Launching SPAN 2 Initial Margin Framework

The SPAN 2TM framework will be rolled out for specific product groupings in a phased multi-year approach after extensive testing, starting with major NYMEX energy futures and options on futures.

CME Clearing will work with clearing members and service providers to test the technology for computing margins using the SPAN 2 framework beginning H2 2020.

Over the next few years, margins for diversified portfolios will consist of products using the SPAN 2 framework and also in existing SPAN; appropriate levels of offsets will continue to be provided across products subject to  the SPAN and SPAN 2 frameworks.

Products in Scope

Category Example Products
Regular Futures - Seasonal & Non-Seasonal  CL, NG, NN, RB, HO
Vanilla Options on Regular Futures – Seasonal & Non-Seasonal  LO, LN, BZO, BE
Swaps and Spreads on Regular Futures  CS, BK, GZ, RBB
Non-Standard Options  AO, WA, BV, 9C

Adoption

To ease the transition and facilitate margining of portfolios that have products using both the SPAN and SPAN 2 frameworks, CME Clearing will ensure customers can continue to use the SPAN margining system, which will be updated to support both the current and enhanced methodology inside the system.

You can use the suite of margin tools available within CME Clearing’s margin services to compute margins and compare margin changes between the SPAN and SPAN 2 framework. SPAN will be supported for the foreseeable future.

Roadmap of SPAN 2 Initial Margin Calculation Tools for In-Scope Energy Futures and Options

PC SPAN software will not be updated to support the SPAN 2 methodology

  • CME to incorporate most commonly used PC SPAN functionality into CME CORE and Deployable Margin Engine

*PC-SPAN software will continue to be supported for products margined through the legacy SPAN model

Prod Parallel Phase

During the Prod Parallel phase, starting Q4 2020, CME Clearing will run SPAN in production and the SPAN 2 framework in production parallel. Clearing members and service providers can use this time for testing and preparation.

Clearing Member

Clearing members can compare margin levels using the SPAN2 framework with SPAN for in scope products:

Using SPAN today?

An updated version will be available via the Hosted Solution

A bespoke solution

A deployable solution is available to allow a customer to develop a bespoke on-premise solution

Client

Clients can see how SPAN 2 margins compare with SPAN margins via CME CORE, the CME Clearing online risk engine.

Login to CME Core

Service Provider

Service providers will be offered several solutions from which they can build tools to evaluate how SPAN and SPAN 2 margin levels compare.

Operational Implementation

Clearing Member: Programmatic Integration with the SPAN 2 framework

Dependent on use case, there are several solutions available for customers.

Hosted Solution

  • Margin API
  • CME Hosted Web Service as calculation process
  • Extends existing functionality

Deployable Margin Software

  • Java Margin Engine
  • Deployed on Clearing Member Infrastructure
  • Windows and Linux supported

Service Provider: Programmatic Integration with SPAN 2

Service Providers can provide native integration or use the web service running on CME. FCM back office systems have a different option for integrating with the new model. The JAVA margin engine contains SPAN and SPAN 2 margin methodology.

Native Integration: operates in existing SP structure

Hybrid Integration: running locally on FCM infrastructure on separate Linux/Windows server

 

Contact Us

PostTradeServices@cmegroup.com

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