Release:                      #4306-99
For Release:              August 25, 1999


Washington, D.C.--The Commodity Futures Trading Commission announced today that it is proposing changes to its rules on agricultural trade options. Agricultural trade options are off-exchange options on specified domestic agricultural commodities offered to producers, processors or merchandisers in connection with their business. The current rules permitting the offer and sale of agricultural trade options went into effect on June 15, 1998. These rules, among other things, require merchants offering these options to register with the Commission, require risk disclosure to customers and place certain restrictions on the types of options permitted. To date, no one has registered to be an agricultural trade option merchant. Nevertheless, the Commission has received a number of comments from groups within the agricultural sector supporting reconsideration by the Commission of various aspects of the rules as a means of increasing interest in the possible offer and sale of these instruments. After carefully reviewing its current rules, the Commission is proposing several changes to allow more flexibility in the types of options that can be offered, to streamline the reporting and disclosure requirements and generally to bring the rules more into line with practices in the cash markets.

A notable change being proposed is to permit cash settlement of agricultural trade options. Under the current rules an agricultural trade option, if exercised, must result in physical delivery of the underlying commodity. The proposed rules will give parties greater flexibility to settle an option through financial means. The Commission is also proposing to streamline the registration requirements for agricultural trade option merchants and their sales agents in several respects including removing the training requirement for those sales agents. Changes to the rules will also revise the required disclosure statements and will streamline and reduce overall reporting and recordkeeping requirements.

The proposed rules will be published shortly in the Federal Register. Public comment must be received within 30 days of the date of publication in the Federal Register. A copy of the Commission's Notice of Proposed Rulemaking can be obtained by contacting the Commission's Office of Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100. The Commission also intends to make the proposal available in the near future on its website at