Margin Efficiency Energy Spread | Chicago Mercantile Exchange | New York Mercantile Exchange


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

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 Requirement 3 ICE Brent: 2 NYMEX RBOB: 1 NYMEX ULSD: $12,300 $11,000 $4,290 Initial Margin Requirement 3 NYMEX Brent: 2 NYMEX RBOB: 1 NYMEX ULSD: $2,862 $2,611 $644

7 8%

Savings Per Spread Trade :

Total Margin


Total Margin


No Cross-Margining benefit
*Margin information from and on July 23, 2013

Cross-Margining offsets lead to savings
**Margin information for offsets from CME SPAN on July 23, 2013

How the world advances

Cost of Trade Savings*
NYMEX provides the tightest Bid/Ask spreads for our benchmark WTI, RBOB and ULSD futures with NYMEX Brent volumes growing dramatically in 2013. When energy traders look for liquidity in energy spreads, it is no surprise that they are choosing the suite of products available from NYMEX.

WTI & Brent Crack Spread (NYMEX vs. ICE)
•  3 NYMEX WTI, 2 NYMEX RBOB, 1 NYMEX ULSD vs. 3 ICE WTI, 2 ICE RBOB, 1 ICE ULSD •  3 NYMEX Brent, 2 NYMEX RBOB, 1 NYMEX ULSD vs. 3 ICE Brent, 2 ICE RBOB, 1 ICE ULSD Analysis of repeated one-minute interval calculations of Bid/Ask spreads for the trade for the July 2013 contracts traded May 31–June 13, 2013 showed that in each case NYMEX provided the tightest Bid/Ask spread when trading both WTI and Brent based crack spreads, as well as proving the most liquid venue for trading and a lower cost of trade for this multi-leg spread. Trading this entire spread on NYMEX decreases your execution cost and leads to a total savings of $55.50 per Brent spread trade (about 2¢/barrel) and a total savings of $131.40 per WTI spread trade (about 4¢/barrel).

Distribution of Brent-Based 3-2-1 Crack Spreads*

Distribution of WTI-Based 3-2-1 Crack Spreads*

90 80 Number Of Observations 70 60 50 40 30 20 10 0 0.04 0.06 0.08 0.02 0.20 0.24 0.26 0.22 0.10 0.14 0.16 0.18 0.12 Number Of Observations

140 120 100 80 60 40 20 0 0.01 0.03 0.05 0.07 0.09 0.11 0.13 0.15 0.17 0.19 0.21 0.23 0.25 Bid/Ask Spread, $/Barrel

Bid/Ask Spread, $/Barrel

* Data and analysis courtesy of “Creating Capital Efficiencies through Portfolio Margining” by Howard Simons

To learn more about why trading on NYMEX is the most capital efficient way to execute your strategy, contact us at

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Chicago Mercantile Exchange, and Globex are trademarks of Chicago Mercantile Exchange Inc. ClearPort, New York Mercantile Exchange and NYMEX are registered trademarks of New York Mercantile Exchange, Inc. The information within this card has been compiled by CME Group for general purposes only. Although every attempt has been made to ensure the accuracy of the information within this card, CME Group assumes no responsibility for any errors or omissions. Current rules should be consulted in all cases concerning contract specifications. Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All examples in this card are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. Copyright © 2013 CME Group. All rights reserved.

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