• Administrative Rule Amendments to Eight (8) Options on Dairy and Lean Hog Futures Contracts

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6932
      • Notice Date
      • 18 December 2013
      • Effective Date
      • 22 December 2013
    • Effective Sunday, December 22, 2013 for trade date Monday, December 23, 2013, the Chicago Mercantile Exchange, Inc. (CME or Exchange) will amend the below rules for options on dairy and lean hog futures contracts. The amendments rephrase when contrary exercise instructions may be provided for In-the-Money options. For informational purposes, the amendments also expressly describe In-the-Money options. The amendments reflect the current and traditional settlement practices for these options on dairy and lean hog futures contracts.
      It is important to note that there will be no operational changes to the settlement procedures for options on dairy and lean hog options on futures as a result of these rule amendments. These amendments are administrative in nature and will, in no manner, impact the economic characteristics of the products.
      The Commodity Futures Trading Commission (CFTC) will be notified of the rule amendments during the week of December 30, 2013, via the weekly notification procedures set forth in Part 40 of the CFTC Regulations.
       

      Contract
      Rule Number
      (underline indicates addition; strikethrough indicates deletion)
      Options on Class III Milk Futures
      52A02.A.
      The buyer of a Class III Milk futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
      Midsize Options on Class III Milk Futures
      52B02.A.
      An option may be exercised by the buyer only on the day that the option expires. To exercise the option, the clearing member representing the buyer shall present a notice to the Clearing House by 7:00 p.m. or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
       
      Options on Nonfat Dry Milk Futures
       
      54A02.A.
      The buyer of a Nonfat Dry Milk futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
      Options on Class IV Milk Futures
       
      55A02.A.
      The buyer of a Class IV Milk futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
      Options on Cash-Settled Butter Futures
       
      56A02.A.
      The buyer of a Cash-Settled Butter futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
      Options on Dry Whey Futures
       
      57A02.A.
      The buyer of a Dry Whey futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
       
      Options on Cheese Futures
       
      60A02.A.
      The buyer of a Cheese futures option may exercise the option on any Business Day prior to expiration by giving notice of exercise to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on such day.
       
      [After the close on the last day of trading, all in-the-money options shall be automatically exercised unless notice to cancel automatic exercise is given to the Clearing House. Notice to cancel automatic exercise shall be given to the Clearing House by 7:00 p.m., or by such other time designated by the Exchange, on the last day of trading.] An option that is in-the-money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instruction delivered to the Clearing House by 7:00 p.m. on the Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in-the-money if the final settlement price of the underlying futures contract lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.
      Options on Lean Hog Futures
       
      152A02.A.
      An option that is in the money and has not been liquidated or exercised prior to the termination of trading shall, in the absence of contrary instructions delivered to the Clearing House by 7:00 p.m. on the second Business Day following the Expiration Day by the clearing member representing the option buyer, be exercised automatically. An option is in the money if the final settlement price of the underlying futures contract at the termination of trading lies above the exercise price in the case of a call, or lies below the exercise price in the case of a put.

       
      Questions regarding this Special Executive Report may be directed to Jack Cook, Director, Commodity Research & Product Development, at 312-930-3295, Jack.Cook@cmegroup.com; Matt Herrington, Manager, Commodity Research & Product Development, 312-338-2787, matthew.herrington@cmegroup.com; Charles Piszczor, Director, Commodity Research & Product Development, 312-930-4536, Charles.Piszczor@cmegroup.com; or David Lehman, Managing Director, Commodity Research & Product Development, 312-930-1875, David.Lehman@cmegroup.com. 
       
      For media inquiries concerning this Special Executive Report, please contact CME Group Corporate Communications at 312-930-3434 or news@cmegroup.com.
       
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