HYBRID CROSS-MARGINING

• US 20110191235A1
• Filed: 04/12/2011
• Published: 08/04/2011
• Est. Priority Date: 11/18/2005
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Glinberg, Dmitriy, Yoo, Tae Seok C., Gogol, Edward
• Granted Patent: US 10,636,088 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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 hybrid cross-margining system is disclosed. The disclosed provides for both joint accounts, maintained by multiple exchanges, as well as non-joint accounts, whereby the system recognizes both intra-account offsets within the joint account and inter-exchange offsets between the joint account and accounts maintained by another exchange to minimize the margin requirement of the associated market participant with respect to the positions reflected in these accounts.

Claims

1. A computer implemented method for determining a margin requirement, the method comprising:

maintaining, by a processor, an inter-exchange account of positions resulting from one or more trades executed on either of at least two exchanges;

maintaining an intra-exchange account by one of the at least two exchanges of positions resulting from trades executed on the one of the at least two exchanges;

determining, by the processor, an inter-account net position based on positions reflected in the intra-exchange account and positions reflected in the inter-exchange account; and

determining, by the processor, the margin requirement based on the inter-account net position.

2. The computer implemented method of claim 1, wherein the inter-account net position is further based on un-netted positions remaining after a first intra-account net position has been determined, and wherein the margin requirement is based on the first intra-account net position and a contractual relationship between the at least two exchanges.

3. The computer implemented method of claim 2 further comprising:

determining a second intra-account net position prior to determining the inter-account net position wherein the inter-account net position is determined based on positions remaining after the second intra-account net position has been determined and the positions remaining after the first intra-account net position has been determined.

4. The computer implemented method of claim 1, wherein at least a subset of the positions reflected in the inter-exchange account and at least a subset of the positions reflected in the intra-exchange account are characterized by a marginable correlation.

5. The computer implemented method of claim 1 wherein the inter-exchange account is limited to reflecting positions resulting from cross-margin eligible trades.

6. The computer implemented method of claim 1 wherein the inter-exchange account is maintained by a virtual exchange with respect to a perspective of market participants.

7. The computer implemented method of claim 1 further comprising transferring one or more of the positions reflected in the inter-exchange account to the intra-exchange account.

8. The computer implemented method of claim 1 wherein the determining of the intra-account net position, further comprises recognizing intra-commodity spreads and inter-commodity spreads with respect to one of the at least two exchanges.

9. The computer implemented method of claim 1 wherein a contractual relationship among the at least two exchanges recognizes offsets between the inter-exchange and intra-exchange accounts.

10. A system for determining a minimum margin requirement, the system comprising:

an inter-exchange account stored in a database, the inter-exchange account reflecting positions resulting from one or more trades executed on either of at least two exchanges;

an inter-account net position calculator coupled with the database and operative to determine an inter-account net position based on positions reflected in an intra-exchange account and positions reflected in the inter-exchange account; and

a margin calculator coupled with the inter-account net position calculator and operative to determine the margin requirement for a market participant based on the inter-account net position.

11. The system of claim 10, further comprising:

an intra-account net position calculator configured to determine an intra-account net position based on the positions reflected in the inter-exchange account, wherein the margin calculator determines the margin requirement for the market participant based, in part, on the intra-account net position.

12. The system of claim 10, wherein a plurality of rules establish a contractual relationship between the at least two exchanges, wherein the margin calculator determines the margin requirement for the market participant based, in part, on the contractual relationship.

13. The system of claim 10, wherein at least a subset of the positions reflected in the inter-exchange account and at least a subset of the positions reflected in the intra-exchange account are characterized by a marginable correlation.

14. The system of claim 10, wherein the inter-exchange account is limited to reflecting positions resulting from cross-margin eligible trades.

15. The system of claim 10 wherein the inter-exchange account is maintained by a virtual exchange with respect to a perspective of the market participant.

16. The system of claim 10 further comprising a position transmitter operative to transfer at least one of the positions reflected in the inter-exchange account to the intra-exchange account.

17. The system of claim 10 wherein the inter-account net position calculator is further operative to determine a first margin requirement for the inter-exchange account and the intra-account net position calculator is further operative to determine a second margin requirement for the intra-exchange account, wherein the minimum margin requirement is not more than the sum of the first and second margin requirements.

18. The system of claim 10 wherein the intra-account net position calculator is further operative to recognize intra-commodity spreads and inter-commodity spreads with respect to one of the at least two exchanges.

19. The system of claim 10 wherein a contractual relationship among the at least two exchanges recognizes offsets between the inter-exchange and intra-exchange accounts.

20. A system for determining a margin requirement, the system comprising:

a processor;

a memory coupled with the processor;

first logic stored in the memory and executable by the processor to maintain an inter-exchange account stored in a database for the market participant, the inter-exchange account reflecting a plurality of positions associated with intra-commodity spreads or inter-commodity spreads;

second logic stored in the memory and executable by the processor to determine an inter-account net position based on the plurality of positions reflected in the intra-exchange account and positions remaining after a intra-account net position has been determined based on the plurality of positions reflected in the inter-exchange account; and

third logic coupled with the first and second logic, stored in the memory and executable by the processor to determine the margin requirement based on the inter-account and intra-account net positions.