Computer-implemented system and method for clearing a derivative trade involving multiple trading exchanges

• US 9,396,497 B2
• Filed: 12/19/2012
• Issued: 07/19/2016
• Est. Priority Date: 12/19/2012
• Status: Active Grant

• Current Assignee: Nasdaq Technology AB (Nasdaq, Inc.)
• Original Assignee: Nasdaq Technology AB (Nasdaq, Inc.)
• Inventors: Kronwall, Mattias, Sthl, Cecilia, Josefsson, Magnus
• Primary Examiner(s): Shaikh, Mohammad Z
• Application Number:
  US13/719,794
• Publication Number:
  US 20140172663A1
• Time in Patent Office: 1,308 Days
• Field of Search: 705 35- 45
• US Class Current: 1/1
• CPC Class Codes: G06Q 30/0601 Electronic shopping [e-shopping]
• 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 derivative trade order at a home marketplace is routed to an away market place having a better price for a counter position to the order where it is executed. The executed order triggers creation of a “balance derivative trade” at the home marketplace to balance at a home clearing house the away trade. The home clearing house uses the balance derivative trade to create derivative positions of the balance derivative trade and informs a balancing clearing entity which manages the balance derivative trade obligations. The balance derivative trade order account permits netting and reduced margin benefits for the trading participant. A dual derivative exercise operation allows balance derivative positions to be performed in one day to reduce overnight risk for the clearing entity.

Claims

1. A computer-implemented method performed by a data processing node associated with a first electronic exchange computing system, comprising the steps of:

receiving an electronic data message that includes an instruction for a trade order for a derivative instrument from a first trading participant that is associated with the first electronic exchange computing system that is associated with a first clearing house computing system, which is affiliated with a balancing clearing entity computing system;

determining which electronic exchange computing system, from among at least the first electronic exchange computing system and a second electronic exchange computing system, that the electronic data message is to be routed, the first electronic exchange computer system being different from the second electronic exchange computing system;

routing, in accordance with the determination, the electronic data message to the second electronic exchange computing system to be matched with another electronic data message that includes an instruction for a counter order for the trade order, where a matched trade of the trade order to the counter order is cleared via a second clearing house computing system that is associated with the second electronic exchange computing system and different from the first clearing house computing system

in accordance with determination that the electronic data message is matched at the second electronic exchange computing system, automatically generating, by the data processing node, a new electronic data message and including a newly generated balance trade for the derivative instrument that corresponds to the matched trade between the first trading participant and a balancing clearing entity that is associated with the balancing clearing entity computing system, the new balance trade being separate from the matched trade of the trade order to the counter order on the second electronic exchange computing system; and

sending, by the data processing node, the new electronic data message to the first clearing house computing system for clearing of the included newly generated balance trade.

2. The computer implemented method in claim 1, wherein the newly generated balance trade mirrors obligations of the matched trade of the trade order to the counter order.

3. The computer implemented method in claim 1, wherein the newly generated balance trade reflects the balancing clearing entity assuming responsibility to fulfill the first trading participant'"'"'s contract obligations for the matched trade executed with respect to the second electronic exchange computing system.

4. The computer implemented method in claim 1, wherein the balancing clearing entity computing system includes the data processing node.

5. The computer implemented method in claim 1, wherein the data processing node is an order router in communication with the first electronic exchange computing system.

6. The computer implemented method in claim 1, wherein the newly generated balance trade is sent via the first electronic exchange computer system to the first clearing house computing system for clearing.

7. The computer implemented method in claim 1, wherein determination that the electronic data message is matched at the second electronic exchange computing system includes:

receiving, at the data processing node, a confirmation electronic data message that includes trade confirmation data related to the trade order being routed to the second electronic exchange computing system.

8. The computer implemented method in claim 1, further comprising:

upon reception of the electronic data message, determining, by the data processing node, that a counter order is on the second electronic exchange computing system with a price that is better than a counter order of the first electronic exchange computing system,

wherein routing of the electronic data message is based on determination that the counter order on the second electronic exchange computing system has a better price than the counter order on the second electronic exchange computing system.

9. A data processing node associated with a first electronic exchange computing system, comprising:

memory configured to store instructions and data for performing exchange operations;

one or more data processors, coupled to the memory, configured to;

receive an electronic data message that includes an instruction for a trade order for a derivative instrument from a first trading participant that is associated with the first electronic exchange computing system, which is associated with a first clearing house computing system, which is affiliated with a balancing clearing entity computing system;

determine which electronic exchange computing system, from among at least the first electronic exchange computing system and a second electronic exchange computing system, that the electronic data message is to be routed, the first electronic exchange computer system being different from the second electronic exchange computing system;

route, in accordance with the determination, the electronic data message to the second electronic exchange computing system to be matched with another electronic data message that includes an instruction for a counter order for the trade order, where a matched trade of the trade order to the counter order is cleared via a second clearing house computing system that is associated with the second electronic exchange computing system and different from the first clearing house computing system;

in accordance with determination that the electronic data message is matched at the second electronic exchange computing system, automatically generate a new electronic data message and including a newly generated balance trade for the derivative instrument that corresponds to the matched trade, between the first trading participant and a balancing clearing entity affiliated with the first clearing house computing system, the new balance trade being separate from the matched trade of the trade order to the counter order on the second electronic exchange computing system; and

send the new electronic data message to the first clearing house computing system for clearing of the included newly generated balance trade.

10. The data processing node in claim 9, wherein the newly generated balance trade mirrors obligations of the matched trade that was executed on the second electronic exchange computing system.

11. The data processing node in claim 9, and wherein the newly generated balance trade reflects the balancing clearing entity assuming responsibility to fulfill the first trading participant'"'"'s contract obligations for the matched trade executed with respect to the second electronic exchange computing system.

12. The data processing node in claim 9, wherein the balancing clearing entity computing system includes the data processing node.

13. The data processing node in claim 9, wherein the data processing node is an order router in communication with the first electronic exchange computing system.

14. The data processing node in claim 9, wherein the newly generated balance trade is sent via the first electronic exchange computer system to the first clearing house computing system for a clearing process.

15. The data processing node in claim 9, wherein the one or more data processors is configured to:

detect an electronic data message comprising trade confirmation data related to the trade order routed to the second electronic exchange computing system.

16. The data processing node in claim 9, wherein the one or more data processors are further configured to:

upon reception of the electronic data message, determine that a counter order is on the second electronic exchange computing system with a price that is better than a counter order on the first electronic exchange computing system,

wherein routing of the electronic data message is based on determination that the counter order on the second electronic exchange computing system has a better price than the counter order on the second electronic exchange computing system.

17. A system comprising:

an order router that includes at least one hardware processor and a transceiver; and

an electronic exchange computing system that is coupled to the order router by an electronic communications link, the electronic exchange computing system including at least one hardware processor configured to match pending electronic data messages stored in a memory with newly received electronic data messages, electronic exchange computing system being linked to a first clearing house computing system that clears data transaction trades processed by the electronic exchange computing system, the first clearing house computing system affiliated with a balancing clearing entity computing system,

the at least one hardware processor of the order router configured to;

receive, via the transceiver, an electronic data message that includes an instruction for a trade order for a derivative instrument from a first trading participant that is associated with the electronic exchange computing system;

determine whether to route the electronic data message to the electronic exchange computing system or another, different, electronic exchange computing system;

route, in accordance with the determination, the electronic data message to the another electronic exchange computing system to be matched with another electronic data message that includes an instruction for a counter order for the trade order that is pending in the another electronic exchange computing system, where a match of the trade order to the counter order is cleared via a second clearing house computing system that is different from the first clearing house computing system;

in accordance with determination that the electronic data message is matched at the another electronic exchange computing system, automatically generate a new electronic data message that includes a newly generated balance trade for the derivative instrument that corresponds to the matched trade of the trade order to the counter order the newly generated balance trade being between the first trading participant and a balancing clearing entity that is associated with the balancing clearing entity computing system, the newly generated balance trade being separate from the matched trade of the trade order to the counter order on the second electronic exchange computing system; and

communicate the new electronic data message to the first clearing house computing system for clearing of the newly generated balance trade.

18. The system of claim 17, wherein the communication of the automatically generated new electronic data message to the first clearing house computing system is accomplished via the electronic exchange computing system which communicates the data regarding the newly generated balance trade to first clearing house computing system.

19. The system of claim 17, wherein the newly generated balance trade matches the obligations of the match of the trade order to the counter order.

20. A computer-implemented method performed on an order router that is coupled to a first electronic exchange computing system, the method comprising:

receiving, via at least one transceiver of the order muter and from a computing device of a first trading participant, an electronic data message that includes a data transaction instruction for a derivative trade order, the first electronic exchange computing system associated with a first clearing house computing system that performs an electronic clearing process for electronic trades matched by the first electronic exchange computing system, the clearing house computing system affiliated with a balancing clearing entity;

selecting, from among at least the first electronic exchange computing system and a second electronic exchange computing system, where the electronic data message is to be muted, the first electronic exchange computer system being different from the second electronic exchange computing system;

in response to selecting the second electronic exchange computing system for muting the electronic data message, routing, via the at least one transceiver of the order muter, the electronic data message to the second electronic exchange computing system to be matched with another electronic data message that includes an instruction for another derivative trade order that is a contra order for the derivative trade order, where a matched trade of the derivative trade order to the another derivative trade order is cleared via a second clearing house computing system that is associated with the second electronic exchange computing system and different from the first clearing house computing system;

in response to determination of the matched trade being completed at the second electronic exchange computing system, automatically generating, by processing resources of the order router, a new electronic data message and including a newly generated balance trade for the derivative instrument that corresponds to the matched trade, the newly generated balance trade being between the first trading participant and the balancing clearing entity, the new balance trade being separate from the matched trade on the second electronic exchange computing system; and

sending, via the at least one transceiver, the new electronic data message to the first clearing house computing system for clearing of the included newly generated balance trade.

21. The computer-implemented method of claim 20, wherein the newly generated balance trade includes data value obligations that mimic the data value obligations of the matched trade on the second electronic exchange computing system.

22. A non-transitory computer readable storage medium storing computer executable instructions for use with a processing system that includes at least one hardware processor coupled to a memory and at least one transceiver, the stored computer executable instructions comprising instructions that are configured to cause the processing system to:

receive, via the at least one transceiver from a computing device of a first trading participant, an electronic data message that includes a data transaction instruction for a derivative trade order, the first electronic exchange computing system associated with a first clearing house computing system that performs an electronic clearing process for electronic trades matched by the first electronic exchange computing system, the clearing house computing system affiliated with a balancing clearing entity;

select, from among at least the first electronic exchange computing system and a second electronic exchange computing system, where the electronic data message is to be routed, the first electronic exchange computer system being different from the second electronic exchange computing system;

in response to selecting the second electronic exchange computing system for routing the electronic data message, route, via the at least one transceiver, the electronic data message to the second electronic exchange computing system to be matched with another electronic data message that includes an instruction for another derivative trade order that is a contra order for the derivative trade order, where a matched trade of the derivative trade order to the another derivative trade order is cleared via a second clearing house computing system that is associated with the second electronic exchange computing system and different from the first clearing house computing system;

in response to determination of the matched trade being completed at the second electronic exchange computing system, automatically generate a new electronic data message and including a newly generated balance trade for the derivative instrument that corresponds to the matched trade, the newly generated balance trade being between the first trading participant and the balancing clearing entity, the new balance trade being separate from the matched trade on the second electronic exchange computing system; and

send, via the at least one transceiver, the new electronic data message to the first clearing house computing system for clearing of the newly generated balance trade.