This topic describes the spread and combination instrument types available on the CME Globex platform.
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Spread types Average Price Strip (SA) and Futures Strip (FS) are not supported in the same market. Currently, the FS Strip for 30-Day Federal Funds Futures (ZQ) and Ethanol Futures (EH) is settled to zero. As a result, the trade entry price is a net change from settlement.
A Strip has:
- One Product
- Minimum of two legs
- Maximum of 26 legs
- Quantity/side ratio of +1:+1...+1
- All legs must have same tick size
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- Leg1 = is calculated:
- Spread Trade Price + Leg2 + Leg3 – Leg 4
- Leg2 = most recent price update 7092
- Leg3 = most recent price update 6834
- Leg4 = 7038
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Reduced Tick Inter-Commodity Spread
SecuritySubType =
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RI
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The Reduced Tick Inter Commodity
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is a futures spread involving the simultaneous purchase (sale) of
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two products with a corresponding sale (purchase) of a second related
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product.
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Spreads with
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SecuritySubType RI
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will have a smaller tick than their corresponding outright legs.
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A Reduced Tick Inter Commodity
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has:
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- Two different products
- Two
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- legs
- Leg1
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- is the buy leg
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- Leg2
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- is the sell leg
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- Quantity/side ratio of the legs is +1:-1
- Buying
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- a Reduced Tick Inter Commodity
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- buys leg1, sells leg2
- Selling
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- a Reduced Tick Inter Commodity
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- sells leg1, buys leg2
Example
- Instrument Symbol = HPZ9-HHZ9
- Leg1 = +1 HPZ9
- Leg2 = -1 HHZ9
Note:
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This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how CME Globex assigns prices. Member firms commonly designate a default way of handling price assignment to these
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legs in Clearing. As a result, it is not unusual to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process allowing leg price adjustment on traded calendar spreads is referred to
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as “SLEDS” (Single Line Entry Differential).
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Pricing
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- The Reduced Tick Inter Commodity
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- Trade Price is = Leg1 – Leg2
NOTE: All prices expressed below are in a fractional pricing format.
Leg Price Assignment
- Determine the anchor leg of
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- the Reduced Tick Inter Commodity
- The leg with the most recent price update is the anchor leg.
- In the event of no recent price updates, the prior day settle of the nearby leg will be the anchor leg.
- Calculate the non-anchor leg:
- If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
- If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
- If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
Note:
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If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.
Pricing Examples
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Leg1 is the anchor leg
Reduced Tick Inter Commodity
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trades at 3.00
- Leg1 = anchor price of 2656
- Leg2 = 2656 – 3.00 = 2653
Leg2 is the anchor leg
Reduced Tick Inter Commodity
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trades at 3.0
- Leg2= anchor price of 2653
- Leg1= 2653 +3.00 = 2656
MS BMD Strip
SecuritySubType=MS
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For advanced information on UDS construction rules, see UDS - Validation and Messaging Rules.
CME FX Link (XF, YF)
CME FX Link is traded on CME Globex as the differential between CME FX Futures and OTC Spot FX, resulting in the simultaneous execution of FX Futures cleared by CME Group, and OTC Spot FX transactions subject to bilateral OTC relationships. The CME FX Link spreads consist of OTC FX Spot vs. each of the front three quarterly CME FX Futures. Three consecutive CME FX Link months are listed for eligible currency pairs. A new spread will be added two weeks prior to the last trade date of an expiring CME FX Future. The OTC FX Spot leg is only tradeable as part of the CME FX Link spread.
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- The CME FX Future is inverted from the standard OTC convention.
- The buyer of the spread sells CME FX futures and sells OTC spot. The seller buys CME futures and buys OTC spot.
Non-Inverted CME FX Link Spread (XF)
Construction: Buy1FXFutureExp1 Sell1FXOTCSpot
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The formula for spot rate for non-inverted and inverted spreads is outlined below. The FX Link spot leg is rounded based on the Security Definition minimum tick precision (tag 969-MinPriceIncrement), after the calculations below are performed. The trade date for FX Link is the market data trade date, not the clearing trade date. Tag 527-SecondaryExecID allows linking the spread summary fill notice with the leg fill notices to determine price information.
Pricing Formula
- Non-Inverted (XF)
- Spot Price = Future Price – Spread Price
- Inverted (YF)
- Spot Price = (1/ Futures Price) – Spread Price
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Leg Price Assignment
- Leg2 is the anchor and assigned the most recent available price from the outright market
- Leg1 is calculated in metric tons:
- Leg1 ((Traded Spread + CBOT Soybean Price) * 36.74))
- To convert Leg1 from metric tons to bushels:
- Take calculated leg1 price in metric tons and divide by 36.74
- To convert Leg1 from metric tons to bushels:
- Leg1 ((Traded Spread + CBOT Soybean Price) * 36.74))
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- Leg1 has Fair Market Price of = 25210
- 25210 - 2583 = 22627
- Rounded to nearest 1000 - point increment = 23000
- Leg1 = 23000 + 2583 = 25583
- 25210 - 2583 = 22627
- Leg2 is calculated rounded to the nearest 1 cent
- 23000 * 3.129 = 71967
- Resulting legs:
- Leg1 Buy 3 lots of HOZ3 at 25583
- Leg2 Sell 4 lot of 7FZ3 at 71967
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To convert leg2 to gallons use leg2/3.129 |
RB Butterfly
SecuritySubType=RB
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