Trade Reporting Risk Management

CME Group complies with the Dodd-Frank general requirement that processing and acceptance or rejection of a derivative contract from clearing must occur "as quickly as is technically practicable". The CFTC allows both the FCM and CME 60 seconds each to action the trade.

Two methods are offered to Clearing Firms to manage accept/reject of trades. The risk method used is selected by the Clearing Firm:

CME Hosted Risk Management Credit Limit Validation

Clearing Firms must set "hard credit limits" and may also set per product “maximum long and short quantity limits”. Each submitted trade associated with a Clearing Firm is checked against these hard limits and is automatically approved if the position does not exceed any limits and is automatically rejected otherwise.

Credit usage in CME ClearPort is calculated by the standard CME SPAN engine. IRS Credit Limits use Net Present Value (NPV) and PV01 models.

Clearing Firm Explicit Claim Risk Approval

This method is currently only offered for IRS and FX products.

In this method, the trade is submitted via Front End Clearing (FEC) API to the Clearing Firm risk management system, which will dynamically approve or reject the trade based on their own risk calculations. The CME may automatically reject a trade if the Clearing Firm does not respond promptly to the claim request.

CME Group has also built OTC risk management controls at the Clearing Firm level.

Clearing Firm Risk Management

CME risk management staff can enforce hard credit limits on a Clearing Firm. The limits are managed at the Origin level (customer and house) for each guarantee fund (other, IRS).

Credit usage in CME ClearPort is calculated by the standard CME SPAN engine. IRS Credit Limits use Net Present Value (NPV) and PV01 models.