The New York Board of Trade has advised CME of its plan to introduce options on futures calendar spreads next year.  In calculating performance bond requirements for these products, NYBOT plans to use a feature of SPAN® called super-intercommodity spreading.  Although this feature has been part of SPAN for some time, and has been supported in PC-SPAN®, this will be the first time it has been used for any listed product.  In addition, an important enhancement has been made to the SPAN algorithm and to PC-SPAN, to allow the specification of different credit rates for each leg of a delta-based spread.  This advisory outlines how these products will be defined in NYBOT's daily SPAN files, and how processing for them will work using super-intercommodity spreading.

The key impact to firm bookkeeping systems is the ability to process the super-intercommodity spreads themselves – the group of intercommodity spreads that are evaluated before any intracommodity spreads and before regular intercommodity spreads.  A secondary impact is the ability to support different credit rates for the different legs of an intercommodity spread.  Firms should also make sure their bookkeeping systems can process the underlying contract period codes with a C in the seventh byte – for example, 200412C2.  And, because these are options on combinations, their strike price may be either positive or negative, and firms should ensure that their systems can handle negative strike prices.  Similarly, the settlement prices for the underlying combinations may be either positive or negative.

Sample SPAN and portfolio datafiles are available at ftp.cme.com/pub/span/data/nyb/test/super. 

PC-SPAN version 4.05, which adds support for different credit rates for different legs of an intercommodity spread, is also now available.

For further information about super-intercommodity spreading in SPAN and PC-SPAN, please contact CME's Dmitriy Glinberg, 312-648-8680.  For further information about NYBOT's options on futures calendar spreads and specific plans for their margining, please contact New York Clearing Corp's Fred Oltarsh, 212-478-4122.

For the full text of this advisory, please see: ...