CME Group to Launch Next Generation of CME SPAN Margin Methodology

Discussion in 'Index Futures' started by ETJ, May 29, 2019.

  1. ETJ


    CME Group to Launch Next Generation of CME SPAN Margin Methodology
    Wed May 29 2019
    CHICAGO, May 29, 2019 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced it will launch the next generation of its industry-leading Standard Portfolio Analysis of Risk (SPAN) margin framework – CME SPAN 2. The new framework is slated for testing in the second half of 2019 and, pending regulatory review and approval, roll out in the first half of 2020.

    CME SPAN 2 will provide enhanced risk management capabilities in a single, unified interface by maintaining SPAN's current calculations and functions while incorporating several new modeling, reporting and margin replication enhancements. As with SPAN, CME SPAN 2 will continue to be based on a Value at Risk (HVaR) framework, using historical data to model how a position or portfolio may gain or lose value under various risk scenarios. CME SPAN 2 will enable implementation of granular and dynamic adjustments to margins at a product and portfolio level. In addition, CME SPAN 2 will provide enhanced reporting of margining into different risk factors such as market risk, liquidity and concentration.

    "Incorporating insights gained from more than 30 years of market leadership, CME SPAN 2 provides unique enhancements that will streamline and standardize margin calculations across listed futures, options, and OTC products," said Sunil Cutinho, President, CME Clearing. "By modernizing our technology, expanding the breadth of risk factors that can be analyzed, and improving the overall user experience, CME SPAN 2 will deliver greater transparency and operational efficiencies to clearing members and end clients."

    CME Clearing plans to launch CME SPAN 2 in a phased, multi-year approach and in compliance with its regulatory responsibilities, beginning with energy products. CME SPAN 2 will launch after extensive pre-launch testing that will provide CME's market participants the opportunity to perform comparative analysis relative to existing SPAN. The full rollout is expected to last up to four years, during which both SPAN and CME SPAN 2 will be available in parallel for end users.

    SPAN was originally launched in 1988 to calculate margin requirements for a wide range of derivatives by analyzing the "what-ifs" of virtually any market scenario and is utilized by more than 50 exchanges, clearing organizations, service bureaus and regulatory agencies worldwide.

    As the world's leading and most diverse derivatives marketplace, CME Group ( enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

    CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively.Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.

    Robert Morse likes this.
  2. Times


    Awesome, Hope TD Ameritrade gets on board. They don't have any kind of span margin for futures I think.
  3. Sig


    They certainly do in my account. Try selling an ATM ES put and let us know what kind of margin it's giving you? If it's less than the full value of the contract should the S&P drop to zero, you're getting SPAN margin.
  4. srinir


    Not for future spreads. If i am long five year note and short 10 year note based on exchange published ratio, they do charge margin for both contracts instead of relief offered by CME
    Times likes this.
  5. bone

    bone ET Sponsor

    That sucks. Complain to CME - Member Clearing Firms are supposed to abide by exchange rules including SPAN margin offsets.
  6. Sig


    Do you have a screen shot of a dummy order entry showing that, I'm not seeing it?
  7. bone

    bone ET Sponsor

    Depends on the FCM - for CERTAIN the margin offset should show up the Daily Statement. Usually I’ll see a firm’s Risk Department assign more intraday buying power to a spread trader (Advantage routinely uses 4x) then the exact SPAN offset appears in the evening.pdf statement emailed to the client.
    srinir likes this.
  8. srinir


    I do not have account with them anymore. They used to charge me full margin couple of years back, when i had account with them.

    What margins you are seeing say when you buy ZF and sell ZN in 3:2 ratio?
  9. bone

    bone ET Sponsor

    CME lists a 81% margin credit offset using a 5:3 Delta. 3:2 is close - margin credit will be a smidge less percentage points. The difference between a 1.67 and a 1.5 hedge ratio. What many people don't realize is that if you are using a hedge ratio slightly different than what CME lists on their website - SPAN will still calculate a margin offset credit on that position.
    Last edited: May 30, 2019
  10. Overnight


    What I worry about is that this will cause performance bonds to fluctuate much more rapidly during a given week, thus not allowing smaller swing folks like us to realistically decide on how to engage in trading based on the more rapid changes. If it does, I would hope the intra-week changes are fairly small. Of course, one should not be trading at max margin anyways, but I digress.

    Is more rapid margin adjustment what you perceive to be the outcome of this @bone ? @Robert Morse?
    #10     Jun 2, 2019