On December 13, 2011, NYMEX adopted a number of revisions to Rule 984 (“Clearing Member Acceptance of Executed Customer Trades”) which generally governs the responsibilities and obligations of clearing member firms and executing brokers in connection with customer trades that are executed by an executing broker and subsequently given up to a clearing member firm for clearing. Those revisions were described in CME Group Special Executive Report S-6041
from December 8, 2011.
In response to marketplace feedback, NYMEX has adopted revisions to Rule 984.B.3. with respect to the requirement that an executing broker contact the clearing member firm before resuming executions for a customer that had not executed trades within the preceding 90 days. As a result of the revisions, this requirement will not apply in a circumstance where there is a written give-up agreement in place among the execution broker, the clearing member firm and the customer.
The revisions to Rule 984.B.3. are set forth below, with additions underscored and deletions overstruck, and will become effective on March 21, 2012.
Rule 984. CLEARING MEMBER ACCEPTANCE OF EXECUTED CUSTOMER TRADES
The following provisions define the minimum responsibilities and obligations of those parties to the clearance of a customer trade.
The term "executing broker" as used in this Rule is the Member Firm or Floor Broker to whom the order is transmitted.
[Section A. is unchanged.]
984.B. Responsibilities and Obligations of Executing Brokers
[Sections B.1. and B.2. are unchanged.]
3. Executing Broker Responsibility for Verifying Clearing Member Authorization
Prior to accepting and executing an initial order for any new customer account, the executing broker must confirm with such customer’s Clearing Member by telephonic, electronic or written means that:
(a) the customer has a valid account with the Clearing Member;
(b) the account number;
(c) the brokerage rate; and
(d) the customer is authorized by the Clearing Member to place orders with the executing broker for that specific account.
The executing broker shall retain as part of his books and records a copy of the authorization received from the Clearing Member, or the specifics of the telephonic confirmation, which includes the name of the Clearing Member representative, date, time and any other relevant information. The falsification of such information shall be the basis for disciplinary action.
Each executing broker shall conduct ongoing due diligence to ensure that all customer orders received are for active accounts.
Each executing broker shall ensure that every Clearing Member to which he allocates trades: (1) has received current telephonic and electronic contact information for the executing broker and his PCM; and (2) is immediately informed of any change in the broker’s PCM.
For purposes of providing any notice required under this Rule, a Clearing Member may rely upon the most recent telephonic and electronic contact information it received from the executing broker.
[The remainder of the Rule is unchanged.]
Questions regarding the revision to Rule 984 may be directed to Lisa Dunsky, Director and Associate General Counsel, at 312.338.2483.
For media inquiries concerning this Special Executive Report, please contact CME Group Corporate Communications at 312.930.3434 or firstname.lastname@example.org.