[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] ======================================================================= ----------------------------------------------------------------------- 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. ----------------------------------------------------------------------- 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. [[Page 13639]] 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). --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. [[Page 13640]] 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