Futures Combinations

Although futures combinations have their own order books, these books are integrated in the order books for the individual 'legs'. Market orders and stop orders are not permitted for futures combinations. For unrestricted orders, a validity date may also be specified. Unrestricted futures combination orders that cannot match at initial order entry are automatically written to the combination order book.

Two types of futures combinations are permitted on the Eurex® system:

• Time Spreads
• Inter-product Spreads

Time Spreads

Time spreads combine two different maturities for futures on the same underlying. At any time, three time spreads are supported for products subject to price/time matching:

• first month/second month (for example March/June)
• second month/third month (for example June/September)
• first month/third month (for example March/September)

For pro-rata matched futures products, all spreads between each pair of consecutive maturity months are supported.

The purchase of a combination means you buy the first (nearer to expiration) leg and sell the later leg, with the price limit reflecting the net price of the purchase and sale. For example, "Buy 5 MAR/JUN FDAX spreads at -25" represents an order to buy 5 March contracts and simultaneously sell 5 June contracts of the DAX® Futures. The prices of the purchase and the sale are individually unspecified, but the net of the price on the buy trade must be no greater than the price of the sell trade minus 25 points. The trader is not concerned with the price level of the contracts, but with the relationship between the two prices. If the order is filled, the trader is long the combination, i.e. he is long the nearby contract, but short the later contract.

Futures time spread combinations are fully integrated with the order books for the individual legs. Orders will automatically be matched against either the outright order books for the individual legs (sometimes called an 'implied-in' price) or the separate combination order book, depending on which book will yield the better price. For time spreads, it is possible to enter prices with an increment smaller than the tick size for single leg orders in the same product.

If the order is not immediately executed or cancelled, it enters the combination order book. Due to the integration of the combination book and the books for the individual legs, the open combination order will generate a synthetic price in the later leg.

The counterparties for the two legs may not be the same. Individual legs are treated as separate trades for position and transaction management purposes, although they are related to each other through their single order number.

If the conditions of the order book change, the synthetic prices will change accordingly.

Inter-Product Spreads (IPS)

The Eurex® system also supports Inter-product Spreads (IPSs) for futures. The buyer of an Inter-product Spread buys the first and sells the second component similar to the time spread, but the components refer to different underlyings, usually with the same expiration month. Inter-product Spreads are treated as separate products in the Eurex® system. Matched orders in Inter-product Spread products are posted to the two separate product legs. As with time spreads, a buy of an Inter-product Spread product results in a long position in one product and short position of another product. The Eurex® system does not directly permit negative pricing for Inter-product Spread orders; instead, an offset price is applied. At present, Inter-product Spreads are not set up for trading.