CME Group’s new Precious Metals Spot Spread allows traders to seamlessly and transparently transfer risk between the COMEX futures market and the London OTC market in one simple and cost-effective transaction.
How Does It Work?
The Spot Spread is constructed of two legs. One leg is the active Gold or Silver COMEX futures contract and the other is a London deliverable unallocated future. This spread enables both the COMEX and London spot legs to be executed on CME Globex and cleared through CME Clearing, which provides greater security and guaranteed counterparty credit.
A trader is long London OTC gold and short COMEX Gold futures and wants to offset the risks of both positions. By buying the spot spread, this trader would be able to cover the short COMEX position and liquidate the long London spot position simultaneously.
Electronic Trading and Reporting
CME Globex trading platform allows you to trade electronically and removes the worry of searching for counterparties to trade with. Spot Spread trades are automatically fed into CME Clearing to help you meet 5-minute reporting windows in busy markets.
This contract melds the ease of COMEX futures and the flexibility of the OTC market. For traders who routinely transfer risk between the futures and OTC spot markets, the COMEX Precious Metals Spot Spread offers an around-the-clock transparent price for trading and a secure and efficient way of executing those trades.
Test your knowledge
In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.