CME Ratio'ed Metals Spreads !!

Discussion in 'Commodity Futures' started by bone, Sep 22, 2016.

  1. bone

    bone

    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
     
  2. Maverick74

    Maverick74

    That is very good news.
     
  3. bone

    bone

    That is awesome news because those beasts are such a bitch to leg.
     
  4. Maverick74

    Maverick74

    Do you know how they are doing the ratio? They really should be weighted by volatility and not notional contract value.
     
  5. bone

    bone

    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.
     
  6. drm7

    drm7

    Still double commission? (one commission per leg per side?)
     
  7. bone

    bone

    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.
     
    Deuteronomy_24_7 likes this.
  8. i960

    i960

    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.

    image.jpeg
     
  9. Trader13

    Trader13

    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.
     
  10. i960

    i960

    A few months back I ran some numbers comparing correlations and margin haircuts for all the CME metals stuff:

    image.jpeg
     
    #10     Sep 22, 2016
    propwarrior likes this.