01/15/2004
All NYMEX contracts that allow EFP and EFS transactions will be updated accordingly. Those contracts are as follows: New York Harbor No. 2 Heating Oil (150.14), Petroleum Product Futures Contract (190.14), Light "Sweet" Crude Oil Futures Contract (200.20), Natural Gas Futures Contract (220.17), Liquified Propane Gas Futures Contract (230.17), and Central Appalachian Coal Futures Contract (260.19).
These changes will in effect eliminate the requirement for each Clearing Member, omnibus account and foreign broker to manually submit to the Exchange names of all customers representing the buyer and/or seller of each EFP and EFS transaction. Instead, this information will be submitted via daily large trader submissions identifying the reportable customer who executed the EFP or EFS and the commodity and quantity of the futures cleared.
Any questions regarding the above can be directed to Nicholas Galati, Director, Market Surveillance, at (212) 299-2920, Anthony V. Densieski, Director, Market Surveillance Investigations, at 299-2881, or Bonnie Yurga, Supervisor, Market Surveillance at 299-2879.
Amendments to Rules 6.21 and 6.21 A (Bold indicates additions;
6.21 Exchange of Futures for, or in Connection with, Product
(A) An exchange of futures for, or in connection with, product (EFP) consists of two discrete, but related, transactions; a cash transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and the buyer of a quantity of the physical product covered by this Section (or any derivative, by-product or related product). The quantity of physical product must be approximately equivalent to the quantity covered by the futures contracts.
(B) Eligible Contracts and Transactions.
(1) EFP transactions may be effected in all futures contracts offered for trading on the Exchange. Additionally, EFP transactions may be effected for any contract executed off the Exchange which the Exchange has designated as eligible for clearing.
(2) EFP transactions may be posted according to the following procedures:
EFP Procedures for Futures Contracts Traded during RTH. The posting of any EFP in any futures market traded on the Exchange shall be made during the hours of futures trading and otherwise in accordance with Rule 6.90. Each EFP transaction shall be posted, immediately when relevant cash terms are determined, but in no event later than the earlier of the next business day or the end of the permissible posting period for EFPs following the expiration of the underlying futures contract, by the Floor Members and cleared through the Exchange in accordance with normal procedures and by the Clearing Members involved except that EFP transactions in PJM electricity futures contracts listed for trading on the Exchange may be posted on the Floor of the Exchange during the hours of futures trading or may be posted by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. EFP transactions in these contracts transacted must be posted on the Exchange within one business day of the EFP transaction. With regard to the final deadline for EFPs in PJM electricity futures contracts in an expiring contract month, such EFP transactions must be posted no later than the close of the posting period on the last trade date of the expiring contract month.
(ii) EFP Procedures for Futures Contracts Not Listed for Trading on the Exchange. The posting of any EFP transaction for contracts executed off the Exchange, but designated as eligible for clearing, shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFP transactions must be posted no later than the close of the posting period on the last trade date on the expiring contract month except that EFP transactions in electricity contracts shall be permitted until the close of the posting period of the business day following the last trade date of the regular posting period of an expiring contract month, provided, however, that an EFP in an electricity contract that establishes a futures position for both the buyer and the seller shall not be permitted on the first business day following the expired contract.
(iii) EFP Procedures for Futures Contracts Listed Only for Trading on NYMEX ACCESS(R). The posting of any EFP transaction for contracts listed for trading only on NYMEX ACCESS(R) shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFP transactions must be posted no later than the close of the posting period on the last trade date on the expiring contract month.
(iv) EFP Procedures for Futures Contracts Listed Only for Trading on an Alternative Electronic Trading System. For the purposes of this rule, the term "Alternative Electronic Trading System" shall mean any electronic trading system other than NYMEX ACCESS(R) on which NYMEX Division or COMEX Division products are traded, but not including GLOBEX(R). The posting of any EFP transaction for contracts listed for trading only on "Alternative Electronic Trading System" shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFP transactions must be posted no later than the close of the posting period on the last trade date on the expiring contract month.
(C) A report of
(D) (1) Each buyer and seller must satisfy the Exchange, at its request, that the transaction is a legitimate EFP transaction. Upon the request of the Exchange, all documentary evidence relating to the EFP, including, without limitation, evidence as to change of ownership of the cash commodity or a commitment therefore shall be obtained by the Clearing Members from the buyer or seller and made available by the Clearing Members for examination by the Exchange. Additionally, if the buyer or seller is a Member/Member Firm, the Exchange may obtain the information directly from such person(s).
(2) Failure by a buyer or seller, or its Clearing Member, to satisfy the Exchange that an EFP transaction is bona fide, shall subject such buyer or seller if a Member/Member Firm, or the Clearing Member to disciplinary action. Such disciplinary action, depending on the gravity of the offense, may be deemed to be a major offense of the Exchange's rules. Further, if the buyer or seller is not a Member/Member Firm, the Exchange may conduct a hearing before the Business Conduct Committee to limit, condition or deny access to the market.
(E) Each EFP transaction shall be posted, immediately when relevant cash terms are determined, but in no event later than the earlier of the next business day or the end of the permissible posting period for EFPs following the expiration of the underlying futures contracts, by the Floor Members and cleared through the Exchange in accordance with normal procedures and by the Clearing Members involved.
(F) The following provisions shall apply to EFP transactions which involve a non-commercial market participant:
(1) The Exchange shall presume that any EFP which does not involve commercial market participants as both buyer and seller is not a bona fide transaction. In order to overcome the presumption, upon request of the Compliance Department, the Clearing Members shall obtain from the buyer and seller for examination by the Exchange, documentation clearly demonstrating that the cash transaction underlying the EFP is independent and not contingent upon a contemporaneous offsetting cash transaction (commonly referred to as an "ABA" or transitory trade), and would have involved a cash market risk if not hedged by a futures contract. A delivery of product from the seller to the buyer will satisfactorily overcome the presumption if confirmed by credible documentation.
(2) For purposes of this subsection (F), a "commercial market participant" shall be defined as a person or entity which transacts business in the normal channels of commerce in the cash commodity or related commodity underlying the EFP posted on the Exchange.
(G) All omnibus accounts and foreign brokers shall submit a signed EFP 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 EFP pursuant to Rule 6.21(C), shall supply the name of its customer and such other information as the Exchange may require.
6.21A Exchange of Futures for, or in Connection with, Swap Transactions (Pilot Program)
(A) 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 applicable CFTC swap regulatory requirements. The initial term of the pilot program shall be three years from the effective date of this Rule 6.21A. [This rule was implemented on September 5, 2001.]
(B) Eligible Contracts and Transactions. (1) Eligible contracts shall include Natural Gas futures, Brent Crude Oil futures, any contract executed off the Exchange that the Exchange has designated as eligible for clearing at the Exchange, and any contract that is listed for trading only on NYMEX ACCESS(R) or that is listed for trading only on an Alternative Electronic Trading System. For the purposes of this rule, the term "Alternative Electronic Trading System" shall mean any electronic trading system other than NYMEX ACCESS(R) on which NYMEX Division or COMEX Division products are traded, but not including GLOBEX(R).
(2) EFS transactions may be posted according to the following procedures:
(i) Natural Gas and NYMEX Brent Crude Oil. The posting of any Natural Gas or NYMEX Brent Crude Oil EFS transaction shall be given on the floor of the Exchange by the Floor Members during the hours of futures trading for such contract and otherwise in accordance with Rule 6.90. Each EFS transaction shall be posted, immediately when the relevant swap terms are determined, but in no event later than the earlier of the next business day or the end of the following permissible posting periods for EFS transactions (following the expiration of the underlying futures contract):
(a) EFS transactions involving the NYMEX Brent contract are permitted until the close of trading on the last trading day in the expiring contract month; and
(b) EFS transactions involving the Natural Gas contract are permitted until two hours after trading terminates on the last day of trading in the expiring contract month.
These EFS transactions will be cleared through the Exchange in accordance with normal procedures and by the Clearing Members involved.
(ii) Contracts Executed Off the Exchange. The posting of any EFS transaction for contracts executed off the Exchange, but designated as eligible for clearing, shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFS transactions must be posted no later than the close of the posting period on the last trade date of the expiring contract month.
(iii) EFS Procedures for Futures Contracts Listed Only for Trading on NYMEX ACCESS(R). The posting of any EFP transaction for contracts listed for trading only on NYMEX ACCESS(R) shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFP transactions must be posted no later than the close of the posting period on the last trade date on the expiring contract month.
(iv) EFS Procedures for Futures Contracts Listed Only for Trading on an Alternative Electronic Trading System. The posting of any EFS transaction for contracts listed for trading only on "Alternative Electronic Trading System" shall be accomplished by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. Such EFS transactions must be posted no later than the close of the posting period on the last trade date on the expiring contract month.
(v) PJM Electricity Futures Contracts Listed for Trading on the Exchange. EFS transactions in PJM electricity futures contracts listed for trading on the Exchange may be posted on the Floor of the Exchange during the hours of futures trading or may be posted by submission of reports to the NYMEX Customer Service Center in accordance with its procedures. EFS transactions in these contracts transacted must be posted on the Exchange within one business day of the EFS transaction. With regard to the final deadline for EFS transactions in PJM electricity futures contracts in an expiring contract month, such EFS transactions must be posted no later than the close of the posting period on the last trade date of the expiring contract month.