SYSTEM AND METHOD FOR CONDUCTING AN EXCHANGE AUCTION

• US 20150170281A1
• Filed: 02/27/2015
• Published: 06/18/2015
• Est. Priority Date: 02/15/2013
• Status: Active Application

• Current Assignee: Creditex Group, Inc. (TP ICAP Plc)
• Original Assignee: Creditex Group, Inc. (TP ICAP Plc)
• Inventors: Crowley, Chris, Rowell, Mark
• Application Number:
  US14/633,445
• Publication Number:
  US 20150170281A1
• Time in Patent Office: Days
• US Class Current: 1/1
• 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 method for conducting an exchange auction includes a computer receiving financial positions data defining long and short positions associated with a first financial instrument. The method further includes matching, by the computer, one of the short positions and one of the long positions and generating a first proposed trade including the matched positions. The method further includes generating, by the computer, a second proposed trade including a short position and long position associated with second financial instrument, such that a net notion of the first proposed is equal to a notional of the second propose trade. The method further includes executing the first and second proposed trades.

Claims

1. A method of conducting an exchange auction, the method comprising:

receiving, by at least one computer, financial position data defining one or more long positions and one or more short positions associated with a first financial asset;

matching, by the at least one computer, at least one of the one or more long positions with at least one of the one or more short positions associated with said first financial asset;

generating, by the at least one computer, a first proposed trade that includes the matched positions;

generating, by the at least one computer, a second proposed trade that includes one or more long positions and one or more short positions associated with a second financial asset, wherein a net notional associated with the first proposed trade is equal to a net notional associated with the second proposed trade; and

executing the first proposed trade and the second proposed trade.

2. The method of claim 1, wherein the first proposed trade is simultaneously executed with the second trade.

3. The method of claim 1, wherein each of the first financial asset and the second financial asset is a type of a derivative associated with a same underlying financial asset.

4. The method of claim 3, wherein the first financial asset is a modified restructuring (MR) credit default swap (CDS) contract and the second financial asset is a no restructuring (NR) CDS contract.

5. The method of claim 1, wherein executing the first proposed trade results in offsetting at least a portion of at least one of the matched positions.

6. The method of claim 5, wherein the long and short positions included in the second proposed trade correspond to offset portions of the matched positions that would result from executing the first proposed trade.

7. The method of claim 1, wherein the financial position data is received in response to an invitation, generated by the at least one computer, inviting one or more traders to participate in an exchange auction, said financial position data being received from one or more traders'"'"' computing devices in communication with the at least one computer.

8. The method of claim 1, further comprising:

receiving proposed mid-price data associated with the first financial asset;

calculating a trade price for the first proposed trade based on the proposed mid-price data associated with said first financial asset;

receiving proposed mid-price data associated with the second financial asset; and

calculating a trade price for the second proposed trade based on the proposed mid-price data associated with the second financial asset.

9. The method of claim 1, further comprising:

receiving proposed mid-price data associated with at least one of the first financial asset and the second financial asset;

receiving a proposed spread between the first financial asset and the second financial asset; and

calculating a trade price for the first proposed trade and a trade price for the second proposed trade based on the proposed mid-price data and the proposed spread.

10. The method of claim 1, wherein at least one of the matched long positions is held by a first trader and at least one of the matched short positions is held by a second trader, and wherein the first trader and the second trader are counterparties to each of the first proposed trade and the second proposed trade.

11. The method of claim 1, further comprising:

presenting the first proposed trade and the second proposed trade to a first trader and a second trader via one or more trader computing devices for approval; and

receiving an opt-out indication from at least one of the first trader and the second trader via the one or more trader computing devices, wherein receipt of said opt-out indication prevents execution of both the first proposed trade and the second trade,

wherein if the opt-out indication is received from only one of the first and second traders, repeating the matching and generating steps for at least one of the matched positions belonging to the trader from which the opt-out indication was not received.

12. The method of claim 1, wherein at least one of the long positions and short positions associated with the second financial asset is a replacement position for at least one of the matched positions associated with the first financial asset, and wherein at least one of the long positions and short positions has a notional that is equal to a notional of at least one of the matched positions.

13. The method of claim 1, wherein the financial position data is received during a predetermined time window.

14. The method of claim 1, wherein the financial position data includes position tenor data that indicates a tenor of between zero and ten years, in quarterly increments, for the long and short positions defined by said financial position data.

15. The method of claim 1, wherein the matching step comprises multi-laterally matching three or more positions associated with the first financial asset such that at least one long position is matched with two or more short positions or at least one short position is matched with two or more long positions, wherein generating the first proposed trade comprises generating a first collection of proposed bilateral trades involving the multi-laterally matched positions, and wherein generating the second proposed trade includes generating a second collection of bilateral trades involving long and short positions associated with the second financial asset.

16. A system for conducting an exchange auction, the system comprising:

an electronic auction server comprising at least on processor and at least one non-transitory computer-readable storage medium having computer-readable program code portions stored therein, wherein the computer-readable program code portions, when executed, cause the electronic auction server to;

receive financial position data defining one or more long positions and one or more short positions associated with a first financial asset;

match at least one of the one or more long positions with at least one of the one or more short positions associated with said first financial asset;

generate a first proposed trade that includes the matched positions;

generate a second proposed trade that includes one or more long positions and one or more short positions associated with a second financial asset, wherein a net notional associated with the first proposed trade is equal to a net notional associated with the second proposed trade; and

execute the first proposed trade and the second proposed trade.

17. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to execute the first proposed trade simultaneously with the second trade.

18. The system of claim 16, wherein each of the first financial asset and the second financial asset is a type of a derivative associated with a same underlying financial asset.

19. The system of claim 18, wherein the first financial asset is a modified restructuring (MR) credit default swap (CDS) contract and the second financial asset is a no restructuring (NR) CDS contract.

20. The system of claim 16, wherein executing the first proposed trade results in offsetting at least a portion of at least one of the matched positions.

21. The system of claim 20, wherein the long and short positions included in the second proposed trade correspond to offset portions of the matched positions that would result from executing the first proposed trade.

22. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to receive the financial position data in response to an invitation, generated by the electronic exchange server, inviting one or more traders to participate in an exchange auction, said financial position data being received from one or more traders'"'"' computing devices in communication with the electronic exchange server.

23. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to:

receive proposed mid-price data associated with the first financial asset;

calculate a trade price for the first proposed trade based on the proposed mid-price data associated with said first financial asset;

receive proposed mid-price data associated with the second financial asset; and

calculate a trade price for the second proposed trade based on the proposed mid-price data associated with the second financial asset.

24. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to:

receive proposed mid-price data associated with at least one of the first financial asset and the second financial asset;

receive a proposed spread between the first financial asset and the second financial asset; and

calculate a trade price for the first proposed trade and a trade price for the second proposed trade based on the proposed mid-price data and the proposed spread.

25. The system of claim 16, wherein at least one of the matched long positions is held by a first trader and at least one of the matched short positions is held by a second trader, and wherein the first trader and the second trader are counterparties to each of the first proposed trade and the second proposed trade.

26. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to:

present the first proposed trade and the second proposed trade to a first trader and a second trader via one or more trader computing devices for approval; and

receive an opt-out indication from at least one of the first trader and the second trader via the one or more trader computing devices, wherein receipt of said opt-out indication prevents execution of both the first proposed trade and the second trade,

wherein if the opt-out indication is received from only one of the first and second traders, the computer-readable program code portions further causing the electronic exchange server to repeat the matching and generating steps for at least one of the matched positions belonging to the trader from which the opt-out indication was not received.

27. The system of claim 16, wherein at least one of the long positions and short positions associated with the second financial asset is a replacement position for at least one of the matched positions associated with the first financial asset, and wherein at least one of the long positions and short positions has a notional that is equal to a notional of at least one of the matched positions.

28. The system of claim 16, wherein the financial position data is received by the electronic exchange server during a predetermined time window.

29. The system of claim 16, wherein the financial position data includes position tenor data that indicates a tenor of between zero and ten years, in quarterly increments, for the long and short positions defined by said financial position data.

30. The system of claim 16, wherein the computer-readable program code portions further cause the electronic exchange server to multi-laterally match three or more financial positions associated with the first financial asset such that at least one long position is matched with two or more short positions or at least one short position is matched with two or more long positions, wherein generating the first proposed trade comprises generating a first collection of proposed bilateral trades involving the multi-laterally matched positions, and wherein generating the second proposed trade includes generating a second collection of bilateral trades involving long and short positions associated with the second financial asset.