CME Special Executive Report S-4322 from September 8, 2005, provided information concerning the October 1, 2005, imposition of a 15% customer intra-association trading restriction pursuant to Rule 515.E. (“Registration and Identification of Broker Associations--Intra Association Trading”) in those CME Eurodollar options and CME One-Year Eurodollar MidCurve options contract months currently subject to the restrictions under Rule 552 (“Dual Trading Restrictions”).  Subsequently, Market Regulation and Trading Floor Operations staff received inquiries concerning the application of the restriction in situations where the parties to a trade in a restricted contract month are the best and only bid and offer at the time the trade is made.  This Advisory is being issued to remind broker association members of CME’s longstanding policy in this regard.

Trades in any contract month to which the Rule 515.E. trading restrictions apply wherein two members of the same broker association fill orders opposite one another when both members are the best and only bid and offer in the pit at the time the trade was made are exempt from the intra-association trading restrictions pursuant to Rule 515.E. provided that such situations are properly documented.

In order for best and only bid and offer trades to be exempt from the trading restrictions pursuant to Rule 515.E., members must comply with the following documentation requirements:

1.         A note must be made on the trading card or order ticket used to record the trade which indicates that both members were the best and only bid and offer in the pit at the time the trade was made;

2.         The time of the trade to the nearest minute must be recorded on the trading card or order; and

3.         A signature of a member that witnessed the trade must be obtained and recorded on the trading card or order.  Members of the same broker association are not eligible to sign as a witness for this purpose, and members are strongly encouraged to obtain the signature of a local trader whenever possible.  It is imperative that the name or trading symbol of the witness be legible on the trading document.

Members asked to sign as witnesses should do so only in circumstances where they were present at the time the trade took place and where the trade was clearly a best and only bid and offer.  If a member was not present at the time the trade took place, or does not believe it was a best and only bid and offer, he or she should not sign the trading document.

Documentation concerning best and only bid and offer trades should be delivered to the Market Regulation Department on the fifth floor of the north tower in the CME Center, and marked to the attention of Jeffrey P. Nierman.

If you have any questions concerning this requirement, please contact Mr. Robert A. Sniegowski, Associate Director, Market Regulation, at 312/648.5493 or Mr. Jeffrey P. Nierman, Investigator, Market Regulation, at 312/930.1319.