[Federal Register Volume 60, Number 104 (Wednesday, May 31, 1995)]
[Notices]
[Pages 28391-28392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13188]
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COMMODITY FUTURES TRADING COMMISSION
New York Mercantile Exchange: Proposed Amendments to the Gulf
Coast Unleaded Regular Gasoline Futures Contract Relating to the
Delivery Procedures and Delivery Period
agency: Commodity Futures Trading Commission.
action: Notice of proposed contract market rule changes.
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summary: The New York Mercantile Exchange (NYMEX or Exchange) has
submitted proposed amendments to its Gulf Coast unleaded regular
gasoline futures contract that, among other things, would: (1) Require
that all futures deliveries regardless of size be made on the Colonial
Pipeline system at an injection point from Pasadena, Texas to
Moundville, Alabama; (2) eliminate the public terminal delivery
alternative; (3) require the buyer receiving less than 25 contracts to
reimburse the seller for any Colonial Pipeline shipping charges
incurred for making such deliveries; and (4) for a particular delivery
month restrict all futures deliveries to the third cycle of the
Colonial Pipeline for that month, provided that deliveries of less than
25 contracts would be further restricted to the back-half of such third
Colonial Pipeline cycle.
In accordance with Section 5a(12) of the Commodity Exchange Act and
acting pursuant to the authority delegated by Commission Regulation
140.96, the Acting Director of the Division of Economic Analysis
(Division) of the Commodity Futures Trading Commission (Commission) has
determined, on behalf of the Commission, that the proposed amendments
are of major economic significance. On behalf of the Commission, the
Division is requesting comment on these proposals.
dates: Comments must be received on or before June 30, 1995.
addresses: Interested persons should submit their views and comments to
Jean A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K
Street NW., Washington, D.C. 20581. Reference should be made to the
proposed amendments to the New York Mercantile Exchange Gulf Coast
unleaded regular gasoline futures contract.
for further information contact: John Forkkio, Jr., Division of
Economic Analysis, Commodity Futures Trading Commission, 2033 K Street
NW., Washington, D.C. 20581, telephone (202) 254-7303.
supplementary information: Under current provisions of the Gulf Coast
unleaded regular gasoline (gasoline) futures contract, for all
positions involving 25 contracts or more, delivery must be F.O.B. at a
Colonial Pipeline injection station selected by the seller in the
delivery area. The delivery area for pipeline deliveries encompasses
the area along the Colonial Pipeline from Pasadena, Texas upstream to
Moundville, Alabama. For all positions involving deliveries of less
than 25 contracts, deliveries must be f.o.b. at one of the three public
terminal facilities located in the region around Pasadena, Texas--GATX
Terminals Corporation, OilTanking Houston Inc., or Amerada Hess
Corporation. Such deliveries can be made by intra-facility or inter-
facility transfer of product or by barge shipment. All public terminal
deliveries are assessed a surcharge of 1.75 cents per gallon, payable
by any party receiving or delivering less than 25 contracts.
Under existing provisions, for a particular delivery month,
pipeline deliveries must be made during either the second or third
Colonial Pipeline delivery cycle for that month. This essentially
provides a delivery period of about 21 days.\1\
\1\ To efficiently transport product through its pipeline
system, Colonial divides the year into 36 cycles. Each month has
three cycles; each with a duration of about ten days. Additionally,
each cycle is subdivided into a front half and a back half, each of
five days duration.
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Under the proposed amendments, all deliveries on the gasoline
futures contract, regardless of position size, must be by pipeline
delivery into the Colonial Pipeline system in the existing delivery
area as noted above.\2\ Additionally, under the proposed amendments,
all deliveries in a particular delivery month would be restricted to
the third cycle of the Colonial Pipeline for that month; provided that
deliveries with respect to positions involving less than 25 contracts
would be further restricted to the back-half of such third cycle.
Proposed amendments also would require the seller making delivery on a
position involving less than 25 contracts to make all the required
arrangements for shipment of the product on the Colonial Pipeline, and
the buyer to reimburse the seller for any Colonial Pipeline shipping
charges incurred by the seller in making such deliveries.
\2\ As a result of this proposal, public terminal deliveries on
the contract will no longer be permitted. As a consequence, intra
and inter-facility transfers and barge shipments will not be
permissible methods of delivery on the contract.
The Exchange proposes to apply the proposed amendments to newly
listed contract months only following its receipt of notice of
Commission approval.
According to the Exchange, the proposed amendments were proposed to
conform the futures delivery rules with cash market practices in the
Gulf and to provide more certainty in the timing of deliveries on the
futures contract. Specifically, the NYMEX stated:
The Contract will remain unchanged for ``round'' deliveries
where delivery is made directly into the Colonial Pipeline * * *
* * * Deliveries of less than 25,000 barrels are not directly
deliverable into the Pipeline, and hence, the existing Gulf Coast
Contract has specified delivery of odd-lots into public terminals.
The proposed amendments are based on the fact that Colonial allows
for a shipper to designate beneficial owners of product through what
is known as a ``consignee'' relationship * * *.
The ``consignee'' relationship allows shippers to consign
smaller portions of gasoline shipments to one or more beneficial
owners, so that odd-lot batches of less than 25,000 barrels can be
accommodated on the [[Page 28392]] Colonial Pipeline. An authorized
shipper on Colonial is allowed to break up a batch of 25,000
barrels, and allocate odd-lot batches to various consignees, who
then specify a delivery point along the Colonial Pipeline. The
beneficial owner, or consignee, can be changed on Colonial's
records. Thus, an odd-lot delivery of gasoline can be shipped on the
Colonial Pipeline, as long as the odd-lot seller finds a shipper in
the cash market to add the seller's odd-lot batch to his existing
shipment of at least 25,000 barrels on Colonial. The ``consignee''
relationship provides the mechanism to perform the odd-lot delivery
directly into Colonial Pipeline * * *.
With respect to the Exchange proposal to change the delivery period
so that all deliveries will occur in either the front-half or back-half
of the third cycle of the Colonial Pipeline, the NYMEX stated that:
In the cash market, prices are negotiated for products delivered
in each half-cycle increment on Colonial Pipeline, and prices
typically vary between each half-cycle, depending on market
conditions. Narrowing the delivery period to the third cycle of the
month provides sufficient capacity on the Colonial Pipeline to
accommodate NYMEX deliveries. In addition, narrowing the delivery
period to the third cycle would provide greater certainly in terms
of the timing for the pricing of the commodity. The most actively
traded cash market instrument in the Gulf Coast is for delivery in
the third cycle of Colonial Pipeline.
The Division requests comment on the proposed changes to the NYMEX
gasoline futures contract. The Commission is specifically requesting
comments on the effect of the proposed restrictions regarding
deliveries involving less than 25 contracts. The Division also requests
comment on the effect of the proposal to restrict deliveries to one
Colonial Pipeline cycle per month on the economically deliverable
supply of gasoline available for the contract.
Copies of the proposed amendments will be available for inspection
at the Office of the Secretariat, Commodity Futures Trading Commission,
2033 K Street NW., Washington, D.C. 20581. Copies of the amended terms
and conditions can be obtained through the Office of the Secretariat by
mail at the above address or by telephone at (202) 254-6314.
The materials submitted by the Exchange in support of the proposed
amendments 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)). 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 CFR 145.7 and 145.8.
Any person interested in submitting written data, views or
arguments on the proposed amendment should send such comments to Jean
A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K Street
NW., Washington, D.C. 20481 by the specified date.
Issued in Washington, D.C. on May 23, 1995.
Blake Imel,
Acting Director.
[FR Doc. 95-13188 Filed 5-30-95; 8:45 am]
BILLING CODE 6351-01-M
