• Adoption of New Rule 418 ("Consent to Exchange Jurisdiction") and Conforming Amendments

      • To
      • Members, Member Firms and Market Users
      • From
      • Market Regulation Department
      • #
      • SER-6342
      • Notice Date
      • 13 August 2012
      • Effective Date
      • 20 August 2012
    • Pending all relevant regulatory review periods, effective on August 20, 2012, CME, CBOT, NYMEX and COMEX will adopt a harmonized rule, Rule 418 (“Consent to Exchange Jurisdiction”), and modify several associated rules in Chapter 4 (‘Enforcement of Rules”) of each Exchange’s Rulebook.
       
      Rule 418 is being adopted in response to new CFTC Regulation 38.151(a), effective on August 20, 2012, which requires a Designated Contract Market (“DCM”) to mandate that its members and market participants consent to the DCM’s jurisdiction as a condition of access to its markets.  The adoption of Rule 418 requires the modification of several ancillary rules in Chapter 4, including a revision to the definition of a Member in Rule 400.
       
      New Rule 418 and revisions to the related rules in Chapter 4 begin on the next page, with additions underscored and deletions overstruck.
       
      Questions regarding these changes may be directed to one of the following individuals in the Market Regulation Department:
       
      Joseph Adamczyk, Executive Director, Global Enforcement, at 312.435.3581
      Erin Schwartz, Senior Rules & Regulatory Outreach Specialist, at 312.341.3083
      Robert Sniegowski, Senior Director, Rules & Regulatory Outreach, at 312.341.5991
       
       
      For media inquiries concerning this Special Executive Report, please contact CME Group Corporate Communications at 312.930.3434 or news@cmegroup.com.
       
       
       
       
      Revisions to the CME, CBOT and NYMEX Rulebooks
       
      Chapter 4 of CME/CBOT/NYMEX Rulebooks
       
      418.        CONSENT TO EXCHANGE JURISDICTION
      Any Person initiating or executing a transaction on or subject to the Rules of the Exchange directly or through an intermediary, and any Person for whose benefit such a transaction has been initiated or executed, expressly consents to the jurisdiction of the Exchange and agrees to be bound by and comply with the Rules of the Exchange in relation to such transactions, including, but not limited to, rules requiring cooperation and participation in investigatory and disciplinary processes.
       
      4189.-431. [RESERVED]
       
      413.        SUMMARY ACCESS DENIAL ACTIONS
      [Sections A. and B. are unchanged.]
      413.C.    Hearing
      Members shall have the right to representation, at their own cost, by legal counsel or anyone other than a member of any Exchange disciplinary committee, a member of the Board, an employee of CME Group or a person related to the investigation. Non-members are only entitled to a hearing and representation if they submit to the Exchange’s jurisdiction for the matter at hand as well as any pending and all future actions related to the underlying conduct that gave rise to the summary access denial. The Panel shall conduct a de novo hearing solely on the issue of the denial of access in accordance with the procedures in Rule 408. Filing of a notice of intent pursuant to Rule 413.B. shall not stay the Chief Regulatory Officer’s decision to deny access.
      [Section D. is unchanged.]
       
      417.        PROHIBITED COMMUNICATIONS
      [Section A. is unchanged.]
      417.B.    Communications with Panelists
      No Personmember shall attempt to influence disciplinary matters pending before a charging, adjudicatory, or appeal committee by discussing, or attempting to discuss, such pending matters with a member of such committee or any member of the Board.
      [The remainder of the Rule is unchanged.]
       
      432.        GENERAL OFFENSES
      It shall be an offense:
      [A. – W. are unchanged.]
      X. for a Member to aid or abet the commission of any offense against the Exchange;
      [The remainder of the Rule is unchanged.]
       
      437.        NOTICE OF DISCIPLINE
      Notice, in accordance with Section 8c(a)(2) of the Commodity Exchange Act, shall be made available to an internet accessible computer database at the National Futures Association and shall be provided to any Member or non-member who is suspended, expelled, disciplined or denied access to the Exchange within 30 days after the decision becomes final. Additionally, a written notice shall be posted on the floor of the Exchange for five business days promptly after the disciplinary action becomes effective. The notice shall include the Member's or non-member’s name, the Rule(s) violated, the reason for the Exchange's action and the action taken or penalty imposed.
       
      CME CHAPTER 4
      400.        GENERAL PROVISIONS
      The Board has adopted Rules, and from time to time adopts amendments and supplements to such Rules, to promote a free and open market on the Exchange, to maintain appropriate business conduct and to provide protection to the public in its dealings with the Exchange and its Members.  The Board has created committees to which it has delegated responsibility for the investigation, hearing and imposition of penalties for violations of Exchange Rules.  The Board has also delegated responsibility for the investigation and imposition of penalties for violations of Exchange Rules to Exchange staff as set forth in the Rules.  The delegation of such responsibility and authority shall in no way limit the authority of the Board with respect to all Rule violations.
       
      For purposes of Chapter 4, the term "Member" shall mean: 1) members and clearing members of the Exchange, including retired members with floor access privileges and individuals and entities described in Rule 106; 2) associated persons ("APs") and affiliates of clearing members and member firms of the Exchange; 3) guaranteed introducing brokers of clearing members and member firms of the Exchange and their APs; 4) Exchange permit holders and any person or entity that has been granted cross-exchange trading privileges; 5) employees, authorized representatives, contractors, and agents of any of the above persons or entities, in regard to the Exchange related activities of such individuals; 6) any Person who initiates or executes a transaction on or subject to the Rules of the Exchange, directly or through an intermediary, and any Person for whose benefit such a transaction has been initiated or executed; 7) individuals and entities that have agreed in writing or via electronic signature to comply with the Rules of the Exchange; and 78) CBOT members and other individuals who have access to the combined CME and CBOT trading floors.
       
      Members are deemed to know, consent to and be bound by all Exchange Rules.  Former Members shall be subject to the continuing jurisdiction of the Exchange, including, without limitation, the application of Rule 432.L., with respect to any conduct that occurred while a Member.
       
      CBOT CHAPTER 4
      400.        GENERAL PROVISIONS
      The Board has adopted Rules, and from time to time adopts amendments and supplements to such Rules, to promote a free and open market on the Exchange, to maintain appropriate business conduct and to provide protection to the public in its dealings with the Exchange and its Members.  The Board has created committees to which it has delegated responsibility for the investigation, hearing and imposition of penalties for violations of Exchange Rules.  The Board has also delegated responsibility for the investigation and imposition of penalties for violations of Exchange Rules to Exchange staff as set forth in the Rules.  The delegation of such responsibility and authority shall in no way limit the authority of the Board with respect to all Rule violations.
       
      For purposes of Chapter 4, the term "Member" shall mean: 1) members and clearing members of the Exchange, including retired members with floor access privileges and individuals and entities described in Rule 106; 2) associated persons ("APs") and affiliates of clearing members and member firms of the Exchange; 3) guaranteed introducing brokers of clearing members and member firms of the Exchange and their APs; 4) Exchange permit holders and any person or entity that has been granted cross-exchange trading privileges; 5) employees, authorized representatives, contractors, and agents of any of the above persons or entities, in regard to the Exchange related activities of such individuals; 6) regular firms; 7) any Person who initiates or executes a transaction on or subject to the Rules of the Exchange, directly or through an intermediary, and any Person for whose benefit such a transaction has been initiated or executed; 8) individuals and entities that have agreed in writing or via electronic signature to comply with the Rules of the Exchange; and 89) CME members and other individuals who have access to the combined CBOT and CME trading floors.
       
      Members are deemed to know, consent to and be bound by all Exchange Rules.  Former Members shall be subject to the continuing jurisdiction of the Exchange, including, without limitation, the application of Rule 432.L., with respect to any conduct that occurred while a Member.
       
      NYMEX CHAPTER 4
      400.        GENERAL PROVISIONS
      The Board has adopted Rules, and from time to time adopts amendments and supplements to such Rules, to promote a free and open market on the Exchange, to maintain appropriate business conduct and to provide protection to the public in its dealings with the Exchange and its Members.  The Board has created committees to which it has delegated responsibility for the investigation, hearing and imposition of penalties for violations of Exchange Rules.  The Board has also delegated responsibility for the investigation and imposition of penalties for violations of Exchange Rules to Exchange staff as set forth in the Rules.  The delegation of such responsibility and authority shall in no way limit the authority of the Board with respect to all Rule violations.
       
      For purposes of Chapter 4, the term "Member" shall mean: 1) members, Commercial Associate Members, member firms and clearing members of the Exchange; 2) associated persons ("APs") and affiliates of clearing members and member firms of the Exchange; 3) guaranteed introducing brokers of clearing members and member firms of the Exchange and their APs; 4) any person or entity that has been granted cross-exchange trading privileges; 5) employees, authorized representatives, contractors, and agents of any of the above persons or entities, in regard to the Exchange related activities of such individuals; 6) any Person who initiates or executes a transaction on or subject to the Rules of the Exchange, directly or through an intermediary, and any Person for whose benefit such a transaction has been initiated or executed; 7) individuals and entities that have agreed in writing or via electronic signature to comply with the Rules of the Exchange; and 78) Exchange members and other individuals who have access to the trading floors.
       
      Members are deemed to know, consent to and be bound by all Exchange Rules.  Former Members shall be subject to the continuing jurisdiction of the Exchange, including, without limitation, the application of Rule 432.L., with respect to any conduct that occurred while a Member.

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