• Revisions to NYMEX & COMEX Chapters 7A and 7B and Six Physically-Delivered Metals Product Chapters

      • To
      • Members, Member Firms and Market Users
      • From
      • Market Regulation Department
      • #
      • SER-6723
      • Notice Date
      • 24 June 2013
      • Effective Date
      • 08 July 2013
    • Pending all relevant regulatory review periods, New York Mercantile Exchange, Inc. (“NYMEX”) and Commodity Exchange, Inc. (“COMEX”) will adopt revisions to Chapters 7A and 7B, the elimination of Rule 994 and revisions to the following six (6) physically-delivered Metals product Chapters. The revisions will become effective on July 8, 2013:
      ·         Chapter 105 (“Platinum Futures”)
      ·         Chapter 106 (“Palladium Futures”)
      ·         Chapter 111 (“Copper Futures”)
      ·         Chapter 112 (“Silver Futures”)
      ·         Chapter 113 (“Gold Futures”)
      ·         Chapter 120 (“E-micro Gold Futures”)
      Revisions to these product chapters are being adopted to ensure that NYMEX and COMEX rules remain in compliance with CFTC Designated Contract Market (“DCM”) Core Principle 7 (“Availability of General Information”), which requires that DCMs make available to the public accurate information concerning each contract market’s rules, regulations, contracts and operations. In connection with CFTC Core Principle 7, a project was launched to identify and eliminate erroneous and obsolete language in the product chapters, including ensuring the accuracy of all listed numerical values (e.g, trading units, tick sizes, etc.) and harmonizing the language and structure of the NYMEX and COMEX product chapters with the product chapters of Chicago Mercantile Exchange Inc. (“CME”) and Board of Trade of the City of Chicago, Inc. (“CBOT”) to the best extent possible. This exercise was already completed for the CBOT product chapters in 2008, in connection with the CME/CBOT merger, and a similar review was recently completed for the CME product chapters. Revisions to additional NYMEX and COMEX product chapters will be forthcoming later this year.
      The majority of the revisions are stylistic in nature. The more substantive revisions include the following:
      ·         Clarification and, in certain instances, corrections in references to clearing member and position holder;
      ·         Insertion of references to position limits and accountability levels;
      ·         Removal of certain references to warrants, brands, delivery procedures and storage which overlap with the newly redesigned NYMEX and COMEX Chapter 7; and
      ·         Addition of an EFRP transaction period, for liquidation purposes only, through 12:00 p.m. on the business day following termination of trading in the expired futures contract.
      Additionally, NYMEX and COMEX are also adopting new Chapter 7 (“Delivery Facilities and Procedures”) on July 8, 2013. New Chapter 7 represents revisions to, and a conflation of, existing Chapters 7A (“Metals Rules for Electronic Warrants”) and 7B (“Delivery Facilities and Procedures”). As of July 8, 2013, Chapters 7A and 7B will cease to exist. The adoption of Chapter 7 includes the adoption of Rule 718 (“Customer Substitution in the Event of Clearing Member Bankruptcy”) which will replace existing Rule 994 with that same title and text.
      A summary of the more substantive revisions include the following:
      • Incorporation of certain governing metals delivery terms and conditions which were previously contained in the metals delivery point agreements that were executed between the metals delivery facilities and the Exchanges, including the requirement that a facility approved for regularity consent to the disciplinary jurisdiction of the Exchange during the approval period;
      • Requiring that a facility approved for regularity consent to the disciplinary jurisdiction of the Exchange for five (5) years after such approval lapses with respect to any conduct which occurred during the approval period;
      • Where applicable, the removal of references to metals paper warrants and the replacement of the references to electronic warrants;
      • Elimination of unnecessary metals-related definitions;
      • Removal of obsolete references to required metals documentation;
      • Removal of references to product terms and conditions from Chapter 7 and the insertion of the references into the specific metals product chapters;
      • The addition of NY Harbor ULSD and RBOB delivery facilities obligations;
      • The adoption of unintentionally omitted clauses relating to the “failure to accept delivery or remit full payment,” “customer substitution in the event of clearing member bankruptcy” and “delivery procedures in other commodities” such that these rules are harmonized with existing language in  CME and CBOT Chapter 7; and
      • The addition of the lists of all Exchange-approved depositories, warehouses, weighmasters, assayers, carriers, metals brands and ULSD and RBOB delivery facilities in the Special Interpretations & Notices section of Chapter 7.
      To view the changes to the product chapters in their entirety, please click on the link listed below and reference filing number 13-252:
      If you have any questions concerning this matter, please contact any one of the following individuals:
      Nadine Brown, Market Regulation, Nadine.Brown@cmegroup.com, 212.299.2223
      For media inquiries concerning this Special Executive Report, please contact CME Group Corporate Communications at 312.930.3434 or news@cmegroup.com.