GDCMEGroup A CME/Citlca&o Board of -/NYMEX Company 

VIA ELECTRONIC MAIL 

David Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, D.C. 20581 

secretarv@cftc.gov 

February 20, 2009 

Re: Regulatorv Governance -74 FR 3475 (January 21. 2009) 

Dear Mr. Stawick: 

COMMENT 

Craig 5. Donohue 

Chief Executive Officer 

CME Group Inc. ("CME Group") appreciates the opportunity to comment on the Commodity Futures 

Trading Commission's ("Commission") proposed amendments to the definition of "public director" 

contained in its acceptable practices for compliance with Core Principle 15 of the Commodity Exchange 

Act ("CEA"). 

CME Group was formed by the merger of Chicago Mercantile Exchange Holdings Inc. and CBOT 

Holdings Inc. in 2007, and subsequently merged with NYMEX Holdings, Inc. in 2008. CME Group is the 

parent of four designated contract markets ("DCMs"): (1) the Chicago Mercantile Exchange ("CME"); (2) 

the Chicago Board of Trade ("CBOT"); (3) the New York Mercantile Exchange ("NYMEX"); and (4) the 

Commodity Exchange ("COMEX"). CME is also among the largest Derivatives Clearing Organizations in 

the world. CME Group serves the risk management needs of customers around the globe. As an 

international marketplace, CME Group brings buyers and sellers together on the CME Globex® electronic 

trading platform and on trading floors in Chicago and New York. The CME Group DCMs offer the widest 

range of benchmark products available across all major asset classes, including futures and options 

based on interest rates, equity indexes, foreign exchange, energy, emissions, agricultural commodities, 

metals, and alternative investment products such as weather and real estate. 

Background 

On July 7, 2006, and January 31, 2007, respectively, the Commission proposed and adopted acceptable 

practices for compliance with Core Principle 15. Core Principle 15, set forth in Section 5(d)(15) of the 

CEA, requires DCMs to "establish and enforce rules to minimize conflicts of interest in the decision 

making process of the contract market and establish a process for resolving such conflicts of interest." 

The acceptable practices included three "operational provisions". First, a DCM's board. of directors must 
David Stawick 

February 20, 2009 

Page 2 

be composed of at least 35% public directors; second, a DCM's regulatory programs must' be subject to 

the oversight of a Regulatory Oversight Committee ("ROC") consisting exclusively of public directors; and 

third, a DCM's disciplinary panels must include at least one person who would qualify as a public director. 

The acceptable practices also set forth a definition of public director that applied to all three operational 

provisions. 

On March 26, 2007, the Commission sought comment on proposed amendments to the definition of 

public director in the acceptable practices. The Commission indefinitely stayed the effectiveness of the 

Core Principle 15 acceptable practices in their entirety on November 23, 2007, since the definition of 

public director had not yet been finalized. Finally, the Commission issued its current modified proposal 

regarding the definition of public director, and withdrew its March 26, 2007 proposed amendments. We 

commend the Commission for confirming that the acceptable practices for compliance with Core Principle 

15 in their entirety, including the proposed definition of public director, are non-exclusive, and that there 

may be other equally acceptable means of compliance with the Core Principle. 

The CME Group DCMs previously filed separate comment letters regarding both the original proposed 

acceptable practices as a whole, and the Commission's earlier proposed amendments to the definition of 

public director. We agree that it is useful to nominate, for election by the shareholders, qualified 

individuals who bring experience from a variety of backgrounds. We believe that each publicly traded 

DCM has an obligation to its shareholders to follow the listing rules of the relevant securities exchange 

and to nominate for election as directors a mix of individuals based on their ability to create value for the 

corporation. We do not agree that the numerical standard set out in the acceptable practices or the 

definition of public director is helpful in accomplishing the goals of Core Principle 15. We have 

consistently met and exceeded the requirements of Core Principle 15 by means of clear and effective 

policies and procedures to minimize conflicts of interest in decision making. In fact, some of the 

Commission's acceptable practices, such as the concept of an ROC for example, are based upon 

governance standards first implemented by CME. 

CME Group continues to believe that the board composition acceptable practices are not related to Core 

Principle 15 and conflict with the clear Congressional intent in the Commodity Futures Modernization Act 

of 2000 ("CFMA") to impose no composition requirements on the boards of publicly owned futures 

exchanges. Notwithstanding our continued belief that the proposed acceptable practices are 

unnecessary and contrary to Congressional intent, we commend the Commission's efforts to significantly 

improve the definition of public director as discussed below. 

The Definition of Public Director 

The definition of public director contained in the acceptable practices adopted on January 31, 2007, was 

not useful. The Commission attempted to address some of the problems of that definition in its March 26, 

2007 proposal. The Commission has now offered additional refinements to its definition of public director. 
David Stawick 

February 20, 2009 

Page3 

The Commission has not modified its overarching materiality test that requires that a public director must 

"have no material relationship with the contract market • However, the Commission has proposed 

substantial amendments to its bright line tests that define certain specific relationships as per se material 

such that an individual would be disqualified from service as a public director under the acceptable 

practices. 

The Commission has appropriately recognized that an individual may be a director of both a DCM and its 

parent, subsidiary, or entity that shares a common parent with the DCM, and not lose his or her status as 

a public director. For example, this amendment clarifies that in a corporate structure such as CME 

Group's, where the holding company and its subsidiary DCMs share identical boards of directors, the 

same individuals could serve as public directors on each board while continuing to meet the proposed 

definition. 

The Commission has also clarified that a director would be disqualified from serving as a public director if 

he were a member of the DCM or an officer or director of a member, while recognizing that not all 

employment relationships with a member would constitute an automatic disqualification. This allows an 

employee of a member to qualify as a public director unless the DCM determines that his or her particular 

employment relationship with the member constitutes a material relationship with the DCM. We believe 

that this amendment appropriately enlarges the potential pool of public director candidates that can bring 

necessary knowledge and experience to the board of a DCM. It also avoids the automatic disqualification 

of immediate family members of employees of members who are not directors or officers of such 

members. However, we urge the Commission to consider a further refinement with respect to immediate 

family members. In particular, we do not believe that an individual should be considered to have a per se 

material relationship with a DCM merely because his immediate family member is a director or an officer 

of a member. Therefore, we suggest that the Commission limit the safe harbor bright line test to only 

exclude individuals whose family members are executive officers of members. 1 This further modification 

would serve to permit a person to serve as a public director if, for example, his immediate family member 

were an independent director of a publicly-traded member or a junior officer who may have no 

responsibilities with respect to the futures business of a large broker-dealer member. Furthermore, under 

the acceptable practice definition, such a person would remain subject to the overarching material 

relationship test. 

The Commission has refined the disqualifying payment provision in four significant and appropriate ways. 

First, it has defined the types of prohibited payments as those for legal, accounting and consulting 

services. Second, it has limited the payment recipients to the potential public director, and any firm with 

which he is an officer, partner or director, and eliminated the earlier proposal to include firms of which the 

potential director was an employee. Third, the current proposal limits the prohibited payment providers to 

1 This is consistent with the parallel provision in the Independence Policy of the NYSE Euronext Board of Directors, 

http://www.nyse.com/pdfs/director independence policy.pdf, and the Securities and Exchange Commission's 

definition of an independent director of a national securities exchange in its proposed, but never adopted, Rule 6a-5 

under the Securities Exchange Act of 1934. 69 FR 71126, 71214-71215 (December 8, 2004). 

http://www.sec.gov/rules/prooosed/34-50699.pdf. 
David Stawick 

February 20, 2009 

Page4 

the DCM and its affiliates, while eliminating members and officers and directors of members, as 

previously proposed. Fourth, it has clarified that the $100,000 payment limit does not include 

compensation for services as a director of an affiliate, in addition to excluding compensation for services 

as a director of the DCM. These amendments together serve to limit the automatically disqualifying 

payments, thus appropriately permitting additional persons to potentially serve as public directors of 

DCMs under the safe harbor definition. 

In sum, we believe that the Commission has substantially improved its proposed definition of public 

director, in connection with the non-exclusive safe harbor acceptable practices for compliance with Core 

Principle 15. We appreciate the Commission's efforts in this regard. 

CME Group thanks the Commission for the opportunity to comment on this matter. We would be happy 

to discuss any of these issues with Commission staff. If you have any comments or questions, please 

feel free to contact me at (312) 930-8275 or Craig.Donohue@cmegroup.com; Richard Lamm, Managing 

Director, Chief Regulatory Counsel, at (312) 930-2041 or Richard.Lamm@cmegroup.com; or Anne 

Polaski, Associate Director and Regulatory Counsel, at (312) 338-2679 or Anne.Polaski@cmegroup.com. 

cc: Acting Chairman Michael V. Dunn 

Commissioner Walter Lukken 

Commissioner Bart Chilton 

Commissioner Jill E. Sommers 

Rachel F. Berdan sky 

Sincerely, 

6~J' s: f)plef~ Craig S. Donohue