Cross-currency implied spreads

• US 8,401,955 B2
• Filed: 08/18/2010
• Issued: 03/19/2013
• Est. Priority Date: 11/18/2005
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Bauerschmidt, Paul Andrew, Studnitzer, Ari L., Albert, William J., Callaway, Paul J., Farrell, James W., Thiruthuvadoss, A. Shanthi
• Primary Examiner(s): Bartley, Kenneth
• Application Number:
  US12/858,853
• Publication Number:
  US 20100312689A1
• Time in Patent Office: 944 Days
• Field of Search: 705/35, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 10/10 Office automation; Time management
• CPC Class Codes: G06Q 20/381 Currency conversion
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The disclosed systems and methods relate to allowing trading of over the counter (“OTC”) foreign exchange (“FX”) contracts on a centralized matching and clearing mechanism, such as that of the Chicago Mercantile Exchange'"'"'s (“CME”'"'"'s) futures exchange system (the “Exchange”). The disclosed systems and methods allow for anonymous transactions, centralized clearing, efficient settlement and the provision of risk management/credit screening mechanisms to lower risk, reduce transaction costs and improve the liquidity in the FX market place. In particular, the disclosed embodiments increase speed of execution facilitating growing demand for algorithmic trading, increased price transparency, lower cost of trading, customer to customer trading, and automated asset allocations, recurring trades as well as clearing and settlement efficiencies.

Claims

1. A computer implemented method of determining a market for a new product, the method comprising:

receiving, by an identification processor, identification of a new product for which an order book is not available on an exchange, the new product comprising first and second components;

identifying, by the identification processor in response to the receiving, a first available order book for a first available product listed on the exchange and a second available order book for a second available product listed on the exchange, the first available product comprising one of the first and second components and the second available product comprising the other of the first and second components;

correlating, by a correlation processor coupled with the identification processor, the first and second available order books based on the first and second components; and

generating, by a market generator coupled with the identification processor and the correlation processor, a new order book for the new product based on the correlating, the new order book comprising one or more orders to buy or sell the new product, each of the one or more orders having been generated based on one or more orders to buy or sell the first available product comprised by the first available order book, one or more orders to buy or sell the second available product comprised by the second available order book, or a combination thereof, and causing the new product to be listed on the exchange having the new order book such that subsequently received orders to buy or sell the new product may be matched to at least one of the one or more orders in the new order book if counter thereto or otherwise be entered into the new order book to await a further subsequent order counter thereto.

2. The computer implemented method of claim 1 wherein the first available product further comprises a first correlatable component and the second available product further comprises a second correlatable component, the correlating being based on a correlation of the first and second correlatable components.

3. The computer implemented method of claim 2 where the first and second correlatable components are the same.

4. The computer implemented method of claim 2 wherein the first and second correlatable components are correlatable via a third available order book for a third available product comprising both of the first and second correlatable components.

5. The computer implemented method of claim 1 wherein the first and second components each comprise a currency.

6. The computer implemented method of claim 1 wherein the new order book is capable of reflecting both orders implied by the first and second available order books and outright orders received for the new product.

7. The computer implemented method of claim 1 where in the correlating is based on a transitive relationship between the one or more orders to buy or sell in the first available order book and the one or more orders to buy or sell in the second available order book.

8. The computer implemented method of claim 1 wherein the generating of each of the one or more orders to buy or sell the new product in the new order book comprises interpolating between one of the one or more orders to buy or sell the first available product in the first available order book and one of the one or more orders to buy or sell the second available product in the second available order book.

9. A system for determining a market for a new product, the system comprising:

an identification processor coupled with an exchange and operative to receive identification of a new product for which an order book is not available on the exchange, the new product comprising first and second components;

the identification processor being further operative to, in response to the receipt of identification of the new product, identify a first available order book for a first available product listed on the exchange and a second available order book for a second available product listed on the exchange, the first available product comprising one of the first and second components and the second available product comprising the other of the first and second components;

a correlation processor coupled with the identification processor and operative to correlate the first and second available order books based on the first and second components; and

a market generator coupled with the exchange, the identification processor, and the correlation processor and operative to generate a new order book for the new product based on the correlation between the first and second available order books, the new order book comprising one or more orders to buy or sell the new product, each of the one or more orders having been generated based on one or more orders to buy or sell the first available product comprised by the first available order book, one or more orders to buy or sell the second available product comprised by the second available order book, or a combination thereof, and wherein the market generator is further operative to cause the new product to be listed on the exchange having the new order book such that subsequently received orders to buy or sell the new product may be matched to at least one of the one or more orders in the new order book if counter thereto or otherwise be entered into the new order book to await a further subsequent order counter thereto.

10. The system of claim 9 wherein the first available product further comprises a first correlatable component and the second available product further comprises a second correlatable component, the correlation processor being further operative to correlate the first and second available order books based on a correlation of the first and second correlatable components.

11. The system method of claim 10 where the first and second correlatable components are the same.

12. The system method of claim 10 wherein the first and second correlatable components are correlatable via a third available order book for a third available product comprising both of the first and second correlatable components.

13. The system method of claim 9 wherein the first and second components each comprise a currency.

14. The system method of claim 9 wherein the new order book is capable of reflecting both orders implied by the first and second available order books and outright orders received for the new product.

15. The system method of claim 9 wherein the correlation processor is further operative to correlate the first and second available order books based on a transitive relationship between the one or more orders to buy or sell in the first available order book and the one or more orders to buy or sell in the second available order book.

16. The system method of claim 9 wherein the market generator is further operative to generate each of the one or more orders to buy or sell the new product in the new order book based on an interpolation between one of the one or more orders to buy or sell the first available product in the first available order book and one of the one or more orders to buy or sell the second available product in the second available order book.

17. A system for determining a market for a new product, the system comprising a processor coupled with an exchange and a computer readable storage media coupled with the processor, the system further comprising:

first logic stored in the computer readable storage media and executable by the processor to receive identification of a new product for which an order book is not available on an exchange, the new product comprising first and second components, and, in response to the receipt of identification of the new product, identify a first available order book for a first available product listed on the exchange and a second available order book for a second available product listed on the exchange, the first available product comprising one of the first and second components and the second available product comprising the other of the first and second components;

second logic stored in the computer readable storage media and executable by the processor to correlate the first and second available order books based on the first and second components; and

third logic stored in the computer readable storage media and executable by the processor to generate a new order book for the new product based on the correlation between the first and second available order books, the new order book comprising one or more orders to buy or sell the new product, each of the one or more orders having been generated based on one or more orders to buy or sell the first available product comprised by the first available order book, one or more orders to buy or sell the second available product comprised by the second available order book, or a combination thereof, and wherein the third logic is further operative to cause the new product to be listed on the exchange having the new order book such that subsequently received orders to buy or sell the new product may be matched to at least one of the one or more orders in the new order book if counter thereto or otherwise be entered into the new order book to await a further subsequent order counter thereto.

18. The system of claim 17 wherein the first available product further comprises a first correlatable component and the second available product further comprises a second correlatable component, the second logic being further executable by the processor to correlate the first and second available order books based on a correlation of the first and second correlatable components.

19. The system method of claim 18 where the first and second correlatable components are the same.

20. The system method of claim 18 wherein the first and second correlatable components are correlatable via a third available order book for a third available product comprising both of the first and second correlatable components.

21. The system method of claim 17 wherein the first and second components each comprise a currency.

22. The system method of claim 17 wherein the new order book is capable of reflecting both orders implied by the first and second available order books and outright orders received for the new product.

23. The system method of claim 17 wherein the second logic is further executable by the processor to correlate the first and second available order books based on a transitive relationship between the one or more orders to buy or sell in the first available order book and the one or more orders to buy or sell in the second available order book.

24. The system method of claim 17 wherein the third logic is further executable by the processor to generate each of the one or more orders to buy or sell the new product in the new order book based on an interpolation between one of the one or more orders to buy or sell the first available product in the first available order book and one of the one or more orders to buy or sell the second available product in the second available order book.