Chicago Mercantile Exchange

Clearing House Advisory Notice

99-74

August 23, 1999

TO: Clearing House Personnel

ATTN: Back Office Managers

Margin Managers

Service Bureau Representatives

FROM: Risk Control Department

SUBJECT: Performance Bond Requirements

The CME will begin automatic net margining of positions in the House origin on Friday, August 27, 1999. This program can reduce clearing level performance bond requirements by netting long and short positions in the same contracts. This program will not affect account level requirements in the House origin.

All firms will need to continue to submit PCS to the Clearing House as they presently do. Therefore, each firm must continue to report Final Long and Final Short positions on a gross basis. The CME will then automatically transfer the Final Long and Final Short Positions to Inter-Commodity spreadable Long and Short positions. This will give firms net margining for all House origin positions. If a firm already submits all positions as inter-commodity spreadable, they will notice no difference with the new automatic net margining process. The CME has attempted to make this transition as easy as possible for firms as they will not need to change anything in their submission process to achieve net margining.

If you have any questions regarding the automatic net margining of house origin accounts, please call the Clearing House Risk Control Department at (312) 648-3888.