CME / Nymex / Comex is launching ratio'ed intermarket precious metals spreads, which is super awesome. This will work like the ratio'ed interest rate market spreads that have been trading on the CBOT / Globex for several years. What this means is that the exchange will internally match ( leg ) inter market precious metals spreads in the correct hedge ratio. One order, and a singular order book price ladder. No manual legging risk or automated legging software required. Very nice. http://cmegroup.mediaroom.com/2016-...ous-Metals-Spread-and-Ratio-Futures-Contracts
Do you know how they are doing the ratio? They really should be weighted by volatility and not notional contract value.
I have no further info, but am dying to find out. They will probably change it every quarterly expiry and publish a fresh quarterly ratio .pdf sheet every quarter like they do the CBOT exchange supported intermarket interest rate spreads - my guess.
Sure, they're going to get the same pound of flesh whether the exchange internally matches them, or you leg them manually, or you have a platform like RTS or TT AutoSpreader. Regardless, IMHO, this is huge. Legging a Shatz / Bobl spread yourself is one thing, but legging Gold vs. Platinum is worse than a gasoline or a heating oil crack which is just atrocious. If the exchange can do it at price levels I like then I am SO happy to pay the vig.
Btw looks like only gold/silver is a ratio and the rest are IS spreads. Also not sure what to make of the "for each day of the contract month" part.
I applaud any exchange support that promotes spreads. But no interest in spreading these contracts. Take the Gold/Silver spread, for example. Economists and financial journalists write about it. But for traders, it's poorly correlated and poorly cointegrated. It's really a currency vs commercial metal with little potential for an interesting intermarket relationship.
A few months back I ran some numbers comparing correlations and margin haircuts for all the CME metals stuff: