Chicago Mercantile Exchange Application for Designation as a Contract Market in Ninety Percent Lean Boneless Futures, and a Proposal To Amend and To Recommence Trading in the Dormant Fifty Percent Lean Boneless Beef Trimmings Futures Contract

COMMODITY FUTURES TRADING COMMISSION

Chicago Mercantile Exchange Application for Designation as a

Contract Market in Ninety Percent Lean Boneless Futures, and a Proposal

To Amend and To Recommence Trading in the Dormant Fifty Percent Lean

Boneless Beef Trimmings Futures Contract

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of availability of the terms and conditions of proposed

and amended commodity futures contracts.

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SUMMARY: The Chicago Mercantile Exchange (CME or Exchange) has applied

for designation as a futures contract market in a ninety percent lean

boneless beef. In addition, the CME has submitted a proposal to amend

its dormant fifty percent lean boneless beef trimmings futures contract

and has filed a request to list new contract months for trading in that

contract. The Acting Director of the Division of Economic Analysis

(Division) of the Commission, acting pursuant to the authority

delegated by Commission Regulation 140.96, has determined that

publication of the proposals for comment is in the public interest,

will assist the Commission in considering the views of interested

persons, and is consistent with the purposes of the Commodity Exchange

Act.

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DATES: Comments must be received on or before October 23, 1996.

ADDRESSES: Interested persons should submit their views and comments to

Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st St. NW, Washington, DC 20581. In addition,

comments may be sent by facsimile transmission to facsimile number

(202) 418-5521, or by electronic mail to [email protected]. Reference

should be made to the CME fifty percent lean boneless beef trimmings

and ninety percent lean boneless beef futures contracts.

FOR FURTHER INFORMATION CONTACT:

Please contact Fred Linse of the Division of Economic Analysis,

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

St., NW, Washington, DC 20581, telephone 202-418-5273, or electronic

mail: [email protected].

SUPPLEMENTARY INFORMATION: The Exchange currently is designated as a

contract market in fifty percent lean boneless beef trimmings futures.

That contract currently is dormant within the meaning of CFTC

Regulation 5.2. In addition, as noted, the Exchange has applied for

designation as a contract market in ninety percent lean boneless beef

futures.

The proposed ninety percent lean boneless beef futures contract and

the amended fifty percent lean boneless beef trimmings futures contract

would provide for cash settlement of all open positions at the

expiration of trading in each contract month.\1\ For the fifty percent

lean boneless beef trimmings futures contract, the cash settlement

price would be based on daily weighted average price and volume of

sales information reported by the United States Department of

Agriculture (USDA) for fifty percent lean boneless beef FOB Omaha in

the National Carlot Meat Report. For the ninety percent lean boneless

beef futures contract, the cash settlement price would be based on

USDA-reported daily weighted average price and volume of sales

information for ninety percent lean boneless beef FOB Omaha and East

Texas-Oklahoma. The cash settlement price for each expiring fifty and

ninety percent boneless beef contract month would be the weighted

average of the prices reported by the USDA for the last five days

immediately preceding (and including) the last trading day on which the

USDA reports both a daily weighted average price and a volume of sales

that exceeds zero.\2\

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\1\ The existing terms of the Exchange's dormant fifty percent

lean boneless beef trimmings futures contract provide for physical

delivery.

\2\ The proposed rules do not require that the cash settlement

period consist of the five consecutive days preceding and including

the last trading day of each expiring contract month. If the USDA

does not report both a weighted average price and non-zero trading

volume for one or more of the last five consecutive days that

precede (and include) the last trading day, the cash settlement

price would be calculated using price and quantity information for

the next preceding day(s) on which both the weighted average price

and non-zero sales volume are reported by the USDA.

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The trading unit for both contracts would be 20,000 pounds. The

maximum daily price fluctuation for both contracts would be $.030 per

pound, which could be raised to $.045 per pound under certain

conditions. For the fifty percent lean boneless beef trimmings futures

contract, speculative position limits would be 1,250 contracts long or

short in any contract month, except the expiring contract month, and

250 contracts as of the close of business on the fifth business day of

the contract month. Speculative position limits for the ninety percent

lean boneless beef futures contract would be 500 contracts long or

short in any contract except the expiring contract month, and 100

contracts as of the close of business on the fifth business day of the

contract month. Trading in expiring contract months would end on the

tenth business day of the spot month for both contracts.

The Exchange indicates that the futures contracts are intended to

respond to increased interest among cash market participants for

mechanisms to manage price risk in view of the growing importance of

boneless beef production and increased price volatility. In this

respect, the CME indicates that the consumption of ground beef, which

is produced by grinding boneless beef, has increased to over 50 percent

from 25 percent of all beef consumed in the U.S. since 1975. The

Exchange also notes that the yearly range of fifty-percent lean

boneless beef prices has increased to 17 cents in 1995 from 3-5 cents

per pound in the 1980s, while the annual range of ninety-percent lean

boneless beef prices has increased to 50 cents in 1995 from 3-5 cents

per pound in the 1980s. The Exchange believes that the futures

contracts will offer risk management opportunities to a wide range of

cash market participants.

On behalf of the Commission, the Division is requesting comment on

the CME's proposals. In particular, the Division is seeking comments

regarding the extent to which the proposed cash settlement prices will

reflect the underlying cash market and the susceptibility of the

proposed cash settlement prices to manipulation or distortion.

Copies of the terms and conditions will be available for inspection

at the Office of the Secretariat, Commodity Futures Trading Commission,

Three Lafayette Centre, 1155 21st St. NW., Washington, DC 20581. Copies

of the terms and conditions can be obtained through the Office of the

Secretariat by mail at the above address or by phone at (202) 418-5097.

Other materials submitted by the Exchange 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)),

except to the extent they are entitled to confidential treatment as set

forth in 17 CFR 145.5 and 145.9. 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 terms and conditions, or with respect to

other materials submitted by the CSCE, should send such comments to

Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st St. NW., 20581 by the specified date.

Issued in Washington, DC, on September 17, 1996.

Paul Architzel,

Acting Director.

[FR Doc. 96-24272 Filed 9-20-96; 8:45 am]

BILLING CODE 6351-01-M