- What UCO futures contracts are available to help clients manage risk in the energy market?
- What are the contract specifications?
- What is the regulatory jurisdiction of the UCO futures contracts?
- What are the underlying price references? What is the Argus Media U.S. Gulf Coast UCO assessment?
- How is the final settlement price (the floating price) of the futures contract calculated?
- How do we settle futures on a daily basis?
- Are there price limits?
- Are these futures contracts eligible for block trading? How does it work?
- What are the position limits?
- What is the listing schedule?
- What are the fees for the Gulf Coast UCO futures contracts?
- I am a bona-fide hedger and I need to exceed position limits. Can I apply for a hedge exemption?
- What are the margin levels?
- How do I start trading and clearing this contract?
1. What UCO futures contracts are available to help clients manage risk in the energy market?
As the U.S. energy market continues to evolve and decarbonize, there is a greater focus on renewable road transport fuels.
To meet customer demand for risk management tools, we’ve listed the following contracts: Gulf Coast UCO (Argus) (60,000 lb) futures and Gulf Coast UCO (Argus) futures. Both futures contracts trade on Globex or can be submitted for clearing via ClearPort. Clients can trade their Soybean Oil futures, NY ULSD futures and UCO futures at CME Group.
2. What are the contract specifications?
3. What is the regulatory jurisdiction of the UCO futures contracts?
The contracts are listed in the U.S. by NYMEX and cleared in the U.S. by CME Clearing. The regulator is the CFTC.
4. What are the underlying price references? What is the Argus Media U.S. Gulf Coast UCO assessment?
The contracts are based on the U.S. Gulf Coast UCO price assessments as published by Argus Media.
The assessments reference UCO at the U.S. Gulf Coast. Assessments are of the price of product with a maximum free fatty acid (FFA) content of 15pc and a maximum moisture, impurities and unsaponifiable (MIU) content of 2pc.
Used Cooking Oil
| Location | Basis | Minimum volume | Forward timing |
|---|---|---|---|
| US Gulf Coast* | Del rail or truck | 5 railcars; 20 trucks | 30-90 days |
*Texas and Louisiana coasts
5. How is the final settlement price (the floating price) of the futures contract calculated?
The final settlement price for each contract month is equal to the arithmetic average of the UCO price assessments from Argus Media for each day that it is determined during the contract month.
6. How do we settle futures on a daily basis?
We will collate prices from the brokers and provide daily settlement prices for the futures where there is open interest.
7. Are there price limits?
No, there are no price limits.
8. Are these futures contracts eligible for block trading? How does it work?
Yes, these are eligible for block trading. The minimum block threshold is two contracts. All block trading is subject to Rule 526.
These futures contracts can be privately negotiated via the brokers as a block trade and submitted into ClearPort for clearing. Trades need to be reported by the broker onto ClearPort within 15 minutes of execution.
Firms need to be classified as an Eligible Contract Participant (ECP) in order to be able to engage in block trades. The definition of Eligible Contract Participant (ECP) can be found in Section 1a(18) of the Commodity Exchange Act.
9. What are the position limits?
The Gulf Coast UCO (Argus) (60,000 lb.) futures and the Gulf Coast UCO (Argus) futures will have a spot month limit of 1,100 contracts. Single Month Accountability Level and All Month Accountability Level are set at 3,000 and 4,000 contracts, respectively.
The contract size for the Gulf Coast UCO (Argus) futures contract is 100 metric tons, therefore, the equivalent spot month position limit will be applied with a ratio of 3.674 LBU : 1 UCO.
10. What is the listing schedule?
Monthly contacts will be listed for 12 consecutive months for the futures contracts. A new monthly contract will be added following the termination of trading in the front-month contract
11. What are the fees for the Gulf Coast UCO futures contracts?
The Gulf Coast UCO futures contracts are part of the NYMEX fee schedule.
12. I am a bona-fide hedger and I need to exceed position limits. Can I apply for a hedge exemption?
Yes, you can apply for a hedge exemption. Market participants may be eligible to receive an exemption from position limits in accordance with Rule 559 based on having bona fide hedging positions (as defined by CFTC Regulation §1.3(z)(1)), risk management positions and/or arbitrage and spread positions. To obtain an exemption application or for further information on the exemption application process, please contact us at NYHedgeprogram@cmegroup.com.
13. What are the margin levels?
Margin levels (outrights and offsets) are constantly under review and will be updated and listed on the product specification pages on www.cmegroup.com.
14. How do I start trading and clearing this contract?
There are various ways to begin trading these contracts. Outlined below is the process:
Contact biofuel@cmegroup.com or any of the inter-dealer brokers (IDBs) that service this market, and they will be able to provide guidance.
Step 1: Register on ClearPort
Step 2: Appoint an inter-dealer broker (IDB) that services this market
Step 3: Request your CME Group Clearing firm to permission your chosen IDB for trade submission
Visit the website for more information on getting set up to trade the contracts on Globex and/or as a block trade on ClearPort.
To view contract specifications for each contract, visit the Gulf Coast UCO (Argus) (60,000 lb) futures and Gulf Coast UCO (Argus) futures specs pages.
Biofuel and Renewable Fuel Products
Hedge your financial risk in the global biofuels (including waste-based products) and ethanol markets with a wide range of futures and options contracts at CME Group.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
