At the request of the Clearinghouse Committee, the amendments to NYMEX Division Rule 9.24(E) were reviewed and approved by the Executive Committee and Board of Directors at their respective meetings on March 1 and 2, 2005. The amendments, effective Monday, March 7, 2005, generally increase the aggregate dollar value of Letters of Credit issued by approved banks on behalf of our Clearing Members from $100 million to $200 million.
The change to the rule was instigated by concerns of Clearing Members and their respective banking entities that the marketplace has greatly changed and demands for margin financing have increased. Since the rule limits Letters of Credit to a maximum of the lesser of 10% of the bank's capital on $200 million, the increase provides the Exchange with the comfort that a bank which has issued to our Clearing Members Letters of Credit totaling $200 million would be required to maintain capital of $2 billion.
(Strikethroughs indicate deletions; additions are in bold and underlined.)
NYMEX Division Rule 9.24 - Original Margin Depositories and Originators of Letters of Credit
(E) No approved original margin depository or issuer of a letter of credit may commit, with respect to Exchange contracts, more than the lesser of ten percent (10%) of its capital and surplus or $100 200 million, provided, however, that an issuer may issue letters of credit up to $200 300 million, if such issuer establishes, to the satisfaction of the Exchange, an account at another financial institution and deposits in such account, for the benefit of the Exchange, collateral in the form of U.S. Government obligations of maturities of less than ten (10) years valued at 95% of par value, for the excess over $100 200 million. Such collateral shall be deemed to secure any and all obligations of such issuer under letters of credit issued by the issuer in favor of the Exchange. The Board of Directors, upon the application of an issuer of letters of credit, may grant a waiver of the $200 300 million ceiling, upon such terms and conditions as it deems appropriate. |
