Notice to Members
Notice No. 26
01/19/2001
Henry Hub Natural Gas Margin Rate Change: February, March, and April 2001 Contracts Only
   
Effective Date: Friday, January 19, 2001 (close of business)
Futures Contract: Henry Hub Natural Gas
Contract Months:
February, March, and April 2001 Contracts Only


NYMEX Division Margins for the February and March 2001
Henry Hub Natural Gas Futures Contracts Only

Effective at Close of Business Friday, January 19, 2001
 Old New
Clearing Member (Maintenance Margin)
$14,000
$12,000
Member Customer (Initial Margin)
$15,400
$13,200
Non-Member Customer (Initial Margin)
$18,900
$16,200
NYMEX Division Margins for the April 2001
Henry Hub Natural Gas Futures Contract Only

Effective at Close of Business Friday, January 19, 2001
 Old New
Clearing Member (Maintenance Margin)
$5,000
$6,000
Member Customer (Initial Margin)
$5,500
$6,600
Non-Member Customer (Initial Margin)
$6,750
$8,100


Current systems calculate the margin requirement for spread positions by first determining the "Scan Risk" and then multiplying the number of spreads by a rate set by the Exchange. Scan Risk is determined by netting the outright margin required for each leg of a spread.

Note: The outright margin level required for the February and March 2001 contracts, the April 2001 contract, and all subsequent contracts differ. Spreading between differently margined contracts results in a higher spread margin than between equally margined contracts. Below are provided three spread scenarios where the legs of the spread are margined differently.

Scenario One
A spread consisting of one leg in either the February 2001 or March 2001 contracts and another in the April 2001 contract will have its requirement (at the clearing member rates) calculated at $8,500 starting on Friday, January 19, 2001.

Example at Clearing Member Rates

       
One Long February 2001 or March 2001 NG
(1 x $12,000)
=
$12,000
One Short April 2001 - January 2004 NG
(1 x $6,000)
=
- $6,000
Net Scan Risk
($12,000 - $6,000)
=
$6,000
Spread Rate
(1 x $2,500)
=
+ $2,500
Total Requirement
=
$8,500


Scenario Two
A spread consisting of one leg in either the February 2001 or March 2001 contracts and another in any month following the April 2001 contract will have its requirement (at the clearing member rates) calculated at $9,500 starting on Friday, January 19, 2001.

Example at Clearing Member Rates

       
One Long February 2001 or March 2001 NG
(1 x $12,000)
=
$14,000
One Short April 2001 - January 2004 NG
(1 x $5,000)
=
- $5,000
Net Scan Risk
($12,000 - $5,000)
=
$7,000
Spread Rate
(1 x $2,500)
=
+ $2,500
Total Requirement
=
$9,500


Scenario Three
A spread consisting of one leg in the April 2001 contract and another in any month following the April 2001 contract will have its requirement (at the clearing member rates) calculated at $3,500 starting on Friday, January 19, 2001.

Example at Clearing Member

       
One Long April 2001 NG
(1 x $6,000)
=
$6,000
One Short May 2001 - January 2004 NG
(1 x $5,000)
=
- $5,000
Net Scan Risk
($6,000 - $5,000)
=
$1,000
Spread Rate
(1 x $2,500)
=
+ $2,500
Total Requirement
=
$3,500


Summary of NYMEX Division Margins on Natural Gas Futures Spreads

Scenario One: February or March 2001 Contracts versus the April 2001 Contract

 
Clearing Member (Maintenance Margin)
$8,500
Member Customer (Initial Margin)
$9,350
Non-Member Customer (Initial Margin)
$11,475


Scenario Two: February or March 2001 Contracts versus Contracts Following the April 2001 Contract

 
Clearing Member (Maintenance Margin)
$9,500
Member Customer (Initial Margin)
$10,450
Non-Member Customer (Initial Margin)
$12,825


Scenario Three: April 2001 Contract versus Contracts Following the April 2001 Contract

 
Clearing Member (Maintenance Margin)
$3,500
Member Customer (Initial Margin)
$3,850
Non-Member Customer (Initial Margin)
$4,725
Should you have any questions or require any further information, please contact exchangeinfo@nymex.com