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S&P 500 Futures Daily Settlement Procedure

Normal Daily Settlement Procedure

Daily settlement of the S&P 500 (SP) and E-Mini S&P 500 futures (ES) are settled according to the procedure below.  Daily settlement of the E-Mini S&P 500 futures (ES) is equal to the daily settlement price of the S&P 500 futures (SP), rounded to the nearest tradable tick. 

Lead month

The lead month is the anchor leg for settlements and is the contract expected to be the most active.

Tier 1:   The volume-weighted average price (“VWAP”) of all trades executed in the full-sized futures contract on the trading floor and in the E-mini futures contract executed on CME Globex will be calculated for the designated lead month contract from 15:14:30 – 15:15:00 Central Time (“CT”), the settlement period.  A multiplier of 5 will be applied to the quantities traded in the full-sized contract to reflect the 5 to 1 relationship between the full-sized and the E-mini contracts.  The combined VWAP for the designated lead month will be rounded to the nearest .10 index point.   

Tier 2:   If no trades in the lead month occur between 15:14:30 and 15:15:00 CT, then the contract month settles to the midpoint of the Bid/Ask between 15:14:30 and 15:15:00 CT, the settlement period.

Tier 3:   If a two-sided market is not available during the settlement period, then the cash index will be used in the following Carry calculation to derive a settlement price. 

Index price + [(Days to expiration/ 365) x Interest rate x Index price)] 

Second Month

When the lead month is the expiry month, then the second month is defined as the calendar month immediately following the lead month. When the lead month is not the expiry month, then the second month is defined as the first expiring non-lead month.

Tier 1: The second contract month will settle to the combined VWAPs of the lead month-second month spread trades between 15:14:30 and 15:15:00 CT, using the same methodology as described above.   

Tier 2: If there are no spread trades between 15:14:30 and 15:15:00 CT, then the last spread trade price is applied to the lead month settle to derive the second month settle.

If the last spread trade is outside of the spread’s Bid/ Ask, then the bid or ask price that is closer to the last spread trade is applied to the lead month settle to derive the second month settle.

Tier 3: If there is no spread market information available then the cash index will be used in the following Carry calculation to derive a settlement price.

Index price + [(Days to expiration/ 365) x Interest rate x Index price)] 

Back Months

To derive settlements for all remaining months, the following Carry calculation will be used to derive a settlement prices provided that this value does not violate the bid or ask between 15:14:30 and 15:15:00 CT for the respective outrights.

Index price + [(Days to expiration/ 365) x Interest rate x Index price)] 

Note

The Index Price used in the Carry calculation in this methodology, for futures that settle at a different time than their underlying Cash Equity Index, will be a ‘Synthetic’ Index price.  This ‘Synthetic’ price will be derived by taking the Lead month futures contract minus the Cash Index at the cash close to calculate a Basis.  At the futures settlement time, the Lead Month settlement minus the Basis will equal the ‘Synthetic’ Index price.  The Interest Rate component used in the Carry calculation in this methodology is derived by subtracting expected dividends from a normalized interest rate curve.

End of Month Fair Value Procedure

http://www.cmegroup.com/trading/equity-index/fairvaluefaq.html

Final Settlement

The Final Settlement Price shall be a special quotation of the S&P 500 Index based on the opening prices of the component stocks in the index, determined on the third Friday of the contract month. If the S&P 500 Index is not scheduled to be published on the third Friday of the contract month, the Final Settlement Price shall be determined on the first earlier day for which the Index is scheduled to be published.

If the primary market for a component stock in the index does not open on the day scheduled for determination of the Final Settlement Price, then the price of that stock shall be determined, for the purposes of calculating the Final Settlement Price, based on the opening price of that stock on the next day that its primary market is open for trading.

If a component stock in the index does not trade on the day scheduled for determination of the Final Settlement Price while the primary market for that stock is open for trading, the price of that stock shall be determined, for the purposes of calculating the Final Settlement Price, based on the last sale price of that stock.  However, if the Exchange determines that there is a reasonable likelihood that trading in the stock shall occur shortly, the Exchange may instruct that the price of stock shall be based, for the purposes of calculating the Final Settlement Price, on the opening price of the stock on the next day that it is traded on its primary market.  Factors to be considered in determining whether trading in the stock is likely to occur shortly shall include the nature of the event and recent liquidity levels in the affected stock.

Additional Details

For information regarding the SOQ, please see the following links:

 

Additional Details

For information regarding the SOQ, please see the following links:

If you have any questions, please call the CME Global Command Center.


Note: In the event the aforementioned calculations described in this advisory cannot be made or if CME Group staff, in its sole discretion, determines that anomalous activity yields results that are not representative of the fair value of the contract, the staff may determine an alternative settlement price.


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