Electronic credit default futures market
First Claim
Patent Images
1. A method for exchanging credit futures contracts comprising:
- receiving, by a computer, a first trade order from a first party requesting a long position on a bond recovery rate (REC) futures contract, the REC futures contract having a reference entity, a maturity date and a settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity;
receiving, by the computer, a second trade order from a second party requesting a short position on the REC futures contract;
matching, by the computer, the first trade order with the second trade order;
recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price;
determining, by the computer, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract;
determining, by the computer, a daily settlement payment between the first party and the second party based on the daily settlement price;
determining the settlement price based at least in part on the solvency of the reference entity;
determining, by the computer, a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the REC futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; and
recording on a computer readable storage medium, settlement of the REC futures contract at the final settlement price.
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Accused Products
Abstract
Systems and methods are provided for providing a credit default futures market. A system providing the credit default futures market includes a processor, memory and an interface. The interface is configured to display credit default futures contracts that subscribe to a set of standard terms and conditions. The processor is configured to settle certain credit futures contracts in kind and other in cash, depending on, at least in part, the maturity date of the futures contract. A method is presented for electronically clearing and settling probability of default futures contracts.
49 Citations
46 Claims
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1. A method for exchanging credit futures contracts comprising:
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receiving, by a computer, a first trade order from a first party requesting a long position on a bond recovery rate (REC) futures contract, the REC futures contract having a reference entity, a maturity date and a settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity; receiving, by the computer, a second trade order from a second party requesting a short position on the REC futures contract; matching, by the computer, the first trade order with the second trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, by the computer, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, by the computer, a daily settlement payment between the first party and the second party based on the daily settlement price; determining the settlement price based at least in part on the solvency of the reference entity; determining, by the computer, a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the REC futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; and recording on a computer readable storage medium, settlement of the REC futures contract at the final settlement price. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13)
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14. A method for exchanging futures contracts comprising:
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recording, on a computer readable storage medium, a completed transaction including; at least one first trade order from a first party requesting a long position on a series of bond recovery rate (REC) futures contracts, each of the series of futures contracts having at least one of reference entity and a settlement price at a maturity date, the settlement price at the maturity date being based at least in part on solvency of the at least one reference entity and a realized bond recovery rate of the reference entity, none of the series of futures contracts sharing a common maturity date; at least one second trade order from a second party requesting a short position on the series of futures contracts; and a traded price for each of the series of REC futures contracts; matching, by the computer, the first trade order with the second trade order; determining, by the computer, for each of the REC futures contracts, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, by the computer, for at least one of the REC futures contracts, a daily settlement payment between the first party and the second party based on the daily settlement price; determining, for each of the REC futures contracts, the settlement price based at least in part on the solvency of the reference entity; determining, by the computer, for at least one of the REC futures contracts, a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the REC futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; and recording on a computer readable storage medium, for each of the REC futures contracts, settlement of the REC futures contract at the final settlement price. - View Dependent Claims (15, 16)
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17. A computer readable storage medium comprising computer readable instructions that, as a result of being executed by a processor, instruct the processor to perform a method, the method comprising:
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receiving, by the processor, a first trade order from a first party requesting a long position on a bond recovery rate (REC) futures contract, the REC futures contract having a reference entity, a maturity date and a settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity; receiving, by the processor, a second trade order from a second party requesting a short position on the REC futures contract; matching, by the processor, the first trade order with the second trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, by the processor, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, by the processor, a daily settlement payment between the first party and the second party based on the daily settlement price; determining the settlement price based at least in part on the solvency of the reference entity; determining, by the processor, a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the REC futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; and recording on a computer readable storage medium, settlement of the REC futures contract at the final settlement price.
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18. A system for providing a bond recovery rate futures contract exchange comprising:
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a computer; the computer having computer readable storage media with instructions stored therein that when executed by the computer cause the computer to implement; an order interface configured to receive a first trade order from a first party requesting a long position on a bond recovery rate (REC) futures contract and a second trade order from a second party requesting a short position on the REC futures contract, the REC futures contact having at least one reference entity, a maturity date and a settlement price at the maturity date based at least in part on solvency of the at least one reference entity and a realized bond recovery rate of the reference entity; an auction engine configured to match the first and second trade orders and store the first and second trade orders as completed transactions; and a settlement engine configured to determine a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determine a daily settlement payment between the first party and the second party based on the daily settlement price; determine the settlement price based at least in part on the solvency of the reference entity; determine a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the REC futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; and record on a computer readable storage medium, settlement of the REC futures contract at the final settlement price. - View Dependent Claims (19, 20, 21, 22)
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23. A method for exchanging an index of bond recovery rate (REC) futures contracts comprising:
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receiving, by a computer, a first trade order requesting a long position on the index, the index having an index settlement price based at least in part on a plurality of REC futures contracts, each of the REC futures contracts having a reference entity, a maturity date and an REC settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity; receiving, by the computer, a second trade order from a second party requesting a short position on the index; matching, by the computer, the first trade order with the second trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, for each of the REC futures contracts, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, for each of the REC futures contracts, the REC settlement price based at least in part on the solvency of the reference entity; determining, by the computer, the index settlement price, the index settlement price being based on the settlement prices of each of the REC futures contracts at the maturity date; determining, by the computer, a final index settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the index at the index settlement price via a payment of the final index settlement payment, wherein (1) the final index settlement payment is owed by the first party to the second party if all of the reference entities are solvent at the maturity date, (2) the final index settlement payment is owed by the second party to the first party if all of the reference entities are insolvent at the maturity date, and (3) if some of the reference entities are solvent and some of the reference entities are insolvent at the maturity date, the final index settlement payment is owed either by the first party to the second party or by the second party to the first party, depending on how many of the reference entities are solvent and how many of the reference entities are insolvent; and recording on a computer readable storage medium, settlement of the index at the index settlement price. - View Dependent Claims (24, 25, 26, 27, 28, 29, 30)
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31. A method for exchanging a tranche in an index of bond recovery rate fREC) futures contracts comprising:
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receiving, by a computer, a first trade order requesting a long position on the tranche, the tranche having a tranche settlement price based at least in part on an index settlement price of the index, the index settlement price being based at least in part on a plurality of REC futures contracts, each of the REC futures contracts having a reference entity, a maturity date and a REC settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity; receiving, by the computer, a second trade order requesting a short position on the tranche; matching, by the computer, the first trade order with the second trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, for each of the REC futures contracts, a daily settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, for each of the REC futures contracts, the REC settlement price based at least in part on the solvency of the reference entity; determining, by the computer, the index settlement price, the index settlement price being based on the settlement prices of each of the REC futures contracts at the maturity date; determining, by the computer, a final tranche settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the index at the index settlement price via a payment of the final tranche settlement payment, wherein (1) the final tranche settlement payment is owed by the first party to the second party if all of the reference entities are solvent at the maturity date, (2) the final tranche settlement payment is owed by the second party to the first party if all of the reference entities are insolvent at the maturity date, and (3) if some of the reference entities are solvent and some of the reference entities are insolvent at the maturity date, the final tranche settlement payment is owed either by the first party to the second party or by the second party to the first party, depending on how many of the reference entities are solvent and how many of the reference entities are insolvent; and recording on a computer readable storage medium, settlement of the tranche at the tranche settlement price. - View Dependent Claims (32, 33, 34, 35, 36, 37, 38)
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39. A method for exchanging a series of futures contracts comprising:
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receiving, by a computer, a first trade order from a first party requesting a long position on at least one of the series of futures contracts, the series of futures contracts having a risk period substantially equivalent to a risk period of a previously traded futures contract, each of the series of futures contracts having a maturity date, none of the series of futures contracts sharing a common maturity date, each of the series of futures contracts having a settlement price at the maturity date being at least in part on solvency of at least one reference entity; receiving, by a computer, a second trade order from a second party requesting a short position on the at least one of the series of futures contracts; matching the first trade order with the second trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, and a traded price; determining, by the computer, for each of the futures contracts, a daily settlement price for the futures contract for each day of trading of the futures contract; determining, by the computer, for at least one of the futures contracts, a daily settlement payment between the first party and the second party based on the daily settlement price; determining, for each of the futures contracts, the settlement price based at least in part on the solvency of the reference entity; determining, by the computer, for at least one of the futures contracts, a final settlement payment between the first party and the second party based on the settlement price, the first party and the second party both being obligated to settle the futures contract at the final settlement price via a payment of the final settlement payment, the final settlement payment either being paid by the first party to the second party or being paid by the second party to the first party depending on the solvency of the reference entity at the maturity date; and recording on a computer readable storage medium, for each of the futures contracts, settlement of the futures contract at the final settlement price. - View Dependent Claims (40)
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41. A method of creating a financial position comprising:
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receiving, by a computer, a first trade order from a first party requesting a short position on a probability of default futures contract, the probability of default futures contract having a reference entity and a maturity date, a probability of default settlement price at the maturity date based at least in part on the solvency of the reference entity, the probability of default futures contract having first and second potential settlement prices at the maturity date that are predetermined prior to a beginning of a term of the probability of default futures contract, the first party holding a financial instrument in the reference entity; receiving, by the computer, a second trade order from the first party, the second order requesting a short position on a bond recovery rate (REC) futures contract with a notional amount equal to the financial instrument exposure, the REC futures contract having the same reference entity and an REC settlement price at the maturity date based at least in part on solvency of the reference entity and a realized bond recovery rate of the reference entity; receiving, by the computer, a third trade order from a second party requesting a long position on the probability of default futures contract; receiving, by the computer, a fourth trade order from a third party requesting a long position on the REC futures contract; matching the computer, the first trade order and the third trade order; matching the computer, the second trade order and the fourth trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, the third trade order, and the fourth trade order; determining, by the computer, a daily probability of default settlement price for the probability of default futures contract for each day of trading of the probability of default futures contract; determining, by the computer, a daily probability of default settlement payment between the first party and the second party based on the daily probability of default settlement price; selecting one of the first and second potential settlement prices to be a final probability of default settlement price of the probability of default futures contract, the selecting being performed based at least in part on solvency of the reference entity; determining, by the computer, a final probability of default settlement payment between the first party and the second party based on the final settlement price, the first party and the second party both being obligated to settle the probability of default futures contract at the final probability of default settlement price via a payment of the final probability of default settlement payment, the final probability of default settlement payment being paid by the first party to the second party if the reference entity is solvent at the maturity date and the final probability of default settlement payment being paid by the second party to the first party if the reference entity is insolvent at the maturity date; determining, by the computer, a daily REC settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, by the computer, a daily REC settlement payment between the first party and the third party based on the daily settlement price; determining the REC settlement price based at least in part on the solvency of the reference entity; determining, by the computer, a final REC settlement payment between the first party and the third party based on the REC settlement price, the first party and the third party both being obligated to settle the REC futures contract at the final REC settlement price via a payment of the final REC settlement payment, the final REC settlement payment being paid by the first party to the third party if the reference entity is insolvent at the maturity date and the final REC settlement payment being paid by the third party to the first party if the reference entity is solvent at the maturity date; and recording on a computer readable storage medium, settlement of the probability of default futures contract at the final probability of default settlement price and settlement of the REC futures contract at the final REC settlement price. - View Dependent Claims (42, 43, 44)
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45. A method of creating a financial position comprising
receiving, by a computer, a first trade order from a first party requesting a long position on a probability of default futures contract, the probability of default futures contract having a reference entity and a maturity date, a probability of default settlement price at the maturity date based at least in part on the solvency of the reference entity, the probability of default futures contract having first and second potential settlement prices at the maturity date that are predetermined prior to a beginning of a term of the probability of default futures contract; -
receiving, by the computer, a second trade order from the first party, the second order requesting a long position on a bond recovery rate (REC) futures contract, the REC futures contract having the same reference entity and an REC settlement price at the maturity date based at least in part on solvency of the reference entity and on a realized bond recovery rate of a funded bond of the reference entity; receiving, by the computer, a third trade order from a second party requesting a short position on the probability of default futures contract; receiving, by the computer, a fourth trade order from a third party requesting a short position on the REC futures contract; matching the computer, the first trade order and the third trade order; matching the computer, the second trade order and the fourth trade order; recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, the third trade order, and the fourth trade order; determining, by the computer, a daily probability of default settlement price for the probability of default for each day of trading of the probability of default futures contract; determining, by the computer, a daily probability of default settlement payment between the first party and the second party based on the daily probability of default settlement price; selecting one of the first and second potential settlement prices to be a final probability of default settlement price of the probability of default futures contract, the selecting being performed based at least in part on solvency of the reference entity; determining, by the computer, a final probability of default settlement payment between the first party and the second party based on the final settlement price, the first party and the second party both being obligated to settle the probability of default futures contract at the final probability of default settlement price via a payment of the final probability of default settlement payment, the final probability of default settlement payment being paid by the first party to the second party if the reference entity is insolvent at the maturity date and the final probability of default settlement payment being paid by the second party to the first party if the reference entity is solvent at the maturity date; determining, by the computer, a daily REC settlement price for the REC futures contract for each day of trading of the REC futures contract; determining, by the computer, a daily REC settlement payment between the first party and the third party based on the daily settlement price; determining the REC settlement price based at least in part on the solvency of the reference entity; determining, by the computer, a final REC settlement payment between the first party and the third party based on the REC settlement price, the first party and the third party both being obligated to settle the REC futures contract at the final REC settlement price via a payment of the final REC settlement payment, the final REC settlement payment being paid by the first party to the third party if the reference entity is solvent at the maturity date and the final REC settlement payment being paid by the third party to the first party if the reference entity is insolvent at the maturity date; and whereby the combination of the completed transaction and a government bond provide the user with the returns of a synthetic corporate bond. - View Dependent Claims (46)
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Specification