Citrus Associates of the New York Cotton Exchange: Proposed Amendments Pertaining to Financial Requirements for Facilities Licensed for Delivery on the Frozen Concentrated Orange Juice Futures Contract

COMMODITY FUTURES TRADING COMMISSION

Citrus Associates of the New York Cotton Exchange: Proposed

Amendments Pertaining to Financial Requirements for Facilities Licensed

for Delivery on the Frozen Concentrated Orange Juice Futures Contract

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed contract market rule changes.

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SUMMARY: The Citrus Associates of the New York Cotton Exchange

(``CANYCE or Exchange'') has submitted proposed amendments to its

frozen concentrated orange juice (``FCOJ'') futures contract. The

primary proposed amendments will revise the contract's financial

requirements concerning the dollar value of performance bonds or

letters of credit operators of CANYCE-licensed delivery facilities must

obtain in support of shipping certificates and warehouse receipts

issued for delivery on the futures contract.

In accordance with section 5a(a)(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

publication of the proposed amendments would be in the public interest

and would assist the Commission in considering the views of interested

persons. On behalf of the Commission, the Division is requesting

comment on this proposal.

DATES: Comments must be received on or before April 24, 1995.

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

proposed amendments to the CANYCE's financial requirements for licensed

delivery facilities.

FOR FURTHER INFORMATION CONTACT: Frederick V. Linse, Division of

Economic Analysis, Commodity Futures Trading Commission, 2033 K Street

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

SUPPLEMENTARY INFORMATION: The current provisions of the FCOJ futures

contract provide that delivery may be effected by tendering to the

CANYCE a shipping certificate or warehouse receipt issued by an

Exchange-licensed delivery facility.\1\ The existing terms of the

futures contract provide that the number of shipping certificates

issued by a CANYCE-licensed tank facility operator may not exceed the

sum of the following two calculations: (1) The number obtained by

dividing the facility operator's net worth\2\ by $40,000 and (2) the

number obtained by dividing the total principal amounts of all

performance bonds and letters of credit\3\ issued to the facility

operator by $25,000. The futures contract also currently provides that

a facility [[Page 15537]] operator that desires to increase the number

of shipping certificates it may issue for futures delivery may provide

additional performance bonds or letters of credit to the Exchange equal

to $1 million.

\1\Under the contract's current terms, a shipping certificate

issuer is required to load out FCOJ from the issuer's CANYCE-

licensed tank storage facility upon the request of the certificate

holder. Deliverable warehouse receipts represent FCOJ packed in

drums in store at the receipt issuers' Exchange-licensed warehouses.

\2\The contract's existing terms define ``net worth'' as the

excess of assets over liabilities.

\3\The contract's existing rules provide that performance bonds

must be in a form approved by, and issued by sureties satisfactory

to, the Exchange. Under the current rules, letters of credit must be

in a form approved by the CANYCE, issued by a bank satisfactory to

the Exchange and written in favor of the CANYCE. In addition, such

letters of credit must be unconditional, irrevocable, and available

to be drawn upon by the CANYCE on demand by clean sight drafts.

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The primary proposed amendments would specify that the maximum

number of shipping certificates that could be issued by a CANYCE-

licensed delivery facility will be determined in accordance with a

CANYCE specified schedule based on the amount of performance bonds or

letters of credit posted with the Exchange. The minimum performance

bond would be $1,000,000, which would permit the facility posting such

a bond to issue and have outstanding up to 44 shipping certificates.

The schedule specifying the maximum number of shipping certificates

that may be issued for given dollar amounts of performance bonds or

letters of credit is set forth below:

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Maximum No.

of

Amount of performamce bond or letter of credit in dollars certificates

or receipts

issuable

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1,000,000................................................. 44

2,260,000................................................. 100

3,760,000................................................. 200

5,260,000................................................. 300

6,760,000................................................. 400

8,260,000................................................. 500

9,760,000................................................. 600

11,260,000................................................ 700

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The proposed amendments would require that a licensed delivery

facility operator or owner must submit to the Exchange a letter of

credit or performance bond issued by a bank, insurance company or other

financial institution that is acceptable to the CANYCE. The proposed

amendments specify that such bonds or letters of credit must be

approved by a special Exchange committee.\4\ The CANYCE also is

proposing amendments to certain other Exchange rules to facilitate

implementation of the above-noted proposed financial requirements.

\4\The proposed amendments also would specify that the above-

noted special committee shall consist of a minimum of seven and a

maximum of ten members, with each member and the committee's

chairman being appointed by the CANYCE's President. Under the

proposed amendments, the special committee would have authority to

decide all matters pertaining to the financial requirements of

CANYCE-licensed delivery facilities.

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The CANYCE indicates that the purpose of the proposed amendments is

to better protect the holders of shipping certificates and warehouse

receipts against performance failure on the part of a CANYCE-licensed

delivery facility and, therefore, increase the confidence of shipping

certificate and warehouse receipt holders in the FCOJ futures market.

The Exchange also indicates that the proposed amendments will simplify

the contract's financial requirements for CANYCE-licensed delivery

facility operators.

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 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 CANYCE 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 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 March 17, 1995.

Blake Imel,

Acting Director.

[FR Doc. 95-7262 Filed 3-23-95; 8:45 am]

BILLING CODE 6351-01-P