Communication of credit filtered prices in an electronic brokerage system

• US 7,636,683 B1
• Filed: 09/11/1998
• Issued: 12/22/2009
• Est. Priority Date: 09/11/1998
• Status: Expired due to Fees

• Current Assignee: EBS Group Ltd. (CME Group Incorporated)
• Original Assignee: EBS Group Ltd. (CME Group Incorporated)
• Inventors: Mills, Gregory D., Jain, Neena, Howorka, Edward R.
• Primary Examiner(s): Poinvil; Frantzy
• Application Number:
  US09/786,736
• Time in Patent Office: 4,120 Days
• Field of Search: 705 10- 44
• US Class Current: 705/37
• CPC Class Codes: G06Q 20/40 Authorisation, e.g. identification of payer or payee, verification of customer or shop credentials; Review and approval of payers, e.g. check credit lines or negative lists
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

Computerized trading system for trading financial instruments having a communication network connecting traders dealing in financial instruments and a plurality of trader terminals connected to the communication network. The communication network comprises a credit store for storing an indication of credit available from each credit granting entity, a price distributor for distributing the price quotation messages to trader terminal for display, a credit filter to filter the price quotation messages to each trader terminal associated with at least one credit granting entity.

Claims

1. A computerized trading system for trading Forward Rate Agreements (FRAs) between traders associated with a plurality of credit granting entities, the system comprising:

a quote distribution system which contains information received from a plurality of credit granting entities indicating whether that credit granting entity is extending unilateral credit to other credit granting entities;

at least some of the credit granting entities having at least one maker screen and at least one taker screen associated therewith;

(a) the maker screen being configured to permit a trader to send maker price quotation messages to the quote distribution system, the maker price quotation message indicating a bid price at which the trader is willing to sell one or more of the FRAs and/or an offer price at which the trader is willing to buy one or more of the FRAs; and

(b) the taker screen being configured to permit a trader to view and accept dealable price quotation messages received from the quote distribution system; and

the quote distribution system;

(a) determining which pairs of credit granting entities are credit bearing counter-parties which extend bilateral credit to one another as a function of the unilateral credit information, said determination being made as a function of at least two respective assigned risk factors including a volatility factor for each of the FRAs, the at least two of the assigned risk factors being different from one another; and

(b) sending dealable price quotation messages to each credit granting entity indicating the best available bid and/or offer that originates from one or more credit bearing counter-parties of that credit granting entity.

2. The computerized trading system of claim 1, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time to settlement.

3. A method of trading a plurality of Forward Rate Agreements (FRAs) on an electronic trading system comprising one or more computers, the method comprising:

one or more computers of the electronic trading system receiving maker price quotation messages from a trader associated with one or more credit granting entities, the maker price quotation messages indicating a bid price at which the trader is willing to sell one or more of the FRAs and/or an offer price at which the trader is willing to buy one or more of the FRAs; and

one or more computers of the electronic trading system determining which pairs of credit granting entities are credit bearing counter-parties which extend bilateral credit to one another as a function of risk factors including a volatility factor which vary for at least two FRAs and sending dealable price quotation messages to the credit granting entities as a function thereof, each credit granting entity being sent dealable price quotation messages indicating bids and/or offers that originate from one or more credit bearing counter-parties of that credit granting entity.

4. The method of claim 3, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time to settlement.

5. The method of claim 3, further comprising permitting traders at at least some of the credit granting entities to accept dealable price quotation messages received by the credit granting entity with which it is associated.

6. A computerized trading system for trading a plurality of Forward Rate Agreements (FRAs) between traders associated with a plurality of credit granting entities, the system comprising:

a quote distribution system, which contains information received from a plurality of credit granting entities, which determines, as a function of at least two assigned risk factors including a volatility factor for each of the FRAs, the at least two of the assigned risk factors being different from one another, which pairs of the plurality of credit granting entities have bilateral credit with each other, such pairs of credit granting entities being credit bearing counter-parties, the quote distribution system also sending information to the credit granting entities as a function thereof;

each of the credit granting entities being associated with at least one;

(a) maker screen configured to permit a trader to send maker price quotation messages to the quote distribution system, the price quotation message indicating a bid price at which the trader is willing to sell one or more FRAs and/or an offer price at which the trader is willing to buy one or more FRAs; and

(b) taker screen configured to permit a trader to view and accept dealable price quotation messages indicating bids and/or offers that originate from one or more credit bearing counter-parties.

7. The computerized trading system of claim 6, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time of settlement.

8. A computerized trading system for trading a plurality of Forward Rate Agreements (FRAs) between traders at a plurality of credit granting entities, the system comprising:

a quote distribution system which contains information received from a plurality credit granting entities, at least a plurality of the credit granting entities including at least one;

(a) maker screen configured to permit a trader associated with the credit granting entity to send maker price quotation messages to the quote distribution system, the price quotation message indicating a bid price at which the trader is willing to sell one or more of the FRAs and/or an offer price at which the trader is willing to buy one or more of the FRAs; and

(b) taker screen configured to permit a trader to view dealable price quotation messages received from the quote distribution system and accept a dealable bid and/or offer displayed on the taker screen, the quote distribution system determining which pairs of credit granting entities have bilateral credit with one another and sending information to the credit granting entities as a function thereof, the determination being made as a function of at least two assigned risk factors including a volatility factor for each of the FRAs, the at least two of the assigned risk factors being different from one another.

9. The computerized trading system of claim 8, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time to settlement.

10. The computerized trading system of claim 8, wherein each of the credit granting entities is configured to display dealable price quotation messages on its taker trading screens which indicate which bids and/or offers it can accept as a function of whether or not the bid and/or offer originates from one or more credit granting entities with which it has bilateral credit as determined by the quote distribution system.

11. A method of trading, on an electronic trading system comprising one or more computers, a plurality of Forward Rate Agreements (FRAs) between traders at a plurality of credit bearing entities, some of the credit bearing entities being credit bearing counter-parties which extend bilateral credit to one another, the counter parties extending bilateral credit to one another as a function of risk factors including a volatility factor which vary for at least two FRAs, at least one of the credit bearing entities being associated with one or more trading screens configured to permit a trader to trade the FRAs, the trading screen being configured to display bids and/or offers made by traders at other credit bearing entities and to permit a trader to accept certain ones of the bids and/or offers, the trading screens having a best dealable price area and a best market price area, the method comprising:

one or more computers of the electronic trading system causing a trading screen to display, in the best market price area, only the best market bid and/or offer made by one or more traders at any of the credit bearing entities irrespective of whether or not the bid and/or offer originated from credit bearing entity which is a credit bearing counter-party to the credit bearing entity with which the trader screen is associated; and

one or more computers of the electronic trading system causing the trading screen to simultaneously display in the best dealable price area only the best dealable bid and/or offer which a trader using the trading screen is permitted to accept.

12. The method of claim 11, wherein at least one of the FRAs is associated with a time to settlement and the counter-parties extending bilateral credit to one another also as a function of the time to settlement.

13. The method of claim 11, wherein the best dealable bid and/or offer are the best bid and/or offer made by one or more credit bearing counter-parties of the credit bearing entity with which the trading screen is associated.

14. The method of claim 11, wherein the best dealable bid and/or offer for a preset quantity of FRAs are caused by the one or more computers to be displayed in the best dealable price area.

15. The method of claim 11, wherein the best dealable bid and/or offer of any quantity are caused by the one or more computers to be displayed in the best dealable price area.

16. The method of claim 11, further comprising one or more computers of the electronic trading system permitting the trader using the trading screen to accept the best dealable bid and/or offer displayed in the best dealable price area but preventing that trader from accepting the best market bid and/or offer displayed in the best market price area.

17. A method for trading a plurality of Forward Rate Agreements (FRAs) on an electronic trading system comprising one or more computers, the method comprising:

one or more computers of the electronic trading system determining which pairs of a plurality of credit granting entities are credit bearing counter-parties which extend bilateral credit to one another without any of the credit granting entities knowing which of the other credit granting entities are currently extending credit to it, the determination being made as a function of at least two assigned risk factors including a volatility factor for each of the FRAs, the at least two of the assigned risk factors being different from one another;

one or more computers of the electronic trading system receiving maker price quotation messages from individual credit granting entities, each maker price quotation message indicating a bid and/or offer price at which a maker is willing to buy and/or sell one or more of said FRAs to other anonymous traders having bilateral credit with the credit granting entity with which the maker is associated; and

one or more computers of the electronic trading system generating a display for each credit granting entity of the best bid and/or offer that originates from one or more credit bearing counter-parties of that credit granting entity and permitting a trader to accept such best bid and/or offer.

18. The method of claim 17, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time to settlement.

19. A method for trading a plurality of Forward Rate Agreements (FRAs) on an electronic trading system comprising one or more computers, said method comprising:

one or more computers of the electronic trading system determining which pairs of a plurality of credit granting entities are credit bearing counter-parties who have granted each other sufficient credit to trade the FRAs with each other, the determination being made as a function of at least two assigned risk factors including a volatility factor for each of the FRAs, the at least two of the assigned risk factors being different from one another; and

permitting credit bearing counter-parties to trade a plurality of the types of financial instruments with one another by one or more computers of the electronic trading system generating a display, for each credit bearing counter-party, of information concerning bids and/or offers from its credit bearing counter-parties.

20. The method of claim 19, wherein at least one of the FRAs is associated with a time to settlement and the determination is made as a function of the time to settlement.

21. The method of claim 19, wherein the assigned risk factors for at least one of the credit granting entities is different than the assigned risk factors for at least one other of the credit granting entities.

22. The method of claim 21, wherein, for each credit granting entity, a separate risk factor is assigned to each of the FRAs, the separate risk factor being different for at least two of the FRAs.

23. The method of claim 19, wherein, for each credit granting entity, a separate risk factor is assigned to each of the FRAs, the separate risk factor being different for at least two of the FRAs.

24. The method of claim 19, wherein each credit granting entity has a respective set of assigned risk factors assigned to the respective FRAs, at least two of the sets of assigned risk factors being different from each other.

25. The method of claim 24, wherein each credit granting entity assigns its own set of assigned risk factors.

26. The method of claim 25, wherein the determination of which pairs of credit granting entities are credit bearing counter-parties is made as a function of a calculated credit utilization for each of the FRAs, each credit utilization being calculated for each respective credit granting entity as a function of the risk factors assigned to the FRAs by the respective credit granting entity.

27. The method of claim 19, wherein the determination of which pairs of credit granting entities are credit bearing counter-parties is made as a function of unilateral credit granting messages generated by each credit granting entity and indicating which of the other credit granting entities it is granting unilateral credit to.

28. The method of claim 27, wherein each credit granting entity determines whether or not it will grant unilateral credit to the other credit granting entities as a function of a respective set of said risk factors which said credit granting entity assigns for each of the FRAs.

29. A computerized trading system for trading a plurality of Forward Rate Agreements (FRAs) between traders associated with a plurality of credit granting entities, the system comprising:

a quote distribution system which contains information received from a plurality of credit granting entities indicating whether that credit granting entity is extending unilateral credit to other credit granting entities;

at least some of the credit granting entities having at least one maker screen and at least one taker screen associated therewith;

(a) the maker screen being configured to permit a trader to send maker price quotation messages to the quote distribution system, the maker price quotation message indicating a bid price at which the trader is willing to sell one or more of the FRAs and/or an offer price at which the trader is willing to buy one or more of the FRAs; and

(b) the taker screen being configured to permit a trader to view and accept dealable price quotation messages received from the quote distribution system; and

the quote distribution system;

(a) determining which pairs of credit granting entities are credit bearing counter-parties which extend bilateral credit to one another as a function of the unilateral credit information, said determination being made as a function of at least a respective assigned risk factor for each of the FRAs, the risk factors including a time to settlement, a volatility factor representing a measure of volatility of interest rates in the currency of the FRA and the time between settlement and maturity of the FRA; and

(b) sending dealable price quotation messages to each credit granting entity indicating the best available bid and/or offer that originates from one or more credit bearing counter-parties of that credit granting entity.