Effective Sunday, April 27 (trade date Monday, April 28), a new exchange-defined crack intercommodity calendar futures spread (commonly known as a "box spread") will be made available for trading on CME Globex. The new spread will utilize a new strategy type (CB).  

The CB spread is the simultaneous purchase/sale of an intercommodity calendar spread on futures of two crack spreads (commonly known as a “box spread") allowing customers to trade two intercommodity spreads as a single instrument, eliminating leg execution risk. The CB spread is the net differential between two intercommodity spreads.

This page provides technical specifications and additional details on the new CB strategy type.

Contents

Revision History

Key Events and Dates

Testing and Certification

Certification is not required. Testing is strongly recommended.

Summary of Impacts

The following identifies the various impacts of this new spread.

New Strategy Type 

SecuritySubType=CB

The new spread is a intercommodity calendar spread between two crack spreads. The spread is identified by FIX tag 762-SecuritySubType=CB in the MDP3 security definition message; and strategyType=CB in the CME Reference Data API.

Spread Product Details

The new Crack Box spread will launch with the following spreads:

Security Exchange

The Crack Box  spreads will have 207-SecurityExchange=XNYM.

Implied Functionality

The Crack Box spread will launch with implied functionality enabled. Creation of implied in and out prices will be created between combinations of the spread component legs, calendar spreads, and between two crack spreads. Additional information and example of implied in and out orders can be found in Implied Orders.

Crack Box Spread Construction

The Crack Box spread is a intercommodity calendar spread between different month 1:1 Crack Spreads. Note the two months included in the spreads can be consecutive or non-consecutive months.  

The Crack Box  Spread has:

• Two products 

• Four legs

  • Leg1  the first leg of the Refined Product with nearest expiration

  • Leg2 the second leg of the Refined Product with deferred expiration

  • Leg3 the first leg of the Crude Product with nearest expiration 

  • Leg4  the second leg of the Crude Product with deferred expiration

• Quantity/side ratios of the legs is +1:-1:-1:+1

• Buying a Crack Box  spread buys leg1, sells leg2, sells leg3, buys leg4

• Selling a Crack Box  spread sells leg1, buys leg2, buys leg3, sells leg4

Example

• Instrument Symbol = HO-CL X24-Z24

Pricing 

• The Crack Box  spread Trade Price is = Leg1*.42 - Leg 2*.42 - Leg3*1 + Leg4*1

Leg Price Assignment 

The leg pricing calculations is a multiple step process requiring the the use of two anchor legs. 

• Start by retrieving the recent Fair Market Price of all four legs.

  1. Anchor to the most recent Fair Market Price of the two Refined Product Legs.

  2. Calculate the difference between the two retrieved Refined Product leg prices.

     1. Round the Refined Product Difference to the nearest 50.

  3. Apply the Rounded Refined Product Difference to determine the final price of the non-anchor leg of the refined products:

     1. If Leg 1 is anchor, then final Leg 2 Price = Leg 1 Price - Rounded Refined Product Difference.

     2.  If Leg 2 is anchor, then final Leg 1 Price = Leg 2 Price + Rounded Refined Product Difference.

  4. Anchor to the most recent Fair Market Price of the two Crude product Legs.

     1. Non-anchor crude product leg is yet to be determined.

  5. Calculate the adjusted Fair Market Value of the Crack Box spread as the Rounded Refined Product Difference * 0.42 - Leg3 + Leg4.

  6. Calculate the difference between the crack box spread trade price and the adjusted fair value.

  7. Adjust the price of the non-anchor Crude Product leg the same number of ticks as the Trade Price - Adjust Fair Value.

     1. If Leg3 is anchor, Leg4 Price = Leg 4 Fair Market Price + (Trade Price - Adjusted Fair Market Price).

     2. If Leg4 is anchor, Leg3 Price = Leg3 Fair Market Price - (Trade Price - Adjusted Fair Market Price)  – Minus instead of plus.

  8. Prices outside of the daily limits:

     1. In the event of a calculated price being outside of the daily limits, set calculated leg equal to the daily limit, and apply the relevant differential to recalculate the anchor leg, and any other legs as needed.

     2. If any recalculated anchor legs are outside of the daily limits the price will stand. Customers can receive a non-settled price for the recalculated leg(s).

Leg Pricing Examples 

The Crack Box  spread trades at 382.

Fair Market Price of the legs of the spread:

1.  Leg1 and Leg3 are used as the anchors

   • Leg1 = 26695 - Leg2 = 25631 = 1064

     • Leg1 - Leg2 = 1050 (Rounded to nearest 50)

     • Leg2 = 26695 - Leg2 Rounded  Price = 1050

       • Leg2 = 25645 (Finalized Leg2 Price)

2. Leg3 of the two Crude Products as the anchor leg:

   • Leg3 = 7865

     • Leg4 is calculated:

       • 1050 * 0.42 - 7865 + 7796 = 372

       • 382-372=10

     • Leg4 = 7796 + 10 = 7806

3. Final prices for all four legs:

   • Leg1 = 26695

   • Leg2 = 25645

   • Leg3 = 7865

   • Leg4 = 7806

Partner Exchange Impacts

There are no Partner Exchange Impacts.

Contact Information

For technical development support, contact Certification Support for Electronic Trading (CSET).

For production requests, please contact the Global Command Center (GCC).

For all other inquiries, please contact Global Account Management (GAM).