Auction for financially settled contracts

• US 7,676,424 B2
• Filed: 11/20/2007
• Issued: 03/09/2010
• Est. Priority Date: 11/20/2007
• Status: Active Grant

• Current Assignee: DCC Energy Limited (DCC PLC)
• Original Assignee: DCC Energy Limited (DCC PLC)
• Inventors: Bulkeley, Mark A., Wilde, Dean L. II, Tate, Matthew R., Stevens, Andrew J.
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Preston; John O
• Application Number:
  US11/986,091
• Publication Number:
  US 20090132408A1
• Time in Patent Office: 840 Days
• Field of Search: 705/37
• 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

Abstract

Various embodiments show a system for conducting an auction for a plurality of financially settled contracts: The system may comprise at least one processor. The at least one processor may be programmed to receive a plurality of first participant bids from a first participant and a plurality of second participant bids from a second participant. The at least one processor may also be programmed to match a batch of bids to create a plurality of awarded bids. The contracts may include, for example, an oil contract, a coal contract, a natural gas contract, an electricity contract, a weather contract, a weather-related events contract, a commodities contract, location specific service contracts (e.g., passenger contract and/or freight contracts).

Claims

1. A computer readable memory medium containing computer readable instructions that when executed by a computer perform the following steps for conducting an auction for a plurality of financially settled contracts:

receiving by the computer a plurality of first participant bids from a first participant;

receiving by the computer a plurality of second participant bids from a second participant; and

simultaneously matching by the computer a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of bids from all the participants,

wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, and wherein the matching comprises matching at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

2. The computer readable memory medium of claim 1, wherein the plurality of awarded bids maximizes at least one auction variable selected from the group consisting of auction revenue and transaction volume.

3. The computer readable memory medium of claim 1, the steps further comprising:

receiving by the computer a first participant constraint;

generating by the computer a preliminary awarded portfolio for the first participant, wherein the preliminary awarded portfolio comprises at least one awarded bid selected from the plurality of first participant bids; and

if the preliminary awarded portfolio does not meet the first participant constraint, discarding a portion of the plurality of first participant bids.

4. The computer readable memory medium of claim 3, wherein the portion of the plurality of bids is selected considering at least one factor selected from the group consisting of a bid priority received from the first participant;

and the first participant'"'"'s economic surplus.

5. The computer readable memory medium of claim 3, wherein the first participant constraint is at least one constraint selected from the group consisting of a trade limit and a collateral limit.

6. The computer readable memory medium of claim 1, wherein the plurality of awarded bids comprises an equal volume of long bids and short bids for each of the plurality of financially settled contracts with at least one set of awarded bids.

7. The computer readable memory medium of claim 1, wherein matching the batch of bids comprises maximizing:

$\underset{n}{\sum <br><br>}<br><br>\underset{b}{\sum <br><br>}<br><br><br><br>{\mathrm{AwardP}}_{n,b}\times <br><br>{\mathrm{AwardQ}}_{n,b}<br><br>.$

8. The computer readable memory medium of claim 7, wherein the maximizing comprises maximizing according to the constraint that

$\sum _{}$

b ⁢

AwardQ n , b = 0.

9. The computer readable memory medium of claim 7, wherein the maximizing comprises maximizing according to the constraints that:

0≦

AwardQ_n,b≦

BidQ_n,b;

0≧

AwardQ_n,b≧

BidQ_n,b;

AwardP_n,b≦

BidP_n,b; and

AwardTP_b≦

BidTP_b.

10. The computer readable memory medium of claim 1, the steps further comprising deriving a price for all of the plurality of financially settled contracts.

11. The computer readable memory medium of claim 1, the steps further comprising deriving a price for a contract selected from the plurality of financially settled contracts, wherein the contract has no awarded bids in the plurality of awarded bids.

12. The computer readable memory medium of claim 11, wherein deriving the price comprises setting the price to a mid-point between a lowest short bid and a highest long bid for the contract selected from the batch of bids.

13. The computer readable memory medium of claim 11, wherein deriving the price comprises modifying a price for the contract from a previous auction by an amount proportional to a price change of a second contract correlated to the first contract.

14. The computer readable memory medium of claim 1, the steps further comprising publishing at least a portion of un-awarded bids from the batch of bids to at least one broker.

15. The computer readable memory medium of claim 1, wherein the matching comprises resolving at least one degenerate solution selected from the group consisting of a degenerate price solution and a degenerate volume solution.

16. The computer readable memory medium of claim 1, wherein the plurality of financially settled contracts each settle on the price of a commodity type at a location over a settlement period.

17. The computer readable memory medium of claim 1, wherein the plurality of contracts comprises at least one contract selected from the group consisting of an electricity contract, a congestion contract and a loss contract.

18. The computer readable memory medium of claim 1, wherein the at least one non-outright bid comprises a non-outright bid comprising a first leg and a second leg, and wherein the first leg and the second leg relate to underlying contracts settling on the price of different underlying values at different locations over different settlement periods.

19. The computer readable memory medium of claim 1, wherein the batch of bids comprises at least one bid type selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

20. The computer readable memory medium of claim 1, wherein the plurality of financially settled contracts comprises at least one contract selected from the group consisting of an oil contract, a coal contract, a natural gas contract, an electricity contract, a weather contract, a weather-related events contract, a commodities contract, a passenger contract;

and a freight contract.

21. The computer readable memory medium of claim 1, wherein the matching further comprises matching at least one bid with a synthetic equivalent.

51. The computer readable memory medium of claim 1, wherein the matching further comprises matching each leg of a non-outright bid with a combination of legs from other non-outright bids.

52. The computer readable memory medium of claim 1, wherein the bids from all the participants are received over a predetermined bid submission period.

22. A method using a programmable device for conducting an auction for a plurality of financially settled contracts, the method comprising:

receiving, by the programmable device, a plurality of first participant bids from a first participant;

receiving, by the programmable device, a plurality of second participant bids from a second participant; and

simultaneously matching a batch of bids by the programmable device to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of bids from all the participants,

wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, and wherein the matching comprises matching at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

23. A programmable apparatus with a trade platform for conducting an auction for a plurality of financially settled contracts, the trade platform comprising:

a programmable processor with an auction engine configured to generate awarded bids by simultaneously matching bids selected from a batch of bids received from a plurality of participants,

wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts,

wherein the matching comprises matching at least one leg of at least one non-outright bid selected from the batch of bids,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple leas. where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

24. The trade platform of claim 23, wherein the plurality of financially settled contracts comprises at least one contract selected from the group consisting of an oil contract, a coal contract, a natural gas contract, an electricity contract, a weather contract, a weather-related events contract, a commodities contract, a passenger contract;

and a freight contract.

25. The trade platform of claim 23, further comprising a trade capture system, wherein the trade capture system is configured to:

receive matched bids from a broker;

verify that the broker is authorized to transact on the trade platform; and

verify that completing a transaction for the matched bids would not violate a constraint of participants making the matched bids.

26. The trade platform of claim 23, wherein the auction engine is also configured to send a portion of the batch of bids that are unmatched to at least one broker.

27. The trade platform of claim 23, further comprising:

a participant interface for receiving bids from at least a portion of the plurality of participants and forwarding the bids to the auction engine; and

a clearing interface for sending awarded bids to a clearing corporation and for receiving participant constraints from the clearing corporation.

28. The trade platform of claim 23, wherein the awarded bids comprise an equal volume of long bids and short bids for each of the plurality of financially settled contracts with at least one set of awarded bids.

29. The trade platform of claim 23, wherein the awarded bids maximize at least one auction variable selected from the group consisting of auction revenue and transaction volume.

30. The trade platform of claim 23, wherein the batch of bids comprises at least one bid selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

31. A computer readable memory medium containing computer readable instructions that when executed by a computer perform the following steps for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market:

receiving by the computer a plurality of first participant bids from a first participant;

receiving by the computer a plurality of second participant bids from a second participant; and

simultaneously matching by the computer a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of bids from all the participants,

wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching at least one leg of at least one non-outright bid,

wherein the plurality of financially settled forward electricity contracts comprises a plurality of nodal contracts,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

32. The computer readable memory medium of claim 31, wherein the plurality of nodal contracts each settle on a price of electricity at a node over a settlement period.

33. The computer readable memory medium of claim 31, wherein the at least one non-outright bid comprises a non-outright bid comprising a first leg and a second leg, and wherein the first leg and the second leg relate to underlying contracts settling at different nodes and over different settlement periods.

34. The computer readable memory medium of claim 31, wherein the plurality of financially settled forward electricity contracts comprises contracts that settle at substantially all of the nodes of the spot market.

35. The computer readable memory medium of claim 31, wherein the plurality of awarded bids maximizes at least one auction variable selected from the group consisting of auction revenue and transaction volume.

36. The computer readable memory medium of claim 31, wherein the plurality of financially settled forward electricity contracts comprises at least one hundred thousand contracts.

37. The computer readable memory medium of claim 31, wherein the batch of bids comprises at least one bid selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

38. The computer readable memory medium of claim 31, wherein the plurality of financially settled forward electricity contracts comprise at least one price contract and at least one congestion contract.

39. The computer readable memory medium of claim 31, wherein the plurality of financially settled forward electricity contracts comprise at least one loss contract.

40. The computer readable memory medium of claim 31, wherein the matching further comprises matching at least one bid with a synthetic equivalent.

41. A method using a programmable device for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market, the method comprising:

receiving, by the programmable device, a plurality of first participant bids from a first participant;

receiving, by the programmable device, a plurality of second participant bids from a second participant; and

simultaneously matching a batch of bids by the programmable device to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of bids from all the participants,

wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts,

wherein the matching comprises matching at least one leg of at least one non-outright bid,

wherein the plurality of financially settled forward electricity contracts comprises a plurality of nodal contracts,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

42. A programmable apparatus with a trade platform for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market, the trade platform comprising:

a programmable processor with an auction engine configured to generate awarded bids by simultaneously matching bids selected from a batch of bids received from a plurality of participants,

wherein each bid selected from the batch of bids relates to at least a portion of the plurality of financially settled contracts,

wherein the matching comprises matching at least one non-outright bid selected from the batch of bids,

wherein the plurality of financially settled forward electricity contracts comprises a plurality of nodal contracts,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded.

43. The trade platform of claim 42, further comprising a trade capture system, wherein the trade capture system is configured to:

receive matched bids from a broker;

verify that the broker is authorized to transact on the trade platform; and

verify that completing a transaction for the matched bids would not violate a constraint of participants making the matched bids.

44. The trade platform of claim 42, wherein the auction engine is also configured to send a portion of the batch of bids that are unmatched to at least one broker.

45. The trade platform of claim 42, further comprising:

a participant interface for receiving bids from at least a portion of the plurality of participants and forwarding the bids to the auction engine; and

a clearing interface for sending match bids to a clearing corporation and for receiving participant constraints from the clearing corporation.

46. The trade platform of claim 42, wherein the awarded bids comprise an equal volume of long bids and short bids for each of the plurality of financially settled contracts with at least one set of awarded bids.

47. The trade platform of claim 42, wherein the awarded bids maximize at least one auction variable selected from the group consisting of auction revenue and transaction volume.

48. The trade platform of claim 42, wherein the batch of bids comprises at least one bid selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

49. The trade platform of claim 42, wherein the batch of bids comprises at least two bids that differ across a class dimension, a locational dimension and a settlement period dimension.

50. The trade platform of claim 42, wherein the plurality of financially settled forward electricity contracts comprises contracts that settle at substantially all of the nodes of the spot market.