• Exchange Rule 905. Choice of Law

      • To
      • Chief Executive Officers, Chief Compliance Officers, Chief Financial Officers
      • From
      • Legal Department, Audit Department - Clearing House Division
      • #
      • AIB 11-01
      • Notice Date
      • 17 March 2011
      • Effective Date
      • 17 March 2011

    • The Dodd-Frank Act amended Section 5b of the Commodity Exchange Act by adding new Derivatives Clearing Organization (“DCO”) Core Principle R regarding Legal Risk. The CFTC has proposed to adopt new Regulation 39.27, which contains requirements to implement Core Principle R. The Regulation will require a DCO that provides clearing services outside of the U.S. to, among other things, “specify a choice of law” in its contractual agreements.  At present, Exchange Rules do not include a choice-of-law provision, nor do they generally specify a venue for resolution of disputes with clearing members outside of issues governed by Chapters 4, 5 and 6 of the Rulebook. 

       
      To address these issues, we are planning to adopt new CME, CBOT and NYMEX Rule 905, which has been approved by CME’s Clearing House Risk Committee but is not yet effective. 
       
      Rule 905.  Choice of Law. 
       
      The Rules of the Exchange shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to its conflict-of-law principles.  Except as otherwise provided in Chapters 4, 5 and 6 of the Rulebook, any action, claim, dispute or litigation of any kind between the Clearing Member and the Exchange arising from the Clearing Member’s membership in the Exchange shall be adjudicated in a federal or state court in Chicago, Illinois. Clearing Members consent to the jurisdiction of such court and to service of process by any means authorized by Illinois or U.S. federal law, and shall not seek to transfer the venue of such litigation.
       
         
      The term “Rules” is defined in the Rulebook as follows: “The Certificate of Incorporation, By-Laws, rules, interpretations, orders, resolutions, advisories, notices, manuals and similar directives of the Exchange, and all amendments thereto. The trading and clearing of all Exchange futures, options on futures, cleared-only and spot contracts shall be subject to the rules.”
       

      The Clearing House Risk Committee has determined that new Rule 905 constitutes a significant rule change. As such, CME Clearing is publishing the Rule to notify interested parties prior to its effective date. Interested parties may provide comments on new Rule 905. CME Clearing will review the comments and use its judgment to determine if any modification of the Rule is necessary. 

       
      Comments may be directed to Lisa Dunsky, Director and Associate General Counsel, CME Group, Inc. at lisa.dunsky@cmegroup.com and are due by March 31, 2011.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2025 CME Group Inc. All rights reserved.