CALENDAR SPREAD FUTURES

• US 20110295726A1
• Filed: 06/01/2010
• Published: 12/01/2011
• Est. Priority Date: 06/01/2010
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Sturm, Frederick, Mueller, Eugene, Grombacher, Daniel
• Granted Patent: US 8,639,601 B2
• Time in Patent Office: Days
• US Class Current: 705/30
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

A calendar spread futures contract is a forward contract on the intermonth spread of futures contracts. The calendar spread futures contract can be independently traded and accounted for independent of the traditional roll periods of the complementary futures contracts. An open interest holder can hedge against price volatility in the related futures contracts that may occur prior to or during the roll period. In other words, the calendar spread futures contract locks in the current spread between the front-month contract and the first-deferred contract. Buying a calendar spread futures control is equivalent to buying the spread difference between the expiring contract and the second expiry. Selling a calendar spread futures contract is equivalent to selling the spread difference between the expiring contract and the second expiry.

Claims

1. A method of trading a calendar spread futures contract using an electronic trading system, the method comprising:

receiving, by a processor, a first request from a first entity via a first terminal to buy a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date;

receiving, by the processor, a second request from a second entity via a second terminal to sell the spread difference between the first futures contract having the first delivery date and the second futures contract having the second delivery date; and

executing a trade of a calendar spread futures contract, using the trading engine, by matching the first request and the second request such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.

2. The method of claim 1, further comprising:

outputting at least one of the long position, the short position, or the calendar spread futures contract to a terminal.

3. The method of claim 1, wherein the first futures contract and the second futures contract call for physical delivery.

4. The method of claim 1, wherein an underlying asset of the first futures contract is a Treasury note, a Treasury bond, or a commodity.

5. The method of claim 1, wherein the first delivery date is a next available delivery month and the second delivery date is a first-deferred delivery month.

6. The method of claim 1, wherein the first delivery date is a first-deferred delivery month and the second delivery date is a second-deferred delivery month.

7. The method of claim 1, wherein the first delivery date is a second-deferred delivery month and the second delivery date is a third-deferred delivery month.

8. The method of claim 1, wherein a mark-to-market position in the calendar spread futures contract is recorded in trading accounts of the first entity and the second entity.

9. A system for trading calendar spread futures contracts on an exchange, the system comprising:

a terminal operable to receive a first order from a first entity to buy a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date;

a memory storing at least a second order to from a second entity to sell a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date; and

a trading engine operable to match the first request and the second request as a calendar spread futures contract such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.

10. The system of claim 9, wherein the terminal receives data based on at least one of the calendar spread futures contract, long position, or short position from the trading engine.

11. The system of claim 9, wherein the first futures contract and the second futures contract call for physical delivery.

12. The system of claim 9, wherein an underlying asset of the futures contract is a Treasury note, a Treasury bond, or a commodity.

13. The system of claim 9, wherein the first delivery date is the next available delivery month and the second delivery date is the first-deferred delivery month.

14. The system of claim 9, wherein the first delivery date is the first-deferred delivery month and the second delivery date is the second-deferred delivery month.

15. The system of claim 9, wherein the first delivery date is the second-deferred delivery month and the second delivery date is the third-deferred delivery month.

16. The system of claim 9, wherein a mark-to-market position in the calendar spread futures contract recorded in the trading accounts of the first entity and the second entity.

17. A method of trading calendar spread futures contracts on an exchange by operating a trading engine of the exchange, the method comprising:

defining a calendar spread based on a first futures contract with a first delivery date and a second futures contract with a second delivery date;

listing a calendar spread futures contract based on the first delivery date and the second delivery date; and

offering, with the trading engine, the calendar spread futures contract in combination with an offsetting position in the first futures contract.

18. The method of claim 17, wherein the calendar spread is defined by a long position in the first futures contract.

19. The method of claim 17, wherein the calendar spread is defined by a short position in the first futures contract.

20. The method of claim 17, wherein the first delivery date is the next available delivery month and the second delivery date is the first-deferred delivery month.

21. A system for trading calendar spread futures contracts, the system comprising:

first order receiving means for receiving a first request from a first entity to buy a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date;

second order receiving means for receiving a second request from a second entity to sell a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date; and

trading means for matching the first request and the second request as a calendar spread futures contract such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.

22. A system for trading calendar spread futures contracts by way of a trading engine comprising a processor and a memory coupled to the processor, the system further comprising:

first logic stored in the memory and executable by the processor to receive a first request from a first entity to buy a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date;

second logic stored in the memory and executable by the processor to receive a second request from a second entity to sell a spread difference between a first futures contract having a first delivery date and a second futures contract having a second delivery date; and

third logic stored in the memory and executable by the processor to trade a calendar spread futures contract by matching the first request and the second request such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.