Attachment C

The Chairman referred the Board to Original Margin Rule Q which was adopted by the Board of the Exchange this morning. He noted that the Exchange Board has requested the Association to take action to implement that Rule.

Thereupon, following full discussion, it was on motion duly made, seconded and unanimously adopted:

RESOLVED, that the Association open an account with Chemical Bank to be entitled "Comex Silver Straddle" Account: for the purpose of holding all payments received from clearing members pursuant to Exchange Original Margin Rule Q; and it was

FUTHER RESOLVED, that checks, drafts and other instruments for the payment of money drawn on said account may be made payable only to the order of a clearing member and may be signed by an officer or director of the Association signing singly; and it was

FURTHER RESOLVED, that the officers of the Association are authorized, empowered and directed to certify the adoption of the foregoing resolutions to Chemical Bank, in such form as said bank customarily requires.

FURTHER RESOLVED, that the procedures applicable to the use by clearing members of Treasury Bills and Letters of Credit to meet the Association's original margin requirements shall apply in full to the use of Treasury Bills and Letters of Credit to meet the requirements of Exchange Original Margin Rule Q, except that Treasury Bills and Letters of Credit used to meet the requirements of Exchange Original Margin Rule Q shall be identified as being for the "Comex Silver Straddle Account".

The Chairman noted that Exchange Original Margin Rule Q requires a clearing member to submit statements in duplicate listing every straddle of the type described in said Rule entered into on the previous business day. The Board directed the Secretary-Treasurer to transmit one copy of each such statement received by the Association to the Compliance Department of the Exchange.

The Board also requested the Secretary-Treasurer to notify clearing members of the adoption of the foregoing and to emphasize that the requirements of Exchange Original Margin Rule Q are in addition to all original margin requirements of the Association.

Attachment D

Following further discussion, it was agreed that the following information would satisfy the objectives both of Comex and the Association:

1. Pays and collects for FCMs will be furnished on

a daily basis broken down as between customer and proprietary

accounts.

2. Pays and collects for trade houses will be furnished weekly. The Comex compliance staff will attempt to develop "kickout" numbers (perhaps a dollar amount equal to a stated percentage of reported working capital) which when reached would trigger daily reporting of pays and collects for trade houses.

3. Code numbers for Clearing Members will be developed so that their identity will be known only to the compliance staff. 4. Comex will notify the Association if Comex

becomes aware that a Clearing Member has violated Association

financial rules or requirements.

Comex and the Association

will endeavor to obtain the same information for the Association when the joint audit program, which is now being reviewed by

the CFTC, goes into operation.

Attachment E

Pursuant to the policy adopted at the November 26th Board meeting, the Board reviewed original margin rates. The Board determined to increase silver straddle original margin rates effective Monday, January 7, 1980, as follows:

The Secretary-Treasurer was directed to notify the Clearing Members of the foregoing on December 27, 1979.

Except as set forth above, the Board unanimously determined not to revise the present original margin

rates.

Attachment F

Counsel reported that the CFTC staff informed him that, contrary to prior expectations, the Commission has not yet acted on the Association's proposed new By-Laws, including proposed Section 8.4 which would permit the Association to impose special original margins on selected members. He stated further that the CFTC staff has reviewed the proposed By-Laws and Rules and has recommended to the Commission that they be approved in all respects but that the Commissioners apparently have concluded that they wish more time.

The Board reviewed schedules prepared by the Secretary-Treasurer setting forth the outright long position, the outright short position and the true straddle position in silver of each Clearing Member as at the close of business on January 16th, together with the last reported working capital of each member. Each Clearing Member was identified by a number so that its actual identity was not known to the Board members.

The Board next reviewed the action it could take, given the fact that the CFTC has not yet authorized the Association to selectively impose original margin.

The available choices include:

Raising original margins on net positions pursuant to By-Law Section 16.

2. Requiring an additional original margin from both buyer and seller upon any interest in any month or months pursuant to By-Law Section 17, and

3. Directing a Clearing Member to reduce its net open silver position pursuant to By-Law Section 22(d).

The Board stated that in its opinion the greatest danger to the Association was presented by smaller Clearing Members who hold substantial positions, both long and short, for customer account but have only a small net open position. Such a member could be subject to great financial risk if its customers on one side of the market fail to meet margin calls. This problem probably will be alleviated when the newly adopted Comex silver margin requirements become effective on February 4.

Attachment F (cont'd.)

Under the present By-Laws, the Association collects original margin only on a Clearing Member's net open. position plus substantially smaller margin on straddles created by long and short positions in different months. Trade houses do not appear presently to be a problem. Their positions are all hedges and based on spot check, they appear to have adequate financing.

After extended discussion, the Board concluded that under the existing By-Laws, it cannot take meaningful action.

Increasing original margin (net and straddle) on silver positions pursuant to By-Law Section 16 will not address the basic problem and could compel holders of bona fide straddles to liquidate their positions thereby reducing the already limited liquidity in the silver market.

Similarly, imposing additional original margin on selected months pursuant to Section 17 of the By-Laws would be ruinous to the holders of straddles.

Lastly, in view of the trading restrictions imposed by Commodity Exchange, Inc. on silver, it probably is impossible to comply with a direction pursuant to By-Law Section 22 (d) to certain members to reduce silver positions.

The Board reiterated its opinion that the only effective and practical approach to deal with the present problem is the ability to impose special original margin requirements on those members whose positions are deemed to constitute a dangerous situation. The Secretary-Treasurer was directed to continue to monitor the situation.