0 K:f 10330 NW Pm;ri, v;~ Rd 

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816-891-7000 Office 

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July 28, 2008 

David A. Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street N.W. 

Washington, D.C. 20581 U) 

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Re: Chicago Mercantile Exchange Exemption Requests and Request for Relief~ .t:: 

Pursuant to Section 4(c) and 4(d) of the Commodity Exchange Act -73 Fed. Reg. ~03 · · 

(July 7, 2008) · :;,. ~ ~ 

Dear Mr. Stawick: 

FCStone Group Inc. appreciates the opportunity to provide comment on the 

Commodity Futures Trading Commission's ("CFTC or Commission") Federal Register 

Release dated July 7, 2008 ("the Release"). Chicago Mercantile Exchange ("CME") is 

proposing to offer clearing services for agricultural swaps that will be executed offexchange and cash settled. 

FCStone Group, Inc. is a for-profit corporation organized under the laws of the 

State of Delaware. FCStone Group's chief operating subsidiary is FCStone LLC. 

FCStone LLC is a registered Futures Commission Merchant. FCStone Group, Inc and 

its subsidiaries provide commodity risk management consulting and transaction 

execution services to commercial commodity intermediaries, end-users and producers. 

FCStone Group, Inc and its subsidiaries assist primarily middle-market customers in 

optimizing their profit margins and mitigating exposure to commodity price risk. 

FCStone Group, Inc strongly supports the CME's request to permit the clearing 

of OTC Agricultural Swap Transactions and the Commingling of Customer Funds 

Associated with such transactions with other Funds Held in Segregated Accounts for the 

following reasons: 

Mitigating Counter-Party Default Risk: 

By allowing the CME to clear OTC Agricultural Swap Transactions, counter-party 

credit risk would be mitigated as the CME, a registered derivatives clearing organization 

in good standing and in compliance with Part 39 of the Commission's rules and 

regulations, would provide to the counter-party of these swap transactions a guarantee 

to make whole. 

The CME has proven its ability to manage risk by securing proper funding to 

protect itself if a default situation were to arise and has demonstrated with its past 

successful risk management techniques and procedures to ensure intermediaries have 

the financial wherewithal to clear these transactions. 

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Settlement Pricing and Performance Bond Methodology: 

10330 NW Prairie View Rd 

Kansas City, MO 64153 

816-891-7000 Office 

As the CME purports in its petition, settlement prices for these swap transactions 

will be based on the settlement of the respective futures contract. These settlement 

procedures provide for standardization of the these products adding credibility and 

security to these instruments thereby opening these markets to other users who may 

have been reluctant in the past as settlement was not standardized. Standardizing 

performance bond applications to these products will provide for a more level playing 

field in OTC markets, offering guidance on margining these types of positions. 

Alternative for Delivery: 

Currently corn producers and consumers located in the western corn region 

including Nebraska, Iowa, South Dakota and Minnesota are unable to access 

standardized products tailored to their specific crop. By design these tailored 

standardized corn basis swaps will provide these producers an alternative to delivery 

and as such clearing these products by a regulated clearing organization will impart 

liquidity in these markets affording these producers and consumers greater flexibility in 

managing their risk. 

·performance Relief: 

Traditional short hedgers are currently in great need of performance bond/margin 

relief. For a short hedger to manage his risk in these violate markets, his costs to 

maintain positions in these markets is costly and in some instances unavailable. These 

products may mitigate some of the financing issues faced by the producer. As noted in 

the CME's request, the clearing house may determine to apply inter-market spread 

credits for accounts with identical ownership that hold such spread positions. Effectively 

this spread credit could provide much needed performance bond relief and still 

encourage growth and product development in these areas. 

For reasons stated above, FCStone Group Inc and its subsidiaries believe the 

Commission should grant the Orders requested in the CME Petition and such orders are 

consistent with Congress' intent that the Commission use its exemption power under 

4(c) of the Commodity Exchange Act to provide, "certainty and stability to existing and 

emerging markets so that financial innovation and market development can proceed in 

an effective and competitive manner". 1 

1 HOUSE CONF. REPORT NO. 102-978, 1992 U.S.C.C.A.N. 3179, 3213 ("4(c) Conf. Report").