Systems and Methods for a Maximum Product Position Risk Check

• US 20130232091A1
• Filed: 04/19/2013
• Published: 09/05/2013
• Est. Priority Date: 03/31/2011
• Status: Abandoned Application

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Garlanger, Andrea C., Messina, Patricia A., Mittal, Bharat
• Application Number:
  US13/866,753
• Publication Number:
  US 20130232091A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Various systems and methods are described herein for product level risk checks. The product level risk checks are used to either allow or prevent a trading strategy to proceed. When a trading strategy is initiated, positions created by various contracts for the trading strategy are grouped based on their association with the same product. Then, an offsetting logic is applied at a contract level to offset at least some positions created for the same contract by various orders across the orders of the trading strategy.

Claims

1. (canceled)

2. A system comprising:

a computing device comprising a processor, the computing device including;

a position calculating component configured to receive an attempted order to buy or sell a trading strategy, wherein the trading strategy comprises an exchange-provided spread in a first leg and a first contract in a second leg, the exchange provided spread comprising the first contract and a second contract of the same product, wherein the first contract in the exchange-provided spread is for a first side comprising one of a bid side and an ask side, and wherein the first contract in the second leg is for a second side that is opposite from the first side;

wherein the position calculating component is configured to determine a first maximum long outright position and a first maximum short outright position for the first contract based on a quoting long position and a quoting short position for the first contract in the first leg and the second leg, and further based on a long outright hedge position and a short outright hedge position for the first contract in the second leg, wherein the outright hedge long position reduces the quoting short position when the first maximum long outright position is calculated, and wherein the outright hedge short position reduces the quoting long position when the first maximum short outright position is calculated;

wherein the position calculating component is configured to determine a first maximum long spread position and a first maximum short spread position for the first contract based on the quoting long position, the quoting short position, the long outright hedge position, the short outright hedge position, a spread hedge long position and a spread hedge short position for the first contract in the first leg and the second leg, wherein the spread hedge short position reduces the quoting long position, the long outright hedge position, and the spread hedge long position when the first maximum long spread position is calculated, and wherein the spread hedge long position reduces the quoting short position, the short outright hedge position, and the spread hedge short position when the first maximum short spread position is calculated;

a product risk calculating component configured to determine a maximum long product position based on the first maximum outright long position and the first maximum spread long position, and further to determine a maximum short product position based on the first maximum outright short position and the first maximum spread short position;

a limit component configured to compare the maximum long product position and the maximum short product position to a product position balance associated with the product;

an order generator component configured to generate at least one order in the first leg or the second leg of the trading strategy based on current market conditions in at least one of the exchange-provided spread of the first leg and the first contract of the second leg; and

an order sending component configured to send the at least one order in the first leg or the second leg of the trading strategy to an electronic exchange when the maximum long product position and the maximum short product position do not exceed the product position balance.

3. The system of claim 2, wherein the first leg and the second leg are being quoted.

4. The system of claim 2, wherein the first maximum long outright position is determined based on the following relationship:

maximum of [(quoting long position−

quoting short position+outright hedge long position),0].

5. The system of claim 2, wherein the first maximum short outright position is determined based on the following relationship:

maximum of [(quoting short position−

quoting long position+outright hedge short position),0].

6. The system of claim 2, wherein the first maximum long spread position is determined based on the following relationship:

maximum of [(quoting long position−

quoting short position+outright hedge long position+spread hedge long position−

spread hedge short position),0].

7. The system of claim 2, wherein the first maximum short spread position is determined based on the following relationship:

maximum of [(quoting short position−

quoting long position+outright hedge short position+spread hedge short position−

spread hedge long position),0].

8. The system of claim 2, wherein the position calculating component is further configured to:

determine a total maximum long outright position based on maximum long outright positions for each of the first contract and the second contract; and

determine a total maximum long spread position based maximum long spread positions for each of the first contract and the second contract.

9. The system of claim 8, wherein the total maximum long outright position is determined based on the following relationship:

Σ

(maximum long outright position of each contract).

10. The system of claim 8, wherein the total maximum long spread position is determined based on the following relationship:

Σ

(maximum long spread position of each contract).

11. The system of claim 8, wherein the maximum long product position is determined based on the total maximum long outright position and the total maximum long spread position.

12. The system of claim 11, wherein the maximum long product position is determined based on the following relationship:

maximum of (total maximum long outright position, total maximum long spread position).

13. The system of claim 2, wherein the position calculating component is further configured to:

determine a total maximum short outright position based on maximum short outright positions for each of the first contract and the second contract; and

determine a total maximum short spread position based maximum short spread positions for each of the first contract and the second contract.

14. The system of claim 13, wherein the total maximum short outright position is determined based on the following relationship:

Σ

(maximum short outright position of each contract).

15. The system of claim 14, wherein the total maximum short spread position is determined based on the following relationship:

Σ

(maximum short spread position of each contract).

16. The system of claim 13, wherein the maximum short product position is determined based on the total maximum short outright position and the total maximum short spread position.

17. The system of claim 16, wherein the maximum short product position is determined based on the following relationship:

maximum of (total maximum short outright position, total maximum short spread position).

18. The system of claim 2, wherein the trading strategy comprises a spread trading strategy.

19. The system of claim 2, wherein the position calculating component is further configured to:

determine a second maximum long outright position and a second maximum short outright position for the second contract based on a quoting long position and a quoting short position to be created for the second contract in the first leg, and further based on a long outright hedge position and a short outright hedge position to be created for the second contract in the first leg; and

determine a second maximum long spread position and a second maximum short spread position for the second contract based on the quoting long position, the quoting short position, the long outright hedge position, the short outright hedge position, a spread hedge long position and a spread hedge short position to be created in the first leg.

20. The system of claim 19, wherein the maximum long product position is further based on the second maximum outright long position and the second maximum spread long position, and wherein the maximum short product position is further based on the second maximum outright short position and the second maximum spread short position.