RULE 4 PARTICIPANTS TABLE OF CONTENTS

Transcription

1 RULE 4 PARTICIPANTS TABLE OF CONTENTS Part 4A General Part 4B Participant Classes and Categories 4B.01 Classes of Participants 4B.02 Classes and Categories of Participants Part 4C Participant Requirements 4C.01 Requirement for Clearing Authorization 4C.02 Qualifications 4C.03 Reserved 4C.04 Direct Access Trading Participants and Trading Participants Supervision Obligations 4C.05 Merchant Participants Supervision Obligations 4C.06 Market Participants Entering Order into the Trading System 4C.07 Obligation to Comply with The Code of Conduct Part 4D Application Process and Obligations of Participants 4D.01 Application 4D.02 Application Process 4D.03 Acceptance as a Participant 4D.04 Appeal from Decision by Staff of the Regulatory Division 4D.05 Waiting Period if Rejected 4D.06 Annual Participation Fee 4D.07 Register of Participants 4D.08 Appointment of Authorized Representative 4D.09 Bankruptcy and Insolvency 4D.10 Withdrawal from Participant Status 4D.11 Change in Participant Status 4D.12 Failure to Pay 4D.13 Notice of Change of Equity Interest in Participant Part 4E Additional Requirements and Rule for Futures Commission Merchants 4E.01 Requirements for FCM status 4E.02 Electronic Trading and Order Routing Systems Disclosure Statement 4E.03 Transaction Fee Audits of Canadian FCMs 4E.04 Required Position Disclosure by FCMs 4E.05 Margins 4E.06 Margins on Day Trading A. Supervision Policy Page 1 of 16

2 RULE 4 PARTICIPANTS Part 4A General 4A.01 Participant status in the prescribed class and category is required in order to do one or more of the following; obtain a direct connection via its own conformance tested Direct Access Interface to the ICE Platform or via a conformance tested Direct Access Interface of an ISV, list delivery space and/or issue Warrants as part of the delivery and shipment processes at the Exchange, receive reduced transaction charges, and/or participate in certain activities of the Exchange. 4A.02 Participant status provides the Participant with the right to conduct the activities permitted by the class and category of registration, provided all the provisions of the Rules and all relevant regulatory requirements are met. 4A.03 For the purposes of this Rule, Affiliated and Associated have the meanings assigned to them in The Securities Act. (Manitoba). 4B.01 Classes of Participants There are four Classes of Participants a. Direct Access Trading Participants; b. Trading Participants; c. Merchant Participants; and d. Ancillary Participants; Part 4B Participant Classes and Categories and each shall have the rights and obligations set out under these Rules. A Person may apply for Participant status in more than one Class in accordance with the Rules. 4B.02 Classes and Categories of Participants a. Direct Access Trading Participants Direct Access Trading Participants may be Companies or Individuals, depending upon their category of registration. Direct Access Trading Participants are entitled, upon acceptance, to directly connect to the system through an approved certified Direct User Access Interface, either its own, or that of an approved ISV, all in accordance with the Rules, and in accordance with all relevant regulatory requirements. All Direct Access Trading Participants must ensure that they have a minimum of two (2) Responsible Individuals registered at all times and must have a sufficient number of employees for the nature and scale of business conducted and must comply in all respects with the Rules relating to employees required for the Trading System. (1) Companies shall be registered in one or more of the following categories; (i) Futures Commission Merchant (FCM): FCMs are companies which engage in soliciting, accepting and/or handling monies and/or orders for third parties, including the retail public respecting futures and/or options contracts on the Exchange or any other derivatives exchange. All FCMs must be properly registered with the regulatory authorities in its home jurisdiction and in any other jurisdiction Page 2 of 16

3 required by law and must be a member in good standing of any selfregulatory organization required by the Exchange. (ii) Merchant: A Merchant is a company which buys or sells grain or other commodities either for its own account or as an agent charging commission. A Merchant may operate a facility or plant for the storing, processing or transportation of grain or other commodities. A Merchant is permitted to trade futures and/or options contracts solely for its own account(s) or the account(s) of an Affiliated or Associated Merchant company provided such Affiliated or Associated Merchant company is a Participant of the Exchange. (iii) Liquidity Provider: A Liquidity Provider is a company whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for its own account(s). Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. (iv) Market Maker: A Market Maker is a company whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for its own accounts. Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. Market Makers must enter into written agreements with the Exchange where they agree to make a market in one or more future and/or options contracts, by being ready, willing and able to effect transactions, and/or provide bids and offers to other market participants, all in accordance with the terms and provisions of the said written agreement. Market Makers are entitled to receive incentives from the Exchange for their adherence to the terms and provisions of the said written agreements, which may include reduced or no trading fees, rebates, and/or other value. (v) General: A general company is a company that trades derivative products for purposes other than as set out in the categories of FCM, Merchant, or Market Maker / Liquidity Provider. (2) Individuals shall be registered in one of the following categories: (i) Liquidity Provider: A Liquidity Provider is an individual whose business is primarily restricted to the trading of derivative products for non-hedging purposes for his or her own account(s). Trading done by participants in this category cannot be for the benefit of third parties, including but not limited to, clients, hedge funds and/or managed money accounts. Page 3 of 16

4 (ii) Market Maker: A Market Maker is an individual whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for his or her own accounts. Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. Market Makers must enter into written agreements with the Exchange where they agree to make a market in one or more future and/or options contracts, by being ready, willing and able to effect transactions, and/or provide bids and offers to other market participants, all in accordance with the terms and provisions of the said written agreement. Market Makers are entitled to receive recompense from the Exchange for their adherence to the terms and provisions of the said written agreements, which may include reduced or no trading fees, rebates, and/or other value. (iii) General: An individual registered in the category of General, trades derivative products for purposes other than set out in the category of Market Maker / Liquidity Provider. b. Trading Participants Trading Participants are Persons who trade Exchange products for their own account or for the accounts of clients and/or third parties, all in accordance with the Rules and all regulatory requirements. Market access and connectivity must be set up by the Trading Participant with a Direct Access Trading Participant or an FCM which itself has the contractual arrangements necessary to access the ICE Futures Canada markets. All market access connectivity must be set up in accordance with the Rules and all relevant regulatory requirements. (1) Companies shall be registered in one of the following categories: (i) FCM: FCMs are companies which engage in soliciting, accepting and/or handling monies and/or orders for third parties, including the retail public, respecting futures and/or options contracts on the Exchange or on any other derivatives exchange. All FCMs must be properly registered with the regulatory authorities in its home jurisdiction and elsewhere as required by law and must be a member in good standing of any selfregulatory organization required by the Exchange. (ii) Merchant: A Merchant is a company which buys or sells grain or other commodities either for its own account or as an agent charging commission. A Merchant may operate a facility or plant for the storing, processing or transportation of grain or other commodities. A Merchant is permitted to trade futures and/or options contracts solely for its own account(s) or the account(s) of an Affiliated or Associated Merchant company provided such Affiliated or Associated Merchant company is a Participant of the Exchange. Page 4 of 16

5 (iii) Liquidity Provider: A Liquidity Provider is a company whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for its own account(s). Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. (iv) Market Maker: A Market Maker is a company whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for its own accounts. Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. Market Makers must enter into written agreements with the Exchange where they agree to make a market in one or more future and/or options contracts, by being ready, willing and able to effect transactions, and/or provide bids and offers to other market participants, all in accordance with the terms and provisions of the said written agreement. Market Makers are entitled to receive incentives from the Exchange for their adherence to the terms and provisions of the said written agreements, which may include reduced or no trading fees, rebates, and/or other value. (v) General: A general company is a company that trades derivative products for purposes other than as set out in the categories of FCM, Merchant, Market Maker or Liquidity Provider. (2) Individuals shall be registered in one of the following categories: (i) Liquidity Provider: A Liquidity Provider is an individual whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for his or her own account(s). Trading done by participants in this category cannot be for the benefit of third parties, including but not limited to, client, hedge funds and/or managed money accounts. (ii) Market Maker: A Market Maker is an individual whose business is primarily restricted to the trading of derivative products for non-hedging purposes solely for his or her own accounts. Trading done by this category of Participant cannot be for the benefit of third parties, including, but not limited to, client, hedge funds and/or managed money accounts. Market Makers must enter into written agreements with the Exchange where they agree to make a market in one or more future and/or options contracts, by being ready, willing and able to effect transactions, and/or provide bids and offers to other market participants, all in accordance with the terms and provisions of the said written agreement. Page 5 of 16

6 Market Makers are entitled to receive incentives from the Exchange for their adherence to the terms and provisions of the said written agreements, which may include reduced or no trading fees, rebates, and/or other value. (iii) General: An individual registered in the category of General trades derivative products for purposes other than as set out in the category of Market Maker/Liquidity Provider. c. Merchant Participants - Merchant Participants are companies entitled, upon acceptance, to list facilities for delivery against futures contracts and/or to issue warrants. Merchant Participants may register in one of the following categories: (1) Multi-Commodity - this category of Merchant Participant is entitled to apply to register facilities for delivery against all futures contracts and to issue Warrants for all futures contracts. (2) Deliverable Location Participant Deliverable Location Participants are corporations, cooperatives or other organizations approved by the Exchange entitled, in accordance with the Rules, to register regular for delivery elevators for storage and/or shipment against Exchange contracts. Deliverable Location Participants may enter into Handling Agreements with Merchant Participants as permitted by these Rules. Deliverable Location Participants are not entitled to issue Warrants. d. Ancillary Participants - Ancillary Participants are Individuals or Companies with an interest in the Exchange, who have been continuously registered as an Ancillary Participant prior to January 1, Administrative Amendments effective June 1, 2014 [4B.02 a. (2) (iii) deleted or Floor Broker ; b. (2) (iii) deleted in its entirety; b. (2) (iv) renumbered as (iii) and deleted or Floor Brokers ]. Amended by the Special Regulatory Committee September 18, 2014; effective October 15, 2014 [4B.02 b. first para]. Amended by the Board May 24, 2016; Effective Trade Date May 25, 2016; [4B.02 a.; a. (1) (i); b. (1) (iii) 2 nd para]. Amended by the Board May 24, 2016; Effective Trade Date June 24, 2016; [4B.02 d.]. Part 4C Participant Requirements 4C.01 Requirement for Clearing Authorization and Guaranty or System Managed Accounts a. Excluding only Clearing Participants, all Direct Access Trading Participants must either a) enter into and file with the Exchange a Clearing Authorization and Guaranty Form, in the form approved by the Exchange; or b) be issued one or more System Managed Accounts (SMAs) by a Clearing Participant. b. If at any time, a Clearing Participant revokes a Clearing Authorization and Guarantee, or revokes a SMA, the affected Direct Access Trading Participant s participant status and all trading privileges will immediately be suspended for up to thirty days. If a Direct Access Trading Participant is unable to meet the requirements of sub-rule a. within thirty days, its participant status will be terminated. Page 6 of 16

7 4C.02 Qualifications All Participants must meet and maintain all applicable educational and qualifying standards on an ongoing basis, as required by these Rules, all Self-Regulatory Organizations they are members of and as required by any regulatory authorities they are subject to the jurisdiction of. 4C.03 Reserved Amended by the Board May 24, 2016; Effective Trade Date May 25, 2016 [deleted]. 4C.04 Direct Access Trading Participants and Trading Participants Supervision Obligations Each Direct Access Trading Participant and Trading Participant, other than an individual, shall adopt written policies and procedures (the Supervision System ) to be followed by the directors, officers, partners and employees of the Participant who are involved in or engage in business activities that impact on Exchange matters, that are adequate, taking into account the nature, scope and complexity of the business and affairs of the Participant, to ensure compliance with these Rules, the Act and the rules and regulations of all other Self-Regulatory Organizations of which the Participant is a member. 4C.05 Merchant Participants Supervision Obligations Every Merchant Participant shall adopt written policies and procedures (the Supervision System ) to be followed by the directors, officers, partners, and employees of the Participant who are involved in, or engage in business activities that impact on Exchange matters, that are adequate, taking into account the nature, scope and complexity of the business and affairs of the Merchant Participant, to ensure compliance with the Rules, the Act, and the rules and regulations of all Self-Regulatory Organizations of which it is a member. 4C.06 Market Participants Entering Order into the Trading System Prior to the entry of an order in the Trading System, all Participants shall comply with: a. applicable regulatory standards with respect to the review and approval of orders; b. the policies and procedure set out in the participant s Supervision System, if one is required; and c. all requirements of the Exchange Rules, the Act, and the rules and regulations of all other Self-Regulatory Organizations of which it is a member. 4C.07 Obligation to Comply with The Code of Conduct All Participants, directors, officers, partners and employees of Direct Access Trading Participants and Trading Participants are required to comply with the applicable provisions of The Code of Conduct as provided in the Annexures hereto. 4D.01 Application Part 4D Application Process and Obligations of Participants a. All prospective Participants shall file and execute a form of application/agreement as required by the Exchange. The application shall be made in such form and contain such information as the Exchange may from time to time require; Page 7 of 16

8 b. The Exchange may request such information as it deems necessary to evaluate the application. 4D.02 Application Process a. All applications will be reviewed by the staff of the Regulatory Division upon receipt of all necessary information. b. Each individual or company applying for Participant status may be required to attend at a meeting, and answer any questions put to it. c. At any such meeting, the individual or one or more representatives of a company applicant may be required to provide sworn evidence. d. Upon the approval or rejection of an application, written notice shall be given to the applicant forthwith and all acceptances will be posted on the Website. 4D.03 Acceptance as a Participant The staff of the Regulatory Division may: a. accept an applicant unconditionally; b. accept an applicant subject to such terms and conditions as may be considered appropriate or necessary to ensure compliance by the applicant with the Exchange requirements; or c. refuse the applicant if, after having regard to such factors as staff of the Regulatory Division may consider relevant including, but not limited to, the past or present conduct, business or condition of the applicant or any of its directors, senior officers or holders of a significant equity interest, staff of the Regulatory Division is of the opinion that: (1) the applicant will not comply with Exchange requirements; (2) the applicant is not qualified; or (3) such acceptance is otherwise not in the public interest. 4D.04 Appeal from Decision by Staff of the Regulatory Division a. If an applicant is rejected by staff of the Regulatory Division, or is granted subject to terms and conditions, the applicant shall have a right of appeal to and the right to be heard by the Special Regulatory Committee. The hearing process will comply with the provisions of Rule 10. An appeal is commenced by the applicant filing a written notice with the Regulatory Division within seven (7) days of the date of receipt of the notice of rejection. Immediately upon receipt of the notice of appeal, the staff of the Regulatory Division shall give notice to the Special Regulatory Committee by calling a meeting to consider the appeal and the applicant shall be advised of the place and date of the meeting. b. The Special Regulatory Committee shall review all information it deems relevant and may ask for any additional information to be produced by the applicant and/or the Regulatory Division, as it requires. c. The decision of the Special Regulatory Committee is final. Page 8 of 16

9 4D.05 Waiting Period if Rejected An applicant whose application has been refused may not apply to be accepted as a Participant for six (6) months following the date of the refusal. 4D.06 Annual Participant Fee a. An applicant that has been accepted as a Participant shall pay, before beginning to exercise any rights of Participant status, the applicable annual Participant Fee as may, from time to time, be fixed by the Board. Each year every Participant is required to pay an annual Participant Fee as set by the Board from time to time. b. The Participant Fee is not refundable upon the Participant s withdrawal from Participant status without the consent of the President. The President shall make his decision on such factors as he deems reasonable, and his decision shall be final. 4D.07 Register of Participants The Exchange shall keep a register of Participants with the names of all persons who are or have been Participants within the last seven (7) years, together with the address of each such Participant while a Participant. 4D.08 Appointment of Authorized Representative a. A Participant that is not an individual shall appoint, in writing, one or more individuals as its representatives (the Authorized Representatives ). Authorized Representatives shall be senior officers, directors or partners of the Participant. b. The Authorized Representative(s) shall: (1) represent the Participant in all dealings with the Exchange and have full authority to speak for and bind the Participant; and (2) ensure that the Participant and its partners, shareholders, directors, officers and employees of the Participant comply with Exchange requirements. 4D.09 Bankruptcy and Insolvency a. Upon being adjudged insolvent or bankrupt under the Bankruptcy and Insolvency Act (Canada) or any other applicable legislation, all Participants shall immediately notify the Exchange of their status. b. The Exchange shall have the same rights over the Participants as it had before the bankruptcy. c. There is no monetary value to Participant status. d. If a Participant becomes insolvent or bankrupt or adjudged to be in default, the Participant shall automatically and without the necessity of any action by the Exchange, be suspended as a Participant and notice of such suspension shall be provided by the Exchange to all Participants. e. A Participant shall be deemed to be insolvent if: (1) the Participant is for any reason unable to meet its obligations as they generally become due; Page 9 of 16

10 (2) the Participant has ceased paying its current obligations in the ordinary course of business as they generally become due; or (3) the aggregate of the property of the Participant is not, at a fair valuation, sufficient or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all its obligations, due and accruing due. f. A Participant shall be deemed to be bankrupt if the Participant has committed an act of bankruptcy as set forth in the Bankruptcy and Insolvency Act (Canada). 4D.10 Withdrawal from Participant Status a. Upon suspension of Participant status for any reason, including the voluntary withdrawal of a Participant, a Participant shall remain and continue to be: (1) subject to their Application/Agreement with the Exchange and all of the Rules; (2) liable for all dues, fees, charges and penalties imposed by the Exchange; and (3) obligated to the Exchange, the Clearinghouse, the Participant s Clearing Participant Guarantor (if applicable), and all other Participants for all contracts, obligations and liabilities entered into or incurred before, during and after suspension. b. Upon the termination of a Participant s Participant status for any reason, including the voluntary or involuntary withdrawal of a Participant, the Participant shall remain and continue to be: (1) liable for all dues, fees, charges, penalties and interest imposed by the Exchange for matters prior to the termination of such rights and privileges; and (2) obligated to the Exchange, the Clearinghouse, the Participant s Clearing Participant Guarantor (if applicable) and all other Participants for all contracts, obligations and liabilities entered into before or at the time of termination. c. A Participant may withdraw from Participant status upon satisfaction of the following conditions: (1) providing notification in writing to the Exchange of the intent to withdraw from Participant status. The notification must be provided no less than ten (10) days prior to the intended date of withdrawal; and (2) that there are no dues, fees, penalties or assessments, outstanding against the Participant and no claim, complaint or charges have been lodged by the Exchange, a regulator or the Participant s Clearing Participant Guarantor or are lodged after posting of the notice of intention to withdraw by the Clearing Participant Guarantor or the Exchange. d. As soon as practicable after receipt of a notice of intention to withdraw from Participant status, a notice shall be posted on the Website and the Clearing Participant Guarantor shall have seven (7) days to file any claim, complaint or charge against the Participant withdrawing. The Exchange has up to one (1) year to file a claim under Rules 10 and 11. e. Persons withdrawing from Participant status shall not be entitled to a refund or redemption of any monies paid to the Exchange. Page 10 of 16

11 f. The Exchange may postpone the effective date of termination until it is satisfied that the Participant has complied with the Exchange requirements. Amended by the Special Regulatory Committee June 25, 2014; Effective July 11, 2014 [4D.10 f.]. 4D.11 Change in Participant Status a. A Participant wishing to change its Category of Participant status shall provide a letter to the Exchange advising of its intentions. The Participant shall, if required by the Exchange, complete a new Application/Agreement for Participant status in the applicable Category and shall submit such other documents as are necessary. b. A Participant wishing to change its Class of Participant status shall provide a completed Application/Agreement for Participant status for the Class being applied for together with a letter detailing the reasons for the change and the date the change is requested to take effect. Such other documentation as is necessary shall be provided by the Participant upon the request of the Exchange. c. All applications to change Company Participant Category or Class must be completed/submitted by the Authorized Representative of the Company. d. Changes in Participant Category or Class are not effective until approved by the Regulatory Division and confirmed in writing to the Participant. e. All approved changes in Participant Category or Class will be posted on the Website. 4D.12 Failure to Pay a. Any Participant failing to pay any application or any other monies owed to the Exchange within fifteen (15) days of the date on which the same became payable shall be required to pay the following penalties: (1) each week thereafter, for the first three months, the sum of $50.00 per week; and (2) each week thereafter, the sum of $ per week. Provided that, if a Participant has failed to pay any application or any other monies owed, for thirty (30) days or more, the Exchange may, at its option, terminate the Participant s registration status and privileges. In order to be reinstated as a registrant, such Participant will be required to re-submit an Application/Agreement package and pay all monies owing, including all late penalty fees. If the Participant believes that there are extenuating circumstances which justify it not having to pay the penalties, such Participant shall make its request, in writing, to the President. The President shall make his decision on such factors as he deems reasonable, and his decision shall be final. b. Any Participant who has not paid the annual Participant Fees owing to the Exchange within one (1) calendar month of the date on which the same became payable shall be required to pay the following penalties: (1) each week, for the first three months, the sum of $50.00 per week; and (2) each week thereafter, the sum of $ per week. Provided that, if a Participant has failed to pay the annual Participant fees owing to the Exchange for thirty (30) days or more, the Exchange may, at its option, terminate the Participant s status and privileges. In order to be reinstated as a registrant, such Participant will be required to re-submit an Application/Agreement package and pay all Page 11 of 16

12 monies owing, including all late penalty fees. If the Participant believes that there are extenuating circumstances which justify it not having to pay the penalties, such Participant shall make its request, in writing, to the President. The President shall make his decision on such factors as he deems reasonable, and his decision shall be final. c. Disciplinary penalties assessed by the Exchange are due and payable to the Exchange on the date noted. Failure to pay all monies owing within this time period shall result in immediate suspension of Participant status. Any Participant who has not paid such monies within two (2) calendar months will be terminated and be required to re-apply for Participant status. d. Disciplinary penalties assessed by the Discipline Committee or the Special Regulatory Committee of the Exchange are due and payable to the Exchange on the date noted in the Order or Settlement Agreement. Failure to pay all monies owing within this time period shall result in immediate suspension of Participant status. Any Participant who has not paid such monies within two (2) calendar months will be terminated and be required to re-apply for Participant status. Amended by the Board April 30, 2015; Effective May 29, 2015 [4D.12 a. & b.]. 4D.13 Notice of Change of Equity Interest in Participant a. A Participant shall give the Exchange prompt written notice of a person, or combination of persons acting jointly and in concert, acquiring, directly or indirectly, or obtaining the ability to exercise control over, a significant equity interest in the Participant. b. Without restricting the generality of this Rule, notice shall be given of the acquisition of an indirect significant equity interest in a Participant through a holding company. 4E.01 Requirements for FCM Status Part 4E Additional Requirements and Rules for Futures Commission Merchants In order to be registered as an FCM in any of the categories of Participant status at the Exchange the following criteria must be met: a. The entity is a Corporation, cooperative or partnership; individuals are not eligible for registration. b. If the FCM is dealing with Canadian customers, it must be a member of good standing of a self-regulatory organization approved by the Exchange which provides Canadian Investor Protection Fund ( CIPF ) coverage for all its members or have received an exemption order from the relevant statutory regulatory authorities; c. If the FCM is dealing with customers other than Canadian customers, it must be properly registered with and adhere to all requirements of the relevant statutory and regulatory authorities in all jurisdictions in which it is situated and in which its customers are resident; and d. The FCM must meet and maintain all sales and financial standards and related requirements of its self-regulatory organizations. Page 12 of 16

13 4E.02 Electronic Trading and Order Routing Systems Disclosure Statement Before opening an account for a new customer trading in commodity futures, or accepting the first such order from an existing customer, FCMs shall provide such customer with the Electronic Trading and Order Routing System Disclosure Statement in the form set out in the Annexures or a written Statement providing the customer with equivalent information. Amended by the Board May 24, 2016; Effective Trade Date May 25, E.03 Transaction Fee Audits of Canadian FCMs a. The Exchange shall be entitled, upon five (5) business days written notice, to conduct an audit of transaction fees. Any person or persons designated by the Exchange shall have access to the offices of the Canadian FCM where records are usually held, or as designated by the Canadian FCM, in order to observe, examine and inspect all records kept by the Canadian FCM in connection with the payment of transaction fees. All observations and examinations shall be reasonable and the person or persons designated by the Exchange shall ensure that the audit is carried out with the minimum of disruption to the Canadian FCM s business operations. b. Costs of the audit shall be borne by the Exchange except where a discrepancy is discovered by the audit which is in excess of ten percent (10%) of the correct payment, in which case the Canadian FCM shall pay all of the reasonable costs of the Exchange relating to the audit. c. The Canadian FCM will be required to pay the Exchange for the amount of the discrepancy determined by the audit, together with interest which shall be payable at the rate of 1.5% compounded monthly. Payment must be made within ten (10) business days of demand by the Exchange. Amended by the Board May 24, 2016; Effective Trade Date May 25, E.04 Required Position Disclosure by FCMs a. All Trading Participants and Direct Access Trading Participants registered in the class of FCMs having an omnibus account with another FCM shall promptly disclose to their Clearing Participant the gross long and short positions held by that omnibus account. b. Clearing Participants with long futures positions shall apply sales against their oldest long position. In the case of a customer position held by a Trading Participant or Direct Access Trading Participant registered in the class of FCM, the FCM shall apply sales against the customer s oldest long position. c. The provisions of section b. shall not be mandatory for: 4E.05 Margins (1) offsetting sales and purchases during the same day (commonly known as day trades ); (2) omnibus customers of Trading Participants or Direct Access Trading Participants registered in the class of FCMs. Amended by the Board May 24, 2016; Effective Trade Date May 25, This rule applies to all FCMs. Subject to Rule 4E.06; Page 13 of 16

14 a. The minimum rates of margins required to be deposited by customers and rules governing initiation, maintenance and accounting for margins shall be as published by the Exchange from time to time. b. FCMs must, as a condition of accepting and carrying an account for any customer, require the customer to deposit and maintain at least the minimum margins prescribed by the Exchange from time to time. FCMs may call for higher margins at their discretion. c. The following are the minimum rates of margins for outright positions and inter-crop year spread positions for FCM non-participant clients: (1) Maintenance margins shall be equal to the current Clearinghouse margin; and (2) Initial margins shall be 110% of the maintenance margin level. d. FCMs can, at their discretion, permit non-participant clients holding hedge-based positions to provide margin at the Clearinghouse margin rate. e. The FCM client minimum margin for non-clearing Participants is equal to the Clearinghouse margin. FCMs are required to collect, at a minimum, the Clearinghouse margin for both the speculative and hedge based positions of the Participants they provide clearing services to. f. If within a reasonable delay a customer fails to comply with a demand for margin, the FCM may close out all of the customer s positions or sufficient positions to restore the customer s account to the registered margin status. Amended by the Board August 11, 2014; effective close of business September 11, 2014 [4E.05 c. (2)]. 4E.06 Margins on Day Trading An FCM may use its discretion in permitting a customer having an established account to make day trades in derivative instruments without margining each transaction, provided that any such transactions which are not closed out on the same day shall be subject to the full amount of margin required. Page 14 of 16

15 A. SUPERVISION POLICY Introduction The purpose of this Policy is to outline the Exchange Rule requirements respecting supervision obligations. Participants are required to supervise their employees, directors, officers and/or partners, to ensure that the activities of its operations relative to the Exchange, including all trading, delivery and shipment, operational and/or clearing matters, are carried out in compliance with all applicable rules and requirements of the Exchange and of the Act. Responsibility for Supervision and Compliance An effective Supervision System requires a strong commitment on the part of each Participant. It is necessary that the board of directors and senior management, develop, approve, and implement a clearly defined set of written policies and procedures (the Supervision System ) that are focused on ensuring compliance with, as well as preventing and detecting violations of, Exchange Rules and the Act. An effective Supervision System requires that there be sufficient authority and resources dedicated to ensuring that the program is met and maintained. A company s board of directors is responsible for the overall stewardship and has a specific responsibility to supervise the management of the firm. On an ongoing basis, the board of directors must ensure that the principal risks for non-compliance with the Exchange Rules and the Act have been identified and that an appropriate Supervision System to manage those risks has been implemented. Management is responsible for ensuring that the Supervision System adopted is effectively carried out. The head of trading and any other person to whom supervisory responsibility has been delegated must fully and properly supervise all employees under their supervision to ensure compliance. If a supervisor has not followed the supervision procedures stipulated in the Supervision System, that supervisor will have failed to comply with their supervisory obligations under the Exchange Rules. The compliance department of the Participant, if one exists, is responsible for monitoring adherence to rules, regulations, requirements, policies and procedures. In doing so, the compliance department must have a compliance monitoring system in place that is reasonably designed to prevent and detect violations. The compliance department must report the results from its monitoring to the Participant s management, and where appropriate, the board of directors, or its equivalent. If the Participant does not have a compliance department, then the Participant s management group should accept the responsibilities of the compliance department set out herein. Minimum Elements of a Supervision System For the purposes of the Exchange Rules, an appropriate Supervision System should consist of written policies and procedures aimed at both ensuring all staff who are involved with, or engage in business activities that impact on, Exchange matters are aware of the Exchange Rules and the Act, and at preventing violations from occurring. The Supervision System should include compliance procedures to detect whether violations have occurred. It is acknowledged that there is no one Supervision System that will be appropriate for all Participants. The scope and structure of the Supervision System should be proportionate to the nature, scale and complexity of the Participant s operations. Given the differences among Participants in terms of their size, the nature of their business, whether they are operating from more than one location or jurisdiction, the experience and training of their employees and the fact that effective supervision can be achieved in a variety of ways, no particular type of Supervision System is mandated. At the same time, Participants must be aware that simply complying with this Policy does not relieve them from complying with other rules and requirements that may apply in certain circumstances. Page 15 of 16

16 Participants should also develop and implement provisions in their Supervision Systems that exceed the elements identified in this Policy where the circumstances warrant. For example, previous disciplinary proceedings, warning and/or reprimand letters from the Regulatory Division or the identification of problems with the Supervision System by the Participant or the Regulatory Division, may warrant the implementation of more detailed, more targeted, or more frequent supervision and compliance procedures. Regardless of the circumstances of the Participant, however, every Participant shall: 1. Identify the relevant rules and requirements, the applicable laws and all other regulatory requirements that apply to the lines of business in which the Participant is engaged, including the delivery and shipment processes of the Exchange and/or clearing-related operational requirements (all such requirements are collectively referred to herein as the Trading Requirements ). 2. Develop and implement Supervision Systems that are appropriate for the Participant s size, lines of business in which it is engaged, and whether the Participant carries on business in more than one location or jurisdiction. 3. Document its Supervision System by preparing a written policies and procedures manual. The manual must be accessible to all relevant employees. The manual must be kept current and Participants are advised to maintain a historical copy. 4. Designate individuals responsible for supervision and compliance. The compliance function should, whenever possible, be conducted by persons other than those who supervise the day to day trading activity. 5. Identify the steps a firm will take when violations of the Trading Requirements, securities laws or other regulatory requirements have been identified. This may include increased supervision of the employee or the business activity, internal disciplinary measures and/or reporting the violation to the Regulatory Division or another regulatory organization. 6. Ensure that employees responsible for activities relative to the Exchange marketplace (including trading, delivery and shipment, and clearing operations) are appropriately registered and trained and that they are knowledgeable about the Trading Requirements that apply to their responsibilities as well as the firm s Supervision System. Persons with supervisory responsibility must ensure that employees under their supervision are appropriately registered and trained. The Participant should provide a continuing training and education program, and ongoing assistance and guidance, to ensure that its employees remain informed of, and knowledgeable about, changes to the Trading Requirements and any other rules and regulations that apply to their responsibilities. 7. Review the Supervision System at least once per year to ensure it continues to be reasonably designed to prevent and detect violations. More frequent reviews may be required if past reviews have detected problems with supervision and compliance. 8. Maintain the results of all compliance reviews for at least five years. 9. Report to the board of directors of the Participant, or if applicable, the partners, a summary of the compliance reviews and the results of the Supervision System review. These reports should be made at least annually. If the Regulatory Division or the Participant has identified significant issues concerning the Supervision System or compliance procedures, the board of directors, if applicable, the partners, should be advised immediately. Page 16 of 16