Hybrid cross-margining

• US 7,801,810 B2
• Filed: 06/14/2006
• Issued: 09/21/2010
• Est. Priority Date: 11/18/2005
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Glinberg, Dmitriy, Yoo, Tae Seok C., Gogol, Edward
• Primary Examiner(s): Borlinghaus; Jason M
• Application Number:
  US11/452,673
• Publication Number:
  US 20070118456A1
• Time in Patent Office: 1,560 Days
• Field of Search: 705/38
• US Class Current: 705/38
• 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

Abstract

A hybrid cross-margining system is disclosed. The disclosed provides for both joint accounts, maintained by multiple exchanges, as well as non-joint accounts, whereby the system recognizes both intra-account offsets within the joint account and inter-exchange offsets between the joint account and accounts maintained by another exchange to minimize the margin requirement of the associated market participant with respect to the positions reflected in these accounts.

Claims

1. A computer implemented method of determining a minimal margin requirement for a market participant the method comprising:

maintaining, by a first processor associated with a first exchange and a second exchange different from the first exchange, a first account for the market participant, the first account reflecting a first plurality of positions resulting from a first one or more trades executed on the first exchange for one or more products available from the first exchange; and

a second one or more trades executed on the second exchange for one or more products available from the second exchange, the first account being maintained separately from other accounts maintained by the first exchange which are only capable of exclusively reflecting positions resulting from trades executed by the first exchange and the first account being maintained separately from other accounts maintained by the second exchange which are only capable of exclusively reflecting positions resulting from trades executed by the second exchange;

determining, by the first processor, a first net position based solely on the first plurality of positions reflected in the first account;

maintaining, by a second processor associated with a third exchange, a second account for the market participant, the second account reflecting a second plurality of positions resulting from a third one or more trades executed on the third exchange for one or more products available from the third exchange;

determining, by the second processor, a second net position solely based on the second plurality of positions reflected in the second account;

determining, by a third processor coupled with the first and second processors, a third net position based on the first plurality of positions reflected in the first account and the second plurality of positions reflected in the second account wherein the determining of the first net position and the determining of the second net position are performed prior to the determining of the third net position and further wherein the determining of the first net position results in a first un-netted position and the determining of the second net position results in a second un-netted position, the determining of the third net position further comprising netting the first and second un-netted positions;

establishing, by one or more of the first, second or third processors, a relationship between the third exchange and at least one of the first and second exchanges; and

determining, by one or more of the first, second or third processors, the minimal margin requirement for the market participant based on the first, second and third net positions and the relationship.

2. The computer implemented method of claim 1, wherein at least a subset of the first and second plurality of positions are characterized by a marginable correlation.

3. The computer implemented method of claim 1 wherein first account is limited to reflecting positions resulting from cross-margin eligible trades.

4. The computer implemented method of claim 1 wherein the first account is maintained by a virtual exchange.

5. The computer implemented method of claim 1 further comprising transferring one or more of the first plurality of positions to one of the other accounts maintained by the first exchange or the second exchange.

6. The computer implemented method of claim 1 wherein the determining of the first net position further comprises determining a first margin requirement for the first account and the determining of the second net position further comprises determining a second margin requirement for the second account, wherein the minimal margin requirement is not more than the sum of the first and second margin requirements.

7. The computer implemented method of claim 1 wherein the determining of the second net position, further comprises recognizing intra-commodity spreads and inter-commodity spreads with respect to the third exchange.

8. The computer implemented method of claim 1 wherein the third exchange is different from first and second exchanges.

9. The computer implemented method of claim 1 wherein the second account is further maintained by a fourth exchange, the second plurality of positions further including positions resulting from a fourth one or more trades executed on the fourth exchange for one or more products available from the fourth exchange, the second account being maintained separately from other accounts maintained by the third exchange which are only capable of exclusively reflecting positions resulting from trades executed by the third exchange and the second account being maintained separately from other accounts maintained by the fourth exchange which are only capable of exclusively reflecting positions resulting from trades executed by the fourth exchange.

10. The computer implemented method of claim 1 wherein the relationship comprises a contractual relationship among the first, second and third exchanges to recognize offsets between the first and second accounts.

11. A system for determining a minimal margin requirement for a market participant the system comprising:

a first account, stored in a first database and maintained for the market participant by a first exchange and a second exchange different from the first exchange, the first account reflecting a first plurality of positions resulting from a first one or more trades executed on the first exchange for one or more products available from the first exchange and a second one or more trades executed on the second exchange for one or more products available from the second exchange, the first account being maintained separately from other accounts maintained by the first exchange which are only capable of exclusively reflecting positions resulting from trades executed by the first exchange and the first account being maintained separately from other accounts maintained by the second exchange which are only capable of exclusively reflecting positions resulting from trades executed by the second exchange;

a first net position calculator coupled with the first database and operative to determine a first net position based solely on the first plurality of positions reflected in the first account;

a second account, stored in a second database and maintained by a third exchange for the market participant, the second account reflecting a second plurality of positions resulting from a third one or more third executed on the third exchange for one or more products available from the third exchange;

a second net position calculator coupled with the second database and operative to determine a second net position based solely on the second plurality of positions reflected in the second account;

a third net position calculator coupled with the first and second databases and operative to determine a third net position based on the first plurality of positions reflected in the first account and the second plurality of positions reflected in the second account wherein the first net position calculator and second net position calculator are further operative to determine the first and second net positions prior to the third net position calculator determining the third net position and further wherein the first net position calculator further determines a first un-netted position and the second net position calculator further determines a second un-netted position, the third net position calculator being further operative to net the first and second un-netted positions;

wherein the third exchange is coupled with at least one of the first and second exchanges via a plurality of rules thereby establishing a relationship there between, the relationship being based on the plurality of rules; and

a minimal margin calculator coupled with the first, second and third net positions calculators and operative to determine the minimal margin requirement for the market participant based on the first, second and third net positions and the relationship.

12. The system of claim 11 wherein the first and second plurality of positions are characterized by a marginable correlation.

13. The system of claim 11 wherein first account is limited to reflecting positions resulting from cross-margin eligible trades.

14. The system of claim 11 wherein the first account is maintained by a virtual exchange.

15. The system of claim 11 further comprising a position transmitter operative to transfer one or more of the first plurality of positions to one of the other accounts maintained by the first exchange or the second exchange.

16. The system of claim 11 wherein the first net position calculator is further operative to determine a first margin requirement for the first account and the second net position calculator is further operative to determine a second margin requirement for the second account, wherein the minimal margin requirement is not more than the sum of the first and second margin requirements.

17. The system of claim 11 wherein the second net position calculator is further operative to recognize intra-commodity spreads and inter-commodity spreads with respect to the third exchange.

18. The system of claim 11 wherein the third exchange is different from first and second exchanges.

19. The system of claim 11 wherein the second account is further maintained by a fourth exchange, the second plurality of positions further including positions resulting from a fourth one or more trades executed on the fourth exchange for one or more products available from the fourth exchange, the second account being maintained separately from other accounts maintained by the third exchange which are only capable of exclusively reflecting positions resulting from trades executed by the third exchange and the second account being maintained separately from other accounts maintained by the fourth exchange which are only capable of exclusively reflecting positions resulting from trades executed by the fourth exchange.

20. The system of claim 11 wherein the relationship comprises a contractual relationship among the first, second and third exchanges to recognize offsets between the first and second accounts.

21. A system for determining a minimal margin requirement for a market participant the system comprising:

means for maintaining, by a first exchange and a second exchange different from the first exchange, a first account for the market participant, the first account reflecting a first plurality of positions resulting from a first one or more trades executed on the first exchange for one or more products available from the first exchange and a second one or more trades executed on the second exchange for one or more products available from the second exchange, the first account being maintained separately from other accounts maintained by the first exchange which are only capable of exclusively reflecting positions resulting from trades executed by the first exchange and the first account being maintained separately from other accounts maintained by the second exchange which are only capable of exclusively reflecting positions resulting from trades executed by the second exchange;

means for determining a first net position based solely on the first plurality of positions reflected in the first account, the means for determining the first net position being coupled with the means for maintaining the first account;

means for maintaining, by a third exchange, a second account for the market participant, the second account reflecting a second plurality of positions resulting from a third one or more trades executed on the third exchange for one or more products available from the third exchange;

means for determining a second net position based solely on the second plurality of positions reflected in the second account, the means for determining the second net position being coupled with the means for maintaining the second account;

means for determining a third net position based on the first plurality of positions reflected in the first account and the second plurality of positions reflected in the second account, the means for determining the second net position being coupled with the means for maintaining the first account and the means for maintaining the second account wherein the means for determining of the first net position determines the first net position and the means for determining of the second net position determines the second net position prior to means for determining of the third net position determining the third net position and further wherein the determining of the first net position may results in a first un-netted position and the determining of the second net position may results in a second un-netted position, the means for determining of the third net position being further operative to net the first and second un-netted positions;

means for establishing a relationship between the third exchange and at least one of the first and second exchanges; and

means for determining the minimal margin requirement for the market participant based on the first, second and third net positions and the relationship, the means for determining the minimal margin requirement being coupled with the means for determining the first net position, the means for determining the second net position, the means for determining the third net position and the means for establishing.

22. A system for determining a minimal margin requirement for a market participant, the system being coupled with first, second and third exchanges, the system comprising:

a first processor;

a first memory coupled with the first processor;

first logic stored in the first memory and executable by the first processor to maintain a first account for the market participant, the first account capable of reflecting a first plurality of positions resulting from a first one or more trades executed on the first exchange for one or more products available from the first exchange; and

a second one or more trades executed on the second exchange for one or more products available from the second exchange, the first account being maintained separately from other accounts maintained by the first exchange which are only capable of exclusively reflecting positions resulting from trades executed by the first exchange and the first account being maintained separately from other accounts maintained by the second exchange which are only capable of exclusively reflecting positions resulting from trades executed by the second exchange;

second logic, coupled with the first logic, stored in the first memory and executable by the first processor to determine a first net position based solely on the first plurality of positions reflected in the first account;

a second processor;

a second memory coupled with the second processor;

third logic stored in the second memory and executable by the second processor to maintain a second account for the market participant, the second account capable of reflecting a second plurality of positions resulting from a third one or more trades executed on the third exchange for one or more products available from the third exchange;

fourth logic, coupled with the third logic, stored in the second memory and executable by the second processor to determine a second net position based solely on the second plurality of positions reflected in the second account;

a third processor;

a third memory coupled with the third processor;

fifth logic, coupled with the first logic and the third logic, stored in the third memory and executable by the third processor to determine a third net position based on the first plurality of positions reflected in the first account and the second plurality of positions reflected in the second account wherein the determination of the first net position and the determination of the second net position are performed prior to the determination of the third net position and further wherein the determination of the first net position results in a first un-netted position and the determination of the second net position results in a second un-netted position, the fifth logic being further executable to determine the third net position based on a netting of the first and second un-netted positions;

sixth logic stored in at least one of the first memory, the second memory, the third memory, or combinations thereof, and executable by the at least one of the first processor, the second processor, the third processor, or combinations thereof, to establish a relationship between the third exchange and at least one of the first and second exchanges; and

seventh logic, coupled with the second logic, the fourth logic, the fifth logic and the sixth logic, stored in at least one of the first memory, the second memory, the third memory, or combinations thereof, and executable by the at least one of the first processor, the second processor, the third processor, or combinations thereof, to determine the minimal margin requirement for the market participant based on the first, second and third net positions and the relationship.