11/13/2000
As part of its Report on Gold Options Trading on September 28, 1999 (the "Report"), the Commodity Futures Trading Commission ("Commission") reviewed the current COMEX Division rules regarding not held orders. As a result, the Commission recommended the Exchange revise its rules to clarify its format and more clearly define its characteristics using the corresponding NYMEX rules as a model. NYMEX Rule 6.15(H) provides that if a trading member obtains agreement from the customer prior to accepting an order that it is being accepted on a not held basis, then the trading member is not responsible for failure to execute the order, absent fraud or willful misconduct. NYMEX Rule 6.16 covers orders other than not held orders, which applies a due diligence standard to executable orders and a negligence standard to contingent orders. The attached COMEX rule incorporates the Commission’s recommendations, based upon the NYMEX rules described herein.
The COMEX Governors Committee, the Compliance Review Committee, the Executive Committee and the Board of Directors have already reviewed and approved the proposed amendment.
The proposed amendments to COMEX Rule 4.08 affects a ASpecial Matter@ under the terms of the COMEX By-Laws. Accordingly, COMEX Division Members have ten (10) days to submit a petition signed by owners of at least 155 COMEX Division Memberships requesting a vote of the COMEX Division Members to disapprove the amendments, pursuant to the procedures set forth under COMEX By-Law 205(D). If a petition is not received, or if the amendment is not disapproved, it will be submitted to the Commodity Futures Trading Commission (CFTC).
4.08 Not Held Orders.
A member may accept and attempt to execute any order in a form not specified in Rule 4.07 ("Forms of Orders"), but a member attempting to execute such order in a ring shall not be held responsible for his failure to execute such order. No member or member firm may assert a claim against any floor member for his failure to execute such order.
(a) Not Held Orders for Execution on the Trading Floor:
(1) A Trading Member who obtains the agreement of his customer or his customer’s agent prior to acceptance of any order from such customer, that such order will be accepted only on a "Not Held" basis, shall not be responsible to the customer for the execution or failure to execute such order. However, a claim may be asserted against the Trading Member by the customer and/or the Compliance Department, if the execution or the failure thereof, was done fraudulently or by willful misconduct.
(2) Any order accepted on a "Not Held" basis must be so designated on the customer order ticket at the time of receipt of such order.
(b) Not Held Orders for Execution on NYMEX ACCESS®. An Electronic Trader or a NYMEX ACCESS® Operator may accept orders on a "Not Held" basis provided that they have received prior written permission from the ultimate customer.
(c) Nothing in this rule shall be construed as a limitation of the Exchange’s disciplinary authority.