Switch engine for risk position discovery in an electronic trading system

• US 20040015430A1
• Filed: 02/28/2003
• Published: 01/22/2004
• Est. Priority Date: 10/14/1997
• Status: Active Grant

• Current Assignee: Blackbird Holdings, Inc.
• Original Assignee: Blackbird Holdings, Inc.
• Inventors: May, R. Raymond
• Granted Patent: US 7,689,497 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A switch engine module receive interest rate risk portfolios from a plurality of traders, and for each prospective trader, provides available switches based on positions in other counterparty portfolios that offset the viewing traders'"'"' positions. The offsetting positions are encoded with credit preference information in order to identify eligible trades based on both counterparties credit preferences. Further, an embodiment of the provides for a switch auction whereby users can use an auction process to trade for forward rate agreement switches with other counterparties. In the switch auction, the price is predetermined by the system prior to the auction so that parties can opt out of the transaction if desired. The credit preferences of the participating traders are taken in consideration in making matches.

Claims

1. A system for risk portfolio management that enables switches between traders, comprising

means for receiving risk position portfolios associated with respective said traders;

means for calculating relative positions for each of said risk position portfolios associated with respective said traders; and

means for presenting said relative positions to respective said traders.

2. The system of claim 1, wherein said means for presenting presents to a first trader at least one possible switch combination with a second trader based on respective said risk position portfolios associated with said first and second traders

3. The system of claim 1, wherein said means for presenting presents to a first trader at least one offsetting position in said risk position portfolio of said first trader which corresponds with a position in said risk position portfolio of a second trader.

5. The system of claim 1, wherein said means for receiving comprising means for uploading risk position portfolio data by file transfer.

6. The system of claim 1, further including means for updating said risk position portfolio in substantially real-time.

7. The system of claim 1, wherein respective said risk position portfolios comprise interest rate reset risk.

9. The system of claim 1, wherein said risk position portfolio includes position data for at least 90 days forward.

4. The system of claim 4, wherein said offsetting position is visually encoded to reflect trade eligibility based on credit preferences of said first and second trader when presented to said first trader.

8. The system of claim 8, wherein said interest rate reset risk includes size and direction data.

10. A system for performing a switch auction utilizing risk position portfolios related to least a first trader and a second trader, comprising:

means for receiving risk position portfolios inputted by respective said first and second traders;

means for calculating relative risk positions for said first and second traders;

means for determining an auction price; and

means for matching offsetting risk positions of said first and second traders based on credit preferences of said first and second traders.

11. The system of claim 11, wherein the means for determining an auction price calculates the average auction price entered by said first and second traders.

12. The system of claim 11, wherein said means for matching offsetting risk positions selects matches between offsetting positions so that a maximum total volume is traded and a minimum number of matches are made.

13. The system of claim 11, further comprising means for generating a confirmation notice for confirming a match of offsetting risk position

14. The system of claim 11, further comprising means for presenting respective said relative risk positions to said first and second traders

15. A method for risk portfolio management utilizing an electronic trading system, wherein said electronic trading system includes a plurality of traders operationally connected, said method comprising the steps of:

receiving a risk position portfolio from at least a first trader and a second trader from the plurality of traders;

calculating relative risk positions of each risk position portfolio received from the first and second traders;

matching offsetting relative risk positions of the first and second traders, thereby executing a switch; and

updating the risk position portfolios of the fist and second traders based on the executed switch.

16. The method of claim 16, further comprising means for generating a confirmation notice for confirming a switch of offsetting risk positions.

17. A computer program product for risk portfolio management utilizing an electronic trading system, wherein said electronic trading system includes a plurality of traders operationally connected, said computer program product comprising:

a computer usable medium having computer-readable code means embodied in said medium, said computer-readable code means comprising;

computer readable code means for receiving a risk position portfolio from at least a first trader and a second trader from the plurality of traders;

computer readable code means for calculating relative risk positions of each risk position portfolio received from the first and second traders;

computer readable code means for matching offsetting relative risk positions of the first and second traders, thereby executing a switch; and

computer readable code means for updating the risk position portfolios of the fist and second traders based on the executed switch.