Composite commodity financial product

• US 20030154153A1
• Filed: 01/31/2002
• Published: 08/14/2003
• Est. Priority Date: 01/31/2002
• Status: Abandoned Application

• Current Assignee: Board of Trade of The City of Chicago (CME Group Incorporated)
• Original Assignee: Board of Trade of The City of Chicago (CME Group Incorporated)
• Inventors: Winkler, Julie M., Hutchings, Robert P., Miclot, James, Kunda, Eugene L., Sturm, Frederick, Steidlmayer, J. Peter
• Application Number:
  US10/062,887
• Publication Number:
  US 20030154153A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A method of administering a composite commodity financial product involves the identification of a portfolio of component financial products. A number of component financial products are selected from the portfolio of component financial products, and a composite commodity financial product comprising the selected financial products is formed, with the product having a fixed termination date. A baseline figure or value for the composite commodity financial product is set, and derivative products based upon the product are traded during a predetermined period of time until the fixed termination date. At the end of the predetermined period of time, the baseline value is redesignated based upon the change in value of the selected financial products.

Claims

1. A method of administering a derivative product, comprising the steps of:

identifying a portfolio of component financial products in accordance with a sponsoring authority'"'"'s general guidelines;

selecting a plurality of component financial products from the portfolio to form a composite commodity, each of the designated component financial products having no requirement for a relationship to each other or to an independent structure other than the general guidelines;

forming a derivative product based on the composite commodity comprising the selected financial products, the derivative product having a fixed termination date; and

trading the derivative product based upon the composite commodity during a predetermined period of time until the fixed termination date.

2. The method of claim 1, wherein the derivative product comprises futures contracts.

3. The method of claim 2, wherein up to a designated number of component financial products are selected from the portfolio.

4. The method of claim 3, further comprising the steps of:

before the trading step, establishing a baseline figure for the composite commodity; and

at or after the fixed termination date, redesignating the baseline figure based upon the change in value of the selected financial products during the predetermined period of time.

5. The method of claim 4, wherein the portfolio of component financial products comprises futures contracts.

6. The method of claim 5, wherein the portfolio of component financial products consists of futures contracts.

7. The method of claim 6, wherein the portfolio of component financial products consists of agricultural futures contracts, security futures contracts, index futures contracts, and financial futures contracts.

8. The method of claim 4, wherein up to four component financial products are selected from the portfolio of component financial products.

9. The method of claim 4, further comprising the step of adjusting the baseline figure on at least a daily basis during the predetermined period of time based upon the change of the settlement prices of the component financial products.

10. The method of claim 8, wherein none of the up to four component financial products are already within their own delivery cycles or will enter into their own delivery cycles during the term of the Composite Commodity.

11. The method of claim 4, wherein the predetermined period of time is two weeks.

12. A method for administering a derivative including a plurality of futures contracts, comprising the steps of:

selecting up to a predetermined number of component financial products from a pool of available component financial products, the pool formed in accordance with a sponsoring authority'"'"'s general guidelines but the component financial products not being required to be correlated to each other;

forming a composite commodity comprising the selected component financial products; and

trading futures contracts based upon the composite commodity during a predetermined period of time.

13. The method of claim 12, wherein the component financial products comprise futures contracts.

14. The method of claim 13, wherein up to four component futures contracts are selected from the group consisting of available component futures contracts.

15. The method of claim 14, wherein the group of available component futures contracts includes agricultural futures contracts, security futures contracts, index futures contracts, and financial futures contracts.

16. The method of claim 13, further comprising the steps of:

before trading, identifying a baseline;

at the end of the predetermined period of time, measuring the change in value of each of the selected component futures contracts; and

adjusting the baseline in accordance with the change in value of each of the selected component futures contracts.

17. The method of claim 16, wherein the change in value of the selected component futures contracts is determined based upon the daily settlement price of the selected component futures contracts.

18. The method of claim 17, wherein the futures contract expires at the end of the predetermined period of time.

19. The method of claim 16, wherein the predetermined period of time comprises two weeks.

20. The method of claim 16, wherein the component futures contracts cannot be altered during a period of time specified by a sponsoring authority.

21. The method of claim 19, wherein the available pool of futures contracts excludes futures contracts that are within their own delivery cycles or will enter into their own delivery cycles during the term of the Composite Commodity.

22. A method, comprising the steps of:

identifying a portfolio of available financial products according to a sponsoring authority'"'"'s general requirements;

selecting up to a predesignated number of financial products from the portfolio, the selected financial products having no requirement to be correlated to each other or to an independent structure other than the general requirements;

providing a composite commodity consisting of the selected financial products; and

trading futures contracts on the composite commodity over a fixed period of time beginning with the opening date.

23. The method of claim 22, further comprising the steps of:

before trading, identifying an opening indication of the composite commodity on an opening date; and

at or after trading, identifying a closing indication of the composite commodity based upon the opening price and the change in price of the selected financial products during the fixed period of time.

24. The method of claim 22, wherein the available financial products consist of futures contracts.

25. The method of claim 22, wherein the selecting step includes designating each of the selected financial products as either long or short.

26. The method of claim 24, further comprising the step of identifying on at least a daily basis an intermediate indication of the composite commodity based upon the change in price of the selected financial products since the opening date.

27. The method of claim 25, wherein the selected financial products are fixed during the fixed period of time.