Notice to Members
Notice No. 48 02/03/2005
CFTC Extends Order Allowing NYMEX Floor Members to Trade Specified OTC Transactions
The Commodity Futures Trading Commission ("CFTC") has granted NYMEX a one-year extension of its "Order" originally effective February 4, 2003, which recognizes registered NYMEX Floor Traders and Floor Brokers acting in a proprietary capacity as "eligible contract participants" ("ECPs") qualified to enter into specified over-the-counter transactions if their trades are cleared at the Exchange and guaranteed by an Exchange clearing member subject to certain requirements, summarized below. An amendment to NYMEX Rule 6.21G memorializes this extension. Further, NYMEX Rule 9.41, Special Capital Provisions for Clearing Members Guaranteeing and Clearing OTC Contracts Executed by NYMEX Floor Members, has been amended to eliminate out-dated provisions applicable only to the first 18 months of the program. Background Trading in off-Exchange, over-the-counter ("OTC") products is generally limited by statute to firms and persons that qualify for the statutory category of an "Eligible Contract Participant" ("ECP"). Individuals basically can qualify as an ECP only if they have total assets exceeding $10 million. However, the Exchange has successfully obtained CFTC regulatory relief that allows Exchange Floor Members who may not otherwise qualify as ECPs, under certain conditions and with a specific FCM guarantee, to trade certain OTC products that are then brought to the Exchange for clearing (e.g., via EFS transactions). This special program is set forth in NYMEX Rule 6.21(G), "Participation by NYMEX Floor Members in Special Program for Over-the-Counter Trading with FCM Guarantee," which can be found on the Exchange website. (As a note, compliance with the requirements of the Rule 6.21(G) special program is unnecessary for those Exchange Floor Members who can meet the financial assets test to qualify as ECPs in their own right.) Accordingly, please be reminded that prior to the commencement of trading under the Rule 6.21(G) program, all applicable NYMEX Floor members must first: (1) obtain a financial guarantee from their PCM (view sample) and (2) formally notify the Compliance Department of the intention to trade eligible OTC products pursuant to this special program, The Compliance Department will deem the receipt of the attached Financial Guarantee as the appropriate notification that a Floor Member intends to trade OTC products under this special program. The Financial Guarantee should be submitted to the attention of: Exchange Compliance Department 14th Floor
Should you have any questions or require any further information, please contact exchangeinfo@nymex.com