• NEW FOREIGN EXCHANGE BENCHMARK TO BE USED IN THE SETTLEMENT OF CME CRUDE PALM OIL FUTURES AND SWAPS

      • To
      • Members, Member Firms and Market Users
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      • Research and Product Development
      • #
      • SER-6754
      • Notice Date
      • 23 July 2013
      • Effective Date
      • 06 August 2013
    • Pending CFTC review, the Exchange plans to replace the foreign exchange rate it currently uses in settlement procedures for CME U.S. Dollar Cash Settled Crude Palm Oil Futures and CME USD Malaysian Crude Palm Oil Calendar Swaps and replace it with the on-shore MYR/USD Spot Rate reported by Persatuan Pasaran Kewangan Malaysia (“PPKM”).
       
      The settlement prices for CME Crude Palm Oil futures and CME Crude Palm Oil swaps are based off Bursa Malaysia Crude Palm Oil futures, which are traded in Malaysian Ringgit. Settlements for both CME products are determined by converting the corresponding Bursa Malaysia Crude Palm Oil futures settlement prices into U.S. dollars using the Association of Banks in Singapore (ABS) 11:00 a.m. spot USD/MYR fixing. On July 5, 2013, ABS announced that they would discontinue publication of their USD/MYR spot fixing after August 5, 2013. ABS has recommended that the market settle its USD/MYR transactions going forward using the onshore USD/MYR Spot Rate reported by Persatuan Pasaran Kewangan Malaysia (PPKM). Beginning on August 6, 2013 and pending CFTC review, the Exchange will begin using the PPKM rate.
       
      Questions may be directed to Nelson Low in Singapore (+65 6593 5570 or Nelson.Low@CMEGroup.com) or Fred Seamon in Chicago (312-634-1587 or Fred.Seamon@CMEGroup.com). 


      Rule changes pending CFTC review. Additions are underlined and bold; deletions are [bracketed with strikethrough].
       
       
      Chapter 204
      U.S. Dollar Cash Settled Crude Palm Oil Futures
       
       
      20403. SETTLEMENT PROCEDURES
       
      20403.A. Final Settlement
       
      There shall be no delivery of crude palm oil in settlement of this contract. All contracts open as of the termination of trading shall be cash settled to the average price of the corresponding FCPO contract traded on the Bursa Malaysia Derivatives Berhad during the last five Trading Days two months prior to becoming the delivery month. For each of the five-day calculation, the daily settlement price will be converted to USD and rounded to the nearest $0.25 using the [Association of Banks in Singapore’s 11:00 am (Singapore time) MYR spot price.] USD/MYR spot rate reported by Persatuan Pasaran Kewangan Malaysia (PPKM), which appears on Thomson Reuters Screen MYRFIX2 Page at approximately 11:10 am Kuala Lumpur time. The five daily prices are then averaged to produce the final settlement price.
       
       
      Chapter 204A
      USD Malaysian Crude Palm Oil Calendar Swap (Cleared Only)
       
       
      204A03. FINAL SETTLEMENT PRICE AND DAILY SETTLEMENT DURING THE LAST MONTH OF TRADING
       
      The final settlement price shall be determined on the final settlement day. The final settlement price shall be the cumulative average of the settlement prices for the third forward month FCPO contract traded on the Bursa Malaysia Derivatives Berhad for each trading day in the swap contract month converted to USD and rounded to the nearest $0.25 using the [Association of Banks in Singapore (ABS) 11:00 am (Singapore time) MYR spot fixing.] USD/MYR spot rate reported by Persatuan Pasaran Kewangan Malaysia (PPKM), which appears on Thomson Reuters Screen MYRFIX2 Page at approximately 11:10 am Kuala Lumpur time. .
       
      For example, final settlement for a January USD Malaysian Crude Palm Oil Calendar Swap would be the cumulative average of the daily settlement prices for the third forward FCPO contract listed on the Bursa Malaysia Derivatives Berhad contract during the month of January, which in this example will comprise half of the March futures contract and half of the April futures contract, with the month roll determined by the Bursa Malaysia Derivatives Berhad listing and expiration cycle. These daily settlement prices are converted to USD and rounded to the nearest $0.25 using the [Association of Banks in Singapore's 11:00 am (Singapore time)MYR spot fixing.] USD/MYR spot rate reported by PPKM at approximately 11:10 am Kuala Lumpur time.
       
      Daily settlement during the last month of clearing shall be the cumulative average of each settlement price of the corresponding Bursa Malaysia Derivatives Berhad FCPO futures contract and converted to USD and rounded to the nearest $0.25 weighting the current day’s settlement price across each remaining clearing day.
       
      Settlement prices shall be generated each CME business day using the most recent available values from Bursa Malaysia Derivatives Berhad and the most recent [ABS spot fixing.] USD/MYR spot rate reported by PPKM. However, any settlement prices generated on a CME business day that is not also a Bursa Malaysia Derivatives Berhad business day will not be counted toward final settlement. Additionally, there will be no daily settlement prices generated on non-CME business days that are Bursa Malaysia Derivatives Berhad business days, but the Bursa Malaysia Derivatives Berhad settlement prices generated on such days will count toward final settlement and daily settlement during the last month of clearing.
       
      204A04. DAILY SETTLEMENT PRICE
       
      Daily settlement other than settlement on the final settlement day or during the last month of clearing (as described in Rule 204A03) shall be the settlement price of the Bursa Malaysia Derivatives Berhad FCPO futures contract that is the third-forward month from the swap month converted to USD using the [Association of Banks in Singapore's 11:00 am (Singapore time) MYR spot fixing] USD/MYR spot rate reported by PPKM at approximately 11:10 am Kuala Lumpur time and rounded to the nearest $0.25. Daily settlement prices shall be generated each business day the CME is open using the most recent available Bursa Malaysia Derivatives Berhad FCPO futures prices and the latest available [Association of Banks in Singapore's 11:00 am MYR spot fixing] USD/MYR spot rate reported by PPKM at approximately 11:10 am Kuala Lumpur time. 
       

      The Exchange may list USD Malaysian Crude Palm Oil Calendar Swaps before corresponding Bursa Malaysia Derivatives Berhad FCPO futures contracts are listed. In such cases, daily settlements will be based on interpolation between contracts that are listed.