| Effective July 16, 1998 the Commodity Futures Trading Commission ("CFTC") eliminated the 4% capital charge for customer short options held by futures commission merchants ("FCMs"). However, the Securities and Exchange Commission ("SEC") still required firms dually registered as FCMs and broker-dealers to deduct the 4% short option value charge from capital. Pursuant to the no action relief letter attached, broker-dealers are no longer required to take the 4% short option value charge for accounts of market-makers and specialists when the account owner holds a position that is hedged with short futures options and the related capital charge is computed in accordance with paragraph (c)(2)(x) and Appendix A of SEC Rule 15c3-1. However, the four percent short option value charge is required for all other customer short option future positions (i.e. position margined by SPAN) in accordance with SEC Rule 15c3-1b(a)(3)(x). The CME, in conjunction with the Joint Audit Committee, will continue to work with the SEC to eliminate this charge in its entirety. If you have any questions, please call us at (312) 930-3230 or email us at audits@cme.com. | 