System and method for trading short-term rate derivative futures

• US 20070100731A1
• Filed: 10/28/2005
• Published: 05/03/2007
• Est. Priority Date: 10/28/2005
• Status: Abandoned Application

• Current Assignee: LIFFE Administration and Management company
• Original Assignee: LIFFE Administration and Management company
• Inventors: Ward, Declan, Sudworth, Amanda
• Application Number:
  US11/260,491
• Publication Number:
  US 20070100731A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A method and system for facilitating trading of a plurality of financial derivative products are provided. Financial derivative products called strips, packs, bundles, and condors are defined, and each is based on combinations of quarterly deliveries of a short term interest rate (STIR) futures contract. The system includes a server at which each product is actively traded, and an interface in communication with the server. The interface enables a user to buy or sell a product. The server accepts bids and offers for strips, packs, bundles, and condors, and also accepts bids and offers for individual quarterly deliveries of the STIR futures contract. The server automatically combines accepted bids and offers into sets of quarterly deliveries, and then automatically matches resulting combinations with bids or offers for strips, packs, bundles, or condors, such that market efficiency and liquidity are increased.

Claims

1. A system for facilitating trading of a plurality of financial derivative products, a first product of the plurality of financial products comprising at least four consecutive quarterly deliveries of a short term interest rate (STIR) futures contract, and the system comprising:

a server at which each financial product is actively traded; and

an interface in communication with the server, the interface being configured to enable a user to at least one of buy and sell a financial product,

wherein the server is configured to receive bids and offers for a first product via the interface, and

wherein the server is further configured to receive bids and offers for individual quarterly deliveries of the STIR futures contract; and

wherein the server is further configured to;

combine received bids and offers into sets of at least four consecutive quarterly deliveries;

match a result of the combination with a bid or offer for the first product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

2. The system of claim 1, wherein the plurality of financial products includes a second product, the second product comprising at least four consecutive quarterly deliveries of the STIR futures contract which occur within one of a plurality of predetermined delivery years, and

wherein the server is further configured to:

receive bids or offers for the second product;

match a result of the combination with a bid or offer for the second product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

3. The system of claim 1, wherein the plurality of financial products includes a third product, the third product comprising exactly eight consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and

wherein the server is further configured to:

receive bids or offers for the third product;

match a result of the combination with a bid or offer for the third product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

4. The system of claim 1, wherein the plurality of financial products includes a fourth product, the fourth product comprising exactly twelve consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and

wherein the server is further configured to:

receive bids or offers for the fourth product;

match a result of the combination with a bid or offer for the fourth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

5. The system of claim 1, wherein the plurality of financial products includes a fifth product, the fifth product comprising exactly sixteen consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and

wherein the server is further configured to:

receive bids or offers for the fifth product;

match a result of the combination with a bid or offer for the fifth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

6. The system of claim 1, wherein the plurality of financial products includes a sixth product, the sixth product comprising exactly twenty consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and

wherein the server is further configured to:

receive bids or offers for the sixth product;

match a result of the combination with a bid or offer for the sixth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

7. The system of claim 1, wherein the server comprises a server computer residing on a network, and the interface comprises a network connection through which a client computer can access the server computer.

8. The system of claim 7, wherein the network is the Internet.

9. A system for facilitating trading of a plurality of financial derivative products, the plurality of financial products including a first product comprising at least four quarterly deliveries of a short term interest rate (STIR) futures contract, and the system comprising:

a server at which each financial product is actively traded; and

an interface in communication with the server, the interface being configured to enable a user to at least one of buy and sell a financial product,

the server being configured to receive bids and offers for a first product via the interface, wherein a bid for a first product comprises;

a bid to purchase a first quarterly delivery having a first delivery date;

an offer to sell a second quarterly delivery having a second delivery date subsequent to the first delivery date;

an offer to sell a third quarterly delivery having a third delivery date subsequent to the second delivery date; and

a bid to purchase a fourth quarterly delivery having a fourth delivery date subsequent to the third delivery date,

wherein the server is further configured to receive bids and offers for individual quarterly deliveries of the STIR futures contract; and

wherein the server is further configured to;

combine received bids and offers into sets of four quarterly deliveries;

match a result of the combination with a bid or offer for the first product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

10. The system of claim 9, wherein the server comprises a server computer residing on a network, and the interface comprises a network connection through which a client computer can access the server computer.

11. The system of claim 10, wherein the network is the Internet.

12. A method of trading a plurality of financial derivative products in a market, a first product of the plurality of financial products comprising at least four consecutive quarterly deliveries of a short term interest rate (STIR) futures contract, and the method comprising the steps of:

enabling a user to submit at least one of a bid and an offer for a first product;

enabling bids and offers to be received for individual quarterly deliveries of the STIR futures contract;

combining received bids and offers for individual quarterly deliveries into sets of at least four consecutive quarterly deliveries;

matching a result of the combining step with a submitted bid or offer for the first product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

13. The method of claim 12, wherein the plurality of financial products includes a second product, the second product comprising at least four consecutive quarterly deliveries of the STIR futures contract which occur within one of a plurality of predetermined delivery years, and wherein the method further includes the steps of:

enabling a user to submit at least one of a bid and an offer for a second product;

matching a result of the combining step with a submitted bid or offer for the second product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

14. The method of claim 12, wherein the plurality of financial products includes a third product, the third product comprising exactly eight consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the method further includes the steps of:

enabling a user to submit at least one of a bid and an offer for a third product;

matching a result of the combining step with a submitted bid or offer for the third product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

15. The method of claim 12, wherein the plurality of financial products includes a fourth product, the fourth product comprising exactly twelve consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the method further includes the steps of:

enabling a user to submit at least one of a bid and an offer for a fourth product;

matching a result of the combining step with a submitted bid or offer for the fourth product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

16. The method of claim 12, wherein the plurality of financial products includes a fifth product, the fifth product comprising exactly sixteen consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the method further includes the steps of:

enabling a user to submit at least one of a bid and an offer for a fifth product;

matching a result of the combining step with a submitted bid or offer for the fifth product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

17. The method of claim 12, wherein the plurality of financial products includes a sixth product, the sixth product comprising exactly twenty consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the method further includes the steps of:

enabling a user to submit at least one of a bid and an offer for a sixth product;

matching a result of the combining step with a submitted bid or offer for the sixth product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade.

18. The method of claim 12, wherein a server computer residing on a network is configured to perform the steps of combining, matching, executing, and distributing, the server computer being operably connected to an interface through which a client computer can access the server computer via the network.

19. The method of claim 18, wherein the network is the Internet.

20. A method of trading a plurality of financial derivative products in a market, a first product of the plurality of financial products comprising at least four quarterly deliveries of a short term interest rate (STIR) futures contract, and the method comprising the steps of:

enabling a user to submit at least one of a bid and an offer for a first product;

enabling bids and offers to be received for individual quarterly deliveries of the STIR futures contract;

combining received bids and offers for individual quarterly deliveries into sets of at least four consecutive quarterly deliveries;

matching a result of the combining step with a submitted bid or offer for the first product;

executing a trade based on the match; and

distributing information relating to each of the individual quarterly deliveries included in the executed trade,

wherein a bid for a first product comprises a bid to purchase a first quarterly delivery having a first delivery date, an offer to sell a second quarterly delivery having a second delivery date subsequent to the first delivery date, an offer to sell a third quarterly delivery having a third delivery date subsequent to the second delivery date, and a bid to purchase a fourth quarterly delivery having a fourth delivery date subsequent to the third delivery date.

21. The method of claim 20, wherein a server computer residing on a network is configured to perform the steps of combining, matching, executing, and distributing, the server computer being operably connected to an interface through which a client computer can access the server computer via the network.

22. The method of claim 21, wherein the network is the Internet.

23. A storage medium for storing software for facilitating trading of a plurality of financial derivative products in a market, a first product of the plurality of financial products comprising at least four consecutive quarterly deliveries of a short term interest rate (STIR) futures contract, the software being computer-readable, wherein the software includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a first product;

enable bids and offers to be received for individual quarterly deliveries of the STIR futures contract;

combine received bids and offers for individual quarterly deliveries into sets of at least four consecutive quarterly deliveries;

match a result of the combining step with a submitted bid or offer for the first product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

24. The storage medium of claim 23, wherein the plurality of financial products includes a second product, the second product comprising at least four consecutive quarterly deliveries of the STIR futures contract which occur within one of a plurality of predetermined delivery years, and wherein the software further includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a second product;

match a result of the combining step with a submitted bid or offer for the second product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

25. The storage medium of claims 23, wherein the plurality of financial products includes a third product, the third product comprising exactly eight consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the software further includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a third product;

match a result of the combining step with a submitted bid or offer for the third product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

26. The storage medium of claim 23, wherein the plurality of financial products includes a fourth product, the fourth product comprising exactly twelve consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the software further includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a fourth product;

match a result of the combining step with a submitted bid or offer for the fourth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

27. The storage medium of claim 23, wherein the plurality of financial products includes a fifth product, the fifth product comprising exactly sixteen consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the software further includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a fifth product;

match a result of the combining step with a submitted bid or offer for the fifth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

28. The storage medium of claim 23, wherein the plurality of financial products includes a sixth product, the sixth product comprising exactly twenty consecutive quarterly deliveries of the STIR futures contract, wherein a date of the first quarterly delivery coincides with the first possible quarterly delivery date after the date of the bid or offer, and wherein the software further includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a sixth product;

match a result of the combining step with a submitted bid or offer for the sixth product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade.

29. A storage medium for storing software for facilitating trading of a plurality of financial derivative products in a market, a first product of the plurality of financial products comprising at least four consecutive quarterly deliveries of a short term interest rate (STIR) futures contract, the software being computer-readable, wherein the software includes instructions for causing a computer to:

enable a user to submit at least one of a bid and an offer for a first product;

enable bids and offers to be received for individual quarterly deliveries of the STIR futures contract;

combine received bids and offers for individual quarterly deliveries into sets of at least four consecutive quarterly deliveries;

match a result of the combining step with a submitted bid or offer for the first product;

execute a trade based on the match; and

distribute information relating to each of the individual quarterly deliveries included in the executed trade,

wherein a bid for a first product comprises a bid to purchase a first quarterly delivery having a first delivery date, an offer to sell a second quarterly delivery having a second delivery date subsequent to the first delivery date, an offer to sell a third quarterly delivery having a third delivery date subsequent to the second delivery date, and a bid to purchase a fourth quarterly delivery having a fourth delivery date subsequent to the third delivery date.