• CME Clearing Notice: March 12, 2012

      • To
      • Clearing Member Firms; Back Office Managers
      • From
      • CME Clearing
      • #
      • 12-110
      • Notice Date
      • 16 March 2012
      • Effective Date
      • 12 March 2012

    • Topics in this issue include:
      *      Deliveries
       
      As many of you are aware, we successfully completed Phase I conversion of our FTP and SFTP (secured FTP) system which targeted all firms using our legacy Internet connection architecture.
      Next, we will address the conversion of all clearing member firm WAN (Leased Line) connections from the legacy to the new CME infrastructure.
      Clearing firms using the Legacy environment will be required to complete their conversion to the new server and, if necessary, convert from FTP to SFTP by April 2nd, 2012.
      The Legacy WAN environment includes the following addresses.
      • FTP:                            xxx.xxx.xxx.45
      • SFTP:                           xxx.xxx.xxx.46
      The new environment is in place and is reachable at the following addresses using SFTP: 
      • Production:                   xxx.xxx.xx.33
      • Disaster Recovery:        xxx.xxx.xx.33
      Please call Clearing Services at the number below for the new IP addresses.
      We recommend a non-production file name convention be used when sending a test file.
      Please be aware, firms that have not converted to the new SFTP IP address by April 2nd, 2012 will incur a monthly maintenance fee to use the old FTP server. Updated notices will follow to outline fees.
      We ask that each clearing member firm and any organization connecting FTP please provide us contact information (name, phone number and email) of the primary and back-up contacts for this conversion effort.  Once firms have tested and converted activity to the new destination, credentials will be removed from the legacy server.
      For further information or assistance please contact Clearing Services at (312) 207-2525 or
      On February 29, 2012 in the New Release environment, and beginning on March 12, 2012 in Production, several additions will be made to the FIXML Settlement Price files and Product Reference Files (FPRF) for CDS and OTC FX contracts.
      CDS Settlement Price File
      The “Dirty Price” will be added in a new repeating “Full” block, with a Type of “y” (lower case).  
      Dirty price is one that incorporates the accrued coupon up through the day the price is being reported. Dirty price is expressed as upfront points as derived from the percent of parsettlement price and includes the accrued coupon rate. The formula for deriving dirty price can be expressed as:  
      (100 – percent of par) + ((coupon rate/100) x (accrued number of days/360) x 100)
      Where
      ·         ‘percent of par’ is the current day’s settlement price
      ·         ‘coupon rate’ is the coupon rate of the contract
      ·         ‘accrued number of days’ is the number of days accrued from the last coupon payment date through today’s business date
      ·         ‘360’  is the day count convention
       
      CDS Product Reference file
      • Attribute Type “115” will be added as a CDS Auction Indicator.
       
      OTC FX Settlement Price File
      • Discount Factor will be added to the existing Type “6” Full Block.
      • Currency Day Count Convention for PAI will be added as Attribute Type 116. The Day Count Convention for EUR and USD is 360. The Day Count Convention for CAD, GBP, and JPY is 365.
       
      OTC FX Product Reference File
      • Currency Day Count Convention for PAI will be added as Attribute Type 116.    Conventions are as described above.
       
      Specific to the change regarding the CDS Product Reference file, here’s an example of how CME Clearing will publish the auction indicator using the recently-completed credit event in Eastman Kodak. Assume that the auction for Eastman Kodak will be held on Friday, March 2nd and that Eastman Kodak is a constituent of the High Yield series 12 index. On the CDS Product Reference File that CME Clearing publishes at end of day Thursday, March 1st for business date Friday, March 2nd, CME Clearing will indicate that Friday, March 2nd is the auction date for the Eastman Kodak index constituent by setting Attribute Type 115 to “Y” within the product reference file record for the new version of High Yield series 12 index which will begin trading on the following business day, also known as the Final Processing Day. For business days on which an auction is not taking place, CME Clearing will set Attribute Type 115 to “N.”
      Samples are shown on the following page. If you should have any questions regarding this notice, please call the CME Clearing Client Services team at 312-338-7112, or email us at onboarding@cmegroup.com
       
      Effective Sunday, March 11, 2012, for trade date Monday, March 12, 2012, and pending all relevant CFTC regulatory review periods, please be advised that the New York Mercantile Exchange, Inc. (NYMEX or Exchange) will expand the listing of contract months for NY ULSD (Argus) vs. Heating Oil Spread Swap futures, listed for trading on the NYMEX trading floor and for submission for clearing through CME ClearPort. The commodity code and new listing schedules are provided below.
      Contract Title
      Code
      Expanded Listing Schedule
      NY ULSD (Argus) vs. Heating Oil Spread Swap Futures
      7Y
      Through March 2013, discontinued thereafter
       
       
       
       
       
       

      Information Contacts
      cmegroup.com Inquiries

      Customer Service
      (800) 331-3332
      General Information
      Products & Services
      (312) 930-8213
      Clearing House
      (312) 207-2525
      Globex Information
      Globex Control Center
      (312) 456-2391
      Performance Bond Information
      Risk Management Dept.
      (312) 648-3888
      Position Limits
      Market Regulation
      (312) 341-7970
      Clearing Fees
      Clearing Fee Hotline
      (312) 648-5470
       
      Effective Sunday, March 11, 2012, for trade date Monday, March 12, 2012, and pending all relevant CFTC regulatory review periods, please be advised that the New York Mercantile Exchange, Inc. (NYMEX or Exchange) will expand the listing of contract months for Heating Oil Last Day Financial futures contracts, listed for trading on the NYMEX trading floor and for submission for clearing through CME ClearPort. The commodity code and new listing schedules are provided below.
      Contract Title
      Code
      Expanded Listing Schedule
      Heating Oil Last Day Financial Futures
      23
      Through April 2013, discontinued thereafter
       
       
       
       
       
       
      Information Contacts
      cmegroup.com Inquiries
      Customer Service
      (800) 331-3332
      General Information
      Products & Services
      (312) 930-8213
      Clearing House
      (312) 207-2525
      Globex Information
      Globex Control Center
      (312) 456-2391
      Performance Bond Information
      Risk Management Dept.
      (312) 648-3888
      Position Limits
      Market Regulation
      (312) 341-7970
      Clearing Fees
      Clearing Fee Hotline
      (312) 648-5470
       
      At the request of Clearing Member Firms, effective Monday, March 12, 2012, CME Clearing will modify the manner in which the daily value adjustment (DVA) is determined for transfer trades and as-of offsets for give-outs. The modification addresses the scenario where a different DVA for the long and the short position causes firm balancing discrepancies for offsetting transactions.
       
      Currently for transfer trades, there is a trade level DVA component based upon the original trade date of the transaction. Starting March 12th, no trade level DVA will be moved with transfers. Firms will have the option to provide a cash residual on the transfer to account for this amount or handle it outside the Clearing System. Position level DVA will still be calculated as normal.
       
      For as-of give-up and averaging trade offsets, the DVA is currently being calculated based upon the buy/sell indicator. For example, if a firm executes a buy trade, then the offsetting record is a sell. In situations where the DVA amounts differ between the long and short, it caused balance discrepancies when the trade was not accepted top day. With this modification, the DVA of the offset will always agree with the DVA of the original trade ensuring the cash flows balance.
      The modification is available in Certification for Firm testing. If you have any questions or require further information please contact CME Clearing at 312-207-2525 or ccs@cmegroup.com.
      Effective Sunday, April 1, 2012, CME Group will introduce the Risk Management Interface (RMI), an API and GUI that supports granular, pre-trade risk management for clearing firms.
      The RMI consists of two components and offers the following services:
      • RMI Application Programming Interface (API)
        • Allows Clearing Member Firms to programmatically send instructions to:
          • Block/Unblock order entry by Execution Firm and Account and Exchange and Derivative Type and Side; product designation optional
          • Query current block/unblock instructions
      • RMI Graphical User Interface (GUI)
        • A web-based user interface that allows Clearing Firms to:
          • Block/Unblock order entry at the same levels as the API
          • View current blocks
      Access to the RMI is limited to Clearing Firms’ certified proprietary and third-party risk management applications.
      The Software Developent Kit (Core Functionality and Message Specification) for the RMI API is available online.
      The WebHelp that details how to use the RMI GUI is also available online.
       
      RMI API certification via AutoCert+ is mandatory for Clearing Firms who wish to use the API. The Risk Management Interface will be available for testing in New Release on Monday, February 27.
      Order cancellation functionality will be supported at a later date; more information will be published in the CME Globex Notices.
      Please contact your Global Account Manager at 312 634 8700, in Europe at 44 203 379 3754, or in Asia at 65 6593 5574 for additional information.
      This link provides the stockyards and slaughter plants that have been approved for deliveries against the CME Group Live Cattle futures contract from February 1, 2012 through January 31, 2013. Delivery point information and contact numbers are listed for your reference.
       
      If there any questions, please contact the Deliveries Unit at (312) 930-3172.
      This link provides the relevant delivery dates for March 2012 Chicago Mercantile Exchange Inc., Chicago Board of Trade, New York Mercantile Exchange, Dubai Mercantile Exchange, COMEX and GreenX contracts
      Due to a South African Rand (ZAR) holiday on Wednesday, March 21st the delivery date for the South African Rand contract will be Thursday, March 22nd. As a result, all OTPs and Wire Transfers will be due to CME on Tuesday, March 20th by 1:00 p.m. for the South African Rand contract.
       
      Additionally, there is a Japanese Yen (JPY) holiday on Tuesday, March 20th. There will be no change to the last trading date and the delivery date will remain as Wednesday, March 21st.   If your firm anticipates going through delivery and anticipates a payment obligation on Tuesday, March 20th, please ensure you have the necessary funds to send to the CME Group account or arrange for a Yen denominated Order to Pay.
      Detailed currency delivery procedures are available on cmegoup.com at the following link:
       
      Firms can obtain a copy of CME’s banking instructions for all currency contracts by contacting Deliveries. 
      If there are any questions, please contact Deliveries at 312-930-3172.
      Please note that an updated specification for clearing and bookkeeping processing for cleared forwards, is now available at:
      The section on the calculation of Price Alignment Interest for forwards with cash mark-to-market, has been updated at the request of clearing firms. It now reflects that PAI for forwards is calculated trade by trade. The PAI amount for each position is then determined as the sum of the PAI amounts for the individual open trades.
       
      The trade-level PAI amount has been added to the FIXML and CSV format trade register files, for each individual open trade. 
      For further information please contact CME Clearing at 312-207-2525.
      As per the normal review of acceptable collateral and limits, CME Clearing is making the below changes regarding expansion and diversification requirements of collateral composition used by clearing member firms to meet performance bond requirements.
      Collateral accepted by CME Clearing will be categorized as noted below. Effective with the RTH cycle on Friday, April 13, 2012, clearing member firms are permitted to meet a maximum of 40% core performance bond requirements with each of Category 2 and Category 3 assets. Also, Category 3 assets have a hard dollar limit of $3 billion per clearing member firm across settlement accounts. Category 1 assets have no requirement type limits. Please refer to the website link below for details on individual asset type limits and product class restrictions.
      Clearing member firms that do not use assets in Category 3 should contact the Financial Unit for utilization of assets in Category 2 according to a 40% limit for U.S. Government Agencies, Mortgage Backed Securities, and TLGP, as well as a 40% limit for IEF5 and Letters of Credit.
      Additionally, CME Clearing will no longer differentiate utilization of assets for reserve performance bond requirements. The core performance bond requirement will envelope requirements previously categorized as reserve performance bond requirements. The reserve requirement will be phased out beginning with the RTH on Friday, April 13, 2012. There is no change to CME Clearing’s policy for concentration performance bond requirements. Each clearing member firm will be subject to core performance bond requirements and concentration performance bond requirements as applicable.
      Category 1 Assets:
      ·         U.S. Cash
      ·         U.S. Treasuries
      ·         IEF2 Money Market Fund Program (limits and diversification requirements within IEF2 program remain in effect)
      Category 2 Assets:
      ·         U.S. Government Agencies
      ·         Select Mortgage Backed Securities
      ·         TLGP
      ·         IEF5 Specialized Cash Program
      ·         Letters of Credit
      Category 3 Assets*:
      ·         Physical Gold
      ·         Select U.S. Equities from the S&P 500
      ·         IEF4 Specialized Collateral Program**
      ·         Select Foreign Sovereign Debt - Canada, France, Germany, Sweden, UK
       
      Please call CME Clearing for availability of Foreign Cash deposits. 
      *Note: The maximum allowable limit for utilization of Category 3 Assets will be the lesser of a) 40 % of core margin requirements and concentration requirements per origin and asset account or b) $3 billion per Clearing Member Firm across all settlement accounts.
      **Note: Although CME Clearing is operationally ready to support the new IEF4 collateral acceptance structure, final legal documentation with custodians is pending.
      Please refer to the website http://www.cmegroup.com/clearing/financial-and-collateral-management/ for further detail regarding acceptable collateral, haircuts, and limits. For questions about requirements, please call Risk Management hotline at 312-634-3888 and questions about collateral can be directed to the Financial Unit hotline at 312-207-2594.
      In response to requests from clearing firms, and in conjunction with an initiative of the Futures Industry Association (FIA), CME Group is planning to introduce a new field to allow clearing firms to identify on each trade in books, the source of the order which resulted in that trade. This in turn will allow firms to charge appropriately differentiated rates for orders entered directly by customers versus orders phoned into an order desk, as well as other order distinctions a firm may want to recognize for differentiating customer fees and commissions.
      The formal name of the new field is the Execution Source Code. More typically, it is called the Rate Identifier, and it is informally referred to as the Voice/Director Indicator. In summary:
      ·         The new field may be submitted on Globex orders.
      ·         Submitted values will be provided to clearing firms on all FIXML trade confirmation messages and allocation messages generated by CME Clearing. Note that when a trade is given up, the original value submitted with the trade will flow along with the give-up.
      ·         The values will be carried with the trade into the Give-up Payment System (GPS), where they can be used to drive processing at different rates according to the different values.
      FIA has defined the following set of values for the indicator:
      A          Phone simple
      B          Phone complex
      C          FCM-provided screen
      D          Other-provided screen
      E          Client-provided platform controlled by FCM
      F          Client-provided platform direct to exchange
      G          FCM API or FIX
      H          Algo Engine
      J          Price at Execution (price added at Initial order entry, trading, middle office or time of give-up)
      W         Desk – Electronic
      X          Desk – Pit
      Y          Client – Electronic
      Z          Client – Pit
      An existing FIX attribute called the Customer Order Handling instruction will be used for this purpose. On iLink messages for CME Globex, this is FIX tag 1031. In FIXML, the attribute name is CustOrdHdlInst. For example: CustOrdHdlInst=”W”
      The new field is expected to be available in CME’s “New Release” testing environment for CME Globex and clearing in the second quarter of 2012, and available in production also in the second quarter (exact dates will be announced soon).
      FIXML message samples are available at:
      For the CME Globex notice, please see:
      For more information, please contact CME Clearing at 312-207-2525.
      This link provides the advisory notice reflecting the contract specifications for this new contract.
      This link provides the advisory notice reflecting the contract specifications for this new contract.
      This link provides the advisory notice reflecting the contract specifications for this new contract.
      This link provides the advisory notice reflecting the contract specifications for this new contract.
      This link provides the advisory notice reflecting the contract specifications for this new contract.
      This link provides the advisory notice reflecting the contract specifications for this new contract.

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