[Federal Register: January 11, 1999 (Volume 64, Number 6)]
[Page 1603-1604]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Proposed Amendments to Chicago Board of Trade Soybean Oil Futures
Contract Regarding Locational Price Differentials, Maximum Limit on the
Delivery Capacity That May Be Registered, and Allocation of
Responsibility for Payment of Switching and/or Freight Costs

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of availability of proposed amendments.


SUMMARY: The Chicago Board of Trade (CBT or Exchange) has proposed
amendments to its soybean oil futures contract. The proposed amendments
were submitted under the Commission's 45-day Fast Track procedures
which provide that, absent any contrary action by the Commission, the
proposed amendments may be deemed approved 45 days after the
Commission's receipt of the proposals. 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: Comments must be received on or before February 10, 1999.

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 secretary@cftc.gov.
Reference should be made to the proposed amendments to the CBT soybean
oil futures contract.

FOR FURTHER INFORMATION CONTACT: Please contact John Bird of the
Division of Economic Analysis, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581,
telephone (202) 418-5274. Facsimile number: (202) 418-5527. Electronic
mail: jbird@cftc.gov.

SUPPLEMENTARY INFORMATION: The existing terms of the soybean oil
futures contract provide for the delivery of warehouse receipts
representing 60,000 pounds of crude soybean oil in store at CBT-
approved (regular) delivery facilities. Regular delivery facilities
must be located within a prescribed area consisting of all, or portions
of, nine mid-western states of the U.S. The futures contract currently
provides for delivery at par at regular delivery facilities located
within the Illinois Territory (which consists of that portion of the
state of Illinois located north of latitude 38 deg.00'N.) and at
specified locational price differentials at regular delivery facilities
located within four other specified delivery territories within the
contract's delivery area. The contract's current terms also provide for
the adjustment of the locational price differentials annually for each
of the four-non par territories. The annual adjustments are based on
the ratio of the average number of outstanding registered warehouse
receipts to the soybean crushing capacity for all facilities in the
particular territory relative to the ratio of the number of outstanding
registered warehouse receipts to soybean crushing capacity for all
facilities in the other four delivery territories combined. The
contract currently provides that the locational price differential for
a given territory may be adjusted by a maximum of 10 cents per
hundredweight per year.
    The futures contract's existing terms require that the CBT approve
the storage capacity eligible for delivery at each individual regular
delivery facility. Currently, regular delivery facility operators may
deliver soybean oil warehouse receipts equivalent to the maximum CBT-
approved storage capacity for each of their individual warehouses. Upon
surrender of a warehouse receipt, the delivery receiver may direct that
the delivery soybean oil be loaded into railcars or trucks. The
receiver is obligated to arrange for, and to pay all costs of,
transportation of soybean oil from the delivery facility.
    The primary proposed amendments will make the following changes:
(1) The maximum yearly adjustment to the price differential applicable
to delivery territories (other than the Illinois par territory) will be
increased to 20 cents per hundredweight; (2) the futures delivery
capacity (the maximum number of warehouse receipts that any delivery
facility may have outstanding at any time) of each regular delivery
facility will be limited to 30 times the facility's registered daily
load-out rate and (3) operators of regular delivery facilities not
located on Class I railroads will be required to pay switching and/or
freight costs to the nearest Class I railroad interchange point, if
requested in writing by the taker of delivery.
    The CBT intends to implement the proposed amendments to newly
listed contract months, commencing with the January 2000 contract
month. The Exchange has listed for trading the January, July, October
and December 2000 contract months with asterisks indicating that
proposed amendments will be applied to these contract months, pending
approval by the Commission.
    In support of the proposed amendments, the CBT stated that:

    The purpose of the proposed amendments is to improve the pricing
accuracy and hedging effectiveness of the soybean oil futures
contract. This will be achieved by increasing the amount by which
territorial delivery differentials can change each year, improving
access to delivery stocks for takers

[[Page 1604]]

of delivery and compensating takers of delivery at facilities served
by non-Class I railroads for the costs of moving the oil to a Class
I railroad.

    The CBT further submits that:

    The proposed doubling of the maximum annual adjustment in
delivery differentials will help ensure that the delivery
differentials between territories reflect true cash market
differentials. The proposal to limit delivery capacity to 30 times
the daily load-out capacity for each regular facility will reduce
the period of time over which load-out can occur and give takers of
delivery quicker access to delivery stocks. Implementation of the
new regulation requiring operators of delivery facilities which are
not located on Class I railroads to pay the switching and/or freight
costs for making the oil available on the nearest Class I railroad
will improve the arbitrage process of the delivery system and
facilitate convergence.

    Commenters are requested to address the extent to which the
proposed amendments reflect cash market practices or conditions.
Specifically, will the proposed changes to the annual locational price
differential adjustment allow for better conformity with prevailing
cash market price differences between delivery territories. Also, will
the proposed changes to the rail delivery procedures better reflect the
relative value of soybean oil stored in facilities located on Class I
railroads relative to soybean oil stored in facilities located on non-
Class I railroads. In addition, commenters are requested to assess the
overall effect of the proposed amendments on the supply of soybean oil
likely to be available for delivery on the contract and whether the
proposed amendments will have any effect on the futures contract's
susceptibility to price manipulation or distortion.
    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, or via the Internet on the CFTC website at secretary@cftc.gov.
    Other materials submitted by the CBT in support of the proposal 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 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 CBT, should send such comments to Jean A.
Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581 by the specified

    Issued in Washington, DC, on January 4, 1999.
John R. Mielke,
Acting Director.
[FR Doc. 99-514 Filed 1-8-99; 8:45 am]

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