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Execution references for calendar spreads
Greg Wood / Credit Suisse
26 Jun 2008 3:09PM ETHi all,
Here's an interesting one for those of you in the futures space. When you trade a calendar spread via 4.4, the execution report only gives you the ability to report back a unique ExecID at spread execution level, not leg level.
That's fine for the mechanics of ensuring uniqueness on each execution message, but it does not allow for easy post-trade allocation of the individual leg trades (via FIX, file, etc) since you need to reference each trade for each leg, not each trade of the spread.
For those of you unused to futures, you trade the *spread* between different maturities as a way of ensuring each leg is traded in tandem (for example "buy ESM8-U8") but for post-trade purposes each *leg* (sold ESM8 at X, bought ESU8 at Y) settles individually and back-office processes expect unique allocation instructions for each trade for each leg. They don't care that the execution occurred as part of a spread. To use ExecID means referencing *two* trades - the sell of ESM8 and the buy of ESU8.
FIX 4.4 provides the best mechanism for trading calendar spreads compared to earlier versions that don't support Multileg message types, but it lacks a LegExecID tag that can be subsequently referenced for allocations.
I'm tempted to use tag 672 LegIndividualAllocID as a placeholder for a unique reference per trade per leg that will be consistent against execution reports and what our back-office sees, but that is not really what it should be used for.
I would be interested to hear how other parties have addressed this issue.
Thanks,
- Greg
Execution references for calendar spreads
Greg Wood / Credit Suisse 26 Jun 2008 3:09PM ET
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