Risk Management Overview

Futures Margin Rates

FCM Clearing Members must determine a risk profile for each account that it carries consistent with the requirement to monitor the credit risks of accepting trades, including give-up trades, of its Customers and within its Risk Management Policies and Procedures required under Rule 304(b)(ii) in the Cboe Clear US Rulebook. For those accounts that the FCM determines to have a heightened risk profile, the FCM Clearing Member must charge those accounts an initial margin requirement that is higher than the maintenance margin (clearing initial margin requirement). As of the date of these rates, the Clearinghouse has set that premium to a minimum of 115%.

*The total margin requirement for a spread position is the sum of the margin requirement for the spread as shown

Margin Methodology

Cboe Clear U.S. determines margin rates for each listed futures contract using a hybrid model by taking the more conservative of two-tailed 99.0% Filtered Historical Simulated VaR (“FHSVaR") and Historical VaR (“HVaR") calculations using spot data based on a two-day margin period of risk. Specifically, the FHSVaR calculation scales all historical returns by a ratio of the most recent estimate of short-term volatility (“revol volatility") to the estimate of short-term volatility at the time the return was observed (“devol volatility"). The historical scaled returns are the filtered returns that comprise the timeseries used in the FHSVaR calculation's lookback period. The short-term volatility estimate is an exponentially weighted moving average of volatility computed using a lambda (decay factor) in a recursive formula for both the revol and devol volatility. A 5.5-year lookback period is used for the FHSVaR calculation where the initial 0.5 years of data is used to generate a stable short-term volatility estimate and then the most recent 5 years of filtered returns is used as the basis for the final FHSVaR calculation output. The FHSVaR is supplemented with the HVaR calculation also using a 5-year lookback period to prevent margin rates from falling too quickly during extended periods of low volatility. Finally, once all tails of the FHSVaR and the HVaR calculations are determined, the highest absolute value of those values is used as the current day's measure of spot tail risk and adjusted to account for differences in volatility observed between the underlying spot market and the futures markets to determine each futures contract's margin rate.

Cboe Clear U.S. provides margin relief for spread positions portfolios which contain risk offsetting positions on the same underlying commodity. Cboe Clear U.S. does not provide any margin offset for positions across different underlying commodities at this time. FCM Clearing Members may also be required to post additional margin to account for credit, liquidity, or other risk factors that may expose Cboe Clear U.S. to excessive risk as determined by Cboe Clear U.S.

Default Resources

While many safeguards are put in place by Cboe Clear U.S. to limit the risk of exposure to potential losses from default, the following Financial Resources are available to Cboe Clear U.S. as of the date indicated in the event an FCM Clearing Member is declared in Default pursuant to the Clearinghouse's Rulebook (“Default Financial Resources").

Financial Resources

In the event an FCM Clearing Member is declared in Default pursuant to the Clearinghouse's Rulebook, only the margin of the Defaulting FCM Clearing Member and, if applicable and subject to Cboe Clear U.S.'s default waterfall, margin held in the Defaulting FCM Clearing Member's customer account, may be used for default management. The order in which all Cboe Clear U.S. Default Financial Resources will be used (“Default Waterfall") is described below.

1. Defaulting FCM Clearing Member's Initial Margin
2. Defaulting FCM Clearing Member's Guaranty Fund Contribution
3. Corporate Contribution
4. Non-Defaulting FCM Clearing Members' Guaranty Fund Contributions
5. Assessment Powers on FCM Clearing Members¹
6. Recovery & Wind-Down Tools²

1. See Cboe Clear U.S. Rulebook for more information.
2. Includes measures such as partial or full tear-ups, and variation margin haircutting.

Settlement Cycles

Collateral Custodians