HEDGE
Street

privileges in particular types of Contracts or of placement of certain types of
orders); and

€e) (d) revocation of membership status or privileges, including partial
revocation of such privileges (for example, revocation of trading privileges in
particular types of Contracts or of placement of certain types of orders).

www.hedgestreet.com



ose MS ST PHU 13

OFC. OF THE SECRETARIAT

June 17, 2005

VIA EMAIL: secretary@efte.gov

Ms. Jean A. Webb

Secretary of the Commission

Commodity Futures Trading Commission
3 Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

RE: HedgeStreet, Inc. — Amending HedgeStreet Rule 5.13(a) to Define Member
Penalties for Violations of said Rule

Dear Secretary Webb:

Pursuant to Section 5c(c)(1) of the Commodity Exchange Act, as amended (“Act”), and
§40.6(a) of the regulations promulgated by the Commodity Futures Trading Commission
(the “Commission”) under the Act, HedgeStreet, Inc. (“HedgeStreet”) hereby submits
amendments to HedgeStreet Rule 5.13(a) (the “Rule”) in order to define penalties for
Members who are in violation of said Rule. HedgeStreet also adds new Rule 9.5(b) to
inform Members that they may be fined as a penalty of violating rules of HedgeStreet.
These Rule amendments are intended to impose the following penalties if a Member
violates Rule 5.13(a).

e Upon the discovery of a Member violating the Rule for the first time within a
calendar year, HedgeStreet will debit the account of the Member a penalty fee per
incident in an amount of $10;

e Upon the discovery of a Member violating the Rule for the second time within a
calendar year, HedgeStreet will debit the account of the Member a penalty fee per
incident in an amount of $10 and require that the Member re-certify that the
Member has read and agreed to be bound by this Rule 5.13(a);

e Upon the discovery of a Member violating the Rule for the third time within a
calendar year, HedgeStreet will debit the account of the Member a penalty fee per
incident in an amount of $15 and, require that the Member satisfactorily explain the
reason for violating Rule 5.13(a). If a satisfactory answer is not received within a
reasonable period of time, the Member’s trading privileges will be suspended for
30 days;

« Upon the discovery of a Member violating the Rule for the fourth time within a
calendar year, HedgeStreet will debit the account of the Member per incident a
penalty fee in an amount of $20 and suspend the Member’s membership privileges
for a period of no less than 30 days, regardless of the explanation received by the
Member;

e Upon the discovery of a Member violating the Rule for the fifth time within a
calendar year, HedgeStreet will debit the account of the Member per incident a
penalty fee in an amount of $25, and suspend the Member’s membership privileges

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1825 S. Grant Street
Suite 500

‘San Mateo, CA 94802
Tel: 650.638-3500
Fax: 650.638.3501


HEDGE
Street

for period of no less than 6 months, regardless of the explanation received by the
Member;

e Upon discovery of a Member violating the Rule for the sixth time within a calendar
year, HedgeStreet will debit the account of the Member a penalty fee in an amount
of no less than $30, and revoke the Member’s membership privileges

The purpose of this letter is to notify the Commission of HedgeStreet’s intention to
implement the Rule amendments contained herein on Monday, June 20, 2005.

No substantive opposing views were expressed to HedgeStreet with respect to these
additions and amendments.

Should you have any questions or require additional information, please do not hesitate to
contact the undersigned at (650) 638-3511 or sford@hedgestreet.com.

Sincerely,

Stephanie Ford
Vice President, Legal & Compliance

ce: Clarissa Manansala — HedgeStreet, Inc.

www.hedgestreet.com

2825 S. Grant Street
‘Sulte 500

‘San Mateo, CA 94402
Tel: 650.638.3500
Fax: 650.638.3501


HEDGE
Street

EXHIBIT A
RULE 5.13. PROHIBITED TRANSACTIONS AND ACTIVITIES

(a) You are prohibited from entering orders on the Market if there are
insufficient funds or Contracts in your account to satisfy such orders if they are
executed. Subject to the conditions set forth in Rule 9.2(f) and Rule 9.6, if you
violate this Rule, the following penalties shall apply:

Number of Per Penalty
Incident
Violations Within
a Calendar Year
1 $10 fee deducted from your account
2 $10 fee deducted from your account, and you will be required
to re-certify that you have read and agree to be bound by this
Rule 5.13(a).
3 $15 fee deducted from your account, and you will be required
to give a satisfactory explanation as to why the Rule violation
occurred, or your trading privileges will be suspended for 30
days
4 $20 fee deducted from your account and suspension of your
trading privileges for 30 days (regardless of explanation)
5 $25 fee deducted from your account and suspension of your
trading privileges for 6 months (regardless of explanation)
6 $30 fee and revocation of trading privileges (regardless of
explanation)
RULE 9.5 PENALTIES

As a result of a disciplinary proceeding or as part of a settlement, HedgeStreet
may impose one or more of the following penalties:

(a) a letter of warning, censure, or reprimand;

(b) a fine or penalty fee;

{b) (c) suspension of membership status or privileges for a specified period,
including partial suspension of such privileges (for example, suspension of trading

www.hedgestreet.com

1825 S. Grant Street
Sulte 500

‘San Mateo, CA 94402
Tel: 650.638.3500
Fax: 650.638.3501