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Mid-Market Marks

Daily (Post-trade) Mid-Market Marks and Pre-trade Mid Market Marks

Daily (Post-trade) Mid-Market Marks

SG hereby notifies you that for cleared swaps originally executed by you with SG, you have the right to receive the daily mark from the relevant derivatives clearing organization upon request. With respect to uncleared swaps executed between you and SG, SG (or your third-party prime broker, including Societe Generale International Limited, if applicable) will provide you with a daily mid-market mark pursuant to CFTC Rule 23.431(d). Any daily mark that SG may provide to you in connection with a swap will not include amounts for profit, credit reserve, hedging, funding, liquidity, or any other costs and adjustments, and may not necessarily:

  • Be a price at which either SG or you would agree to replace or terminate the swap;
  • Unless otherwise expressly agreed, be the basis for margin calls and maintenance of collateral; and
  • Be the value of the swap that is marked on SG’s books and records.

We will generally provide the daily mark to you in a daily valuation report either sent to you via electronic mail or posted on a password protected web page or other client portal. Please note that we may post your daily marks to our website or other client-accessible portal without providing you with separate notices of each posting.

Below is general information regarding the methodologies and assumptions that are generally used to prepare the daily mark in respect to uncleared swaps.

With respect to each swap entered into with Société Générale SA, the daily mark you receive from Société Générale SA is generally prepared, giving consideration to the applicable tenor of such swap, by discounting future cashflows (or expected cashflows in the case of options) of the swap to arrive at a current value. Uncertain cash flows are generally derived from forward curves, correlation (if applicable), and volatility levels based upon observable market inputs available and/or good faith estimates, depending on asset class and availability. In some cases, we may use probabilistic models or other simulations or mathematical pricing models to determine the expected value of future cashflows before discounting. The specific discount rate applicable to a transaction, if any, may be obtained from your Société Générale SA sales contact upon request.

With respect to swaps entered into with Societe Generale International Limited, the daily mark is generally calculated as follows:

(i) For FX and Metals swaps, the daily mark is calculated using spot and forward prices provided by a third-party vendor.

(ii) For Energy swaps, the daily mark is calculated using futures settlement prices and query of broker information provided by a third-party vendor.

(iii) For IRS products, the daily mark is calculated using market data and yield curve information provided by a third-party vendor.

(iv) For products based off exchange traded futures, the daily mark is calculated using futures pricing information provided by the exchanges.

In either case, the daily mark is an indicative estimate provided to you by SG for informational purposes only; it is not intended for use by, and should not be disseminated to, any third party. It is indicative as of the close of business on the date shown only, and does not constitute an offer to purchase or sell any instrument or enter into, transfer, assign, or terminate any transaction, security, or instrument; nor does it constitute a commitment by SG to make such an offer. Where SG expresses a daily mark as a negative amount, this is the amount you would owe to SG upon termination of the transaction. Where SG expresses a daily mark as a positive amount, this is the amount SG would owe to you upon termination of the transaction.

In our sole discretion, we may use a variety of methodologies and inputs to prepare the estimated cash flows described above, including without limitation, preparing Monte Carlo simulations and utilizing Black-Scholes and other mathematical pricing models. We are under no obligation to disclose to you any confidential, proprietary information about the methodology used or the inputs thereto. In our sole discretion, we may modify our methodologies or vary the inputs used. Such changes may result in unanticipated and significant changes in the daily mark.

Various factors potentially relevant to the value of your particular swap may not have been assessed for purposes of the daily mark, including, for example, the notional amount, credit spreads, underlying volatility, costs of carry, your CSA terms, cost of capital, and profits. In addition, daily marks may vary significantly from indicative prices available from other sources or values determined for other purposes. To the extent that such marks may be based on inputs and/or information obtained from external sources, SG believes any such sources to be reliable but makes no representations or warranties with respect to the accuracy, reliability, or completeness of such data and/or information, or the resulting daily mark.

Valuation models are applied giving consideration to the relevant transaction type, in each case with adjustments applied in accordance with SG’s proprietary models that reflect market standard practices using spot, forward and volatility values and assumptions regarding past, present and future market conditions including liquidity of markets, trading volumes and interest rates. Because of these circumstances, a daily mark will not necessarily be indicative of, and may be materially different from, the value which any other person might assign to the relevant swap, including a person affiliated with SG.

Pre-trade Mid Market Marks

Any pre-trade mid-market mark that SG may provide to you in connection with a swap pursuant to CFTC Rule 23.431(a)(3)(i) will not include amounts for profit, credit reserve, hedging, funding, liquidity, or any other costs and adjustments, and may not necessarily: 

  • Be a price at which either SG or you would agree to replace or terminate the swap;
  • Unless otherwise expressly agreed, be the basis for margin calls and maintenance of collateral; and
  • Be the value of the swap that is marked on SG’s books and records.

We will generally provide the pre-trade mid-market mark to you either:

  • in writing via electronic mail, Bloomberg chat or any other means of electronic communication notified by us to you to the email address that you have provided; or
  • orally, whether over the telephone or any other similar communication device and followed up with a post-trade written confirmation to the email or Bloomberg address that you have provided for such purposes (provided that you have either consented in writing or made the relevant election under the ISDA 2012 DF Protocol and Questionnaire to receive oral pre-trade mid-market marks).

SG makes no representations or warranties to you that the prices at which SG offers or values swaps are the best prices available in the marketplace. You may wish to seek representative quotations from other participants in the relevant market to compare prices or to determine the intrinsic or current market value of a particular swap.

You should not regard any pre-trade mid-market mark that we provide to be an offer to enter into or terminate the relevant swap at that value or price, unless we identify that value or price as firm or binding with respect to a specific quantity or notional amount of the swap. SG makes no representations or warranties that any such pre-trade mid-market marks are suitable for complying with any financial or tax reporting obligation, determining net asset value, computing any tax liability or any other purpose, matters which you should discuss with your own financial, legal, tax, accounting and other professional advisors and, except as otherwise agreed, SG disclaims any liability for any such use or reliance thereon, whether losses or damages are direct, indirect, incidental or consequential, even if SG is advised of their possibility

In addition to the above, with respect to swaps that are equity-linked swaps based on a broad index, the mid-market mark will be calculated by assuming that the rate fixings would be performed at (i) a rate tenor corresponding to the length of the reset period on the floating leg and (ii) the rate currency corresponding to the settlement currency for a standard equity-linked swap in the relevant jurisdiction. Using a rate other than the rate tenor that corresponds with the length of the reset period or a rate currency other than the one that corresponds to the settlement currency of the swap would introduce scenarios that are beyond the scope of the pricing systems that SG uses to produce the mid-market mark and may result in a mark that is substantially different than the mark provided. The mid-market mark will be calculated based on the earliest optional termination date, unless the deal may not be terminated by either party, in which case it will be calculated based on the stated maturity of the swap.

In certain cases, the pre-trade mid-market mark will be provided to you by the electronic platform on which you may execute your swap transactions (such as in the case of certain FX execution platforms).  

To the extent that you do not wish to receive a pre-trade mid-market mark, you may, under certain limited circumstances and with respect to certain limited products, waive your right to a pre-trade mid-market mark.  Please contact your SG relationship contact for further details.

If you have any further questions regarding SG’s calculation of the mid-market mark for any particular product, please discuss with your SG relationship contact.