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

• US 9,928,551 B2
• Filed: 07/15/2016
• Issued: 03/27/2018
• 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:
  US15/211,495
• Publication Number:
  US 20160321755A1
• Time in Patent Office: 620 Days
• Field of Search: 705 35- 45
• 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 method comprising:

using a processing system, which includes at least one hardware processor, to perform a computer-implemented method comprising;

receiving, from a first client computer system of a first trading participant that is associated with a first electronic exchange computing system, an electronic data message that includes an instruction for a first order for a derivative instrument, the first electronic exchange computing system being associated with a first clearing house computing system, which is correspondingly 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 determining, the electronic data message to the second electronic exchange computing system to be matched with a counter order for the first order, where a matched trade of the first 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 a determination that the first order is matched at the second electronic exchange computing system, automatically generating a new electronic data message that includes a newly generated balance trade for the derivative instrument that corresponds to the matched trade, the new electronic data message including data that indicates the newly generated balance trade is between the first trading participant and a balancing clearing entity that is associated with the balancing clearing entity computing system, where data of the newly generated balance trade is separate from the data of the matched first order and the counter order that is cleared via the second clearing house computing system; and

sending the new electronic data message to cause the newly generated balance trade to be cleared via the first clearing house computing system.

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

3. The method of claim 1, wherein the newly generated balance trade reflects the balancing clearing entity assuming responsibility to fulfill obligations of the first trading participant for the matched trade.

4. The method of claim 1, wherein the computer-implemented method is executed on a data processing node that includes the balancing clearing entity computing system.

5. The method of claim 1, wherein the computer-implemented method is executed on an order router that is in electronic communication with the first electronic exchange computing system.

6. The method of claim 1, wherein the newly generated balance trade is sent to the first clearing house computing system by using the first electronic exchange computer system.

7. The method of claim 1, wherein the computer-implemented method further comprises:

receiving, after routing the electronic data message to the second electronic exchange computing system, a confirmation electronic data message that includes trade confirmation data related to the first order being matched at the second electronic exchange computing system,

wherein determination that the first order is matched at the second electronic exchange computing system is based on the received trade confirmation data included in the confirmation electronic data message.

8. The method of claim 1, wherein the computer-implemented method further comprises:

responsive to reception of the electronic data message, determining that the counter order listed on the second electronic exchange computing system has a price field that is better than another counter order that is listed on the first electronic exchange computing system,

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

9. A computer system that is coupled to a first electronic exchange computing system, which is associated with the first clearing house computing system, and an electronic order router, the computer system comprising:

a transceiver configured to receive at least a first electronic message, the electronic order router being configured to (1) determine which electronic exchange computing system, from among at least the first electronic exchange computing system and a second electronic exchange computing system that is different from the first electronic exchange computing system, that an electronic order, which specifies a derivative instrument identifier, is to be routed, the electronic order being submitted, via the electronic order router, to the first electronic exchange computer system by a first client computer system of a first trading participant that is associated with the first electronic exchange computing system, and (2) route the electronic order to the second electronic exchange computing system as a result of the determination, where the routed electronic order is to be matched against a counter electronic order that is listed on the second electronic exchange computing system, a matched electronic trade of the routed electronic order and the counter electronic order being cleared via a second clearing house computing system that is associated with the second electronic exchange computing system;

memory configured to store computer implemented-instructions;

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

based on contents of the first electronic message that indicate that the electronic order was routed to the second electronic exchange computing system or matched at the second electronic exchange computing system with the counter electronic order, automatically generate a new electronic balance trade that is between the first trading participant and a balancing clearing entity that is associated with a balancing clearing entity computing system, where data of the new electronic balance trade is separate from the data of the matched routed electronic order and the counter electronic order that is cleared via the second clearing house computing system; and

update electronic record information to indicate that the new electronic balance trade has been executed with respect to the first clearing house computing system.

10. The computer system of claim 9, wherein the new generated balance trade mirrors obligations of the match between routed electronic order and the counter electronic order of the second electronic exchange computing system.

11. The computer system of claim 9, and wherein the new generated balance trade reflects the balancing clearing entity assuming responsibility to fulfill obligations of the first trading participant for the match of the routed electronic order and counter electronic order executed with respect to the second electronic exchange computing system.

12. The computer system of claim 9, wherein the balancing clearing entity computing system includes the one or more hardware data processors.

13. The computer system of claim 9, wherein the electronic order router is included as part of the first electronic exchange computing system.

14. The computer system of claim 9, wherein the first electronic message is sent from the electronic order router to the computer system for reception by the transceiver thereof.

15. The computer system of claim 9, wherein the first electronic message includes trade confirmation data related to the electronic order being routed to the second electronic exchange computing system.

16. A system comprising:

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

an electronic exchange computing system that is coupled to the order router by an electronic communications link, the electronic exchange computing system including the at least one hardware processor configured to match pending electronic data messages stored in a memory with newly received electronic data messages;

a first clearing house computing system that is linked with the electronic exchange computing system, the first clearing house computing system including the at least one hardware processor and configured to perform electronic clearing processing for electronic trades matched by the electronic exchange computing system, the first clearing house computing system affiliated with a balancing clearing entity computing system; and

a processing system that includes the at least one hardware processor, the processing system configured to;

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

determine whether to route the electronic data message to the electronic exchange computing system or a second electronic exchange computing system that is different from the 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 electronic order, the counter electronic order pending with the second electronic exchange computing system, where a match between the first electronic order and the counter electronic order is subsequently cleared via a second clearing house computing system that is different from the first clearing house computing system;

in accordance with determination of a match of the first electronic order at the second 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 match between the first electronic order and the counter electronic 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 first electronic order to the counter order on the second electronic exchange computing system; and

execute the electronic clearing process on the first clearing house computing system for clearing of the newly generated balance trade included in the new electronic data message.

17. The system of claim 16, wherein the at least one hardware processor is a plurality of hardware processors, with at least some of the plurality of hardware processors divided between the order router, the electronic exchange computing system, and the first clearing house computing system.

18. The system of claim 16, wherein the generated new electronic data message is communicated from the order router to the first clearing house computing system.

19. The system of claim 18, wherein the generated new electronic data message is communicated to the first clearing house computing system via the electronic exchange computing system.

20. The system of claim 16, wherein a hardware processor of the order router is configured to automatically generate the new electronic data message.