November 22, 2006 

Ms. Jean A. Webb 

Office of the Secretariat 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

RE: CME Rulebook Chapter Nine 

 Submission No. 06-104

Dear Ms. Webb: 

Chicago Mercantile Exchange Inc. (“CME” or “Exchange") hereby notifies the Commission that 

the Exchange has approved revisions to CME Rulebook Chapter 9 (“Clearing Members”). These 

changes were made to streamline and consolidate or eliminate rules where appropriate and to improve 

and update rule language to increase the clarity of the rules in CME's Rulebook. 

Attached is Chapter 9 with additions underlined and deletions lined out. The main changes are 

summarized below: 

 The Exchange certifies that this regulatory advisory neither violates nor is inconsistent with any 

provision of the Commodity Exchange Act or of the rules and regulations thereunder. 

 If you have any questions regarding this matter, please call me at (312) 648-5422. 

Sincerely, 

 /S/ Stephen M. Szarmack 

 Director and Associate General Counsel 

SMS/elm/5999 SUB 06-104.doc 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 1 of 24

Chapter 9 

Clearing Members 

GENERAL 

900. 1 CATEGORIES OF CLEARING MEMBERS 2 

The Exchange may establish different clearing member categories and alter the rights and 

responsibilities of such categories.from time to time. The clearing member categories set forth 

below may be modified by the Exchange.

900 A. Clearing Members 

The term “clearing member” as used in the Rules, shall include all clearing member categories set 

forth in this Rule 900 or other applicable rule, unless otherwise specifiedstated in a particular rule, 

policy or the Manual. 

900.B. CME Clearing Members 

CME Clearing Members shall be fully vested clearing members withhave all the applicable rights, 

responsibilities and privileges attendant thereof, subject to the provisions of these rules and shall 

be qualified to clear transactions for all CME products. 

900.C. Inactive Clearing Members

Inactive clearing members shall: (i) have no customers, (ii) not qualify traders, and (iii) have no 

direct clearing relationship with the Exchange. Inactive clearing members must meet all clearing 

membership requirements except certain financial capital and reporting requirements as 

determined by Exchange staff.

900.BD. Special CME Clearing Members 

Notwithstanding any other provision in the Rules, aAll individuals and firms that were CBOT 

Clearing Members on or before April 16, 2003, shall bewere eligible to be admitted as Special CME 

Clearing Members at CME. Individuals and firms that become CBOT Clearing Members after April 

16, 2003, shall be admitted as Special CME Clearing Members at CME if such CBOT Clearing 

Members meet CME’s’s CME’s requirements for clearing membership. 

Except as otherwise provided in the Rules, CBOT Clearing Members admitted as Special CME 

Clearing Members shall not be subject to the assignment ownership requirements of CME 

memberships and Class A and B Shares. Applicants seeking for Special CME Clearing 

Membership at CME must apply for membership on the homeCBOT exchange. 

Special CME Clearing Members shall, unless otherwise stated in the Rules, be fully vested clearing 

members with have all of theapplicable rights, responsibilities and privileges attendant thereof, 

subject to the provisions of the Rules. Unless otherwise provided by the Exchange, Special CME 

Clearing Members shall only be qualified to clear products traded on such Special CME Clearing 

Member’s home exchange. 

901. GENERAL REQUIREMENTS AND OBLIGATIONS 3

Membership in the Clearing House is a privilege and license granted by the Board and may be 

withdrawn by the Board for cause at any time. Exchange staff may grant exemptions to the 

General Requirements and Obligations set forth below for Special CME Clearing Members if it is 

determined that such an exemption will not jeopardize the financial integrity of the Exchange. 

Subject to such exemptions, each applicant for qualification as a clearing member must satisfy the 

following requirements: 

A. It shall be a corporation (defined by the Rules of the Exchange to include a limited liability 

company), partnership or cooperative associationother entity approved by Exchange staff; It 

shall agree to: 1) abide by all CME Rules and to cooperate in their enforcement; 2) be 

responsible, even after it has withdrawn as a clearing member, for any violations of CME Rules 

committed by it while it was a clearing member; and 4 3) continue to meet all requirements of 

clearing members, including all financial requirements provided by these rules., or suffer 

 

1 NOTE: Associate broker and sub-broker membership classifications eliminated March 1979; inoperative negotiated commissions March 1978; 

also reference to IOM clearing members deleted November 1984. Revised November 1995; October 2001. 

2 Revised June 2003. 

3 Rule 901.N. eliminated July 1998; Revised November 2000; June 2003. 

4 Revised August, 1992. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 2 of 24

suspension and revocation of its membership; 5

B. It shall have an authorized representative (i.e., officer, principal, or partner) who shall represent 

the clearing member before the Exchange and its committees. Such authorized representative 

shall be responsible to the Exchange for any representations made to the Exchange as if such 

person was a member as defined by Rule 400. 

C. It shall be qualified to do business in the State of Illinois or have a valid aAgency aAgreement 

with an entity qualified to do business in the State of Illinois; 

D. It shall be engaged in or demonstrate immediate capacity to engage in the conduct of the 

business of a clearing member; 

E. It shall demonstrate such fiscal and moral integrity as would justify the Clearing House's 

assumption of the risks inherent in clearing its trades; 

F. It shall demonstrate financial capitalization commensurate with Exchange requirements as set 

by the Clearing House Risk Committee in order to justify assumption of clearing activities; 

G. If any person directly or indirectly controls, owns 10% or more of, or has the right to 10% or 

more of the profits of two or more Class A clearing members, then each such clearing member 

shall guarantee the obligations of the others to the Exchange and shall execute a written 

guarantee to the Exchange on a form approved by the Exchange. Exchange staff may grant 

exemptions from the guarantee requirements of this Rule 901.G. if it is determined that such 

exemptions will not jeopardize the financial integrity of the Exchange. 6

H. It shall notify the Exchange prior to any significant business transaction or significant change in 

operations which shall include, but is not limited to the following: 

1. The merger, combination or consolidation between the clearing member and another 

person or entity; 

2. The assumption or guarantee by the clearing member of all or substantially all of the 

liabilities of another in connection with a direct or indirect acquisition of all or substantially 

all of that person's or entity's assets; 

3. The sale by the clearing member of a significant part of its business and/or assets to 

another person or entity; 

4. A change in the direct or indirect beneficial ownership of 20% or more of the clearing 

member; 

5. Any change in the system provider used by the clearing member to process its trades; and 

6. An increase in the number of members that a clearing member qualifies as determined by 

the Clearing House Risk Committee or Exchange staff. 

Additionally, a clearing member that qualifies members must provide fifteen days' notice to 

the Exchange of any proposal to terminate such business or any material part of such 

business. 

The Clearing House Risk Committee or Exchange staff, upon such notice, may disapprove or 

approve subject to certain conditions such changes in structure or operations if it determines 

that the proposed change could jeopardize the financial or operational integrity of the 

Exchange. 

A violation of this Rule may constitute a major offense. 7

I. It shall agree to guarantee and assume complete responsibility for: 1) all trades executed or 

directed to be executed in any division by floor brokers and traders qualified by it; and 2) all 

orders that floor brokers qualified by it negligently execute or fail to execute; 

J. and K. [Reserved] 

J. It shall agree to 1) abide by all CME rules and to cooperate in their enforcement and 2) be 

responsible, even after it has withdrawn as a clearing member, for any violations of CME Rules 

committed by it while it was a clearing member;

K. It shall agree to continue to meet all requirements of clearing members, including all financial 

requirements provided by these rules, or suffer suspension and revocation of its Clearing 

 

5 Revised December 1993. 

6 Revised July 1987; April 1991; November 2000. 

7 Revised February 1995. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 3 of 24

House membership; and 

L. It shall submit to the Exchange a written guarantee, on a form provided by the Exchange, from 

each person or entity owning 5% or more of the equity securities of the clearing member, that 

shall guarantee all obligations of the clearing member to the Exchange arising out of accounts 

cleared by the clearing member that are: 8

1. non-customer accounts, including proprietary accounts as defined by CFTC Regulation 

1.3(y); and 

2. accounts carried by another futures commission merchant if such accounts would be 

considered non-customer accounts, including proprietary accounts as defined by CFTC 

Regulation 1.3(y), of the clearing member, if carried directly by the clearing member. 

Notwithstanding anything herein to the contrary, the guarantee required by this Rule 

901.L. shall not apply to any obligations of the clearing member to pay an assessment to 

the Exchange pursuant to Rule 802.B. 

Each clearing member must submit and maintain with the Audit Department a current list 

of every person or entity who is directly, or indirectly through intermediaries, the beneficial 

owner of 5% or more of any class of equity security of the clearing member. If such 

person or entity owns the clearing member indirectly through intermediaries, all 

intermediaries must be listed including, if a corporation, all shareholders who own 5% or 

more of any class of equity security, or, if a partnership, all general and any limited or 

special partners who have contributed 5% or more of the partnership's capital. If the 

intermediary's shareholders or partners are not individuals, the clearing member must 

include the chain of ownership of 5% shareholders, general partners and 5% limited or 

special partners until individuals are listed. 

If a corporation directly or indirectly owns 5% or more of the equity securities of the 

clearing member, the written guarantee shall be signed by an appropriate officer of the 

corporation, and a resolution granting such officer authority to sign the guarantee shall 

also be submitted to the Exchange. Exchange staff may also require each person or 

entity owning 5% or more of the equity securities of such parent corporation, or of parents 

of such parent corporation, to execute guarantees. 

For purposes of this Rule 901.L., the term "equity security" shall include any stock, 

partnership interest or similar security; or any security convertible, with or without 

consideration, into such a security, or carrying any warrant or right to subscribe to or 

purchase such a security; or any such warrant or right; or any other security which that 

Exchange staff shall deem to be of similar nature and consider necessary or appropriate 

to treat as an equity security. 

Exchange staff may grant exemptions from the guarantee requirements of this Rule 901.L. 

for good cause shown if it determines that such exemptions will not jeopardize the 

financial integrity of the Exchange.

M. It shall guarantee and assume financial responsibility for all trading through its GLOBEX 

terminals, any other applicable electronic trading system, and the terminals that it provides to 

others. activity routed through a Globex portal, or routed through any other electronic trading 

system to CME for clearing of such transactions, and are guaranteed to CME by the clearing 

member via any connection, terminal, link, telecommunications hub or handheld unit provided 

by the clearing member to a third party as well as any other applicable electronic trading 

systems and terminals that the clearing member provides to a third party to enter orders. A 

clearing member shall also be responsible for the acts of GlobexLOBEX terminal operators 

using its terminals and the terminals that it provides to Rule 106.I. firms that are under 

common ownership with it. It shall be the duty of the clearing member to supervise such 

GlobexLOBEX terminal operators' compliance with Exchange rules, and any violation of 

Exchange rules by such terminal operators may be considered a violation by the clearing 

member. 9

N. It shall agree to guarantee and assume complete responsibility for trades executed on (1) the 

Exchange’s electronic trading venue(s); or (2) Marketplaces for which the Exchange provides 

clearing services per Rule 8B02 and Rule 8-C. 10

 

8 Revised August, 1992. 

9 Effective February 1989. 

10 Adopted April 2002. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 4 of 24

902. CLEARING MEMBERSHIP ASSIGNMENT REQUIREMENTS 11

902.A. Assignment Requirement 12

Subject to exemptions granted by Exchange staff, each CME clearing member shall have at least 

15,000 Class A Shares assigned to it and shall have at least: two CME memberships, at least two 

IMM memberships, and at least two IOM memberships, and at least one GEM membership 

assigned. A clearing member which was an IMM Class A clearing member on or prior to May 6, 

1987, shall have at least 15,000 Class A Shares assigned to it and shall have at least one CME 

membership, three IMM memberships, two IOM memberships, at least and one GEM membership 

assigned. 

A higher Division membership and associated Class B Share may be substituted for a lower 

Division membership to satisfy these requirements. Class A Shares assigned to a clearing 

member may not be sold, pledged, hypothecated, lent, reregistered or otherwise transferred 

without the prior approval of the Exchange. Each clearing member assigning Class A Shares to 

CME hereby acknowledges that CME has control over such Class A Shares and further agrees to 

comply with any policies or procedures established by CME to affect control over Class A shares.

All of the membership interests and Class A and B Shares required for clearing memberships 

pursuant to this rule must be owned by the clearing member or a person, including a parent 

company, with an acceptable proprietary interest in such clearing member, if such clearing member 

was approved for membership after June 1, 2003. 

A clearing member approved for membership on or before June 1, 2003, may continue to maintain 

the same number of independent membership assignments and the same ratio of independent 

Class A Share assignments as the clearing member held on June 1, 2003 (i.e., up to one CME, 

one IMM, and one IOM memberships, the associated Class B Shares and up to 50 percent of the 

Class A Shares). If a clearing member approved on or before June 1, 2003, or a person with an 

acceptable proprietary interest in the clearing member, subsequently purchases a membership and 

associated Class B Share or Class A Shares and substitutes such asset for one which was 

previously an independent assignment, such membership and associated Class B Share or Class 

A Shares must thereafter be owned by the clearing member or a person with an acceptable 

proprietary interest. 13

Upon default of a clearing member in meeting its obligations to the Exchange or upon the Clearing 

House Risk Committee's determination that a clearing member's financial position jeopardizes the 

financial integrity of the Exchange, the Exchange may direct the sale of any or all of the clearing 

member's assigned CME memberships and associated Class B Class A Shares and any 

Membership Interests and associated shares of common stock of a Special CME Clearing Member 

held by or pledged to the Clearing House. The proceeds from the sale of the CME memberships, 

Class B Shares, and Membership Interests shall be used to satisfy Rule 110 obligations. 

902.B. Trading Privileges for Assigned Memberships 14

A member may assign his membership and associated Class B Share without trading restrictions. 

902.C. Assignment Process 15

A membership and/or Class A Shares and Class B Shares may be assigned to a clearing member 

upon the completion of an Exchange-approved form. A membership and Class A Shares and Class 

B Shares may be assigned to only one clearing member and may not be subject to any Rule 110 

claims at the time of assignment. Upon submitting an assignment form to the Shareholder 

Relations and Membership Department, the newly assigned membership and Class B Share shall 

be posted to the membership for ten days. After all Rule 110 claims have been resolved to the 

satisfaction of the Exchange, the membership and Class B Share shall be assigned to the clearing 

member. 

902.D. Assignment Substitutions 16

A clearing member may substitute a membership and associated Class B Share and/or Class A 

Shares for an assigned membership and associated Class B Share and/or Class A Shares 

 

11 Revised November 1997; November 2000; April 2001; October 2001; November 2001; June 2003. 

12 Revised November 2000; November 2001. 

13 Effective September 1989. Revised November 1995; Revised November 2000; November 2001; April 2003. 

14 Revised November 2000; October 2001; November 2001. 

15 Revised November 2000; November 2001; April 2003. 

16 Revised November 2000; October 2001; November 2001; April 2003. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 5 of 24

provided that the clearing member continues to meet the assignment requirements of this Rule. 

In the event a clearing member has a valid claim against a member that it qualifies and the 

member’s membership and associated Class B Share is assigned to another clearing member, the 

clearing member utilizing the membership and associated Class B Share for assignment shall have 

10 business days to substitute another membership and associated Class B Share to fulfill the 

assignment requirements of this Rule. Such substitution shall be required to protect the financial 

integrity of the Exchange. Violation of this rule may be a major offense. 

902.E. Assignment Withdrawal Disputes 17

In the event a member wants to withdraw his assigned membership and associated Class B Share

over the objection of the clearing member to which the membership and associated Class B Share 

is assigned, such member must request permission to do so from Exchange staff. The request 

must be in writing with a copy delivered to the clearing member to which the membership is 

assigned. Exchange staff may grant such requests under conditions that do not jeopardize the 

financial integrity of the Exchange. 

902.F. Lien on Membership Interests 18

Each clearing member and Special CME Clearing Member hereby grants to CME a first priority and 

unencumbered lien against all Membership Interests and any associated shares of common stock 

required for clearing membership by the Exchange or the Special CME Cclearing Mmember’s 

exchange or Market, as applicable. Clearing members and Special CME Clearing Members shall 

execute any documents required by the Exchange to create and enforce such lien. 

(Next Rule 910)

903. RISK MANAGEMENT 19 

All clearing members must have written risk management policies and procedures in place to 

ensure they are able to perform certain basic risk and operational functions at all times. At a 

minimum, the following areas must be considered in the firm’s policies and procedures, depending 

on the firm’s size and its business and product mix:

A. Trade Submission and Account Monitoring. Clearing members must have procedures in place 

to demonstrate compliance in the following areas for trades executed through both electronic 

platforms and open outcry:

1. Monitoring the credit risks of accepting trades of specific customers.

2. Monitoring the risks associated with proprietary trading.

3. Limiting the impact of significant market moves through the use of tools such as stress 

testing or position limits.

4. Maintaining the ability to monitor account activity on an intraday basis.

5. Ensuring order entry systems include the ability to set automated credit controls or 

position limits or requires a firm employee to enter orders.

6. Defining sources of liquidity for increased settlement obligations.

B. Additional and/or Alternative Requirements. Exchange staff may prescribe additional and/or 

alternative requirements in order for clearing members to comply with this Rule.

904. DISASTER RECOVERY AND BUSINESS CONTINUITY 20

All clearing members must have written disaster recovery and business continuity policies and 

procedures in place to ensure they are able to perform certain basic operational functions in the 

event of a significant internal or external interruption to their operations. At a minimum, the 

following areas must be considered in the firm’s policies and procedures, depending on the firm’s 

size and its business and product mix:

A. Clearing members must have procedures in place to allow them to continue to operate during 

periods of stress or to transfer accounts to another fully operational clearing member with 

minimal disruption to either the Exchange or their customers. In order to satisfy this 

requirement, clearing members must perform:

1. Periodic testing of disaster recovery and business continuity plans.

 

17 Revised November 2000; November 2001. 

18 Adopted June 2003. Revised October 2004. 

19 Adopted September 2003. 

20 Adopted September 2003. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 6 of 24

2. Duplication of critical systems at back up sites.

3. Periodic back-up of critical information.

B. Key Staff Contacts. Clearing members must maintain and, at the request of the Exchange, 

provide accurate and complete information for their key personnel. Clearing members must 

inform the Exchange whenever a change to its key personnel is made.

C. Additional and/or Alternative Requirements. Exchange staff may prescribe additional and/or 

alternative requirements in order for clearing members to comply with this Rule.

9035.— 909. [RESERVED] 

APPLICATION PROCEDURES FOR CLEARING MEMBERS 

910. APPLICATION FORMS 21

Applicants for clearing membership shall submit an application, and shall include therewith such

financial statements and other documentation as Exchange staff shall require. 

911. SCREENING PROCEDURES 22

Upon receipt of an application, the Audit Department shall investigatemake a complete 

investigation of the applicant's qualifications, which may include an examination of the books and 

records of the applicant. The Audit Department shall coordinate its investigation with staff at the 

applicable exchange or market if the applicant is also applying for clearing membership at such 

exchange or market. 

912. APPROVAL 23

An applicant for clearing membership receiving a majority vote of the full membership of the 

Clearing House Risk Committee shall be approved effective immediately. 

An applicant that fails to receive a majority vote shall be informed by the Clearing House Risk 

Committee chairman and shall have 10 days thereafter to file an appeal to the Board seeking 

further consideration. The Board may approve the applicant by a majority vote if it is satisfied that 

the Clearing House Risk Committee's decision was clearly erroneous or unreasonable arbitrary, 

capricious or an abuse of the Committee’s discretion. 

913. WITHDRAWAL FROM CLEARING MEMBERSHIP 24

913.A. Voluntary Withdrawal 

A clearing member may apply to withdraw from clearing membership upon approval of and 

Exchange staff, and ratification by the subject to ratification by the Clearing House Risk Committee,

Exchange staff shall base its decision on shall have discretion to approve or deny such application 

based on all relevant factors, including, but not limited to, whether the withdrawal would beis

consistent with the best interests of the Exchange, the membership and the public. The withdrawal 

shall be effective on the date that the withdrawal is posted. 

913.B. Release of Security Deposit, Membership and Class B Share Proceeds and 

Assignments 

When a clearing member withdraws from clearing membership (whether voluntarily or 

involuntarily), its security deposit, the proceeds offrom the sales of its memberships and associated 

Class B Shares and of the its Class A Shares and Class B Shares assigned to it for clearing 

qualification or any membership equivalent amounts, and any remaining assignments ofassets 

available to the Exchange including, but not limited to, memberships, or Class A and Class B 

Shares,, as well as any Membership Interests and any associated shares of common stock of a 

Special CME Clearing Member held by or pledged to the Clearing House, if applicable, will be 

released when the Clearing House Risk Committee Exchange staff determines that the following 

has occurred: (1) all contracts and obligations with the Exchange have been settled and paid, (2) 

all sums owing to the Exchange have been paid, (3) all obligations to other members and 

customers arising out of claims directly related to futures transactions cleared on the Exchange 

have been paid or otherwise provided for, and (4) all obligations to other members and customers 

arising out of other arbitration claims filed pursuant to Chapter 6 have been paid or otherwise 

provided for and (5) the requisite liquidity providers for the Exchange have released the security 

 

21 Revised March 1979; November 2000. 

22 Revised February 1998; November 2000; June 2003. 

23 Revised March 1979; Revised November 2000; December 2001. 

24 Adopted April 1993; Revised November 2000; October 2001; November 2001; April 2002; June 2003; September 2004. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 7 of 24

interest in such clearing member's "Assets" contemplated by Rule 816 in accordance with the 

terms of the liquidity facility contemplated thereby; provided, however, that in the event that the 

Clearing House Risk Committee Exchange staff determines that all of the foregoing other than (4) 

have occurred, the Clearing House Risk Committee may in its discretion authorize the release of 

such property. 

Generally, Nno such property shall be released prior to the 60th day following the effective date of 

the clearing member's withdrawal from membership in the Clearing House. Notwithstanding the 

above, Exchange staff may grant an exemption to the above restriction for good cause shown if it 

determines that such exemption will not jeopardize the financial integrity of the Exchange. Further, 

for purposes of the above paragraph, all obligations of the withdrawing clearing member to the 

Exchange, of whatever nature or kind, shall be accelerated and become due and payable upon the 

effective date provided for in the Clearing House Risk Committee decision to approve the 

withdrawal. 

(Next Rule 922) 25

914.— 921. [RESERVED] 

FINANCIAL REQUIREMENTS 

922. FAILURE TO MEET MINIMUM FINANCIAL REQUIREMENTS 26

If, in the opinion of the Audit Department, a clearing member fails to meet the minimum financial 

requirements as prescribed herein or neglects to promptly furnish a statement upon request, a 

recommendation shall be made to the Clearing House Risk Committee to suspend the privileges of 

the clearing member. Thereupon, the Clearing House Risk Committee shall conduct a hearing and 

the said clearing member shall show cause why his its privileges shall should not be suspended. 

Upon finding that the minimum financial requirements are being violated, the Clearing House Risk 

Committee may suspend the privileges of such clearing member in accordance with the provisions 

of Chapter 4 of these rules. The CFTC shall be immediately notified of any clearing member who 

fails to meet the minimum financial requirements. Any suspended clearing member may appeal 

the decision of the Clearing House Risk Committee to the Board. 

923. EMERGENCY FINANCIAL CONDITIONS 27

In the event, after investigation, If the Chief Executive Officer or President or the Managing 

Director and President of the Clearing House determines that the financial or operational condition 

of a clearing member or one of its affiliates is such that to allow that clearing member to continue its 

operation would jeopardize the integrity of the Exchange, he or negatively impacts the 

commoditiesfinancial markets by introducing an unacceptable level of uncertainty, volatility or risk, 

whether or not the clearing member continues to meet the required minimum financial 

requirements, he or she may empanel the Chief Executive Officer, the President, Chairman of the 

Board, the Chairman of the Clearing House Risk Committee and the Managing Director and 

PresidentChief Executive Officer of the Clearing House. Such panel shall be duly authorized and, 

upon a unanimous vote of the committeepanel, be empowered to order (a) an immediate position 

limitation, (b) an immediate suspension of the clearing member, (c) that all open trades of said 

clearing member be for liquidation only, (d) the liquidation or transfer of all or a portion of the open 

positions of the clearing member, or (e) additional performance bond to be deposited with the 

Clearing House. The clearing member affected by action taken shall be notified and may request a 

hearing before the Board as provided in Rule 411. In the event of suspension, the Chief Executive 

Officer shall, promptly after a within five days of suspension, set the matter for hearing before the 

Board for final determination. To the extent that the panel orders that all open trades of said 

clearing member be for liquidation only, or the panel orders the liquidation or transfer of all of the 

open positions of the clearing member, Rule 913.B shall apply and the clearing member shall be 

treated as a withdrawing clearing member. 

924. RESPONSIBILITY FOR QUALIFIED TRADERS 

A. When a A clearing member that qualifies a floor broker or trader thereby it agrees to 

guarantees and assumes complete responsibility for: 1) all trades and orders executed or 

directed to be executed by such floor broker or trader; and 2) all orders that such floor broker 

 

25 Rule 920.__CAPITALIZATION AND POSITIONS and Rule 921.__REDUCTION IN ADJUSTED NET CAPITAL IN EXCESS OF 20% 

rescinded October 1993. 

26 Revised February 1998; November 2000. 

27 Revised March 1979; November 2000; September 2004. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 8 of 24

negligently or fraudulently executes or fails to execute. 

B. To qualify traders, a clearing member must have established systems in place for trade 

submission, clearing, and settlement/banking with the Clearing House. 

C. No member may be qualified by more than one clearing member at one time. 

D. A member may not transfer his qualification unless he has obtained a written release from the 

clearing member last qualifying him. A release shall not be withheld unless a member has 

failed to pay any indebtedness to the clearing member last qualifying him that arises out of a 

pledge of a membership and a Class B Share as collateral security on any such indebtedness, 

or due to a deficit arising out of futures transactions on the Exchange. Any other disputes 

between the parties shall be resolved through the arbitration procedures set forth in Chapter 6. 

E. A clearing member may, without prior notice, revoke a member’s authorization to trade by 

written revocation filed with the Shareholder Relations and Membership Services Department. 

Such revocation shall be effective and the member’s qualification to trade shall terminate when 

notice of the disqualification is posted on the Exchange floor. A member shall not appear upon 

the floor of the Exchange until he has been requalified. 

F. A member shall place all trades, including trades for his own account or any account which he 

controls, on the books of his qualifying clearing member unless written authorization to the 

contrary from said clearing member has been filed with the Shareholder Relations and 

Membership Services Department. Regardless of such authorization, a member in a deficit 

position with any clearing member shall only place trades through his qualifying clearing 

member. Any clearing member that has a member’s account in a deficit position shall 

promptly notify the clearing member that is qualifying such member. 

G. No clearing member shall provide a GlobexLOBEX terminal to or clear any trade for an 

employee, qualified trader or other representative of another clearing member without the 

written consent of such clearing member. No clearing member shall provide a GlobexLOBEX

terminal to or clear any trade for a person in partnership with another clearing member without 

the written consent of all partners. Such written consent shall be filed with the Shareholder 

Relations and Membership Services Department. 

H. In the case of a member who has GlobexLOBEX access guaranteed by a clearing member 

other than his qualifying clearing member, the qualifying clearing member may terminate the 

member’s ability to place orders through GlobexLOBEX by notifying the clearing member 

providing the member access to GlobexLOBEX. The clearing member providing the access to 

GlobexLOBEX will be responsible for ensuring that the member does not place orders through 

GlobexLOBEX. 

(Next Rule 930)

925.— 929. [RESERVED] 

ACCOUNT HOLDER PERFORMANCE BOND REQUIREMENTS 

930. PERFORMANCE BOND REQUIREMENTS: ACCOUNT HOLDER LEVEL 

930.A. Performance Bond System 

The Standard Portfolio Analysis of Risk (SPAN®) Performance Bond System is the performance 

bond system adopted by the Exchange. SPAN generated performance bond requirements shall 

constitute Exchange performance bond requirements. All references to performance bond within 

the rules of the Exchange shall relate to those computed by the SPAN system. 

Performance bond systems other than the SPAN system may be used to meet Exchange 

performance bond requirements if the clearing member can demonstrate that its system will always 

produce a performance bond requirement equal to or greater than the SPAN performance bond 

requirements. 

930.B. Performance Bond Rates 

1. Non-Security Futures 

Exchange staff shall determine initial and maintenance performance bond rates used in 

determining Exchange performance bond requirements. The Board reserves the right to change or 

modify any performance bond levels determined by Exchange staff. 

2. Security Futures 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 9 of 24

a. Initial and maintenance performance bond (or “margin”) rates used in determining 

Exchange performance bond requirements applied to Security Futures on behalf of 

Customers, whether effected on the Exchange or on a Marketplace apart from Exchange 

but cleared by the Clearing House per Chapter 8B, and held in a futures account, shall be 

established at levels no lower than those prescribed by CFTC Regulation Section 41.45; 

and, SEC Regulation 242.403, including any successor Regulations. 

b. As used in this Rule, the term “Customer” does not include (a) an “exempted person” as 

defined in CFTC Regulation 41.43(a)(9) and SEC Regulation 242.401(a)(9); or (b) Market 

Makers as defined below. 

A Person shall be a “Market Maker” for purposes of this Rule, and shall be excluded from 

the requirements set forth in CFTC Regulations 41.42 through 41.49; and, SEC 

Regulations 242.400 through 242.406 in accordance with CFTC Regulation 41.42(c)(2)(v) 

and SEC Regulation 242.400(c)(2)(v), with respect to all trading in Security Futures for its 

own account, if such Person is an Exchange Member that is registered with the Exchange 

as a “Security Futures Dealer.” 

Each Market Maker shall (a) be a member of the Exchange and be registered as a floor 

trader or a floor broker with the CFTC under Section 4f(a)(1) of the CEA; or, be registered 

as a dealer with the SEC under Section 15(b) of the Exchange Act; (b) maintain records 

sufficient to prove compliance with the requirements set forth in this Rule and CFTC 

Regulation 41.42(c)(2)(v) and SEC Regulation 242.400(c)(2)(v), including without 

limitation, trading account statements and other financial records sufficient to detail activity 

and verify conformance with the standards set forth herein; and (c) hold itself out as being 

willing to buy and sell Security Futures for its own account on a regular or continuous 

basis. 

A Market Maker satisfies condition (c) above if, at a minimum, any of the following three 

requirements are fulfilled: 

(1)The Market Maker: 

(i)Provides continuous two-sided quotations throughout the trading day for all delivery 

months of Security Futures Contracts representing a meaningful proportion of the 

total trading volume of Security Futures Contracts on the Exchange, subject to 

relaxation during unusual market conditions as determined by the Exchange (such as 

a fast market in either a Security Futures Contract or a security underlying a Security 

Futures Contract) at which times the Market Maker must use its best efforts to quote 

continuously and competitively; and 

(ii)When providing quotations, quotes with a maximum bid/ask spread no more than the 

greater of $0.20 or 150% of the bid/ask spread in the primary market for the security 

underlying each Security Futures Contract. 

(2)The Market Maker: 

(i)Responds to at least 75% of the requests for quotation for all delivery months of 

Security Futures Contracts representing a meaningful proportion of the total trading 

volume of Security Futures Contracts on the Exchange, subject to relaxation during 

unusual market conditions as determined by the Exchange (such as a fast market in 

either a Security Futures Contract or a security underlying a Security Futures 

Contract) at which times the Market Maker must use its best efforts to quote 

competitively; and 

(ii)When responding to requests for quotation, quotes within five seconds with a maximum 

bid/ask spread no more than the greater of $0.20 or 150% of the bid/ask spread in the 

primary market for the security underlying each Security Futures Contract. 

(3)The Market Maker: 

(i)Is assigned to a group of Security Futures Contracts listed on the Exchange that is 

either unlimited in nature (“Unlimited Assignment”); or, is assigned to no more that 

20% of the Security Futures Contracts listed on the Exchange (“Limited 

Assignment”);. 

(ii)At least 75% of the Market Maker’s total trading activity in Exchange Security Futures 

Contracts is in its assigned Security Futures Contracts, measured on a quarterly 

basis; 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 10 of 24

(iii)During at least 50% of the trading day the Market Maker has bids or offers in the 

market that are at or near the best market, except in unusual market conditions as 

determined by the Exchange (such as a fast market in either a Security Futures 

Contract or a security underlying a Security Futures Contract), with respect to at least 

25% (in the case of an Unlimited Assignment) or at least one (in the case of a Limited 

Assignment) of its assigned Security Futures Contracts; and 

(iv)The requirements in (ii) and (iii) are satisfied on (a) at least 90% of the trading days in 

each calendar quarter by Market Makers who have undertaken an Unlimited 

Assignment; or (b) at least 80% of the trading days in each calendar quarter by 

Market Makers who have undertaken a Limited Assignment; or (c) on at least 80% of 

the trading days in each calendar quarter by Market Makers who have undertaken 

either an Unlimited Assignment or Limited Assignment but where the Exchange is 

listing four (4) or fewer Security Futures Contracts. 

For purposes of clauses (1) and (2) above, beginning on the 181st calendar day after the 

commencement of trading of Security Futures Contracts on the Exchange, a “meaningful 

proportion of the total trading volume of Security Futures Contracts on the Exchange” shall 

mean a minimum of 20% of such trading volume. 

Any Market Maker that fails to comply with the applicable Rules of the Exchange, CFTC 

Regulations 41.41 through 41.49 and SEC Regulations 242.400 through 242.406 shall be 

subject to disciplinary action in accordance with Chapter 4. Appropriate sanctions in the 

case of any such failure shall include, without limitation, a revocation of such Market 

Maker’s registration as a Security Futures Dealer. 

c. The Exchange shall establish initial and maintenance performance bond requirements 

applicable to Security Futures and held in a futures account, provided that the 

performance bond requirement for any long or short position held by a clearing member 

on behalf of a Customer shall not be less than 20% of the current market value of the 

relevant Contract; or, such other requirement as may be established by the CFTC and 

SEC for purposes of CFTC Regulation 41.45(b)(1) and SEC Regulation 242.403(b)(1) 

except as provided below. 

d. Initial and maintenance performance bond requirements for offsetting positions involving 

Security Futures and related positions are provided in the schedule below, for purposes of 

CFTC Regulation 41.45(b)(2) and SEC Regulation 242.403(b)(2). 

PERFORMANCE BOND (or “MARGIN”) REQUIREMENTS FOR OFFSETTING POSITIONS 

DESCRIPTION OF OFFSET 

SECURITY 

UNDERLYING 

THE SECURITY 

FUTURE 

INITIAL MARGIN 

REQUIREMENT 

MAINTENANCE MARGIN 

REQUIREMENT 

1

Long security future (or basket 

of security futures representing 

each component of a narrowbased securities index28) and 

long put option29 on the same 

underlying security (or index) 

Individual stock 

or narrow-based 

security index 

20% of the current market 

value of the long security 

future, plus pay for the long 

put in full. 

The lower of: (1) 10% of the 

aggregate exercise price30 of the 

put plus the aggregate put outof-the-money31 amount, if any; 

or (2) 20% of the current market 

value of the long security future. 

 

28 Baskets of securities or security futures contracts must replicate the securities that comprise the index, and in the same proportion. 

29 Generally, for the purposes of these rules, unless otherwise specified, stock index warrants shall be treated as if they were index options. 

30 “Aggregate exercise price,” with respect to an option or warrant based on an underlying security, means the exercise price of an option or 

warrant contract multiplied by the numbers of units of the underlying security covered by the option contract or warrant. “Aggregate exercise 

price” with respect to an index option, means the exercise price multiplied by the index multiplier. 

31 “Out-of-the-money” amounts shall be determined as follows: 

(1) for stock call options and warrants, any excess of the aggregate exercise price of the option or warrant over its current 

market value (as determined in accordance with Regulation T of the Board of Governors of the Federal Reserve System); 

(2) for stock put options or warrants, any excess of the current market value (as determined in accordance with Regulation T of

the Board of Governors of the Federal Reserve System) of the option or warrant over its aggregate exercise price; 

(3) for stock index call options and warrants, any excess of the aggregate exercise price of the option or warrant over the 

product of the current index value and the applicable index multiplier; and 

(4) for stock index put options and warrants, any excess of the product of the current index value and the applicable index 

multiplier over the aggregate exercise price of the option or warrant. See, e.g., NYSE Rule 431 (Exchange Act Release No. 42011 

(October 14, 1999), 64 FR 57172 (October 22, 1999) (order approving SR-NYSE-99-03)); Amex Rule 462 (Exchange Act Release No. 

43582 (November 17, 2000), 65 FR 71151 (November 29, 2000) (order approving SR-Amex-99-27)); CBOE Rule 12.3 (Exchange Act 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 11 of 24

DESCRIPTION OF OFFSET 

SECURITY 

UNDERLYING 

THE SECURITY 

FUTURE 

INITIAL MARGIN 

REQUIREMENT 

MAINTENANCE MARGIN 

REQUIREMENT 

2

Short security future (or basket 

of security futures representing 

each component of a narrowbased securities index) and 

short put option on the same 

underlying security (or index) 

Individual stock 

or narrow-based 

security index 

20% of the current market 

value of the short security 

future, plus the aggregate put 

in-the-money amount, if any. 

Proceeds from the put sale 

may be applied. 

20% of the current market value 

of the short security future, plus 

the aggregate put in-the-money 

amount, if any.

32 

3

Long security future and short 

position in the same security (or 

securities basket) underlying 

the security future 

Individual stock 

or narrow-based 

security index 

The initial margin required 

under Regulation T for the 

short stock or stocks. 

5% of the current market value 

as defined in Regulation T of the 

stock or stocks underlying the 

security future. 

4

Long security future (or basket 

of security futures representing 

each component of a narrowbased securities index) and 

short call option on the same 

underlying security (or index) 

Individual stock 

or narrow-based 

security index 

20% of the current market 

value of the long security 

future, plus the aggregate 

call in-the-money amount, if 

any. Proceeds from the call 

sale may be applied. 

20% of the current market value 

of the long security future, plus 

the aggregate call in-the-money 

amount, if any. 

5

Long a basket of narrow-based 

security futures that together 

tracks a broad-based index and 

short a broad-based security 

index call option contract on the 

same index 

Narrow-based 

security index 

20% of the current market 

value of the long basket of 

narrow-based security 

futures, plus the aggregate 

call in-the-money amount, if 

any. Proceeds from the call 

sale may be applied. 

20% of the current market value 

of the long basket of narrowbased security futures, plus the 

aggregate call in-the-money 

amount, if any. 

6

Short a basket of narrow-based 

security futures that together 

tracks a broad-based security 

index and short a broad-based 

security index put option 

contract on the same index 

Narrow-based 

security index 

20% of the current market 

value of the short basket of 

narrow-based security 

futures, plus the aggregate 

put in-the-money amount, if 

any. Proceeds from the put 

sale may be applied. 

20% of the current market value 

of the short basket of narrowbased security futures, plus the 

aggregate put in-the-money 

amount, if any. 

7

Long a basket of narrow-based 

security futures that together 

tracks a broad-based security 

index and long a broad-based 

security index put option 

contract on the same index 

Narrow-based 

security index 

20% of the current market 

value of the long basket of 

narrow-based security 

futures, plus pay for the long 

put in full. 

The lower of: (1) 10% of the 

aggregate exercise price of the 

put, plus the aggregate put outof-the-money amount, if any; or 

(2) 20% of the current market 

value of the long basket of 

security futures. 

8

Short a basket of narrow-based 

security futures that together 

tracks a broad-based security 

index and long a broad-based 

security index call option 

contract on the same index 

Narrow-based 

security index 

20% of the current market 

value of the short basket of 

narrow-based security 

futures, plus pay for the long 

call in full. 

The lower of: (1) 10% of the 

aggregate exercise price of the 

call, plus the aggregate call outof-the-money amount, if any; or 

(2) 20% of the current market 

value of the short basket of 

security futures. 

9

Long security future and short 

security future on the same 

underlying security (or index) 

Individual stock 

or narrow-based 

security index. 

The greater of: 5% of the 

current market value of the 

long security future; or (2) 

5% of the current market 

value of the short security 

future. 

The greater of: 5% of the 

current market value of the long 

security future; or (2) 5% of the 

current market value of the short 

security future. 

 

Release No. 41658 (July 27, 1999), 64 FR 42736 (August 5, 1999) (order approving SR-CBOE-97-67)); or NASD Rule 2520 (Exchange Act 

Release No. 43581 (November 17, 2000), 65 FR 70854 (November 28, 2000) (order approving SR-NASD-00-15)). 

32 “In-the-money” amounts must be determined as follows: 

(1) for stock call options and warrants, any excess of the current market value (as determined in accordance with Regulation T 

of the Board of Governors of the Federal Reserve System) of the option or warrant over its aggregate exercise price; 

(2) for stock put options or warrants, any excess of the aggregate exercise price of the option or warrant over its current 

market value (as determined in accordance with Regulation T of the Board of Governors of the Federal Reserve System); 

(3) for stock index call options and warrants, any excess of the product of the current index value and the applicable index 

multiplier over the aggregate exercise price of the option or warrant; and 

(4) for stock index put options and warrants, any excess of the aggregate exercise price of the option or warrant over the 

product of the current index value and the applicable index multiplier. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 12 of 24

DESCRIPTION OF OFFSET 

SECURITY 

UNDERLYING 

THE SECURITY 

FUTURE 

INITIAL MARGIN 

REQUIREMENT 

MAINTENANCE MARGIN 

REQUIREMENT 

10

Long security future, long put 

option and short call option. 

The long security future, long 

put and short call must be on 

the same underlying security 

and the put and call must have 

the same exercise price. 

(Conversion) 

Individual stock 

or narrow-based 

security index. 

20% of the current market 

value of the long security 

future, plus the aggregate 

call in-the-money amount, if 

any, plus pay for the put in 

full. Proceeds from the call 

sale may be applied. 

10% of the aggregate exercise 

price, plus the aggregate call inthe-money amount, if any. 

11

Long security future, long put 

option and short call option. 

The long security future, long 

put and short call must be on 

the same underlying security 

and the put exercise price must 

be below the call exercise price 

(Collar) 

Individual stock 

or narrow-based 

security index. 

20% of the current market 

value of the long security 

future, plus the aggregate 

call in-the-money amount, if 

any, plus pay for the put in 

full. Proceeds from call sale 

may be applied. 

The lower of: (1) 10% of the 

aggregate exercise price of the 

put plus the aggregate put outof-the money amount, if any; or 

(2) 20% of the aggregate 

exercise price of the call, plus 

the aggregate call in-the-money 

amount, if any. 

12

Short security future and long 

position in the same security (or 

securities basket) underlying 

the security future 

Individual stock 

or narrow-based 

security index. 

The initial margin required 

under Regulation T for the 

long stock or stocks. 

5% of the current market value, 

as defined in Regulation T, of 

the long stock or stocks. 

13

Short security future and long 

position in a security 

immediately convertible into the 

same security underlying the 

security future, without 

restriction, including the 

payment of money 

Individual stock 

or narrow-based 

security index. 

The initial margin required 

under Regulation T for the 

long security. 

10% of the current market value, 

as defined in Regulation T, of 

the long security. 

14

Short security future (or basket 

of security futures representing 

each component of a narrowbased securities index) and 

long call option or warrant on 

the same underlying security 

(or index) 

Individual stock 

or narrow-based 

security index. 

20% of the current market 

value of the short security 

future, plus pay for the call in 

full. 

The lower of: (1) 10% of the 

aggregate exercise price of the 

call, plus the aggregate call outof-the-money amount, if any; or 

(2) 20% of the current market 

value of the short security future. 

15

Short security future, Short put 

option and long call option. 

The short security future, short 

put and long call must be on 

the same underlying security 

and the put and call must have 

the same exercise price. 

(Reverse Conversion) 

Individual stock 

or narrow-based 

security index. 

20% of the current market 

value of the short security 

future, plus the aggregate put 

in-the-money amount, if any, 

plus pay for the call in full. 

Proceeds from put sale may 

be applied. 

10% of the aggregate exercise 

price, plus the aggregate put inthe-money amount, if any. 

16

Long (short) a basket of 

security futures, each based on 

a narrow-based security index 

that together tracks the broadbased index and short (long) a 

broad-based index future 

Narrow-based 

security index 

5% of the current market 

value for the long (short) 

basket of security futures. 

5% of the current market value 

of the long (short) basket of 

security futures. 

17

Long (short) a basket of 

security futures that together 

tracks a narrow-based index 

and short (long) a narrowbased index future 

Individual stock 

or narrow-based 

security index 

The greater of: (1) 5% of the 

current market value of the 

long security future(s); or (2) 

5% of the current market 

value of the short security 

future(s). 

The greater of: (1) 5% of the 

current market value of the long 

security future(s); or (2) 5% of 

the current market value of the 

short security future(s). 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 13 of 24

DESCRIPTION OF OFFSET 

SECURITY 

UNDERLYING 

THE SECURITY 

FUTURE 

INITIAL MARGIN 

REQUIREMENT 

MAINTENANCE MARGIN 

REQUIREMENT 

18 

Long (short) a security future 

and short (long) an identical 

security future traded on a 

different market.33

Individual stock 

or narrow-based 

security index 

The greater of: (1) 3% of the 

current market value of the 

long security future(s); or 

(2) 3% of the current market 

value of the short security 

future(s). 

The greater of: (1) 3% of the 

current market value of the long 

security future(s); or (2) 3% of 

the current market value of the 

short security future(s). 

930.C. Acceptable Performance Bond Deposits 

1. Non-Security Futures 

Clearing members may accept from their account holders as performance bond cash 

currencies of any denomination, readily marketable securities (as defined by SEC Rule 15c3-

1(c)(11) and applicable SEC interpretations), money market mutual funds allowable under 

CFTC Regulation 1.25, and bank–issued letters of credit. 

Clearing members shall not accept as performance bond from an account holder securities 

that have been issued by the account holder or an affiliate of the account holder unless the 

clearing member files a petition with and receives permission from Exchange staff. 

Bank-issued letters of credit must be in a form acceptable to the Exchange. Such letters of 

credit must be drawable in the United States. Clearing members shall not accept as 

performance bond from an account holder letters of credit issued by the account holder, an 

affiliate of the account holder, the clearing member, or an affiliate of the clearing member. 

All assets deposited by account holders to meet performance bond requirements must be and 

remain unencumbered by third party claims against the depositing account holder. 

Except to the extent that Exchange staff shall prescribe otherwise, cash currency performance 

bond deposits shall be valued at market value. All other performance bond deposits other than 

letters of credit shall be valued at an amount not to exceed market value less applicable 

haircuts as set forth in SEC Rule 240.15c3-1. 

2. Security Futures 

a. Clearing Members may accept from their Customers as performance bond (or “margin”) 

for Security Futures held in a futures account, deposits of cash, margin securities (subject 

to the limitations set forth in the following sentence), exempted securities, any other 

assets permitted under Regulation T of the Board of Governors of the Federal Reserve 

System (as in effect from time to time) to satisfy a performance bond deficiency in a 

securities margin account, and any combination of the foregoing, each as valued in 

accordance with CFTC Regulations 41.46(c) and 41.46(e); and, SEC Regulations 

242.404(c) and 242.404(e). Shares of a money market mutual fund that meet the 

requirements of CFTC Regulation 1.25 may be accepted as a performance bond deposit 

from a Customer for purposes of this Rule. 

b. A Clearing Member shall not accept as performance bond from any Customer securities 

that have been issued by such Customer or an Affiliate of such Customer unless such 

Clearing Member files a petition with and receives permission from the Exchange for such 

purpose. 

c. All assets deposited by a Customer to meet performance bond requirements must be and 

remain unencumbered by third party claims against the depositing Customer. 

930.D. Acceptance of Orders 

Clearing members may accept orders for an account provided sufficient performance bond is on 

deposit in the account or is forthcoming within a reasonable time. 

For an account which has been subject to calls for performance bond for an unreasonable time, 

clearing members may only accept orders that reduce the performance bond requirements of 

existing positions in the account. 

Clearing members may not accept orders for an account that has been in debit an unreasonable 

time. 

 

33 Two security futures will be considered “identical” for this purpose if they are issued by the same clearing agency or cleared and 

guaranteed by the same derivatives clearing organization, have identical contract specifications, and would offset each other at the 

clearing level.
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 14 of 24

930.E. Calls for Performance Bond 

1. Clearing members must issue calls for performance bond that would bring an account up to 

the initial performance bond requirement: a.) when performance bond equity in an account 

initially falls below the maintenance performance bond requirement; and b). subsequently, 

when performance bond equity plus existing performance bond calls in an account is less than 

the maintenance performance bond requirement. 

Such calls must be made within one business day after the occurrence of the event giving rise 

to the call. Clearing members may call for additional performance bond at their discretion. 

Notwithstanding the foregoing, a clearing member is not required to call for or collect 

performance bond for day trades. 

2. Clearing members shall only reduce a call for performance bond through the receipt of 

performance bond deposits permitted under subsection C. of this rule. Clearing members may 

[delete] cancel a call for performance bond through: a.) the receipt of performance bond 

deposits permitted under subsection C. of this rule only if such deposits equal or exceed the 

amount of the total performance bond call; or b.) inter-day favorable market movements and/or 

the liquidation of positions only if performance bond equity in the account is equal to or greater 

than the initial performance bond requirement. Clearing members shall reduce an account 

holder's oldest outstanding performance bond call first. 

3. Clearing members must maintain written records of all performance bond calls issued and 

satisfied in whole or in part., reduced, and deleted.

930.F. Disbursements Release of Excess Performance Bond 

Subject to exceptions granted by Exchange staff, Cclearing members may only release 

performance bond deposits from an account if such deposits are in excess of initial performance 

bond requirements. 

930.G. Loans to Account Holders 

Clearing members may not extend make loans to account holders to satisfy their for performance 

bond requirements purposes unless such loans are secured as defined in CFTC 

Regulation 1.17(c)(3). The proceeds of such loans must be treated in accordance with CFTC 

Regulation 1.30. 

930.H. Aggregation of Accounts and Positions 

Clearing members may aggregate and net positions in accounts under identical ownership within 

the same classifications of customer segregated, customer secured, special reserve account for 

the exclusive benefit of customers, and nonsegregated for performance bond purposes. Clearing 

members may compute performance bond requirements on identically owned concurrent long and 

short positions on a net basis. 

930.I. Hedge Positions 

Clearing members shall have reasonable support to classify positions asfor bona-fide hedge and 

risk management positions, as defined by Rule 543, that are afforded hedge performance bond 

rates. 

930.J. Omnibus Accounts 

1. Clearing members shall collect performance bond on a gross basis for positions held in 

domestic and foreign omnibus accounts. 

2. For omnibus accounts, initial performance bond requirements shall equal maintenance 

performance bond requirements. 

3. Clearing members shall obtain and maintain written instructions from domestic and foreign 

omnibus accounts for positions which are entitled to spread or hedge performance bond rates. 

930.K. Liquidation of Accounts 

1. Non-Security Futures 

If an account holder fails to comply with a performance bond call within a reasonable time (the 

clearing member may deem one hour to be a reasonable time), the clearing member may 

close out the account holder's trades or sufficient contracts thereof to restore the account 

holder's account to required performance bond status. Clearing members shall maintain full 

discretion to determine when and under what circumstances positions in any account shall be 

liquidated. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 15 of 24

2. Security Futures 

If a Customer fails to comply with a performance bond (or “margin”) call within a reasonable 

period of time (the clearing member may deem one hour to be a reasonable period of time), 

the relevant clearing member shall take the deduction required with respect to an 

undermargined account in computing its net capital under applicable CFTC Regulations and 

SEC Regulations. 

If at any time there is a liquidating deficit in an account in which security futures are held, the 

clearing member shall take steps to liquidate positions in the account promptly and in an 

orderly manner. 

930.L. Failure to Maintain Performance Bond Requirements 

If a clearing member fails to maintain performance bond requirements for an account in accordance 

with this rule, the Exchange may direct such clearing member to immediately liquidate all or part of 

the account's positions to eliminate the deficiency. 

930.M. Violation 

Violation of this rule may constitute a major offense. 

 (Next Rule 935)

931.— 934. [RESERVED] 

CUSTOMER ORDERS 

935. RESPONSIBILITIES OF CLEARING MEMBER UPON RECEIPT OF CUSTOMER 

ORDER 34

All orders received by a clearing member shall, immediately upon receipt from a customer, be 

reduced to writing, with the customer's designation indicated, and be time-stamped. All such 

orders shall be retained by the clearing member for a minimum of five years. In addition, all orders 

received by a clearing member for execution pursuant to the Mutual Offset System must be timestamped upon transmission to the executing clearing member. 

936. CONFIRMATIONS TO CUSTOMERS

A clearing member shall confirm to the customer every transaction made for the customer no later 

than the following business day. Such confirmation shall be in writingelectronic or written form and 

shall show the commodity bought or sold, the quantity, the price, the delivery month and, for 

options, strike price, put or call and expiration month. 

(Next Rule 940)

937.— 939. [RESERVED] 

SUSPENSION AND EXPULSION 

940. SUSPENSION OF CLEARING MEMBERS 35

If a clearing member becomes insolvent, the fact of such insolvency shall be announced by the 

President or the Managing Director and President of the Clearing House Chief Executive Officer of 

the Exchange, and thereupon such member shall be deemed automatically suspended. If a 

corporation, limited liability company or cooperative association member of the Clearing House 

becomes insolvent, or for other reasons is suspended from the Clearing House, the officers who 

are members of the Exchange may also be suspended from the Exchange. If a partnership is 

suspended from the Clearing House, the partners who are members of the Exchange may be 

suspended from the Exchange. 

A clearing member shall be deemed insolvent: 

1. If it files a voluntary petition in bankruptcy or is adjudicated as bankrupt; 

2. If it fails to fulfill or promptly adjust all of its Exchange obligations; or 

3. If satisfactory proof is made to the Clearing House Risk Committee that it is unable to pay its 

debts as they fall due in the ordinary course of business. 

A clearing member may be suspended by the Board if it fails to meet the capital requirements of 

 

34 Effective October 1985. 

35 Revised November 2000; October 2001; April 2002; September 2004. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 16 of 24

the Exchange or the Commodity Futures Trading Commission or if its financial condition, or the 

financial condition of one of its affiliates, is such that its continued operation would jeopardize the 

integrity of the Exchange. Members and clearing members suspended in accordance with this rule 

shall be notified and may request a hearing before the Board as provided in Rule 411. 36

941. SUSPENSION OF OFFICERS OR PARTNERS 37

Whenever an officer, owner or partner of a clearing member is suspended or expelled, the 

respective clearing member, may be suspended or expelled for a like term. Members and clearing 

members affected by this rule shall be notified and may request a hearing before the Board as 

provided in Rule 411. 

942. OPEN TRADES OF SUSPENDED CLEARING MEMBERS 38

When a clearing member, having open trades, is suspended or expelled, it may designate a 

clearing member to close out such transactions through designated personnel and in a manner 

acceptable to the Clearing House. The foregoing shall not apply where a member is suspended for 

default upon his obligations to the Clearing House or otherwise suspended for insolvency. 

When a clearing member whothat has open positions, having an open trade or trades has 

defaultsed to the Clearing House in the deposit of performance bonds or settlements, or ishas been

suspended for insolvency, the Chief Executive Officer and Exchange President or the Managing 

Director and President of the Clearing Houseand CH President may appoint a clearing member to 

which all such open positionstrades shall be transferred for liquidation, to be handled or may 

appoint a clearing member to managedliquidate such positions on behalf of for such defaulted or 

suspended clearing member., or may appoint a clearing member to close out such positions. 

When If open positionsa trade or trades are so transferred, all supporting performance bonds

associated with these positions anddeposited thereon and any settlement payments due or 

collected must be delivered to the Clearing House, to be entrusted to the clearing member 

designated to liquidatemanage the positions.handle the transactions. The managing clearing 

member appointed to liquidate the positions shall have the right, under the direction of the 

Managing Director and President of the Clearing House, to buy or sell for the account of the 

member such commodities for the delivery and in the quantity, in whole or in part, as may be 

necessary to clear the suspended clearing member's contracts with the Clearing House; the 

clearing member shall also have the right under the direction of the Chief Executive Officer to make 

or take delivery. 

The clearing member shall be entitled to charge such commission as the Board may determine. 

943. REINSTATEMENT AFTER SUSPENSION 39

A clearing member of the Exchange suspended for insolvency may be reinstated upon affirmative 

proof to the Board that of itshis financial responsibility. has been re-established. A member 

suspended because of the suspension of the clearing membercorporation, partnership or other 

entity sole proprietorship with which he was connected, may be reinstated upon showing that the 

financial responsibility of that clearing member such corporation, partnership or sole proprietorship 

has been re-established; provided, however, that nothing herein shall prevent the member from 

withdrawing from the corporation, partnership or sole proprietorship and making an application for 

reinstatement to membership in the Exchange, provided that the previous failure of the clearing 

member corporation, partnership or sole proprietorship was not caused by that member's willful, 

reckless or unbusinesslike conduct. 

944. LIQUIDATION OF SUSPENDED OR EXPELLED CLEARING MEMBERS 40

A clearing member who is suspended or expelled, pursuant to order of the Board, the Chief 

Executive Officer, the President, the Managing Director and President of the Clearing 

Houseexchange and ch president or the Clearing House Risk Committee, or pursuant to the 

provisions of Rule 940 or other rules of the Exchange resulting from failure to meet financial 

requirements, may be placed in liquidation by the Board.

In the event a clearing member has been placed in liquidation, the clearing member shall comply 

with all orders of the Board, the Chief Executive Officer, or the Clearing House Audit Departmentin 

matters relating to that liquidation or transfer of commitments and disbursements of funds. 

 

36 Revised May 1982. 

37 Revised March 1979; May 1982; June 2003. 

38 Revised November 1979; September 1989; June 1992; November 2000; October 2001; September 2004. 

39 Revised June 2003. 

40 Revised March 1979; February 1998; November 2000; September 2004. 
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In the event of refusal of a clearing member to comply with requirements placed upon it, the 

Clearing House Audit Department may take whatever means necessary in proceeding with 

compliance. 

945. LIQUIDATION OF EXPELLED CLEARING MEMBER 41

A clearing member who has been expelled for violation of Exchange rules may be placed in 

liquidation by the Board, in accordance with the provisions of Rule 944 

(Next Rule 950)

9456.— 949. [RESERVED] 

SALES PRACTICES AND CUSTOMER PROTECTION 42

950. SUPERVISION 43

Each clearing member shall adopt and enforce written procedures pursuant to which it will be able 

to supervise in accordance with the requirements of these Rules and the CEA and CFTC 

Regulations thereunder, adequately each customer's account(s), including, but not limited to, the 

solicitation of any such account(s). For purposes of this rule, the term "customer" does not include 

another futures commission merchant. Exchange staff shall determine whether the sales practices 

and customer protection requirements set forth in the Rules shall be applicable to Special CME 

Clearing Members. 

951. DISCLOSURE REQUIREMENTS 

Each clearing member must comply with the disclosure requirements set forth in CFTC Regulation 

33.7. 

952. SALES COMMUNICATIONS 

No clearing member shall make fraudulent or high-pressure sales communications relating to the 

offer or sale of commodity futures and options. Violation of this rule may constitute a major 

offense. 

953. PROMOTIONAL MATERIAL 

A. No clearing member shall use any promotional material which is likely to deceive or mislead 

the public. 

B. Each clearing member shall maintain a copy of all written and electronic promotional material 

in a central file at the clearing member's principal place of business. 

C. Violation of this rule may constitute a major offense. 

954. CUSTOMER COMPLAINTS 

Each clearing member shall retain all written customer complaints, and make and retain a record of 

the date each complaint was received, the associated person who serviced the account, a general 

description of the matter complained of, and what, if any, action was taken by the clearing member 

regarding the complaint. With respect to verbal complaints, each clearing member shall develop 

and implement a written program approved by senior management that requires clearing member 

staff to direct individuals with verbal complaints to place such complaints in written form and submit 

such complaints to the Compliance Officer of the clearing member. Such complaints and related 

records must be maintained in a central file at the clearing member's principal place of business. 

955. ASSIGNMENT AND NOTIFICATION OF EXERCISE NOTICES 

A. Each clearing member shall adopt written procedures pursuant to which it shall allocate option 

exercise notices in a fair and non-preferential manner. 

B. Upon notification from the Exchange of assignment of an exercise notice, the clearing member 

shall promptly notify the option grantor to whom the notice has been allocated. 

956. DISCRETIONARY, CONTROLLED AND MANAGED ACCOUNTS 44

956.A. Requirements 

1. Power of Attorney 

 

41 Revised March 1979. 

42 Effective December 1993. 

43 Revised June 2003. 

44 Revised February 1996 (formerly Rule 932) ; September 2004. 
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No clearing member shall accept or carry an account over which a person other than the 

account owner, exercises trading authority or control, (hereinafter referred to as a 

discretionary, controlled, or managed account) without first obtaining a written power of 

attorney, trading authorization, or similar document (hereinafter referred to as a power of 

attorney). Such power of attorney must be signed and dated by the account owner and clearly 

designate the person to whom discretionary authority has been granted. 

The power of attorney shall remain in effect until it is terminated by a written revocation signed 

and dated by the account owner or by the death or incapacity of the account owner. Written 

revocation may also be made by the person to whom trading authority has been granted. 

2. Discretionary Account Listing 

A clearing member must clearly identify each discretionary account it carries and promptly 

provide the Exchange with a complete and accurate list of such account upon request. 

956.B. Presumption of Authority 

Except where specifically indicated by the phrase "discretion not exercised" written on the order 

ticket, and subsequently confirmed to the customer as such, every trade in a discretionary account 

shall be presumed to have been made pursuant to the power of attorney and subject to the 

requirements of this rule. 

956.C. Supervision of Discretionary Trading 

1. Discretionary Account Activity 

Each clearing member shall have a supervisory employee (other than the person granted 

discretionary authority) continuously supervising activity in discretionary accounts. The 

supervision shall include, but is not limited to, a review of excessive trading in amount or 

frequency in relation to account equity. This requirement shall only apply to discretionary 

accounts controlled by an employee of the clearing member or the clearing member's 

guaranteed introducing brokers. 

2. Floor Trading 

During Regular Trading Hours, eEach order for a discretionary account executed on the floor 

must be executed by a member in the pit other than the person granted discretionary trading 

authority over the account unless: 

a. The member granted discretionary authority does not trade for his personal account or an 

account referred to in Rule 956.E.; 

b. The member granted discretionary authority has filed with the Division of Market 

Regulation notice of his intention to execute orders for discretionary accounts for which he 

has power of attorney; and 45 

c. Whenever the member has discretionary authority over more than one account: 

(1) The member shall disclose this fact to all persons having an interest in any of the 

discretionary accounts; 

(2) The member shall have a similar financial interest (including, but not limited to, equity, 

brokerage and performance fees) in each such account; 

(3) All such discretionary accounts shall be maintained with the member's qualifying 

clearing member; and 

(4) The member's qualifying clearing member shall monitor the allocation of trades 

among such discretionary accounts. 

956.D. Position Limits 

A person with discretionary trading authority over one or more discretionary accounts shall not 

execute or order the execution of trades for such accounts where such trades, by themselves or in 

addition to his personal trades, exceed the limits prescribed in these rules regarding total positions 

in any contract. 

A husband, wife and children are presumed to be a single entity and, as such, must adhere to the 

position limits as prescribed by the Exchange rules unless otherwise approved by the Exchange 

staff Chief Executive Officer upon written application. 

 

45 Revised February 1998. 
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956.E. Exceptions 

The provisions of this rule shall not apply to the following accounts: 

1. Family Accounts 

Accounts controlled or managed by persons for their own family, except with regard to Rule 

956.D. For purposes of this rule, members of one's family shall include one's spouse, 

brothers, sisters, parents, grandparents, great-grandparents, children, grandchildren, greatgrandchildren and in-laws. 

2. Member and Proprietary Accounts 

Accounts of members or proprietary accounts as defined by CFTC Regulation 1.3(y), except 

with regard to Rules 956.A.1. and 956.D. 

956.F. Violation 

Violation of this rule may be a major offense. 

957. AUTHORIZED TRADERS 46

For an account of a corporation, partnership, trust or similar organization, a clearing member must 

maintain a current list of authorized traders. During Regular Trading Hours, if a floor broker 

authorized to act on behalf of the organization executes orders for such organization, then the floor 

broker may not trade for any other account unless the organization specifically authorizes such 

floor broker to do so. A member or clearing member may not open an account in accordance with 

Rule 957 to avoid the requirements within Rule 956. 

958. BRANCH OFFICES, GUARANTEED INTRODUCING BROKERS, AND ASSOCIATED 

PERSONS 47

A. Each clearing member must maintain a complete and accurate list of all branch offices, 

guaranteed introducing brokers, and the associated persons of the clearing member and its 

guaranteed introducing brokers. Such list shall be promptly provided to the Exchange upon 

request. 

B. Branch offices, guaranteed introducing brokers, and the associated persons of the clearing 

member and its guaranteed introducing brokers must comply with Exchange rules. Each 

associated person of the clearing member or its guaranteed introducing brokers shall be bound 

by Exchange rules to the same extent as if such person were a member. 

C. Each clearing member must diligently supervise its branch offices, guaranteed introducing 

brokers, and the associated persons of the clearing member and its guaranteed introducing 

brokers. 

D. Each clearing member shall be responsible for the acts or omissions of its branch offices, 

guaranteed introducing brokers, and the associated persons of the clearing member and its 

guaranteed introducing brokers. Any violation of an Exchange rule by any such person may 

be considered a violation by the clearing member. 

E. Violation of this rule may be a major offense. 

(Next Rule 960)

959. [RESERVED] 

OMNIBUS AND CARRYING BROKER ACCOUNTS 48

960. OMNIBUS AND CARRYING BROKER ACCOUNTS 49

A. All clearing members must maintain a complete list of all omnibus and carrying broker 

accounts maintained on their books. Such list shall be promptly provided to the Exchange 

upon request. Information for each such account must include account name, number and 

address, and classification of the account as either customer or house. 

B. A clearing member carrying an omnibus account shall have the responsibility for ensuring that 

each person carried in the account does not exceed speculative limits unless granted an 

exemption pursuant to Rule 543. 

 

46 Revised February 1996 (formerly Rule 933). 

47 Adopted February 1996. 

48 Effective December 1993. 

49 Revised November 2000 
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C. Each clearing member carrying an omnibus account must at all times reflect in its records the 

gross long and short positions held in such omnibus account. 

Prior to the first delivery day in a contract month or as otherwise required by the Clearing 

House, each clearing member carrying an omnibus account must maintain a complete and 

accurate list of the purchase and sale dates of all open positions held in such omnibus account 

for that contract month. Such list must be current throughout the contract month to ensure that 

the delivery procedure is not impaired. 

D. Each clearing member that maintains an omnibus account with another clearing member shall 

also bear financial responsibility to the Exchange for that omnibus account. 

(Next Rule 970)

961.— 969. [RESERVED] 

FINANCIAL REQUIREMENTS 50

970. FINANCIAL REQUIREMENTS 51

A. Subject to exceptions granted by Exchange staff to Special CME Clearing Members regarding 

CME imposed financial requirements (Rules 970-973), all clearing members, including nonFCMs, must comply with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17 and 

1.18. This includes, but is not limited to, the following: 

1. Maintenance of minimum capital requirements; 

2. Submission of a Form 1-FR, FOCUS Report or other requested information within the 

specified period of time; 

3. Notification requirements when a clearing member: 

a. Fails to maintain minimum capital requirements; 

b. Fails to maintain early warning capital requirements; 

c. Fails to maintain current books and records; or 

d. Determines the existence of a material inadequacy as specified in CFTC Regulation 

1.16(d)(2); 

e. Changes its fiscal year; or 

f. Changes its public accountant; 

In addition to the notifications required by CFTC regulations, all clearing members must 

provide written notice to the Audit Department of the above events. 

4. Completely and accurately computing and recording the balances in the net capital 

computation including capital requirements; 

5. Subordination agreement requirements, including the filing of such agreements; and 

6. Preparation of a monthly computation of adjusted net capital and minimum financial 

requirements. 

B. For non-FCMs, all filing, notification, and approval requirements set forth in CFTC Regulations 

1.10, 1.12, 1.17 and 1.18 and in the rules of the Exchange must be submitted to or obtained 

from the Audit Department, if necessary, rather than the Commission. 

C. In conjunction with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17, and 1.18, 

clearing members must comply with the following requirements: 

1. Submit a monthly Form 1-FR or FOCUS Report and the Exchange Supplementary 

Information schedule including an unaudited monthly Form 1-FR or FOCUS Report as of 

the clearing member’s fiscal year-end, within the time requirements set forth in CFTC 

Regulation 1.10. A clearing member must include with its Form 1-FR or FOCUS Report a 

Statement of Income (loss) for the period between the date of the most recent financial 

statement or, at the option of the clearing member, the most recent certified financial 

statement file with the Audit Department and the date for which the report is made. 

2. Submit a certified Form 1-FR or FOCUS Report as of the clearing member’s fiscal yearend within the time requirements set forth in CFTC Regulation 1.10. A clearing member 

 

50 Adopted October 1993. 

51 Adopted October 1993. Revised June 1996; March 1997; April 1998; July 1998; May 1999; July 1999; November 2000; June 2001; October 

2001; November 2000; December 2001; June 2003. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 21 of 24

must include with its certified Form 1-FR or FOCUS Report, a reconciliation from the 

certified Form 1-FR or FOCUS Report to the monthly Form 1-FR or FOCUS Report as of 

the same date or a statement that no differences were noted. 

3. A clearing member for which CME is the designated self-regulatory organization may 

request to change their fiscal year from the Audit Department. Such request will only be 

granted for good cause and in accordance with the requirements of CFTC Regulation 

1.10(e)(1). The Audit Department’s grant of the change in fiscal year will fulfill the 

approval requirements of CFTC Regulation 1.10(e)(1). 

4. A clearing member for which CME is the designated self-regulatory organization may 

request an extension of time to file a monthly Form 1-FR, monthly FOCUS Report, 

certified Form 1-FR or certified FOCUS Report from the Audit Department. Such 

extension will only be granted for good cause and in accordance with the requirements of 

CFTC Regulations 1.10(f) and 1.16(f). The Audit Department’s grant of extension will 

fulfill the approval requirements of CFTC Regulations 1.10(f) and 1.16(f). 

D. Exchange staff may prescribe additional accounting, reporting, and other financial and/or 

operational requirements and clearing members must comply with such requirements. All 

clearing members must provide notice to the Audit Department of a failure to comply with the 

additional accounting, reporting, financial, and/or operational requirements. The Audit 

Department must receive immediate written notification when a clearing member knows or 

should know of such failure.

E. Financial statement filing requirements under this Rule must be met through Exchangeapproved electronic transmissions, except for certified Form 1-FRs or FOCUS Reports. 

Personal Identification Numbers (PINs) must be submitted by authorized signers of the Form 

1-FR or FOCUS Report. The PIN will constitute and become a substitute for the manual 

signature of the authorized signer to the electronically filed Form 1-FR or FOCUS Report. The 

PIN is a representation by the authorized signer that, to the best of his or her knowledge, all 

information contained in the statement being transmitted under the PIN is true, correct and 

complete.

F. Exchange staff may grant exceptions to the financial and reporting requirements of Rule 970. 

for good cause if it is determined that such exceptions will not jeopardize the financial integrity 

of the Exchange. 

G. Special CME Clearing Members shall be subject to reporting and minimum capital 

requirements established by the Exchange. 

H. Violation of this rule may constitute a major offense. 

971. SEGREGATION AND SECURED REQUIREMENTS 52

A. All clearing members must comply with the requirements set forth in CFTC Regulations 1.20 

through 1.30, 1.32, and 30.7. This includes, but is not limited to, the following: 

1. Maintaining sufficient funds in segregation or set aside in separate accounts; 

2. Computing, recording and reporting completely and accurately the balances in the: 

 a. Statement of Segregation Requirements and Funds in Segregation; and 

 b. Statement of Secured Amounts and Funds Held in Separate Accounts; 

3. Obtaining satisfactory segregation and separate account acknowledgment letters and 

identifying segregated and separate accounts as such; and 

4. Preparing complete and materially accurate daily segregation and secured amount 

computations in a timely manner. 

B. Exchange staff may prescribe additional segregation and secured amount requirements. 53

C. All clearing members must provide written notice to the Audit Department of a failure to 

maintain sufficient funds in segregation or set aside in separate accounts. The Audit 

Department must receive immediate written notification when a clearing member knows or 

should know of such failure. 54

D. Violation of this rule may constitute a major offense. 

 

52 Adopted October 1993. Revised May 1999; November 2000. 

53 Revised November 2000. 

54 Revised July 1999. 
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972. REDUCTIONS IN CAPITAL 55

A. A clearing member must provide written notice to the Audit Department as set forth below of 

any substantial reduction in capital as compared to the most recent filing of a financial report. 

1. If any event or series of events, including any withdrawal, advance, loan or loss would 

cause, on a net basis, a reduction in net capital as reported on the Form 1–FR, or in 

tentative net capital as reported on the FOCUS Report for broker/dealers, of 20% or more, 

notice must be provided within two business days of the event or series of events causing 

the reduction; and 

2. If equity capital of the clearing member or a subsidiary or a consolidated affiliate would be 

withdrawn by action of a stockholder or a partner or by redemption or repurchase of 

shares of stock by any of the consolidated entities or through the payment of dividends or 

any similar distribution, or an unsecured advance or loan would be made to a stockholder, 

partner, sole proprietor, employee or affiliates, such that the withdrawal, advance or loan 

would cause, on a net basis, a reduction in excess net capital of 30% or more, notice must 

be provided at least two business days prior to the withdrawal, advance or loan that would 

cause the reduction. 

The foregoing shall not apply in the case of a reduction in capital resulting from (1) the 

repayment or prepayment of subordinated liabilities for which notice has been given in 

accordance with Rule 970 or (2) any futures or securities transaction in the ordinary course of 

business between a clearing member and any affiliate where the clearing member makes 

payment to or on behalf of such affiliate for such transaction and then receives payment from 

such affiliate for such transaction within two business days from the date of the transaction. 

B. Violation of this rule may constitute a major offense. 

973. CUSTOMER ACCOUNTS WITH THE EXCHANGE 56

All customer funds deposited with the Exchange on behalf of customers protected by CFTC 

Regulation 1.20 shall be held in accordance with the Commodity Exchange Act and CFTC 

Regulation 1.20 in an account identified as Customer Segregated. Such customer funds shall be 

segregated by the Exchange and treated as belonging to the customers of the clearing member. 

Pursuant to this rule, a clearing member shall satisfy the segregation acknowledgment letter 

requirement of CME Rule 971.A.2., the Commodity Exchange Act, and CFTC Regulation 1.20 for 

customer deposits held at the Exchange. 

All customer funds deposited with the Exchange on behalf of customers protected by SEC 

Regulation 15c3-3 shall be held in accordance with the Securities Exchange Act of 1934 and SEC 

Regulation 15c3-3 in an account identified as Special Reserve Account for the Exclusive Benefit of 

Customers. Such customer funds shall be segregated by the Exchange and treated as belonging 

to such customers of the clearing member. 

(Next Rule 980)

974.— 979. [RESERVED] 

RECORDS AND REPORTS 57

980. REQUIRED RECORDS AND REPORTS 58

A. Subject to exceptions granted by Exchange staff, eEach clearing member shall prepare, 

maintain and keep current those books and records required by the rules of the Exchange, the 

Commodity Exchange Act and the Regulations thereunder. Such books and records shall be 

open to inspection and promptly provided to the Exchange upon request. 

B. Each clearing member shall maintain an adequate accounting system, internal accounting 

controls, and procedures for safeguarding customer and firm assets as set forth in CFTC 

Regulation 1.16(d)(2). This includes, but is not limited to, the following: 

1. Preparation and maintenance of complete and accurate reconciliations for all accounts; 

and 

2. Resolution of reconciling items in a timely manner. 

 

55 Adopted October 1993. Revised June 1996; November 2000. 

56 Adopted July 1997. Revised 2002. 

57 Adopted October 1993. 

58 Revised July 2003. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 23 of 24

C. A clearing member must file any information requested by the Exchange within the time period 

specified in the request. 

D. D. Each clearing member shall maintain at all times the ability to provide to the Exchange in 

an acceptable form a complete set of equity system reports (including, at a minimum, the 

equity run, open position listing, day trade listing, cash adjustments listing and performance 

bond call and debit equity listing). Such reports shall be available to the Exchange in Chicago 

no later than 8:00 a.m. Chicago time on the business day following the report date. 

E. Each clearing member shall maintain at all times the ability to provide to the Exchange a listing 

of each customer’s method of access to CME markets, including front end applications and 

network connections. 

981. ANTI-MONEY LAUNDERING 59

Each clearing member shall develop and implement a written anti-money laundering program 

approved in writing by senior management reasonably designed to achieve and monitor the 

clearing member’s compliance with the applicable requirements of the Bank Secrecy Act (31 

U.S.C. 5311, et. seq.), and the implementing regulations promulgated thereunder by the 

Department of the Treasury and, as applicable, the Commodity Futures Trading Commission. That 

anti-money laundering program shall, at a minimum, 

(1) Establish and implement policies, procedures and internal controls reasonably designed to 

assure compliance with the applicable provisions of the Bank Secrecy Act and the 

implementing regulations thereunder; 

(2) Provide for independent testing for compliance to be conducted by Member personnel or by a 

qualified outside party; 

(3) Designate an individual or individuals responsible for implementing and monitoring the day-today operations and internal controls of the program; and 

(4) Provide ongoing training for appropriate personnel. 

Clearing members must also supervise and ensure that their guaranteed introducing brokers are in 

compliance with the anti-money laundering provisions contained in this Rule. 

Violation of this rule may be a major offense. 

(End Chapter 9) 

982. RISK MANAGEMENT 60

All clearing members must have written risk management policies and procedures in place to 

ensure they are able to perform certain basic risk and operational functions at all times. At a 

minimum, the following areas must be considered in the firm’s policies and procedures, depending 

on the firm’s size and its business and product mix:

A. Trade Submission and Account Monitoring. Clearing members must have procedures in place 

to demonstrate compliance in the following areas for trades executed through both electronic 

platforms and open outcry:

1. Monitoring the credit risks of accepting trades of specific customers.

2. Monitoring the risks associated with proprietary trading.

3. Limiting the impact of significant market moves through the use of tools such as stress 

testing or position limits.

4. Maintaining the ability to monitor account activity on an intraday basis.

5. Ensuring order entry systems include the ability to set automated credit controls or 

position limits or requires a firm employee to enter orders.

6. Defining sources of liquidity for increased settlement obligations.

B. Additional and/or Alternative Requirements. Exchange staff may prescribe additional and/or 

alternative requirements in order for clearing members to comply with this Rule.

983. DISASTER RECOVERY AND BUSINESS CONTINUITY 61

 

59 Adopted December 2002. 

60 Adopted September 2003. 
© Copyright Chicago Mercantile Exchange, Inc. All rights reserved. Page 24 of 24

All clearing members must have written disaster recovery and business continuity policies and 

procedures in place to ensure they are able to perform certain basic operational functions in the 

event of a significant internal or external interruption to their operations. At a minimum, the 

following areas must be considered in the firm’s policies and procedures, depending on the firm’s 

size and its business and product mix:

A. Clearing members must have procedures in place to allow them to continue to operate during 

periods of stress or to transfer accounts to another fully operational clearing member with 

minimal disruption to either the Exchange or their customers. In order to satisfy this 

requirement, clearing members must perform:

1. Periodic testing of disaster recovery and business continuity plans.

2. Duplication of critical systems at back up sites.

3. Periodic back-up of critical information.

B. Key Staff Contacts. Clearing members must maintain and, at the request of the Exchange, 

provide accurate and complete information for their key personnel. Clearing members must 

inform the Exchange in a timely manner whenever a change to its key personnel is made.

C. Additional and/or Alternative Requirements. Exchange staff may prescribe additional and/or 

alternative requirements in order for clearing members to comply with this Rule.

 

61 Adopted September 2003.