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Support for Custom Carries

Overview

TT LME Gateway Version 7.15.1 supports the exchange’s Custom Carry creation functionality. Custom Carries are used by brokers to hedge their risk against open positions in illiquid markets.

LME allows users to create spreads, referred to by LME as “carries,” which consist of any two contracts of the same product. The front leg must have an earlier prompt date than the back leg of the Custom Carry contract. TT LME Gateway 7.15.1 allows users to create a Custom Carry product with any of the available futures contracts as legs of the carry.

LME Gateway 7.17.78 and higher supports valuation prices for LME custom carries (user defined spreads). These prices will be displayed in the Indicative Settlement column in Market Grid. In instances where floor closing prices are not disseminated by the exchange, valuation prices will not be calculated.

Creating Custom Carries

Users create Custom Carries via the X_TRADER® Strategy Creation window when submitting an order. The LME Gateway rejects any attempt to create a Custom Carry contract that does not adhere to the following rules:

  • A Custom Carry contract must always have two legs with a ratio of 1 x -1.
  • Only intra-product carries may be created.

Once a carry is created for a product, the Price Server adds it to the TT product table and makes the carry available to all client applications that connect to the LME Gateway. Users may send bids and offers to the Exchange on any carries that have been created. Once the LME Exchange receives an order for a carry, it will broadcast those carries to all applications connected to the LME Exchange at that time.

Note

The LME Gateway allows users to create Custom Carries for all available products, however, the exchange currently does not support these for LME e-mini products.

Custom Carries Functionality

Price Updates

The LME Exchange provides real-time price updates for any Custom Carry created on the market. The LME Gateway processes the market data update for the carry product and broadcasts the update to the connected client applications.

When the LME Gateway receives a price update for a Carry that is not available in the TT Product list, the Gateway creates a new carry contract and dynamically provides the new contract update to the connected client applications as a “Strategy” product type.

Order Types and Restrictions

The available order types for Custom Carry contracts will directly correspond to the order types and restrictions available for the outright contracts. All other order types, restrictions, and modifications will be rejected by the Order Server. Negative (Contango), positive (Backwardation) and 0 (Level) prices are allowed for Custom Carry orders.

To place a Custom Carry Buy order, users must buy one Front Month contract and sell one Back Month contract. To place a Custom Carry Sell order, users must sell one Front Month contract and buy one Back Month contract.

Pre-defined Carries (Spreads)

All other existing carries (i.e., spreads) are still created by the Price Server at startup with the exception of carries between month-month contracts (e.g., OCT11-NOV11 carries will not be created).

Minimum Price Tick

Custom Carries will have minimum tick size of 0.01 as compared to its outright.