Effective November 29, 2007, CME and CBOT adopted substantially common rule language with respect to Rule 538 (“Exchange of Futures for Related Positions”), which is set forth below. The only difference between the CME and CBOT rules is in Section 8 of the rule. A detailed FAQ document addressing EFRP transactions is attached to this advisory.

Member firms are strongly encouraged to ensure that all firm employees, as well as customers on whose behalf the firm clears EFRPs, are fully informed of the requirements of Rule 538.

Rule 538 – (“Exchange of Futures for Related Positions”)

The following transactions shall be permitted by arrangement between parties in accordance with the requirements of this rule:

1. Exchange for Physical (“EFP”) - A privately negotiated and simultaneous exchange of a futures position for a corresponding cash position. Exchange for Risk (“EFR”) – A privately negotiated and simultaneous exchange of a futures position for a corresponding agricultural commodity swap or other OTC instrument. For purposes of this rule, all EFPs and EFRs shall be referred to as Exchanges of Futures for Related Positions (“EFRP”).

2. Options on futures are not a permissible component of an EFRP.

3. The related position (cash, swap, or OTC derivative) must involve the commodity underlying the futures contract, or must be a derivative, by-product or related product of such commodity that has a reasonable degree of price correlation to the commodity underlying the futures contract.

4. An EFRP consists of two discrete, but related simultaneous transactions. One party must be the buyer of (or have the long market exposure associated with) the related position and the seller of the corresponding futures, and the other party must be the seller of (or have the short market exposure associated with) the related position and the buyer of the corresponding futures. However, a member firm may facilitate, as principal, the related position on behalf of a customer provided that the member firm can demonstrate that the related position was passed through to the customer who received the futures position as part of the EFRP transaction.

5. The accounts involved in the execution of an EFRP must be (a) independently controlled accounts with different beneficial ownership; or (b) independently controlled accounts of separate legal entities with the same beneficial ownership, provided that the account controllers operate in separate business units; or (c) independently controlled accounts within the same legal entity provided that the account controllers operate in separate business units; or (d) commonly controlled accounts of separate legal entities provided that the separate legal entities have different beneficial ownership. However, on or after the first day on which delivery notices can be tendered in a physically delivered contract, an EFRP may not be executed for the purpose of offsetting concurrent long and short positions in the expiring contract when the accounts involved in the transaction are owned by the same legal entity and when the date of the futures position being offset is not the same as the date of the offsetting transaction.

6. The quantity covered by the related position must be approximately equivalent to the quantity covered by the futures contracts.

7. An EFRP may be entered into in accordance with the applicable trading increments set forth in the rules governing such futures contracts, at such prices as are mutually agreed upon by the two parties to the transaction.

8. CBOT - EFRP transactions may be permitted during the contract month after termination of the contract as prescribed in the applicable product chapters. Such transactions shall not establish new futures positions. CME - Subject to approval by the Clearing House, EFRP transactions may be permitted during the contract month after termination of the contract. Such transactions shall not establish new futures positions.

9. Clearing firms on opposite sides of an EFRP must subsequently approve the terms of the transaction, including the clearing firm (division), price, quantity, commodity, contract month and date prior to submitting the transaction to the Clearing House. All EFRP transactions must be submitted to the Clearing House by a clearing firm acting on its own behalf or for the beneficial account of a customer who is a party to the transaction. Clearing firms are responsible for exercising due diligence as to the bona fide nature of EFRP transactions submitted on behalf of customers.

10. Each EFRP transaction shall be designated as such, and cleared through the Clearing House. Each such transaction shall be submitted to the Clearing House within the time period and in the manner specified by the Exchange.

11. The time of execution of an EFRP must be recorded on the futures order ticket, and on the record submitted to the Clearing House.

12. Parties to any EFRP transaction must maintain all documents relevant to the futures and the cash, swap, or OTC transactions, including all documents customarily generated in accordance with cash or other relevant market practices and any documents reflecting payment and transfer of title. Any such documents must be provided to the Exchange upon request and it shall be the responsibility of the carrying clearing firm to provide the requested documentation on a timely basis.

 - Exchange of Futures for Related Positions and FAQ - Replacement - 05.01.2008