[Federal Register Volume 63, Number 54 (Friday, March 20, 1998)]
[Notices]
[Pages 13638-13640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7244]


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COMMODITY FUTURES TRADING COMMISSION


Proposed Amendments to the Price Limit and Trading Halt 
Provisions in Domestic Stock Index Futures Contracts

AGENCY: Commodity Futures Trading Commission

ACTION: Notice of availability of proposed amendments to the price 
limit and trading halt provisions in domestic stock index futures 
contracts listed on the Chicago Mercantile Exchange, Chicago Board of 
Trade, Kansas City Board of Trade, and New York Futures Exchange.

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SUMMARY: The Chicago Mercantile Exchange (CME), Chicago Board of Trade 
(CBOT), Kansas City Board of Trade (KCBT), and New York Futures 
Exchange (NYFE) have submitted proposals to modify existing ``circuit 
breaker'' and related price limit provisions in those exchanges' 
domestic stock index futures contracts. The 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 proposals for comment is in the public 
interest, will assist the Commission in considering the views of 
interested persons, and is consistent with the purposes of the 
Commodity Exchange Act.

DATE: Comments must be received on or before April 6, 1998.


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ADDRESS: Interested persons should submit their views and comments to 
Jean A. Webb, Secretary, Commodity Futures Trading Commission, 1155 
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 [email protected]. Reference should be made to the 
proposed amendments to the price limit and trading halt provisions of 
domestic stock index futures and futures option contracts.

FOR FURTHER INFORMATION CONTACT: Please contact Michael Penick of the 
Division of Economic Analysis, Commodity Futures Trading Commission, 
1155 21st Street NW, Washington, DC 20581, telephone 202-418-5279. 
Facsimile number: (202) 418-5527. Electronic mail: [email protected].

SUPPLEMENTARY INFORMATION: The CME, CBOT, KCBT and NYFE proposed 
changes to the price limit and trading halt provisions, including 
circuit breaker trigger levels, for their domestic stock index futures 
contracts. The submissions were made to coordinate with the proposal 
from the New York Stock Exchange (NYSE) to revise its circuit breaker 
rules. The NYSE proposal would establish three ``circuit breaker'' 
trading halt triggers that will be reset quarterly such that the levels 
are equivalent to 10%, 20%, and 30% of the average closing level of the 
Dow Jones Industrial Average (DJIA) for the calendar month preceding 
that quarter. These triggers would replace the current fixed 350-point 
and 550-point DJIA triggers. The NYSE also proposes to increase the 
duration of each circuit breaker trading halt.1 The NYSE 
proposal is currently under review by the Securities and Exchange 
Commission (SEC). Notice of that proposal was given in the Federal 
Register on February 23, 1998 (63 FR 9034).
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    \1\ Under current NYSE rules, the 350-point trading halt 
generally lasts one half hour and the 550-point trading halt 
generally lasts one hour or until the end of the trading day.
    Under the NYSE proposal, the halt for a 10% decline generally 
will be one hour. However, if the 10% trigger value is reached at or 
after 2:00 p.m. but before 2:30 p.m., the halt would be one half 
hour, while if it occurs at or after 2:30 p.m. a 10% decline would 
not trigger a halt. The halt for a 20% decline generally will be two 
hours. However, if the 20% trigger value is reached at or after 1:00 
p.m. but before 2:00 p.m., the halt would be one hour, while if it 
occurs at or after 2:00 p.m., trading would halt for the rest of the 
day. Finally, if the market declines by 30% at any time, trading 
will be halted for the remainder of the day.
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    The CME proposes that, for each of its domestic stock index 
contracts, there be circuit breaker trading halts coordinated with the 
NYSE trading halts. Consistent with the quarterly adjustment method 
proposed by the NYSE, beginning on the first day of each quarter, the 
CME will reset its circuit breaker price limits to 10% and 20% of the 
average daily closing price in the current primary futures contract 
during the preceding calendar month. The 10% limit will be rounded down 
to the nearest multiple of 10 Index points, and the 20% limit will be 
twice the 10% limit.2 Following each of the two circuit 
breaker trading halts, trading on the CME would resume after the NYSE 
reopens and 50% of the stocks in the S&P 500 (measured by 
capitalization) have begun to trade. The price limit at the 20% circuit 
breaker level will remain in effect when trading resumes following a 
20% circuit breaker trading halt.
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    \2\ Using this calculation method, the CME's circuit breaker 
levels typically will be slightly more restrictive than the 
comparable circuit breaker trigger levels on the NYSE which are 
based on the DJIA.
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    The CME further proposes that, on the day after futures trading 
either ended limit-offered or was halted at the 20% circuit breaker 
limit, the 10% price decline limit on that next day would be treated as 
a ``speed bump'' (discussed below) rather than a circuit breaker price 
limit. This is because the S&P 500 futures price could be up to 10 
percentage points above the cash index which, as noted, could have 
declined as much as 30 percent under proposed NYSE rules. Under this 
proposal, on such next day, the futures contracts would be halted if 
the NYSE halted, and reopened as described above, with the 20% limit in 
place after such reopening.
    The CME also proposes to increase its intermediate price decline 
limits (speed bumps), generally to 2.5% and 5% of the underlying index, 
from the current fixed point levels. 3 Those speed bump 
levels will be calculated quarterly. Intermediate price decline limits 
are in effect for ten minutes after the primary futures contract is 
limit offered. If the futures is limit offered at the end of that 10 
minute period, there would be a two minute trading halt, after which 
the next price limit would be in effect. The 2.5% price decline limit 
also will be the price limit for the overnight Globex session, both 
above and below the regular trading hours settlement price.
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    \3\  The current speed bumps for the actively traded S&P 500 
futures contract are 15 and 30 points or about 1.5% and 3.0% of the 
S&P 500 index.
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    Finally, the CME proposes to eliminate rule 831 which provides that 
daily variation payments are based on the implied market price when the 
cash index is lower than the futures price due to price limits on the 
futures contract.
    The KCBT proposes circuit breaker and price limit rules to its 
stock index contracts that generally are coordinated with the proposed 
NYSE rules and generally are similar to those of the CME. However, 
under that proposal, the KCBT would calculate, on a daily basis, speed 
bump price limits of 2.5% and 5.0% of the previous day's settlement 
price, and circuit breaker price limits of 10% and 20% of the previous 
day's settlement price. Trading would halt whenever either of the two 
lead futures contract months is locked limit down and trading halts on 
the NYSE. The CBOT proposes price limits and trading halts for its DJIA 
futures contract at the same trigger levels as proposed by the NYSE. 
Consistent with current CBOT rules, the CBOT's proposal does not 
include speed bump price limits prior to the first circuit breaker 
price limit. The NYFE proposes circuit breaker and price limit rules 
for its domestic stock index contracts at the same trigger levels as 
proposed by the NYSE. In addition, the NYFE proposes to delete its 
speed bump price limits prior to the first circuit breaker price limit.
    Copies of the proposed amendments will be available for inspection 
at the Office of the Secretariat, Commodity Futures Trading Commission, 
1155 21st Street, N.W., Washington, D.C. 20581. Copies of the terms and 
conditions can be obtained through the Office of the Secretariat by 
mail at the above address or by phone at (202) 418-5097.
    Other materials submitted by the CME, CBOT, KCBT, and NYFE in 
support of the proposals may be available upon request pursuant to the 
Freedom of Information Act (5 U.S.C. 552) and the Commission's 
regulations thereunder (17 C.F.R. Part 145 (1987)), except to the 
extent they are entitled to confidential treatment as set forth in 17 
C.F.R. 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 the Secretariat at the Commission's headquarters in 
accordance with 17 C.F.R. 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 CME, CBOT, KCBT, and NYFE should send such 
comments to Jean A. Webb, Secretary, Commodity Futures Trading 
Commission, 1155 21st Street, NW, Washington, DC 20581 by the specified 
date.


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    Issued in Washington, DC, on March 12, 1998.
John Mielke,
Acting Director.
[FR Doc. 98-7244 Filed 3-19-98; 8:45 am]
BILLING CODE 6351-01-P