06/08/2006
Because most of the rule changes being made to Chapter 11G either involve reviving various rules in that chapter that had previously applied to the trading of NYMEX mini contracts on Globex or simply involve copying rules now located in NYMEX Chapter 11 governing electronic trading on NYMEX's own electronic trading systems, this notice will focus only upon significant rule changes being made at this time. (As a note, separate notices to members will address position accountability and/or position limits for the new contracts and also any changes or modifications to the Exchange's existing policy regarding use of wireless devices on the NYMEX trading floor.)
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NYMEX Chapter 11G
Incorporation of Certain CME Rules by Reference and Applicable Error Trade Provisions
NYMEX Rule 11G.00 lists a number of CME rules that will be incorporated by reference and made applicable to the trading of NYMEX products on Globex. In particular, this rule makes clear that the CME's error trade rule (CME Rule 588 Globex Trading Cancellations), which is administered by CME staff, will apply to trading of NYMEX products as well. This rule is quite similar in substance to the NYMEX error trade approach that has been in place for trading on NYMEX's trading systems. The CME rule lists the "no bust" ranges that apply for specific contracts, and the CME rule is being updated to add in the NYMEX contracts with no bust ranges that establish relative parity as between the NYMEX miNY™ contracts and the regular size financially settled NYMEX contracts that also will be listed on Globex.
Average Price Calculations
The average price system that is offered by the CME is made available through their clearing system and thus will not be applicable to NYMEX products listed on Globex, which will be cleared instead by NYMEX. Nonetheless, a rule is being added to Chapter 11G that parallels an existing rule for floor trading of NYMEX products and that confirms that futures commission merchants will be able to use their own proprietary average price systems subject to the conditions set forth in that rule.
Price Fluctuation Limits
There will not be separate price fluctuation limits established for any of the financially settled NYMEX products included in the initial product slate being listed on Globex on June 11. However, a new rule in Chapter 11G clarifies that a market halt in the physically settled futures contract in the same underlying commodity also will trigger a market halt in the financially settled contract listed on Globex.
Settlement Determinations for Financially Settled Contracts Listed on Globex
Until further notice from the Exchange, these contracts will be settled on a daily and on a final basis on the settlement prices for the physically settled contracts offered by NYMEX in the same underlying commodity
Permissible Pre-Execution Discussions
A new rule in Chapter 11G is adopting the same approach and time frame now applicable to the trading of CME products on Globex that allows for pre-execution discussion but that requires a period of at least five seconds to elapse from the time an order for a futures contract is entered for one party and the entry of the orders for the second party.
Exchange of NYMEX Physically Settled Regular Size Futures for NYMEX miNY™ Contracts (EFM)
The Exchange will continue to allow for EFM transactions and is renumbering former Rule 6.21E as Rule 11G.22. The only significant change is in the elimination of the prior restrictions on eligible transaction prices.
Exchange of Regular Size Financially Settled Futures Contracts for Regular Size Physically Settled Futures Contracts
The Exchange is adding a new rule (11G.23) to allow for the exchange of regular size physically-settled and regular size cash-settled futures contracts in the same underlying commodity ("exchange of futures for bigs" or "EFB"), which in substance parallels the provisions of the EFM rule noted above.
Disciplinary Status of NYMEX Non-Members
In general, a participant trading in NYMEX products on Globex who is not a NYMEX Member or Member Firm will not be subject to the disciplinary jurisdiction of the Exchange with the exception of NYMEX Rule 8.99G (Summary Procedures for Denial of Access to NYMEX ClearPort® Trading or to Globex).
Trading Ahead Prohibition
New Rule 11G.18 and 11G.26 carry over to trading on Globex the provisions that have been in place for some time with regard to trading of NYMEX products on NYMEX's systems, except that the Exchange is clarifying the trading ahead prohibition to make clear that this restriction on trading in the same "commodity" applies to any contract based on the same underlying physical commodity regardless of the futures contract's size or whether the contract is physically or financially settled.
OTHER RULE CHANGES
Exchange of Futures for Swaps
Amendments to NYMEX Rule 6.21A clarify that the EFS procedure will be available for the regular size financially settled NYMEX contracts listed on Globex, but not for the NYMEX miNY™ contracts.
Arbitration
Participants in NYMEX Products on Globex who are not NYMEX Members or Member Firms may but will not be required to use NYMEX's arbitration procedures to resolve disputes relating to such transactions.
Offset of NYMEX miNY™ and Regular Size Financially Settled NYMEX Futures Contracts
The Exchange is adding new NYMEX Rule 9.10A to allow for the offset and liquidation through the Exchange's clearing system of positions in these two types of contracts. The provisions of this rule are similar to a CME rule that has been in place for some time.