Intra-Commodity Future Spread

For a Secured Overnight Financing Rate (SOFR) bundle, the Spread Adjustment Factor does not apply because all the future legs are on the same side.

Intra-Commodity Covered (single option leg and single future leg)

For 10-yr Note option calls covered by the 10-yr Note future, the Spread Adjustment Factor does not apply because the spread crosses over futures and options Product Types.

Inter-Exchange Future Spread across exchange groups

For Gulf Mercantile Exchange (GME) / NYMEX energy future calendar spread, if the Risk Admin defines the GME and NYMEX across two exchange groups, the Spread Adjustment Factor does not apply.

If the Risk Admin has grouped GME/NYMEX in the same exchange group, then the Spread Adjustment Factor applies.

Calculate Value A = Spread’s total margin

Value A is the sum of:

• The spread order quantity (+/- for buy/sell)

• Multiplied by each leg’s buy/sell ratio (+/- for buy/sell)

• Multiplied by each leg’s maintenance margin rate

Calculate Value B = Spread's total margin in absolute value (abs) terms

Value B is the sum of:

• The spread order quantity                                                                                                  

• Multiplied by each leg’s buy/sell leg Ratio

• Multiplied by each leg’s maintenance margin rate

Calculate Value C = Value B multiplied by the Spread Adjustment Factor (10%)

Determine the spread’s working long value

• If Value A is positive, the working long value is Value A + Value C

• If Value A is zero or negative, the working long value is Value C

Determine the spread’s working short value

• If Value A is negative, the working short value is the absolute Value of A + Value C

• If value A is zero or positive, the working short value is  Value C

If Value A is positive

Value A + Value C

Value C

If Value A is negative

Value C

Absolute Value of A + Value C 

If Value A is zero

Value C

Value C

 (Buy) 1 UBU4 - (Sell) UBZ4 spread (Ultra U.S. Treasury Bond Sep 2024 - Dec 2024) with equal margin rates

• Leg 1: One contract UBU4 - Maintenance Margin (MM) $5500 

• Leg 2: One contract UBZ4 - Maintenance Margin (MM) $5500 

Value A =  qty * MM leg 1 - qty * MM Leg 2

1 (qty) * 5500 MM  - 1 (qty) * 5500 MM = $0

Value B = absolute value (qty * MM leg 1) + absolute value (qty * MM leg 2)

1 (qty) * 5500 MM + 1 (qty) * 5500 MM = $11000

Value C = Value B * 0.10 (spread adjustment factor)

$11000 (value B, above) * 0.10 (spread adjustment factor) = $1100

• GC2 Working Long Exposure =  $1100

• GC2 Working Short Exposure =  $1100

Buy 1 CLN5-CLZ5 (Crude Oil Future Jul 2025 - Dec 2025) with different margin rates

• Leg 1: One contract CLN5 - Maintenance Margin (MM) $4000 

• Leg 2: One contract CLZ5 - Maintenance Margin (MM) $3600

Value A = [ qty * leg 1 - qty * leg 2]

1 (qty) * 4000 MM  - 1 (qty) * 3600 MM= $400

Value B = absolute value [qty * leg 1) + absolute value (qty * leg 2]

1 (qty) * 4000 MM + 1 (qty) * 3600 MM = $7600

Add sum of the Maintenance Margin of the legs and multiply by 10% - spread adjustment factor, then apply to the applicable working long and short

Value C = Value B * 0.10 

$7600 (value B, above) * 0.10 (spread adjustment factor) = $760

• GC2 Working Long Exposure    = A ($400) + C ($760) = $1160

• GC2 Working Short Exposure = C = $760   

User defined spread - 10-Year U.S. Treasury Note spread - Sep 2024 109.50 / 112.00 call option spread

• Underlying future maintenance margin of ZNU4 = $2000

• Risk value = Maintenance Margin (MM) of underlying future (ZNU4) * delta of OZNU4 
  Risk values are calculated using prior end of day (eod) delta 

• Leg 1: Buy - One contract OZNU4 - Sep 2024 Call Option -109.5 strike - MM $2000 * (prior-eod) delta 0.755 =$1510

• Leg 2: Sell - One contract OZNU4  - Sep 2024 Call Option - 112.0 strike - MM $2000 * (prior-eod) delta 0.279 = $558

Value A = [ qty * leg 1 risk value  - qty *  leg 2 risk value]

1 qty * $1510 risk value - 1 qty * $558 risk value = $952

Value B = absolute value [qty * leg 1 risk value + absolute value qty * leg 2 risk value]

$1510 + $558 = $2068

Multiply sum of risk values by spread adjustment factor

Value C = Value B * 0.10

2068 * 0.10 (spread adjustment factor) = $207

• GC2 Working Long Exposure: A ($952) + C ($207) = $1159

• GC2 Working Short Exposure: C = $207

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>"

Buy Futures

Y

The Buy Futures area on the GC2 window enables the GC2 Risk Administrator to set Max Quantity Limit for a futures buy order.

Buy Options

Y

The Buy Options area on the GC2 window enables the GC2 Risk Administrator to set Max Quantity Limit for an options buy order.

CME Globex API ID

N

Also called Executing Firm ID

Clearing Firm

N

The CME Group or partner exchange Clearing member firm.

Clearing Firm Administrator

N

Individual at the Clearing firm with entitlements to enter and change GC2 risk parameters.

Control Group

N

Within a Legal Clearing Entity (LCE), the logical grouping of Executing Firm ID / Exchange 

Covered Spread

N

Buying and selling option(s) and future(s) to achieve delta neutrality (i.e. insulate the option leg(s) from price risk).

Example: Buying 10 50-delta eMini S&P Dec call options and selling 5 eMini S&P Dec futures.

Credit Control Alerts

Y

GC2 displays exposure limit and (product) maximum quantity limit

Current Positions - Futures

N

The area on the GC2 window which details the long and short futures positions. The position is based on the Specific Listed Contract Margin Rate and defined in U.S. dollars.

Current Positions - Options

N

The area on the GC2 window which details the long and short options positions. The position is based on the margin rate defined in U.S. dollars.

Exchange

N

An organization, incorporated or unincorporated, that constitutes, maintains, or provides a marketplace or facilities for bringing together purchasers and sellers of securities or futures.

Example: CBOT, CME, NYMEX, COMEX and GME.

Exchange Defined Spread (EDS)

N

Spreads with legs defined by the Exchange. EDS is the only way by which future spreads are defined. There is no EDS for options.

Executing Firm ID

N

A logical entity allowed to trade products in accordance with its clearing relationships. The Executing Firm ID is three digits long and is alphanumeric or just numeric. Sometimes this coincides with the Clearing Firm ID. Executing Firm ID is synonymous with: Executing Firm, CME Globex API / CME Globex API ID, Trading Member Firm (TMF) / Trading Firm, and Badge Firm.

Exposure Limit

Y

The GC2 Risk Administrator must set the exposure limits per Executing Firm ID / Exchange for:

• Futures overall exposure limit in USD (no default, a value must be set)

• Options overall exposure limit in USD (no default, a value must be set)

If a position reaches the exposure limit at 100%, CME Globex rejects all new orders on the exceeding side. A cancel message is accepted.

Inter-Exchange Spread

N

Buying and selling the same future but on different Exchanges

Example: Nymex Crude vs GME Oman Crude

Inter-Market Spread

N

All legs are in a similar underlying asset. Buying one future in a given delivery month and selling a different future in the same delivery month.

Example: Crack Spread = Crude Oil vs. Unleaded Gasoline and Heating Oil

Example: Crush spread = Soybeans vs Soybean Oil and Soybean Meal

Intra-Commodity Spread

N

Buying and selling the same future but for different months Example: Buy July Wheat and sell Dec Wheat.

Legal Clearing Entity (LCE)

N

GC2 Entity is defined as the Clearing firm which legally guarantees trades executed for a single Executing Firm on CME Globex. The clearing firm may clear products from a single or multiple exchanges.

GC2 Entity is defined as the combination of Legal Clearing Entity + Executing Firm ID + Exchange

Max Quantity Limits

Y

In addition to entering the Exposure Limits, the risk administrator can enter the optional Max Quantity Limit for Buy/Sell Futures and/or Buy/Sell Options for the grouping.

Notifications

Y

The Clearing Firm or partner exchange risk administrator can specify the percentage of utilized limit at which to receive a credit control alert.

Product Complex

N

Describes a group of products belonging to a given economic sector or market segment which include: Agriculture, Credit, Economic Events, Energy, Equity Index, FX, Interest Rates or  Metals.

See also: Exchange Traded Instruments on CME Globex - Product Complex

Risk Administrator

N

Defines the daily exposure limits per Executing Firm ID/ Exchange group using GC2.

Sell Futures

Y

The Sell Futures area on the  CME Globex Credit Controls window where the GC2 Risk Administrator sets Max Quantity Limit for a futures "sell" order.

Sell Options

Y

The Sell Options area on the GC2 window where the GC2 Risk Administrator sets Max Quantity limit for an options "sell" order.

Spread Adjustment Factor

N

A positive single percentage value that is universally applied for all qualifying spreads.

User Defined Spread (UDS)

N

Spreads with legs are defined by the client.

UDS are the only way by which option spreads and Covereds can be created.