BrokerTec RV Curve & Butterflies

The spread is traded at a +/- yield differential with inverted prices (bid higher than offer). The outright legs will trade in prices requiring price-to-yield and yield-to-price conversions.

The key to RV products is the implied functionality, which allows orders for a spread to match with passive orders in BrokerTec’s outright CLOB if the order would fill completely at the given yield or better. This deepens liquidity and allows for efficient execution of spread orders.

• If available, incoming RV orders match with existing RV orders at the required price; otherwise, Globex will “leg” the spread order by implying out one of the legs to the outright market
• If an RV order is matched with a non-implied RV order:
  • Curves: The back leg (leg with the higher maturity) will be spotted off the instrument’s last traded price in the outright orderbook. The front leg price is then calculated by adding the negotiated yield to the yield differential of the back leg. Leg price assignments for curves
  • Butterflies: The back two legs (legs with the higher maturity) will be spotted off the instrument’s last traded price in the outright orderbook. The front leg price is then calculated by adding the negotiated yield differential to two times the leg 2 (middle) yield minus the leg 3 (furthest) yield. Leg price assignments for butterflies
• If an RV order is matched with an implied RV order from separate outright orders, the legs will receive the prices of the underlying outright orderbooks. The matching engine ensures that the RV order will only be executed as a yield differential at or better than what was inputted.
• Each RV product utilizes 1^st generation implied functionality, meaning that both curves and butterflies orders can match outright CLOB orders, but cannot match with one another.
• Implied outright orders created by RV have FIFO priority amongst other implied outrights, but are prioritized behind real outright orders in the underlying outright orderbooks at a given price.
• While RV prices are disseminated and orders entered the standard 1/10th of a basis point (0.00100) tick increment, implied RV orders are frequently matched at bid/ask spreads narrower than the standard tick increment. In these cases, the spread order will be executed at the most advantageous differential possible, which may be better than the price on the incoming order.

FaK, FoK, FaS, and hidden/iceberg orders. “Only Best” is not currently supported for RV products.

Only implied “in” market data is disseminated, being orders on the legs (outrights) that are used to create implied orders in the RV spread market.

Currently not prevented for RV orders implying against the outright orderbooks.

CME STP supports both implied and non-implied Curve Ratio (RV) Spreads and Butterfly (RB) Spreads for U.S. Treasury Actives.

RV products are available via the iLink API and through BTEC’s Global Front End (GFE). Product enabling is required, please speak with your BTEC account rep to kick off setup.