Systems and methods for providing a liquidity-based commodities index

• US 7,958,033 B2
• Filed: 08/30/2007
• Issued: 06/07/2011
• Est. Priority Date: 09/01/2006
• Status: Active Grant

• Current Assignee: Bloomberg Finance LP (Bloomberg LP)
• Original Assignee: Barclays Capital Incorporated (Barclays PLC)
• Inventors: Upbin, Brian Scott, Wardley, Neil William
• Primary Examiner(s): Trammell; James P
• Application Number:
  US11/847,890
• Publication Number:
  US 20080059358A1
• Time in Patent Office: 1,377 Days
• Field of Search: 705/35, 705/36.R, 705/37
• US Class Current: 705/35
• 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

Systems and methods are provided for a liquidity-based commodity index in which historical liquidity-related data for a commodity is used to determine whether to include a commodity in an index and also used to weight commodities in the index. Liquidity of a commodity is calculated based on an average daily dollar value of contracts traded for the commodity. The commodity liquidity is compared to a liquidity threshold to determine that the commodity should be included in the index. A liquidity factor is calculated for each commodity included in the index and is also used to weight the commodity in the index.

Claims

1. A system comprising:

memory operable to store at least one program; and

at least one processor communicatively coupled to the memory, in which the at least one program when executed b the at least one processor causes the at least one processor to;

receive liquidity related data for a commodity, said liquidity related data including a historical daily dollar value of contracts traded for said commodity;

calculate a liquidity for said commodity based on an average daily dollar value of contracts traded for said commodity;

set a liquidity threshold for including said commodity in an index;

select said commodity for inclusion in said index based on a comparison of said calculated liquidity to said liquidity threshold;

calculate a liquidity factor for said selected commodity; and

weight said selected commodity based on said liquidity factor of said commodity.

2. The system of claim 1, wherein said average daily dollar value of contracts traded for said commodity equals an average of a sum of:

(a closing price of a contract) multiplied by (a daily reported trading volume of said contract) multiplied by (a fixed number of units in said contract).

3. The system of claim 1, wherein the at least one processor, further, evaluates said liquidity across a plurality of contracts for said commodity and a plurality of settlement dates for said commodity on more than one commodity futures exchange.

4. The system of claim 1, wherein said liquidity factor (LF) is calculated using a formula:

5. The system of claim 1, wherein weighting said selected commodity is performed on a periodic basis.

6. The system of claim 1, wherein weighting said selected commodity based on said liquidity factor of said commodity is performed using a formula:

7. The system of claim 1, wherein said liquidity threshold is defined by a user.

8. The system of claim 1, wherein the at least one processor further:

identifies an expiring contract for said commodity;

incrementally rolls said expiring contract for a later dated contract;

calculates a second liquidity for a rolling contract based on a price of said expiring contract and a price of said later dated contract;

calculates a second liquidity factor of said rolling contract; and

reweights said commodity based on said second liquidity factor of said commodity.

9. The system of claim 8, wherein incrementally rolling said expiring contract is performed over a period, said period defined by a user.

10. The system of claim 8, wherein incrementally rolling said expiring contract comprises:

selling on a first day a first portion of an expiring contract and purchasing a corresponding first portion of said later dated contract; and

selling on a second day a second portion of said expiring contract and purchasing a corresponding second portion of said later dated contract;

wherein reweighting said commodity based on said second liquidity factor of said commodity is based on a price of said expiring contract on said second day and a price of said later dated contract on said second day.

11. The system of claim 8, wherein said expiring contract is defined by a user.

12. The system of claim 1, wherein said calculated liquidity of each of said plurality of commodities is based on a trading volume of a contract for each of said plurality of commodities over a trailing period.

13. A computer readable medium having stored thereon computer executable instructions that, when executed on a computer, configure the computer to perform a method comprising:

receiving liquidity related data for a commodity, said liquidity related data including a historical daily dollar value of contracts traded for said commodity;

calculating with a processor a liquidity for said commodity based on an average daily dollar value of contracts traded for said commodity;

setting a liquidity threshold for including said commodity in an index;

selecting said commodity for inclusion in said index based on a comparison of said calculated liquidity to said liquidity threshold;

calculating with a processor a liquidity factor for said selected commodity; and

weighting said selected commodity based on said liquidity factor of said commodity.

14. The computer readable medium of claim 13, wherein said average daily dollar value of contracts traded for said commodity equals an average of a sum of:

(a closing price of a contract) multiplied by (a daily reported trading volume of said contract) multiplied by (a fixed number of units in said contract).

15. The computer readable medium of claim 13, said method further comprising evaluating said liquidity across a plurality of contracts for said commodity and a plurality of settlement dates for said commodity on more than one commodity futures exchange.

16. The computer readable medium of claim 13, wherein said liquidity factor (LF) is calculated using a formula:

17. The computer readable medium of claim 13, wherein weighting said selected commodity is performed on a periodic basis.

18. The computer readable medium of claim 13, wherein weighting said selected commodity based on said liquidity factor of said commodity is performed using a formula:

19. The computer readable medium of claim 13 wherein said liquidity threshold is defined by a user.

20. The computer readable medium of claim 13, said method further comprising:

identifying an expiring contract for said commodity;

incrementally rolling said expiring contract for a later dated contract;

calculating with a processor a second liquidity for a rolling contract based on a price of said expiring contract and a price of said later dated contract;

calculating with a processor a second liquidity factor of said rolling contract; and

reweighting said commodity based on said second liquidity factor of said commodity.

21. The computer readable medium of claim 20, wherein incrementally rolling said expiring contract is performed over a period, said period defined by a user.

22. The computer readable medium of claim 20, wherein incrementally rolling said expiring contract comprises:

selling on a first day a first portion of an expiring contract and purchasing a corresponding first portion of said later dated contract; and

selling on a second day a second portion of said expiring contract and purchasing a corresponding second portion of said later dated contract;

wherein reweighting said commodity based on said second liquidity factor of said commodity is based on a price of said expiring contract on said second day and a price of said later dated contract on said second day.

23. The computer readable medium of claim 20, wherein said expiring contract is defined by a user.

24. The computer readable medium of claim 13, wherein said calculated liquidity of each of said plurality of commodities is based on a trading volume of a contract for each of said plurality of commodities over a trailing period.