06/06/2003
In summary, the LMM is required to maintain a 50-lot market in e-miNY Crude Oil and 25-lot market in e-miNY Natural Gas. The markets will have a required spread of $.05 (five cents) in e-miNY Crude Oil and $.02 (two cents) in e-miNY Natural Gas. The LMM will maintain these markets during normal trading hours of the standard floor contracts (currently 10:00 AM to 2:30 PM EST.) The LMM(s) will assume the risk of maintaining these markets while participating in a 40% allocation of executed orders.
Approved NEW NYMEX RULE G11.08
("NYMEX LEAD MARKET MAKER PROGRAM")
("NYMEX LEAD MARKET MAKER PROGRAM")
(Entire rule is new.)
Rule G11.08 NYMEX LEAD MARKET MAKER PROGRAM
A. General Provisions. The Exchange shall establish a Lead Market Maker ("LMM") Program to remain in effect for a period determined by the Exchange. The principal obligation of a LMM is to continuously make a market of a specified width and depth throughout the regular trading session for the Exchange's Crude Oil and Natural Gas e-miNY(sm) contracts listed for trading on the Chicago Mercantile Exchange's ("CME") Globex(tm) electronic trading system and in all contract months of such listed Exchange contracts, as such contract months may be modified from time to time. Trading in the capacity of an LMM shall be limited to trading in proprietary trading accounts. The Exchange may determine to appoint one or more LMMs for this Program.
B. Steering Committee. The Exchange's e-miNY(sm) Steering Committee ("Steering Committee") shall negotiate terms with prospective applicants during the application and review process, and shall make recommendations for approval by the Board of Directors with respect to eligible participants for the Lead Market Maker Program. The Steering Committee's recommendations will be based, among other things, on the applicant's business reputation, financial resources and trading activity in relevant futures, options or related cash markets. The Steering Committee may determine to establish separate obligations respecting maintenance of bid-ask spreads and minimum trade size obligations for trading during abnormal market conditions.
The Steering Committee shall also supervise the operation of the LMM Program. Any individual or entity accepted as a Lead Market Maker must comply with the conditions established by the Steering Committee. The Steering Committee will have discretion in determining whether an LMM has complied with this rule and with all conditions of the LMM program. In the event that the Steering Committee determines that a LMM has failed to comply with any requirement, it shall recommend to the Board that appropriate action be taken. The Exchange also reserves the right to cancel the LMM Program upon 30 days notice to participating firms.
C. Application Process. Any Member Firm or Member is eligible to submit an application, in the manner provided by the Exchange, to become a Lead Market Maker. Such applications must include for each Exchange e-miNY(sm) futures contract an indication of the width and depth to be consistently quoted on Globex(tm) for that contract.
D. Maintenance of Working Capital. As a continuing condition for appointment as an LMM, at all times an LMM shall maintain an amount in working capital in excess of that otherwise required by Exchange rules as further specified by the Steering Committee. The LMM shall promptly inform the Steering Committee and the Exchange's Compliance Department within forty-eight hours of any material change in financial or operational conditions or in personnel.
E. LMM Priority Rights. Except as otherwise provided below, the LMM will have priority rights in the Exchange's e-miNY(sm) contracts covered by the LMM Program as provided below:
(1) After the opening, the LMM has the opportunity to match the best bid or offer. In the event that the LMM does so before bids and offers are matched by the system, the LMM Algorithm will allocate a specified minimum proportion of the trade to the LMM provided that the LMM's bid or offer matches the best available bid or offer. Any contracts still to be allocated after the "LMM Allocation" are allocated based upon the time of order entry.
If the allocations to the LMM results in a fraction, the LMM Algorithm will "Round Up" to the nearest integral contract multiple.
In the event that the Exchange designates a single LMM in a specified market, the LMM's allocated proportion shall be up to 50% (and scaled according to volume targets) . In the event that the Exchange designates two (2) LMMs in a specified market, each LMM shall be allocated split evenly between the LMMs based on the scaled volume targets. In the event that the Exchange designates three (3) LMMs in a specified market, each LMM shall be allocated split evenly between the LMMs based on the scaled volume targets.
F. Duration of LMM Appointment and Related Priority Rights. Consistent with the other provisions of this rule and the other conditions of the LMM program, an LMM's appointment will continue for a period of two (2) years following the trade date where there has been on average over the preceding twenty (20) business days daily trading volume of 10,000 or more contracts for e-miNY(sm) Crude Oil and 5,000 or more contracts for e-miNY(sm) Natural Gas covered by the LMM Program.
G. Clearing and System Rates. Clearing fees and GLOBEX fees for an LMM's trading may be waived for a period established by the Steering Committee.