Chicago Mercantile Exchange (CME): Proposed Amendments to the Spot Month Speculative Position Limits for the Live Cattle Futures Contract

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of availability of terms and conditions of proposed amendments to the CME's spot month speculative position limits for the live cattle futures contract.

SUMMARY:

The Chicago Mercantile Exchange (CME or Exchange) has requested that the Commission approve proposed amendments to the spot month speculative position limits for the live cattle futures contract. The proposal was submitted pursuant to the provisions of section 5c(c)(2) of the Commodity Exchange Act (Act) and Commission Regulation 40.4(a). Under the proposal, the speculative position limit that applies during the period at the close of business on the first business day following the first Friday of the contract month through the business day preceding the last five business days would be reduced to 300 contracts from 600 contracts. The Exchange intends to implement the amendments with respect to positions held in the December 2002 through the October 2003 contract months.

The Director of the Division of Market Oversight (Division) of the Commission, acting pursuant to the authority delegated by Commission Regulation 140.96, has determined that publication of the Exchange's proposed amendments for comment 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 14, 2002.

ADDRESSES:

Interested persons should submit their views and comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. In addition, comments may be sent by facsimile transmission to (202) 418-5521 or by electronic mail to secretary@cftc.gov. Reference should be made to the CME's proposed amendments to the spot month speculative position limits for the live cattle futures contract.

FOR FURTHER INFORMATION CONTACT:

Please contact Martin G. Murray of the Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC (202) 418-5276. Facsimile number: (202) 418-5527. Electronic mail: mmurray@cftc.gov

SUPPLEMENTARY INFORMATION:

The CME live cattle futures contract's speculative position limit rules currently specify an individual contract month limit of 3,300 contracts, a “scale down” spot month speculative position limit of 600 contracts that becomes effective at the close of business on the first business day following the first Friday of the contract month, and a 300-contract spot month limit that becomes effective at the close of business on the business day immediately preceding the last five business days of the expiring contract month. The proposed amendments will eliminate the “scale down” limit of 600 contracts, and require that speculative positions be reduced immediately to 300 contracts as of the close of business on the first business day following the first Friday of the contract month.

In support of the proposal, the Exchange states that the proposed level is “more in balance with deliverable supplies” for the live cattle futures contract. In particular, the Exchange states that deliverable supplies of live cattle meeting the futures contract's existing weight specifications have been adversely impacted by the “significant increase in slaughter weights of cattle in the U.S.” As a result, “a growing proportion of the U.S. fed steer population is rapidly becoming ineligible for delivery against the Live Cattle contract.” In this regard, the futures contract does not permit the delivery on a live-graded basis of individual steers weighing more than 1,350 pounds (or 1,375 pounds effective with the June 2003 contract month). However, the average carcass weight for steers has increased steadily in recent years, and in August 2002 was 837 pounds, for a live-weight equivalent of 1,329 pounds.

The Exchange has proposed to implement the subject proposed amendments only for existing contracts, beginning with the December 2002 contract month through the October 2003 contract month. The Exchange has separately notified the Commission that it will delay listing of the December 2003 contract month, pending its consideration of additional contract changes. In this regard, the Exchange notes that it is contemplating amendments that will increase the weight specifications for the live cattle futures contract to accommodate the higher observed weights in the cash market and will make additional amendments to the spot-month speculative position limits.

The Division is requesting comment on the proposal. Copies of the Exchange's proposed amendments will be available for inspection at the Office of the Secretariat, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Copies of the proposed amendments can also be obtained through the Office of the Secretariat by mail at the above address or by phone at (202) 418-5100.

Other materials submitted by the CME in support of the request for approval may be available upon request pursuant to the Freedom of Information Act (5 U.S.C. 552) and the Commission's regulations there under (17 CFR part 145 (2000)), 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 pertaining to the proposed amendments or with respect to other materials submitted by the CME should send such comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre 1155 21st Street, NW., Washington, DC 20581 by the specified date.