The 7IS contract represents the price differential between South Asia Soybean Oil (Fastmarkets) futures (7IF) and U.S. Soybean Oil futures. Since both legs settle against calendar-month averages, the final 7IS futures settlement reflects the average difference between the two benchmarks over the month.

The contract allows participants to trade basis risk directly. In this context, basis risk refers to the gap between the U.S. soybean oil benchmark and the delivered cost of soybean oil in India. That gap can widen or narrow due to freight costs, South American export flows, and U.S. crush and biofuel demand, even when outright soybean oil prices remain relatively stable.

Like the South Asia Crude Palm Oil (Fastmarkets) vs. USD Malaysian Crude Palm Oil (IPS) futures spread, the 7IS contract is listed on a quarterly expiry cycle (March, June, September and December). 

IPS tracks the price difference between delivered Indian Crude Palm Oil and Malaysian CPO futures. The rationale for 7IS futures is similar: Basis risk between a delivered Indian benchmark and an external futures contract can persist beyond a single month. This makes it more efficient to concentrate liquidity in fewer, more actively traded contract months.

See theSouth Asian Vegetable Oil futures white paper for more details.

Since its launch, the 7IS futures spread has traded entirely in negative territory, ranging from a high of -$133.25/MT on March 27 to a low of -$448/MT on June 3, a total range of $314.75/MT.

The negative spread reflects U.S. Soybean Oil futures consistently trading above delivered soybean oil prices in India. 

The sharp widening between April and June followed the U.S. Environmental Protection Agency’s (EPA) finalization of a record Renewable Fuel Standard biofuel mandate on March 27, which lifted demand expectations for soybean oil as a biodiesel feedstock and drove U.S. futures sharply higher. Soybean oil is the main feedstock for biodiesel and renewable diesel production in the U.S., so a mandate this large has a direct impact on U.S. Soybean Oil futures.

Although the spread has narrowed since U.S. Soybean Oil futures retreated from their June peak, it remains firmly negative. This highlights that the 7IS futures spread is influenced not only by physical soybean oil fundamentals but also by U.S. biofuel policy and regional pricing dynamics.

The daily settlement price is determined by the derivatives marketplace using a range of market inputs, including broker quotes, cleared trades, settlements in related contracts and other reliable pricing data. 

Unlike a spot spread, the contract's final settlement is based on the difference between two calendar-month average prices rather than a single day's value. 

Specifically, it settles against the difference between the monthly average settlement price of South Asia Soybean Oil (Fastmarkets) futures (7IF) and the nearest non-spot U.S. Soybean Oil futures contract, converted to USD/MT.

In simple terms:

7IS contract final settlement = 7IF price - U.S. Soybean Oil price

Where 7IF and U.S. Soybean Oil are averaged quantities at settlement

For example, using the June 2025 contract month:

The South Asia Soybean Oil (Fastmarkets) futures calendar-month average settlement price was $1,091.00/MT.

The U.S. Soybean Oil (July 2025 contract) calendar-month average, converted to USD/MT and rounded to the nearest $0.25, was $1,112.50/MT.

The final 7IS settlement was:

$1,091.00/MT – $1,112.50/MT = – $21.50/MT

The 7IF contract settles against the arithmetic average of the daily Fastmarkets South Asia Soybean Oil price assessments published over the calendar month.

As more daily prices are added, the running monthly average gradually converges towards the final settlement.

The U.S. Soybean Oil leg follows a similar approach. First, the nearest U.S. Soybean Oil futures contract that is not in its delivery month (also referred to as the nearest non-spot contract) is picked. For the June 2025 example, this means using the July 2025 contract.

Next, the contract’s daily settlement price, quoted in cents per pound, is converted into USD per metric ton using the fixed conversion factor of 2,204.623 pounds per metric ton. Finally, these daily prices are averaged across all trading days in the month, with the final figure rounded to the nearest $0.25.

In the example provided, the daily prices of U.S. Soybean Oil futures reacted sharply to the mid-June rally; the running average incorporated those gains gradually, resulting in a much smoother path.

The 7IS contract ultimately settles against the difference between the calendar-month average settlement values of the 7IF and U.S. Soybean Oil legs.

Importantly, these values do not represent daily 7IS futures prices. Only the final settlement of the averaged series matches the official 7IS futures settlement, with futures prices gradually converging towards it as expiry approaches.

The difference can be significant. On June 30, 2025, the unaveraged spread was -$47.9/MT, compared with the official settlement of -$21.5/MT, a gap of $26.4/MT. Relying on the raw daily spread would therefore have resulted in a materially different hedge outcome.

This averaging mechanism makes 7IS contract particularly well suited for participants who build physical exposure throughout the month rather than on a single day. By settling against monthly averages, the contract provides a closer match to ongoing procurement patterns and reduces the need to frequently roll shorter-dated hedges.

The South Asia Soybean Oil (Fastmarkets) vs. Soybean Oil futures spread is primarily traded through the over-the-counter (OTC) market. While listed on Globex, most transactions are privately negotiated and cleared through ClearPort.

In practice, the most common route is through an inter-dealer broker (IDB) such as ICAP.

The process is straightforward. An importer, refiner or trader contacts a broker, who matches them with a counterparty willing to take the opposite side of the spread. Both parties agree on the spread level, volume and contract month. This is known as a block trade.

The minimum trade size is 10 contracts, equivalent to 100 metric tons, and the agreed spread must reflect prevailing market conditions. Once executed, the trade must be reported to ClearPort within 15 minutes.

IPS’s 10,000 contract spot month position limit is double the 7IS contract’s 5,000 contract limit, alongside a 6,500 contract accountability level. In practice, the 7IS contract still represents 50,000 MT of exposure, comfortably covering most market participants.

IPS’s 10,000 contract spot month position limit is double the 7IS contract’s 5,000 contract limit, alongside a 6,500 contract accountability level. In practice, the 7IS contract still represents 50,000 MT of exposure, comfortably covering most market participants.

Larger physical players with commercial exposure above this threshold can apply for a bona fide hedger exemption, allowing them to exceed the standard limit to hedge genuine commercial risk.

Clearing then becomes the central counterparty to both sides of the transaction. This removes direct counterparty exposure, with CME Clearing guaranteeing the trade, managing margin requirements and handling daily mark-to-market settlements. The result is a flexible and secure framework for managing basis risk.

For full details on block trades, position limits, the approved IDB list and margin requirements, read our South Asia Vegetable Oil (Fastmarkets) futures FAQ.

Meridian Overseas Agro Trading (MOAT), a trading firm, secures an allocation under the new India-U.S. tariff rate-quota and imports a cargo of U.S.-origin soybean oil. Since the cargo originates from the United States, its purchase price is linked directly to U.S. Soybean Oil futures, which serve as the benchmark for the transaction.

MOAT then signs a supply agreement with a refiner in India, pricing the cargo against the Fastmarkets CFR India Soybean Oil assessment (7IF) plus a fixed premium of $250/MT. This premium covers MOAT's handling costs and reflects the duty savings available under the tariff rate-quota compared with a standard duty import.

As a result, MOAT's purchase cost moves with U.S. Soybean Oil futures, while its selling price moves with the 7IF contract plus the fixed premium. This means its trading margin is simply the fixed $250/MT premium plus the 7IS spread.

On March 23, when MOAT fixed both the purchase and the sale, the 7IS spread was -$196.50/MT, giving the company an expected trading margin of $53.50/MT.

Expecting U.S. biofuel policy to increase spread volatility in the coming weeks, MOAT sells 10 7IS contracts (100 MT), locking in the spread at -$196.50/MT. Four days later, on March 27, the EPA finalized its record Renewable Fuel Standard biofuel mandate, triggering exactly the type of spread widening MOAT had anticipated.

By May 26, U.S. Soybean Oil futures had rallied in response to the mandate, widening the 7IS spread to -$381.25/MT. This represented a move of $184.75/MT against MOAT's physical contract with the refiner.

1. Transaction costs will apply and have been excluded from the above example for simplicity.
2. Futures positions require the posting of initial and maintenance margins with CME Clearing brokers; associated margin requirements and cost of capital are not reflected in the above illustration.

Without the hedge, the wider 7IS spread would have turned MOAT's expected profit margin of $53.50/MT into a loss of $131.25/MT. The gain on the short 7IS position offset this loss, effectively locking in the original $53.50/MT margin.

Falcon Traders plans to import soybean oil from Brazil for sale in India, which remains the country’s largest source of soybean oil imports.

These cargoes are priced against U.S. Soybean Oil futures at a fixed discount of $300/MT, reflecting the typical pricing advantage of South American origin over the U.S. benchmark. This discount has widened further as stronger U.S. biodiesel demand has pushed U.S. Soybean Oil futures higher.

Falcon Traders then agrees to supply the cargo to a refiner in India at a price linked to the Fastmarkets CFR India Soybean Oil (7IF) assessment.

As a result, Falcon Trader's purchase cost is linked to the U.S. Soybean Oil futures contract less the fixed $300/MT discount, while its selling price is linked to the 7IF contract. This means its trading margin is simply the 7IS spread plus $300/MT.

On June 30, Falcon Trader signed both contracts. With the 7IS spread at -$214/MT, the company expects a trading margin of $86/MT. To protect this margin during the shipping and delivery period, Falcon Trader sells 10 7IS contracts, locking in the spread at -$214/MT.

By July 23, the 7IS spread had widened to -$343.25/MT, reducing Falcon Trader's expected trading margin by $129.25/MT.

1. Transaction costs will apply and have been excluded from the above example for simplicity.
2. Futures positions require the posting of initial and maintenance margins with CME Clearing brokers; associated margin requirements and cost of capital are not reflected in the above illustration.

Without the hedge, the widening of the 7IS spread would have turned Falcon Trader's expected profit margin of $86/MT into a loss of $43.25/MT. Gains on the short 7IS futures position offset the adverse move, preserving the original $86/MT margin.

Trading 7IS futures requires posting margin with CME Clearing, which acts as a performance bond. Margin has three components, including:

Initial margin is the collateral required to open a position. For 7IS futures, this is $935 per contract. A position of 10 contracts (100 MT) therefore requires an initial margin of $9,350. This is not a trading cost and is returned when the position is closed, provided all obligations are met.

Maintenance margin is the minimum balance that must be maintained in the margin account. For 7IS futures, this is $850 per contract, or $8,500 for a 10-contract position. If the account balance falls below this level, a margin call is issued.

Variation margin reflects the daily mark-to-market of the position. Profits are credited, and losses are debited each trading day as the 7IS spread moves.

Example

Assume a participant sells 10 contracts (100 MT) of the 7IS spread at -$300.00/MT, posting an initial margin of $9,350.

If the spread narrows to -$230/MT, the position incurs a loss of $70/MT. Across 100 MT, this results in a $7,000 variation margin loss.

The loss is deducted from the margin account, reducing the balance from $9,350 to $2,350. Since this falls below the $8,500 maintenance margin requirement, a margin call is triggered.

To keep the position open, the participant must deposit $6,150 to restore the account to the maintenance margin requirement of $8,500. Failure to meet the margin call within the required timeframe may result in the clearing broker closing the position.

If the spread remains unchanged, no margin call is triggered. If the spread moves in the participant's favor, variation margin gains are credited daily, and any excess funds above the required margin can be withdrawn.

For importers and refiners sourcing soybean oil, whether under the new U.S. tariff-rate quota or through traditional South American channels, changes in the CFR India-U.S. Soybean Oil basis can materially affect procurement margins, particularly given how far U.S. prices can diverge from delivered Indian levels under domestic biofuel demand.

The 7IS contract provides a dedicated tool to hedge this basis risk separately from outright soybean oil price exposure, helping market participants manage import costs with greater precision.

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