Black Sea Financially Settled (Platts) Sunflower Oil futures

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Black Sea Financially Settled
(Platts) Sunflower Oil futures
Background
•   There was no viable price risk management tool for the global sunflower oil trade

•   Market participants requested a solution to manage price and counterparty risk

•   Ukraine world’s largest sunflower oil exporter, Russia second

•   Platts provides Ukrainian Sunflower Oil FOB daily cash price assessment

               800,00                                                                                                                   32

               750,00                                                                                                                   31

               700,00                                                                                                                   30

                                                                                                                                             US cents/pounds
               650,00                                                                                                                   29
      USD/MT

               600,00                                                                                                                   28

               550,00                                                                                                                   27

               500,00                                                                                                                   26

               450,00                                                                                                                   25

               400,00                                                                                                                   24
                    11.янв.19        11.фев.19         11.мар.19         11.апр.19       11.май.19   11.июн.19       11.июл.19

                           Platts Sunoil FOB Ukraine               Palmoil futures front month       Soyoil futures front month (RHS)

                        Source: CME Group, S&P Global Platts

    © 2019 CME Group. All rights reserved
Black Sea Sunflower Oil futures (BSF) highlights

•     First trading day was 26 August 2019

•     Available alongside Black Sea Wheat (Platts) and Black Sea Corn (Platts) contracts
       • These have been well adopted by physical market participants
       • Over 320k lots traded since launch (16 million tonnes)

•     Compliments other CBOT edible oil benchmark contracts:
       • US physically delivered soyoil
       • Cash-settled Malaysian crude palmoil

    © 2019 CME Group. All rights reserved
Black Sea Sunflower Oil futures (BSF) overview

•      Cash settled using Platts Black Sea sunflower oil cash assessments
•      Platts assessments:
         • Ukrainian raw sunflower oil
         • FOB Chornomorsk 3000 mt parcels
         • loading one or two calendar months forward
•      First listed month available to trade November 19, further 11 months available
•      25 tonne contracts, in US$ per metric tonne
•      Settlement period: 6th calendar day of the month two months prior to the listed month
       to 15th calendar day of the month prior to the listed month
•      Settlement prices provided on a daily basis 12 months out
•      Available to trade on screen (Globex) and as blocks via Clearport (min. 5 lots)
•      Counterparty risk managed through CME Clearing

    © 2019 CME Group. All rights reserved
BSF Specifications
  Contract Size                           25 Metric Tonnes
  Price Quotation                         US Dollars and Cents per Metric Tonne
  Tick Size (Minimum Fluctuation)         $0.50 per metric tonne (US$12.50 per contract)

  ClearPort (Block) Trading Hours         Sunday - Friday 5:00 p.m. - 4:00 p.m. Chicago Time/CT with a 60-minute break each
                                          day beginning at 4:00 p.m. CT

  Settlement time                         6pm London time
  Listed Contracts Months                 12 months listed, starting with November 19

  Settlement Method                       Financially Settled
  Final Settlement Price                  The Final Settlement price for each listed month is equal to the arithmetic average of
                                          the Sunflower Oil Black Sea FOB Ukraine price assessments published by Platts for each
                                          day that is determined during the Settlement Period. The Settlement Period for a
                                          specified listed month is the period that starts on, and includes, the 16th calendar day
                                          of the month that is two months prior to the contract month, and ends on, and
                                          includes the 15th calendar day of the month prior to the contract month.
  Termination of Trading                  Trading shall cease on the 15th calendar day of the month prior to the listed month,
                                          subject to this being a business day which is also a Platts publication date for the price
                                          assessment
  Block minimum                           5 lots

  © 2019 CME Group. All rights reserved
Key features of Clearing
          OTC Market Without a                                OTC Market With a
       Central Clearing Counterparty                     Central Clearing Counterparty

Buyer                                     Seller    Buyer                               Seller
                             Multiple
                                          Seller     Buyer             CME              Seller
Buyer                       Bilateral
                           Agreements                                Clearing
                                          Seller     Buyer                              Seller
Buyer

• Buyers and sellers consummate deals on           • Buyers and sellers execute trades with
  their own                                          each other
    • Sellers must accept each buyer’s credit      • Buyers and sellers submit trade to CME
    • Buyers must accept each seller’s credit        for clearing
• Pricing is differentiated by quality of               • Buyer and seller are guaranteed
  counterparty                                            performance by CME Clearing
• Buyer and seller have to negotiate to                 • Buyer and seller no longer have credit
  close out a trade                                       exposure to one another
                                                   • Parties close out transactions with any
                                                     party in the marketplace

  © 2019 CME Group. All rights reserved
Daily and Final Settlements

•    Daily settlement prices for each listed month are established by CME Group

•    These are based on price curves received from the brokers and actual trades

•    Settlement prices are published daily latest 4pm Chicago time (typically 2pm)

•     Final settlement price determined after listed month closes (post last trading day)

•    Final settlement price is value at which remaining open positions are ‘cashed out’

•    Final settlement price for each listed month is the arithmetic average of the price
     assessments published by Platts during the Settlement Period

•    The Settlement Period starts the 16th calendar day of the month that is two months
     prior to the listed month to the 15th calendar day of the month prior

    © 2019 CME Group. All rights reserved
Margining and fees

•    Initial Margins (deposit) has to be provided to initiate every futures trade

•    Required from both buyer and seller

•    Initial Margins for BSF as of 1 September: $xx per lot of 25 tonnes (3% of contract
     value)

•    Additional (variation) margin called when funds fall below initial level

•    Margins are returned when positions are closed

•   CME Group trading fees for non-members: $2.03 per lot of 25 tonnes (8 cents per
    tonne) as a block, and $1.03 per lot on screen

    © 2019 CME Group. All rights reserved
Accessing BSF to trade

•   Open/have a clearing account with a Clearer/firm with Clearing access (an FCM)

•   Firms can trade BSF either:

      1. on screen (Globex). This can be done via your FCM by phone or via a front end
         provided by the FCM.
      2. as a block on Clearport via a Clearport broker. This will additionally require setting-
         up on Clearport

    © 2019 CME Group. All rights reserved
Getting registered on ClearPort

•   To trade blocks, a firm should set-up on ClearPort and choose the brokers to work with

•   The first step is to register on ClearPort:
    • Complete firm registration:
      http://www.cmegroup.com/info_forms/registration/clearPortEula.html
    • Complete the user (trader/verification officer) registration to obtain Login IDs:
      https://login.cmegroup.com/sso/register/

•   Once ClearPort registration completed, the firm requests their Clearer to:
    • Enable the account for BSF
    • Permission any broker that the firm wishes to enter block trades on their behalf

    © 2019 CME Group. All rights reserved
Brokers negotiating block futures

•    As with CME Black Sea Wheat and Corn, Sunflower Oil block futures are privately
     negotiated by broking firms and booked into ClearPort

•    In essence, brokers call around to find both sides of the futures trade and then executes
     the futures in ClearPort

•    Eight firms currently providing this service. Most broking Black Sea Wheat and Corn
     •     SCB Brokers
     •     TFS Derivatives
     •     INTL FCStone
     •     McDonald Pelz
     •     RJO’ Brien
     •     Venture Commodities
     •     Mariana UFP
     •     HPC SA

•    Contact details at www.cmegroup/blacksea

    © 2019 CME Group. All rights reserved
Summary – key features of BSF

•   Only Sunflower Oil futures contract available to trade

•   Effective price risk management for Black Sea Sunflower Oil cash markets

•   No physical delivery – cash settled using Platts assessments

•   Physical booked can be hedged up to 12 months out

•   Price settlements provided by CME Group on a daily basis 12 months out

•   Numerous brokers providing liquidity to the market

•   Clearing removes counterparty risk and widens number of counterparties

•   Arbitrage opportunities vs other CBOT edible oil contracts

    © 2019 CME Group. All rights reserved
Further information
• Contract details available at www.cmegroup.com/blacksea

• Dedicated website: www.cmegroup.com/blacksea also provides details on:
  • CME Clearport
  • Block Trading guide
  • Margins
  • Platts pricing methodology
  • Contract rules and specifications

•    Settlement prices and Open Interest available at:
    http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/black-sea-
    sunfloweroil-financially-settled-platts_quotes_settlements_futures.html

•    Live futures and options trades: https://www.cmegroup.com/tools-
    information/quikstrike/block-trade-browser.html

•    Any queries, contact: blacksea@cmegroup.com

     © 2019 CME Group. All rights reserved
Disclaimer
Helping the World Advance: CME Group is comprised of four designated contract markets (DCMs), the Chicago Mercantile Exchange Inc
(“CME”), the Chicago Board of Trade, Inc. (“CBOT”), the New York Mercantile Exchange, Inc. (“NYMEX”), and the Commodity Exchange, Inc.
(“COMEX”). The Clearing Division of CME is a derivatives clearing organization (“DCO”) for CME Group’s DCMs.

 Exchange traded derivatives and cleared over-the-counter (“OTC”) derivatives are not suitable for all investors and involve the risk of loss.
Exchange traded and OTC derivatives are leveraged instruments and because only a percentage of a contract’s value is required to trade, it is
possible to lose more than the amount of money initially deposited. This communication does not (within the meaning of any applicable
legislation) constitute a Prospectus or a public offering of securities; nor is it a recommendation to buy, sell or retain any specific investment
or service.

 The content in this communication has been compiled by CME Group for general purposes only and is not intended to provide, and should
not be construed as, advice. Although every attempt has been made to ensure the accuracy of the information within this communication as
of the date of publication, CME Group assumes no responsibility for any errors or omissions and will not update it. Additionally, all examples
and information in this communication are used for explanation purposes only and should not be considered investment advice or the
results of actual market experience. All matters pertaining to rules and specifications herein are made subject to and superseded by official
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specifications.

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  © 2019 CME Group. All rights reserved
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