11/17/2000
One change from the terms of the rule should be noted. Rule 6.21C provides for report of EFS transactions to be given to the Exchange via NYMEX ACCESS®. However, this functionality still needs to be added to NYMEX ACCESS®. Therefore, the Exchange’s current procedures instead provide for reporting EFS transactions to Exchange Floor Dept. staff located in the Late Submissions Area on the NYMEX trading floor in the same manner as the reporting of EFP transactions. Such reports of EFS transactions would be subsequently disseminated to NYMEX ACCESS® System Users through a bulletin message sent via NYMEX ACCESS® .
As a reminder, it is necessary for market participants to comply with the CFTC’s EFP-related reporting and recordkeeping regulations as if these regulations applied to EFS transactions. Specifically, the Exchange will require:
Each Exchange member, futures commission merchant ("FCM"), and introducing broker ("IB") to comply with the requirements of Commission Regulation 1.35(a) as if this regulation applied to EFS transactions and will further require each Exchange member, FCM, and IB to provide the required records to the Exchange for inspection upon request;
Each customer to comply with the requirements of Commission Regulation1.35(a-2)(2) as if this regulation applied to EFS transactions and will further require each customer to provide the required records to the Exchange for inspection upon request;
Each Exchange clearing member, FCM, and foreign broker to comply with the requirements of Commission Regulations 17.00(a)(1) and (2) as if these regulations applied to EFS transactions, and NYMEX will further require each Exchange clearing member, FCM, and foreign broker to file the required records with the Exchange;
Each trader who holds or controls a reportable futures position to comply with the requirements of Commission Regulation 18.05 as if this regulation applied to EFS transactions, and NYMEX will further require each trader to provide the required records to the Exchange for inspection upon request; and
Upon the request of the Commission, each FCM, IB, foreign broker, and trader to comply with the requirements of Commission Regulations 24.03(e)(1)(iii) and (e)(2)(iv), and NYMEX will further require each FCM, IB, foreign broker, and trader to file the required records at the place and within the time frame specified by the Exchange.
APPROVED AMENDMENTS TO NYMEX RULE 6.21C
(Brackets indicate additions.)
Rule 6.21C. EXCHANGE OF FUTURES FOR, OR IN CONNECTION WITH, SWAP TRANSACTIONS FOR FUTURES CONTRACTS TRADED ONLY ON VIA NYMEX ACCESS®
(A) (1) An exchange of futures for, or in connection with, a swap (EFS) consists of two discrete, but related, transactions; a swap transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be, respectively, the seller and the buyer of the swap. The swap component shall involve the commodity underlying the futures contract (or a derivative, by-product or related product of such commodity). The quantity covered by the swap must be approximately equivalent to the quantity covered by the futures contracts. The swap component of an EFS transaction must comply with the requirements of Commission Regulation Part 35 (Exemption of Swap Agreements). The initial term of the pilot program shall be three years from the effective date of this Rule 6.21C.
(2)The pilot program is available only to commercial market participants. For purposes of this rule, a "commercial market participant" shall include a person or entity that transacts business in the normal channels of commerce in the cash commodity or related commodity underlying the EFS posted on the Exchange and also shall include an entity that regularly maintains a book of and acts as a dealer in swap transactions.
(B) The report of an EFS transaction involving a futures contract that is not listed for trading on the Exchange trading floor and instead is listed for trading only on NYMEX ACCESS® shall be given to the Exchange via NYMEX ACCESS® during the hours of trading on NYMEX ACCESS® for that futures contract.
(C) A report of such EFS transaction shall be submitted to the Exchange by each Clearing Member representing the buyer and/or seller. Such report shall identify the EFS as made under this Rule and shall contain the following information: a statement that the swap component of the EFS complied with the requirements of Part 35 at the time the EFS was entered into between the buyer and seller, a statement that the EFS has resulted or will result in a change of payments or other such change, the kind and quantity of the futures, the price at which the futures transaction is to be cleared, the names of the Clearing Member(s) and customers and such other information as the Exchange may require. Such report (form) shall be submitted to the Compliance Department by 12:00 p.m. New York time, no later than two (2) Exchange business days after the day of posting the EFS via NYMEX ACCESS® .
(D) Each buyer and seller must satisfy the Exchange, at its request, that the transaction is a legitimate EFS transaction. Upon the request of the Exchange, all documentary evidence relating to the EFS, including a master swap agreement and any supplements thereto, shall be obtained by the Clearing Members from the buyer or seller and made available by the Clearing Members for examination by the Exchange.
(E) A report of each EFS transaction shall be given and notice thereof shall be posted on NYMEX ACCESS7 in the manner provided by the Exchange on the day that the transaction thereto was made, or if such agreement was made after the close of trading, then on the next business day. EFS transactions shall be cleared through the Exchange in accordance with normal procedures, shall be clearly identified and marked in the same manner as EFP transactions, and shall be recorded by the Exchange and by the Clearing Members involved.
(F) All omnibus accounts and foreign brokers shall submit a signed EFS reporting agreement in the form prescribed by the Exchange to the Exchange?s Compliance Department. Such Agreement shall provide that any omnibus account or foreign broker identified by a Clearing Member (or another omnibus account or foreign broker) as the buyer or seller of an EFS pursuant to Rule 6.21C(C), shall supply the name of its customer and such other information as the Exchange may require. Such information shall be submitted to the Exchange?s Compliance Department by 12:00 p.m. New York time no later than two (2) Exchange business days after the day of posting the EFS on the Floor of the Exchange. Failure by an omnibus account or foreign broker to submit either the agreement or the particular EFS information to the Exchange may result in a hearing by the Business Conduct Committee to limit, condition or deny access of such omnibus account or foreign broker to the market.
(G) The Board may, by resolution, authorize the posting of EFS transactions in any or all of the futures contracts specified below.
Futures Contract: Middle East Sour Crude Oil EFS Reporting Deadline for Expiring Contract : An EFS is permitted in the expiring futures contract of the Middle East Sour Crude Oil futures contract at any time before 12:00 p.m. New York time on the last business day of the contract month, provided, however, that an EFS which establishes a futures position for both the buyer and the seller shall not be permitted after the termination of trading.
[ Futures Contract: Electricity Futures EFS Reporting Deadline for Expiring Contract : An EFS is permitted in an expiring electricity futures contract at any time before 10:00 a.m. New York time on the first business day following termination of trading in the applicable futures contract month provided, however, that an EFS which establishes a futures position for both the buyer and the seller shall not be permitted after the termination of trading for that contract month.]