Switch engine for risk position discovery in an electronic trading system

• US 7,689,497 B2
• Filed: 02/28/2003
• Issued: 03/30/2010
• Est. Priority Date: 10/14/1997
• Status: Expired due to Term

• Current Assignee: Blackbird Holdings, Inc.
• Original Assignee: Blackbird Holdings, Inc.
• Inventors: May, R. Raymond
• Primary Examiner(s): Kyle, Charles R
• Assistant Examiner(s): WEIS, SAMUEL
• Application Number:
  US10/377,254
• Publication Number:
  US 20040015430A1
• Time in Patent Office: 2,587 Days
• Field of Search: 705 35- 37
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A switch engine module receives interest rate risk portfolios from a plurality of traders, and for each prospective trader, provides available switches based on positions in other counterparty portfolios that offset the viewing traders'"'"' positions. The offsetting positions are encoded with credit preference information in order to identify eligible trades based on both counterparties credit preferences. Another embodiment provides for a switch auction whereby users can use an auction process to trade for forward rate agreement switches with other counterparties. In the switch auction, the price is predetermined by the system prior to the auction so that parties can opt out of the transaction if desired. The credit preferences of the participating traders are taken in consideration in making matches.

Claims

1. A system for risk portfolio management that enables switches between traders, comprising:

means for receiving risk position portfolios associated with respective said traders;

means for calculating relative positions for each of said risk position portfolios associated with respective said traders;

means for presenting said relative positions to each of said traders, wherein said means for presenting is configured for determining potential switches between said traders of said relative positions of said traders based upon at least one of credit preferences of a first trader and credit preferences of a second trader, and wherein said means for presenting is further configured for presenting to said first trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of said second trader representing one of said potential switches; and

means for executing a switch between at least two of said traders based on said relative positions, wherein the switch comprises an exchange of (a) at least one financial instrument defining a financial risk position for (b) at least one financial instrument defining an opposite financial risk position.

2. The system of claim 1, wherein said means for presenting is further configured for determining said potential switches between said traders of said relative positions of said traders based upon said credit preferences of said first trader and said credit preferences of said second trader, and wherein said means for presenting is further configured for presenting to said first trader at least one possible switch combination of said potential switches with said second trader based on respective said risk position portfolios associated with said first and second traders.

3. The system of claim 1, wherein said means for presenting is further configured for presenting to said second trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of a second trader, wherein said at least one offsetting position is one of said potential switches determined based at least in part upon credit preferences of said first trader.

4. The system of claim 1, wherein said at least one offsetting position is visually encoded to reflect switch eligibility based on at least one of said credit preferences of said first trader and said credit preferences of said second trader when presented to said first trader.

5. The system of claim 1, wherein said means for receiving comprising means for uploading risk position portfolio data by file transfer.

6. The system of claim 1, further including means for updating said risk position portfolio in real-time.

7. The system of claim 1, wherein respective said risk position portfolios comprise interest rate reset risk.

8. The system of claim 1, wherein said risk position portfolio includes position data for at least 90 days forward.

9. The system of claim 1, wherein said risk position portfolio includes position data for at least 2 days forward.

10. The system of claim 1, wherein said risk position portfolio includes data for at least two financial instruments.

11. The system of claim 1,wherein respective said risk position portfolios comprise bonds.

12. The system of claim 1, wherein said means for presenting said relative positions presents said relative positions anonymously to respective said traders.

13. A method for risk portfolio management that enables switches between traders, comprising:

receiving, at a central processing center of a electronic trading system, risk position portfolios associated with respective said traders;

calculating, via said central processing center, relative positions for each of said risk position portfolios associated with respective said traders;

anonymously presenting said relative positions to each of said traders, wherein anonymously presenting said relative positions comprises;

determining, via said central processing center, potential switches between said traders of said relative positions of said traders based upon at least one of credit preferences of a first trader and credit preferences of a second trader; and

presenting to said first trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of said second trader representing one of said potential switches; and

executing, via said central processing center, a switch between at least two of said traders based on said relative positions, wherein the switch comprises an exchange of (a) at least one financial instrument defining a financial risk position for (b) at least one financial instrument defining an opposite financial risk position.

14. The method of claim 13, further comprising determining said potential switches between said traders of said relative positions of said traders based upon said credit preferences of said first trader and said credit preferences of said second trader.

15. The method of claim 13, further comprising presenting to said second trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of the second trader, wherein said at least one offsetting position is one of said potential switches determined based at least in part upon credit preferences of said first trader.

16. The method of claim 13, further comprising visually encoding said at least one offsetting position presented to said first trader to reflect switch eligibility based on at least one of said credit preferences of said first trader and said credit preferences of said second trader.

17. The method of claim 13, wherein receiving risk position portfolios associated with respective said traders comprises receiving risk position portfolio data uploaded by file transfer.

18. The method of claim 13, further comprising updating said risk position portfolio in real-time.

19. The method of claim 13, further comprising:

receiving a request to initiate execution of a switch of said at least one offsetting position between said first trader and said second trader;

applying the credit preferences of said first trader for said second trader and any credit preferences of said second trader for said first trader to confirm the current switch eligibility of the requested switch of said at least one offsetting position between said first trader and said second trader; and

if the switch is confirmed to currently be an eligible switch between said first trader and said second trader based upon said credit preferences of said first trader for said second trader, executing the requested switch.

20. The method of claim 13, further comprising:

receiving said credit preferences from at least said first trader using a first trader node of a plurality of trader nodes configured to be connected to a communications network, wherein said credit preferences comprise at least two credit preferences of said first trader; and

storing said credit preferences of said first trader for said second trader in a computer-readable storage medium.

21. The method of claim 20, wherein receiving said credit preferences from at least said first trader comprises receiving at least one of the credit preferences selected from the group of binary, line binary, and complex credit preferences.

22. The method of claim 20, wherein receiving said credit preferences from at least said first trader comprises receiving at least two of the credit preferences selected from the group of binary, line binary, and complex credit preferences.

23. The method of claim 20, wherein receiving said credit preferences from at least said first trader comprises receiving at least one each of the credit preferences of the group of line binary credit preferences and complex credit preferences.

24. The method of claim 20, wherein receiving said credit preferences from at least said first trader comprises receiving an upload of an electronic file from the first trader, wherein the electronic file comprises said credit preferences of said first trader.

25. A computer-readable storage medium having computer-readable program code embodied in said medium for causing a switch between traders in response to execution by a computer of a central processing center of an electronic trading system, said computer-readable program code comprising:

a first computer program instruction code configured to receive risk position portfolios associated with respective said traders;

a second computer program instruction code configured to calculate relative positions for each of said risk position portfolios associated with respective said traders;

a third computer program instruction code configured to anonymously present said relative positions to each of said traders, wherein said third computer program instruction code is further configured to determine potential switches between said traders of said relative positions of said traders based upon at least one of credit preferences of a first trader and credit preferences of a second trader, and wherein said third computer program instruction code is further configured to present to said first trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of said second trader representing one of said potential switches; and

fourth computer program instruction code configured to execute a switch between at least two of said traders based on said relative positions, wherein the switch comprises an exchange of (a) at least one financial instrument defining a financial risk position for (b) at least one financial instrument defining an opposite financial risk position.

26. The computer-readable storage medium of claim 25, wherein said third computer program instruction code is further configured to determine said potential switches between said traders of said relative positions of said traders based upon said credit preferences of said first trader and said credit preferences of said second trader.

27. The computer-readable storage medium of claim 25, wherein said third computer program instruction code is further configured to present to said second trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of the second trader, wherein said at least one offsetting position is one of said potential switches determined based at least in part upon credit preferences of said first trader.

28. The computer-readable storage medium of claim 25, wherein said third computer program instruction code is further configured to visually encode said at least one offsetting position presented to said first trader to reflect switch eligibility based on at least one of said credit preferences of said first trader and said credit preferences of said second trader.

29. The computer-readable storage medium of claim 25, wherein said first computer program instruction code is further configured to receive risk position portfolio data uploaded by file transfer.

30. The computer-readable storage medium of claim 25, further comprising fifth computer program instruction code configured to update said risk position portfolio in real-time.

31. The computer-readable storage medium of claim 25, further comprising:

fifth computer program instruction code configured to receive a request to initiate execution of a switch of said at least one offsetting position between said first trader and said second trader;

sixth computer program instruction code configured to apply the credit preferences of said first trader for said second trader and any credit preferences of said second trader for said first trader to confirm the current switch eligibility of the requested switch of said at least one offsetting position between said first trader and said second trader; and

computer program instruction code configured to execute the requested switch if the switch is confirmed to currently be an eligible switch between said first trader and said second trader based upon said credit preferences of said first trader for said second trader.

32. The computer-readable storage medium of claim 25, further comprising:

fifth computer program instruction codes configured to receive said credit preferences from at least said first trader using a first trader node of a plurality of trader nodes configured to be connected to a communications network, wherein said credit preferences comprise at least two credit preferences of said first trader; and

sixth computer program instruction code configured to store said credit preferences of said first trader for said second trader in a computer-readable storage medium.

33. The computer-readable storage medium of claim 32, wherein said fifth computer program instruction code is further configured to receive at least one of the credit preferences selected from the group of binary, line binary, and complex credit preferences.

34. The computer-readable storage medium of claim 32, wherein said fifth computer program instruction code is further configured to receive at least two of the credit preferences selected from the group of binary, line binary, and complex credit preferences.

35. The computer-readable storage medium of claim 32, wherein said fifth computer program instruction code is further configured to receive at least one each of the credit preferences of the group of line binary credit preferences and complex credit preferences.

36. The computer-readable storage medium of claim 32, wherein said fifth computer program instruction code is further configured to receive an upload of an electronic file from the first trader, wherein the electronic file comprises said credit preferences of said first trader.