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Home / Education / Futures & Options 101 / Risk Management

Risk Management

Chicago Mercantile Exchange provides and regulates a marketplace where futures and options on futures are traded. CME clears, settles and guarantees all matched transactions in CME contracts occurring through its facilities. Furthermore, it establishes and monitors financial requirements for clearing members and sets minimum “performance bond” levels for all CME-traded products. The financial integrity of the CME marketplace is a foremost consideration of the Exchange’s Board of Directors and management.

Risk management and financial surveillance are the two primary functions of CME’s financial safeguard system. The system is designed to provide the highest level of safety and the early detection of unsound financial practice on the part of any clearing member. The system is constantly being updated to reflect the most advanced risk management and financial surveillance techniques.

The Clearing House is an operating division of the Exchange, and all rights, obligations and/or liabilities of the Clearing House are rights, obligations and/or liabilities of CME.

The Safeguards

The techniques employed by CME are comprehensive and specifically designed to:

  • Prevent the accumulation of losses
  • Ensure that sufficient resources are available to cover future obligations
  • Result in the prompt detection of financial and operational weaknesses
  • Allow swift and appropriate action to be taken to rectify any financial problems and protect the clearing system

Performance Bonds

CME establishes minimum initial and maintenance performance bond levels for all products traded through its facilities. CME bases these requirements on historical price volatilities, current and anticipated market conditions, and other relevant information. Levels vary by product and are adjusted to reflect change in price volatility and other factors. Both initial and maintenance performance bonds are good faith deposits to guarantee performance on futures and options contracts. Should performance bonds on deposit at the customer level fall below the maintenance level, Exchange rules require that the account be re-margined at the required initial performance bond level.

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Contents Courtesy of CME Group.

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The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

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