• Amendments to Strike Increments and Number of Strike Prices Pre-Listing for Short-Term Natural Gas Option Contract

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6944
      • Notice Date
      • 11 December 2013
      • Effective Date
      • 05 January 2014
    • Effective Sunday, January 5, 2014 for trade date Monday, January 6, 2014, the New York Mercantile Exchange, Inc. (NYMEX or Exchange) will amend the strike price pre-listing for the Short-Term Natural Gas Option contract (Chapter 1066, commodity codes U01-U31).  This contract is listed for trading on CME Globex and the NYMEX trading floor, and for submission for clearing through CME ClearPort. Currently the Exchange lists 10 strikes above and below the at-the-money (ATM) strike in $.05/MMBtu interval. The amendments provide that there will be 40 strikes above and below the ATM in $.025 MMBtu pre-listed every day. In addition, dynamic strike price generation of $.025 per MMBtu will be available.
      The Commodity Futures Trading Commission (CFTC) will be notified of the amendment during the week of January 13, 2014 via the weekly notification procedures set forth in Part 40 of the CFTC Regulations.
      (Underscore Denotes Addition; Strikethrough Denotes Deletion)
      Chapter 1066
      Short-Term Natural Gas Option
      1066.04   Strike Prices
      Trading shall be conducted for options with strike prices in increments as set forth below.
      (A) On the first business day of trading in an option contract day, trading shall be at the following strike prices: (i) the previous day's settlement price for Henry Hub Natural Gas futures contracts in the corresponding delivery month rounded off to the nearest $.025five-cent increment strike price unless such settlement price is precisely midway between two $.025 increment strike prices in which case it shall be rounded off to the lower $.025 five-cent increment strike price and (ii) the forty ten$.025 five-cent increment strike prices which are forty ten increments higher than the strike price described in (i) of this rule 1066.04(A) and (iii) the forty ten five-cent $.025 increment strike prices which are forty ten increments lower than the strike price described in (i) of this rule1066.04(A).
      (B) Thereafter, on any business day prior to the expiration of the option: (i) new consecutive $.025five-cent increment strike prices for both puts and calls will be added such that at all times there will be at least forty ten$.025 five-centincrement strike prices above and below the at-the-money strike price available for trading in all option contracts;
      (C) Notwithstanding the provisions of subsections (A) and (B) of this rule, if the Exchange determines that trading in Short-Term Natural Gas option will be facilitated thereby, the Exchange may, by resolution, change the increments between strike prices, the number of strike prices which shall be traded on the first day in any new option contract month, the number of new strike prices which will be introduced on each business day or the period preceding the expiration of a Short-Term Natural Gas option in which no new strike prices may be introduced.
      For additional information, please contact Bob Biolsi at Bob.Biolsi@cmegroup.com (212) 299-2610 or Jeff White at Jeff.White@cmegroup.com (212) 299.2325.