System and method for risk management

• US 8,566,209 B2
• Filed: 01/14/2013
• Issued: 10/22/2013
• Est. Priority Date: 11/26/2002
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Kraus, Henrik, Owens, Farley, Schluetter, Jens-Uwe
• Primary Examiner(s): NGUYEN, TIEN C
• Application Number:
  US13/740,893
• Publication Number:
  US 20130132259A1
• Time in Patent Office: 281 Days
• Field of Search: 705/35, 705/37, 705/38, 705/39, 705/45, 705/26
• US Class Current: 705/36.R
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A margin requirement is computed while trading. The margin requirement may be calculated while trading because the preferred system takes into account working orders to generate the margin requirement. The on the fly possibility allows the preferred system to provide pre-trade risk calculations, but can also be used to provide post-trade calculations. A generic spread number and the maximum number of outright positions are determined. Using the spread positions and the maximum number of outright positions, a spread margin and an outright margin are calculated, which when summed provide a total margin requirement. Limits based in part on the total margin requirement may be imposed on one or more traders.

Claims

1. A system including:

a computing device,

wherein the computing device is configured to determine a total maximum leg position based on maximum leg positions for each of one or more tradeable objects, wherein the maximum leg positions represent a maximum position in each leg;

wherein the computing device is configured to determine a number of total outright positions based on a total filled net long position and a total filled net short position, wherein the number of total outright positions represents the number of positions that are not considered part of a spread;

wherein the computing device is configured to determine a number of spreads based on (the total maximum leg position−

the number of total outright positions)/2, wherein the number of spreads represents a generic spread position;

wherein the computing device is configured to determine a first margin requirement based on the number of spreads and a first base margin value;

wherein the computing device is configured to determine a maximum number of outrights based on a number of outrights due to working buy outright orders and a number of outrights due to working sell outright orders, wherein the maximum number of outrights represents the maximum number of outright positions possible with a current configuration of outright market working orders and filled positions;

wherein the computing device is configured to determine a second margin requirement based on the maximum number of outrights and a second base margin value;

wherein the computing device is configured to determine a total margin requirement based on the first margin requirement and the second margin requirement; and

wherein the computing device is configured to provide the total margin requirement, wherein a decision to allow an order to be sent is based on an available margin balance and the total margin requirement.

2. The system of claim 1, wherein the total maximum leg position is the sum of the maximum leg positions for each of the one or more tradeable objects.

3. The system of claim 1, wherein the maximum leg position for each of the one or more tradeable objects is based on a filled net long position, a filled net short position, an equivalent buy leg spread position, and an equivalent sell leg spread position.

4. The system of claim 3, wherein a maximum leg position for one of the one or more tradeable objects is equal to maximum(absolute value(filled net long position−

filled net short position+equivalent buy leg spread position), absolute value(filled net long position−

filled net short position−

equivalent sell leg spread position)).

5. The system of claim 3, wherein the equivalent buy leg spread position and the equivalent sell leg spread position are provided by an exchange.

6. The system of claim 1, wherein the number of total outright positions is equal to absolute value(the total filled net long position−

the total filled net short position).

7. The system of claim 1, wherein the total filled net long position is based on filled net long positions for each of the one or more tradeable objects, wherein the total filled net short position is based on filled net short positions for each of the one or more tradeable objects.

8. The system of claim 7, wherein the total filled net long position is the sum of all filled net long positions for each of the one or more tradeable objects, wherein the total filled net short position is the sum of all filled net short positions for each of the one or more tradeable objects.

9. The system of claim 1, wherein the number of spreads is equal to (the total maximum leg position−

the number of total outright positions)/2.

10. The system of claim 1, wherein the first margin requirement is equal to (the number of spreads * the first base margin value).

11. The system of claim 1, wherein the first base margin value is specified by one of a user, a trading house, a clearing house, and an exchange.

12. The system of claim 1, wherein the maximum number of outrights is equal to maximum(the number of outrights due to working buy outright orders, the number of outrights due to working sell outright orders).

13. The system of claim 1, wherein one of the number of outrights due to working buy outright orders and the number of outrights due to working sell outright orders includes the order.

14. The system of claim 1, wherein the number of outrights due to working buy outright orders is based on a total filled net position and a number of working buy outright orders, wherein the number of outrights due to working sell outright orders is based on the total filled net position and a number of working sell outright orders.

15. The system of claim 14, wherein the number of outrights due to working buy outright orders is equal to absolute value(the total filled net position+the number of working buy outright orders), wherein the number of outrights due to working sell outright orders is equal to absolute value(the total filled net position−

the number of working sell outright orders).

16. The system of claim 1, wherein the second margin requirement is equal to (the maximum number of outrights * the second base margin value).

17. The system of claim 1, wherein the second base margin value is specified by one of a user, a trading house, a clearing house, and an exchange.

18. The system of claim 1, wherein the total margin requirement is equal to (the first margin requirement+the second margin requirement).

19. The system of claim 1, wherein the instructions are further executable to display the total margin requirement.

20. The system of claim 1, wherein the total margin requirement is determined for a group of traders.