[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]


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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.

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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