Binary options on an organized exchange and the systems and methods for trading the same

• US 8,738,499 B2
• Filed: 12/21/2004
• Issued: 05/27/2014
• Est. Priority Date: 01/22/2004
• Status: Active Grant

• Current Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Inventors: Montanaro, Donato A., Bickford, Michael T., Burns, Jeffrey P., Masciale, Christopher P., Ebner, Scott R.
• Primary Examiner(s): Subramanian, Narayanswamy
• Application Number:
  US11/017,191
• Publication Number:
  US 20050165669A1
• Time in Patent Office: 3,444 Days
• Field of Search: 705 35- 37
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

Financial systems and methods for trading fixed return options on secondary markets such as stock exchanges including an electronic order delivery and execution system and/or an on-floor trading auction, configured to provide an exchange-traded environment. Also included is at least one fixed return option or binary option traded through an exchange'"'"'s order delivery and execution system or on-floor trading auction, whereby such trading environment provides an open market. Also included are methods for calculating the closing settlement value for securities underlying fixed return options or binary options in order to maintain a fair and orderly trading environment for these instruments on an organized exchange.

Claims

1. A method comprising:

assigning symbols to a fixed return option that comply with the symbol conventions of standard exchange-traded options,

listing and trading, by a computer, the fixed return option in standardized form on an organized exchange,

processing transactions involving the fixed return option using existing trading, clearance, margin, and settlement systems based on the symbols assigned to the fixed return option,

calculating, by a computer, the closing settlement value of a security underlying the fixed return option using a volume weighted average price of the security,

clearing and settling, based at least in part on the calculated closing settlement value, the fixed return option using the same electronic systems used on the exchange to trade, clear and settle standardized, non-binary options and

wherein the volume weighted average price of the security is calculated over a pre-determined time period on the last regular trading day prior to expiration of the fixed return option.

2. The method of claim 1, wherein a multiplier code for the fixed return option provides information about the fixed return option for the systems used on the exchange to clear and settle standardized, non-binary options.

3. A system for trading a fixed return option, comprising:

an electronic order delivery and execution system in an exchange-trading environment, wherein the same electronic order delivery and execution system used to execute transactions in and deliver the fixed return option is used to execute transactions in and deliver standard, non-binary options,

the system including computer means for assigning symbols to the fixed return option that comply with the symbol conventions of standard exchange-traded options and computer means for processing transactions involving the fixed return option using existing trading, clearance, margin, and settlement systems based on the symbols assigned to the fixed return option, and

the system further comprising computer means for calculating the closing settlement value of a security underlying the fixed return option using a volume weighted average price of the security.