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EXHIBIT A

OCC By-Laws

Blue underlined text indicates new text

Blue strikethrough text indicates deleted text

Blue double strikethrough text indicates existing rule text that is being relocated from OCC’s ByLaws, as indicated in [brackets] herein
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ARTICLE I - DEFINITIONS

Definitions

SECTION 1. Unless the context requires otherwise (or except as otherwise specified in the ByLaws or Rules), the terms defined herein shall, for all purposes of these By-Laws and the Rules

of the Corporation, have the meanings herein specified.

A.

(1) through (9) [No change]

Appointed Clearing Member

(10) The term "Appointed Clearing Member" means a Clearing Member that, in accordance with

the provisions of Rule 901, has been appointed by an Appointing Clearing Member to make

settlement of obligations of the Appointing Clearing Member to deliver or receive underlying

securities arising from the exercise or maturity of cleared securities.

[Relocated to Chapter I of the Rules]

Appointing Clearing Member

(11) The term "Appointing Clearing Member" means a Clearing Member that, in accordance

with the provisions of Rule 901, has appointed an Appointed Clearing Member to make

settlement of obligations of the Appointing Clearing Member to deliver or receive underlying

securities arising from the exercise or maturity of cleared securities.

[Relocated to Chapter I of the Rules]

(12) through (16) renumbered as (10) through (14)

* * * * *

B.

(1) through (3) [No change]

Borrowing Clearing Member

(4) The term "Borrowing Clearing Member" means any Hedge Clearing Member or Market Loan

Clearing Member that borrows Eligible Stock in a Stock Loan.

(5) through (8) [No change]

* * * * *
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C.

(1) [No change]

Canadian Clearing Member

(2) The term "Canadian Clearing Member" means a Non-U.S. Clearing Member formed and

operating under the laws of Canada or a province thereof with its principal place of business in

Canada.

[Relocated to Chapter I of the Rules]

Canadian Hedge Clearing Member

(3) The term “Canadian Hedge Clearing Member” means a Canadian Clearing Member approved

to participate in the Stock Loan/Hedge Program.

(4) through (10) renumbered (2) through (8)

CFTC

(9) The term CFTC means the U.S. Commodity Futures Trading Commission.

(11) through (15) renumbered (10) through (14)

Clearing Member

(1615) The term “Clearing Member” means a person or organization that has been admitted to

membership in the Corporation pursuant to the provisions of the By-Laws and Rules. References

in the By-Laws or Rules to the term “Clearing Member” preceded by a capitalized reference to

an underlying interest or a cleared contract, e.g., a “Stock Clearing Member,” or a “Security

Futures Clearing Member,” shall be deemed to be to a Clearing Member approved in accordance

with Article V of the By-Laws Chapter II of the Rules to clear transactions in options on the

specified underlying interest, or in the cleared contract, as applicable, provided that the term

“Stock Clearing Member” shall be deemed to include a Clearing Member approved to clear

transactions in BOUNDs as well as stock options, the term “Treasury Securities Clearing

Member” shall mean a Clearing Member approved to clear transactions in Treasury Securities

options excluding yield-based Treasury options and the term “Index Clearing Member” shall

mean a Clearing Member approved to clear transactions in cash-settled options other than OTC

options and flexibly structured options on fund shares that are cash settled. The term “OTC Index

Option Clearing Member” means a person that has been approved to clear OTC index options.

(17) through (39) renumbered (16) through (38)

D.
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(1) through (7) [No change]

Designated Examining Authority

(8) The term “Designated Examining Authority” means the self-regulatory organization

designated by the SEC pursuant to SEC Rule 17d-1 under the Securities Exchange Act of 1934

as having responsibility for examining the Clearing Member or the Clearing Member’s

“designated self-regulatory organization”, as defined in the Rules of the Commodity Futures

Trading Commission, as applicable.

(8) through (9) renumbered (9) through (10)

Domestic Clearing Member

(10) The term “Domestic Clearing Member” means any Clearing Member other than a “NonU.S. Clearing Member” as defined in this Article I.

* * * * *

F.

FATCA

(1) The term “FATCA” means (i) the provisions of Sections 1471 through 1474 of the Internal

Revenue Code of 1986, as amended, which were enacted as part of The Foreign Account Tax

Compliance Act (or any amendment thereto or successor sections thereof), and related Treasury

Regulations and other official interpretations thereof, as in effect from time to time, and (ii) the

provisions of any intergovernmental agreement to implement The Foreign Account Tax

Compliance Act as in effect from time to time between the United States and the jurisdiction of

the FFI Clearing Member’s residency.

[Relocated to Chapter I of the Rules]

FATCA Compliant

(2) The term “FATCA Compliant” or “FATCA Compliance” means, with respect to an FFI

Clearing Member, that such FFI Clearing Member has qualified under such procedures

promulgated by the Internal Revenue Service as are in effect from time to time to establish an

exemption from withholding under FATCA such that the Corporation will not be required to

withhold any amount with respect to any payment or deemed payment to such FFI Clearing

Member under FATCA.

[Relocated to Chapter I of the Rules]

FFI Clearing Member

(3) The term “FFI Clearing Member” means any Clearing Member that is treated as a non-U.S.

entity for U.S. federal income tax purposes.

[Relocated to Chapter I of the Rules]

(4) through (16) renumbered (1) through (13)
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* * * * *

H.

Hedge Clearing Member

(1) The term "Hedge Clearing Member" means a Clearing Member approved to participate in the

Stock Loan/Hedge Program.

(2) through (3) renumbered (1) through (2)

* * * * *

L.

(1) [No change]

Lending Clearing Member

(2) The term "Lending Clearing Member" means any Hedge Clearing Member or Market Loan

Clearing Member that lends Eligible Stock in a Stock Loan.

(3) through (6) [No change]

M.

(1) through (3) [No change]

Market Loan Clearing Member

(4) The term "Market Loan Clearing Member" means a Stock Clearing Member approved to

participate in the Market Loan Program.

(5) through (7) renumbered (4) through (6)

Matched-Book Borrowing Clearing Member

(87) The term “Matched-Book Borrowing Clearing Member” shall mean, with respect to any

Matched-Book Positions in the Stock Loan/Hedge Program, the Hedge Clearing Member that

borrows Eligible Stock from a Hedge Clearing Member maintaining Matched-Book Positions in

that Eligible Stock.

Matched-Book Lending Clearing Member

(98) The term “Matched-Book Lending Clearing Member” shall mean, with respect to any
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Matched-Book Positions in the Stock Loan/Hedge Program, the Hedge Clearing Member that

lends Eligible Stock to a Hedge Clearing Member maintaining Matched-Book Positions in that

Eligible Stock.

Matched-Book Positions

(109) The term “Matched-Book Positions” shall mean Hedge Loan positions in which a single

Hedge Clearing Member borrows Eligible Stock from a Matched-Book Lending Clearing

Member and lends an equal or lesser amount of the same Eligible Stock to a Matched-Book

Borrowing Clearing Member.

(11) through (16) renumbered (10) through (15)

N.

Non-Customer

(1) The term “non-customer” in respect of any person carrying an account with a broker or dealer

(other than an account that is required to be segregated under Section 4d of the Commodity

Exchange Act) means a person that is not a customer of such broker or dealer as defined in Rules

8c-1 and 15c2-1 under the Securities Exchange Act of 1934. In addition, the term “noncustomer” shall include a Member Affiliate that (a) has consented to having its securities account

at a Clearing Member treated as a noncustomer account; (b) has executed a non-conforming

subordination agreement which has been filed with the Clearing Member’s dDesignated

eExamining aAuthority (in a form approved by such dDesignated eExamining aAuthority),

pursuant to which the Member Affiliate (i) has agreed to subordinate its claims against the

Clearing Member in respect of such account to the claims of “customers” as defined in Rule

15c3-3 of the Securities Exchange Act of 1934; (ii) provides written acknowledgment that its

securities account is not covered by the Securities Investor Protection Act of 1970 and that any

credit balances in the account are not subject to foreign investor protection (including

appropriate disclosure of these two points if the Member Affiliate’s assets are not proprietary);

(iii) contains a written representation that the subordinated assets (funds and securities) are not

those of U.S. customers; and (c) has attached to such non-conforming subordination agreement

an opinion of counsel to the effect that the Member Affiliate is legally authorized to subordinate

its claims against such Clearing Member to the claims of other Rule 15c3-3 customers; provided,

however, that the requirements set forth in clauses (a), (b) and (c) shall not apply to a Member

Affiliate that is registered as a broker-dealer under the Securities Exchange Act of 1934.

(2) through (3) [No change]

Non-U.S. Regulatory Agency

(4) The term "Non-U.S. Regulatory Agency" shall mean that government agency or selfregulatory authority primarily responsible for regulating the activities of a Non-U.S. Clearing
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Member. With respect to a Canadian Clearing Member such term shall mean the Investment

Industry Regulatory Organization of Canada.

[Relocated to Chapter I of the Rules]

Non-U.S. Securities Firm

(5) The term “Non-U.S. Securities Firm” shall mean a securities firm: (1) formed and operating

under the laws of a country other than the United States; (2) with its principal place of business

in that country; and (3) that is subject to the regulatory authority of that country’s government or

an agency or instrumentality thereof, or subject to the regulatory authority of an independent

organization or exchange in that country. The term “Non-U.S. Securities Firm” shall not include

any broker-dealer registered, or required to be registered, with the Securities and Exchange

Commission pursuant to Section 15 of the Securities Exchange Act of 1934, as amended or any

futures commission merchant registered, or required to be registered, as such pursuant to Section

4d of the Commodity Exchange Act, as amended. The term “Non-U.S. Clearing Member” shall

mean a Non-U.S. Securities Firm that has been admitted to membership in the Corporation

pursuant to the provisions of the By-Laws and Rules. The term “exempt Non-U.S. Clearing

Member” shall mean a Non-U.S. Clearing Member that has made an election pursuant to Rule

310.

[Relocated to Chapter I of the Rules]

* * * * *

Q.

Qualified Intermediary Assuming Primary Withholding Responsibility

(1) The term “Qualified Intermediary Assuming Primary Withholding Responsibility” means an

FFI Clearing Member that has entered into an agreement with the Internal Revenue Service to be

a qualified intermediary and to assume primary responsibility for reporting and for collecting and

remitting withholding tax pursuant to Chapters 3 and 4 of subtitle A, and Chapter 61 and Section

3406, of the Internal Revenue Code with respect to any income (including Dividend Equivalents)

arising from transactions entered into by the Clearing Member with the Corporation as an

intermediary, including transactions entered into on behalf of such Clearing Member’s

customers.

[Relocated to Chapter I of the Rules]

Qualified Derivatives Dealer

(2) The term “Qualified Derivatives Dealer” means an FFI Clearing Member that has entered

into an agreement with the Internal Revenue Service that permits the Corporation to make

Dividend Equivalent payments or deemed payments to such Clearing Member free from U.S.

withholding tax pursuant to Chapters 3 and 4 of subtitle A, and Chapter 61 and Section 3406, of

the Internal Revenue Code with respect to transactions entered into by such Clearing Member

with the Corporation as a principal (i.e., for such Clearing Member’s own account).

[Relocated to Chapter I of the Rules]

Quarterly Option
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(31) The term “quarterly option” means an option of a series of stock options or index options

that expires on the last business day of a calendar quarter. The term “quarterly index option”

means a quarterly option on an index.

* * * * *

S.

SEC

(1) The term SEC means the U.S. Securities and Exchange Commission.

Section 871(m) Effective Date

(1) The term “Section 871(m) Effective Date” means January 1, 2017, or, if later, the date on

which Section 871(m) of the Internal Revenue Code of 1986, as amended, and related Treasury

Regulations and other official interpretations thereof, first apply to any type of listed options

transactions.

Section 871(m) Implementation Date

(2) The term “Section 871(m) Implementation Date” means such date on or after December 1,

2016 as the Corporation may designate in an Information Memo issued to its Clearing Members.

(3) through (26) renumbered (2) through (25)

* * * * *

ARTICLE V – CLEARING MEMBERSRESERVED

Qualifications

SECTION 1. (a) Any person registered as a broker-dealer under the Securities Exchange Act of

1934, as amended, or any Non-U.S. Securities Firm, shall be eligible to become a Clearing

Member; and in addition, a futures commission merchant registered under Section 4f(a)(1) of the

Commodity Exchange Act shall be eligible to become a Clearing Member for the purpose of

clearing transactions in commodity futures, futures options and commodity options. Each

applicant to become a Clearing Member must meet the initial Clearing Member financial

requirements then in effect and maintain facilities and personnel adequate for the expeditious and

orderly transaction of business with the Corporation and other Clearing Members. Every

applicant must meet such additional non-discriminatory standards of financial responsibility,

operational capability, experience and competence as may from time to time be prescribed in the

statutory rules of the Corporation. The Corporation may, and in cases in which the Securities and

Exchange Commission, by order, directs as appropriate in the public interest, shall disapprove

the application for clearing membership of any person subject to a statutory disqualification.

[Relocated in part to proposed Rules 201, 201(d), and 204(c)]
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(b) Notwithstanding any other provision of the By-Laws or Rules, no broker or dealer registered

under Section 15(b)(11) of the Securities Exchange Act of 1934 shall clear transactions or carry

positions in cleared securities other than security futures.

[Relocated to new Rule 201(b)(4)]

(c) The procedures of the Corporation may provide that a Clearing Member shall not clear

transactions in a particular type of product unless, in addition to satisfying any specific

requirements applicable to such type of product set forth in the By-Laws and Rules, the

Corporation has specifically approved the Clearing Member to clear such type of product.

[Relocated to new Rule 201(c)]

(d) Any Clearing Member who holds positions in physically-settled metals futures or options on

such futures is required to be a member of the Exchange on which the products are traded.

[Relocated to new Rule 201(b)(2)(iii)]

(e) Beginning on the Section 871(m) Implementation Date, no applicant that, if admitted, would

be an FFI Clearing Member, will be admitted to membership unless such applicant is a Qualified

Intermediary Assuming Primary Withholding Responsibility and FATCA Compliant. In order to

be able to conduct any transaction or activity through the Corporation for its own account, such

applicant also must be a Qualified Derivatives Dealer. If such applicant currently is admitted,

such applicant must cease conducting any transaction or activity through the Corporation for its

own account until it is a Qualified Derivatives Dealer, but may continue to conduct any other

authorized transaction or activity through the Corporation provided it is a Qualified Intermediary

Assuming Primary Withholding Responsibility and FATCA Compliant.

[Relocated to new Rule 202(a)]

. . . Interpretations and Policies:

.01 Financial Responsibility. The Risk Committee will not approve any application for clearing

membership if:

[Relocated to new Rule 204(a)]

a. the applicant fails to meet the initial financial requirements set forth in the OCC Rules;

[Relocated to new Rule 204(a)]

b. the applicant has sustained net pre-tax losses, after giving effect to realized and unrealized

gains and losses in trading, investment or other proprietary accounts, (i) during the three calendar

months preceding the month in which the application is considered, in a net amount equal to

30% or more of the excess of its net capital at the end of such three-month period over the initial

net capital required by the Rules; (ii) during the two calendar months preceding the month in

which the application is considered, in a net amount equal to 25% or more of such excess net

capital, or (iii) during the calendar month preceding the month in which the application is

considered, in a net amount equal to 15% or more of such excess net capital;

c. the applicant was listed in the special surveillance list (SIPC Form 5A) most recently filed
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with the Securities Investor Protection Corporation by the applicant's designated Examining

Authority or is subject to similar special financial surveillance procedures imposed by a

regulatory or self-regulatory authority under the Commodity Exchange Act; or

d. the applicant lacks access to sufficient financial resources to meet obligations arising from

clearing membership in extreme but plausible market conditions, as determined by the

Corporation for purposes of this Rule.

[Replaced by/consolidated with Rule 301(d)]

.02 Operational Capability. The Risk Committee will not approve any application for clearing

membership unless:

a. the applicant:

1. is in compliance with all applicable requirements with respect to the maintenance of books and

records under the Securities Exchange Act of 1934, the Commodity Exchange Act, or both, as

the case may be; or

[Relocated to new Rule 302(c)]

2. in the case of a Non-U.S. Securities Firm other than a Non-U.S. Securities Firm that is

applying for clearing membership as an exempt Non-U.S. Clearing Member, maintains those

books and records necessary to reflect accurately its net capital, aggregate indebtedness and debtequity total as defined by Securities and Exchange Commission Rule 15c3-1, or, in the case of a

Non-U.S. Securities Firm that is applying for clearing membership as an exempt Non-U.S.

Clearing Member, maintains those books and records necessary to comply with the reporting

requirements of its Non-U.S. Regulatory Agency and with such additional requirements as the

Corporation may impose;

b. the applicant employs personnel and utilizes procedures which, in the opinion of the Risk

Committee, are operationally sufficient to enable the applicant to discharge its functions as a

Clearing Member in a timely and efficient manner, including the ability to process expected

volumes and values of transactions cleared by the Clearing Member within required time

frames, including at peak times and on peak days; the ability to fulfill collateral, payment, and

delivery obligations as required by the Corporation, and the ability to participate in applicable

default management activities, including auctions, as may be required by the Corporation and

in accordance with applicable laws and regulations

[Relocated to new Rule 302(d)]

c. the applicant's Designated Examining Authority (or designated self-regulatory organization, in

the case of an applicant primarily regulated as a futures commission merchant) has stated that it

has no objections to the application for clearing membership; provided that, upon the written

request of an applicant, the Risk Committee may, in exceptional cases and where good cause is

shown, waive the foregoing requirement.

[Relocated to new Rule 204(f)]
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.03 Experience and Competence. The Risk Committee has discretion not to approve, and will not

approve if so ordered by the SEC, any application for clearing membership if:

a. the applicant is subject to a "statutory disqualification," as defined in Section 3 of the

Securities Exchange Act of 1934, as amended, or, in the case of an applicant regulated as a

futures commission merchant, the applicant or a principal of the applicant, as defined in Section

8a(2) of the Commodity Exchange Act, is subject to statutory disqualification under Section

8a(2)-(4) of the Commodity Exchange Act, or, in the case of a Non-U.S. Securities Firm, any

similar provision of the laws or regulations applicable to such Non-U.S. Securities Firm;

[Relocated to Chapter I of the Rules]

b. the applicant or any natural person associated with the applicant has engaged and there is a

reasonable likelihood he will again engage in acts or practices inconsistent with just and

equitable principles of trade; or

[Relocated to new Rule 204(d)]

c. the applicant lacks substantial experience in clearing the kind(s) of cleared contracts that the

applicant proposes to clear or related kinds of transactions (e.g., stock transactions where the

applicant proposes to clear physically-settled options or futures on individual stocks or futures

transactions where the applicant proposes to clear futures options), and has failed, in the opinion

of the Risk Committee, to employ back-office personnel with sufficient experience to

compensate for the applicant’s lack of such experience.

[Relocated to new Rule 303(a)]

The terms "associated person" and "person associated with an applicant" as used in these

Interpretations and Policies means any partner, officer, director, or branch manager of such

applicant (or any person occupying a similar status or performing similar functions), any person

directly or indirectly controlling, controlled by, or under common control with such applicant, or

any employee of such applicant.

In respect of clause (a) above, the applicant must notify the Corporation in writing if the

applicant is or becomes subject to a statutory disqualification as soon as practicable upon

learning of such statutory disqualification and in any event within 5 business days. The applicant

must provide the Corporation with any information and forms, including amendments thereto,

related to the statutory disqualification provided to the SEC, the CFTC or any self-regulatory

organization, including, as applicable, any amended Form BD, Financial Industry Regulatory

Authority (“FINRA”) Form MC-400A, and any written response to a National Futures

Association (“NFA”) Rule 504 Notice of Intent or other written request for relief addressed to a

self-regulatory organization. Applicants that are not members of NFA or FINRA must provide to

the Risk Committee, at a minimum, the information required by FINRA Form MC-400A in

addition to any forms or written responses filed with any self-regulatory organization or

regulatory agency with respect to a statutory disqualification or similar provision of the laws or

regulations applicable to such applicant. If an applicant fails to provide the notice required by

this paragraph, the Risk Committee has discretion not to approve such applicant’s application for

clearing membership.
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[Consolidated with/replaced by Rule 217(b) and relocated to new Rule 306A(c)]

* * *

In addition, the Risk Committee will not approve any application for clearing membership

unless:

In respect of clause (c) above, an applicant for clearing membership or at least one associated

person of applicant:

a. in the case of a broker-dealer registered under Section 15(b)(1) or (2) of the Securities

Exchange Act of 1934), must be registered as a “Limited Principal - Financial and Operations”

with the Financial Industry Regulatory Authority or must have passed the appropriate

qualification examination for registration as such;

[Consolidated with/replaced by Rule 214(a) and moved to new Rule 303(b) with revisions]

b. in the case of a Non-U.S. Securities Firm that is applying for clearing membership as an

exempt Canadian Clearing Member, must be registered as such Canadian Clearing Member’s

Chief Financial Officer with the Investment Industry Regulatory Organization of Canada; or

[Consolidated with/replaced by Rule 214(a) and moved to new Rule 303(b) with revisions]

c. in the case of a Non-U.S. Securities Firm other than one which is applying for clearing

membership as an exempt Non-U.S. Member, has taken and successfully completed any

applicable OCC financial and operational examination for employees who are responsible for

supervising the preparation of applicant's financial reports.

[Consolidated with/replaced by Rule 214(a) and moved to new Rule 303(b) with revisions]

d. in the case of a futures commission merchant or other registrant registered under Section 4f of

the Commodity Exchange Act that is not a broker-dealer registered under Section 15(b)(1) or (2)

of the Securities Exchange Act of 1934, must meet such other non-discriminatory standards of

experience and competence as the Corporation may prescribe.

[Consolidated with/replaced by Rule 214(a) and moved to new Rule 303(b) with revisions]

If an applicant elects to use an associated person to satisfy the requirements of the foregoing

clauses applicable to such applicant that associated person shall be a full-time employee of the

applicant. The Risk Committee may exempt from the applicable requirements of the foregoing

clauses any applicant for clearing membership which entered into a facilities management

agreement in accordance with Interpretation and Policy .05 below. Upon the written request of

an applicant, the Risk Committee may, in exceptional cases and where good cause is shown,

waive the foregoing requirements and accept other standards as evidence of an applicant’s

experience in clearing securities, futures options, commodity options or futures transactions.

In addition, the Risk Committee will not recommend the approval of any application for clearing

membership unless:
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d. at least two key operations employees of the applicant who shall be full-time employees of

such applicant have attended all applicable OCC operations readiness review sessions and

successfully completed any applicable OCC operational and financial examinations for

operations employees, provided that the Risk Committee may, upon the applicant’s written

request, waive the requirement that the operations employees be full-time employees of the

applicant if the applicant’s daily operations are conducted by staff employed on a full-time basis

by an entity affiliated with the applicant; and

e. if the applicant has not applied for authorization to clear all types of transactions (i.e.,

customer transactions, firm transactions, market-maker and JBO Participant transactions), or all

kinds of transactions (e.g., transactions in stock options, Treasury securities options, foreign

currency options, cross-rate foreign currency options, cash-settled options, futures options,

commodity options and futures), or has not applied to carry positions in its accounts on a routine

basis, or has not applied to be a Hedge Clearing Member, the applicant shall have undertaken to

apply to the Risk Committee for further approval before commencing to clear any type or kind of

transaction for which approval is not currently being sought, before carrying positions in its

accounts on a routine basis, or before participating in the Stock Loan/Hedge Program, as

applicable.

[Relocated to new Rule 203(c)]

In the event that expedited treatment is requested for an application submitted pursuant to clause

(e) above, the Chief Executive Officer, Chief Operating Officer, or any delegate of such officer,

shall have the authority to approve or disapprove such application on a temporary basis. Any

delegate shall be an officer of the rank of Managing Director or higher. Thereafter, at the next

scheduled meeting of the Risk Committee, the Risk Committee shall independently review the

submitted application and shall determine de novo whether to approve or disapprove such

application. Should the Risk Committee's determination result in the modification or reversal of

the action taken by the Chief Executive Officer, Chief Operating Officer or any delegate of such

officer, any acts taken by the Corporation prior to such modification or reversal shall not be

invalidated nor shall any rights of any person arising out of such acts be affected.

Notwithstanding the foregoing, in the event a Hedge Clearing Member submits an application to

become a Market Loan Clearing Member pursuant to clause (e) above, the Chief Executive

Officer, Chief Operating Officer, or any delegate of such officer shall have the authority to

approve or disapprove such application without further review by the Risk Committee. Any

delegate shall be an officer of the rank of Managing Director or higher.

[Relocated to new Rule 203(c)]

.04 Fitness Standards. In addition to the standards of financial responsibility, operational

capability and experience and competence, the Risk Committee shall consider the criteria of the

Fitness Standards for Directors, Clearing Members and Others, as adopted or amended by the

Board of Directors from time to time, before approving any application for clearing membership.

[Relocated to new Rule 201(e)]

.05 Facilities Management. In determining whether the requirements of Sections .02, .03c, .03d,

and .03e of this Interpretation have been satisfied by an applicant, the Risk Committee will

consider the provisions of a written agreement (“facilities management agreement”) between the
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applicant and another Clearing Member (“Managing Clearing Member”), approved by the

Corporation, pursuant to which the Managing Clearing Member agrees to perform certain of the

applicant's obligations as a Clearing Member for (i) the transaction of business with the

Corporation and other Clearing Members and (ii) the maintenance of required books and records.

The Corporation shall not approve a facilities management agreement in which a Clearing

Member acts as Managing Clearing Member, and such facilities management agreement shall be

of no force or effect, unless:

[Relocated to new Rule 303(d)]

a. The agreement clearly sets forth the specific facilities management services (the "managed

services") which are to be performed by the Managing Clearing Member on behalf of a Clearing

Member (the "Managed Clearing Member") and the respective duties and obligations of the

Managing Clearing Member and Managed Clearing Member. The Risk Committee will not

approve any application for membership unless the applicant demonstrates in accordance with

this Interpretation that it has the operational capability, experience and competence to perform

those duties and obligations which are not required under the terms of the agreement to be

performed by the Managing Clearing Member.

[Relocated to new Rule 303(d)]

b. The agreement provides that it will not be terminated until 30 days after written notice of such

termination is provided (i) by the terminating party to the Corporation, and (ii) if the terminating

party is the Managing Clearing Member, by the terminating party to the Managed Clearing

Member.

[Relocated to new Rule 303(d)]

c. The agreement provides for its termination in the event the Managing Clearing Member shall

no longer be approved by the Corporation to act as a Managing Clearing Member. A Clearing

Member shall be approved by the Corporation to act as a Managing Clearing Member only so

long as the Corporation continues to be satisfied after conducting periodic reviews that the

Managing Clearing Member has the requisite operational capability, experience and competence,

and has allocated sufficient resources and experienced staff, to enable it properly to serve as a

Managing Clearing Member under all facilities management agreements to which it is a party

and that it shall have and shall maintain net capital of not less than the amount prescribed in the

Rules for Managing Clearing Members. Each Clearing Member will be required to undergo a

further operational readiness review each time it expands its facilities management activities by

an additional four Managed Clearing Members.

[Relocated to new Rule 303(d)]

.06 Additional Membership Criteria. If the Risk Committee determines that the applicant’s

financial or operational condition, in relation to the business that the applicant is expected to

transact with the Corporation, makes it necessary or advisable, for the protection of the

Corporation, Clearing Members, or the general public, the Risk Committee may impose: (i)

additional financial requirements on an applicant for clearing membership, including, but not

limited to, requiring such applicant to increase its net capital or to make and maintain an initial

margin deposit, or (ii) restrictions on the applicant’s clearance of confirmed trades. Additional
15

requirements or restrictions imposed pursuant to this Section shall remain in force for the period

determined by the Risk Committee, but in any event not later than the end of the first three

calendar months commencing after the applicant’s admission to clearing membership. The

imposition of additional requirements or restrictions pursuant to this Section shall not preclude

the Corporation from imposing contemporaneous requirements or restrictions pursuant to other

provisions of the By-Laws and Rules, including without limitation, Rule 305.

[Relocated to new Rule 204(g)]

.07 Designation as a Hedge Clearing Member. In order to be designated as a Hedge Clearing

Member, a Clearing Member must (i) be a member of the Depository (as defined in Article XXI

of the By-Laws) or be a Canadian Clearing Member on behalf of which CDS maintains an

identifiable sub-account in a CDS account at the Depository, provided that CDS is a participant

of the Depository eligible to perform the necessary functions on behalf of the Canadian Clearing

Member during the period when such Canadian Clearing Member has in effect an appointment

of CDS pursuant to the provisions set forth in this Interpretation, and (ii) execute such

agreements and other documents as the Corporation may prescribe.

[Relocated to new Rule 302(e)(1)]

A Canadian Hedge Clearing Member on behalf of which CDS maintains an identifiable subaccount in a CDS account at the Depository may appoint, in such manner as the Corporation

shall from time to time prescribe, CDS to act on its behalf with respect to effecting delivery

orders for stock loan and stock borrow transactions in the accounts of the Canadian Hedge

Clearing Member through the Depository. An appointment pursuant to this paragraph shall

become effective as of the second business day following the day on which the Corporation shall

receive written notice of the appointment from the Canadian Hedge Clearing Member, or such

later date as may be specified by the Canadian Hedge Clearing Member, and (unless the

Corporation shall terminate the appointment at an earlier time) shall remain effective until the

close of business on the thirtieth calendar day after the Corporation shall have received, from

either the Canadian Hedge Clearing Member or CDS, written notice of revocation of the

appointment, and shall remain effective thereafter, with respect to each obligation of the

Canadian Hedge Clearing Member to close out open stock loan and borrow positions directed to

CDS prior to the effective date of the revocation, until the close out of all such positions is

completed. If, for any reason, CDS ceases to act on behalf of the Canadian Hedge Clearing

Member with respect to effecting delivery orders for stock loan and stock borrow transactions,

the Corporation may require the Canadian Hedge Clearing Member to close out open stock loan

and borrow positions through buy-in and sell-out procedures, or any other procedures provided

in the By-Laws or Rules, as necessary. [Relocated to new Rule 2201(c)]The Canadian Hedge

Clearing Member shall promptly notify the Corporation, in writing, if it knows or reasonably

expects that CDS will cease, or if CDS has ceased, to act on behalf of the Canadian Hedge

Clearing Member with respect to effecting delivery orders for stock loan and stock borrow

transactions. [Relocated to new Rule 306A(b)(2)(L)]During the effectiveness of an appointment

pursuant to this paragraph, the Canadian Hedge Clearing Member shall remain responsible to the

Corporation with respect to its stock loan and borrow positions, regardless of any nonperformance or failure by CDS, and the Corporation may treat any failure by CDS to complete

delivery or payment required to close out an open stock loan or borrow position as a default by
16

such Clearing Member and the Corporation may thereby exercise all remedies that the

Corporation has under its By-Laws and Rules against a defaulting Clearing Member and the

collateral deposited by the Clearing Member. [Relocated to new Rule 2201(d)]

.07A Designation as a Market Loan Clearing Member. In order to be designated as a Market

Loan Clearing Member with respect to a particular Loan Market, a Clearing Member must be a

Hedge Clearing Member and (i) be a U.S. Clearing Member, (ii) be a subscriber to such Loan

Market with full access to services provided by the Loan Market, (iii) be a member of the

Depository that has provided the Depository with written authorization to honor instructions

issued by the Corporation against such Clearing Member’s account at the Depository, and (iv)

execute such agreements and other documents as the Corporation may prescribe. A separate

designation is required for each Loan Market in which a Clearing Member participates. A

Market Loan Clearing Member shall continue to comply with all conditions referred to in (i) –

(iv) above until the Clearing Member has terminated all open stock borrow and loan positions

resulting from Market Loans.

[Relocated to new Rule 302(e)(2)]

.08 Admission of Clearing Member Affiliates to Clear Security Futures. If an affiliate of an entity

that is currently a Clearing Member applies to become a Clearing Member solely in order to

clear transactions in futures or future options, the Corporation will endeavor to perform an

expedited review of the affiliate's qualifications as appropriate under the circumstances of each

case and, in particular, the degree to which the experience and operational resources of the

existing Clearing Member can be called upon by the affiliate. The Corporation shall have the

ability to waive normal membership requirements (other than financial requirements) and review

procedures, temporarily or permanently, where appropriate.

.09 Any Clearing Member that is a Stock Clearing Member on the day on which the Corporation

commences clearing security futures shall be authorized to clear physically-settled stock futures,

and any Clearing Member that is an Index Clearing Member on the day on which the

Corporation commences clearing security futures shall be authorized to clear cash-settled stock

futures and index futures.

.10 Regulatory Authorization. A Clearing Member must be: (i) registered as a broker-dealer

under Section 15(b)(1) or (2) of the Securities Exchange Act of 1934 (the “Exchange Act”) (a

“fully registered broker-dealer”); (ii) registered as a futures commission merchant (“FCM”)

under Section 4f(a)(1) of the Commodity Exchange Act (the “CEA”) (a “fully registered FCM”);

or (iii) a Non-U.S. Securities Firm. In addition, in order to clear transactions in particular types

of products, a Clearing Member must be in compliance with all registration and other regulatory

requirements applicable to that activity. In that regard, the following specific requirements will

ordinarily apply:

[Relocated to new Rule 201(b)]

(a) In order to clear transactions in options other than futures options or commodity options, a

Clearing Member must be a fully-registered broker-dealer or a Non-U.S. Securities Firm.
17

(b) In order to clear transactions in commodity futures, futures options and commodity options, a

Clearing Member must be (i) a fully registered FCM or (ii) not required by the CEA or the

regulations of the Commodity Futures Trading Commission (the “CFTC”) to be registered as an

FCM. (An exclusion from the FCM registration requirement under the CEA would ordinarily be

available to a firm that clears only transactions that are for a “proprietary account” as defined in

the regulations of the CFTC.)

[Relocated to new Rule 201(b)]

(c) In order to clear transactions in security futures products, a Clearing Member must be: (i) a

fully registered broker-dealer that is also (A) a fully registered FCM, (B) notice-registered as an

FCM under Section 4f(a)(2) of the CEA, or (C) not required to register as an FCM under the

CEA and the regulations of the CFTC; (ii) a fully registered FCM that is notice-registered as a

broker-dealer under Section 15(b)(11)(A) of the Exchange Act; or (iii) a Non-U.S. Securities

Firm.

[Relocated to new Rule 201(b)]

.11 Designation as an OTC Index Option Clearing Member. In order to be designated as an OTC

Index Option Clearing Member, a Clearing Member must (i) be a broker-dealer registered under

Section 15(b)(1) or (2) of the Securities Exchange Act of 1934 or a Non-U.S. Securities Firm;

(ii) execute and maintain in effect such agreements and other documents as the Corporation may

prescribe (including, for purposes of clearing OTC index options on indices published by the

Standard & Poor’s Financial Services LLC (“S&P”), a short-form index license agreement in the

form specified from time to time by S&P); (iii) be a user of or participant in an OTC Trade

Source for the purpose of affirming and submitting confirmed trades to the Corporation for

clearance; and (iv) meet such other requirements as the Corporation may specify. An OTC Index

Option Clearing Member shall continue to comply with all conditions described above until the

Clearing Member has closed out all open positions in OTC index options.

[Relocated to new Rule 201(b)]

Admission Procedure

SECTION 2. (a) Applications for clearing membership shall be in such form and contain such

information as the Corporation shall from time to time prescribe. The Risk Committee shall

review and approve or disapprove such applications for clearing membership. The Risk

Committee, or its designated delegates or agents, may examine the books and papers of any

applicant, take such evidence as they may deem necessary or employ such other means as they

may deem desirable or appropriate to ascertain relevant facts bearing upon the applicant's

qualifications. If the Risk Committee proposes to disapprove an application for clearing

membership, it shall first furnish the applicant with a written statement of its proposed

recommendation and the specific grounds therefor, and afford the applicant an opportunity to be

heard and to present evidence on its own behalf. If the Risk Committee disapproves the

application, written notice of its decision, accompanied by a statement of the specific grounds

therefor, shall be mailed or delivered to the applicant. An applicant shall have right to present

such evidence as it may deem relevant to its application. A verbatim record shall be kept of any

hearing held pursuant hereto.
18

[Relocated to new Rule 203(a)]

(b) Authority to approve applications for clearing membership shall be delegated to the Chief

Executive Officer, or Chief Operating Officer, provided that: (i) the Risk Committee’s

designated delegates or agents do not recommend that the Risk Committee impose additional

membership criteria upon the applicant pursuant to Section 1, Interpretation and Policy .06 of

this Article V, and (ii) the Risk Committee is given not less than five business days from the date

it is notified by its designated delegates or agents that the Chief Executive Officer or Chief

Operating Officer intends to approve a given application to determine that such application

should be reviewed at a meeting of the Risk Committee and the Risk Committee has not

requested that the application be reviewed at a meeting of the Risk Committee within such five

day period.

(c) The Board of Directors shall be informed of all applications for membership at its next

regularly scheduled meeting.

Conditions to Admission

SECTION 3. No applicant shall be admitted as a Clearing Member until the applicant has

deposited with the Corporation its initial contribution to the Clearing Fund in the amount

required by Chapter X of the Rules and has signed and delivered to the Corporation an

agreement in such form as the Corporation shall require, including applicant’s agreements (a) to

clear through the Corporation, either directly or through another Clearing Member, all of its

confirmed trades and all other transactions which the By-Laws or the Rules may require to be

cleared through the Corporation, (b) to abide by all provisions of the By-Laws and the Rules and

by all procedures adopted pursuant thereto, (c) that the By-Laws and the Rules shall be a part of

the terms and conditions of every confirmed trade or other contract or transaction which the

applicant, while a Clearing Member, may make or have with the Corporation, or with other

Clearing Members in respect of cleared contracts, or which may be cleared or required to be

cleared through the Corporation, (d) to grant the Corporation all liens, rights and remedies set

forth in the By-Laws and the Rules, (e) to pay to the Corporation all fees and other compensation

provided by or pursuant to the By-Laws and the Rules for clearance and for all other services

rendered by the Corporation to the applicant while a Clearing Member, (f) to pay such fines as

may be imposed on it in accordance with the By-Laws and the Rules, (g) to permit inspection of

its books and records at all times by the representatives of the Corporation and to furnish the

Corporation with all information in respect of the applicant’s business and transactions as the

Corporation or its officers may require, (h) to make such payments to or in respect of the

Clearing Fund as may be required from time to time, (i) to comply, in the case of Non-U.S.

Securities Firms, with the guidelines and restrictions imposed on domestic broker-dealers

regarding the extension of credit, as provided by Section 7 of the Securities Exchange Act of

1934 and Regulation T promulgated thereunder by the Board of Governors of the Federal

Reserve System, with respect to any customer account that includes cleared contracts issued by

the Corporation, (j) to comply, in the case of Non-U.S. Securities Firms, with the Rules of the

Financial Industry Regulatory Authority governing maintenance margin and cut-off times for the

submission of exercise notices by customers, and (k) to consent, in the case of Non-U.S.
19

Securities Firms, to the jurisdiction of Illinois courts and to the application of United States law

in connection with any dispute with the Corporation arising from membership.

[Relocated to new Rule 204(b)]

. . . Interpretations and Policies:

.01 Each applicant that has been approved for clearing membership subject to satisfaction of

specified conditions shall meet all conditions applicable to its admission within six months from

the date on which its application was approved, unless the Risk Committee prescribed an earlier

date at the time the applicant was approved for clearing membership. In the event that an

applicant fails to meet such conditions within the applicable time period, the approval of the

application shall be deemed withdrawn and the application shall be deemed to have lapsed,

unless the Corporation shall determine to extend the deadline for fulfilling such conditions. Any

applicant seeking an extension under this paragraph shall submit a written request to the

Secretary, specifying in detail any material changes that have occurred in applicant's financial

condition, operational capability and experience and competence in clearing securities

transactions from the date on which its application for clearing membership was approved by the

Risk Committee. The Chief Executive Officer, Chief Operating Officer, or, if it is not feasible

for the Chief Executive Officer or Chief Operating Officer to take such action, then a Designated

Officer shall have the authority to approve or disapprove the applicant's request for an extension,

which shall be communicated in writing to the applicant. In no event may that deadline be

extended beyond one year from the date the application originally was approved.

[Relocated to new Rule 204(e)]

* * * * *

ARTICLE XI – AMENDMENT OF THE BY-LAWS AND THE RULES

Amendment of the By-Laws

SECTION 1. The By-Laws may be amended at any time by the Board of Directors upon the

affirmative vote of two-thirds of the directors then in office (but not less than a majority of the

number of directors fixed by these By-Laws); provided that Sections 2, 3 and 5 of Article II,

Article III, the first two sentences of Section 1 of Article V, the first sentence of Section 10 of

Article VI, Sections 11 and 11A of Article VI, Article VIIA, Article VIIB, Section 9 of Article

IX, and this Section 1 of Article XI may not be amended by action of the Board of Directors

without the approval of the holders of all of the outstanding Common Stock of the Corporation.

Amendment of the Rules

SECTION 2. [No change]

* * * * *
20

ARTICLE XXI – STOCK LOAN/HEDGE PROGRAM

Introduction through Section 1 [No change]

Role of the Corporation

SECTION 2.

(a) through (b) [No change]

(c) The Corporation may at any time terminate the outstanding Stock Loans relating to one or

more particular Eligible Stocks upon a determination by the Corporation, in its sole discretion,

that such action is warranted by reason of the lack of substantial volume in such Stock Loans, the

impending termination of business on the part of the Corporation, the inability of the Corporation

from time to time to maintain in effect satisfactory arrangements with the Depository, or other

circumstances in which the Corporation in its sole discretion determines that such action is

necessary or appropriate for the protection of the Corporation, its Clearing Members or the

public. The Corporation may effect a termination pursuant to this paragraph (c) by giving written

notice thereof to all affected Hedge Clearing Members specifying the date on which such

termination is to become effective, which date shall be a stock loan business day at least two

stock loan business days after the date of such notice.

. . . Interpretations and Policies:

.01 If a Lending Clearing Member and a Borrowing Clearing Member complete the termination

of a Stock Loan at a price other than the correct settlement price for the termination, the

Corporation will treat the termination as having been completed at the correct settlement price. If

the records of the Corporation show that a Lending Clearing Member and a Borrowing Clearing

Member are party on a particular day to two or more Stock Loans between them in respect of a

particular Eligible Stock but having different termination settlement prices (this might occur

because one or more of the Stock Loans was initiated on that day) and the Lending Clearing

Member and the Borrowing Clearing Member complete the termination of a Stock Loan at a

price other than the correct settlement price for the termination of any of the Stock Loans, the

Corporation will determine which of the Stock Loans will be deemed to have been terminated in

accordance with its procedures as in effect from time to time, and will treat the termination as

having been completed at the correct settlement price for that Stock Loan. In any of these events,

the records of the Corporation shall be dispositive as between the Corporation and each of the

two Hedge Clearing Members, the Lending Clearing Member and the Borrowing Clearing

Member will be responsible for reconciling the discrepancy between the actual price and the

settlement price utilized by the Corporation among themselves and, notwithstanding paragraph

(a) of this Section, the Corporation shall have no responsibility to either the Borrowing Clearing

Member or the Lending Clearing Member to reconcile the discrepancy.

SECTION 3. [No change]
21

SECTION 4. [No change]

Maintaining Stock Loan and Stock Borrow Positions in Accounts

SECTION 5. [No change]

. . . Interpretations and Policies:

.01 Until such time as the Corporation determines that appropriate regulatory approvals have

been obtained, a Hedge Clearing Member is not permitted to allocate stock loan or stock borrow

positions resulting from Stock Loans to any proprietary X-M account, non-proprietary X-M

account, internal non-proprietary cross-margining account or segregated futures account.

* * * * *

ARTICLE XXIA – MARKET LOAN PROGRAM

Introduction through SECTION 4 [No change]

Maintaining Stock Loan and Stock Borrow Positions in Accounts

SECTION 5. (a) [No change]

(b) Notwithstanding the provisions of Section 3 of Article VI of the By-Laws, stock loan and

stock borrow positions resulting from Market Loans may be maintained in any of a Market Loan

Clearing Member's accounts with the Corporation. For the purposes of Section 3 of Article VI of

the By-Laws, stock loan positions resulting from Market Loans shall be deemed to be

"securities" and stock borrow positions resulting from Market Loans shall be deemed to be

"funds," and the authority of the Corporation to close out "positions" in any account shall include

the authority to close out such stock loan and stock borrow positions.

[Section 5 of this Article supplements Section 3 of Article VI of the By-Laws.]

. . . Interpretations and Policies:

.01 Until such time as the Corporation determines that appropriate regulatory approvals have

been obtained, a Market Loan Clearing Member is not permitted to allocate stock loan or stock

borrow positions resulting from Market Loans to any proprietary X-M account, non-proprietary

X-M account, internal non-proprietary cross-margining account or segregated futures account.

* * * * *