Federal Register December 17, 1998 Chicago Mercantile Exchange: Proposed Amendments to the Cash Settlement Provisions of the CME Brazilian Real Futures Contract

[Federal Register: December 17, 1998 (Volume 63, Number 242)]
[Notices]
[Page 69615-69616]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17de98-42]

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COMMODITY FUTURES TRADING COMMISSION


Chicago Mercantile Exchange: Proposed Amendments to the Cash
Settlement Provisions of the CME Brazilian Real Futures Contract

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of availability of proposed amendments to the terms and
conditions of commodity futures contract.

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SUMMARY: The Chicago Mercantile Exchange (CME or Exchange) has
submitted proposed amendments related to the cash settlement provisions
of its Brazilian Real futures contract. Under the proposal, the CME
proposes to adopt procedures to set an alternative cash settlement
price in the event the Central Bank of Brazil does not determine and/or
the SISBACEN does not disseminate the official average offer rate of
Brazilian reais per U.S. dollar on the last day of trading. That
alternative cash settlement price would be based on the results of the
CME survey of financial institutions inside of Brazil who are active in
the Brazilian reais per commercial U.S. dollar spot and/or non-
deliverable forward (NDF) markets. The Acting Director of the Division
of Economic Analysis (Division) of the Commission, acting pursuant to
the authority delegated by Commission Regulation 140.96, has determined
that publication of the proposals for comment is in the public
interest, will assist the Commission in considering the views of
interested persons, and is consistent with the purpose of the Commodity
Exchange Act.

DATES: Comments must be received on or before January 4, 1999.

ADDRESSES: Interested persons should submit their views and comments to
Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW Washington, DC 20581. In
addition, comments may be sent by facsimile transmission to facsimile
number (202) 418-5521, or by electronic mail to secretary@cftc. gov.
Reference should be made to the amendments to the CME Brazilian Real
futures contract.

FOR FURTHER INFORMATION CONTACT:
Please contact Thomas Leahy of the Division of Economic Analysis,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, 20581, telephone (202) 418-5278. Facsimile
number: (202) 418-5527. Electronic mail: [email protected].


[[Page 69616]]


SUPPLEMENTARY INFORMATION: Under current rules for the CME Brazilian
Real futures contract, the cash settlement price is the reciprocal of
the exchange rate of reais per commercial U.S. dollars for cash
delivery, according to the provisions of Resolution No. 1690/'90 of the
Brazilian National Monetary Council. That rate is defined as the
average transaction rate calculated by the Central Bank of Brazil
(Central Bank), according to its criteria, and broadcast by SISBACEN,
transaction PTAX 800, option 5-L,\1\ on the last day of trading. In the
event that the Central Bank does not determine and/or SISBACEN does not
broadcast that exchange rate, CME rules provide for the declaration of
an emergency pursuant to existing Exchange rule 3022.J.
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    \1\ According to the CME, the PTAX rate is the weighted average
Brazilian real per U.S. dollar price of all transactions for that
day plus the current value of 0.0004 real per U.S. dollar to obtain
the average offered rate.
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    The Exchange proposes to adopt, in its rules, backup procedures
that would be used if the Central Bank does not determine, and/or
SISBACEN does not disseminate, the exchange rate of Brazilian reais per
commercial U.S. dollar on the last trading day of the subject contract.
The backup cash settlement price would be based on the exchange rate
derived from the CME's survey of financial institutions on the last day
of trading. By implementing backup procedures in its rules, the CME
would be able to avoid an emergency declaration in the event that the
primary cash settlement price is not determined or published.\2\
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    \2\ In addition, the CME proposes a nonsubstantive amendment to
clarify that the final settlement price is the reciprocal of the
weighted average offered rate, rather than the weighted average
transaction rate that is calculated by the Central Bank.
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    The CME survey is conducted as follows. The CME surveys eight
reference institutions from a list of at least twelve institutions that
are active participants in the market for spot and/or non-deliverable
forward markets. Beginning at 6:00 p.m. (Sao Paolo time), each randomly
selected participant is asked for its perception of the average dollar
offered rate at which spot transactions for Brazilian reais per
commercial U.S. dollar occurred during the trading day, calculated in
accordance with the Central Bank's methodology for transaction PTAX
800, option 5-L. The highest two and the lowest two offer rates are
eliminated. The remaining four offer rates are averaged and the
reciprocal of that average is the final settlement price.
    If the CME is unable to obtain eight responses, but is able to
obtain at least five responses, then the CME eliminates the highest and
the lowest offer rate and averages the remaining offer rates. The final
settlement price is the reciprocal of that average. If fewer than five
responses are received, then the CME would invoke its existing
emergency provisions.
    The CME proposes to implement the changes to the proposed
amendments to the cash settlement provisions upon Commission approval
for application to existing and newly listed contracts beginning with
the February 1999 contract month which expires on January 29, 1999.
    The Division requests comment on the proposed changes and the
proposal to implement the amendments to existing positions.
    Copies of the proposed amendments will be available for inspection
at the Office of the Secretariat, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st St., NW, Washington, D.C. 20581.
Copies of the terms and conditions can be obtained through the Office
of the Secretariat by mail at the above address or by phone at (202)
418-5097.
    Other materials submitted by the CME may be available upon request
pursuant to the Freedom of Information Act (5 U.S.C. 552) and the
Commission's regulations thereunder (17 CFR part 145 (1987)), except to
the extent they are entitled to confidential treatment as set forth in
17 CFR 145.5 and 145.9. Requests for copies of such materials should be
made to the FOI, Privacy and Sunshine Act Compliance Staff of the
Office of the Secretariat at the Commission's headquarters in
accordance with 17 CFR 145.7 and 145.8.
    Any person interested in submitting written data, views, or
arguments on the proposed amendments, or with respect to other
materials submitted by the CME, should send such comments to Jean A.
Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st St., NW, Washington, DC 20581 by the specified date.

    Issued in Washington, DC, on December 11, 1998.
John R. Mielke,
Acting Director.
[FR Doc. 98-33354 Filed 12-16-98; 8:45 am]
BILLING CODE 6351-01-M
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