[Federal Register Volume 61, Number 19 (Monday, January 29, 1996)]
[Rules and Regulations]
[Pages 2717-2719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1511]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Foreign Option Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Order.
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SUMMARY: The Commodity Futures Trading Commission (Commission) is:
confirming that the Part 30 Order issued on February 17, 1993 (the
``Initial Order'') to the Tokyo Grain Exchange (TGE) continues in
effect subsequent to the merger on October 1, 1993 of the TGE with the
Tokyo Sugar Exchange (TSE) with the TGE as the surviving entity; and
allowing the option contract on the raw sugar futures contract traded
on TGE to be offered or sold to persons located in the United States.
This Order is issued pursuant to Commission rules 30.3 and 30.10,
17 CFR 30.3 and 30.10 (1995), which: granted an exemption to designated
members of the Exchange from the application of certain of the
Commission's foreign futures and option rules based on substituted
compliance with comparable Japanese regulatory and self-regulatory
requirements; and authorized options on U.S. soybean futures contracts
traded on the TGE to be offered or sold in the United States, 58 FR
10953 (Feb. 23, 1993). By this Order, the Commission also acknowledges
the substitution of the merged TGE as the party to several ongoing
information sharing and financial intermediary recognition arrangements
entered into with the former TGE, the Ministry of Agriculture, Forestry
and Fisheries (``MAFF'') and the Commission as described in the Initial
Order.
EFFECTIVE DATE: February 28, 1996.
FOR FURTHER INFORMATION CONTACT: Jane C. Kang, Esq. or Robert
Rosenfeld, Esq., Division of Trading and Markets, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581. Telephone: (202) 418-5435.
SUPPLEMENTARY INFORMATION: The Commission has issued the following
Order:
United States of America Before The Commodity Futures Trading
Commission
Order Pursuant to Commission Rules 30.3 and 30.10 Confirming that the
Initial Order to the TGE Continues in Effect Subsequent to the Merger
of TGE and TSE and Permitting Option Contracts on the Raw Sugar Futures
Contract Traded on the TGE To Be Offered or Sold to Persons Located in
the United States Thirty Days After Publication of This Notice in the
Federal Register Absent Further Notice
In the Initial Order,1 the Commission exempted certain
designated members of the TGE from the application of certain of the
foreign futures and option rules based on substituted compliance with
comparable Japanese regulatory and self-regulatory requirements and
allowed option contracts on U.S. soybean futures contracts traded on
the TGE to be offered or sold in the United States.2 Among other
conditions, the Initial Order specified that:
\1\ See 58 FR 10953 (February 23, 1993).
\2\ Commission rule 30.3(a), 17 CFR 30.3(a), makes it unlawful
for any person to engage in the offer or sale of a foreign option
product until the Commission, by order, authorizes such foreign
option to be offered or sold in the United States.
Except as otherwise permitted under the Commodity Exchange Act
and regulations thereunder, * * * no offer or sale of any Tokyo
Grain Exchange option product in the United States shall be made
until thirty days after publication in the Federal Register of
notice specifying the particular option(s) to be offered or sold
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pursuant to this Order.
On October 1, 1993, the membership of the TSE merged with the TGE
with the TGE as the surviving entity. The merger was approved by the
MAFF, the government regulator with oversight responsibility for both
exchanges.
The Exchange has represented, among other things, that the basis
upon which the Commission issued the Initial Order as well as the terms
and conditions set forth therein continue in effect with respect to TGE
subsequent to the merger with TSE.3 In particular, the Exchange
has represented that: 4
\3\ In this connection, the Initial Order was issued, in part,
based on the Exchange's commitment to phase in physical segregation
requirements for customer property. Specifically, a special
enforcement order issued by MAFF on December 14, 1990 required that
one quarter of all customer property held by an FCM be physically
segregated in accordance with Article 92-2 of the CEL, with an
additional quarter to be segregated on April 1 of each subsequent
year until April 1, 1996, when 100% of all customer property will be
required to be segregated. Therefore, 75% of customer property is
currently subject to physical segregation at the TGE. Under the CEL,
the segregation protection is supplemented by the Guarantee Money
Fund, the Commodity Transaction Responsible Reserve Fund, Membership
Trust Money and the Compensation Fund.
\4\ See letter dated June 14, 1995 from Seiji Mori, TGE, to
Andrea M. Corcoran, Commission and letters dated July 11 and July
28, 1995 from Itsuji Yanagisawa, TGE, to Jane C. Kang, Commission.
(1) the recognition and continued oversight by MAFF of TGE
remain unaffected by the merger;
(2) the TSE futures and options which are now traded on the TGE
Sugar Market are designated and traded according to the requirements
of the Japanese Commodity Exchange Law (``CEL''), which the
Commission considered in issuing the Initial Order to the TGE; and
[[Page 2718]]
(3) no significant rule changes have been implemented at TGE as
a result of the merger: the only modifications made to date have
been those necessary to bring futures and options contracts traded
at TSE within the TGE regulatory structure.
In particular, the TGE has summarized relevant changes resulting
from the merger as follows:
(1) Membership. Although many TSE members were also TGE members,
TSE had an additional category of membership--associate members who
are permitted to trade only for their own accounts and must execute
their trades through a futures commission merchant (``FCM'') member
of the TGE. Therefore, TGE rules were amended to add associate
members to the existing regular member and FCM categories.
(2) Creation of Two Markets. The integrated, centrally located
TGE marketplace now consists of a TGE Agricultural Market, trading
commodities previously associated with TGE and a TGE Sugar Market,
trading commodities previously associated with TSE.
(3) Staff. Staff of the two exchanges merged to form staff of
the TGE to ensure there is no diminution in oversight or staff
expertise. The 38 staff members who are responsible for market
surveillance comprise one-third of the total Exchange staff.
By letter dated June 14, 1995, TGE requested that the Commission
confirm that the Initial Order continues in effect relative to the
merged entity which came into existence on October 1, 1993 and
supplement the Initial Order authorizing the offer and sale in the
United States of options on the U.S. soybean futures contract by also
authorizing the TGE's option contract on the raw sugar futures contract
to be offered or sold to persons located in the United States. 5
\5\ The TGE's application had submitted terms for two option
contracts on raw sugar futures contracts. The last trading day for
one of those contracts was October 31, 1995. Accordingly, this Order
authorizes the one option contract on the raw sugar futures contract
which started trading on January 1, 1995 as described below in the
``Contract Specifications''.
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Based upon the foregoing, and subject to the terms and conditions
specified in the Initial Order, the Commission hereby publishes this
Order in the Federal Register confirming the continued applicability of
the Initial Order to the newly merged entity, TGE, and allowing the
option contract based on the raw sugar futures contract traded on the
TGE to be offered or sold to persons located in the United States
thirty days after publication of this Order in the Federal Register,
unless prior to that date the Commission receives any comments which
may result in a determination to delay the effective date of the Order
pending review of such comments. Under such circumstances the
Commission will provide notice.
Contract Specifications Options on Raw Sugar Futures (March 1996
Contract)
Year Contract Began Trading--May 1992
Trading Hours
Morning: Opening Session, 9:10 a.m.-9:30 a.m.; Continuous Session
9:30 a.m.-11:30 a.m.
Afternoon: Opening Session, 1:00 p.m.-1:15 p.m.; Continuous
Session, 1:15 p.m.-3:00 p.m.; Closing Session, 3:00 p.m.-3:15 p.m.
Contract Unit--One TGE Raw sugar futures contract
Delivery Months--January, March, May, July, September and November
within a 15 month period
Price Quotation--Yen per 1,000 kilogram
Minimum Price Fluctuation--10 yen per 1,000 kilogram (500 yen per
contract)
Maximum Daily Price Fluctuation--1,000 yen per 1,000 kilogram with
variable limits effective under certain conditions.
Strike Price Increment--1,000 yen per 1,000 kilogram intervals with one
strike price at-the-money and minimum of three exercise prices above
and three below.
Speculative Position Limits--None
Last Trading Day--The last business day 3 months prior to the delivery
month of the underlying futures contract.
Expiration Date--3:45 p.m. of the last trading day
Automatic Exercise--None
Exercise Style--American style. The option holder shall give an
exercise notice to the FCMs by 3:30 p.m. of any business day up to the
last trading day. FCMs and regular members shall give an exercise
notice to the FCMs from 3:00 p.m. to 3:45 p.m. of any business day up
to the last trading day. The Exchange shall proportionally assign an
exercised position to the option writer.
Customer Margin--The writer shall deposit 50,000 yen (the half amount
of the initial margin of the underlying futures contract) plus the
option premium per one contract to FCMs.
Commission Fee
New Order, 3,000 yen or less per one contract
Resale/Repurchase (for liquidation), 2,000 yen or less per one
contract.
Note: The first trading day of March 1996 contract started from
January 4, 1995.
List of Subjects in 17 CFR Part 30
Commodity futures, Commodity options, Foreign transactions.
Accordingly, 17 CFR Part 30 is amended as set forth below:
PART 30--FOREIGN FUTURES AND FOREIGN OPTION TRANSACTIONS
1. The authority citation for Part 30 continues to read as follows:
Authority: Secs. 2(a)(1)(A), 4, 4c, and 8a of the Commodity
Exchange Act, 7 U.S.C. 2, 6, 6c and 12a.
2. Appendix B to Part 30 is amended by adding the following entry
after the existing entries for the ``Tokyo Grain Exchange'' to read as
follows:
Appendix B.--Option Contracts Permitted To Be Offered or Sold in the
U.S. Pursuant to Sec. 30.3(a)
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FR date and
Exchange Type of contract citation
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* * * * *
* *
Tokyo Grain Exchange........ Option Contract on 1996; ____FR____
the Raw Sugar
Futures Contract.
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* *
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[[Page 2719]]
Issued in Washington, D.C. on January 22, 1996.
Jean A. Webb,
Secretary to the Commission.
[FR Doc. 96-1511 Filed 1-26-96; 8:45 am]
BILLING CODE 6351-01-P
