[Federal Register Volume 59, Number 43 (Friday, March 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5044]


[[Page Unknown]]

[Federal Register: March 4, 1994]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 30

 

Foreign Option Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
authorizing option contracts on the 3-month Canadian Bankers' 
Acceptance Futures Contract traded on the Montreal Exchange to be 
offered or sold to persons located in the United States. This Order is 
issued pursuant to: (1) Commission rule 30.3(a), 17 CFR 30.3(a) (1993), 
which makes it unlawful for any person to engage in the offer or sale 
of a foreign option product until the Commission, by order, authorizes 
such foreign option to be offered or sold in the United States; and (2) 
the Commission's Order issued on July 20, 1988, 53 FR 28840 (July 29, 
1988), authorizing certain option products traded on the Montreal 
Exchange to be offered or sold in the United States.

EFFECTIVE DATE: April 4, 1994.

FOR FURTHER INFORMATION CONTACT: Jane C. Kang, Esq., Division of 
Trading and Markets, Commodity Futures Trading Commission, 2033 K 
Street, NW., Washington, DC 20581. Telephone: (202) 254-8955.

SUPPLEMENTARY INFORMATION: The Commission has issued the following 
Order:
Order Under Commission Rule 30.3(a) Permitting Option Contracts on the 
3-month Canadian Bankers' Acceptance Futures Contract Traded on the 
Montreal Exchange to be Offered or Sold in the United States Thirty 
Days after Publication of this Notice in the Federal Register.

    By Order issued on July 20, 1988 (``Initial Order''), the 
Commission authorized, pursuant to Commission rule 30.3(a),\1\ certain 
option products traded on the Montreal Exchange to be offered or sold 
in the United States. 53 FR 28840 (July 29, 1988). Among other 
conditions, the Initial Order specified that:



    \1\Commission rule 30.3(a), 17 CFR 30.3(a) (1993), makes it 
unlawful for any person to engage in the offer or sale of a foreign 
option product until the Commission, by order, authorizes such 
foreign option to be offered or sold in the United States.
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    Except as otherwise permitted under the Commodity Exchange Act 
and regulations thereunder, * * * no offer or sale of any Montreal 
Exchange option product in the United States shall be made until 
thirty days after publication in the Federal Register of notice 
specifying the particular option(s) to be offered or sold pursuant 
to this Order.

    By letter dated February 9, 1994 the Montreal Exchange represented 
that it would be introducing an option contract based on the 3-month 
Canadian Bankers' Acceptance Futures Contract. The Montreal Exchange 
has requested that the Commission supplement its Initial Order and 
subsequent Order\2\ authorizing Options on the Government of Canada 
Bond Futures by also authorizing the Montreal Exchange's Option 
Contract on the 3-month Canadian Bankers' Acceptance Futures Contract 
to be offered or sold to persons in the United States. Upon due 
consideration, and for the reasons previously discussed in the Initial 
Order, the Commission believes that the request for authorization to 
offer or sell an option contract on the 3-month Canadian Bankers' 
Acceptance Futures Contract should be granted.
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    \2\See 56 FR 3207 (January 29, 1991).
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    Accordingly, pursuant to Commission rule 30.3(a) and the 
Commission's Initial Order issued on July 20, 1988, and subject to the 
terms and conditions specified therein, the Commission hereby 
authorizes the Montreal Exchange's Option Contract on the 3-month 
Canadian Bankers' Acceptance Futures Contract to be offered or sold to 
persons located in the United States thirty days after publication of 
this Order in the Federal Register.

Contract Specifications

Options on 3-Month Canadian Bankers' Acceptance Futures

Underlying Interest

    One (1) 3-month Canadian Bankers' Acceptance Futures (BAX) contract 
representing C$1,000,000 principal of 3-month Canadian Bankers' 
Acceptances.

Description

    A buyer of one option on 3-month Bankers' Acceptance Futures may 
exercise the option to assume a position in one 3-month Bankers' 
Acceptance Futures (BAX) contract (long position if the option is a 
call and short position if the option is a put) of a specified contract 
month at a specified strike price.
    The seller of one option on 3-month Bankers' Acceptance Futures has 
the obligation of assuming, if the option is exercised by the buyer, a 
position in one 3-month Bankers' Acceptance Futures (BAX) contract 
(short position if the option is a call and long position if the option 
is a put) of a specified contract month at a specified strike price.

Price Quotation

    Quoted in points where each .01 of a point (1 basis point) 
represents C$25. For example, a quote of 0.46 represents a total option 
premium of C$1,150 (i.e. 46 basis points x C$25).

Minimum Price Increment (Tick Size and Value)

    0.01 point (also known as one tick)=C$25 per contract (same as for 
underlying futures).

Strike Prices

    Strike prices are set at maximum 0.50 point intervals.* Two 
(2) in-the-money and two (2) out-of-the-money strike prices will 
generally be available (for example, if a specific BAX futures 
settlement price is 90, option strike prices may be set at 89, 89.50, 
90, 90.50, 91).

    *Strike prices of the nearest contract month may be set at 
.25 point interval.

Contract Months

    Options available on the four nearest months in the BAX futures 
quarterly cycle, i.e. March, June, September and December.

Trading Hours

    8:20 a.m. to 3 p.m. (EST/EDT)

Last Trading Day

    Options trading shall terminate at the same date and time as the 
underlying futures contract, i.e. at 10:00 a.m. (EST/EDT) on the second 
London (U.K.) business day prior to the third Wednesday of the contract 
month.

Exercise

    American style, i.e. buyers of futures options may exercise their 
options on any business day up to and including the expiration date 
(prior to the daily cut-off time). The Clearing Corporation assigns 
exercise notices to sellers of options according to a random selection 
process. In-the-money options are automatically exercised by the 
Clearing Corporation at expiry (unless otherwise instructed). The final 
settlement price of the underlying futures contract will be used as a 
reference to determine which options may be exercised automatically at 
expiry.

Expiration

    The last trading day.

Minimum Margin Requirements

    The minimum margin is subject to periodic changes.
Buyers of Options
     Premium must be paid in full when the option is bought.
Uncovered Writers of Options
     Market value of the option plus the margin required for 
the underlying futures contract less half of the amount that the option 
is out-of-the-money. Minimum: market value of the option plus 50% of 
the margin required on the underlying futures contract (futures 
speculator or hedger rate, as the case may be).
Options-Futures Spread
     Short Call-Long Futures or Short Put-Short Futures.
     The underlying market value of the option plus the margin 
required for the underlying futures contract less half of the amount 
that the option is in-the-money. Minimum: market value of the option 
plus 50% of the margin required on the underlying futures contact 
(futures speculator or hedger rate, as the case may be).
     Long Call-Short Futures or Long Put-Long Futures.
     The margin required is the greater of the market value of 
the option or the margin required on the futures contract.
Other Combinations
     Special rules apply to calculate margin requirements for 
other combinations.

Position Limits

    The maximum number of options and underlying futures contract net 
on the same side of the market in all contract month combined which a 
person may own or control shall be as follows:
    (a) For speculators: 5,000 futures equivalent contracts.
    (b) For hedgers: The greater of 7,000 futures equivalent contracts 
or of such a limit to be established and published on a monthly basis 
by the Exchange based on 20% of the average daily open interest for all 
Canadian Bankers' Acceptance futures contract during the preceding 
three calendar months or such other position limits as may be 
determined by the Exchange.
    For the purpose of calculating these limits, positions in the 
options contracts are aggregated with positions in the underlying 
futures contract. For aggregation purposes, the futures-equivalent of 
one in-the-money options contract is one futures contract and the 
futures-equivalent of one at-the-money option or out-of-the-money 
contract is half a futures contract.

Reporting Levels

    300 options or 300 futures equivalent contracts for positions 
involving the option and the underlying futures contract.

Ticker Symbol

    OBX.

Clearing Corporation

    Trans Canada Options Inc.

List of Subjects in 17 CFR Part 30

    Commodity futures, Commodity options, Foreign transactions.

    Accordingly, 17 CFR part 30 is amended as set forth below:

PART 30--FOREIGN FUTURES AND FOREIGN OPTION TRANSACTIONS

    1. The authority citation for part 30 continues to read as follows:

    Authority: Secs. 2(a)(1)(A), 4, 4c, and 8a of the Commodity 
Exchange Act, 7 U.S.C. 2, 6, 6c and 12a.


Appendix B to Part 30   [Amended]

    2. Appendix B to part 30 is amended by adding the following entry 
after the existing entries for the ``Montreal Exchange'' to read as 
follows:

Appendix B--Option Contracts Permitted To Be Offered or Sold in the 
U.S. Pursuant to Sec. 30.3(a)

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        Exchange             Type of contract      FR date and citation 
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                              * * * * * * *                             
Montreal Exchange......  Options on the 3-month   1994; ________ FR     
                          Canadian Bankers'        ________             
                          Acceptance Futures                            
                          Contract.                                     
                                                                        
                              * * * * * * *                             
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    Issued in Washington, DC, on March 1, 1994.
Jean A. Webb,
Secretary to the Commission.
[FR Doc. 94-5044 Filed 3-3-94; 8:45 am]
BILLING CODE 6351-01-P