Computer system for an auction exchange for financially settled contracts

• US 7,991,686 B1
• Filed: 06/05/2009
• Issued: 08/02/2011
• 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., Bulkeley, Mark A., Gibbs, Paul S., Stevens, Andrew J.
• Primary Examiner(s): Akintola; Olabode
• Assistant Examiner(s): Preston; John O
• Application Number:
  US12/479,432
• Time in Patent Office: 788 Days
• Field of Search: 705/37, 705/36, 705/1, 705/36.R, 283/67
• 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 computer. The at least one computer 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 computer may also be programmed to match a batch of bids, where the matched bids may be modified to reduce the trade risk of a portfolio of the first participant, or to liquidate a defaulted portfolio subject to a Maximum Portfolio Liquidation Cost Constraint. 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., a passenger contract and/or freight contract), a financial derivative contract, or a 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 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, and wherein the first participant has a portfolio, and if the portfolio has a trade risk in violation of a trade risk limit, the plurality of awarded bids are modified to award the first participant bids that reduce or do not increase the trade risk of portfolio.

2. The system of claim 1, wherein the awarded bids reduce the trade risk of the portfolio to below the trade risk limit.

3. The system of claim 1, wherein the reduction of the trade risk of the portfolio is maximized through matching of the first participant bids.

4. The system of claim 1, further comprising:

means for receiving a first participant constraint;

means for generating a preliminary awarded portfolio for the first participant, wherein the preliminary awarded portfolio comprises at least one awarded bid selected from the plurality of first participant bids; and

means for, if the preliminary awarded portfolio does not meet the first participant constraint, discarding a portion of the plurality of first participant bids.

5. The system of claim 4, wherein the portion of the plurality of bids is selected considering at least one factor selected from the group consisting of a bid priority received from the first participant;

and the first participant'"'"'s economic surplus.

6. The system of claim 4, wherein the first participant constraint is at least one constraint selected from the group consisting of a trade limit and a collateral limit.

7. The system of claim 1, wherein the plurality of awarded bids comprises 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.

8. The system of claim 1, wherein matching the batch of bids comprises maximizing:

9. The system of claim 8, wherein the maximizing comprises maximizing according to the constraint that

10. The system of claim 8, wherein the maximizing comprises maximizing according to the constraints that:

0≦

AwardQ_n,b≦

BidQ_n,b;

0≧

AwardQ_n,b≧

BidQ_n,b;

AwardP_n,b≦

BidP_n,b; and

AwardTP_b≦

BidTP_b.

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

12. 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.

13. The system of claim 12, 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.

14. The system of claim 12, 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

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

23. A computer system for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market, the computer system comprising:

A computer memory, and

A programmable processor in electronic communication with the memory, the processor configured to generate awarded bids by 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, and wherein the plurality of participants have portfolios, and if one of the participant'"'"'s portfolios has a trade risk in violation of a trade risk limit, the awarded bids are modified to award the participant bids that reduce or do not increase the trade risk of the participant'"'"'s portfolio.

24. The computer system of claim 23, wherein the awarded bids reduce the trade risk of the portfolio to below the trade risk limit.

25. The computer system of claim 23, wherein the reduction of the trade risk of the portfolio is maximized through matching of the participant bids.

26. The computer system of claim 23, wherein the trade risk is measured using Value at Risk (VAR).

27. A system for conducting an auction for a plurality of financially settled forward electricity contracts corresponding to a first spot market, 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

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 the plurality of financially settled forward electricity contracts comprises a plurality of nodal contracts, and wherein the first participant has a portfolio, and if the portfolio has a trade risk in violation of a trade risk limit, the plurality of awarded bids are modified to award the first participant bids that reduce or do not increase the trade risk of the portfolio.

28. 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 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, and wherein at least a portion of the plurality of financially settled contracts are in a defaulted portfolio, and wherein the plurality of awarded bids are modified to liquidate the defaulted portfolio for a liquidation cost less than or equal to a Maximum Portfolio Liquidation Cost Constraint.

29. The system of claim 28, wherein the Maximum Portfolio Liquidation Cost Constraint is set by a liquidation agent.

30. The system of claim 28, wherein the liquidation cost is calculated by summing, across all initial positions in the defaulted portfolio, the difference between a liquidation price and a previous settlement price for a position multiplied by the size of the position in the defaulted portfolio.

31. The system of claim 28, wherein the liquidation cost is calculated by summing, across all liquidated positions in the defaulted portfolio, the difference between a liquidation price and a previous settlement price for a position multiplied by the size of the position in the defaulted portfolio.

32. The system of claim 28, wherein, if the defaulted portfolio cannot be liquidated with the liquidation cost under Maximum Portfolio Liquidation Cost Constraint, the awarded bids are modified to optimize the tradeoff between the liquidation cost and the liquidation of the defaulted portfolio.

33. The system of claim 32, wherein the tradeoff between the liquidation cost and the liquidation of the defaulted portfolio maximizes the economic surplus of a defaulted portfolio offer set.

34. The system of claim 32, wherein the tradeoff between the liquidation cost and the liquidation of the defaulted portfolio maximizes the percentage of total Megawatt hours (MWh) sold divided by a percentage of the Maximum Portfolio Liquidation Cost Constraint used, subject to the constraint that the percentage of the Maximum Portfolio Liquidation Cost Constraint used is at least a certain set percentage.

35. The system of claim 32, wherein the tradeoff between the liquidation cost and the liquidation of the defaulted portfolio maximizes a percentage of total risk removed from the defaulted portfolio divided by a percentage of the Maximum Portfolio Liquidation Cost Constraint used, subject to the constraint that the percentage of the Maximum Portfolio Liquidation Cost Constraint used is at least a certain set percentage.