Presentation to Ukraine Commodity Market Development Conference The author of the presentation: Fred Seamon, CME Group (US)

1. © 2017 CME Group. All rights reserved.
Exchange/Regulator Interaction – New
Product Launch
06 December 2017

2. © 2017 CME Group. All rights reserved.
• Position Limits
• Internal Set-Up
• Designated Contract Market Requirements
• CFTC Submission
Objectives – Describe Exchange Regulatory Processed
During the Product Launch Process

3. © 2017 CME Group. All rights reserved.
Summary
Contract
Specs
To
Launch
Checklist
Position
Limits
Fees
Walk-
through
Internal
Set-Up
DCO/DCM
Rules
Analysis
DAO
Approval
Publish
SER
CFTC
Submission
Launch
Technical
Set-Up
Web Info
Sales &
Marketing
Product Launch: Key Regulatory Processes

4. © 2017 CME Group. All rights reserved.
Key Considerations Determining Which Futures Contract
Settlement Method Should Be Utilized
Adequate Delivery
Infrastructure?
Adequate Data For
A Cash Index?
CFTC
Requirements
Is There Adequate Infrastructure For
Delivery?
A. For storable commodities, pre-approved
‘regular’ facilities such as warehouses that
meet minimum Exchange requirements are
needed.
B. For non-storable commodities, pre-
approved facilities such as stockyards or
terminal markets that enable the physical
transfer of ownership and immediate
movement and/or consumption of the
commodity have historically been needed.
Is There Adequate Data For a Cash Index?
A. Is there a public or private data source that
is reflective of the underlying cash market
and has enough underlying data to support
a futures contract?
B. Is it mandatory or voluntary data? Is it
audited and reliable?
Exchange
Considerations
CFTC Minimum Requirements Considerations:
A. Do one or both of the settlement methods allow
for adequate deliverable supply to prevent
market manipulation and/or price distortions?
B. Do one or both of the settlement methods
accurately reflect the underlying cash market
and allow the Exchange to monitor for price
convergence?
C. Does the physical settlement process in the
contract reflect current cash market practices?
D. Does the cash settlement process reflect a
thinly traded cash market / lack of competition
amongst participants?
E. Do one or both of the settlement methods meet
all of the Commission’s core principles?
Which Settlement Method Best…:
A. … allows the exchange to meet CFTC
guidelines?
B. … reflects pricing reflective of prevalent
underlying cash marketing practices? i.e.
does one converge better than the other?
C. … discourages futures market disruptions
and potential attempts at price
manipulation at contract expiration?
D. … encourages adequate liquidity
throughout the entire life cycle of all
contract months?
E. ... provides the most long-term room for
growth for the Exchange while still
meeting all of the above considerations?

5. © 2017 CME Group. All rights reserved.
• Deliverable Supply – Quantity of the commodity meeting delivery specifications that are
reasonably available to traders at market value at the contract’s delivery point(s) during
the delivery period.
- Example: Commodity in storage at delivery points or that can be economically moved through such
points
• Supply subject to long-term contracts should not be included.
• Estimates should be monthly for at least the most recent three (3) years (seasonality).
• PRA Analysis
- Historical reports
- PRA Methodology
- Average Number of Daily Transactions
- Average Volume of those Transactions
- Number of Participants
Position Limits – (Cash Market Overview and Deliverable
Supply Analysis)

6. © 2017 CME Group. All rights reserved.
Summary
Contract
Specs
To
Launch
Checklist
Position
Limits
Fees
Walk-
through
Internal
Set-Up
DCO/DCM
Rules
Analysis
DAO
Approval
Publish
SER
CFTC
Submission
Launch
Technical
Set-Up
Web Info
Sales &
Marketing
Product Launch: Key Regulatory Processes

7. © 2017 CME Group. All rights reserved.
• Managed by Registrar’s Office in Market Regulation
• Formal Written Application Submitted
- Audited Financial Statements (Net Worth & Working Capital)
- Proof of Ownership
- Description of Facility
• Market Notice* Issued Indicating Warehouse, Location, and Quantity Applied
• Registrar Physical Inspection
• Regulatory Committee Approval
• MUST APPROVE ENOUGH FACILITIES TO ASSURE DELIVERABLE SUPPLY AND
CONFIDENTIALITY WHEN REPORTING STOCKS
Internal Set-Up – (On-Boarding Delivery Facilities)

8. © 2017 CME Group. All rights reserved.
• Exchange Requires Reporting by Approved Warehouses
• Key Registrar Reports
- Deliverable Commodities Under Registration
- Receipts and Shipments
- Stocks of Grain
- Issues and Stops
Internal Set-Up – (Registrar Reports)

9. © 2017 CME Group. All rights reserved.
Registrar’s DCUR
http://www.cmegroup.com/clearing/operations-and-
deliveries/registrar-reports.html
CORN FUTURES Previous
Firm Location ZONE 1 ZONE 2 ZONE 3 ZONE 4 Date Balance Date
ADM GRAIN COMPANY MORRIS, IL 440 06/29/2017 0 07/18/2016
OTTAWA-N, IL 440 06/29/2017 0 07/18/2016
OTTAWA-S, IL 220 06/29/2017 0 11/04/2015
SPRING VALLEY, IL 0 11/04/2015 118 10/29/2015
LASALLE, IL 110 06/29/2017 0 12/16/2010
HENNEPIN, IL 0 07/21/2011 8 07/18/2011
LACON, IL 220 06/29/2017 0 03/12/2015
HENRY, IL 0 05/07/2009 1 05/05/2009
CARGILL, INC. BURNS HARBOR, IN 0 03/18/2015 1 07/16/2014
OTTAWA, IL 0 05/05/2015 23 03/10/2015
SPRING VALLEY, IL 28 07/21/2017 29 07/14/2017
MORRIS, IL 0 06/27/2011 1 05/11/2010
SENECA, IL 0 03/24/2016 1 03/14/2016
HENNEPIN, IL 0 05/07/2009 1 05/05/2009
LACON, IL 6 07/14/2017 22 07/05/2017
CHS INC MORRIS, IL 0 03/17/2016 110 03/16/2016
PEKIN, IL 0 03/15/2016 8 10/28/2015
CIRM CHICAGO, IL 0 03/17/2016 4 03/15/2016
CONSOLIDATED GRAIN & BARGE PERU, IL 0 05/04/2009 1 03/03/2009
HENNEPIN, IL 45 07/21/2017 46 07/18/2017
UTICA, IL 30 07/18/2017 35 07/17/2017
ELBURN COOPERATIVE, INC. MORRIS, IL 0 06/19/2015 18 05/06/2015
MAPLEHURST OTTAWA, IL 0 07/20/2011 11 07/14/2011
ZEN-NOH GRAIN CORPORATION HENNEPIN, IL 63 07/17/2017 163 07/07/2017
UTICA, IL 44 07/17/2017 71 07/07/2017
Totals 0 440 1,206 0
Total Outstanding 1,646

10. © 2017 CME Group. All rights reserved.
Registrar’s Receipts & Shipments
http://www.cmegroup.com/clearing/operations-and-
deliveries/registrar-reports.html
Daily Stocks of Grain Received and Shipped at
the Close of Business: 07/26/2017
Received Shipped
Chicago Board of Trade
CORN
CHICAGO 0 0
CREVE COEUR - PEKIN 0 0
LOCKPORT-SENECA 152,400 58,893
OTTAWA-CHILLICOTHE 325,905 358,049
EU WHEAT (METRIC TONNES)
FRANCE 13,727 3,059
OATS
CHICAGO 0 6,649
DULUTH - SUPERIOR 151,951 0
MINNEAPOLIS 111,237 190,340
SOYBEANS
CHICAGO 125,312 0
CREVE COEUR - PEKIN 79,996 47,000
HAVANA-GRAFTON 87,533 161,662
LOCKPORT-SENECA 26,152 111,533
OTTAWA-CHILLICOTHE 352,818 394,235
ST LOUIS RIVER AREA 324,633 575,639
WHEAT
CHICAGO 132,942 0
MISSISSIPPI RIVER 74,317 84,224
NORTHWEST OHIO 22,500 3,558
OHIO RIVER 124,987 2,523
ST LOUIS 147,631 144,450
TOLEDO 81,698 5,471

11. © 2017 CME Group. All rights reserved.
Registrar’s Stocks of Grain
http://www.cmegroup.com/clearing/operations-and-
deliveries/registrar-reports.html
GRAIN 07/21 WEEK YEAR 07/21 WEEK YEAR 07/21 WEEK YEAR 07/21 WEEK YEAR
AGO AGO AGO AGO AGO AGO AGO AGO
CORN CHICAGO CREVE COEUR - PEKIN LOCKPORT-SENECA OTTAWA-CHILLICOTHE
Deliverable Grades 140 126 253 2 24 0 1,720 1,386 1,075 1,935 2,025 1,318
Non-Del Grades/Ungraded 0 0 0 0 0 0 0 0 0 74 119 327
CCC Stocks 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL CORN STOCKS 140 126 253 2 24 0 1,720 1,386 1,075 2,009 2,144 1,645

12. © 2017 CME Group. All rights reserved.
Clearing’s Issues & Stops Facility Detail Report
http://www.cmegroup.com/clearing/operations-and-
deliveries/cbot-delivery-reports.html

13. © 2017 CME Group. All rights reserved.
Summary
Contract
Specs
To
Launch
Checklist
Position
Limits
Fees
Walk-
through
Internal
Set-Up
DCO/DCM
Rules
Analysis
DAO
Approval
Publish
SER
CFTC
Submission
Launch
Technical
Set-Up
Web Info
Sales &
Marketing
Product Launch: Key Regulatory Processes

14. © 2017 CME Group. All rights reserved.
• Core Principle Analysis Occurs Early in the Launch Process
• Research Conducts the Analysis With Legal
• Launch Process can be Delayed or Halted by Legal
• Example:
- Prevention of Market Disruption: Trading in the Contracts will be subject to Rulebook Chapter 4,
which include prohibitions on manipulation, price distortion and disruptions of the delivery or
cash‐settlement process. As with all products listed for trading on one of CME Group’s designated
contract markets, activity in the Contracts will be subject to extensive monitoring and surveillance by
CME Group’s Market Regulation Department.
DCM Analysis – Does the Product Meet Core Principles?

15. © 2017 CME Group. All rights reserved.
Summary
Contract
Specs
To
Launch
Checklist
Position
Limits
Fees
Walk-
through
Internal
Set-Up
DCO/DCM
Rules
Analysis
DAO
Approval
Publish
SER
CFTC
Submission
Launch
Technical
Set-Up
Web Info
Sales &
Marketing
Product Launch: Key Regulatory Processes

16. © 2017 CME Group. All rights reserved.
• Research Drafts with Assistance from Legal
• Drafting Process Starts Early – Often Drafts Also Shared with the CFTC
• New Products are Filed Under Reg 40.2
• Reg 40.2 new product and Reg 40.6 new rule/rule change submissions to the CFTC
must include:
1. A concise explanation and analysis of the rule and its compliance with the
Commodity Exchange Act, including core principles, and the CFTC regulations
thereunder.
2. A certification that the registered entity posted a notice of the pending certification
with the CFTC and a copy of the submission, concurrent with the filing of the
submission with the CFTC, on the registered entity’s website.
• One business day requirement for Reg 40.2 new product submissions (Certification)
CFTC Submission – Almost Ready to Launch

17. © 2017 CME Group. All rights reserved.
• Terms & Conditions must be Certified. Terms & Conditions include Maximum Price
Fluctuations and No Cancellation Range
• Block trading levels are not within the definition of “Terms and conditions” so the
submission of new block trading levels, along with changes to “Terms and conditions”
already in the rulebook, must be submitted under Reg. 40.6 which requires the longer 10
business day implementation period.
• Typical Submission will include:
- Contract Specifications (Salient Features); Hours; Fee Schedule; Position Limits;
Block/Cross Trade Availability; Delivery Warehouses; Core Principle Analysis;
Rulebook Chapter; Non-Reviewable Trading Range; and Cash Market Analysis &
Deliverable Supply Estimation
CFTC Submission – Almost Ready to Launch

18. © 2017 CME Group. All rights reserved.
Thank you

19. © 2017 CME Group. All rights reserved.
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken
by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and
swaps each are leveraged investments and, because only a percentage of a contract's value is required to trade, it is possible to lose more than the
amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without
affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade.
All references to options refer to options on futures.
Any research views expressed those of the individual author and do not necessarily represent the views of the CME Group or its affiliates. The
information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any
errors or omissions. All examples are hypothetical situations, used for explanation purposes only, and should not be considered investment advice
or the results of actual market experience.
All matters pertaining to rules and specifications herein are made subject to and are superseded by official rulebook of the organizations. Current
rules should be consulted in all cases concerning contract specifications
CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago
Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New
York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity
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Copyright © 2017 CME Group. All rights reserved.
Disclaimer