A User Defined Spread (UDS) is a multi-legged instrument created by a client for trading on the CME Globex platform. The user submits a request proposing the attributes of the spread (e.g. legs, leg ratio, leg option delta, etc.) and CME Globex processes the request. If accepted, CME Globex disseminates the tradable instrument to the market.

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UDS Instrument Types

Since UDS instruments are user-defined and initially created from available outright instruments, a variety of spread spreads and combinations can be created and are classified according to their component instruments as described below.

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• Unrecognized UDS - Spread structure does not match the construction of any standard CME Globex spread type, disseminated as a Generic (GN) spread type.
• Recursive UDS - Spread having at least 1 leg that is a UDS. Only one level of recursion is allowed. UDS instruments constructed recursively can contain up to a maximum of 40 total outright instruments.

• Covered UDS - Spread created by combining an outright option or options spread with up to 39 outright futures instruments, for a maximum of 40 instruments. Exchange-recognized spread types and unrecognized UDS can be used to construct a Covered spread, which is disseminated as a Covered (CV) spread type. A Covered spread is designed to be delta-neutral.

Refer to User Defined Spread Types and Characteristics for complete details on the UDS types described above.

Futures UDS Instruments

Futures UDS have the following constraints:

• UDS futures are only supported for:
  • TL spreads in CBOT treasury futures (ZT, Z3, ZF, ZN, ZU, ZB)
  • GN, SB, WS, XS, SA, FS and SP spreads in Market Segments (tag 1300-MarketSegmentID) 78 and 80
    • EXCEPT for the CL group, which does not support UDS
• Futures UDS cannot be implied.

UDS Terminology

UDS messaging relies on message tag groups, i.e., each instrument included in the UDS creation request is defined in a block of message values, which is repeated within the message for each component instrument.

Each repeating group may be referred to as a leg; however, a leg is not necessarily an outright instrument, but may contain a spread as in the case of a recursive UDS (see below).

UDS Methodology

All UDS on CME Globex are constructed with the iLink Security Definition Request (tag 35-MsgType=c) message and acknowledged with the iLink 2 Security Definition message.

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All defined and active spreads are disseminated at the beginning of the week, or at initial creation on the market data Incremental feeds, and looped on the market data Instrument Definition feeds.

UDS Creation and Market States

Security Definition Request (tag 35-MsgType=c) messages are accepted during all market states except market close.

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• the RFQ will not be auto-generated—clients must submit the RFQ when the destination group state returns to Open.
• the implied book will not be generated; the implied book will be auto-generated at market Open.

UDS Composition

CME Globex allows a User Defined Spread (UDS) to be composed of instruments from multiple related security groups; the resulting UDS instrument then belongs to the UDS security group (U$) as indicated in tag 1151-Security Group in the market data Security Definition message. For example, instruments from the following security groups may be used in a single UDS:

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1. Buying one option from security group J1 and selling another option from security group J1
2. Buying one option from security group J2 and selling another option from security group J2
3. Buying one option from security group J2 and selling another option from security group J2
4. Buying one option from security group J1 and selling another option from security group J3
5. Buying one option from security group J3 and selling another option from security group J2
6. Buying one option from security group J1 and selling another option from security group J2
7. Buying one option from security group J1, buying one option from security group J2, and buying one option from security group J2

UDS Recursion

A UDS can be constructed from available outrights or a combination of outrights and existing UDS instruments.

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UDS Life Cycle

• A covered UDS expires at the end of the trading session in which it has been created.
• All other UDS instruments expire and are extended according to UDS Expiration and Extension rules.