• Launch of Weekly Options on Kansas City Board of Trade Wheat Futures on July 1, 2013

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6693
      • Notice Date
      • 05 June 2013
      • Effective Date
      • 01 July 2013
    • On Monday, July 1, 2013, pending CFTC review, the Exchange will add weekly options to the current lineup of standard and serial options on Kansas City Board of Trade (KCBT) Wheat futures.
       
      The Exchange currently lists standard and serial options on KCBT Wheat futures. These options expire on the last Friday that proceeds the last business day of the month proceeding the named option expiration month by at least two business days. Thus, currently there is one option expiration per month in KCBT Wheat options. With the addition of weekly options, market participants will now have an option expiration every week. These contracts are listed by and subject to the rules of KCBT.
       
      The addition of weekly KCBT Wheat options will complement the existing options complex by giving market participants increased trading flexibility in managing their existing option positions as well as increased trading opportunities due to the advantages offered by weekly options. 
       
      At launch, KCBT will initially list the following weekly options:
       
      • July Week 1 options expiring on Friday, July 5;
       
      • July Week 2 options expiring on Friday, July 12; and
       
      • July Week 3 options expiring on Friday, July 19.
       
      All of these weekly options will exercise into the corresponding September 2013 KCBT Wheat futures contracts.
       
      A detailed fee schedule is shown in APPENDIX A.
       
      Weekly options will have the same contract specifications – American-style exercise, strike price ranges, strike price increments, minimum option premium increments, daily and final settlement – as their related standard or serial options.
       
      Weekly options exercise into underlying futures contracts. If a weekly option expires prior to the nearby expiration date of the related standard option, then that weekly option exercises into the nearby futures contract. If the weekly option expires after the nearby expiration date of the related standard option but before the expiration date of the nearby underlying futures, then that weekly option exercises into the first-deferred futures contract.
       
      Weekly KCBT Wheat options that expire each Friday will be listed, except for those Fridays where standard or serial options are scheduled to expire. In cases where an expiration Friday is a holiday, weekly options that would otherwise be scheduled to expire that Friday will expire on the preceding exchange business day.
       
      Three weekly options will be listed concurrently for KCBT Wheat futures product. Each weekly option will have about 25 days to expiration upon its initial listing date. New weekly options will be listed for the Monday trade date following a weekly option expiration. No new weekly options will be listed for trading on the weekend following expiration of standard or serial options.  More detailed contract specifications are shown in APPENDIX B.
       
      APPENDIX C summarizes the KCBT rulebook changes that apply to incorporate weekly options.
       
      If you require any additional information, please contact Randy Shao at 312-648-3795 or via e-mail at Renyuan.Shao@cmegroup.com; Fred Seamon at 312-634-1587 or via e-mail at Fred.Seamon@cmegroup.com; or Dave Lehman at 312-930-1875 or via e-mail at David.Lehman@cmegroup.com.
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      APPENDIX A: FEE SCHEDULE
       
      CBOT Member Firms and Individuals - HRW Weekly Options – Exchange Fees

      Level
      CBOT Account Owner 2
      Execution Type
      Platform
      Exchange Fee
      Individual Member
      1
      Individual Members
      Member Trading
      Own Account
      Open Auction
      $0.09
      Electronic
      $0.14
      Individual Delegates
      Delegate Trading Own Account
      Open Auction
      $0.24
      Electronic
      $0.29
      Equity Members (Individual Equity members, Clearing Firms and Equity Firms)
      2
      Equity Members 1
      Member or Delegate
      Open Auction
      $0.09
      Electronic
      $0.14
      Equity Members 1
      Non Member
      Electronic
      $0.45
      (Exception) Rule 106.S. Family of Funds Equity Member Firms
      Member, Delegate or Non Member
      Open Auction
      $0.09
      Electronic
      $0.45

      1 - Clearing Closely Held Corporate Members & Sole Proprietors, Rule 106.J. Equity Closely Held Corporate Members & Rule 106.I. Affiliate Equity Member Firms, Individual Equity Members (other member/delegate executing), Clearing FCMs, Rule 106.J. Equity FCMs, Clearing Corporate Members, Rule 106.J. Equity Corporate Members & Rule 106.I. Affiliate Equity Member Firm (Affiliate of Clearing FCM, Clearing Corporate Member or Rule 106.J Equity FCM or Equity Corporate Member), Rule 106.I. Affiliate Membership Umbrella - Qualified Affiliate - Unlimited Number of Affiliates
       

      Level
      CBOT Account Owner 2
      Platform
      Exchange Fee
      Trading Members (Individual Non-Equity Members and Non-Equity Member Firms)
      3
      Individual Non-Equity Members (other member/delegate executing); Rule 106.H. Corporate Trading Firms; Rule 106.H. Trading FCMs; & Rule 106.I. Affiliate Trading Member Firms
      Open Auction
      $0.20
      Electronic
      $0.75
      Individual Delegates (Other Member or Delegate executing the trade) & Rule 106.I. Affiliate Trading Member Firms
      Open Auction
      $0.35
      Electronic
      $0.90
      Rule 106.S. Family of Funds Equity Member Firms
      Open Auction
      $0.20
      Electronic
      $0.75
      Electronic Corporate Member Firms
      4
      Electronic Corporate Members
      Electronic
      $0.90
      Incentive Programs
      4
      International Incentive Program (IIP) and International Volume Inventive Program (IVIP)
      Electronic
      $0.75

      2– Product--Seat Division Eligibility
      HRW Options – Account Owners noted above must hold or lease a CBOT FULL, AM, or COM seat to be eligible for these reduced rates.


       
      CME Member Firms and Individuals - HRW Weekly Options – Exchange Fees
       

      Level
      CME Account Owners 1
      Execution Type
      Platform
      Exchange Fee
      Individual Member
      1
      Individual Members
      Member Trading
      Own Account
      Open Auction
      $0.09
      Electronic
      $0.14
      Individual Delegates
      (Rule 106.D Lessees / Rule 106.F Employees)
      Delegate Trading Own Account
      Open Auction
      $0.24
      Electronic
      $0.29
      Clearing and Equity Firms
      2
      Clearing Member Firms,/ Rule 106.J Equity Member Firms/Rule 106.I Members/
      106.S Family of Hedge Funds
      Member or Delegate
      Open Auction
      $0.09
      Electronic
      $0.14
      Non Member
      Electronic
      $0.45

       
       

      Level
      CME Account Owners 1
      Platform
      Exchange Fee
      Individual Members  - Not Trading For Own Account (Execution not a Factor)
      3
      Individual Members 
      Open Auction
      $0.20
      Electronic
      $0.75
      Individual Delegates
      (Rule 106.D Lessees / Rule 106.F Employees)
      Open Auction
      $0.35
      Electronic
      $0.90

      1 – Product--Seat Division Eligibility
      HRW Options – Account Owners noted above must hold or lease a CME, IMM, or IOM seat to be eligible for these reduced rates.
       
      CME& CBOT Member Firms and Individuals - HRW Futures/Options
      Clearing, EFR Surcharge and Non Trade Processing Fees  
       

      Other CBOT Processing Fees
      Rate
      Clearing Fee  1
      $0.06
      Ex-Pit Surcharge (EFR)
      $0.50
      Exchange Fees for Non Trades  
      (Exercise, Assignment, Delivery, Future from Exercise and Future from Assignment)
       $0.05 Member
       $0.20 Delegate
      Exchange Fees for Expired Options
      $0.05
      Brokerage (With or Without Discretion)
      $0.002

      1         Clearing Fee includes Pit Trades, Pit Spreads, Give Ups, Electronic Trades, Electronic Spreads, Exercise, Assignment and Delivery transaction types
      2         Brokerage Fees to be waived at this time for CBOT and CME Members.

       
       
       
       
       
       
       
      KCBT Permit Holders - HRW Weekly Options
      Exchange Fees
      Account Type
      Platform
      Wheat Options Exchange Fee
      Individual Member
      Open Auction
      $0.00
      Electronic
      $0.15
      Other Member
      Open Auction
      $0.00
      Electronic
      $0.50
      Non-Member
      Open Auction
      $0.55
      Electronic
      $1.70
      Clearing Fees
       
       
      Account Type
      Platform
      Wheat Options Exchange Fee
      Member
      Open Auction
      $0.00
      Electronic
      $0.00
      Non-Member
      Open Auction
      $0.10
      Electronic
      $0.10
       
       
       
       
      Surcharges
      Trade Types
      Open Auction
      Exchange For Risk
      All Trades
      $0.50
      Delegate Member
      CTI Type 1
      $0.20
      CTI Type 2,3&4
      $0.10

       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      APPENDIX B: CONTRACT SPECIFICATIONS
       

      Contract Name
      Weekly KCBT Wheat Options
      Contract Unit
      One KCBT Wheat futures contract (of a specified month) of 5,000 bushels
      Minimum Fluctuation
      1/8 of One Cent per Bushel ($6.25 per contract)
      Strike Price Intervals
      Trading shall be conducted for put and call options with strike prices in integral multiples of five (5) cents per bushel. More details on strike price intervals are outlined in KCBT Rulebook Chapter 2511.01
      Expiration Dates
      Week 1 – 1st Friday of the month
      Week 2 – 2nd Friday of the month
      Week 3 – 3rd Friday of the month
      Week 4 – 4th Friday of the month
      Week 5 – 5th Friday of the month
      Daily Price Limit
      Same as the daily price limit applied to standard and serial options.
      Last Trade Date
      A given Friday that is not also the last trading day of a standard or a serial option. If such a Friday is the last trading day of a standard or a serial option, there will be no Weekly Option listed for trading for that expiration date.
      Exercise
      American-style. The buyer of a futures option may exercise the option on any business day prior to expiration by giving notice to the Clearing House by 6:00 p.m. Chicago time. Option exercise results in an underlying futures market position. Options in-the-money on the last day of trading are automatically exercised.
      Expiration
      Unexercised futures options shall expire at 7:00 p.m. on the last day of trading.
      Hours
      (All Times are Chicago Time/CT)
      CME ClearPort: 5:00 pm – 4:15 pm CT, Sunday – Friday with a 45-minute break each day beginning at 4:15 pm CT
      Open Outcry: 8:30 am - 1:15 pm CT, Monday - Friday
      Globex: 7:00 pm - 1:15 pm CT, Sunday - Friday with a 45-minute break each day between 7:45 am and 8:30 am
      Product Ticker Symbols
      Globex: OK1-5
      Open Outcry: OK1-5
      Rulebook Chapter
      KCBT Rulebook Chapter 25
      Note: Please insert following link and open in a new window.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of KCBT.

       
       
       
      The recommended rule book changes are attached with additions bold and underlined and deletions [bracketed with strikethrough].
       
      APPENDIX C: RULEBOOK CHANGES
       
      KCBT Rulebook
      CHAPTER 25
      OPTIONS ON CONTRACTS OF SALE ON
      HARD WINTER WHEAT FUTURES CONTRACTS
       
      2507.00 Option Trading Months.
       
      Options shall be listed for trading in the following months:
      a. For options months in the ordinary cycle of the underlying futures contract (i.e., July,
      September, December, March and May), the number of months listed shall be the same as the underlying futures contract, provided, however, that a new option contract based on the ordinary cycle will be introduced the day after trading has commenced in the underlying futures pursuant to Rule 2511.02.
       
      b. For options months outside the ordinary cycle (i.e., August, October, November, January,           
      February, April and June, hereinafter referred to as "serial" months), the number of   months listed shall be established by the Exchange. However, no serial months shall be listed outside of the months listed pursuant to subsection (a) above.
       
      c. Weekly options expire on every Friday, except for those Fridays on which standard or serial options are scheduled to expire.  A new weekly option will automatically be introduced the business day following the expiration of a weekly option so that three weekly options are always listed concurrently.
       
      2511.02 New Options.
      A new option based on a futures month within the ordinary cycle will be introduced the day after trading has commenced in the underlying futures contract for that contract month, (for example — if on February 1, the December futures contract had traded for the first time, then on February 2, an option month for the December futures contract is listed, having strike prices as specified in Rule 2511.01). A new option based on a serial month (a month outside of the ordinary cycle) will automatically be introduced the day following the expiration of a serial month, so as to at all times have available for trading the number of serial months established by the Exchange for trading, (for example, if the Exchange has authorized the listing of three serial months, and those months currently traded are January, February and April, then the serial contract month of June will automatically be listed for trading the day following the expiration of the January contract month). A new weekly option will automatically be introduced the business day following the expiration of a weekly option so that three weekly options are always listed concurrently. Weekly options expire on every Friday, except for those Fridays on which standard or serial options are scheduled to expire.  On the business day following the expiration of standard or serial options, no new weekly option will be introduced. 
       
      2514.00 Last Day Of Trading And Expiration.
      a. For options months in the ordinary cycle; no trades in options expiring in the current month
      shall be made after 2:00 p.m. on the last Friday which precedes by at least two (2)  business days, the first notice day for the corresponding futures contract.
      b. For serial options months (months outside the ordinary cycle); no trades shall be made after 2:00 p.m. on the Friday which precedes by at least two (2) business days, the last business day of the calendar month immediately preceding the option serial month, (for example, for November serial options contracts, the last trading day is the Friday which precedes by at least two (2) business days, the last business day in October). If such Friday is not a business day, the last day of trading shall be the business day prior to such Friday. The option shall expire at 10:00 a.m. on the first Saturday following the option's last day of trading.
      c. For weekly options; no trades in weekly options shall be made after 1:15 p.m. on the Friday such a weekly option expires. If such Friday is not a business day, the last day of trading shall be the business day prior to such Friday.  The option shall expire at 10:00 a.m. on the first Saturday following the option's last day of trading.

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