Ethanol Futures and Options Trading

Trading Specs: 7,750 U.S. gallons

Trading Hours: 8:50 AM to 12:05 PM New York Time.

Price Quotation : Cents per gallon

Contract Months: February, April, June, September and November

Ticker Symbol: XA

Minimum Fluctuation: 1/10 cent/gal., equivalent to $7.75 per contract.

Daily Price Limits: None

Position Limits: 1,000 futures equivalent contracts net on the same side of the market in all months combined or in any one month. Exemptions may apply for hedge, straddle and arbitrage positions. Contact the Exchange for more information.

Grade: Biomass-derived, un denatured, anhydrous ethanol at 60 degrees Fahrenheit.

Countries of Origin: The Bahamas, Brazil, Costa Rica, El Salvador, Guatemala, Jamaica, Nicaragua, Panama and the United States.

Delivery Points : A port in the country of origin or in the case of landlocked countries, at a berth or anchorage in the customary port of export. Subject to minimum standards established by the Exchange's rules.

Last Trading Day: Last business day of the contract month.

Notice Day: First business day after last trading day.

Options Contract on Ethanol

Confers to buyer the right to buy (in the case of a call) or sell (in the case of a put) one Ethanol futures contract.

Trading Unit: One Ethanol futures contract.

Trading Hours: 8:50 AM to 12:05 PM New Your Time

Price Quotation: Cents per gallon

Contract Months: February, April, June, September and November

Ticker Symbol: XA

Minimum Fluctuation: 1/10 cent/gal., equivalent to $7.75 per contract.

Daily Price Limits: None

Strike Price Increments: Five cents/gallon.

Last Trading Day: The last trading day for any regular option month shall be the second Friday of the calendar month.

Expiration Date/Time: 9:00 PM New York Time on last trading day. Notification of intention to exercise must be made by an options holder to carrying member firm by 3:00 PM that day

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Ethanol Futures Commodity Contract Specifications

The United States ethanol industry is experiencing major growth and this growth trend is expected to continue. Factors contributing to ethanol growth include relatively low prices for grains, higher prices for crude oil, unleaded gasoline, bans on MTBE (oxygenate) and growing concern about national dependence on imported crude oil. A record 3.41 billion gallons of ethanol was produced in 2004, more than double the 2000 production.

Ethanol (ethyl alcohol) is an alcohol produced by fermenting and distilling starch crops that have been converted into simple sugars. It has been with us for a long time. And now current events suggest that ethanol's time has arrived as a fuel alternative.

Ethanol fuel can be produced from any biological feedstock that contains appreciable amounts of sugar or materials that can be converted into sugar such as starch or cellulose. Sugar cane is the predominant commodity that is converted into ethanol fuel on a global scale. Grains (corn, wheat and barley) are another common source, with corn serving as the primary feedstock in the U.S. The European Union also uses other sources such as sugar beet molasses.

The ethanol dry-milling production process starts by grinding up the commodity so it is more easily and quickly processed. Once ground up, the sugar is either dissolved out of the material or the starch or cellulose is converted into sugar. The sugar is then fed to microbes that use it for food, producing ethanol and carbon dioxide in the process. A final step purifies the ethanol to the desired concentration. Ethanol can also be made from a wet-milling process. The largest ethanol production facilities in the U.S. use the wet-milling process. The final product is ethanol, regardless of the sugar source.

Ethanol takes three major forms from its original commodity: beverages, industrial products and fuel (E-85). Today, ethanol is most commonly used in reformulated gasoline (RFG) to increase octane and improve the emissions quality of gasoline. Fuel Ethanol takes two basic forms: anhydrous ethanol (with all water removed) to use for blending with gasoline (5.7-10% in the U.S. up to 26% in Brazil); and hydrous ethanol (with some water), to be used as a standalone fuel (95% ethanol).

The global importance of the sugar trade provides a critical basis for the establishment of the ethanol futures market. The size of the new ethanol contract (7,750 gallons) represents a close approximation of the amount of ethanol that can be produced from 112,000 pounds of raw sugar (the size of the Sugar No. 11 futures contract). The ethanol (anhydrous, un denatured alcohol) deliverable against the contract does not specify sugar-based ethanol. The commodity contract treats all ethanol as ethanol and makes no distinction, very much in the same way that the world Sugar No. 11 contract makes no distinction between sugar produced from beets or cane.

With so many variables at work in the pricing of ethanol, the presence of a price benchmark is critical to the growth and economic stability of the ethanol industry. The New York Board of Trade has created a world ethanol fuel futures and options marketplace to bring some order to this unpredictable pricing picture.

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