Trading at Settlement in Intra-Commodity Calendar Spreads in Crude Oil, Heating Oil, Natural Gas and RBOB Gasoline

This Special Executive Report (“SER”) is being reissued to clarify the method that will be applied to the pricing of the legs of Trading at Settlement (“TAS”) calendar spreads and to provide a third example.  The clarification is based on questions that have been received since the original SER was issued on February 2, 2010.

Effective trade date February 8, 2010, New York Mercantile Exchange, Inc. (NYMEX or Exchange) will launch TAS in four NYMEX intra-commodity energy futures calendar spreads trading on CME Globex and the NYMEX trading floor. As of that date, intra-commodity calendar spreads in the nearby month/second month spread and the second month/third month spread in Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil, Henry Hub Natural Gas and RBOB Gasoline may be executed on CME Globex and the NYMEX trading floor and priced at TAS

The commodity codes and respective venues are provided below for your convenience:

The pricing of the legs of a TAS calendar spread will be calculated as follows:

·         The nearby leg of the spread will always be priced at the settlement price determined by the Exchange for that contract month. 

·         The far leg of the spread will be priced at the settlement price determined by the Exchange for that contract minus the allowable TAS price increment traded (negative 10 through positive 10).

Example 1: 

A March 2010/April 2010 (H/J) Light Sweet Crude Oil calendar spread trades at TAS -1.  Assume the March contract settles at 74.71 and the April contract settles at 75.15.

The March leg will be priced at the March settlement price of 74.71.  The April leg will be priced at 75.16, which is the April settlement price of 75.15 minus the TAS price increment of –1 (75.15 minus –.01 = 75.16).

Example 2:

An April 2010/May 2010 (J/K) Henry Hub Natural Gas calendar spread trades at TAS +3.  Assume the April contract settles at 5.411 and the May contract settles at 5.459.

The April leg will priced at the April settlement price of 5.411.  The May leg will be priced at 5.456, which is the May settlement price of 5.459 minus the TAS price increment of +3 (5.459 minus +.003 = 5.456).

Example 3:

A March 2010/April 2010 (H/J) New York Harbor No. 2 Heating Oil calendar spread trades at TAS +/- 0.  Assume the March contract settles at 2.0317 and the April contract settles at 2.0379.

The March leg will be priced at the March settlement price of 2.0317.  The April leg will be priced at 2.0379, which is the April settlement price.

A complete list of TAS-eligible products is available in today’s release of Revised NYMEX & COMEX Market Regulation Advisory Notice RA1002-4.

Should you have any questions, please contact Howard Hopkins at 212.299.2351