Nymex Implements New Procedures For Metals Deliveries
Wednesday September 19, 3:30 AM
NEW YORK (Dow Jones)--The destruction of warrants for precious metals deliveries issued by licensed depositories and the inaccessibility to metals stored under the razed World Trade Center has prompted the New York Mercantile Exchange to implement new procedures and a temporary emergency rule, the exchange announced Tuesday.
The bars of gold, silver, platinum and palladium are stored at ScotiaMocatta Depository Corporation located in a vault beneath 4 World Trade Center and may not be available until the debris from last week's collapse has been cleared. Its status as a viable depository is currently unknown, Nymex noted.
ScotiaMocatta is the metals-trading arm of the Bank of Nova Scotia (T.BNS).
Nymex has approved replacing the lost warrants with new warrants issued by an Exchange-licensed depository, as long as the chain of custody can be documented, an affidavit of loss is prepared by the warrant holder and the clearing member of the original warrant guarantees the validity of the chain of custody.
The chain of custody must be documented either by the street invoice issued by the clearing house, the records of the depository proving the original warrant was issued, transfer letters issued by the clearing house, or a photocopy of the original warrant.
If a chain of custody can't be verified by documents from the licensed depository, the clearing member or the Exchange clearing house, the holder of the warrant must obtain an open penalty indemnity bond for the lost or stolen instrument, Nymex said.
If a clearing member taking delivery is provided a warrant from the ScotiaMocatta Licensed Depository and refuses to accept transfer of title of metal located there, that member "may require that the clearing member making delivery provide either a warrant from another Exchange licensed depository, or physical metal, meeting the specifications of the applicable metal contract, in a mutually agreed upon location," in accordance with certain guidelines.
Those guidelines stipulate that, if agreed to by the member accepting delivery, the clearing member making delivery will execute an alternative notice of intention to deliver on the form prescribed by Nymex and then deliver a completed, executed copy of the intention to deliver to the Exchange. That delivery will release the clearing members and the Exchange from their respective obligations under the Exchange contracts.
Clearing members, in executing this notice, "shall indemnify the Exchange against any liability, cost, or expense it may incur for any reason as a result of the execution, delivery or performance of such contracts or such agreement, or any breach thereof or default thereunder," Nymex's published release said. The Exchange will also be required to return all margin money held for each clearing member's account to the appropriate clearing member upon receiving the alternative notice of intention to deliver.
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