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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: SOblander@carrfut.com X-To: soblander@carrfut.com X-cc: X-bcc: X-Folder: \Fletcher_Sturm_Dec2000\Notes Folders\Discussion threads X-Origin: Sturm-F X-FileName: fsturm.nsf Notice No. 00-421 December 12, 2000 MEMORANDUM TO: ALL NYMEX AND COMEX MEMBERS FROM: Neal L. Wolkoff Executive Vice President DATE: December 12, 2000 RE: Reminder of Price Fluctuation Limits Applicable to Trading on NYMEX ACCESS The purpose of this Notice is to remind Members and Member Firms that an Executive Committee Resolution that was ratified by the Board of Directors and that concerns Exchange price fluctuation limit rules as those rules apply to trading on NYMEX ACCESS (Resolution), remains in effect and will continue until February 1, 2001, unless Members are notified otherwise by the Exchange. As background, on October 6, 2000, the Exchange issued a Notice to Members (#347), advising Members and Member Firms that the CFTC had approved this Resolution. The Resolution, which became effective with the commencement of the NYMEX ACCESS session on Sunday, October 8, 2000, has amended on a temporary basis a number of Exchange price fluctuation limit rules as those rules apply to trading on NYMEX ACCESS. The Resolution is included below. The Resolution was issued so as to ensure the successful reimplementation of the new implied order functionality on NYMEX ACCESS. By significantly expanding the price fluctuation limits applicable to trading activity occurring on NYMEX ACCESS, the Resolution reduces the possibility that a price limit would be triggered by the implied functionality. The Resolution amends, on a temporary basis, Exchange price fluctuation limit rules - but only with respect to market activity occurring on NYMEX ACCESS. Thus, the new price limits that went into effect last week for Natural Gas are further expanded as provided by the terms of the Resolution. The Resolution amends the Exchange's price fluctuation limit rules with regard to trading on NYMEX ACCESS in four ways: (1) The initial and subsequent price fluctuation limits (for each Exchange futures contract that has such limits) are expanded to 200% of the initial and subsequent price fluctuation limits applicable to the first two contract months for energy contracts, or to the first contract month with limits in effect for metals contracts, of that futures contract under the applicable rule. (2) This expanded limit (e.g., 200% of the limits for the front two months for energy contracts) is applicable to all contract months for that futures contract. (3) In the event that an expanded price limit was touched by a bid or offer, trading on NYMEX ACCESS generally would be halted immediately, rather than requiring the market to trade at that price for five minutes. During the last 90 minutes of a NYMEX ACCESS session, the market would be halted only far as long as it takes for the system to incorporate expanded price limits. (4) As a clarification, the Resolution suspends use of certain "haircuts" narrowing price limits based on notional settlement prices. Specifically, NYMEX Rule 6.56 (Settlement Prices and Price Fluctuation Limits for NYMEX ACCESS) establishes the use of notional settlement prices as the base point for price limits (until the actual settlement prices from the RTH session can be input into the system.) NYMEX ACCESS will continue to use such notional settlement prices under the Resolution. However, Rule 6.56 reduces applicable price limits by certain specified percentages during the period when notional settlement prices are used as the base point for establishing limits. Such "haircuts" are not being used under the Resolution; the Exchange will resume use of such haircuts following the expiration of the Resolution. Finally, the Resolution also clarifies one aspect of existing Exchange practice. In the event that a contract trading on NYMEX ACCESS traded for five minutes at a price fluctuation limit applicable to Regular Trading Hours (RTH) trading, then the RTH session would open with expanded price fluctuation limits as provided under the applicable rule. This practice will continue to be followed during the period when the Resolution is in effect, even though there had been no temporary cessation of trading during the NYMEX ACCESS trading session because the market had not hit the expanded limits applicable only to NYMEX ACCESS. * * * * As noted, these temporary amendments to the Exchange's price limits shall expire on February 1, 2001, unless Members are notified otherwise by the Exchange. * * * * If you have any questions, please contact Stu Homler, Director, NYMEX ACCESS Operations, NYMEX ACCESS Department, at (212) 299-2754, Matt Morano, NYMEX ACCESS Department, at (212) 299-2679, or Brian Regan, Senior Associate General Counsel, at (212) 299-2207. APPROVED RESOLUTION OF THE EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS REGARDING PRICE FLUCTUATION LIMITS FOR EXCHANGE CONTRACTS The Executive Committee of the Board of Directors hereby Resolves that, until further notice, the price fluctuation limit rules for each futures contract that is listed for trading on NYMEX ACCESSc and that has such applicable rules shall continue in effect except as amended below with regard to market activity occurring on NYMEX ACCESSc: The initial and subsequent price fluctuation limits (for each Exchange futures contract that has such limits) shall be expanded to 200% of the initial and subsequent price fluctuation limits applicable to the first two contract months of that futures contract that have price limits under the applicable rule. This expanded limit (200% of the limits for the first two months with limits) shall be applicable to all contract months for that futures contract. In the event that such a price fluctuation limit is reached by a bona fide bid at the high price fluctuation limit or a bona fide offer at the low price fluctuation limit, trading on NYMEX ACCESSc shall be halted immediately except as directed otherwise by the President or the President's designee. Following resumption of trading, the price limits in effect shall be 200% of the limits applicable to RTH trading. In the event that a limit is touched during the last 90 minutes of a NYMEX ACCESSc session, the market shall be halted briefly, and price limits shall be expanded thereafter In addition, in the event that a contract trading on NYMEX ACCESSc traded for five minutes during the NYMEX ACCESS session at a price fluctuation limit applicable to the Regular Trading Hours session, then the RTH session shall open with expanded price fluctuation limits as provided under the applicable rule, even though no temporary cessation of trading occurred during the NYMEX ACCESSc trading session. Carr Futures 150 S. Wacker Dr., Suite 1500 Chicago, IL 60606 USA Tel: 312-368-6149 Fax: 312-368-2281 soblander@carrfut.com http://www.carrfut.com
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