101 Overview: Settlement
Settlement
CME Clearing conducts settlement cycles at least twice daily for exchange-traded derivatives products, once at intraday and once at the end-of-day, and at least once daily at end-of-day for IRS and FX swaps products.1 At each settlement cycle, snapshots of prices and positions are taken and settlement variation pays/collects2 are calculated and then collected from or paid to each clearing member, as applicable.
Timing of Settlement Flows
CME Clearing has an established timeline for the movement of funds for intraday and end-of-day settlement cycles for settlement variation payments:
- 7:30 a.m. CT: settlement banks confirm debits from clearing members’ accounts for credit to CME Clearing’s accounts for the prior day’s end-of-day settlement cycle;
- 8:30 a.m. CT: settlement banks confirm debits from CME Clearing’s accounts for credit to clearing members’ accounts for the prior day’s end-of-day settlement cycle;
- 12:30 p.m. CT: for exchange-traded derivatives products,3 intraday settlement cycle instructions distributed to settlement banks; and
- 1:30 p.m. CT: for exchange-traded derivatives products,4 settlement banks confirm debits and credits for the intraday settlement cycle.
CME Clearing also has the authority, provided under the CME Group Exchange Rules, and the operational capacity to execute ad hoc intraday settlement cycles to facilitate the exchange of settlement variation payments for the products it clears, if conditions warrant. However, CME Clearing prioritizes predictable settlement cycles and would utilize this tool only where market conditions or price fluctuations necessitate such action.5
Settlement variation payments are final, irrevocable, and unconditional no later than when the correct CME Clearing bank account at the relevant settlement bank is debited or credited with the payment. Indicative and final settlement obligations are made available in advance of the relevant settlement windows and this information generally becomes available between 10:00 p.m. – 12:00 a.m. CT for end-of-day cycles and between 11:30 a.m. – 1:00 p.m. CT for intraday cycles.
The scheduling of settlement cycles takes into account relevant holidays as communicated to market participants through established channels, such as advisory notices, in preparation for such an event. Both advisory notices and CME Group’s Holiday Calendar are publicly available on the CME Group website.
Risk Monitoring of Settlement Flows
CME Clearing employs internally developed systems to identify, measure, and monitor settlement and funding flows on an ongoing basis. CME Clearing’s systems allow the Risk Management team to monitor positions and settlement variation exposures in real-time throughout the day. These systems provide CME Clearing with the ability to flexibly analyze clearing members’ settlement variation obligations at various levels of granularity (e.g., per clearing member and by each clearing member’s settlement account).
As appropriate, based on risk considerations, CME Clearing communicates expected settlement variation requirements throughout the day to clearing members and settlement banks to confirm their understanding of payment obligations to mitigate funding risks and enhance transparency.
References
1 Products listed on FEX are subject to at least once daily settlement cycles during Australian regular trading hours but may be subject to twice daily settlement cycles where predetermined thresholds are exceeded.
2 For ease of reading, the term “settlement variation” refers to settlements made pursuant to CME Group Exchange Rule 814, which captures the settlement of any outstanding exposures—i.e., obligations to pay include any settlement variation payment and any other payments due in respect of a product (e.g., options premium and price alignment amount).
3 All Base products with the exception of FX swaps and FEX products, which are subject to once daily settlement cycles at end-of-day. See supra note 1.
4 Id.
5 In making this decision, CME Clearing takes into account the potential impacts on the larger market and market participants.
This summary page is designed to provide a brief overview of a topic related to the CME Clearing. The information contained in this summary has been compiled by CME Group for general purposes only. While some relevant CME Group Exchange Rules may be discussed with respect to CME Clearing's practices, all matters pertaining to rules and specifications herein are made subject to, and are superseded by, the CME Group Exchange Rulebooks. Current versions of the Rules should always be consulted.
