Trading in calendar spreads

Calendar spread is a new connective trading instrument allowing for simultaneous trading in two futures contracts on the same underlying asset but with different delivery months and opposite (short or long) positions. In trading in calendar spreads the price indicated is equal to spread value (i.e. variance in prices under the futures contracts), that can be positive, null or negative.

Calendar spread does not represent a derivatives financial instrument as it is interpreted by the Russian laws (neither it represents a swap trade).

The first leg of a calendar spread is a nearby futures contract, and the second leg is a futures contract with the most distant expiration (at the first stage of implementation the most distant expiration will the period following the nearby, for example June-September; with further successful development of the instrument admission of spreads with the most distant futures, for example June-December, will be possible).

Buying or selling a calendar spread involves two simultaneous trades (as it is defined in the Trading Rules). The Seller and the Buyer of the spread open positions for a futures contract with two different delivery terms on the same underlying asset.

Result for filling the order for a direct calendar spread:

Calendar spread buy = first leg sale + second leg buy

Calendar spread sale = first leg buy + second leg sale


Result of filling the order for a reverse calendar spread:

Calendar spread buy = first leg buy + second leg sale

Calendar spread sale = first leg sale + second leg buy

"Direct" or "reverse" characteristics of a calendar spread are linked to the underlying asset of the futures contract. At the first stage of implementation all calendar spreads are to be direct.

Calendar spreads are traded in a separate order book. This order book is not related to order book for futures contracts in the spread. Initial margin under calendar spread orders will be similar to initial margin under simultaneously entered atomic orders (i.e. equal to initial margin value under one of two legs, whichever is the largest, normally equal to initial margin under the second leg). The price tick will be equal to the price tick under the futures contracts part of the spread.

As business logic and technical implementation assume that calendar spreads represent a trading instrument, settlement price and price fluctuation limit shall be determined for calendar spreads subject to regular procedures.

At the first stage of implementation the price of the trade under the first leg will always be equal to the current settlement price of the nearby futures contract (i.e. the settlement price calculated before the previous clearing), price of the trade under the second leg will be equal to price under the first leg plus spread value as indicated in the calendar spread order (as defined in the Trading Rules — the Calendar Spread Order).

This instrument is introduced first to provide market participants with a user-friendly tool to rollover positions from nearby futures to the next futures (as trades are executed simultaneously, it allows for avoiding slippage). Besides some trading strategies may use trading in calendar spreads as a separate instrument.

During the marketing period (6 months as from start of trading in calendar spreads) the fee for executing trades in calendar spreads will be 20% less than for the futures contracts executed under order books for the futures contracts. Scalper discount will not be applied.

The first implementation stage implies trading in calendar spreads one or two weeks prior to settlement of a futures contract being the first leg. Calendar spreads for futures contracts on RTS Index (June-September) and futures contracts on the USD/RUB exchange rate (June-September) will be admitted to trading in June 2013.