17 CFR Part 20, Appendix A to Part 20 - Guidelines on Futures Equivalency

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Appendix A to Part 20—Guidelines on Futures Equivalency
The following examples illustrate how swaps should be converted into futures equivalents. In general the total notional quantity for each swap should be apportioned to referent futures months based on the fraction of days remaining in the life of the swap during each referent futures month to the total duration of the swap, measured in days. The terms used in the examples are to be understood in a manner that is consistent with industry practice.
Example 1—Fixed for Floating WTI Crude Oil Swap Linked to a DCM Contract
Reference Price Daily official next to expire contract price for the NYMEX Light Sweet Crude Oil Futures Contract (“WTI”) in $/bbl through the NYMEX spot month.
Fixed Price $80.00 per barrel.
Floating Price The arithmetic average of the reference price during the pricing period.
Notional Quantity 100,000 bbls/month.
Calculation Period One month.
Fixed Price Payer Company A.
Floating Price Payer Company B.
Settlement Type Financial.
Swap Term Six full months from January 1 to June 30.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
NYMEX WTI trading in the next to expire futures contract ceases on the third business day prior to the 25th of the calendar month preceding the contract month. For simplicity in this example, the last trading day in each WTI futures contract is shown as the 22nd of the month.
Futures Equivalent Position on January 1
Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000 bbls
1,000 bbl = 1 futures contract
Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent contracts
Total number of days in swap term = 31 28 31 30 31 30 = 181
Futures Equivalent Position of Swap on January 1
Dates swap in force Referent futures month Fraction of days Company A position (long) Company B position (short)
Contracts rounded to the nearest integer.
January 1—January 22 February 22/181 73 −73
January 23—February 22 March 31/181 103 −103
February 23—March 22 April 28/181 93 −93
March 23—April 22 May 31/181 103 −103
April 23—May 22 June 30/181 99 −99
May 23—June 22 July 31/181 103 −103
June 23—June 30th August 8/181 27 −27
Total 181/181 601 −601
Futures equivalent position on January 2
Total Notional Quantity = Remaining swap term * 100,000 bbls/month = 596,685 bbls
1,000 bbl = 1 futures contract
Therefore 596,685 bbls/1,000 bbls/contract = 597 futures equivalent contracts
Total number of days = 30 28 31 30 31 30 = 180
Futures Equivalent Position of Swap on January 2 (Example 1 Continued)
Dates swap in force Referent futures month Fraction of days Company A position (long) Company B position (short)
Contracts rounded to the nearest integer.
January 2—January 22 February 21/180 70 −70
January 23—February 22 March 31/180 103 −103
February 23—March 22 April 28/180 93 −93
March 23—April 22 May 31/180 103 −103
April 23—May 22 June 30/180 99 −99
May 23—June 22 July 31/180 103 −103
June 23—June 30th August 8/180 27 −27
Total 180/180 597 −597
Example 2—Fixed for Floating Corn Swap
Reference Price Daily official next to expire contract price for the CBOT Corn Futures Contract in $/bushel through the CBOT spot month.
Fixed Price $5.00 per bushel per month.
Floating Price The arithmetic average of the reference price during the pricing period.
Calculation Period One month.
Notional Quantity 1,000,000 bushels/month.
Fixed Price Payer Company A.
Floating Price Payer Company B.
Settlement Type Financial.
Swap Term Six full months from January 1 to June 30.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
Last trading day in the nearby CBOT Corn futures contract is the business day preceding the 15th of the contract month. For simplicity in this example, the last trading day in each Corn futures contract is shown as the 14th of the month. Futures contract months for corn are March, May, July, September, and December.
Futures Equivalent Position on January 1
Total Notional Quantity = 6 contract months * 1,000,000 bushels/month = 6,000,000 bushels
5,000 bushels = 1 futures contract
Therefore 6,000,000 bushels/5,000 bushels/contract = 1,200 futures equivalent contracts
Total days = 31 28 31 30 31 30 = 181
Futures Equivalent Position of Swap on January 1
Dates swap in force Referent futures month Fraction of days Company A position (long) Company B position (short)
Contracts rounded to the nearest integer.
January 1-March 14 March 73/181 483 −483
March 15-May 14 May 61/181 404 −404
May 15-June 30 July 47/181 311 −311
Total 181/181 1,198 −1,198
Example 3—Fixed for Floating NY RBOB (Platts) Calendar Swap Futures
Reference Price Platts Oilgram next to expire contract Price Report for New York RBOB (Barge) through the NYMEX spot month.
Fixed Price $1.8894 per gallon.
Floating Price For each contract month, the floating price is equal to the arithmetic average of the high and low quotations from Platts Oilgram Price Report for New York RBOB (Barge) for each business day that it is determined during the contract month.
Calculation Period One quarter.
Notional Quantity 84 million gallons/quarter.
Fixed Price Payer Company A.
Floating Price Payer Company B.
Settlement Type Financial.
Swap Term Six full months from January 1 to June 30.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
NYMEX NY RBOB (Platts) Calendar Swap Futures Contract month ends on the final business day of the contract month. For simplicity in this example, the last trading day in each futures contract is shown as the final day of the month.
Futures Equivalent Position on January 1
Total Notional Quantity = 2 quarters * 84 million = 168 million gallons
42,000 gallons = 1 futures contract
Therefore 168 million/42,000 gallons/futures contract = 4,000 futures equivalent contracts
Total number of days = 31 28 31 30 31 30 = 181
Futures Equivalent Position of Swap on January 1
Dates swap in force Referent futures month Fraction of days Company A position (long) Company B position (short)
Contracts rounded to the nearest integer.
January 1-March 31 April 90/181 1989 −1989
April 1-June 30 July 91/181 2011 −2011
Total 181/181 4000 −4000
Example 4—Calendar Spread Swap
Reference Price The difference between the next to expire contract price for the NYMEX WTI Futures contract and the deferred contract price for the NYMEX WTI Futures contract.
Fixed Price $80 per barrel.
Floating Price The arithmetic average of the reference price during the pricing period.
Calculation Period One month.
Notional Quantity 100,000 bbls/month.
Fixed Price Payer Company A.
Floating Price Payer Company B.
Settlement Type Financial.
Swap Term Six full months from January 1 to June 30.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
NYMEX WTI trading in the next to expire futures contract ceases on the third business day prior to the 25th of the calendar month preceding the contract month. For simplicity in this example, the last trading day in each WTI futures contract is shown as the 22nd of the month.
Futures Equivalent Position on January 1
Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000 bbls
1,000 bbl = 1 futures contract
Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent contracts
Total number of days = 31 28 31 30 31 30 = 181
Futures Equivalent Position of Swap on January 1
Dates swap in force Fraction of days Applicable next to expire futures month Company A position (long) Company B position (short) Applicable deferred futures month Company A position (short) Company B position (long)
Contracts rounded to the nearest integer.
January 1—January 22 22/181 February 73 −73 March −73 73
January 23—February 22 31/181 March 103 −103 April −103 103
February 23—March 22 28/181 April 93 −93 May −93 93
March 23—April 22 31/181 May 103 −103 June −103 103
April 23—May 22 30/181 June 99 −99 July −99 99
May 23—June 22 31/181 July 103 −103 August −103 103
June 23—June 30th 8/181 August 27 −27 September −27 27
Total 181/181 601 −601 −601 601
Example 5—Columbia Gulf, Mainline Midpoint (“Midpoint') Basis Swap
Reference Price The Platts Gas Daily Columbia Gulf, Mainline Midpoint (“Midpoint”) and the next to expire NYMEX (Henry Hub) Natural Gas Futures contract.
Fixed Price $0.05 per MMBtu.
Floating Price The Floating Price will be equal to the arithmetic average of the daily value of the Platts Gas Daily Columbia Gulf, Mainline Midpoint (“Midpoint”) minus the NYMEX (Henry Hub) Natural Gas Futures contract daily settlement price.
Calculation Period Monthly.
Notional Quantity 10,000 MMBtu/calendar day.
Fixed Price Payer Company A.
Floating Price Payer Company B.
Settlement type Financial.
Swap Term One month from January 1 to January 31.
Floating Amount Floating Price * Notional Quantity * calendar days in the month.
Fixed Amount Fixed Price * Notional Quantity * calendar days in the month.
NYMEX Henry Hub Natural Gas Futures Contract trading ceases three business days prior to the first day of the delivery month. For simplicity in this example, the last trading day in the futures contract is shown as the 28th of the month.
Futures Equivalent Position on January 1
Total Notional Quantity for each leg = 1 month * 31 days/month * 10,000 MMBtu/day = 310,000 MMBtu
10,000 MMBtu = 1 futures contract
Therefore 310,000 MMBtu/10,000 MMBtu/contract = 31 futures equivalent contracts
Total number of days = 31
Futures Equivalent Position of Swap on January 1
Dates swap in force Fraction of days Referent futures month Company A position in Columbia Gulf, ainline Midpoint (“Midpoint”) natural gas (long) MMBtu Company A Position in NYMEX (Henry Hub) natural gas futures (short) Company B position in Columbia Gulf, Mainline Midpoint (“Midpoint”) natural gas (short) MMBtu Company B position in NYMEX (Henry Hub) natural gas futures (long)
††† Note: Because there is no underlying position taken in a basis contract, for reporting purposes, only enter the futures equivalent contract quantities into the corresponding futures.
January 1—January 28 28/31 February ††† −28 ††† 28
January 29—January 31 3/31 March −3 3
Total 31/31 −31 31
Example 6—WTI Swaption (Call)
Swaption Style American.
Option Type Call.
Swaption Start Date Jan 1 of the current year.
Swaption End Date June 30 of the current year.
Strike Price $80.50/bbl.
Notional Quantity 100,000 bbl/month.
Calculation Period One month.
Reference Price Daily official next to expire contract price for WTI NYMEX Crude Oil Futures Contract in $/bbl through the NYMEX spot month.
Fixed Price $80.00 per barrel per month.
Floating Price The arithmetic average of the reference price during the pricing period.
Settlement Type Financial.
Swap Term One month from July 1 to July 31 of the current year.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
NYMEX WTI trading ceases on the third business day prior to the 25th of the calendar month preceding the delivery month. For simplicity in this example, the last trading day in each WTI futures contract is shown as the 22nd of the month.
Futures Equivalent Position on January 1
Total Notional Quantity = 1 month*100,000 bbls/month=100,000 bbls
1,000 bbl = 1 futures contract
Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent contracts
Total number of days = 31
Gross Position on January 1
Dates swap in force Referent futures month Fraction of days Company A position (long) Company B position (short)
Contracts rounded to the nearest integer.
July 1 -July 22 August 22/31 70 −70
July 23—July 31 September 9/31 29 −29
Total 31/31 99 −99
Delta†† Adjusted Position and Futures Equivalent Position on January 1
Date August September
Delta Position Delta Position
†† Deltas should be calculated in an economically reasonable and analytically supportable basis.
January 1 .2 14 .2 5
Example 7—WTI Collar Swap
Swaption Style American.
Swaption Start Date Jan 1 of the current year.
Swaption End Date June 30 of the current year.
Call strike Price $70.00 per bbl.
Put strike price $90.00 per bbl.
Notional Quantity 100,000 barrels per month.
Calculation Period One month.
Reference Price Daily official next to expire contract price for WTI NYMEX Crude Oil in $/bbl through the NYMEX spot month.
Fixed Price $80.00 per barrel.
Floating Price The arithmetic average of the reference price during the pricing period.
Settlement Type Financial.
Swap Term One month from July 1 to July 31 of the current year.
Floating Amount Floating Price * Notional Quantity.
Fixed Amount Fixed Price * Notional Quantity.
NYMEX WTI trading ceases on the third business day prior to the 25th of the calendar month preceding the delivery month. For simplicity in this example, the last trading day in each WTI futures contract is shown as the 22nd of the month.
Futures Equivalent Position on January 1
Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000 bbls
1,000 bbl = 1 futures contract
Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent contracts
Total number of days = 31
Gross Position on January 1
Dates swap in force Referent futures month Fraction of days Company A position Company B position
Call Put Call Put
July 1-July 22 August 22/31 70.97 70.97 −70.97 −70.97
July 23-July 31 September 9/31 29.03 29.03 −29.03 −29.03
Total 31/31 100 100 −100 −100
Company (A) Delta Adjusted Position on January 1
Date August September
Long call Short put Long call Short put
Delta Position Delta Position Delta Delta Position
Deltas should be calculated in an economically reasonable and analytically supportable basis.
January 1 .7 49 .3 −21 .7 20 .3 −8
Futures Equivalent Position on January 1
Date August†† September††
Long Short Long Short
†† Contracts rounded to the nearest integer.
January 1 70 0 28 0

Title 17 published on 2013-04-01

The following are only the Rules published in the Federal Register after the published date of Title 17.

For a complete list of all Rules, Proposed Rules, and Notices view the Rulemaking tab.

  • 2013-11-18; vol. 78 # 222 - Monday, November 18, 2013
    1. 78 FR 69178 - Ownership and Control Reports, Forms 102/102S, 40/40S, and 71
      GPO FDSys XML | Text
      COMMODITY FUTURES TRADING COMMISSION
      Final rule.
      Effective date: February 18, 2014. Compliance date: The compliance date will be delayed by an additional 180 days, with the result that the compliance date of these final rules will be August 15, 2014.
      17 CFR Parts 15, 17, 18, and 20

Title 17 published on 2013-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 17 CFR 20 after this date.

  • 2013-11-18; vol. 78 # 222 - Monday, November 18, 2013
    1. 78 FR 69178 - Ownership and Control Reports, Forms 102/102S, 40/40S, and 71
      GPO FDSys XML | Text
      COMMODITY FUTURES TRADING COMMISSION
      Final rule.
      Effective date: February 18, 2014. Compliance date: The compliance date will be delayed by an additional 180 days, with the result that the compliance date of these final rules will be August 15, 2014.
      17 CFR Parts 15, 17, 18, and 20