[Federal Register Volume 60, Number 104 (Wednesday, May 31, 1995)]
[Notices]
[Pages 28391-28392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13188]



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COMMODITY FUTURES TRADING COMMISSION


New York Mercantile Exchange: Proposed Amendments to the Gulf 
Coast Unleaded Regular Gasoline Futures Contract Relating to the 
Delivery Procedures and Delivery Period

agency: Commodity Futures Trading Commission.

action: Notice of proposed contract market rule changes.

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summary: The New York Mercantile Exchange (NYMEX or Exchange) has 
submitted proposed amendments to its Gulf Coast unleaded regular 
gasoline futures contract that, among other things, would: (1) Require 
that all futures deliveries regardless of size be made on the Colonial 
Pipeline system at an injection point from Pasadena, Texas to 
Moundville, Alabama; (2) eliminate the public terminal delivery 
alternative; (3) require the buyer receiving less than 25 contracts to 
reimburse the seller for any Colonial Pipeline shipping charges 
incurred for making such deliveries; and (4) for a particular delivery 
month restrict all futures deliveries to the third cycle of the 
Colonial Pipeline for that month, provided that deliveries of less than 
25 contracts would be further restricted to the back-half of such third 
Colonial Pipeline cycle.
    In accordance with Section 5a(12) of the Commodity Exchange Act and 
acting pursuant to the authority delegated by Commission Regulation 
140.96, the Acting Director of the Division of Economic Analysis 
(Division) of the Commodity Futures Trading Commission (Commission) has 
determined, on behalf of the Commission, that the proposed amendments 
are of major economic significance. On behalf of the Commission, the 
Division is requesting comment on these proposals.

dates: Comments must be received on or before June 30, 1995.

addresses: Interested persons should submit their views and comments to 
Jean A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K 
Street NW., Washington, D.C. 20581. Reference should be made to the 
proposed amendments to the New York Mercantile Exchange Gulf Coast 
unleaded regular gasoline futures contract.

for further information contact: John Forkkio, Jr., Division of 
Economic Analysis, Commodity Futures Trading Commission, 2033 K Street 
NW., Washington, D.C. 20581, telephone (202) 254-7303.

supplementary information: Under current provisions of the Gulf Coast 
unleaded regular gasoline (gasoline) futures contract, for all 
positions involving 25 contracts or more, delivery must be F.O.B. at a 
Colonial Pipeline injection station selected by the seller in the 
delivery area. The delivery area for pipeline deliveries encompasses 
the area along the Colonial Pipeline from Pasadena, Texas upstream to 
Moundville, Alabama. For all positions involving deliveries of less 
than 25 contracts, deliveries must be f.o.b. at one of the three public 
terminal facilities located in the region around Pasadena, Texas--GATX 
Terminals Corporation, OilTanking Houston Inc., or Amerada Hess 
Corporation. Such deliveries can be made by intra-facility or inter-
facility transfer of product or by barge shipment. All public terminal 
deliveries are assessed a surcharge of 1.75 cents per gallon, payable 
by any party receiving or delivering less than 25 contracts.
    Under existing provisions, for a particular delivery month, 
pipeline deliveries must be made during either the second or third 
Colonial Pipeline delivery cycle for that month. This essentially 
provides a delivery period of about 21 days.\1\

    \1\ To efficiently transport product through its pipeline 
system, Colonial divides the year into 36 cycles. Each month has 
three cycles; each with a duration of about ten days. Additionally, 
each cycle is subdivided into a front half and a back half, each of 
five days duration.
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    Under the proposed amendments, all deliveries on the gasoline 
futures contract, regardless of position size, must be by pipeline 
delivery into the Colonial Pipeline system in the existing delivery 
area as noted above.\2\ Additionally, under the proposed amendments, 
all deliveries in a particular delivery month would be restricted to 
the third cycle of the Colonial Pipeline for that month; provided that 
deliveries with respect to positions involving less than 25 contracts 
would be further restricted to the back-half of such third cycle. 
Proposed amendments also would require the seller making delivery on a 
position involving less than 25 contracts to make all the required 
arrangements for shipment of the product on the Colonial Pipeline, and 
the buyer to reimburse the seller for any Colonial Pipeline shipping 
charges incurred by the seller in making such deliveries.

    \2\ As a result of this proposal, public terminal deliveries on 
the contract will no longer be permitted. As a consequence, intra 
and inter-facility transfers and barge shipments will not be 
permissible methods of delivery on the contract.
    The Exchange proposes to apply the proposed amendments to newly 
listed contract months only following its receipt of notice of 
Commission approval.
    According to the Exchange, the proposed amendments were proposed to 
conform the futures delivery rules with cash market practices in the 
Gulf and to provide more certainty in the timing of deliveries on the 
futures contract. Specifically, the NYMEX stated:

    The Contract will remain unchanged for ``round'' deliveries 
where delivery is made directly into the Colonial Pipeline * * *
    * * * Deliveries of less than 25,000 barrels are not directly 
deliverable into the Pipeline, and hence, the existing Gulf Coast 
Contract has specified delivery of odd-lots into public terminals. 
The proposed amendments are based on the fact that Colonial allows 
for a shipper to designate beneficial owners of product through what 
is known as a ``consignee'' relationship * * *.
    The ``consignee'' relationship allows shippers to consign 
smaller portions of gasoline shipments to one or more beneficial 
owners, so that odd-lot batches of less than 25,000 barrels can be 
accommodated on the [[Page 28392]] Colonial Pipeline. An authorized 
shipper on Colonial is allowed to break up a batch of 25,000 
barrels, and allocate odd-lot batches to various consignees, who 
then specify a delivery point along the Colonial Pipeline. The 
beneficial owner, or consignee, can be changed on Colonial's 
records. Thus, an odd-lot delivery of gasoline can be shipped on the 
Colonial Pipeline, as long as the odd-lot seller finds a shipper in 
the cash market to add the seller's odd-lot batch to his existing 
shipment of at least 25,000 barrels on Colonial. The ``consignee'' 
relationship provides the mechanism to perform the odd-lot delivery 
directly into Colonial Pipeline * * *.

    With respect to the Exchange proposal to change the delivery period 
so that all deliveries will occur in either the front-half or back-half 
of the third cycle of the Colonial Pipeline, the NYMEX stated that:

    In the cash market, prices are negotiated for products delivered 
in each half-cycle increment on Colonial Pipeline, and prices 
typically vary between each half-cycle, depending on market 
conditions. Narrowing the delivery period to the third cycle of the 
month provides sufficient capacity on the Colonial Pipeline to 
accommodate NYMEX deliveries. In addition, narrowing the delivery 
period to the third cycle would provide greater certainly in terms 
of the timing for the pricing of the commodity. The most actively 
traded cash market instrument in the Gulf Coast is for delivery in 
the third cycle of Colonial Pipeline.

    The Division requests comment on the proposed changes to the NYMEX 
gasoline futures contract. The Commission is specifically requesting 
comments on the effect of the proposed restrictions regarding 
deliveries involving less than 25 contracts. The Division also requests 
comment on the effect of the proposal to restrict deliveries to one 
Colonial Pipeline cycle per month on the economically deliverable 
supply of gasoline available for the contract.
    Copies of the proposed amendments will be available for inspection 
at the Office of the Secretariat, Commodity Futures Trading Commission, 
2033 K Street NW., Washington, D.C. 20581. Copies of the amended terms 
and conditions can be obtained through the Office of the Secretariat by 
mail at the above address or by telephone at (202) 254-6314.
    The materials submitted by the Exchange in support of the proposed 
amendments 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)). Requests for copies of such 
materials should be made to the FOI, Privacy and Sunshine Act 
Compliance Staff of the Office of the Secretariat at the Commission's 
headquarters in accordance with CFR 145.7 and 145.8.
    Any person interested in submitting written data, views or 
arguments on the proposed amendment should send such comments to Jean 
A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K Street 
NW., Washington, D.C. 20481 by the specified date.

    Issued in Washington, D.C. on May 23, 1995.
Blake Imel,
Acting Director.
[FR Doc. 95-13188 Filed 5-30-95; 8:45 am]
BILLING CODE 6351-01-M