System and method for risk management using average expiration times
First Claim
1. A method for computing margin requirement during the trading day in an electronic trading system, the method comprising:
- determining by a computer device a number of spreads based on working spread positions of each leg of an exchange provided spread comprising a first tradeable object and a second tradeable object being traded by a trading entity, and further based on a first long filled position and a first short filled position associated with the first tradeable object that is individually traded at the exchange by the trading entity and a second long filled position and a second short filled position associated with the second tradeable object that is individually traded at the exchange by the trading entity, wherein the first long and short filled positions and the second long and short filled positions of the individually traded first tradeable object and the second tradeable object are grouped to form spreads;
determining by the computer device a risk factor associated with the number of spreads, wherein the risk factor for the number of spreads is based on a relative time difference between a first expiration time of the first tradeable object and a second expiration time of the second tradeable object;
computing by the computer device a spread margin requirement using the number of spreads and the risk factor associated with the number of spreads, wherein the risk factor is used to increase the spread margin requirement when the relative time difference between the first expiration time and the second expiration time is increased, and to decrease the spread margin requirement when the relative time difference is decreased; and
storing by the computer device the spread margin requirement.
1 Assignment
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Accused Products
Abstract
A margin requirement is computed while trading. The margin requirement may be calculated while trading because the preferred system takes into account working orders to generate the margin requirement. The on the fly possibility allows the preferred system to provide pre-trade risk calculations, but can also be used to provide post-trade calculations. A generic spread number and the maximum number of outright positions are determined. Average expirations for the generic spread are computed. Using the spread positions, the average expirations and the maximum number of outright positions, a spread margin and an outright margin are calculated, which when summed provide a total margin requirement. Limits based in part on the total margin requirement may be imposed on one or more traders.
39 Citations
10 Claims
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1. A method for computing margin requirement during the trading day in an electronic trading system, the method comprising:
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determining by a computer device a number of spreads based on working spread positions of each leg of an exchange provided spread comprising a first tradeable object and a second tradeable object being traded by a trading entity, and further based on a first long filled position and a first short filled position associated with the first tradeable object that is individually traded at the exchange by the trading entity and a second long filled position and a second short filled position associated with the second tradeable object that is individually traded at the exchange by the trading entity, wherein the first long and short filled positions and the second long and short filled positions of the individually traded first tradeable object and the second tradeable object are grouped to form spreads; determining by the computer device a risk factor associated with the number of spreads, wherein the risk factor for the number of spreads is based on a relative time difference between a first expiration time of the first tradeable object and a second expiration time of the second tradeable object; computing by the computer device a spread margin requirement using the number of spreads and the risk factor associated with the number of spreads, wherein the risk factor is used to increase the spread margin requirement when the relative time difference between the first expiration time and the second expiration time is increased, and to decrease the spread margin requirement when the relative time difference is decreased; and storing by the computer device the spread margin requirement. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9)
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10. A computer readable medium having stored therein instructions for causing a processor to execute a method for computing margin requirement during a trading day in an electronic trading system, comprising:
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determining by a computer device a number of spreads based on working spread positions of each leg of an exchange provided spread comprising a first tradeable object and a second tradeable object being traded by a trading entity, and further based on a first long filled position and a first short filled position associated with the first tradeable object that is individually traded at the exchange by the trading entity and a second long filled position and a second short filled position associated with the second tradeable object that is individually traded at the exchange by the trading entity, wherein the first long and short filled positions and the second long and short filled positions of the individually traded first tradeable object and the second tradeable object are grouped to form spreads; determining by the computer device a risk factor associated with the number of spreads, wherein the risk factor for the number of spreads is based on a relative time difference between a first expiration time of the first tradeable object and a second expiration time of the second tradeable object; computing by the computer device a spread margin requirement using the number of spreads and the risk factor associated with the number of spreads, wherein the risk factor is used to increase the spread margin requirement when the relative time difference between the first expiration time and the second expiration time is increased, and to decrease the spread margin requirement when the relative time difference is decreased; and storing by the computer device the spread margin requirement.
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Specification