• Clearing Weekly Notice: Monday, July 22, 2013

      • To
      • Clearing Member Firms; Back Office Managers
      • From
      • CME Clearing
      • #
      • 13-337
      • Notice Date
      • 26 July 2013
      • Effective Date
      • 22 July 2013

    • Topics in this issue include:
      *     Deliveries
      ·        Contact Information
       
       
      New functionality and changes have been made to Deliveries Plus for Lumber futures and is available for testing in the New Release environment beginning the afternoon of July 17, 2013.
      The Lumber product is scheduled to migrate to Deliveries Plus effective for the September 2013 delivery period. The migration will include new and improved features for the delivery process. Some of the features include:
      ·        Firms can manage delivery scheduling through the Delivery Schedules feature in Deliveries Plus.
      ·        Firms will receive email confirmations when additions or changes are made to delivery schedules in real time.
      Training will be provided in August 2013 in preparation for the September 2013 delivery period. A separate notice will be sent that contains details of the training session.
      If there are any questions, please contact Deliveries at 312.930.3172 or email clearinghousedelivteam@cmegroup.com.
       
      Listed in the linked advisory notice are the relevant delivery dates for August 2013 Chicago Mercantile Exchange Inc., Chicago Board of Trade, NYMEX/COMEX and DME contracts.
      Listed in the linked advisory notice are the relevant delivery dates for July 2013 Chicago Mercantile Exchange Inc., Chicago Board of Trade, Kansas City Board of Trade, NYMEX, and DME contracts.
      Please be advised in coordination with the USDA and CME approved stockyards, the following live cattle grading capacity limits at stockyards are in effect beginning with the August 2013 live cattle delivery cycle. The capacity limits at the stockyards have been instituted to ensure stockyards have the wherewithal to grade cattle on eligible delivery days and a USDA grader is available for grading the cattle. The capacity limits are not static and are subject to change based on changes such as stockyard wherewithal or USDA grader availability.
      Delivery Point
      Maximum Facility Capacity
      Amarillo, TX
      40
      Clovis, NM
      15
      Columbus, NE
      15
      Dodge City, KS
      40
      Norfolk, NE
      30
      North Platte, NE
      20
      Ogallala, NE
      25
      Pratt, KS
      10
      Syracuse, KS
      25
      Texhoma, OK
      30
      Tulia, TX
      20
      Worthing, SD
      60
      Wray, CO
      10
       
      Selling clearing firms are also reminded per Rule 10104.A. when submitting an intent to deliver a seller must contact the delivery point stockyard and ensure the facility can accommodate a live-graded delivery on the sixth business day following the day of tender/intent (fourth business day following the day of tender if tender/intent is on or after the last trading day.
      Selling clearing firms must provide to the Exchange the name and number of the person authorizing delivery at the stockyard when submitting an intent to deliver.
      Please refer further questions on this subject to:
      Clearing House
      Deliveries                    clearinghousedelivteam@cmegroup.com       312.930.3172
      Research and Product Development
      Jack Cook                   jack.cook@cmegroup.com                              312.930.3295
      Market Regulation
      Bill Lange                    william.lange@cmegroup.com                        312.341.7757        
       
      The migration of the live cattle application to Deliveries Plus has been delayed. For the June 2013 live cattle contract, clearing firms should use the existing live cattle application. Beginning with the August 2013 live cattle contract month, firm may use the live cattle functionality in Deliveries Plus.
      Clearing firms may still test the new live cattle application in the New Release environment. The migration of Live Cattle to Deliveries Plus offers new and improved features to clearing member firms. Some of the features include: 
      ·        Ability to manage delivery scheduling through the Delivery Schedules feature in Deliveries Plus.
      ·        Email confirmations for actions completed throughout the delivery process.
      ·        Improved firm management functionality for feedlots.
      If a firm needs to access to the New Release environment, please complete the access request form http://www.cmegroup.com/clearing/files/onlineaccess.pdf and fax to Firm Support 312.604-9450.
      If there are any questions, please contact Deliveries at 312.930.3172 or email clearinghousedelivteam@cmegroup.com .
      The listed Stockyards and Slaughter Plants at this link have been approved for deliveries against the CME Group Live Cattle futures contract from February 1, 2013 through January 31, 2014. Delivery point information and contact numbers are listed for your reference.
      If there are any questions, please contact the Deliveries Unit at (312) 930-3172.
       
      Effective July 29th, 2013, CME Clearing will upgrade the pre-trade credit limits on Clearing Members for Credit Default Swap (CDS) products. 
      Currently, Clearing Member Firms have the ability to set CME-hosted credit limits for CDS on a customer account by customer account basis. Additionally, CME Clearing has limits in place on each Clearing Member Firm. This upgrade will allow CME Clearing to systematically track and enforce the CME Clearing level risk limits. This is similar to the process that CME Clearing has in place for its interest rate swap offering.
      CME Clearing will determine two maintenance margin limits for each Clearing Member Firm – one for its customer origin and one for its house origin. The utilization of this limit will be based on the same margin methodology that CME Clearing currently uses on a daily basis to calculate initial margin. Please note that this limit will be a daily limit and will be based on trades executed for the current trade date only. In other words, the calculation is reset daily, and it does not reflect the exposure of any open trades executed prior to the current trade date. 
      Three hypothetical examples of the calculation of the utilization are outlined below:
      Trade 1: Customer A executes a buy-protection $100M notional CDXHY20 5yr trade with Clearing Member Firm B equivalent to $5M in margin for the current trade date. 
      Trade 2: Customer C then executes a sell-protection $100M notional CDXHY20 5yr trade with Clearing Member Firm B for the current trade date.
      Example 1: Credit Utilization – Same Trade Dates
       
      After Trade 1
      After Trade 2
      Clearing Member Firm B House Origin
      $5M
      $0M (offsetting)
      Clearing Member Firm B Customer Origin
      $5M
      $0M (offsetting)
       
      Now, if the 2nd trade was executed on the following trade date:
      Example 2: Credit Utilization – Different Trade Dates
       
      After Trade 1
      After Trade 2*
      Clearing Member Firm B House Origin
      $5M
      $5M (not offsetting)
      Clearing Member Firm B Customer Origin
      $5M
      $5M (not offsetting)
       Further, using the original 2 trades above as the base case, if the 2nd trade was now buy-protection (instead of sell-protection):
      Example 3: Credit Utilization – Same Trade Dates - Directional
       
      After Trade 1
      After Trade 2**
      Clearing Member Firm B House Origin
      $5M
      $10M
      Clearing Member Firm B Customer Origin
      $5M
      $10M
      A result of pre-trade credit limit automation is that CDS transactions that exceed the daily limit will be rejected for clearing by CME Clearing. CME Clearing will continue to communicate via email and telephone to work with your firm if your credit limit utilization is approaching its limit. In the future, we will provide firms with access to a separate view in CME Account Manager (RAV Manager) with the ability to view your Clearing Member Firm and Origin level limits and utilizations real-time. 
      If you have questions about the calculation or the specific limit in place for your Clearing Member Firm, please contact the CME Clearing Risk Team at clearing.riskmanagement@cmegroup.comor 312.648.3888. 
      For all other questions, please contact the CME Client Services Team at onboarding@cmegroup.comor 312-338-7112.
      CME Clearing accepts shares of certain equity stocks for customer and house segregated performance bond collateral. CME Clearing implemented its Stock Program to enable clearing members to post shares of selected stock with the Clearing House to satisfy performance bond requirements.
      CME Clearing’s performance bond requirements consist of two amounts: core performance bond requirements and concentration performance bond requirements. Concentration performance bond requirements are set from time to time and are equal to the portion of the total performance bond requirement that may be met using concentration collateral.
       
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      (312) 207-2525

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