Integrated electronic exchange of structured contracts with dynamic risk-based transaction permissioning

• US 20030033240A1
• Filed: 06/10/2002
• Published: 02/13/2003
• Est. Priority Date: 06/11/2001
• Status: Active Grant

• Current Assignee: OTC Online Partners
• Original Assignee: OPT4 Derivatives, Inc.
• Inventors: Barz, Graydon L., Balson, William E., Rausser, Gordon C., Craft, Laura R.
• Granted Patent: US 7,702,563 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 10/10 Office automation; Time management
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer implemented method for negotiating contracts between a plurality of participants is provided. An order is received from a first participant of the plurality of participants. Position risk of the first participant is calculated by accessing data regarding the first participant and using the data regarding the first participant in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the first member. The order is blocked, if the position risk of the first participant is in a first condition for the first participant. The order is made available for forming into a contract, if the position risk of the first participant is in a second condition for the first participant.

Claims

1. A computer implemented method for negotiating contracts between a plurality of participants, comprising:

receiving an order from a first participant of the plurality of participants;

calculating position risk of the first participant, comprising;

accessing data regarding the first participant; and

using the data regarding the first participant in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the first participant; and

blocking the order, if the position risk of the first participant is in a first condition for the first participant; and

making the order available for forming into a contract, if the position risk of the first participant is in a second condition for the first participant.

2. The computer implemented method, as recited in claim 1, wherein the first condition for the first participant is that the position risk of the first participant is greater than collateral of the first participant, and wherein the second condition for the first participant is that the position risk of the first participant is less than the collateral of the first participant.

3. The computer implemented method, as recited in claim 1, further comprising:

receiving an order from a second participant;

calculating a position risk of the second participant;

blocking the order from the second participant if the position risk of the second participant is in a first condition for the second participant; and

binding the first participant and the second participant into a contract based on the order from the first participant and the order from the second participant if the position risk of the second participant is in a second condition for the second participant and the order from the second participant is available for forming into a contract.

4. The computer implemented method, as recited in claim 3, wherein the first condition for the first participant is that the position risk of the first participant is greater than collateral of the first participant, and wherein the second condition for the first participant is that the position risk of the first participant is less than the collateral of the first participant, and wherein the first condition for the second participant is that the position risk of the second participant is greater than collateral of the second participant, and wherein the second condition for the second participant is that the position risk of the second participant is less than the collateral of the second participant.

5. The computer implemented method, as recited in claim 3, wherein making the order available for forming a contract comprises forwarding the order to at least the second participant of the plurality of participants, wherein the order received from the second participant is in response to the order from the first participant.

6. The computer implemented method, as recited in claim 3, wherein making the order available for forming a contract comprises forwarding the order to a plurality of the plurality of participants, wherein the order received from the second participant is in response to the order from the first participant.

7. The computer implemented method, as recited in claim 3, further comprising:

storing data regarding the contract; and

using the data regarding the contract to determine the position risk of the first participant and the position risk of the second participant.

8. The computer implemented method, as recited in claim 1, wherein the calculating the position risk of the first participant further comprises using prices, amounts, and terms specified in the received order to determine the position risk of the first participant.

9. The computer implemented method, as recited in claim 1, further comprising:

matching the order from the first participant which is available for forming into a contract with an order from a second participant that matches criteria of the order from the first participant, wherein the position risk of the second participant has been calculated;

binding the first participant and the second participant into a contract based on the order from the first participant and the order from the second participant if the position risk of the second participant is in a first condition for the second participant;

storing data regarding the contract; and

using the data regarding the contract to determine the position risk of the first participant and the position risk of the second participant.

10. The computer implemented method, as recited in claim 1, wherein the blocking of the order makes the order unavailable for forming into a contract.

11. The computer implemented method, as recited in claim 1, wherein the making the order available for forming a contract comprises forwarding the order to a plurality of the plurality of participants.

12. A computer implemented method of estimating value at risk for a participant, comprising:

generating a parametric variable equation from provided data;

generating a simulation model from the provided data;

generating control values from the simulation model; and

generating an estimated value at risk equation from the parametric variable equation, where parameters of the parametric variable equation are modified by the control values.

13. The computer implemented method, as recited in claim 12, further comprising:

receiving data from contracts binding the participant; and

using the data from the contracts binding the participant in the estimated value at risk equation to determine the estimated value at risk of the participant.

14. The computer implemented method, as recited in claim 13, further comprising receiving data from orders placed by the participant that are not bound by contracts, wherein the using the data from the contracts also uses data from the orders to determine the estimated value at risk of the participant.

15. The computer implemented method, as recited in claim 13, wherein the data from the contracts comprise prices, amounts, and terms specified in the contracts.

16. A computer system for providing an exchange for forming contracts between a plurality of users, comprising:

a transaction system connected to a plurality of client applications over a network, wherein the transaction system comprises;

an order management system for managing orders received from the plurality of users;

an order matching system for comparing orders received from the plurality of users to find matching orders; and

a contract execution system for combining matched orders to form a legally binding contract; and

a permissioning system, comprising

a collateral system for monitoring collateral of the plurality of users; and

a real-time position risk system for calculating a position risk of a user to determine, wherein the real time position risk system uses the calculated position risk to designate an order to be a permitted order, wherein the contract execution system only combines permitted orders into a legally binding contract.

17. The computer system, as recited in claim 16, further comprising a position risk supervision system, wherein the position risk supervision system provides control values to the real-time position risk system, and wherein the real-time position risk system uses a parametric variable equation modified by the control values.

18. The computer system, as recited in claim 17, further comprising a storage system for storing the legally binding contracts, wherein the real-time positioning system receives contract data from the storage system to calculate position risk.

19. A computer readable media for negotiating contracts between a plurality of participants, comprising:

computer readable code for receiving an order from a first participant of the plurality of participants;

computer readable code for calculating position risk of the first participant, comprising;

computer readable code for accessing data regarding the first participant; and

computer readable code for using the data regarding the first participant in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the first member;

computer readable code for blocking the order, if the position risk of the first participant is in a first condition for the first participant; and

computer readable code for making the order available for forming into a contract, if the position risk of the first participant is in a second condition for the first participant.

20. The computer readable media, as recited in claim 19, wherein the first condition for the first participant is that the position risk of the first participant is greater than the collateral of the first participant, and wherein the second condition for the first participant is that the position risk of the first participant is less than the collateral of the first participant.

21. The computer readable media, as recited in claim 19, further comprising:

computer readable code for receiving an order from a second participant;

computer readable code for calculating a position risk of the second participant;

computer readable code for blocking the order from the second participant if the position risk of the second participant is in a first condition for the second participant; and

computer readable code for binding the first participant and the second participant into a contract based on the order from the first participant and the order from the second participant if the position risk of the second participant is in a second condition for the second participant and the order from the second participant is available for forming into a contract.

22. The computer readable media, as recited in claim 21, wherein the first condition for the first participant is that the position risk of the first participant is greater than the collateral of the first participant, and wherein the second condition for the first participant is that the position risk of the first participant is less than the collateral of the first participant, and wherein the first condition for the second participant is that the position risk of the second participant is greater than the collateral of the second participant, and wherein the second condition for the second participant is that the position risk of the second participant is less than the collateral of the second participant.

23. The computer readable media, as recited in claim 21, wherein the computer readable code for making the order available for forming a contract comprises computer readable code for forwarding the order to at least the second participant of the plurality of participants, wherein the order received from the second participant is in response to the order from the first participant.

24. A computer implemented method for clearing contracts between a plurality of participants, comprising:

receiving a request for authorization of contract assurance from a plurality of participants;

calculating position risk of the participants, comprising;

accessing data regarding the participants;

using the data regarding the participants in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the participants; and

using the position risk to form a risk-based assurance price for each participant;

blocking the authorization, if the position risk of any participant is in a first condition; and

authorizing contract assurance, if the position risk of the participants is in a second condition.

25. A computer implemented method for marketing structured contracts between a plurality of customers, comprising:

receiving a request for a contract from a customer;

calculating position risk of the customer, comprising;

accessing data regarding the customer;

using the data regarding the customer in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the customer; and

using the position risk to form a risk-based price for the contract requested by the customer.

26. A computer implemented method for requesting quotes or bids for structured contracts between a plurality of vendors, comprising:

sending a request for a contract from a plurality of vendors;

receiving contract modification counteroffers and price quotations from some or all of the plurality of vendors;

calculating position risk of the vendors, comprising;

accessing data regarding the vendors;

using the data regarding the vendors in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the vendors; and

using the position risk to form a risk-adjusted price for the contract offered by the vendor;

blocking authorization of a vendor, if the position risk of that vendor is in a first condition; and

authorizing contracts with a vendor, if the position risk of that vendor is in a second condition.

27. A computer implemented method for assuring performance of orders shared between a plurality of exchanges, comprising:

receiving a request for authorization of contract assurance from one of the plurality of participants in one of the plurality of exchanges;

calculating position risk of the participants, comprising;

accessing data regarding the participants; and

using the data regarding the participants in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the participants;

blocking the authorization, if the position risk of the participant is in a first condition;

authorizing contract assurance, if the position risk of the participant is in a second condition; and

forwarding only those orders that have been authorized to a plurality of the plurality of exchanges.