Proposed Amendments to the NYFE NYSE Composite Index Futures and Futures Option Contracts

COMMODITY FUTURES TRADING COMMISSION

Proposed Amendments to the NYFE NYSE Composite Index Futures and

Futures Option Contracts

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of Proposed Contract Market Rule Changes.

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SUMMARY: The New York Futures Exchange (NYFE) has submitted proposed

rule amendments to its NYSE Composite Index (Index) futures contract to

base the final settlement price on the closing level of the Index on

the third Friday of the contract month, rather than on the special

opening quotation on the third Friday, and change the last day of

trading in the Index futures and futures option contracts to the third

Friday of the contract month from the day preceding the third Friday.

In accordance with Section 5a(a)(12) of the Commodity Exchange Act,

the Commission has determined that publication of the proposal is in

the public interest and will assist the Commission in considering the

views of interested persons.

DATES: Comments must be received on or before August 22, 1994.

ADDRESSES: Interested persons should submit their views and comments to

Jean A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K

Street NW., Washington, DC 20581. Reference should be made to the

amendments to the NYFE NYSE Composite Index futures contract.

FOR FURTHER INFORMATION CONTACT: Contact Stephen Sherrod, Division of

Economic Analysis, Commodity Futures Trading Commission, 2033 K Street

NW., Washington, DC 20581, telephone 202-254-7303.

SUPPLEMENTARY INFORMATION: In April 1987, the Commission approved rule

amendments to the NYFE's NYSE Composite Index futures contract

providing that the final settlement price of the futures contract would

be based on the special opening quotation of the Index, rather than on

the closing level of the Index, on the third Friday of the contract

month. These amendments first went into effect for the June 1987

contract month.1

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\1\Under the implementation plan, during the transition period

from June 1987 through March 1988 the NYFE listed concurrently in

each contract month two NYSE Composite Index futures contracts. The

final settlement price for one contract was based on the closing

level of the Index while the final settlement price for the other

contract was based on the special opening quotation of the Index.

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The effect of the proposed amendments would be that the final

settlement price determination and last trading day provisions would be

identical to the previous rules of the subject contracts, as noted

above. Current rules would continue to apply to contracts expiring

prior to June P1995.2

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\2\The NYFE informed its members of the proposed amendments

prior to listing the June 1995 contract month.

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In its submission, the NYFE noted that the use of the special

opening quotation as a basis of cash settlement has caused confusion

among public customers. The level of the Index is disseminated based on

the last transaction price of each of the over 2,400 component stocks.

However, the special opening quotation is calculated based on the

opening price of each component stock. Such opening stock prices

typically are not determined contemporaneously. Thus, the level of the

special opening quotation may vary from the range of the cash Index

level on the expiration Friday. The NYFE noted such variations have

resulted in numerous complaints from public customers.

The Commission notes that the final settlement prices for certain

other broad-based stock index futures contracts also are based on the

closing levels of the relevant indices.3 Further, the final

settlement prices for certain broad-based stock index option contracts

traded on national securities exchanges also are based on the closing

levels of the relevant indices.4

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\3\For example, the final settlement prices of the Value Line

Average Stock Index futures contract of the Kansas City Board of

Trade and the Major Market Index futures contract of the Chicago

Mercantile Exchange are based on the closing level of those indices.

\4\For example, options on the Major Market Index of the

American Stock Exchange settle to the closing level of that index.

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In support of its proposed change, the NYFE noted its belief that

the proposed amendments would have no detrimental impact on the

underlying market. According to NYFE staff, there is not significant

futures trading volume associated with direct arbitrage between the

subject futures contract and the equities comprising the Index.

The Commission is requesting comment on the proposed amendments,

considering the appropriateness of the revised procedures relative to

the requirements of Commission Guideline No. 1. for cash settled

futures contracts. Also, the Commission requests comment as to whether

there are any issues, in addition to the relative extent of cash/

futures arbitrage in this Index, that should be considered by the

Commission in its review of the proposal.

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, DC 20581. Copies of the proposed rule

amendments can be obtained through the Office of the Secretariat by

mail at the above address or by phone at (202) 254-6314.

The materials submitted by the NYFE 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 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 17

CFR 145.7 and 145.8.

Any person interested in submitting written data, views, or

arguments on the proposed amendments should send such comments to Jean

A. Webb, Secretary, Commodity Futures Trading Commission, 2033 K

Street, NW., Washington, DC 20581 by the specified date.

Issued in Washington, DC, on July 19, 1994.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 94-17881 Filed 7-21-94; 8:45 am]

BILLING CODE 6351-01-P