Perhaps no other market in the world has the universal appeal of the gold market. For centuries, gold has been coveted for its unique blend of rarity, beauty, and near indestructibility. Nations have embraced gold as a store of wealth and a medium of international exchange; individuals have sought to possess gold as insurance against the day-to-day uncertainties of paper money.

COMEX Division gold futures and options provide an important alternative to traditional means of investing in gold such as bullion, coins, and mining stocks.

Gold futures contracts are also valuable trading tools for commercial producers and users of the metal. Commercial concentrations of gold are found in widely distributed areas: in association with ores of copper and lead, in quartz veins, in the gravel of stream beds, and with pyrites (iron sulfide). Seawater contains astonishing quantities of gold, but its recovery is not economical.

The greatest early surge in gold refining followed the first voyage of Columbus. From 1492 to 1600, Central and South America and the Caribbean islands contributed significant quantities of gold to world commerce. Colombia, Peru, Ecuador, Panama, and Hispaniola contributed 61% of the world’s newfound gold during the 17th century. In the 18th century, they supplied 80%.

Following the California gold discovery of 1848, North America became the world’s major gold supplier; from 1850 to 1875, more gold was discovered than in the previous 350 years. By 1890, the gold fields of Alaska and the Yukon were the principal sources of supply and, shortly afterwards, discoveries in the African Transvaal indicated deposits that exceeded even these. Today, the principal gold producing countries include South Africa, the United States, Australia, Canada, China, Indonesia, and Russia.

The United States first assigned a formal monetary role for gold in 1792, when Congress put the nation’s currency on a bimetallic standard, backing it with gold and silver.

During the Great Depression of the 1930s, most nations were forced to sever their currency from gold in an attempt to stabilize their economies.

Gold formally reentered the world’s monetary system in 1944, when the Bretton Woods agreement fixed all the world’s paper currencies in relation to the U.S. dollar which in turn was tied to gold. The agreement was in force until 1971, when President Nixon effectively cancelled it by ending the convertibility of the dollar into gold.

Today, gold prices float freely in accordance with supply and demand, responding quickly to political and economic events.

Gold is a vital industrial commodity. It is an excellent conductor of electricity, is extremely resistant to corrosion, and is one of the most chemically stable of the elements, making it critically important in electronics and other high-tech applications.

A broad cross-section of companies in the gold industry, from mining companies to fabricators of finished products, can use the COMEX Division gold futures and options contracts to hedge their price risk. Furthermore, gold has traditionally had a role in investment strategies, and gold futures and options can be found in investors’ portfolios.

Contract Specifications

Trading Unit
Futures: 100 troy ounces
Options: One COMEX Division gold futures contract.

Trading Hours
Futures and Options: Open outcry trading is conducted from 8:20 A.M. until 1:30 P.M. Eastern Time

After-hours futures trading is conducted via the NYMEX ACCESS® internet-based trading platform beginning at 3:15 P.M. on Mondays through Thursdays and concluding at 8:00 A.M. the following day. On Sundays, the session begins at 7:00 P.M. All times are New York time.

Trading Months
Futures: Trading is conducted for delivery during the current calendar month, the next two calendar months, any February, April, August, and October thereafter falling within a 23-month period, and any June and December falling within a 60-month period beginning with the current month.

Options: The nearest six of the following contract months: February, April, June, August, October, and December. Additional contract months — January, March, May, July, September, and November — will be listed for trading for a period of two months. A 24-month option is added on a June/December cycle.

The options are American-style and can be exercised at any time up to expiration.

On the first day of trading for any options contract month, there will be 13 strike prices each for puts and calls.

Price Quotation
Futures and Options: Dollars and cents per troy ounce. For example: $282.70 per troy ounce.

Minimum Price Fluctuation
Futures and Options: Price changes are registered in multiples of 10¢ ($0.10) per troy ounce, equivalent to $10 per contract. A fluctuation of $1 is, therefore, equivalent to $100 per contract.

Maximum Daily Price Fluctuation
Futures: Initial price limit, based upon the preceding day’s settlement price is $75 per ounce. Two minutes after either of the two most active months trades at the limit, trades in all months of futures and options will cease for a 15-minute period. Trading will also cease if either of the two active months is bid at the upper limit or offered at the lower limit for two minutes without trading.

Trading will not cease if the limit is reached during the final 20 minutes of a day’s trading. If the limit is reached during the final half hour of trading, trading will resume no later than 10 minutes before the normal closing time.

When trading resumes after a cessation of trading, the price limits will be expanded by increments of 100%.

Options: No price limits.

Last Trading Day
Futures: Trading terminates at the close of business on the third to last business day of the maturing delivery month.

Options: Expiration occurs on the second Friday of the month prior to the delivery month of the underlying futures contract. Beginning with the expiration of the December 2002 contract, options will expire on the fourth business day prior to the end of the month preceding the options contract month. If the expiration day falls on a Friday or immediately prior to an Exchange holiday, expiration will occur on the previous business day.

Exercise of Options
Until 3:00 P.M., New York time, on any business day for which the option is listed for trading. On expiration day, the buyer has until 4:00 P.M., New York time, to exercise an option.

Options Strike Price Intervals
Options: $10 per ounce apart for strike prices below $500, $20 per ounce apart for strike prices between $500 and $1,000, $50 per ounce apart for strike prices above $1,000. For the nearest three contract months, strike prices will be $5, $10, and $25 apart, respectively.

Delivery
Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository located in the Borough of Manhattan, New York City, licensed by the Exchange.

Delivery Period
The first delivery day is the first business day of the delivery month; the last delivery day is the last business day of the delivery month.

Exchange of Futures for, or in Connection with, Physicals (EFP)
The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.

Grade and Quality Specifications
In fulfillment of each contract, the seller must deliver 100 troy ounces (±5%) of refined gold, assaying not less than .995 fineness, cast either in one bar or in three one-kilogram bars, and bearing a serial number and identifying stamp of a refiner approved and listed by the Exchange. A list of approved refiners and assayers is available from the Exchange upon request.

Position Limits
Position accountability level of 7,500 contracts. Includes gold futures and options on a net futures equivalent basis. Spot month limit of 3,000 contracts from the beginning of the last business day prior to the delivery month.

Margin Requirements
Margins are required for open futures and short options positions. The margin requirement for an options purchaser will never exceed the premium paid.

Trading Symbols
Futures: GC
Options: OG

Safeguards and Standards Overview
The New York Mercantile Exchange is not only the world’s premier market for energy and metals trading, it is also the safest. A sophisticated, intricate system of safeguards virtually guarantees against counterparty credit risk and default, an assurance that is absent from over-the-counter markets and many foreign exchanges.

Because the rules of the Exchange give it broad self-regulatory responsibilities, market participants can trade confident of the financial protection offered by a fully margined clearinghouse.

This self-regulatory authority derives from regulations of the Commodity Futures Trading Commission (CFTC) which, in turn, is overseen by the U.S. Congress.

The Exchange maintains absolute neutrality toward the markets because its rules apply to both sides of a transaction. The Exchange does not trade futures or options, does not take positions in the market, and does not advise others on what positions to take. Instead, the Exchange provides a forum where members, on behalf of their customers, their employers, or themselves, can trade the Exchange’s standardized contracts in a safe, efficient, and orderly manner.

This section explains how the Exchange’s rules and procedures are designed to assure all who use its markets – commercial hedgers and investors alike – of the highest standards of integrity and financial security.

Organization of The Exchange

The Exchange is a membership organization that, following its 1994 merger with the Commodity Exchange, Inc., conducts trading through two divisions, the NYMEX Division and the COMEX Division.

The NYMEX Division consists of 816 seats held by approximately 770 individual members who can trade in energy and platinum group metals futures and options and have proprietary electronic trading rights for all COMEX Division contracts. The COMEX Division is comprised of 772 seats held by approximately 640 individuals who can trade futures and options on gold, silver, copper, aluminum, as well as the NYMEX Division platinum group metals contracts on a proprietary basis. COMEX Division members also have proprietary electronic trading rights for NYMEX Division products.

Members of the Exchange include approximately 60 clearing firms and 120 non-clearing firms. The Exchange is owned by its members and is governed by an elected board of directors who set policy and establish the future direction and scope of Exchange activities. Members need to be approved by the board and must meet strict standards for business integrity and financial solvency. These standards are even higher for clearing members. They include rigidly enforced capitalization requirements which the Exchange monitors on a daily basis.

Regulation of Market Participants

Among the more important Exchange rules and regulations are those governing position and price limits, margin requirements, and delivery procedures. These rules and regulations, which allow the Exchange to maintain fair and orderly markets, are vital to the smooth operation of the Exchange. Enforcement rests with the Exchange compliance department, which is divided into three groups: trade, market, and financial surveillance. Trade surveillance focuses on the trading activity of Exchange members and member firms. Market surveillance reviews large trader data and surveys activity in the various physical markets underlying the futures contracts. Financial surveillance monitors the fiscal suitability of participants in the Exchange markets and conducts periodic audits of certain member firms.