• Correction of Error to CME Rule 274H.02.A. on Cash Settlement of Cleared OTC U.S. Dollar/Chilean Peso (Cleared OTC USD/CLP) Spot, Forwards, and Swaps Contracts

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6872
      • Notice Date
      • 04 November 2013
      • Effective Date
      • 17 November 2013
    • The Chicago Mercantile Exchange, Inc. (CME or Exchange) is amending the trading rules and regulations for the Cleared OTC U.S. Dollar/Chilean Peso (Cleared OTC USD/CLR) spot, forwards, and swaps contracts in order to correct an error. Specifically, the CME rulebook incorrectly specifies the time of the underlying benchmark fixing for the spot exchange rate of the Chilean peso per U.S. dollar that is calculated by the Central Bank of Chile and is used by the Exchange for the final cash settlement of Cleared OTC USD/CLP as 8:00 p.m. Santiago time. The correct time is 10:30 a.m. Santiago time.
       
      This correction will become effective on Sunday, November 17, 2013 (trade date Monday, November 18, 2013), pending the expiration of the applicable regulatory review period. CME will apply this amendment to all existing and newly cleared contracts as of the effective date.
                                            
      Attachment 1 summarizes amendments to CME Rule 274H.02.A.
       
      Cleared OTC USD/CLP is listed by and subject to the rules of CME.
       
      Please direct questions regarding this notice to:
       
      Europe
      Will Patrick                                +44 20 3379 3721                      Will.Patrick@cmegroup.com
      Malcolm Baker                          +44 20 3379 3863                      Malcolm.Baker@cmegroup.com
      Sandra Ro                                +44 20 3379 3789                      Sandra.Ro@cmegroup.com
                                                     
      U.S.
      Craig LeVeille                            +1 312 454 5301                        Craig.LeVeille@cmegroup.com
      Simon Burnham                         +1 312 930 3426                        Simon.Burnham@cmegroup.com
      Kevin McMillin                           +1 312 930 8264                        Kevin.McMillin@cmegroup.com
      Daniel Grombacher                    +1 312 634 1583                        Daniel.Grombacher@cmegroup.com
      Lori Aldinger                             +1 312 930 2337                        Lori.Aldinger@cmegroup.com
       
       


      Attachment 1
       
      Revised Rules to
      Cleared OTC U.S. Dollar/Chilean Peso (Cleared OTC USD/CLR) Spot, Forwards, and Swaps
       
      (Additions are underlined; deletions are struck through.)
       
      Chapter 274H    Cleared OTC U.S. Dollar/Chilean Peso (USD/CLP) Spot, Forwards and Swaps
       
      274H.02.           CASH SETTLEMENT
       
      274H.02.A.        Day of Cash Settlement
       
      Each Cleared OTC Contract, for the valid value date for cash settlement in two Business Days, shall be liquidated by cash settlement at a price equal to the daily Final Settlement Price for that day. The daily Final Settlement Price shall be equal to the spot exchange rate of Chilean peso per U.S. dollar, ”CLP DÓLAR OBS (CLP10),” as reported for that day by Banco Central de Chile for the formal exchange market which is available at approximately 10:30 AM8:00 PM Santiago time and rounded to four decimal places. This rate is used widely by the interbank foreign exchange market to cash settle non-deliverable forward contracts for Chilean peso versus U.S. dollars.
       
      All open positions for that valid value date for cash settlement will be cash settled in U.S. dollars based upon the difference between the Final Settlement Price for the valid value date for cash settlement and the original trade price as submitted for clearing times the notional value of the transaction in USDs divided by Final Settlement Price. In the event, this U.S. dollar amount is positive, then the Clearing House shall debit the seller’s clearing member account and credit the buyer’s clearing member account for this amount in U.S. dollars. In the event, this U.S. dollar amount is negative, then the Clearing House shall debit the buyer’s clearing member account and credit the seller’s clearing member account for this amount in U.S. dollars.
       
      For example, if the ”CLP DÓLAR OBS (CLP10)” for the valid value date for cash settlement in two Business Days, is as follows: “Observado Value DD MM YYYY Close” is 547.10 Chilean pesos per U.S. dollar, and the original trade price submitted for clearing by clearing firms of the buyer and seller was 515.25 Chilean pesos per U.S. dollar for a notional amount of 100,000 U.S. dollars, then the Clearing House on the Business Day following the valid value date for cash settlement shall credit the clearing member account for the buyer with $5,821.60 (i.e., 547.10 CLP per USD – 515.25 CLP per USD = (+31.85 CLP per USD x 100,000 USD) / 547.10 CLP per USD) = $5,821.60.). Similarly, the Clearing House on the Business Day following the valid value date for cash settlement shall debit the clearing member account for the seller with $5,821.60.
       
      For example also, if the ”CLP DÓLAR OBS (CLP10)” for the valid value date for cash settlement in two Business Days, is as follows: “Observado Value DD MM YYYY Close” is 515.25 Chilean pesos per U.S. dollar, and the original trade price submitted for clearing was 547.10 Chilean pesos per U.S. dollar for a notional amount of 100,000 U.S. dollars, then the Clearing House on the Business Day following the valid value date for cash settlement shall debit the buyer’s clearing member account with $6,181.47 (i.e., 515.25 CLP per USD – 547.10 CLP per USD = (-31.85 CLP per USD x 100,000 USD) / 515.25 CLP per USD) = -$6,181.47.). Similarly, the Clearing House on the Business Day following the valid value date for cash settlement shall credit the clearing member account for the seller with $6,181.47.

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