SYSTEM FOR SETTLING OVER THE COUNTER TRADES

• US 20080270278A1
• Filed: 10/31/2007
• Published: 10/30/2008
• Est. Priority Date: 05/31/2002
• Status: Active Grant

• Current Assignee: Intercontinental Exchange Holdings, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Intercontinental Exchange, Inc.
• Inventors: Goone, David, Cummings, R.J.
• Granted Patent: US 7,904,377 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• 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

Abstract

A system for automatically determining a trade settlement pathway comprising: receiving trade pathway preferences from a first and second party with respect to each other; wherein the trade is settled through clearing if both parties have available accounts with a clearing firm and the trade satisfies each party'"'"'s clearing account credit limitations; and wherein the trade is settled bilaterally if at least one party does not have an available clearing account or both parties prefer to settle the trade bilaterally, and the trade satisfies each party'"'"'s bilateral credit limitations.

Claims

1. A method of pre-screening an order entered by a first party to determine whether to make the order executable by a second party, the method comprising:

evaluating at least two alternative methods of settlement; and

determining that at least one method of settlement is at least one of commonly available and acceptable to both parties.

2. The method of claim 1, wherein the at least two alternative methods of settlement comprise bilateral and clearing methods of settlement, and wherein determining whether a method of settlement is one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

3. A method of a second party executing an order entered by a first party, the method comprising:

evaluating at least two alternative methods of settlement;

determining that at least one method of settlement is at least one of commonly available and acceptable to both parties; and

enabling the trade to be executed where it is determined that there is at least one of a commonly available and acceptable settlement method between the parties.

4. The method of claim 3, wherein the at least two alternative methods of settlement comprise bilateral and clearing methods of settlement, and wherein determining whether a method of settlement is at least one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

5. The method of claim 3, wherein the step of determining whether a method of settlement is at least one of commonly available and acceptable to the parties comprises:

selecting a method of settlement for a trade between the first party and the second party;

establishing at least one settlement preference by at least one of the first and second parties;

evaluating the at least one settlement preference to identify a preferred method of settlement between the parties; and

selecting the preferred method of settlement, where a preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

6. The method of claim 5, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

7. A method of selecting a method of settlement for a trade between a first party and a second party, the method comprising:

establishing at least one settlement preference;

evaluating the at least one settlement preference to identify a preferred method of settlement between the parties; and

selecting the preferred method of settlement, where a preferred method of settlement is at least one of a commonly available and acceptable to both parties, to settle the trade.

8. The method of claim 7, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

9. The method of claim 7, wherein the at least one settlement preference comprises at least one of:

bilateral only, cleared only, bilateral preferred, cleared preferred, and closed trading preference.

10. The method of claim 7, further comprising establishing at least one default settlement method, said at least one default settlement method being selected by any of an exchange, a clearinghouse, a broker, a brokerage firm, or any third party.

11. The method of claim 7, wherein the at least one settlement preference is established by at least one of the first party, the second party, and a third party.

12. The method of claim 11, wherein where the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

13. The method of claim 11, wherein the third party is selected from the group consisting of an exchange, a clearinghouse, a broker, and a brokerage firm.

14. The method of claim 7, further comprising pre-screening and executing an order between the first party and the second party prior to selecting a method of settlement, the method further comprising:

pre-screening the order by determining from a plurality of settlement methods whether there is at least one settlement method that is at least one of commonly available and acceptable to the parties;

making the order executable by the second party where there is at least one of a commonly available and acceptable settlement method between the parties;

the second party attempting to execute the order;

enabling the second party to execute the order where it is determined from a plurality of settlement methods that there is at least one settlement method that is at least one of commonly available acceptable to the parties; and

the second party executing the order, thereby generating an executed trade.

15. The method of claim 14, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

16. The method of claim 14, wherein the plurality of settlement methods comprises bilateral and clearing methods of settlement, and wherein determining whether a settlement method is at least one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

17. The method of claim 14, wherein the at least one settlement preference comprises at least one of:

bilateral only, cleared only, bilateral preferred, cleared preferred, and closed trading preference.

18. The method of claim 14, wherein the third party comprises one or more selected from the group consisting of an exchange, a clearinghouse, and a broker.

19. The method of claim 14, further comprising establishing at least one default settlement method, said at least one default settlement method being selected by any of an exchange, a clearinghouse, a broker, a brokerage firm, or any third party.