Chicago Board of Trade: Proposed Amendments to the Chicago Board of Trade Corn and Soybeans Futures Contracts, Increasing the Maximum Daily Premium Charge, Decreasing the Maximum Number of Shipping Certificates Issuable, and Modifying Certain Loading Requirements

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of availability of proposed amendments to contract terms and conditions.

SUMMARY:

The Chicago Board of Trade (CBOT or Exchange) has submitted proposed amendments to its corn and soybeans futures contracts which would increase the maximum daily premium charge, decrease the maximum number of shipping certificates issuable, and modify certain loading requirements. The CBT's proposals are described in detail below. The proposed amendments were submitted under the Commission's 45-day Fast Track procedures which provide that, absent any contrary action by the Commission, the proposed amendments may be deemed approved on November 20—45 days after the Commission's receipt of the proposals. The Acting Director of the Division of Economic Analysis (Division) of the Commission, acting pursuant to the authority delegated by Commission Regulation 140.96, has determined that publication of the proposed amendments is in the public interest and will assist the Commission in considering the views of interested persons.

DATES:

Comments must be received on or before November 13, 2000.

ADDRESSES:

Interested persons should submit their views and comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street, NW, Washington, DC 20581. In addition, comments may be sent by facsimile transmission to facsimile number (202) 418-5521, or by electronic mail to secretary@cftc.gov. Reference should be made to the proposed amendments to the CBOT's maximum permissible premium charge, maximum number of shipping certificates issuable, and certain loading requirements.

FOR FURTHER INFORMATION CONTACT:

Please contact Martin Murray of the Division of Economic Analysis, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581, telephone (202) 418-5276. Facsimile number: (202) 418-5527. Electronic mail: mmurray@cftc.gov

SUPPLEMENTARY INFORMATION:

The CBT's proposed amendments are summarized in the table below.

The Exchange intends to make the proposed amendments effective on November 1, 2001, for all existing and newly listed contract months beginning with the November 2001 contract month. The proposed changes will apply to all shipping certificates that are outstanding on the effective date. Shipping certificates issued prior to November 1, 2001 or shipping certificates that are returned to the shipper, or his agent, for reissuance prior to November 1, 2000 may indicate two premium charges, one for the period through October 31, 2001 and other commencing on November 1, 2001.

In support of the proposed amendments, the Exchange provides the following justification:

• Increase in the maximum premium charge. The CBT indicates that the proposed charge better reflects commercial charges in the delivery territory during periods of high crop surplus, such as currently exist. Thus, the CBT believes that the proposal will improve convergence between cash and futures prices.
• Reduction in the maximum number of shipping certificates issuable to 20 times the daily rate of load-out. The CBT believes that the proposal will provide more timely load-out to receivers by reducing the potential delivery lineup to 20 business days from 30. The Exchange further notes that “only about 20 percent of the [current] maximum number of shipping certificates have been registered at one time.” Consequently, it believes that this proposal would not reduce substantively “the effective deliverable supply.”
• Receiver must pay premium charges through completion of loading, rather than through the earlier of ten business days following constructive placement of barges or completion of loading. The CBT indicates that the proposal “would compensate the maker for securing grain in preparation for load-out.” The Exchange also notes that the receiver is protected from unnecessary delays in loading (and consequent increased premium charges) by the contracts' existing preferential treatment of shipping certificate holders over all other receivers, as well as the proposed reduction in the potential delivery line-up to 20 days, as indicated above.
• Stevedoring fees for loading grain into barges are to be paid by the certificate issuer. The CBT indicates that this reflects customary cash market practice, and “will standardize the load-out charges at all shipping stations for barges.”
• Clarification that receiver must compensate deliverer for costs incurred when loading orders are canceled. The CBT notes that the proposal merely “clarifies that the taker must reimburse the maker for expenses for making the grain available for load-out when loading and shipping instructions are canceled prior to load-out.”
• Permit delivery in minimum increments of 5,000 bushels, rather than 55,000 bushels. The CBT states that, “If the taker can issue shipping certificates in any multiple of 5,000 bushels and not be restricted to making initial deliveries in multiples of 55,000 bushels, the delivery process will be simplified and made more flexible.” Furthermore, the “concern that less than barge load quantities would be left outstanding is minimized” by the proposed requirement that a shipper with fewer than a barge-load quantity of certificates outstanding must quote a market rate for buying back the certificates or selling a sufficient quantity of certificates to make up a barge load.
• New requirement that shippers provide a market quote for buying or selling shipping certificates should the number of shipping certificates at the shipping station fall below eleven certificates (55,000 bushels or one barge load). The CBT states that the proposal “increases merchandising opportunities of outstanding shipping certificates for the taker.” The CBT also notes that, “if the shipper does not wish to be obligated to buy back shipping certificates or provide the balance for loadout, he may decide to maintain at least eleven shipping certificates outstanding at a shipping station.”

The Commission is requesting comments on the proposed amendments. In particular, the Commission requests that commenters address the extent to which the proposals reflect commercial practices, and their potential impact on deliverable supplies for the corn and soybeans futures contracts.

Copies of the proposed amendments will be available for inspection at the Office of the Secretariat, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581. Copies of the proposed amendments can be obtained through the Office of the Secretariat by mail at the above address, by phone at (202) 418-5100, or via the Internet at secretary@cftc.gov.

Other materials submitted by the Exchange in support of the proposal may be available upon request pursuant to the Freedom of Information Act (5 U.S.C. 552) and the Commission's regulations thereunder (17 CFR part 145 (1987)), except to the extent they are entitled to confidential treatment as set forth in 17 CFR 145.5 and 145.9. Requests for copies of such materials should be made to the FOI, Privacy and Sunshine Act Compliance Staff of the Office of Secretariat at the Commission's headquarters in accordance with 17 CFR 145.7 and 145.8.

Any person interested in submitting written data, views, or arguments on the proposed amendments, or with respect to other materials submitted by the Exchange, should send such comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581 by the specified date.