At its meeting on October 6, 2005, the Board of Directors reviewed and approved an amendment to COMEX Rule 104.36, Exchanges for Physicals. Subsequent to recent amendments to COMEX Rule 104.36 which removed the term "contingent," effective August 8, 2005, the Commodity Futures Trading Commission ("CFTC") had further comment on the COMEX EFP Rule. To address the comments raised, the examples cited in the "Interpretation of EFPs" have been eliminated from the Rule. The amendment, which shall become effective Wednesday, October 26, 2005, does not affect review or enforcement of the Rule by Market Surveillance Staff.
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(Italics in bold indicate additions; strikethroughs in bold indicate deletions.)
COMEX Rule 104.36, Exchanges for Physicals, and Associated Interpretation
Sections (a) through (g) remain unchanged.
Interpretation of the Governors Committee of Commodity Exchange, Inc. Regarding Exchanges of Futures for Physicals ("EFP")
Essential Elements and Other Indicia of a Bona Fide EFP — Remains unchanged.
Ownership of the Physical Commodity
Questions have arisen as to the permissibility of an EFP involving the transfer of a physical commodity in connection with the consummation of an additional cash commodity transaction offsetting the cash commodity component of the EFP. For example, a trader may purchase the cash commodity and upon condition that he can immediately resell it to the person from whom it was purchased in exchange for a long futures position (or, conversely, the trader may sell the cash commodity and repurchase it together with a short futures position) by means of an EFP. Alternatively, a trader may transact an EFP with one party as a condition to entering into a cash commodity transaction with another party, which will liquidate the cash commodity component of the EFP.
The Board has determined to bar the use during COMEX trading hours of EFPs such as those described above as such activity appears to be undertaken with the primary intent of avoiding open and competitive trade execution when entering or exiting the futures market. Accordingly, nNo EFP which is linked to entry into a second, offsetting cash trade may be transacted during COMEX's business hours at any time that COMEX offers trading in its contracts, unless trading in a market is halted, such as during a physical emergency.
Recordkeeping — Remains Unchanged |
