Notice to Members
Notice No. 262
06/24/2003
Approved Amendments to NYMEX Rules 2.50, 2.51, 2.52, 2.70 and 2.71
NYMEX Rules 2.50, 2.51, 2.52, 2.70 and 2.71 have been amended to clarify and codify the rights, obligations and liabilities of lessors, lessees and PCM Guarantors of leased memberships on the NYMEX Division. More specifically, the amended rules are now effective and provide that:

  • The lessor shall neither be liable for nor shall the leased membership be used to satisfy any and all claims against the lessee which have not been satisfied by the lessee's guarantor(s);
  • Lessees shall have continuing personal liability for any claims which accrued during the term of the lease which were not satisfied by the lessee's guarantor(s); for the payment of disciplinary fines assessed against the lessee who were not otherwise satisfied; and for any other financial obligations to the Exchange and or its Members that were not otherwise satisfied; and
  • The membership shall automatically be transferred back from the lessee to the lessor upon termination of the agreement.
    The Exchange's form of lease agreement has been amended to correspond to the provisions of the amended rules. The amended lease agreement form will be required to be submitted for all "new" leases and will also be required upon the expiration date of any lease agreement currently in effect in order to "renew" such lease. It should be noted that the all lease agreements currently in effect are now subject to the provisions of Rules 2.50, 2.51, 2.52, 2.70 and 2.71, as amended.

    The amended version of the foregoing rules is attached hereto for your review and information. Questions regarding this notice should be directed to the Membership Department.
    AMENDMENTS TO NYMEX RULES 2.50, 2.51, 2.70 and 2.71
    (bold indicates additions; strikethrough indicates deletions)

    Rule 2.50. TRANSFER OF MEMBERSHIPS

    (A) A Member may transfer ownership of his membership only to another Member or Member-elect in the same Division and shall be permitted upon: (i) a sale of a membership as provided in Rule 2.52; or (ii) either the effective date or termination of an ABC Agreement as set forth in Rule 2.60; (iii) either the effective date or termination of a lease agreement as set forth in Rule 2.70; (iv) as a result of a bona fide gift where the donor and the donee are members of the same family (a spouse, parent, child, sibling, grandparent, or grandchild); or (v) by operation of law; or (vi) as a result of a sale where the seller and purchaser are members of the same family (a spouse, parent, child, sibling, grandparent, or grandchild). The transfer in ownership of a membership shall be effective upon the execution of an assignment of registration to the transferee on the membership records of the Exchange.

    (B) A Member may retain ownership of his membership and transfer, via lease or ABC Agreement, those rights and obligations specifically provided for in the lease or ABC Agreement. The transfer of such rights and obligations shall be concurrent with the effective and/or termination date of the lease or ABC Agreement

    (C) The Exchange shall treat the person in whose name a membership is registered on the membership records of the Exchange as the sole owner of the membership , notwithstanding the terms and conditions of an ABC Agreement pursuant to which the person holds such membership, and, except as provided in the By-Laws and Rules, shall not be bound to recognize any claim to, or interest in, such membership, by any other person, whether or not the Exchange has notice of such purported claim or interest.

    Rule 2.51. PROCEDURE FOR TRANSFER OF MEMBERSHIPS

    (A) If a Member desires to transfer ownership of a membership, the transferor shall deliver to the Membership Department notification of intention to transfer, executed by the transferor or his legal representative. The notice of intention to transfer shall include the seat identification number, the date on which the transfer is intended to become effective and the name of the proposed transferee. The Membership Department, upon receipt of a Member's notice of intention to transfer a membership, shall promptly notify the membership of the Exchange, by posting for a period of ten (10) days the notice of intention to transfer.

    (B) No Member may transfer ownership of a membership unless and until the following conditions have been met:

    (i) All dues, assessments, fines, penalties and any other monies (including, but not limited to, booth fees, office rent and phone charges) due and payable to the Exchange shall have been paid:

    (ii) (a) All claims of Members that: (1) arise out of, or in connection with, the transaction of business on the Exchange, and (2) are filed with the Membership Department within ten (10) days after the Exchange gave the membership notice of the receipt of the notice of intention to transfer have been settled or discharged.

    (b) The condition in subpart (ii)(a) above shall not apply to claims of Member Firms who are the beneficial owners of the proposed transferred membership pursuant to an A-B-C Agreement financed the proposed transferor's seat pursuant to Rule 2.60, or and

    (2) the lessor of a membership leased to the proposed transferor

    (iv)     (iii) Payment by the transferee to the Exchange of a transfer fee in an amount to be fixed, from time to time, by the Board; provided, however, that a mMember who purchases a membership in order to transfer it to another mMember or to mMember-elect and files a notice of intention to transfer the membership to such other mMember or to such mMember-elect shall not be required to pay a transfer fee upon transfer to such other mMember or mMember-elect.

    (C) A transfer of ownership of a membership may be effected, notwithstanding the provisions of Sections (A) and (B) hereof provided that:

    (i) the transferor owns and holds more than one full membership in the Division of the transferred membership; provided, however, that the claim shall be less than the then current value of a membership; or,

    (ii) the transferor deposits with the Exchange a certified check, payable to the Exchange, in an amount equal to the amount of the claim, including a reasonable amount for costs and attorney fees, for liquidated claims or such amount as may be determined by the Exchange for unliquidated claims provided that such amount shall be no higher of than the price at which a membership last sold or at which a membership was bid and, files with the Exchange an affidavit which states that all of the conditions of Subsection (B) of this Rule have been satisfied. The Exchange shall retain such deposit until the earlier of ten (10) days after receipt of a notice of intention to transfer is received or all claims filed within ten (10) days of posting such notice have been resolved, or until the transferor, as specified above, has deposited with the Exchange an amount equal to the total of all claims filed within ten (10) days notice of such notice.

    (D) A Member other than a lessee who is the subject of any disciplinary proceeding or investigation by the Exchange may transfer a membership notwithstanding that such Member or the Member Firm upon which such Member conferred member privileges is the subject of any investigation or proceeding by the Exchange only if the Member or Member Firm submits a written agreement, acceptable to the Board, by which the Member or Member Firm submits to the continuing jurisdiction of the Exchange.

    (E)     A lessee who is the subject of any disciplinary proceeding or investigation by the Exchange may transfer the rights and obligations granted pursuant to the lease of a membership back to a lessor upon the termination of a lease notwithstanding the existence of the disciplinary action and subject to the following provisions:

    (i) such lessee shall remain subject to Exchange jurisdiction and be personally liable for any fines assessed in connection with the proceeding or investigation;

    (ii) the lessee shall be deemed to have consented to the jurisdiction of the courts of the State of New York in New York County for the purpose of any action brought by the Exchange to enforce its rights against such lessee;

    (iii) in the event that the lessee satisfied the financial requirements of Rule 2.23 by maintaining the required trading account equity such funds: (1) shall be frozen until the investigation is closed or proceeding concluded; (2) shall be paid to the Exchange in full or partial satisfaction of any fine; and (3) shall be released only upon written approval to the lessee's Clearing Member PCM from the Exchange's Compliance Department.

    (F)(E). A seat transfer of the rights and obligations of membership back to a lessor upon the termination of a lease shall nonetheless result in continuing Exchange jurisdiction over the lessee with respect to any pending disciplinary investigation or proceedings involving the lessee, or any proceeding arising out of the lessee's acts or omissions during or relating to such pending proceeding. Notwithstanding sSubsection (B)(i) herein, a seat may be transferred back to a lessor while a fine against the lessee remains due and payable. Lessors shall not be liable for, and shall not be responsible for the payment of, disciplinary fines assessed against lessees. Such lessees shall have continuing personal liability for all disciplinary fines arising out of such investigations or proceedings.

    (G)(F) Notwithstanding sSection (E) (D), the lessee may receive all of the funds in his trading account at the time of the seat transfer, provided that he deposits in the Membership Department a certified check, or a check drawn on a Clearing Member's account, payable to the Exchange in the amount of $50,000 for NYMEX Division lessees.

    (H)(G) A membership that has been sold in accordance with Rule '2.52 may be transferred to the purchaser free from any claims notwithstanding that a claim may have been made under sSection (B) hereof. The portion of the proceeds required in accordance with Subsection (C)(ii) of this Rule shall not be distributed until resolution of any claim as provided in By-Law ' 858.

    Rule 2.70. LEASES OF MEMBERSHIPS' TRADING PRIVILEGES

    (A) A Member may lease a membership's trading privileges to another Member or to a Member-elect pursuant to an agreement in a form prescribed by the Exchange; provided that, memberships subject to outstanding seat financing agreements under Rule 2.56 shall not be leased. A copy of the lease must be delivered to the Membership Department and to the lessee's qualifying Clearing Member PCM.

    (B) Except as provided in Rules 2.60 and 2.61, a lease includes any transfer of a membership by a Member where the transferring Member: retains the ownership interest in the membership; retains a right to appreciation or depreciation (or both) in the value of the membership; and retains a right to reacquire the membership.

    (C) A Member may separately lease his privileges to trade during rRegular tTrading hHours (hereinafter referred to as "regular trading privileges") and to apply for designation as an Electronic Trader on the NYMEX ACCESS® System (hereinafter referred to as "electronic trading privileges").

    (D) A Member who, with respect to his last or sole membership, has leased to another either his regular trading privileges or his electronic trading privileges ("lessor") shall not be entitled to member rates for trades executed for his account during any trading session to which he has leased to another his trading privileges. A Member who, with respect to his last or sole membership on the NYMEX Division, has leased to another his regular NYMEX trading privileges shall not be entitled to: (i) serve on the Board of Directors, except as otherwise provided for in the by-laws or charter, or (ii) receive any life insurance and/or disability insurance benefits bestowed upon NYMEX Members; Hhowever, a NYMEX Member who has leased to another any or all of his trading privileges with respect to any of his memberships shall be entitled to receive the pro rata share of any other distribution of: (i) the revenues, assets and proceeds of the Exchange; and (2) the assets of the Exchange in the event of any liquidation, dissolution or winding up the affairs of the Exchange. (iii) except as otherwise provided in Section (J K), the right to vote that is set forth in the By-Laws of the Exchange; or (iv) earn continuous service credits in connection with the Member Retention and Retirement Plan, or (v) A Member who, with respect to his last or sole membership, has leased to another his trading privileges ("lessor") shall not, while present on the respective Division(s') trading floor, be entitled to place orders, directly with any floor member or floor clerk, for the execution of any futures or options contracts traded on the Exchange (except that, if properly registered as a clerk, such person may transmit customer orders for execution).

    (E) Notwithstanding anything to the contrary in Section (D), during the term of a lease of regular trading privileges on the NYMEX Division the lessee of those privileges ("lessee of regular trading privileges") shall be entitled to serve on the Board of Directors, receive any life insurance and/or disability insurance benefits bestowed upon NYMEX Division Members, to vest and participate in any distributions from the Member Retention and Retirement Plan that are attributable to or derived during the period of time that lessee leased regular trading privileges, and member rates for any trades executed for his account during any Regular Trading Hours trading session, and, except as otherwise provided in Section (J) (K), the right to vote on all mattters to which Members have the right to vote under the By-Laws of the Exchange, except that no lessee of regular trading privileges shall have the right to vote on any merger to which the Exchange is a party.

    (F) [RESERVED]

    (G) During the term of a lease of electronic trading privileges, the lessee of those rights (and its designee, if any) shall be entitled to receive member rates for any trades for his account during a NYMEX ACCESS7 trading session, in accordance with Rule 11.14.

    (G) Lessors and lessees may serve on Exchange committees to the extent allowed by the By-Laws and Rules and as determined by the Board of Directors.

    (H) All lessors and lessees shall be subject to such dues and assessments as are from time-to-time determined by the Board of Directors.

    (I) Lessees of regular trading privileges shall not be entitled to any other rights of membership not specifically set forth or addressed elsewhere in this Rule 2.70. Unless otherwise specified in the lease or in any ancillary agreements, tThe lessee's guarantor(s) shall have no a right of indemnification against the lessor for any and all claims against the lessee which have been satisfied in accordance with the terms of the guarantee, provided that the guarantor's right of indemnification shall be limited to the value of the leased membership. The lessor shall neither be liable for nor shall the leased membership may also be used by other Members of the same Division as the leased membership and the Exchange to satisfy any and all claims against the lessee which have not been satisfied by the lessee and/or the lessee's guarantor(s). Lessees shall have continuing personal liability for any claims which accrued during the term of the lease which were not satisfied by the lessee's guarantor(s); for the payment of disciplinary fines assessed against the lessee which were not otherwise satisfied; and for any other financial obligations to the Exchange and or its Members that were not otherwise satisfied.

    (J) A Member who leases to another his last or sole membership may, in the lease agreement, retain the right to vote that leased membership or provide that the lessee thereof is granted such right during the term of the lease; provided, however, that a member who has leased to another his last or sole membership shall retain the right to vote on any merger to which the Exchange is a party, whether or not that lessor has retained the right to voe that leased membership in the lease agreement and the lessee shall have no right to vote on any merger to which the Exchange is a party. No Member who has leased to another his last or sole membership shall retain or have the right to vote more than one leased membership.

    Rule 2.71. TERMS OF LEASE AGREEMENT

    (A) A membership lease agreement must, and shall be deemed to, include the following minimum provisions:

    (i) upon the death of the lessee, the expiration of the term stated in the agreement or any other event of termination, the agreement shall terminate and the parties shall immediately give written notice thereof to the Membership Department Exchange of such termination as promptly as possible;

    (ii) neither the lessor nor the lessee shall be permitted to sell or transfer the leased membership during the term of the lease agreement unless it is specifically provided otherwise in this agreement;

    (iii) the agreement shall not be effective until the lessee is elected to membership and the lease agreement, or its extension, is approved by the Membership Committee;

    (iv) the rights and obligations associated with the lease of a membership shall automatically may not be transferred back to the lessor from the lessee upon termination of the agreement or any event of termination not withstanding any restrictions to such transfer pursuant to the terms of unless the transfer complies with Rule 2.51;

    (v) during the term of the lease, the lessor and lessee shall be entitled to only those rights of membership as are set forth in Rule 2.70;

    (vi) any and all controversies arising out of, or in connection with the lease, its negotiation, interpretation or termination shall be arbitrated in accordance with the provisions of Chapter 5 of the Rules; and

    (vii) Claims of the Exchange, its Members, and Member Firms, and Clearing Member that arise out of the transaction of business on the same Division as the leased membership Exchange that remain unsatisfied shall have no effect on the automatic shall have a prior right to full payment before any transfer of the rights and obligations associated with the leased membership to the lessor from the lessee.

    (B) A Class I Lease Agreement ("at risk lease") as provided for in Rule 2.23 shall include all the provisions of Section (A) of this Rule and, in addition, shall require the lessor to agree to joint and several liability to the extent of the then current membership value for any claim which accrued during the term of the lease and which results in (1) any obligation of the lessee to the Exchange or (2) any obligation of the lessee to others arising out of the transaction of business on the Exchange; any other lease shall be classified as a Class II Lease Agreement ("not at risk lease").

    (C) The lease agreement must also set forth:

    (i) all financial agreements between the lessor and lessee regarding the lease;

    (ii) all arrangements with respect to voting; and

    (iii) whether the lessee may act as a floor broker.
Should you have any questions or require any further information, please contact exchangeinfo@nymex.com