[Federal Register Volume 64, Number 6 (Monday, January 11, 1999)] [Notices] [Pages 1603-1604] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 99-514] ======================================================================= ----------------------------------------------------------------------- COMMODITY FUTURES TRADING COMMISSION Proposed Amendments to Chicago Board of Trade Soybean Oil Futures Contract Regarding Locational Price Differentials, Maximum Limit on the Delivery Capacity That May Be Registered, and Allocation of Responsibility for Payment of Switching and/or Freight Costs AGENCY: Commodity Futures Trading Commission. ACTION: Notice of availability of proposed amendments. ----------------------------------------------------------------------- SUMMARY: The Chicago Board of Trade (CBT or Exchange) has proposed amendments to its soybean oil futures contract. The proposed amendments were submitted under the Commission's 45-day Fast Track procedures which provide that, absent any contrary action by the Commission, the proposed amendments may be deemed approved 45 days after the Commission's receipt of the proposals. The Acting 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 purpose of the Commodity Exchange Act. DATES: Comments must be received on or before February 10, 1999. 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 facsimile number (202) 418-5521, or by electronic mail to [email protected]. Reference should be made to the proposed amendments to the CBT soybean oil futures contract. FOR FURTHER INFORMATION CONTACT: Please contact John Bird of the Division of Economic Analysis, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581, telephone (202) 418-5274. Facsimile number: (202) 418-5527. Electronic mail: [email protected]. SUPPLEMENTARY INFORMATION: The existing terms of the soybean oil futures contract provide for the delivery of warehouse receipts representing 60,000 pounds of crude soybean oil in store at CBT- approved (regular) delivery facilities. Regular delivery facilities must be located within a prescribed area consisting of all, or portions of, nine mid-western states of the U.S. The futures contract currently provides for delivery at par at regular delivery facilities located within the Illinois Territory (which consists of that portion of the state of Illinois located north of latitude 38 deg.00'N.) and at specified locational price differentials at regular delivery facilities located within four other specified delivery territories within the contract's delivery area. The contract's current terms also provide for the adjustment of the locational price differentials annually for each of the four-non par territories. The annual adjustments are based on the ratio of the average number of outstanding registered warehouse receipts to the soybean crushing capacity for all facilities in the particular territory relative to the ratio of the number of outstanding registered warehouse receipts to soybean crushing capacity for all facilities in the other four delivery territories combined. The contract currently provides that the locational price differential for a given territory may be adjusted by a maximum of 10 cents per hundredweight per year. The futures contract's existing terms require that the CBT approve the storage capacity eligible for delivery at each individual regular delivery facility. Currently, regular delivery facility operators may deliver soybean oil warehouse receipts equivalent to the maximum CBT- approved storage capacity for each of their individual warehouses. Upon surrender of a warehouse receipt, the delivery receiver may direct that the delivery soybean oil be loaded into railcars or trucks. The receiver is obligated to arrange for, and to pay all costs of, transportation of soybean oil from the delivery facility. The primary proposed amendments will make the following changes: (1) The maximum yearly adjustment to the price differential applicable to delivery territories (other than the Illinois par territory) will be increased to 20 cents per hundredweight; (2) the futures delivery capacity (the maximum number of warehouse receipts that any delivery facility may have outstanding at any time) of each regular delivery facility will be limited to 30 times the facility's registered daily load-out rate and (3) operators of regular delivery facilities not located on Class I railroads will be required to pay switching and/or freight costs to the nearest Class I railroad interchange point, if requested in writing by the taker of delivery. The CBT intends to implement the proposed amendments to newly listed contract months, commencing with the January 2000 contract month. The Exchange has listed for trading the January, July, October and December 2000 contract months with asterisks indicating that proposed amendments will be applied to these contract months, pending approval by the Commission. In support of the proposed amendments, the CBT stated that: The purpose of the proposed amendments is to improve the pricing accuracy and hedging effectiveness of the soybean oil futures contract. This will be achieved by increasing the amount by which territorial delivery differentials can change each year, improving access to delivery stocks for takers [[Page 1604]] of delivery and compensating takers of delivery at facilities served by non-Class I railroads for the costs of moving the oil to a Class I railroad. The CBT further submits that: The proposed doubling of the maximum annual adjustment in delivery differentials will help ensure that the delivery differentials between territories reflect true cash market differentials. The proposal to limit delivery capacity to 30 times the daily load-out capacity for each regular facility will reduce the period of time over which load-out can occur and give takers of delivery quicker access to delivery stocks. Implementation of the new regulation requiring operators of delivery facilities which are not located on Class I railroads to pay the switching and/or freight costs for making the oil available on the nearest Class I railroad will improve the arbitrage process of the delivery system and facilitate convergence. Commenters are requested to address the extent to which the proposed amendments reflect cash market practices or conditions. Specifically, will the proposed changes to the annual locational price differential adjustment allow for better conformity with prevailing cash market price differences between delivery territories. Also, will the proposed changes to the rail delivery procedures better reflect the relative value of soybean oil stored in facilities located on Class I railroads relative to soybean oil stored in facilities located on non- Class I railroads. In addition, commenters are requested to assess the overall effect of the proposed amendments on the supply of soybean oil likely to be available for delivery on the contract and whether the proposed amendments will have any effect on the futures contract's susceptibility to price manipulation or distortion. Copies of the 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 be obtained through the Office of the Secretariat by mail at the above address, by phone at (202) 418- 5100, or via the Internet on the CFTC website at [email protected]. Other materials submitted by the CBT in support of the proposal may be available upon request pursuant to the Freedom of Information Act (5 U.S.C. 552) and the Commission's regulations thereunder (17 CFR part 145 (1987)), 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 on the proposed amendments, or with respect to other materials submitted by the CBT, 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. Issued in Washington, DC, on January 4, 1999. John R. Mielke, Acting Director. [FR Doc. 99-514 Filed 1-8-99; 8:45 am] BILLING CODE 6351-01-M