May 26, 2005
USER’S GUIDE TO
RUSSIAN RUBLE NDF DOCUMENTATION
EFFECTIVE AS OF JUNE 16, 2005
TABLE OF CONTENTS
I. INTRODUCTION
II. EMTA TEMPLATE TERMS FOR RUB/USD NON-DELIVERABLE FX
TRANSACTIONS
III. REVISED RUB CME-EMTA RATE DEFINITION
IV. EMTA RUB INDICATIVE SURVEY RATE DEFINITION
V. CME/EMTA DAILY RUSSIAN RUBLE PER U.S. DOLLAR REFERENCE RATE
SURVEY METHODOLOGY
VI. EMTA RUB INDICATIVE SURVEY RATE METHODOLOGY
VII. A NOTE ON THE CME RUSSIAN RUBLE FUTURES RULES
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
EMTA TEMPLATE TERMS FOR RUB NON-DELIVERABLE FX
TRANSACTIONS
RUSSIAN RUBLE RATE SOURCE DEFINITIONS OF ANNEX A
CME/EMTA DAILY RUSSIAN RUBLE PER U.S. DOLLAR
REFERENCE RATE SURVEY METHODOLOGY AND CME
RULES FOR RUSSIAN RUBLE FUTURES
EMTA RUB INDICATIVE SURVEY RATE METHODOLOGY
__________________
©Copyright 2005 by EMTA, Inc.
I.
INTRODUCTION
Despite the availability of standardized terms for non-deliverable forward foreign
exchange (“NDF”) transactions for many other emerging markets, by 2004, the Russian
market had yet to be addressed by EMTA. The Russian financial crisis of 1998 and the
resulting lack of liquidity in the Russian NDF market had made it a low priority for EMTA
Members, notwithstanding the early and important developments of a back-up
RUB/USD rate quotation system sponsored by EMTA and Chicago Mercantile
Exchange, Inc. (“CME”) and the addition of Russian ruble rate source definitions to
Annex A of the 1998 FX and Currency Option Definitions (the “1998 Definitions”).
After the 1998 Russian financial crisis, EMTA Members turned their focus to other
markets and over the next several years, developed and refined a documentation
architecture and formalized market practices for the NDF market, currency by currency.
An early focus by EMTA on the backlog of unsigned documentation due to a lack of
uniform terms available to industry participants led to the first round of standardized
NDF template terms and accompanying definitions. This initial focus later matured into a
focus on the risks associated with long-term market closures. By the end of 2004, the
initial round of standardized terms developed by EMTA in 2000 for non-deliverable FX
and currency option transactions all had been revised and updated to address this later
concern. For more information on the updates to the template terms for specific
currencies, see, variously, the EMTA User’s Guide to Revised ARS NDF
Documentation (January 2, 2003), the EMTA User’s Guide to Revised BRL NDF
Documentation (March 1, 2004) and the EMTA/SFEMC/FXC User’s Guide to 2004
Asian Currency Non-Deliverable FX Documentation (December 1, 2004).
During the second half of 2004, in response to increasing activity in the Russian Ruble/
US Dollar non-deliverable foreign exchange market, EMTA undertook to prepare for the
first time, standardized documentation for the Russian Ruble / US Dollar segment of the
NDF market. Once again partnering with CME, EMTA Members (together, the “RUB
Working Group”) worked for many months to develop a package of documentation and
procedures designed to accommodate the closely linked foreign exchange and futures
markets. The resulting documentation ultimately received the review and approval of
both the NDF and the futures markets, and incorporates many of the principles and
practices adopted by EMTA Members for other currencies to address long-term market
disruptions. This documentation is reviewed in detail below.
Unless otherwise defined herein, terms used herein are used as defined in the 1998
Definitions, as amended, including Annex A thereto.
II.
EMTA TEMPLATE
TRANSACTIONS
TERMS
FOR
RUB/USD
NON-DELIVERABLE
FX
In developing the EMTA Template Terms for RUB / USD Non-Deliverable FX
Transactions, (the “RUB Template”) (see Appendix A), the RUB Working Group was
able to build upon the significant experience it had gained since 2000 in developing and
strengthening standardized terms for Latin American and, in partnership with the
lpj/RUBGuide
2
SFEMC and the FXC, Asian currency NDF documentation. The RUB Working Group
began its endeavors with a view toward advancing the theme that has dominated
EMTA’s work in the NDF area since 2002, i.e., bolstering the market’s ability to obtain a
reliable, market-oriented rate for settlement of contracts even in the event of a lengthy
local market closure, but quickly realized that close coordination with the Russian ruble
futures market was necessary to minimize basis risk to market participants. The results
of this collaboration as reflected in the RUB Template are summarized below.
A. RUB CME-EMTA as the First Settlement Rate Option. At the time the RUB
Working Group began discussions, market practice for RUB/USD non-deliverable
FX transactions was to rely on RUB CME-EMTA as the first settlement rate
option. The RUB Template confirms and formalizes this approach. However, at
the recommendation of the RUB Working Group, the “RUB CME-EMTA” rate
definition found in Annex A to the 1998 Definitions was updated to incorporate a
one business day settlement convention, and the methodology underlying the
survey that produced the rate (the “RUB Methodology”) was modified in
significant respects. (see Sections I and IV).
B. Settlement Date. An important adjustment was made to current market practice
in the area of settlement cycle. The RUB Working Group discussed at length the
settlement cycle for RUB/USD transactions, considering, variously, market
practice for other non-deliverable traded currencies (generally, two business
days), the then-current market practice in Russia for NDF transactions (same day
settlement), the relationship to the spot market and the impact on the market of a
change. Ultimately, the RUB Working Group determined to recommend a T+1
settlement cycle in conjunction with the move to a “TOM” rate quote for the
RUB/USD rate quote by CME and the desire not to disrupt the local Russian spot
market practice of same day settlement. This recommendation is embedded in
the term “Settlement Date and it is anticipated that commencing the effective
date of the documents, the NDF market will observe a T+1 settlement cycle.
C. Price Source Disruption as the Only Disruption Event. Confirming current market
practice, the RUB Template provides for Price Source Disruption as the only
Disruption Event. This was felt appropriate by the RUB Working Group as the
primary rate source for RUB/USD transactions is an industry, or market–based,
rate source, which alleviates the concern that where an official or government
sponsored source is the primary rate source, the rate could, for various reasons
deviate from a true “market” rate, creating a need for a price materiality measure
and trigger (in the form of a Disruption Event) in the contract.
D. Valuation Postponement as the First Disruption Fallback. The RUB Template
provides for “Valuation Postponement” as the first Disruption Fallback following a
Price Source Disruption. “Valuation Postponement for Price Source Disruption”
is a term originally developed in connection with the revisions of the EMTA
Template Terms for ARS/USD Non-Deliverable FX Transactions in January of
2003 (the “ARS Template”). This term provides that, in the absence of a
quotation for the primary settlement rate option, valuation of contracts be
lpj/RUBGuide
3
deferred daily up until the “Maximum Days of Postponement” set forth in the
Template is reached. The Maximum Days of Postponement recommended for
Russia by the RUB Working Group was 14 consecutive calendar days, less than
the 30-day period adopted for Latin American currencies (see EMTA NDF Market
Practice No. 32, dated June 23, 2003), but closer in length to the “14-plus-3” day
period reflected in the standardized terms developed for six Asian currencies in
the 2004 (the “Asian Templates”) (also see EMTA NDF Market Practice No. 34
dated November 1, 2004). Upon reaching the Maximum Days of Postponement,
the next Business Day will be deemed to be the Valuation Date, and a Spot Rate
may be determined for the contract based upon the next applicable Disruption
Fallback. The next applicable Disruption Fallbacks set forth in the RUB Template
are described below.
E. Fallback Reference Price (the EMTA RUB Indicative Survey Rate) as the next
succeeding Disruption Fallback. Following the model developed initially for the
ARS Template and subsequently adopted for all NDF-traded currencies for which
templates exist, the EMTA RUB Indicative Survey Rate (RUB04) (hereinafter, the
“Indicative Rate”) was adopted as the Disruption Fallback following Valuation
Postponement specifically to provide the market with a rate quotation that could
function for long periods of time even in times of significant market dislocation,
illiquidity or otherwise. This required the addition of a new rate source definition,
“EMTA RUB Indicative Survey Rate” or “RUB04”, into Annex A of the 1998
Definitions. This new rate source is modeled after the ARS, BRL and Asian
Currency Indicative Survey Rates previously developed by EMTA (in the case of
the Asian Templates, with the co-sponsorship of the SFEMC and the FXC) and
like them is specifically designed to be market-based, obtained from active
market participants both onshore and offshore, and to operate for long periods of
time.
F. Calculation Agent Determination as the final Disruption Fallback. Calculation
Agent Determination is retained as the final Disruption Fallback in recognition of
the fact that once market-oriented options for objective rate quotation sources
have been exhausted, and the markets have all but ceased to function, parties to
any outstanding contracts at that time will still need to value and close out their
remaining transactions. In these circumstances, reliance on Calculation Agent
Determination does not present the concern regarding systemic basis risk to the
market that fueled the overhaul of the EMTA Templates that began in 2002 with
the ARS Template, and is useful as a final valuation mechanism.
G. Deferral Period for Unscheduled Holiday. The RUB Working Group identified
that market practice prior to the publication of the RUB Template was to observe
an eight-day “Drop Dead Date”. This has been updated in the RUB Template, to
rely on the newer term, “Deferral Period for Unscheduled Holiday” that has
supplanted the Drop-Dead date concept across the board in standardized NDF
documentation. Upon the occurrence of an Unscheduled Holiday and the
consequent unavailability of a rate quotation pursuant to the RUB Methodology,
lpj/RUBGuide
4
valuation of the contract (and consequently, the Valuation Date therefor) may be
deferred for not more than 14 consecutive calendar days (such 14-day period
being a “Deferral Period”). The calendar day after the lapse of the Deferral
Period will be deemed to be the Valuation Date, and a Spot Rate may be
determined for the contract based upon a rate quotation determined pursuant to
the Indicative Survey Rate Methodology (see Section VI).
H. Cumulative Events. Like the ARS, BRL and Asian Templates the RUB Template
incorporates the distinct, but parallel, concepts of a “Deferral Period” in the
context of an Unscheduled Holiday AND “Maximum Days of Postponement”
relative to a Price Source Disruption. In order to eliminate the possibility that
valuation could be deferred or postponed for unreasonably long periods of time
by the interaction or overlapping of these two time periods, the RUB Template
incorporates the concept of “Cumulative Events” to implement a “no tacking” rule
for deferral or postponement, thus ensuring that in no event will valuations be
deferred or postponed for more than 14 consecutive calendar days even if the
Russian market is closed for a longer period of time.
I. Maximum Days of Postponement. As noted above, the RUB Template includes
a concept of “Maximum Days of Postponement”. This covers the same number
of calendar days as a Deferral Period (i.e. 14 consecutive calendar days)
specifically to achieve parallel treatment in the time periods for deferral or
postponement of valuation of an NDF contract following the occurrence of either
an Unscheduled Holiday or a Price Source Disruption.
J. NYC and Moscow as Relevant Cities for Business Day for Valuation Date
purposes. The RUB Template provides for both New York and Moscow as
Business Days for Valuation Date purposes. Market practice prior to the
issuance of the RUB Template seemed largely (but, possibly not exclusively) to
be to observe Moscow Business Days only. This change in market practice was
recommended by the RUB Working Group to reflect the fact that the polling entity
(CME) operates in the United States and ordinarily observes New York Business
Days in its own operations. In addition, the RUB Working Group determined that
this change would be largely in keeping with the market’s expectations as to
when a rate would in fact be available. For purposes of the survey that produces
the RUB CME-EMTA rate, “polling days” will be determined jointly by EMTA and
CME corresponding generally to days on which the foreign exchange markets
are open for business in both Moscow and New York. This change will result in
fewer polling days for this survey and thus, fewer days on which the rate will be
available to the NDF market. Only in the unusual circumstance will this change
affect the futures markets, given the fact that valuations for futures contracts
occur on four days of the year only. A difference in the observance of the
business day convention between the two markets (NDF market moves to a
“Preceding Business Day” convention in the case of regularly scheduled
holidays, but to Following Business Day convention in the case of an
Unscheduled Holiday (as defined in the RUB Template), while the futures market
lpj/RUBGuide
5
uniformly values on the day following.) was identified. It was determined that the
circumstances where this might pose basis risk to the market were so limited and
would be apparent sufficiently in advance that NDF market participants can
readily take action to coordinate for this ahead of time.
K. ENDNOTES. Endnotes that have become standard to EMTA’s Template Terms
for Non-deliverable FX transactions are all included in the RUB Template.
III.
REVISED RUB CME-EMTA RATE SOURCE DEFINITION
The most important change to the RUB CME-EMTA rate source definition (see
Appendix B) is the change to a TOM rate quote from a TOD rate quote. Several other
smaller changes were made to the rate source definition, including a reference to the
updated RUB CME/EMTA Methodology as well as a change in the time the rate quote
will be posted by CME (changed from 4:30 pm, Moscow time, to 1:30 pm, Moscow
time). For more explanation on this, see Section V.
IV.
EMTA RUB INDICATIVE SURVEY RATE DEFINITION
The new Annex A definition for the “EMTA RUB Indicative Rate” (RUB04) (see
Appendix B) describes an EMTA-sponsored survey of market participants based upon
an agreed-upon and published methodology (the EMTA RUB Indicative Rate
Methodology; hereinafter, the “Indicative Methodology”). The definition, and by
extension, the Methodology for the rate, are substantially similar to the other Indicative
Rate definitions and their related Methodologies published by EMTA in connection the
various updates of the EMTA Template Terms for Non-deliverable FX Transactions
published over the last several years. See the various Users’ Guides referred to in
Section I above.
To produce the RUB Indicative Survey Rate, dealers will be asked to quote an indicative
or hypothetical rate based upon the following question:
“Taking the foregoing into account, based upon your knowledge of, and
experience in, the Russian Ruble/U.S. Dollar spot market generally, what, in your
reasonable judgment is or (in the case of an Unscheduled Holiday, would be) the
current prevailing free market spot rate (bid-offer pair) for a standard size
Russian Ruble/U.S. Dollar wholesale financial transaction for same-day
settlement in the Moscow marketplace?
In arriving at this “indicative” quotation, all relevant available rates, whether
expressed or implied, should be considered, as well as the historical
relationships between such rates and the free market RUB/USD wholesale
financial spot rate. Listed below are some (but not all) of the types of rates that
may be taken into consideration in the determination of this “indicative rate”:
The spot rate(s) implied in the offshore NDF market for Russian Ruble/U.S.
Dollar transactions;
lpj/RUBGuide
6
The spot rate implied by any other financial market transactions (to the extent
that such other financial markets are open for business);
The spot rate used in connection with any commercial transactions for goods or
services from offshore suppliers or providers;
Any existing rate for trade finance transactions; and
Any other, existing unofficial rate for Russian Ruble/U.S. Dollar transactions
(commercial or otherwise) “
These factors are intended to be non-exclusive factors that could, in the dealer’s
discretion under the prevailing circumstances, be taken into consideration in arriving at
its rate quotations.
Dealers eligible to participate in the Indicative Survey will include dealers both in
Moscow and in the offshore markets. The choice of a “hybrid” survey was intended to
achieve a balance among several goals: to ensure the greatest participation possible by
active market participants in the survey, to ensure its longevity and to establish as
useful a rate as possible with the greatest possible integrity.
V.
CME / EMTA DAILY RUSSIAN RUBLE PER U.S. DOLLAR REFERENCE
RATE METHODOLOGY
The CME / EMTA Daily Russian Ruble Per U.S. Dollar Reference Rate Methodology
(the “RUB Methodology”) (see Appendix C) was originally constructed in 1998 to
support the calculation and publication of a rate quote as a result of the initial
consultations among market participants following the failure of the MICEX rate. At this
time, CME was asked to administer the survey and up until 2005, the RUB CME-EMTA
rate was continuously produced and published based upon this same Methodology. A
history of daily rates since that time can be found on both CME’s and EMTA’s websites.
Over the course of the development of the RUB Template Terms, a number of changes
were suggested that updated and/or changed market practice in both the NDF and the
futures markets, including some changes that affected the RUB Methodology
substantially. As a result, the RUB Methodology and the relevant portions of the
Consolidated Rules of the Chicago Mercantile Exchange (the “CME Rules”) were
modified in several, significant ways.
One modification to the RUB Methodology involved the nature of the rate quote
requested from the participants in the survey. Since 1998, CME had requested market
participants to provide TOD and TOM rate quotes as well as the overnight money
market rate. CME would use a TOD rate quote, if provided by the survey participants
and if not provided, CME would use the TOM rate quote and the overnight rate to back
out a “synthetic” TOD rate quote for publication. At the recommendation of the RUB
Working Group, and subject to the phase-in procedures developed by CME, survey
participants will be asked for a TOM rate quote only. This recommendation was made
by the RUB Working Group to parallel current market convention in the spot Ruble /U.S.
Dollar market which had changed since the initial design of the survey procedures.
lpj/RUBGuide
7
Another change to the survey procedures included expanding the list of banks
participating in the survey. At the recommendation of the RUB Working Group,
additional names of participants in the Ruble spot market were added to the list of
survey participants (originally compiled in 1998) increasing the total number of
participants to no less than 15 on any given polling day.
Another, and perhaps more significant change is to be found in the structure of the
survey itself. The RUB Methodology as designed in 1998 required CME to survey
market participants twice a day at unannounced, randomly selected times between
12:00 pm and 3:40 pm, Moscow time. The revised RUB Methodology provides for a
single survey to be conducted between 12 and 12:30 p.m. Moscow time. This change
was made at the suggestion of NDF market participants based upon their experience
with primary and back-up surveys in Latin America, and after assessing the Russian
market. In 1998, market participants carefully designed procedures for the RUB
Methodology intended to protect against concerns of market manipulation. The revision
of the survey procedures was the result of a number of factors. These factors included
EMTA’s experience over the last several years in designing rate survey mechanisms for
other currencies, a determination that a single intra-day survey produces a rate that is
closer to a true spot rate than the blended rate produced by the two survey approach,
the desire to facilitate more precise hedging activity in the underlying Russian Ruble
market as well as the determination that the Russian market had stabilized and matured
significantly since 1998. The confluence of these factors all made it possible to suggest
and implement new procedures for the RUB Methodology. While the calculation
methodology itself remains roughly the same, a mechanism intended to produce greater
transparency into the rate quotation process has been introduced. In this regard,
individual rate quotations will be published following the publication of the RUB CMEEMTA Rate itself. EMTA’s experience with this mechanism on the Latin American
markets has led it to conclude that it is a successful mechanism in ensuring
transparency and integrity of the rate.
In addition, under the RUB Methodology, CME and EMTA have discretion to make
appropriate changes to the Methodology to ensure its continued operation and integrity.
VI.
EMTA RUB INDICATIVE SURVEY RATE METHODOLOGY
The EMTA RUB Indicative Survey Rate Methodology (the “Indicative Methodology”)
(see Appendix D) is based upon the ARS Indicative Survey Methodology, which was
repeated almost exactly for the BRL Indicative Survey Methodology in early 2004 and
the Indicative or back-up survey methodologies for the various Asian currencies in late
2004.
EMTA will commence polling for the Indicative Rate Survey following any 14
consecutive calendar day period of time during which the RUB CME-EMTA rate has
been unavailable. EMTA will commence polling for the Indicative Survey in the
lpj/RUBGuide
8
afternoon of the 15th calendar day, following the time period during which CME would
normally poll the market for the RUB CME-EMTA rate.
The Indicative Survey will comprise up to 30 financial institutions that may be located in
either the onshore or offshore Russian Ruble/US Dollar market (as opposed to the
Reference Rate Survey participants, which are all located onshore). Midpoints will be
determined, high and low quotes will be discarded (how many will be based upon the
number of responses received) and the remaining quotes will be averaged. If and to the
extent that less than 8 quotes are received from survey participants on any given day,
no rate will be published by EMTA for that day. EMTA also intends to publish individual
bank rate quotations at a reasonable time following the posting of the RUB CME-EMTA
rate.
The Indicative Survey will be discontinued (a) when the RUB CME-EMTA is once again
viable upon the reopening of the market and/or sufficient responses are obtained to an
attempted Industry Survey, or (b) when, for two consecutive polling days, no rate is
obtained (due to insufficient responses). The mechanics of the Indicative Survey are
structured to ensure that polling can continue and a rate can be quoted for long periods
of time during market disruption (and theoretically indefinitely) if the parameters of the
Methodology can be observed. Abandonment of the Indicative Survey is envisioned
when there are continuous insufficient responses to the Survey. It is envisioned that
insufficient responses by the survey participants would signal a lack of need by such
institutions for a continuing rate quotation representing natural attrition in the market
place as contracts mature or are settled bilaterally by market participants.
As with the RUB Methodology, EMTA now has discretion to make appropriate changes
to the Indicative Methodology to ensure its continued operation and integrity.
VII.
A NOTE ON THE CME RULES FOR RUSSIAN RUBLE FUTURES
Designing the RUB Template and updating the RUB Methodology required
corresponding changes to be made to the CME Rules (see Appendix C) and approval of
these changes by the CME Board. Significant efforts were made by the RUB Working
Group to coordinate the market practices of both the NDF and the futures markets to
ensure to the greatest extent possible, a minimization of basis risk to market
participants and a lack of disruption to the markets. Changes were made in both market
practice and to the CME Rules themselves that involve polling days, type of quotation
requested, survey mechanics, all as summarized above. However, the most profound
change to market practice and the CME Rules involved the introduction of a “deferral” or
valuation postponement period to the futures market. Market practice in the futures
market generally requires the valuation of an open futures contract as soon as possible
after a disruption in a price source. By contrast, NDF market practice over the last
several years had evolved toward a (n almost) universal incorporation of some length of
deferral or valuation postponement period following a price source disruption. The NDF
markets adopted this mechanism in order to permit markets adequate opportunity to
stabilize and to return to orderly price quotation mechanisms before market participants
would close out contracts on the basis of a rate that might not represent a true market
lpj/RUBGuide
9
rate. After careful consideration of the proposal by the NDF market to incorporate a 14day deferral or postponement period into its RUB Template, CME determined that it was
in its customers’ best interests to mirror the NDF market procedures to minimize their
basis risk resulting from the occurrence of a termination of trading day during an NDF
market deferral period. The amendment to the CME Rules for Russian ruble futures
contracts reflect in significant respect the introduction of mechanisms to allow CME to
observe deferral procedures in tandem with the NDF market precisely to minimize this
basis risk. In addition, “phase-in” procedures to minimize disruption to the futures
market in the implementation of the changes were adopted. These phase-in procedures
involve the determination to continue to publish both TOD and TOM rate quotes on the
Ruble futures termination dates only until the last contract of March 2006 with open
interest is valued. That way, no open Ruble futures contract would need to be subject to
a rate quotation methodology not envisioned at the time it was entered into. For the
period June 2005 until March 2006, NDF contracts and futures contracts will be valued
at different fixes however it was determined that the basis risk to the market for these
limited specific dates as a result of this dual quote was sufficiently minimal. Following
March 2006, only a TOM rate quote will be published and both the NDF and futures
markets will look to the same quote.
lpj/RUBGuide
10
June 16, 2005
(Appendix A)
EMTA TEMPLATE TERMS
for
RUB/USD Non-Deliverable FX Transactions
General Terms:
Trade Date:
[Date of Annex A]1:
Reference Currency:
[Notional Amount]2:
[Forward Rate]2:
[Reference Currency Notional
Amount]2:
Reference Currency Buyer:
Reference Currency Seller:
Settlement Currency:
U.S. Dollars
3
Settlement Date :
[DATE CERTAIN], provided, however,
that if the Scheduled Valuation Date is
adjusted in accordance with the
Following Business Day Convention,
then the Settlement Date shall be as
soon as practicable after the Valuation
Date, but in no event later than one
Business Day after determination of a
rate.
Settlement:
Settlement Rate Option:
Valuation Date5:
Applicable Disruption Events:
Price Source Disruption:
Applicable Disruption Fallbacks:
Lpj/RUBTemplate
Non-Deliverable
RUB CME-EMTA (RUB03)4, 7
[DATE
CERTAIN]
(“Scheduled
Valuation Date"), subject to adjustment
in accordance with the Preceding
Business Day Convention; provided
however, that, in the event of an
Unscheduled Holiday, subject to
adjustment in accordance with the
Following Business Day Convention.
Applicable
Valuation Postponement:
Fallback Reference Price:
EMTA RUB Indicative Survey Rate
(RUB04) 6, 7
Calculation Agent Determination
of Settlement Rate:
Other Terms:
Definition
of
“Unscheduled “Unscheduled Holiday” means that a
Holiday”
day is not a Business Day and the
market was not aware of such fact (by
means of a public announcement or by
reference to other publicly available
information) until a time later than 9:00
a.m. local time in the Principal
Financial Center(s) of the Reference
Currency two Business Days prior to
the Scheduled Valuation Date.
“Deferral
Period”
Unscheduled Holiday:
for In the event the Scheduled Valuation
Date becomes subject to the Following
Business Day Convention after the
occurrence of an Unscheduled Holiday,
and if the Valuation Date has not
occurred on or before the 14th
consecutive calendar day after the
Scheduled Valuation Date (any such
period being a “Deferral Period”), then
the next day after the Deferral Period
that would have been a Business Day
but for the Unscheduled Holiday, shall
be deemed to be the Valuation Date.
Valuation Postponement
Price Source Disruption
for “Valuation Postponement” means, for
purposes of obtaining a Settlement
Rate, that the Spot Rate will be
determined on the Business Day first
succeeding the day on which the Price
Source Disruption ceases to exist,
unless the Price Source Disruption
continues to exist (measured from the
date, that, but for the occurrence of the
Price Source Disruption, would have
been the Valuation Date) for a
consecutive number of calendar days
equal to the Maximum Days of
Postponement. In such event, the Spot
Rate will be determined on the next
Business Day after the Maximum Days
of Postponement in accordance with
the next applicable Disruption Fallback.
2
Cumulative Events:
Notwithstanding anything herein to the
contrary, in no event shall the total
number of consecutive calendar days
during which either (i) valuation is
deferred due to an Unscheduled
Holiday,
or
(ii)
a
Valuation
Postponement shall occur (or any
combination of (i) and (ii)), exceed 14
consecutive calendar days in the
aggregate. Accordingly, (x) if, upon the
lapse of any such 14 day period, an
Unscheduled Holiday shall have
occurred or be continuing on the day
following such period that otherwise
would have been a Business Day, then
such day shall be deemed to be a
Valuation Date, and (y) if, upon the
lapse of any such 14 day period, a
Price Source Disruption shall have
occurred or be continuing on the day
following such period, then Valuation
Postponement shall not apply and the
Spot Rate shall be determined in
accordance with the next Disruption
Fallback.
Maximum Days of
Fourteen (14) calendar days
Postponement:
Relevant Cities for Business Day New York and Moscow
for Valuation Date:
Relevant City for Business Day New York City
for Settlement Date:
Calculation Agent8:
3
ENDNOTES
1
Only include if parties wish to modify the presumption that Annex A is
incorporated as amended through the Trade Date.
2
Parties must specify either (a) a Notional Amount and a Reference Currency
Notional Amount or (b) a Forward Rate and either a Notional Amount or a
Reference Currency Notional Amount.
3
A date certain must be specified for Settlement Date.
4
The RUB CME-EMTA Ruble Rate is determined pursuant to the Chicago
Mercantile Exchange / EMTA, Inc. Daily Russian Ruble Per U.S. Dollar
Reference Rate Methodology Effective June 16, 2005.
5
A date certain must be specified for Valuation Date.
6
The EMTA RUB Indicative Survey Rate is determined pursuant to the EMTA
RUB Indicative Survey Methodology effective June 16, 2005.
7
A party may wish to include the following additional provision if such party is or
may be a participant in the Chicago Mercantile Exchange / EMTA, Inc. Daily
Russian Ruble Per U.S. Dollar Reference Rate Survey Effective June 16, 2005
or the EMTA RUB Indicative Survey.
[Quoting Dealer Disclaimer:]
The parties acknowledge that one or both parties to this Transaction acting
directly or through a branch or an affiliate may be requested to provide a
quotation or quotations from time to time for the purpose of determining the
EMTA RUB Indicative Survey Rate and such quotation may affect, materially or
otherwise, the settlement of the Transaction.
8
The following may be applicable for inter-dealer trades where parties agree to be
Joint Calculation Agents:
Calculation Agents: Party A and Party B
If the parties are unable to agree on a determination within one Business Day,
each party agrees to be bound by the determination of an independent leading
dealer in Reference Currency/Settlement Currency Transactions not located in
the Reference Currency jurisdiction (“independent leading dealer”), mutually
selected by the parties, who shall act as the substitute Calculation Agent, with
the fees and expenses of such substitute Calculation Agent (if any) to be met
equally by the parties. If the parties are unable to agree on an independent
leading dealer to act as substitute Calculation Agent, each party shall select an
independent leading dealer and such independent dealers shall agree on an
independent third party who shall be deemed to be the substitute Calculation
Agent.
4
(Appendix B)
Effective as of June 16, 2005, Section 4.5(b) (iii) of Annex A will be amended to
replace section (C) thereof in its entirety and to add a new section (D), each as
follows:
(C) “RUB CME-EMTA” and “RUB03” each means that the Spot Rate
for a Rate Calculation Date will be the Russian Ruble/U.S. Dollar Specified Rate,
expressed as the amount of Russian Rubles per one U.S. Dollar, for settlement
in one Business Day, calculated by the Chicago Mercantile Exchange (“CME”)
and as published on CME’s website, which appears on the Reuters Screen
EMTA Page, at approximately 1:30 p.m., Moscow time, on that Rate Calculation
Date. The Spot Rate shall be calculated by the CME pursuant to the Chicago
Mercantile Exchange / EMTA, Inc. Daily Russian Ruble Per U.S. Dollar
Reference Rate Methodology (which means a methodology, effective as of June
16, 2005, as amended from time to time, for a centralized industry-wide survey of
financial institutions in Russia that are active participants in the Russian
Ruble/U.S. Dollar spot market for the purpose of determining the RUB CMEEMTA Rate).
(D)
"EMTA RUB INDICATIVE SURVEY RATE" and "RUB04" each
means that the Spot Rate for a Rate Calculation Date will be the Russian
Ruble/U.S. Dollar Specified Rate for U.S. Dollars, expressed as the amount of
Russian Rubles per one U.S. Dollar, for settlement in one Business Day, as
published on EMTA’s web site (www.emta.org) at approximately 2:45 p.m.,
Moscow time, or as soon thereafter as practicable, on such Rate Calculation
Date. The Spot Rate shall be calculated by EMTA (or a service provider EMTA
may select in its sole discretion) pursuant to the EMTA RUB Indicative Survey
Methodology (which means a methodology dated as of June 16, 2005, as
amended from time to time, for a centralized industry-wide survey of financial
institutions that are active participants in the Russian Ruble/U.S. Dollar spot
market for the purpose of determining the EMTA RUB Indicative Survey Rate).
Practitioner’s Notes:
•
Lpj/RUBDef
Parties that specify in confirmations that a particular version of
Annex A applies to their trades should reference Annex A effective
as of June 16, 2005 if they desire to incorporate either or both of
the amended RUB CME-EMTA (RUB03) or the new EMTA RUB
Indicative Survey Rate (RUB04) definitions into their trades. If
parties do not specify in their confirmations a particular version of
Annex A, the above Russian Ruble rate source definitions will apply
to trades that incorporate the 1998 FX and Currency Option
Definitions and have a trade date on or after June 16, 2005.
•
Lpj/RUBDef
The RUB CME-EMTA rate source definition has been updated to
incorporate a one business day settlement convention and a
corresponding reliance on a “TOM” rate quote over a “TOD” rate
quote, which changes are also embedded in the methodology used
by the CME and EMTA to produce the rate.
(Appendix C)
April 26, 2005
CHICAGO MERCANTILE EXCHANGE INC. / EMTA, INC
DAILY RUSSIAN RUBLE / U.S. DOLLAR
REFERENCE RATE METHODOLOGY
EFFECTIVE JUNE 16, 2005
Background
In August, 1998, representatives from the Russian Ruble / U.S. Dollar non-deliverable forward (“NDF”)
market participated in a telephone conference call with EMTA, Inc. (previously, the “Emerging Markets
Traders Association”) and Chicago Mercantile Exchange Inc. (“CME” or “CME Clearing House” or any
of CME’s other divisions or designated agents) to discuss the problems associated with a lack of a fixing
for Russian ruble per U.S. dollar trading at the Moscow Interbank Currency Exchange ("MICEX"). This
rate was the standard "settlement rate" used for Russian Ruble/U.S. Dollar non-deliverable foreign
exchange and currency option transactions as well as the rate used by CME to settle its Russian Ruble
futures and options contracts. Following this discussion, CME was asked, in collaboration with EMTA,
to conduct a daily survey (the “CME/EMTA Reference Rate Survey” or the “Survey") of market
participants to determine a Russian Ruble/U.S. Dollar reference rate and CME’s Rules were amended to
incorporate these procedures. The results of the Survey are currently published daily on Reuters page
"EMTA" as well as on CME’s and EMTA’s websites. CME also distributes the CME/EMTA Reference
Rate through its normal quote distribution channels. As a further step, on Friday, September 11, 1998,
the International Swaps and Derivatives Association ("ISDA"), EMTA, and the Foreign Exchange
Committee (FXC) approved the addition of a definition for the CME/EMTA Reference Rate (RUB03) as
another Russian Ruble rate source in Annex A of the 1998 FX and Currency Option Definitions (the
“1998 Definitions”). This facilitated settlement of Russian Ruble/U.S. Dollar NDF transactions to the
CME/EMTA Reference Rate.
In the weeks following September 15, 1998 (which was the Termination of Trading day for a CME
Russian Ruble futures contract), representatives from the Russian Ruble / U.S. Dollar NDF market again
participated in discussions with EMTA and CME to discuss proposed refinements to the CME/EMTA
Reference Rate survey procedures. After discussions, the parties to the discussions agreed that it was in
the best interest of the marketplace to adopt a revised methodology for the Survey, which was then
implemented and governed the operation of the Survey into early 2005.
In the second half of 2004, in response to increasing activity in the Russian Ruble/ U.S. Dollar nondeliverable foreign exchange market, EMTA undertook to prepare standardized documentation for use in
connection with Russian Ruble/U.S. Dollar non-deliverable foreign exchange and currency option
transactions. To achieve a result compatible for both the foreign exchange and futures markets, CME and
EMTA determined to collaborate in this effort and worked closely together for many months to develop a
package of documentation (including further additions to Annex A of the 1998 Definitions) and
procedures suitable for both these markets. Notably, this Methodology was closely reviewed and both it
and CME’s Rules were updated as part of that effort (the “2005 Revisions”). Revisions to Chapter 260
(Russian Ruble Futures) of the CME Rules incorporating these changes were approved by the CME
Board on April 25, 2005 and are attached to this Methodology.
lpj/RUBCMEMethodology.doc
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 2 of 12
Procedures for the CME/EMTA Reference Rate Survey
The Survey. CME will maintain a list of at least 15 survey participants, constituted of international banks
located in Moscow with banking licenses authorizing them to deal spot Russian Ruble/U.S. Dollar foreign
exchange on a principal basis as well as Russian banks and financial institutions based in Moscow that are
active in the Russian Ruble/U.S. Dollar market. On each Polling Day1 CME will contact the survey
participants at an unannounced, randomly selected time between 12:00 Noon and 12:30 PM Moscow
time.2 At such time, CME will ask each survey participant to provide both the bid and offer at which such
participant could then execute a minimum-sized (US$100,000) Russian Ruble / U.S. Dollar spot
transaction for next-day value (“TOM”) in the Moscow marketplace3. A survey participant’s response
will be deemed usable for the Survey if both bid and offer quotes are received by CME. Survey
participants will be requested to confirm their quotes in writing by telex, facsimile, other hard-copy
confirmation, or by recorded telephone message or secure electronic confirmation.
Calculation Methodology. If more than ten usable responses are received for any survey, CME will
randomly select ten of those responses. CME will determine the midpoint of each bid-offer pair and
1
For purposes of the CME/EMTA Reference Rate Survey, Polling Days are determined for each calendar year in
advance jointly by CME and EMTA corresponding generally to days on which the foreign exchange markets are
open for business in both Moscow and New York, adjusted as necessary in the discretion of CME and EMTA from
time to time to take account of market circumstances. Polling Days are published on CME’s and EMTA’s websites.
For purposes of this Methodology, a Polling Day shall be a Polling Day notwithstanding the occurrence of an
Unscheduled Holiday (as defined in the 1998 FX and Currency Option Definitions).
2
Previously, the Methodology provided for two intraday surveys taken at randomly chosen times between 12:00
Noon and 3:40 PM Moscow time. This time interval was originally selected to approximate the trading times for the
former “System for Electronic Lot Trading (“SELT”) session between commercial banks on the Moscow Interbank
Currency Exchange (“MICEX”). As of May 31, 2004, SELT of MICEX and the Unified Trading System (“UTS”)
of the regional Russian exchanges unified under the Unified Trading System nomenclature. The 2005 Revisions
implemented a one-survey structure based upon the assessment by the market that the new, one survey construct and
methodology would provide sufficient protection against concerns of market manipulation while enhancing the
opportunity to produce a more representative spot or dealing rate for the market and to facilitate hedging activities
by market participants
3
Up until the 2005 Revisions, survey participants were requested to provide rates for minimum-sized transactions
(US$100,000) for both same-day value (“TOD”) and next-day value (“TOM”) transactions as well as for the current
bid and offer of the overnight Russian ruble money-market rate. From 1998 until the 2005 Revisions, the TOD rate
was used if provided by the survey participants and if not, the TOM rate that was provided was adjusted to a
synthetic spot rate using an average bid and offer of the overnight Russian ruble money-market rate provided by all
participants and the overnight Fed Funds Effective Rate from Telerate page 118 or Reuters page "FEDM" or a
successor page. The synthetic spot rate (TOD) was determined pursuant to the following standard interest rate parity
formula: TOM = TOD (1+O/N RUB Rate x # Days/ 360)/(1 +O/N Fed Funds Rate x # Days / 360)). The 2005
Revisions recognized that collecting and relying solely on the TOM rate, instead of the TOD rate more accurately
reflected market practice as it had evolved since 1998. Notwithstanding the move to a reliance on the TOM rate in
connection with the 2005 Methodology Revisions, CME determined to continue to collect and publish a TOD rate
for a reasonable period of time for CME Russian Ruble futures contract termination dates until all previously listed
CME Russian ruble futures and options contracts had expired. All CME Russian Ruble futures and options listed for
trading following the implementation of the 2005 Revisions specified settlement to the TOM rate. These procedures
were adopted in order to effect an orderly transition for the futures market.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 3 of 12
eliminate the two lowest and the two highest midpoints. CME will then compute the arithmetic mean of
the remaining midpoints for such survey, rounded to four decimal places (.0001) to determine the
resulting rate. This resulting rate will be the CME/EMTA Reference Rate for that Polling Day. CME and
EMTA will make reasonable efforts to post the CME/EMTA Reference Rate by 1:30 PM Moscow time4
on such day. In order to enhance market integrity by increasing the transparency of the CME’s
calculation, the list of survey participants and individual bid and offer rate quotations for the previous
Polling Day will be published not later than the next Polling Day.5
If less than ten, but at least five, responses for any survey are received, using all such responses, CME
will determine the midpoint of each bid-offer pair, and the lowest and highest of such midpoints will be
eliminated. CME will then compute the arithmetic mean of the remaining 3, 4, 5, 6 or 7 midpoints as
appropriate, and will calculate and publish the CME/EMTA Reference Rate as described above.
On any Polling Day that is also a Termination of Trading day6, CME will determine the reciprocal of the
CME/EMTA Reference Rate (rounded to the nearest $.000001 per Russian Ruble) and the resulting rate
will constitute the Final Settlement Price for purposes of CME Rule 26002.B for such Termination of
Trading day. The Final Settlement Price will be posted by CME on its website and also disseminated
through its normal quote distribution channels.
Insufficient Responses. On any Polling Day, if CME receives less than five responses to the Survey, then
such Survey will be deemed incomplete and no CME/EMTA Reference Rate will be calculated or
published for that day. A notice that no rate is available for that Polling Day will be posted by CME by
approximately 1:30 PM Moscow time.7
4
This time corresponds to 10:30 AM London time, 5:30 AM New York City time, and 4:30 AM Chicago time.
5
The CME has extensive experience in conducting surveys for the purposes of final settlement of its cash-settled
contracts and it has been the practice of the CME to keep the names of the survey participants confidential in order
to insure the integrity of the survey. Following extensive discussions with EMTA and its Members, and taking into
account EMTA’s experiences with survey methodologies in Latin America, this policy was modified and CME
determined to publish individual rate quotations received in response to the CME/EMTA Reference Rate Survey,
but after a time interval designed to ensure that at the time of publication, the rates no longer represent actual dealing
rates. See Rule 26002.B1.
6
CME Rule 26001.G. (Termination of Trading) provides that the CME Russian Ruble futures contract terminates
trading at 11:00 AM Moscow time on the 15th calendar day of the contract month. If the 15th calendar day of the
contract month is not a business day for the Moscow interbank foreign exchange market, then trading in CME
Russian Ruble futures will terminate at the same time on the next business day for the Moscow interbank foreign
exchange market.
7
Pursuant to the EMTA Template Terms for RUB/USD Non-deliverable FX Transactions dated June 16, 2005 (the
“EMTA Template Terms”), parties to a contract based on the EMTA Template Terms may defer or postpone
valuation of their contracts for up to 14 consecutive calendar days if the CME/EMTA Reference Rate is not
available on the Valuation Date of such contract . On any day prior to the lapse of such 14 consecutive calendar day
deferral or valuation postponement period, if and to the extent a CME/EMTA Reference Rate is calculated and
published by CME, then contracts for which the Valuation Date had been postponed or deferred shall be valued
using that rate. Following the lapse of any such period, the parties to the contract may rely upon the next fallback
reference price set forth in the contract for valuation.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 4 of 12
Postponing or Deferring Valuation of CME Russian Ruble Futures Contracts
On any Polling Day that is also a Termination of Trading day for the CME Russian Ruble futures
contract, but for which no CME/EMTA Reference Rate has been calculated or published, then
determination of a Final Settlement Price by CME and the valuation of the CME Russian Ruble futures
contract maturing on that day may be postponed or deferred by CME in its discretion8. CME shall post a
notice on its website notifying the marketplace of any such postponement or deferral of valuation. On the
next, and for each subsequent Polling Day, CME shall attempt to complete a CME/EMTA Reference Rate
Survey and if successful, CME shall calculate and publish the CME/EMTA Russian Ruble Reference
Rate on such day. In such event, CME shall use the reciprocal of the CME/EMTA Russian Ruble
Reference Rate to calculate the Final Settlement Price for any CME Russian ruble futures contract that
has terminated and for which the calculation of its Final Settlement Price has been postponed or deferred
up until such date.
To achieve congruity with the NDF market, following the deferral or postponement of calculation of the
CME Russian Ruble futures contract Final Settlement Price for a maximum of 14 consecutive calendar
days, CME, in its discretion, may determine to publish a Final Settlement Price on any day thereafter. In
the discretion of CME, this Final Settlement Price may be calculated as the reciprocal of the rate
published by EMTA in response to its EMTA RUB Indicative Survey, if available.9
In the event that the CME President determines that CME is not able to determine a Final Settlement
Price according to any of the preceding procedures, then Rule 26003. Emergencies, Acts of
Government, Acts of God will apply to determine the Final Settlement Price. The Board will then take
action as it deems necessary under the circumstances and its decision will be binding on all parties to the
contract.
Amendments. CME and EMTA may, in their discretion from time to time, make such administrative,
procedural or other modifications to this Methodology as are appropriate to ensure the continued
operation and integrity of the CME/EMTA Reference Rate Survey.
Disclaimer. CME and EMTA disclaim liability for the CME/EMTA Russian Ruble Reference Rate, and
no representation or warranty, express or implied, is made concerning the CME/EMTA Reference Rate
(including, without limitation, the Methodology for its determination and its suitability for any particular
use).
(End of Methodology)
8
This mechanism was developed in order to reduce basis risk for market participants associated with holding
Russian Ruble NDF positions and CME Russian ruble futures and/or options on futures positions.
9
The EMTA RUB Indicative Survey is designed as a back-up survey mechanism to be performed by EMTA
following the unavailability of the CME/EMTA Reference Rate for a period of 14 consecutive calendar days. The
Methodology for the EMTA RUB Indicative Survey is available to EMTA Members on EMTA’s website
(www.emta.org) and also in CME Rule 26002.B.3. and the Interpretation to Chapter 260.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 5 of 12
CHAPTER 260
RUSSIAN RUBLE FUTURES
26000. SCOPE OF CHAPTER
This chapter is limited in application to futures trading in Russian rubles versus the U.S. dollar. The
procedures for trading, clearing, delivery, settlement and any other matters not specifically contained
herein shall be governed by the rules of the Exchange.
26001. FUTURES CALL
26001.A.
Trading Schedule
Futures contracts shall be scheduled for trading and delivery during such hours and in such months as
may be determined by the Board of Directors.
26001.B.
Trading Unit
The unit of trading shall be 2,500,000 Russian rubles.
26001.C.
Price Increments
Minimum price fluctuations shall be in multiples of $.00001 per Russian ruble (equivalent to $25.00) per
contract.
26001.D.
Position Limits
A person shall not own or control more than 6,000 contracts net long or net short in any contract month or
more than 10,000 contracts net long or net short in all contract months combined except that in no event
shall he own or control more than 750 contracts in the lead month on or after the day one week prior to
the termination of trading day. For positions involving options on the CME Russian ruble currency
futures, this rule is superseded by the option speculative position limit rule.
26001.E.
Accumulation of Positions
For purposes of this rule, the positions of all accounts directly or indirectly owned or controlled by a
person or persons, and the positions of all accounts of a person or persons acting pursuant to an expressed
or implied agreement or understanding, and the positions of all accounts in which a person or persons
have a proprietary or beneficial interest, shall be cumulated.
26001.F.
Exemptions
The foregoing position limits shall not apply to bona fide hedge positions meeting the requirements of
Regulation 1.3(z)(1) of the CFTC and the rules of the Exchange, and shall not apply to other positions
exempted pursuant to Rule 543.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 6 of 12
26001.G.
Termination of Trading
Futures trading shall terminate at 11:00 AM (Moscow Time)10 on the 15th calendar day of the contract
month. If the foregoing date for termination is not a business day for the Moscow interbank foreign
exchange market, futures trading shall terminate at the same time on the next business day for the
Moscow interbank foreign exchange market.
26001.H.
Contract Modifications
Specifications shall be fixed as of the first day of trading of a contract, except that all deliveries must
conform to government regulations in force at the time of delivery. If any national or international
government agency or body issues an order, ruling, directive or law that conflicts with the requirements of
these rules, such order, ruling, directive or law shall be construed to take precedence and become part of
these rules and all open and new contracts shall be subject to such government orders.
26002. SETTLEMENT PROCEDURES
26002.A.
[Reserved]
26002.B.
Cash Settlement
Applicable for the June 2005 through March 2006 contract months.
All Russian ruble futures contracts remaining open after the close of trading on the termination of trading
day shall be liquidated by cash settlement at a price equal to the Final Settlement Price. The CME
Russian ruble futures contract Final Settlement Price shall be equal to the reciprocal of the result of
Chicago Mercantile Exchange Inc. ("CME") / EMTA, Inc. (previously the Emerging Markets Traders
Association) ("EMTA") Russian Ruble per U.S. Dollar Reference Rate survey procedure as described in
sections 1 and 2 below, rounded to six decimal places.
1.
CME/EMTA Survey Procedure
The Exchange shall determine the CME/EMTA Russian Ruble per U.S. Dollar Reference Rate by
conducting two surveys of financial institutions inside the Russian Federation that are active participants
in the Russian Ruble per U.S. Dollar spot and/or non-deliverable forward ("NDF") markets. For each
survey, the Clearing House shall select at random 8 reference institutions from a list of no less than 12
institutions who are active participants in the market for spot and/or NDF Russian Rubles. During the
regular SELT11 session for foreign exchange trading between commercial banks, two surveys at
unannounced randomly selected times will be conducted. Each participant shall be requested to provide
the bid and offer at which the participant could currently execute a transaction of at least US$100,000 for
same-day value ("TOD") and for next-day value ("TOM") Russian Ruble per U.S. dollar spot transactions
in the Moscow marketplace and the current bid and offer of the overnight Russian ruble money-market
rate. Before a quote is officially accepted, it must be confirmed either by telex, facsimile, or other hard10
This is usually 2:00 a.m. Chicago Time but may be either 1:00 a.m. or 3:00 a.m. Chicago time when Daylight
Savings Time is in effect in either, but not both, Moscow or Chicago.
11
“SELT” is the “System for Electronic Trading” of the Moscow Interbank Currency Exchange (“MICEX”).
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 7 of 12
copy confirmation, or by recorded telephone message. A participant's survey response will be deemed
usable if either a TOD rate (bid and offer) is provided or a TOM rate (bid and offer) and an overnight
Russian ruble money-market rate (bid and offer) is provided, or both. For each participant, the TOD rate
will be used if provided, otherwise, the TOM rate will be adjusted to a synthetic TOD rate using an
average bid and offer of the overnight Russian ruble money-market rate provided by all participants and
the overnight Fed Funds Effective Rate from Telerate page 118 or Reuters page "FEDM" or a successor
page. For each of the two surveys, the midpoint of each bid-offer pair shall be determined, and the two
lowest and two highest such midpoints shall be eliminated. The Clearing House shall then compute the
arithmetic mean of the remaining 4 midpoints for each survey and average the means of the two surveys
to determine the CME/EMTA Reference Rate.
In the event that the CME/EMTA survey procedures result in less than eight but at least five responses for
either of the two surveys, the CME Clearing House shall select at random as appropriate five, six, or
seven reference institutions from a list of no less than 12 institutions who are active participants in the
market for spot and/or NDF Russian rubles. The midpoint of each bid-offer pair shall be determined, and
the lowest and highest of such midpoints shall be eliminated. The Clearing House shall then compute the
arithmetic mean of the remaining 3, 4, or 5 midpoints as appropriate.
Any survey with at least 5 usable responses shall be deemed complete.
If both surveys on the termination day are complete, the arithmetic average of the two shall be the
CME/EMTA Russian ruble per U.S. Dollar Reference Rate. On the termination of trading day the
reciprocal of this arithmetic mean of the Russian ruble per U.S. dollar spot exchange rate will then be
calculated and rounded to the nearest $.000001 per Russian Ruble. This number shall become the Final
Settlement Price for the termination of trading day. If for any reason there is difficulty in obtaining a
quote within a reasonable time interval from one of the participants in the sample, that participant shall be
dropped from the sample, and another shall be randomly selected to replace it.
If only one survey is complete, the result of that survey shall be the CME/EMTA Russian Ruble per U.S.
Dollar Reference Rate for that day. In that instance the Final Settlement Price shall be determined by the
procedures in section 2.
In the event the CME/EMTA survey procedures result in less than five responses for each of the two
surveys, a substitute for the CME/EMTA Reference Rate may be published for information purposes only
along with an explanatory note.
2. Futures Final Settlement Price When Both Surveys Cannot Be Completed For A Given Day
In the event that two surveys cannot be completed, the Clearing House shall conduct the survey on the
following business day. Provided two surveys can be completed on that day as described in section 1
above, the results shall be used to determine the Final Settlement Price as so described.
In the event that two surveys cannot be completed on the following business day either, then the results
from the most recent day when two complete surveys were conducted shall be used to determine the Final
Settlement Price. In this instance, TOM rates will be used if provided to get the nearest value date to the
termination of trading, or in the absence of TOM rates, TOD rates would be adjusted to synthetic TOM
rates.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 8 of 12
3. When No Survey Can Be Done
However, in the event that the Exchange President determines that the Clearing House is not able to
determine a Final Settlement Price pursuant to any of the preceding sections, then Rule 26003 shall apply
to determine the Final Settlement Price.
[Start New Revisions to Rule 26002.B. Cash Settlement]
Applicable for the June 2006 and subsequently listed contracts.
All Russian ruble futures contracts remaining open after the close of trading on the termination of trading
day shall be liquidated by cash settlement at a price equal to the Final Settlement Price. The CME
Russian ruble futures contract Final Settlement Price shall be equal to the reciprocal of the result of
Chicago Mercantile Exchange Inc. (“CME”) / EMTA, Inc. (previously, the “Emerging Markets Traders
Association”) Russian Ruble per U.S. Dollar Reference Rate survey procedure as described in sections 1,
2, 3 and 4 below, rounded to six decimal places.
1.
CME/EMTA Survey Procedure
CME shall determine the CME/EMTA Russian Ruble per U.S. Dollar Reference Rate by conducting a
survey of financial institutions inside the Russian Federation that are active participants in the Russian
Ruble per U.S. Dollar spot and/or non-deliverable forward ("NDF") markets. For such survey, CME shall
poll no less than 15 such institutions at an unannounced, randomly selected time between 12:00 noon and
12:30 p.m. Moscow time.12 Each participant shall be requested to provide the bid and offer at which the
participant could currently execute a transaction of at least US$100,000 for next-day value ("TOM")
Russian Ruble per U.S. dollar spot transactions in the Moscow marketplace. Before a quote is officially
accepted, it must be confirmed either by telex, facsimile, or other hard-copy confirmation, or by recorded
telephone message or secure electronic confirmation. If ten or more responses are received to the survey,
CME shall randomly select ten of such responses. CME shall calculate the midpoint of each bid-offer pair
and shall eliminate the two lowest and two highest midpoints. CME shall then compute the arithmetic
mean of the remaining 6 midpoints for the survey to determine the CME/EMTA Reference Rate.
In the event that the CME/EMTA survey procedures result in less than ten but at least five responses for
the survey, using all responses received, CME shall determine the midpoint of each bid-offer pair and the
lowest and highest of such midpoints shall be eliminated. CME shall then compute the arithmetic mean
of the remaining 7, 6, 5, 4 or 3 midpoints for the survey as appropriate to determine the CME/EMTA
Reference Rate.
A survey with at least 5 usable responses shall be deemed complete.
If such survey on the termination day is complete, the arithmetic average of the survey results shall be the
CME/EMTA Russian ruble per U.S. dollar Reference Rate. On the termination of trading day the
reciprocal of the CME/EMTA Russian ruble per U.S. dollar Reference Rate (spot exchange rate) will then
12
This time interval usually corresponds to 9:00 a.m. to 9:30 a.m. London time, 4:00 a.m. to 4:30 a.m. New York
City time and 3:00 a.m. to 3:30 a.m. Chicago time.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 9 of 12
be calculated and rounded to the nearest $.000001 per Russian Ruble. This number shall become the
Final Settlement Price for the Termination of Trading day.
In the event the CME/EMTA survey procedures result in less than five responses for the survey, then such
survey shall be deemed incomplete and no CME/EMTA Reference Rate shall be calculated and published
for that day. A notice that no rate is available for that day shall be posted by CME by approximately 1:30
p.m. Moscow time.
In order to contribute to transparency in the survey process, by not later than the next Polling Day from
each survey, CME shall publish on the CME Web site as well as on the EMTA Web site the results of
each day’s CME/EMTA Russian Ruble Reference Rate Survey, including the names of respondents to the
survey and each respondent’s corresponding bid and offer quotes provided in each day’s survey.
2.
Futures Final Settlement Price When the Survey Cannot Be Completed For A Given Day
In the event that the survey cannot be completed on the CME Russian ruble futures contract Termination
of Trading day, and therefore, CME cannot determine the CME/EMTA Russian Ruble Reference Rate
used to calculate the Final Settlement Price, then final settlement of the CME Russian ruble futures
contract may be deferred or postponed for up to (but not more than) 14 consecutive calendar days. This
procedure is intended to correspond to the deferral or postponement procedure followed by the NDF
market pursuant to recognized market practices as published by EMTA, Inc. Upon the publication of the
CME/EMTA Reference Rate prior to the lapse of such 14-day period, CME shall determine the Final
Settlement Price using the reciprocal of such Rate and the CME Russian ruble futures contract shall be
settled on such day. If however, 14 consecutive calendar days pass without publication of the
CME/EMTA Reference Rate, CME shall otherwise determine the Final Settlement Price. See section 3.
3.
Deferring or Postponing Valuation and the EMTA RUB Indicative Survey Rate
After the lapse of 14 consecutive calendar days without publication of the CME/EMTA Reference Rate,
the Final Settlement Price may be calculated and published by CME on the next business day using the
EMTA RUB Indicative Survey Rate, if available. The EMTA RUB Indicative Rate is a rate proposed to
be published by EMTA, Inc. (or its designee) and posted on the public portion of EMTA’s website
following the continuous unavailability of the CME/EMTA Reference Rate for 14 calendar days in order
to provide the NDF market with a back-up rate source for valuation of certain outstanding non-deliverable
foreign exchange transactions if the CME/EMTA Reference Rate cannot be published for an extended
period of time. The procedures for the EMTA RUB Indicative Survey are defined in the Interpretation to
this chapter.
However, if EMTA fails to publish the EMTA RUB Indicative Rate following the lapse of the valuation
postponement or deferral period described above, and the CME/EMTA Reference Rate is also not
available, then Rule 26003 shall apply to determine the Final Settlement Price. See section 4.
[3]4.
When No Survey Can Be Done and the EMTA RUB Indicative Survey Does Not Provide a Rate
However, in the event that the Exchange President determines that the Clearing House is not able to
determine a Final Settlement Price pursuant to any of the preceding sections and the Interpretation to this
chapter, then Rule 26003 shall apply to determine the Final Settlement Price.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 10 of 12
26003.
EMERGENCIES, ACTS OF GOVERNMENT, ACTS OF GOD
If the Exchange President determines that the calculation of the Final Settlement Price is prevented by
strike, fire, accident, act of government, or act of God, he shall call a special meeting of the Board of
Directors and arrange for the presentation of evidence respecting the emergency condition. If the Board
determines that an emergency exists, it shall take such action as it deems necessary under the
circumstances and its decision shall be binding upon all parties to the contract. For example, and without
in any way limiting the Board's power, it may: 1) accelerate or extend the Termination of Trading date,
2) set the Final Settlement Price equal to the previous day's settlement price, and/or 3) determine a Final
Settlement Price based on information at its disposal.
(End of Rule)
INTERPRETATION TO CHAPTER 260
Effective, June 16, 2005, EMTA, Inc. adopted procedures for the “EMTA RUB Indicative Survey”
(“RUB Indicative Survey”) to be conducted in certain circumstances when the CME/EMTA Russian
Ruble Reference Rate is unavailable for settlement of expiring non-deliverable forward (“NDF”) Russian
ruble versus U.S. dollar transactions. The RUB Indicative Survey results in the calculation of the “EMTA
RUB Indicative Survey Rate” (“RUB Indicative Survey Rate”), which can be used by the NDF market to
settle non-deliverable Russian ruble/U.S. Dollar transactions in defined circumstances. In order to reduce
basis risk for market participants trading both NDF Russian ruble transactions and CME Russian ruble
futures and options on futures contracts, CME has also adopted procedures to settle terminated CME
Russian ruble futures and options contracts to the reciprocal of the RUB Indicative Survey Rate when the
CME/EMTA Russian Ruble Reference Rate has been unavailable for 14 consecutive calendar days. The
following sets forth the EMTA methodology for the RUB Indicative Survey.
EMTA RUB Indicative Survey
For purposes of determining the EMTA RUB Indicative Survey Rate (a “RUB Indicative Survey Rate”)
for any Valuation Date, EMTA (or a service provider EMTA may select in its sole discretion) shall
conduct a survey of financial institutions (a “RUB Indicative Survey”) for such date.
•
Polled Banks: On each day that a RUB Indicative Survey is to be conducted, EMTA shall survey no
more than 30 randomly selected financial institutions that are active participants in the Russian
Ruble/U.S. Dollar market.
•
Survey Question: Each survey participant will be asked to provide its reasonable judgment of what
is (or, in the case of an Unscheduled Holiday, would be) the current prevailing free market Russian
Ruble spot rate (bid-offer pair) for a standard size Russian Ruble /U.S. Dollar wholesale financial
transaction for settlement in one business day in the Moscow marketplace on the Valuation Date. In
arriving at this indicative quotation, survey participants will be directed to take such factors into
consideration as they deem appropriate, which factors may (but need not) include any or all of the
following: the spot rate(s) implied in the offshore non-deliverable foreign exchange market for
Russian Ruble/U.S. Dollar transactions; the spot rate implied by any other financial market
transactions (to the extent that such other financial markets are open for business); the spot rate used
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 11 of 12
in connection with any commercial transactions for goods or services from offshore suppliers or
providers; any existing rate for trade finance transactions; and any other existing unofficial rate for
Russian Ruble/U.S. Dollar transactions (commercial or otherwise).
•
Quotes: Quotes shall be provided to the fourth decimal point (e.g., 1.0000).
•
Price Source Disruptions and Unscheduled Holidays: (A) on any Business Day on which a Price
Source Disruption has occurred or is continuing OR (b) on any Valuation Date that is NOT a
Business Day, in each case following the lapse of a 14 calendar day period during which the
CME/EMTA Reference Rate (“RUB CME-EMTA” and “RUB03”) shall have been continuously
unavailable, EMTA shall poll survey participants beginning at approximately 2:00 PM (Moscow
time)13
Use of Survey Results
•
EMTA will determine the mid-point of each bid-offer pair. The arithmetic mean of the mid-points
will be used to determine the RUB Indicative Survey Rate, rounded to the fourth decimal point as
described below.
•
If the RUB Indicative Survey results in 21 or more responses, then the 4 highest and 4 lowest midpoints will be eliminated, and the arithmetic mean of the remaining responses shall be computed and
will constitute the RUB Indicative Survey Rate for such Valuation Date. For purposes of eliminating
the 4 highest and 4 lowest mid-points, if more than 4 mid-points have the same highest value or
lowest value, then only 4 such mid-points shall be eliminated
•
If the RUB Indicative Survey results in less than 21 but 12 or more responses, then the 2 highest and
2 lowest mid-points will be eliminated, and the arithmetic mean of the remaining responses shall be
computed and will constitute the RUB Indicative Survey Rate for such Valuation Date. For purposes
of eliminating the 2 highest and 2 lowest mid-points, if more than 2 mid-points have the same highest
value or lowest value, then only 2 such mid-points shall be eliminated.
•
If the RUB Indicative Survey results in less than 12 but 10 or more responses, then the highest and
the lowest rate will be eliminated and the arithmetic mean of the remaining responses shall be
computed and will constitute the RUB Indicative Survey Rate for such Valuation Date. For purposes
of eliminating the highest and lowest mid-points, if more than 1 mid-point has the same highest value
or lowest value, then only 1 such mid-point shall be eliminated.
•
If the RUB Indicative Survey results in less than 10 but 8 or more responses, then no rate will be
eliminated and the arithmetic mean of all rates obtained shall be computed and will constitute the
RUB Indicative Survey Rate for such Valuation Date.
Insufficient Responses
•
13
If the RUB Indicative Survey results in less than 8 responses, no RUB Indicative Survey Rate will be
available for the relevant Valuation Date.
Moscow time is 8 hours earlier than New York time and 9 hours earlier than Chicago time.
CME/EMTA Ruble Methodology & CME Ruble Rule Changes
April 14, 2005
Page 12 of 12
RUB Indicative Survey Rate Publication
•
The RUB Indicative Survey Rate will be published on EMTA’s web site (www.emta.org) (the
“Publication Site”) by approximately 2:45 PM (Moscow time) 14, or as soon thereafter as practicable,
on the Valuation Date.
•
As soon as it is determined that the RUB Indicative Survey will result in Insufficient Responses, a
notice that no RUB Indicative Survey Rate is available for the Valuation Date shall be published on
the Publication Site.
Discontinuing the RUB Indicative Survey
•
The RUB Indicative Survey will be discontinued (a) following the publication of a CME EMTA
Reference Rate (RUB CME-EMTA (RUB03)) or (b) on the third day following polling for the RUB
Indicative Survey Rate that results in less than 8 responses for more than two consecutive polling
days. Notwithstanding the foregoing, nothing herein shall be construed to prevent EMTA from reinitiating the RUB Indicative Survey at an appropriate time in the future.
•
A notice that the RUB Indicative Survey has been discontinued will be published on the Publication
Site.
Amendments to the Methodology
•
EMTA may, in its discretion, from time to time, make such administrative, procedural or other
modifications to this Methodology as are appropriate to ensure the continued operation and integrity
of the RUB Indicative Survey.
Disclaimer
•
EMTA (and any service provider EMTA may select) disclaim liability for the RUB Indicative Survey
Rate, and no representation or warranty, express or implied, is made concerning the RUB Indicative
Survey Rate (including, without limitation, the methodology for determining the RUB Indicative
Survey Rate and its suitability for any particular use).
End of the Interpretation to Chapter 260.
(End Chapter 260)
Filename: CMERUBMeth.doc
14
Moscow time is 8 hours earlier than New York time and 9 hours earlier than Chicago time.
June 16, 2005
(Appendix D)
EMTA RUB Indicative Survey Rate Methodology
Dated as of June 16, 2005
Capitalized terms not defined below are defined in the 1998 FX and Currency Option
Definitions as published by the International Swaps and Derivatives Association, Inc.
EMTA, Inc. and the Foreign Exchange Committee.
I.
The EMTA RUB Indicative Survey
For purposes of determining the EMTA RUB Indicative Survey Rate (a “RUB
Indicative Survey Rate”) for any Valuation Date, EMTA (or a service provider
EMTA may select in its sole discretion) shall conduct a survey of financial
institutions (a “RUB Indicative Survey”) for such date.
1
•
Polled Banks: On each day that a RUB Indicative Survey is to be conducted,
EMTA shall survey no more than 30 randomly selected financial institutions
that are active participants in the Russian Ruble/U.S. Dollar market.
•
Survey Question: Each survey participant will be asked to provide its
reasonable judgment of what is (or, in the case of an Unscheduled Holiday,
would be) the current prevailing free market Russian Ruble spot rate (bidoffer pair) for a standard size Russian Ruble /U.S. Dollar wholesale financial
transaction for settlement in one business day in the Moscow marketplace on
the Valuation Date. In arriving at this indicative quotation, survey participants
will be directed to take such factors into consideration as they deem
appropriate, which factors may (but need not) include any or all of the
following: the spot rate(s) implied in the offshore non-deliverable foreign
exchange market for Russian Ruble/U.S. Dollar transactions; the spot rate
implied by any other financial market transactions (to the extent that such
other financial markets are open for business); the spot rate used in
connection with any commercial transactions for goods or services from
offshore suppliers or providers; any existing rate for trade finance
transactions; and any other existing unofficial rate for Russian Ruble/U.S.
Dollar transactions (commercial or otherwise).
•
Quotes: Quotes shall be provided to the fourth decimal point (e.g., 1.0000).
•
Price Source Disruptions and Unscheduled Holidays: (A) on any Business
Day on which a Price Source Disruption has occurred or is continuing OR (B)
on any Valuation Date that is NOT a Business Day (or that would have been
a Business Day but for the occurrence of an Unscheduled Holiday), in each
case following the lapse of a 14 calendar day period during which the
CME/EMTA Reference Rate (“RUB CME-EMTA” and “RUB03”) shall have
been continuously unavailable, EMTA shall poll survey participants beginning
at approximately 2:00 PM (Moscow time)1
Moscow time is 8 hours earlier than New York time and 9 hours earlier than Chicago time.
Lpj/RUBIndicativeMeth
II.
III.
•
Use of Survey Results
•
EMTA will determine the mid-point of each bid-offer pair. The arithmetic
mean of the mid-points will be used to determine the RUB Indicative Survey
Rate, rounded to the fourth decimal point as described below.
•
If the RUB Indicative Survey results in 21 or more responses, then the 4
highest and 4 lowest mid-points will be eliminated, and the arithmetic mean
of the remaining responses shall be computed and will constitute the RUB
Indicative Survey Rate for such Valuation Date. For purposes of eliminating
the 4 highest and 4 lowest mid-points, if more than 4 mid-points have the
same highest value or lowest value, then only 4 such mid-points shall be
eliminated
•
If the RUB Indicative Survey results in less than 21 but 12 or more
responses, then the 2 highest and 2 lowest mid-points will be eliminated, and
the arithmetic mean of the remaining responses shall be computed and will
constitute the RUB Indicative Survey Rate for such Valuation Date. For
purposes of eliminating the 2 highest and 2 lowest mid-points, if more than 2
mid-points have the same highest value or lowest value, then only 2 such
mid-points shall be eliminated.
•
If the RUB Indicative Survey results in less than 12 but 10 or more
responses, then the highest and the lowest rate will be eliminated and the
arithmetic mean of the remaining responses shall be computed and will
constitute the RUB Indicative Survey Rate for such Valuation Date. For
purposes of eliminating the highest and lowest mid-points, if more than 1
mid-point has the same highest value or lowest value, then only 1 such midpoint shall be eliminated.
•
If the RUB Indicative Survey results in less than 10 but 8 or more responses,
then no rate will be eliminated and the arithmetic mean of all rates obtained
shall be computed and will constitute the RUB Indicative Survey Rate for
such Valuation Date.
Insufficient Responses
•
IV.
RUB Indicative Survey Rate Publication
•
2
If the RUB Indicative Survey results in less than 8 responses, no RUB
Indicative Survey Rate will be available for the relevant Valuation Date.
The RUB Indicative Survey Rate will be published on EMTA’s web site
(www.emta.org) (the “Publication Site”) by approximately 2:45 PM (Moscow
time) 2, or as soon thereafter as practicable, on the Valuation Date.
Moscow time is 8 hours earlier than New York time and 9 hours earlier than Chicago time.
LPJ/indcmeth
2
•
V.
VI.
As soon as it is determined that the RUB Indicative Survey will result in
Insufficient Responses, a notice that no RUB Indicative Survey Rate is
available for the Valuation Date shall be published on the Publication Site.
Discontinuing the RUB Indicative Survey
•
The RUB Indicative Survey will be discontinued (a) following the publication of
a CME EMTA Reference Rate (RUB CME-EMTA (RUB03)) or (b) on the third
day following polling for the RUB Indicative Survey Rate that results in less
than 8 responses for more than two consecutive polling days.
Notwithstanding the foregoing, nothing herein shall be construed to prevent
EMTA from re-initiating the RUB Indicative Survey at an appropriate time in
the future.
•
A notice that the RUB Indicative Survey has been discontinued will be
published on the Publication Site.
Amendments to the Methodology
EMTA may, in its discretion, from time to time, make such administrative,
procedural or other modifications to this Methodology as are appropriate to
ensure the continued operation and integrity of the RUB Indicative Survey.
VII.
Disclaimer
EMTA (and any service provider EMTA may select) disclaim liability for the RUB
Indicative Survey Rate, and no representation or warranty, express or implied, is
made concerning the RUB Indicative Survey Rate (including, without limitation,
the methodology for determining the RUB Indicative Survey Rate and its
suitability for any particular use).
LPJ/indcmeth
3