[Federal Register Volume 64, Number 20 (Monday, February 1, 1999)]
[Notices]
[Pages 4845-4847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2303]


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COMMODITY FUTURES TRADING COMMISSION


Chicago Board of Trade Futures Contracts in Corn and Soybeans; 
Order Approving Proposed Rules and Amending Orders of May 7, 1998, and 
November 7, 1997

AGENCY: Commodity Futures Trading Commission.

ACTION: Final order to the Chicago Board of Trade.

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SUMMARY: The Commodity Futures Trading Commission (Commission), on 
January 25, 1999, issued an Order to the Board of Trade of the City of 
Chicago (CBT) under sections 5a(a)(12) and 5a(a)(10) of the Commodity 
Exchange Act (Act), 7 U.S.C. 7a(a)(12) and (10), approving amendments 
to the CBT's corn and soybean futures contracts and amending the 
Commission's Orders under section 5a(a)(10) of the Act of November 7, 
1997, and May 7, 1998, to effectuate the approved rule amendments.
    On January 25, 1999, the Commission approved for the CBT corn and 
soybean futures contracts, beginning on January 3, 2000: (1) Deletion 
of provisions relating to in-loading of the commodities at regular 
warehouses; (2) rules extending a preference for load-out by regular 
warehouse or shipping station operators of deliveries on futures 
contracts over their cash commitments until meeting their daily load-
out requirement that is currently in effect for delivery by barge to 
other modes of transportation; and (3) rules requiring regular shipping 
stations, at a minimum, to load at the highest loading rate applicable 
for the commodities in a loading line-up which includes both wheat and 
corn or soybeans or both oats and corn or soybeans. The Commission, by 
its Order, amended its Orders of November 7, 1997, and May 7, 1998, to 
effectuate the above approvals relating to the CBT corn and soybean 
futures contracts.
    The Commission has determined that publication of this Order is in 
the public interest, will provide the public with notice of its action, 
and is consistent with the purposes of the Act.

DATES: This Order became effective on January 25, 1999.

ADDRESSES: Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW, Washington, DC 20581.

FOR FURTHER INFORMATION CONTACT: John Mielke, Acting Director, or Paul 
Architzel, Chief Counsel, Division of Economic Analysis, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 
NW, Washington, DC 20581, (202) 418-5260, or electronically, Mr. 
Architzel at PA[email protected].

SUPPLEMENTARY INFORMATION: The Commission, on January 25, 1999, issued 
an Order to the CBT approving amendments to the CBT's corn and soybean 
futures contracts under sections 5a(a)(12) and 5a(a)(10) of the Act and 
amending the Commission's Orders under section 5a(a)(10) of the Act of 
November 7, 1997, and May 7, 1998, to effectuate the approved rule 
amendments.
    The text of the Commission's Order is as follows:

    In the Matter of the Amendment: of the Terms and Conditions of 
the Chicago Board of Trade Corn and Soybean Futures Contracts.

Order of the Commodity Futures Trading Commission Approving Proposed 
Amendments to the Board of Trade of the City of Chicago Corn and 
Soybean Futures Contracts and Amending Commission Orders of May 7, 
1998, and November 7, 1997.
    The Commodity Futures Trading Commission (Commission) hereby 
approves under sections 5a(a)(12) and 5a(a)(10) of the Commodity 
Exchange Act (Act), 7 U.S.C. 7a(a)(12) and (10), amendments to the 
Board of Trade of the City of Chicago's (CBT) corn and soybean futures 
contracts submitted by the CBT for Commission approval on October 22, 
1998, and January 20, 1999, and amends the Commission's Orders of May 
7, 1998, and November 7, 1997, under section 5a(a)(10) of the Act, 
making all changes necessary effect the above approval. Specifically, 
the Commission approves for the CBT corn and soybean futures contracts, 
beginning on January 3, 2000:

[[Page 4846]]

    (1) Deletion of provisions relating to in-loading of the 
commodities at regular Chicago shipping stations;
    (2) Rules extending a preference for load-out by regular shipping 
station operators of commodity for futures delivery over their cash 
commitments until meeting their daily load-out requirement that is 
currently in effect for Chicago delivery by barge to delivery by other 
modes of transportation; and,
    (3) Rules requiring shipping stations, at a minimum, to load at the 
highest loading rate applicable for the commodities in a loading line-
up which includes both wheat and corn or soybeans or both oats and corn 
or soybeans.

I. Background

    The CBT corn and soybean futures contracts were the subject of a 
notification and proceeding under section 5a(a)(10) of the Act. Under 
that proceeding, the Commission on November 7, 1997, issued an Order to 
the CBT amending the CBT's corn and soybean futures contracts, 62 FR 
60831 (November 13, 1997) (section 5a(a)(10) Order), and on May 7, 
1998, the Commission issued a second, amending Order designating new 
CBT corn and soybean futures contracts with revised contract terms. 63 
FR 26575 (May 13, 1998) (Amending Order) (together, ``section 5a(a)(10) 
Orders'').
    The CBT on October 21, 1998, and January 20, 1999, submitted to the 
Commission for its review proposed amendments to its corn and soybean 
futures contracts. The Commission on November 25, 1998, requested 
public comment on the exchange rule amendments. 63 FR 65175. The 
Commission's request for public comment noted that, to the extent these 
proposed rule amendments differ from the provisions of the Commission's 
Order of May 7, 1998, the CBT's requested approval also constituted a 
request to the Commission to amend its Order and that the request for 
comment also constituted notice of the proposed amendment of the 
Commission's Order consistent with the proposed rule amendments.\1\ Id. 
at 65176. It also raised a number of specific issues for response, 
including whether the proposed load-out preference was consistent with 
cash market practice and, if not, to what extent the proposal would 
limit deliverable supplies on the contracts. The Commission also 
requested comment on the likely effect on deliverable supplies which 
might result from the increasing concentration of control over delivery 
facilities.\2\ 63 FR 65175, 65177 (November 25, 1998).
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    \1\ The CBT also proposed amendments to its wheat and oats 
futures contracts in its October 22 and January 20 submissions. 
Those contracts are not subject to Commission section 5a(a)(10) 
Orders and are being reviewed separately for Commission approval 
under section 5a(a)(12) of the Act.
    \2\ Five commenters--the CBT, a flour miller, two grain 
merchants and an association--responded. However, none of the 
commenters specifically addressed issues related to the corn and 
soybean futures markets. Instead their comments were addressed to 
associated rules applicable to the CBT wheat and oats futures 
contracts.
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II. The CBT Proposal

    The CBT is proposing to amend its corn and soybean futures 
contracts by requiring Chicago shipping station operators to give 
preference to orders for vessel or rail load-out of corn or soybeans 
for futures delivery over their cash commitments until shipping 
stations operators meet their daily load-out requirement. CBT rules 
already extend such a preference to receivers of corn and soybeans for 
delivery by barge. In addition, the CBT is proposing to require that 
the regular shipper not give preference to one commodity over another 
in making delivery and that, when different commodities are to be 
loaded out, the applicable load-out rate is the higher of the two. 
Finally, the CBT is proposing to delete provisions relating to the in-
loading of corn and soybeans at the Chicago delivery location.

III. Standard of Review

    The Commission has reviewed the CBT proposals to determine whether 
they would impermissibly reduce the level of deliverable supplies 
provided for by the Commission's section 5a(a)(10) Orders or would 
violate any other provision of the Act or Commission rules or policies.

IV. Proposed Amendment of Loading Rules

    Under the current delivery procedures for the corn and soybean 
futures contracts, shipping certificate holders for delivery at the 
Chicago delivery location may require load-out from regular elevators 
into vessels, rail cars or barges on a first-come first-served basis. 
Regular warehouse operators must load the commodity at least at 
specified daily rates, which differ depending upon the mode of 
transportation provided by the shipping certificate holder. However, 
takers of futures delivery by barge are provided a preference over the 
shipping station operator's cash commitments until the shipping 
station/warehouse has met its daily load-out requirements.\3\ See, 
section 5a(a)(10) Order, 62 FR 60850.
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    \3\ Similarly, regular warehouse/shipping station operators at 
the Chicago delivery point currently are required to in-load corn or 
soybeans consecutively without giving preference to products owned 
by the operator over the products of others and without giving 
preference to one depositor over another. The operator must in-load 
products into the warehouse/shipping station consecutively in the 
order in which they arrive at specified minimum daily rates pursuant 
to in-loading orders previously received, to the extent that the 
warehouse capacity for grain and grade permits. The CBT is proposing 
to delete these rules relating to in-loading for corn and soybeans.
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    The CBT is proposing to amend these provisions by providing all 
takers of futures deliveries in Chicago a preference over the shipping 
station's cash loading commitments until the shipping station has met 
its daily load-out requirements. The CBT's proposed preferential load-
out requirements are contrary to cash market practice, where customers 
generally are accommodated on a first-come, first-served basis.
    Nevertheless, the Commission approved such a preference in its 
section 5a(a)(10) Orders for barge load-out. In doing so, it noted that 
the effect of this departure from cash market practice on deliverable 
supplies was difficult to measure in advance and required the CBT to 
report to the Commission on experience with deliveries for a five year 
period. Whatever the preference's overall effect, in light of the 
diminished importance of Chicago as a delivery point, the effect of 
extending the preference to Chicago vessel and rail delivery takers 
likely will be minor. In any event, the CBT is required under the 
section 5a(a)(10) Orders to report on delivery experience. Such reports 
will provide better information on what effect, if any, extending the 
preference to Chicago vessel and rail delivery takers has on 
deliverable supplies.\4\
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    \4\ Similarly, in light of Chicago's diminished importance as a 
delivery point, deletion of the in-loading requirement would have 
little impact on overall deliverable supplies on the corn or 
soybeans futures contracts.
    The CBT also proposes a clarifying amendment that specifies 
that, if a lineup for loading out grain into barges from a 
particular regular warehouse/shipping station includes both wheat 
and corn or soybeans or both oats and corn or soybeans, then the 
minimum daily rate for loading shall be the highest of the 
applicable rates. According to trade sources, barge loading rates do 
not vary substantially among these commodities. Accordingly, the 
proposed amendments would not create any impediment to deliveries 
and are hereby approved by the Commission.
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V. Concentration of Ownership of Delivery Facilities

    Section 15 of the Act requires the Commission, when reviewing 
exchange rule proposals or amendments, to consider the public interest 
to be protected by the antitrust laws and to endeavor to take the least 
anti-competitive means of achieving the

[[Page 4847]]

objectives of the Act. Guideline No. 1 requires exchanges to justify 
the contract's delivery specifications in light of the number and total 
capacity of facilities meeting contract requirements and the extent to 
which ownership and control of such facilities is dispersed or 
concentrated. 17 CFR part 5, Appendix A(a)(2)(C)(1) and (4). These 
proposed rule amendments do not raise particular issues under section 
15.
    However, on November 10, 1998, Cargill announced that it had signed 
an agreement to acquire Continental Grain Company's (Continental) 
commodity marketing business, including Continental's grain storage 
facilities in the United States. If this announced acquisition is 
consummated, Cargill potentially will own and operate both of the two 
delivery warehouse/shipping stations in the Chicago area and will take 
over one of the three delivery shipping stations in St. Louis. Under 
the agreement, Cargill also will acquire six barge loading facilities 
on the northern Illinois River and two facilities on the southern 
Illinois River. Cargill's ownership of potential delivery capacity on 
the new corn contract will increase from 13% to 34% and on the new 
soybean contract from 13% to 38%. This increased concentration 
potentially could raise significant issues under section 15 and could 
have a negative impact on the corn and soybean futures contracts.
    The Cargill acquisition is under review by the United States 
Department of Justice. Until the Department of Justice acts to approve, 
disapprove or modify the terms of the acquisition, the acquisition will 
not be consummated. The Commission does not currently have sufficient 
information to determine its actual effect on the contract. The 
Commission will consider further this issue at such time as the 
acquisition occurs. However, in order to assist it in its analysis of 
this issue, the Commission directs the CBT carefully to monitor the 
1999 corn and soybean futures contract expirations at all of its 
delivery locations to assess the impact of concentration of ownership 
or control of approved delivery facilities on the price convergence of 
the contracts. In addition, the CBT is directed to include such an 
analysis in its reports to the Commission on the revised corn and 
soybean futures contracts which are required under the section 
5a(a)(10) Orders.

VI. Implementation

    The CBT plans to apply the proposed amendments to the load-out 
provision to all corn and soybeans loaded out against shipping 
certificates delivered on the corn and soybean futures contracts on and 
after January 3, 2000. The CBT also proposes to apply the amendments to 
all corn and soybean warehouse receipts that are outstanding on January 
3, 2000.
    In reviewing whether proposed amendments can be applied to the 
terms of existing contracts, the Commission considers the effect any 
such amendments may have on the value of existing positions. In this 
regard, the proposed amendments to the soybean and corn futures 
contracts are proposed to apply to shipping certificates delivered 
against futures positions in certain currently-listed contract months 
that expire after January 3, 2000, and to all corn and soybean 
warehouse receipts that are outstanding on that date. The Commission 
specifically requested public comment on what effect, if any, the 
proposed amendments would have on the value of existing positions. 63 
FR 65175. None of the commenters addressed this issue.
    As discussed above, the proposed loading provisions would require 
the warehouse/shipping station operator to standardize loading 
requirements in Chicago for all deliveries regardless of mode of 
transport presented or commodity. They would not have an impact on the 
value of existing positions, and the Commission therefore approves the 
CBT's implementation plan under section 5a(a)(12) of the Act.
    For the reasons discussed above, the Commission finds that none of 
the rule amendments proposed by the CBT would have a discernable impact 
on the level of deliverable supplies provided under the Commission's 
section 5a(a)(10) Orders or otherwise would violate the Act or 
Commission rules or policies.
    Based on this finding, the Commission hereby approves under 
sections 5a(a)(12) and 5a(a)(10) of the Act, 7 U.S.C. 7a(a)(12) and 
7a(a)(10), amendments to the CBT's corn and soybean futures contracts 
as shown in attachment 1 to this Order and amends the Commission's 
Orders under section 5a(a)(10) of the Act of May 7, 1998, and November 
7, 1997, making all changes necessary to effect the above approval.
    Further, the Commission hereby directs the CBT carefully to monitor 
the 1999 corn and soybean futures contract expirations to assess the 
impact of concentration of ownership or control of approved delivery 
facilities on the price convergence of the contracts. In addition, the 
CBT is directed to include such an analysis in its reports to the 
Commission on the revised corn and soybean futures contracts which are 
required under the section 5a(a)(10) Orders.

    Dated: January 25, 1999.

    By the Commission.
Jean A. Webb,
Secretary of the Commission.

Attachment 1.--Rules and Regulations Approved by the Commission for the 
Chicago Board of Trade's Corn and Soybean Futures Contracts

Corn
    1009.00
    1009.01
    1049.03
    1052.00
    1052.00(d)
    1052.00A
    1081.00(11)
    1081.01(12)A.
    1081.01(12)B.
    1081.01(12)C.
    1081.01(12)E.
    1081.01(12)H.
    1085.01
Soybeans
    1009.00
    1049.03
    1052.00
    1052.00(d)
    1052.00A
    1081.00(11)
    1081.01(12)A.
    1081.01(12)B.
    1081.01(12)C.
    1081.01(12)E.
    1081.01(12)H.
    1085.01

    Issued in Washington, DC, this 25th day of January, 1999, by the 
Commodity Futures Trading Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 99-2303 Filed 1-29-99; 8:45 am]
BILLING CODE 6351-01-M