CME Globex Volume
gelbergroup.com
Currently more than 20% of total electronic volume on CBOT
Consistently accounts for 5-10% of CME Globex Volume
Now help me out with this:
cme.com
VIII. SUMMARY
CME’s financial safeguard system provides a unique blend of risk management and financial surveillance techniques designed for the protection of the clearing membership and its customers. The keystones of the system are CME’s ability to detect unsound practices, the financial backing of its clearing members and the CME Trust. This combination provides unparalleled safeguards for the protection and benefit of all users of CME markets. In the 106-year history of CME and its predecessor organizations, there has never been a failure by a clearing member to pay settlement variation to CME Clearing; there has never been a failure by a clearing member to meet a performance bond call; there has never been a failure by a clearing member to deliver resulting from the exercise or assignment of an option contract; there has never been a failure by a clearing member to meet its delivery obligations; and, there has never been a failure of a clearing member resulting in a loss of customer funds. This system has been remarkably successful in periods of tremendous volatility in the financial markets. Nonetheless, the Exchange continuously strives to improve and strengthen its financial safeguard system.
Performance Bonds
CME establishes minimum initial and maintenance performance bond levels for all products traded through its facilities. For CBOT products CME Clearing establishes clearing level requirements, while the CBOT establishes minimum customer level requirements. CME bases these requirements on historical price volatilities, current and anticipated market conditions, and other relevant information. Performance bond levels vary by product and are adjusted to reflect changes in price volatility and other factors. Both initial and maintenance performance bonds are good faith deposits to guarantee performance on futures and options contracts. Maintenance performance bond levels represent the minimum amount of protection against potential losses at which the Exchange will allow a clearing member to carry a position or portfolio. Should performance bonds on deposit at the customer level fall below the maintenance level, Exchange rules require that the account be remargined at the required higher initial performance bond level. Clearing members may impose more stringent performance bond requirements than the minimums set by the Exchanges. At CME Clearing level, clearing members must post at least the maintenance performance bonds for all positions carried. This requirement applies to positions of individual members, non-member customers and the clearing member itself.
In setting performance bond levels, CME Clearing monitors current and historical price movements covering short-, intermediate- and longer-term data using statistical and parametric and non-parametric analysis. CME Clearing and CME Board of Directors then typically set futures maintenance performance bond levels to cover at least the maximum one-day price move on 95% of the days during these time periods. The actual performance bond requirements often exceed this level. Performance bond requirements for options reflect movements in the underlying futures price, volatility, time to expiration and other risk factors, and adjust automatically each day to reflect the unique and changing risk characteristics of each option series. In addition, long options must be paid for in full, and CME mandates stringent minimum performance bonds for short option positions.
CME calculates performance bonds using a system developed and implemented by CME in 1988 called Standard Portfolio Analysis of Risk™ (SPAN®). SPAN bases performance bond requirements on the overall risk of the portfolios using parameters as determined by CME’s Board of Directors, and thus represents a significant improvement over other performance bond systems, most notably those that are “strategy-based” or “delta-based.” SPAN simulates the effects of changing market conditions and uses standard options pricing models to determine a portfolio’s overall risk. It treats futures and options uniformly while recognizing the unique features of options. In standard options pricing models, three factors most strongly affect options values: the underlying futures price, volatility (variability of futures price) and time to expiration. As these factors change, futures and options may gain or lose value. SPAN constructs scenarios of futures prices and volatility changes to simulate what the entire portfolio might reasonably lose over a one day time horizon. The resulting SPAN performance bond requirement covers this potential loss. CME has licensed SPAN to futures and options exchanges around the world and has successfully established SPAN as the industry’s standard performance bond system.
CME Clearing requires “gross” performance bonds for customer positions in CME products. The clearing member must deposit performance bonds for each open position (long or short) held at the end of each day’s trading, with appropriate allowances for spreads. CME Clearing allows for “net” performance bonds for customer positions in CBOT products as a continuation of the market practices for those products. If a clearing member does not have sufficient performance bond collateral on deposit with CME Clearing, then the clearing member must meet a call for cash performance bond deposits by 6:40 a.m. and/or by 2:00 p.m. Chicago time, which results in a direct debit to the clearing member’s account at one of CME’s settlement banks. Clearing members’ performance bond deposits may only be:
Cash (Currently U.S. dollars, Japanese yen, Euro currency, Swiss francs, British pounds, Canadian dollars, Australian dollars, Norwegian krone, Mexican peso and Swedish krona)
U.S. Treasury securities including “Strips” and “TIPS”
Letters of credit issued in the Exchange’s name by approved banks
Stocks selected from among approximately half of those in the Standard & Poor’s 500 ® Stock Price Index and depository trust shares based on the Standard & Poor’s 500 Stock Price Index
Selected sovereign debt of Canada, France, Germany, and the UK
Discount notes issued by the Federal Farm Credit Banks, Federal Home Loan Mortgage Corporation, Federal Home Loan Bank System, or Fannie Mae, provided that the notes have less than twelve months remaining to maturity; also included are the Callable and Non-callable Fannie Mae Benchmark series of Bills, Bonds and Notes, the Freddie Mac Reference series of Bills, Bonds and Note, Federal Home Loan Bank Bills, Notes and Bonds as Federal Farm Credit Bank Bills, Notes and Bonds
Mortgage Backed Securities issued by Fannie Mae, Freddie Mac or Ginnie Mae
Fixed rate note and bond securities issued by the Federal Farm Credit Bank, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Fannie Mae or Ginnie Mae
IEF2: Money Market Mutual Funds allowable under CFTC Regulation 1.25
IEF3 and IEF4: Clearing firm self-directed collateral management programs, which allow collateral instruments permitted under CFTC Regulation 1.25.
IEF5: A demand deposit on the Trust Ledger of JP Morgan Chase Bank.
WTF?? The Philster probably is not happy about that last one - hehe. |
