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RTS Instrument


An abbreviation for reduced tick spread instrument; instruments that trade, separately in their own markets, at a smaller tick (tick size) than their component outright legs. For example, futures tick in nickels, but their spreads (reduced tick spreads) tick in pennies. The instrument is based on a type of a narrower/ smaller bid–ask spread in spread futures, where the pricing structure is finer (the so called reduced tick size), in the spread futures (e.g., calendar spread) than the primary contract.

The outright legs of the calendar spread can be negotiated, without involving the spread futures itself, concurrently in the futures market. The tick size constrains and dictates the possible prices at which the legs can be negotiated. A smaller tick size, a finer set of possible price can be attained thanks to the spread futures market.

An RTS instrument allows for narrower bid–ask spreads (and hence lower transaction costs) in trading the calendar spread.



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