Energy

Maximize Your Capital Efciency 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 signicant capital efciencies to rms 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 efciencies.

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 rened 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

$27,590

Total Margin

$6,117

No Cross-Margining benet
*Margin information from www.cmegroup.com and www.theice.com on July 23, 2013

Cross-Margining offsets lead to savings

**Margin information for osets 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 31June 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
NYMEX ICE
PM833/00/0713

Bid/Ask Spread, $/Barrel

NYMEX ICE

* Data and analysis courtesy of Creating Capital Eciencies through Portfolio Margining by Howard Simons

To learn more about why trading on NYMEX is the most capital efcient way to execute your strategy, contact us at energy@cmegroup.com.

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