[Federal Register Volume 59, Number 62 (Thursday, March 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7580]


[[Page Unknown]]

[Federal Register: March 31, 1994]


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COMMODITY FUTURES TRADING COMMISSION

 

Financial Instrument Exchange Trading Session at the 
International Financial Services Centre (Dublin, Ireland)

AGENCY: Commodity Futures Trading Commission.

ACTION: Request for Comment.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
seeking comments on rule amendments submitted by the Financial 
Instrument Exchange (``FINEX''), a Division of the New York Cotton 
Exchange (``NYCE''), pursuant to Section 5a(a)(12)(A) of the Commodity 
Exchange Act (``Act'') and Commission Regulations 1.41(b) and 1.41(c) 
which would provide for the trading of certain FINEX contracts on the 
floor of the International Financial Services Centre (``IFSC'') in 
Dublin, Ireland. Specifically, the amendments would establish an 
extended trading hours session from 8 a.m. through 1 p.m., Dublin time 
(3 a.m. through 8 a.m., New York time), Monday through Friday. The 
proposal would allow futures and options contracts on both the US 
Dollar Index (``USDX'') and the European Currency Unit (``ECU'') to be 
traded at the IFSC. The Commission believes that publication of the 
proposal will assist the Commission in considering the views of 
interested persons and is consistent with the purposes of the Act. 
Copies of the proposed rule amendments and accompanying correspondence 
are available from the Secretary of the Commission at the address and 
telephone number set forth below.

DATES: Comments must be received on or before May 2, 1994.

FOR FURTHER INFORMATION CONTACT: David P. Van Wagner, Special Counsel, 
Division of Trading and Markets, Commodity Futures Trading Commission, 
2033 K Street, NW., Washington, DC 20581. Telephone: (202) 254-8955.

SUPPLEMENTARY INFORMATION: FINEX has submitted proposed rule amendments 
which would provide for an extended trading hours session at the IFSC 
in Dublin, Ireland. Under the proposed amendments, FINEX would list its 
USDX and ECU futures and options contracts for trading on the floor of 
the IFSC. In addition to full members of NYCE and FINEX licensees, 
European permit holders--a new FINEX membership interest class--would 
be able to trade such contracts on the IFSC floor.1
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    \1\By letters dated January 21, 1994 through March 11, 1994, 
FINEX submitted to the Commission, pursuant to Commission Regulation 
1.41(c), a proposed new Rule 6.19 and a proposed amendment to By-Law 
2.33 which would authorize issuance of European permits. By letter 
dated March 14, 1994, the Division of Trading and Markets 
(``Division'') informed FINEX that it had determined, pursuant to 
the authority delegated by Commission Regulation 1.41a(a)(3), that 
FINEX's proposal did not require prior Commission approval under 
Section 5a(a)(12)(A) of the Act and could be made effective 
immediately. In that same letter, the Division informed FINEX that 
holders of European permits could only trade FINEX contracts upon 
the Commission's approval of the currently pending proposal to 
establish procedures for the trading of FINEX contracts on the floor 
of the IFSC.
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    FINEX's proposed IFSC trading session would run from 8 a.m. through 
1 p.m., Dublin time (3 a.m. through 8 a.m., New York time), Monday 
through Friday. Because FINEX already has an extended trading session 
for USDX and ECU contracts on its New York floor, the proposed IFSC 
session would be a revision of its existing extended trading session 
scheme. The current extended session begins trading each Sunday through 
Thursday evening at 7 p.m., recesses at 10 p.m., reopens ninety minutes 
later at 11:30 p.m. and trades until the session's close at 8:19 a.m. 
of the next day.2 FINEX's regular trading session follows each day 
on Monday through Friday with an open at 8:20 a.m. and a close at 3 
p.m.
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    \2\The times for FINEX's current extended trading session are 
all expressed in Eastern Standard Time. During Eastern Day Light 
Savings Time, the session's open and close remains the same but the 
recess shifts to between 11 p.m. and 12:30 a.m. of the next day. The 
current extended trading session's hours were established to 
coincide with active trading hours in both the Far East and European 
exchange markets. In fact, the session's 90-minute recess 
corresponds with a mid-day break for Japan's financial markets.
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    Under FINEX's subject proposal, after the 7-10 p.m. segment of each 
FINEX extended trading session, there would be a recess in trading from 
10 p.m. until 3 a.m. of the next day. At that time, trading in the 
designated FINEX contracts would recommence on the floor of IFSC and 
continue until 8 a.m. (8 a.m. through 1 p.m., Dublin time). Thus, under 
the proposal, FINEX's trading session at the IFSC essentially would 
replace the 11:30 p.m. (or 12:30 a.m. during Day Light Savings Time) to 
8:19 a.m. segment of FINEX's current extended trading session.
    Under FINEX's current proposal, the opening and closing times of 
each trading day would remain the same, opening at 7 p.m. of each 
Sunday through Thursday with the start of the extended trading session 
in New York and closing at 3 p.m. of the following Monday through 
Friday with the conclusion of the regular trading session.
    A contract's settlement price would continue to be established at 
the end of the entire trading day--3 p.m. in New York. Daily price 
limits on the futures contracts would continue to be calculated on the 
basis of the settlement price and would apply to the entire following 
trading day. Volume and open interest would continue to be calculated 
after the end of each trading day.3
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    \3\The Exchange plans to continue to publish a single price, 
volume and open interest figure for each contract each trading day.
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    FINEX represents that its clearing organization, the Commodity 
Clearing Corporation (``CCC''), would not alter its current clearance 
and settlement system in connection with FINEX's proposal. Regardless 
of the membership status or location of the executing member, all 
transactions in FINEX contracts at the IFSC would have to be cleared by 
a CCC clearing member. Original and variation margin as well as option 
premium payments for trades executed during a trading day (7 p.m.-3 
p.m.) would continue to be due at 10 a.m. on the next trading day as is 
presently the case. CCC also intends to continue to process an intra-
day variation margin call between the hours of noon and 3 p.m. This 
intra-day variation margin call would use the previous trading day's 
positions and the trades executed during the two immediately following 
extended trading hours sessions in New York and Dublin and mark those 
positions to market. The CCC does not plan to establish any special 
intra-day margin call during the hours of the proposed extended trading 
session at the IFSC.
    Persons trading FINEX contracts at the IFSC, NYCE members, FINEX 
licensees and European permit holders alike, would be subject, 
generally, to all of the requirements of FINEX's various rules and by-
laws as a feature of their membership interests. Similarly, persons 
trading at the IFSC would enjoy the various rights and privileges 
established by those provisions such as arbitration and disciplinary 
procedures.
    FINEX's oversight of trading of FINEX contracts in Dublin would be 
incorporated into the Exchange's current self-regulatory surveillance 
and compliance programs. FINEX's Compliance Department in New York 
would receive trade registers for FINEX trading activity at the IFSC 
and use its customary review techniques and exception reports to detect 
any improper trading activity. Just as it does on its New York floor, 
FINEX would have selected personnel directly monitor trading activity 
on the floor of the IFSC. The same FINEX personnel also would perform 
various support tasks, such as document retrieval and witness 
interviews, to assist the Compliance Department during investigations. 
The CCC also would establish an IFSC Floor Committee to take summary 
actions against market participants who violate any of FINEX's decorum 
rules while trading at the IFSC.
    In order to permit FINEX contracts to be traded at the IFSC, FINEX 
states that it will be obtaining a certificate of authority from the 
Irish Advisory Committee to do business in the Republic of Ireland. The 
IFSC and FINEX would have a simple landlord-tenant relation, and the 
IFSC would have no proprietary interest in FINEX or its trading 
activity at the IFSC.
    FINEX believes that all persons trading FINEX contracts would, as a 
feature of their membership, be fully subject to all of FINEX's rules 
as well as the Commodity Exchange Act and the Commission's regulations. 
The Division is engaging in separate discussions with the Central Bank 
of Ireland, the appropriate Irish regulatory body, to clarify 
regulatory responsibilities between the Bank and the Commission and to 
ensure effective information access and oversight with respect to FINEX 
trading at the IFSC.
    Any person interested in submitting written data, views or 
arguments on the proposed trading of FINEX contracts at the IFSC and 
proposed implementing rule amendments should send such comments to Jean 
A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K Street 
NW., Washington, DC 20581, by the specified date.

    Issued in Washington, DC, on March 24, 1994.
Alan L. Seifert,
Deputy Director.
[FR Doc. 94-7580 Filed 3-30-94; 8:45 am]
BILLING CODE 6351-01-P