17 C.F.R. § 20 app A to Part 20
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)[DAGGER] | Company B position (short)[DAGGER] |
| 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 |
[DAGGER] 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 force | Referent futures month | Fraction of days | Company A position (long)[DAGGER] | Company B position (short)[DAGGER] |
| 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 |
[DAGGER] Contracts rounded to the nearest integer.
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)[DAGGER] | Company B position (short)[DAGGER] |
| 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 |
[DAGGER] Contracts rounded to the nearest integer.
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)[DAGGER] | Company B position (short)[DAGGER] |
| January 1-March 31 | April | 90/181 | 1989 | -1989 |
| April 1-June 30 | July | 91/181 | 2011 | -2011 |
| Total | 181/181 | 4000 | -4000 |
[DAGGER] Contracts rounded to the nearest integer.
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)[DAGGER] | Company B position (short)[DAGGER] | Applicable deferred futures month | Company A position (short)[DAGGER] | Company B position (long)[DAGGER] |
| 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 |
[DAGGER] Contracts rounded to the nearest integer.
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, 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 28 | 28/31 | February | [DAGGER][DAGGER][DAGGER] | -28 | [DAGGER][DAGGER][DAGGER] | 28 |
| January 29-January 31 | 3/31 | March | -3 | 3 | ||
| Total | 31/31 | -31 | 31 |
[DAGGER][DAGGER][DAGGER] 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 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)[DAGGER] | Company B position (short)[DAGGER] |
| July 1 -July 22 | August | 22/31 | 70 | -70 |
| July 23-July 31 | September | 9/31 | 29 | -29 |
| Total | 31/31 | 99 | -99 |
[DAGGER] Contracts rounded to the nearest integer.
Delta[DAGGER][DAGGER] Adjusted Position and Futures Equivalent Position on January 1
| Date | August | September | ||
| Delta | Position | Delta | Position | |
| January 1 | .2 | 14 | .2 | 5 |
[DAGGER][DAGGER] Deltas should be calculated in an economically reasonable and analytically supportable basis.
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[DAGGER] Adjusted Position on January 1
| Date | August | September | ||||||
| Long call | Short put | Long call | Short put | |||||
| Delta | Position | Delta | Position | Delta | Delta | Position | ||
| January 1 | .7 | 49 | .3 | -21 | .7 | 20 | .3 | -8 |
[DAGGER] Deltas should be calculated in an economically reasonable and analytically supportable basis.
Futures Equivalent Position on January 1
| Date | August[DAGGER][DAGGER] | September[DAGGER][DAGGER] | ||
| Long | Short | Long | Short | |
| January 1 | 70 | 0 | 28 | 0 |
[DAGGER][DAGGER] Contracts rounded to the nearest integer.
17 C.F.R. § 20 app A to Part 20