FRM Part I · FRM Exam Part I · Central Clearing
A clearing member holds a long futures position cleared by a CCP. The contract was entered at 1,250.00, the contract multiplier is 100, and there are 40 contracts. Settlement prices on two consecutive days are 1,243.00 and 1,236.50. What variation margin does the member pay or receive on the second day?
The long member pays USD 26,000. The settlement price fell 6.50 points on day two, and multiplying by 100 and 40 contracts gives 26,000. Variation margin is settled on the daily change, not on the cumulative change since trade inception.
- APays USD 26,000Correct
- BReceives USD 26,000
- CPays USD 28,000
- DPays USD 52,000
Explanation
Day 2 price change is 1,236.50 - 1,243.00 = -6.50. Loss = 6.50 x 100 x 40 = 26,000, so the long pays. USD 28,000 would use the day 1 change of 7.00, and receiving has the wrong sign. The 52,000 figure doubles the correct amount.
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