System for settling over the counter trades

• US 7,685,051 B2
• Filed: 05/23/2003
• Issued: 03/23/2010
• Est. Priority Date: 05/31/2002
• Status: Active Grant

• Current Assignee: Intercontinental Exchange Holdings, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Intercontinental Exchange, Inc.
• Inventors: Cummings, Raymond J., Goone, David
• Primary Examiner(s): Patel; Jagdish N
• Assistant Examiner(s): POE, KEVIN T
• Application Number:
  US10/444,324
• Publication Number:
  US 20030225681A1
• Time in Patent Office: 2,496 Days
• Field of Search: 705 35- 45
• 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

A system for automatically determining a trade settlement pathway comprising: receiving trade pathway preferences from a first and second party with respect to each other; wherein the trade is settled through clearing if both parties have available accounts with a clearing firm and the trade satisfies each party'"'"'s clearing account credit limitations; and wherein the trade is settled bilaterally if at least one party does not have an available clearing account or both parties prefer to settle the trade bilaterally, and the trade satisfies each party'"'"'s bilateral credit limitations.

Claims

1. An electronic exchange system comprising:

a network of data processing terminals, said data processing terminals including at least one exchange server, at least two trading terminals respectively operated by first and second participants and at least one other such terminal operated by a clearing party,

wherein the exchange server comprises;

a database configured for receiving and storing trading preferences of at least one of the first and second participants, said trading preferences comprising one or more methods of settlement; and

a computer-readable program that when run enables the exchange server to;

execute a pre-screening function to determine whether to make an order entered by the first participant executable by the second participant, wherein the pre-screening function comprises evaluating at least two alternative methods of settlement for the order entered by the first participant and determining whether at least one of said alternative methods of settlement is commonly available or commonly acceptable to both participants based upon the trading preferences of both participants.

2. The electronic exchange system of claim 1, wherein the at least two alternative methods of settlement comprise bilateral and clearing methods of settlement, and wherein the exchange server is configured to determine whether a method of settlement is commonly available or commonly acceptable to the participants by:

performing bilateral credit checks if both participants permit bilateral trading with each other; and

performing clearing account checks if both participants have a clearing account.

3. The electronic exchange system of claim 2, wherein the exchange server is configured to:

permit the second participant to execute the order if it is determined that there is at least one commonly available or commonly acceptable method of settlement between the participants; and

deny the second participant from executing the order if there are no commonly available or commonly acceptable methods of settlement.

4. The electronic exchange system of claim 3, wherein the exchange server is further configured to:

identify a preferred method of settlement between the participants based on at least one settlement preference established by at least one of the first and second participants; and

determine whether said preferred method of settlement is commonly available or commonly acceptable to both participants.

5. The electronic exchange system of claim 4, wherein the server exchange is further configured to identify a non-preferred method of settlement that is commonly available or commonly acceptable to both participants when the preferred method of settlement is unavailable or unacceptable to at least one of the participants.

6. The electronic exchange system of claim 5, wherein at least one settlement preference comprises at least one of:

bilateral only, cleared only, bilateral preferred, cleared preferred, and closed trading preference.

7. The electronic exchange system of claim 6, wherein the exchange server is further configured to enforce at least one default settlement method, said at least one default settlement method being selected by any of an exchange, a clearinghouse, a broker, a brokerage firm, or any third party.

8. The electronic exchange system of claim 7, wherein the at least one settlement preference is established by at least one of the first participant, the second participant, and a third party.

9. The electronic exchange system of claim 8, wherein the third party is selected from the group consisting of an exchange, a clearinghouse, a broker, and a brokerage firm.

10. An electronic trading system comprising:

one or more exchange servers;

one or more trading-participant terminals in communication with the exchange server; and

at least one clearing-participant terminal in communication with at least one of the exchange servers,

wherein at least one of the exchange servers comprises;

means for pre-screening an order entered by a first trading-participant to determine whether make the order executable by a second trading-participant, wherein pre-screening an order comprises evaluating at least two alternative methods of settlement for the order and determining whether at least one of said alternative methods of settlement is commonly available or commonly acceptable to both trading-participants; and

means for determining whether a trading transaction may be consummated after the order has been made executable to the second trading-participant; and

means for determining how the trading transaction will be settled according to pre-defined trading preferences of the trading-participants.

11. The electronic trading system of claim 10, wherein at least one of the trading-participant terminals comprises an interactive user-interface for providing access to trading parameters and trading preferences of at least one trading-participant.

12. The electronic trading system of claim 11, wherein the interactive user-interface is a counterparty filter.

13. The electronic trading system of claim 12, wherein the one or more exchange servers further comprises means for receiving and matching trade bids and offers.

14. The electronic trading system of claim 13, wherein the means for pre-screening an order entered by a first trading-participant to determine whether to make the order executable by a second trading-participant comprises:

a computer-readable program that when run enables the one or more servers to;

determine whether the trading participants permit bilateral trading with each other;

determine whether the trading participants have clearing accounts; and

determine whether a clearing account passes a clearing credit check.

15. The electronic trading system of claim 14, wherein the means for determining whether the trading transaction may be consummated comprises:

a computer-readable program that when run enables the one or more servers to;

determine whether either of the trading participants has a clearing account;

run clearing account checks; and

run bilateral credit checks.

16. The electronic trading system of claim 15, wherein the means for determining how the trading transaction will be settled comprises:

a computer-readable program that when run enables the one or more servers to;

compare the pre-defined trading preferences of each of the trading participants; and

determine how to settle the trading transaction according to the comparison, wherein the pre-defined trading preferences comprise at least one of a bilateral only, a cleared only, a bilateral preferred, a cleared preferred, and a closed trading preference.

17. The electronic trading system of claim 16, wherein the one or more exchange servers further comprises means for settling the trading transaction as at least one of a cleared trade and a bilateral trade.

18. The electronic system of claim 17, wherein at least one of the trading participants is one of a person, an entity, a participant administrator, a company, a broker, a brokerage, and a subsidiary company.

19. A method of pre-screening an order entered by a first party at a first trading terminal to determine whether to make the order executable by a second party at a second trading terminal, the method comprising:

storing in a database trading preferences of at least the first party and the second party, the trading preferences comprising one or more methods of settlement;

evaluating by an exchange server at least two alternative methods of settlement for the order entered by the first party;

determining by the exchange server that at least one of the alternative methods of settlement is at least one of commonly available and acceptable to both parties based upon the trading preferences of both parties; and

wherein the exchange server comprises the database and computer-readable instructions for performing the evaluating and determining operations.

20. The method of claim 19, wherein the at least two alternative methods of settlement comprise bilateral and clearing methods of settlement, and wherein determining whether a method of settlement is at least one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

21. A method of a second party executing an order entered by a first party at a trading terminal, the method comprising:

storing in a database trading preferences of at least the first party and the second party, the trading preferences comprising one or more methods of settlement;

evaluating by an exchange server at least two alternative methods of settlement for the order entered by the first party;

determining by the exchange server that at least one of the alternative methods of settlement is at least one of commonly available and acceptable to both parties based upon the trading preferences of both parties; and

enabling by the exchange server the trade to be executed where it is determined that there is at least one of a commonly available and acceptable settlement method between the parties;

wherein the exchange server comprises the database and computer-readable instructions for performing the evaluating, determining, and enabling operations.

22. The method of claim 21, wherein the at least two alternative methods of settlement comprise bilateral and clearing methods of settlement, and wherein determining whether a method of settlement is at least one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

23. The method of claim 21, wherein the step of determining whether a method of settlement is at least one of commonly available and acceptable to the parties comprises:

selecting a method of settlement for a trade between the first party and the second party;

establishing at least one settlement preference by at least one of the first and second parties;

evaluating the at least one settlement preference to identify a preferred method of settlement between the parties; and

selecting the preferred method of settlement, where a preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

24. The method of claim 23, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of the commonly available and acceptable to both parties, to settle the trade.

25. A method of selecting a method of settlement for a trade between a first party and a second party operating a first and second trading terminal, respectively, the method comprising:

establishing at least one settlement preference;

storing the at least one settlement preference in a database;

evaluating by an exchange server the at least one settlement preference to identify a preferred method of settlement between the parties; and

selecting by the exchange server the preferred method of settlement, where a preferred method of settlement is at least one of a commonly available and commonly acceptable to both parties, to settle the trade;

wherein the exchange server comprises the database and computer-readable instructions for performing the evaluating and selecting operations.

26. The method of claim 25, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

27. The method of claim 25, wherein the at least one settlement preference comprises at least one of:

bilateral only, cleared only, bilateral preferred, cleared preferred, and closed trading preference.

28. The method of claim 25, further comprising establishing at least one default settlement method, said at least one default settlement method being selected by any of an exchange, a clearinghouse, a broker, a brokerage firm, or any third party.

29. The method of claim 25, wherein the at least one settlement preference is established by at least one of the first party, the second party, and a third party.

30. The method of claim 29, wherein where the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

31. The method of claim 29, wherein the third party is selected from the group consisting of an exchange, a clearinghouse, a broker, and a brokerage firm.

32. The method of claim 25, further comprising pre-screening and executing an order between the first party and the second party prior to selecting a method of settlement, the method further comprising:

pre-screening the order by determining from a plurality of settlement methods whether there is at least one settlement method that is at least one of commonly available and acceptable to the parties;

making the order executable by the second party where there is at least one of a commonly available and acceptable settlement method between the parties;

the second party attempting to execute the order;

enabling the second party to execute the order where it is determined from a plurality of settlement methods that there is at least one settlement method that is at least one of commonly available acceptable to the parties; and

the second party executing the order, thereby generating an executed trade.

33. The method of claim 32, wherein when the preferred method of settlement is unavailable or unacceptable to at least one of the parties, the method further comprising:

selecting a non-preferred method of settlement, where a non-preferred method of settlement is at least one of commonly available and acceptable to both parties, to settle the trade.

34. The method of claim 32, wherein the plurality of settlement methods comprises bilateral and clearing methods of settlement, and wherein determining whether a settlement method is at least one of commonly available and acceptable to the parties comprises:

performing bilateral credit checks if both parties permit bilateral trading with each other; and

performing clearing account checks for the parties if both parties have a clearing account.

35. The method of claim 32, wherein the at least one settlement preference comprises at least one of:

bilateral only, cleared only, bilateral preferred, cleared preferred, and closed trading preference.

36. The method of claim 32, wherein the third party comprises one or more selected from the group consisting of an exchange, a clearinghouse, and a broker.

37. The method of claim 32, further comprising establishing at least one default settlement method, said at least one default settlement method being selected by any of an exchange, a clearinghouse, a broker, a brokerage firm, or any third party.