INTEGRATED ELECTRONIC EXCHANGE OF STRUCTURED CONTRACTS WITH DYNAMIC RISK-BASED TRANSACTION PERMISSIONING

• US 20100223200A1
• Filed: 03/02/2010
• Published: 09/02/2010
• Est. Priority Date: 06/11/2001
• Status: Abandoned Application

• Current Assignee: OTC Online Partners
• Original Assignee: OTC Online Partners
• Inventors: Barz, Graydon L., Balson, William E., Rausser, Gordon C., Craft, Laura R.
• Application Number:
  US12/716,230
• Publication Number:
  US 20100223200A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 10/10 Office automation; Time management
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer implemented method for negotiating contracts between a plurality of participants is provided. An order is received from a first participant of the plurality of participants. Position risk of the first participant is calculated by accessing data regarding the first participant and using the data regarding the first participant in a parametric variable equation modified by control values from a simulation model, to calculate the position risk of the first member. The order is blocked, if the position risk of the first participant is in a first condition for the first participant. The order is made available for forming into a contract, if the position risk of the first participant is in a second condition for the first participant.

Claims

1-11. -11. (canceled)

12. A computer implemented method of estimating real-time value at risk for a participant, comprising:

generating a parametric variable equation from provided data;

generating a simulation model from the provided data;

generating control values from the simulation model; and

generating a real-time estimated value at risk equation from the parametric variable equation, where parameters of the parametric variable equation are modified by the control values.

13. The computer implemented method, as recited in claim 12, further comprising:

receiving data from contracts binding the participant; and

using the data from the contracts binding the participant in the real-time estimated value at risk equation to determine the real-time estimated value at risk of the participant.

14. The computer implemented method, as recited in claim 13, further comprising receiving data from orders placed by the participant that are not bound by contracts, wherein the using the data from the contracts also uses data from the orders to determine the real-time estimated value at risk of the participant.

15. The computer implemented method, as recited in claim 13, wherein the data from the contracts comprise prices, amounts, and terms specified in the contracts.

16-23. -23. (canceled)

24. A computer implemented method for clearing structured contracts comprising a plurality of different deal elements between a plurality of participants, comprising:

receiving a request for authorization of contract assurance for the structured contracts from a plurality of participants;

calculating a real-time position risk of the participants, comprising;

accessing data regarding the participants;

using the data regarding the participants and data for each of the different deal elements of the plurality of different deal elements to calculate the real-time position risk of the participants in a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the participants; and

using the real-time position risk to form a real-time risk-based assurance price for each participant;

blocking the authorization, if the real-time position risk of any participant is in a first condition; and

authorizing contract assurance for the structured contracts, if the real-time position risk of the participants is in a second condition.

25. A computer implemented method for marketing structured contracts comprising a plurality of different deal elements between a plurality of customers, comprising:

receiving a request for a structured contract from a customer;

calculating a real-time position risk of the customer, comprising;

accessing data regarding the customer;

using the data regarding the customer and data for each of the different deal elements of the plurality of different deal elements, to calculate the real-time position risk of the customer in a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the customer; and

using the real-time position risk to form a risk-based price for the structured contract requested by the customer.

26. A computer implemented method for requesting quotes or bids for structured contracts comprising a plurality of different deal elements between a plurality of vendors, comprising:

sending a request for a structured contract from a plurality of vendors;

receiving contract modification counteroffers and price quotations from some or all of the plurality of vendors;

calculating position risk of the vendors, comprising;

accessing data regarding the vendors;

using the data regarding the vendors and data for each of the different deal elements of the plurality of different deal elements, to calculate the real-time position risk of the vendors in a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the vendor; and

using the real-time position risk to form a risk-adjusted price for the structured contract offered by the vendor;

blocking authorization of a vendor, if the real-time position risk of that vendor is in a first condition; and

authorizing structured contracts with a vendor, if the real-time position risk of that vendor is in a second condition.

27. A computer implemented method for assuring performance of structured contracts comprising a plurality of different deal elements shared between a plurality of exchanges, comprising:

receiving a request for authorization of contract assurance from one of the plurality of participants in one of the plurality of exchanges;

calculating real-time position risk of the participants, comprising;

accessing data regarding the participants;

accessing data for each of the different deal elements of the plurality of different deal elements; and

using the data regarding the participants and the deal elements, to calculate the real time position risk of the participants;

blocking the authorization, if the real-time position risk of the participant is in a first condition;

authorizing contract assurance, if the position risk of the participant is in a second condition; and

forwarding only those structured contracts that have been authorized to a plurality of the plurality of exchanges.

28. A computer implemented method for negotiating contracts between a plurality of participants, comprising:

creating a structured contract from a plurality of different deal elements by a first participant of the plurality of participants by a client application running on a computer system, wherein the client application provides a user interface to the computer system for the first participant;

calculating a position risk of the first participant by a risk-based permissioning system of the computer system, wherein the position risk is a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the first participant;

calculating a real-time collateral valuation of the first participant by a collateral system, the collateral valuation, taking into account the current positions of the portfolio of structured contracts of the first participant; and

comparing the calculated real-time position risk of the first participant with the calculated real-time collateral valuation of the first participant by a transaction permission system of the computer system;

blocking the structured contract by the transaction permission system, if the real-time position risk of the first participant is greater than the real-time calculated collateral valuation of the first participant; and

forming the structured contract by the transaction system of the computer system, if the real-time position risk of the first participant is less than the collateral of the first participant.

29. The computer implemented method, as recited in claim 28, further comprising:

receiving an order from a second participant;

calculating a position risk of the second participant;

blocking the order from the second participant if the position risk of the second participant is in a first condition for the second participant; and

binding the first participant and the second participant into the contract based on the structured contract from the first participant and the order from the second participant if the position risk of the second participant is in a second condition for the second participant and the order from the second participant is available for forming into the contract.

30. The computer implemented method, as recited in claim 29, wherein the first condition for the second participant is that the position risk of the second participant is greater than collateral of the second participant, and wherein the second condition for the second participant is that the position risk of the second participant is less than the collateral of the second participant.

31. The computer implemented method, as recited in claim 29, wherein making the structured contract available for forming the contract comprises forwarding the structured contract to at least the second participant of the plurality of participants, wherein the order received from the second participant is in response to the structured contract from the first participant.

32. The computer implemented method, as recited in claim 28, further comprising:

matching the structured contract from the first participant which is available for forming into the contract with an order from a second participant that matches criteria of the structured contract from the first participant, wherein a position risk of the second participant has been calculated;

binding the first participant and the second participant into the contract based on the structured contract from the first participant and the order from the second participant if the position risk of the second participant is in a first condition for the second participant;

storing data regarding the contract; and

using the data regarding the contract to determine the position risk of the first participant and the position risk of the second participant, wherein the binding occurs after the calculating the position risk of the first participant, and wherein the calculating the position risk of the first participant is performed in real-time.

39. The computer implemented method, as recited in claim 29, wherein at least one deal element of the plurality of different deal elements is one of a type of option, future, Asian option, binary options, knock-in/out options, swaps, swaptions, or American options, and wherein the plurality of different deal elements are different types of deal elements.

40. The computer implemented method, as recited in claim 39, wherein at least one deal element of the plurality of different deal elements is traded over-the-counter.

33. A computer system for providing an exchange for forming structured contracts comprising a plurality of different deal elements between a plurality of users, comprising:

a transaction system connected to a plurality of client applications over a network, wherein the transaction system comprises;

an order management system for managing orders received from the plurality of users, wherein at least one order is for a structured contract comprising the plurality of different deal elements;

an order matching system for comparing orders received from the plurality of users to find matching orders; and

a contract execution system for combining matched orders to form a legally binding contract; and

a permissioning system, configured to calculate a position risk of a first participant wherein the position risk is a real-time position risk of a first participant, wherein the position risk is a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the first participant;

a collateral system configured to calculate a real-time collateral valuation of the first participant, the collateral valuation taking into account the current positions of the portfolio of structured contracts of the first participant;

a transaction permission system configured to compare the calculated real-time position risk of the first participant with the calculated real-time collateral valuation of the first participant and further configured to;

block the structured contract if the real-time position risk of the first participant is greater than the real-time calculated collateral valuation of the first participant; and

form the structured contract, if the real-time position risk of the first participant is less than the collateral of the first participant.

34. The computer system, as recited in claim 33, further comprising a storage system for storing the legally binding contract, wherein the real-time positioning position risk system receives contract data from the storage system to calculate the position risk, and wherein the real-time position risk system uses a combination of analytic and Monte Carlo methods.

35. An executable computer program tangibly recorded on computer readable media able to cause at least one computing device to provide for negotiating structured contracts between a plurality of participants, comprising:

computer executable code for creating a structured contract from a plurality of different deal elements by a first participant of the plurality of participants;

computer executable code for calculating a position risk of the first participant, wherein the position risk is a real-time position risk algorithm, the real-time position risk algorithm comprising real-time value at risk of a portfolio of structured contracts of the first participant;

computer executable code for calculating a real-time collateral valuation of the first participant, the collateral valuation taking into account the current positions of the portfolio of structured contracts of the first participant;

computer executable code for comparing the calculated real-time position risk of the first participant with the calculated real-time collateral valuation of the first participant and blocking the structured contract, if the real-time position risk of the first participant is greater than the real-time calculated collateral valuation of the first or forming the structured contract, if the real-time position risk of the first participant is less than the collateral of the first participant.

36. The computer executable code, as recited in claim 35, further comprising:

computer executable code for receiving an order from a second participant;

computer executable code for calculating a position risk of the second participant;

computer executable code for blocking the order from the second participant if the position risk of the second participant is in a first condition for the second participant; and

computer executable code for binding the first participant and the second participant into a contract based on the structured contract from the first participant and the order from the second participant if the position risk of the second participant is in a second condition for the second participant and the order from the second participant is available for forming into the contract.

37. The computer executable code, as recited in claim 36, wherein the first condition for the second participant is that the position risk of the second participant is greater than the collateral of the second participant, and wherein the second condition for the second participant is that the position risk of the second participant is less than the collateral of the second participant.

38. The computer executable code, as recited in claim 36, wherein the computer readable code for making the structured contract available for forming the contract comprises computer readable code for forwarding the structured contract to at least the second participant of the plurality of participants, wherein the order received from the second participant is in response to the structured contract from the first participant.

41. A computer implemented method of estimating value at risk to permit or deny transactions for a participant in a real-time electronic transaction exchange, comprising:

generating a parametric variable equation from provided data;

generating a simulation model from the provided data;

generating control values from the simulation model;

generating an estimated value at risk equation from the parametric variable equation, where parameters of the parametric variable equation are modified by the control values.

42. The computer implemented method, as recited in claim 41, further comprising:

receiving data from contracts binding the participant;

using the data from the contracts binding the participant in the estimated value at risk equation to determine the estimated value at risk of the participant; and

;

using the estimated vale at risk to permit or block a transaction before the trade is executed.

43. The computer implemented method, as recited in claim 42, further comprising receiving data from orders placed by the participant that are not bound by contracts, wherein the using the data from the contracts also uses data from the orders to determine the estimated value at risk of the participant.

44. The computer implemented method, as recited in claim 42, wherein the data from the contracts comprise prices, amounts, and terms specified in the contracts.