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Migration to CME SPAN Margining for ASX Clear and ASX Clear (Futures)

Frequently Asked Questions

Webinar Recording

7 November 2012 - CME Span Phase 2 benefits, implications and timeline overview

Fact Sheets

Understanding Margins Booklet
CME SPAN 4.0 Broker Factsheet
CME SPAN 4.0 Client Factsheet

Background

The current margining methodologies of ASX Clear (ADMS algorithm) and ASX Clear (Futures) (RIVA SPAN algorithm) largely reflect the historical background of each central counterparty (CCP). ASX proposes phasing out both margining algorithms and moving toward CME SPAN 4.0, the current industry standard, for both CCPs. ASX believes the introduction of an advanced, common margining methodology across both CCPs would improve risk estimation (for example, by more flexibly accounting for spreads between products and by correctly estimating changes in volatility on ASX Clear options), open opportunities for margin offsets between the two CCPs, and bring ASX’s CCPs into line with international best practice.

Once implemented on both CCPs, CME SPAN will potentially enable a margin offset capability between the two. This will allow margins for Clearing Participants that clear on both clearing houses to be calculated on the combined positions of related products rather than separately. It is anticipated that such offsets would provide capital efficiencies to Clearing Participants, and in turn, potentially their clients, who participate on both CCPs, at no increase in risk to the CCPs.

Consultation Process

In the first quarter of 2009, ASX sought responses to its Consultation Paper, “Delivering Efficiencies to the Marketplace through the Harmonisation and Linking of CCP Activities”. The paper outlined a number of potential enhancements to the current operation and structure of ASX’s two central counterparties, ASX Clear and ASX Clear Futures, and also the interaction between them.

Amongst other initiatives, support from Clearing Participants for the following initiatives was evident:

migration from ADMS and RIVA SPAN to CME SPAN; and
margin offset arrangements, in particular across equity derivatives products

Overview of Proposed Approach

Given market wide support for the CME SPAN margining methodology the ASX is adopting a three phased approach to the implementation of CME SPAN 4.0. Phase 1 will be to introduce CME SPAN 4.0 across ASX Clear (Futures). Phase 2 will focus on replacing ADMS with CME SPAN 4.0 across the derivative products offered by ASX Clear. The project will complete with Phase 3, at which point offsetting of margins across eligible positions on ASX Clear and ASX Clear (Futures) will potentially be implemented.

Timelines and Implementation

The proposed timelines below list the indicative timings for each milestone and are provided to assist third parties with resource allocation and planning.

ASX Clear (Futures) Implementation Schedule

Milestone	Indicative Timing
Sample CME SPAN File Availability	Sep 2011
Sample Clearing Report Availability	Oct 2011
Availability of Parallel Files	Oct 2011
Implementation	26 March 2012

ASX Clear Implementation Schedule

Milestone	Date(s)
Sample CME SPAN File	30 August 2012
Sample CME SPAN File	10 October 2012
DCS server upgrade for CME Span 4.0	Pre-EOD 7 December 2012
ASX CME Span 4.0 go-live	Effective for start of business 10 December 2012