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Contents
Table of Contents
Enhancement Overview
The existing method divides the available credit (GC2 exposure limit - GC2 exposure utilization for the day) by the “average margin rate” of contracts traded for the week to calculate an allowable order quantity (i.e., a “clip-size” limit) for the next incoming order. The new method will calculate the margin requirement of the incoming new order, using the margin rate of the contract (or contracts) in the order, and compare this requirement with the available credit. If requirement is less than or equal to the available credit, the order will be accepted; otherwise, it will be rejected.
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| Current GC2 | Enhanced GC2 |
|---|---|
Allowable Clip Size – Most Restrictive Available Exposure/Dynamic Margin Rate Max Quantity Limit Available Exposure/Selected Product Margin Rate in RMT UI | Allowable Clip Size – Most Restrictive Available Exposure/Specific Listed Contract Margin Rate Max Quantity Limit |
Futures Margin Rates – Static Values from Previous Friday End-of Day | Futures Margin Rates – Updated Daily COB |
Strategies (Futures and Options) Spread Discount Given after Order Acceptance | Strategies (Futures and Options) Order Acceptance Based on Spread Discount Value No change in Spread Usage calculation methodology |
Option Risk Values SPAN 13th Risk Array Static Values from Previous Friday End-of Day | Option Risk Values Option Delta * Futures Margin Rate Option Deltas Updated Daily COB Minimum Risk Value - $20 |
Order Reject Text Enhancement
Currently iLink Order reject due to GC2 violations are denoted with generic text "Order exceeds clip size ##".
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| Contract Type | Reject text |
|---|---|
| Futures and related contracts | "GC2 Futures Exposure Violation: <Text with details of the violation>" |
| Options and related contracts | "GC2 Options Exposure Violation: <Text with details of the violation>" |
Changes to GC2 Credit Setting User Interface
The GC2 - Manage Limits screen will be updated to remove ability to change the Margin Rate fields highlighted below:
Futures Clip Size Calculations
Following is an illustration of changes to Clip size calculations
Assumptions
Futures Exposure Limit: $1,000,000
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Total Quantity: 20
Total Usage: $139,250
Example 1
New Futures Order
| Side | Quantity | Contract |
|---|---|---|
| Buy | 500 | ZFM4 |
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Result: Buy 500 of ZFM4 accepted.
Example 2
New Calendar Spread Order
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Result: Buy 2000 of ZNM4-ZNU4 accepted.
Options Risk Values
| Current GC2 | 13th Risk Array | Derived COB - Previous Friday | |||
| Example | ESM4 P5000 | Risk Value | |||
| Date | Future Settle | ||||
| Friday | 4/19/2024 | 5003.75 | Underlying Future Margin Rate | $11,800 | |
| 13th Risk Array | $8,561 | ||||
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| Enhanced GC2 | |||||
| Date | Future Settle | ||||
| Friday | 4/19/2024 | 5003.75 | Underlying Future Margin Rate | $11,800 | |
| Delta | 0.479 | $5,652 | |||
| Monday | 4/22/2024 | 5047.50 | Underlying Future Margin Rate | $11,800 | |
| Delta | 0.422 | $4,980 | |||
| Tuesday | 4/23/2024 | 5106.50 | Underlying Future Margin Rate | $11,800 | |
| Delta | 0.345 | $4,071 | |||
Options Minimum Risk Value
| Current GC2 | 13th Risk Array | Derived COB - Previous Friday | |||
| Example | OZFK4 C1075 | Risk Value | |||
| Date | Future Settle | ||||
| Friday | 4/19/2024 | 105.0625 | Underlying Future Margin Rate | $1,400 | |
| 13th Risk Array | $7 | ||||
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