• PB Requirement Changes--Effective August 3, 2009--OTC Ethanol Forward Month Swaps

      • To
      • Clearing Member Firms, Back Office Managers
      • From
      • CME Clearing
      • #
      • 09-327
      • Notice Date
      • 31 July 2009
      • Effective Date
      • 03 August 2009
    • To receive advanced notification of Performance Bond (margin) changes, through our free automated mailing list, go to: http://www.cmegroup.com/newsletter/web2lead/web2sf-old.html and subscribe to the Performance Bond Rates Advisory Notices listserver.
       
      As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed below. The rates are effective at the close of business on Monday, August 3rd, 2009
       
      The following products will have decaying margins:
       
      OTC Ethanol Forward Month Swaps (71)
       
      Therefore, for these products the margin for any contract that is in its averaging period will gradually decrease over time as the contract nears expiration. These amounts will vary depending on the averaging period and the outright margin on the product. The formula to calculate the Decay Margin for a contract that is currently in its averaging period is as follows:
       
      X = Outright Margin
      Y = Remaining calendar days in the averaging period
      Z = Total calendar days in the averaging period
       
      Decay Margin = X * SQRT(Y/Z)
       
       

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