CFERG14-013

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Regulatory Circular RG14-013

Date: April 2, 2014

To: CFE Trading Privilege Holders (TPHs)From: Regulatory Services Division RE: Position Accountability for CBOE Volatility Index Futures

CBOE Volatility Index (VIX) futures are subject to position accountability under CFE Rule 412A (PositionAccountability) and CFE Rule 1202(d). CBOE Futures Exchange, LLC (CFE) has revised the noticerequirements that apply with respect to the position accountability levels for expiring VIX futures. Thepurpose of this circular is to remind TPHs of the position accountability levels applicable to VIX futuresand to provide an overview of the revised requirements applicable to position accountability. All times

referenced in this circular are Chicago time.

Position Accountability Levels

• The position accountability levels for VIX futures are:

o Ownership or control at any time of more than 50,000 VIX futures contracts net long or net shortin all VIX futures expirations combined; or

o Ownership or control of more than 30,000 contracts net long or net short in the expiring VIXfuture, commencing at the start of trading hours for the Friday prior to the final settlement date ofthe expiring VIX future; or

o

Ownership or control of more than 10,000 contracts net long or net short in the expiring VIXfuture, commencing at the start of trading hours for the Business Day immediately preceding thefinal settlement date of the expiring VIX future.

• The start of trading hours for the Friday prior to the final settlement date of the expiring VIX futureand the start of trading hours for the Business Day immediately preceding the final settlement dateof the expiring VIX future occurs upon commencement of the first period of extended trading hoursfor the trading session for that Business Day.

Notice Requirements

All-Expirations-Combined Position Accountability Level

• If a TPH anticipates exceeding the all-expirations-combined VIX futures position accountability level,the TPH should submit a completed CFE Position Accountability Information form (PositionAccountability Form) to CFE Regulation. If a TPH exceeds the all-expirations-combined VIX futuresposition accountability level and has not already submitted a completed Position Accountability Formwith respect to those positions, the TPH must submit a completed Position Accountability Form toCFE Regulation within one business day of exceeding that position accountability level.

Expiring Contract Position Accountability Levels

• If at the time of commencement of trading hours for the Business Day immediately preceding the

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Business Day on which a position accountability level solely for the expiring VIX future becomesapplicable a TPH controls aggregate positions in the expiring VIX future in excess of that position

accountability level, the TPH must submit a completed Position Accountability Form to CFERegulation by no later than 10:00 a.m. on that immediately preceding Business Day.

o For example, assume the final settlement date of the April VIX future is Wednesday, April 16.As a result, the 30,000 contract position accountability level for the April VIX future becomesapplicable at 3:30 p.m. on the preceding Thursday, April 10 (which is the start of VIX futurestrading hours for the Business Day of Friday, April 11). Assume that at 3:30 p.m. onWednesday, April 9 (which is the start of VIX futures trading hours for the Business Day ofThursday, April 10) a TPH controls over 30,000 net long April VIX futures contracts. The TPHmust submit a completed Position Accountability Form to CFE Regulation by no later than 10:00a.m. on Thursday, April 10. This is the case even though the 30,000 contract positionaccountability level does not become applicable until 3:30 p.m. on Thursday, April 10.

• If at the time of commencement of trading hours for the Business Day immediately preceding theBusiness Day on which a position accountability level solely for the expiring VIX future becomesapplicable a TPH intends to control aggregate positions in the expiring VIX future in excess of thatposition accountability level at the time it becomes applicable, the TPH must submit a completedPosition Accountability Form to CFE Regulation by no later than 10:00 a.m. on that immediatelypreceding Business Day.

o For example, assume again that the final settlement date of the April VIX future is Wednesday,April 16. As a result, the 30,000 contract position accountability level for the April VIX futurebecomes applicable at 3:30 p.m. on the preceding Thursday, April 10 (which is the start of VIXfutures trading hours for the Business Day of Friday, April 11). Assume that at 3:30 p.m. onWednesday, April 9 (which is the start of VIX futures trading hours for the Business Day ofThursday, April 10) a TPH does not control over 30,000 net long or net short April VIX futures

contracts but that the TPH intends to control over 30,000 net short April VIX futures by 3:30 p.m.on Thursday, April 10. The TPH must submit a completed Position Accountability Form to CFERegulation by no later than 10:00 a.m. on Thursday, April 10. This is the case even though the30,000 contract position accountability level does not become applicable until 3:30 p.m. onThursday, April 10.

• During the time period in which a position accountability level solely for the expiring VIX future isapplicable, a TPH must submit a completed Position Accountability Form to CFE Regulation by nolater than one full Business Day prior to exceeding that position accountability level.

o For example, assume again that the final settlement date of the April VIX future is Wednesday,April 16. As a result, the 10,000 contract position accountability level for the April VIX futurebecomes applicable at 3:30 p.m. on the preceding Monday, April 14 (which is the start of VIXfutures trading hours for the Business Day of Tuesday, April 15). Assume that at 1:00 p.m. onTuesday, April 15 a TPH first decides that it would like to exceed the 10,000 contract positionaccountability level. The TPH would not be able to do so because the TPH would have had tohave submitted a completed Position Accountability Form to CFE Regulation by no later than1:00 p.m. on Monday, April 14 (a full Business Day in advance) and also have not beenrestricted by CFE Regulation with respect to exceeding that position accountability level.

Position Accountability Form

• The Position Accountability Form is available on CFE’s website at:

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http://cfe.cboe.com/publish/CFETradingPermitForms/CFEPositionAccountabilityInformationForm.pdfand contains instructions on how to submit the Form to CFE Regulation.

Position Accountability Requirements

• A TPH that is required to submit the Position Accountability Form to CFE Regulation or that controlspositions in VIX futures in excess of a position accountability level during the time period in which theposition accountability level is applicable shall be subject to the following provisions:

o The TPH shall provide to CFE such information as CFE may prescribe or request pertainingto: the nature and size of the positions, the trading strategy employed with respect to thepositions, the TPH’s intentions with respect to the positions, any hedging activities relating tothe positions and any other information relating to the positions or the TPH’s intentions withrespect to the positions as CFE may prescribe or request;

o CFE may, in its sole discretion, require the TPH (a) not to further increase any positions thatare above the applicable position accountability levels, (b) to reduce any positions that areabove the applicable position accountability levels, or (c) to comply with any prospectivelevels or limits prescribed by CFE which equal or exceed the applicable positionaccountability levels or the size of the positions controlled by the TPH;

o The TPH shall hold all positions in excess of the applicable position accountability levels inan account or accounts designated in writing to CFE and shall not transfer or move thepositions to another account absent advance written notice to and approval by CFE; and

o Any positions in excess of the position accountability levels must be initiated and liquidatedin an orderly manner.

• In determining whether any TPH has exceeded the position accountability levels established byCFE, all positions in accounts for which such TPH, by power of attorney or otherwise, directly orindirectly controls trading (as set forth in Commission Regulation §1.3(j) and Commission Regulation§150.5(g)), whether on a proprietary basis or on behalf of Customers, shall be included. Positionaccountability levels shall apply to positions held by two or more TPHs acting pursuant to an expressor implied agreement or understanding in the same manner as if such positions were held by asingle Person.

• If a TPH exceeds a position accountability level as a result of maintaining positions at more than oneClearing Member, the TPH will be deemed to have waived the confidentiality of its positions and theidentity of the Clearing Members at which the positions are maintained.

• To the extent that a TPH does not comply with any written or verbal instruction issued by CFE with

respect to position accountability levels, such non-compliance may constitute a violation of Rule412A.

• Pursuant to CFE Rule 308, Customers and Customer accounts are also subject to CFE positionaccountability levels and the provisions of Rule 412A to the same extent that TPHs are subject tothose position accountability levels and provisions. Accordingly, Customers are obligated to,among other things, complete and submit a Position Accountability Form when submission of theForm is required as described above. Additionally, TPHs are required under CFE Rule 609 toestablish, maintain, and administer reasonable supervisory procedures to ensure that Customerscomply with CFE Rules, including Rule 412A.

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Additional Information:

Please contact the Regulatory Services Division at [email protected] and (312) 786-8141 foradditional information.

(Replaces CFE Regulatory Circular RG12-051)

CFERG14-013

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