BrokerTec RV Curve creates a single market to trade US Treasury benchmark spreads, bringing the efficiency of implied orders from our futures inter-commodity spreads to cash bonds for the first time.
Leveraging the power of CME Globex, the RV Curve merges liquidity from the central limit order book with a single-threaded matching engine ‒ eliminating legging risk, providing inside liquidity, and increasing matching opportunities when trading benchmark spreads.
RV Curve offers 21 spreads, providing a full view of the relationships between 2-year, 3-year, 5-year, 7-year, and 10-year Treasury notes and 20-year and 30-year Treasury bonds.
Whether trading outright or implied spreads, RV orders are guaranteed to execute both legs of the trade.
All RV spreads are executable to 1/10th of a basis point (0.00100), enabling savings from $32 per million (2-year/3-year spread) to $167 per million (10-year/30-year spread).
RV orders will be worked directly in the outright order books on a first-in, first-out basis after all non-implied orders – increasing fill probability and liquidity across all spreads.
Implied orders are likely to incur additional yield as a result of rounding. This savings is 100% allocated to the RV order and could reflect material savings.
RV Curve is integrated into the BrokerTec central limit order book, and accessible via the same STP, API, and front-end connectivity.
BrokerTec RV Curve is a single market for spreads on US Treasury benchmarks. Trades can be executed in a single order, providing the opportunity to trade the yield curve more efficiently and without legging risk.
|RV CURVE SPREADS||RV CURVE COMPONENTS|
|NAME||SYMBOL||FRONT LEG||BACK LEG||LEG RATIO||FRONT QUANTITY (MM)||BACK QUANTITY (MM)|
|UST 2YR vs 3YR RV Curve||UB2:03||2 Yr||3 Yr||1.5||3||2|
|UST 2YR vs 5YR RV Curve||UB2:05||2 Yr||5 Yr||2.33||7||3|
|UST 2YR vs 7YR RV Curve||UB2:07||2 Yr||7 Yr||3.0||3||1|
|UST 2YR vs 10YR RV Curve||UB2:10||2 Yr||10 Yr||4.0||4||1|
|UST 2YR vs 20YR RV Curve||UB2:20||2 Yr||20 Yr||6.0||6||1|
|UST 2YR vs 30YR RV Curve||UB2:30||2 Yr||30 Yr||9.0||9||1|
|UST 3YR vs 5YR RV Curve||UB3:05||3 Yr||5 Yr||1.67||5||3|
|UST 3YR vs 7YR RV Curve||UB3:07||3 Yr||7 Yr||2.0||2||1|
|UST 3YR vs 10YR RV Curve||UB3:10||3 Yr||10 Yr||3.0||3||1|
|UST 3YR vs 20YR RV Curve||UB3:20||3 Yr||20 Yr||4.0||4||1|
|UST 3YR vs 30YR RV Curve||UB3:30||3 Yr||30 Yr||5.0||5||1|
|UST 5YR vs 7YR RV Curve||UB5:07||5 Yr||7 Yr||1.33||4||3|
|UST 5YR vs 10YR RV Curve||UB5:10||5 Yr||10 Yr||1.67||5||3|
|UST 5YR vs 20YR RV Curve||UB5:20||5 Yr||20 Yr||2.5||5||2|
|UST 5YR vs 30YR RV Curve||UB5:30||5 Yr||30 Yr||3.0||3||1|
|UST 7YR vs 10YR RV Curve||UB7:10||7 Yr||10 Yr||1.25||5||4|
|UST 7YR vs 20YR RV Curve||UB7:20||7 Yr||20 Yr||2.0||2||1|
|UST 7YR vs 30YR RV Curve||UB7:30||7 Yr||30 Yr||3.0||5||2|
|UST 10YR vs 20YR RV Curve||U10:20||10 Yr||20 Yr||1.5||3||2|
|UST 10YR vs 30YR RV Curve||U10:30||10 Yr||30 Yr||2.0||2||1|
|UST 20YR vs 30YR RV Curve||U20:30||20 Yr||30 Yr||1.25||5||4|
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 Curve is its implied functionality, which allows orders for a spread to match with passive orders in BrokerTec’s Central Limit Order Book if the order would fill completely at the given yield or better. This deepens liquidity and allows for efficient execution of spread orders.
FaK, FoK, FaS, and hidden/iceberg orders. “Only Best” is not currently supported for RV Curve.
Only implied “in” market data is disseminated, being orders on the legs (outrights) that are used to create implied orders in the RV Curve spread market.
Currently not prevented for RV Curve orders implying against the outright orderbooks.
CME STP supports both implied and non-implied Curve Ratio (RV) Spreads for US Treasury Actives.
RV Curve is 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.
Buying 25M UST 10Yr vs 30Yr (2:1) at a yield spread of -43.75bp will buy 50M 10Yr and sell 25M 30Yr, with the 10Yr yield 43.75bp lower than the 30Yr yield.
Buying 10M UST 2Yr vs 5Yr (5:2) at a yield spread of 1.5bp will buy 50M 2Yr and sell 20M 5Yr, with the 2Yr yield 1.5bp higher than the 5Yr yield.
Selling 5M UST 2Yr vs 10Yr (9:2) at a yield spread of -103bp will sell 45M 2Yr and buy 10M 10Yr, with the 2Yr yield 103bp lower than the 10Yr yield.
Selling 10M UST 2Yr vs 3Yr (3:2) at a yield spread of 1.0bp will sell 30M 2Yr and buy 20M 3Yr, with the 2Yr yield 1.0bp higher than the 3Yr yield.
|Example: A participant believes that the curve will steepen, she then buys 10M UST 10Yr vs 30Yr (2:1) at -43.750 (equivalent to a -0.43750% yield differential).|
Leg quantity assignment
Each leg quantity trades in a predetermined ratio that approximates DV01 neutrality. For the UST 10Yr vs 30Yr (2:1), 10M 10-year US Treasury Notes and 30-Year US Treasury Bonds in each spread.
By trading in a yield format, RV Curve spread orders that match with implied orders are frequently done at prices better than the original spread order due to rounding. This creates an excess efficiency, which is allocated 100% to the RV order.
Based on empirical analysis of the $460 billion in volume transacted in RV Curve in 2022, these excess efficiencies saved clients $8 per million on average, equating to over $3.8 million in aggregate.
|DAILY SPREADS||SAVING / $MM||SAVING / SPREAD|
BrokerTec RV Curve will be available to trade on the BrokerTec central limit order book, powered by CME Globex. Existing BrokerTec clients can contact their account rep to get access through the iLink API and BrokerTec Global Front End.
BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.