Over the counter traded product and system for offset and contingent trading of commodity contracts

• US 7,831,502 B2
• Filed: 10/24/2007
• Issued: 11/09/2010
• Est. Priority Date: 05/06/2005
• Status: Active Grant

• Current Assignee: Intercontinental Exchange Holdings, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Intercontinental Exchange, Inc.
• Inventors: Leppard, Marc, Cummings, Raymond James
• Primary Examiner(s): Kazimi; Hani
• Assistant Examiner(s): JOHNSON, GREGORY L
• Application Number:
  US11/877,746
• Publication Number:
  US 20080270284A1
• Time in Patent Office: 1,112 Days
• Field of Search: None
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method for facilitating the offset or contingent trading of commodity contracts comprising: providing a futures exchange wherein a futures or option contract based on a first commodity of a commodity type is traded; and automatically registering a trade of the futures or options contract on the futures exchange at a market price for the futures or options contract when an over the counter contract for a second commodity of the commodity type is traded. In certain embodiments, the invention is an over the counter product comprising: a first leg comprising a purchase or sale of a futures contract based on a first commodity; and a second leg comprising a sale or purchase of an over the counter contract based on a second commodity; wherein the first commodity and the second commodity are of the same commodity type and the over the counter traded product trades at a price differential between the two legs; and wherein the purchase or sale of the futures or options contract is automatically registered on a futures exchange when the sale or purchase of the over the counter contract occurs. A system for offset or contingent trading of commodity contracts is also disclosed.

Claims

1. A method of offset or contingent trading comprising:

offering for sale or purchase a first financial derivatives contract on a first exchange;

offering for purchase or sale a second financial derivatives contract on a second exchange;

consummating one of an offsetting and contingent trading transaction for the second financial derivatives contract at a price differential that is based on prevailing market prices as indicated by the first exchange; and

automatically registering via an electronic computing device in communication with said first and second exchanges, a trade for the first financial derivatives contract on the first exchange upon a trade of the second financial derivatives commodity contract.

2. The method of claim 1, wherein the first financial derivatives contract corresponds to the consummated trading transaction.

3. The method of claim 2, wherein the one of an offsetting and contingent trading transaction is one of an exchange for physical (EFP) and exchange for swap (EFS) transaction.

4. The method of claim 3, further comprising publicizing details of the trade for the first derivatives contract to marketplace participants of the first exchange.

5. The method of claim 4, wherein the first exchange is a futures exchange.

6. The method of claim 5, wherein the second financial derivatives contract is an over-the-counter (OTC) bilateral contract, and wherein the second exchange is an OTC exchange.

7. The method of claim 6, wherein the OTC bilateral contract is one of a swap, forward and options contract.

8. The method of claim 7, wherein the first financial derivative contract is for a first commodity of a commodity type and wherein the second financial derivative contract is for a different commodity of said commodity type.

9. The method of claim 8, wherein the commodity type is one of energy, oil, precious metals, base metals, currency, agricultural commodities, and fixed income financial futures.

10. The method of claim 9, wherein the commodity type is energy and wherein the first and different commodities are selected from the group consisting of natural gas, crude oil, refined crude oil products, electricity, emissions, coal, liquid natural gas, natural gas liquids, weather, bio fuels, nuclear fuel, petrochemicals, hydroelectric energy generation, solar energy generation, and wind energy generation.

11. The method of claim 9, wherein the commodity type is oil and wherein the first and different commodities are selected from the group consisting of oil futures, oil forwards, oil options, oil swaptions, rolling date forwards, contracts-for-difference, front line swaps, fixed-for-floating swaps, float-for-float swaps, and index swaps.

12. A system for offset and contingent trading in an electronic trading environment, the system comprising:

an electronic computing device;

two or more exchanges in communication with the electronic computing device, the exchanges providing price feeds and reporting trades to the electronic computing device; and

one or more user terminals in communication with the electronic computing device, the user terminals providing access to the price feeds and trades reported to the electronic computing device,

wherein the electronic computing device is configured to automatically transmit a first trade for registration on a first of the exchanges in response to a second trade occurring on a second of the two or more exchanges, and

wherein the second trade is consummated at a price differential that is based on prevailing market prices as indicated by the first exchange.

13. The system of claim 12, wherein the electronic computing device is further configured to:

consummate one of an offsetting and contingent trading transaction by offering for sale or purchase a first financial derivatives contract on the first exchange;

offer for purchase or sale a second financial derivatives contract on the second exchange; and

automatically register a trade of the first financial derivatives contract on the first exchange upon a trade of the second financial derivatives commodity contract.

14. The system of claim 13, wherein the first exchange is a futures exchange, wherein the second exchange is an over-the-counter (OTC) exchange, and wherein the electronic computing device is configured to move a bilateral OTC contract into a cleared position upon consummating one of an offsetting and contingent trading transaction.

15. The system of claim 14, wherein the electronic computing device is further configured to move a cleared contract into a bilateral OTC position upon consummating one of an offsetting and contingent trading transaction.

16. The system of claim 15, wherein the electronic computing device is further configured to simultaneously initiate a position in both a bilateral OTC contract and a cleared contract upon consummating one of an offsetting and contingent trading transaction.

17. The system of claim 16, wherein the first financial derivatives contract is one of a futures and options contract, and wherein the second financial derivatives contract is an over-the-counter (OTC) bilateral contract.

18. The system of claim 17, wherein the OTC bilateral contract is one of a swap, forward and options contract.

19. The system of claim 18, wherein the first and second financial derivatives contracts are based on one of commodities, natural resources, and financial instruments.

20. The system of claim 19, wherein the first financial derivative contract is for a first commodity of a commodity type and wherein the second financial derivative contract is for a different commodity of said commodity type.

21. The system of claim 20, wherein the commodity type is one of oil, natural gas, and energy.