99-11785. Applications of the Chicago Mercantile Exchange for Designation as a Contract Market in Futures and Options on Three Month Eurodallar FRAs

[Federal Register Volume 64, Number 93 (Friday, May 14, 1999)]
[Notices]
[Pages 26365-26366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11785]


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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 [phone], or by electronic mail to [e-mail]. 
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 [phone]. Facsimile 
number [phone]. Electronic Mail: [e-mail]. 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 [phone]. Facsimile number: (202) 
418-5527. Electronic mail: [e-mail].

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 
[phone].
    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