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Question 17 How are position limits applied to intercommodity 'spread' or 'diff' contracts? [Last update: 23/09/2022]

RTS 21

How are position limits applied to intercommodity 'spread' or 'diff' contracts?

Answer 17

A commodity derivative contract in the legal form of a "spread" or "diff" contract is a cash-settled contract whose value is determined by the difference between two reference commodities that may vary in, inter alia, type, grade, location, or delivery characteristics. Whilst having multiple underlying constituents, the spread derivative is available on a trading venue as a single tradable financial instrument.

A spread contract differs from a 'spread trading strategy' (two or more com modity contracts traded together to achieve a particular economic effect), as such a strategy may be executed by a single action in a venue's trading systems, but it remains composed of separate, and legally distinct commodity derivatives which are executed as trades simultaneously.

As a spread contract has no single underlying commodity at a specific place or time, it is not possible to link it to a singl

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