Table of Contents

1. What are Performance Bonds?

Performance Bonds, also known as margins, are deposits held at CME Clearing to ensure that clearing members can meet their obligations to their customers and to CME Clearing. Performance bond requirements vary by product and market volatility. 

2. What is the difference between maintenance margin and initial margin?

Initial margin is the margin that market participants must pay when they initiate their position with their clearing firm whereas maintenance margin is the minimum level at which market participants must keep in their account, or "maintain" in their account over time. If subsequently margin equity falls below maintenance margin, a call must be issued to bring the account up to initial margin.

3. Where are CME Group Margin Requirements?

CME Group requires performance bonds, more commonly known as margins, for all of our products. Currently, only the exchange margins for our futures products are available online. Portfolio and options margins can only be calculated in SPAN.

4. How is margin held in my trading account affected by price fluctuation?

As prices change throughout the life of a futures contract, the trading accounts where performance bonds are held are debited and credited accordingly. A theoretical example of a trading account’s balance through time is shown below:

  • Initial Performance Bond: $4,000
  • Maintenance Performance Bond: $3,200
  • Contract Value Factor: $50/point

Suppose a trader established a position to buy (go long) a September E-mini S&P 500 futures contract on June 13, when the contract was trading at 1050.00 points. CME, at the time, required an initial performance bond of $4,000 to trade that contract, with a maintenance bond of $3200.

If the price variations of the contract bring the account balance under $3200, the trader will have to deposit additional funds to bring the account back up to $4,000.

The total notional - cash - value of the contract is determined by multiplying $50 times the S&P 500 Stock Index futures index. On June 13, therefore, the contract was valued at $52,500. The account balance will vary at the end of each day based on the closing value of the index multiplied by $50. For example, if the index goes down by 10 points the next day, the account goes down by 10 x $50 or $500. If it goes up by six points, the account goes up in value by 6 x $50 or $300.

For in-depth trading account examples, view the JAC's Margins Handbook.

5. How is spread risk defined and where can I find examples of how spreads are calculated?

Scanning Based Spreads: recognizes risk offsets among Combined Commodities by scanning them together.

Intra-Commodity (Calendar) Spreads: an Intra-Commodity Spread Charge can be set in SPAN to evaluate the basis risk between contract periods with different expirations within the same product..  Since futures prices do not correlate exactly across contract months, a gain in one month may not exactly offset losses in another month.

Inter-Commodity Spreads: to recognize the risk reducing aspects of portfolios containing off-setting positions in highly correlated instruments.

For examples to calculate scanning based spreads, inter-commodity spread calculations and intra-commodity spread calculations view Spread Calculation Examples.

6. Where can I find margin changes released to the public?

CME Group notifies the public of margin changes through our Advisory service.

You can also subscribe to receive these advisories by providing your email address and selecting "Performance Bonds/Margins" under "Clearing." 

7. Where can I find historical margins?

Historical margins from 2003 to present are available as PDFs. Each PDF shows the past changes to initial and maintenance margins for specific products and when those changes were made.

8. Where can I find information on Globex Credit Controls (GC2) and Risk Management Tools?

CME Globex Credit Controls (GC2) provides pre-execution risk controls and allows Clearing Firm Risk Administrators to set real-time credit limits. It is one of many risk management tools in place to protect customers and clearing firms.

9. What are eroding margins?

Eroding margins are margins that decrease in value over time. Many products have eroding margins because the margins are based on the average price for the month and thereby, they present less risk than regular margins. Currently, eroding margins are calculated with the formula: price scan *(calendar days remaining/total calendar days in the month) so as the month goes on, the eroding margin decreases in value. The following table provides an example of linear erosion:

Settle date: 30 (total days 23)

Margin: $5,000 on the first day of the month. By the settlement date, it has decreased to $217.

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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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