APPENDIX 9B-2

CBOT Market Operations will determine the bid or the offer of an option or an option strategy by using as
many as four procedures:

1. Market Operations will observe the bid and the offer prices prior to the potential error
occurring. .

2. Market Operations will submit RFQs using delta neutral strategies with futures at the same
level prior to the execution of the potential error.

3. Market Operations will attempt to contact at least three market makers that were not involved
in the potential error trade in order to determine their bids and offers prior to the potential
error occurring.

4. During regular trading hours (which are defined as the hours of open auction), Market

Operations may also obtain bid and offer prices from the open auction platform using delta
neutral strategies with futures at the same level prior to the execution of the potential error.

CBOT Market Operations will determine the average bid or offer price based upon the size of the error
trade and the market depth. The average price will be calculated by:

1. Determining the true average (weighted average) bid or offer price.
2. Rounding the true average to the nearest tick value, up for buy orders and down for sell
orders.

Ifthe depth of the market in response to the first RFQ is less than the size of the order, CBOT Market
Operations will submit a second RFQ for the size of the error trade. CBOT Market Operatioris will
calculate the average bid or offer price based upon the size of the error trade._If the depth of the
response to the second RFQ is less than the size of the trade, CBOT Market Operations will calculate an
average bid or offer based upon the depth of the market.

identifying an Error Trade

CBOT Market Operations will consider an option trade an error if it determines one of the following:

4. The trade has been executed at a price at least two ticks below the determined bid price in
the case of a sell error.

The trade has been executed at a price at least two ticks above the determined offer price in the case of a
buy error.

Determining an Adjustment for Option Error Trades

Option error trades may not be resolved through a busting of the disputed transactions. They may
only be resolved via a price adjustment based on the price which is one tick less than the determined bid

price in the case of a sell error or one tick greater than the determined offer price in the case of a buy
error.

78. Arbitration Procedures

ited to trades that-are-determined by-e-cbot
Operatic to be errortrade—A-In CBOT Arbitrations involving actual error trades or asserted error

trades, a notice of intention to arbitrate must be filed within ten business days after the date of the error
trade. The party that caused the error may be held responsible for realized losses incurred by parties
whose trades were busted as a result of the error.

89. Error Trade Fees


APPENDIX 9B-3

CS ee
mini-sized Eurodollar YE % Basis Point 10 ticks 5 Points 5 points NA
100 oz. Gold ZG 10 cents 40 ticks $4.00 $4.00 N/A
mini-sized Gold YG 10 cents 40 ticks $4.00 $4.00 N/A
5,000 oz. Silver ZI 1/10 cent 80 ticks 8 cents 8 cents N/A
mini-sized Silver YI 1/10 cent 80 ticks 8 cents 8 cents N/A
Ethanol ZE 1/10 cent. 40 ticks 4 cents 4 cents 15 cents
Com ZC cent 40 ticks 10 cents 10 cents 20 cents
Com Options OZC 1/8 cent 2tieksN/A | 2-centsN/A 2% cents 20 cents
Wheat ZW ‘Acent 40 ticks 10 cents 10 cents 30 cents
Wheat Options OZW. 1/8 cent 2OticksN/A | 2-centsN/A 2% cents 30 cents
Oat ZO 'Acent 40 ticks 10 cents 10 cents 20 cents
Oat Options OZO 1/8 cent 20-tieksN/A 2eentsN/A 2% cents 20 cents
Rough Rice ZR. ‘A cent 40 ticks 20 cents 20 cents 50 cents
Rough Rice Options OZR. ‘cent 20-tieksN/A SentsN/A. Scents 50 cents
South American Soybeans ZK Ya cent 80 ticks 20 cents 20 cents 50 cents
Soybeans ZS cent 80 ticks 20 cents 20 cents 50 cents
Soybean Options OZS 1/8 cent 40-tieksN/A S-eentsN/A 5 cents 50 cents
Soybean Meal ZM 10 cents 80 ticks $8.00 $8.00 $20
Soybean Meal Options OZM. 5 cents 40-ticksN/A $2.00N/A $2.00 $20
Soybean Oil ZL 1/100 cents 80 ticks -80 cents -80 cents 2 cents
Soybean Oil Options OZL 5/1000 cents 40-+tieksN/A. -20-eentsN/A -20 cents 2 cents

No-Bust Range”.(See Section

(07/01/05)


APPENDIX 9B-2
broadcast message and an alert to the quote vendor network indicating whether the trade was
busted, re-priced or allowed to stand.

B. In making its determination, e-cbot Operations may consider relevant factors including, but not
limited to: market conditions immediately before and after the transaction; the prices of related
contracts; whether one or more parties to the trade believe the trade was executed at a valid
price; the extent to which the transaction appeared to trigger contingency orders and other trades;
information related to the e-cbot Operations by third parties.

6. Procedures for Correcting Error Trades

In the event a trade is busted, the parties to the transaction must reverse the transaction through
applicable clearing house procedures. e-cbot Operations will notify OIA regarding any situation where a
party fails to claim or misclear trades in a timely manner. Such failure may be deemed a violation of Rule
504.00, Acts Detrimental to the Welfare of the Association.

Under no circumstances shall the parties to an alleged-asserted error trade be permitted to reverse the
error by entering into a prearranged transaction.

If the asserted error trade called-into-question-is determined not to be an actual error trade, the parties to
the trade are permitted to mutually agree upon cash adjustment or to arbitrate the matter. any-Any such
cash adjustment must be reported to e-cbot Operations.

Spreads

Because of the autoleg feature of the e-cbot system, spreads may be executed such that one leg of the
spread is determined to be an error trade and the other leg is deemed to have been executed at a good
price. In such circumstances, the party who enters an outright order that causes an error trade on an
autolegged spread will be deemed to be the counterparty to the good leg of the spread (see Appendix 9B-
4). The parties to the transactions will reverse and claim the transactions as indicated through the
applicable clearing house procedures.

If an option trade is asserted to be at a price that is in error, the trade shall not be considered for review
by e-cbot Operations unless the price of the asserted error trade conforms to the following quidelines:

Zz. Determination of Option Error Trades

CBOT Market Operations will identify error trades by one of two means:

4. Notification of market participants within five minutes of the execution time of the asserted
error trade.

2. Determining that the price of an option or option strategy is greater than the designated
number of ticks (as outlined in Table 1) from the fair value.

Table 1:
Products Ranges-Potential Errors _|
U.S. Treasury 3 ticks
30 Day Fed Funds 6 ticks
CBOT mini-sized Dow 10 ticks
Commodity 6 ticks

Determining Average Bid and Offer

CBOT Market Operations will calculate a bid price or an offer price in order to determine whether the
potential error trade should be considered an error. If the trade is determined to be an error trade, CBOT
Market Operations will also use the bid or offer price to determine the price adjustment of the error trade.



APPENDIX 9B-2
The party responsible for the error must pay a $1,000 fee for each of the first two error trades, $3,000 for
the 3” error trade, and $5,000 for each subsequent error trade within a calendar year.

(11/01/03)


RECEIVED

C.F.T.C.
July 19, 2005 705 JUL 19 Pu 4: 49
Ms. Jean A. Webb ore. oF THE SECRETARIN
Secretary

Commodity Futures Trading Commission
Three Lafayette Center

1155 21* Street, N.W.

Washington, D.C. 20581

Reference File # 2566.01
Rule Certification
Dear Ms. Webb:

Pursuant to Commission Regulation 40.6(a), the Chicago Board of Trade (CBOT®) hereby
submits the following:

- Amendments to CBOT Rulebook Appendices 9B.02 and 9B.03 per the attached texts
(additions underlined; deletions struck through).

The referenced amendments will modify the e-cbot® Error Trade Policy with respect to options
transactions on the Exchange’s electronic trading platform. The revised policy is designed to
reinforce trade certainty by requiring that erroneous trades be price adjusted, based on
transparent and straightforward criteria, rather than being busted.

The CBOT intends to implement these revisions on July 24, 2005.

There were no opposing views concerning these revisions.

The CBOT certifies that these revisions comply with the Commodity Exchange Act and the rules
thereunder.

Sincerely,

Paul J. Draths
Vice President and Secretary

B071905


APPENDIX 9B-3

TICK BREAKDOWN PER CBOT PRODUCT

ne
che i
U.S. T-Bond ZB 1/32 96 ticks 3 points 30/32nds N/A
U.S. T-Bond Options OZB 1/64 20-ticksN/A 20/64thsN/A 20/64ths N/A
10 Yr. T-Note ZN (4y/32 192 ticks 3 points 15/32nds N/A
10 Yr. T-Note Options OZN 1/64 20-ticksN/A 20/64thsN/A. 20/64ths N/A
5 Yr. T-Note ZF (Ay/32 192 ticks 3 points 15/32nds N/A
5 Yr, T-Note Options OZF 1/64 20-ticksN/A 20/64thsN/A. 20/64ths N/A
2 Yr. T-Note ZT (AY32 384 ticks 3 points 7.5/32nds N/A
2 Yr. T-Note Options OZT (Ay64 20-+tieksN/A. 40/64thsN/A 10/64ths N/A
Muni-Note Index ZU 1/32 20 ticks 20/32nds 20/32nds NA
30-Day Fed Funds ZQ ¥% Basis Point 20 ticks 10 Points 10 points NA
30-Day Fed Funds Options OZQ ' Basis Point 20-tieksN/A SPeintsN/A 5 points N/A
10 Yr. Interest Rate Swaps SR 1/32 20/32nds 20/32nds N/A
10 Yr. Interest Rate Swaps OSR 1/64 20/64thsN/A. 20/64ths N/A
Options
5 Yr. Interest Rate Swaps SA (AY32 20 ticks 10/32nds 10/32nds N/A
5 Yr. Interest Rate Swaps OSA 1/64 20-tieksN/A 20/64thsN/A. 20/64ths N/A
Options
Bund GBL .01 of 1 Point 20 ticks .20 of 1 Point | _.20 points N/A
Bobl GBM .01 of 1 Point 20 ticks .20 of 1 Point | .20 points N/A}
Schatz GBS .01 of I Point 20 ticks .20 of 1 Point | .20 points N/A
Dow AIG Commodity Index Al 0.1 Points 40 ticks 4 Points 4 points N/A
DJIA ($10) ZD 1 Point 250 Points 250 Points 40 points 10%, 20%
and 30%
Circuit
Breakers
DJIA Options OZD % Point 40-tieksN/A. 20-PeintsN/A 20 points | 10%, 20%
and 30%
Circuit
Breakers
mini-sized Dow ($5) YM 1 Point 250 Points 250 Points 40 points 10%, 20%
and 30%
Circuit
Breakers
mini-sized Dow Options OYM 1 Point 40+4ieksN/A 40-PeintsN/A | 40 points 10%, 20%
and 30%
Circuit
Breakers



APPENDIX 9B-2

e-cbot ERROR TRADE POLICY

The CBOT’s error trade policy is designed to preserve the integrity of CBOT product markets by striking
an appropriate balance between trade certainty and erroneous price discovery. The policy provides a
mechanism to promptly address transactions that are executed at obviously erroneous prices
substantially inconsistent with the last trade price of the contract or alternative determination of the
contract's fair value. This policy does not relieve market participants from potential financial responsibility
or liability for the execution of trades that are deemed or asserted to be an “error trade” if their actions
caused financial loss to other parties-whese-transactions-were-busted.

1. Invoking the Error Trade Policy

If an e-cbot user believes that he executed a trade through e-cbot at a price that was in error, he must
contact e-cbot Market Operations (“e-cbot Operations”) at (312) 347-4600 without delay. If e-cbot
Operations is not notified within five minutes of the execution time of the asserted error trade, the trade
will stand. A third party or e-cbot Operations may also call a trade into question within five minutes of the
execution. Trades called into question within five minutes will be evaluated in accordance with sections 2
and 3 of this policy. However, e-cbot Operations has the authority, but not the obligation, to consider
trades reported after the five minute deadline provided the trade price in question is grossly (i.e. multiple
points) out of line with the last trade price or alternatively determined fair value of the respective contract.

Trades resulting from quantity errors generally will not be called into question.
2. Trade Price Within the “No Bust Range”

If a futures transaction is asserted to be at a price that is in error, the trade shall not be considered for
review by e-cbot Operations unless the price of the asserted error trade is greater than the designated
number of ticks (as outlined in Appendix 9B-3) from the reference price. The reference price will be the
last trade price preceding the entry of the asserted error trade or an alternatively determined fair value of
the contract. Fair value for futures contracts may be determined by the last trade price, preceding
settlement price, spread relationships and/or other variables deemed relevant by e-cbot Operations.
However, during side-by-side hours the reference price on a downside (upside) move will never be higher
(lower) than the low (high) of the pit traded price for an equivalent contract during the time period that the
Prices of the contracts were disjointed. During non-side-by-side hours, the reference price will never be
higher (lower) than the low (high) of an equivalently traded contract.

HE i is-asserted to -be-at a -price-thatis_in-error, the trade-shall net b idered-{ view
b bot Operati less-the-_price-of th red. trade-conforms-te-the-followi ideli
ye Pp P sg
4 Trad tb ter than-2-tick bel oretical price i
~ g abo: the theoretical-p: -der-to-be-busted-
2 Frades-greater than-2tisk 'y-from-the theoretical price, butless-than-20-ticks away from-th
theoretical-pri tbs ter than-20%-ab: belew-the theoretical orice—i
‘ price, gt | price, derto-bi
ee Frades-greater- than 20-ticks-ab below-the-theoretical price (40 ticks for the Soyb
0 AD: ex), be-busted. if-the-tick disparity-i 9
p plex} may k disparity is tess than 20%-of th:
theoretical value.
it rted trade-ent Its-in-trad r t-raultip! level
Pepi
d-to-determine-the-refe i hall-be-the- last trade-prk ‘
price price-prior-to-the entry of the alleged error
trade.


APPENDIX 9B-2

FEOF i rsttrade-in-a-cont hath: t- previously_be d_e-cbet

IEth rted. trade-is-the-firstt tract! ‘pF pened;
i i i i i the-contract-which-then-will-bi

Operations will det f jh timate a gauged-againstthe
trade-range-to- determine the final-status-of the-trade.

If e-cbot Operations contacts a member user regarding a suspicious order and the user states that the
order is entered correctly, the order (if subsequently executed) may only be called into question by a third

party.

Trades that are executed outside of the daily price limits will be busted by e-cbot Operations irrespective
of whether the trade(s) falls within the “no bust range” established above.

3. Trade Price Outside of the “No Bust Range”

If the price of the asserted error trade is more than the specified number of ticks from the reference price,
e-cbot Operations will send a broadcast message to the user community indicating that the trade has
been called into question. If the asserted error trade is outside of the specified tick range and involves
only two parties, e-cbot Operations will attempt to contact the parties to the transaction. If both parties
agree to bust or re-price the transaction, e-cbot Operations shall send a broadcast message to the user
community and an alert to the quote vendor network indicating that the trade was busted or re-priced.

If there is more than one contra-party to the order asserted to have been executed in error, e-cbot
Operations will gauge the erroneous transactions against the error trade range to determine the final
status of the trades.

4. e-cbot Operations Authority to Halt Markets

e-cbot Operations shall have the authority to halt markets in any contract during extraordinary
circumstances where there has been a major market movement without any apparent economic or
fundamental basis for movement to have occurred.

5. Decisions of e-cbot Operations

A. e-cbot Operations will review the circumstances surrounding the-alegedan asserted error trade to
determine whether it should be deemed an error trade and busted. However, subject to the
mutual agreement of both parties, the trade may be re-priced in line with the contract's fair value.
If the trade is repriced to a level that is below a sell limit price or above a buy limit price, and the
customer rejects the trade, the trade must be placed in the error account of the customer's
clearing firm. Parties to these transactions are permitted to make cash adjustments to settle
losses that occur as a result of the-an asserted error trade_or an actual error trade. Should
parties to a disputed transaction be unable to mutually resolve financial disputes arising from
such transactions, arbitration facilities are available through the Exchange. The Arbitration
Committee may hold the party who entered the order that resulted in the-an asserted error trade
or an actual error trade financially responsible for losses that occur as a result of the busted
trade(s).

Trade certainty and the timely resolution of asserted error trades are critical objectives of this
policy. Therefore, if parties to a disputed transaction do not agree to the terms of resolution, e-
cbot Operations reserves the final authority to determine the disposition of the questioned
transaction.

During side-by-side trading hours, e-cbot Operations shall, unless impracticable, make its
determination within 10 minutes of the broadcast message regarding the petentialasserted error
trade. During non side-by-side trading hours, e-cbot Operations shall, unless impracticable,
make its

determination within 15 minutes of the broadcast message regarding the petential asserted error
trade. The decisions of e-cbot Operations shall be final, and e-cbot Operations shall send a