• Launch of KCBT-CBOT Wheat Intercommodity Spread Options

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6717R
      • Notice Date
      • 28 June 2013
      • Effective Date
      • 01 July 2013
    • This SER replaces SER S-6717 issued on June 26, 2013 and includes revisions to the ticker symbol information for this product.
       
      KCBT-CBOT Wheat Intercommodity spread options are scheduled to begin trading on Monday, July 1, 2013 pending CFTC review. These options will be available for trading on the CME Globex electronic trading platform and on the Chicago trading floor. These contracts will be listed by and subject to the rules and regulations of CBOT.
       
      Trading hours on CME Globex will be Sunday through Friday 7:00 p.m. to 7:45 a.m. with a pause from 7:45 a.m. to 8:30 a.m. and from 8:30 am to 1:15 p.m. Chicago time. Trading hours on the trading floor will be Monday through Friday 8:30 a.m. to 1:15 p.m. Chicago time.
       
      The following option expirations will be available for trade:
       

      Option Month
      KCBT Leg
      CBOT Leg
      July
      July
      July
      December
      December
      December

       
      Initially, options on the December 2013 and the July 2014 spreads will be listed.
       
      KCBT-CBOT Wheat Intercommodity spread options are European Style options that will be cash settled at expiration. A long KCBT-CBOT spread represents a long the KCBT position and short the CBOT position. A short KCBT-CBOT spread represents a short the KCBT position and long the CBOT position.
       
      Attached are the contract salient features, terms and conditions and fees.
       
      Questions may be directed to Susan Sutherland, Senior Director, Commodity Products, at 312-930-2325 or Susan.Sutherland@cmegroup.com; John D. Hill, Economist, Commodity Research and Product Development at 312-930-1852 or John.Hill@cmegroup.com; or Dave Lehman, Managing Director, Commodity Research and Product Development at 312-930-1875 or David.Lehman@cmegroup.com.


      KCBT-CBOT WHEAT SPREAD OPTIONS
      CONTRACT SPECIFICATIONS
       
      Contract Size: One KCBT-CBOT wheat spread option reflects one KCBT wheat futures contract of a specified month, and one CBOT wheat futures contract of a specified month.
       
      Tick Size: 1/8 of one cent per bushel ($6.25 per contract).
       
      Price Basis: The specified KCBT wheat futures price in cents per bushel minus the specified CBOT wheat futures price in cents per bushel.
       
      Strike Price Interval: Strike prices will be listed in increments of five cents per bushel. The minimumstrike price range will include the strike price closest to the current KCBT-CBOT futures spread price, plus the next ten consecutive higher and the next ten consecutive lower strike prices.
       
      Contract Months: July (KCBT July:CBOT July); December  (KCBT December:CBOT December)
       
      Daily Price Limit: The sum of the trading limits for KCBT wheat futures and CBOT wheat futures. There shall be no price limits on the last trading day.
       
      Last Trading Day: The last Friday which precedes by at least two business days, the last business day of the month preceding the option month.
       
      Exercise: European-style. The buyer of a KCBT-CBOT wheat spread option that is in-the-money after the close on last trade day will be cash settled to the final settlement price.
       
      CME Globex/Floor/Clearing Symbol: KWC
       
      Exchange Rules: This contract is listed with and subject to the rules and regulations of the CBOT
       
      Trading Hours (Chicago time)
       
      Open Outcry (CBOT trading floor): 8:30 a.m. – 1:15 p.m., Monday – Friday
       
      CME Globex (electronic platform): 7:00 p.m. – 7:45 a.m., Sunday to Friday and 8:30 a.m. – 1:15 p.m., with a pause in electronic trading from 7:45 a.m. to 8:30 a.m.
       


       
      Chapter 14x
      KCBT-CBOT Wheat Intercommodity Spread Options
       
      14x00. SCOPE OF CHAPTER
       
      This chapter is limited in application to put and call options on KCBT-CBOT Wheat Intercommodity spreads. In addition to the rules of this chapter, transactions in KCBT-CBOT wheat spread options shall be subject to the general rules of the Exchange insofar as applicable.
       
      14x01. OPTIONS CHARACTERISTICS
       
      14x01.A. Contract Months
       
      Trading in KCBT-CBOT Wheat Intercommodity spread options may be scheduled in such months as determined by the Exchange.
       
      14x01.B. Trading Unit
       
      One KCBT-CBOT Wheat Intercommodity spread option reflects one (1) KCBT Wheat futures contract of a specified contract month on the Board of Trade of Kansas City, Missouri, Inc., and one (1) opposing CBOT Wheat futures contract of a specified contract month on the Board of Trade of the City of Chicago, Inc.
       
      The KCBT-CBOT Wheat Intercommodity spread is calculated in cents/bushel as:
       
      KCBT Wheat futures price in cents/bu – CBOT Wheat futures price in cents/bu.
       
      14x01.C. Minimum Fluctuations
       
      The premium for KCBT-CBOT Wheat Intercommodity spread options shall be in multiples of one-eighth (1/8) of one cent per bushel, or six dollars and twenty five cents ($6.250) per contract.
       
      However, a position may be initiated or liquidated in KCBT-CBOT Wheat Intercommodity spread options at premiums ranging from $1.00 to $6.00, in $1.00 increments per option contract.
       
      14x01.D. Trading Hours
       
      The hours for trading of KCBT-CBOT Wheat Intercommodity spread options contracts shall be determined by the Exchange. KCBT-CBOT Wheat Intercommodity spread options shall be opened and closed for all months and strike prices simultaneously.
       
      14x01.E. Exercise Prices
       
      Trading shall be conducted for put and call options with strike prices in integral multiples of five cents per bushel per KCBT-CBOT Wheat Intercommodity spread option. At the commencement of trading for such option contracts, the following strike prices shall be listed: one with a strike price closest to the difference between the previous day’s corresponding KCBT-CBOT Wheat settlement prices (the at-the-money strike); the next ten consecutive higher and the next ten consecutive lower strike prices from the at-the-money strike. If the difference between the previous day’s settlement prices is midway between two strike prices, the closest price shall be the larger of the two. New strike prices will be added through time to assure ten strikes above and below the at the money strike.   When a new strike price is added for an option contract month, the same strike price will be added to all option contract months for which that strike price is not already listed.
       
       
      All strikes will be listed prior to the opening of trading on the following business day. Upon demand and at the discretion of the Exchange, new out-of-current-range strike prices at regularly defined intervals may be added for trading on as soon as possible basis.
       
      The Exchange may modify the procedures for the introduction of strikes as it deems appropriate in order to respond to market conditions.
       
      14x01.F. Position Limits, Exemptions, Position Accountability and Reportable Levels
       
      The applicable position limits and/or accountability levels, in addition to the reportable levels, are set forth in the Position Limit, Position Accountability and Reportable Level Table in the Interpretations & Special Notices Section of Chapter 5.
       
      A Person seeking an exemption from position limits for bona fide commercial purposes shall apply to the Market Regulation Department on forms provided by the Exchange, and the Market Regulation Department may grant qualified exemptions in its sole discretion.
       
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
       
      14x01.G. Reserved
       
      14x01.H. Reserved
       
      14x01.I. Termination of Trading
       
      Subject to the provisions of rule 14x01.D no trades in KCBT-CBOT Wheat Intercommodity spread options expiring in the current month shall be made after the close of trading of the open outcry trading session on the day identical to the expiration of standard CBOT Wheat options and standard KCBT wheat options. Therefore, expiration will occur on the last Friday which precedes by at least two business days, the last business day of the month preceding the option month. If such Friday is not a business day, the last day of trading shall be the business day prior to such Friday. For example, the July KCBT-CBOT Wheat Intercommodity spread option (July KCBT wheat minus July CBOT wheat) will expire on the last Friday which precedes by at least two business days the last business day of June; the December-December KCBT-CBOT Wheat Intercommodity spread option (December KCBT wheat minus December CBOT wheat) will expire on the last Friday which precedes by at least two business days the last business day of November.
       
      14x01.J. Contract Modification
       
      Specifications shall be fixed as of the first day of trading of a contract except that all options must conform to government regulations in force at the time of exercise. If the U.S. government, an agency, or duly constituted body thereof issues an order, ruling, directive, or law inconsistent with these rules, such order, ruling, directive, or law shall be construed to become part of the rules and all open and new options contracts shall be subject to such government orders.
       
      14x02. EXERCISE
       
       
      KCBT-CBOT Wheat Intercommodity spread options will be cash settled on expiration day.
       
      KCBT-CBOT Wheat Intercommodity spread options cannot be exercised at any time during the life of the option.
       
       
      14x03. ACTS OF GOVERNMENT, ACTS OF GOD AND OTHER EMERGENCIES
       
      (Refer to Rule 701.).
       
      14x04. RESERVED
       
      14x05. OPTION PREMIUM FLUCTUATION LIMITS
       
      Trading is prohibited during any day except for the last day of trading in a KCBT-CBOT Wheat Intercommodity spread option at a premium of more than the sum of the trading limits for the CBOT Wheat futures contract and the KCBT Wheat futures contract, above and below the previous day's settlement premium for that option as determined by the Clearing House.
       
       
      14x06. PAYMENT OF OPTION PREMIUM
       
      The option premium must be paid in full by each clearing member to the Clearing House and by each option customer to his futures commission merchant at the time that the option is purchased, or within a reasonable time after the option is purchased.
      KCBT – CBOT WHEAT SPREAD OPTION FEE SCHEDULE
       

      Level
      Account Owner
      Execution Type
      Platform
      Exchange Fee
      Individual Member
      1
      Individual Members
      Member Trading
      Own Account
      Open Auction
      $0.18
      Electronic
      $0.28
      Individual Delegates
      Delegate Trading Own Account
      Open Auction
      $0.48
      Electronic
      $0.58
      Equity Members (Individual Equity members, Clearing Firms and Equity Firms)
      2
      Equity Members 1
      Member or Delegate
      Open Auction
      $0.18
      Electronic
      $0.28
      Equity Members 1
      Non Member
      Open Auction
      $0.18
      Electronic
      $0.90
      (Exception) Rule 106.S. Family of Funds Equity Member Firms
      Member,  Delegate or Non Member
      Open Auction
      $0.18
      Electronic
      $0.90

      1 - Clearing Closely Held Corporate Members & Sole Proprietors, Rule 106.J. Equity Closely Held Corporate Members & Rule 106.I. Affiliate Equity Member Firms,  Individual Equity Members (other member/delegate executing), Clearing FCMs, Rule 106.J. Equity FCMs, Clearing Corporate Members, Rule 106.J. Equity Corporate Members & Rule 106.I. Affiliate Equity Member Firm  (Affiliate of Clearing FCM, Clearing Corporate Member or Rule 106.J Equity FCM or Equity Corporate Member), Rule 106.I. Affiliate Membership Umbrella - Qualified Affiliate - Unlimited Number of Affiliates
       
      Note: Execution Not a Factor in Membership Types below
       
      Level
      Account Owner
      Platform
      Exchange Fee
       
      Trading Members (Individual Non-Equity Members and Non-Equity Member Firms)
       
      3
      Individual Non-Equity Members (other member/delegate executing); Rule 106.H. Corporate Trading Firms; Rule 106.H. Trading FCMs; & Rule 106.I. Affiliate Trading Member Firms
      Open Auction
      $0.40
       
      Electronic
      $1.50
       
      Individual Delegates (Other Member or Delegate executing the trade) & Rule 106.I. Affiliate Trading Member Firms
      Open Auction
      $0.70
       
      Electronic
      $1.80
       
      Rule 106.S. Family of Funds Equity Member Firms
      Open Auction
      $0.40
       
      Electronic
      $1.50
       
      Electronic Corporate Member Firms
       
      4
      Electronic Corporate Members
      Electronic
      $1.80
       
      Non Members
       
      5
      Int'l;  Asian; Latin American Bank &
      Latin American Fund Manager Incentive Programs
      Electronic
      $1.50
       
      Non Members
      Open Auction
      $1.20
       
      Electronic
      $3.50
       
      Clearing, Ex-Pit Surcharge and Non Trade Processing Fees  
       
       
      Other CBOT Processing Fees
      Rate
       
      Clearing Fee 
      $0.06
       
      Position Adjustment/Position Transfers
      $0.10
       
      Ex-Pit Surcharge (EFP)
      $0.75
       
      Ex-Pit Surcharge (EFR)
      $1.25
       
      Ex-Pit Surcharge (Block)
      $0.75
       
      Exchange Fees for Non Trades  
       $0.05 Member, $0.20 Delegate, $0.50 Non-Member
       
       
      Exchange Fees for Expired Options
      $0.05
       
      Facilitation Desk
      $0.20
       
      Brokerage Fees
      $0.04/$0.17
       
       
      Current Fee Programs
      Inclusion/Exclusion
       
      Ag Back Month Program
      Exclusion
       
      Ag Volume Discount Program
      Exclusion
       
      Market Maker/Targeted Program
      Exclusion
       
      Fee Cap
      Inclusion
       
      NTIP
      Inclusion
       

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