| As you are aware, the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), and the Board of Trade Clearing Corporation (BOTCC) adopted a risk based capital requirement at the clearing organization level effective January 1, 1998. This coordinated risk based requirement is based upon customer and noncustomer risk margin/performance bond requirements which are reported on the supplemental information sheet of your 1-FR/FOCUS. As this is our industry's first experience with a risk based capital requirement, we have continuously monitored the requirement for not only compliance but effectiveness as well. Extensive testing has been performed to ensure the customer and noncustomer risk maintenance margin/performance bond requirements computed and reported to us are accurate. We completed an analysis of the percentages applied in determining risk based capital requirements and their overall effect on our membership communities. Based on this analysis, we have reduced from 10% to 8% the percentage applied to customer risk maintenance margin/performance bond requirements. The noncustomer level of 4% was unchanged Therefore, the revised risk based capital requirement will require all members to maintain adjusted net capital in excess of the greatest of. - Minimum dollar balances of the respective clearing organizations or,
- 8% of domestic and foreign domiciled customer and 4% of noncustomer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures and options on futures contracts or;
- CFTC minimum regulatory capital requirements or;
- SEC minimum regulatory capital requirements.
The new 8% level for customer risk maintenance margin-performance bond requirements will be effective August 31, 1998. If you have any questions, please contact the CME Audit Department at (312) 930-3230 or the CBOT Office of Investigations and Audits at (312) 435-3654. | 