CME CLEARING EUROPE LIMITED

CLEARING PROCEDURES
14 November 2011
 Contents

Clause Page

INTRODUCTION...................................................................................................................................... 1

MEMBERSHIP PROCEDURE ................................................................................................................. 2

RISK MANAGEMENT PROCEDURE ...................................................................................................... 6

CLEARING AND SETTLEMENT PROCEDURE ..................................................................................... 8

GUARANTEE FUND PROCEDURE ...................................................................................................... 14

DELIVERY PROCEDURES.....................................................................................................................16
A. Precious Metal Delivery Procedure...........................................................................................16

COMPLAINTS PROCEDURE ................................................................................................................ 20

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 INTRODUCTION

These Procedures should be read in conjunction with CME Clearing Europe Limited’s Rules. In the event
of any conflict between the Rules and these Procedures, the Rules shall take precedence. Capitalised
terms that are defined in the Rules shall have the same meaning in these Procedures unless otherwise
specified.

Unless otherwise specified, each provision of these Procedures applies to each category of Transaction.

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 MEMBERSHIP PROCEDURE

1 Introduction

1.1 The general requirements of clearing membership are set out in Chapter 3 of the Rules. This
Membership Procedure provides further information about certain of those requirements. The
Clearing House reserves the right, at its absolute discretion and on the basis of ensuring the risk
integrity of clearing arrangements, to establish additional, different or higher requirements for
particular applicants or Clearing Members. In some cases this may reflect different categories of
clearing membership for different types of Transactions.

2 Application Process

2.1 To apply for membership of the Clearing House, each applicant must complete the application form
and submit this along with the supporting documents set out in it to the Risk and Membership
Department of the Clearing House. The application form is available on the Website or may be
obtained by contacting the Risk and Membership Department on 44 (0)20 3379 3100.

2.2 The Risk and Membership Department will review the completed application and request additional
information from the applicant where necessary.

2.3 Upon receipt of the completed application the Risk and Membership Department will submit the
application for review and consideration by the Risk Committee. It is anticipated that the Risk
Committee review will take place within six (6) weeks of receipt of the completed application.

2.4 Applicants will be notified in writing of the determination of the Risk Committee.

3 General Requirements

These are set out in Clearing Rule 3.2.1. The remaining provisions of this Procedure set out
further information about the Membership Criteria.

4 Capital Requirements

4.1 Clearing Members are required to maintain capital of at least GBP 10 million.

4.2 In establishing that the minimum capital requirements are met and respected by banks and other
Clearing Members authorised and supervised by a Regulatory Authority for financial services (such
as the UK Financial Services Authority), the Clearing House will only recognise capital calculated
pursuant to the rules and regulations of the primary Regulatory Authority of the Clearing Member in
question. For banks, capital is defined as Tier I capital computed according to the capital
adequacy requirements to which it is subject (for example, the Basel Capital Accord of 1988 (Basel
I) or, if adopted, the Revised Basel Capital Framework (Basel II)). Clearing Members which are
banks must also maintain a Total Risk-Based Capital Ratio (Tier I Capital plus Tier II Capital
divided by Total Risk Weighted Assets) of at least 10%. The Clearing House may set additional
Capital Requirements.

4.3 For Clearing Members not regulated by any Regulatory Authority for financial services, the Clearing
House will recognise the equivalent of Tier 1 capital as described in paragraph 4.2 in assessing
whether the minimum capital requirement is met. A Clearing Member which is in doubt about this
definition should contact the Risk and Membership Department on 44 (0) 20 3379 3100.

4.4 On the basis of risk evaluation and at its sole discretion, the Clearing House may require an
applicant to maintain capital above the minimum capital requirement.

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 5 Collateral Requirements

5.1 Clearing Members must at all times meet the Collateral requirements which are set out in Chapter
6 of the Rules and the Clearing and Settlement Procedure.

6 Contribution

6.1 Clearing Members must deposit with the Clearing House a Contribution to the Guarantee Fund.
The amount of the Contribution is determined by the Clearing House and re-assessed on at least a
quarterly basis. The amount required initially and each quarter is notified to the Clearing Member.

6.2 The minimum Contribution for a Clearing Member is USD 2.5 million.

6.3 Further detail on the Guarantee Fund and Contributions to it are set out in Chapter 7 of the Rules
and the Guarantee Fund Procedure.

7 Financial Reporting Requirements

7.1 Clearing Members authorised and supervised by a Regulatory Authority for financial services must
submit any and all financial reports that are required to be filed with such Regulatory Authority to
the Clearing House unless the Clearing House is able to obtain them directly from such Regulatory
Authority. Such financial reports must be filed with the Clearing House within thirty (30) calendar
days after such statements are provided to the Clearing Member’s primary Regulatory Authority.

7.2 Clearing Members not regulated by a Regulatory Authority for financial services must submit monthly
unaudited financial reports in a form acceptable to the Clearing House. Such financial reports must
be filed within fifteen (15) Business Days of each month-end.

7.3 The financial reports must:

7.3.1 demonstrate compliance with the Clearing House’s minimum capital requirements

7.3.2 demonstrate a Total Risk-Based Capital Ratio of 10%, if applicable;

7.3.3 be presented in English; and

7.3.4 be stated in the currency in which the Clearing Member is legally required to produce its
audited financial reports.

7.4 If the information is not included in the financial reports, Clearing Members must also notify the
Clearing House of any planned capital withdrawals and subordinated debt maturing within six (6)
months of the date of such reports.

8 Financial Statement Filings

8.1 Clearing Members, authorised and supervised by a Regulatory Authority for financial services, are
also required to submit audited financial statements as of the Clearing Member’s financial year-end
unless the Clearing House is able to obtain them directly from the Regulatory Authority. Such
financial statements must be filed within five (5) Business Days of their submission to the Clearing
Member’s primary Regulatory Authority.

8.2 Clearing Members not regulated by a Regulatory Authority for financial services must also submit
an audited financial statement as of the Clearing Member’s financial year-end. These annual financial
reports must be filed within sixty (60) Business Days of the Clearing Member’s financial year-end.

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8.3 Financial statements must:

8.3.1 demonstrate compliance with the Clearing House’s minimum capital requirements;

8.3.2 demonstrate a Total Risk-Based Capital Ratio of 10%, if applicable;

8.3.3 be presented in English; and

8.3.4 be stated in the currency in which the Clearing Member is legally required to produce its
audited financial reports.

8.4 The audited financial statements of Clearing Members must include at a minimum the following (or
the equivalent in any jurisdiction to the extent applicable):

8.4.1 external auditor’s opinion letter;

8.4.2 statement of financial condition;

8.4.3 statement of income (loss);

8.4.4 statement of cash flows;

8.4.5 statement of changes in ownership equity; and

8.4.6 appropriate footnote disclosures.

9 Disaster Recovery and Business Continuity

9.1 Each Clearing Member is required to have in place adequate disaster recovery and business
continuity policies and procedures to enable it to satisfy its obligations under the Rules. It is for
each Clearing Member to determine whether these are adequate but the Clearing House would
expect, as a minimum, that a Clearing Member’s arrangements:

9.1.1 comply with any requirements or guidance of any applicable Regulatory Authority;

9.1.2 are in line with any relevant industry standards or guidelines;

9.1.3 enable the Clearing Member to satisfy its obligations to the Clearing House even in
unforeseen circumstances; and

9.1.4 are tested on a regular basis and improved as necessary on the basis of the test results.

9.2 Each Clearing Member will be required to participate in the Clearing House's testing of its own
business continuity arrangements at least once each year. The Clearing House will provide at least
four (4) months’ notice of any such test, which will usually take place over a weekend.

9.3 Clearing Members are required to notify the Clearing Support Desk of the Clearing House on 44
(0)20 3379 3131 of relevant details in the event that the Clearing Member invokes its business
continuity policies and procedures and is likely to require assistance from the Clearing House or if
the event is likely to cause disruption to the Clearing Member’s ability to satisfy its obligations to the
Clearing House.

9.4 Where the Clearing House invokes its own business continuity arrangements, either partially or
fully, it shall notify Clearing Members of such via its Website and/or Notice.

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9.4.1 The Clearing House operates a number of business continuity arrangements, including
system failovers and site recovery. Depending upon the nature of a recovery event the
Clearing House may:

(a) extend timings or deadlines as set out in the Rules or these Procedures;

(b) amend or temporarily suspend margin procedures, including invoking ad hoc margin
calls; and/or

(c) amend the timing for acceptance and novation of Transactions.

9.4.2 The Clearing House shall keep Clearing Members informed of any such events via its
Website and/or Notice.

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 RISK MANAGEMENT PROCEDURE

1 Introduction

1.1 The Clearing House manages its counterparty and market risk by margining Clearing Members
Contracts on a daily and intra-day basis according to the procedures described in this Risk
Management Procedure. Risk is further mitigated through the collection and payment of profits
and losses as determined through the variation settlement process described in this Risk
Management Procedure.

2 Calculation of Margin Requirement and Variation Requirement

2.1 Each Clearing Member which has a Non-Segregated Client Account and/or a Segregated Client
Account may request as many sub-accounts within each of these Accounts as it wishes and ask
the Clearing House to designate each sub-account as it specifies. A Clearing Member may wish
to request a sub-account to reflect the Contracts relating to an individual Client or group of
Clients.

2.2 The Clearing Member must designate the basis on which the Contracts (or positions) are
recorded on each sub-account as either net or gross (it is only possible to record positions on a
net basis if the sub-account represents only one Client). Long and short positions on a sub-
account which is designated as net are automatically set off against one another whereas the
Clearing Member will be required to specify which positions on a sub-account which is
designated as gross should be set off against one another.

2.3 Margin Requirement and Variation Requirement are calculated separately for each Account.

2.4 The Clearing House calculates the Margin Requirement for each sub-account within the
Segregated Client Account on a gross basis (except where the sub account has been
designated as a net account). The Collateral which the Clearing House calls in respect of the
Segregated Client Account is the aggregate of the amounts calculated in respect of each sub-
account within the Segregated Client Account.

2.5 The Clearing House calculates the Margin Requirement for each sub-account in the Non-
Segregated Client Account on a net basis The Collateral which the Clearing House calls in
respect of the Non-Segregated Client Account is the aggregate of the amounts calculated in
respect of each sub-account within the Non-Segregated Client Account.

2.6 The Clearing House calculates the Margin Requirement for all Contracts reflected in the House
Account on a net basis. Therefore, off-settable Contracts in the House Account are recognised
for the purposes of calculating the Margin Requirement for the House Account.

2.7 Clearing Members must identify and report the gross position relating to each Client whose
Contracts are reflected in each sub-account within each of the Non-Segregated Client Account
and the Segregated Client Account.

2.8 The Clearing House calculates the Variation Requirement for Contracts at least twice daily:
intra-day and end-of-day. The Variation Requirement consists of a periodic mark-to-market or
revaluation of Contracts and the determination of any final settlement amounts. The Variation
Requirement also takes account of other amounts payable under the Contracts relating to an
Account such as premiums. Under volatile market conditions, the Clearing House will conduct
additional Variation Requirement calculations. For further information on the settlement cycles
resulting from intra-day and end-of-day calculations, see paragraph 4 of the Clearing and
Settlement Procedure.

2.9 To calculate the intra-day Variation Requirement, the Clearing House uses current market
prices and applies them to the position data submitted by Clearing Members prior to the
relevant time set out on the Website on that Business Day. For the end-of-day Variation

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 Requirement, the Clearing House uses final settlement prices and applies them to the position
data submitted by Clearing Members prior to the relevant time set out on the Website.

2.10 The Clearing House uses the Margin Requirement and the Variation Requirement to calculate
the Net Settlement Amount for the settlement cycle. The Net Settlement Amount for each
Clearing Member is reported to the Clearing Member at the end of each settlement cycle. The
Clearing House reserves absolute discretion as to how it calculates the Net Settlement Amount.

3 Margin Model and Parameters

3.1 The model used to calculate margin requirements is CME SPAN. The model simulates the
effects of changing market conditions and uses tailored options pricing models to determine a
portfolio’s overall risk. CME SPAN constructs scenarios of price and volatility changes to
estimate the potential loss arising if an entire portfolio must be closed out over a one or more
day time horizon. The resulting margin requirement is designed to cover this potential loss at
the required confidence level. Additionally, options purchased must be paid in full and therefore
the value is added to the account equity. Conversely, the value of options sold is added to the
overall margin requirement for the account.

3.2 A number of parameters are specified for each Contract in order for SPAN to simulate portfolio
losses. These include:

3.2.1 Price scan ranges: in effect, the maximum price movement reasonably likely to occur
in each instrument or, for options, in the underlying instrument;

3.2.2 Volatility scan ranges: the maximum change reasonably likely to occur in the implied
volatility of the price of each option’s underlying instrument;

3.2.3 Intra-commodity spreading rates: for evaluating risk among portfolios of closely
related contracts within the same product group, such as products with particular
patters of calendar spreads;

3.2.4 Inter-commodity spreading rates; for evaluating risk offsets between related products;

3.2.5 Short option minimum rates: to provide coverage for the special situations associated
with portfolios of deep out of the money short option positions.

3.3 Parameters used in the calculation of the Margin Requirement are defined by the Clearing
House. Parameters are reviewed and updated at least monthly, though ad hoc changes to
parameters can be made at the sole discretion of the Clearing House at any time. Margin
parameters and changes to margin parameters are published on the Website.

4 Pricing and Valuation

4.1 Prices used in valuing Contracts are available to Clearing Members and certain Clients via the
Clearing System and the price file available through the following FTP site:
ftp.cmeclearingeurope.com.

4.2 The Clearing House makes available to its Clearing Members a tool for simulating Margin
Requirement calculations known as PC SPAN. Clearing Members can request the simulation
tool by contacting the Clearing Support Desk of the Clearing House on 44 (0)20 3379 3131.

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 CLEARING AND SETTLEMENT PROCEDURE

1 Submission of Transactions

1.1 Transactions may be submitted to the Clearing House through any of the following routes:

1.1.1 the ClearPort GUI and API;

1.1.2 other broker or trade-negotiation platforms; or

1.1.3 directly from Clearing Members to Front End Clearing.

1.2 In order to use certain submission routes, the Clearing Member and, in some cases, its Clients
and Designated Users (as defined in the User Licence Agreement) may be subject to additional
terms and conditions.

1.3 Regardless of Transaction submission route, only Clearing Members which have entered into
the User License Agreement authorising the Clearing Member and/or Client to submit
Transactions to the Clearing House on its and/or its Designated Users’ behalf are eligible to
submit Transactions.

1.4 Clearing Members must confirm with the Clearing House each Designated User which has
completed the registration form available from the Website.

2 Clearing System Modules and Infrastructure

The Clearing House utilises a Clearing System comprised of five (5) basic categories of
applications:

2.1 Transaction and Position Management Systems:

2.1.1 Front-End Clearing: a multi-faceted trade processing module integrated with multiple
Transaction matching and affirmation platforms and linked via a real time messaging
infrastructure to all Clearing Member back office systems.

2.1.2 The Position Management System: a central application that performs real time
valuation and multi-lateral netting of all Clearing Member House and Client
Transactions as well as generating the core clearing settlement cycle trade register
data files and reports.

2.1.3 Margin Calculation Systems: the Clearing House uses different margin models
depending upon the Contract. The Clearing House uses the SPAN Model described
in the Risk Management Procedure.

2.1.4 Settlement, Banking and Asset Management Systems: the application where all
Clearing Member account structures are managed and linked to a Clearing Member’s
Settlement Bank Account for the purposes of the Net Settlement Amount cash flows.

2.1.5 Referential Data Modules: these modules include the Clearing House Product,
Calendar, Account Registration and Security Administration systems.

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2.2 Transaction and Position Management

2.2.1 Upon acceptance for clearing by the Clearing House pursuant to Rule 5.2, a
Transaction becomes a Contract. The details of a particular Contract are set out within
the following:

(a) The trade confirmation messages to the Clearing Member as generated by the
Clearing System;

(b) The Contract Module contains the terms of the Transaction except Transaction-
specific data: date, price, initial amount, side-of-market (reflected on the trade
confirmation message); and

(c) General terms set out in the Rules.

2.3 Transactions, Contracts, and Positions

2.3.1 Once novated, Transactions give rise to positions in a specific Contract. A position in
a Contract is opened by clearing a Transaction entered into as Buyer or Seller and
closed by clearing a Transaction in the opposite capacity. With the Clearing House as
a central counterparty to each Contract, multilateral position netting is possible. Thus,
it does not matter whether the opposite Transaction is entered into with the same
counterparty or a different one.

2.3.2 The Contract is made unique within a product family via:

(a) The Product Reference File

(i) This file is published in the late afternoon of each Business Day, and
provides complete specifications for all Contracts eligible for clearing the
following Business Day.

(b) The Clearing Product Code

(i) The clearing product code identifies the details of a Contract. This is an
alphanumeric value.

2.3.3 The clearing product code is provided in both the product reference file and on each
clearing trade confirmation in the ID attribute of the Instrument block.

2.4 Positions

2.4.1 The Position Management module complements the real-time Transaction processing
capabilities of Front End Clearing, by providing near real-time tracking on position
quantities and money amounts such as Margin Requirement and Variation
Requirement of Contracts.

2.4.2 As Transactions clear, and as allocation processing is performed, messages are sent
from Front End Clearing to Position Management, which performs the following
processing in real time:

(a) updates the Contract position quantities held by Clearing Members; and

(b) for each such position, performs real-time calculations of the Net Settlement
Amount.

2.4.3 Margin Calculation shall be calculated in accordance with the Risk Management
Procedure.

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2.5 Settlement, Banking and Asset Management Systems

2.5.1 The Margin Requirement and the Variation Requirement are major components of the
risk management protections of the Clearing House. Collateral is transferred to the
Clearing House in respect of Contracts reflected in the Clearing Members’ Accounts.
Net Settlement Amounts due and owing to the Clearing House are payable by the
Clearing Member through its Settlement Bank in Eligible Cash and may be
subsequently substituted with an equal or greater amount of Eligible Securities. Net
Settlement Amounts due and owing to the Clearing Member are payable by the
Clearing House through the relevant Clearing Member’s Settlement Bank.

2.5.2 The Clearing House calculates the Collateral requirements for Accounts as set out in
the Risk Management Procedure. Clearing Members are responsible for meeting Net
Settlement Amounts payable to the Clearing House in respect of the Accounts. It is
the responsibility of the Clearing Member to collect collateral from Clients, which must
be of an amount not less than the amount of Collateral set by the Clearing House and
may not necessarily take the same form of such Collateral or to advance credit in
respect of the Client of not less than such amount.

3 Eligible Collateral and Valuation

3.1 The Clearing House accepts a range of currencies and securities as collateral, which may be
used by Clearing Members to meet their Collateral requirements and Guarantee Fund
Contributions.

3.2 Eligible Cash and Eligible Securities have the meanings set out on the Website.

3.3 The Clearing House values each type of Eligible Cash and Eligible Securities at a discount. The
percentage discount for each type of Eligible Cash and Eligible Security, known as a haircut, is
set out on the Website.

3.4 The Clearing House determines the market value of Collateral in the following ways:

3.4.1 Eligible Cash: face value though appropriate haircuts are applied to cash when it is
utilised to meet the Margin Requirement established in other currencies; and

3.4.2 Eligible Securities: The Clearing House revalues Eligible Securities on a daily basis
with prices provided by third party price sources.

3.5 The Clearing House reports the value of Eligible Securities to the Clearing Member daily.

3.6 A Clearing Member may request that additional Eligible Cash or Eligible Securities be accepted.
Such requests will be analysed by the Risk and Membership Team and a recommendation to
accept or reject the new type of collateral will be presented to the Risk Committee for review
and endorsement.

4 Settlement Banks and Timings

4.1 Each Clearing Member must identify its Settlement Bank or Settlement Banks in writing to the
Clearing House, along with the numbers of the Bank Accounts to be used for settlement.
Written notification in advance is required whenever a Clearing Member changes its Settlement
Bank or Bank Account number. The Clearing House has relationships with the Settlement
Banks set out on the Website.

4.2 Clearing Members must execute the appropriate documentation with each Settlement Bank to
allow the Settlement Bank to debit or credit the Clearing Member’s Bank Accounts on
instruction from the Clearing House to meet the amounts set out in Rule 4.2.2 and to allow the
Settlement Bank to share certain information with the Clearing House. This will be provided by
the Settlement Bank but the Clearing Member will provide the Clearing House with a copy of the

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 executed document and any amendments to it as set out in the Clearing Membership
Agreement.

4.3 The Clearing House operates two (2) settlement cycles each day and may require the Clearing
Member to transfer Collateral to it or make payment to the Clearing Member at the end of each
settlement cycle in satisfaction of a Net Settlement Amount. However, for certain Transactions,
the Clearing House may, in practice, only require the Clearing Member to transfer Collateral or
make payment to the Clearing Member at the end of one settlement cycle each day. The
normal deadlines for the transfer to the Clearing House of Eligible Cash in respect of Contracts
for clearing are set out on the Website.

4.4 The Net Settlement Amount will be called in the currency required by the Clearing House. Each
Clearing Member is responsible for its own cash management by monitoring Collateral
requirements and taking appropriate actions to deposit or release Eligible Assets as necessary.

4.5 Each Clearing Member must ensure that it has provided the Settlement Bank with adequate
Eligible Cash or has appropriate arrangements with its Settlement Bank to enable its Settlement
Bank to satisfy its Net Settlement Amounts payable to the Clearing House at each settlement
cycle.

4.6 A Clearing Member may request that Eligible Cash or Eligible Securities be substituted with
alternate forms of Eligible Assets. Requests for such substitutions can be made by the Clearing
Member using the clearing system. Substitutions are subject to confirmation of receipt by the
Clearing House prior to release of the Eligible Assets being substituted. In most cases,
substitutions can be made within the same day. The relevant cut-offs and timings for
substitutions are set out on the Website.

5 Fees and Charges

5.1 Fees and charges for clearing Transactions are set out in the Fees and Charges Notice, which
are published on the Website. Fees and Charges are payable in the currencies set out in the
Fees and Charges Notice. The Clearing House collects fees and charges on a monthly basis
through each Clearing Member’s Bank Account. Clearing Members are notified of applicable
fees for each month in arrears on the fourth Business Day of each month and collected through
the Settlement cycle on the seventh Business Day of each month.

5.2 If the Clearing Member does not have adequate Eligible Cash in the required currency in its
Bank Account, the Clearing House may take Eligible Cash in a different currency from the
Clearing Member’s Bank Account and then charge the Clearing Member for conversion at the
rates set out in the Fees and Charges Notice.

5.3 The Clearing House will transfer Distributions on Eligible Securities transferred to it in
accordance with the Clearing Membership Agreement within five (5) Business Days of receipt of
the Distributions by the Custodian.

5.4 The Clearing House will pay interest on Eligible Cash. The Clearing House will determine the
interest rate and calculate the interest payable each Business Day in respect of the previous
Business Day and publish such rates on the Website. Interest will be payable on a monthly
basis.

5.5 The Clearing House will pass on custody fees in respect of Eligible Securities to Clearing
Members which provide Eligible Securities at the rates set out in the Fees and Charges Notice.

6 Reports

6.1 The Clearing House will provide the Clearing Member with the following reports:

(a) EOD Asset Inventory Trial Balance

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 (b) EOD Full Value Delivery Margin Requirements

(c) EOD Pledge Stock

(d) EOD Recap Ledger Audit Report

(e) IDY Recap Ledger Audit Report

(f) EOD Span Recap Ledger-Total PB Requirements by PB Acct.

(g) IDY Span Recap Ledger-Total PB Requirements by PB Acct.

(h) EOD Span Recap Ledger-Detail By Position Accounts

(i) IDY Span Recap Ledger-Detail By Position Accounts

(j) EOD Span Recap Ledger-PB By Commodity Group

(k) IDY Span Recap Ledger-PB By Commodity Group

(l) EOD Span Recap Ledger-FNL Performance Bond Requirements

(m) IDY Span Recap Ledger-FNL Performance Bond Requirements

(n) EOD Recap Ledger-Total Variation By Settlement

(o) IDY Recap Ledger-Total Variation By Settlement

(p) EOD Final Margin Accounts

(q) IDY Final Margin Accounts

(r) Commodity Position Adjustment By Firm

(s) IDY Gross Position Change (PC) Listing

(t) Cash Settlement Report

(u) In-The-Money-Report

(v) EOD Daily Trade And Position Register

(w) IDY Daily Trade And Position Register

(x) EOD Pay/Collect Summary

(y) IDY Pay/Collect Summary

(z) Variable Size Contracts Recap

(aa) Option Exception Summary

(bb) Option Assignment Notice

6.2 Reports can be retrieved in pre-formatted form or in a form capable of interface through the
Clearing System and are generally available to Clearing Members by 21:00.

6.3 The Clearing House requires that Clearing Members inform the Clearing House not later than
one (1) hour before the time at which the Clearing House publishes the EOD Daily Trade and

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 Position Register on any Business Day of their Clients’ final end of day positions. This is known
as the PCS deadline.

7 Client support

The Clearing House provides client support to Clearing Members between the hours of 07:00
and 19:00 Monday to Friday other than Holidays. However, a Clearing Member technical
helpdesk is available to assist with queries from Clearing Members twenty-four (24) hours per
day, six (6) days per week. The telephone number for the Clearing Support Desk is +44 0(20)
3379 3131.

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 GUARANTEE FUND PROCEDURE

1 Introduction

The Guarantee Fund is an important element of the financial safeguards for the protection of the
Clearing House and its Clearing Members. The Contribution posted by a Clearing Member is
available for use in the event that it is unable to meet its obligations to the Clearing House and
the costs to the Clearing House of managing the default exceed the Collateral that the Clearing
Member has posted with it. The Clearing House may use its own contribution and then the
Contributions of non-defaulting Clearing Members should the costs of managing the default of a
Defaulting Clearing Member exceed the value of that Clearing Member’s assets held by the
Clearing House.

2 Fund Size and Composition

2.1 The size of the Guarantee Fund is determined by the Clearing House on the basis of its
Guarantee Fund policy. The Guarantee Fund comprises a contribution from the Clearing House
and Contributions from each Clearing Member. The adequacy of the size of the Guarantee
Fund will be formally assessed at least quarterly.

3 Calculation, Re-calculation and Payment of Contributions

3.1 A Clearing Member’s Contribution is the higher of:

3.1.1 the minimum Contribution of the equivalent of USD 2.5 million; and

3.1.2 the standard formula, under which a Clearing Member’s Contribution is based on its
proportion of the average daily Margin Requirement for all Clearing Members in the
previous quarter, weighted to a factor of 85%, and its proportion of gross volume in
the previous quarter, weighted to a value of 15%.

3.2 The Clearing House will re-calculate Clearing Member’s Contributions to the Fund on a
calendar quarterly cycle, reflecting any adjustments to the size of the Fund in those calculations
but may do so more frequently if it so determines. In cases where the size of the Fund is
unchanged, changes to Contributions will be driven by the standard formula and interactions
with the minimum requirement. Within a calendar quarter, the Clearing House will require an
incremental Contribution if the market value of any Contribution less the relevant Clearing
House haircut has dropped below the level of the required Contribution. The Contribution of any
Clearing Member joining the Clearing House during a calendar quarter will be based either on
the minimum Contribution or a higher amount determined at the absolute discretion of the
Clearing House on the basis of the anticipated size of the clearing activity of the new Clearing
Member.

3.3 No later than two (2) Business Days after the re-calculation of Contributions, the Clearing
House will notify Clearing Members of the size of their new Contributions with the underlying
detail. Incremental Contributions must be received by the Clearing House within one (1)
Business Day of such notification.

4 Form and valuation of Contributions

4.1 Contributions to the Guarantee Fund may be made in Eligible Cash or Eligible Securities.

4.2 The market value of, and haircuts applicable to, Eligible Cash and Eligible Securities transferred
to the Clearing House as Contributions to the Guarantee Fund will be determined in the same
way as the market value of Eligible Cash and Eligible Securities transferred to the Clearing
House as Collateral in accordance with the Clearing and Settlement Procedure.

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 5 Distributions, Payments and Charges linked to Contributions

5.1 Distributions related to Eligible Securities will be made by the Clearing House and interest
payments related to Eligible Cash will be paid by the Clearing House within five (5) Business
Days of receipt of the Distributions by the Custodian at the end of each calendar quarter. The
Clearing House will pass on the custody charges that it incurs in respect of Eligible Securities,
detailing the charges to Clearing Members.

6 Miscellaneous

6.1 For the avoidance of doubt, Contributions held by the Clearing House will not under any
circumstances be considered payment in full or in part for any Collateral or other amounts
required by the Clearing House.

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 DELIVERY PROCEDURES

A. PRECIOUS METAL DELIVERY PROCEDURES

1 Introduction

1.1 These Precious Metal Delivery Procedures describe the delivery mechanics in respect of
physically deliverable OTC Gold Forward Contracts as set out in the Contract Module and shall
apply to Clearing Members entering into OTC Gold Forward Contracts with the Clearing House.

1.2 Delivery is effected by transferring unallocated Gold between the Unallocated Precious Metals
Accounts of Clearing Members and the Clearing House.

2 Operating Times

2.1 OTC Gold Forward Contracts can be accepted for clearing on any Business Day.

3 Unallocated Precious Metals Accounts

3.1 Clearing Members shall open and maintain one or more Unallocated Precious Metals Accounts
in respect of unallocated Gold.

3.2 Clearing Members shall open and maintain Unallocated Precious Metals Accounts for the
purposes of making delivery of unallocated Gold to and taking delivery of unallocated Gold from
the relevant Unallocated Precious Metals Account of the Clearing House. Clearing Members
shall provide the details of their Unallocated Precious Metals Accounts to the Clearing House
before entering into OTC Gold Forward Contracts with the Clearing House. Clearing Members
shall ensure that the Clearing House holds accurate and up to date details of their Unallocated
Precious Metals Accounts at all times.

3.3 The Clearing House shall open and maintain Unallocated Precious Metals Accounts for the
purposes of making delivery of unallocated Gold to and taking delivery of unallocated Gold from
the relevant Unallocated Precious Metals Account of the Clearing Member. The Clearing
House shall provide details of its Unallocated Precious Metals Accounts to Clearing Members
entering into OTC Gold Forward Contracts with the Clearing House.

3.4 Clearing Members shall at all times comply with any applicable provisions of the LPMCL, any
other applicable legislation and any applicable requirements, terms, conditions and procedures
of any relevant bank in performing its obligations under OTC Gold Forward Contract. Each
Clearing Member shall obtain and adequately maintain at all times such systems and
technology as may be necessary in order to comply with such requirements.

3.5 Unallocated Precious Metals Accounts in respect of unallocated Gold shall be denominated in
fine troy ounces of gold (to three decimal spaces).

3.6 Each Clearing Member with a requirement to deliver shall ensure that all unallocated Gold
delivered is free and clear of all Encumbrances.

4 Delivery Process

4.1 Delivery under an OTC Gold Forward Contract is effected by the transfer of unallocated Gold in
accordance with the terms of that Contract from the Unallocated Precious Metals Account of the
seller to the relevant Unallocated Precious Metals Account of the Clearing House and from the
relevant Unallocated Precious Metals Account of the Clearing House to the Unallocated
Precious Metals Account of the buyer.

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4.2 In order to effect the delivery of OTC Gold Forward Contract, the buyer shall pay cash to the
Clearing House and send a transfer instruction to its Settlement Agent for Gold in order to
receive Gold into its Unallocated Precious Metals Account. The Clearing House must receive
such payment from the buyer before the Clearing House authorises the transfer of Precious
Metal from its Unallocated Precious Metals Account to that of the buyer.

4.3 In order to effect the delivery of OTC Gold Forward Contract, the seller shall send a transfer
instruction to its Settlement Agent for Gold in order to allow unallocated Gold to be transferred
from its Unallocated Precious Metals Account to that of the Clearing House. The Clearing
House must receive the Gold in its Unallocated Precious Metals Account before the Clearing
House authorises payment to the seller.

4.4 The detailed delivery timings are set out in paragraph 6 below and are subject to any
amendment to the operational arrangements of the Settlement Agent for Gold. The Clearing
House shall notify Clearing Members of any such amendments where such amendments are
known.

4.5 Offsetting positions for an Account or its related sub-account are held open until delivery and all
open positions are netted during the delivery process. For the avoidance of doubt, offsetting
positions in the House Account or in the Non-Segregated Client Account shall not be netted
against offsetting positions in the Segregated Client Account.

4.6 In accordance with the terms stipulated by the LPMCL, the Settlement Agent for Gold acting for
the Clearing House has reserved the right to reverse provisional or erroneous entries credited to
the Unallocated Precious Metals Account of the Clearing House. In such circumstances, the
Clearing House shall have the right to reverse or adjust any payments made in respect of such
entries and to give such directions as appropriate to the Clearing Members who are
counterparties to the corresponding OTC Gold Forward Contracts.

5 Third Parties

5.1 All payments relating to OTC Gold Forward Contract shall be made between the Clearing
House and the Clearing Member. For the avoidance of doubt, the Clearing House will not make
any payments to Clients. The Clearing Member should make separate arrangements for the
payment of cash between itself and its Clients in relation to OTC Gold Forward Contract.

5.2 Unless otherwise instructed, the Clearing House delivers Precious Metal to, and receives the
delivery of Precious Metal from, the Clearing Member’s Unallocated Precious Metals Account
for which the details have been provided to the Clearing House as described in paragraph 3.2
above. In respect of Precious Metals, the Clearing House may accept delivery from, and make
delivery to, Unallocated Precious Metals Accounts of third parties notified by the Clearing
Member to the Clearing House. Third party Unallocated Precious Metal Accounts may be used
for any Client sub-account. For the avoidance of doubt, the Clearing Member is at all times
responsible for the satisfactory performance of the OTC Gold Forward Contract (including
completion of its and its nominated third parties’ delivery and payment obligations). The
Clearing House has no obligations or liabilities under the Rules to any person other than a
Clearing Member.

5.3 The Clearing Member shall notify the Clearing House of Unallocated Precious Metals Accounts
relating to any Client sub-accounts no later than 16:00 hours (London time) on the Business
Day prior to delivery.

6 Delivery Timings

6.1 The Clearing House shall provide a report detailing delivery obligations for each Unallocated
Precious Metals Account of the Clearing Member as soon as reasonably practicable after 16:00
hours (London time) on the Business Day prior to the delivery day. The report shall describe
net flows of cash and Precious Metal relating to physically deliverable Precious Metal Contracts
of the Clearing Member at the sub-account level.

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6.2 The Clearing House shall send a SWIFT message to the Clearing Member in respect of cash
and Precious Metal overnight prior to the delivery day.

6.3 For cash flows

6.3.1 A Clearing Member with a net requirement to pay cash to the Clearing House shall
pay such cash from its Bank Account to the bank account of the Clearing House as
part of the RTH Settlement Cycle but before 09:00 hours (London time) on the
delivery day.

6.3.2 For Clearing Members with a net requirement to receive cash from the Clearing
House:

(a) where such Clearing Member also has a net requirement to deliver Precious
Metal to the Unallocated Precious Metals Account of the Clearing House, the
Clearing House shall instruct its bank to pay cash to the Bank Account of the
Clearing Member, upon receipt of confirmation that Precious Metal has been
delivered to the Unallocated Precious Metals Account of the Clearing House; or

(b) where such Clearing Member does not also have a net requirement to deliver
Precious Metal to the Unallocated Precious Metals Account of the Clearing
House, the Clearing House shall instruct its bank to pay cash to the Bank
Account of the Clearing Member, no earlier than 10:00 hours (London time) on
the delivery day.

6.3.3 Provided that relevant Precious Metal deliveries have been made by the Clearing
Member to the Clearing House, the Clearing House shall complete the payment of
cash to the Bank Account of the Clearing Member, no later than 14:00 hours (London
time) on the delivery day.

6.4 For Precious Metal flows

6.4.1 A Clearing Member with a net requirement to deliver Precious Metal to the
Unallocated Precious Metals Account of the Clearing House shall complete such
delivery, or shall ensure that such delivery is completed from the nominated third party
account, by 13:00 hours (London time) on the delivery day.

6.4.2 For Clearing Members with a net requirement to receive Precious Metal from the
Clearing House:

(a) where such Clearing Member also has a net requirement to pay cash to the
Clearing House, the Clearing House shall deliver Precious Metal to the
Unallocated Precious Metals Account of the Clearing Member, or its nominated
third party account, upon receipt of confirmation that cash has been paid to the
bank account of the Clearing House; or

(b) where such Clearing Member does not also have a net requirement to pay cash
to the Clearing House, the Clearing House shall deliver Precious Metal to the
Unallocated Precious Metals Account of the Clearing Member, or its nominated
third party account, no earlier than 09:00 hours (London time) on the delivery
day.

6.4.3 Provided that relevant cash payments have been made by the Clearing Member to
the Clearing House, the Clearing House shall complete the delivery of Precious Metal
to the Unallocated Precious Metals Account of the Clearing Member, or its nominated
third party account, no later than 16:00 hours (London time) on the delivery day.

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 7 Early Close-out Prior to Delivery Day

7.1 Where the Clearing Member, or its Client, wishes to enter into a Transaction to close out a
position prior to its delivery date, the Clearing Member shall enter into an opposing Transaction
at the same transaction price as the original position. Where such a price does not represent a
fair market value for the Transaction at the time of the offsetting Transaction, an additional cash
payment will arise between the Clearing Member closing out and its trading counterparty to
such Transaction.

To ensure the early close out of positions, the Clearing Member shall make a request to the
Clearing House that such positions are closed out at the time the offsetting Transaction is
submitted for clearing and shall provide the following information to the Clearing House:

7.1.1 the Account and sub-account in which the Transactions have been placed (the
offsetting Transaction must be in respect of the same Account and sub-account as the
original position);

7.1.2 the transaction identifiers for the two offsetting Transactions;

7.1.3 the amount of Precious Metal to be closed out (subject to the maximum amount, being
the lower of the two Transaction volumes); and

7.1.4 the amount and direction of any additional cash payment being made between the
counterparties entering into the offsetting Transactions.

7.2 Such information should be provided in writing by email to

clearingsupport@cmeclearingeurope.com. Clearing Members should in addition contact the
Clearing House by telephone to confirm instructions.

7.3 Where an additional cash payment is included, such payment may be made through the
Clearing House settlement cycle.

7.4 If the cash payment is to be included in the Clearing House settlement cycle, the Clearing
House shall confirm payment details with the counterparty Clearing Member. Positions will be
closed out once the cash payment has been made in the settlement cycle.

7.5 If the cash payment is not to be included in the Clearing House settlement cycle, the Clearing
Member shall provide verifiable information to the Clearing House demonstrating that such
payment has been made between the counterparties. Positions will be closed out once the
cash payment has been verified.

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 COMPLAINTS PROCEDURE

1 Introduction

1.1 This Complaints Procedure is designed to ensure that all Complaints received from Clearing
Members are dealt with fairly and in an objective and prompt way.

2 Types of Complaints

2.1 Paragraphs 3 to 7 of this Complaints Procedure set out how a Clearing Member who has a
Clearing House Complaint may make a formal complaint to the Clearing House and how the
Clearing House will investigate and resolve such a complaint.

2.2 Paragraph 8 of this Complaints Procedure sets out how a Clearing Member who has a Clearing
Member Complaint may make a formal complaint to the Clearing House and how the Clearing
House will investigate and resolve such a complaint.

3 Requirements for Clearing House Complaints

3.1 A Clearing House Complaint must:

3.1.1 be made in writing, dated and addressed to the Regulatory Compliance Officer, CME
Clearing Europe Limited, One New Change, London EC4M 9AF;

3.1.2 set out, so far as possible, full details of the substance of the Clearing House
Complaint including, without limitation, the date(s) and place(s) when it occurred, the
names of the persons involved;

3.1.3 set out the outcome that is sought by the complainant;

3.1.4 contain any other details or documentation that the complainant considers that the
Clearing House shall require in order to investigate the Clearing House Complaint;

3.1.5 be made no later than three (3) months after the conduct, behaviour or other actions
that are the subject of the Clearing House Complaint or if the conduct, behaviour or
other actions complained of consists of a series of events, no later than three (3)
months after the end of the last such event; and

3.1.6 contain the complainant’s full name and address and the contact details of the person
who the Clearing House should contact in relation to the Clearing House Complaint.

4 Acknowledgement and investigation

4.1 The Clearing House must acknowledge the Clearing House Complaint in writing, to the address
shown on the letter of complaint, within ten (10) Business Days of receipt.

4.2 If, in the opinion of the Clearing House, the letter of complaint meets the Complaints
Requirements (as set out in paragraph 3 above), the Clearing House will refer the Clearing
House Complaint to an Investigation Committee. Complaints must be referred to the
Investigation Committee within ten (10) Business Days of receipt of the letter of complaint by
the Clearing House.

4.3 An Investigation Committee shall consist of any 3 of the following persons:

 The Chief Executive Officer of the Clearing House;

 The Chief Operating Officer of the Clearing House;
 Any head of department of the Clearing House;
 The Regulatory Compliance Officer of the Clearing House

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  Any of the independent non-executive members of the Board

providing always that an Investigation Committee shall have at least one Director among its
number.

4.4 If, in the opinion of the Clearing House, the letter of complaint does not meet the Complaints
Requirements, the Clearing House reserves the right not to commence an internal investigation
until, in its opinion, the Complaints Requirements are met.

5 Internal investigation

5.1 The Investigation Committee has responsibility for carrying out an objective and thorough
review and investigation of the Clearing House Complaint.

5.2 The Investigation Committee will carry out an investigation and review into the subject matter of
the Clearing House Complaint (the Internal Investigation) and must deliver its report to the
complainant and to the Board of the Clearing House within seventy (70) Business Days from the
date on which the Clearing House Complaint was referred to it. The report will contain
recommendations for resolving the Clearing House Complaint or it may contain no
recommendations if, in the opinion of the Investigation Committee, this is considered to be
appropriate. The report will also contain reasons for any decision taken by the Investigation
Committee.

5.3 The costs of the Internal Investigation, review and report will be met entirely by the Clearing
House.

6 Referral to an Independent Complaints Investigator

6.1 If the complainant is not satisfied with the outcome of the Internal Investigation, or if the
complainant does not receive the Investigation Committee’s report within seventy (70) Business
Days of the Clearing House Complaint being referred to it (and providing that the subject matter
of the Clearing House Complaint (or substantially the same matters) shall not have already
been referred to an independent investigator as a result of a Clearing House Complaint from the
same complainant) the complainant may request that the Clearing House refer the Clearing
House Complaint to an independent complaints’ investigator (the Independent Investigator)
who has been nominated in accordance with the procedure set out in paragraph 6.4 below.

6.2 A complainant must make a referral request to the Clearing House:

6.2.1 in writing to the Regulatory Compliance Officer of the Clearing House;

6.2.2 no later than:

(a) ten (10) Business Days following receipt by the complainant of the report from
the Investigation Committee (provided in accordance with paragraph 5.2 above);
or

(b) eighty (80) Business Days from the submission of the Clearing House Complaint
to the Clearing House (in accordance with paragraph 3.1) if no report has been
received from the Investigation Committee (as per paragraph 5.2).

6.3 The Clearing House must refer the Clearing House Complaint to an Independent Investigator
within ten (10) Business Days of receipt of a written request for referral made in accordance
with paragraph 6.2 above.

6.4 An Independent Investigator shall be nominated for the purposes of this Complaints Procedure
by the Centre for Effective Dispute Resolution (CEDR), with whom the Clearing House will
liaise. The Independent Investigator will:

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 6.4.1 be independent of the Clearing House, meaning for the purposes of this Complaints
Procedure, that the Independent Investigator is not and has not ever been an officer,
director or employee of the Clearing House or any of its Affiliates;

6.4.2 have appropriate knowledge of how clearing is carried out by the Clearing House and
of the Rules and other relevant documentation, regulation and Applicable Law; and

6.4.3 have appropriate experience of the market and/ or activities to which the Clearing
House Complaint relates.

6.5 The Clearing House will allow the Independent Investigator full access to records, staff and any
key individuals or such other persons as may reasonably enable him to pursue his investigation
and prepare his report and recommendations.

6.6 The Clearing House will pay the fees and expenses of the Independent Investigator.

6.7 If, for reasons beyond the Clearing House’s control, a referral to an Independent Investigator is
not made within the ten (10) Business Day period referred to in paragraph 6.3, the Clearing
House must notify the complainant in writing as soon as possible (but in any event no more than
twelve (12) Business Days following dissemination by the Investigation Committee to the
complainant of the report) of the reasons for the delay.

7 Independent Investigator’s procedure for dealing with the Complaint

7.1 On being appointed, the Independent Investigator must immediately notify the complainant and
the Clearing House in writing of its appointment and will invite both parties to make submissions
and submit any documentation they wish, within a timescale that the Independent Investigator
will determine. Wherever possible, the Independent Investigator’s investigation of a Clearing
House Complaint referred to it under this Procedure will be concluded within two (2) months
from the date of its nomination. Where this is not reasonably possible because of the nature or
complexity of the Clearing House Complaint, or any other reasonable factor, the Independent
Investigator will notify both the complainant and the Clearing House in writing and must provide
a further date for the completion of the investigation.

7.2 The Independent Investigator can determine its own procedure for considering the Clearing
House Complaint referred to it and may, without limitation, take one or more of the following
steps to do so:

7.2.1 interview one or more Representatives of the complainant;

7.2.2 interview one or more Representatives of the Clearing House;

7.2.3 seek further or other information from the Clearing House and / or the complainant; or

7.2.4 make any further or reasonable inquiries as it deems fit in order to properly and fully
investigate the Clearing House Complaint.

7.3 On concluding his investigation, the Independent Investigator will produce a written report
setting out its findings, conclusions and reasons for its conclusions. A copy of this report will be
provided by the Independent Investigator to both the complainant and the Clearing House. In
its written report, the Independent Investigator may make such recommendations it deems fit in
the circumstances including a recommendation that the Clearing House make a compensatory
payment to the complainant and / or takes remedial action to remedy the cause of the Clearing
House Complaint.

7.4 The report will not be made public unless the complainant and the Clearing House agree that
this should be the case. In the event that it is to be made public, the report will be published on
the Website.

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 8 Clearing Member Complaints

8.1 Clearing Member Complaints should:

8.1.1 be made in writing, dated and addressed to the Regulatory Compliance Officer, CME
Clearing Europe Limited, One New Change, London, EC4M 9AF;

8.1.2 set out, so far as possible, full details of the substance of the Complaint including,
without limitation, the date(s) and place(s) when it occurred, the names of the persons
involved;

8.1.3 set out the outcome that is sought by the complainant;

8.1.4 contain any other details or documentation that the complainant considers that the
Clearing House shall require in order to investigate the Complaint;

8.1.5 be made no later than three (3) months after the conduct, behaviour or other actions
that are the subject of the Complaint or if the conduct, behaviour or other actions
complained of consists of a series of events, no later than three (3) months after the
end of the last such event; and

8.1.6 contain the complainant’s full name and address and the contact details of the person
at the complainant who the Clearing House should contact in relation to the
Complaint.

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