• Performance Bond Requirements

      • To
      • Chief Financial Officers, Chief Compliance Officers
      • From
      • Audit Department, Clearing House Division
      • #
      • AIB 09-02
      • Notice Date
      • 26 June 2009
      • Effective Date
      • 26 June 2009
    • Chicago Mercantile Exchange Inc., Chicago Board of Trade, Inc., New York Mercantile Exchange, Inc. and Commodity Exchange, Inc. (collectively referenced as “Exchange”) rules regarding performance bond are contain in Rule 930 of the respective rulebooks and are identical across each individual exchange. Based on the results of recent examinations, the Audit Department would like to remind all clearing members of their responsibilities regarding the collection and maintenance of performance bond from account holders as well as the rules governing the acceptance of orders.
      Rule 930.D. Acceptance of Orders
      Under Exchange Rule 930.D., clearing members may only accept risk reducing orders from an account owner that has been subject to performance bond calls for an unreasonable period of time. No orders may be accepted for an account that has been in debit for an unreasonable period of time. An unreasonable period of time is defined as five business days for customers and four business days for omnibus accounts and noncustomers. 
      Rule 930.F. Release of Excess Performance Bond
      Clearing members may only release performance bond deposits from an account if such deposits are in excess of initial performance bond requirements of the account owner.
      Rule 930.H. Aggregation of Accounts and Positions
      Exchange Rule 930.H. provides that aggregation and netting for identically owned positions must be within the same classifications of customer segregated, customer secured and nonsegregated. Therefore, in adhering to Exchange performance bond rules, clearing members cannot combine account origins for performance bond purposes. However, clearing members may transfer free funds from an account in one origin to an identically owned account in a different origin to meet a performance bond deficiency. Free funds are defined as equity in excess of initial performance bond requirements. A transfer must occur for the utilization of free funds. An equity system transfer between accounts is permissible when the firm maintains excess segregated or secured funds in an amount at least equal to the dollar value of the credit entry. 
      Please keep in mind that clearing members are responsible for complying with all Exchange rules regarding performance bond. For complete rules, refer to the individual exchange rulebooks at www.cmegroup.com.
      If you have any questions, please call the Audit Department at (312) 930-3230 or at (212) 299-2120.