NYMEX AND COMEX CROSS-EXCHANGE CUSTOMER SOLICITATION PRIVILEGES

This Special Executive Report addresses the cross-exchange solicitation privileges applicable to NYMEX and COMEX full members who are registered as floor brokers.  The text of NYMEX Rule 127 (“Trading and Solicitation Privileges”) is set forth below.

127.      TRADING AND SOLICITATION PRIVILEGES

A member shall have the right, subject to the rules of the Exchange, to trade as principal and as broker for others by open outcry only with respect to products assigned to his membership division or as otherwise designated by the Exchange.  The Exchange shall designate the products which NYMEX and COMEX members may solicit from the combined NYMEX and COMEX trading floor.  In order to solicit customer business, the member must have proper industry registration.  All solicitations must take place from the trading floor or the premises of an entity registered to conduct customer business.   Solicitations occurring from the premises of an entity registered to conduct customer business must be on behalf of the entity or one of its properly registered affiliates and such entity or affiliate must be an NFA member where required by NFA rules.

Cross-exchange solicitation privileges are permitted in all products traded on NYMEX and COMEX provided that the member holds a Full Membership in either Division.  COMEX Options Members are not permitted to solicit any products traded on NYMEX or COMEX that are not covered by their Options Membership.

Solicitation Defined

For the purposes of this policy, solicitation shall include any of the following:

1)             Being compensated for the production of orders;

2)             Providing personal opinions regarding trading strategies or market direction for the purpose of generating interest in exchange products;

3)             Exercising discretion with respect to any order.

Clerical activities, including the entry of non-discretionary orders and the communication of market information, shall not be considered solicitation.

A Frequently Asked Questions section providing additional information on cross-exchange solicitation privileges appears on the next page.

FAQ Regarding Solicitation Privileges on the

Consolidated NYMEX and COMEX Trading Floors

1. How is “solicitation” defined in the context of NYMEX rules?

Solicitation shall include any of the following:

1)     Being compensated for the production of orders;

2)     Providing personal opinions regarding trading strategies or market direction for the purpose of generating interest in exchange products;

3)     Exercising discretion with respect to any order.

Clerical activities, including the entry of non-discretionary orders and the communication of market information, shall not be considered solicitation.  Full Members may function as a clerical employee of either Division without being registered as a clerk.

2. If I am on a COMEX Options membership, what products will I be able to solicit from the trading     floor?

Only products that you are permitted to trade in open outcry pursuant to your COMEX Options membership.

3. Do I need to own my membership in order to exercise cross-exchange solicitation privileges?

No.  Individuals leasing a Full Membership in either division who are registered as a Floor Broker are able to exercise cross-exchange solicitation privileges.

       4. Do registered NYMEX or COMEX broker associations qualify for cross-exchange solicitation    privileges?

No.  The policy applies only to Full Members registered as floor brokers.

5. I am a full member on the COMEX and work as a clerk for a revenue sharing broker association on NYMEX.  May I:

1. have an ownership interest in that Broker Association?

Yes, as long as it is less than 10%.

2. trade electronically while working on the NYMEX floor?

Yes.  Remember that you must observe all rules including the priority of customer orders and the prohibition on disclosure and trading ahead when you are handling customer orders.  These rules pertain to you regardless of whether you are also a clerk and exercising cross-divisional solicitation privileges.

3. trade for myself in a NYMEX trading ring via open outcry or on CME Globex via a tablet from within a NYMEX trading ring?

No.

Questions regarding the solicitation policy should be directed to one of the following individuals:

Nancy Minett, Director, Market Regulation, at 212.299.2940

Robert Sniegowski, Associate Director, Market Regulation, at 312.648.5493