Over the counter traded product and system for offset and contingent trading of commodity contracts

• US 7,539,643 B2
• Filed: 05/05/2006
• Issued: 05/26/2009
• Est. Priority Date: 05/06/2005
• Status: Active Grant

• Current Assignee: Intercontinental Exchange Holdings, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Intercontinental Exchange, Inc.
• Inventors: Leppard, Marc, Cummings, Raymond James
• Primary Examiner(s): Karmis; Stefanos
• Application Number:
  US11/418,962
• Publication Number:
  US 20060253383A1
• Time in Patent Office: 1,117 Days
• Field of Search: 705 35- 37
• 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 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method for facilitating the offset or contingent trading of commodity contracts comprising: providing a futures exchange wherein a futures or option contract based on a first commodity of a commodity type is traded; and automatically registering a trade of the futures or options contract on the futures exchange at a market price for the futures or options contract when an over the counter contract for a second commodity of the commodity type is traded. In certain embodiments, the invention is an over the counter product comprising: a first leg comprising a purchase or sale of a futures contract based on a first commodity; and a second leg comprising a sale or purchase of an over the counter contract based on a second commodity; wherein the first commodity and the second commodity are of the same commodity type and the over the counter traded product trades at a price differential between the two legs; and wherein the purchase or sale of the futures or options contract is automatically registered on a futures exchange when the sale or purchase of the over the counter contract occurs. A system for offset or contingent trading of commodity contracts is also disclosed.

Claims

1. A method of offset or contingent trading comprising:

providing a first financial exchange configured for offering for sale or purchase a first financial derivatives contract;

providing a second financial exchange and offering for purchase or sale a second financial derivatives contract;

consummating, via an electronic trading platform, one of an offsetting and contingent trading transaction for the second financial derivatives contract at a price differential that is based on prevailing market prices as indicated by the first exchange and

said electronic trading platform automatically registering a trade of the first financial derivatives contract on the first financial exchange immediately upon consummating the trading transaction for the second financial derivatives contract,

wherein the first financial exchange is one of a futures exchange and an over-the-counter (OTC) exchange, and wherein the second financial exchange is the other of said futures exchange and said OTC exchange.

2. The method of claim 1, wherein the first financial derivatives contract corresponds to the consummated trading transaction.

3. The method of claim 2, wherein the one of an offsetting and contingent trading transaction is one of an exchange for physical (EFP) and exchange for swap (EFS) transaction.

4. The method of claim 3, further comprising publicizing details of the trade for the first derivatives contract to marketplace participants of the first exchange.

5. The method of claim 4, wherein the first financial derivatives contract is a futures or options contract, wherein the first financial exchange is a futures exchange, wherein the second financial derivatives contract is an OTC bilateral contract, and wherein the second financial exchange is an OTC exchange.

6. The method of claim 5, wherein the OTC bilateral contract is one of a swap, forward and options contract.

7. The method of claim 1, wherein the first financial derivatives contract is based on a first commodity of a commodity type, and wherein the second financial derivatives contract is based on a second commodity of said commodity type.

8. The method of claim 7, wherein the commodity type is one of energy, oil, precious metals, base metals, currency, agricultural commodities, and fixed income financial futures.

9. The method of claim 8, wherein the commodity type is energy and wherein the first and second commodities are selected from the group consisting of natural gas, crude oil, refined crude oil products, electricity, emissions, coal, liquid natural gas, natural gas liquids, weather, bio fuels, nuclear fuel, petrochemicals, hydroelectric energy generation, solar energy generation, and wind energy generation.

10. The method of claim 7, wherein the commodity type is oil and wherein the first and second commodities are selected from the group consisting of oil futures, oil forwards, oil options, oil swaptions, rolling date forwards, contracts-for-difference, front line swaps, fixed-for-floating swaps, float-for-float swaps, and index swaps.

11. A system for offset and contingent trading in an electronic trading environment, the system comprising:

an electronic trading platform;

two or more exchanges in communication with the electronic trading platform, the exchanges providing price feeds and reporting trades to the electronic trading platform; and

one or more user terminals in communication with the electronic trading platform, the user terminals providing access to the price feeds and trades reported to the electronic trading platform,

wherein the electronic trading platform is configured to;

consummate one of an offsetting and contingent trading transaction by offering for sale or purchase a first financial derivatives contract on a first of the exchanges;

offer for purchase or sale a second financial derivatives contract on a second of the exchanges at a price differential that is based on prevailing market prices as indicated by the first exchange; and

automatically register a trade of the first financial derivatives contract on the first exchange upon a trade of the second financial derivatives contract and

wherein said first of the exchanges is one of a futures exchange and an OTC exchange, and wherein said second of the exchanges is the other of said futures exchange and said OTC exchange.

12. The system of claim 11, wherein the first exchange is a futures exchange, wherein the second exchange is an OTC exchange, and wherein the electronic trading platform is configured to move a bilateral OTC contract into a cleared position upon consummating one of an offsetting and contingent trading transaction.

13. The system of claim 12, wherein the electronic trading platform is further configured to move a cleared contract into a bilateral OTC position upon consummating one of an offsetting and contingent trading transaction.

14. The system of claim 13, wherein the electronic trading platform is further configured to simultaneously initiate a position in both a bilateral OTC contract and a cleared contract upon consummating one of an offsetting and contingent trading transaction.

15. The system of claim 12, wherein the first financial derivatives contract is one of a futures and options contract, and wherein the first exchange is a futures exchange.

16. The system of claim 12, wherein the second financial derivatives contract is an over-the-counter (OTC) bilateral contract.

17. The system of claim 16, wherein the OTC bilateral contract is one of a swap, forward and options contract.

18. The system of claim 17, wherein the first and second financial derivatives contracts are based on one of commodities, natural resources, and financial instruments.

19. The system of claim 18, wherein the first financial derivative contract is for a first commodity of a commodity type and wherein the second financial derivative contract is for a second commodity of said commodity type.

20. The system of claim 19, wherein the commodity type is one of oil, natural gas, and energy.