

 Subject to compliance with the applicable regulations of the CFTC, all cash and 

other property in the Participant’s Account or otherwise held by QCEX on the Participant’s behalf 

may, from time to time, without notice to the Participant, be co-mingled with the property of other 

Participants or be invested by QCEX, separately or with any other property, consistent with CFTC 

Regulation 1.25 and 39.15(e). QCEX shall have no obligation to inform the Participant of any 

such investments or of the results or performance of such investments and shall be entitled to retain 

any profits from or return on such investments. 

5.5. Transfers of Positions 

 The Clearinghouse in its sole discretion may permit the transfer of positions 

between Accounts: 

 

(a) to correct errors in an existing Contract, provided that the original trade 

documentation confirms the error; 

(b) to transfer an existing Contract through operation of law from death or 

bankruptcy; 

(c) as a result of a merger, asset purchase, consolidation, or similar nonrecurring transaction for a Person that is an organization; 

(d) for Accounts of Participants that are under the same common beneficial 

ownership; or 

(e) any other circumstances in which the Clearinghouse determines in its sole 

discretion that such a transfer is necessary or appropriate for any other reason. 

 Any positions transferred pursuant to this Rule 5.5 will be at the original price and 

date that appears on the books of the Clearinghouse. 

PARTICIPANT CONDUCT 

6.1. Prohibited Activities 

(a) No Participant or Authorized User shall engage in conduct in violation of 

Applicable Law or the Rules. Notwithstanding anything to the contrary in these Rules, no 

provision of these Rules will supersede any applicable prohibitions on fraud and manipulation, 
DCM Exhibit M-1 

34 

whether such prohibitions are prescribed by law, regulation or the Rules. All such prohibitions on 

fraud and manipulation, including, but not limited to, the antifraud provisions of the CEA and the 

antifraud rules promulgated by the CFTC thereunder, will remain in full force and effect with 

respect to, and will be fully applicable to, the trading of all Contracts. The Exchange and the 

Clearinghouse each retain the right to take any appropriate disciplinary actions against Participants 

as permitted by the Rules, as applicable. 

(b) It shall be an offense to violate any Rule regulating the conduct or business 

of a Participant, or any agreement made with QCEX, or to engage in fraud, dishonorable or 

dishonest conduct, or in conduct which is inconsistent with just and equitable principles of trade. 

(c) No Participant shall enter into or attempt to enter into any trade on QCEX 

that: 

(i) does not result in a change in beneficial ownership, 

(ii) is designed to artificially inflate trading volume, 

(iii) in any way attempts to circumvent QCEX’s Order processing, trade 

ordering, trade execution systems, or otherwise to circumvent exposure of the Order to 

open and competitive bidding on QCEX, or 

(iv) that has some other illegitimate purpose. 

(d) No Participant or Authorized User shall engage, or attempt to engage, in 

any fraudulent act or engage, or attempt to engage, in any scheme to defraud, deceive or trick in 

connection with or related to any trade on or other activity related to the Exchange or the 

Clearinghouse. 

(e) No Participant or Authorized User shall execute any fictitious transactions 

or execute any such Order with knowledge of its nature. No Participant shall effect or induce the 

purchase or sale of any Contract for the purpose of creating or inducing a false, misleading, or 

artificial appearance of activity in such Contract, or for the purpose of unduly or improperly 

influencing the market price of such Contract or for the purpose of making a price which does not 

reflect the true state of the market in such Contract. No Participant shall arrange and execute 

simultaneous offsetting buy and sell Orders in a Contract with intent to artificially affect reported 

revenues, trading volumes or prices. 

(f) Orders entered into the QCEX Direct System for the purpose of upsetting 

the equilibrium of the market in any Contract, creating, facilitating or exacerbating a disorderly 

market or creating a condition in which prices do not or will not reflect fair market values are 

prohibited, and any Participant or Authorized User who makes or assists in entering any such Order 

or clearing a transaction with knowledge of the purpose thereof or who, with such knowledge, in 

any way assists in carrying out any plan or scheme for the entering of any such Order or clearing 

a transaction, will be deemed to have engaged in an act detrimental to the Exchange or the 

Clearinghouse. 
DCM Exhibit M-1 

35 

(g) No Participant shall manipulate or attempt to manipulate the market in any 

Contract. Furthermore, no Participant shall intentionally or recklessly engage, or attempt to 

engage, in the following in connection with any Contract: use manipulation to defraud, make an 

untrue or misleading statement or omit a material fact, engage in fraudulent or deceitful business 

practices, or deliver misleading or inaccurate reports concerning market information that affect the 

price of any Contract. No Participant shall directly or indirectly participate in or have any interest 

in the profit of a manipulative operation or knowingly manage or finance a manipulative operation. 

(h) No Participant shall place or accept buy and sell Orders in the same product 

and expiration month, where the Participant knows or reasonably should know that the Orders are 

intended to avoid taking a bona fide market position exposed to market risk (transactions 

commonly known or referred to as “wash sales”). For the avoidance of doubt, opposing positions 

of the same expiration may be used to close positions before expiration and shall not be deemed 

to violate the prohibition on wash trades. Buy and sell Orders by Participants that are entered with 

the intent to negate market risk or price competition shall be deemed to violate the prohibition on 

wash trades. Additionally, no Participant shall knowingly execute or accommodate the execution 

of such Orders by direct or indirect means. 

(i) No Participant shall engage in any trading, practice, or conduct on or subject 

to the rules of the Exchange or the Clearinghouse that constitutes fraudulent or abusive trading, 

including, but not limited to violating bids or offers; demonstrating intentional or reckless 

disregard for orderly execution of transactions during the closing period; or what is, is of the 

character of, or is commonly known to the trade as, “spoofing” (bidding or offering with the intent 

to cancel the bid or offer before execution). Any Participant who makes or assists in entering any 

such Order with knowledge of the purpose thereof or who, with such knowledge, in any way assists 

in carrying out any plan or scheme for the entering of any such Order, will be deemed to have 

engaged in an act detrimental to QCEX. 

(j) No Participant shall engage in any trading, practice, or conduct that 

constitutes a “disruptive trading practice,” as such term is defined by the CEA or in CFTC 

Regulations. Disruptive trading practices shall include any activity that (i) demonstrates intentional 

or reckless disregard for the orderly execution of transactions during the closing period, (ii) 

consists of placing one or more Order with an intent to cancel such Order(s) prior to execution, 

(iii) submitting or cancelling Orders with an intent to overload QCEX, (iv) submitting or cancelling 

bids or offers with an intent to delay another person’s execution of trades, or (v) submitting or 

cancelling multiple bids or offers to create an appearance of false market depth. 

(k) No Person shall make any misstatement of a material fact to the Exchange 

or the Clearinghouse (including the Board of Directors, any committee thereof or any panel of any 

such committee, or any Officer) or to the CFTC or the NFA (including any members of its staff), 

including on an application to become a Participant of QCEX. 

(l) No Participant or Authorized User may use its Trading Privileges or 

Clearing Privileges or access the Exchange or the Clearinghouse in any way which could be 

expected to bring disrepute upon such Participant or the Exchange or the Clearinghouse. 
DCM Exhibit M-1 

36 

(m) No Participant shall engage in any act that is detrimental to QCEX. It shall 

be deemed an act detrimental to QCEX to permit unauthorized use of QCEX, to assist any Person 

in obtaining unauthorized access to QCEX, to interfere with the operation of the QCEX, to 

intercept or interfere with information provided thereby, or in any way to use QCEX in a manner 

contrary to these Rules. 

(n) Each Participant shall be responsible for establishing, maintaining and 

administering reasonable supervisory procedures to ensure that its Authorized Users comply with 

Applicable Law and the Rules, and shall be responsible for supervising its Authorized Users and 

may be held accountable for the actions of such Authorized Users. 

(o) No Participant who is not an Entity shall trade for a person or Entity other 

than itself, and no Authorized User of a Participant that is an Entity shall trade for a person or 

Entity other than the Entity for whom that person is an Authorized User. 

(p) Except in accordance with any policies or procedures for pre-execution 

discussion or pre-clearing discussion from time to time adopted by QCEX, no Participant shall 

disclose to any Person any Order placed by any other Person, except to an Officer of QCEX or a 

member of the staff of the CFTC, the NFA, or the Department of Justice, respectively. No 

Participant shall solicit or induce another Participant to disclose Order information. No Person 

shall take action or direct another to take action based on non-public Order information, however 

acquired. The mere statement of opinions or indications of the price at which a market may open 

or resume trading does not constitute a violation of this Rule 6.1(p). 

(q) No Participant shall enter into or agree to transfer or transfer the benefit of 

any position in any Contract to another person other than through a transaction executed through 

QCEX. 

(r) All pre-negotiated or pre-arranged transactions that are not expressly 

permitted by QCEX are hereby prohibited. 

RULE ENFORCEMENT 

7.1. Market Surveillance 

 The QCEX Direct System will record and store for a period of not less than 5 years in a 

searchable, read-only database a record of all data entered into the QCEX Direct System. Such 

records shall be maintained in a readily available manner during the first two years. QCEX shall 

conduct market surveillance and trade practice surveillance using this data with programs designed 

to alert QCEX when potentially unusual or otherwise questionable trading activity takes place. 

QCEX will initiate review and, where appropriate, investigate such unusual trading activity. 

QCEX will also investigate any time it has other reason to believe that inappropriate activity of 

any sort is taking place. 

7.2. General 
DCM Exhibit M-1 

37 

(a) All Participants and Authorized Users shall be subject to QCEX’s 

jurisdiction. All Participants and Authorized Users are subject to this Chapter 7 if they are alleged 

to have violated, to have aided and abetted a violation, to be violating, or to be about to violate, 

any Rule or any provision of Applicable Law for which QCEX possesses disciplinary jurisdiction. 

(b) QCEX will conduct inquiries, investigations, disciplinary proceedings and 

appeals from disciplinary proceedings, summary impositions of fines, summary suspensions or 

other summary actions in accordance with this Chapter 7. 

(c) No member of the staff of QCEX will interfere with or attempt to influence 

the process or resolution of any inquiry, investigation, disciplinary proceeding, appeal from a 

disciplinary proceeding, summary imposition of fines, summary suspension or other summary 

action. No Director will interfere with or attempt to influence the process or resolution of any 

inquiry, investigation, disciplinary proceeding, appeal from a disciplinary proceeding, summary, 

imposition of fines, summary suspension or other summary action with respect to which the 

Director is not a member of the relevant Appeals Panel. 

(d) Any Participant or Authorized User may be represented by counsel during 

any inquiry, investigation, disciplinary proceeding, appeal from a disciplinary proceeding, 

summary imposition of fines, summary suspension or other summary actions pursuant to this 

Chapter 7. 

(e) Pursuant to this Chapter 7, QCEX may hold: 

(i) a Participant liable for, and impose sanctions against such 

Participant, for such Participant’s own acts and omissions that constitute a violation; 

(ii) a Participant liable for, and impose sanctions against such 

Participant, for the acts and omissions of each Authorized User authorized by, and each 

other agent or representative of, such Participant that constitute a violation as if such 

violation were that of the Participant; 

(iii) an Authorized User liable for, and impose sanctions against him or 

her, for such Authorized User’s own acts and omissions that constitute a violation; and 

(iv) an Authorized User liable for, and impose sanctions against him or 

her, for the acts and omissions of each agent or representative of such Authorized User that 

constitute a violation as if such violation were that of the Authorized User. 

7.3. Inquiries and Investigations 

(a) The Compliance Department will investigate any matter within QCEX’s 

disciplinary jurisdiction that is brought to such department’s attention, including but not limited 

to, possible violations of the Rules or manipulation of a Contract that is traded on the Exchange or 

cleared through the Clearinghouse. All such investigations must be completed within 12 months 

of the date when the Compliance Department commenced its investigation unless there are 

mitigating factors that may reasonably justify an investigation taking longer than 12 months, 

including the complexity of the investigation, the number of Participants or individuals involved 
DCM Exhibit M-1 

38 

as potential wrongdoers, the number of potential violations to be investigated, and the volume of 

documents and data to be examined and analyzed by the Compliance Department. The Compliance 

Department will determine the nature and scope of its inquiries and investigations within its sole 

discretion and will function independently of any commercial interests of QCEX. 

(b) The Compliance Department has the authority to: 

(i) initiate and conduct inquiries and investigations; 

(ii) prepare investigative reports and make recommendations 

concerning initiating disciplinary proceedings; 

(iii) prosecute alleged violations within QCEX’s disciplinary 

jurisdiction; and 

(iv) represent QCEX on appeal from any disciplinary proceeding, 

summary imposition of fines, summary suspension or other summary action. 

(c) Each Participant or Authorized User: 

(i) is obligated to appear and testify and respond in writing to 

interrogatories within the time period required by the Compliance Department in 

connection with: (A) any Rule; (B) any inquiry or investigation; or (C) any preparation by 

and presentation during a disciplinary proceeding or appeal from a decision in a 

disciplinary proceeding, summary imposition of fines, summary suspension or other 

summary action by QCEX; 

(ii) is obligated to produce books, records, papers, documents or other 

tangible evidence in its, his or her possession, custody or control within the time period 

required by the Compliance Department in connection with: (A) any Rule; (B) any inquiry 

or investigation; or (C) any preparation by and presentation during a disciplinary 

proceeding or appeal from a decision in any disciplinary proceeding, summary imposition 

of fines, summary suspension or other summary action by QCEX; and 

(iii) may not impede or delay any inquiry, investigation, disciplinary 

proceeding, appeal from a disciplinary proceeding, summary imposition of fines, summary 

suspension or other summary action. 

(d) The Compliance Department will maintain a log of all investigations and 

their disposition. The Compliance 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 QCEX’s 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. Any written report of investigation will include the reasons for initiating the 

investigation (including a summary of the complaint, if any), all relevant facts and evidence 

gathered, and the recommendation of the Compliance Department. For each potential respondent, 

the Compliance Department will recommend either (i) closing the investigation without further 

action, (ii) summary action, (iii) resolving the investigation through an informal disposition, 
DCM Exhibit M-1 

39 

including the issuance of a warning letter or (i) initiating disciplinary proceedings. An informal 

disposition (including the issuance of a warning letter) will not constitute a finding of a violation 

or a sanction. 

(e) The Chief Compliance Officer will review promptly each completed 

investigation report to determine whether a reasonable basis exists to believe that a violation within 

QCEX’s jurisdiction has occurred or is about to occur. Such determination will be made by the 

Chief Compliance Officer within ten (10) Business Days of receipt of the applicable investigation 

report. If the Chief Compliance Officer determines that additional investigation or evidence is 

needed to decide whether a reasonable basis exists to believe that a violation within QCEX’s 

jurisdiction has occurred or is about to occur, the Chief Compliance Officer will direct the 

Compliance Department to conduct further investigation. 

(f) After receiving completion of an investigation, the Chief Compliance 

Officer will determine for each potential respondent whether to authorize: 

(i) the commencement of disciplinary proceedings because a 

reasonable basis exists to believe that a violation within QCEX’s jurisdiction has occurred 

or is about to occur; 

(ii) the informal disposition of the investigation (by issuing a warning 

letter or otherwise) if the Chief Compliance Officer determines that a violation of the Rules 

or any applicable Contract Rules may have occurred but that formal disciplinary 

proceedings are unwarranted; or 

(iii) the closing of the investigation without any action, and without the 

issuance of a warning letter, because disciplinary proceedings are not warranted and no 

reasonable basis exists to believe that a violation within QCEX’s jurisdiction has occurred 

or is about to occur. 

7.4. Notice of Charges and Opportunity to Respond 

(a) If the Chief Compliance Officer authorizes disciplinary proceedings 

pursuant to Rule 7.3, the Compliance Department will prepare in accordance with this Rule 7.4 

and serve in accordance with this Rule 7.4, a notice of charges within twenty (20) Business Days 

thereafter. 

(b) A notice of charges will: 

(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; 
DCM Exhibit M-1 

40 

(iv) advise the respondent of its right 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, which statement must be submitted within twenty 

(20) Business Days after service of the notice of charges; 

(v) advise the respondent of its right to a hearing and its right to have 

counsel present; 

(vi) state the period of time within which the respondent can request a 

hearing on the notice of charges, in lieu of submitting a written statement pursuant to Rule 

7.4(b)(iv), which will not be less than twenty (20) Business Days after service of the notice 

of charges; 

(vii) advise the respondent 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; and 

(viii) advise the respondent that any allegation in the notice of charges 

that is not expressly denied will be deemed to be admitted. 

(c) If the respondent submits a written statement pursuant to Rule 7.4(b)(iv), 

the Chief Compliance Officer shall, within ten (10) Business Days after receipt of the written 

statement, advise the respondent: 

(i) of the Chief Compliance Officer’s decision to drop any or all of the 

potential charges; 

(ii) that the disciplinary proceedings will proceed with respect to all 

remaining charges in accordance with the notice of charges delivered to the respondent; 

and/or, as appropriate 

(iii) that the respondent shall have twenty (20) Business Days to submit 

an answer to the notice of charges, as described in this Rule 7.4. 

(d) If the respondent determines to answer a notice of charges, the respondent 

must file answers within twenty (20) Business Days after being served with such notice, or within 

such other time period determined appropriate by the Chief Compliance Officer. To answer a 

notice of charges, the respondent must in writing: 

(i) specify the allegations that the respondent denies or admits; 

(ii) specify the allegations that the respondent does not have sufficient 

information to either deny or admit; 

(iii) specify any specific facts that contradict the notice of charges; and 

(iv) specify any affirmative defenses to the notice of charges. 
DCM Exhibit M-1 

41 

(e) 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. 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 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. 

(f) Any notice of charges or other documents contemplated to be served 

pursuant to this Chapter 7 may be served (and service shall be deemed complete) upon the 

respondent either personally or by (i) leaving the same at his or her place of business or 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 QCEX, or (ii) sending the same 

via electronic mail to the e-mail address of the respondent as it appears on the books and records 

of QCEX. 

7.5. Settlements 

(a) A respondent or potential respondent may at any time propose in writing an 

offer of settlement to anticipated or instituted disciplinary proceedings. Any offer of settlement 

should contain proposed findings and sanctions and be signed by the respondent or potential 

respondent and submitted to the Compliance Department. A respondent or potential respondent 

may offer to settle disciplinary proceedings without admitting or denying the findings contained 

in the order of the disciplinary proceedings but must accept the jurisdiction of QCEX over it and 

over the subject matter of the proceedings and consent to the entry of the findings and sanctions 

imposed. 

(b) If a respondent or potential respondent submits an offer of settlement in 

accordance with paragraph (a) above, the Compliance Department will forward the offer to the 

Chief Compliance Officer with a recommendation on whether to accept or reject the offer. If the 

Chief Compliance Officer conditionally accepts an offer of settlement, 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. 

(c) If an offer of settlement is accepted and the related order of disciplinary 

proceedings becomes final, the respondent’s submission of the offer will be deemed to constitute 

a waiver of the right to notice, opportunity for a hearing and review and appeal under these Rules. 

(d) If the offer of settlement of a respondent or potential respondent is not 

accepted, fails to become final or is withdrawn by the respondent or potential respondent, the 

matter will proceed as if the offer had not been made and the offer and all documents relating to it 

will not become part of the record. Neither a respondent or potential respondent nor the 

Compliance Department may use an unaccepted offer of settlement as an admission or in any other 

manner at a hearing of, or appeal from, disciplinary proceedings. 

7.6. Disciplinary Panel 

(a) A disciplinary panel consisting of five individuals selected by the Board of 

Directors (the “Disciplinary Panel”), will conduct hearings in connection with any disciplinary 
DCM Exhibit M-1 

42 

proceedings, to make findings and impose sanctions pursuant to this Chapter 7. A separate 

Disciplinary Panel will be established prior to the commencement of each disciplinary matter. No 

Disciplinary Panel shall be comprised in a manner such that any group or class of industry 

participants may reasonably be expected to dominate or exercise disproportionate influence on 

such panel. Each Disciplinary Panel shall consist of individuals who (1) would qualify as a Public 

Director (if the individual is a director of QCEX), except in cases limited to decorum, attire, or the 

timely submission of accurate records required for clearing or verifying each day’s transactions 

and (2) are drawn from the NFA’s Hearing Committee. For the avoidance of doubt, members of 

the Compliance Department shall not be eligible to serve on a Disciplinary Panel. 

(b) Within ten (10) Business Days of being notified of the appointment of the 

Disciplinary Panel, a respondent may seek to disqualify any individual named to the Disciplinary 

Panel for any reasonable grounds, by serving written notice on the Chief Compliance Officer. By 

not timely filing a request for disqualification, the respondent will be deemed to have waived any 

objection to the composition of a Disciplinary Panel. The Chief Compliance Officer will decide 

the merits of any request for disqualification within his or her sole discretion. Any such decision 

will be final and not subject to appeal. 

(c) All disciplinary proceedings (except for summary impositions of fines 

pursuant to Rule 7.13) will be conducted at a hearing before the Disciplinary Panel. A hearing will 

be conducted privately and confidentially unless the Disciplinary Panel decides that the hearing, 

or any part of it, should be held in public after giving each respondent the opportunity to present 

its, his or her views on holding a public hearing. Notwithstanding the confidentiality of hearings, 

the Disciplinary Panel may appoint an expert to attend any hearing and assist in deliberations if 

such expert agrees to be subject to an appropriate confidentiality agreement. 

(d) After reasonable notice to each respondent, the Disciplinary Panel will 

promptly (but in no event later than thirty (30) Business Days following such notice) convene a 

hearing to conduct the disciplinary proceedings with respect to such respondent. Parties to a 

disciplinary proceeding include each respondent and the Compliance Department. 

(e) The chairman of the Disciplinary Panel may continue, adjourn or otherwise 

conduct the hearing, as he or she may deem appropriate. The chairman of the Disciplinary Panel 

will determine all procedural and evidentiary matters, including the admissibility and relevance of 

any evidence proffered. In determining procedural and evidentiary matters, the chairman of the 

Disciplinary Panel 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. QCEX will provide guidance to the chairman of the 

Disciplinary Panel on the conduct of the hearing. 

(f) Except for procedural and evidentiary matters decided by the chairman of 

the Disciplinary Panel pursuant to paragraph (e) above, unless each respondent otherwise consents, 

the entire Disciplinary Panel must be present during the entire hearing and any related 

deliberations. 

7.7. Respondent Review of Evidence 
DCM Exhibit M-1 

43 

(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 

tangible evidence in the possession or under the control of QCEX that the Compliance Department 

will use to support the allegations and proposed sanctions in the notice of charges or which the 

chairman of the Disciplinary Panel deems relevant to the disciplinary proceedings. 

Notwithstanding the foregoing, no respondent will have the right to review, and QCEX will have 

no obligation to disclose, any information protected by attorney-client privilege or any other 

privileges recognized by Applicable Law. 

(b) If any books, records, documents, papers, transcripts of testimony, or other 

tangible 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 Compliance Department, the Compliance 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 

Compliance 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 Compliance Department intends to rely on to support 

the allegations or proposed sanctions in the notice of charges. 

(d) For purposes of this Rule 7.7, 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 Participant or Authorized User and the 

personal finances of the Person providing the information. 

7.8. Hearings 

(a) At a hearing conducted in connection with any disciplinary proceedings, the 

Compliance Department will present its case supporting the allegations and proposed sanctions in 

the notice of charges to the Disciplinary Panel. If a respondent has timely filed an answer to the 

notice of charges in accordance with Rule 7.4, the respondent is entitled to attend and participate 

in the hearing. 

(b) At a hearing conducted in connection with any disciplinary proceedings, the 

Disciplinary Panel or the Compliance Department and each respondent may: 

(i) present evidence and facts determined relevant and admissible by 

the chairman of the Disciplinary Panel; 

(ii) call and examine witnesses; and 

(iii) cross-examine witnesses called by other parties. 
DCM Exhibit M-1 

44 

(c) If the respondent fails to file an answer, has filed a general denial, or if any 

or all of the allegations in the notice of charges are not expressly denied in the respondent’s answer, 

the chairman of the Disciplinary Panel may limit evidence concerning any allegations not 

expressly denied in determining the sanctions to impose. If a respondent fails to file an answer but 

appears at the hearing, the respondent may not participate in the hearing (by calling or crossexamining witnesses, testifying in defense, presenting evidence concerning the notice of charges, 

or otherwise) unless the Disciplinary Panel determines that the respondent had a compelling reason 

for failing to timely file an answer. If the Disciplinary Panel determines that the respondent had a 

compelling reason for failing to timely file an answer, the Disciplinary Panel will adjourn the 

hearing and direct the respondent to promptly file a written answer in accordance with Rule 7.4. 

(d) Any Person entitled, or required or called upon, to attend a hearing before a 

Disciplinary Panel pursuant to paragraph (b)(ii) 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. QCEX will require all Participants and Authorized Users that are called as witnesses 

to appear at the hearing and produce evidence. QCEX will make reasonable efforts to secure the 

presence of all other Persons called as witnesses whose testimony would be relevant. 

(e) If during any disciplinary proceedings the Disciplinary Panel determines 

that a reasonable basis exists to believe that the respondent violated or is about to violate a Rule 

or a provision of Applicable Law other than the violations alleged in the notice of charges, the 

Disciplinary Panel may consider those apparent violations after providing the respondent with an 

opportunity to answer the additional allegations in accordance with Rule 7.4. In connection with 

considering apparent violations pursuant to this paragraph (e), the Disciplinary Panel may request 

that the Compliance Department provide the Disciplinary Panel with any additional information. 

(f) The Disciplinary Panel may summarily impose sanctions on any Participant 

or Authorized User that impede or delay the progress of a hearing. 

(g) QCEX will arrange for any hearing conducted in connection with 

disciplinary proceedings to be recorded hearing 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 chairman of the Disciplinary Panel may within his or her sole discretion 

order the respondent to pay the costs for transcribing the recording of the hearing. 

(h) No interlocutory appeals of rulings of any Disciplinary Panel or chairman 

of the Disciplinary Panel are permitted. 

7.9. Decision of Disciplinary Panel 

(a) As promptly as reasonable following a hearing, the Disciplinary Panel will 

issue an 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) QCEX will serve a copy of the order of the disciplinary proceedings on the 

respondent and the Compliance Department. The order will include: 
DCM Exhibit M-1 

45 

(i) the notice of charges or summary of the allegations; 

(ii) the answer, if any, or a summary of the answer; 

(iii) a brief summary of the evidence introduced at the hearing; 

(iv) findings of fact and conclusions concerning each allegation, 

including each specific Rule and provision of Applicable Law that the respondent is found 

to have violated; 

(v) the imposition of sanctions, if any, and the effective date of each 

sanction; and 

(vi) notice of the respondent’s right to appeal pursuant to Rule 7.12. 

(c) Unless a timely notice of appeal is filed pursuant to Rule 7.12, 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 a copy thereof is provided to the Compliance 

Department. 

7.10. Sanctions 

(a) After notice and opportunity for hearing in accordance with these Rules, 

QCEX will impose sanctions if a Participant or Authorized User is found to have violated or to 

have attempted to violate a Rule or provision of Applicable Law for which QCEX possesses 

disciplinary jurisdiction. QCEX may impose one or more of the following sanctions or remedies: 

(i) censure; (ii) limitation on Trading Privileges and/or Clearing Privileges, association with a 

Participant or other activities, functions or operations; (iii) suspension of Trading Privileges and/or 

Clearing Privileges or association with a Participant; (iv) fine (subject to paragraph (b) below); (v) 

restitution or disgorgement; (i) termination of Trading Privileges and/or Clearing Privileges; or 

(vii) any other sanction or remedy deemed to be appropriate. All sanctions, including those 

imposed pursuant to an accepted settlement offer, shall take into account respondent’s disciplinary 

history and remediation efforts. 

(b) QCEX may impose a fine of up to $500,000 for each violation. If a fine or 

other amount is not paid within thirty (30) Business Days of the date that it becomes payable, then 

interest will accrue on the sum from the date that it became payable at the quoted prime rate plus 

three percent. QCEX has sole discretion to select the bank on whose quotations to base the prime 

rate. Each Participant will be responsible for paying any fine or other amount imposed on, but not 

paid by, any Authorized User authorized by, or other agent or representative of, such Participant. 

(c) No more than one warning letter may be issued to the same Person found to 

have committed the same rule violation within a rolling twelve-month period. 

7.11. Costs 

(a) Regardless of the outcome of any disciplinary proceeding, the Disciplinary 

Panel may order a respondent to pay some or all of the costs associated with the disciplinary 
DCM Exhibit M-1 

46 

proceedings that the Disciplinary Panel believes were unnecessarily caused by the respondent. 

Costs may include costs associated with the inquiry or investigation, the prosecution by the 

Compliance Department, legal and professional assistance, the hearing and administrative and 

other expenses incurred by the Disciplinary Panel. 

(b) The Disciplinary Panel may only award costs against QCEX if it concludes 

that QCEX has behaved in a manifestly unreasonable manner in the commencement or conduct of 

the disciplinary proceedings in question. The Disciplinary Panel must limit any award of costs 

against QCEX to an amount that it concludes is reasonable and appropriate, but does not exceed 

the respondent’s costs for external legal or other external professional assistance. 

(c) The Disciplinary Panel may determine the amounts and allocation of costs 

in any manner it may deem appropriate. QCEX or the respondent will pay any costs ordered to be 

paid by it by the Disciplinary Panel within thirty (30) Business Days of the later of either written 

notice of (i) the amount imposed by the Disciplinary Panel or (ii) the determination of an appeal 

by the Appeals Panel against the Disciplinary Panel’s determination. 

7.12. Appeals 

(a) Each respondent found by the Disciplinary Panel to have violated a Rule of 

or a provision of Applicable Law or who is subject to any summary fine imposed pursuant to Rule 

7.13 or any summary sanction imposed pursuant to Rule 7.14 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 Chief Compliance Officer. 

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; provided 

however, any summary sanction entered under Rule 7.14 shall continue in effect during the appeal. 

(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. An appellant may 

appeal the order of disciplinary proceedings or any summary decision on the grounds that: 

(i) the decision was arbitrary, capricious, an abuse of discretion, or not 

in accordance with the Rules; 

(ii) the decision exceeded the authority or jurisdiction of the 

Disciplinary Panel, the Chief Compliance Officer or QCEX; 

(iii) the decision failed to observe required procedures; 

(iv) the decision was unsupported by the facts or evidence; or 

(v) the imposed sanctions, remedies or costs are inappropriate or 

unsupported by the record. 

(c) The Chief Compliance Officer will forward copies of any notice of appeals 

received by it to all parties to the disciplinary proceeding or summary action, as the case may be, 

except the appellant. On or before the twentieth (20th) Business Day after filing a notice of appeal, 
DCM Exhibit M-1 

47 

the appellant must file with the Chief Compliance Officer and serve on the Compliance 

Department a brief supporting the notice of appeal and documents supporting the brief. On or 

before the twentieth (20th) Business Day after the date on which the appellant serves their 

supporting brief, the appellee must file and serve its brief in opposition. On or before the tenth 

(10th) Business Day after the date on which the appellee serves its brief in opposition, the appellant 

must file and serve a brief in reply. 

(d) In connection with any appeal, the Compliance Department will furnish to 

the Chief Compliance Officer and to the respondent/appellant a 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 Chief Compliance Officer will appoint the Appeals Panel to consider and 

determine the appeal. If less than 3 individuals from the Regulatory Oversight Committee are 

eligible to serve on the Appeals Panel, the Appeals Panel shall be a panel solely comprised of those 

individuals from the Regulatory Oversight Committee that are eligible to serve on the Appeals 

Panel and such additional individuals meeting the requirements of Public Director who are 

appointed by the Chief Compliance Officer. Members of the Compliance Department of QCEX 

shall not be eligible to serve on the Appeals Panel. Members of a Disciplinary Panel may not serve 

on an Appeals Panel for the same matter. 

(f) The Appeals Panel may hold a hearing to allow parties to present oral 

arguments. Any hearing will be conducted privately and confidentially unless the Appeals Panel 

decides that the hearing, or any part of it, should be held in public after giving each appellant the 

opportunity to present their views on holding a public hearing. Notwithstanding the confidentiality 

of hearings, the Appeals Panel may appoint individuals to attend any hearing and assist in the 

deliberations if such individuals agree to be subject to appropriate confidentiality agreements. In 

determining procedural and evidentiary matters, the Appeals Panel will be bound by evidentiary 

or procedural rules or law. 

(g) The Appeals 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 Chief 

Compliance Officer or the Chief Compliance Officer’s designee, the notice of appeal, the briefs 

filed in support and opposition of the appeal, and any oral arguments of the parties. The Appeals 

Panel may only consider new evidence when the Appeals Panel is satisfied that good cause exists 

on why the evidence was not introduced during the disciplinary proceeding or when imposing the 

summary action. 

(h) After completing its review, the Appeals Panel may affirm or, only if it finds 

that the decision of the Disciplinary Panel or the Chief Compliance Officer that is under review, 

as the case may be, meets one of the criteria listed in Rule 7.12(i) below, 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 remedy authorized by the Rules, or remanding the matter to the same or a 

different Disciplinary Panel for further disciplinary proceedings or for reconsideration by the Chief 

Compliance Officer. The Appeals Panel may order a new hearing for good cause or if the Appeals 
DCM Exhibit M-1 

48 

Panel determines in its sole discretion that the appellant was not given a full and fair opportunity 

to make an argument in its favor and present supporting evidence. 

(i) As described in Rule 7.12(h) above, the Appeals Panel may modify or 

reverse any order of the disciplinary proceedings or summary action under appeal only if it finds 

that the decision was: 

(i) Arbitrary, capricious, or an abuse of the discretion of the 

Disciplinary Panel, the Chief Compliance Officer, or the Chief Compliance Officer’s 

designee, as the case may be; 

(ii) In excess of the authority or jurisdiction of the Disciplinary Panel or 

the Chief Compliance Officer, as the case may be; or 

(iii) Based on a clearly erroneous application or interpretation of the 

Rules. 

(j) As promptly as reasonably possible following its review, the Appeals Panel 

will issue a written decision on appeal rendering its decision based on the weight of the evidence 

before the Appeals Panel. 

The decision of the Appeals 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 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. 

(k) The Appeal Panel’s written order on appeal (including findings of fact and 

conclusions and the imposition of sanctions, remedies and costs, and the effective date of any 

sanction, remedy cost) will be the final action of QCEX and will not be subject to appeal within 

QCEX. 

(l) Within ten (10) Business Days of being notified of the appointment of the 

Appeals Panel, a respondent may seek to disqualify any individual named to the Appeals Panel for 

the reasons identified in this Rule 7.12 or for any other reasonable grounds, by serving written 

notice on the Chief Compliance Officer. By not timely filing a request for disqualification, the 

respondent will be deemed to have waived any objection to the composition of an Appeals Panel. 

The Chief Compliance Officer will decide the merits of any request for disqualification within his 

or her sole discretion. Any such decision will be final and not subject to appeal. 

7.13. Summary Imposition of Fines 

(a) The Chief Compliance Officer may summarily impose a fine against a 

Participant or Authorized User for failing: 

(i) to make timely payments of margin, options premiums, fees, cost, 

charges or fines to the Exchange or the Clearinghouse; 
DCM Exhibit M-1 

49 

(ii) to make timely and accurate submissions to the Exchange or 

Clearinghouse of notices, reports or other information required by the Rules; and 

(iii) to keep any books and records required by the Rules. 

(b) The Compliance Department, acting on behalf of the Chief Compliance 

Officer, will give notice of any fine imposed pursuant to this Rule 7.13 to each Participant or 

Authorized User 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 and (iii) 

the amount of the fine. Within twenty (20) Business Days of serving the notice of fine, the 

Participant or Authorized User, as the case may be, must either pay the fine or file notice of an 

appeal pursuant to Rule 7.12. Unless timely notice of appeal is filed pursuant to Rule 7.12, the fine 

will become final upon the expiration of twenty (20) Business Days after the notice of fine is 

served on the Participant or Authorized User, as the case may be. 

(c) QCEX, in its sole discretion, may deduct the amount of any fine imposed 

pursuant to Rule 7.13(b) directly from the Participant’s Account; provided, that QCEX may not 

make such a deduction if the result would be to cause an event of default with respect to any Open 

Contract Positions then held in the Account of such Participant. 

(d) QCEX will set the amount of any fines imposed pursuant to this Rule 7.13, 

with the maximum fine for each violation not to exceed $5,000. Summary imposition of fines 

pursuant to this Rule 7.13 will not preclude QCEX from bringing any other action against the 

Participant or Authorized User, as the case may be. 

7.14. Summary Suspensions and Other Summary Actions 

(a) Notwithstanding anything in the Rules to the contrary, the Chief 

Compliance Officer or the Chief Compliance Officer’s designee, upon a good faith determination 

that there are substantial reasons to believe that such immediate action is necessary to protect the 

public or the best interests of QCEX, may order that any party be denied access to the Exchange 

and/or the Clearinghouse, or summarily limit, condition, restrict or qualify the Trading Privileges 

and/or the Clearing Privileges of a Participant or Authorized User, and may take other summary 

action against any Participant or Authorized User in accordance with the Rules; provided, however, 

that the Chief Compliance Officer or the Chief Compliance Officer’s designee in issuing an order 

denying access, may permit such party to enter Orders solely for the purpose of liquidating the 

Open Contract Positions of such Participant while the applicable suspension, limitation, condition, 

restriction or qualification of access is in effect. 

(b) Promptly after an order is issued pursuant to paragraph (a), the party shall 

be informed of the action taken, the reasons for the action, the effective date and the duration of 

the action. The party shall also be informed of his or her right to appeal the action under Rule 7.12. 

Whenever practicable, the Compliance Department, acting on behalf of the Chief Compliance 

Officer, shall provide such notice prior to taking the action. 

(c) Unless timely notice of appeal is filed pursuant to Rule 7.12, the summary 

action will become final upon the expiration of twenty (20) Business Days after the notice of action 

is served on the respondent. 
DCM Exhibit M-1 

50 

(d) At the request of the Exchange or the Clearinghouse, a respondent against 

whom a summary action is brought pursuant to this Rule 7.14 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 or the Clearinghouse in connection with the enforcement of any Rule. 

(e) A respondent whose Trading Privileges and/or Clearing Privileges are 

suspended, limited, conditioned, restricted or qualified pursuant to this 7.14 may apply for 

reinstatement by filing with the Compliance Department a written request stating the applicant’s 

reasons for seeking reinstatement. QCEX will not consider a respondent’s request for 

reinstatement if the respondent (i) persists in the conduct which was the subject of the order 

denying access; (ii) owes any fines, fees, charges or costs to QCEX, (iii) continues to fail to appear 

at disciplinary proceedings without good cause or (iv) 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 

respondent will present its, his or her case supporting the reinstatement and the Compliance 

Department, acting on behalf of the Chief Compliance Officer may, in its discretion, present its 

case opposing or supporting the reinstatement and each may present relevant and admissible 

evidence and facts and call, examine and cross-examine witnesses. At the hearing for 

reinstatement, QCEX may require any Participant or any Authorized User to appear as witnesses 

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 the Clearing Privileges, or association with a 

Participant, 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 Appeals Panel’s initial order issued pursuant to Rule 7.14(d) above. The Appeals Panel’s order 

may not be appealed. 

(h) Any decision to deny access pursuant to paragraph (a) shall not remain in 

effect for more than sixty (60) Business Days unless the Chief Compliance Officer or the Chief 

Compliance Officer’s designee, upon further consideration of the circumstances giving rise to the 

order denying access, issues a separate order denying access for an additional period of time, not 

to exceed sixty (60) Business Days. The party must be notified thereof prior to issuance of the 

second order, unless prior notice is impracticable. Such notice must meet the standards provided 

in paragraph (b). At any time, a party subject to an action under this Rule 7.14, may petition the 

Chief Compliance Officer or the Chief Compliance Officer’s designee to reconsider an access 

denial pursuant to this Rule based upon materially changed circumstances. 

(i) When the Trading Privileges and/or Clearing Privileges of a Participant are, 

or the association of an Authorized User with a Participant is, suspended for a period of 12 months 

or less, none of its rights and Trading Privileges and/or Clearing Privileges (including the right to 

hold oneself out to the public as a Participant, enter Orders into the QCEX Direct System and 

receive Participant rates for fees, costs, and charges and deposit margin at Participant levels) will 

apply during the period of the suspension, except for the right of the Participant or Authorized 
DCM Exhibit M-1 

51 

User in question to assert claims against others as provided in the Rules. Any such suspension will 

not relieve the Participant or Authorized User in question of its, his or her obligations under the 

Rules to perform any Contracts entered into before the suspension, or for any QCEX imposed fees, 

costs, or charges incurred during the suspension. QCEX may discipline a suspended Participant or 

Authorized User under this Chapter 7 for any violation of a Rule or provision of Applicable Law 

committed by the Participant before, during or after the suspension. 

(j) When the Trading Privileges and/or Clearing Privileges of a Participant are, 

or the association of an Authorized User with a Participant is, terminated, all of its rights and 

Trading Privileges and/or Clearing Privileges will terminate, except for the right of the Participant 

or Authorized User in question to assert claims against others, as provided in the Rules. A 

terminated Participant or Authorized User may only seek to reinstate its Trading Privileges and/or 

Clearing Privileges by applying for Trading Privileges and/or Clearing Privileges pursuant to Rule 

3. QCEX will not consider the application of a terminated Participant or Authorized User if such 

Participant or Authorized User, 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. 

(k) A suspended or terminated Participant or Authorized User remains subject 

to the Rules and the jurisdiction of QCEX 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 Participant or an Authorized User still had Trading Privileges and/or Clearing 

Privileges or was still associated with a Participant, as the case may be. 

7.15. Publication of Disciplinary Action 

(a) Within two (2) Business Days after a disciplinary action becomes final, 

notice of any disciplinary action outcome providing that a Participant is suspended, expelled, 

disciplined or denied access to the Exchange and/or the Clearinghouse shall be provided to the 

NFA for inclusion in its internet accessible database of disciplinary matters. 

(b) QCEX will make public notice of the disciplinary action by posting on its 

website, in accordance with CFTC Regulation 9.13, the information required by CFTC Regulation 

9.11. The disciplinary action will be considered final on the date the notice of the disciplinary 

action is published on the QCEX website. 

DISPUTE RESOLUTION 

8.1. General 

(a) Any dispute, controversy or claim related to transactions executed and 

cleared through the QCEX Direct System, or otherwise related to participation on the QCEX Direct 

System shall be resolved and settled through binding arbitration in New York, New York. If the 

parties are able to agree on an arbitrator, the arbitration shall be conducted by a single arbitrator. 

If the parties are unable to agree on an arbitrator, each party shall select an arbitrator and the two 

arbitrators shall select a third arbitrator. Any arbitrator selected in connection with such arbitration 

must qualify as a Public Director (if the individual is a director of QCEX) and must have 
DCM Exhibit M-1 

52 

reasonable prior experience in the operation and regulation of exchanges and clearinghouses 

providing execution and clearing services in connection with commodity futures contracts, 

commodity options or swaps, and with respect to the rules of the CFTC and exchanges and 

clearinghouses generally. The arbitrator(s) shall determine the procedures for any arbitration held 

under this Rule 8.1, and shall, to the extent practicable, rely on applicable provisions of Chapter 7 

with respect to such procedures, including but not limited to in connection with discovery by the 

parties, submission of documents and a hearing, provided that the arbitrator(s) shall have the 

authority to determine the appropriate procedures, notwithstanding the provisions of Chapter 7. 

The arbitrator(s) shall have the authority to award any remedy or relief that a court of competent 

jurisdiction could order or grant, including the issuance of an injunction. The fees and expenses 

of such arbitration shall be borne by the non-prevailing party, as determined by such arbitration. 

This provision shall not be construed in any way as creating a cause of action. 

(b) Any failure on the part of any Participant or Authorized User to arbitrate a 

case subject to arbitration, or the commencement by any such Person of a suit in any court prior to 

arbitrating a case subject to arbitration, violates the Rules and subjects such Participant or 

Authorized User to disciplinary proceedings pursuant to Chapter 7, unless the parties mutually 

agree not to submit their dispute to arbitration. 

(c) QCEX may summarily suspend, pursuant to Chapter 7, a Participant or 

Authorized User that fails to satisfy an arbitration award rendered in any arbitration pursuant to 

this Chapter 8. 

CONTRACT RULES 

9.1. Contract Specifications 

Each Contract will meet such specifications, and all trading in such Contract will be 

subject to such procedures and requirements, as set forth in the rules governing such Contract. 

9.2. Contract Modifications 

The specifications for, and the procedures and requirements for trading, any Contract may not be 

modified in any respect without the prior approval of the Exchange.