COMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members Effective Thursday, August 25, 2011

TO: Clearing Member Firms Floor Brokers/Floor Clerks
FROM: CME Clearing
DATE: August 24, 2011
RE: COMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members Effective Thursday, August 25, 2011
The expiration date for the September 2011 options contract for Copper Option (HX), Gold Option (OG), and Silver Option (SO) is Thursday, August 25, 2011.

GENERAL OPERATIONAL PROCEDURES
All Clearing Members and Qualified Floor Traders that carried an options position as of the close of business day prior to the expiration day, or engaged in trading activity on Expiration Day in the expiring options contract will be required to have a knowledgeable, duly authorized representative present at the their normal work station promptly at 2:15 PM EST until released by the Exchange staff as specified below. All adjustments and/or corrections, must be accompanied by relevant supporting documentation prior to being incorporated into expiration processing, in essence making the expiration processing an extension of the afternoon trade resolution procedures.

CME Group NY Division Clearing (212-299-2120), COMEX Floor Trade Processing (212-299-2465 and 212-299-2044) personnel, as well as a representative of the Floor Committee will be available to assist with the processing of notices of Exercise and Abandonment, position transfers, trade corrections and other questions or problems you may have.


CLEARING DEPARTMENT OPERATIONAL PROCEDURES
The Option Expiration process is a screen based process for which all information is provided in FEC (Front End Clearing) and the CME Position System. No Option Expiration Reports will be provided. The following screens will assist you through the Option Expiration process:

ALLOCATIONS AND CLAIMS DEADLINES Give-up orders entered by the executing Party must be allocated within 30 minutes from the time the trade was entered into FEC. The carrying Clearing Member must accept or reject trades within 60 minutes of allocation. Allocations may not be transferred following the last day of trading for the expiring option contracts.

MEMBER TRADE INQUIRY (FEC)
Contains real-time top day trade information, trade information for the previous 4 business days and trades adjusted for the previous 4 business days by adjustment date.

POSITION LIST (CME Positions)
Contains a real-time snapshot for each option series from the start of day position to the projected end of day position.

REVIEW TRANSFERS (FEC)
Contains all trade transfers “TO” and “FROM” your firm and the status of each transfer. Search Type: Transfer Sub Type: Normal

OPTION EXERCISE NOTICE SUBMISSION (CME Positions) (Option Instruction Entry)
Contains your available long position and an input field to enter the number of long positions you wish to exercise.

OPTION ABANDON SUBMISSION (CME Positions) (Option Instruction Entry)
Contains your available long position and an input field to enter the number of long positions you wish to abandon.

CONTRARY OPTION EXERCISE/ABANDON INSTRUCTIONS
These will disseminated via e-mail. They will also be available on the CME Group NY Division 24 Hour Information Service and on the web at http://www.cmegroup....ption-exercise- instructions.html .

POSITION CHANGE SUBMISSION (CME Positions) (PCS List)
PCS may be submitted either by manual input or by electronic transmission. To enter your firm’s final PCS manually, enter the Long PCS and check the lock button adjacent to the Long PCS. Checking the lock box will make the system ignore any further transmissions or edits from the firm for the day unless the lock checkbox is removed. This input may be made at any time prior to 6:45 PM EST.

ALL POSITIONS ARE DEEMED FINAL (CME Positions)
Upon completion of all PCS input, all positions will be deemed final.

EXERCISE/ASSIGNMENT INFORMATION (CME Positions) (Option Instruction Summary)
This will be available to you by contract series which contains all your Assignments on one window. You will be notified of its availability by E-Mail and by the CME Group NY Division Clearing 24 Hour Information Service. Exercise/Assignment information is also available in the POS650 report.
All Clearing Members are required to have an authorized representative(s) available for any communication during the expiration process.

CLEARING DEPARTMENT 24 HOUR INFORMATION SERVICE
Clearing Members should call the CME Group NY Division Clearing 24 Hour Information Service at (212) 299-2309, Option 1 (Clearing Report Status), Option 2 (Option Expiration Status) for messages advising Members of the event status.
E-MAIL
Clearing Member Representative should read their E-Mail messages immediately to be aware of each event status.
The standard event CME Group NY Division Clearing 24 Hour Information Service and/or E-Mail messages and the sequence in which they will be announced are:

CLEARING STANDARD EVENT MESSAGES
Option Exercise/Abandon Notice Submission Deadline
Announce Out-of-the Money Exercise and In-the-Money Abandon Submissions
All positions are deemed final
Announce Exercise/Assignment Information Availability in CME Positions and Expiration Report A vailability

APPROXIMATE TIME OF MESSAGE AVAILABILITY
N/A 4:45 PM EST
7:00 PM EST 8:30 PM EST
USUAL EVENT TIME
4:30 PM EST 4:45 PM EST
7:00 PM EST 8:30 PM EST
24 HOUR INFORMATION SERVICE (F) E-MAIL (E)
BOTH N/A B
F B
The times appearing in the Usual Event Time column are based on normal operational conditions and could vary.
If you have any questions concerning these procedures, please contact Melvin Garcia at (212) 299-2144 or Melvin.Garcia@cmegroup.com, Joe Fata at (212) 299-2165 or Joe.Fata@cmegroup.com, or Anthony Di Benedetto at (212) 299-2152 or Anthony.DiBenedetto@cmegroup.com, prior to the expiration process.

COMEX Registered Silver Bullion Inventories Fall Sharp 38.5% in Two Weeks – Risk of COMEX Silver Default Remains

Spot gold and silver prices rose slightly again this morning after hitting a one-month high yesterday as equity markets internationally came under selling pressure. The Moody's downgrade of Greece and worryingly poor US economic data again pushed investors to seek the safe haven of bullion. Gold reached new record nominal highs in sterling yesterday (£945.62/oz) as the pound fell on concerns about the UK economy.

Silver Prices and Rates
Markets await key U.S. data on nonfarm payrolls Friday, while ongoing concerns over Greek sovereign debt and contagion in the Eurozone also affected market sentiment and supported the precious metals.

COMEX Silver Bullion Registered Inventories – January 1996 to May 31st 2011
Friday's U.S. payrolls is likely to show that the world's largest economy is weakening and may be on the verge of a double dip which will likely lead to further safe haven demand.
Seeing as the extent of the recovery was always exaggerated, this is not a surprise to us.
The supply situation in the silver market gets more interesting by the day.
Registered COMEX silver inventories have fallen to multiyear lows at 29,631,268 ounces. In the last 5 days they fell from 32,132,903 ounces to Tuesday’s holdings of 29,631,268 ounces. As can be seen in the table below registered silver inventories fell every single day last week leading to a sharp fall of 8.4% in 5 days.
Registered metals are those metals which meet the standards for delivery under the silver futures contracts and for which a receipt from an Exchange-approved depository or warehouse has been issued. Eligible metals are those which meet the delivery standards as stated in the rules for which no receipt from an Exchange-approved warehouse has been issued.
This is a long term trend that has been seen since the early 1990’s when total COMEX silver stockpiles were over 101.45 million ounces.

However, the scale of the drop in inventories since early 2008 is significant and the trend has accelerated in recent weeks.

Registered silver inventories are down a sharp 38.5% in just two weeks – from 41,044,280 to 29,631,268

COMEX Silver Bullion Registered Inventories – June 2009 to May 31st 2011
The record nominal highs near $50/oz, seen 31 years ago and again at the end of April, are likely to be seen again sooner rather than later due to the increasingly delicate supply demand balance.
The scale of current investment demand and industrial demand, especially from China and the rest of Asia, is such that it is important to keep monitoring COMEX warehouse stocks.
The Hunt Brothers were one of a few dozen billionaires in the world in the late 1970’s when they attempted to corner the market. Today there are thousands of billionaires in the world, any number of whom could again attempt to corner the silver market.
Also, today unlike in the 1970s, there are sovereign wealth funds and hundreds of hedge funds with access to billions in capital.

The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real. However it would be very difficult to corner the silver market due to the very small nature of the silver bullion market.
A COMEX default remains a risk as does a massive short squeeze which could see silver surge as it did in the 1970s and again recently leading to silver targeting the inflation adjusted record high of $140/oz.
As ever price predictions from gurus should be take with a pinch of salt and diversification remains of paramount importance.

http://www.businessinsider.com/comex-registered-silver-bullion-inventories-fall-sharp-385-in-two-weeks--risk-of-comex-silver-default-remains-2011-6