Effective Sunday, August 23, 2015, for trade date Monday, August 24, 2015, and pending all relevant CFTC regulatory review periods, the New York Mercantile Exchange, Inc. (NYMEX or Exchange) will amend the termination of trading rules for two (2) electricity products, shown below in Tables 1 and 2.
Table 1. Monthly and Daily Futures Electricity Contract
Clearing Code |
Rulebook Chapter |
Futures Contract Title |
T3 |
904 |
NYISO Zone G Day-Ahead Peak Calendar-Month 5 MW Futures |
Table 2. Electricity Option Contract
Clearing Code |
Rulebook Chapter |
Option Contract Title |
9U |
904A |
NYISO Zone G 5 MW Peak Calendar-Month Day-Ahead LBMP Option |
Currently, the termination of trading rules for the monthly electricity futures and the option contract are shown in Table 3.
Table 3. Termination of Trading for Electricity Contracts in Tables 1 and 2
Clearing Code |
Monthly Futures |
Current Termination of Trading Rule |
T3 |
NYISO Zone G Day-Ahead Peak Calendar-Month 5 MW Futures |
Trading on CME Globex shall cease on the last business day of the month prior to the contract month. Trading on the trading floor venue, as well as submission of all block transactions, shall cease on the last business day of the contract month. |
9U |
NYISO Zone G 5 MW Peak Calendar-Month Day-Ahead LBMP Option |
The contract shall expire on the second to last business day of the calendar month immediately preceding the contract month. |
These amendments provide that trading in the monthly electricity contract will expire at the close of business two business days prior to the start of the contract month. An existing position at the termination of trading will be converted into a strip of corresponding daily futures contracts within the originally specified calendar month. The associated daily futures contract is the NYISO Zone G Day-Ahead Peak Calendar-Day 5 MW Futures. By terminating trading in the monthly futures contract two business days before the contract month, trading all of the associated daily contracts that are obtained after the conversion will be enabled.
In order to illustrate the conversion process, a peak contract will be explained. The size of the affected peak-hour monthly futures contract and the associated peak-hour daily futures contract is 80 MWh. Peak monthly contracts are traded in multiples of the number of peak days in the contract month. So, if one trades the NYISO Zone G Day-Ahead Peak Calendar-Month 5 MW Futures (T3) contract in a nineteen (19) peak-day month, the market participant would hold nineteen (19) NYISO Zone G Day-Ahead Peak Calendar-Month 5 MW Futures (T3) contracts for that month. After the conversion, the market participant would hold one (1) NYISO Zone G Day-Ahead Peak Calendar-Day 5 MW Futures (GN) contract for each peak day in the originally specified calendar month, totaling nineteen (19) NYISO Zone G Day-Ahead Peak Calendar-Day 5 MW Futures (GN) contracts.
In terms of final settlement, the monthly electricity contract currently is cash settled based on the arithmetic average of the hourly Zone G peak day-ahead electricity prices during the contract month, as reported by the New York Independent System Operator. Once the rule amendments are implemented, the monthly contract will not have a final settlement price. At expiration, the daily settlement price on the last trading day will be cascaded to all of the related daily contracts within the originally specified calendar month. After the conversion occurs, each daily contract will be individually settled on a daily basis. The final settlement price of each daily contract will continue to be the arithmetic average of the applicable hourly electricity prices during the contract day. The original final settlement price for the monthly contract will be identical to the price received if a strip of daily contracts is held for the entire calendar month.
The Exchange fee structure for the monthly and daily electricity futures contracts will not be amended. It should be noted that market participants will not incur a related Exchange fee when switching from monthly futures to daily futures. Moreover, since the Exchange fees for the monthly contract are the same as those for the daily contract, market participants will not be negatively impacted by the amendments.
The last trading day for the NYISO Zone G 5 MW Peak Calendar-Month Day-Ahead LBMP Option is being amended to accommodate the new last trading date for the underlying futures contract. Currently, the option terminates on the second to last business day before the contract month, which is the same as the current last trading date for the underlying futures contract. The new last trading date for the NYISO Zone G 5 MW Peak Calendar-Month Day-Ahead LBMP Option will be the third to last business day before the contract month.
Finally, please note that the Exchange has obtained the written unanimous consent of holders of open interest of the 9U contract to implement the rule amendments.
Please refer questions on this subject to:
Greg Price Gregory.Price@cmegroup.com (212) 299-2625
Please click here for complete SER-7401.