Federal Register May 14, 1999 Applications of the Chicago Mercantile Exchange (CME) for Designation as a Contract Market in Futures and Options on Three Month Eurodollar FRAs

[Federal Register: May 14, 1999 (Volume 64, Number 93)]
[Notices]
[Page 26365-26366]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14my99-44]

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COMMODITY FUTURES TRADING COMMISSION


Applications of the Chicago Mercantile Exchange for Designation
as a Contract Market in Futures and Options on Three Month Eurodallar
FRAs

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of availability of amended terms and conditions of
proposed commodity futures and option contracts.

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SUMMARY: The Chicago Mercantile Exchange (CME or Exchange) has applied
for designation as a contract market in futures and options on three-
month Eurodallar FRAs (forward rate agreements). Following Commission
receipt of the applications in July 1998, the Director of the Division
of Economic Analysis (Division) of the Commission, acting pursuant to
the authority delegated by Commission Regulation 140.96, published
those proposals for public comment (63 FR 42617). That comment period
ended on September 9, 1998. In a supplemental submission dated October
2, 1998, the CME proposed to amend the original application to provide
that positions in the proposed three-month Eurodallar FRA futures
contract would not be

[[Page 26366]]

offset. The Commission has determined that an additional period for
public comment on the proposals will assist the Commission in
considering the views of interested persons, and is consistent with the
purposes of the Commodity Exchange Act.

DATES: Comments must be received on or before June 14, 1999.

ADDRESSES: Interested persons should submit their views and comments to
Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three
Lafayette Center, 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 [email protected].
Reference should be made to the CME three-month Eurodallar FRA futures
and option contracts.

FOR FURTHER INFORMATION CONTACT: Please contact David Van Wagner of the
Division of Trading and Markets, telephone (202) 418-5481. Facsimile
number (202) 418-5547. Electronic Mail: [email protected]. With
respect to the individual contract terms and conditions, please contact
Michael Penick of the Division of Economic Analysis, Commodity Futures
Trading Commission, Three Lafayette Center, 1155 21st Street NW,
Washington, DC 20581, telephone (202) 418-5279. Facsimile number: (202)
418-5527. Electronic mail: [email protected].

SUPPLEMENTARY INFORMATION: In the original application, the terms and
conditions of the proposed futures contract provided that the contract
would be cash settled using procedures substantially identical to those
of the existing CME Eurodollar futures contract. Other features of the
proposed contract were also comparable to those approved for existing
markets.
    In a supplemental filing, the CME has clarified which exchange
procedures specifically would apply to the trading, clearing and
settlement of the proposed three-month Eurodollar FRA futures contract.
As proposed, CME Rule ____.00, Scope of Chapter, would be modified to
state that the procedures for trading, clearing and settlement of the
three-month Eurodollar FRA futures are governed by the rules of the
Exchange except for Rule 806.\1\ Procedures requiring the posting of
collateral to cover daily pays and collects would remain the same.
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    \1\ CME Rule 806 states that ``a clearing member long or short
any commodity to the Clearing House as a result of substitution may
liquidate the position by acquiring an opposite position for its
principal.''
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    Under the proposed revision, positions in the proposed three-month
Eurodallar FRA futures contract would not be liquidated by offset.
Rather, positions must be held to contract expiration once opened. As
the CME explained in its supplemental filing:

. . . the value of a price change in the Eurodollar FRA futures
contract is not known until the final settlement date when the value
of a tick is determined. Therefore, the Clearinghouse cannot
determine accurately the pays and collects on Eurodollar FRA futures
positions until the final settlement. . . Hence, as the Eurodollar
FRA futures rules already reflect, the Eurodollar FRA futures
contract is not subject to Rule 814 regarding daily pays and
collects between the contract holder and the Clearinghouse.
Similarly, because the Eurodollar FRA futures contract is not
settled daily and because pays and collects do not occur daily as
the Eurodollar futures contracts, the Clearinghouse cannot offset
Eurodollar FRA futures contracts. Rather, pays and collects will be
netted out across the settling Eurodollar FRA contracts on the
settlement date.\2\

    \2\ As mentioned, the Clearinghouse would require the posting of
collateral to cover pays and collects on the final settlement date.
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    The Commission is requesting comment on the proposed contract
provisions with respect to exchange financial integrity, futures
industry practices, and the application of any provisions of the
Commodity Exchange Act or of any specific Commission policy or
interpretation.
    Copies of the amended terms and conditions will be available for
inspection at the Office of the Secretariat, Commodity Futures Trading
Commission, Three Lafayette Center, 1155 21st Street NW, Washington, DC
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) 418-5100.
    Other materials submitted by the CME in support of the applications
for contract market designation 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 (1997)), except to the extent
they are entitled to confidential treatment as set forth in 17 CFR
145.5 ad 145.9. Requests for copies of such materials should be made to
the FOI, Privacy and Sunshine Act Compliance Staff of the Office of
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 terms and conditions, 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 Central, 1155 21st Street NW, Washington, DC 20581 by the
specified date.

    Issued in Washington, DC, on May 5, 1999.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 99-11785 Filed 5-12-99; 9:17 am]
BILLING CODE 6351-01M-M
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