Spot Spread FAQs

  • 30 Nov 2016
  • By CME Group
  • Topics: Metals

Why is CME Group offering the Spot Spread?

London hosts a substantial bullion marketplace. The Spot Spread provides a direct link between the London market and the futures markets available on COMEX. The Spot Spread provides simple on-screen execution for trades between the two markets, improving the efficiency and transparency of this spread market.

What are the benefits of the Spot Spread?

The Spot Spread provides an efficient mechanism to execute spread trades between London and New York bullion markets. As a screen traded market on CME Globex, the Spot Spread is easily accessible and provides real-time price transparency for these trades. The London gold and silver elements are both cleared at CME Clearing, providing security and financial safeguards to transactions. CME ClearPort can also be used to enter privately negotiated trades for submission to clearing.

What is the Precious Metals Spot Spread and how does it work?

The Spot Spread represents simultaneous opposing transactions between the new London Spot Gold futures and COMEX Gold futures and, similarly, between the new London Spot Silver futures and COMEX Silver futures. The London Spot futures contracts will be listed on a daily basis, and have one contract day listed at a time. The Spot Spread will be the spread between this daily contract and the respective COMEX Gold and Silver futures active contract month. The London Spot futures contracts will deliver unallocated metal in London two days after the contract day.

What is the relationship between Spot Spread and London Spot Gold/Silver Futures?

The London Spot Gold and Silver futures make trading the spot spread possible. Spreading the two new contracts with our liquid COMEX Gold and Silver futures contracts, respectively, gives you a way to easily manage risk on the difference between futures and OTC markets.

London Spot Gold Futures

Contract Unit

100 troy ounces

Price Quotation U.S. Dollars and Cents per troy ounce
Trading Hours

CME Globex and CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT)with a 60-minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

Minimum Trade Price Fluctuation

$0.10 per troy ounce

Minimum Daily and Final Settlement Price Fluctuation

$0.01 per troy ounce

Minimum Spread Price Fluctuation

GC:GSP

$0.01 per troy ounce

Product Code GSP
Listed Contracts One daily contract
Termination of Trading Daily
Exchange Rulebook Chapter 129
Block Minimum 25

 

London Spot Silver Futures

Contract Unit

5,000 troy ounces

Price Quotation U.S. Dollars and Cents per troy ounce
Trading Hours

CME Globex and CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60-minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

Minimum Trade Price Fluctuation

$0.005 per troy ounce

Minimum Daily and Final Settlement Price Fluctuation

$0.001 per troy ounce

Minimum Spread Price Fluctuation

SI:SSP

$0.001 per troy ounce

Product Code SSP
Listed Contracts One daily contract
Termination of Trading Daily
Exchange Rulebook Chapter 130
Block Minimum 25

 

What are the Contract Day and Delivery Day of the London Spot Gold Futures and London Spot Silver Futures?

The London Spot futures contracts will be listed on a daily basis, and have a single contract listed at a time. The Contract Day is the day of listing and trading of the London Spot Gold Futures or London Spot Silver Futures. For example, the first Contract Day that will be listed will be 9 January 2017. The Delivery Day will be Contract Day plus two business days. For this example, the Delivery Day for Contract Day 9 January 2017 will be 11 January 2017.

How does the delivery process work?

Delivery occurs by the transfer of unallocated metal between London bank accounts. At the end of the Contract Day, holders of open positions must confirm their delivery arrangements with the Clearing House and their Clearing Member. On the Delivery Day, holders of short positions must deliver metal to the account of the Clearing House, and will receive payment thereafter. Holders of long positions must pay the dollar amount to the Clearing House on the delivery day, and will subsequently receive delivery of metal from the Clearing House.

What do customers need to do to start trading Spot Spread?

Customers will need to confirm with their FCMs that they will have access to the new contracts, and they may also need to confirm trading position parameters. Delivery of metal is made to and from London based bank accounts – customers should ensure they have an account that can be used for this purpose. The new contracts will be made available in CME’s test environments from 19 December.

What do FCMs need to do to start clearing the Spot Spread?

The Exchange has published a description of the clearing and bookkeeping process for the new contracts. Link to the description here: http://www.cmegroup.com/notices/clearing/2016/11/Chadv16-472.pdf.

Of particular note, clearing firms that wish to be active in the new contracts will need to have or establish unallocated precious metal accounts in London, which will be used to make and take deliveries of gold and silver.

How does an FCM open a Loco London unallocated account?

Five banks offer unallocated Loco London precious metal accounts. These are HSBC Bank, ICBC Standard Bank, JP Morgan, The Bank of Nova Scotia – ScotiaMocatta, and UBS. Relevant contact details can be found at http://lpmcl.com/, the website of London Precious Metals Clearing Limited.

What will the charges be? How do they compare to the bilateral charges via an IDB?

CME’s Trading and Clearing Fees have been set to be transparent. Standard execution fees for London Spot Gold/Silver Futures are $0.25 per lot for COMEX members and $0.75 for non-members. Delivery fees are $1 per lot taken to delivery.

We can’t easily compare our fees to charges from an IDB or other arrangements in the OTC market, as these charges will be unique to each customer.

Which banks/depositories offer Loco London unallocated accounts?

Five banks offer unallocated Loco London precious metal accounts. These are HSBC Bank, ICBC Standard Bank, JP Morgan, The Bank of Nova Scotia – ScotiaMocatta, and UBS. Relevant contact details can be found at http://lpmcl.com/, the website of London Precious Metals Clearing Limited, which is the organization that coordinates the London unallocated delivery process.

Will the spot futures operate within Deliveries Plus?

The London Spot Gold Futures and London Spot Silver Futures will operate in CME’s Deliveries Plus system, which is used to facilitate the transfer of delivery information between position holders and the Clearing House.

Will customers be required to open subaccounts in an FCM’s Loco London account or can they use their own?

Each FCM will determine its own approach. If the FCM deems it appropriate, it may allow customers to make or take delivery directly from their account.

What are CME Globex and CME Direct?

CME Globex is CME’s electronic trading platform. CME Globex has an open architecture that allows for a wide range of trading interfaces. CME Direct is a trading front end that complements CME Globex and provides access to CME’s markets. Details of these platforms can be found on CME’s website.

What is CME ClearPort?

CME ClearPort is a system that provides an interface for brokers and traders to submit off-exchange transactions (such as block trades and EFRP trades) to CME so that they can be cleared by CME’s Clearing House.

About CME Group

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