Futures and Options Margin Model

CME Clearing designed our futures and options margin model to cover at least 99% of anticipated price changes for all products over a given liquidation period.

CME Clearing considers a vast array of inputs, including historical data, annual or seasonal patterns, recent or anticipated events and changes in market dynamics when calibrating our margin model. This approach is grounded in data-driven calibration over different time periods, and is supplemented by expert analysis of current market conditions. CME Clearing employs a tailored approach for each asset classes we clear, which reflects the price movements, trading practices and patterns specific to these products.

We determine prudent and appropriate margin rates using a combination of quantitative and qualitative metrics. Quantitatively, CME Clearing evaluates potential futures contract exposures using historic and forward looking volatility measures, product liquidity, seasonality and historically observed correlations. Qualitatively, CME Clearing considers macroeconomic conditions, event-driven risk, geopolitical risk and the impact of certain product-specific features. For example, ahead of events such as the U.S. election or UK referendum, CME Clearing considers potential risks and takes proactive steps to adjust margin levels in advance of the event to reduce the need for large step changes on a post-hoc basis.

Historical Volatility

Historical volatility is incorporated through the use of multiple lookback periods. CME Clearing uses a variety of Value-at-Risk (VaR)-based models to determine our benchmark margin levels, which are then incorporated into SPAN.

Lookback periods can vary across product groups and are weighted individually based on the unique characteristics of a given group to ensure that 99% coverage is achieved for all products. Lookbacks are driven by product-specific characteristics and may differ for a variety of reasons, including to ensure consideration of procyclicality and seasonality associated with certain products. Details on these lookback periods can be found in the table below.

Volatility Floors

CME Clearing determines margin floors for our model input parameters for products where appropriate. The floors are designed to retain historically observed volatility patterns during periods that may be subject to below-average volatility. Floors are typically benchmarked at a level equivalent to a 10-year lookback plus a percentage-based add-on, as appropriate per product.

Benchmark Margin Buffer

As margin levels are not reset on a daily basis, CME Clearing employs a benchmark margin buffer to reduce the impact of increased volatility, which may occur during periods of stress. This buffer decreases the likelihood of frequent, procyclical margin calls. 

Product Group Parameters

Product Group

Minimum Coverage Level

Primary Lookback Period

Seasonal Volatility

Volatility Floors

Benchmark Margin Buffer

Equity Indices

99%

3 months–10 years

No

Yes

Yes

FX Majors

99%

3 months–10 years

No

Yes

Yes

FX Emerging

99%

3 months–10 years

No

Yes

Yes

Interest Rates: Short-Term

99%

3 months–10 years

No

Yes

Yes

Interest Rates: Long-Term

99%

3 months–10 years

No

Yes

Yes

Agricultural

99%

3–12 months

1–3 year lookback

Yes

Yes

Metals

99%

3 months–10 years

No

Yes

Yes

Energy: Crude Oil

99%

3–12 months

No

Yes

Yes

Energy: Natural Gas

99%

3–12 months

1–3 year lookback 

Yes

Yes

Energy: Refined Products

99%

3–12 months

1–3 year lookback

Yes

Yes

Energy: Electricity

99%

3–12 months

1–3 year lookback

Yes

Yes

Changes to any of these parameters are communicated via Clearing Advisories and are typically published 24 hours prior to the effective date of the change.

Where to See Futures and Options Margins

Margin for both futures and options can be calculated using SPAN, the Standard Portfolio Analysis of Risk (SPAN) system.

Learn more about SPAN.

CME Clearing publishes all outright margin rates, intra-commodity charges and inter-commodity spread credits for public access.

View Margin Rates.

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