Market regulation · 09/06/1997

Trade Options on the Enumerated Agricultural Commodities

Generally, the offer or sale of commodity options is prohibited except on designated contract markets. 17 CFR 32.11. One of several specified exceptions to the general prohibition on off-exchange options is for ``trade options.'' Trade options are defined as off- exchange options ``offered by a person having a reasonable basis to believe that the option is offered to'' the categories of commercial users specified in the rule, where such commercial user ``is offered or enters into the transaction solely for purposes related to its business as such.'' 17 CFR 32.4(a). Trade options, however, are not permitted on the agricultural commodities which are enumerated in the Commodity Exchange Act, 7 U.S.C. Sec. 1 et seq. (Act). The Division of Economic Analysis of the Commodity Futures Trading Commission recently completed a study of the prohibition on the offer or sale of off-exchange trade options on the enumerated agricultural commodities. Based upon the Division's analysis and recommendations, the Commission is seeking comment on whether it should propose rules to lift the prohibition on trade options on the enumerated agricultural options subject to conditions and, if so, what conditio