The Floor Governors Committee wishes to remind floor brokers that the type of activity described in the example below violates Exchange trade practice regulations:

 A floor broker receives an order to buy 100 Treasury Bond futures at 112.00.  The floor broker enters an order on e-cbot to buy 100 at 112.00 or better for his own account and is filled.  Upon receiving the e-cbot fill, the floor broker simultaneously buys and sells 100 contracts opposite a local in the pit, the sell side offsetting the broker’s e-cbot position and the buy side filling the customer order.

In such a scenario, the Floor Governors Committee may find that the floor broker has traded for his own account prior to filling an executable customer order in his possession and/or has indirectly taken the other side of his customer’s order for his own account.  Individuals who engage in such conduct may be subject to disciplinary action.

As a reminder, floor brokers cannot be held to prices that are exclusively available in the e-cbot market.  Orders entered in the open auction market may, with the consent of the customer, be executed on e-cbot and given up to the firm on whose behalf the order was executed provided that the appropriate give-up arrangements are in place.

Questions regarding this notice may be directed to Jennifer Baum (341-3124 / jbaum@cbot.com), Shelly Goodwin (347-4123 / sgoodwin@cbot.com) or Melissa Kemp (435-3681 / mkemp@cbot.com) of the Office of Investigations and Audits.