## Modified Split Allocation

Modified split allocation was developed to properly represent the risk of products whose prices are based on other products, typically a combination of other products or various calendar months of another product. The Modified Split Allocation approach helps better align available risk offsets between these products and their underlying contracts by “splitting” contracts into other contracts in the SPAN margining process.

The following are some examples of the logic:

#### Splitting Calculation Example

Modified Split on a long August 2016 CS contract, splits into:

1. Long 0.696 contracts of September 2016 CL
2. Long 0.304 contracts of October 2016 CL

Steps:

1. August 2016 CS expires 31st of August
2. August has 23 business days in the month
3. September CL expires 22nd of August, spanning 16 business days of August (16/23 = 0.696)
4. CS now continues to price off of October CL for the remainder of 7 business days in August (7/ 23 = 0.304)

#### Margining Example

CL Sep 16 margin = \$3350
CL Oct 16 margin =  \$3325

1. CL Sep 16 -  3350 * 0.696 = 2332; and CL Oct 16 - 3325 * 0.304 = 1011
2. 2332 + 1011 = 3342 will be the August 2016 CS outright margin

#### Splitting Calculation Example

Modified Split on a long August 2016 RM contract, splits into:

1. Short 0.696 contracts of September 2016 CL contract
2. Short 0.304 contracts of October 2016 CL contracts

Steps:

1. August has 23 business days in the month
2. September RB expires 31st of August, spanning all 23 business days of August (23/23 = 1)
3. September CL expires 22nd of August, spanning 16 business days of August (16/23 = 0.696 CL contracts)
4. RM now continues to price off of October CL for the remainder of 7 business days in August (7/ 23 = 0.304)

#### Margining Example

RB Sep 16 margin = \$4400
CL Sep 16 margin = \$3350
CL Oct 16 margin = \$3325
RB vs. CL Inter Spread Credit = 79%

1. RB Sep 16 -  4400 * 1 = 4400; and CL Sep 16 * 0.696 = 2332; and CL Oct 16 – 3325 * 0.304 = 1011
2. 4400 + 2332 + 1011 = 7743 – (7743 * Inter Credit of 0.79) = 1626 will be the August 2016 RM outright margin

All margin and credit rates on this page are for example purposes only.

Below you can find a comprehensive list of all products that are currently modified split.  For the most accurate margins for the below products please use CME Core or SPAN.

## Modified Split Product List

CHILD LEG 1 CHILD LEG 2
CONTRACT NAME PRODUCT CODE DIRECTION CONTRACTS MONTH OFFSET TO SOURCE AGGREGATE PRODUCT CODE DIRECTION CONTRACTS MONTH OFFSET TO SOURCE AGGREGATE PRODUCT CODE
Ethanol Forward Month Futures 71 Long 0.5 Mix 0,1 EH N/A N/A N/A N/A
LLS (Argus) vs. WTI Financial Futures  WJ Long 1 0 XA Short 1 Mix 1, 2 CL
NY Harbor ULSD Heating Oil vs. Gasoil Futures HA Long 1 1 HO Short 0.13 Mix 0, 1 BG
Los Angeles Jet (OPIS) vs. NY Harbor ULSD Futures  JS Long 1 0 LL Short 1 1 HO
Gulf Coast Jet (Argus) Up-Down Futures JU Long 1 0 AF Short 1 1 HO
European Gasoil Crack Spread Swap Futures GZ Long 0.13 Mix 0, 1 BG Short 1 Mix 2, 3 BB
Low Sulphur Gasoil Crack Spread (1000mt) Financial Futures  GOC Long 1 Mix 0, 1 BG Short 7.45 Mix 2,3 BB
WTI-Brent (ICE) Calendar Swap Futures BK Long 1 Mix 1, 2 CL Short 1 Mix 2, 3 BB
WTI-Brent Bullet Futures BY Long 1 0 CL Short 1 0 BB
European Naphtha (Platts) Crack Spread Swap Futures EN Long 0.11 0 UN Short 1 Mix 2, 3 BB
Argus Gasoline Eurobob Oxy Barges NWE Crack Spread (1000mt) Futures NOB Long 1 0 UN Short 8.9 Mix 2, 3 BB
3.5% Fuel Oil (Platts) Barges FOB Rdam Crack Spread Swap Futures FO Long 0.16 0 UV Short 1 Mix 2, 3 BB
3.5% Fuel Oil Barges FOB Rdam (Platts) Crack Spread (1000mt) Futures BOB Long 1 0 UV Short 6.35 Mix 2, 3 BB
Mini 3.5% Fuel Oil Barges FOB Rdam (Platts) Crack Spread (100mt) Futures MFR Long 0.1 0 UV Short 0.635 Mix 2, 3 BB
Gulf Coast ULSD (Platts) Crack Spread Swap Futures GY Long 1 0 LY Short 1 Mix 1, 2 CL
WTI Calendar Swap Futures CS Long 1 Mix 1, 2 CL N/A N/A N/A N/A
Heating Oil Crack Spread Swap Futures  HK Long 1 1 HO Short 1 Mix 1, 2 CL
Heating Oil Calendar Swap Futures MP Long 1 1 HO N/A N/A N/A N/A
RBOB Gasoline Calendar Swap Futures RL Long 1 1 RB N/A N/A N/A N/A
Brent (ICE) Calendar Swap Futures CY Long 1 Mix 2, 3 BZ N/A N/A N/A N/A
Mini Brent Financial Futures MBC Long 0.1 Mix 2, 3 BZ N/A N/A N/A N/A
European Gasoil Financial Futures GX Long 1 Mix 0, 1 BG N/A N/A N/A N/A
Low Sulphur Gasoil Mini Financial Futures QA Long 0.1 Mix 0, 1 BG N/A N/A N/A N/A
Gulf Coast ULSD (Platts) Up-Down Spread Swap Futures LT Long 1 0 LY Short 1 1 HO
RBOB Gasoline Crack Spread Swap Futures RM Long 1 1 RB Short 1 Mix 1, 2 CL
Gulf Coast ULSD (Platts) vs. Gulf Coast Jet (Platts) Futures VV Long 1 0 LY Short 1 0 GE
NY Jet Fuel (Platts) vs. NY Harbor ULSD Futures  1U Long 1 0 1Q Short 1 1 HO
NY Jet Fuel (Argus) vs. NY Harbor ULSD Futures 5U Long 1 0 4Y Short 1 1 HO
Gasoline Euro-bob Oxy NWE Barges (Argus) Crack Spread Futures 7K Long 0.12 0 7H Short 1 Mix 2, 3 BB
Argus Gasoline Eurobob Oxy Barges NWE Crack Spread (1000mt) Futures EOB Long 1 0 7H Short 8.33 Mix 2, 3 BB
Mini Argus Gasoline Eurobob Oxy Barges NWE Crack Spread (100mt) Futures MAC Long 0.1 0 7H Short 0.83 Mix 2, 3 BB
Gulf Coast No. 6 Fuel Oil 3.0% vs. European 3.5% Fuel Oil Barges FOB Rdam (Platts) Swap Futures GCU Long 1 0 MF Short 0.16   UV
RBOB Gasoline Brent Crack Spread Futures RBB Long 1 1 RB Short 1 Mix 2, 3 BB
Heating Oil Brent Crack Spread Futures HOB Long 1 1 HO Short 1 Mix 2, 3 BB
RBOB Gasoline vs. Euro-bob Oxy NWE Barges (Argus) (350,000 gallons) Futures EXR Long 8.33 1 RB Short 1 0 7H
RBOB Gasoline vs. Euro-bob Oxy NWE Barges (Argus) Futures XER Long 1 1 RB Short 0.12 0 7H
Mini RBOB Gasoline vs. Gasoline Euro-bob Oxy NWE Barges (Argus) Futures MXB Long 0.83 1 RB Short 0.10 0 7H
Copper Financial Futures HGS Long 1 Mix 0, 1 HG N/A N/A N/A N/A
Eurodollar 2-Yr Bundle Futures BU2 Long 1 0 ED N/A N/A N/A N/A
Eurodollar 3-Yr Bundle Futures BU3 Long 1 0 ED N/A N/A N/A N/A
Eurodollar 5-Yr Bundle Futures BU5 Long 1 0 ED N/A N/A N/A N/A
Jet Fuel Cargoes CIF NWE (Platts) Crack Spread Futures JFC Long 0.13 0 UJ Short 1 Mix 2, 3 BB
RBOB Gasoline vs. NY Harbor ULSD Futures RH Long 1 1 RB Short 1 1 HO
Gulf Coast Unl 87 Gasoline M2 (Platts) vs. RBOB Gasoline Spread Swap Futures  RVG Long 1 0 GCM Short 1 1 RB
Gulf Coast Unl 87 (Argus) Up-Down Futures UZ Long 1 0 AW Short  1 1 RB
Gulf Coast Unl 87 (Argus) Crack Spread Futures CK Long 1 0 AW Short 1 mix 1,2 CL
Gulf Coast Unl 87 Gasoline M2 (Argus) vs. RBOB Gasoline Futures RBG Long 1 0 UGG Short  1 1 RB
Gulf Coast Unl 87 Gasoline M2 (Platts) Crack Spread Futures GCC Long 1 0 GCM Short 1 mix 1,2 CL
Gulf Coast HSFO (Platts) Futures MF Long 1 0 SMF N/A N/A N/A N/A
Iron Ore 62% Fe, CFR China (TSI) Futures TIO Long 1 0 STIO N/A N/A N/A N/A
Gulf Coast HSFO (Platts) Brent Crack Spread Futures GCI Long 1 0 SMF Short 1 mix 2,3 BB
Gulf Coast HSFO (Platts) Crack Spread Futures MG Long 1 0 SMF Short 1 mix 1,2 CL
Dominion, South Point Natural Gas (Platts IFERC) Fixed Price Futures DSF Long 1 0 NN Long 1 0 PG
Permian Natural Gas (Platts IFERC) Fixed Price Futures PFS Long 1 0 NN Long 1 0 PM
MichCon Natural Gas (Platts IFERC) Fixed Price Futures MFS Long 1 0 NN Long 1 0 NF
TETCO STX Natural Gas (Platts IFERC) Fixed Price Futures ZTS Long 1 0 NN Long 1 0 TX
SoCal Natural Gas (Platts IFERC) Fixed Price Futures XN Long 1 0 NN Long 1 0 NS
Rockies Natural Gas (Platts IFERC) Fixed Price Futures XR Long 1 0 NN Long 1 0 NR
Columbia Gas TCO (Platts IFERC) Fixed Price Futures CFS Long 1 0 NN Long 1 0 TC
Waha Natural Gas (Platts IFERC) Fixed Price Futures WFS Long 1 0 NN Long 1 0 NW
Sumas Natural Gas (Platts IFERC) Fixed Price Futures DVS Long 1 0 NN Long 1 0 NK
Houston Ship Channel Natural Gas (Platts IFERC) Fixed Price Futures XJ Long 1 0 NN Long 1 0 NH
San Juan Natural Gas (Platts IFERC) Fixed Price Futures XX Long 1 0 NN Long 1 0 NJ
Platinum/Palladium Spread Futures PPS Long 2 Custom PL Short 1 Custom PA
Gold/Platinum Spread Futures GPS Long 1 Custom GC Short 2 Custom SPL
RME Biodiesel FOB Rdam (Argus) (RED Compliant) vs. Low Sulphur Gasoil Futures BFR Long 1 0 RBF Short 0.1 mix 0,1 BG
FAME 0 Biodiesel FOB Rdam (Argus) (RED Compliant) vs. Low Sulphur Gasoil Futures FBT Long 1 0 FBD Short 0.1 mix 0,1 BG
Gasoil 0.1 Barges FOB Rdam (Platts) vs. Low Sulphur Gasoil Futures WQ Long 1 0 VL Short 1 mix 0,1 BG
Mini Gasoil 0.1 Barges FOB Rdam (Platts) vs. Low Sulphur Gasoil Futures MGB Long 0.1 0 VL Short 0.1 mix 0,1 BG
Gasoil 0.1 Cargoes CIF MED (Platts) vs. Low Sulphur Gasoil Futures Z5 Long 1 0 Z4 Short 1 mix 0,1 BG
Gasoil 0.1 Cargoes CIF NWE (Platts) vs. Low Sulphur Gasoil Futures TU Long 1 0 TW Short 1 mix 0,1 BG
Mini Gasoil 0.1 Cargoes CIF NWE (Platts) vs. Low Sulphur Gasoil Futures MGF Long 0.1 0 TW Short 0.1 mix 0,1 BG
NY Harbor ULSD vs. Low Sulphur Gasoil (1,000bbl) Futures NLS Long 1 1 HO Short 0.13 mix 0,1 BG

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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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