On Monday, June 26, 2000, the CME will begin a three-month pilot program for 20-contract All-Or-None (AON) trading in Swiss Franc Futures. This effectively lowers the current threshold from 100 contracts to 20 contracts. 

Please read the attached Special Executive Report detailing the changes and the associated Q&A paper. If you have any questions, please contact Fern Szymborski at (312) 207-2586. Thank you.

S- 3545 June 22, 2000

This Special Executive Report contains the following:

I. CFTC Approves Proposed 3-Month Pilot Program Lowering the All-Or-None ("AON") Threshold for Swiss Franc Futures From 100 to 20 Contracts, Effective Monday, June 26, 2000

II. Questions and Answers ("Q & A") Regarding All-Or-None Trading in the Pilot Program for Swiss Franc Futures

I. CFTC APPROVES PROPOSED 3-MONTH PILOT PROGRAM LOWERING THE ALL-OR-NONE THRESHOLD FOR SWISS FRANC FUTURES FROM 100 TO 20 CONTRACTS, EFFECTIVE MONDAY, JUNE 26, 2000

In a letter dated, Friday, June 16, 2000, the CFTC approved the CME's proposed 3-month pilot program to lower the All-Or-None ("AON") threshold for Swiss franc futures from 100 to 20 contracts. AON trading at the 20-contract threshold in Swiss franc futures will begin Monday, June 26, 2000. Unless extended by the Board, the pilot program will expire on Friday, September 29, 2000. 

You were previously notified of this proposal in CME Update 00-07, dated Monday, June 12, 2000. The Board of Directors approved the 3-month pilot program for a 20-contract AON threshold at its Regular Meeting on Wednesday, June 7, 2000. Also at this meeting, the Board delegated authority to the Foreign Currency Committee to suspend the lower AON threshold pilot program in Swiss franc futures pit at any time (via a majority vote of the Committee), in the event of market disruptions attributable to AON trading at the allowed lower threshold. 

The Board believed that by lowering the AON threshold significantly, the Exchange can compete better with the over-the-counter ("OTC") spot, forward, and exchange for physical ("EFP") foreign exchange markets. Market users report that the CME AON rule in currency products works well for executions of 100 or more contracts, but for smaller orders, multiple price fills can at times discourage CME currency futures business. Smaller-sized commodity trading advisors ("CTAs") and financial institutions may be attracted to the CME currency products, if AON trades can be done for smaller amounts. 

Since the section "All-Or-None Transactions" of Rule 521 - PIT TRADING allows AON trades to occur outside of the current best bid and best offer in the regular pit, multiple markets of AON and regular pit trades can occur simultaneously. In the event the Swiss Franc Futures Pit Community perceives that AON trading at the 20-contract threshold is disrupting Swiss franc futures pit-trading, then the Swiss Franc Futures Pit Committee Vice Chairman may request a polling of the Foreign Currency Committee to suspend the pilot program. In case of such suspension, Exchange staff will prepare a report to the Board of Directors concerning the suspension of the pilot program.

If you have any questions, please contact either Mr. Scott Brusso, Vice President, Currency Marketing, at (312) 930-3133 or Mr. Felix Carabello, Director, Currency Marketing, at (312) 634-1585 or the Members' Hotline at (312) 930-3333.

II.QUESTIONS AND ANSWERS ("Q & A") REGARDING ALL-OR-NONE TRADING IN THE PILOT PROGRAM FOR SWISS FRANC FUTURES

The following Q & A addresses some of the most frequently asked questions concerning AON trading.

• Q. What is the Swiss franc futures All-Or-None (AON) Rule?
  The Swiss franc futures AON rule is designed to allow outright transactions with a size of 20 contracts or more to be executed in its entirety at a single price. The price may be outside the best bid or offer for regular pit trading.
  
  
• Q. Can an order of 32 contracts be presented to the Swiss franc futures AON market?
  Yes. Any AON transaction of 20 or more contracts will be allowed during the pilot program.
  
  
• Q. Will an AON calendar spread trading be permitted in Swiss franc futures?
  No. However, AON option spreads/combinations are allowed above the minimum threshold of 100 lots.
  
  
• Q. What is the proper procedure for initiating an AON transaction in the pit?
  The initiator must indicate to the pit an interest in an AON order including quantity. Example: �All-Or-None What�s here on 30?� (Always preface order with �All-Or-None�). With no response of a bid/offer to the AON order, the initiator may bid/offer for that interest. 

Example: �All-Or-None-What�s here on 30?� Then the initiator may show �AON, 22 on 30� or �All-Or-None 30 at 27.� 

Whether initiator or respondent, it is mandatory to make clear that it is an intended AON transaction. Failure to do so may constitute a violation of Rule 514 - TRADING INFRACTIONS. 

• Q. May a member other than the member requesting the AON quote accept (trade upon) a responding bid or offer?
  Yes. Anyone may trade in response to an AON quote for the total amount of the AON order.
  
  
• Q. Do AON transactions set off �Stop Orders or MIT�s� in the regular market?
  No.
  
  
• Q. May orders not designated AON be executed as an AON?
  Yes, as long as the floor broker is executing that order at the best available price in the pit at that time, and the terms of the order allow.
  
  
• Q. Is there a time limit for an AON order?
  There is no strict time limit. However, AON orders are not intended to be �resting� orders. The floor broker should attempt to fill the order in a reasonable time or tell the customer �unable.�
  
  
• Q. May a floor broker allocate an AON order to multiple other members?
  No.

Example: Broker A says � AON on 20, what�s here? Locals B & C have interest for 10 lots each. Broker A cannot trade 10 with both locals. However, Locals B & C are allowed to join together as a single entity with one of the locals responding for single entity to the AON order. (See question 16 also.) 

• Q. May a member working an AON execute that order opposite a member working an order for a different quantity?
  No.

Example: Broker A offers �AON 30 at 08.� Broker B bids �AON 08 on 20.� Broker A may not trade 20 lots with Broker B.

• Q. May AON orders be crossed?
  Yes, as long as Rule 531 - TRADING AGAINST CUSTOMERS' ORDERS PROHIBITED and Rule 533 - SIMULTANEOUS BUYING AND SELLING ORDERS FOR DIFFERENT PRINCIPALS EXECUTED BY ONE TRADER are followed.
  
  
• Q. If a floor broker is working an AON order, may another broker working market orders in the regular market trade against the AON order?
  Yes, but only if the AON order is the best available price in the pit.
  
  
• Q. Will AON transactions have separate time and sales?
  Yes, as well as a separate order type indicator.
  
  
• Q. May an AON order be executed outside of the day�s range?
  Yes. Members are reminded to call out the AON trade and make sure the trade is posted in AON time and sales.

Example: The low of the day in the regular market is 6120, and the current regular market is quoted 6120-6122. A broker bids an AON order 6118 for 50 and is hit. The AON trade is permitted, however, the low in the regular market is 6120.

• Q. May AON orders be presented in the post settlement session?
  Yes, but only at eligible post settlement session prices.
  
  
• Q. May locals combine their orders to initiate or respond to an AON order?
  Yes.

Example: Broker A bids 6100 on 50 AON. Locals B & C each give verbal 25 lot sell orders to floor broker D who hits the AON bid.

Example: Broker A bids AON 6100 on 90 lots. Locals B, C & D have interest in hitting the AON bid 30 times each. After receiving verbal orders from the other locals, Local B (also a registered floor broker) hits the AON bids and allocates 30 lots to both C & D. In effect, these locals have formed a single entity to trade against AON orders. One local represents the single entity by hitting the AON order. Then this local representative allocates the trade to the other single entity members.

• Q. Are there different recordation ("CTR")[1] requirements when locals give such orders to floor brokers?
  No. Locals must comply with the same verbal order requirements in Rule 536 - RECORDS FOR ORDERS AND PERSONAL TRANSACTIONS DURING REGULAR TRADING HOURS.
  
  
• Q. If a broker is bidding on an AON order, may another broker offer an AON order at a lower price?
  Yes.

Example: Broker A bids �AON 6100 on 60. Broker B offers �AON 30 at 6098.� Broker C buys Broker B�s offer. An AON order may only be executed for the entire quantity. The AON bid or offer would not be violated by an AON bid or offer for a different quantity.

• Q. If a member requests a quote for an AON quantity and receives a responding bid or offer, and another member betters that bid or offer for a different AON quantity, may the original member requesting the quote trade with the second member�s bid or offer?
  Yes.

Example: Broker A requests a quote for 80 lots AON. Broker B responds by bidding AON 6110 on 80. Broker C bids AON 6112 on 50. Broker A. Broker A sells 50 to Broker C. That AON trade is allowed ONLY if Broker A receives a NEW ORDER to sell 50 AON. Broker A cannot break up his original 80 lot AON order.

• Q. Can a member working an AON order combine his own account to lift or hit another AON order?
  Yes.

Example: Floor Broker A is offering AON 50 lots at 6180. Floor broker B receives an AON order to pay 6180 for 40. Floor broker B may buy 10 for his own account, combine this response with his AON to buy 40, and hit Floor broker A's AON 50 lot order.

If you have any questions, please contact either Mr. Scott Brusso, Vice President, Currency Marketing, at (312) 930-3133 or Mr. Felix Carabello, Director, Currency Marketing, at (312) 634-1585 or the Members' Hotline at (312) 930-3333.

[1] CTR = "computerized trade reconstruction," the Exchange's computer program that imputes execution times for futures and options trades.