CA-5.6.7
Positions in different commodities36 cannot be offset for the purpose of calculating the open-positions as described in Paragraph CA-5.6.6 except in the following instances:
(a) The sub-categories of commodities are deliverable against each other;
(b) The commodities represent close substitutes for each other; and
(c) A minimum correlation of 0.9 between the price movements of the commodities can be clearly established over a minimum period of one year to the satisfaction of the CBB. Netting of positions for different commodities is subject to the CBB's approval. Under the maturity ladder approach, the net positions are entered into seven time bands as set out in Paragraph CA-5.6.10.
36 Commodities can be grouped into clans, families, sub-groups and individual commodities; for example, a clan might be Energy Commodities, within which Hydro-carbons is a family, with Crude Oil being a subgroup, and West Texas Intermediate, Arabian Light and Brent being individual commodities.
January 2015