Method and trading instrument for effecting trade of a commodity and method of assessing a commodity price

• US 20040024684A1
• Filed: 01/07/2003
• Published: 02/05/2004
• Est. Priority Date: 07/29/2002
• Status: Abandoned Application

• Current Assignee: McGraw-Hill Companies Incorporated
• Original Assignee: McGraw-Hill Companies Incorporated
• Inventors: Montepeque, Jorge Eduardo
• Application Number:
  US10/337,432
• Publication Number:
  US 20040024684A1
• Time in Patent Office: Days
• US Class Current: 705/37
• 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 method of assessing a market price of a benchmark grade of a commodity includes artificially injecting additional volumes of the benchmark grade into the marketplace to thereby increase the market activity upon which the assessment is based. By increasing the market activity upon which the benchmark assessment is based, problems associated with having a small number of market events for assessing the benchmark price, such as price volatility, may be avoided. Additional volumes of the benchmark grade may be artificially injected into the marketplace by including, in the assessment of the benchmark price, observations of market events involving one or more alternative, non-benchmark grades of the commodity. Alternatively, or in addition, additional volumes of the benchmark grade may be artificially injected into the marketplace by permitting a seller offering cargoes of the benchmark grade of the commodity to actually deliver a cargo of one or more alternative, non-benchmark grades of the commodity in satisfaction of a contract for sale of the benchmark grade. Sales of the commodity may also made in terms of a virtual grade, wherein, following a sale of a quantity of the virtual grade, the seller may designate one of a specified number of grades for delivery to the buyer.

Claims

7. An instrument for effecting a trade of a commodity comprising a virtual grade defined in respect of the commodity, the virtual grade encompassing two or more physically deliverable grades of the commodity, whereupon in a sale of a quantity of the virtual grade between a buyer and a seller, the seller designates for delivery to the buyer one of the physically deliverable grades encompassed by the virtual grade.

1. A method of facilitating a trade of a commodity between a buyer and seller, said method comprising:

defining a virtual grade of the commodity, the virtual grade of the commodity encompassing two or more specified physically deliverable grades of the commodity; and

adopting rules regulating sales of the virtual grade whereby in a sale of a quantity of the virtual grade between a buyer and seller, the buyer and seller agree on a price to be paid by the buyer, and then, following agreement on the price, the seller may designate for delivery to the buyer one physically deliverable grade of the two or more specified physically deliverable grades encompassed by the virtual grade.

2. The method of claim 1, wherein the commodity comprises crude oil.

3. The method of claim 2, wherein the physically deliverable grades comprising the virtual grade are Brent, Forties, and Oseberg.

4. The method of claim 2, wherein the physically deliverable grades comprising the virtual grade are Dubai and Oman.

5. The method of claim 1, wherein the rules regulating sales of the virtual grade obligate the seller to designate the physically deliverable grade for delivery to the buyer, as well as a delivery date, at least a specified number of days prior to the delivery date.

6. The method of claim 5, wherein the specified number of days is 21.

8. The instrument of claim 7, wherein the commodity comprises crude oil.

9. The instrument of claim 8, wherein the physically deliverable grades encompassed by the virtual grade are Brent, Forties, and Oseberg.

10. The instrument of claim 8, wherein the physically deliverable grades encompassed by the virtual grade are Dubai and Oman.

12. The instrument of claim 1, wherein the specified number of days is 21.

10-1. The instrument of claim 7, wherein the seller is obligated to designate the physically deliverable grade for delivery to the buyer, as well as a delivery date, at least a specified number of days prior to the delivery date.