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

• US 8,156,038 B2
• Filed: 07/18/2011
• Issued: 04/10/2012
• Est. Priority Date: 11/24/1999
• Status: Expired due to Term

• Current Assignee: CME Group Incorporated
• Original Assignee: TriOptima AB (CME Group Incorporated)
• Inventors: Brouwer, Derk Pieter
• Primary Examiner(s): Patel, Jagdish
• Assistant Examiner(s): Bartley, Kenneth
• Application Number:
  US13/184,817
• Publication Number:
  US 20110276460A1
• Time in Patent Office: 267 Days
• Field of Search: 705/35, 705/37, 705/38
• 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 prematurely terminating outstanding OTC (Over The Counter) 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 operable for;

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

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;

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

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

2. The system of claim 1, 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 two linked transaction records have different or same subjective valuations of a net present value of the same OTC derivative transaction.

3. A method of prematurely terminating outstanding OTC (Over The Counter) 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.

4. The method of claim 3, wherein each OTC derivative transaction is a privately negotiated contract requiring each party to carry out its own subjective valuation of the transaction and two linked versions have different or same subjective valuations of a net present value of the OTC derivative transaction.

5. A system for prematurely terminating outstanding OTC (Over The Counter) 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 operable for;

receiving previously linked groups of different versions of the same OTC derivative transaction, each version having previously been received from a different party to that transaction;

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;

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

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

6. The system of 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 and wherein two linked transaction records have different or same subjective valuations of a net present value of the same OTC derivative transaction.