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EXCHANGES FOR CREATING AND TRADING DERIVATIVE SECURITIES

  • US 20100191639A1
  • Filed: 03/20/2008
  • Published: 07/29/2010
  • Est. Priority Date: 03/26/2007
  • Status: Abandoned Application
First Claim
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1. A computer system that constitutes a primary exchange for creating derivative securities that secure a claim of a predetermined nominal derivative security value that is contingent on a well defined, externally influenced numerical variable associated therewith at or before a predetermined future time, which system comprises:

  • (a) a database for storing data defining purchase offers and offers of sale of the derivative securities received from traders, whether buyers or sellers, the database being structured for storing records for each offer including(i) the identity of a trader that has made the offer,(ii) data indicating whether the offer is a purchase offer or offer for sale,(iii) the identity of the numerical variable,(iv) numbers representing the price offered by a buyer (the bid price) or the price offered by a seller (the offer price),(v) numbers representing the predetermined future time,(vi) numbers representing a value of the numerical variable at the predetermined future time or before the predetermined future time that is defined in the offer,(vii) data indicating the relationship between the defined value of the numerical variable at or before the predetermined future time specified in the offer and the actual value of the numerical variable at or before the predetermined future time that is required in order for the trader to secure the claim,(viii) numbers representing the quantity of derivative securities in the offer;

    (b) an input for receiving the data defining the purchase offers from buyers;

    (c) an input for receiving the data defining offers of sale from sellers;

    (d) a decision unit for determining whether or not a match exists between a purchase offer and an offer of sale in the database in terms of;

    (i) the bid and offer prices, referred to as the agreed trade price if a match is determined,(ii) the numerical variable,(iii) the predetermined future time,(iv) the defined value of the numerical variable at the predetermined future time specified in the offer, and(v) the relationship between the defined value of the numerical variable specified in the offer and the actual value of the numerical variable at the predetermined future time or at a time up to the predetermined future time; and

    (e) a derivative security creation module that is responsive to output from the decision unit that a match exists in order to create one or more derivative securities, which comprises;

    (i) a trade settlement unit for automatically calculating the agreed number of the derivative securities, being the maximum number of derivative securities that are the subject of both the purchase offer and the offer of sale;

    calculating the maximum financial obligation of a trader, being substantially the product of the agreed number of derivative securities and the agreed trade price of the derivative securities if the trader is a buyer, or substantially the product of the agreed number of derivative securities and the difference between the nominal derivative security value and the agreed trade price if the trader is a seller;

    automatically receiving funds from traders corresponding to their maximum financial obligation; and

    (ii) a derivative security creation unit for notifying the traders of creation of the derivative security and of data relating to the derivative security, and storing data relating to the derivative security in a database; and

    (f) a maturity settlement module for paying appropriate traders at the predetermined future time or before the predetermined future time depending on the type of derivative security, which comprises;

    (i) a maturity data input module for receiving from an external source data quoted by an independent institution representing the actual value of the numerical variable at the predetermined future time or before the predetermined future time;

    (ii) a determination module responsive to data from the maturity data input module, for determining, at the predetermined future time or before the predetermined future time, whether the actual value of the numerical variable is the same as or is above or below the defined value specified in the offer;

    (iii) a reimbursement module responsive to data from the determination module, for sending to one of the traders or to an agreed third party funds corresponding substantially to the product of the agreed number of the securities and the nominal derivative security value.

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