Exhibit 10.43
Confidential Treatment Requested by CBOT Holdings, Inc.
EXECUTION COPY
CLEARING SERVICES AGREEMENT
EFFECTIVE THE 16th DAY OF APRIL 2003
BETWEEN
CHICAGO MERCANTILE EXCHANGE INC., a business corporation organized under the
laws of the State of Delaware and having its principal office situated at 00
Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 U.S.A., duly represented by its
Chairman of the Board, Xxxxxxxx Xxxxx, and by its President and Chief Executive
Officer, Xxxxx X. XxXxxxx, (hereinafter referred to at times as "CME"),
AND
THE BOARD OF TRADE OF THE CITY OF CHICAGO, INC., a non share corporation
organized under the laws of the State of Delaware and having its principal
office situated at 000 X. Xxxxxxx Xxxx., Xxxxxxx, Xxxxxxxx 00000 U.S.A., duly
represented by its Chairman, Xxxxxxx X. Xxxxx, and by its President and Chief
Executive Officer, Xxxxxxx X. Xxx, (hereinafter referred to at times as "CBOT").
Each of CBOT and CME is referred to herein as a "Party", and collectively they
are referred to as the "Parties."
RECITALS:
WHEREAS, CME is registered with the Commodity Futures Trading Commission
(the "CFTC") as a designated contract market ("DCM") and a "derivative clearing
organization " ("DCO") within the meaning of the Commodity Exchange Act, as
amended (the "CEA"), and seeks to provide clearing services, as defined herein,
for CBOT futures and options contracts;
WHEREAS, CBOT is registered with the CFTC as a DCM and intends to register
as a DCO within the meaning of the CEA, as amended, and seeks to have CME
provide clearing services, as defined herein, for CBOT futures and options
contracts;
WHEREAS, the Parties intend to provide substantial benefits to their
customers by clearing their listed contracts through the same clearing house;
WHEREAS, the Parties intend to enhance the efficient use of capital by
their members by employing CME's system of financial guarantees and providing
for more efficient portfolio risk margining of certain positions held at CME's
clearing house; and
WHEREAS, the Parties intend to cooperatively promote the advantages of
clearing certain CBOT products by means of CME systems, all on the terms and
subject to the conditions set forth in this Agreement.
CONFIDENTIAL INFORMATION REDACTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. OMITTED PORTIONS INDICATED BY [**].
Confidential Treatment Requested by CBOT Holdings, Inc.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and with the intent to be legally bound, the
Parties hereby agree as follows:
1. INTERPRETATION
1.1. Definitions.
In this Agreement, unless the context otherwise requires:
1.1.1. Agreement means the Clearing Services Agreement, effective as of
April 16, 2003, by and between CME and CBOT.
1.1.2. BOTCC shall have the meaning set forth in Section 7.3.
1.1.3. CBOT Clearing Member means an individual or firm that meets
CBOT's requirements to clear CBOT Products on or after the
Effective Date.
1.1.4. CBOT Core Products means CBOT's U.S. Treasury, agricultural and
federal funds based products as of the Effective Date.
1.1.5. CBOT Data shall have the meaning set forth in Section 5.1.
1.1.6. CBOT Products means all futures and futures options listed for
trading on CBOT on the Launch Date or thereafter.
1.1.7. CBOT Sole Proprietorship Clearing Member shall have the meaning
set forth in Section 7.4.
1.1.8. CEA shall have the meaning set forth in the first Recital.
1.1.9. CFTC shall have the meaning set forth in the first Recital.
1.1.10. Clearing Members means CBOT Clearing Members and/or CME Clearing
Members, as the context requires.
1.1.11. Clearing Services means the clearing, settlement and related
services to be provided by CME under this Agreement, as further
described in Schedule A.
1.1.12. Clearing Systems shall have the meaning set forth in Section
3.4.
1.1.13. CME Clearing Member means an individual or firm that meets CME's
requirements for clearing membership.
1.1.14. CME Rules means CME's rules and clearing procedures, including
interpretations and explanations.
1.1.15. DCM shall have the meaning set forth in the first Recital.
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1.1.16. DCO shall have the meaning set forth in the first Recital.
1.1.17. Dispute Notice shall have the meaning set forth in Section 19.4.
1.1.18. Effective Date means April 16, 2003.
1.1.19. EFS shall have the meaning set forth in Section 3.1.
1.1.20. FCMs shall have the meaning set forth in Section 7.6.
1.1.21. Indemnified Party shall have the meaning set forth in Section
16.1.
1.1.22. Indemnifying Party shall have the meaning set forth in Section
16.1.
1.1.23. Initial Term shall have the meaning set forth in Section 2.
1.1.24. Launch Date means the first trading day for CBOT Products as to
which transactions are required to be cleared through CME. The
Launch Date is the trading date of January 2, 2004.
1.1.25. Market Participant means an individual or firm that engages in
trading futures and options contracts.
1.1.26. Material Breach means a breach of a provision of this Agreement
that is material to a Party's obligations under the Agreement.
1.1.27. Operational Policies and Procedures shall have the meaning set
forth in Section 3.2.
1.1.28. Party and Parties shall have the meaning set forth in the
Preamble.
1.1.29. Proprietary Business Information shall have the meaning set
forth in Section 13.1.
1.1.30. Renewal Term shall have the meaning set forth in Section 2.
1.1.31. Replica CBOT Products shall have the meaning set forth in
Section 6.4.
1.1.32. Special CME Clearing Member means a CBOT Clearing Member that
qualifies as a CME Clearing Member for purposes of clearing CBOT
Products pursuant to this Agreement, as set forth more fully in
Section 7.
1.1.33. Transition Clearing Services shall have the meaning set forth in
Section 12.
1.1.34. Transition Costs shall have the meaning set forth in Section
12.4.
1.1.35. Term shall have the meaning set forth in Section 2.
1.1.36. Unexcused Breach shall have the meaning set forth in Section
10.1.
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1.2. References. Unless something in the subject matter or context is
inconsistent with the resulting interpretation, all references to
Sections and Schedules are to Sections and Schedules of this
Agreement. The words "hereto", "herein", "of this Agreement", "under
this Agreement" and similar expressions mean and refer to this
Agreement.
1.3. Schedules. The Schedules forming part of this Agreement are as
follows:
Schedule A Clearing Services
Schedule B Fees
Schedule C Project Development Plan
1.4. Headings. The inclusion of headings in this Agreement is for
convenience of reference only and does not affect the construction or
interpretation of this Agreement.
2. Initial Term; Renewal Term. This Agreement shall commence on the Effective
Date and, unless terminated earlier in accordance with its terms, shall
terminate on January 10, 2008 (the "Initial Term"). Upon expiration of the
Initial Term, this Agreement shall automatically renew for successive
three-year renewal terms (each a "Renewal Term") unless either Party
notifies the other Party in writing at least six (6) months prior to the
beginning of the applicable Renewal Term of its decision not to renew. The
Initial Term and the Renewal Terms, if any, are collectively referred to in
this Agreement as the "Term".
3. Clearing Services.
3.1. Services Provided. Commencing with the Launch Date until the
termination of this Agreement, whether at the end of the Initial Term
or any Renewal Term, each as specified in Section 2 above, and until
expiration of any post-termination obligations, CME shall provide to
CBOT the Clearing Services described in Schedule A hereto. The
Clearing Services shall be provided by CME with proper and reasonable
care in conformance with the standards and procedures by which CME
performs such services for its listed contracts, except that trades
matched by CBOT shall not be guaranteed until the matched trade record
is received by CME. CBOT reserves the right to charge fees for
post-trade transactions and related services for CBOT Products even if
CME does not now charge a fee for such transactions. Subject to the
provisions of Section 3.10 respecting change request procedures and
payment of development cost, if applicable, CME agrees to facilitate
the implementation of such charges, including providing CBOT access to
CME's Exchange Fee System ("EFS"), and to provide CBOT with any
necessary data related to such policies and fees. CBOT shall pay CME
for any reasonable additional costs it may incur in providing data and
other support to CBOT in response to a request authorized by this
Section 3.1.
3.2. Operational Policies and Procedures. CME's operational practices,
policies and procedures related to implementing and performing
Clearing Services, including, without limitation, establishing marking
prices that vary from settlement prices submitted by CBOT, where such
settlement prices materially deviate from appropriate market prices;
the timeline for CME's receipt of information and data necessary to
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perform the Clearing Services and CME's delivery of information and
data to CBOT, Clearing Members and other third parties; data file
formats; the manner in which CME makes information available to
Clearing Members; and the mechanics of CME's automated delivery
processes shall be the same as CME's existing practices, policies and
procedures, including the automated delivery system to be developed by
CME as provided by Schedule A (collectively, the "Operational Policies
and Procedures"), provided that nothing in the Operational Policies
and Procedures shall contravene any provision set forth in this
Agreement.
3.3. Fungibility and Cross-Margining of CBOT Products. CBOT shall have sole
authority to determine (i) whether CBOT Products shall be risk offset
against other products pursuant to CME's portfolio margining policies
or any cross-margining agreement and (ii) whether CBOT Products shall
be made fungible, at the clearing level, against products that are
cleared by CME and listed for trading by CME, by another contract
market, or by any other entity. CME may accept or reject any risk
offset or fungibility arrangement against products traded at CME that
may be proposed by CBOT. CME shall support cross-margining of CBOT
Products as set forth in Schedule A. CME support for cross-margining
arrangements or fungibility of CBOT Products other than as set forth
above or in Schedule A shall be subject to the change request
procedures set forth in Section 3.10, below.
3.4. Clearing Systems. The systems owned by or licensed to CME that are
utilized by CME in connection with providing Clearing Services are
referred to herein as the "Clearing Systems." CME shall pay to the
appropriate software manufacturers, suppliers and distributors all
license fees, royalties, use charges, taxes or other payments
associated with the Clearing Systems' intellectual property and
technology utilized by CME in providing Clearing Services.
3.5. CME Personnel. CME shall make available, at all times, a sufficient
number of individuals who are properly qualified to perform and who
will perform the Clearing Services in accordance with this Agreement.
3.6. Cooperation as to Development Work. The Parties acknowledge and agree
that, after the Effective Date, they will be engaged in development
work as described in Schedule C hereto. The Parties agree to cooperate
and use all reasonable efforts to perform the tasks necessary to
complete such development work in accordance with the time table set
forth in Schedule C. CME shall be primarily responsible for such
development work.
3.7. Technical Cooperation. The Parties acknowledge that CME may have to
incorporate new equipment into or modify its Clearing Systems in ways
that will require testing from time to time. Each Party acknowledges
that, in implementing and testing such new equipment or modifications,
it may require the technical assistance and cooperation of the other,
and both Parties agree to provide such assistance and cooperation.
CBOT shall have the obligation of securing any necessary assistance of
its third party providers.
3.8. Backup and Disaster Recovery. CME will provide, as a part of the
Clearing Services, backup and disaster recovery services and
procedures and functions for the Clearing
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Systems and the Clearing Services using the backup and disaster
recovery systems that CME employs for its own contracts.
3.9. CME Modifications. CME may make modifications to the Clearing Systems
and Clearing Services on its own initiative and at its own expense as
it may reasonably deem necessary or desirable, provided that any such
modifications do not (i) materially increase CBOT's total costs of
receiving the Clearing Services, (ii) require CBOT to make material
changes to its systems, software, or equipment other than with respect
to changes made in the ordinary course of business, or (iii) violate
the CEA, applicable rules and regulations thereunder, or other
applicable CFTC requirements. If any changes desired by CME would
violate the conditions described in clauses (i) or (ii) above, CME
will obtain CBOT's written consent, which shall not be unreasonably
withheld, prior to making any such change.
3.10. Change Requests. CME will make modifications and enhancements to its
Clearing Systems at the request and expense of CBOT, where such
changes are necessary to provide Clearing Services for a CBOT Product
with characteristics significantly different from futures and futures
options products traded as of the Effective Date or additional cross
margining arrangements, if in CME's sole judgment such changes will
not impair functionality or materially increase operational costs.
CBOT shall pay a commercially reasonable fee, to be agreed in advance,
to cover the cost of all such changes. All such requests will be
addressed to a designated representative of CME's clearing house.
3.10.1. CME response to requests. CME shall respond to requests from
CBOT concerning modifications or enhancements to the Clearing
Services by evaluating the request, including the cost of the
requested change and the impact of the requested change upon
clearing services provided by CME as to other products and
upon CME's technical systems, and providing a response in
accordance with this Section to CBOT concerning such request
within thirty (30) days of CME's receipt of the request
(unless the complexity of the request reasonably requires a
longer period, in which case CME shall provide an initial
response).
3.10.2. No material concerns. If CME reasonably determines in its sole
judgment that the requested change will not materially impair
clearing services or materially increase operational costs to
CME or CME Clearing Members, CME shall submit to CBOT a
reasonably detailed proposal for implementing the change,
which need not be binding, and which shall include an estimate
of the amount to be paid to CME for the requested change.
3.10.3. Material concerns. If CME reasonably determines in its sole
judgment that the requested change will materially impair
functionality or materially increase operational costs to CME
or CME Clearing Members, CME may, but shall not be required
to, submit to CBOT a reasonably detailed proposal for
implementing the change, including cost estimates, which need
not be binding.
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3.10.4. Negotiations in good faith. In any case, the Parties shall
negotiate in good faith as to any requested change and the
terms of CME's proposal, if any. Any change implemented by
CME pursuant to this Section shall be made at the sole
expense of CBOT at a commercially reasonable fee or upon any
other financial basis to be agreed upon between the Parties.
Such financial arrangement may include upfront fees and/or
modifications to the fee structure set forth in Schedule B.
Except as otherwise agreed between CME and CBOT in a writing
that specifically purports to amend this Agreement and is
executed by individuals with authority to do so, CME and/or
its licensors, as applicable, shall own all right, title and
interest in any intellectual property created by the Parties
in connection with any such implemented change that is used
by CME in connection with providing Clearing Services. CME
will grant CBOT a license covering its free use of its
contribution to any intellectual property developed by CME.
3.11. Assistance with Regulatory Matters. CME agrees to actively
participate in, and make available sufficient human and technical
resources for, any submissions or presentations to, or meetings or
discussions with, the staff of the CFTC respecting CME's provision of
Clearing Services for CBOT Products. If CME reasonably determines
that CME's active participation in such submissions, presentations,
meetings or discussions with the CFTC may result in the disclosure of
CME's confidential or proprietary information, CBOT will cooperate
with CME to secure appropriate nondisclosure and confidentiality
commitments from the CFTC prior to requiring CME's active
participation in any such submissions, presentations, meetings or
discussions.
4. CBOT Payment of Fees and Expenses.
4.1. Generally. CBOT will pay fees for the Clearing Services provided by
CME in accordance with this Agreement as set forth in Schedule B
hereto.
4.2. Invoicing. CME shall invoice CBOT and CBOT shall pay such invoices as
provided in Schedule B. If CME does not receive any payment from CBOT
in time required by schedule B, CME shall notify CBOT thereof and, if
CBOT fails to pay such amount within fifteen (15) days of CBOT's
receipt of such notice, CME may declare CBOT in Material Breach of
this Agreement and may thereafter exercise its rights set forth in
Section 10.1 below.
4.3. Initial Development Fee. CBOT shall reimburse CME for start-up costs
incurred by CME in connection with preparations to perform its
obligations under this Agreement up to a maximum amount of [**]. CME's
start-up costs may include, without limitation, costs associated with
hardware purchased; software purchased, licensed, or developed
internally; additional office space and other equipment required to
support CME's operations on behalf of CBOT; and CME employee,
consultant and independent contractor time billed either at an actual
rate per hour or reasonable average rate per hour (including
reasonable benefits costs and allocation of overhead). Such start-up
costs incurred by CME shall be reimbursed by CBOT and such payments
shall be non-
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refundable, without regard to termination of this Agreement for any
reason. Such costs shall be billed monthly and promptly paid.
4.4. CBOT Costs of Formatting Data. CBOT shall be responsible for and bear
any costs of formatting trading data for use by its compliance and
surveillance systems.
5. CME Intellectual Property.
5.1. CME Ownership. Subject to any different agreement between the Parties
pursuant to Section 3.10.4, CME and its licensors, as applicable,
shall have sole and exclusive ownership of all right, title and
interest in and to the intellectual property and technology developed
or used by CME in connection with providing Clearing Services. No
provision of this Agreement shall be construed to bind or obligate CME
in any way to develop, make further enhancements to or maintain any
current or future version of the Clearing 21(R) system software or any
of the Clearing Systems, provided that CME agrees that it will provide
to CBOT the same Clearing Services utilizing the same systems CME
applies to clearing the futures and options contracts traded on CME.
5.2. CBOT Ownership of Data. As between CBOT and CME, any and all trading
data, surveillance records, investigation reports and other similar
data or information created, generated, collected, or processed by CME
in the performance of the Clearing Services ("CBOT Data") is and will
remain the sole property of CBOT, and CME will and hereby does,
without additional consideration, assign to CBOT any and all right,
title and interest that CME may now or hereafter possess in and to the
CBOT Data. Except as provided below, CBOT Data will not be utilized by
CME for any purpose other than the performance of Clearing Services
under this Agreement and will not be sold, assigned, leased or
otherwise transferred, disposed of or provided to third parties by CME
or commercially exploited by or on behalf of CME.
5.3. CME Delivery of CBOT Data. CME will promptly retrieve and deliver to
CBOT a copy of all CBOT Data (or such portions as will be specified by
CBOT), in the format and on the media reasonably prescribed by CBOT,
at CBOT's reasonable request from time to time. Upon termination of
this Agreement or at the completion of any requested Transition
Clearing Services (whichever is later), if requested by CBOT, CME will
destroy or securely erase all copies of the CBOT Data in CME's
possession or under CME's control, except that CME may retain copies
of such CBOT Data for its appropriate regulatory and surveillance
purposes.
5.4. Protection of CBOT Data. CME will take those measures that CME takes
to protect its own most confidential data of like kind, but not less
than reasonable measures: (i) to preserve the security of the CBOT
Data; (ii) to prevent unauthorized access to or modification of any
CBOT Data; and (iii) to establish and maintain environmental, safety,
facility and data security procedures and other safeguards against
destruction, loss, alteration or theft of, or unauthorized access to,
any CBOT Data.
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5.5. CME Use of CBOT Data. Notwithstanding CBOT's ownership of CBOT Data as
described above, CME shall be free to use CBOT Data with respect to
the performance of the Clearing Services.
6. CBOT Contracts Subject to Clearing Services.
6.1. Launch Date. On the Launch Date, CME shall commence clearing of all
CBOT Products.
6.2. CBOT Products. Except as otherwise specified in this Agreement, all
CBOT Products shall be subject to this Agreement and shall be cleared
by CME, including any futures and options contracts traded at CME that
CBOT also determines to list for trading. However, if a new CBOT
Product requires changes to the Clearing Systems, Section 3.10 shall
govern the timing of CME's response to a notification by CBOT of such
requested change. Products other than futures and futures options
products may be cleared by CME as CBOT Products under this Agreement
only by mutual written agreement of the Parties.
6.3. Notification to CME. CBOT shall notify CME of the classes and maturity
dates of the CBOT Products that it intends to list for trading in
accordance with the Operational Policies and Procedures. CBOT shall
also submit to CME in advance of listing any CBOT Product a copy of
the contract specifications for the product, and shall provide CME
advance notice thereafter of any changes in contract specifications
for the product.
6.4. Replica CBOT Products. CME may offer and provide its clearing services
to any exchange that lists for trading any product, including CBOT
Core Products where the underlying deliverable commodity is the same
or substantially the same as in a CBOT Core Product ("Replica CBOT
Products"). If CME determines to provide clearing services for Replica
CBOT Products traded or executed on any exchange other than CBOT, CME
will notify CBOT at the time CME agrees to provide clearing services
for, or thirty (30) days before CME begins clearing, such Replica CBOT
Products, whichever is sooner. CBOT thereafter shall have ninety (90)
days following receipt of such notice to determine whether to
terminate this Agreement without penalty in light of such CME
decision.
6.5. Notices. Notwithstanding Section 19.5, notices required under this
Section 6 may be delivered by e-mail or through any other electronic
method to which the Parties agree as a part of their operational
discussions.
7. Admission of CBOT Clearing Members.
7.1. Generally. CME shall admit as Special CME Clearing Members all firms,
including sole proprietorships, that were CBOT Clearing Members as of
the Effective Date. CME shall also admit as Special CME Clearing
Members any firms that become CBOT Clearing Members after the
Effective Date if such firms meet CME's requirements for clearing
members other than requirements respecting ownership of CME
memberships or CME common stock. CBOT Clearing Members admitted as
Special CME Clearing
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Members pursuant to this Agreement shall be authorized to clear CBOT
Products, to the extent permitted by CBOT as of the Effective Date.
The rights of such individuals or firms as Special CME Clearing
Members may not be assigned or transferred voluntarily or by operation
of law. For the avoidance of doubt, Special CME Clearing Members shall
be permitted to clear other products cleared by CME only to the extent
permitted by CME.
7.2. Process for Admission. Following the Effective Date, CME shall,
in consultation with CBOT, adopt rules for the admission of CBOT
Clearing Members as Special CME Clearing Members. Any CBOT Clearing
Member admitted as a Special CME Clearing Member pursuant to Section
7.1 of this Agreement or under the rules adopted pursuant to this
Section 7.2 shall be considered to be admitted pursuant to this
Agreement and shall be subject to all of the rules, requirements and
obligations of CME's clearing house, other than admission
requirements, including ownership of CME memberships or CME common
stock, and capital rules, except as hereinafter provided in this
Section 7.
7.3. Minimum Capital Rules. Any CBOT Clearing Member that is operating
in compliance as of the Effective Date, and that continues to remain
in compliance through the Launch Date, with the Board of Trade
Clearing Corporation ("BOTCC") rules respecting initial or admission
capital requirements that are in effect on the Effective Date shall be
deemed to be in compliance with CME minimum capital rules on the
Launch Date. After that date, CME may increase or decrease the capital
requirements for any Special CME Clearing Member on an individualized
basis if the Special CME Clearing Member's risk profile changes
materially, provided that CME may not, in any event, treat Special CME
Clearing Members as a class or group for these purposes. To the extent
any Special CME Clearing Member that is not also a CME Clearing Member
is required by CME to increase its minimum capital, such increase may
be achieved through the acquisition of additional CBOT memberships.
7.4. Provisions for CBOT Clearing Members Joining After the Effective Date.
Any CBOT Clearing Member that was not a CBOT Clearing Member as of the
Effective Date, but that becomes a Special CME Clearing Member
thereafter, shall be subject to the following provisions with respect
to capital requirements: (i) the CME capital requirement for such
Special CME Clearing Member will be equivalent to the BOTCC
requirement that would have applied to such CBOT Clearing Member if it
had been a CBOT Clearing Member on the Effective Date, but (ii) CME
may in its discretion require such Special CME Clearing Member to hold
additional assets in an aggregate value equal to the difference
between the CME minimum capital requirement and the BOTCC capital
requirement described in clause (i) above. If CME requires a Special
CME Clearing Member to hold additional assets as set forth in clause
(ii) above, the assets allowed to be held in satisfaction of such
requirement shall include CBOT memberships.
7.5. Special Rules for CBOT Sole Proprietorship Clearing Members. Any CBOT
Clearing Member that is a sole proprietorship ("CBOT Sole
Proprietorship Clearing Member") as of the Effective Date, admitted as
a Special CME Clearing Member
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pursuant to this Section 7, shall be excused from compliance with the
CME minimum capital rules for the Initial Term of this Agreement, and
shall be subject to no other minimum capital requirements imposed by
CME provided that such CBOT Sole Proprietorship Clearing Member (i)
was in compliance with the BOTCC rules respecting initial or admission
capital requirements that are in effect on the Effective Date, (ii)
continues to operate in compliance with such BOTCC rules that were in
effect on the Effective Date, and (iii) does not materially change its
risk profile (in which case a change in minimum capital requirements
by CME shall be subject to the provisions of Section 7.3). Any other
CBOT Sole Proprietorship Clearing Member admitted as a Special CME
Clearing Member shall be subject to special CME minimum capital rules
that shall be agreed to by CME and CBOT. After the Initial Term of
this Agreement has expired, all CBOT Sole Proprietorship Clearing
Members shall be subject to those special capital rules.
7.6. Lien on CBOT Memberships. Each CBOT Clearing Member admitted hereunder
as a Special CME Clearing Member shall execute in favor of CME a lien
against the CBOT membership interests required to be held by CBOT for
clearing status, as of the Effective Date, to qualify as a CBOT
Clearing Member or otherwise required to be held under Section 7.4.
The lien shall be the first lien against such membership interests
following release of any prior lien held by BOTCC, which release shall
be requested by the CBOT Clearing Member promptly following the Launch
Date. Each Special CME Clearing Member will be subject to a
requirement to continue to hold at least the same number of CBOT
memberships that CBOT required such Special CME Clearing Member to
hold for clearing member status as of the Effective Date.
7.7. Audit of Non-FCM CBOT Clearing Members. CBOT shall periodically audit
its Clearing Members that are not futures commission merchants
("FCMs") and shall promptly share the results with CME's clearing
house.
8. Transfer of CBOT Open Interest.
8.1. CBOT Rules. Promptly following the execution of this Agreement, CBOT
shall draft and submit to the CFTC for approval rules that provide for
the clearing of CBOT Products at the CME clearing house, to the extent
provided herein, and rules that will facilitate the transfer of open
interest in CBOT Products from BOTCC to CME. CBOT shall use its best
efforts to ensure that such rules are approved by the CFTC reasonably
in advance of the Launch Date, and CME shall use its best efforts to
provide such assistance as CBOT may request in securing such approval.
8.2. CME Rules. Promptly following the execution of this Agreement, CME
shall draft and submit to the CFTC for approval rules that provide for
the clearing of CBOT Products at the CME clearing house, to the extent
provided herein, and that will facilitate the transfer of open
interest in CBOT Products from BOTCC to CME. CME shall use its best
efforts to ensure that such rules are approved by the CFTC reasonably
in advance of the Launch Date, and CBOT shall use its best efforts to
provide such assistance as CME may request in securing such approval.
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8.3. CME Margining of Positions. CME shall margin the positions so
transferred prior to the opening of trading in CBOT Products on the
Launch Date, and the relevant Special CME Clearing Members shall be
required to post the necessary performance bonds.
8.4. CBOT Clearing Members. CME may require that, in order to participate
in the transfer of open interest described in this Section, CBOT
Clearing Members that intend to become Special CME Clearing Members
have completed CME's application process for Special CME Clearing
Member status, have contributed to CME's security deposit pool, and
have established appropriate banking relationships by a date certain
prior to the Launch Date.
9. Network Interconnections Between CBOT and CME
9.1. Facilities. CME shall establish and maintain an appropriate router or
routers at CBOT for the purposes of (i) delivering data to CME for
clearing purposes, (ii) delivering data to CBOT for regulatory
purposes, and (iii) exchanging data between the Parties for all other
purposes required by this Agreement and the Schedules hereto. CME
shall establish and maintain appropriate telecommunications circuits
between CBOT and CME as necessary to handle message flow and data
delivery as set forth above. CBOT shall provide computer room floor
space and inside wiring for such routers and shall provide CME or any
telecommunications provider with which it contracts for such services
reasonable access for maintenance and testing purposes.
9.2. Outsourcing Permitted. CME may fulfill its obligation to establish and
maintain the routers and telecommunications circuits described in
Section 9.1 through appropriate contractual arrangements with
telecommunications service providers and/or other technology service
providers.
9.3. Financial Terms. CBOT shall be responsible for paying, via
reimbursement to CME or direct billing, all third party or other
direct costs (not to include CME employee or CME independent
contractor time) associated with the establishment and maintenance of
the telecommunications circuits and routers described in Section 9.1,
provided that (i) where CME has a negotiated rate with an applicable
telecommunications provider, CME shall attempt to secure for CBOT any
preferential rate available under such contract, and (ii) in no event
shall the amounts paid by CBOT under this Section exceed the published
tariff rate of the applicable telecommunications provider. Unless CME
arranges for CBOT to be billed directly by the applicable
telecommunications provider, CME shall submit to CBOT an invoice for
reimbursement of fees or other third-party costs actually paid by CME,
and CBOT shall pay CME such amounts no later than the final business
day of the calendar month following the month in which CME invoices
CBOT.
10. Breach of Agreement; Termination.
10.1. Breach of Agreement; Termination for Unexcused Breach. If either
Party is in breach of this Agreement, the non-breaching Party shall be
required to provide written notice specifying such breach to the other
Party, within five (5) business days of becoming aware of such breach,
prior to submitting any Dispute Notice under Section
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19.4 or exercising any right to terminate as set forth in this
Section 10.1. The breaching Party shall have thirty (30) days from
receipt of such notice to cure such breach. If the breaching Party
cures such breach within such 30-day period, the right of termination
or to submit a Dispute Notice shall expire and the breaching Party
shall not be subject to any further remedy or liability in respect of
such breach. If the breaching Party does not cure such breach within
such 30-day period, [**]
10.2. Bankruptcy. Either Party may terminate this Agreement immediately
upon the occurrence of any of the following events affecting the
other Party:
10.2.1. Insolvency. The other Party admits its inability to pay its
debts generally as they become due, or makes an assignment of
substantially all of its assets for the benefit of its
creditors;
10.2.2. Bankruptcy Filed. A proceeding in bankruptcy or for the
reorganization of the other Party or for the readjustment of
its debts, under the United States Bankruptcy Code or any
other State or Federal law for the relief of debtors now or
hereafter existing, is commenced by or against the other
Party and is not discharged within sixty (60) days of
commencement; or
10.2.3. Receiver Appointed. A receiver or trustee is appointed in a
bankruptcy proceeding for the other Party or for any
substantial part of its assets, or any proceedings are
instituted for the dissolution or the full or partial
liquidation of such Party, and such receiver or trustee is
not discharged within sixty (60) days of his or her
appointment or such proceedings are not discharged within
sixty (60) days of their commencement, as the case may be.
10.3. [**]
10.4. [**]
10.5. [**]
10.6. Legal Or Regulatory Matters. If either Party is precluded from
performing its obligations under the Agreement by statute, regulation
or legal action of any governmental agency, including failure of the
CFTC to approve necessary rules (including rules necessary to
transfer the open interest) by the Launch Date, [**]
10.7. [**]
10.8. CME Provision of Clearing Services for Replica CBOT Products. Section
6.4 shall govern the respective rights of the parties if CME notifies
CBOT that CME will offer clearing services for Replica CBOT Products.
10.9. Inability to Meet Launch Date. If CME's provision of services under
this Agreement on the Launch Date is deficient to an extent that
prevents CBOT from operating its exchange for a substantial portion
of the trading day on the Launch Date
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due solely or primarily to failures or problems that were within
CME's ability to prevent or mitigate, failure to perform shall be
CME's responsibility and shall constitute a Material Breach by
CME. In such case, within five (5) business days thereafter CBOT
may either (i) seek to terminate this Agreement by exercising its
rights as set forth in Section 10.1, or (ii) without application
of any provision of Section 10.1, including any cure period, file
a Dispute Notice and pursue a claim for damages, [**]If CME's
provision of services under this Agreement on the Launch Date is
deficient to an extent that prevents CBOT from operating its
exchange for a substantial portion of the trading day on the
Launch Date due solely or primarily to failures or problems that
were within CBOT's ability to prevent or mitigate, and CBOT
failed to prevent or mitigate such failures or problems despite
receiving notice from CME concerning the risk of failing to meet
the Launch Date, then the failure to perform shall be the
responsibility of CBOT and shall constitute a Material Breach by
CBOT, which shall trigger CME's rights under Section 10.1. For
purposes of this Section 10.9, a failure by CBOT's electronic
trade matching facility service provider that was within such
service provider's ability to prevent or mitigate shall be deemed
a failure by CBOT. In any situation described in this Section
10.9 and throughout any applicable cure period, the Parties shall
remain in regular communication concerning the failure at issue,
and the breaching Party shall give prompt notice to the other
Party if it determines that it will not cure the breach within
the cure period.
10.10. Joint Press Release. If either Party terminates this Agreement prior
to or immediately following the Launch Date, the Parties shall work
together to issue a joint press release and, if appropriate, hold a
joint press conference, concerning the termination of the Agreement.
10.11. [**]
10.12. Action for Damages. For the avoidance of doubt, either Party may
bring an action for damages against the other Party alleging any
breach of this Agreement (except where an alleged breach has been
cured, as described in Section 10.1) in lieu of invoking any right
to terminate[**]. Any such action for damages shall be subject to
the applicable limitation of liability set forth in Section 15.1 or
Section 15.2.
11. Limited Right to Continuance of Clearing Services. Notwithstanding any
other provision of this Agreement, upon termination of this Agreement for
any reason, if CBOT is unable to engage another entity prepared and able to
provide services comparable to the Clearing Services on commercially
reasonable terms, CBOT shall have the right to require that CME continue
providing any or all of the Clearing Services, as set forth below. For the
avoidance of doubt, pricing terms generally shall be deemed commercially
reasonable, and alternate services generally shall be deemed comparable, if
such terms and services are reasonably similar to those accepted by other
parties receiving services from other clearing services providers.
11.1. Six-Month Continuation Period. In the event that (i) this Agreement
is terminated by CME as a result of an Unexcused Breach by CBOT, (ii)
CBOT elects not to renew this Agreement pursuant to Section 2 above,
or (iii) this Agreement is
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terminated for any other reason except those described in Section
11.2, CBOT may require that CME continue to provide Clearing Services
after the termination of this Agreement or expiration of the Initial
Term or Renewal Term of this Agreement, as the case may be, for 180
days.
11.2. One-Year Continuation Period. In the event that (i) this Agreement is
terminated by CBOT as a result of an Unexcused Breach by CME, (ii)
this Agreement is terminated by CBOT pursuant to Section 6.4, or
(iii) CME elects not to renew this Agreement pursuant to Section 2
above, CBOT may require that CME continue providing Clearing Services
after the termination or expiration date, as the case may be, for up
to one (1) year.
11.3. Payment of Fees. In the event that CBOT requires CME to continue to
provide all or substantially all of the Clearing Services pursuant to
this Section 11, CBOT shall pay CME for these Clearing Services at
the fees set forth in Schedule B. In the event that this Agreement is
terminated by CME for nonpayment of fees, bankruptcy or insolvency,
or if CBOT fails to timely pay fees during the continuation period,
CME shall not be required to continue to provide Clearing Services
unless CBOT pays CME monthly in advance for the continued provision
of such Clearing Services based upon a reasonable estimate of the
amounts likely to be due in respect of each month. CME agrees to
credit back to CBOT any estimated amounts paid by CBOT that are later
determined to be over-payments by CBOT.
11.4. Notice to CME. If CBOT elects to require the continuation of any
Clearing Services under this Section 11, then CBOT shall give at
least ninety (90) days prior written notice to CME of the date for
cessation of such continuation of Clearing Services.
11.5. Hold Over by CBOT. If CBOT is unable to transfer to another provider
of clearing services at the conclusion of any of the periods provided
above for the limited continuation of Clearing Services, CME shall
continue to provide the Clearing Services. During the period that CME
provides clearing services under this Section 11.5, CBOT shall pay a
fee of [**] plus all additional costs incurred by reason of CBOT's
failure to transfer to another DCO, including without limitation any
necessary retention bonuses or employment benefits or fees, in
addition to the fees set forth in Schedule B, for each month that it
holds over.
11.6. Continuation is Not Renewal. Continuation of Clearing Services under
this Section 11 shall not be deemed a renewal of this Agreement under
Section 2 beyond the termination date.
12. Transition Clearing Services. In connection with the termination of this
Agreement for any reason or expiration of the Initial Term or Renewal Term
of this Agreement, as the case may be, and in order to assist CBOT in
terminating the Clearing Services and transitioning such services to
another entity in an orderly manner, CME shall, if and as requested by
CBOT, provide the following services (the "Transition Clearing Services"):
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12.1. Transition Plan. CME and CBOT shall cooperate to prepare a transition
plan setting forth the respective tasks to be accomplished by each
Party in connection with the transition and a schedule pursuant to
which such tasks are to be completed;
12.2. Necessary Date. CME shall provide CBOT with all data and other
information maintained by CME necessary to transfer responsibility
for providing the Clearing Services to another entity as of the date
services are no longer rendered by CME and all hardcopy records
relating to other CBOT Data maintained by CME, except that CME may
retain copies of such data and other information for its appropriate
regulatory and surveillance purposes; Such data and other information
shall be provided to CBOT on magnetic tape or such other storage
medium, and in such format, reasonably acceptable to CBOT;
12.3. Transfer of Positions. CME shall transfer any open positions in CBOT
Products from CME to the new DCO selected by CBOT in accordance with
directions CME shall receive from CBOT for such transfer; and
12.4. Reimbursement of Costs. CBOT shall pay or reimburse CME for any and
all costs ("Transition Costs") reasonably and actually incurred by
CME that are directly attributable to providing Transition Clearing
Services in accordance with this Section 12 (with the rates for any
CME employees used to perform such Clearing Services reasonably
reflecting CME's fully loaded costs with respect to such employees,
plus a commercially reasonable profit margin); provided that CME
shall act in good faith and use commercially reasonable efforts to
minimize and mitigate any Transition Costs.
13. Confidentiality.
13.1. Generally. CBOT and CME each acknowledges that it will receive during
the term of this Agreement confidential or proprietary information of
the other Party relating to the Clearing Services and Clearing
Systems. (All such information is collectively referred to in this
Agreement as "Proprietary Business Information.") Materials embodying
such information and within the scope of this Section 13.1 shall bear
reasonable legends to such effect to the extent appropriate. Each
Party agrees to take reasonable steps to maintain the confidentiality
of the Proprietary Business Information of the other Party, and each
Party agrees to use such information only in connection with the
performance of its obligations and the exercise of its rights under
this Agreement and for appropriate regulatory and surveillance
purposes. In the event that this Agreement is terminated for any
reason, each Party agrees that it shall use reasonable efforts to
return to the other Party or destroy all Proprietary Business
Information of the other Party in its possession in tangible form and
that it shall not knowingly retain any copies thereof, except that
each Party may retain copies of the other Party's Proprietary
Business Information for its appropriate regulatory and surveillance
purposes.
13.2. Exclusions. In no event shall the provisions of this Section 13 apply
to any information that: (i) was rightfully known to the receiving
Party prior to its receipt from the disclosing Party, or becomes
rightfully known to the receiving Party other than as a result of the
relationship between the Parties pursuant to this Agreement; (ii) is
or
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becomes public knowledge through no fault of the receiving Party; (iii)
is disclosed to the receiving Party by a third Party with the right to
disclose the information without restriction or subject to restrictions
to which the receiving Party has conformed; or (iv) is independently
developed by the receiving Party without use of any confidential or
proprietary information of the disclosing Party. Notwithstanding
anything in Section 13.1 above to the contrary, each Party may disclose
any Proprietary Business Information received by it to the extent that
it is required by subpoena or other order of court, law or other
regulation, or required or requested by any governmental or regulatory
authority having jurisdiction or required pursuant to an information
sharing agreement, rule, or policy with another self-regulatory body,
to furnish such Proprietary Business Information to any third Party, or
as otherwise permitted in this Agreement; provided that, in any such
case, the receiving Party shall provide the disclosing Party with
prompt notice thereof so that the disclosing Party may seek an
appropriate protective order. In the absence of a protective order, if
the receiving Party is nonetheless, in the opinion of its counsel,
compelled to furnish Proprietary Business Information to any third
Party or else stand liable for contempt or suffer other censure or
penalty, such Party may furnish such information without liability
under this Section 13 or otherwise.
14. Force Majeure. Each Party shall be excused from performance under this
Agreement and shall have no liability to the other Party to the extent
that, and for any period during which, it is prevented from performing any
of its obligations hereunder as a result of any act, or failure to act, of
the other Party or by an act of God, war, civil disturbance, act of
terrorism, court order[**], or other cause beyond its reasonable control
(including, without limitation, failures or fluctuations in the electrical
or mechanical equipment, communication lines, heat, light or
telecommunications, in each case to the extent beyond its reasonable
control), provided that each party agrees to apply fully its disaster
recovery system to minimize any reduction in service it has agreed to
provide under this Agreement.
15. Liability Limits; Indemnification.
15.1. CME. [**] Notwithstanding the foregoing, but subject to the
provisions of Section 16 below, CME shall indemnify, defend and hold
harmless CBOT and its directors, officers, employees and agents, in
accordance with the procedures described in Section 16.1 below, from
and against any and all losses, liabilities, damages and claims, and
all related costs and expenses (including without limitation
reasonable attorneys' fees), arising from the willful misconduct on
the part of CME, its directors, officers, employees or agents.
15.2. CBOT. [**] Notwithstanding the foregoing, but subject to the
provisions of Section 16 below, CBOT shall indemnify, defend and hold
harmless CME and its directors, officers, employees and agents, in
accordance with the procedures described in Section 16.1 below, from
and against any and all losses, liabilities, damages and claims, and
all related costs and expenses (including without limitation
reasonable attorneys' fees), arising from the willful misconduct on
the part of CBOT, its directors, officers, employees or agents.
16. Indemnity
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16.1. Procedure. If any third Party notifies either Party (the "Indemnified
Party") with respect to any matter which may give rise to a claim for
indemnification against the other Party (the "Indemnifying Party"),
then the Indemnified Party shall promptly notify the Indemnifying
Party thereof; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder,
except to the extent (if any) that the Indemnifying Party is damaged
by such delay. If the Indemnifying Party notifies the Indemnified
Party that it is assuming the defense of any claim:
16.1.1. Defense of Claim. The Indemnifying Party shall defend the
Indemnified Party against such claim with counsel of its
choice reasonably satisfactory to the Indemnified Party;
16.1.2. Separate Co-counsel Permitted. The Indemnified Party may
retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party shall be responsible for
the fees and expenses of the separate co-counsel to the
extent that the Indemnified Party concludes reasonably that
the counsel the Indemnifying Party has selected has a
conflict of interest);
16.1.3. Consent Decree or Settlement. The Indemnified Party shall
not, without foregoing the benefits of this Section 16.1,
consent to the entry of any judgment or enter into any
settlement with respect to such claim without the prior
written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed; and
16.1.4. Full Release. The Indemnifying Party shall not consent to the
entry of any judgment with respect to the matter or enter
into any settlement which does not include a provision
whereby the plaintiff or claimant releases the Indemnified
Party from any and all responsibility and liability with
respect to such claim, without the prior written consent of
the Indemnified Party.
17. Consequential and Punitive Damages.
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18. Public Announcements.
18.1. Requirements Generally. CME and CBOT each agree that it will not
issue any public announcement concerning CME's provision of Clearing
Services, the terms of this Agreement, the negotiations between CME
and CBOT leading up to and following the execution of this Agreement,
or any other matter related in any way to this Agreement that, for
each Party, involves the other Party, without (i) consulting with the
other Party prior to issuing the announcement so that such
announcements may be issued jointly, if appropriate; (ii) providing
the other Party an advance copy of the proposed press release or
other announcement not later than three (3) business days prior to
its release; and (iii) in the case of public appearances by
directors, officers or other officials associated with a Party at
which any of the foregoing matters are likely to be discussed,
providing advance notice to the other Party of such appearance and,
if possible, extending an invitation to the other Party for a
representative of its own to be included in such appearance.
18.2. Definition. For purposes of this Section, a "public announcement"
shall include, without limitation, (i) any press release, press
statement or press conference, (ii) any brochures or notices to be
delivered or made available to the public generally (including
marketing materials), and (iii) any notice to be circulated to
Clearing Members or Market Participants, that, in each case, includes
or may include material information that has not previously been
released about the terms of or negotiations surrounding this
Agreement or the relationship between CME and CBOT that is
established through this Agreement.
18.3. Joint Press Releases, Statements and Conferences. Notwithstanding the
foregoing, the Parties shall use their best efforts to ensure that
any press release, press statement or press conference the primary
topic of which concerns this Agreement or the relationship between
CME and CBOT shall be a joint press release, press statement or press
conference.
19. Miscellaneous.
19.1. Benefits of Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Parties hereto and their respective
successors. Except to the extent provided in Sections 15.1 and 15.2
above with respect to the directors, officers, employees and agents
of CBOT and CME, respectively, nothing in this Agreement, express or
implied, shall give to any other person or entity any benefit or any
legal or equitable right or remedy.
19.2. Waiver. Except as expressly provided herein, neither Party shall, by
mere lapse of time, without giving notice or taking any other action,
be deemed to have waived any breach by the other Party of any of the
provisions of this Agreement.
19.3. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Illinois (other than the
laws thereof that would require reference to the laws of any other
jurisdiction).
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19.4. Dispute Resolution. A Party shall not commence a litigation proceeding
against the other Party unless that Party first gives written notice to
the other Party setting forth the nature of the dispute ("Dispute
Notice"). The Parties shall attempt in good faith to resolve the dispute
by mediation with a mediator selected by mutual agreement of the Parties.
If the Parties cannot agree on the selection of a mediator within twenty
(20) days after delivery of the Dispute Notice, or if the dispute has not
been resolved by mediation as provided by this Section 19.4 within sixty
(60) days after the delivery of the Dispute Notice, then either Party may
commence litigation. The state courts of the County of Xxxx, Illinois and
the United States District Court for the Northern District of Illinois
shall have the exclusive jurisdiction over any and all litigated claims
arising out of or relating to this Agreement or the subject matter hereof.
Each of the Parties hereby irrevocably (i) submits to the personal
jurisdiction of such courts over such Party in connection with any
litigation, proceeding or other legal action arising out of or in
connection with this Agreement or the subject matter hereof, (ii) waives
to the fullest extent permitted by law any objection to the venue of any
such litigation, proceeding or action which is brought in any such court,
and (iii) agrees to the mailing of service of process to the address
specified below for such Party as an alternative method of service of
process in any legal proceeding brought in any such court.
19.5. Notices. All communications or notices required or permitted to be given
under this Agreement shall be sufficiently given for all purposes
hereunder if given in writing and (i) delivered personally, (ii) deposited
in the United States mail, postage prepaid and return receipt requested,
(iii) delivered by a recognized document overnight delivery service or
(iv) sent by telecopy, facsimile or other electronic transmission service
(provided a confirmation of delivery is received). All notices delivered
in accordance with this Section 19.5 shall be sent to the appropriate
address or facsimile number set forth below, or to such other address or
facsimile number or to the attention of such other person as the recipient
Party may have specified by prior written notice to the sending Party.
CME Contact CBOT Contact
Mr. Xxxxx Xxxxxxx Xx. Xxxxxx Xxxxx
Executive Vice President and Executive Vice President, Chief
Chief Administrative Officer of Staff and General Counsel
Chicago Mercantile Exchange Inc. CBOT
00 Xxxxx Xxxxxx Xxxxx 000 X. Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: 000-000-0000 Facsimile No.: 000-000-0000
19.6. Severability. If any provision of this Agreement is deemed to be illegal
or unenforceable by any court of competent jurisdiction, (i) such
provision shall be deemed to be severable from the remainder of this
Agreement, (ii) the effect of such determination shall be limited to such
provision to the extent reasonably practicable, and
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(iii) the validity, legality and enforceability of such provision in any
other jurisdiction shall not in any way be affected or impaired thereby.
19.7. Amendments. No provision of this Agreement may be amended, modified,
supplemented or waived, except by an agreement in writing executed and
delivered by authorized representatives of both Parties.
19.8. Entire Agreement. This Agreement, including the Schedules hereto,
constitutes the entire agreement and understanding, and supersedes any
and all prior agreements and understandings, whether written or oral,
between the Parties with respect to the subject matter hereof.
19.9. Relationship of Parties. CME, in providing the Clearing Services, is
acting only as an independent contractor. Except as expressly provided in
this Agreement or any other agreement to which CME and CBOT are parties,
CME does not undertake to perform any obligations of CBOT, whether
regulatory or contractual, or to assume any responsibility for the
business or operations of CBOT.
19.10. Counterparts. This Agreement may be executed in one or more counterparts,
each of which when so executed shall be an original, but all of which
together shall constitute but one and the same instrument.
19.11. Assignment. This Agreement may not be assigned in whole or in part by
either Party hereto without the prior written consent of the other Party
hereto. CBOT may assign this Agreement and its rights and obligations
hereunder to an entity to which CBOT is selling all or substantially all
of its assets without the prior written consent of CME. The consummation
of the transactions contemplated by CBOT's proposed restructuring shall
not be deemed to be such an assignment or sale for purposes of this
Agreement. CME may assign this Agreement and its rights and obligations
hereunder, in their entirety, to an entity to which CME is selling all or
substantially all of its clearing assets without the prior written
consent of CBOT.
19.12. Survival. Following any termination of this Agreement in accordance with
its terms and the expiration of the post-termination obligations of CME
pursuant to Sections 11 and 12 hereof, all obligations hereunder of each
Party to the other shall terminate and (without limiting the generality
of the foregoing) CME shall have no further obligation to provide
Clearing Services to CBOT. Notwithstanding the foregoing, however, the
provisions of Sections 13, 15, 16 and 17 of this Agreement (including
this Section 19.12) shall survive and remain in effect following any
termination of this Agreement in accordance with its terms and the
expiration of the post-termination obligations of CME.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
CHICAGO MERCANTILE EXCHANGE THE BOARD OF TRADE OF THE CITY
INC. OF CHICAGO, INC.
By: By:
---------------------------------- ----------------------------------
Xxxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx
Chairman of the Board, CME Chairman of the Board, CBOT
Date: Date:
---------------------------- ----------------------------
By: By:
---------------------------------- ----------------------------------
Xxxxx X. XxXxxxx Xxxxxxx X. Xxx
President and Chief Executive Officer President and Chief Executive Officer
Date: Date:
---------------------------- ----------------------------
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SCHEDULE A
DESCRIPTION OF CLEARING AND SETTLEMENT SERVICES
In accordance with the terms of this Agreement, CME shall provide clearing
services as follows with respect to transactions in CBOT Products:
Electronic Trade Acceptance. CME shall accept for clearing and guarantee matched
trades submitted to CME by CBOT (or CBOT's electronic trade matching facility
service provider) in accordance with the CME Rules and the Operational Policies
and Procedures in effect from time to time.
Pit Trade Acceptance - Electronic Devices. CME shall receive unmatched trade
records submitted to CME by CBOT from electronic pit trading technology devices,
and CME shall accept for clearing and guarantee such trades upon matching by CME
in accordance with the CME Rules and the Operational Policies and Procedures in
effect from time to time.
Pit Trade Acceptance - Open Outcry. CME shall receive unmatched trade records
submitted to CME by Special CME Clearing Members for trades executed without
benefit of electronic pit trading technology devices, and CME shall accept for
clearing and guarantee such trades upon matching by CME in accordance with the
CME Rules and the Operational Policies and Procedures in effect from time to
time.
Ex-Pit Trade Acceptance. CME shall receive unmatched trade records submitted to
CME by Special CME Clearing Members for ex-pit trades (blocks and EFPs) that are
executed in accordance with CBOT rules, and CME shall accept for clearing and
guarantee such trades upon payment of initial settlement variation and
performance bond by the applicable settlement bank for each party to the
transaction, as set forth in the CME Rules and the Operational Policies and
Procedures in effect from time to time.
Requirements for CME Trade Acceptance. In addition to the other requirements
that may be set forth in this Agreement, the CME Rules and the Operational
Policies and Procedures, the following requirements apply to CME's receipt and
acceptance for clearing of trades as set forth in this Schedule A:
Origins for Matched and Unmatched Trade Records. CME will support up to
four origins for transactions in CBOT Products - house, house market-maker,
customer, and customer market-maker - subject to final confirmation by CBOT
promptly following the effective date.
Report Formats. Message formats for trade records, including but not
limited to, trade registers, out-trade and EQC reports, and brokers'
matched and unmatched trade reports shall conform to CME specifications.
Opposite House Switches. CME will not support the current modified contra
matching practice currently employed by BOTCC with respect to unmatched
trades in CBOT
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products. However, CME will facilitate matching of unmatched trades by
performing automatic opposite house switches for unmatched trades in CBOT
products, as CME does for unmatched trades in its own products, in
accordance with the CME Rules and the Operational Policies and Procedures.
CME will explore the functional requirements for integrating modified
contra-matching processes as a possible enhancement after the Launch Date.
SLEDs. CME will not support single-line spread entry functionality
("SLEDs") as of the Launch Date. CME will use reasonable efforts, in
consultation with CBOT, to implement SLEDs for transactions in CBOT
products by February 20, 2004.
Position Maintenance and Settlement. On a daily basis CME shall calculate and
collect original margin, premium and variation margin on futures and options
trades and positions in the accounts of Special CME Clearing Members. CME shall
settle the gains and losses associated with futures and options trades and
positions in the accounts of clearing members at least once each business day,
typically twice each business day, and more frequently as CME determines is
warranted by market volatility.
CME PCS Process. CME's position change submission (PCS) process will be
used for reporting final positions and spreadable positions and to
determine each clearing member's final position for margining purposes and
for exercise and assignment of options, as well as for determining the
exchange open interest to be reported for each business day.
Net Margining of CBOT Products. CME will support net margining of positions
in CBOT Products in substantially the same manner as the current procedures
employed by BOTCC with respect to performance bond requirements.
Notwithstanding the foregoing, CME may adjust formulas for calculating
security deposit requirements or assessment of security deposit
contributions with respect to net-margined products, as CME in its
reasonable discretion deems appropriate in order to fairly and equitably
calculate security deposit requirements, given differences between
positions subject to gross margining and positions subject to net
margining.
SPAN Files. CME will generate and distribute to Special CME Clearing
Members' and customers' SPAN files reflecting SPAN margining of positions
in CBOT Products. SPAN files will be distributed over the internet and
through any other means specified in the CME Rules and the Operational
Policies and Procedures. CME may generate and distribute joint SPAN files
for positions in CBOT Products, CME products and products of any other
exchange for which CME provides clearing services or linked clearing.
Authority Over Clearing Firm Margin Requirements. CME will work with CBOT
to develop a coordinated performance bond / margin review process such that
CME can receive input from CBOT as to performance bond / margin
requirements. Such process shall involve monthly meetings with
representatives designated by CBOT and will involve data analysis and
discussions with respect to how and when to implement
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changes to clearing firm level performance bond / margin requirements;
provided however, that ultimate control over performance bond / margin
requirements at the clearing member level shall reside with CME.
Notwithstanding the foregoing, CME agrees that determinations by CME with
respect to performance bond / margin requirements for CBOT Core Products
shall be made strictly on the basis of risk management principles and shall
not involve competitive considerations associated with CME products and
competing CBOT Products. Additionally, CME shall not recognize clearing
member level spreads between CBOT Products and products of any other
exchange without the prior written approval of CBOT.
Authority Over Customer Level Requirements. CBOT shall have ultimate
control over customer level exchange minimum performance bond / margin and
spread requirements, provided that CBOT shall consult with CME as to such
requirements as a part of the coordinated review process to be developed
between CME and CBOT.
Acceptable Collateral. CME will review the forms of collateral currently
accepted by BOTCC that are not currently accepted by CME and, where in
CME's judgment such additional forms of collateral are frequently used and
not unduly costly or risky to accept, CME will amend the CME Rules to
accept such forms of collateral with respect to CBOT Products.
Notwithstanding the foregoing, CME will conduct this review process prior
to the Launch Date only if time permits.
Transfers. CME shall effect the transfer of positions in CBOT Products between
Special CME Clearing Members, where applicable, in accordance with the CME Rules
and Operational Policies and Procedures in effect from time to time. Transferred
positions will be guaranteed by CME to the transferee only upon payment of
initial settlement variation and performance bond by the transferor or the
transferee, as applicable.
Give-Up Transactions. CME will make the allocate claim system ("ACS") available
to Special CME Clearing Members for processing give-up transactions.
Exercise and Assignment. CME will provide exercise and assignment functionality
to Special CME Clearing Members with respect to positions in options products,
including at option expiration, as set forth in the CME Rules and the
Operational Policies and Procedures. CME will not support option expiration
processing on Saturdays, and option expiration processing for CBOT Products as
of the Launch Date will be completed on Fridays (or another business day, with
respect to Friday holidays) in accordance with the CME Rules and the Operational
Policies and Procedures.
Deliveries. CME will provide automated support to CBOT in connection with
deliveries management of CBOT Products, including inventory of deliverable
positions, inventory of deliverable supply, delivery intent processing, delivery
assignment, and delivery invoicing, except that CBOT shall maintain
responsibility for management and operation of the registration and delivery
process. CME will provide automated deliveries support as of the Launch Date of
financial and equity CBOT Products that are listed for trading by CBOT as of the
Effective Date. CME will use its best efforts to implement automated deliveries
support of other CBOT Products
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that are listed for trading by CBOT as of the Effective Date, including
agricultural products, as of the Launch Date or as soon thereafter as is
practicable. CME shall provide automated deliveries support for new CBOT
Products (or for changed features of existing CBOT Products) listed for trading
by CBOT after the Effective Date, provided that the product characteristics
permit automation of deliveries management through means substantially similar
to those that CME then employs with respect to other products cleared by CME. If
significant development work will be required by CME to provide automated
deliveries support for such products listed for trading by CBOT after the
Effective Date, the work will be subject to the change request procedures set
forth in Section 3.10.
Settlement Banks. CME will interface with all banks that serve as settlement
banks for transactions in CME products to provide settlement services for
transactions in CBOT Products also, provided that such banks agree to serve as
settlement banks for transactions in CBOT Products. Additionally, CME will use
best efforts to establish a settlement bank relationship with Lakeside Bank and,
as appropriate, Xxxxxxx Bank, prior to the Launch Date.
Large Trader Reports. CME will collect on CBOT's behalf the large trader
submissions from Special CME Clearing Members or their clients and forward such
submissions to the CFTC and to CBOT for regulatory purposes. The CME clearing
house shall be authorized to use this data to perform the type of account level
stress testing it performs on its own products to identify concentration of
client exposure at a clearing member. CME shall facilitate reporting of large
trader data for CBOT products by accepting transmissions of such data in
standard formats. CME shall construct an application that maintains a database
of firms, customer accounts, and EINs (the term CBOT uses for the number used to
aggregate customer accounts by beneficial owner). For each reported position,
the application shall search in the database by the firm and customer account:
a) if the firm and customer account is found, the application shall tag the
position with the EIN for it; and b) if the firm and customer account is not
found, the application shall assign the EIN, using CBOT's standard convention,
and tag the position with the newly-assigned EIN. The application shall then
prepare a datafile of reported positions for transmission to CBOT, with each
position tagged with its EIN. The application shall further provide CBOT staff
with an interface for viewing and modifying the EIN assigned to a particular
firm and customer account. CBOT shall provide an initial datafile or files for
loading this application with its existing EINs and their associated firm and
customer accounts. CME shall prepare position limit reports against the large
trader data for provision to CBOT. Other than these enumerated processes, all
responsibility for large trader reporting analysis and other larger
trader-related functions remains with CBOT.
Calculation and Collection of Fees. CME will calculate, xxxx and collect
clearing fees from Special CME Clearing Members for transactions in CBOT
Products, using the transaction types for which CME currently bills clearing
members with respect to transactions in its own products. The rate billed will
be determined by CBOT for the fee for initial cleared transactions, including
block trades, EFPs and other alternative execution procedures, and by CME for
post-trade transaction types (including, without limitation, give-ups,
transfers, option exercise and assignment, and deliveries).
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Operational Timeline. Except as otherwise set forth in the CME Rules or the
Operational Policies and Procedures, the operational timeline for clearing
services and submission of reports for transactions and positions in CBOT
Products shall be the same as it is with respect to transactions and positions
for CME products. CME anticipates using single, combined clearing process cycles
for both CME products and CBOT Products. Consequently, CME's deadlines and
requirements shall apply with respect to processes including, but not limited
to, trade report submission deadlines, out-trade report production, final
reconciliation and option exercise deadlines, xxxx-to-market and settlement
cycles (including intra-day cycles), collateral substitution and withdrawal
deadlines, and pay/collect procedures.
Support for Existing and Future CBOT Product Characteristics. Subject to any
specific limitations set forth in this Schedule A or elsewhere in this
Agreement, in providing the Clearing Services CME will develop systems and adopt
practices as necessary to support the product features and characteristics of
CBOT products as they are listed for trading as of the Effective Date,
including, without limitation, fractional price formats and variable cabinet
pricing. CME shall similarly support new product features and characteristics of
existing CBOT Products or those that CBOT may list for trading in the future,
provided, however, that if the features and characteristics of such products
differ materially from those of products then cleared by CME, CME's support of
such new product features or characteristics shall be subject to the change
request procedures set forth in Section 3.10.
Security Deposit Management and Assessment. CME will calculate and collect from
Special CME Clearing Members security deposit contributions in accordance with
the CME Rules and the Operational Policies and Procedures in effect from time to
time. CME shall have the authority, as set forth in the CME Rules and the
Operational Policies and Procedures in effect from time to time, to seize the
security deposits of Special CME Clearing Members and to further exercise
certain limited assessment powers in the event of a default by either a Special
CME Clearing Member or a CME clearing member. For the avoidance of doubt, CME
shall manage a joint security deposit pool for the benefit of Special CME
Clearing Members and CME clearing members with respect to transactions in CME
products, transactions in CBOT Products, and transactions in the products of any
other exchange for which CME provides clearing services or linked clearing,
unless CME's agreement with such other exchange prohibits a joint guarantee
fund. Consequently, the security deposit contributions of CME-only clearing
members may be assessed as a result of defaults as to transactions in CBOT
Products, and the contributions of CBOT-only clearing members who are Special
CME Clearing Members may be assessed as a result of defaults as to transactions
in CME products.
Support for Cross-Margining of CBOT Products. CME will provide support for and
will participate in cross-margining of positions in CBOT Products held by
Special CME Clearing Members pursuant to CBOT's existing cross-margining
arrangements with GSCC and OCC, provided that CBOT shall secure any necessary
amendments to substitute CME for BOTCC in its current cross-margining agreements
with GSCC and OCC. CME will provide support for and will participate in
cross-margining of positions in CBOT Products held by Special CME Clearing
Members under any other cross-margining agreements (or amendments to existing
agreements) into which CBOT may enter in the future, provided that (i) such
support, including without
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limitation the development of necessary interfaces, shall be subject to the
change request procedures set forth in Section 3.10, and (ii) CME may decline to
support such cross-margining agreement if CME concludes, in its sole reasonable
judgment after consultation and negotiation with CBOT and the other party, that
such proposed cross-margining arrangement presents an unacceptable credit risk
to CME.
Information and Reports for CBOT. With respect to each trading day, CME will
deliver to CBOT the following reports in accordance with the Operational
Policies and Procedures:
a. End-of-day volume and open interest file;
b. End-of-day transaction listing file; and
c. Large trader data file as submitted by Clearing Members
Information and Reports From CBOT. CBOT (or a third-party service provider to
CBOT, if CBOT delegates such obligation) shall provide the following reports and
information to CME in accordance with the Operations Policies and Procedures:
a. A daily data file of the CBOT Products eligible for trading on the
next business day;
b. Information on the performance bond requirements CBOT sets for the
customer level exchange minimum requirements, which must be provided
at least three to five business days prior to their effective date
except in situations where changes are driven by unusual market
volatility. Such data is required in order for CME to produce the
appropriate customer level SPAN files;
c. A daily data file of eligible CBOT traders for the next trading day,
together with identification of each trader's guarantor Special CME
Clearing Member;
d. Two-sided matched trade record messages, in near real time, for trades
executed electronically on LIFFE Connect;
e. One-sided (unmatched) trade record messages, in near real time, from
any electronic trading floor technology devices where CBOT rather than
the Special CME Clearing Members will be the source of the trade data;
f. Two-sided matched trade messages in near real time for any pit trades
matched by any trade matching system for such trades as CBOT may
implement;
g. Real time quote stream of CBOT prices for real-time clearing house and
Special CME Clearing Member risk management; and
h. End of day settlement prices received both via a datafile and via the
real time quote stream to be received by approximately 2:30-2:45 p.m.
for products that settle by 2:00 p.m. and by approximately 3:45-4:00
p.m. for products that settle later than 2:00 p.m. The purpose of
receiving such end-of-day settlement prices in a timely manner is to
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facilitate the timely publication of daily SPAN files for CBOT
Products and to allow Clearing Members to begin bookkeeping processing
in a timely manner.
Information and Reports for Clearing Members. CME will make available to each
Special CME Clearing Member on every business day the following information, in
machine readable format in accordance with the CME Rules and the Operational
Policies and Procedures:
a. futures and options transactions accepted by CME for each account of
the Special CME Clearing Member;
b. obligations to receive or deliver products or instruments underlying
matured physically settled futures contracts in the Special CME
Clearing Member's accounts;
c. give-up trades, position transfers and other transactions in the
Special CME Clearing Member's accounts involving CBOT Products;
d. EFP transactions, which will be identified as such by CME using an
available "data field" when such transactions are identified as such
to CME by CBOT or Special CME Clearing Members ;
e. block trades, which will be identified as such by CME using an
available "data field" when such transactions are identified as such
to CME by CBOT or Special CME Clearing Members;
f. the daily xxxx-to-market of each open position in futures held by each
Special CME Clearing Member; and
g. amounts of money due to and from CME from and to each Special CME
Clearing Member for each account held by the Special CME Clearing
Member with CME.
File Formats Generally. The formats for data files and/or messages to be
exchanged among CME, CBOT, any third-party service provider to CBOT or any other
entity with which CME must exchange data in connection with providing Clearing
Services, shall be as mutually agreed by CME and CBOT promptly after the
execution of this Agreement. If any disagreement arises, generally the principle
that the receiving party specifies the format shall control.
Special CME Clearing Member Access to CME Clearing Systems. CME will permit
Special CME Clearing Members to access CME's automated and online systems for
all clearing and position management functionality for use in connection with
positions in CBOT Products on substantially the same basis as CME permits such
access with respect to positions in its own products (unless unique
characteristics of a particular CBOT Product preclude use of such
functionality).
Services Complete. Except as otherwise specified in this Agreement, in the CME
Rules or the Operational Policies and Procedures, the services set forth above
are the complete clearing services that CME will provide to CBOT pursuant to
this Agreement. Without limiting the generality of the foregoing, CBOT
understands that CME will not provide additional services
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relating to market regulation, generating statistical information, managing time
and sales information, managing membership requirements, or daily bulletin
processing.
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Schedule B
[**]
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[**]
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[**]
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[**]
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Schedule C
Project Development Plan
Outlined below are the terms to which the Parties have agreed concerning
the development of and compliance with a detailed project plan for implementing
the arrangements described in this Agreement.
Terms Relating to Plan
A. Development of the Plan. Immediately following the Effective Date of
this Agreement and on an ongoing basis throughout the development period prior
to the Launch Date, the Parties will use their best efforts to update the
project development plan (the "Plan", as updated from time to time during the
development period). The Plan shall identify, with reasonable detail, (i) all
material information that must be exchanged between the Parties, (ii) any
outstanding matters that must be agreed to between the Parties or decisions that
must be reached by one Party, (iii) all material tasks that must be completed by
either Party, and (iv) the timeline upon which such tasks must be completed in
order to meet the Launch Date. The Parties shall also use their best efforts to
jointly develop and incorporate within the Plan an (i) outline and timeline for
completing legal documentation, including necessary regulatory filings and any
documentation that must be executed by Special CME Clearing Members or other
entities, and (ii) and outline and timeline for other communications with
Special CME Clearing Members, ISVs, market data vendors, back-office service
bureaus and any other entity with which information must be shared in order to
effectuate a successful launch of Clearing Services.
B. Mutual Best Efforts to Participate and Adhere to Plan. Each of the
Parties shall use its best efforts to participate fully in the planning process
and to complete its required tasks in accordance with the timeline identified in
the Plan. CME understands and agrees that it has primary responsibility for
completing the development work necessary to implement Clearing Services as
described in Schedule A. CBOT understands and agrees that it also will have
development work to complete in order to effectively implement Clearing
Services, including without limitation any development work necessary to provide
to CME the information and reports specified to be provided by CBOT in Schedule
A. Both Parties understand and agree that their full participation will be
required for multiple phases of systems testing, including a comprehensive
end-to-end testing phase of the fully integrated systems, which testing may
require overtime, weekend and holiday work.
C. Failure to Adhere to Plan. A failure to meet a particular internal
deadline set forth in the Plan by either Party shall not be deemed a Material
Breach of this Agreement. However, if either Party concludes that a serious
failure or multiple failures to conform to the tasks and timelines set forth in
the Plan jeopardizes the Parties' ability to meet the Launch Date, the concerned
Party shall so notify the relevant management personnel of the other Party
(including the individuals identified in Section 19.5) in writing, which may be
by e-mail, and the Parties shall use reasonable efforts to resolve the matter
and adjust the Plan to the concerned Party's satisfaction. If such efforts are
not successful, the concerned Party may, not sooner than ten (10) business days
after delivering the notice, submit the matter to arbitration. If the arbitrator
concludes that one of the Parties is primarily and substantially at fault for
the failure and that the failure does jeopardize the Launch Date, the other
Party shall have the option to terminate this
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Agreement for an Unexcused Breach under Section 10.1, without application of any
notice and cure period.
Project Review Teams
--------------------
Immediately following the Effective Date, each Party will identify
individuals to participate in the following review teams, each of which will
review matters assigned to it and develop any related elements of the Plan.
Where a team is assigned to identify interface requirements or other technical
requirements, the team shall produce at least a high-level functional
specifications document. The Parties agree that the project review teams shall
complete the process of fully defining requirements for each aspect of the
project described below by May 16, 2003, meaning that the teams will have
decided how to resolve any open issues and have documented and circulated their
assigned elements of the Plan, including any functional specifications
documents.
A. Product Review Team. Matters to review:
-------------------
Review contract specifications in detail
Identify specifications not currently supported by CME
Document variable cabinet pricing requirements
Review product and price file layouts
Identify product and price interface requirements
Review market related layouts
Map MD layouts
Identify MD interface requirements
B. Deliveries Review Team. Matters to review:
----------------------
Review delivery requirements
Determine information that must be shared to complete
automated deliveries processes development work
Review deliveries file layouts
Identify deliveries interface requirements
C. Regulatory Review Team. Matters to review:
----------------------
Review regulatory file layouts
Identify regulatory interface requirements
D. Membership Review Team. Matters to review:
----------------------
Review membership file layouts
Identify membership interface requirements
E. Trade Review Team. Matters to review:
-----------------
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Review trade related file layouts
Map trade layouts
Identify trade interface requirements
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