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Enron Mail |
November 30, 2001
Notice No. 01-410 TO: NYMEX DIVISION MEMBERS AND MEMBER FIRMS NYMEX DIVISION CLEARING MEMBERS FROM: J. Robert Collins, Jr., President SUBJECT: NEW TEMPORARY NYMEX RULE: EXCHANGE OF OTC ENERGY OPTIONS FOR NYMEX ENERGY OPTIONS ____________________________________________________________________________ _____ Yesterday, the Exchange distributed Notice to Members No. 01-409, which summarized a new temporary procedure going into effect today that permits the exchange of OTC energy options for NYMEX energy options (EOO). As an informational follow-up to yesterday's notice, this notice includes the text of the new temporary EOO rule. NEW TEMPORARY NYMEX RULE 6.21E Rule 6.21E. EXCHANGE OF OTC ENERGY OPTIONS FOR, OR IN CONNECTION WITH NYMEX ENERGY OPTIONS (Temporary Rule) (A) (1) An exchange of Exchange energy options for, or in connection with, an over-the counter ("OTC") energy options product (or an OTC product with similar characteristics) (hereafter an exchange of options for options or "EOO") consists of two discrete, but related, transactions; an OTC options transaction and an Exchange options transaction. At the time such transaction is effected, the buyer and seller of the Exchange options must be, respectively, the seller and the buyer of the OTC options. The OTC options component shall involve the commodity underlying the related futures contract to the Exchange options contract (or a derivative, by-product or related product of such commodity). The quantity covered by the OTC options must be approximately equivalent to the quantity covered by the Exchange options contracts. This temporary rule shall terminate thirty (30) days following the effective date of the implementation of the rule. (2) Restriction on Eligible Contracts. EOO transactions may be effected for transactions in any of the Exchange's energy options contracts. (3) Restriction on Transactions. An EOO that establishes a NYMEX options position for both buyer and seller shall not be permitted on the first business day following the expired NYMEX contract. (B)(1) The report of an EOO transaction shall be given on the Floor of the Exchange during the hours of futures trading. (2) EOO transactions are permitted until trading terminates on the last day of trading in the applicable expiring options contract month. C) A report of such EOO transaction shall be submitted to the Exchange by each Clearing Member representing the buyer and/or seller. Such report shall identify the EOO as made under this Rule and shall contain the following information: a statement that the OTC options component of the EOO complied with any applicable CFTC regulatory requirements at the time the EOO was entered into between the buyer and seller, a statement that the EOO has resulted or will result in a change of payments or other such change, the kind and quantity of the options, the price at which the options transaction is to be cleared, the names of the Clearing Members and customers and such other information as the Exchange may require. Such report (form) shall be submitted to the Compliance Department by 12:00 noon, no later than two (2) Exchange business days after the day of posting the EOO on the Floor of the Exchange. (D)(1) Each buyer and seller must satisfy the Exchange, at its request, that the transaction is a legitimate EOO transaction. Upon the request of the Exchange, all documentary evidence relating to the EOO, including relevant OTC documentation, shall be obtained by the Clearing Members from the buyer or seller and made available by the Clearing Members for examination by the Exchange. Additionally, if the buyer or seller is a Member/Member Firm, the Exchange may obtain the information directly from such person(s). (2) No EOO that is linked to or contingent upon entry into a second, offsetting OTC options transaction may be transacted at any time. (3) Failure by a buyer or seller, or its Clearing Member to satisfy the Exchange that an EOO transaction is bona fide shall subject such buyer or seller, if a Member/Member Firm, or the Clearing Member to disciplinary action. Such disciplinary action, depending on the gravity of the offense, may be deemed to be a major offense of the Exchange's rules. Further, if the buyer or seller is not a Member/Member Firm, the Exchange may conduct a hearing before the Business Conduct Committee to limit, condition or deny access to the market. (E) Each EOO transaction shall be posted by the Floor Members and cleared through the Exchange in accordance with normal procedures and by the Clearing Members involved. (F) All omnibus accounts and foreign brokers shall submit a signed EOO reporting agreement in the form prescribed by the Exchange to the Exchange?s Compliance Department. Such Agreement shall provide that any omnibus account or foreign broker identified by a Clearing Member (or another omnibus account or foreign broker) as the buyer or seller of an EOO pursuant to Rule 6.21A(C), shall supply the name of its customer and such other information as the Exchange may require. Such information shall be submitted to the Exchange?s Compliance Department by 12:00 noon no later than two (2) Exchange business days after the day of posting the EOO on the Floor of the Exchange. Failure by an omnibus account or foreign broker to submit either the agreement or the particular EOO information to the Exchange may result in a hearing by the Business Conduct Committee to limit, condition or deny access of such omnibus account or foreign broker to the market.
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