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Title 17Chapter IPart 20 → Appendix


Title 17: Commodity and Securities Exchanges
PART 20—LARGE TRADER REPORTING FOR PHYSICAL COMMODITY SWAPS


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 PriceDaily 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 PriceThe arithmetic average of the reference price during the pricing period.
Notional Quantity100,000 bbls/month.
Calculation PeriodOne month.
Fixed Price PayerCompany A.
Floating Price PayerCompany B.
Settlement TypeFinancial.
Swap TermSix full months from January 1 to June 30.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceReferent futures monthFraction of daysCompany A
position (long)
Company B
position (short)
January 1—January 22February22/18173−73
January 23—February 22March31/181103−103
February 23—March 22April28/18193−93
March 23—April 22May31/181103−103
April 23—May 22June30/18199−99
May 23—June 22July31/181103−103
June 23—June 30thAugust8/18127−27
Total181/181601−601

Contracts rounded to the nearest integer.

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 forceReferent futures monthFraction of daysCompany A
position
(long)
Company B
position
(short)
January 2—January 22February21/18070−70
January 23—February 22March31/180103−103
February 23—March 22April28/18093−93
March 23—April 22May31/180103−103
April 23—May 22June30/18099−99
May 23—June 22July31/180103−103
June 23—June 30thAugust8/18027−27
Total180/180597−597

Contracts rounded to the nearest integer.

Example 2—Fixed for Floating Corn Swap

Reference PriceDaily 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 PriceThe arithmetic average of the reference price during the pricing period.
Calculation PeriodOne month.
Notional Quantity1,000,000 bushels/month.
Fixed Price PayerCompany A.
Floating Price PayerCompany B.
Settlement TypeFinancial.
Swap TermSix full months from January 1 to June 30.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceReferent futures monthFraction of daysCompany A
position
(long)
Company B
position
(short)
January 1-March 14March73/181483−483
March 15-May 14May61/181404−404
May 15-June 30July47/181311−311
Total181/1811,198−1,198

Contracts rounded to the nearest integer.

Example 3—Fixed for Floating NY RBOB (Platts) Calendar Swap Futures

Reference PricePlatts Oilgram next to expire contract Price Report for New York RBOB (Barge) through the NYMEX spot month.
Fixed Price$1.8894 per gallon.
Floating PriceFor 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 PeriodOne quarter.
Notional Quantity84 million gallons/quarter.
Fixed Price PayerCompany A.
Floating Price PayerCompany B.
Settlement TypeFinancial.
Swap TermSix full months from January 1 to June 30.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceReferent futures monthFraction of daysCompany A
position
(long)
Company B
position
(short)
January 1-March 31April90/1811989−1989
April 1-June 30July91/1812011−2011
Total181/1814000−4000

Contracts rounded to the nearest integer.

Example 4—Calendar Spread Swap

Reference PriceThe 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 PriceThe arithmetic average of the reference price during the pricing period.
Calculation PeriodOne month.
Notional Quantity100,000 bbls/month.
Fixed Price PayerCompany A.
Floating Price PayerCompany B.
Settlement TypeFinancial.
Swap TermSix full months from January 1 to June 30.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceFraction of daysApplicable
next to
expire
futures month
Company A
position
(long)
Company B
position
(short)
Applicable deferred futures monthCompany A
position
(short)
Company B
position
(long)
January 1—January 2222/181February73−73March−7373
January 23—February 2231/181March103−103April−103103
February 23—March 2228/181April93−93May−9393
March 23—April 2231/181May103−103June−103103
April 23—May 2230/181June99−99July−9999
May 23—June 2231/181July103−103August−103103
June 23—June 30th8/181August27−27September−2727
Total181/181601−601−601601

Contracts rounded to the nearest integer.

Example 5—Columbia Gulf, Mainline Midpoint (“Midpoint') Basis Swap

Reference PriceThe 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 PriceThe 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 PeriodMonthly.
Notional Quantity10,000 MMBtu/calendar day.
Fixed Price PayerCompany A.
Floating Price PayerCompany B.
Settlement typeFinancial.
Swap TermOne month from January 1 to January 31.
Floating AmountFloating Price * Notional Quantity * calendar days in the month.
Fixed AmountFixed 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 forceFraction
of days
Referent
futures
month
Company A
position in
Columbia
Gulf,
Mainline
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)
January 1—January 2828/31February†††−28†††28
January 29—January 313/31March−33
Total31/31−3131

††† 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.

Example 6—WTI Swaption (Call)

Swaption StyleAmerican.
Option TypeCall.
Swaption Start DateJan 1 of the current year.
Swaption End DateJune 30 of the current year.
Strike Price$80.50/bbl.
Notional Quantity100,000 bbl/month.
Calculation PeriodOne month.
Reference PriceDaily 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 PriceThe arithmetic average of the reference price during the pricing period.
Settlement TypeFinancial.
Swap TermOne month from July 1 to July 31 of the current year.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceReferent futures monthFraction of
days
Company A
position
(long)
Company B
position
(short)
July 1 -July 22August22/3170−70
July 23—July 31September9/3129−29
Total31/3199−99

Contracts rounded to the nearest integer.

Delta†† Adjusted Position and Futures Equivalent Position on January 1

DateAugustSeptember
DeltaPositionDeltaPosition
January 1.214.25

††Deltas should be calculated in an economically reasonable and analytically supportable basis.

Example 7—WTI Collar Swap

Swaption StyleAmerican.
Swaption Start DateJan 1 of the current year.
Swaption End DateJune 30 of the current year.
Call strike Price$70.00 per bbl.
Put strike price$90.00 per bbl.
Notional Quantity100,000 barrels per month.
Calculation PeriodOne month.
Reference PriceDaily 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 PriceThe arithmetic average of the reference price during the pricing period.
Settlement TypeFinancial.
Swap TermOne month from July 1 to July 31 of the current year.
Floating AmountFloating Price * Notional Quantity.
Fixed AmountFixed 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 forceReferent futures monthFraction
of days
Company A
position
Company B
position
CallPutCallPut
July 1-July 22August22/3170.9770.97−70.97−70.97
July 23-July 31September9/3129.0329.03−29.03−29.03
Total31/31100100−100−100

Company (A) Delta Adjusted Position on January 1

DateAugustSeptember
Long callShort putLong callShort put
DeltaPositionDeltaPositionDelta   DeltaPosition
January 1.749.3−21.720.3−8

Deltas should be calculated in an economically reasonable and analytically supportable basis.

Futures Equivalent Position on January 1

DateAugust††September††
LongShortLongShort
January 1700280

††Contracts rounded to the nearest integer.

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