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Margin Efficiency Energy Spread

Margin Efficiency Energy Spread

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Published by eliforu
Maximize Your Capital Efficiency –
Take Advantage of Cross Margining and
Cost of Trade Savings at NYMEX
Maximize Your Capital Efficiency –
Take Advantage of Cross Margining and
Cost of Trade Savings at NYMEX

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Published by: eliforu on Nov 20, 2013
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11/20/2013

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Maximize Your Capital Efficiency Take Advantage of Cross Margining and Cost of Trade Savings at NYMEX
TRADING YOUR CRUDE AND REFINED PRODUCTS AT NYMEX CAN REDUCE MARGIN BY OVER 75%
Executing energy spreads on CME Group offers significant capital efficiencies to firms holding positions for any length of time. Margin offsets substantially reduce the capital required to trade and hedge energy risk, while tighter bid/ask spreads for cracks and fee-free Brent lead to cost of trade savings, making NYMEX the exchange of choice for customers looking to maximize their capital efficiencies.
Margin Offset Savings
There is no margin relief for energy contracts held on different exchanges, but energy traders can experience substantial savings when they trade both their crude and refined products at NYMEX.
Margining for a 3-2-1 Crack Spread
Compare the initial margin required to hold the following two positions. Both examples use the industry-standard SPAN margin calculation for a 3-2-1 crack spread. Spread A: 3 ICE Brent, 2 NYMEX RBOB, 1 NYMEX ULSD Spread B: 3 NYMEX Brent, 2 NYMEX RBOB, 1 NYMEX ULSD
ENERGY
How the world advances
Spread A*
– No Margin Offsets
ICE Brent, NYMEX RBOB, NYMEX ULSD
Spread B** – Initial Margin Offsets for Brent, RBOB, and ULSD are 78%, 75% and 85% respectively
NYMEX Brent, NYMEX RBOB, NYMEX ULSD
Initial Margin Requirement3 ICE Brent: $12,3002 NYMEX RBOB: $11,0001 NYMEX ULSD: $4,290
Total Margin $27,590
Initial Margin Requirement3 NYMEX Brent: $2,8622 NYMEX RBOB: $2,6111 NYMEX ULSD: $644
Total Margin $6,117
No Cross-Margining benetCross-Margining offsets lead to savings
* Margin information from www.cmegroup.com and www.theice.com on July 23, 2013 **Margin information for offsets from CME SPAN on July 23, 2013
A  A A

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