To provide clearing firms more time for testing, the date for firms to begin using the new combined SPAN files in production has been deferred from Friday June 26, to Friday, July 10.
The new combined files contain two additional enhancements which we expect firms will find useful – (a) the inclusion of type “S” records for all products to drive the calculation of weighted price risk, and (b) the inclusion of current delta values which are used for regulatory position limit calculations.
Weighted Price Risk Calculation Method
For many years, CME Clearing has used the scanrange cap method for calculating weighted price risk for its products, meaning that the weighted price risk is calculated normally but is then capped at the price scan range.
NYMEX, by contrast, has used the normal method for doing this calculation, without any such capping.
At launch of the combined SPAN files on July 10, this business practice difference will be continued. NYMEX and COMEX products will continue to use the normal method and CME and CBOT products will continue to use the scanrange cap method. Changes to harmonize this business practice will be implemented in phases at later dates.
To provide clearing firms with an automated means of driving this difference in their SPAN implementations, the new combined SPAN files contain type “S” records for every combined commodity. Previously, this record type was provided only for products such as Eurodollars which use tiered intercommodity spreading.
Deltas for Position Limit Calculations
The new combined SPAN files contain current delta values, in addition to the SPAN composite deltas that have always been present.
The current delta is the current value of delta for each option, whereas the SPAN composite delta represents an estimate of what the delta will be after one trading day has passed. Current deltas are used for regulatory position limit calculations, and SPAN composite deltas are used for margining.
Previously, CME Clearing published current deltas only in the settlement price files. By including these in the SPAN files as well, we are providing firms with a single source for both delta values.
For NYMEX and COMEX products, firms which previously read deltas from the NYMEX and COMEX SPAN files for position limit calculations, should plan (a) to read them from either the new combined SPAN file or the new NYMEX and COMEX settlement price files, and (b) if reading them from the combined SPAN files, to make sure to use the current delta, not the SPAN delta.
The current delta values will be provided on the type “82” records for each contract in the five bytes from positions 120 through 124, with four implied decimal places. The sign is provided as a plus or minus sign in byte 125. For the record layout please see www.cme-ch.com/span/spanl318.htm. Note that this causes the total record length of the type “82” record to increase from 119 bytes to 126 bytes.
PC-SPAN® version reminder
Firms which use PC-SPAN should be sure to obtain the latest version 4.5, build 491 or newer, which properly supports both delta-based and scanning-based super-intercommodity spreads for NYMEX products. The PC-SPAN software distribution website, either for new purchases or for registered users to download the latest version, is at www.cme-ch.com/pc-span.
For more information
The following advisory notices provide important information about the new combined SPAN file:
- Clearing Advisory 09-220, published May 26, at:
- SPAN Advisory 09-01, published May 1, at:
For more information please contact CME Clearing’s Risk Control Department at 312-648-3888