Resolution No. 8717
I 1
1
2
3
RESOLUTION NO. 8717
4
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND RATIFYING THE EXECUTION OF A
PARTICIPANT AGREEMENT BY AND BETWEEN THE CITY OF
VERNON AND INTERCONTINENTALEXCHANGE, INC. FOR POWER
AND GAS TRADING TRANSACTIONS
5
6
7 WHEREAS, the City of Vernon ("City") desires to participate
8 in a trading service for power, gas and financials that would allow
9 market conditions to be viewed on a real-time basis in order to
10 optimize the City's trading opportunities; and
11
WHEREAS, IntercontinentalExchange, Inc. ("Intercontinental")
12 operates global marketplaces to all commercial market participants for
13 the trading of energy commodity futures and OTC contracts on its
14 internet-based interchange trading platform; and
15 WHEREAS, the City desires to enter into a Participant
16 Agreement with Intercontinental setting forth the terms and conditions
17 under which the City will be provided access to Intercontinental's
18 electronic power and gas trading platform; and
19 WHEREAS, in order to meet the urgent need to mitigate the
20 risk of fluctuating energy prices and increase the City's ability to
21 take advantage of economic opportunities, the City Administrator
22 executed the necessary documents to be a participant of
23 Intercontinental, subject to ratification by the City Council; and
24 WHEREAS, on April 5, 2005, the Finance Committee considered
25 the recommendation of Bruce V. Malkenhorst, the Director of Finance,
26 dated March 31, 2005, that the actions of the City Administrator in
27 executing the Participant Agreement dated on or about January 26,
28 2005, and any other document necessary to be a participant of
..
1 Intercontinental be ratified; and
2 WHEREAS, the City Council of the City of Vernon has
3 determined that, pursuant to the provisions of subsection (a) of
4 Section 2.27 of the Vernon City Code, it is in the public interest and
5 necessity to ratify entering into the Agreement with Intercontinental.
6 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
7 CITY OF VERNON AS FOLLOWS:
8
SECTION 1:
The City Council of the City of Vernon hereby
9 finds and determines that the recitals contained hereinabove are true
10 and correct,
11
SECTION 2:
The City Council of the City of Vernon hereby
12 ratifies the execution of the Participant Agreement with
13 Intercontinental dated on or about January 26, 2005, by the City
14 Administrator, a copy of which is attached hereto as Exhibit A and
15 incorporated by reference.
16
SECTION 3:
The City Council of the City of Vernon hereby
17 ratifies and authorizes the City Administrator to execute any and all
18 documents necessary to implement and carry out the. terms and
19 conditions of the Participant Agreement.
20
SECTION 4:
The City Clerk of the City of Vernon shall
21 certify to the passage of this resolution, and thereupon and
22 thereafter the same shall be in full force and effect.
23 APPROVED AND ADOPTED this 13th day of April, 2005.
24
25
26
27
r
~d-Cd~L6~.l.
~~EONIS C. LBURG, ayor
ATTEST:
~,
~
28 BRUCE V, MALKENHORST, City Clerk
- 2 -
17
18
19
20
21
22
23
24
25
26
27
28
1 STATE OF CALIFORNIA
2
ss
COUNTY OF LOS ANGELES
3
4
I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution No.
8717, was duly adopted by the City Council of the City of Vernon at a
special meeting of the City Council duly held on Wednesday, April 13,
2005, and thereafter was duly signed by the Mayor of the City of
5
6
7
8
9
10
11
12
13 (SEAL)
Vernon.
~~~
BRUCE V. MALKENHORST, City Cletk
14
15
16
- '3 -
EXHIBIT
A
t
.
.
.
Intercontinental Exchange
Confidential
PARTICIPANT AGRE,EMENT
This Agreement ("Agreement"). sets out the terms on which IntercontinentalExchange, Inc,
("Intercontinental"), which. owns and operates IntercontinentalExchange (the "Exchange"), an electronic _
system for the (i) execution ("Execution") of transactions ("Exchange Transactions" or "Transactions"), (ii)
the matching ("Confirmation") of previously executed trades ("Trade Confirmations" or "Trades") with other
Participants, and (iii) the use of other services ("Other Services") involving physical commodities and
derivative products on sucQ commodities (collectively, the "Products"), has. agreed to provide the party
identified below ("Participant") with access to the Exchange. For the purposes of this Agreement, Trades
submitted by Participant for Confirmation or Other Services may include either or both Exchange
Transactions (executed on the Exchange) and Non-Exchange Transactions (executed on other exchanges,
systems, or by non-electronic means). Other Services include (i) the matching ("Broker Confirmation") of
Trade data with a third party ("Broker") responsible for arranging the Trade, (ii) the acceptance and
processing ("Trade Give-Up") of a Non-Exchange Transaction submitted by a Broker on Participant's behalf
and with Participant's authorization for the purposes of giving the Non-Exchange Transaction up to a clearing
organization, and (iii) the submission of data ("Data Submission") for inclusion in market data services.
1) ACCESS TO EXCHANGE, Intercontinental hereby grants Participant a non-exclusive, non-
transferable, revocable license to access the Exchange as it may exist from time to time and to utilize
any hardware, software, systems and/or communications links furnished by Intercontinental to
Participant from time to time (collectively, the "System") in accordance with the Terms (as defined
below), solely for the purpose of allowing Participant to electronically post bids, offers and requests
for quotati6ns (and responses to any such requests) for Exchange Transactions in the Products, to
enter into Exchange Transactions with other participants, to match and confirm Trades with other
participants, and to use the Other Services on the Exchange.
. 2) TERMS OF ACCESS. This Agreement, taken together with (i) the Service and Pricing Schedules
(the "Schedules") (the current versions of which are attached hereto as Annex A), (ii) any other
Annexes to this Agreement (excluding Annex B) (iii) the Transaction Procedures, Product, and User
Guides (the current versions of which are posted on the Exchange) governing Execution, (iv) the
Confirmation Procedures, Product, and User Guides governing Confirmation, (v) the Broker
Confirmation Procedures, Product, and User Guides governing Broker Confirmation, (vi) the Trade
Give-Up Procedures, Product, and User Guides governing Trade Give-Up, and (vii) the Market Data
Submission Procedures and Product Guides governing Data Submission (the current versions of
which are posted on the Exchange), are collectively referred to herein as the "Terms" and will govern
Participant's access to and use of the System and the Exchange and any and all Exchange
Transactions, Trade Confirmations, and Other Services utilized by Participant. With the exception of
the Confirmation Procedures Guide and the Broker Confirmation Procedures Guide, Intercontinental
may amend the Terms at any time by posting amendments on the Exchange, and any such
amendments will be prospectively binding on Participant, provided that Intercontinental will provide
prior notice of any such amendments on the Exchange and provided further that Intercontinental will
provide at least two weeks' prior notice, through electronic or other direct communication with
Participant, of any such amendments that are likely to materially and adversely affect Participant or its
rights or obligations hereunder. Participant's use of the Exchange after the effective date of any such
amendment shall, constitute its ratification of and agreement to any such amendment. If
Intercontinental elects to require Participant to acknowledge and agree to an amendment, such
amendment will not become effective until Participant has done so in the manner specified by
Intercontinental. The Confirmation Procedures Guide and the Broker Confirmation Procedures Guide
are exempt from this amendment process and must be amended according to the terms stipulated
therein.
3) PARTICIPANT'S REPRESENTATIONS. WARRANTIES AND COVENANTS. Participant hereby
represents, warrants and covenants as follows:
a) Unless and until Participant notifies Intercontinental otherwise, Participant is and will continue to
be: (i) an "eligible commercial entity" as defined in Section 1a(11) of the U.S. Commodity
Exchange Act (as amended) (together with relevant Commodity Futures Trading Commission
Notices or Regulations, the "CEA") to the extent that Participant engages in Execution of
'July 1, 2004
Page 1 of 44
I
.
.
.
Intercontinental Exchange
Confidential
Exchange Transactions; and (ii) an "eligible contract participant" as defined in Section 1a(12) of
the CEA to the extent that Participant engages in Trade Give-Up. A summary of the CEA
definitions of the terms "eligible commerCial entity" and "eligible contract participant" is appended
hereto as Annex B. This is only a summary and Participant should direct any questions regarding
these definitions to its legal advisors.
b) Participant will enter into Exchange Transactions solely as principal.
c) Participant acknowledges that the Exchange, the System and all informatjon and content
(including price and trading data) displayed and distributed thereon or in any way related to
Exchange Transactions, Trade Confirmations, or Other Services (such information or content and
information derived therefrom being referred to collectively herein as "Exchange Data") are,
except as set forth in the final sentence of this Section 3(c), the exclusive proprietary property of
Intercontinental constituting trade secrets. Participant has been granted a limited license to use
the System, the Exchange, and the Exchange Data solely for the purposes set forth herein and
Participant will have no other rights with respect to the System, the Exchange, or the Exchange
Data, Without limitation of the foregoing, Participant will access and utilize the System, the
Exchange, and the Exchange Data solely for its own intemal business activities in accordance
with the Terms. Participant agrees that it will not copy, modify, reverse engineer, reverse
assemble or reverse compile the System or any of the Exchange Data displayed on or issued by
the Exchange, that it will not distribute, rent, sell, retransmit, redistribute, release or license the
System, any Exchange Data, or any part thereof to any third party (other than to its affiliates and
agents subject to and in accordance with this Agreement), Participant further agrees that it will
not, without limitation (other than for its own internal use in accordance with this Agreement),
communicate, redistribute, or otherwise fumish, or permit to be communicated, redistributed or
otherwise furnished, all or any portion of the Exchange Data, in any format, to any third party or in
constructing or calculating the value of any index or indexed products, Participant will use its best
efforts to ensure that its partners, officers, directors, employees and agents maintain sole control
and possession of, and sole access to, Exchange Data obtained through Participant's access to
the System. Notwithstanding the foregoing, it is understood and agreed that any and all data..
submitted to the Exchange by Participant (including but not limited to bids and offers for
Exchange Transactions, Exchange Transactions from Execution, Trades to be matched for
Confirmation or Broker Confirmation, and data from Other Services, such as Data Submission)
and all information related to Transactions entered into by Participant through the Exchange as
well as all Trade data submitted to the Exchange by a Broker on Participant's behalf for the
purposes of Trade Give-Up, shall be the non-exclusive property of Intercontinental and
Participant, and that each party shall have the right to use, sell, retransmit or redistribute such
information, subject to the provisions of Section 8 hereof.
d) Participant will comply with the Terms and any and all laws, rules, regulations or orders
applicable to Participant's access to and use of the System, the Exchange, and the Exchange
Data.
e) Participant acknowledges and accepts that it shall be solely responsible for any and all costs or
expenses associated with its accessing and utilizing the Exchange.
f) Participant acknowledges that Intercontinental may, in its sole discretion, with or without cause or
prior notice to Participant, temporarily or permanently cease to operate the Exchange, temporarily
or permanently cease to make certain Products or Transactions or Other Services or Exchange
Data available or suspend, terminate or restrict Participant's access to and utilization of the
Exchange. Participant acknowledges that its access to and utilization of the Exchange may be
monitored by Intercontinental for its own purPoses (including, without limitation, for purposes of
monitoring level~ of activity in categories of Exchange Transactions, Trade Confirmations, and
Other Services and for purposes of maintaining the functional and operational integrity of the
System and for purposes of complying with applicable laws and regulations) and not for the
benefit of Participant. The Confirmation Procedures Guide and the Broker Confirmation
Procedures Guide set forth additional terms and conditions under which Intercontinental may
respectively temporarily or permanently suspend each of those Services.
July 1, 2004
Page 2 of 44
.
,
.
.
Intercontinental Exchange
Confidential
g) Participant has all necessary power and authority to execute and perform this Agreement, and
this Agreement is its legal, valid and binding agreement, enforceable against Participant in
accordance with its terms. Neither the execution of nor performance under this Agreement by
Participant violates any law, rule, regulation or order, or any agreement, document or instrument,
binding on or applicable to Participant. If, within the System, Participant ha~ aU~Qrized any
Broker to submit Non-Exchange Transactions on its behalfforthe purpose of fitQk'erConfirmation
and/or Trade Give-Up, Participant represents and warrants that such Broker is-autherized to. act
on behalf of Participant in connection with the use of such Services and authorizes and instructs ,C.L,
Intercontinental to comply with any instructions submitted by such Broker on behalf of PartiCipant.
h) Participant agrees to provide Intercontinental with information related to Participant's use of the
System and the Exchange that is reasonably requested by Intercontinental, if such information is
reasonably necessary in order to enable Intercontinental to maintain the integrity of the System or
to comply with applicable laws or regulations, and such information will be accurate and complete
in all material respects and subject to the Confidentiality provisions of Section 8. Should
Participant refuse to provide information, or if the information demonstrates a potential violation of
the terms and conditions of this Agreement, then Intercontinental shall have the right, upon five
(5) days notice, to conduct an on-site audit during regular business hours of Participant's
compliance with this Agreement. Intercontinental may inspect, among other things, any use of
the System, the Exchange and the Exchange Data. Intercontinental's right of inspection shall
extend only so far as may be necessary to ensure compliance by Participant with the provisions
of this Agreement.
i) Participant acknowledges that portions of the System and related technical information,
documents and materials are subject to export controls under the U.S. Export Administration
Regulations. Participant will (1) comply with all legal requirements established under these
controls, (2) cooperate fully with Intercontinental in any official or unofficial audit or inspection that
relates to these controls and (3) not export, re-export, divert or transfer, directly or indirectly, any
such item or direct products thereof to Cuba, Iran, Iraq, Libya, Sudan, Syria, the Taliban,
Afghanistan, or any national thereof or to any country or national thereof that is embargoed by
Executive Order. Participant represents and warrants that it will not use the System in' any such
country nor will it permit any national of any such country to use the System for any purpose at
any time. Upon notice to Participant, Intercontinental may modify the list of such countries to
conform to changes in the U,S. Export Administration Regulations.
4) USER IDs AND PASSWORDS. Intercontinental shall issue to Participant, through its employees
designated as its administrator(s) with respect to Participant's use of the System ("Participant User
Administrator"), one or more user IDs and passwords (collectively, the "Passwords") for use
exclusively by employees ("Authorized Employees") of Participant or a Participant affiliate that are
properly authorized to access the Exchange on behalf of Participant. The initial Participant User
Administrator(s) for Exchange Transactions, if applicable, and for Trade Confirmations and Broker
Confirmations, if applicable, are identified, respectively, on the signature page hereof and Participant
will notify Intercontinental promptly of any change in its Participant User Administrator(s). Participant
will be solely responsible for controlling and monitoring the use of the Passwords, will provide the
Passwords only to its Authorized Employees, and will not provide the Passwords to any third party.
Participant will immediately notify Intercontinental of any unauthorized disclosure or use of the
Passwords or access to the Exchange or of the need to deactivate any Passwords. Participant
acknowledges and agrees that it will be bound by any actions taken through the use of its Passwords
(except through the fault or negligence of Intercontinental), including the Execution of Transactions,
the Confirmation of Trades, and the use of Other Services, whether or not such actions were
authorized. Participant will only use the Passwords to access and use the Exchange from the
jurisdictions specified by Participant and accepted by Intercontinental. The. Participant User
Administrator shall be responsible for all communications between Intercontinental and Participant
and any notices or other communications sent to the Participant User Administrator by
Intercontinental shall be binding on Participant.
July 1, 2004
Page 3 of 44
,.
.
.
..
Intercontinental Exchange
Confidential
5) TERM. This Agreement will commence as of the date hereof and will continue thereafter unless and
until terminated by either party upon 30 days' written notice to the other, provided that this Agreement
shall remain in effect with respect to any Exchange Transactions, Trade Confirmations, Broker
Confirmations. or Trade Give-Ups effected prior to such termination and provided that Intercontinental
complies with any additional termination requirements governing the Confirmation service as
stipulated in the Confirmation Procedures Guide and governing the Broker Confirmation service as
stipulated in the Broker Confirmation Procedures Guide. Termination of this Agreement shall --
terminate all services provided by Intercontinental to Participant including Execution, Confirmation,
and Other Services. Each party's continuing obligations under this Agreement and the Terms,
including, without limitation, those relating to "Indemnification" and "Confidentiality", will survive the
termination of this Agreement.
6) EXECUTION OF TRANSACTIONS.
a) Upon the Execution of a binding Transaction in accordance with the Terms. Participant agrees
that: (i) it will be obligated to pay to Intercontinental the commissions due on such Transaction, in
accordance with the Schedules as then in effect, regardless of whether the Transaction is
performed, settled or otherwise completed by Participant and its counterparty; and (ii) the
resulting Transaction will constitute a legally binding obligation of Participant. with respect to its
counterparty, to complete the Transaction in accordance with its terms and subject to the terms
of any master or other applicable agreements between Participant and its counterparty, provided
that Intercontinental shall have no involvement in and no responsibility or liability for any matters
related to the Transaction or the completion or documentation of the Transaction subsequent to
its Execution through the Exchange, including but not limited to the creditworthiness of any
participant, all of which shall be the sole responsibility of Participant and/or its counterparty, as
applicable, Participant acknowledges and agrees that the counterparty to any Transaction may
rely on Participant's agreements hereunder as to the binding nature of such Transaction and
agrees that the counterparty may directly enforce Participant's obligations under such
Transaction against Participant.
b) Participant agrees that Transactions Executed through the Exchange shall be deemed to be "in
writing" and to have been "signed" for all purposes and that any record, of any such Transaction
will be deemed to Be in "writing", Participant will not contest the legally binding nature, validity or
enforceability of any Transaction Executed through the Exchange based on the fact that it was
entered and Executed electronically and expressly waives any and all rights it may have to assert
any such claim.
c) All commissions and other charges and fees incurred by Participant hereunder in any calendar
month shall be invoiced by Intercontinental to Participant based on the Schedules, as amended
from time to time and as set forth in the Terms. Intercontinental will provide Participant with an
invoice which states the amount owed by Participant, including any commissions, other charges
or related taxes, which will be due and payable in the currency. timeframe, and manner specified
in the Schedules. Late payments will bear interest after the due date at a rate per annum of
interest equal to the Prime Rate (as published in the Wall Street Journal) plus 1.5%, to the extent
that such rate shall not exceed the maximum rate allowed by applicable law,
d) Participant shalt be liable for all taxes and dutie.s (other than franchise and income taxes owed by
Intercontinental) arising out of this Agreement or' any Exchange Transactions. Trade
Confirmations, or Other Services utilized by Participant through the Exchange, including, without
limitation. taxes and duties levied by non-U,S. jurisdictions.
7) LIMITATION OF LIABILITY: INDEMNITY.
a) PARTICIPANT ACKNOWLEDGES, UNDERSTANDS AND ACCEPTS THAT
INTERCONTINENTAL MAKES NO WARRANTY WHATSOEVER TO PARTICIPANT AS TO THE
SYSTEM OR THE EXCHANGE, EXPRESS OR IMPLIED, AND THAT THE EXCHANGE IS
PROVIDED ON AN "AS IS" BASIS AT PARTICIPANTS SOLE RISK. INTERCONTINENTAL
EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. NEITHER INTERCONTINENTAL NOR ITS MANAGERS,
July 1, 2004
Page 4 of 44
I
.
.
IntercontinentalExchange
Confidential
OFFICERS, AFFILIATES. SUBSIDIARIES, SHAREHOLDERS, EMPLOYEES OR AGENTS
MAKE ANY WARRANTY WITH RESPECT TO, AND NO SUCH PARTY SHALL HAVE ANY
LIABILITY TO PARTICIPANT (i) FOR THE ACCURACY, TIMELINESS, COMPLETENESS,
RELIABILITY, PERFORMANCE OR CONTINUED AVAILABILITY OF THE SYSTEM OR THE
EXCHANGE, (ii) FOR DELAYS, OMISSIONS OR INTERRUPTIONS THEREIN, (iii) FOR THE
CREDITWORTHINESS OF ANY OTHER-'PARTICIPANT, OR (iv) FOR THE ACTS OR
OMISSIONS OF ANY BROKER AUTHORIZED WITHIN THE SYSTEM BY PARTICIPANT TO
UTILIZE THE SERVICES ON BEHALF OF RARTICIPANT. INTERCONTINENTAL SHALL HAVE
NO DUTY OR OBLIGATION TO VERIFY ANY INFORMATION DISPLAYED ON THE
EXCHANGE. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE EXCHANGE DOES
NOT AND SHALL NOT SERVE AS THE PRIMARY BASIS FOR ANY DECISIONS MADE BY
PARTICIPANT AND THAT INTERCONTINENTAL IS NOT AN ADVISOR OR FIDUCIARY OF
PARTICIPANT,
b) Subject to Section 7(c) of this Agreement, Participant shall indemnify, protect, and hold harmless
Intercontinental, its directors, officers, affiliates, employees and agents from and against any and
all losses, liabilities, judgments, suits, actions, proceedings, claims, damages, costs (including
attorney's fees) resulting from or arising out of (i) any act or omission by any person obtaining
access to the Exchange through the Passwords (other than through the fault or negligence of
Intercontinental), whether or not Participant has authorized such access, and (ii) any act or
omission of any Broker acting under authorization and on behalf of Participant in connection with
the use of the Services.
c) IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES, EVEN IF IT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
d) Notwithstanding the terms of Section 7(a), ih the event that Intercontinental is determined to be
liable to Participant for any cause, Participant expressly agrees that in entering into this
Agreement, Intercontinental's aggregate liability, for all causes of action, will not exceed the total
commissions, fees, and other amounts (excluding any applicable taxes or duties) paid to
Intercontinental by Participant in the previous six months from the date of the occurrence of the
liability.
8) CONFIDENTIALITY.
a) Any and all non-public information in any form obtained by either party or its employees arising
out of or related to the provision or use of the System or the Exchange, including but not limited to
trade secrets, processes, computer software and other proprietary data, research, information or
documentation related thereto and Exchange Data, shall be deemed to be confidential and propri-
etary information, Each party agrees to hold such information in strict confidence and not to
disclose such information to third parties (other than to its employees, its affiliates and their
employees or its agents) or to use such information for any purpose whatsoever other than as
contemplated by the Terms and to advise each of its employees, affiliates and agents who may
be exposed to such proprietary and confidential information of their obligations to keep such
information confidential in accordance with this Section 8,
b) Confidential information shall not include information which is: (i) in or becomes part of the public
domain other than by disclosure by such party in violation of this Agreement; (ii) known to or
obtained by such party previously without an obligation of confidentiality; (iii) independently
developed by such party outside of this Agreement; (iv) required to be disclosed by applicable law
or regulation, or pursuant to a subpoena or order of a court or regulatory, self-regulatory or
legislative body of competent jurisdiction, or in connection with any regulatory or self-regulatory
request for information; (v) information submitted by Participant that is displayed by
Intercontinental on the Exchange or otherwise distributed or sold by Intercontinental,. regarding
bids, offers, Exchange Transactions, Trade Confirmations, Broker Confirmations, Trade Give-
Ups, or data from Data Submission in accordance with its standard policies and procedures,
provided that such displays and distributed or resold information will not identify Participant or, if
July 1, 2004
Page 5 of 44
~.
.
.
Intercontinental Exchange
Confidential
applicable, Broker, by name, unless Intercontinental is explicitly direct~d to do so by Participant
and only then for the express purposes set forth in and under conditions agreed to in the Terms; .
or (vi) any and all information, including without limitation, bids, offers, requests for quotation,
Transactions, or Trades, that relate to any contracts listed in Annex G. Participant specifically
acknowledges that, with regard to any such Exchange activity related to contracts listed in Annex
G 9nly: (i) it~ identity will be displayed publicly on the Exchange and (ii) its bids, offers, requests
for quotation, Transactions, and Trades may be reported to the public, including regulators, by
Intercontinental, third-party press, and/or third-party price assessing agencies.
.-
c) In the event that Intercontinental receives notice that it is or will be legally required. to disclose
confidential information or receives a request to disclose confidential information from a
governmental, regulatory or self-regulatory authority or agency ("Requesting Party") as provided
for in Section 8(b)(iv), Intercontinental will promptly notify Participant of such requirement or
request to the extent it is legally permitted to do so. Intercontinental will make reasonable
commercial efforts to cooperate with Participant to enable Participant to narrow the scope of the
required or requested disclosures or to seek a protective order or other similar relief. If requested
by Participant, Intercontinental will formally request that the Requesting Party treat the
information provided as confidential, to the extent it is not already treated as such, pursuant to the
U.S. Freedom of Information Act or pursuant to an equivalent or comparable law or regulation, if
applicable.
d) Any access to Exchange Data provided by Intercontinental to a corporate affiliate, whether
pursuant to a license or otherwise, shall be allowed solely for the purposes set forth in the Terms
and only with the affiliate's agreement to and compliance with Intercontinental's obligations with
respect to Exchange Data under the Terms, except to the extent otherwise agreed directly
between Participant and such affiliate.
9) NOTICES. All notices delivered with respect to this Agreement shall be in writing and either (i) hand
delivered or forwarded by registered or certified mail; or (ii) sent via electronic mail, in either case to
the relevant address provided by a party for such purpose,
10) NO THIRD PARTY BENEFICIARY, Nothing in this Agreement shall be considered or construed as
conferring any right or benefit on a person not a party to this Agreement or imposing any obligations
on Intercontinental or Participant to persons not a party to this Agreement (other than (i) the right of a
counterparty (Participant) to a Transaction under Section 6(a) of this Agreement, (ii) the right of
another counterparty (Participant) with regard to a Confirmation under the terms of the Confirmation
Procedures Guide, (iii) the right of another party (Broker) with regard to a Broker Confirmation und.er
the terms of the Broker Confirmation Procedures Guide, or (iv) the right of another party (Broker) with
regard to a Trade Give-Up under the terms of the Trade Give-Up Procedures Guide).
11) FORCE MAJEURE. Neither InterContinental nor Participant shall be deemed to be in default of any
provision hereof or be liable for any delay, failure in performance, or interruption of service resulting
directly or indirectly from acts of God, civil or military authority, civil disturbance, war, strikes, fires,
other catastrophes, power failure or any other cause beyond its reasonable control.
12) WAIVER. No waiver by either party of any default by the other in the performance of any provisions
of this Agreement shall operate as a waiver of any continuing or future default, whether of a like or
different character.
13) ASSIGNMENT. This Agreement may not be assigned by either party without the other party's
express prior written consent; provided, however, that either party may assign this Agreement to any
entity (i) controlling, controlled by, or under common control with such party, or (ii) which succeeds to
all or substantially all of the assets and business of such party, provided that, in the case of any such
assignment by Participant, the assignee agrees in writing to assume the assignor's obligations under,
and to be bound by the provisions of, this Agreement (as it may be amended from time to time), This
Agreement shall be binding upon and shall inure to the benefit of the parties and their respective
successors al"!d permitted assigns in accordance with its terms.
July 1, 2004
Page 6 of 44
..
.
.
IntercontinentalExchange
Confidential
14) GOVERNING LAW, Unless otherwise specified in an annex, this Agreement is deemed entered into
in New York, New York and shall be governed and construed in all respects by the laws of the State
of New York, without giving effect to principles of conflict of law.
15) DISPUTE RESOLUTION. Unless otherwise specified in an annex, any dispute, claim or controversy
between the parties relating to this Agreement shall be resolved through binding arbitration conducted
in accordance with the Arbitration Rules of the American Arbitration Association. Any such arbitration
shall be conducted in New York, New York or at such other location as may be agreed to by the
parties and the arbitrators. For the avoidance of doubt, this arbitration clause only applies to
Intercontinental and the Participant and does not apply to any disputes arising between participants
on the Exchange or any other disputes between parties other than Intercontinental and the
Participant. Notwithstanding the foregoing, each party acknowledges that a breach of this Agreement
may cause the other party irreparable injury and damage and therefore may be enjoined through
injunctive proceedings in addition to any other rights and remedies which may be available to such
other party at law or in equity, and each party hereby consents to the jurisdiction of any federal or
state courts located in New York, New York with respect to any such action, The parties expressly
waive their right to trial by jury in any such action.
16) HEADINGS. The headings in this Agreement are intended for convenience of reference and shall not
affect its interpretation. .
17) SEVERABILITY, If any provision of this Agreement (or any portion thereof) shall be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in
any way be affected or impaired thereby.
18) COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute one agreement binding on the parties
hereto.
Date:
,200_
CITY OF VERNON
Intercontinental Exchange, Inc.
2100 River Edge Parkway, 5th Floor
Atlanta, Georgia 30328, USA
(2
Signature: C~ C..::,.
Name: Charles A. Vice
Title: Senior Vice President
Full Legal Name of Participant
Address: 4305 SANTA FE AVENUE
VERNON. CA 90058
[1 .
v'....-e..c_
Signature:
Name:
Title:
~,.,/~
Bruce V~ Malkenhorst
City Adminstrator
ICE Markets to which Participant reQuest~itradinQ access:
!Xl North American Natural Gas (Physical 'and Financial)
Iil North American Power (Physical and Financial)
o Crude Oil and Refined Products (Financial)
o European Natural Gas (Physical)
o UK Power (Physical)
o Precious Metals
Note: To gain tradina access to any of these markets on the ICE
electronic trading p1atfonn, Participant must also provide the
information requested on the following page.
July 1, 2004
Page 7 of 44
..
.-
Intercontinental Exchange
Confidential
Identify which of the following category(ies) apply, Participant is:_
(This information must be provided in order to gain tradina access to the ICE electronic trading platform)
o Listed or owned (51 % or more) by a company that is listed on the following stock exchange:
July 1, 2004
o
ill
o
(Please identify name of parent company, if applicable,)
Privately owned.
a Federal, state, or local, authority.
Registered with and/or regulated by one or more of the following agencies:
o Canada - Alberta Securities Commission
o Canada - British Columbia Securities Commission
o Canada - Manitoba Securities Commission
o Canada - Nova Scotia Securities Commission
o Canada - Ontario Securities Commission
o Canada - Quebec Securities Commission
o Canada - Saskatchewan Securities Commission
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
Finland - Financial Supervisory Authority of Finland
France - Commission des Operations de Borse (COB)
France - Financial Markets Council
Germany - German Financial Supervisory Authority
Italy - Commissione Nazionale per Ie Societa e la Borsa (CON SOB)
Netherlands - Financial Markets Authority
Norway - The Banking, Insurance and Securities C.ommission of Norway
Singapore - Monetary Authority (MAS) of Singapore
Sweden - The Swedish Financial Supervisory Authority
Switzerland - Swiss Federal Banking Commission
UK Financial Services Authority (FSA)
..
U.S. - Commodity Futures Trading Commission (CFTC via National Futures Authority - NFA)
U.S. - Federal Reserve (Office of the Controller of the Currency)
U,S. - National Association of Securities Dealers (NASD)
Other.
Page 8 of 44
?
..
IntercontinentalExchange
Confidential
Participant User Administrator for Transaction Execution:
(Required to gairr access the ICE electronic trading platform)
Name:
Title:
ADdress:
DANIEL E. GARCIA
Rill K POWFR MANAGFR
4305 SANTA FE AVENUE
VFRNON, f.A qOO~R
Telephone:
Fax:
(323) 826-1422
(323) 826-1425
Email: dgarcia@ci.vernon.ca.us
Participant User Administrator for Trade Confirmation:
(Required to gain access the eCoofirm electronic confirmation system)
SAME AS ABOVE
Name:
Title:
Address:
Telephone:
Fax:
Email:
Participant DesiQilated Representatives for Market Mark Data Submission:
(Required to patticipate in the MPV Monthly Mark-ta-Market Service)
First Representative:
Name: DANIEL E. GARCIA
TItle: SAME AS ABOVE
Address:
Second Representative:
Name: SERGIO RODRIGUEZ
Title: RESOURCE SCHEDULER
Address: 4305. SANTA FE AVENUE
VERNON, CA 90058
Telephone:
Fax:
Email:
Telephone: (323) 826-1424
Fax: (323) 826-1425
Email: srodriguez@ci.vernon.ca.us
July 1, 2004
Page 9 of 44
i'
..
IntercontinentalExchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
PRECIOUS METALS
Effective June 1, 2002
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates per Transaction
Spot Gold
Gold Forward
Less than 1 month
1 - less than 12 months
12 -18 months
Greater than 18 months
Gold Options
No Charge
2.00 basis points
1.00 basis points
0.50 basis points
0.25 basis points
$0.02 per oz,
Spot Silver
Silver Forward
6 months or less
1 year or less, but greater than 6 months
Greater than 1 year
Silver Options
No Charge
2,00 basis points
1.00 basis points
0,50 basis points
$0.00075 per oz,
Gold IRS
1 year
2 - 10 years
0.50 basis points
0.25 basis points
1. No charge for a Forward transaction when traded as a hedge
with an Option transaction,
2. Minimum monthly commission of $3,000 per Participant.
B. Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A.
Fee per Trade Confirmation - $2.00
B. '
Payment - Intercontinental will provide Participant with an invoice which.
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due,
July 1, 2004
Page 10 of 44
~
.'
Intercontinental Exchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
OIL
Effective March 1, 2003
{~
. :.:;)
.~
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates per Transaction
Crude Oil Swaps
Crude Oil Options
Crude Oil Forwards (Physical)
$0.0025 per barrel
$0.0025 per barrel
$0.0025 per barrel
$0.0050 per barrel*
$0.0050 per barrel*
$0,0050 per barrel*
Refined Product Swaps
Refined Product Options
Refined Product Forwards (Physical)
1. No charge for one leg of a spread trade. If the legs carry
different commission rates, the higher commission rate applies.
Otherwise, commission is applied to the sell-side of the spread.
2. No charge for a Swap transaction when traded as a hedge with
an Option transaction.
3. All "Traded at Settlement" (TAS or BAS) swaps are $0.0010 per
barrel.
* Barrel Equivalent Conversions Factors:
Fuel Oil 6.35 barrels per metric tonne
Gasoil 7.45 barrels per metric tonne
Jet Fuel 7.88 barrels per metric tonne
Gasoline 8,33 barrels per metric tonne
Naphtha 8,90 barrels per metric tonne
Any product measured in gallons 42 gallons per barrel
B.
Payment (Bilateral Transactions) -Intercontinental will provide
Participant with an invoice which details the amount owed by Participant,
including any commissions, other charges or related taxes, which. will be
due and payable within 30 days of Participant's receipt of such invoice or
other notice of the amount due.
C.
Payment (Cleared Transactions) - The dearinghouse wilLcollect the
commission from Participant's FCM account on behalf of Intercontinental
no later than the first business day after the Transaction was Executed.
Intercontinental will rebate to Participant amounts collected in excess, if
any, oftherates above within 30 days of the end of the month in which
the Transaction was Executed.
July 1, 2004
Page 11 of 44
I
.
.
Intercontinental Exchange
Confidential
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A. Fee per Trade Confirmation - $2.00
B. Payment -Intercontinental will provide Participant with ao'invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
III. OPTIONAL SERVICE - BLOCK TRADE PROCESSING I TRADE GIVE-UP
A; Rates per Trade
Crude Oil Swaps
Crude Oil Options
Crude Oil Forwards (Physical)
$0.00125 per barrel
$0.00125 per barrel
$0.00125 per barrel
$0.0025 per barrel*
$0,0025 per barrel*
$0.0025 per barrel*
Refined Product Swaps
Refined Product Options
Refined Product Forwards (Physical)
* Barrel Equivalent Conversions Factors:
Fuel Oil 6.35 barrels per metric tonne
Gasoil 7.45 barrels per metric tonne
Jet Fuel 7.88 barrels per metric tonne
Gasoline 8,33 barrels per metric tonne
Naphtha 8.90 barrels per metric tonne
Any product measured in gallons 42 gallons per barrel
B. Payment - The clearinghouse will collect this fee from Participant's FCM
account on behalf of Intercontinental no later than the first business day
after the Trade was processed, Intercontinental will rebate to Participant
amounts collected in excess, if any, of the rates above within 30 days of
the end of the month in which the Trade was processed.
IV. OPTIONAL SERVICE - BROKER CONFIRMATION
A.
B,
Fee oer Broker Confirmation - $2.00
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
July 1, 2004
Page 12 of 44
"
.'
IntercontinentalExchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
NORTH AMERICAN ELECTRIC POWER
Effective March 1, 2003
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates per Transaction
Electric Power
Forwards $0.005 per megawatt-hour
Swaps $0.005 per megawatt-hour
Options $0.005 per megawatt-hour
(Minimum charge of $4.00 per Transaction)
1. No charge for one leg of a spread trade. If the legs carry different
commission rates, the higher commission rate applies. Otherwise,
commission is applied to the sell-side of the spread, '
2. No charge for a Forward or Swap transaction when traded as a hedge
with an Option transaction.
B. Payment (Bilateral Transactions) - Intercontinental will provide
Participant with an invoice which details the amount owed by Participant,
including any commissions, other charges or related taxes, which will be
due and payable within 30 days of Participant's receipt of such invoice or
other notice of the amount due,
C. Payment (Cleared Transactions) - The clearinghouse will collect the
commission from Participant's FCM account on behalf of Intercontinental
no later than the first business day after the Transaction was Executed.
Intercontinental will rebate to Participant amounts collected in excess, if
any, of the rates above within 30 days of the end of the month in which
the Transaction was Executed,
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A.
Fee per Trade Confirmation - $2.00
B.
Payment - Intercontinental will proYide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due,
July 1, 2004
Page 13 of 44
..
.'
Intercontinental Exchange
Confidential
III. OPTIONAL SERVICE - BLOCK TRADE PROCESSING I TRADE GIVE-UP
A. Rates per Trade
Electric Power
Forwards
Swaps
Options
$0.0025 per megawatt-hour
$0.0025 per megawatt-hour
$0.0025 per megawatt-hour
B. Payment - The clearinghouse will collect this fee from Participant's FCM account
on behalf of Intercontinental no later than the first business day after the Trade
was processed. Intercontinental will rebate to Participant amounts collected in
excess, if any, of the rates above within 30 days of the end of the month in which
the Trade was processed,
IV. OPTIONAL SERVICE - BROKER CONFIRMATION
A.
B,
Fee per Broker Confirmation - $2,00
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
July 1, 2004
Page 14 of 44
..
.'
Intercontinental Exchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
NORTH AMERICAN NATURAL GAS
Effective March 1, 2003
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates per Transaction
Natural Gas
Physical $0.00025 per mmBtu ·
Swaps $0.00025 per mmBtu ·
Options $0.00025 per mmBtu ·
(Minimum charge of $2.50 per Transaction)
1. No charge for one leg of a spread trade. If the legs carry
different commission rates, the higher commission rate applies.
Otherwise, commission is applied to the sell-side of the spread.
2. No charge for a FOfWard or Swap transaction when traded as a
hedge with an Option transaction.
mmBtu Equivalent Conversions Factors:
Natural Gas - 1 mmBtu per 1,055056 gigajoules (GJ)
B. Payment (Bilateral Transactions) - Intercontinental will proYide
Participant with an invoice which details the amount owed by Participant,
including any commissions, other charges or related taxes, which will be
due and payable within 30 days of Participant's receipt of such invoice or
other notice of the amount due.
C. Payment (Cleared Transactions) - The clearinghouse will collect the
commission from Participant's FCM account on behalf of Intercontinental
no later than the first business day after the Transaction was Executed.
Intercontinental will rebate to Participant amounts collected in excess, if
any, of the rates above within 30 days of the end of the month in which
the Trans~ction was Executed,
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A.
Fee per Trade Confirmation - $2,00
B.
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or,related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due,
July 1, 2004
Page 15 of 44
J"
.'
Intercontinental Exchange
Confidential
III. OPTIONAL SERVICE - BLOCK TRADE PROCESSING I TRADE GIVE-UP
A. Rates per Trade
Natural Gas
Physical
Swaps
Options
$0.000125 per mmBtu
$0.000125 per mmBtu
$0.000125 per mmBtu
B, Payment - The clearinghouse will collect this fee from Participant's FCM
account on behalf of Intercontinental no later than the first business day
after the Trade was processed. Intercontinental will rebate to Participant
amounts collected in excess, if any, of the rates above within 30 days of
the end of the month in which the Trade was processed,
IV. OPTIONAL SERVICE - BROKER CONFIRMATION
A.
B.
Fee per Broker Confirmation - $2.00
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
July 1, 2004
Page 16 of 44
.'
.
.
Intercontinental Exchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
EUROPEAN NATURAL GAS
Effective March 1, 2003
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates oar Transaction
Natural Gas
Physical 1:0.000025 per therm
Swaps 1:0.??oo25 per therm
EFP/EFS 1:0.000025 per therm
(Exchange in this case is cleared OTC)
Options EO.000025 per therm
1, No charge for one leg of a spread trade. If the legs carry different
commission rates, the higher commission rate applies. Otherwise,
commission is applied to the sell-side of the spread,
2, No charge for bilateral leg of an EFP/EFS.
3. No charge for a Swap transaction when traded as a hedge with an
Option transaction.
B. Payment (Bilateral Transactions) - Intercontinental will provide
Participant with an invoice which details the amount owed by Participant,
including any commissions, other charges or related taxes, which will be
due and payable within 30 days of Participant's receipt of such invoice or
other notice of the amount due,
C. Payment (Cleared Transactions) - The clearinghouse will collect the
commission from Participant's FCM account on behalf of Intercontinental
no later than the first business day after the Transaction was Executed.
Intercontinental will rebate to Participant amounts collected in excess, if
any, of the rates above within 30 days of the end of the month in which
the Transaction was Executed.
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A.
Fee oar Trade Confirmation - 1:1.50
B.
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the
'amount due.
July 1, 2004
Page 17 of 44
"
.
.
Intercontinental Exchange
Confidential
III. OPTIONAl SERVICE - BLOCK TRADE PROCESSING I TRADE GIVE-UP
A Rates per Trade
Natural Gas
Physical
Swaps
Options
fO.0000125 per therm
fO.OOO0125 pertherm
(0.0000125 per therm
B. Payment - The clearinghouse will collect this fee from Participant's FCM
account on behalf of Intercontinental no later than the first business day
after the Trade was processed. Intercontinental will rebate to Participant
amounts collected in excess, if any, of the rates above within 30 days of
the end of the month in which the Trade was processed.
IV. OPTIONAL SERVICE - BROKER CONFIRMATION
A
B.
Fee per Broker Confirmation - (1.50
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions.
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
July 1, 2004
Page 18 of 44
..
.
.
Intercontinental Exchange
Confidential
ANNEX A - SERVICE AND PRICING SCHEDULE
UK POWER
Effective April 1, 2003
Set forth below is the Schedule referred to in paragraph (2) of the Participant Agreement. All charges
incurred by Participant will be payable in accordance with the Participant Agreement.
I. EXECUTION BROKERAGE
A. Commission Rates per Transaction
Power
Forwards
Swaps
Options
EO.0025 per megawatt-hour
EO.0025 per megawatt-hour
EO,0025 per megawatt-hour
1. No charge for one leg of a spread trade. If the legs carry different
commission rates, the higher commission rate appfies, Otherwise,
commission is applied to the sell-side of the spread.
2. No charge for a Swap transaction when traded as a hedge with an
Option transaction.
B. Pavment (Bilateral Transactions) -Intercontinental will provide
Participant with an invoice which details the amount owed by Participant,
including any commissions, other charges or related taxes, which will be
due and payable within 30 days of Participant's receipt of such invoice or
other notice of the amount due,
C, Payment (Cleared Transactions) - The clearinghouse will collect the
commission from Participant's FCM account on -behalf of Intercontinental
no later than the first business day after the Transaction was Executed.
Intercontinental will rebate to Participant amounts collected in excess, if
any, of the rates above within 30 days of the end of the month in which
the Transaction was Executed.
II. OPTIONAL SERVICE - ELECTRONIC TRADE CONFIRMATION
A.
Fee per Trade Confirmation - E1.50
B.
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the
amount due.
July 1, 2004
Page 19 of 44
..
.'
Intercontinental Exchange
Confidential
III. OPTIONAl SERVICE - BLOCK TRADE PROCESSING I TRADE GIVE-UP
A. Rates per Trade
Power
Forwards
Swaps
Options
(0,00125 per megawatt-hour
1:0,00125 per megawatt-hour
1:0.00125 per megawatt-hour
B. Payment - The clearinghouse will collect this fee from Participant's FCM
aCcount on behalf of Intercontinental no later than the first business day
after the Trade was processed. Intercontinental will rebate to Participant
amounts collected in excess, if any, of the rates above within 30 days of
the end of the month in which the Trade was processed,
IV. OPTIONAL SERVICE - BROKER CONFIRMATION
A.
Fee per Broker Confirmation - 1:1.50
B.
Payment - Intercontinental will provide Participant with an invoice which
details the amount owed by Participant, including any commissions,
other charges or related taxes, which will be due and payable within 30
days of Participant's receipt of such invoice or other notice of the amount
due.
July 1, 2004
Page 20 of 44
f
,
.
IntercontinentalExchange
Confidential
ANNEX B - ELIGIBLE COMMERCIAL ENTITIES UNDER THE U,S. COMMODITY FUTURES
MODERNIZATION ACT
The following table is only a summary of the definition of the term, "eligible commercial entity," under the
Commodity Exchange Act and the CFTC Order. Participants or prospective participants should review
the definition carefully and consult their counsel with respect to any questions regarding their status as an
eligible commercial entity.
In addition, it should be noted that entities of the types listed below that are engaged in commercial
activities (as defined in the footnote at the end of this table), are subject to the "Other Requirements"
column but are not required to satisfy the requirements for entities not engaged in commercial activities.
Entities not engaged in commercial activities, as defined in the footnote, must satisfy the requirements in
the third and fourth columns of this table.
other Requirements
(which qualify the
Engaged in entity as an Eligible
Commercial Activity 1 Not Engaged in C~ntract Participant,
Type of Entity Related to Commodity Commercial Activity or ECP)
Banks OK OK if (1) regularly Must be regulated
enters into transactions entity
involving commodity
and (2) part of group
with aggregate total
assets> $100 million
Insurance OK OK if (1) regularly Must be regulated
Companies enters into transactions entity
involving commodity
and (2) part of group
with aggregate total
assets> $100 million
Corporations OK OK if (1) regularly Must have total
enters into transactions assets> $10 million
, involving commodity or net worth> $1
and (2) part of group million (must be
with aggregate total trading for hedging
assets> $100 million purposes)
Governmental OK Not Permitted
Entities
Broker Dealers OK OK if (1) regularly Must be regulated
enters into transactions entity
involving commodity
and (2) part of group
with aggregate total
assets> $100 million
Futures Commission OK OK if (1) regularly Must be regulated
Merchants enters into transactions entity
involving commodity
and (2) part of group
with aggregate total
assets> $100 million
July 1, 2004
Page 21 of 44
. , >
.. . . ~
IntercontinentalExchange Confidential
Collective Not Applicable OK it (1) regularly Investment
Investment Vehicles enters into transactions companies must be
(such as commodity involving commodity subject to regulation;
pools, mutual funds, and either: commodity pools
hedge funds etc,) Aggregate total assets must have at least $5
, > $1 billion under million in assets and
common management be formed and
Aggregate total assets operated by a person
> $100 mm under subject to regulation
common management
and limited to
accredited investors
with $2 mm in assets,
QEPs, or qualified
purchasers.
Employee Benefits Not Applicable OK if (1) regularly Must have total
Plans enters into transactions assets exceeding $5
involving commodity million or be advised
and (2) part of group by a regulated
with aggregate total advisor
assets> $100 million
Floor Brokers and OK, if ECP or trades are OK, if ECP or trades Must be all of the
Floor Traders guaranteed by an ECP are guaranteed by an following: (1)
that is a clearing ECP that is a clearing registered with the
member of a designated member of a CFTC; (2) member
clearing organization designated clearing of, or have trading
organization privileges on, a
designated contract
market; (3) acting in
proprietary capacity;
and (4) have as part
of business acting as
floor broker or floor
trader on designated
contract market's
open outcry or
perform a similar
function in its
electronic market
Natural Persons NofAooiicable Not Permitted
Notes
1. To be considered "Engaged in Commercial Activity Related to Commodity", an entity must:
(a) have a demonstrable ability (directly or through separate contractual arrangements) to make or take delivery
of the commodity; or
(b) incur risks (in addition to price risk) related to the commodity; or
(c) be a dealer that regularly provides risk management or hedging services to, or engages in market-making
activities with, the foregoing entities involving transactions in the commodity.
July 1, 2004 Page 22 of 44
(<
.
.
IntercontinentalExchange
Confidential
ANNEX B - ELIGIBLE CONTRACT PARTICIPANTS UNDER THE U,S. COMMODITY FUTURES
MODERNIZATION ACT
The following table is only a summary of the definition of the term, "eligible contract participant," under the
Commodity Exchange Act. Participants or prospective participants should review the definition carefully
and consult their counsel with respect to any questions regarding their status as an eligible contract
entity,
Type of Entity
ECP Requirements
, Banks
Must be regulated entity
Insurance Companies
Must be regulated entity
Must have (1) total assets> $10 million or (2) net worth>
$1 million (and, in the case of (2), must be trading for
hedging/risk management purposes)
Corporations
Governmental Entities
None
Broker Dealers
Must be regulated entity
Futures Commission Merchants
Must be regulated entity
Collective Investment Vehicles (such as
commodity pools, mutual funds, hedge
funds etc.)
Investment companies must be subject to regulation;
commodity pools must have at least $5 million in assets
and be formed and operated by a person subject to
re ulation
Must have total assets exceeding $5 million or be advised
bare ulated advisor
Total assets> $10 million or total assets >$5 million if
tradin for hed in or risk mana ment ur ses,
Employee Benefits Plans
Natural Persons
July 1, 2004
Page 23 of 44
.'
.
.
IntercontinentalExchange
Confidential
ANNEX C - ADDITIONAL TERMS FOR EU PARTICIPANTS
Where the Participant is incorporated in any member state of the European Union the following terms
shall be incorporated into and form part of the Agreement and, in the event of conflict with any other
terms of the Agreement, shall prevail over such terms.
I. COMPLIANCE WITH LAW AND DATA PROTECTION
A. Participant shall:
1. comply with, and represents and warrants that it has complied with, the UK Data
Protection Act 1998 and all applicable data protection legislation and regulations
(the "Data Protection Laws") in relation to the use of the System and access to
the Exchange by Participant and its Authorized Employees;
2, not, by any act or omission, put Intercontinental or any of its affiliates or
subsidiaries in breach of any of the Data Protection Laws; and
3. do and execute, or arrange to be done and executed, each act, document and
thing necessary or desirable in order to comply with this clause A.
8. Without limiting the foregoing, Participant shall:
1. inform, and represents and warrants that it has informed, Authorised Employees
that Intercontinental may:
a. process their Personal Data for the purposes of providing and using the
System and accessing the Exchange (including training and support),to
administer and improve the System and the Exchange, marketing of
Intercontinental products and/or services and to meet legal and
regulatory obligations;
b. disclose their Personal Data, for the purposes described in clause 8.1.a.
to any affiliate and/or subsidiary, legal and regulatory authority and any
third party to whom Intercontinental may delegate services or functions in
relation to the System and/or the Exchange in accordance with the
Terms which may include transferring Personal Data to countries that do
not provide legal protection of Personal Data equivalent to that in the
United Kingdom.
2, obtain, and represents and warrants that it has obtained, from its Authorized
Employees all consents (in the relevant form required by the Data Protection
Laws) to the processing described in clauses 8.1.a. and 8.2.b.
C.
Participant shall provide to Intercontinental, upon request, evidence that clause I. has
been complied with,
July 1, 2004
Page 24 of 44
I'
l'
Intercontinental Exchange
Confidential
II. GOVERNING LAW
A. The Agreement shall be governed in all respects by, and construed in accordance with
the laws of England,
III. ARBITRATION
A. Any dispute, claim or controversy between the parties relating to this Agreement shall be
referred to and finally resolved by arbitration in England.
IV. THIRD PARTY RIGHTS
A.
Subject to this section and Section 6(a) of the Agreement, a person who is not a party to
this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 (the
"Third Parties Act") to enforce any term of this Agreement but this does not affect any
right or remedy of a third party which exists or is available apart from the Third Parties
Act.
A counterparty to any Transaction (a "Third Party") may enforce the terms of Section 6(a)
of the Agreement subject to and in accordance with this section and the arbitration
section of this Annex and the provisions of the Third Parties Act, Any counterparty trying
to claim against a participant by exercising its third party rights under this Agreement
rather than by its direct contractual relations with the participant will be bound by English
law and arbitration jurisdiction under this fonnulation,
The parties to this Agreement do not require the consent of any Third Party to rescind or
vary this Agreement at any time.
B.
C.
July 1, 2004
Page 25 of 44
,.
"
IntercontinentalExchange
Confidential
ANNEX 0 - (INTENTIONALLY LEFT BLANK)
July 1, 2004
Page 26 of 44
.
:
Intercontinental Exchange
Confidential
ANNEX E - OTC CLEARING (LCH PRODUCTS)
I. DESCRIPTION OF CLEARING MODEL
The London Clearing House ("LCH") has been appointed by Intercontinental as the global central
counterparty for the dearing of Exchange Transactions and Non-Exchange Transactions in
Eligible Derivative Products (as defined below), including "ICEBlock Transactions" (i.e., Non-
Exchange Transactions submitted by Eligible Brokers (as defined below) with Participant
authorization as part of the Trade Give-Up service). A summary of the contractual relationships
that arise during the dearing process is provided beloW.
Please note that this description only summarizes the terms applicable to Products that LCH has
, ,approved for clearing (such Products, "Eligible Derivative Products"), The complete terms
applicable to Eligible Derivative Products are described in greater detail in the Terms, and in
particular the Product Guides, as amended from time to time. The General Regulations, Default
Rules and Procedures of LCH, as amended from time to time (the "LCH Regulations") define the
complete terms applicable to Clearing Member Contracts and LCH EnClear Contracts, which are
discussed further below.
A. Pre-reauisites to OTC ClearinQ
Eligible Participants. In order to submit Eligible Transactions (as defined below)
for dearing, a Participant must:
1. either (a) have duly designated an LCH Clearing Member (a "Clearer") to clear
Eligible Transactions on its behalf directly or a U,S. futures commission merchant
("FCM") that agrees to dear Eligible Transactions on its behalf through a Clearer,
or (b) be itself an LCH Clearing Member that is authorized by LCH to dear
Eligible Transactions (and therefore "self-clear");
2. be authorized by Intercontinental for clearing Eligible Transactions through LCH
and be set up on the System to do so.
Eligible Brokers. To be eligible to submit an Eligible Transaction for clearing on behalf of
a Participant using the Trade Give-Up service, a Broker must:
1. be authorized by Intercontinental for the Trade Give-Up service and be set up on the
System to do so; and
2. be permissioned by that Participant within the System to do so,
Eligible Transactions. To be eligible for clearing:
1.
the Product underlying the relevant Exchange Transaction or Non-Exchange
Transaction must have been approved by lCH as an "Eligible Derivative
Product";
2.
each party to the relevant Exchange Transaction or Non-Exchange Transaction
must satisfy the Eligible Participant requirements specified above; and
3.
the credit filter of each party's Clearer must approve the relevant Exchange
Transaction or Non-Exchange Transaction.
July 1, 2004
Page 27 of 44
:
Intercontinental Exchange
Confidential
B. Order Entry and Routina
Exchange Transactions, When a Participant who has designated a Clearer enters an
order on the Exchange for an Eligible Derivative Product, the order is routed to the
Clearer's credit filter. If the Clearer's credit filter "approves" the order, the order may be
transmitted to the Exchange and made available for execution.
Upon execution of a Participant's order by another Participant, a binding Exchange
Transaction arises between them based on the Terms (as defined in Section 2 of this
Agreement), The Terms related to Eligible Derivative Products provide that any
Transactions in such Products between Eligible Participants will be automatically
submitted for clearing as provided below.
Non-Exchange Transactions. When a Non-Exchange Transaction between two Eligible
Participants is submitted for clearing, the Non-Exchange Transaction is routed to the
credit filters of each Participant's respective Clearer, If both Clearers' credit filters
approve the Non-Exchange Transaction, it will be automatically submitted for clearing as
provided below.
C. Status of Exchanae Transactions and Non-Exchanae Transactions Prior to Submission to
LCH
Exchange Transactions. Immediately upon execution of an Eligible Transaction that is an
Exchange Transaction, it will be discharged and novated into a contract between the
Clearers designated by the Participants on the same Economic Terms (as defined in sub-
paragraphs (i) to (vii) inclusive of paragraph 2,3 of Part A of the Schedule to the LCH
EnClear Regulations) as the Eligible Transaction and otherwise on such terms as shall
be prescribed from time to time by LCH Regulations (a "Clearing Member Contract").
The Clearing Member Contract is then automatically submitted on behalf of the Clearers
to LCH for clearing.
Non-Exchange Transactions. Once a Non-Exchange Transaction is submitted into the
System and approved by the relevant Clearers' credit filters, the Non-Exchange
Transaction will be discharged and novated into a Clearing Member Contract (as defined
above). The Clearing Member Contract is then automatically submitted on behalf of the
Clearers to LCH for clearing.
D. Creation of Corresoondina Contract (Inapplicable to Self-Clearers)
Simultaneously with the creation of any Clearing Member Contract in the name of a
Participant's Clearer, a corresponding contract will arise between the Clearer and the
Participant on the same terms as the Clearing Member Contract (except as to the parties)
or otherwise as agreed between the Participant and its Clearer from time to time. The
Clearing Member Contract and the Corresponding Contract are each subject to a
condition subsequent pursuant to which the contract will automatically terminate without
any obligation or liability of any party to such contracts in the event that LCH does not
clear the Clearing Member Contract as provided below for any reason.
E. Submission of Clearina Member Contract to LCH and Reaistration of LCH EnClear
Contracts
Upon submission of a Clearing Member Contract to LCH, each Clearer will be deemed to
offer to LCH to have an LCH EnClear Contract registered between it and LCH based
upon the Economic Terms of the Clearing Member Contract. The Clearing Member
Contract remains in place until either (1) it is novated and, as described below, the
July 1, 2004
Page 28 of 44
.
,
Intercontinental Exchange
Confidential
resulting LCH EnClear Contracts are registered by LCH, or (2) it is rejected by LCH for
any reason, in which case the Clearing Member Contract will automatically terminate
pursuant to a condition subsequent without any obligation or liability of either party,
F, Novation of ClearinQ Member Contract and Reoistration of EnClear Contracts
Upon acceptance of the Clearing Member Contract for registration by LCH, the Clearing
Member Contract will be novated and give rise to two new LCH EnClear Contracts on the
same terms (except as to parties) in accordance with LCH Regulations, the first LCH
Ene/ear Contract being between the Clearer described as seller in the Clearing Member
Contract and LCH as buyer, and the second LCH EnClear Contract being between the
Clearer described as buyer in the Clearing Member Contract and LCH as seller. As a
consequence of novation, the Clearing Member Contract will terminate,
G. Participants Who Clear EIiQible Transactions throuQh Third Parties on Omnibus Basis
Participants that choose to clear Eligible Transactions through the omnibus customer
account of a third party entity, such as a U.S. Futures Commission Merchant, must be
authorized by Intercontinental and the relevant third party entity to enter their orders
through the account of that entity on the Exchange. In such circumstances, Eligible
Transactions will be between the third party entity's customer omnibus account (rather
than the Participant itself) and the relevant counterparty,
II. ADDITIONAL TERMS APPLICABLE TO OTC CLEARING
Where a Participant is authorized to have its Eligible Transactions submitted for clearing to LCH,
the following terms shall be incorporated into and form part of the Agreement and, in the event of
conflict with any other terms of the Agreement, shall prevail over such terms.
A, Participant acknowledges and agrees that:
1. Only Clearers will be principal to LCH EnClear Contracts with LCH that arise
from Eligible Transactions executed through the Exchange and submitted for
clearing by LCH;
2, LCH shall in no circumstances owe any obligations or have any liability to
Participant, and Participant has no right to make any claim against LCH in
respect of Eligible Transactions, whether in law or in equity or otherwise;
, 3. A Clearing Member Contract and a Corresponding Contract are each subject to a
condition subsequent providing that, in the event LCH does not ultimately clear
the Clearing Member Contract arising from an Eligible Transaction, the contract
will automatically terminate without obligation of any party; and
4. In accordance with LCH Regulations or at the request of a Participant's Clearer,
LCH will have the right to reject Clearing Member Contracts that arise from
Eligible Transactions and to suspend clearing of such Eligible Transactions
without notice.
B.
Participant has read and understood the "Description of Clearing Model" provided above
(including in particular the "Pre-Requisites to OTC Clearing") and agrees to comply with
the Terms and the LCH Regulations applicable to EnClear transactions that are
submitted for clearing by LCH on its behalf.
July 1, 2004
Page 29 of 44
:
IntercontinentalExchange
Confidential
III. ADDITIONAL TERMS APPLICABLE ONLY TO TRADING/DELIVERY OF CLEARED NATURAL
GAS AT THE UK NATIONAL BALANCING POINT
A. Physical Delivery
lCH Members with open poSitions following cessation of trading are obliged to make/take
delivery. Members must make themselves aware of their delivery obligations in
accordance with the lCH Regulations, Default Rules and lCH procedures.
On cessation of trading, lCH Members with open positions will have until 18.00 hrs
(london time) on the day of expiry to close out these positions using Intercontinental's
block trading facility.
The NBP contract allows sellers and buyers (lCH Members) to nominate Transferors and
Transferees respectively. Transferors and Transferees must be entitled under TransCo,
pic ("TransCo") rules to submit Trade nominations, and must have access to and use of
AT link. They are permitted to makeltake delivery of Natural Gas tolfrom lCH on behalf
of the lCH Member.
Deliveries of NBP are affected by the transfer of gas rights from the seller (transferor) to
lCH and from lCH to the buyer (transferee) via the input of acquiring and disposing
Trade Nominations into TransCo's AT link system.
B, Quantity
Natural Gas is delivered in Kilowatt hours (kWh) where 1 therm is equal to 29.3071 kWh.
C, Final Settlement Price
The price at which the contract is delivered is the final settlement price for the expiring
front month contract, Le., the front month settlement price two business days prior to
beginning of the delivery month, This price will be used to calculate the delivery contract
value and used in the account documentation sent out by lCH for payment of the natural
gas,
D. Payment
lCH will issue account documentation to the Buyer and. Seller, in respect of the delivered
contract, 17 days after the last calendar day of the month, specifying the amount due
from the Buyer and any payment due to the Seller. All payments due in respect of the '
delivery contract must be made no later than two business days following the issue of the
account documentation.
E. Default
A Seller or a Buyer in default ("Defaulting Party") shall indemnify a Buyer or a Seller who
is the non-defaulting party ("Non-Defaulting Party") for any costs and expenses, including
any charges or fees levied by TransCo, which the Non-Defaulting Party suffers or incurs
directly as a result of a failure of the Defaulting Party to comply with its obligations under
a Contract. The right to be indemnified shall be the Non-Defaulting Party's sole remedy
in respect of any failure by the Defaulting Party to comply with its obligations under the
Contract, including, without limit, failure to submit a Trade Nomination in accordance with
the lCH Regulations, Default Rules and Procedures.l
July 1, 2004
Page 30 of 44
j
y
..
Intercontinental Exchange
Confidential
F. Deliverv Failure
In the event of a failure to comply with the delivery obligations in accordance with LCH
Regulations, Default Rules and Procedures, Intercontinental Exchange may from time to
time authorise the imposition of fixed penalty fines on Members, and may direct that such
a fine may be imposed for every day of a Member's failure to Comply.
G. Arbitration
A dispute arising in relation to a contract, unless resolved between the parties, shall be
referable to arbitration, to be conducted in London, in accordance to the procedures
contained in the Arbitration. Act 1996.
1. Appointment and constitution of panel
(a) Either party may refer a dispute to arbitration after giving four clear
business days notice in writing of his intention to do so to the other party
and to Intercontinental.
(b) For the determination of the dispute, Intercontinental shall appoint a
board of arbitration consisting of representatives of three Exchange
participants. Participants in the deared UK natural gas market on the
Exchange agree to serve on an arbitration board, if asked. One of the
three representatives should be nominated or appointed as a Chairman.
No member of the board of arbitration shall act in any arbitration in which
he is or becomes directly or indirectly interested in the subject matter in
dispute.
(c) In the event of a member of the board of arbitration being or becoming
so interested, dying or in any other way being or becoming, in the
opinion of Intercontinental, incapacitated from acting, Intercontinental,
may appoint another person of the same dass as the perSon whom he is
to replace, to take his place and the arbitration shall thereupon proceed
as if such other person had been originally appointed in lieu of the first
mentioned person.
(d) In the event of disagreement between the members of the board of
arbitration the decision of the majority shall prevail and in the event of an
equality of votes the Chairman, who shall have been previously elected
by the members of the board of arbitration, shall have a second or
casting vote.
(e) The award of the board of arbitration shall be signed by its Chairman,
and when so signed shall be final and binding in all cases.
(f) The award shall state the reasons of the board of arbitration and a note
thereof shall be entered in a book to be kept for that purpose.
2. The role of the London Clearing House
(a)
In any such dispute to which LCH is a party, LCH shall be entitled to call
upon a dearing member who is a Buyer, and a clearing member who is a
Seller, under the terms of Contracts which have been matched by the
LCH and in respect of which reference to arbitration has under these
July 1, 2004
Page 31 of44
'1
.
,
Intercontinental Exchange
Confidential
Arbitration Rules been made, to conduct the arbitration between them
under these Rules in accordance with the following procedure.
(b) In the event that the LCH elects to call upon a Seller and a Buyer to
arbitrate between them pursuant to these Rules, the following
procedures shall apply:
(i) the LCH shall give notice in writing of such election to the Buyer,
the Seller and Intercontinental;
(ii) the Seller and the Buyer shall, at their own expense, each have
the conduct of the LCH's case against the other subject to the
provisions of this Rule;
(iii) copies of all pleadings, correspondence and documents shall be
given to the LCH, and LCH shall be entitled to submit any
additional arguments to the board of arbitration in support of its
own case, in which case it shall supply copies of such
submissions to the Seller and the Buyer;
(iv) the board of arbitration shall have the power to call upon the
LCH to disclose documents relating to the arbitration which are
in its custody, power or possession, to the same extent as if it
were a direct party to the arbitration;
(v) the board of arbitration shall issue two awards, one between the
Seller and the LCH and one between the Buyer and the LCH,
which shall determine the rights of each of the Seller and Buyer
against the LCH and vice versa,
(c)
If the LCH is found liable to one party in respect of a breach of a Contract
and the other party is also found liable to the LCH in respect of the same
breach of a Contract which has been matched by the LCH as mentioned
in paragraph (a) above, then the liability of the LCH shall be deemed to
be a foreseeable consequence of that breach and the LCH shall be
entitled to be indemnified by the other party in respect of such liability.
The LCH shall be bound by an arbitration award made against it in
pursuance of an arbitration, whether it participates in the arbitration or
not.
(d)
July 1, 2004
Page 32 of 44
1
,
.
Intercontinental Exchange
Confidential
ANNEX F - (INTENTIONALLY LEFT BLANK) ,
July 1, 2004
Page 33 of 44
.
.
Intercontinental Exchange
Confidential
ANNEX G - CONTRACTS TRADED WITHOUT PARTICIPANT ANONYMITY
I. PHYSICAl OIL
A.
B.
21 Day Brent Forties Oseberg (BFO) - Forward Contracts (Partial and Full Cargo)
21 Day Brent Forties Oseberg (BFO) - Exchange for Physical (EFP) Contracts
21 Day Brent Forties Oseberg (BFO) - Contingent-EFP Contracts
Weekly CFDs Contracts
C.
D.
July 1, 2004
Page 34 of 44
.
.
.
.
Intercontinental Exchange
PREAMBLE
Confidential
ANNEX H - PARTICIPANT CODe OF CONDUCT
This Code of Ethics and Sound Trading Practices (Code) defines and reaffirms the values, principles and
internal controls that Participant must follow in conducting its business activities on the Exchange. The
Code is intended to complement the internal principles and practices of Participant and to guide
Participant as it posts bids, offers, and requests for quotation, executes Transactions, confirms Trades,
and uses Other Services on the Exchange. Compliance with the Code allows Participant to assure
Intercontinental, legislators, regulators, the public and other market participants that its business activities
on the Exchange are, and will continue to be, conducted with integrity. In addition, Participant gives
assurance that unlawful and unethical trading practices are not tolerated, that public disclosures of trading
information are accurate, and that it will abide by these ethical standards and maintain sound trading
practices.
Participant acknowledges that violations of this Code can incur penalties including, but not limited to,
temporary or permanent loss of access to the Exchange.
I. ETHICAL STANDARDS
A. Core Value: InteQritv
Conducting trading activities with integrity is the essence of ethical conduct. Integrity
means conducting these activities in an honorable and principled manner consistent with
the ethical standards and sound trading practices set forth herein,
B. Ethical Standards
July 1, 2004
On the Exchange, Participant will:
1,
Conduct its business in accordance with all applicable laws, regulations, tariffs
and rules, and in good faith, and with a commitment to honest dealing.
Not engage in fraudulent behavior.
Honor the terms and conditions of this Participant Agreement.
Engage only in Transactions with legitimate business purposes, such as
managing business risk or that otherwise have economic substance. In no event
will Participant engage in any Transactions intended to boost revenues or
volumes artificially, or intended to manipulate market prices.
Not collude with other market participants to affect the price or supply of any
commodity, allocate territories, customers or products, or otherwise unlawfully
restrain competition.
Adopt, adhere to, and enforce risk management and other policies and structures
that are designed to ensure that trading activities are conducted in accordance
with this Code.
2.
3.
4.
5.
6.
Page 35 of 44
t f.'
.
.
Intercontinental Exchange
Confidential
II. SOUND TRADING PRACTICES
A. Core Value: Adherence to Sound Tradino Practices and Principles
Commodity markets reflect the constantly changing dynamics of supply and demand.
Efficient business operations in such an environment demand practices that can manage
risk and discover market prices, Such practices must be consistent with the guiding
Ethical Standards of this Code,
B. Sound TradirlQ Practices Standards
Participant will act in accordance with these standards of sound trading practices with
regard to its Exchange activity:
1, No "wash" trades. Participant will not arrange and execute simultaneous
offsetting buy and sell trades, i.e. with the same counterparty and price,
commodity, location and quantity terms, with an intent to artificially affect
reported revenues, trading volumes, or prices,
2. No misrepresentative tradino. No trading will be conducted for the purpose of
misrepresenting the financial condition of the organization.
III. INFORMATION DISCLOSURE AND DOCUMENTATION
A. Core Value: Candid and Complete Disclosure
Markets depend on trust in the accuracy of market information provided by Participant
and in the transparency of market behavior of all market participants.
B. Information Disclosure and Documentation Standards
July 1, 2004
With regard to its Exchange activity, Participant will:
1.
Provide Transaction information to regulators in compliance with all applicable
rules and requirements and continue to cooperate with regulators as reasonably
necessary to assist in their understanding of the markets.
Ensure that any information disclosed to Intercontinental is accurate and
consistent.
2.
3.
Maintain and adhere to internal procedures designed to ensure that all
Transactions are properly documented in a timely fashion and that no
Transactions or Trades are concealed or misrepresented when providing market
information to Intercontinental or any of its affiliates,
Promptly notify Intercontinental of any material change (to a Transaction
executed on the Exchange) mutually agreed to by Participant and counterparty
after execution, but prior to confirmation, including, but not limited to changes in
price, quantity, grade, delivery location, reference index, delivery or settlement
timeframes, or payment terms.
4.
Page 36 of 44
t "f' 3
Intercontinental Exchange Confidential
IV, COMPLIANCE
5. Promptly notify Intercontinental of any Transaction cancellation or reversing trade
with the same counterparty for the explicit purpose of effecting cancellation (an
equal, but opposite offsetting trade), mutually agreed to by Participant and
counterparty of a Transaction executed or Trade confirmed on the Exchange,
6. Maintain documentation on all Transactions for an appropriate period of time as
required under applicable laws and regulations.
A, Core Value: Comorehensive Camarate Comoliance
Each Participant will have a compliance program commensurate with the size and scope
of its trading activities on the Exchange and designed to ensure appropriate, timely and
ongoing review of trading practices and compliance with this Code.
B. Camoliance Standards
Participant will:
July 1, 2004
1,
2.
3.
Provide for proper training of personnel on the provisions of this Code,
Maintain internal policies and procedures to promote compliance with this Code,
Promptly disclose to Intercontinental the details of any violations of this Code
involving Participant's activities on the Exchange or provision of market
information to Intercontinental or any of its affiliates,
Provide an environment that encourages employees within the trading
organization to engage in safe and confidential discussions and to disclose to
senior management any trading practices that might violate this Code.
Establish clear lines of accountability for the company's trading practices,
including provisions relating to the responsibilities of corporate officers, with
appropriate oversight by the Board of Directors or other senior corporate
management committee,
4.
5.
Page 37 of 44
1 ~ :
Intercontinental Exchange
Confidential
ANNEX 1- (INTENTIONALLY LEFT BLANK)
July 1, 2004 .
Page 38 of 44
"
.
t '1' :
"
Intercontinental Exchange
Confidential
ANNEX J - MASTER AGREEMENT SUPPLEMENT FOR
RECOGNIZING CONTROLLING STATUS OF ELECTRONIC TRADE CONFIRMA nONS
I. PURPOSE
A. Intercontinental has published this Annex J to enable Participant and each counterparty
of Participant that uses the eConfirm Service (each, a "Counterparty" for the purpose of
this Annex J) to confirm their mutual agreement as to the controlling legal status of
confirmations generated by the eConfirm Service with respect to submitted and matched
Trades.
B. Accordingly, Participant may accept this Annex J and agree to be bound by its terms by
completing and delivering a letter in the form of Exhibit 1 to this Annex J (an "Acceptance
Letter") to Intercontinental, as agent, as described in further detail in Section III below.
C, Once Participant and a Counterparty have both accepted Annex J, an electronic
confirmation generated by the eConfirm service with respect to a Trade under a Covered
Master Agreement (as defined below) shall be deemed to be the controlling confirmation
of the Trade (a "Controlling Confirmation").
D, Capitalized terms used in this Annex without definition shall have the meanings given to
such terms in the Participant Agreement and Confirmation Procedures Guide,
II. AMENDMENTS TO COVERED MASTER AGREEMENT
By accepting to be bound by this Annex J in the manner set forth in Section III below, Participant
agrees with those of its Counterparties that likewise accept to be bound by this Annex J as
follows:
RECITALS
Participant believes it to be beneficial to replace the manual process for confirming certain Trades
with a more efficient electronic process to match and confirm such Trades;
Participant and certain Counterparties have each executed a Participant Agreement with
Intercontinental that governs the use of the eConfirm Service and outlines the processes and
terms and conditions controlling the matching of Trades;
Participant desires to use eConfirm for the purpose of electronically confirming certain Trades in
lieu of the confirmation procedures otherwise specified in the master agreements governing such
Trades;
Participant desires to avoid the need to amend multiple master agreements and, instead, to rely
on this Annex J for the limited purpose of recognizing the controlling legal status and effect of
Controlling Confirmations;
NOW THEREFORE for good and valuable consideration the adequacy of which is hereby
acknowledged, Participant hereby agrees as follows, notwithstanding anything to the contrary in
any Covered Master Agreement (as defined below):
A. Covered Master Aareement. As between Participant and any Counterparty that accepts
to be bound by Annex J, a "Covered Master Agreement" shall be, for purposes of this
Annex J, a Master Agreement between Participant and Counterparty (whether executed
by the parties before, on or after the Annex J Effective Date (as defined below)) that both
Participant and the Counterparty have identified as a Covered Master Agreement.in their
respective Acceptance Letters.
July 1, 2004
Page 39 of 44
J "'
.
~
Intercontinental Exchange
Confidential
B. Leaal Effect of Controllinq Confirmations, In the event that the eConfirm Service
determines that a Trade governed by a Covered Master Agreement between Participant
and a Counterparty that has accepted to be bound by Annex J is matched pursuant to
Section 3(a) or 3(b) of the Confirmation Procedures Guide:
1, the Controlling Confirmation generated by the eConfirm Service with respect to
the Trade will be deemed fully executed by both parties and shall be the
controlling confirmation for purposes of the relevant Covered Master Agreement;
2, the terms of such Controlling Confirmation shall be legally binding on and
enforceable against each of the parties to the Trade and such Controlling
Confirmation shall supplement, form a part of and be subject to the relevant
Covered Master Agreement, as amended 'by this Annex J, and
3. the matching by means of the eConfirm Service shall be deemed to constitute an
effective notification or delivery of the fully executed confirmation for purposes of
the applicable Covered Master Agreement.
C. Waiver of Defenses. Participant and its Counterparty agree not to contest or assert any
defense to the validity or enforceability of any Controlling Confirmation, based on any law
requiring agreements to be in writing or to be signed by the parties. For this purpose,
Participant agrees that to the extent the signature or acknowledgement is required or
requested with respect to any Controlling Confirmation, the "dicking" in the appropriate
spaces provided by the eConfirm Service in order to input Trade Data for matching
purposes or to confirm a Trade using eConfirm's "Click and Confirm" functionality shall be
deemed to constitute the requisite signature or acknowledgement to the same extent,
and with the same force and effect, as if the relevant party had manually executed a
paper confirmation.
D. Trade Data Submission and Reconciliation, Participant agrees to use commercially
reasonable efforts to promptly submit and confirm Trade Data and reconcile any Trade
Data discrepancies presented to Participant by the eConfirm Service in accordance with
the Confirmation Procedures Guide.
E. Multiple Confirmations, In the event the parties receive both a Controlling Confirmation
from the eConfirm Service with respect to a Trade governed by a Covered Master
Agreement and another form of written confirmation with respect to the same Trade, the
Controlling Confirmation shall govern and be controlling with respect to such Trade.
F. Alternative Confirmation Procedures. Nothing in this Annex J shall be construed as
requiring Participant to use the eConfirm Service to confirm all Trades executed under a
Covered Master Agreement. Where the eConfirm Service does not generate a
Controlling Confirmation with respect to a Trade or is not used to confirm a Trade for any
reason, Participant and a Counterparty may confirm such Trade pursuant to any other
mutually agreed upon confirmation procedure, either as specified in the relevant Covered
Master Agreement or otherwise.
G. Bindina Nature of Trades. Nothing in this Annex J shall be construed as affecting the
legally binding nature and validity of any Trade,
III. PROCEDURE FOR ACCEPTING ANNEX J
A. To accept Annex J, Participant must return to Intercontinental by the Annex J Deadline
(as defined below) (i) a completed and duly executed Acceptance Letter, in the form of
Exhibit 1 to this Annex J, and (ii) a conformed copy of the Acceptance Letter containing,
in place of the signature(s) in the duly executed version, the printed or typewritten name
of each signatory,
July 1, 2004 Page 40 of 44
r, ~
,. ~. ,
'. ~
Intercontinental Exchange
Confidential
B. The "Annex J Deadline" will initially be June 1, 2005; however, Intercontinental may
extend the Annex J Deadline by one year on each anniversary of the initial Annex J
Deadline by notice given no later than two weeks prior to such anniversary if
Intercontinental determines in its sole discretion that market interest justifies such an
extension of the acceptance period. Participant shall be deemed to have accepted any
such extension of the Annex J Deadline if it does not submit written notice of its rejection
of such extension within 5 business days of receiving notice of the extension. In the
event Participant rejects an extension, such rejection will be effective upon the
anniversary of the Annex J Deadline which is the subject of the extension (the
"Revocation Pate"), and Annex J will n9t amend or otherwise affect any Covered Master
Agreement (or any Trade governed by it) between that Participant and a Counterparty
that accepts Annex J after the Revocation Date, Participant's right to reject an extension
of the Annex J ~adline is without prejudice to (i) any amendment to any Covered Master
Agreement between Participant and a Counterparty effected pursuant to this Annex J on
or prior to the Revocation Date, and (ii) any amendment effected pursuant to this Annex J
to a Covered Master Agreement executed after the Revocation Date between Participant
and a Counterparty that each accepted Annex J on or before the Revocation Date, which
in each case will be (or continue to be) effective.
C. Upon receipt of the Acceptance Letter and the conformed copy, Intercontinental will .
archive the original and post the conformed copy of the Acceptance Letter on the
eConfirm system thereby making it available online for viewing, downloading and printing
by any Counterparty using the eConfirm Service.
D. The agreement to supplement and make the specified amendments to a Covered Master
Agreement as contemplated by this Annex J and the Acceptance Letter, on the terms and
subject to the conditions set forth in this Annex J, shall, as between Participant and a
Counterparty, be effective on receipt by Intercontinental, as agent, of an Acceptance
Letter from the later of the parties to accept Annex J (the "Annex J Effective Date"). Any
such amendments shall apply to each Covered Master Agreement between Participant
and the relevant Counterparty (whether entered into before, on or after the Annex J
Effective Date) and any Trade governed by it and submitted to the eConfirm Service on
or after the Annex 'J Effective Date,
E. In accepting Annex J, Participant may not specify additional provisions, conditions,
modifications, deletions, or limitations in its Acceptance Letter or otherwise with respect
to Annex J, Any purported acceptance of Annex J that Intercontinental, as agent,
determines in good faith is not in compliance with this Section 11/ will be void.
F. Acceptance of Annex J is irrevocable except that Participant may reject an extension of
the Annex J Deadline as provided in clause A of this Section 11/,
IV. OTHER PROVISIONS
A. Representations of Participant. Participant represents that:
1. it has the necessary corporate and/or legal authority to accept this Annex J and
to perform each and every obligation imposed by this Annex J; and
2. this Annex J represents a legally valid, binding and enforceable obligation of
Participant.
B. Status of Master Agreements. The sole purpose of this Annex J is to recognize electronic
Trade Confirmations generated by the eConfirm Service for Trades governed by Covered
Master Agreements as Controlling Confirmations. Accordingly, this Annex J shall not be
construed to amend or modify any provisions of any Covered Master Agreement other
than those related to confirmations,
July 1, 2004 Page 41 of 44
.. I.
...
1 '.
IntercontinentalExchange
July 1, 2004
C.
"
.
... o()
Confidential
Notices. Notices between Participant and a Counterparty related to any Trade governed
by a Covered Master Agreement stlall be delivered in accordance with the notice
provisions of the relevant Covered Master Agreement or the Confirmation Procedures
Guide, as appropriate,
Status of Bilateral Amendments to Covered Master Agreements to Provide for Electronic
Confirmations, If Participant and a Counterparty have previously entered or at any time
in the Mure enter into a bilateral amendment to a Covered Master Agreement to provide
for electronic confirmations such as those generated by the eConfirm Service, Annex J
will not apply to such Covered Master Agreement or Trades governed by it and will be
without prejudice to such bilateral amendment from the date such bilateral amendment is
effective.
D.
Page 42 of 44
,. re ~.
4 ,C;' :
-.. c; ..
IntercontinentalExchange
Confidential
Exhibit 1 to Annex J
Form of Acceptance Letter for Annex J
[To be printed on Participant's letterhead]
[Date]
ladies and Gentlemen:
Annex J to the Intercontinental Exchange, Inc. Participant Agreement
- Binding Acceptance
The purpose of this letter is to confirm our agreement, as an Intercontinental Exchange Participant, to be
bound by the terms of Annex J to the Participant Agreement as published by Intercontinental Exchange,
Inc. ("Intercontinental"), as amended from time to time ("AnnexJ"). This letter constitutes an Acceptance
letter as defined in Annex J.
,
1, Binding Supplement to Covered Master Agreements
The entirety of provisions contained in Annex J is incorporated by reference into this Acceptance letter.
Pursuant to the terms of Annex J, this Acceptance letter shall supplement and form part of each Covered
Master Agreement that is now or in the future executed between us and other IntercontinentalExchange
Participants that also agree to be bound by Annex J with respect to the Covered Master Agreement.
For purposes of Annex J and this Acceptance letter, we hereby agree that the following shall be
"Covered Master Agreements":
o
o
o
o
o
o
July 1,2004
Covered Master Agreements
o
NAESB: Base Contract for Sale and Purchase of Natural Gas (as published by the
North American Energy Standards Board, Inc.)
GISB: Base Contract for Short-Term Sale and Purchase of Natural Gas (as sponsored
by the Gas Industries Standard Board, Inc.)
EEl: Master Power Purchase and Sale Agreement (as published by the Edison
Electric Institute and National Energy Marketers Association)
WSPP: Western Systems Power Pool Agreement (as sponsored by the Western
Systems Power Pool)
ISDA: ISDA Master Agreement (as published by the International Swap and
Derivatives Association, Inc.)
Market Based Power Sales Tariff
.
o
o
Interchange Agreement
Master Power Purchase and Sale Agreement (non-EEl)
Master Power Sale Agreement
Page 43 of 44