Clearing members are highly capitalized, closely monitored and carefully selected companies that stand behind all trades made through CME Group’s Exchanges. Clearing members assume full financial and performance responsibility for all transactions executed through them and cleared by CME Clearing. They are responsible and accountable for every position they carry, whether it is for the account of a member, member firm, non-member customer or their own account.
CME Clearing provides clearing services to CBOT and is a division of CME, through which all trades are confirmed, matched and settled on a daily basis until either offset or delivered and through which all financial settlement is made. In every matched transaction executed through CME, CBOT, NYMEX and COMEX, CME Clearing is substituted as the buyer to the seller and the seller to the buyer, with a clearing member assuming the opposite side of each transaction.
CME Clearing conducts business only with its clearing members, not with their customers, individual members or corporate member firms of the Exchange. Customers, members and member firms must have a relationship with a CBOT clearing member to be able to trade CBOT products. As the contra-side to every position, CME Clearing is held accountable to clearing members for performance on all open positions. CME Clearing, by monitoring and overseeing its clearing members through its Financial Safeguard System, guarantees performance on each contract to protect both buyers and sellers from financial loss.
The clearing member with shares is eligible for preferential Exchange fee rates for its proprietary trading of CBOT products (open auction and electronic) when such trading activity is conducted in accordance with CME Group Fee Policies. The trading activity of parent companies, affiliates, subsidiaries or customers of the clearing member are not eligible for preferential Exchange fee rates. The trading activity of parent companies, affiliates and subsidiaries of the clearing member may be eligible for preferential Exchange fee and performance bond rates as CBOT Rule 106.I. affiliate member firms.
- CBOT Rule 106.I. affiliate corporate membership may be obtained by an affiliate of CBOT clearing member. The affiliate may qualify as either a CBOT Rule 106.I. affiliate equity member firm (requires either a B-1/Full membership and 30,000 shares or a B-2/Associate membership and 8,750 shares) or as a CBOT Rule 106.I. affiliate trading member firm (requires a B-1/Full, B-2/Associate, B-4/IDEM or B-5/COM membership).
- The CBOT clearing member may also qualify an unlimited number of affiliates if it qualifies as a CBOT membership umbrella firm. A CBOT clearing member may qualify as a CBOT membership umbrella firm if it owns 4 B-1/Full memberships and 2 B-2/Associate memberships. This includes the memberships required for the firm’s clearing membership privileges. The affiliates must be approved as Rule 106.I. Qualified Affiliates.
Eligibility and Requirements
The requirements for CBOT clearing membership are contained in Chapter 9 of the CBOT rulebook. To become a clearing member for CBOT products, the clearing member must:
Demonstrate fiscal and moral integrity
- Have sufficient financial capitalization to justify the risks assumed in clearing trades
- Be a corporation (including C Corporations, Subchapter S Corporations and Limited Liability Companies), a partnership (including Limited Partnerships and General Partnerships) or a cooperative association
- Guarantee and assume responsibility for all trading activity routed through it by members it qualifies or by any electronic trading system.
Be a CBOT member
- Must own or have assigned to it two B-1/Full memberships (if registered as an FCM) or one B-1/Full (if not registered as an FCM). One B-1/Full membership (if two B-1/Full memberships are required) must be owned by the clearing member or a person, including a parent company, with an acceptable proprietary interest in the clearing member (i.e. "firm owned"). The remaining membership may be independently assigned.
- The "firm owned" memberships owned or assigned to the clearing member may be held by the clearing member or an individual. The individual must be approved for CBOT individual membership.
Maintain capital requirements
- Maintain capital (Adjusted Net Capital for non-Banks and Tier 1 Capital for Banks) at greatest of CFTC or SEC capital requirement or:
- For non-Banks:
- $5,000,000 if clearing only exchange-traded futures/options; or
- $50,000,000 if clearing OTC products.
- For Banks:
- $5,000,000,000 if clearing exchange-traded futures/options; or,
- $50,000,000 if clearing only OTC derivative products.
- Submit daily segregated, secured 30.7 and sequestered statements through WinJammer system by 12:00 noon on following business day.
- If non-Bank: Submit monthly Form 1-FRs (for FCM-only firms) or FOCUS reports (for broker-dealers) including Exchange Supplemental Information, through the WinJammer system within 17 business days of month-end
- If Bank: Submit all financial reports required to be filed with its primary regulator – minimum quarterly basis- filed within 5 days after such statements are filed with it primary banking regulator.
- If non-Bank: Submit certified financial statements to CME Group’s Audit Department within 60 days of fiscal year-end (for broker-dealers) or 90 days of fiscal year-end (for clearing members which are not registered as broker-dealers)
- If Bank: Submit certified financial statement within 5 days after such statements are filed with its primary banking regulator.
Deposit a guaranty fund deposit with CME Clearing
- •Deposit must be the greater of the minimum requirement or the clearing member’s proportionate share of the "Aggregate Guaranty Fund Deposit"
Provide parent guarantees
- Parent guarantees cover all non-customer proprietary obligations, which include:
- Performance bond and settlement for non-customer and proprietary positions held and cleared;
- Non-customer and proprietary trades executed by traders who are qualified by the clearing member, until accepted for clearing by another firm; and
- Non-customer and proprietary trades executed and processed through give-up systems by the clearing member, until accepted for clearing by another firm.
- Submit a parent guarantee for any person or entity which owns directly or indirectly five percent or more of the clearing member.
- Guarantor is liable to CME Clearing for all non-customer and proprietary obligations of the clearing member
Exemptions from the parent guarantee
- Clearing members may request an exemption from the parent guarantee requirements if:
- The clearing member maintains $300,000,000 or more in adjusted net capital;
- The clearing member does not clear, execute and give up, or qualify individual traders who execute non-customer or proprietary trades; or
- The clearing member meets certain criteria and is determined to have minimal activity in the house origin
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