Portfolio Margining - SPAN®

Advantages of the SPAN® System of Portfolio Risk Analysis

The standard portfolio risk analysis system (Standard Portfolio Analysis of Risk – SPAN®) for portfolios consisting of options and futures was designed and introduced at the Chicago Mercantile Exchange (CME) in 1988. It is a transparent, well-defined calculation mechanism for minimum security deposit (deposit margin) size requirements for a portfolio. The SPAN method has the following features and advantages:

flexible settings for end users (exchange / clearing organization, Trader / Clearing Participant etc.);
adaptability to changing standards and principles of transactions (variation of accepted risk level, bilateral clearing (netting) method, level of requirements and obligations etc.);
scalability subject to the volume and structure of portfolios analyzed.

SPAN methodology has become widely used in the exchange industry, becoming the unofficial standard in this sphere. It is:

approved by financial market regulators in more than 10 countries worldwide, including for risk analysis and control;
used by more than 50 futures and option exchanges and clearing houses worldwide as the calculation and determination mechanism for security deposit size requirements;
used by more than 1,500 investment banks, financial and insurance companies, mutual and hedge funds, portfolio investors, and independent auditing firms worldwide for market risk analysis and managing financial derivative instrument portfolios (exchange and off-exchange) and other instruments;
used by information technology companies as a standard tool.

Currently, the SPAN system is used by exchanges and clearing houses for determining the security deposit (deposit margin) size, as well as, in some cases, collective clearing fund charges for transactions with:

exchange derivative financial instruments (futures and options);
off-exchange derivative financial instruments;
securities (shares, bonds etc.);
monetary and foreign exchange market instruments;
mercantile assets and any combinations of the instruments above.