Derivatives trading methods that use a variable order price

• US 9,911,157 B2
• Filed: 07/02/2009
• Issued: 03/06/2018
• Est. Priority Date: 03/10/2003
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Johnston, Scott, Falck, John, Troxel, Jr., Charlie, Farrell, James W., Thiruthuvadoss, Shanthi, Ariathurai, Arjuna, Salvadori, David
• Primary Examiner(s): Hamilton, Lalita M
• Application Number:
  US12/496,831
• Publication Number:
  US 20090265267A1
• Time in Patent Office: 3,169 Days
• Field of Search: 705 35, 705 36 R, 705 37
• 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

Methods and systems for an exchange to handle variable derivative product order prices are disclosed. The price of a derivative product order (bid or offer) is updated based on changes in the price of a related underlying product. Price determination variable(s), such as delta and gamma, are used to determine the price of the order. The exchange may periodically recalculate the price without requiring the trader to transmit additional information to the exchange.

Claims

1. A method of dynamically determining a price for an order for a derivative product at an exchange, comprising:

receiving, by an exchange computer system and from a computing device, an order for a derivative product, wherein the order has a price, and wherein the order price has a value;

receiving, by the exchange computer system and from the computing device, a designation of a formula by which updated order price values can be determined using values that include an underlying product price value, a delta variable value and a gamma variable value, wherein receiving the designation of the formula comprises receiving the formula with the order;

determining by the exchange computer system and based on the order, new book listings for current bids and offers;

transmitting, to the computing device, the new book listings;

detecting a change in the underlying product price value;

in response to detecting the change in the underlying product price value, utilizing the formula to determine, by the exchange computer system and based in part on the determined new book listings, an updated value for the order price without further input from the computing device; and

executing, by the exchange computer system, a trade that includes the order.

2. A method of dynamically determining a price for an order for a derivative product at an exchange, comprising:

receiving, by an exchange computer system and from a computing device, an order for a derivative product, wherein the order has a price, and wherein the order price has a value;

receiving, by the exchange computer system and from the computing device, a designation of a formula by which updated order price values can be determined using values that include an underlying product price value, a delta variable value and a gamma variable value, wherein receiving the designation of the formula comprises receiving a selection of the formula;

determining, by the exchange computer system and based on the order, new book listings for current bids and offers;

transmitting, to the computing device, the new book listings;

detecting a change in the underlying product price value;

subsequent to receiving the order and to receiving the designation, and in response to detecting the change in the underlying product price value, utilizing the formula to determine, by the exchange computer system and based in part on the determined new book listings, an updated value for the order price without further input from the computing device; and

executing, by the exchange computer system, a trade that includes the order.