SOFR User Defined Options Spreads

Owned by CME Group
Last updated: Aug 06, 2024
2 min read

For the SOFR complex, customers can create and trade options spreads that tick according to spread component legs.

The tick increment for SOFR, SOFR Bundle, and SOFR Mid-Curve options User Defined Spreads (UDS) is determined as follows:

  • If all legs are fixed 1/4 tick, the spread will be fixed 1/4

  • If legs are a combination of 1/4 tick and Variable Tick Table (VTT) value=12, the spread will be VTT=12 (0.50)

  • If all legs are VTT=12, the spread will be VTT=12

  • If any leg is 1/2 tick, the spread will be 1/2 tick

One exception is that the smallest tick will be used when all of the following criteria are met:

  • bundles are part of the UDS

  • at least two of the furthest underlying expiration dates are equal

  • at least two of the furthest options expirations dates are equal

The minimum tick increment is defined in the instrument’s Security Definition (tag 35-MsgType=d) message in tag 969-MinPriceIncrement. The Variable Tick Table (VTT) values are defined in the instrument’s Security Definition (tag 35-MsgType=d) message in tag 6350-TickRule value.

Contents

SOFR User Defined Options Spreads Examples

The following examples illustrate how tick increments are determined for the SOFR complex.

Example 1: All Legs are Fixed 1/4 Tick

If all legs are fixed 1/4 tick, the spread will be fixed 1/4 tick.

UDS Legs

  • Buy BU5Z5 C0375: .25 tick

  • Buy BU3F6 P9725: .25 tick

  • Sell BU2H6 P0225: .25 tick

UDS Tick Result

  • 969-MinPriceIncrement=.25

Example 2: Legs are Mix of 1/4 Tick and VTT=12

If the legs are a mix of 1/4 tick and VTT=12, the spread will be VTT=12.

UDS Legs

  • Buy SR3G4 C0375: .25 tick

  • Buy SR3H4 C9950: VTT=12

  • Sell SR3M4 P0300: VTT=12

UDS Tick Result

  • 969-MinPriceIncrement=VTT

Example 3: All Legs are VTT=12

If all legs are VTT=12, the spread will be VTT=12.

UDS Legs

  • Buy SR3M4 P9425: VTT=12

  • Buy SR3U4 C9950: VTT=12

  • Sell SR3Z4 P0300: VTT=12

UDS Tick Result

  • 969-MinPriceIncrement=VTT

Example 4: A Leg is 1/2 Tick

If any leg is 1/2 tick, the spread will be 1/2 tick.

UDS Legs

  • Buy SR3M4 C0375: .25 tick

  • Buy SR3U4 C9950: VTT=12

  • Sell SR3Z4 P9575: .50 tick

UDS Tick Result

  • 969-MinPriceIncrement=.5

Example 5: Bundle Exception

In this example, the legs are a combination of 1/4 tick and VTT=12, but a bundle is part of the UDS and the expiry date of the underlying future and option are the same. As a result, the smallest tick (.25) is used.

UDS Legs

  • Buy SR3M4 C0200 from Bundle: .25 tick

  • Buy SR3U4 C9950: VTT=12

  • Sell SR3Z4 P9937: VTT=12

UDS Tick Result

  • 969-MinPriceIncrement=.25



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