Notice to Members
Notice No. 194
06/07/2001
Amendments to NYMEX Division Position Limit and Reporting Rules; Amendments to Large Trader Reporting Requirements for Light Sweet Crude Oil and the Addition of Brent Crude Oil
The Board of Directors of the New York Mercantile Exchange, Inc. has approved various amendments to NYMEX Division Chapter 9 rules which, in general, move away from hard position limits "in any one month and all months combined" to position accountability standards. These amendments shall be effective as of the open of trading on Friday, June 15, 2001.

The amendments to any one month, all months combined and option quadrants limits as cited in Rule 9.26, position accountability, will provide for the ability for any participant to exceed the prescribed levels. (As a note: the levels advocated for any one month and all months combined are the levels currently in place for all months combined under the existing rule structure. The currently defined any one month limits, which are lower than the all months limits, are being deleted. Additionally, the gross side of market rules are deleted.) Any market participant exceeding the defined position accountability levels will be subject to being contacted by the Exchange when the Exchange deems it necessary, and will be required to supply relevant information as to its position and the status of its account. If the participant refuses to do so, or if the Exchange believes the position, by its size, is a threat to the orderly operation of the market, a market participant can be directed either to not increase or to decrease its position.

The existing current delivery month on expiration limits as defined in existing Rule 9.27 will be unchanged and subject to hedge/swap exemptions as they are today. The only caveat to this is that certain cash-settled enymexsm contracts will operate with some level of position accountability in the current delivery month.

Further, the large trader reporting levels cited in Rule 9.34 for Light Sweet Crude Oil futures has been amended from 300 to 350 contracts to coincide with existing CFTC standards. The soon to be traded Brent Crude Oil futures' reporting level has been added at the same level of 350 contracts.

Lastly, the any one month/all months position accountability level for the Brent Crude Oil contract of 20,000 has been added. All amended rules are attached for review.


PROPOSED AMENDMENTS TO NYMEX RULES 9.26, 9.27, 9.28, 9.29, 9.30, 9.32 and 9.34

(Bold indicates additions; Strikethrough indicates deletions)


Rule 9.26. ALL MONTH/ANY ONE MONTH POSITION ACCOUNTABILITY LIMITS

(A) No person may own or control

(i) with respect to futures contracts for which there are no corresponding options contracts, a net long position or a net short position, in any one month or all months combined, that exceeds the levels set forth in Subsections (B) and (C) of this Rule 9.26, respectively;

(ii) with respect to futures and options contracts for which there are corresponding futures and options contracts, a net futures-equivalent position, in any one month or in all months combined, resulting from a combination of options and underlying futures contracts that exceeds the levels set forth in Subsections (B) and (C) of this Rule 9.26, respectively; and

(iii) with respect to futures contracts with corresponding options contracts and spread option contracts, the net futures-equivalent positions relative to each leg of such spread option contracts shall be added to positions in the relevant underlying futures contracts and corresponding options contract for purposes of determining compliance with the limits specified in Subsections (B) (i), (vii) & (viii) and (C)(i), (vii) & (viii) of this Rule 9.26.

(A) Any person, as defined in Rule 1.26, who owns or controls positions in excess of the levels cited in Sections (C) and (D) of this Rule shall be subject to the following provisions pursuant to position accountability levels:

(1) promptly supply to the Exchange such information as the Exchange may request pertaining to the nature and size of the position, the trading strategy employed with respect to the position, and the position owner's or controller's hedging requirements, provided, however, that if the position owner or controller fails to supply such information as and when requested, the President or his designee may order the reduction of such position;

(2) agree, upon request by the President or his designee, not to increase the position owned or controlled as of the time the request was received; and

(3) agree to comply with any prospective limit prescribed by the President or his designee which exceeds the size of the position owned or controlled.

(B) For the purposes of this Rule 9.26, the futures-equivalent of an option contract and spread option contract is the previous day's NYMEX Risk Factor for that option. Further, long calls, short puts and long futures are on the same side of the market; short calls, long puts and short futures are on the same side of the market.

With respect to spread option contracts, a call option is the equivalent of a long product futures contract and a short crude oil futures contract; a put option is the equivalent of a short product futures contract and a long crude oil futures contract. Therefore, long spread option calls and short spread option puts are on the same side of the market; short spread option calls and long spread option puts are on the same side of the market.

(B) Except as provided for in Rule 9.27, the any one month limit for each futures contract traded on the Exchange is:

  • Futures Contract Net Futures or Futures-Equivalent Position

    (i) Crude Oil Light Sweet 10,000 contracts
    (ii) Sour Crude Oil 5,000 contracts
    (iii) Middle East Sour Crude Oil 3,500 contracts
    (iv) Gulf Coast Leaded Gasoline 5,000 contracts
    (v) Texas Unleaded Gasoline 5,000 contracts
    (vi) Gulf Coast Unleaded Gasoline 2,500 contracts
    (vii) Gulf Coast Heating Oil 5,000 contracts
    (viii) New York Harbor Unleaded Gasoline 5,000 contracts
    (ix) New York Heating Oil 5,000 contracts
    (x) Natural Gas 7,000 contracts


  • Futures Contract Net Futures or Futures-Equivalent Position

    (xi) Permian Basin Natural Gas 3,500 contracts
    (xii) Alberta Natural Gas 3,500 contracts
    (xiii) Liquefied Propane Gas 500 contracts
    (xiv) Residual Fuel Oil 1,500 contracts
    (xv) Palladium 625 contracts
    (xvi) Platinum 1,500 contracts
    (xvii) California Oregon Border Electricity 3,500 contracts
    (xviii) Palo Verde Electricity 3,500 contracts
    (xix) Cinergy Electricity 3,500 contracts
    (xx) Entergy Electricity 3,500 contracts
(C) Except as provided in Rule 9.27, the any one month/all month position accountability limits levels for each futures contract traded on the Exchange is are:

Futures Contract — Net Futures or Futures-Equivalent Position Accountability

(i) (a) Crude Oil Light Sweet — 20,000 contracts
(i) (b) Brent Crude Oil — 20,000 contracts
(ii) Sour Crude Oil — 5,000 contracts
(iii) Middle East Sour Crude Oil — 5,000 contracts
(iv) Gulf Coast Leaded Gasoline — 5,000 contracts
(v) Texas Unleaded Gasoline — 5,000 contracts
(vi) Gulf Coast Unleaded Gasoline — 2,500 contracts
(vii) Gulf Coast Heating Oil — 5,000 contracts
(viii) New York Harbor Unleaded Gasoline — 7,000 contracts
(ix) New York Heating Oil — 7,000 contracts
(x) Natural Gas — 12,000 contracts
(xi) Permian Basin Natural Gas — 5,000 contracts
(xii) Alberta Natural Gas — 5,000 contracts
(xiii) Liquefied Propane Gas — 1,500 contracts
(xiv) Residual Fuel Oil — 5,000 contracts
(xv) Palladium — 625 contracts
(xvi) Platinum — 1,500 contracts
(xvii) California Oregon Border Electricity — 5,000 contracts
(xviii) Palo Verde Electricity — 5,000 contracts
(xix) Cinergy Electricity — 5,000 contracts
(xx) Entergy Electricity — 5,000 contracts

(D) Notwithstanding the limits set forth in Subsections (B) and (C), no person may own or control a gross futures position or a short futures position the greater side of which is in excess of the amounts set forth below:

Futures Contract Gross Position/Quadrant Option

(i) Crude Oil Light Sweet 20,000 contracts
(ii) Sour Crude Oil 20,000 contracts
(iii) Middle East Sour Crude Oil 20,000 contracts
(iv) Gulf Coast Leaded Gasoline 20,000 contracts
(v) Texas Unleaded Gasoline 20,000 contracts
(vi) Gulf Coast Unleaded Gasoline 20,000 contracts
(vii) Gulf Coast Heating Oil 20,000 contracts
(viii) New York Harbor Unleaded Gasoline 20,000 contracts
(ix) New York Heating Oil 20,000 contracts
(x) Natural Gas 20,000 contracts
(xi) Permian Basin Natural Gas 20,000 contracts
(xii) Alberta Natural Gas 20,000 contracts
(xiii) Liquefied Propane Gas 20,000 contracts
(xiv) California Oregon Border Electricity 20,000 contracts
(xv) Palo Verde Electricity 20,000 contracts
(xvi) Cinergy Electricity 20,000 contracts
(xvii) Entergy Electricity 20,000 contracts
(xviii) Platinum 6,000 contracts
(xix) Palladium 6,000 contracts

(E) (D) Notwithstanding the limits set forth in Subsections (B) and (C), no person may own or control a gross option position per option quadrant which is in excess of the amounts set forth below:

Quadrant Option Contract  —  Gross Position/Option Gross Option Quadrant Position Accountability

(i) Crude Oil Light Sweet — 40,000 contracts (provided that no more than 20,000 contracts per short option quadrant may be held or controlled in the current delivery month)
(ii) N.Y. Heating Oil — 20,000 contracts
(iii) N.Y. Harbor Unleaded Gasoline — 20,000 contracts
(iv) N.Y. Heating Oil-Crude Oil Light Sweet Spread — 20,000 contracts
(v) N.Y. Harbor Unleaded Gasoline-Crude Oil Light Sweet Spread — 20,000 contracts
(vi) Natural Gas — 20,000 contracts
(vii) Permian Basin Natural Gas — 20,000 contracts
(viii) Alberta Natural Gas — 20,000 contracts
(ix) California Oregon Border Electricity — 20,000 contracts
(x) Palo Verde Electricity — 20,000 contracts
(xi) Cinergy Electricity — 20,000 contracts
(xii) Entergy Electricity — 20,000 contracts
(xiii) Platinum — 20,000 contracts

For the purposes of this Rule 9.26, option quadrants are: (a) long call; (b) short call; (c) long put; (d) short put.


Rule 9.27. EXPIRATION AND CURRENT DELIVERY MONTH POSITION LIMITS OR POSITION ACCOUNTABILITY

(A) No person may own or control a net long position or a net short position in the expiration or current delivery month, (as defined in this Rule 9.27 for energy and metals contracts respectively, ) in excess of the levels set forth in this Rule 9.27.

(B) The expiration position limits for energy contracts set forth below are effective on the open of trading of the last three trading days of the futures contract. The expiration position limits shall be calculated on a net futures-equivalent basis.

The expiration position limits for energy futures contracts are:

(i) Crude Oil Light Sweet — 1,000 contracts
(ii) Sour Crude Oil — 500 contracts
(iii) Middle East Sour Crude Oil — 350 contracts
(iv) Gulf Coast Leaded Gasoline — 1,000 contracts
(v) Texas Unleaded Gasoline — 1,000 contracts
(vi) Gulf Coast Unleaded Gasoline — 500 contracts
(vii) Gulf Coast Heating Oil — 1,000 contracts
(viii) New York Harbor Unleaded Gasoline — 1,000 contracts
(ix) New York Heating Oil — 1,000 contracts
(x) Natural Gas — 1,000 contracts
(xi) Permian Basin Natural Gas — 350 contracts
(xii) Alberta Natural Gas — 350 contracts
(xiii) Liquefied Propane Gas — 250 contracts
(xiv) Residual Fuel Oil — 400 contracts
(xv) California Oregon Border Electricity — 350 contracts
(xvi) Palo Verde Electricity — 350 contracts
(xvii) Cinergy Electricity — 350 contracts
(xviii) Entergy Electricity — 350 contracts

e-NYMEX(SM) Contracts
Physical Delivery Contracts
Louisiana Light Sweet Crude Oil — 1,000 contracts
West Texas Sour Crude Oil — 1,000 contracts
West Texas Intermediate Midland Crude Oil — 1,000 contracts
Mars Blend Crude Oil — 1,000 contracts

(C) The current delivery month position limits for platinum and palladium are effective on the business day prior to the first notice day for any delivery month. No person shall maintain any position which, when combined with the number of contracts for which a delivery notice has been tendered or accepted during the delivery month, exceeds the maximum permissible current delivery month position limit for such contract.

The current delivery month position limits for metals futures contracts are:

(i) Palladium — 225 contracts
(ii) Platinum — 700 contracts


Rule 9.28. EXEMPTIONS FROM POSITION LIMITS FOR BONA FIDE HEDGING TRANSACTIONS, INDEPENDENTLY CONTROLLED POSITIONS, INTERMARKET SPREAD POSITIONS AND MARKET MAKER OPTION OR SPECIALIST MARKET MAKER POSITIONS

(A) The limits set forth at Rules 9.26 and 9.27 shall not apply to bona fide hedging transactions as defined in §1.3(z)(1) of the Regulations of the Commission (17 C.F.R. §1.3(z)(1)), as it may be amended from time to time.

(B) Notwithstanding the provisions of Subsection (A) of this Rule 9.28, any person who owns or controls a bona fide hedging position in excess of the levels set forth in Rule 9.26 or Rule 9.27 must comply with the applicable provisions of Rules 9.29, 9.31, 9.32 and this Rule 9.28.

* * * *
Existing Sections (F) through (S) deleted.

(T) (F) Nothing in this Chapter 9 concerning exemption from position limits or any related provision shall in any way limit (i) the authority of the Exchange to take emergency action or (ii) the authority of the President to review at any time the position owned or controlled by any person and to direct that a position be reduced to the level provided for by Rules 9.26 or 9.27.


RULE 9.29 EXEMPTIONS FROM POSITION LIMITS FOR EXPOSURE FROM COMMODITY SWAP TRANSACTIONS

(A) A person may apply to the Exchange for an exemption from the position limits set forth in Rules 9.26 and 9.27 where such exemption is necessary to reduce exposure resulting from commodity swap transactions that meet all the criteria of the Commodity Futures Trading Commission (the "Commission"), as stated in the Policy Statement Concerning Swap Transactions, 54 Fed. Reg. 30694 (July 21, 1989), or the Exemption of Swap Agreements 17 C.F.R. Part 35 (Jan. 22, 1993), as it may be amended or interpreted by the Commission.

* * * *
(F) Any person who has received from the President written authorization to exceed position limits imposed under Rules 9.26 and/or 9.27 must file with the Exchange an updated application annually, no later than the anniversary date of the initial authorization, or waive the exemption.


Rule 9.30. HEDGE NOTICE

(A) Any person who owns or controls a bona fide hedge position in excess of the levels set forth in Rule 9.26 or 9.27 must file with the Exchange a written Hedge Notice accompanied by audited financial statements or other financial statements in the form approved by the President, not more than five (5) days after assuming such a position, provided, however, that such position may not be assumed with respect to a contract expiring within three (3) business days except as authorized in advance by the President; further provided that a Hedge Notice seeking exemption from a current delivery month position limit in a metals futures contract shall be filed, and must be approved, prior to assuming a position in excess of the limit; and, further provided that the President may in special circumstances authorize the late filing of any Hedge Notice.


Rule 9.32. ACTION BY THE EXCHANGE

(D) No Clearing Member shall maintain or clear any position which taken alone or when aggregated in accordance with the provisions of this Chapter 9 exceeds the position limits permitted under Rules 9.26 or 9.27, except as otherwise authorized pursuant to this Chapter 9.


Rule 9.34. REPORTING LEVELS

(A) The quantities fixed for the purposes of filing a report under Rule 9.33 are:

(i) (a) Crude Oil Light Sweet 300 350 contracts
(i) (b) Brent Crude Oil 350 contracts
(ii) Sour Crude Oil 25 contracts
(iii) Gulf Coast Leaded Gasoline 25 contracts
(iv) Texas Unleaded Gasoline 25 contracts
(v) Gulf Coast Unleaded Gasoline 25 contracts
(vi) Gulf Coast Heating Oil 25 contracts
(vii) New York Harbor Unleaded Gasoline 150 contracts
(viii) New York Heating Oil 250 contracts
(ix) Liquefied Propane Gas 25 contracts
(x) Residual Fuel Oil 25 contracts
(xi) Natural Gas 100 contracts
(xii) Permian Basin Natural Gas 25 contracts
(xiii) Alberta Natural Gas 25 contracts
(xiv) Palladium 25 contracts
(xv) Platinum 50 contracts
(xvi) COB Electricity 25 contracts
(xvii) Palo Verde Electricity 25 contracts
(xviii) Cinergy Electricity 25 contracts
(xix) Entergy Electricity 25 contracts
(xx) Crude Oil L.S. Options Long Put 50 contracts
(xxi) Crude Oil L.S. Options Long Call|quad 50 contracts
(xxii) Crude Oil L.S. Options Short Put|quad 50 contracts
(xxiii) Crude Oil L.S. Options Short Call 50 contracts
(xxiv) New York Heating Oil Long Put|quad 50 contracts
(xxv) New York Heating Oil Long Call|quad 50 contracts
(xxvi) New York Heating Oil Short Put 50 contracts
(xxvii) New York Heating Oil Short Call 50 contracts
(xxviii) N.Y.H. Unleaded Gasoline Long Put 25 contracts
(xxix) N.Y.H. Unleaded Gasoline Long Call 25 contracts
(xxx) N.Y.H. Unleaded Gasoline Short Put 25 contracts
(xxxi) N.Y.H. Unleaded Gasoline Short Call 25 contracts
(xxxii) Platinum Options Long Put 25 contracts
(xxxiii) Platinum Options Long Call 25 contracts
(xxxiv) Platinum Options Short Put 25 contracts
(xxxv) Platinum Options Short Call 25 contracts
(xxxvi) Heating Oil-Crude Oil L.S. Spread Long Put 25 contracts
(xxxvii) Heating Oil-Crude Oil L.S. Spread Long Call 25 contracts
(xxxviii) Heating Oil-Crude Oil L.S. Spread Short Put 25 contracts
(xxxix) Heating Oil-Crude Oil L.S. Spread Short Call 25 contracts
(xl) N.Y.H. Unleaded Gas-Crude Oil L.Spread Long Put 25 contracts
(xli) N.Y.H. Unleaded Gas-Crude Oil L.S. Spread Long Call 25 contracts
(xlii) N.Y.H. Unleaded Gas-Crude Oil L.S. Spread Short Put 25 contracts
(xliii) N.Y.H. Unleaded Gas-Crude Oil L.S. Spread Short Call 25 contracts
(xliv) Natural Gas Options Long Put 25 contracts
(xlv) Natural Gas Options Long Call 25 contracts
(xlvi) Natural Gas Options Short Put 25 contracts
(xlvii) Natural Gas Options Short Call 25 contracts
(xlviii) Permian Basin Natural Gas Options Long Put 25 contracts
(xlix) Permian Basin Natural Gas Options Long Call 25 contracts
(l) Permian Basin Natural Gas Options Short Put 25 contracts
(li) Permian Natural Gas Options Short Call 25 contracts
(lii) Alberta Natural Gas Options Long Put 25 contracts
(liii) Alberta Natural Gas Options Long Call 25 contracts
(liv) Alberta Natural Gas Options Short Put 25 contracts
(lv) Alberta Natural Gas Options Short Callt 25 contracts
(lvi) COB Electricity Options Long Put 25 contracts
(lvii) COB Electricity Options Long Call 25 contracts
(lviii) COB Electricity Options Short Put 25 contracts
(lix) COB Electricity Options Short Call 25 contracts
(lx) Palo Verde Electricity Options Long Put 25 contracts
(lxi) Palo Verde Electricity Options Long Call 25 contracts
(lxii) Palo Verde Electricity Options Short Put 25 contracts
(lxiii) Palo Verde Electricity Options Short Call 25 contracts
(lxiv) Cinergy Electricity Options Long Put 25 contracts
(lxv) Cinergy Electricity Options Long Call 25 contracts
(lxvi) Cinergy Electricity Options Short Put 25 contracts
(lxvii) Cinergy Electricity Options Short Call 25 contracts
(lxviii) Entergy Electricity Options Long Put 25 contracts
(lxix) Entergy Electricity Options Long Call 25 contracts
(lxx) Entergy Electricity Options Short Put 25 contracts
(lxxi) Entergy Electricity Options Short Call 25 contracts

(B) If the Commission sets higher levels for reporting under Commission Regulations, such higher levels shall apply for reporting under Rule 9.34 unless the President shall decide otherwise.
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