The Answering Statement may set forth one (1) or more counterclaims against the Claimant provided
that any such counterclaims (A) arise out of the Transaction or occurrence that is the subject of the
Claimant's claim or grievance and (B) do not require for adjudication the presence of essential witnesses,
parties or third (3) [p]Persons over which the Exchange does not have jurisdiction. Other counterclaims
are permissible only if the Claimant agrees to the submission thereof after such counterclaims have arisen.

If an Answering Statement sets forth one (1) or more counterclaims, the Claimant shall reply to such
counterclaims within twenty (20) days following delivery of the [-]Respondent's Answering Statement.
The Reply shall be filed with the [Chai fthe-Arbitration-C ittee] Exchange, with a copy to the
[F]Respondent involved.

(iii) The Chairman of the Arbitration Committee, promptly after receipt by the Exchange of the
Answering Statement, shall appoint a Panel of disinterested [p]Persons to hear and determine the Claim or
grievance, selecting one (1) as the Chairman of the Panel. If the amount of relief requested is less than or
equal to one hundred thousand dollars ($100,000), the Panel shall be composed of three (3) or more
individuals. If the amount of relief requested is in excess of one hundred thousand dollars ($100,000), the
Panel shall be composed of five (5) or more individuals. In a case where a Customer has, in his Notice of
Arbitration, elected a Mixed Panel, at least a majority of the Persons selected shall not be Members or
associated with any Member of a contract market, or any employee thereof, or otherwise associated with a
contract market. Promptly following such appointment, the [Chairman—ofthe—Arbitration-Committee]
Exchange shall forward copies of the Notice of Arbitration, Answering Statement and Reply, if there be
one, to the [Chairman-efthe] Panel members selected.

(iv) The [Chaizman-ef+the-Panel] Exchange shall notify the parties of [his-appeintment-and] the
appointment of the [ether] members of the Panel. Any party objecting to all or any members of the Panel
shall file such objection with the Chairman of the Arbitration Committee within ten (10) days of the
giving of such notice by the [Chairman—ofthe—Panel] Exchange. The Chairman of the Arbitration
Committee shall then determine whether changes in the composition of the Panel are appropriate, and if
so, shall make such changes. Any vacancy occurring on the Panel for any reason shall be filled by an
individual appointed by the Chairman of the Arbitration Committee. The parties shall be notified of the
filling of such vacancy and may file objections to the new appointee to the Panel in accordance with the
procedure set forth above.

(v) Any party may, no later than ten (10) days prior to the first (1°) hearing session, notify the
Chairman of the Panel of any pertinent documents or other information it seeks from another party. Upon
receipt of such request, the Chairman shall notify the party from which the documents or information are
sought. The parties shall thereafter cooperate in the voluntary exchange of such documents and
information. Any objection to a request for the production of documents or other information shall be
resolved by the Chairman of the Panel, or his designee.

(vi) The parties shall, within a time specified by the Chairman of the Panel, furnish each other and the
Panel with a statement listing the witnesses expected to be called and the documents expected to be
introduced into evidence, together with copies of such documents. Unless the Panel waives compliance
with this requirement, no witness may testify and no documentary evidence may be introduced at the
hearing unless listed in (and, in the case of documents, furnished with) such statement.

(vii) The Panel shall establish, on not less than ten (10) days' written notice to the parties, the date,
time and place of the hearing. Each Panel shall determine the procedures to be followed in any hearing
before it, including the use of preliminary hearings to resolve discovery disputes, simplify the issues, and
expedite the hearings, except that the following shall apply in every case:

(A) Each of the parties shall be entitled to appear personally at the hearing

(B) Each of the parties, at his own expense, shall have the right to be represented by counsel in any
aspect of the proceeding.



(B) None of the limitations on counterclaims set forth in [S]subparagraph (ii) of [P]paragraph (a)
shall apply.

Rule 20.04. Withdrawal of Claims

Any [a]Notice of Arbitration may be withdrawn at any time before an Answering Statement is filed in
accordance with these Rules.

If an Answering Statement has been filed, any withdrawal shall require consent of the party against
which the Claim or grievance is asserted.

Rule 20.05, Modification of Award

On written application to the Assistant Corporate Secretary of the Exchange by a party to an
arbitration, within twenty (20) days after delivery of the award to the applicant, the [arbitratien-p]Panel or
sole arbitrator may modify the award if:

(1) [F]there was a miscalculation of figures or a mistake in the description of any [p]Person, thing,
or property referred to in the award; or

(2) the [arbitratien-p]Panel or sole arbitrator has awarded upon a matter not submitted to it and the
award may be corrected without affecting the merits of the decision upon the issues submitted; or

(3) [F]the award is imperfect in a matter of form, not affecting the merits of the controversy.

Written notice of the application shall be given to the other parties to the arbitration. Written objection
to the modification must be served on the [pane}] Exchange and the other parties to the arbitration within
ten (10) days of receipt of the application. The [arbitratien-p]Panel or sole arbitrator shall dispose of any
application made under this [section] Rule in writing, signed and acknowledged by the [p]Panel or sole
arbitrator, within thirty (30) days after either written objection to the modification has been served on it or
the time for serving said objection has expired, whichever is earlier. The parties may in writing extend the
time for such disposition either before or after its expiration.

Rule 20.06. Compensation of Arbitrators.

The parties to an arbitration shall pay the arbitrators appointed in each matter compensation in
accordance with such fee schedule as the Board of Governors may from time to time determine. The
arbitrators in each such matters shall determine the proportion in which such compensation shall be paid
by each of the parties.

Rule 20.07. Punitive Damages

In the [G]case of a Claim or grievance arising from a violation of the Rules in the execution of a
Customer order on the [£]Floor of the Exchange wherein it is determined by the [arbitration-p]Panel or the
sole arbitrator that the violation was willful and intentional, punitive damages may be awarded the
Customer in an amount equal to no more than two (2) times the amount of actual damages proximately
caused by the violation.

Rule 20.08. Failure to Comply With Award

(a) Any Member in whose favor an award has been rendered pursuant to this Chapter shall promptly
notify the Assistant Corporate Secretary of the Exchange, in writing, if the award is not complied with.
Any Member, who fails to comply with the terms of an award rendered against such Member, shall be
subject to the procedures set forth in this Rule. Specifically, [¥Jupon receipt of [sueh] a notice or
information indicating that a Member has failed to comply with the terms of an award rendered against
such Member, the Exchange shall notify the Member against whom or which the award was rendered of
the Exchange's intention to suspend his or its privileges as a Member and afford the Member an
opportunity to be heard by a panel of the Arbitration Committee appointed by the Chairman for the sole



(b) Any Allowable Claim by a Member [ef+the—Exchange] against another Member, whether
originating before or during the period of time that the parties are Members, shall be settled by arbitration
in accordance with these Arbitration Rules. If such an Allowable Claim is made, any Allowable Claim
which may be asserted as a counter-claim under [P]subparagraph (a)(ii) of Rule 20.03 shall likewise be
settled by arbitration in accordance with these Arbitration Rules. Arbitration proceedings invoked
pursuant to this paragraph shall be independent of, and shall not interfere with or delay the resolution of
Customers’ Claims and grievances submitted for arbitration pursuant to [P]paragraph (a).

(c) All other disputes or controversies, regardless of their nature, between or among any two (2) or
more parties, shall, if agreed to by all parties involved, be settled by arbitration in accordance with these
Arbitration Rules. Arbitration proceedings invoked pursuant to this paragraph shall be independent of,
and shall not interfere with or delay the resolution of Customers' Claims and grievances submitted for
arbitration pursuant to [P]paragraph (a).

(d) Notwithstanding the foregoing, any Panel or, in the absence of a Panel, the Arbitration Committee,
in its sole and absolute discretion, may decline to take jurisdiction of, or, having taken jurisdiction may at
any time decline to proceed further with, any Claim or grievance or any other dispute, controversy or
counterclaim, other than such as may be asserted under [P]paragraph (a) of this [Seetion] Rule.

Rule 20.03. Procedure.
(a) Claims Asserted Pursuant to Rules 20.02(a) and (b).
(i) A Person desiring to invoke the provisions of this [2]paragraph (a) shall, within two (2) years from

the time the Claim or grievance arose, _fpot6] file with the Exchange _[ie-writing-of such Claim-or

id Persen-shall-th ided-by-the Exch £ these _Arbitrati
pon-be-pi i> Py
Rulesand] a Notice of Arbitration [form—SuehP. -shall-deliver tothe _Exchange-the-Noti f
A+rbitrati. +thin-b £; theti the-Clai + ++hi Hairty 0} fx
¥ grievan a ¥
the -datethe—Exch. es deli py fF thy Arbitrati Rul a Noti f i i tratt form,

whicheveristater]. The Notice of Arbitration shall set forth the name and address of the party or parties
against whom the Claim or grievance is being asserted, the nature and substance of the Claim or
grievance, the relief requested and the factual and legal bases alleged to underlie such relief. In the event
of a Notice of Arbitration submitted by a Customer, such Notice of Arbitration shall indicate whether the
Customer elects to have the Claim or grievance heard and determined by a Mixed Panel, as provided in
[S]subparagraph (a)(iii) of thfe-Paragrapha)]is Rule. Failure to so indicate will be deemed a waiver of
such election.

The Notice of Arbitration shall be accompanied by the Claimant's non-refundable check payable to the
Exchange in payment of the arbitration fee. The amount of the fee shall be determined by the amount of
the relief requested in the Notice of Arbitration, as follows:

Relief Requested Amount of Fee

Up to $5,000 3% (minimum $100)

$5,001 to $10,000 $150, plus 2% of excess over $5,000
$10,001 to $15,000 $250, plus 1% of excess over $10,000
$15,001 to $100,000 $300, plus 1% of excess over $15,000
$100,001 and above $1,150, plus 1/2% of excess over $100,000

(ii) Upon receipt, the Exchange shall promptly deliver a copy of the Notice of Arbitration to each
[r]Respondent and to the Chairman of the Arbitration Committee. Each []Respondent shall, within
twenty (20) days following the delivery of such Notice, file an Answering Statement with the [Chairman
ofthe-Arbitration Committee] Exchange, with a copy to the Claimant, setting forth its or his position with
respect to the Claimant's Claim or grievance. Any allegation in the Notice of Arbitration not denied by a
[F]Respondent in its or his Answering Statement shall be deemed admitted.


(C) Each of the parties shall be entitled to (1) prepare and present all relevant facts in support of the
Claims and grievances, defenses or counterclaims, and to present rebuttal evidence to such Claims or
grievances, defenses or counterclaims made by the other parties, (2) examine the other parties, (3)
examine any witnesses appearing at the hearing, and (4) examine all relevant documents presented in
connection with the Claim or grievance, or any defense or counterclaim applicable thereto.

(D) The formal rules of evidence shall not apply.

(E) No verbatim record shall be made of the proceedings, unless requested by a party who shall
bear the cost of such record. If such a request is made, a stenographic transcript shall be taken, but not
transcribed unless requested by a party who shall bear the cost of such transcription.

(F) Ex parte contacts by any of the parties with members of the Panel shall not be permitted.

(G) The Panel shall have the power, on the request of any party or on its own motion, to require
any Person to testify and/or to produce documentary evidence in the proceedings as and to the extent
provided for in Rule 21.03.

(viii) The Panel shall, within sixty (60) days of the termination of the hearing, render its award in
writing and deliver a copy thereof either in person or by first-class mail to each of the parties. The Panel,
in its award, may grant any remedy or relief which it deems just and equitable, including, without
limitation, the awarding of interest and the arbitration fee; provided, however, that any costs incurred as a
result of having a Mixed Panel shall be born by the Member unless the Panel determines that the
Customer acted in bad faith in initiating or conducting the proceeding. Further, in any case wherein it is
alleged that the Claim or grievance arose from a violation of the Rules in the execution of a Customer
order on the [£]Floor of the Exchange and the Panel determines that such violation occurred, the [p]Panel
may award the Customer the actual damages proximately caused by said violation. The award of the
Panel shall be final and binding upon each of the parties to the arbitration, and judgment upon such award
may be entered by any court having jurisdiction. Any Member who is a [#]Respondent in an arbitration
conducted pursuant to the Rules shall notify the Assistant Corporate Secretary of the Exchange of any
judicial proceeding based on the award. In addition, any award, if not complied with within the time
specified in the award, shall be enforceable by disciplinary proceedings pursuant to Rules.

(ix) Notwithstanding any other provision of this [Seetien] paragraph (a), including the right of a
Customer to elect a Mixed Panel pursuant to [Arbitratien] Rule [6]20:03(a)(iii), if a Notice of Arbitration
sets forth Claims or grievances aggregating less than five thousand dollars ($5,000), and the Answering
Statement submitted by the [¢]Respondent either does not raise counterclaims or raises one (1) or more
counterclaims aggregating less than five thousand dollars ($5,000), the Chairman of the Arbitration
Committee may, on the request of any party or on his own motion, in his sole and absolute discretion,
decide that there shall not be a hearing, in which case the following procedures shall apply:

(A) The Chairman of the Arbitration Committee shall notify both parties that neither the Claims or
grievances nor the counterclaims, if any, aggregate to five thousand dollars ($5,000).

(B) The Claimant shall, within twenty (20) days of such notification, submit to the [Chairman-of
the—Arbitration—Committee] Exchange, with a copy to each of the [parties] Respondents, a
memorandum (together with such supporting documents, affidavits and other materials as the
[Gustemer] Claimant deems pertinent) setting forth the bases upon which he believes he is entitled to
the relief requested in the Notice of Arbitration.

(C) Each [#]Respondent shall, within twenty (20) days of its or his receipt of the Claimant's
memorandum and supporting documentation, submit to the [Chai the Arbitration Ci ittee]
Exchange, with a copy to the Claimant, a memorandum (together with such supporting documents,
affidavits and other materials as the respondent deems pertinent) setting forth the bases upon which he
believes that the relief requested by the [ewstemer] Claimant should be denied and, if said



purpose of proving that the award has been satisfied, provided that the Secretary of the Exchange receives
a written request from the Member for such a hearing within five (5) Business Days after receipt of such
notice by the Member. Failure to so request such a hearing shall be deemed an acknowledgment by the
Member that the award has not been complied with. Any such hearing shall be conducted in accordance
with such procedures as the Panel shall determine. The Panel shall consist of no less than three (3)
members of the Arbitration Committee. Following any such hearing, the Panel shall determine whether
the Member has failed to timely satisfy the award and shall promptly advise the [Seeretaryefthe]
Exchange, and all parties in the proceeding, of its determination.

(b) If the Panel shall find, or if a Member shall acknowledge that he or it has failed to comply with any
award rendered pursuant to this Chapter when and as provided by such award, the Member shall be
automatically suspended and shall remain suspended until the award is complied with and the suspended
Member is reinstated, as provided in Rule 21.35.

(c) If a Member suspended pursuant to paragraph (b) of this Rule fails to comply with the arbitration
award upon which such suspension was based within thirty (30) days following the effective date of the
suspension:

(i) the Member shall be expelled or, in the case of a Member Firm, member privileges terminated;
and

(ii) his Membership, or in the case of a Member Firm, the Memberships of the Conferring
Members, sold and the proceeds paid and applied as provided in Rule 21.36.


2 ys PAR Bt Gib) NEW YORK YORK
BOARD OF TRADE*

SECRETARIAT World Financial Center
One North End Avenue
New York, New York 10282

BY ELECTRONIC TRANSMISSION

05-38
September 15, 2005

Ms. Jean A. Webb

Secretary of the Commission

Office of the Secretariat

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21* Street, NW

Washington, DC 20581

Re: Amendments to Chapter 20 -
Submission Pursuant to Section 5c(c)(1) of the Act and Regulation 40.6

Dear Ms. Webb:

Pursuant to Section Sc(c)(1) of the Commodity Exchange Act, as amended, and
Commission Regulation 40.6, the Board of Trade of the City of New York, Inc. (“Exchange”)
submits, by written certification, amendments to Chapter 20, attached as Exhibit A.

The Exchange’s Arbitration Rules contain some provisions which are not reflective of the
current practice for administering Exchange arbitrations. For example, Rule 20.03(a)(i) states
that a prospective claimant must notify the Exchange in writing of its grievance, after which the
Exchange will provide the rules and the notice of arbitration form. Today, the most common
method in which claims or grievances are received by the Exchange is by telephone. Once
received, the prospective claimant is either mailed an arbitration package or, more commonly,
directed to the web site where the arbitration package can easily be printed out. Many of the
amendments to Chapter 20 will conform out-of-date provisions to the current practice.

Amendments have also been made to Rule 20.08 which will extend to customers the
expedited remedy for failure to pay an arbitration award. Rule 20.08 currently provides that,
upon notice from a member that he has not been paid in accordance with an award rendered in
his favor under the Rules, the Exchange may suspend the member who failed to make payment,


[r]Respondent has raised counterclaims in his Answering Statement, the bases upon which he believes
he is entitled to the relief requested by such counterclaims.

(D) The Chairman of the Arbitration Committee may, on the request of any party or on his own
motion, in his sole and absolute discretion determine whether to allow or require the submission of
reply or additional papers, unless a [rJRespondent has asserted one (1) or more counterclaims, in
which case the Claimant shall be entitled to reply to such counterclaims within ten (10) days of
delivery of the [FJRespondent's memorandum setting forth the bases thereof.

(E) The Chairman of the Arbitration Committee or his designee, acting as sole arbitrator, shall,
within thirty (30) days of his receipt of the final papers filed, render an award in writing and deliver a
copy thereof either in person or by first-class mail to each of the parties. The sole arbitrator in his
award may grant any remedy or relief which he deems just and equitable, including, without
limitation, the awarding of interest and the arbitration fee; provided, however, that any costs incurred
as a result of a Customer requesting [having] a Mixed Panel shall be borne by the Member unless the
[panel] sole arbitrator determines that the Customer acted in bad faith in initiating or conducting the
proceeding. Further, in any case wherein it is alleged that the Claim or grievance arose from a
violation of the Rules in the execution of a [e]Customer order on the []Floor of the Exchange and the
[Panel] sole arbitrator determines that such a violation occurred, the [panel] sole arbitrator may award
the Customer the actual damages proximately caused by said violation. The decision of the sole
arbitrator shall be final and binding upon each of the parties to the arbitration, and judgment upon such
award may be entered by any court having jurisdiction. In addition, any award, if not complied with
within the time specified in the award, shall be enforceable by disciplinary proceedings pursuant to the

Rules [efthe Exchange].

(x) The failure of any party to an arbitration to comply with any of the requirements of this [Section]
paragraph (a), or with any demand or request of either the Panel, the sole arbitrator or the Chairman of the
Arbitration Committee shall be deemed a violation of the Rules and shall, in addition to any other action
the Exchange may take for any such violation, subject such party to such action by the Panel, the sole
arbitrator or the Chairman of the Arbitration Committee (including without limitation the entry of an
award against such party) as it or he shall deem appropriate under the circumstances.

(xi) Notwithstanding the provisions of [S]subparagraph (x) of this [P]paragraph (a), either the Panel,
the sole arbitrator or the Chairman of the Arbitration Committee, may for good cause shown extend any
time limitation imposed by this [Seetien] paragraph (a) (except the two (2) year and the thirty (30) day
limitation periods set forth in [S]subparagraph (a)(i)) or may excuse any neglect to comply therewith or
with any other requirement of this [Seetien] paragraph (a) or demand or request of the Panel, the sole
arbitrator or the Chairman of the Arbitration Committee.

(b) Other Claims Asserted Pursuant to Rule 20.02(c).

(i) Any dispute or controversy between or among any two (2) or more parties may, if all of the parties
to such dispute or controversy so agree, be settled by arbitration in accordance with this [P]paragraph (b).
Such dispute or controversy shal] be heard and determined in accordance with the procedures set forth in
[P]paragraph (a) of this [Seetien] Rule, except for the following:

(A) In lieu of the procedure set forth in the first sentence of subparagraph (i) of [PJparagraph (a),
the provisions of this [P]paragraph (b) shall be invoked by the submission by all of the parties
concerned of an agreement to submit the dispute or controversy to arbitration in accordance with this
[P]paragraph (b) and to be bound by the award of the arbitrators. Following such submission, the
Exchange shall forward to the party requesting relief the information set forth in subparagraph (i) of
[PJaragraph (a) of this [Seetien] Rule, whereupon all of the other procedures set forth in said
subparagraph (i) of [P]paragraph (a) shall apply.



and if the failure continues beyond thirty days following the suspension, the Exchange may expel
the member. However, a customer, who has not been timely paid an award granted in his favor,
-2-

must wait for the conclusion of a disciplinary action taken against the member for failure to
honor the terms of an Exchange arbitration award. There is no apparent reason for such a
distinction between members and customers.

Finally, technical correction amendments have been made, such as capitalizing defined
terms.

The Exchange certifies that the amendments comply with the requirements of the
Commodity Exchange Act and the rules and regulations promulgated thereunder.

The amendments were adopted by the Exchange’s Board of Governors on September 14,
2005. They will become effective for all arbitrations filed with the Exchange on or after
September 19, 2005. No substantive opposing views were expressed by members or others with
tespect to the amendments.

If you have any questions or need further information, please contact me at

jfassler@nybot.com or 212-748-4084.

Sincerely,

Jill S. Fassler
Vice President
Associate General Counsel

ce: Riva Adriance
CFTC, Division of Market Oversight
Allen Cooper
CFTC, New York Regional Office


(In the text of the amendments below, additions are underlined and deletions are bracketed and
lined out.)

Rule 20.00. Quorum and Disqualification

(a) An individual shall be disqualified from taking any action as a member of the Arbitration
Committee or as an arbitrator prescribed in the Arbitration Rules if such individual or an Affiliated Firm
has an interest in the [e]Claim or dispute. Any member of the Arbitration Committee may disqualify
himself for any reason he deems appropriate. Each member of the Arbitration Committee or arbitrator
appointed to hear and determine a [¢]Claim or grievance shall conduct himself in a manner consistent
with the ABA/American Arbitration Association's "Code of Ethics for Arbitrators in Commercial
Disputes" and shall disclose to the Chairman of the Arbitration Committee, who shall thereafter advise
the parties to the arbitration, at any stage of the arbitration, any past or present, direct or indirect financial,
business, professional, family or social relationship which is likely to affect an appearance or which might
reasonably create an appearance of partiality or bias.

(b) If the Chairman of the Arbitration Committee is disqualified or is unavailable, the [First] Vice
Chairman of the Arbitration Committee shall act as Chairman. If both the Chairman and the [First] Vice
Chairman of the Arbitration Committee are disqualified or are unavailable, [the-Seeond-Vice-Chairman

‘halt “f. Chairman—ttth. Chai: >the First Vi Chi d-the-S. dV, Ch.
disqualified ilable;] the Chairman of the Board of [Managers] Governors shall appoint
another member of the Arbitration Committee to act as Chairman.

(c) The lesser of a majority or three (3) members of the Arbitration Committee shall constitute a
quorum for the transaction of business. Any action taken by a vote of the majority of the Arbitration
Committee members present at a meeting at which a quorum is present shall be deemed to be a valid
action of the Arbitration Committee.

Rule 20.01. Definitions.

Unless otherwise indicated, the following terms shall, for the purposes of these Arbitration Rules, have
the following meanings:

(a) "Claims or grievance" shall mean any dispute which arises out of any Transaction on or subject to
the Rules executed by or effected through a Member or any employee of such Member, which dispute
does not require for adjudication the presence of essential witnesses or third (3) parties over whom the
Exchange does not have jurisdiction or who are otherwise not available. The term "[e]Claim or grievance"
shall not include disputes arising from cash market transactions which are not a part of, or directly
connected with, any Transaction.

* * *

(g) "Allowable Claim" shall mean a Claim arising directly from (i) any order or [¢]Transaction for the
purchase, sale, exercise or expiration of a Futures Contract or Option executed, or to be executed, on or
subject to the Rules or (ii) cash market transactions which are part of, or directly connected with, any
Transaction.

Rule 20.02. Jurisdiction.

(a) Any Claim or grievance by a Customer against a Member, or any employee thereof, shall, if the
Customer so elects, be settled by arbitration in accordance with these Arbitration Rules. If such a Claim
or grievance is made, any counterclaim permissible under [P]subparagraph (a)(ii) o[F]f Rule 20.03 of
these Arbitration Rules shall, if asserted by such Member or employee thereof, likewise be settled by
arbitration in accordance with these Arbitration Rules.

EXHIBIT A