FAQ: Gold (Enhanced Delivery) futures

  • 25 Mar 2020
  • By CME Group
  • Topics: Metals

Why is COMEX launching the Gold (Enhanced Delivery) futures contract?

In light of recent logistical developments in the market for gold, COMEX is introducing a physically-delivered gold contract with additional delivery and trading functionalities. This contract will enable delivery in New York City of Kilo, 100 oz and 400 oz bar sizes for maximum flexibility. As announced in the press release, the contract will also be enabled for inter-commodity spread trading against the GC benchmark gold futures contract, thereby giving existing GC traders efficient access to this new market.

What are the contract specifications?

The Gold (Enhanced Delivery) futures contract (commodity code 4GC) is a physically-delivered gold contract listed on COMEX. It trades in U.S. dollars per troy ounce with a unit size of 100 troy ounces. The listing cycle follows GC market convention. Physical delivery is made via 100 troy ounce bars, or kilo bars, or 400 troy ounce bars in COMEX approved depositories. Because of the three (3) different sizes available for delivery, the Exchange makes use of an Accumulated Certificates of Exchange (“ACEs”) mechanism to facilitate efficient deliveries – more on the ACE mechanism can be found below.

Contract Title Gold (Enhanced Delivery) futures
CME Globex/CME ClearPort Commodity Code 4GC
Rulebook Chapter 126
Contract Size 100 troy ounces
Listing Schedule Monthly contracts listed for 3 consecutive months and any February, April, August, and October in the nearest 23 months and any June and December in the nearest 72 months
Price Quotation U.S. dollars and cents per troy ounce
First Listed Month April 2020
Minimum Price Fluctuation $0.10 per troy ounce
Value per tick $10.00
Termination of Trading Trading terminates on the third last business day of the contract month.
CME Globex Matching Algorithm First in First Out (FIFO)
Delivery Period Delivery may take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but not later than the last business day of the current delivery month.
Delivery Instrument Physical delivery via 100 troy ounce bars, or kilo bars, or 400 troy ounce bars. 400 troy ounce bars are deliverable via “Accumulated Certificates of Exchange” (ACE) certificates issued by the Clearing House.

Preliminary specifications are pending regulatory reviews.

What makes this contract different?

Very little, this contract is similar to GC Gold with the additional ability to deliver 400 oz bars into COMEX approved depositories.

Why not just change your existing contract specs?

There are significant legal and regulatory concerns with making changes to any existing contract with significant open interest, and we always work to preserve the integrity of each contract for all open interest holders – short and long.  In this case, we chose to create a new contract that will provide a broader range of delivery size options for all prospective traders while maintaining and complementing the delivery terms of the benchmark GC contract for current open interest holders.  This also creates inter-commodity spread opportunities as well and provides maximum flexibility for all of our clients.

Will I be able to still trade GC?

Yes, the GC contract will not be modified in any way. This includes GC futures and options.

How do you currently monitor the existing GC contract?

Trading activity

  • Margin requirements – as part of its commitment to the orderly functioning of the market place, CME Clearing proactively monitors market activity in GC futures and adjusts performance bond requirements. The last adjustment became effective on March 25, 2020 (see notice here) which  increased outright margin requirements from 7,000 USD to 8,350 USD. 
  • The Exchange applies spot month position limits, thereby limiting the amount of contracts that a participant can take into delivery without formally obtaining a hedge or other available exemption. Currently spot month position limits are set at 3,000 contracts. Those limits become effective on the close of trading on the business day prior to the first notice day of the delivery month. Gold position limits are monitored by the CME’s Market Regulation Department and are set in accordance with Commodity Futures Trading Commission guidance based on material held in COMEX registered depositories. Further regulatory information is available here
  • Trading activity in COMEX GC is also subject to circuit breakers so that the market may continue to work in an efficient and orderly manner during volatile market conditions. Information on circuit breakers is available here.

Physical delivery

  • Monitoring of inventories – all COMEX gold depositories are obliged to provide daily inventory figures. These figures are broken down into how much material is Registered and Eligible for futures deliveries. COMEX depository stocks are available here
  • Market participants can monitor the daily and cumulative delivery notices issued against COMEX GC – delivery notices are available here

Can I carry over my existing April GC positions into the new contract?

No. The new 4GC and benchmark GC contracts are not fungible, meaning that a position in GC cannot be exchanged into an equivalent position in 4GC. However, 4GC will be enabled for inter-commodity spread trading against GC on CME Globex, providing customers the ability to trade 4GC against GC on screen without execution risk on either leg of the trade.

How does CME Clearing facilitate 400 oz bar delivery?

CME Clearing facilitates 400 oz bar deliveries through the introduction of the Accumulated Certificates of Exchange (“ACE”) mechanism.

A 400 oz bar cannot be used to facilitate delivery of a single contract with a unit size of 100 oz due to its larger size. The ACE mechanism facilitates the conversion of 400 oz bars in fractional units which can be used for delivery. Once a 400 oz bar is warranted, it can be assigned to the Clearing House, and in return the Clearing House will issue four ACEs. Each ACE will represent an equal share of ownership of the larger bar. That means that each 400 oz bar will result in the issuance of 4 ACEs. ACEs can only be issued against the 400 oz bars, not the smaller 100 oz or kilo bars.

Once issued, ACEs can be held as long as necessary. A client can use ACEs to comply with short delivery requirements (1 ACEs reflecting one futures contract of 100 oz) or it can be swapped back against a 400 oz bar by exchanging 4 ACEs. A customer can comply with delivery requirements with ACEs or regular bars, or a combination of both.

Will the delivery locations change?

No, we anticipate that all COMEX delivery points for GC will remain unchanged while also facilitating delivery for 4GC. As before, all eligible locations for delivery of GC and 4GC will fall within a 150-mile radius of New York City.

Can I transfer existing positions in GC into 4GC?

While the contracts will not be fungible, we will enable inter-commodity spreads between the two contracts enabling participants to move positions between contracts.

How will settlements be assessed?

4GC will settle independently from GC, with details to follow on procedures.

Where will the margin levels be set?

The new 4GC contract margins will be very similar to the GC contract and may initially have approximately a 90% credit to GC.

Will existing gold options reference GC or the new contract?

The Exchange is not making any changes to GC, including option contracts where GC is the underlying contract.

Will COMEX list options on the new contract?

Depending on how liquidity builds up in the new contract, COMEX may consider listing options on 4GC subsequently.

What are the ISV codes?

Product Name CME Globex/ClearPort Bloomberg Refinitiv Composite RIC Root TT CQG DTN Fidessa FIS Global ION (Pats & FFastFill) Itiviti (Orc & Tbricks)
Gold (Enhanced Delivery) Futures 4GC IGCA Comdty GCD 4GC 4GC Q4GC 4GC 4GC 4GC 4GC

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