Audit Advisory Notices
To Chief Financial Officers, Compliance Officers, Corporate Members, EFS Contacts
From Audit Department, Clearing House Division
Subject Changes in Exchange Fee Policies for Proprietary Traders
Notice Date 2006-09-01
Notice Number 06-02
Effective Date 2006-10-01

To better define proprietary activity and reflect the evolving trading environment, CME has refined its Exchange fee policies for traders of proprietary accounts of clearing members, including inactive clearing members, and corporate members, including Rule 106.H., Rule 106.I., Rule 106.R., and Rule 106.S. members.  These changes are effective October 1, 2006 and are highlighted below:

  • Independent contractors and other self-employed individuals who trade the proprietary account of clearing and corporate members and whose compensation is reported on an IRS Form 1099-MISC (“1099-MISC”), or equivalent document of a foreign jurisdiction, may receive equity or corporate member, as applicable, clearing and Globex fees on their trading activity. 
  • The proprietary trading activity of independent contractors and other self-employed individuals whose compensation is reported on an IRS Form 1099 which is not a 1099-MISC (e.g. an IRS Form 1099-B) or equivalent document of a foreign jurisdiction will be assessed clearing and Globex fees based on the lowest division of membership held by both the account owner and the independent contractor/self-employed individual.  Traders receiving compensation reported on an IRS Form 1099-B are regarded as “holders” of the positions and, as such, the account would not qualify as a proprietary account of the trading firm. 
  • Individual owners of clearing members and Rule 106.I. members who maintain at least $500,000 of bona-fide capital in the firm may receive equity clearing and Globex fees on their trading activity of the firm’s proprietary account.  Individual owners who do not maintain at least $500,000 of bona-fide capital in the firm are not eligible to receive equity clearing and Globex fees unless their trading profitability is reported on an IRS Form W-2 or 1099-MISC.  If their trading profitability is reported on a form other than an IRS Form W-2 or 1099 MISC (e.g. an IRS Form K-1) the accounts are assessed fees based on the lowest division of membership held by the owner and the firm.

Keep in mind that all other requirements of proprietary trading activity must be met.  Refer to Audit Information Bulletin #06-03 which describes in detail CME’s Proprietary Trading Policies.  If you have any questions, please call the Audit Department at (312) 930-3230.