• Launch of Calendar Spread Options on KC Hard Red Winter (HRW) Wheat Futures

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6980
      • Notice Date
      • 13 January 2014
      • Effective Date
      • 27 January 2014
    •  
      On Monday, January 27, 2014, pending CFTC review, the Exchange will add Calendar Spread Options to the current lineup of options on KC HRW Wheat futures.
       
      Calendar Spread Options (CSOs) are options on the price differential between two contract months, rather than on the underlying asset itself. They offer alternative hedging capabilities compared to standard options and can provide a more precise hedge against adverse movements in price spreads in the KC HRW Wheat market. CSOs are a flexible and cost-effective tool for market participants to manage risk associated with calendar spreads, especially the spreads between old and new crop months.
       
      At launch, KC HRW Wheat CSOs on the following spreads will be listed: the nearby five consecutive futures calendar spreads; the nearest March-July futures spread; the nearest July-December futures spread; the nearest December-July futures spread; the nearest July-July (1 year) futures spread; and the nearest December-December (1 year) futures spread. For consecutive combinations, when the first one expires, a new one will be listed on the following business day. For each non-consecutive combination, when the combination for the current cycle expires, the same combination for the next cycle will be listed on the following business day.
       
      KC HRW Wheat CSOs will have the same contract specifications – European-style exercise, strike price ranges, strike price increments, minimum premium increments, price limits, position limits, trading hours, venues, last trade date, daily and final settlement – as the existing CBOT SRW Wheat CSOs. More detailed contract specifications are shown in APPENDIX A.
       
      A detailed fee schedule is shown in APPENDIX B. APPENDIX C shows the new rulebook chapter for KC HRW Wheat CSOs.
       
      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: CONTRACT SPECIFICATIONS
       
       

      KC HRW Wheat Calendar Spread Options: Consecutive
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearby five consecutive futures calendar spreads.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: KZC for nearby and next 4 consecutive calendar spreads.
      Open Outcry: K7C for nearby and next 4 consecutive calendar spreads.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       

      KC HRW Wheat Calendar Spread Options: March-July
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearest March-July KC HRW Wheat futures spread.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: CK3 for the nearest March - July calendar spread.
      Open Outcry: KC3 for the nearest March - July calendar spread.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       
       
       
       
       
       
       

      KC HRW Wheat Calendar Spread Options: July-Dec
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearest July-December KC HRW Wheat futures spread.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: KCR for the nearest July - December calendar spread.
      Open Outcry: CKM for the nearest July - December calendar spread.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       
       
       
       
       
       
       

      KC HRW Wheat Calendar Spread Options: Dec-July
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearest December-July KC HRW Wheat futures spread.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: KC6 for the nearest December - July calendar spread.
      Open Outcry: CK6 for the nearest December - July calendar spread.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       
       
       
       
       
       
       

      KC HRW Wheat Calendar Spread Options: July-July
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearest July-July (1 year) KC HRW Wheat futures spread.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: 12K for the nearest July - July (1 year) calendar spread.
      Open Outcry: CKN for the nearest July - July (1 year) calendar spread.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

      KC HRW Wheat Calendar Spread Options: Dec-Dec
      Contract Size
      One long KC HRW Wheat futures contract (of a specified month) consisting of 5,000 bushels, and one short KC HRW Wheat futures contract (of a differing specified month) consisting of 5,000 Bushels.
      Tick Size (Minimum Fluctuation)
      1/8 of one cent per bushel ($6.25 per contract)
      Pricing Basis
      The price basis shall be defined as the specified nearby KC HRW Wheat futures contract month price minus the specified deferred KC HRW Wheat futures contract month price.
      Strike Price Intervals
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month (nearby spreads) with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month (longer dated spreads) with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. More details on strike price intervals are outlined in Rule 14M01.E.
      Contract Months
      The nearest December-December (1 year) KC HRW Wheat futures spread.
      Daily Price Limit
      $1.20 cents per bushel, expandable to $1.80 and then to $2.70 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.
      Last Trade Date
      The last Friday preceding the first notice day of the corresponding nearby KC HRW Wheat futures contract month by at least two business days.
      Exercise
      The buyer of a futures calendar spread option may exercise the option only upon 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 absent contrary instructions.
      Position Limits
      12,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month; 12,000 futures-equivalent contracts net long or net short in all months combined.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      Trading Hours
      CME Globex (Electronic Platform)
      Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Open Outcry (Trading Floor)
      Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
      Ticker Symbol
      CME Globex: CKZ for the nearest December - December calendar spread.
      Open Outcry: KCZ for the nearest December - December calendar spread.
      Exchange Rule
      These contracts are listed with, and subject to, the rules and regulations of CBOT.

       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      APPENDIX B: FEE SCHEDULE
       
      CBOT Member Firms and Individuals – KC HRW Wheat Calendar Spread Options – Exchange Fees
       

      Level
      CBOT Account Owner 2
      Execution Type
      Platform
      Exchange Fee
      Individual Member
      1
      Individual Members
      Member Trading
      Own Account
      Open Auction
      $0.18
      Electronic
      $0.28
      Individual Delegates
      Delegate Trading Own Account
      Open Auction
      $0.48
      Electronic
      $0.58
      Equity Members (Individual Equity members, Clearing Firms and Equity Firms)
      2
      Equity Members 1
      Member or Delegate
      Open Auction
      $0.18
      Electronic
      $0.28
      Equity Members 1
      Non Member
      Electronic
      $0.90
      (Exception) Rule 106.S. Family of Funds Equity Member Firms
      Member,  Delegate or Non Member
      Open Auction
      $0.18
      Electronic
      $0.90

      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
      $0.40
      Electronic
      $1.50
      Individual Delegates (Other Member or Delegate executing the trade) & Rule 106.I. Affiliate Trading Member Firms
      Open Auction
      $0.70
      Electronic
      $1.80
      Rule 106.S. Family of Funds Equity Member Firms
      Open Auction
      $0.40
      Electronic
      $1.50
      Electronic Corporate Member Firms
      4
      Electronic Corporate Members
      Electronic
      $1.80
      Incentive Programs
      5
      Latin American Commercial Incentive Program; Asian Incentive Program; Latin American Bank Incentive, formerly know South American Incentive Program, Central Bank Incentive Program,  & Latin American Fund Manager Incentive Program, International Incentive Program
      Electronic
      $1.50
      Non-Members
      5
      Non-Members
      Open Auction
      $1.30
      Electronic
      $3.78

      2– Product--Seat Division Eligibility - CBOT Full, AM, and COM’s
       
      Clearing, EFR Surcharge and Non Trade Processing Fees  
       

      Other CBOT Processing Fees
      Rate
      Clearing Fee  1  (including give-up execution and EFPs, EFRs & blocks)
      $0.06
      Ex-Pit Surcharge (EFP)
      $0.75
      Ex-Pit Surcharge (EFR)
      $1.25
      Exchange Fees for Non Trades  
      (Exercise, Assignment,  Delivery,  Future from Exercise and Future from Assignment)
      $0.05 Member
       $0.20 Delegate
        $0.50 Non-Member
      Exchange Fees for Non-Trade Expired Options
      $0.05
      Expired Option Clearing Fee
      $0.05
      Exercise or Assignment (Future From) Surcharge Clearing Fee
      $0.05
      Brokerage  (With or Without Discretion)
      $0.04/$0.17
      Futures Delivered or Cash Settled Clearing Fee
      $0.05
      Position Adjustment and Position Transfers (transfers $2500 min)
      $0.10

       
      Fee Program  
       

      Other CBOT Processing Fees
      Include/Exclude
      Ag Back Month
      Exclude
      Ags Volume Discount Program
      Exclude
      Grain & Oilseed Market Maker
      Exclude
      New Trader Incentive Program
      Include
      IVIP
      Exclude
      Ags ETH Program
      Exclude

       
       
       
       
       
       
       
       
       
       
       
       
      APPENDIX C: RULEBOOK CHAPTER
       
      (The proposed rule changes are attached with additions underlined and deletions overstruck)
       
       
      Chapter 14M
       
      KC HRW Wheat Calendar Spread Options
       
      14M00. SCOPE OF CHAPTER
      This chapter is limited in application to put and call options on KC HRW Wheat Futures Calendar Spreads. In addition to the rules of this chapter, transactions in KC HRW Wheat Calendar Spread Options shall be subject to the general rules of the Exchange insofar as applicable.
       
      14M01. OPTIONS CHARACTERISTICS
       
      14M01.A. Contract Months
      Trading in KC HRW Wheat Calendar Spread options may be scheduled in such months as determined by the Exchange.
       
      14M01.B. Trading Unit
      One KC HRW Wheat Calendar Spread Option reflects one (1) KC HRW Wheat futures contract of a specified nearby contract month, and one opposing KC HRW Wheat futures contract of a specified deferred contract month on the Board of Trade of the City of Chicago, Inc.
      The Calendar Spread is calculated in cents/bushel as:
      Nearby futures price in cents/bushel – Deferred futures price in cents/bushel.
       
      14M01.C. Minimum Fluctuations
      The premium for KC HRW Wheat Calendar Spread options shall be in multiples of one eighth (1/8) of one cent per bushel, or six dollars and twenty five cents ($6.25) per contract.
      However, a position may be initiated or liquidated in KC HRW Wheat Calendar Spread options at premiums ranging from $1.00 to $6.00, in $1.00 increments per option contract.
       
      14M01.D. Trading Hours
      The hours for trading of KC HRW Wheat Calendar Spread options contracts shall be determined by the Exchange. KC HRW Wheat Calendar Spread options shall be opened and closed for all months and strike prices simultaneously.
      On the last day of trading in an expiring option, the expiring Calendar Spread options shall be closed with a public call, made strike price by strike price, immediately following the close of the open outcry trading session for the corresponding futures contracts.
       
      14M01.E. Exercise Prices
      Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and the next available futures month with strike prices in integral multiples of one cent per bushel per Calendar Spread option contract. Trading shall be conducted for put and call options on futures calendar spreads consisting of the nearby futures month and a futures month beyond the next available futures month with strike prices in integral multiples of five cents per bushel per Calendar Spread option contract. At the commencement of trading for such option contracts, the following strike prices shall be listed: one with a strike price closest to the previous day’s Calendar Spread price settlement; the next ten consecutive higher and the next ten consecutive lower strike prices closest to the previous day’s Calendar Spread price settlement.  If the previous day’s settlement price is midway between two strike prices, the closest price shall be the larger of the two. When a sale in the underlying Calendar Spread occurs at a price greater than or equal to the tenth largest strike price, a new strike price one increment higher than the existing strike prices will be added. When a sale in the underlying Calendar Spread occurs at a price less than or equal to the tenth smallest strike price, a new strike price one increment lower than the existing strike prices will be added. When a new strike price is added for an option contract month, the same strike price will be added to all option contract months for which that strike price is not already listed. All new strike prices will be added prior to the opening of trading on the following business day.
      All strikes will be listed prior to the opening of trading on the following business day. Upon demand and at the discretion of the Exchange, new out-of-current-range strike prices at regularly defined intervals may be added for trading on as soon as possible basis. The Exchange may modify the procedures for the introduction of strikes as it deems appropriate in order to respond to market conditions.
       
      14M01.F. Position Limits, Exemptions, Position Accountability and Reportable Levels
      The applicable position limits and/or accountability levels, in addition to the reportable levels, are set forth in the Position Limit, Position Accountability and Reportable Level Table in the Interpretations & Special Notices Section of Chapter 5.  A Person seeking an exemption from position limits for bona fide commercial purposes shall apply to the Market Regulation Department on forms provided by the Exchange, and the Market Regulation Department may grant qualified exemptions in its sole discretion. Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
       
      14M01.G. Reserved
       
      14M01.H. Nature of Options on the Calendar Spreads
      The buyer of one KC HRW Wheat Calendar Spread put option may exercise his option only upon option expiration, (subject to Rule 14M02.A), to assume a short position of one futures contract of a nearby specified contract month, and a long position in one futures contract of a deferred specified contract month at a combination of prices such that the Calendar Spread equals the strike price set at the time the option was purchased.
      The seller of one KC HRW Wheat Calendar Spread put option incurs the obligation of assuming a long position one futures contract of a nearby specified contract month, and a short position of one futures contract of a deferred specified contract month at a combination of prices such that the Calendar Spread equals the strike price set at the time the option was sold, upon exercise by a put option buyer.
      The buyer of one KC HRW Wheat Calendar Spread call option may exercise his option only upon option expiration, (subject to Rule 14M02.A), to assume a long position of one futures contract of a nearby specified contract month, and a short position of one futures contract of a deferred specified contract month at a combination of prices such that the Calendar Spread equals the strike price set at the time the option was purchased.
      The seller of one KC HRW Wheat Calendar Spread call option incurs the obligation of assuming a short position of one futures contract of a nearby specified contract month and a long position of one futures contract of a deferred specified contract month at a combination of prices such that the Calendar Spread equals the strike price set at the time the option was sold, upon exercise by a call option buyer.
       
      14M01.I. Termination of Trading
      Subject to the provisions of rule 14M01.D no trades in KC HRW Wheat Calendar Spread options expiring in the current month shall be made after the close of trading of the open outcry trading session on the day identical to the expiration of options corresponding to KC HRW Wheat Futures. Therefore, expiration will occur on the last Friday which precedes by at least two business days, the last business day of the month preceding that earliest expiring corresponding option month. If such Friday is not a business day, the last day of trading shall be the business day prior to such Friday. For example, the March-May KC HRW Wheat Calendar Spread Option (March Wheat minus May Wheat) will expire on the last Friday which precedes by at least two business days the last business day of February; the December-July KC HRW Wheat Calendar Spread Option (December Wheat minus July Wheat) will expire on the last Friday which precedes by at least two business days the last business day of November.
       
      14M01.J. Contract Modification
      Specifications shall be fixed as of the first day of trading of a contract except that all options must conform to government regulations in force at the time of exercise. If the U.S. government, an agency, or duly constituted body thereof issues an order, ruling, directive, or law inconsistent with these rules, such order, ruling, directive, or law shall be construed to become part of the rules and all open and new options contracts shall be subject to such government orders.
       
      14M02. EXERCISE AND ASSIGNMENT
      In addition to the applicable procedures and requirements of Chapter 7 and Chapter 14H, the following shall apply to the exercise and assignment of KC HRW Wheat Calendar Spread Options.
       
      14M02.A. Exercise of Option
      The buyer of a KC HRW Wheat Calendar Spread option may exercise the option only on the business day such option expires by giving notice of exercise to the Clearing House by 6:00 p.m. Chicago time, or by such other time designated by the Exchange, on such day. In-the-money options that have not been liquidated or exercised on the last day of trading in such option shall be automatically exercised in the absence of contrary instructions delivered to the Clearing House by 6:00 p.m. Chicago time, or by such other time designated by the Exchange, on the last day of trading by the clearing member representing the option buyer.
      The KC HRW Wheat Calendar Spread is calculated using final settlement values for the underlying contracts in the following formula: (Settlement Price of specified nearby KC HRW Wheat futures) – (Settlement Price of specified deferred KC HRW Wheat futures). An option is in-the-money if the settlement price of the underlying Calendar Spread is greater in the case of a call, or less in the case of a put, than the exercise price of the option.
       
      14M02.B. Assignment
      Exercise notices accepted by the Clearing House shall be assigned through a process of random selection to clearing members’ open short positions in the same series. A clearing member to which an exercise notice is assigned shall be notified of the assignment as soon as practicable after such notice is assigned by the Clearing House.
      Upon the exercise of a KC HRW Wheat Calendar Spread option the Clearing House assigns prices to the legs of the KC HRW Wheat Calendar Spread in the following manner:
      a. assigned nearby KC HRW Wheat Futures price equals the KC HRW Wheat Futures settlement price on the day of exercise,
      b. assigned deferred KC HRW Wheat Futures price equals the nearby KC HRW Wheat Futures settlement price on the day of exercise minus the strike value of the option,
      All such futures positions shall be marked to market in accordance with Rule 814 on the trading day of acceptance by the Clearing House of the exercise notice.
       
      14M03. [RESERVED]
       
      14M04. CORRECTIONS TO OPTIONS EXERCISES
      Corrections to option exercises, including automatic exercises, may be accepted by the Clearing House after the 6:00 p.m. deadline and up to the beginning of final option expiration processing provided that such corrections are necessary due to: (1) a bona fide clerical error, (2) an un-reconciled Exchange option transaction(s), or (3) an extraordinary circumstance where the clearing firm and customer are unable to communicate final option exercise instructions prior to the deadline. The decision as to whether a correction is acceptable will be made by the President of the Clearing House, or the President’s designee, and such decision will be final.
       
      14M05. OPTION PREMIUM FLUCTUATION LIMITS
      Trading is prohibited during any day except for the last day of trading in a KC HRW Wheat Calendar Spread option at a premium of more than the sum of the trading limits for the underlying KC HRW Wheat futures contracts above and below the previous day's settlement premium for that option as determined by the Clearing House.
       
      14M06. PAYMENT OF OPTION PREMIUM
      The option premium must be paid in full by each clearing member to the Clearing House and by each option customer to his futures commission merchant at the time that the option is purchased, or within a reasonable time after the option is purchased.

       

       

       

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