CFTC Staff Letter 76-11: No-Action Relief for New York Cocoa Exchange Rule 3 Amendments

Dear
CFTC STAFF INTERPRETATIVE

• LETTER # 7f.t; -!l.·
  COMMODITY FUTURES TRADING COJV\MISSION 2033 K Street, N.W., VYashinglon, D.C. 20581 Jvlay 4, 1976 This is in response to your letter of April 27, 1976, with which you submitted, pursuant tO· section 5a(l2) of the Connnodity Exchange Act ("Act 11 ), proposed amendments to New York Cocoa Exchange,. Inc. ( 11Exchange") Trade Rule 3 relating to daily price limits for cocoq. Trade Rule 3 presently provides that the daily price limit for cocoa is $.02 per pound above or below: the previous business . day's ·clearing price or, if no clearing price has been established, from the price of the first transaction. The Exchange proposes to amend Trade Rule 3: by increasing· the.· daily price limits for cocoa from $.02 to $.04 per pound and by limiting cocoa's daily trading range in any con￾tract month to $.04. The Exchange explained in its April 27 letter that the proposed amendment to Trade Rule 3 is in response to recent pressures on prices for cocoa futures traded at both the London.Cocoa Terminal Market and the Exchange and is designed as an interim measure until the .Exchange submits to the Commission and receives section Sa(12) approval of a variable pri.ce limit rule for cocoa. Because the concept of a daily trading range with varying parameters depending on the lowest or the highest previous price of any contract month on that trading day is a con￾cept unique to the Exchange, it wi11 require further·study before the Division can make a recommendation to the Commission respecting approval of the proposal. Neverthe~ less, the Division wtll not recormnend, fo·r a period of ' . .. . . .

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-· 2 - sixty (60) days, that the Commiss·ion ·institute enforcement action against the Exchange if the Exchange irnplements the proposed amendment without Conrrnission approval. This should give the Exchange adequate time to adopt a variable limits rule replacing the proposed interim'rule. ... Sincerely, ~4-- Thomas A. Russo Director ~ivision of Trading and Harkets