calendar year of the contract expiration and allowances having a vintage of any year prior
to the calendar year of the contract expiration.

1206.

Delivery Procedures

(a) Delivery. Delivery is a three day process consisting of Position Day,

Notice Day and Delivery Day. The three days occur over three consecutive Business

Days.

(i) Position Day. The tenth trading day prior to a Sulfur
Financial Instrument futures contract’s expiration is the first day that Clearing
Members must report their long futures positions by trade date to the Clearing
Service Provider as of the close of business on the tenth trading day prior to
expiration. Starting on the first Position Day, Clearing Members holding open
short positions (hereafter referred to as “seller Clearing Member”) may submit
delivery tender notices to the clearing Service Provider on their own behalf or on
the behalf of their open short futures position holders, as applicable, in a format
acceptable to the Clearing Service Provider. Upon receipt of a delivery tender
notice, the Clearing Service Provider will make the appropriate delivery
assignment.

(ii) Notice Day. On the Business Day after the delivery
tender notice has been submitted and the delivery assignment has been made by
the Clearing Service Provider, the seller Clearing Member must provide to the
buyer Clearing Member(s) a description of the underlying EPA SO2 Emission
Allowances to be delivered. The buyer Clearing Member(s) must provide EPA
Allowance Tracking System (“ATS”) account information to the seller Clearing
Member. This information exchange must be completed by 4:00 p.m. (Central
time) on Notice Day. The seller Clearing Member must ensurehave the
appropriate emission allowances are on deposited in its_or its customer’s EPA
ATS account by 5:00 p.m. (Central time) on the Notice Day.

(iii) Delivery Day At-6:00-pm-{Centraltime}-0On the Delivery Day,

the Clearing Service Provider shall issue payment instructions to the respective
buyer Clearing Member(s) for the full contract value based upon the Position
Day’s settlement price in a means and manner prescribed by the Clearing Service
Provider. By 10:00 a.m. (Central time) on the Delivery Day, the seller Clearing
Member must ensure that it or its customer has electronically submitted the SO2
Emission Allowances transfer instructions via the EPA’s Clean Air Market
Division (CAMD) Business System. The seller Clearing Member must forward
the EPA confirmation of transfer to the Clearing Service Provider as verification
that the delivery has been completed.

(iv) | Payment After receipt of the EPA confirmation of transfer
from the seller Clearing Member, the Clearing Service Provider will release the
delivery proceeds to the seller Clearing Member according the following
schedule:


by the CCFE CSP.

Starting on the First Position Day, CCFE clearing members (hereafter referred to as
“seller”) on behalf of their short futures position holders may submit delivery tender
notices to CCFE CSP, in a format acceptable to CCFE CSP.

Notice Day

Business day after the delivery tender notice has been submitted and the delivery
assignment made by the CCFE CSP, the seller clearing member provides to the buyer
clearing member(s) a description of the underlying EPA Emission Allowances to be
delivered. The buyer clearing member(s) provides EPA Allowance Tracking System
account information to the seller clearing member. Information exchange is to be
completed by 4:00 p.m. Central Time.

The seller clearing member must ensure the appropriate emission allowances are on
deposit in its or its customer’s EPA Allowance Tracking System account by the 5:00
p.m. Central Time.

CCFE CSP will issue payment instructions to the respective buyer clearing member for
the full contract value based upon the Position Day’s settlement price in a means and
manner prescribed by CCFE CSP.

By 10:00 a.m. Central Time, the seller clearing member must ensure that it or its
customer has electronically submitted the allowance transfer instructions via the EPA’s
CAMD Business System.

Seller clearing member must forward the EPA confirmation to the CCFE CSP as
verification that the delivery has been completed.

Payment

CCFE CSP will release the delivery proceeds to the seller clearing member on the
following schedule.

EPA confirmation received by CCFE CSP prior to 12:45 p.m. CT ~ same day in the mid-
day variation cycle.

EPA confirmation received by CCFE CSP after 12:45 p.m. CT — next business day
through the 6:40 a.m. CT settlement cycle.

Price Limits

100 ticks ($2,500) up and down from the previous trading day’s settlement price.
Expanded daily limits if any contract month settles at the daily limit

Price limits will not be applied for an expiring contract month effective the first Trading
Session of the expiring calendar month.

Reportable Position Limits

25 contracts, equivalent to 625 U.S. EPA SO, Emission Allowances

Nearby Expiration Month
Speculative Position Limits

4,000 contracts, equivalent to 100,000 U.S. EPA SO, Emission Allowances

Contract specifications rules may be subject to change. If CCFE determines that changes to the contract specifications
tules are warranted, reasonable efforts will be taken to provide appropriate advance notification of the changes.

This document is a summary of the CCFE contract specification rules. See the CCFE rulebook for complete contract

specification rules.

August 2006 v3.3



futures contracts. The Exchange of Future for Physical must meet all requirements of,
and must be reported to the Exchange in accordance with, Rule 411.

(m) Block Trades. Pursuant to Rule 412(a)(i), the minimum Block Trade
quantity for the Sulfur Financial Instrument futures contract shall be determined by the
Exchange from time to time. If the Block Trade is executed as a spread or a combination,
one leg must meet the minimum Block Trade quantity for the Sulfur Financial Instrument
futures contract and the other legs(s) must have a contract size that is reasonably related
to the leg meeting the minimum Block Trade quantity. The Block Trade must meet all
requirements of, and must be reported to the Exchange in accordance with, Rule 412.

1204. Settlement Price Calculations
Contract month settlement prices will be based on the following criteria:
(a) A single traded price during the pre-close.

(b) If more than one trade occurs during the pre-close, the trade volume
weighted average of the prices, rounded to the nearest tick.

(c) If no trade occurs during the pre-close, the following will be given
consideration:

(i) the volume weighted average of the last two trade prices,
rounded to the nearest tick;

(ii) if ne-trades-_in-the-Trading Session, the mid-point between
the best bid and offer (volume weighted) in the pre-close,
rounded to the nearest tick;

(iii) spread price relationships; and

(iv) time value between the contract months.

(e) The Exchange reserves the right to take into account other factors in
determining settlement prices.

1205. Deliverable Instruments

U.S. Environmental Protection Agency (“EPA”) SO2 Emission Allowances equal
to the contract size.

Applicable for the June 2005 contract expiration, the SO2 emission allowances
acceptable for delivery are: allowances having a vintage corresponding to the calendar
year of the contract expiration; allowances having a vintage of years prior to the calendar
year of the contract expiration; and, allowances having a vintage corresponding to the
first year subsequent to the calendar year of the contract expiration.

Applicable for all contract expirations after June 2005, the SO2 emission
allowances acceptable for delivery are: allowances having a vintage corresponding to the


EPA confirmation received by the Clearing Service Provider at or prior to
12:45 p.m. (Central time) — same day in the Clearing Service Provider’s mid-day
variation cycle, if applicable.

EPA confirmation received by the Clearing Service Provider after 12:45
p.m. (Central time) — next business day through the 6:40 a.m. (Central time)
settlement cycle.

1207. Validity of Documents

The Exchange makes no representation regarding the authenticity, validity or
accuracy of any delivery tender notice, description of underlying EPA SO, Emission
Allowance transfer instructions, EPA confirmation of transfer or other document or
instrument delivered pursuant to these rules.


‘SOR 16698 HOLY, 2 VOC 11746634, PHIOATZZ-ST, CHEER OTIT, 5201898477", SFH20000"BOO COPGer', S02 14a

. . 190 South LaSolte Strect, Suite 800 T 312.5843
Chicago Climate Exchange’ chicago, ilinots 60603 F 3125543

August 8, 2006

Ms. Eileen A. Donovan

Acting Secretary

Commodity Futures Trading Commission
Three Lafayette Centre

1155 21TM Street, N.W.

Washington, C.C. 20581

Q3AIZ9au

Re: Chicago Climate Futures Exchange, LLC
Submission No. 06-05

Dear Ms. Donovan:

Pursuant to Section 5c(c)(1) of the Commodity Exchange Act, as amended (the “Act") and Parts 40.6 of
the regulations promulgated by the Commodity Futures Trading Commission (“CFTC”) under the Act,
Chicago Climate Futures Exchange, LLC (“CCFE”) hereby submits the following: amended Rule 1204 to
modify settlement price calculation procedures; amended Rule 1206 to modify delivery procedures to allow
use of customer's EPA ETS accounts; and, amended contract specifications for its Sulfur Financial
Instrument (“SFI”) futures contract revising the opening time for the SFI futures market to 7:30 a.m. central
time from 8:30 a.m. central time.

CCFE intends to make these amendments effective as of August 11, 2006. The Exchange certifies that
these amendments neither violate nor are inconsistent with any portion of the Act or of the rules
thereunder.

Amarked copy of amended Rule 1204 and Rule 1206 is attached hereto along with a revised summary of
the contract specifications for SF] futures contracts.

Should you require additional information regarding this submission, please contact me at 312.554.0812.
Please reference our submission number 06-05 in any related correspondence.

Very t Ours,

Ann M. Cresce
Senior Vice President & General Counsel

cc: Martin Murray
Gregory Price

www.chicagoclimateexchange.c:

BOXSEALZ WC LIS PMINASZZ-G', CHAZ, 20 LEGS? TT,



CCFE

Chicago Climate Futures Exchange

Chicago Climate Futures Exchange, LLC

Sulfur Financial Instrument Futures Contract Specifications

Contract Size

25 U.S EPA SO; Emission Allowances

Quotation

US dollars

Minimum Tick Increment

$1.00 per U.S. EPA SO, Emission Allowance = $25.00 per contract

Symbol

SFI

Trading Hours

7:30 a.m. ~ 3:00p.m. Central Time

Delivery Months

Six consecutive quarterly contracts on a March, June, September, December cycle
plus up to eight annual December contracts
plus the front two serial calendar months

Expiration of a June contract will not require the listing of a new quarterly cycle contract
through the June 2013 contract

First Trading Day

The first trading day of a contract is the first business day following an expiration day.

Last Trading Day

The last day of trading is the last business day of the expiration month.

Settlement Price Calculation

Settlement prices will be based on the following criteria:
a. A single traded price during the pre-close.
b. If more than one trade occurs during the pre-close, the trade volume weighted
average of the prices, rounded to the nearest tick.
c. If no trade occurs during the pre-close, the following will be given consideration;
1. the volume weighted average of the last two trade prices, rounded to the
nearest tick;
2. the mid-point between the best bid and offer (volume weighted) in the
pre-close rounded to the nearest tick;
3. spread price relationships; and
4. time value between the contract months
d. The Exchange reserves the right to take into account other factors in determining
settlement prices.

Deliverable Instruments

U.S. Environmental Protection Agency (“EPA”) SO, Emission Allowances equal to the
contract size.

Applicable for all contract expirations, the SO) Emission Allowances acceptable for
delivery are: allowances having a vintage corresponding to the calendar year of the
contract expiration and allowances having a vintage of any year prior to the calendar year
of the contract expiration.

Delivery Process

Clearing participants and parties trading the market must have SO, allowance tracking
accounts established with the EPA.

Delivery is a three day process consisting of Position Day, Notice Day and Delivery
Day. The three days occur over three consecutive business days.

Position Day

The tenth trading day prior to a contract’s expiration (expiration occurring after the close
on the final trading day) is the first day that CCFE clearing members must report their
long futures positions in the expiring contract. The long positions as of the close of
business on the tenth trading prior to expiration, by trade date, must be reported to the
CCFE Clearing Service Provider (““CCFE CSP”) in the time frame and format required

August 2006 v3.3



CHAPTER 12
SULFUR FINANCIAL INSTRUMENT FUTURES
CONTRACT SPECIFICATIONS

1201. Scope of Chapter

This Chapter applies to trading in Sulfur Financial Instrument futures contacts.
The procedures for clearing, trading, settlement, and any other matters not specifically
covered herein shall be governed by the generally applicable rules of the Exchange.

1202. Eligibility

Clearing members and Trading Privilege Holders trading in Sulfur Financial
Instruments futures contacts must have SO2 registry accounts established with the EPA.

1203. Contract Specifications

(a) Contract size. | The contract size for the Sulfur Financial Instrument futures
contract is 25 of U.S. Environmental Protection Agency (“EPA”) SO? emission
allowances (““SO2 Emission Allowances”).

(b) Schedule. | The Exchange may list for trading up to six consecutive quarterly
contract months on the March quarterly cycle (March, June, September, December) for
the Sulfur Financial Instrument futures contract as well as up to eight annual December
contracts after the last listed quarterly contract; and the front two serial calendar months.
The trading days for Sulfur Financial Instrument futures contracts shall be determined by
the Exchange from time to time.

The trading hours for the Sulfur Financial Instrument futures contract shall be
determined by the Exchange from time to time.

(c) Termination of Trading (Contract Expiration). Trading in the last Sulfur
Financial Instrument futures contract terminates on the last Business Day of the expiring
futures contract month at the normal Trading Session closing time.

(d) |New Contract Listing. A new contract month will be listed on the next
Business Day following a Contract Expiration.

(e) Minimum Tick Increment. The minimum tick increment of the Sulfur
Financial Instrument futures contract is $1.00 per SO2 Emission Allowance, which is
equal to $25.00 per contract.

(f) Reportable Position. Pursuant to Commission Regulation §15.03 and
Commission Regulation Part 17, the position level that is required to the Commission is
any open position in Sulfur Financial Instrument futures contracts at the close of trading


on any trading day equal to or in excess of twenty-five contracts on either side of the
market.

If one contract month has a reportable position, all contract months’
positions must be reported.

(g) Position Limits. A person may not own or control more than 4,000
contracts, equivalent to 100,000 SO2 Emission Allowances, net long or net short, in the
nearby expiring futures contract month.

For the purposes of this rule, the positions of all accounts for which a person
directly or indirectly controls trading shall be included, as described in Rule 409(e).

The foregoing position limit shall not apply to bona fide hedge positions meeting
the requirements of the Commission Regulation § 1.3(z)(1) and the Rules of the
Exchange.

(h) Contract Modifications. Specifications are fixed as of the first day of
trading of a contract. If any U.S. Government agency or body issues an order, ruling,
directive or law that conflicts with the requirements of these rules, such order, ruling,
directive or law shall construed to take precedence and become part of these rules, and all
open and new contracts shall be subject to such government orders.

(i) Daily Price Limits. Pursuant to Rule 413, the price limits for Sulfur Financial
Instrument futures contracts are 100 ticks ($2,500) above and below the previous Trading
Session’s settlement price.

(j) Expanded Daily Price Limits

(i) When any contract month is settled at a Daily Price Limit, the
Daily Price Limits for all contract months will increase to 150 ticks ($3,750) for
the next three consecutive Trading Sessions.

(ii) Price limits for all contracts months will revert back to their Daily
Price Limits as stipulated in (i) above on the third consecutive Trading Session if
no contract month is settled at an Expanded Daily Price Limit. However, if one
or more contract months are settled at the Expanded Daily Price Limit on the third
consecutive Trading Session as stipulated in (i)(a) above, Expanded Daily Price
Limits will remain in effect for another three consecutive Trading Sessions. The
Exchange has the authority to modify the level of the Expanded Daily Limits.

(k) Expiration Contract Month Trading Limits. Effective with the opening
of the first Trading Session in the calendar month of an expiring contract month, the
expiring contract month will not be subject to Daily price Limits or Expanded Daily Price
Limits.

(0) Exchange of Future for Physical. There is no minimum size for an
Exchange of Future for Physical transaction with respect to Sulfur Financial Instrument