VOLUME 20 - BULLETIN #222
TO:
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ALL CLEARING MEMBERS
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FROM:
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BUSINESS SYSTEMS GROUP
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DATE:
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July 25, 2000
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SUBJECT:
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SLEDS Updated Implementation Date and Trade Entry Screens
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In coordination with the Chicago Board of Trade, the Board of Trade Clearing Corporation will implement Single Line Entry of Differential of Spreads (SLEDS) for Futures trades in the following commodities on these respective dates.
Monday, July 31, 2000
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Monday, August 7, 2000
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30 Year Treasury Bonds
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Wheat
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10 Year Treasury Notes
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Corn
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5 Year Treasury
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Soybeans
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2 Year Treasury Notes
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Oats
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30 Day Fed Fund
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Soymeal
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Dow Index
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Soyoil
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Dow Composite Average
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Rough Rice
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Dow Transportation Index
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1000 oz Silver
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Dow Utilities Average
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5000 oz Silver
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5 Year Agency Notes
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Kilo Gold
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Muni Bond Index
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100 oz Gold
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The current differential spread processing requires firms to submit the buy and sell legs of a differential spread for financial contracts separately. In addition, Clearing processes Soybeans and Corn in a ‘6 to D’ match at the final reconciliation. These processes will be replaced with the implementation of SLEDS which will require the submission of one record that identifies the two spread months, the buy and sell indicator, trade price for the first month entered and the differential amount.
A new selection, #17 on the OTIS Main Menu, will allow users to access Single Line Entry Differential screens (see attachment #1). Following is overview of the new screens.
Trade Entry
Selection #1, Differential Spread Trade Entry will allow firms to enter Single Line Differential transactions (see attachment #2) To enter a SLEDS transaction, the following information is required:
Contract Months - months for both legs of the spread are required. Months can be entered into the Contract Month fields in any order. Buy/Sell input will determine the position of the first month entered in the Contract Month Field; i.e. a user enters a sell of one spread with September/December in the 1st and 2nd Contract Month fields respectively. The firm will see a sell of one September contract and a buy of one December contract on trade inquiry screens.
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Trade Price - is an optional field. If a price is not entered, Clearing will automatically populate the nearby month using the previous day’s settlement price. If a firm does enter a trade price, this price will apply to the first month entered: i.e. user enters December 2000 in the first month field and September 2000 in the second month field with a trade price of 97.15. The December leg of the spread will have a trade price of 97.15. Like current processing, trade prices for the nearby month of financial spreads must be entered as a whole tick. If left blank, and the previous days settlement price ended in a fraction, clearing will round the price up for buys and down for sells. Although Clearing allows the entry of the trade price of either the nearby or the deferred month, the price of the other spread leg will always be based on the following formula: Nearby Month – Deferred Month = Differential. For example in a December/September 2000 spread, the 1st month entered is December, price entered is 98.11 (0098110 in a seven digit trade entry field), the differential amount is +1 (entered as 10 in OTIS). The trade price of the September leg will be calculated as follows: September – 98.11 = +1. The September price = 98.12. In a September/December 2000 spread, the 1st leg entered is September, price entered is 98.11, the differential amount is +1. The trade price of the December leg will be calculated as follows: 98.11 – December = +1. The December price = 98.10
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Spread Sign – can be positive or negative (+/-). Blank will default to a positive. This is a critical match field. Positive differentials will not match with negative differentials.
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Price Differential – is the price difference between the buy and sell legs. The price differential field will be formatted to match the trade price format of the commodity: i.e. Treasury bond differential will be in 32nds. This is a critical match field.
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Firms will be allowed to enter multiple differential spreads and multiple front month prices using the same card number and screen. Also, firms can submit SLEDS transactions to Clearing via MQM using the TREX format. A new spread block (S1) of the TREX record will be required to support these changes. There are no changes to the main body of the TREX record (see Volume 20 – Bulletin #72.) Once the transaction has been entered, and processed by Clearing, firms will receive, via MQM, TREX records for each leg of the spread. The transmission of the legs will contain the TREX Main block plus the ‘M-1’ and ‘R-1’ blocks.
Spread legs generated from the Single line record will be automatically transmitted to the firm’s outbound MQM queue. Firms that do not wish to receive the legs should contact the Business Systems Group at the numbers listed below.
Please note; when SLEDS is implemented for a contract, any differential spreads in that contract, which are unmatched from a previous day, must be deleted and re-entered as a SLEDS transaction. Also, there will be no ‘6 to D’ match during final processing.
Misclears of SLEDS transactions will also be entered through the SLEDS trade entry screen. Firms will enter an ‘E’ in the Transaction Type field to indicate a misclear.
Inquiry Update
Clearing will assign record IDs for each leg of a SLEDS transaction in the 75000 to 79999 range. These record IDs can only be accessed through the inquiry selections on the SLEDS Menu or the OTIS Trade Status Inquiry screen (choice #11 on the OTIS Main menu). Changes made to the differential amount or the differential sign will automatically change the price of the back or deferred month leg. The trade prices on the legs of a matched differential can be changed. Changes in one month will be automatically updated in the other month, based on the differential, using the formula: Nearby month – Deferred month = Differential.
The SLEDS Menu will also allow firms to inquire on SLEDS transactions that have edited due to keypunch or time stamp error, card order, record ID number and all transactions (attachment #4).
Should you have any questions, please call or e-mail one of the following Business Systems Analysts:
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