The technical information is intended to provide a detailed description of the procedure for calculating SPAN® requirements — in other words, the functional specification for the SPAN calculation algorithm.

This updated version of the SPAN algorithm is generically referred to herein as SPAN version 4, or just SPAN 4. It describes functionality implemented in the upcoming Windows-based PC-SPAN version 4.

Since CME® introduced SPAN in 1988, the many exchanges and clearing organizations worldwide which have adopted SPAN have added many new features and enhancements. SPAN 4 itself introduces many powerful new features.

The fundamentals of the SPAN calculation, however, and the principles behind them, have not changed. The underlying simplicity of SPAN has been preserved. The many new capabilities introduced with SPAN 4 should be thought of not as changes to the underlying methodology, but as providing a vastly greater degree of flexibility and control in the usage of SPAN.

The SPAN algorithm has always been viewed as being applicable to an unlimited range of product types, but the original focus in its implementation has been on standardized futures, options on futures and options on physicals. Portfolios today, however, can contain the widest range of derivative and non-derivative instruments. SPAN 4 supports the ultimate in product flexibility using the advanced, object-oriented model for defining products developed for CME's Clearing 21®  system.

In several important respects, the SPAN 4 methodology has been simplified and generalized. For example, there is no longer any need for "commodity redefinition" in order to group products together across exchanges within a clearing organization, and the hard-coded spreading logic of several exchanges' unique spreading and delivery risk calculations, has been parameterized within the generic spreading process.