PORES ECHANGE

July 3, 2006
Via Electronic Mail

Ms. Jean A. Webb

Secretary

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C, 20581 .

Re: CBOE Futures Exchange, LLC Rule Certification
Submission Number CFE-2006-11

Dear Ms. Webb:

Pursuant to Section 5e(c)(1) of the Commodity Exchange Act, as amended ("Act"), and
§40.6(a) of the regulations promulgated by the Commodity Futures Trading Commission under
the Act, CBOE Futures Exchange, LLC ("CFE” or "Exchange") hereby submits an amendment
("Amendment") to its rules relating to the CFE Gas At The Pump futures contracts (each, a
"GAPP Future") to change the execution allocation method for those contracts and to remove
CFE’s GAPP Futures Market Maker Program ("Program") from the CFE Policies and Procedure
manual.

Currently, a CFE Trading Privilege Holder acts as a designated primary market maker
("DPM") for each GAPP Future and the exccution allocation method for GAPP Futures is price-
time priority with a DPM trade participation right priority overlay. Pursuant to the Amendment,
GAPP Futures will be traded without a DPM solely using the price-time priority execution
allocation method (and no DPM trade participation right priority overlay).

CFE is removing the Program from its Policies and Procedure manual because it expired
by its own terms on April 30, 2006 and CFE decided not to renew the Program at that time.

The Amendment will become effective on July 5, 2006.

CFE is not aware of any substantive opposing views to the Amendment. CFE hereby
certifies that the Amendment complies with the Act and the regulations thereunder.

‘The Amendment, marked to show additions in underlined text and deletions in
[bracketed] text, consists of the following:

ee

Rule 2202. Contract Specifications

(a) - (f) No change.

400 South LaSalle Street Chicago, Illinois 60605-1023 www.cboe.com/cfe


Ms. Jean A. Webb
Page 2 of 3

(g) Execution Priorities. Pursuant to Rule 406(a)(i), the base allocation method of price-time
priority shall apply to trading in GAPP Futures. [Pursuant to Rule 406(b)(iii), a DPM trade
participation right priority shall overlay the price-time priority base allocation method. ]

(h) - (m) No change.

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(Rule 2204. DPM Provisions

(a) DPM Appointment. A Trading Privilege Holder will be appointed to act as a DPM for
each GAPP Future pursuant to Rule 515.

(b) DPM Participation Right. Vhe DPM participation right percentage under Rule 406(b)(1i1)
for each GAPP Future is 30%.]

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CFE Policy and Procedure 1X. {CFE Gas At The Pump Futures Market Maker Program]
Reserved

[Trading Privilege Holders (TPHs) may apply to the Exchange for appointment as a
market maker in CFE Gas At The Pump futures contracts (GAPP Futures). Any TPH that desires
to apply for market maker status should submit an application in the form of a letter outlining the
organization's qualifications and commitments.

The Exchange may approve up to five TPHs as market makers in GAPP Futures under
this Program. TPHs shall be selected by the Exchange based on the Exchange's judgment as to
which applicants are most qualified to perform the functions of a markct maker. Factors to be
considered in making this selection may include, but are not limited to, satisfaction of the
qualifications listed below as well as any one or more of the factors listed in Rule 515(b), as
applied to market maker applicants instead of with respect to DPM applicants.

The following describes the qualifications, obligations, incentive, and appointment term
under the CFE Gas At The Pump Futures Market Maker Program. The obligations and incentive
listed below are with respect to each of the GAPP Futures for which a TPH is appointed as a
market maker under this Program unless otherwise specified.

Qualifications

« Experience in trading options and/or futures in energy related contracts.
* Ability to automatically and systemically provide quotations.

Obligations

e For no less than 65% of the available trading hours in each calendar month, provide
continuous bids and offers in two contract months.

* Provide an average quoted size of no less than 10 contracts (over a calendar month) and
provide a minimum quoted size at all times of at least | contract.


Ms. Jean A. Webb
Page 3 of 3

These obligations are subject to relief in the event of a fast market on the Exchange in the
applicable futures contract, a fast market in a related futures product, or other unusual market
conditions (to be determined solely by the Exchange). Under fast market or unusual conditions, a
market maker is expected to quote competitively using its best efforts.

The Exchange may terminate, place conditions upon, or otherwise limit a TPH's.
appointment as a market maker under this Program if the TPH fails to perform its obligations
under the Program. However, failure of a TPH to comply with its obligations under this Program
shall not be deemed a violation of Exchange rules.

Incentive

e Payment of $0.50 per executed contract, with a monthly cap of $15,000 per TPH in the
months of November and December 2005, and a monthly cap of $6,000 for January
through April 2006.

Term
Each market maker appointment under the CFE Gas At The Pump Futures Market Maker
Program will expire on April 30, 2006. The Exchange may determine to extend the term of an

appointment, allow an appointment to expire, or replace this Program with a different market-
maker program.]

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Questions regarding this submission may be directed to Arthur Reinstein at (312) 786-
7570. Please reference our submission number CFE-2006-11 in any related correspondence.

CBOE Futures Exchange, LLC

Patrick J. Fay
Managing Director

cc: Riva Adriance (CFTC)
Mark Baumgardner (OCC)
Edward Dasso (NFA)