System and method of implementing massive early terminations of long term financial contracts

• US 20100241551A1
• Filed: 09/15/2009
• Published: 09/23/2010
• Est. Priority Date: 11/24/1999
• Status: Active Grant

• Current Assignee: CME Group Incorporated
• Original Assignee: TriOptima AB (CME Group Incorporated)
• Inventors: Brouwer, Derk Pieter
• Granted Patent: US 8,010,441 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 10/0637 Strategic management or analysis, e.g. setting a goal or target of an organisation; Planning actions based on goals; Analysis or evaluation of effectiveness of goals
• 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

Abstract

A method of and system for terminating or assigning outstanding OTC derivative transactions between a plurality of financial institutions (banks). The system comprises: a processing station arranged to receive transaction data describing a plurality of transactions from a plurality of banks via the Internet. The processing station comprises: a linking module for linking different versions of the same transaction received from different parties to that transaction; an analysis module for determining a set of linked transactions between a plurality of different banks, wherein each bank has debts and claims towards other banks in the set; a calculation module arranged to calculate an aggregated value of each set of linked transactions and select the set of linked transactions which has an aggregated value within bank-specified tolerance limits acceptable for executing a termination; and an execution module for executing a termination or assignment of the selected set of linked transactions.

Claims

1. A system for creating a proposal concerning OTC (Over the Counter) derivatives trade-related data regarding OTC derivative trades already entered into between trading parties in order to reduce the number of outstanding OTC derivative trades or reduce the total outstanding notional amounts of the outstanding OTC trades, the system comprising:

at least one data server and an optional central server connected to a network interconnecting the at least one data server and the optional central server,

wherein the at least one data server of a party involved in at least one of the OTC derivative trades, or the optional central server, is arranged to receive trade-related data, for transactions carried out between the trading parties, through the network, and

wherein the at least one data server or the optional central server includes a processor operable to generate early termination proposals including packages of existing OTC transactions, which are acceptable to all involved parties to terminate prior to their maturity dates, according to parameters set respectively by the involved parties.

2. The system of claim 1, wherein at least one of the early termination proposals includes at least one newly suggested OTC transaction which is acceptable to all involved parties of the at least one newly suggested OTC transaction to enter into, which in combination with the existing OTC transactions to be terminated prematurely reduce the number of outstanding OTC trades or reduce the total outstanding notional amounts of the outstanding OTC trades.

3. A system for creating a proposal concerning OTC (Over the Counter) derivatives trade-related data regarding OTC derivative trades already entered into between financial parties, in order to reduce the number of outstanding OTC derivative trades or reduce the total outstanding notional amounts of the outstanding OTC trades, the system comprising:

at least one data server and an optional central server connected to a network interconnecting the at least one data server and the optional central server,

wherein the at least one data server, or the optional central server, is arranged to receive trade-related data, for transactions carried out between the financial parties, through the network, and

wherein the at least one data server or the optional central server includes a processor operable arranged to generate the proposal according to parameters set respectively by the financial parties, the proposal including packages of;

i. existing OTC transactions which, in combination, are acceptable to all involved parties, to terminate prior to their respective maturity dates; and

ii. at least one newly suggested OTC transaction which is acceptable to all involved parties of the at least one newly suggested OTC transaction to enter into;

such that a combination of the existing OTC transactions to be terminated early and the at least one newly suggested OTC transaction reduces the number of outstanding OTC trades between the financial parties or reduces the total outstanding notional amounts of the outstanding OTC trades.

4. A method of massive early transformation of OTC derivatives contracts in order to achieve an objective of significantly decreasing the number of overall outstanding OTC derivative transactions or the total outstanding notional amount of the outstanding OTC derivative transactions between counterparties with the aim of lowering gross and net credit exposure between the counterparties, lowering operational costs and/or risks and/or enhancing risk-control for each of the counterparties, the method comprising:

collecting OTC derivative trade data originating from the counterparties;

grouping together potential combinations of existing OTC transactions and optionally at least one newly suggested OTC transaction where the potential combinations have a low or zero risk;

calculating an aggregated value for each of the groups of transactions; and

selecting for execution a group from the groups having the aggregated value best satisfying party-specified or pre-agreed tolerances for the early transformation, where the transformation includes termination of existing trades and optionally creating at least one new trade in order to achieve the objective.

5. A system for creating proposals for prematurely terminating outstanding OTC (Over The Counter) derivative transactions between a plurality of parties comprising:

a plurality of data input/output and processing stations for transmitting a transaction record of an OTC derivative transaction and operable by the parties, wherein the OTC derivative transaction is between two parties and is described by a plurality of transaction records including a transaction record from each of the plurality of parties to the OTC derivative transaction providing each party'"'"'s view of the OTC derivative transaction, wherein the transaction record includes trade details identifying the OTC derivative transaction, wherein the trade details at least specify the two parties to the OTC derivative transaction, wherein the transaction record includes a designated maturity date of the OTC derivative transaction;

a central processing station, wherein the plurality of data input/output and processing stations and the central processing station are for connecting to a communications network operatively interconnecting all of the stations;

wherein the central processing station comprises;

linking means for linking together two transaction records from two different parties relating to the same OTC derivative transaction, wherein the linking means is arranged to use a plurality of items of the transaction record to determine records from different parties corresponding to the same OTC derivative transaction; and

combining means for combining together a plurality of linked transaction records to determine a premature termination proposal for terminating a plurality of linked OTC derivative transactions prior to their respective designated maturity dates, wherein the proposal is for premature termination at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and at which there is no obligation for the parties involved to make a premature termination,

the central processing station being arranged to transmit the premature termination proposal to the data input/output and processing stations of the respective involved parties in the proposal.

6. A system according to claim 5, wherein the central processing station further comprises conversion means arranged to convert transaction data received via the communications network from the data input/output processing stations into a common format.

7. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein each party'"'"'s input/output and processing station is arranged to enable the parties to send tolerance limits on the net present value, the maturity dates and/or the at least one risk characteristic parameter of the OTC derivative transaction to the central processing station, and the combining means is arranged to utilize the tolerance limits in determining an acceptable combination of linked transaction records which is risk neutral or as determined by risk thresholds defined by the tolerance limits of the at least one risk characteristic parameter and within the tolerance limits of the net present values and maturity dates for the OTC derivative transactions specified by both parties.

8. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and wherein the parties can set target values for the net present values of a proposal with the aim of reducing the credit exposures between two parties or other parties and/or reduce collateral obligations or prevent collateral obligations from occurring, and the central processing station is arranged to calculate an optimal proposal based on the given total net present value and a set of criteria, which set includes a minimal aggregated risk characteristic parameter.

9. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the parties can set target values for the at least one risk characteristic parameter of a proposal in such a way that existing exposures to one or more of the risk characteristic parameters can be reduced, and the central processing station is arranged to calculate an optimal proposal based on the target value for the at least one risk characteristic parameter and a set of criteria, which set includes a minimal aggregated net present value.

10. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the parties can set target values for the net present values of the premature termination proposal with the aim of conditionally increasing the credit exposures between two parties or other parties and/or conditionally increasing collateral obligations, and the central processing station is arranged to calculate an optimal premature termination proposal based on the given total net present value and a set of criteria, which set includes a minimal aggregated risk.

11. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the parties can set target values for the at least one risk characteristic parameter of a proposal in such a way that existing exposures to one or more of the risk characteristic parameters can be conditionally increased, and the central processing station is arranged to calculate an optimal premature termination proposal based on the target value for the at least one risk characteristic parameter and a set of criteria, which set includes a minimal aggregated net present value.

12. A system according to claim 7, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the central processing station is arranged to use both party'"'"'s valuations of the net present value and their tolerance limits to produce a list of all OTC derivative transactions where the individual or aggregated net present value of the transactions are such that it is favorable to both parties to the transactions to terminate the OTC derivative transactions prematurely when both party'"'"'s valuations of the net present value are within both party'"'"'s tolerance limits.

13. A system according to claim 5, wherein each party'"'"'s input/output and processing station is arranged to send to the central processing station information specifying:

which transaction records should not be considered in the composition of the premature termination proposal; and

whether the party will allow partial terminations of existing transaction records.

14. A system according to claim 5, wherein the central processing station is arranged to produce legally binding trade terminations if all pre-agreed parameters are met.

15. A system according to claim 5, wherein the premature termination proposal comprises a plurality of linked OTC derivative transactions between two parties.

16. A system according to claim 5, wherein the combining means is arranged to produce a multilateral premature termination proposal from a combination process using linked OTC derivative transactions between three or more parties.

17. A system according to claim 16, wherein there are three or more parties providing records via their input/output and processing stations for generating a multilateral premature termination proposal between the parties, the central processing station is arranged to generate risk-neutral premature termination proposals in which target values and tolerance limits for one party are applied to the sum of all OTC derivative transactions of all the premature termination proposals with other parties.

18. A system according to claim 16, wherein the central processing station is arranged to select three or more parties having circular claims and the combination means is arranged to construct the proposal with claims and debts between parties in the premature termination proposal reduced by the same amounts for each party such that none of the parties is required to make a net payment exceeding a cash payment tolerance set by that party.

19. A system according to claim 5, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the central processing station is arranged, for each new OTC derivative transaction that a party is about to make, to generate a list of parties with whom it would be favorable to execute the transaction, the central processing station generating the list by finding the parties where adding the OTC derivative transaction would lower the net exposure to the at least one risk characteristic parameter, thereby making the sum of the OTC derivative transactions less prone to shifts in the valuation parameters and possibly allow for a proposal in the near future, or where the OTC derivative transaction would reduce current credit exposure.

20. A system according to claim 18, wherein the central processing station is arranged to generate and send an automated quote request to other parties via the communications network, the other parties being selected by the central processing station based on preferences entered by the existing parties via their input/output and processing stations where the OTC derivative transaction would be most favorable in terms of a combination of risk and/or credit exposure and the price of concluding the OTC derivative transaction.

21. A method of creating proposals for prematurely terminating outstanding OTC (Over The Counter) derivative transactions between a plurality of parties, the method comprising:

transmitting transaction records of OTC derivative transactions by parties from at least one of a plurality data input/output and processing stations to a central processing station via a communications network operatively interconnecting all of the stations, wherein each of the OTC derivative transactions is between two parties and is described by a plurality of transaction records including a transaction record from each of the plurality of parties to the OTC derivative transaction providing each party'"'"'s view of the OTC derivative transaction, wherein each of the transaction records includes trade details identifying the OTC derivative transaction, wherein the trade details at least specify two parties to the OTC derivative transaction, wherein the transaction records includes a designated maturity date of the OTC derivative transaction;

linking together at the central station, by a processor of the central station, two transaction records received from two different parties relating to the same OTC derivative transaction, the linking step using a plurality of trade details for each record that uniquely identify the OTC derivative transaction of the record;

combining together a plurality of linked transaction records to determine a premature termination proposal for prematurely terminating a plurality of linked OTC derivative transactions prior to their designated maturity dates, wherein the proposal is for premature termination at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and at which there is no obligation for the parties involved to make a premature termination; and

transmitting the premature termination proposal to the data input/output and processing stations of the respective involved parties in the premature termination proposal.

22. A system according to claim 21, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction, wherein the transaction record includes one party'"'"'s subjective valuation of the net present value of the OTC derivative transaction and at least one risk characteristic parameter of the OTC derivative transaction, and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction;

and

wherein the risk characteristics sent via the at least one of the data input/output stations are indicated as Greeks.

23. A system for prematurely terminating outstanding OTC derivative transactions between a plurality of parties before designated maturity dates of the derivative transactions, the system comprising:

a processing station arranged to receive transaction data describing a plurality of OTC derivative transactions including the designated maturity date of each transaction, from a plurality of transaction parties via a communications network, the processing station including a processor and comprising;

a linking module (i) for linking together different versions of the same OTC derivative transaction, each version being received from a different party to that transaction, or (ii) for receiving previously linked groups of the different versions of the same OTC derivative transaction;

an analysis module for determining a set of linked OTC derivative transactions between a plurality of different transaction parties, wherein each transaction party in the set has both debts and claims towards other parties in the set;

a calculation module arranged to calculate an aggregated value of each set of linked OTC derivative transactions and arranged to select the set of linked OTC derivative transactions which has an aggregated value within party-specified tolerance limits acceptable for executing a premature termination, at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and at which there is no obligation for the parties to make a premature termination of the linked OTC derivative transactions of the selected set; and

an execution module for executing a premature termination of the selected set of linked OTC derivative transactions, prior to their respective designated maturity dates.

24. A method of claim 23, wherein the OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction and wherein the two linked transaction records have different or same subjective valuations of the net present value of the same OTC derivative transaction.

25. A method of prematurely terminating outstanding OTC derivative transactions between a plurality of parties before designated maturity dates of the derivative transactions, the method comprising:

receiving, at a computer, transaction data describing a plurality of OTC derivative transactions including the designated maturity date of each transaction, from a plurality of transaction parties via a communications network;

linking together, by a processor of the computer, different versions of the same OTC derivative transaction, each version being received from a different party to that transaction;

determining, by the processor, a set of linked OTC derivative transactions between a plurality of different transaction parties, wherein each transaction party in the set has both debts and claims towards other parties in the set;

calculating an aggregated value of each set of linked OTC derivative transactions;

selecting the set of linked OTC derivative transactions which has an aggregated value within party-specified tolerance limits acceptable for executing a premature termination, at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and at which there is no obligation for the parties to make a premature termination of the linked OTC derivative transactions in the selected set; and

executing a premature termination of the selected set of linked OTC derivative transactions, prior to their designated maturity dates.

26. A method of claim 25, wherein each OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction and the two linked version have different or same subjective valuations of the net present value of the OTC derivative transaction.

27. A system for terminating massive numbers of outstanding derivative transactions between a plurality of parties, each transaction being described by a transaction record originating from at least one of the parties to the transaction, the transaction record including trade details identifying the transaction, the trade details at least specifying two parties to the transaction and the maturity date of the derivative transaction, the system being arranged to reduce the overall number of outstanding active transaction records between the parties and comprising:

a plurality of data input/output and processing stations for transmitting a transaction record and operable by the parties;

a central processing station for receiving transaction records originating from at least one of the parties, with each record relating to a unique transaction;

wherein the stations are for connecting to a communications network operatively interconnecting all of the stations;

wherein the central processing station comprises;

a data store for storing the received transaction records; and

combining means for combining together a plurality of transaction records to determine an early termination proposal for terminating a plurality of the transactions prior to their respective maturity dates, wherein the central processing station is arranged to transmit the early termination proposal to the data input/output and processing stations of the respective parties involved in the proposal for approval.

28. A system according to claim 27, wherein the central processing station further comprises conversion means arranged to convert transaction data received via the communications network into a common format.

29. A system according to claim 27, wherein the transaction record includes one party'"'"'s valuation of the net present value of the transaction, and at least one risk characteristic of the transaction.

30. A system according to claim 29, wherein each party'"'"'s input/output and processing station is arranged to enable the parties to send tolerance limits on the net present value, maturity dates and/or the at least one risk characteristic of the transaction to the central processing station, and the combining means is arranged to utilize the tolerance limits in determining an acceptable combination of linked transaction records which is substantially risk neutral as determined by risk thresholds defined by the tolerance limits of the at least one risk characteristic and within the tolerance limits of the net present values and maturity dates for the transactions specified by both parties.

31. A system according to claim 29, wherein the parties can set target values for the net present values of a proposal with the aim of reducing the credit exposures between two parties or other parties and/or reduce collateral obligations or prevent collateral obligations from occurring, and the central processing station is arranged to calculate an optimal proposal based on the given total net present value and a set of criteria, which set includes a minimal aggregated risk.

32. A system according to claim 29, wherein the parties can set target values for the at least one risk characteristic of a proposal in such a way that existing exposures to one or more of the risk characteristics can be reduced, and the central processing station is arranged to calculate an optimal proposal based on the target value for the at least one risk characteristic and a set of criteria, which set includes a minimal aggregated net present value.

33. A system according to claim 29, wherein the central processing station is arranged to use both parties'"'"' valuations of the net present value and their tolerance limits to produce a list of all transactions where the individual or aggregated net present value of the transactions is such that it is favorable to both parties to the transactions to terminate the transactions when both parties'"'"' valuations of the net present value are within both parties'"'"' tolerance limits.

34. A system according to claim 27, wherein each party'"'"'s input/output and processing station is arranged to send to the central processing station information specifying:

which transaction records should not be considered in the composition of the proposal; and

whether the party will allow partial terminations of existing transaction records.

35. A system according to claim 27, wherein the central processing station is arranged to produce legally binding trade terminations if all pre-agreed parameters are met.

36. A system according to claim 27, wherein the proposal comprises a plurality of linked transaction records between two parties.

37. A system according to claim 27, further comprising linking means for linking together two stored transaction records from two different parties relating to the same transaction, the linking means being arranged to use a plurality of items of the transaction record to determine records from different parties corresponding to the same transaction.

38. A system according to claim 37, wherein the combining means is arranged to produce a multilateral proposal from a combination process using linked transaction records between three or more parties.

39. A system according to claim 38, wherein there are three or more parties providing records via their input/output and processing stations for generating a multi-lateral proposal between the parties, the central processing station is arranged to generate substantially risk neutral proposals in which the target values and tolerance limits for one party are applied to the sum of all transactions of all the proposals with other parties.

40. A system according to claim 38, wherein the central processing station is arranged to select three or more parties having circular claims and the combination means is arranged to construct the proposal with claims and debts between parties in the proposal reduced by the same amounts for each party such that none of the parties is required to make a net payment exceeding a cash payment tolerance set by that party.

41. A system according to claim 27, wherein the central processing station is arranged, for each new transaction that a party is about to make, to generate a list of favorable parties to execute the transaction, the central processing station generating the list of favorable parties by finding the favorable parties as the parties where adding the transaction would lower the net exposure to the at least one risk characteristic, thereby making the sum of the transactions less prone to shifts in the valuation parameters and possibly allow for a proposal in the near future, or where the transaction would reduce current credit exposure.

42. A system according to claim 41, wherein the central processing station is arranged to generate and send an automated quote request to other parties via the communications network, the other parties being selected by the central processing station based on preferences entered by the existing parties via their input/output and processing stations where the transaction would be most favorable in terms of a combination of risk and/or credit exposure and the price of concluding the transaction.

43. A system according to claim 37, wherein the combining means is arranged, on approval of the early termination proposal, to implement the proposal and effect a reduction in the overall number of outstanding derivative transaction records between the parties.

44. A method of terminating a massive number of outstanding derivative transactions between a plurality of parties, where each transaction is described by a transaction record provided by one of the parties to the transaction, the transaction record including trade details identifying the transaction, the trade details at least specifying two parties to the transaction and the maturity date of the derivative transaction, the method reducing the overall number of outstanding active transaction records between the parties and comprising:

transmitting transaction records from data input/output and processing stations of the parties to a central processing station via a communications network operatively interconnecting all of the stations;

receiving and storing at the central processing station the transaction records originating from at least one of the parties, with each record relating to a unique transaction;

combining together a plurality of transaction records to determine an early termination proposal for terminating a plurality of linked transactions prior to their maturity dates;

transmitting the early termination proposal to the data input/output and processing stations of the respective involved parties in the proposal for approval.

45. A computer implemented method of creating a proposal for prematurely terminating outstanding OTC derivative transactions before designated maturity dates of the derivative transactions, wherein each OTC derivative transaction is between two initial parties, the method comprising:

each initial party assigning or novating at least one of a plurality of outstanding OTC derivative transaction to a third party, such that the third party becomes a respective counterparty to each of the initial parties for the at least one OTC derivative transaction;

receiving, at a computer, from a plurality of transaction parties via a communications network, data describing a plurality of OTC derivative transaction records relating to the plurality of outstanding OTC derivative transactions; and

generating, using the received OTC derivative transactions, premature termination proposals consisting of packages of a plurality of OTC derivative transactions having designated maturity dates, wherein each of the proposals involves at least both the initial parties and the counterparty, and wherein the proposals are for premature termination of the linked OTC derivative transactions of the packages according to parameters set by the respective parties involved.

47. A computer implemented method according to claim 45, wherein the generating step comprises generating, using the received OTC derivative transactions and newly generated transactions, premature termination proposals consisting of packages of a plurality of OTC derivative transactions having designated maturity dates.

46. A computer implemented method of creating a proposal for prematurely terminating outstanding OTC derivative transactions before designated maturity dates of the derivative transactions, wherein each OTC derivative transaction is between two initial parties, the method comprising:

each initial party assigning or novating at least one of a plurality of outstanding OTC derivative transactions to a third party, such that the third party becomes a respective counter party to each of the initial parties for the at least one OTC derivative transactions;

receiving, at a computer, from a plurality of transaction parties via a communications network, data describing a plurality of OTC derivative transaction records relating to the plurality of outstanding OTC derivative transactions; and

generating, using the received OTC derivative transactions, a plurality of bilateral premature termination proposals consisting of packages of a plurality of linked OTC derivative transactions having designated maturity dates, wherein at least one of the bilateral proposals involves at least one of the initial parties and the counterparty and a plurality of the bilateral proposals involves both the initial parties and the counterparty, and wherein the proposals are for premature termination of the linked OTC derivative transactions of the packages according to parameters set by the respectively involved parties.

48. A computer implemented method according to claim 46, wherein the generating step comprises generating, using the received OTC derivative transactions and newly generated transactions, a plurality of bilateral premature termination proposals consisting of packages of a plurality of OTC derivative transactions having designated maturity dates.

49. A computer implemented method according to claim 46, wherein the generating step comprises generating, using the received OTC derivative transactions, the plurality of bilateral premature termination proposals consisting of packages of a plurality of OTC derivative transactions having designated maturity dates, wherein each of the bilateral proposals includes at least one of the initial parties.

50. A system for exchanging OTC (Over the Counter) derivatives related data, the system comprising:

a plurality of data input/output and processing stations, an optional central station and a network interconnecting all stations, wherein the data input/output and processing stations are operable by parties participating in OTC derivatives related contracts for transmitting and receiving, through the network, trade details, including designated maturity dates, mark-to-market values and risk characteristics, for existing OTC derivative transactions carried out with other parties, wherein the optional central station is for receiving the trade details over the network from the data input/output and processing stations, wherein the existing OTC derivative transactions include linked OTC derivative transactions for which the trade details are available for both of the parties to the respective existing OTC derivative transaction;

wherein at least one of the data input/output and processing stations or optional central station includes a processor, wherein the processor is operable for generating, using the existing linked OTC derivative transactions, premature termination proposals consisting of packages of a plurality of linked OTC derivative transactions having designated maturity dates, wherein each of the proposals includes at least three involved parties, and wherein the proposals are for premature termination of the linked OTC derivative transactions of the packages at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination of the linked OTC derivative transactions of the packages should take place, and at which there is no obligation for the involved parties to make premature terminations of the linked OTC derivative transactions of the packages, wherein there is substantially no financial loss to all of the involved parties to terminate prematurely before their respective designated maturity dates, according to parameters set by the involved parties;

wherein the at least one station provides the premature termination proposal packages to the involved parties for their approval;

wherein the processor is operable, for each new OTC derivative transaction that one party is about to make, to use the available OTC transaction data regarding the one party to propose a list of counterparties with which there is no substantial financial loss to execute the new OTC derivative transaction, wherein the list is determined by finding counterparties to the one party where adding the new OTC derivative transaction will lower net exposure to one or more of the risk characteristics, thereby making the sum of the OTC derivative transactions of the one party less dependent on changes in valuation parameters and allowing for a premature termination proposal, or where the new OTC derivative transaction reduces current credit exposure of the one party.

51. A system for prematurely terminating outstanding OTC (over the counter) derivative transactions between a plurality of parties, the system comprising:

a processing station including a processor and arranged to receive from a plurality of transaction parties via a communications network trade data describing a plurality of previously linked pairs of OTC derivation transaction records including details of designated maturity dates, mark-to-market values and/or risk characteristics indicated as Greeks, the processing station being arranged to enable each transaction party to set target values for one or more of the Greeks of any proposal for premature termination in such a way that existing exposures to one or more of the Greeks between involved parties can be reduced;

wherein each of the transaction records in a linked pair describes the same OTC derivative transaction, wherein the processor of the processing station is operable for;

establishing a first set of linked pairs of OTC derivative transaction records between a plurality of different transaction parties having different subjective valuations of a net present value of the same OTC derivative transaction, wherein each transaction party in the first set has both debts and claims towards other parties in the first set;

determining, using the first set of linked pairs, a second set of linked pairs of OTC derivative transaction records involving at least three parties and corresponding, respectively, to a second set of OTC derivative transactions, wherein the second set of OTC derivative transactions has an aggregated value calculated by the processor to be substantially risk-neutral by being within party-specified tolerance limits on net present values, maturity dates and within the target values for the one or more Greeks, which are acceptable for executing a premature termination of the second set of OTC derivative transactions prior to their respective designated maturity dates, and is for a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and at which there is no obligation for the involved parties to make a premature termination;

wherein the determining furthering includes using the set target values for the one or more Greeks to reduce existing exposures to the one or more Greeks between the involved parties, and calculating a best premature termination proposal based on different criteria, where a minimal aggregated present value can be one of the different criteria;

generating a package proposal comprising the second set of linked pairs of OTC derivative transactions, and the aggregated value for the second set of OTC derivative transactions; and

providing the package proposal to the respective involved parties of the second set of OTC derivative transactions, whereafter the involved parties may agree to prematurely terminate the linked OTC derivative transactions of the package.

52. A system for exchanging OTC (Over the Counter) derivatives related data comprising:

a plurality of data input/output and processing stations and an optional central station connected to a network interconnecting all stations, wherein the data input/output and processing stations are operable by parties participating in OTC derivatives related contracts for transmitting and receiving, through the network, trade details for existing OTC derivative transactions carried out with other parties, wherein the optional central station is for receiving the trade details over the network from the data input/output and processing stations, wherein the existing OTC derivative transactions include linked OTC derivative transactions for which the trade details are available for both of the parties to the respective existing OTC derivative transaction;

wherein at least one of the data input/output and processing stations or optional central station includes a processor, wherein the processor is operable for generating, using the existing linked OTC derivative transactions, premature termination proposals consisting of packages of a plurality of linked OTC derivative transactions having designated maturity dates, wherein each of the proposals includes at least three involved parties, and wherein the proposals are for premature termination of the linked OTC derivative transactions of the packages at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination of the linked OTC derivative transactions of the packages should take place, and at which there is no obligation for the involved parties to make premature terminations of the linked OTC derivative transactions of the packages, wherein there is substantially no financial loss to all of the involved parties to terminate prematurely before their respective designated maturity dates, according to parameters set by the involved parties;

wherein the at least one station provides the premature termination proposal packages to the involved parties for their approval.

53. The system of claim 52, wherein the trade details transmitted via the data input/output and processing stations include designated maturity dates, mark-to-market values and risk characteristics.

54. The system of claim 53, wherein the risk characteristics transmitted via the data input/output and processing stations are indicated as Greeks.

55. The system of claim 54, wherein the processor, based on tolerance-limits entered by the involved parties on net present values, maturity dates and/or one or more of the Greeks to identify intervals they consider to be risk-neutral, generates the packages having the linked OTC derivative transactions, that aggregated together can be considered to be risk-neutral, whereafter the involved parties may agree to prematurely terminate the linked OTC derivative transactions of the package.

56. The system of claim 55, wherein counterparties of the involved parties can set target values for the net present values of a proposal to reduce credit exposures between said counterparties or other counterparties of the involved parties and/or to reduce collateral obligations or to prevent collateral obligations from occurring, whereafter the system is able, based on the set target net present value, to calculate the best premature termination proposal based on different criteria, where a minimal aggregated risk can be one criterion.

57. The system of claim 55, wherein counterparties of the involved parties can set target values for one or more of the Greeks of a proposal in such a way that existing exposures to one or more of the Greeks between the involved parties can be reduced, whereafter the system is able, based on the set target values for the Greeks, to calculate the best premature termination proposal based on different criteria, where a minimal aggregated present value can be one criterion.

58. The system of claim 54, arranged to produce a list of all OTC derivative transactions where the individual or aggregated mark-to-market valuation of trades are such, that there is substantially no financial loss to both of the involved parties to terminate the OTC derivative transactions, which happens when both of the parties'"'"' valuations are within both of the parties'"'"' tolerance ranges.

59. The system of claim 55, wherein counterparties of the involved parties each enter into the system data specifying:

which OTC derivative transactions should not be considered in the composition of proposals; and

allowability of partial premature terminations of existing OTC derivative transactions.

60. The system of claim 55, wherein the system produces legally binding trade terminations if all pre-agreed parameters are met.

61. The system of claim 53, wherein several bilateral sub-proposals are produced from a matching process between three or more of the involved parties.

62. The system of claim 61, wherein the parameters of each of the several bilateral sub-proposals including the risk characteristics target values and tolerance limits for each of the involved parties are summed and considered for determining acceptable risk-neutral packages.

63. The system of claim 62, wherein the system selects the involved parties in such a way that they have circular claims, and designs the premature termination proposals in such a way that the claims are reduced.

64. The system of claim 53, arranged, for each new OTC derivative transaction that one user is about to make, to propose a list of counterparties with which there is no substantial financial loss to execute the new OTC derivative transaction, which is done by finding the counterparties where adding the new OTC derivative transaction will lower net exposure to one or more of the risk characteristics, thereby making the sum of the OTC derivative transactions less dependent on changes in valuation parameters and allow for a premature termination proposal, or where the new OTC derivative transaction reduces current credit exposure.

65. The system of claim 64, wherein automated quote requests are sent to other participants, using the network, and to counterparties of the involved parties selected by the system based upon preferences entered by the users where there is no substantial financial loss for the new OTC derivative transaction from a combination of risk and/or credit exposure point of view as well as from a price at which the new OTC derivative transaction is concluded.

66. The system of claim 52, wherein the processor is operable for generating the proposals using at least one linked OTC derivative transaction created by the processor.

67. The system of claim 52, wherein several bilateral sub-proposals are produced from a matching process between three or more of the involved parties.

75. The system of claim 52, wherein the existing OTC derivative transactions include at least a first linked OTC derivative transaction, which has previously been assigned or novated from another party to one of the parties submitting the trade details with the approval of a counterparty to the first OTC transaction.

68. A system for prematurely terminating outstanding OTC (over the counter) derivative transactions between a plurality of parties comprising:

a processing station including a processor and arranged to receive from a plurality of transaction parties via a communications network data describing a plurality of previously linked pairs of OTC derivation transaction records, wherein each of the transaction records in a linked pair describes the same OTC derivative transaction, wherein the processor of the processing station is operable for;

determining a first set of linked pairs of OTC derivative transaction records between a plurality of different transaction parties having different subjective valuations of a net present value of the same OTC derivative transaction, wherein each transaction party in the first set has both debts and claims towards other parties in the first set;

determining, using the first set of linked pairs, a second set of linked pairs of OTC derivative transaction records involving at least three parties and corresponding, respectively, to a second set of OTC derivative transactions, wherein the second set of OTC derivative transactions has an aggregated value calculated by the processor within party-specified tolerance limits acceptable for executing a premature termination of the second set of OTC derivative transactions prior to their designated maturity dates, and is for a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and where there is no obligation for the involved parties to make a premature termination; and

wherein the processing station is operable for providing the aggregated value for the second set of OTC derivative transactions to the respective involved parties of the second set of OTC derivative transactions.

69. The system of claim 68, wherein the processor is operable for determining the second set of linked pairs of OTC derivative transaction records corresponding to the second set of OTC derivation transactions having the aggregated value, using at least one linked pair of OTC derivative transaction records created by the processor.

70. A computer-implemented method of prematurely terminating outstanding OTC derivative transactions between a plurality of parties, the method comprising:

receiving, at a computer, from a plurality of transaction parties via a communications network, data describing a plurality of previously linked pairs of OTC derivative transaction records, wherein each of the transaction records in a linked pair describes the same OTC derivative transaction having a designated maturity date;

determining, by a processor of the computer, a first set of linked pairs of OTC derivative transaction records between a plurality of different transaction parties having different subjective valuations of a net present value of the same OTC derivative transaction, wherein each transaction party in the first set has both debts and claims towards other parties in the first set;

determining, by the processor using the first set of linked pairs, a second set of linked pairs of OTC derivative transaction records involving at least three parties and corresponding, respectively, to a second set of OTC derivative transactions, wherein the second set of OTC derivative transactions has an aggregated value calculated by the processor within party-specified tolerance limits acceptable for executing a premature termination of the second set of OTC derivative transactions prior to their designated maturity dates, and is for a date at which there is no prescribed value and no prescribed method of determining a value at which the termination should take place, and where there is no obligation for the involved parties to make a premature termination; and

providing, by the computer, the aggregated value for the second set of OTC derivative transactions to the respective involved parties of the second set of OTC derivative transactions.

71. The method of claim 70, wherein the determining of the second set of linked pairs of OTC derivative transaction records corresponding to the second set of OTC derivation transactions having the aggregated value includes using at least one linked pair of OTC derivative transaction records created by the processor.

72. A computer-implemented method for exchanging OTC (Over the Counter) derivatives related data, wherein the OTC derivatives related data describe OTC derivative transactions having designated maturity dates, the method comprising:

transmitting trade details by parties involved in OTC derivatives related contracts using at least one of a plurality of data input/output and processing stations, wherein a network interconnects the data input/output and processing stations and an optional central station, wherein the transmitting of the trade details by the parties is through the network to each other or the central station for OTC derivative transactions done with other parties, and wherein each party'"'"'s transmitted trade details are for existing OTC derivative transactions carried out with other parties, wherein the existing OTC derivative transactions include linked OTC derivative transactions for which the trade details are available for both of the parties to the respective existing OTC derivative transaction;

generating, by a processor of at least one of the data input/output and processing stations or the central station, using the existing linked OTC derivative transactions, premature termination consisting of packages of a plurality of linked OTC derivative transactions involving at least three parties and having designated maturity dates, wherein the proposals are for premature termination of the linked OTC derivative transactions of the packages at a date at which there is no prescribed value and no prescribed method of determining a value at which the termination of the linked OTC derivative transactions of the packages should take place, and at which there is no obligation for the involved parties to make premature terminations of the linked OTC derivative transactions of the packages, wherein there is substantially no financial loss to all of the involved parties to terminate prematurely before their respective designated maturity dates, according to parameters set by the involved parties; and

providing, by the at least one station, the premature termination proposal packages to the involved parties for their approval.

73. The method of claim 72, wherein the generating of the proposals includes using at least one linked OTC derivative transaction created by the processor.

74. The method of claim 72, wherein the transmitting step comprises transmitting at least a first linked OTC derivative transaction, which has previously been assigned or novated from another party to one of the parties submitting the trade details with the approval of a counterparty to the first OTC transaction.