Proposed Amendments to the Chicago Mercantile Exchange Oriented Strand Board Futures Contract

COMMODITY FUTURES TRADING COMMISSION

Proposed Amendments to the Chicago Mercantile Exchange Oriented

Strand Board Futures Contract

agency: Commodity Futures Trading Commission.

action: Notice of availability of proposed amendments to contract terms

and conditions.

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summary: The Chicago Mercantile (CME or Exchange) has proposed

amendments to its oriented strand board (OSB) futures contract. The

primary proposed amendments would allow delivery of OSB from storage

facilities and allow shipments via truck. The proposal was submitted

under the Commission's 45-day Fast Track procedures. 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

purpose of the Commodity Exchange Act.

dates: Comment must be received on or before January 4, 2000.

addresses: Interested persons should submit their views and comments to

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

Lafayette Centre, 1155 21st Street, 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 oriented strand board futures

contract rule amendments.

for further information contact: Please contact John Forkkio of the

Division of Economic Analysis, Commodity Futures Trading Commission,

Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581,

telephone (202) 418-5281. Facsimile number: (202) 418-5527. Electronic

mail: [email protected].

supplementary information: The proposed amendments include two

substantive revisions to the delivery procedures as well as several

minor revisions.

One substantive change is to allow delivery from a storage

facility. The amended rules would provide that a delivery unit must be

delivered from a single mill or storage facility and must be produced

by only one manufacturer. According to the CME, ``this is a normal cash

market practice that gives some assurance of product integrity and

uniformity to the buyer.

Another significant proposed change is to allow delivery via truck.

According to the Exchange.

Truck shipment is possible by mutual agreement between buyer and

seller. Although the buyer is responsible for arranging shipment,

the seller may provide the trucks under terms acceptable to the

buyer. These terms would include a shipping schedule. If the buyer

provides the trucks, however, a shipping interval must be specified

by the seller using the dates required by the futures contract. A

delivery unit of panels would consist of 3 truckloads. The seller

must pick an interval of 4 consecutive business days that may start

as soon as the fifth day, and must start no later than the eighth

day, after delivery instructions have been received from the buyer.

In addition, the CME is proposing to add the phrase ``wood-based

structural-use'' to the commodity specifications for futures contract

deliveries. This would clarify the type of panel allowed in deliveries

on the futures contract. According to the CME, ``[t]he phrase matches

the title of U.S. Department of Commerce product standard PS2-92 that

governs the performance standards of OSB panels, as noted in current

Rule 7304.A.1.

The Exchange also is proposing to require the buyer who chooses

rail shipment to provide a routing to destination that is acceptable to

the originating carrier. The CME stated that ``[t]his is necessary to

ensure that rail shipment is possible along the entire route chosen by

the buyer and matches a provision of the delivery procedures in the

current Random Length Lumber futures contract. In the absence of

instructions from the buyer, delivery will be made via rail to

Chicago.''

The CME stated that current contract calls for the seller to prepay

rail freight from the mill to the buyer's destination and then bill the

buyer for any excess charges over the freight cost incurred if the

shipment were to have been made from the mill to Chicago, using the

lowest published freight rate. The CME indicated that, since this

language is hard to follow, it proposes to amend the rules to add

``explicit language to detail how the calculation of any excess charges

is to be made.''

Another proposed amendment provides that shipping the charges are

to be based on the rate for 52-foot 8-inch boxcars. The CME stated that

``this provision means only that the rate charged to the buyer must be

for that size boxcar; however, any size boxcar can be used to actually

ship the panels.'' According to the Exchange, in cash market

transactions, this size of boxcar is commonly used for shipping panels

of the amounts, thickness and dimension specified by the OSB futures

contract.

The CME also proposes to require that deliverable OSB panels may

not be older than 18 months, dated from the transfer of title.

According to the Exchange, ``an 18-month span was considered by

industry representatives to be long enough to allow for storage

programs to be meaningful yet short enough so that panels would retain

their fresh appearance and condition.''

Finally, rule 7305 is proposed to be amended by adding a clause

allowing

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reinspection requests to be made regardless of when the panels were

first received. The CME stated that this provision reflects a normal

cash market practice ``under PS2-92 for reinspection requests to be

honored free of charge by the grading agency if they are made within 6

months of first receipt of the panels.''

The proposed amendments were submitted pursuant to the Commission's

Fast Track procedures for streamlining the review of futures contract

rule amendments and new contract approvals (62 FR 10434). Under those

procedures, the proposals, absent any contrary action by the

Commission, may be deemed approved at the close of business on January

21, 2000, 45 days after receipt of the proposals. In view of the

limited review period under the Fast Track procedures, the Commission

has determined to publish for public comment notice of the availability

of the terms and conditions for 15 days, rather than 30 days as

provided for proposals submitted under the regular review procedures.

Copies of the proposed amendments will be available for inspection

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

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

Copies of the proposed amendments can be obtained through the Office of

the Secretariat by mail at the above address, by phone at (202) 418-

5100.

Other materials submitted by the CME 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 (1997)), 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 FOL,

Privacy and Sunshine Act Compliance Staff of the Office of 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, or with respect to other

materials submitted by the CME, should send such comments to Jean A.

Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette

Centre, 21st Street NW, Washington, DC 20581 by the specified date.

Issued in Washington, DC, on December 14, 1999.

John R. Mielke,

Acting Director.

[FR Doc. 99-32839 Filed 12-17-99; 8:45 am]

BILLING CODE 6351-01-M