Computer system for an auction exchange for financially settled contracts

• US 7,873,564 B1
• Filed: 03/03/2009
• Issued: 01/18/2011
• Est. Priority Date: 11/20/2007
• Status: Active Grant

• Current Assignee: DCC Energy Limited (DCC PLC)
• Original Assignee: DCC Energy Limited (DCC PLC)
• Inventors: Jacob, Stefan, Wilde, Dean L. II, Tate, Matthew R., Sacra, Ann, Bulkeley, Mark A., Gibbs, Paul S., Stevens, Andrew J.
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Preston; John O
• Application Number:
  US12/396,926
• Time in Patent Office: 686 Days
• Field of Search: 705/37
• 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

Various embodiments show a system for conducting an auction for a plurality of financially settled contracts: The system may comprise at least one processor. The at least one processor may be programmed to receive a plurality of first participant bids from a first participant and a plurality of second participant bids from a second participant. The at least one processor may also be programmed to match a batch of bids, where the bids may be linear combinations, to create a plurality of awarded bids that may maximize an economic surplus or maximize a volume of awarded bids. Degenerate price solutions may be solved by minimizing variations from historic pricing levels for a contract. The contracts may include, for example, an oil contract, a coal contract, a natural gas contract, an electricity contract, a weather contract, a weather-related events contract, a commodities contract, a location specific service contract (e.g., passenger contract and/or freight contracts), a financial derivative contract or credit default contract on any of an entity'"'"'s issued securities.

Claims

1. A computer system for conducting an auction for a plurality of financially settled contracts, the system comprising:

means for receiving a plurality of first participant bids from a first participant;

means for receiving a plurality of second participant bids from a second participant; and

means for simultaneously matching a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of first participant bids and the plurality of second participant bids, wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid with at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded, and

wherein the plurality of awarded bids maximizes an economic surplus.

2. The system of claim 1, wherein matching the batch of bids wherein the plurality of awarded bids maximizes the economic surplus comprises maximizing:

3. The system of claim 2, wherein the maximizing comprises maximizing according to the constraint that

4. The system of claim 2, wherein the maximizing comprises maximizing according to the constraints that:

0≦

AwardQ_n,b≦

BidQ_b;

−

BidQ_b≦

AwardQ_n,b≦

0;

for each bid with one long contract n;

AwardP_n,b≦

BidP_b;

for each bid with one short contract n;

AwardP_n,b≧

BidP_b; and

AwardP_b≦

BidP_b.

5. The system of claim 1, further comprising means for deriving a price for all of the plurality of financially settled contracts.

6. The system of claim 1, further comprising means for deriving a price for a contract selected from the plurality of financially settled contracts, wherein the contract has no awarded bids in the plurality of awarded bids.

7. The system of claim 6, wherein deriving the price comprises setting the price to a mid-point between a lowest short bid and a highest long bid for the contract selected from the batch of bids.

8. The system of claim 6, wherein deriving the price comprises modifying a price for the contract from a previous auction by an amount proportional to a price change of a second contract correlated to the first contract.

9. The system of claim 1, further comprising means for publishing at least a portion of un-awarded bids from the batch of bids to at least one broker.

10. The system of claim 1, wherein the matching comprises resolving at least one degenerate solution selected from the group consisting of a degenerate price solution and a degenerate volume solution.

11. The system of claim 1, wherein the plurality of financially settled contracts each settle on the price of a commodity type at a location over a settlement period.

12. The system of claim 1, wherein the plurality of contracts comprises at least one contract selected from the group consisting of an electricity contract, a congestion contract and a loss contract.

13. The system of claim 1, wherein the at least one non-outright bid comprises a non-outright bid comprising a first leg and a second leg, and wherein the first leg and the second leg relate to underlying contracts settling on the price of different underlying values at different locations over different settlement periods.

14. The system of claim 1, wherein the batch of bids comprises at least one bid type selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

15. The system of claim 1, wherein the plurality of financially settled contracts comprises at least one contract selected from the group consisting of an oil contract, a coal contract, a natural gas contract, an electricity contract, a weather contract, a weather-related events contract, a commodities contract, a passenger contract, a freight contract, and a financially settled derivative contract of any underlying commodity or security.

16. The system of claim 1, wherein the matching further comprises matching at least one bid with a synthetic equivalent.

17. A programmable apparatus with a trade platform for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market, the trade platform comprising:

a programmable processor with an auction engine configured to generate awarded bids by simultaneously matching bids selected from a batch of bids received from a plurality of participants, wherein each bid selected from the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid selected from the batch of bids with at least one leg of at least one non-outright bid selected from the batch of bids,

wherein the plurality of financially settled forward electricity contracts comprises a plurality of nodal contracts,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded, and

wherein the plurality of awarded bids maximizes an economic surplus.

18. The trade platform of claim 17, further comprising a trade capture system, wherein the trade capture system is configured to:

receive matched bids from a broker;

verify that the broker is authorized to transact on the trade platform; and

verify that completing a transaction for the matched bids would not violate a constraint of participants making the matched bids.

19. The trade platform of claim 17, wherein the auction engine is also configured to send a portion of the batch of bids that are unmatched to at least one broker.

21. The trade platform of claim 17, wherein the awarded bids comprise an equal volume of long bids and short bids for each of the plurality of financially settled contracts with at least one set of awarded bids.

22. The trade platform of claim 17, wherein the awarded bids maximize at least one auction variable selected from the group consisting of auction revenue and transaction volume.

23. The trade platform of claim 17, wherein the batch of bids comprises at least one bid selected from the group consisting of:

a spread bid, a strip bid, a spread of spreads bid, a single period bid, a multi-period bid, a non-contiguous multi-period bid, a proportional bid, a multi-class bid, a multi-period/multi-class bid, a locational bid, a temporal bid, a locational/temporal bid.

24. The trade platform of claim 17, wherein the batch of bids comprises at least two bids that differ across a class dimension, a locational dimension and a settlement period dimension.

25. The trade platform of claim 17, wherein the plurality of financially settled forward electricity contracts comprises contracts that settle at substantially all of the nodes of the spot market.

26. The trade platform of claim 17, wherein generating by the auction engine the awarded bids wherein the plurality of awarded bids maximizes the economic surplus comprises maximizing:

20. The trade platform of 17, further comprising:

a participant interface for receiving bids from at least a portion of the plurality of participants and forwarding the bids to the auction engine; and

a clearing interface for sending match bids to a clearing corporation and for receiving participant constraints from the clearing corporation.

27. A programmable apparatus with a trade platform for conducting an auction exchange for financially settled contracts, the trade platform comprising:

a programmable processor with an auction engine and database, in communication with a clearing interface, a participant interface, and a brokerage interface;

wherein the auction engine and database is adapted to simultaneously match a batch of bids to create a plurality of awarded bids, wherein the batch of bids comprises the plurality of first participant bids and the plurality of second participant bids, wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid with at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded,

and wherein the plurality of awarded bids maximizes an economic surplus.

28. The system of claim 27, wherein

(a) the auction engine and database is adapted to receive margin parameters and trade limits from the clearing interface, transmit prices to a broker interface, and transmit prices and transactions from the matched bids to the clearing interface, and to receive bids from the participant interface;

(b) the participant interface is adapted to receive the bids and trade limits from a participant, transmit prices and participant wards to the participant, and transmit the bids to the auction engine and database;

(c) the clearing interface is adapted to receive prices and transactions from the auction engine and database and a trade capture system and database, receive margin parameters from a clearing corporation and trade limits from clearing members, transmit the margin parameters and the trade limits to the auction engine and database and the trade capture system and database, and transmit the prices and the member transactions to the clearing corporation and the clearing members;

(e) the trade capture system and database is adapted to receive the margin parameters and trade limits from the clearing interface, receive a transactions submission from a broker interface, transmit the prices and transactions to the clearing interface, and transmit a transaction approval to the broker interface; and

(f) the broker interface is adapted to receives the prices from the auction engine and database, receive the transactions submission from brokers, receive the transaction approval from the trade capture system and database, transmit the prices and the transactions approval to the brokers, and transmit the transactions submission to the trade capture system and database.

29. The trade platform of claim 27, wherein generating by the auction engine the awarded bids wherein the plurality of awarded bids maximizes the economic surplus comprises maximizing:

30. A computer system for conducting an auction for a plurality of financially settled contracts, the system comprising:

means for receiving a plurality of first participant bids from a first participant;

means for receiving a plurality of second participant bids from a second participant; and

means for simultaneously matching a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of first participant bids and the plurality of second participant bids, wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid with at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded, and

wherein the matching comprises resolving at least one degenerate price solution by minimizing a least squares deviation from a historic price for the at least one degenerate price solution.

31. The system of claim 30, wherein minimizing a least squares deviation from a historic price comprises minimizing:

32. A computer system for conducting an auction for a plurality of financially settled contracts, the system comprising:

means for receiving a plurality of first participant bids from a first participant;

means for receiving a plurality of second participant bids from a second participant; and

means for simultaneously matching a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of first participant bids and the plurality of second participant bids, wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid with at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded, and

wherein the matching comprises resolving at least one path degenerate solution by maximizing a volume of awarded bids.

33. A computer system for conducting an auction for a plurality of financially settled contracts, the system comprising:

means for receiving a plurality of first participant bids from a first participant;

means for receiving a plurality of second participant bids from a second participant; and

means for simultaneously matching a batch of bids to create a plurality of awarded bids,

wherein the batch of bids comprises the plurality of first participant bids and the plurality of second participant bids, wherein each bid of the batch of bids relates to at least a portion of the plurality of financially settled contracts, wherein the matching comprises matching an outright bid with at least one leg of at least one non-outright bid,

wherein a non-outright bid is a bid for a position that does not have a one-to-one correlation to a contract, and has at least one of;

(i) multiple legs, where each leg represents a long or short position in a particular contract, and, (ii) one or more legs each representing a single position that is less than all of a contract;

wherein the non-outright bid comprises a price and an indication of each contract corresponding to a leg of the non-outright bid, the indication comprising, a quantity, a settlement period, and a contract code, and an indication of which leg or legs are short and which leg or legs are long, and

wherein the matching does not match any of the legs of a non-outright bid unless it matches all of the legs of the non-outright bid, such that a participant making a non-outright bid has no risk that less than all of the non-outright bid will be awarded, and

wherein the at least one non-outright bid is a linear combination.

34. The system of claim 33, wherein maximizing an economic surplus comprises maximizing: