U.S. patent application number 14/330820 was filed with the patent office on 2014-10-30 for trade matching platform with variable pricing based on clearing relationships.
The applicant listed for this patent is Chicago Mercantile Exchange Inc.. Invention is credited to Paul J. Callaway, James W. Farrell, Barry L. Galster, Pearce Peck-Walden, Ari Studnitzer.
Application Number | 20140324668 14/330820 |
Document ID | / |
Family ID | 48871114 |
Filed Date | 2014-10-30 |
United States Patent
Application |
20140324668 |
Kind Code |
A1 |
Studnitzer; Ari ; et
al. |
October 30, 2014 |
Trade Matching Platform with Variable Pricing Based on Clearing
Relationships
Abstract
The disclosure describes systems and methods for using enhanced
RFQs and incoming enhanced orders to assist in detecting implied
orders using an implied spread determination module. In one
example, a system includes a processor and memory storing a search
list and computer-executable instructions, where the instructions
determine whether the financial instrument associated with an eRFQ
or new enhanced order is on the search list, and then determine if
an implied order exists in combination with that financial
instrument and CCP attribute designations. In some embodiments, a
timer may be used to track a predetermined amount of time to spend
towards determining if implied orders exist for a particular
financial instrument at particular clearing houses.
Inventors: |
Studnitzer; Ari;
(Northbrook, IL) ; Peck-Walden; Pearce; (Chicago,
IL) ; Farrell; James W.; (Wheaton, IL) ;
Callaway; Paul J.; (Chicago, IL) ; Galster; Barry
L.; (Chicago, IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Chicago Mercantile Exchange Inc. |
Chicago |
IL |
US |
|
|
Family ID: |
48871114 |
Appl. No.: |
14/330820 |
Filed: |
July 14, 2014 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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13564234 |
Aug 1, 2012 |
8781948 |
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14330820 |
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13437583 |
Apr 2, 2012 |
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13564234 |
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13312535 |
Dec 6, 2011 |
8626639 |
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13437583 |
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61438933 |
Feb 2, 2011 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20120101
G06Q040/04 |
Claims
1. A computer-assisted method comprising: receiving an enhanced
request for quote (eRFQ) at a request for quote processor module,
wherein the eRFQ includes an attribute configured to identify at
least one clearing house, wherein the eRFQ includes an inquiry
regarding the current market for a financial instrument associated
with the eRFQ; determining, using an implied spread determination
module, that the financial instrument associated with the eRFQ in
combination with one or more resting orders creates an implied
spread, the implied spread comprising multiple legs, a first of the
multiple legs corresponding to the financial instrument associated
with the eRFQ and a second leg of the multiple legs corresponding
to a resting order of the one or more resting orders; determining,
using the implied spread determination module, that the attribute
of the eRFQ configured to identify at least one clearing house in
combination with clearing house requirements of one or more resting
orders allows clearing of appropriate matched legs; and sending,
using the implied spread determination module, a notification of
the created implied spread to an electronic match engine for
matching, the matching including executing all the multiple legs of
the implied spread.
2. The method of claim 1, further comprising: comparing, using the
request for quote processor module, the financial instrument
associated with the eRFQ to a search list, the search list
comprising a plurality of financial instruments to be monitored for
implied spreads; and wherein the two determining steps result from
the financial instrument associated with the eRFQ being in the
search list.
3. The method of claim 2, where the comparing includes: comparing
the financial instrument associated with the eRFQ to a collection
of needed orders which are generated based on requirements of
acceptable trade templates.
4. The method of claim 3, where the two determining steps occur in
parallel with and apart from an electronic match engine in the
exchange computer system, the method further comprising: updating
the collection of needed orders based on the two determining steps
occurring in parallel apart from the electronic match engine.
5. The method of claim 1, where the financial instrument associated
with the eRFQ is a synthetic implied spread order comprising
information to facilitate matching by the electronic match engine
of the synthetic implied spread order with the one or more resting
orders, the information comprising order book identifiers; where
the determining includes verifying the information that facilitates
matching of the synthetic implied spread order, including
confirming status of orders in order books corresponding to the
order book identifiers; and where the matching by the electronic
match engine includes using the information of the implied spread
order to facilitate matching.
6. The method of claim 1, the two determining steps occurring in at
least one remote computer outside the exchange.
7. The method of claim 1, wherein the financial instrument
associated with the eRFQ is one of: an outright order for a futures
contract, a spread order for a futures contract, and an outright
order for an options contract.
8. A computerized apparatus comprising: a computer processor
configured to execute computer-executable instructions; and a
computer memory storing a search list and the computer-executable
instructions, which when executed by the computer processor, cause
or enable the apparatus to: receive an enhanced order, wherein the
enhanced order includes an attribute configured to identify at
least one clearing house, wherein the enhanced order includes a
request to buy or sell a financial instrument; determine, using an
implied spread determination module, that a combination of the
enhanced order with one or more resting orders for the financial
instrument creates an implied spread, the implied spread comprising
multiple legs, a first of the multiple legs corresponding to the
financial instrument associated with the enhanced order and a
second leg of the multiple legs corresponding to a resting order of
the one or more resting orders; determine, using the implied spread
determination module, that the attribute of the enhanced order
configured to identify at least one clearing house in combination
with clearing house requirements of one or more resting orders
allows clearing of appropriate matched legs; and send a
notification of the created implied spread to an electronic match
engine for matching, the matching including executing all the
multiple legs of the implied spread.
9. The apparatus of claim 8, where the search list comprises a
plurality of financial instruments to be monitored for implied
spreads and is updated based on the determining occurring in the
implied spread determination module that the combination of one or
more resting orders creates an implied spread.
10. The apparatus of claim 8, where the search list is emptied to
prevent determination of whether the financial instrument
associated with the new enhanced order creates an implied
order.
11. The apparatus of claim 8, where the financial instrument is one
of a futures contract and an options contract.
12. A computer-assisted method comprising: receiving an enhanced
order at an electronic match engine, wherein the enhanced order
includes an attribute configured to identify at least one clearing
house, wherein the enhanced order includes a request to buy or sell
a financial instrument; determining, using an implied spread
determination module, that a combination of the enhanced order with
one or more resting orders for the financial instrument creates an
implied spread, the implied spread comprising multiple legs, a
first of the multiple legs corresponding to the financial
instrument associated with the enhanced order and a second leg of
the multiple legs corresponding to a resting order of the one or
more resting orders; determining, using the implied spread
determination module, that the attribute of the enhanced order
configured to identify at least one clearing house in combination
with clearing house requirements of one or more resting orders
allows clearing of appropriate matched legs; and sending, using the
implied spread determination module, a notification of the created
implied spread to the electronic match engine for matching, the
matching including executing all the multiple legs of the implied
spread.
13. The method of claim 12, further comprising: comparing the
financial instrument associated with the enhanced order to a search
list, the search list comprising a plurality of financial
instruments to be monitored for implied spreads; and wherein the
two determining steps result from the financial instrument
associated with the enhanced order being in the search list.
14. The method of claim 13, where the comparing includes: comparing
the financial instrument associated with the enhanced order to a
collection of needed orders which are generated based on
requirements of acceptable trade templates.
15. The method of claim 12, where the two determining steps occur
in parallel with and apart from an electronic match engine in the
exchange computer system, the method further comprising: updating
the collection of needed orders based on the two determining steps
occurring in parallel apart from the electronic match engine.
16. The method of claim 12, where the financial instrument
associated with the enhanced order is a synthetic implied spread
order comprising information to facilitate matching by the
electronic match engine of the synthetic implied spread order with
the one or more resting orders, the information comprising order
book identifiers; where the determining includes verifying the
information that facilitates matching of the synthetic implied
spread order, including confirming status of orders in order books
corresponding to the order book identifiers; and where the matching
by the electronic match engine includes using the information of
the implied spread order to facilitate matching.
17. The method of claim 12, the two determining steps occurring in
at least one remote computer outside the exchange.
18. The method of claim 12, wherein the financial instrument
associated with the enhanced order is one of: an outright order for
a futures contract, a spread order for a futures contract, and an
outright order for an options contract.
19. A tangible computer-readable medium storing computer-executable
instructions that when executed by a processor cause a computing
device to perform steps comprising: receiving an enhanced request
for quote (eRFQ) at a request for quote processor module, wherein
the eRFQ includes an attribute configured to identify at least one
clearing house, wherein the eRFQ includes an inquiry regarding the
current market for a financial instrument associated with the eRFQ;
determining, using an implied spread determination module, that the
financial instrument associated with the eRFQ in combination with
one or more resting orders creates an implied spread, the implied
spread comprising multiple legs, a first of the multiple legs
corresponding to the financial instrument associated with the eRFQ
and a second leg of the multiple legs corresponding to a resting
order of the one or more resting orders; determining, using the
implied spread determination module, that the attribute of the eRFQ
configured to identify at least one clearing house in combination
with clearing house requirements of one or more resting orders
allows clearing of appropriate matched legs; and sending, using the
implied spread determination module, a notification of the created
implied spread to an electronic match engine for matching, the
matching including executing all the multiple legs of the implied
spread.
20. The computer-readable medium of claim 19 further storing
computer-executable instructions that when executed by the
processor cause the computing device to perform steps comprising:
comparing, using the request for quote processor module, the
financial instrument associated with the eRFQ to a search list, the
search list comprising a plurality of financial instruments to be
monitored for implied spreads; and wherein the two determining
steps result from the financial instrument associated with the eRFQ
being in the search list; and wherein the comparing includes
comparing the financial instrument associated with the eRFQ to a
collection of needed orders which are generated based on
requirements of acceptable trade templates.
Description
[0001] This application is a continuation of U.S. patent
application Ser. No. 13/564,234 (Attorney Docket No. 006119.00280;
and U.S. Pat. No. 8,781,948), filed Aug. 1, 2012, which is a
continuation-in-part of U.S. patent application Ser. No. 13/437,583
(Attorney Docket No. 006119.00270), filed Apr. 2, 2012, which is a
continuation-in-part of U.S. patent application Ser. No. 13/312,535
(Attorney Docket No. 006119.00230; and U.S. Pat. No. 8,626,639),
filed Dec. 6, 2011, which claims priority from U.S. Provisional
Patent Application Ser. No. 61/438,933 (Attorney Docket No.
006119.00225), filed Feb. 2, 2011, all of which are herein
incorporated by reference in their entireties.
[0002] This application is related to U.S. patent application Ser.
No. 12/817,610 (Attorney Docket No. 006119.00176), filed Jun. 17,
2010, entitled "Generating Implied Orders Based on Electronic
Requests for Quotes," which is herein incorporated by reference in
its entirety and was previously incorporated by reference in a
priority application to this filing.
[0003] This application is also related to U.S. patent application
Ser. No. 12/176,130 (Attorney Docket No. 006119.00131), filed Jul.
18, 2008, entitled "Adaptive Implied Spread Matching," which is
herein incorporated by reference in its entirety and was previously
incorporated by reference in a priority application to this
filing.
BACKGROUND
[0004] In the financial industry, credit default swaps (CDSs),
request for quotes (RFQs), spread orders, and implied orders are
well known.
[0005] A credit default swap (CDS) is a swap contract in which the
buyer of the CDS makes a series of payments to the seller and, in
exchange, receives a payoff if a credit instrument (typically a
bond or loan) goes into default (fails to pay). Less commonly, the
credit event that triggers the payoff can be a company undergoing
restructuring, bankruptcy, or even just having its credit rating
downgraded. There are two competing theories usually advanced for
the pricing of credit default swaps. The first, referred to as the
`probability model`, takes the present value of a series of cash
flows weighted by their probability of non-default. This method
suggests that credit default swaps should trade at a considerably
lower spread than corporate bonds. The second model, proposed by
Darrell Duffie, but also by John Hull and White, uses a
no-arbitrage approach. Various techniques for valuing credit
default swaps and determining their settlement price are known in
the industry.
[0006] In addition, traders (and others) may submit a request for
quote (RFQ or electronic RFQ) to an exchange and/or a regulated
trading platform. RFQs are similar to orders submitted to an
exchange, however, RFQs differ from an order in that an RFQ is not
binding and not actionable. RFQs are well known in the art and
commonly used by traders, clearing houses, and/or exchanges to
inquire as to the current market for a particular financial
instrument. RFQs, however, are sometimes abused. For example, a
trader may flood the market with RFQs in an attempt to ascertain
other traders' positions on particular financial instruments
without binding himself to an order. Those that respond to RFQs
(e.g., market makers, other traders, etc.) may disregard the RFQs
due to the enormous quantity of RFQs. Unfortunately, a non-abusive
RFQ may be left unresponded to because of such behavior.
Furthermore, in some scenarios, market makers, which although they
are under a contractual obligation to respond to RFQs, may still be
less than diligent in responding to RFQs, thus resulting in a
negative perception of an exchange. In addition to RFQs, traders
may initially request non-binding indicative quotes from market
makers, such as described in FIG. 3A and other portions of U.S.
Pat. No. 7,584,140, entitled "Method and System for Providing
Option Spread Indicative Quotes," which is incorporated by
reference in its entirety herein.
[0007] In addition, traders sometimes desire to trade multiple
financial instruments in combination using what is often called a
spread order. Each component of the combination is called a leg.
Traders can define the combination (e.g., an exchange-defined
combination) and submit orders for each leg or in some cases can
submit a single order for multiple financial instruments to avoid
leg risk. Such orders may be called a strategy order, a spread
order, or a variety of other names. For example, a spread is an
order for the price difference between two contracts with the
objective of profiting from a change in the price relationship. The
counterparty orders that are matched against the aforementioned
combination orders may be individual, "outright" orders or may be
part of other combination orders. In the case of spread orders, the
matching system may imply the counter party order by using multiple
orders to create the counter party order. Examples of spreads
include crack, crush, straddle, strangle, butterfly, calendar, and
pack spreads.
[0008] Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 explains that a spread is an order for the price
difference between two contracts. This results in the trader
holding a long and a short position in two or more related futures
or options on futures contracts, with the objective of profiting
from a change in the price relationship. A butterfly spread is an
order for two inter-delivery spreads in opposite directions with
the center delivery month common to both spreads. A calendar
spread, also called a intra-commodity spread, for futures is an
order for the simultaneous purchase and sale of the same futures
contract in different contract months. (i.e., buying a September
CME S&P 500.RTM. futures contract and selling a December CME
S&P 500 futures contract). A crush spread is an order, usually
in the soybean futures market, for the simultaneous purchase of
soybean futures and the sale of soybean meal and soybean oil
futures to establish a processing margin. A crack spread is an
order for a specific spread trade involving simultaneously buying
and selling contracts in crude oil and one or more derivative
products, typically gasoline and heating oil. Oil refineries may
trade a crack spread to hedge the price risk of their operations,
while speculators attempt to profit from a change in the
oil/gasoline price differential.
[0009] Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 further explains that a straddle is an order for the
purchase or sale of an equal number of puts and calls, with the
same strike price and expiration dates. A long straddle is a
straddle in which a long position is taken in both a put and a call
option. A short straddle is a straddle in which a short position is
taken in both a put and a call option. A strangle is an order for
the purchase of a put and a call, in which the options have the
same expiration and the put strike is lower than the call strike,
called a long strangle. Also the sale of a put and a call, in which
the options have the same expiration and the put strike is lower
than the call strike, called a short strangle. A pack is an order
for the simultaneous purchase or sale of an equally weighted,
consecutive series of four futures contracts, quoted on an average
net change basis from the previous day's settlement price. Packs
provide a readily available, widely accepted method for executing
multiple futures contracts with a single transaction. A bundle is
an order for the simultaneous sale or purchase of one each of a
series of consecutive futures contracts. Bundles provide a readily
available, widely accepted method for executing multiple futures
contracts with a single transaction.
[0010] Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 further explains that by linking the spread and outright
markets, implied spread trading increases market liquidity. For
example, a buy in one contract month and an offer in another
contract month in the same futures contract can create an implied
market in the corresponding calendar spread. An exchange may match
an order for a spread product with another order for the spread
product. Some existing exchanges attempt to match orders for spread
products with multiple orders for legs of the spread products. With
such systems, every spread product contract is broken down into a
collection of legs and an attempt is made to match orders for the
legs. Examples of implied spread trading include those disclosed in
U.S. patent application Ser. No. 10/986,967, entitled "Implied
Spread Trading System," which is incorporated herein by
reference.
[0011] Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 further explains that, for example, implied IN spreads
may be created from existing outright orders in individual
contracts where an outright order in a spread can be matched with
other outright orders in the spread or with a combination of orders
in the legs of the spread. An implied OUT spread may be created
from the combination of an existing outright order in a spread and
an existing outright order in one of the individual underlying leg.
Implied IN or implied OUT spreads may be created when an electronic
match system simultaneously works synthetic spread orders in spread
markets and synthetic orders in the individual leg markets without
the risk to the trader/broker of being double filled or filled on
one leg and not on the other leg.
[0012] Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 further explains that large exchanges typically have
order books for numerous spread products and legs of the spread
products. However, the identification and processing of potential
implied spreads inside electronic trade systems consumes valuable
processing resources that could otherwise be used to process
outright orders. In a typical central limit order book
implementation, the system component for receiving electronic
trades from users appears as a single processing thread with a
single point of control. In such an implementation, there is a
requirement that one order matches only another order, and does not
result in two competing processes both matching different orders
against a single order. Therefore, implementations have been
limited in such trading systems.
[0013] In conclusion, implied orders can fill in gaps in the market
and allow spread and outright traders to share liquidity in a
product where there would otherwise have been little or no
available bids and asks. Thus, the liquidity of a product may be
enhanced by the use of implied orders. For example, by linking the
spread and outright markets, implied spread trading increases
market liquidity. Examples of implied spread trading include those
disclosed in U.S. patent application Ser. No. 10/986,967, entitled
"Implied Spread Trading System," which is incorporated herein by
reference. Large exchanges typically have order books for numerous
spread products and legs of the spread products. The identification
and processing of potential implied spreads inside electronic
trading systems consumes sometimes substantial processing
resources. U.S. Pat. No. 7,584,140, entitled "Method and System for
Providing Option Spread Indicative Quotes," which is incorporated
by reference in its entirety herein, describes systems and methods
for, among other things, minimizing communication bandwidth
consumption among parties trading derivative products and other
types of financial instruments.
[0014] Finally, the Commodity Futures Trading Commission
("Commission" or "CFTC") is proposing new rules, and guidance and
acceptable practices to implement new statutory provisions enacted
by Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. The proposed rules, guidance, and acceptable
practices, which apply to the registration and operation of a new
type of regulated entity named a swap execution facility (SEF),
implement the new statutory framework that, among other things,
adds a new Section 5h to the Commodity Exchange Act ("CEA")
concerning the registration and operation of swap execution
facilities, and new Section 2(h)(8) to the CEA concerning the
listing, trading and execution of swaps on swap execution
facilities.
BRIEF SUMMARY
[0015] The present disclosure overcomes limitations of the prior
art by providing methods and systems that provide for, among other
things, an enhanced financial instrument comprising at least a
clearing house attribute or desired clearing outcome. In one
example, a method is disclosed for receiving, from a computing
device of a user, an order for an enhanced financial instrument
which identifies first and second clearing houses.
[0016] Similar to Appendix E of U.S. Provisional Patent Application
Ser. No. 61/438,933, aspects of this disclosure overcome at least
some of the limitations in the prior art by providing systems and
methods for using enhanced request for quotes (eRFQs) and new
enhanced orders to assist in detecting implied orders. Systems and
methods are disclosed for receiving an eRFQ using a request for
quote processor module, and sending some information from the eRFQ
for use by an implied spread determination module. Also disclosed
are systems and methods for receiving a new enhanced order and
sending some information from the new enhanced order for use by an
implied spread determination module. In one example, a system
includes a processor and memory storing a search list and
computer-executable instructions, where the instructions determine
whether the financial instrument associated with an eRFQ or new
enhanced order is on the search list, and then determine if an
implied order exists in combination with that financial instrument
and CCP attribute designations associated with standing orders
(e.g., spread orders, outright orders, etc.) In some embodiments, a
timer may be used to track a predetermined amount of time to spend
towards determining if implied orders exist for a particular
financial instrument.
[0017] Of course, the methods and systems of the above-referenced
embodiments may also include other additional elements, steps,
computer-executable instructions or computer-readable data
structures. In this regard, other embodiments are disclosed and
claimed herein as well. For example, the computer system may
comprise a computer processor and a tangible, non-transitory
computer memory storing computer-executable instructions, which
when executed by the processor, causes the computer system to
perform one or more of the steps described herein. The details of
these and other embodiments of the present disclosure are set forth
in the accompanying drawings and the description below. Other
features and advantages of the disclosure will be apparent from the
description and drawings and from the claims.
BRIEF DESCRIPTION OF DRAWINGS
[0018] Embodiments of the disclosure may take physical form in
certain parts and steps, embodiments of which will be described in
detail in the following description and illustrated in the
accompanying drawings that form a part hereof, wherein:
[0019] FIG. 1 depicts an illustrative computer network system that
may be used to implement various aspects of the systems disclosed
herein;
[0020] FIG. 2 illustrates a portion of an illustrative computer
network system that may be used to implement various aspects of the
systems disclosed herein;
[0021] FIG. 3 shows an illustrative graphical user interfaces
(GUIs) that may be generated and displayed in accordance with
various aspects of the systems disclosed herein;
[0022] FIG. 4 is an illustrative flowchart of various steps that
may be performed in accordance with various aspects of the systems
involving request for quotes (RFQs);
[0023] FIG. 5 shows a system that may be used to match implieds in
accordance with an embodiment of the disclosure;
[0024] FIG. 6 illustrates a method for identifying implied spreads,
in accordance with various aspects of the systems disclosed herein;
and
[0025] FIG. 7 shows a possible implied spread that consists of
orders for a butterfly spread, two calendar spreads, and outright
orders in accordance with an embodiment of the disclosure.
DETAILED DESCRIPTION
[0026] Similar to Appendix E of U.S. Provisional Patent Application
Ser. No. 61/438,933, the present disclosure generally relates to
systems and methods that are utilized in connection with the
electronic trading of financial instruments. More particularly,
implied spread financial transactions are generated using
information from enhanced requests for quotes (eRFQs) and/or
enhanced orders. The RFQ and order are enhanced, inter alia,
because they include a CCP attribute, as described below. Implied
order generation may be made more efficient by using an RFQ
processor module to focus calculations performed by an implied
spread determination module. A financial instrument associated with
an eRFQ may be provided to the implied spread determination module
to trigger the determination of whether implied orders may exist
related to that particular financial instrument. In addition, in
some embodiments, a financial instrument associated with a new
enhanced order may be provided to the implied spread determination
module to trigger the determination of whether implied orders exist
related to that particular financial instrument.
[0027] In addition, the disclosure describes a regulated trading
platform capable of communicating with a plurality of clearing
houses. In particular, aspects of the disclosure relate to
providing and/or calculating differentiated prices for the same or
underlying financial product/instrument capable of being cleared at
different clearing houses. The trading platform may allow anonymous
counterparties in a multi-clearing house environment, and with full
transparency and improved liquidity. The trading platform may also
allow for non-anonymous counterparties in some situations.
[0028] Methods, systems and apparatuses are disclosed for an
environment including, in some embodiments, a regulated trading
platform (e.g., a SEF), which interacts with one or more clearing
houses and users (e.g., buy-side clients, dealers (e.g., swap
dealers), etc.), using enhanced financial instruments and enhanced
graphical user interfaces (GUIs) or message interfaces. In some
embodiments, dealers (or other entities or users providing
liquidity) may calculate different prices for an enhanced financial
instrument that is listed at multiple clearing houses (e.g., 140A,
140B, 140C, etc.) In some examples, the price may be driven by
clearing house relationships (e.g., cross-margining benefits,
different margin requirements, cost/price of clearing, etc.) In
addition, the price may depend on factors such as, but not limited
to, one or more of size of the order and the identity (e.g., credit
rating) of the user (e.g., buy-side client). The regulated trading
platform (e.g., a SEF) in such an example may aggregate and list
trades to be cleared at multiple clearing houses, and have
different prices for otherwise identical trades dependent on which
clearing house a user can clear (or may wish to clear for margin
and other reasons). A graphical user interface (GUI) in such an
example may include a single display screen or multiple screens
that display a matrix of clearing houses (e.g., clearing
counter-party) to prices (see FIG. 3). For example, a clearing
matrix may be displayed listing different clearing houses along the
x-axis and different prices for the same financial instrument
across the y-axis. Similarly, an automated trading system may, in
some examples, maintain a memory map internally based on message
interfaces to track prices as a function of clearing houses for a
single financial product. A user may interact with the GUI (or
alternatively, a scrolling text-based messaging interface such as a
Bloomberg.TM. terminal) to select a desired price and/or clearing
counter-party (CCP) to clear its financial instrument (e.g.,
over-the-counter (OTC) instrument, swaps trade, etc.)
[0029] A financial instrument traded/cleared in a system in
accordance with the disclosure may include a standardized
over-the-counter (OTC) agreement. The agreement may be
standardized/harmonized through a set of specifications promulgated
by an association (e.g., International Swaps & Derivatives
Association) or entity (e.g., a clearing house, SEF, etc.) For
example, the agreement (e.g., financial instrument) may include one
or more of commonplace attributes/terms such as, but not limited
to: price, notional amount, maturity/term, triggering event (e.g.,
in the case of a CDS), identification of a party/parties (e.g., a
protection buyer) to the agreement. In one example, the price
attribute may take the form of an array data structure. In
addition, the agreement may include an attribute (e.g., a "CCP
attribute") to designate a desired clearing house or CCP. The CCP
attribute of the financial instrument may be populated through
selection by a user of a clearing house (or a CCP where a CCP is
linked to a clearing house) on a GUI (or alternatively, on a
messaging interface) at a workstation terminal (e.g., computing
device 120). A CCP may clear for just one clearing house, or
alternatively, may be a clearing party for multiple clearing
houses.
[0030] In an alternate embodiment, the CCP attribute of a financial
instrument (e.g., OTC agreement) might not designate (i.e., left
empty) a clearing house, and as such the system may rely on a
default setting previously provided by the user (e.g., default user
settings) and/or other entity (e.g., default global system
settings). In one example, a default global system setting may
apply to the entire regulated trading platform and either override
or concede to the corresponding user-specific setting, if it is
populated with a value. The default setting may provide the
capability to provide greater preference details such that certain
types of financial instrument may be automatically routed through
an exchange to particular clearing houses or systems (e.g., non-SEF
system 212). For example, the settings may indicate that all IRS
agreements be cleared/quoted (e.g., via an enhance RFQ) using
clearing house D (104D), while CDS agreements be cleared/quoted
using clearing house C. The settings may indicate a list of unique
identifiers corresponding to each of the clearing houses. In
another embodiment, the indication may be a pointer linked to a
group of clearing houses. For example, one illustrative group may
be those clearing houses whose operating policy may prohibit
sending bid/ask prices (or quote data responsive to enhanced RFQs)
to users unless the user has an authorized relationship existing
with the clearing house. The third indication of at least one
clearing house restricted from the user may include the
aforementioned illustrative group. In yet another example, a user
may indicate that an order for a quantity of 100 contracts may be
filled through any of two clearing houses (e.g., clearing house 140
A and 140B), and a trading platform system 100 may fill the orders
and clear 60 contracts with clearing house 140A and the other 40
contracts with clearing house 140B. This indication (e.g., rule)
may be stored in a user data store (e.g., user database 102) or
other computer memory. Such aforementioned features may allow a
trading platform (e.g., computing system 100) to offer users (e.g.,
user devices 120) and dealers (e.g., dealer devices 130) with a
greater level of control over what information they receive and how
that information is processed by the downstream systems (e.g.,
system 100 and clearing houses 140). Nevertheless, in some
embodiments, the ability to submit an order (e.g., OTC agreement,
incoming order, any inbound instructions, etc.) or trade may be
governed by a clearing relationship and a user's desire/ability to
clear at a specific CCP relative to the available prices at a
CCP.
[0031] In accordance with various aspects of the disclosure, market
data records about an enhanced financial instrument, in addition to
comprising a financial identifier (e.g., "IBM" credit default
swap), may also include a flag or identifier that indicates what
clearing house (or other entity--e.g., DCM, non-SEF, SEF system)
the market data relates to. For example, a "CCP attribute," as
described herein, may be included in the market data record to
indicate this relationship. Alternatively, this "CCP attribute" may
indicate (e.g., with a blank value) that the market data record
(e.g., a price quote on a particular instrument) is valid across
all clearing houses. Such an embodiment may increase liquidity. In
addition, the CCP attribute may enable linked orders wherein a
user/dealer may be allowed to indicate that it wants a number
(e.g., ten) of contracts of a particular financial instrument
(e.g., IBM CDS) and that it wants them cleared through only two
clearing houses. In such an example, some of the ten contracts may
be cleared through clearing house A, while others are cleared
through clearing house B. Moreover, in some examples the enhanced
financial instrument may include a designation of different prices
depending on the designated clearing house. The designation of
different prices may be recited in the price attribute of the
enhanced financial instrument. Alternatively, the price attribute
may indicate an average price desired over all of the orders filled
for the enhanced financial instrument. One or more combinations of
the features recited above may be implemented and are contemplated
by the disclosure. The user/dealer may also specify a priority
setting (e.g., as part of the user settings) with a SEF 100 to
indicate the preference in which orders may be cleared/executed and
with whom they may be cleared (e.g., which clearing firm). Such
linked orders may be enabled without requiring the user/dealer to
create/manage separate contracts (e.g., one for clearing house A
and another for clearing house B) because a standardized agreement
may be used with the aforementioned CCP attribute. In other
examples, a user/dealer may leave the CCP attribute blank to
indicate that clearing house/firm is not a criteria for completing
the order/request. As such, a SEF 100 may submit the order/request
for clearing without regards for clearing house preferences.
[0032] In accordance with the disclosure herein, a system is
contemplated for generating and/or displaying a graphical user
interface (GUI) comprising a matrix of price to clearing house (or
other entities), as illustrated in FIG. 3. The system may comprise
a processor, memory, and/or a display to execute
computer-executable instructions recorded on the memory. The
instructions may allow a user to select one or more financial
instruments and to specify one or more clearing houses (or other
entities--e.g., DCMs, etc.) The instructions may take this
information and submit an enhanced RFQ, as described below, to a
SEF, which sends a request to dealers for a quote with respect to
particular clearing houses (or other entities). The SEF may collect
and organize the information received from the dealers into a
graphical user interface for display to a user of user computing
system 120. The GUI, which may be displayed on a remote user
computing system 120, may, as described herein, include values that
are non-actionable (e.g., rendered as grayed out) for a particular
user for various reasons, while other values are rendered as
selectable/actionable. The decision whether a value is
actionable/non-actionable may depend upon settings stored in a user
data store 102, but the rendering of the values as
actionable/non-actionable may occur at system 100 (e.g.,
server-side) or at user computing system 120 (e.g.,
client-side).
[0033] In some examples, a user (e.g., user of computing device
120) may request an enhanced request-for-quote (RFQ) directed to
one or more clearing houses (CHs). As a result, the user may be
provided with a messaging interface or a GUI displaying a clearing
house matrix (e.g., differentiated pricing based on desired CCP).
Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 provides aspects of a RFQ that may be included in
accordance with various aspects of this disclosure. In particular,
FIGS. 1 and 2 of Appendix E of U.S. Provisional Patent Application
Ser. No. 61/438,933 illustrate a regulated trading system (e.g.,
system 100) that receives RFQs (see, e.g., FIG. 4, ref. 402) from a
user computing device 120 and processes the RFQs through a RFQ
processor module 142 (as illustrated in Appendix E of U.S.
Provisional Patent Application Ser. No. 61/438,933). Paragraph 0028
of Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933 explains numerous terms that may be included as part of
the RFQ. The enhanced RFQ may include one, none, or more than one
of the following terms: an indicator of whether the requested quote
is buy-side or sell-side, statistics/information about the
user/entity submitting the RFQ (e.g., excellent credit rating,
premium status, etc.), covered or not covered, covered at a
particular clearing house, amount of time before the RFQ expires
(e.g., in the case of an open RFQ), a "spread best price" indicator
(e.g., "best price" versus single clearing house price), and other
terms.
[0034] In accordance with various embodiments of the systems
disclosed herein, a clearing house (or non-SEF system 212)
attribute/term (e.g., a "CCP attribute") may be included in the RFQ
(i.e., enhanced RFQ 206) to designate one or more desired clearing
houses to inquire about. For example, the RFQ 206 may designate
only clearing house A (140A) and clearing house B (104B). As such,
a computing system 100 receiving the RFQ may request market maker
130 to provide information only with respect to clearing at those
particular clearing houses. One or more modules/components/system
illustrated in FIGS. 1 and 2 of Appendix E of U.S. Provisional
Patent Application Ser. No. 61/438,933 may be incorporated into the
systems of FIGS. 1 and 2 of this disclosure to enable the features
contemplated/disclosed herein.
[0035] In addition, in alternate embodiments, an enhanced RFQ might
not designate a clearing house, and the clearing matrix generated
for display to a user (e.g., a user of computing device 120) may
display all clearing houses (or a subset of the clearing houses
available for display to the user) by default. In some examples,
the CCP attribute may be empty, or in the case of legacy RFQ
messages (e.g., for backward compatibility reasons), the CCP
attribute may be non-existent. In such cases, the system 100 may
modify (see, e.g., FIG. 4, ref 404), using the request for quote
processor module 142, the enhanced RFQ by adding the first clearing
house and second clearing house to the attribute before sending the
modified RFQ to one or more dealer system 130. In yet another
embodiment, a user might submit an enhanced RFQ that does not
designate a clearing house (or submit a RFQ that may be backwards
compatible with the illustrated system 100), and may instead rely
on a default setting previously provided by the user and/or other
entity (e.g., default global system settings). In another example,
the system 100 may modify (see, e.g., FIG. 4, ref. 404), using the
request for quote processor module 142, the enhanced RFQ by adding
one or more clearing houses to the attribute in accordance with
default settings (e.g., global and/or user-specific) before sending
the modified RFQ to one or more dealer system 130. The default
setting may provide the capability to provide greater preference
details such that different clearing houses or systems (e.g.,
non-SEF system 212) may be designated for different types of
financial instruments. These defaults may be used, in some
examples, to support a market order that is sent for a financial
instrument with a desire to obtain the best price following a
default set of clearing houses up to a desired quantity. For
example, the system settings may indicate that all IRS agreements
be cleared/quoted using clearing house A, while CDS agreements be
cleared/quoted using clearing house C. In another example, the RFQ
206 may be for a spread order for a futures contract that
designates that the legs of the spread may be cleared across a set
of clearing houses (e.g., 140A, 140D) instead of limiting the quote
to a single clearing house. Other examples in accordance with
various aspects of the disclosure include enhanced RFQs for an
outright order for a futures contract and an outright order for an
options contract. The aformentioned features may allow a trading
platform (e.g., computing system 100) to provide benefits to it
users/dealers, such as a better quoted price, and others as
described herein.
[0036] In some examples, the ability to submit a RFQ for a
particular product may be governed by a clearing relationship
and/or a user's desire/ability to clear at a specific CCP relative
to the available prices at a CCP. In addition, some clearing houses
may have operating policies that may prohibit sending bid/ask
prices (or quote data responsive to enhanced RFQs) to users unless
the user has an authorized relationship existing with the clearing
house. These restricted clearing houses may cause the system 100 to
access, by a computer processor, a user data store to retrieve
settings (see, e.g., FIG. 4, ref 406), and determine if the
enhanced RFQ identifies a restricted clearing house. If it does,
then the RFQ processor module 142 may block (see, e.g., FIG. 4, ref
408) the enhanced RFQ from being sent to the one or more dealer
systems 130. Alternatively, the RFQ processor module 142 may modify
the enhanced RFQ to remove those clearing houses that are
restricted from the user, and then send (see, e.g., FIG. 4, ref
410) the modified enhanced RFQ to one or more dealer systems 130
(or a plurality of systems corresponding to market makers).
[0037] Market makers or dealers (e.g., a dealer of system 130) may
choose to quote or not quote specific CCPs or quote different
spreads and liquidity based on their desire to clear at a specific
CCP. When dealer system 130 chooses to quote some or all CCPs
designated in the enhanced RFP, the system 100 may receive (see,
e.g., FIG. 4, ref 412) from the one or more dealer system, a quoted
price of the financial instrument of the enhanced RFQ with respect
to each (i.e., some or all) clearing house identified in the
enhanced RFQ. However, in some instances, when a dealer/market
maker chooses not to provide quotes with respect to some or all
designated clearing houses, the system 100 may seek alternate
options. In one example, the system 100 (e.g., RFQ processor module
142) may send (see, e.g., FIG. 4, ref 422) the enhanced RFQ to
another regulated trading platform (e.g., SEF 200) configured for
communication with the computer system 100. The other SEF 200 may
include dealer systems 230 that might be willing to provide a quote
in response to the RFQ. As a result, the system 100 may receive
(see, e.g., FIG. 4, ref 424) from the other SEF 200 (or directly
from the dealer system 230) quote data 220A responsive to the
enhanced RFQ. In an alternate embodiment, the system 100 may choose
to send the enhanced RFQ to one or both of SEF 200 and/or non-SEF
system 212 (e.g., remote DCM platform) for responsive quotes.
[0038] In addition, in another embodiment in accordance with
various aspects of the disclosure, the RFQ processor module 142 may
be configured to wait a predetermined amount of time before
submitting the enhanced RFQ 206 to another regulated trading
platform (e.g., SEF 200) or non-SEF system (e.g., DCM 212), as
discussed in described in Appendix E of U.S. Provisional Patent
Application Ser. No. 61/438,933, which was previously incorporated
by reference herein. For example, the RFQ processor module 142 may
receive an RFQ 206 at time t1. A timer component in the RFQ
processor module 142 may begin counting down from time t1 for a
predetermined amount of time (e.g., 10 seconds, 30 seconds, 1
minute, 3 minutes, less than 5 minutes, etc.) until a response to
the RFQ is received. If a response to the RFQ is received before
the predetermined amount of time expires, then the RFQ response may
be sent to the requesting entity/individual (e.g., a trader 120
requesting a quote on a particular financial instrument). If no
response is received within the predetermined time, the enhanced
RFQ may be submitted to another regulated trading platform (e.g.,
SEF 200) or non-SEF system (e.g., DCM 212). In some examples the
RFQ processor module 142 may consult with a stored list of SEF and
non-SEF system to determine which (if not all) of them to send the
enhanced RFQ to. In another example, the enhanced RFQ may indicate
(or the user settings for the trader 120 may indicate) which SEF
and non-SEF systems to contact in the event that dealer system 130
associated with the system 100 is not responsive to the RFQ. In
some examples the RFQ processor module 142 may submit the enhanced
RFQ to another regulated trading platform (e.g., SEF 200) or
non-SEF system (e.g., DCM 212) even if a response is received
(e.g., from a market maker 130) within the predetermined amount of
time. At least one benefit of such an approach is that more
responsive quotes may be generated based on the single RFQ.
[0039] In accordance with various aspects of the disclosure, an
enhanced RFQ 206 is contemplated that may also include a
term/attribute for designating an external trading platforms (e.g.,
SEFs, DCMs, non-SEF systems, exchanges, etc.) Such an embodiment
may enable users/traders to submit enhanced RFQs that may span
numerous different SEF and non-SEF systems to provide greater
liquidity and quote data. This disclosure also contemplates a
method involving enhanced RFQs (with a clearing house attribute and
other terms and one or more RFQ processor modules while omitting
some or many of the modules/components described in Appendix E of
U.S. Provisional Patent Application Ser. No. 61/438,933, such as
the implied spread determination modules. In such a system, the
submission of an enhanced RFQ may result in a clearing matrix
(e.g., such as the price matrix illustrated in FIG. 3) being
displayed on a GUI (or other messaging interface).
[0040] Referring to FIG. 3, the price matrix may provide the
ability to view the different price quotes (e.g., bid and ask
prices) for the same financial contract/agreement at multiple,
different trading platforms (e.g., non-SEF system 212) or clearing
houses (e.g., 104A, 104B, etc.) The received market data (or quote
data 220A) may be used to populate the price matrix. The system 100
(e.g., RFQ processor module 142) may send a message (e.g., a single
or multiple messages) to at least one subscriber, such as trader
120. The message may comprises a plurality of price quotes of the
financial instrument with respect to different clearing houses
(e.g., 140A, 140D) as requested by the enhanced RFQ, and may be
organized in various different ways, including, but not limited to
multiple levels deep and market by order. Depending on the type of
enhanced RFQ (e.g., directed RFQ, open RFQ, Hybrid RFQ, etc.)
submitted to the system 100, the message may be sent to one or more
subscribers. For example, in the case of a directed RFQ, the
message may be sent to a single subscriber 120 (see, e.g., FIG. 4,
ref. 414). A directed RFQ is commonly used in non-anonymous trading
where a user 120 may be wish to designate with whom they wish to
request a quote/trade. The quote data, which in one example is
generated by the responding dealer system 130, may be customized
for the user 120. In another example, in the case of an open RFQ,
the message may be sent to some or all subscribers of the system
100 (see, e.g., FIG. 4, ref. 420). An open RFQ is commonly used in
anonymous trading where a user 120 may wish to request a quote
without identifying the parties involved. In addition, open RFQs
are commonly used for liquid product that are conducive to
streaming. For example, an enhanced RFQ 206 may designate the
amount of time that a user 120 wishes to receive updated quote data
about a particular financial instrument. Market makers 130 may
continue to provide updated quote data to system 100 for the
particular products of interest. As a result, system 100 may
receive, from the one or more dealer systems 130 on a recurring
basis for a period of time (or a predetermined period of time),
quote data with respect to the financial instrument and designated
clearing houses identified in the CCP attribute (see, e.g., FIG. 4,
ref 418). The system 100 may send the updated quote data to the
user 120. After the time period expires, the system 100 may stop
sending the updated quote data to the user 120. In one example, the
enhanced RFQ 206 may be an open RFQ that requests streaming quote
data 220A from both the market makers 130 associated with system
100 and also with external platforms (e.g., SEF 200 and DCM 212).
Advantages of such a system are numerous.
[0041] Continuing with the example referencing FIG. 3, the received
data (e.g. market data, quote data, order data, etc.) may be
organized as market by order (MBO), market by price, or in another
format. For market by order, the data may be anonymous or
non-anonymous. For market by price, the aggregated book may be
multiple levels deep such that, in addition to the best bid and ask
prices, the price attribute may store the next N best bid and ask
prices, where N is a number greater than one (e.g., two, five, ten,
etc.) In one example, the price attribute of the enhanced financial
instrument may take the form of an array data structure. In some
examples, multiple levels of data (e.g., bid/ask prices) may be
available for those clearing houses where the user's orders are
actionable, but might or might not be available from other clearing
houses. The price corresponding to each clearing house/etc. may
depend on one or more of the following factors including, but not
limited to, the price to clear at a clearing house, cross-margining
benefits, and other factors. Referring to the illustrative price
matrix (e.g., clearing house matrix) of FIG. 3, the GUI 300 may
include pricing information for various clearing houses (or other
entities--e.g., designated contract markets (DCMs) and other
non-SEFs 212). For example, in one example, the pricing information
for clearing house A (140A) may be displayed on chart 302.
Meanwhile, the pricing information for clearing house B (140B) may
be displayed on chart 304, and the pricing information for clearing
house C (140C) may be displayed on chart 306. In other examples,
the pricing information for the multiple clearing houses may be
integrated into a single chart (or 2-dimensional or 3-dimensional
graph) and compared side-by-side. A user of computing system 120
may view the GUI 300 on a visual display (e.g., LCD display) of
computing system 120 and benefit from a side-by-side comparison of
pricing as compared to each clearing house. In addition, in some
examples, the generated information for display to the user may
include a best bid price and best ask price across all of the
clearing houses, or alternatively, across all of the clearing
houses at which the user's orders are actionable (i.e., a first
indication). As explained herein, one of ordinary skill in the art
will appreciate after review of the entirety disclosed herein that
not every clearing house's (or other entities) pricing may be
displayed and/or actionable on GUI 300, per preferences and/or
restrictions on the user's account/settings.
[0042] In one embodiment in accordance with aspects of the
disclosure, implied orders may be generated/processed using some
information from one or more eRFQs. Referring to FIGS. 1 and 2 of
Appendix E of U.S. Provisional Patent Application Ser. No.
61/438,933, a quote processor module and implied spread
determination modules are illustrated that may be used in
accordance with various aspects of the disclosure herein. For
example, an eRFQ may include an indication/request, in addition to
requesting a quote of an OTC product (e.g., swap agreement), for a
quote on a futures contract or other related product for a user
(e.g., trader using computing device 120) to trade for, among other
things, hedging purposes. In some embodiments an automatic hedging
feature may be included to permit certain automatic safeguards.
[0043] In one embodiment in accordance with various aspects of the
above examples, a method is contemplated comprising: receiving,
using a RFQ processor module 142, an eRFQ for a financial
instrument, where the eRFQ includes an attribute/term for
indicating one or more clearing houses (e.g., a selected clearing
house); sending, using the request for quote processor module, the
financial instrument associated with the eRFQ to implied spread
determination modules at a plurality of regulated trading platforms
(e.g., SEFs) or clearing houses; determining, using the implied
spread determination module, that the financial instrument
associated with the eRFQ in combination with one or more resting
orders creates an implied spread that may be cleared at a desired
clearing house, the implied spread comprising multiple legs, a
first of the multiple legs corresponding to the financial
instrument associated with the eRFQ and a second leg of the
multiple legs corresponding to a resting order of the one or more
resting orders; and sending, using the implied spread determination
module, a notification of the implied spread to the electronic
match engine of a trading platform system (e.g., SEF) for matching,
the matching including executing all the multiple legs of the
implied spread. One or more features disclosed in Appendix E of
U.S. Provisional Patent Application Ser. No. 61/438,933 (e.g.,
pages 28-32 of the Appendix) may be included in the aforementioned
method involving eRFQs.
[0044] For example, FIG. 5, which is reproduced using Appendix E of
U.S. Provisional Patent Application Ser. No. 61/438,933, shows a
system that may be used to match orders in accordance with an
embodiment of the disclosure. In one embodiment, the system of FIG.
5 may be used to receive new enhanced orders 220A that are used to
focus an implied spread determination module 210 on particular
financial instruments for which implied spread orders may exist. In
another embodiment in accordance with the disclosure, the system of
FIG. 5 may be used to direct an implied spread determination module
210 as to which financial instruments to perform analysis on to
determine if implied spread orders may exist. Along these lines,
FIG. 6 illustrates a method for determining implied spreads in
accordance with various embodiments of the disclosure; in
particular, FIG. 6 shows a method for focusing the computations
involving in identifying existing implied orders on order
books.
[0045] In accordance with one embodiment of the disclosure, a new
enhanced order 220 for a financial instrument may be received at an
exchange computer system 100. The new enhanced order 220 may be an
outright order for a single futures contract or any other financial
product (e.g., an options contract, a derivative product, security,
bond, etc.) Alternatively, the new enhanced order 220 may be a
spread order with a butterfly, crack, or other configuration. The
new enhanced order 220 may be received at communication interface
222 in exchange computer system 100. In one embodiment, the
communication interface 222 may be an input/output (I/O) port on a
communications card (e.g., an Ethernet card) on a computing device
at the exchange computer system 100. Alternatively, the
communication interface 222 may be in communication with a user's
computing device 120 that permits the user to enter/select an
enhanced order. One skilled in the arts will appreciate that the
communication interface 222 may be used to communicate with a
variety of devices and/or modules inside or outside an
exchange.
[0046] The new enhanced order may be sent to an implied spread
determination module 210 to determine if the new enhanced order in
combination with one or more pending orders creates an implied
spread. Meanwhile, the new enhanced order 220 may also be nearly
simultaneously submitted to the electronic match engine 106 for
processing. As described in greater detail in commonly assigned,
U.S. patent application Ser. No. 11/617,915 (Attorney Docket No.
006119.00082), entitled "Template Based Matching," which is herein
incorporated by reference in its entirety and was previously
incorporated by reference in its entirety in a priority application
to this filing, match engine module 106 may attempt to match new
enhanced order 220 to data included in a collection of almost
matched orders and pending orders included in various order books.
The collection of almost matched orders and/or various order books
may be stored in a memory accessible to a microprocessor used to
implement a match engine. In addition, this disclosure, as
described herein including in the materials incorporated by
reference, contemplates examples where implieds may also undergo
normal central limit order book processing across clearing
houses.
[0047] Sometime during or after the time the electronic match
engine 106 receives the new enhanced order, the implied spread
determination module 210 may perform in parallel (or alternatively,
in serial) the step of determining if any implied spreads are
created using the new enhanced order 220. Some benefits of an
in-parallel embodiment include reduced match engine 106 workload
and quicker response times from match engine 106. In addition, as
depicted in FIG. 5, the implied spread determination module may be
positioned in various locations. For example, an implied spread
determination module 218 may executed at a remote computer outside
the exchange and generate implied orders 220B. The remote computer
may be a computer located physically outside an exchange, but
controlled by the exchange. Alternatively, the remote computer may
be a trader's computer 120. In yet another example, the implied
spread determination module 210 may be running in a processing
thread on a computer located inside the exchange and running in
parallel with one or more other implied spread determination
modules 210A, 210B. Therefore, numerous implied spread
determination modules 210A, 210B, 218 may be running in parallel
with each other (e.g., different modules may each be searching some
portion or depth of the possible implied space). Moreover, the
implied spread determination modules 210A, 210B, 218 may be running
simultaneous with the electronic match engine 106. At least one
benefit of such a parallel processing distributed architecture is
the greater computational power available at a given time.
[0048] Referring to FIG. 6, which is reproduced using Appendix E of
U.S. Provisional Patent Application Ser. No. 61/438,933, shows that
an implied spread determination module 210 may determine (in step
604) if any implied spreads can be created involving the financial
instrument of an enhanced order 220 or an enhanced request for
quote (eRFQ) 206 received in step 602. In one embodiment, order
books are analyzed to generate a collection of needed orders 216
that each when combined with one or more existing orders meet the
requirements of one of the acceptable trade templates. Trade
templates are discussed in greater detail in commonly assigned,
U.S. patent application Ser. No. 11/617,915 (Attorney Docket No.
006119.00082), entitled "Template Based Matching," which is herein
incorporated by reference in its entirety and was previously
incorporated by reference in its entirety in a priority application
to this filing. The implied spread determination module 210 may
compare, inter alia, any new enhanced orders 220 and pending orders
related to the financial instrument of the eRFQ 206 to the
collection of needed orders 216. If any of these orders match one
of the needed orders, the implied spread determination module 210
may create an implied spread. In addition, before the implied
spread is created, the implied spread determination module may
confirm/verify (in step 604) that the CCP attribute of all the
matched orders are such that the matched legs may be cleared by an
appropriate clearing house. As explained in an earlier example, an
incoming eRFQ 206 (or enhanced order 220A) may designate one or
more clearing houses in its CCP attribute. This designation
indicates that only particular clearing houses may be appropriate
for the financial instrument corresponding to the eRFQ (or enhanced
order 220A), and thus information about (or clearing with) those
designated clearing houses is desired, as illustrated in FIG. 7.
Moreover, as also explained in the earlier example, one or more
modules/components/system (e.g., implied spread determination
module 210A) illustrated in FIGS. 1 and 2 of Appendix E of U.S.
Provisional Patent Application Ser. No. 61/438,933 may be
incorporated to enable the features contemplated/disclosed herein.
For example, in determining whether an implied may be created, the
implied spread determination module may determine the ability of a
particular product to clear at a specific clearing house; that
ability may be governed by a clearing relationship and/or a user's
desire/ability to clear at a specific clearing house.
[0049] In one example, the implied spread created (in step 620) by
the implied spread determination module 210 may comprise multiple
legs. For example, the implied spread may include a first leg
corresponding to a new enhanced order 220 and a second leg
corresponding to a pending order. In one example, the new enhanced
order 220 may be the order that completes the unmatched leg of an
implied spread awaiting a match. The number of legs in the implied
spread may be dependent on the resources (e.g., amount of
processing power and time) available to the implied spread
determination module 210 to attempt to identify possible implied
spreads.
[0050] After the implied spread determination module 210 determines
that an implied spread exists, a notification may be sent (in step
606) through a communication interface 222 to the electronic match
engine 106 informing the engine of the matching combination. The
notification may be intra-exchange (i.e., within a single exchange
or trading platform) or inter-exchange (i.e., between one or more
exchanges or trading platforms) communication. For example,
referring to FIG. 2, an exchange system 100 may send a notification
to another exchange (e.g., a competing exchange 100B) with the
appropriate information to execute and/or clear the implied spread.
As explained previously herein, some clearing houses may be
associated with an exchange system such that access to the clearing
house may be restricted to only communication from that exchange.
The notification may comprise order book identifiers (and other
information) that permit the matching engine at the appropriate
exchange to, in one embodiment, verify that all legs of the implied
spread are valid. For example, the identifiers may be used to check
the appropriate order books to verify that the appropriate resting
orders are still unmatched. One skilled in the art will appreciate
that a communication interface 222 may include an input/output
(I/O) port on a communications card (e.g., an Ethernet card) on a
computing device at the exchange computer system 100.
Alternatively, information may be sent through the communication
interface 222 to an output device (e.g., a display monitor) to
alert a user (e.g., manager) of an exchange that an implied match
exists so the user may respond accordingly.
[0051] Using the information provided in the notification, the
electronic match engine 106 matches (e.g., executes) all of the
multiple legs of the implied spread. The generation and
matching/execution of the implied spread order that includes the
particular financial instrument may create trading activity for the
particular financial instrument. Such trading activity provides
information (e.g., current trading price) that may be used in
various ways. In one example, an implied feed may be generated for
each clearinghouse (140A, 140B, 140C, 140D) corresponding to market
data associated with its respective clearinghouse. In another
example, a single, aggregated feed may be generated for all
implieds. In a third example, different implied feeds may be
aggregated and filtered as appropriate at the order book (e.g.,
order book module 110). It will be apparent to one of skill in the
art after review of the entirety disclosed herein that this
disclosure contemplates implied feeds with market data comprising a
CCP attribute to designate one or more clearing houses.
[0052] Using the information provided in the notification, the
plurality of trades that match the legs of the implied spread may
be contemporaneously executed such that all of the trades are
executed before a material change in the appropriate markets. The
abundance of processing power at the electronic match engine 106 is
at least one factor that permits the matching of the legs of the
implied spread with minimal or no legging risk. For example, after
an implied spread determination module 210 has identified the
corresponding legs of an implied transaction, the electronic match
engine 106 may execute the implied transaction inline without
requiring a locking of the markets involved. In alternate
embodiments, an exchange may lock one or more markets for the
orders involved to eliminate possible legging risk. For example, in
scenarios requiring inter-exchange communication, as described
above, to execute and/or clear an implied spread some locking may
be desirable.
[0053] The electronic match engine 106 may be configured to
determine if a new enhanced order 220 or a pending order in
combination with one or more pending orders for particular
financial instruments creates an implied spread. In some
embodiments, the electronic match engine 106 may limit the
determination to only those financial instruments located in a
search list 214. The search list 214 may comprise a plurality of
financial instruments that are cleared to be monitored for
determining implied spreads. The new enhanced order 220 may be
compared to the search list 214 before determining if an implied
spread is created. At least one benefit of such an embodiment is
that it allows an exchange to restrict the electronic match engine
106 from searching a potentially unlimited number of new enhanced
orders for implied spreads by focusing it on those financial
instruments of new enhanced orders that it believes may be more
conducive to an implied spread.
[0054] In another example in accordance with various aspects of the
disclosure, the RFQ processor module 142 (or another comparable
module) may determine (in step 612) if the financial instrument
associated with an incoming eRFQ 206 may be used to determine (in
step 604) if an implied spread may be generated. In one example, a
search list 214 may be used to further this determination (of step
612). The search list used by the RFQ processor module 142 may be
the same or a different list as the search list used by the
electronic match engine 106. If a match is found in the search list
214, the RFQ processor module 142 may be configured to submit a
request to an implied spread determination module 210 (e.g.,
implied spread determination modules 210A, 210B, or 218) to
determine (in step 604) if an implied spread may be generated using
one or more pending orders for the particular financial instrument
of the eRFQ 206. One skilled in the art after review of the
entirety disclosed herein will appreciate that at least one benefit
of such an embodiment is that it allows an exchange to focus the
potentially unlimited number of combinations that may possibly lead
to implied spreads, thus enhancing efficiency of processing and/or
memory consumption.
[0055] In one example, the search list 214 of RFQ processor module
142 may comprise a plurality of financial instruments (or a name of
a predefined group of financial instruments) that are to be
monitored to determine implied spreads. In an alternate embodiment,
the search list 214 may be the inverse of the prior example. In
other words, the search list 214 may comprise those financial
instruments which the RFQ processor module 142 should exclude from
acting as a trigger for determining implied spreads. At least one
purpose of such an embodiment may be to prevent particular
financial instruments with historically high liquidity from
overloading the exchange computer system 100 and/or implied spread
determination module 210. In yet another embodiment, the search
list 214 may serve as a switch to turn on and turn off various
functionality. For example, the search list 214 may be temporarily
cleared when the generation of implied spreads is to be turned off.
Accordingly, the search list 214 may act as a switch to prevent
additional load on the system due to implied spread generation. The
search list 214 may be restored (i.e., undoing the temporary
clearing) when such functionality is desired to be turned on
again.
[0056] Furthermore, in one embodiment in accordance with aspects of
the disclosure, the search list may be updated (in step 616) based
on the determining occurring in an implied spread determination
module 210. As such, the search list may be an adaptive list that
allows electronic match engine 106 to try to detect implied spreads
where there is a higher probability of finding them. This may be
determined based on past success, market conditions, submitted
enhanced request for quotes (eRFQs) and/or through monitoring
activity of the implied spread determination module 210 and/or the
electronic match engine 106 itself.
[0057] Likewise, the operation of an implied spread determination
module 210 may be adjusted based on prior findings of implied
spreads. For example, the collection of needed orders 216 may be
updated (in step 616) based on the determination of implied spreads
occurring in the implied spread determination module 210. As such,
the collection of needed orders 216 may be dynamically adjusted to
identify those financial instruments that have a higher probability
of contributing to an implied spread. Like the search list 214, the
adjustment may be based on past success, market conditions,
submitted enhanced request for quotes (eRFQs) and/or through
monitoring activity. In one embodiment in accordance with various
aspects of the disclosure, an implied spread determination module
210 may include its own search list. Such a search list may operate
similar to search list 214 to enhance the operation of the implied
spread determination modules 210A, 210B, 218.
[0058] In another embodiment in accordance with various aspects of
the disclosure, the RFQ processor module 142 may receive an eRFQ
206 and submit the financial instrument (i.e., an identifier of the
financial instrument) associated with the eRFQ to an implied spread
determination module 210A, 210B, 218. In some examples the RFQ
processor module 142 may consult with a search list 214, as
described above, before requesting the implied spread determination
module 210 begin determining (in step 604) if implied orders exist.
In some embodiment, the implied spread determination module may
automatically stop calculations to determine (in step 604) if an
implied order exists after a predefined amount of time has passed.
For example, the implied spread determination module may receive a
financial instrument from RFQ processor module 142 at time t1. A
timer in the implied spread determination module 210 may begin
counting down starting at time t1 for a predefined amount of time
(e.g., 0.5 seconds, 1 second, 5 seconds, 10 seconds, 30 seconds,
less than 1 minute, etc.) and stop calculations once the timer
expires. One skilled in the art will appreciate that a timer is
just one way of calculating the passage of time and other
components (e.g., counter, clock, adder, etc.) for accomplishing
the function are contemplated by the term "timer." In addition, the
aforementioned timer may be located in components outside of the
implied spread determination module; for example, the timer may be
located in the RFQ processor module 142, and upon expiration, the
RFQ processor module 142 may instruct the particular implied spread
determination module to stop further calculations. One skilled in
the art will appreciate after review of the entirety disclosed
herein that at least one benefit of a timer to regulate the
determination performed by the implied spread determination module
210 is that it reduces the stress/load on the system created by
memory/processor intensive implied determination calculations.
[0059] Referring to FIG. 7, which is reproduced using Appendix E of
U.S. Provisional Patent Application Ser. No. 61/438,933, an implied
spread determination module 210 in accordance with various aspects
of the disclosure may identify an implied spread for an enhanced
new order 710 (e.g., order 220) using pending enhanced spread
orders 702, 704, 708, and an enhanced outright order 706. The
enhanced new order 710 may be an order to buy 9700 oil future call
contracts and clear only at clearing house B (140B). The implied
spread determination module 210 may, inter alia, calculate that the
legs of butterfly spread 702 may be combined with the legs of
calendar spread 708 and calendar spread 704. Moreover, the implied
spread determination module 210 may access the CCP attribute of
each of the enhanced spread orders 702, 704, 708 to determine that
the appropriate legs/orders may be matched to allow successful
clearing of each leg/order. In this example, for the first leg of
the butterfly spread 702, either clearing house A (140A) or
clearing house B (140B) may be used to clear the match. A priority
algorithm, such as whether a user/exchange has ranked a particular
clearing house better than another, may be used to select between
the possible clearing houses. In this case, clearing house A (140A)
may be selected to clear the match after considering these
preferences.
[0060] In addition, the module 210 may calculate that one of the
two remaining unmatched legs of the enhanced butterfly spread 702
may be filled by a pending enhanced outright order 706. Moreover,
the implied spread determination module 210 may access the CCP
attribute of the enhanced outright order 706 to determine that the
order may be matched to allow successful clearing of the order
(e.g., order 706 designates clearing at clearing houses 140A, 140C,
140D, which overlap with clearing house 104A, which is designated
by the appropriate leg of spread 702 in addition to other clearing
house designations). The remaining unmatched leg in FIG. 7 may be
an enhanced order to sell 9700 oil future call contracts and to be
cleared only at clearing house A or clearing house B (140A, 140B)
(e.g., CCP attribute of this leg of the enhanced spread order 702
designates clearing houses 140A, 140B). The implied spread
determination module 210 may confirm that this unmatched leg and
the enhanced new order 710 designate clearing at a common clearing
house (i.e., clearing house 140B). In other words, the implied
spread determination module 210 may determine that the CCP
attribute of the enhanced new order 710 in combination with
clearing house requirements of one or more resting orders (i.e.,
clearing house 140A, 140B) allow clearing of the leg of the spread
order. As a result, the implied spread determination module 210 may
match them to complete the implied order.
[0061] Therefore, the implied spread determination module 210 may
send a notification to the electronic match engine 106 indicating
that the combination of the pending orders 702, 704, 706, and 708
and new order 710 complete a match. The notification may include
identifiers directing the match engine 106 to the appropriate order
books to find the appropriate pending orders. In some examples in
accordance with various aspects of the disclosure, as previously
described herein, a matching order of an implied spread may be
intra-exchange or even inter-exchange.
[0062] A notification may, in one embodiment in accordance with
aspects of the disclosure, include order book identifiers without
also including a copy of the enhanced orders. Since the best priced
orders on an order book will be used for matching, the electronic
match engine 106 may not necessarily require a copy of the enhanced
order itself. Moreover, since new enhanced orders may arrive during
any period of time, the system may further check the order book to
identify any additional orders. In addition, such an embodiment
allows those that only possess aggregate book information to take
part in the process. For example a customer who only knows the
number, clearing house requirement, and quantity of the orders
present at a price level in an order book may be able to detect and
transmit a possible implied without knowing the detailed
information about orders on the book. Since the implied spread
determination module 210 may be running, in some embodiments, in
parallel with the match engine 106, the module 210 may be able to
run through greater combinations of orders to determine if an
implied spread may be formed.
[0063] In yet another example in accordance with various aspects of
the disclosure, a user external to the exchange computer system
100, such as a user of a trading terminal 120, 118, 116, may
monitor the market and order books to calculate an implied spread.
The terminal 120 may send a new enhanced order 220A (e.g., an
outright order, a synthetic spread order, etc.) to the exchange 100
that uses the implied spread to obtain an advantageous trade price.
The enhanced order 220A includes a CCP attribute that may designate
one, more than one, or no clearing houses for clearing the order.
The new enhanced order may be in a recognized format (e.g., the
FIX/FAST format) and include information in its message format that
facilitates matching by an electronic match engine 106 of the new
enhanced order 220A with the one or more pending orders. That
information may include multiple order book identifiers or other
information useful to the match engine 106 to match the enhanced
order 220A. In one embodiment, the enhanced order may be marked as
"Fill and Kill" or "Fill or Kill;" thus, further reducing the
customer's risk by ensuring that the enhanced order does not rest
on the order book if the implied matching possibility no longer
exists. Moreover, the enhanced order may include an attribute
(e.g., a CCP attribute) comprising an array of bits, where each bit
of the array indicates whether a clearing house is allowed or
restricted for clearing the enhanced order. In the example of a
spread order, the CCP attribute may comprise an array of bits for
at least each of the legs of the spread order.
[0064] The match engine 106 may, in some embodiments, verify the
information that facilitates matching by confirming the status of
pending orders that will be matched against the legs of the implied
spread. The exchange computer system 100 may perform the verifying
in the match engine 106 itself, or alternatively, delegate this
activity to an implied spread determination module 210A where the
verifying may occur in a separate thread running in parallel with
the match engine 106. If the verification finds the implied spread
to be valid, then a notification of the implied spread may be sent
to the match engine 106 for executing all of the legs of the
implied spread against the pending orders identified in the
enhanced order 220. At least one advantage of executing all of the
legs of the implied spread in a nearly simultaneous manner is that
there is miniscule slippage risk. In some embodiments, a limit may
be placed on the number of legs that may be submitted in an implied
spread in order to guarantee that the legging risk is averted.
[0065] In addition, the implied orders generated in the
aforementioned examples may work across the same clearing house
(e.g., clearing house A--104A) or across multiple clearing houses
based on a clearing matrix as previously described herein. For
example, FIG. 3 may include two additional columns: a column for
implied bid and a column for implied offer, per clearing house. In
some instances, a user may prefer to designate (e.g., hedge at)
different clearing houses for risk management reasons; thus, the
user may define a user-defined spread (UDS) to obtain a desired set
of contracts in a spread with each contract able to be at the same
or different clearing houses. For example, a trading platform
system 100 may fill a spread order and split the order such that
sixty contracts are cleared with clearing house 140A and another
forty contracts with clearing house 140B. While it's likely that
the legs of a spread will be frequently cleared at the same
clearing house, if the opportunity arises to match the legs at two
different clearing houses for a great price, or some other benefit,
the implied spread determination module 210 may clear
accordingly.
[0066] In addition, some implieds may be generated at or near
front-end systems (e.g., user computing device 120) and may show
implied strategies across clearing houses, regulated trading
platforms, and/or exchanges where a user may clear or trade. For
example, a notification informing the electronic match engine 106
of a matching combination may comprise order book identifiers that
permit the matching engine to, in one embodiment, verify that all
legs of the implied spread are valid. In another example, the
front-end system may provide implied logic in the case of an
inter-clearing house spreading opportunity. In yet another example,
the front-end system may aggregate and/or display implied
opportunities across exchanges, clearing houses, and/or regulated
trading platforms, and send one or more messages corresponding to
an implied user-defined spread (UDS) to the exchange, clearing
house, and/or regulated trading platform.
[0067] In yet another example, Appendix D of U.S. Provisional
Patent Application Ser. No. 61/438,933 describes a system in FIGS.
7 and 8 of that Appendix where trading engines at a front end
interact with a matching system on the backend to monitor and
regulate/manage risk and credit control. Such a system may limit,
based on risk and credit controls, the ability of a user to clear
at a particular clearing house. As a result, a price matrix
displayed to such a user may or may not list blocked (e.g.,
undesirable or excluded/restricted by user/system settings, etc.)
clearing houses and their corresponding pricing information. In
alternate embodiments, a clearing matrix (e.g., GUI 300 in FIG. 3)
may have the particular clearing house's prices grayed out (e.g.,
incapable of being selected; non-actionable) but still be displayed
to the user. In some examples, GUI 300 may indicate that a price is
non-actionable if the user wishing to act on the price cannot trade
at the particular clearing house (e.g., does not have a
relationship with that clearing house). The clearing matrix (e.g.,
GUI 300 in FIG. 3) may format information about a first clearing
house (e.g., received bid and ask prices from the first clearing
house) in a first style (e.g., color, font type, size,
italics/bold/underline, not visible, etc.), but format information
about a second clearing house in a second style.
[0068] In addition, the identification and processing of potential
implied spreads inside electronic trading systems sometimes
consumes substantial processing resources. Appendix F of U.S.
Provisional Patent Application Ser. No. 61/438,933 describes
systems and methods for, among other things, minimizing
communication bandwidth consumption among parties trading
derivative products and other types of financial instruments. The
systems and methods of Appendix F of U.S. Provisional Patent
Application Ser. No. 61/438,933 may be incorporated or used with
the systems and methods disclosed herein. For example, by linking
the spread and outright markets, implied spread trading increases
market liquidity. Examples of implied spread trading include those
disclosed in U.S. patent application Ser. No. 10/986,967, entitled
"Implied Spread Trading System," which is incorporated herein by
reference. Large exchanges typically have order books for numerous
spread products and legs of the spread products. The identification
and processing of potential implied spreads inside electronic
trading systems consumes sometimes substantial processing
resources. Appendix F of U.S. Provisional Patent Application Ser.
No. 61/438,933, entitled "Method and System for Providing Option
Spread Indicative Quotes," describes systems and methods for, among
other things, minimizing communication bandwidth consumption among
parties trading derivative products and other types of financial
instruments.
[0069] For example, market makers 130 in the examples of Appendix F
of U.S. Provisional Patent Application Ser. No. 61/438,933 may
quote a financial instrument differently with respect to the
clearing houses at which it will be cleared, and that quote data
may be received at a SEF (e.g., a regulated trading platform 100)
and used to facilitate derivation of indicative quotes for one or
more financial products, as described in Appendix F of U.S.
Provisional Patent Application Ser. No. 61/438,933. For example, in
the case of a hybrid RFQ, an enhanced RFQ 206 may be sent to system
100 to request indicative quote data. The indicative quote data may
be packaged as a message including a plurality of price quotes
(e.g., with respect to clearing houses designated in the CCP
attribute, or generally with respect to all clearing houses). The
indicative price quotes are non-binding and non-actionable. The
system 100 sends (see, e.g., FIG. 4, ref. 416) the message
comprising the plurality of non-binding, non-actionable price
quotes to one or more subscribers 130. Moreover, one skilled in the
art will appreciate after review of the entirety disclosed herein
(including Appendix F of U.S. Provisional Patent Application Ser.
No. 61/438,933) that the other examples and features disclosed in
Appendix F of U.S. Provisional Patent Application Ser. No.
61/438,933 are contemplated by this disclosure for use with the
examples described herein. Referring to FIG. 2, SEF systems (e.g.,
computing system 100) may be in communication with a designated
contract market (DCM, such as non-SEF systems 212) and/or clearing
house (e.g., 140B, 140C, 140A, etc.) In some examples, a SEF system
may communicate through a non-SEF system 212 in order to clear at a
particular clearing house 140C. In other instances a clearing house
140B may be available to all trading platforms. In another
embodiment, clearing house A (140A) may only be available through a
particular trading platform (e.g., 100). Implied orders, RFQs, and
other requests/submissions may be made across non-SEF 212 and SEF
200 systems. In some examples, a single computing system 100 (e.g.,
match engine module 106) may include both SEF service and non-SEF
services.
[0070] Regarding an automatic hedging feature in accordance with
various aspects of the disclosure, some OTC products (e.g., swaps,
IRS, CDS, currency swaps, etc.) may be hedged with a product in a
futures market or other market. In many instances, a futures
product may have greater liquidity than an OTC product. As such, a
user (e.g., user of computing system 120) may desire to hedge
his/her OTC market risk with purchases on a futures market. In one
example, the hedge may be specified to trade at a different or
selection of clearing houses. In another example, a user may submit
a trade for an IRS (fixed or floating) with a hedge in a basket of
Eurodollars. The user may submit a RFQ (or other order type, e.g.,
a covered call) that assist in deciding whether to automatically
hedge the IRS trade. In the RFQ, the user may indicate non-swap
(e.g., forward rate agreements) and cause the system 100 to
generate implieds and quote those. When products are not listed on
an exchange 100, the exchange may look to other platforms (e.g.,
SEF 200) or clearing houses or DCMs (e.g., non-SEF systems 212).
The SEF and non-SEF systems may interact to obtain the desired
information. In some instances, a user may prefer to hedge at
different clearing houses for risk management reasons; thus, the
user may define a user-defined spread to obtain a desired set of
contracts in a spread with each contract able to be at the same or
different clearing houses. For example, a trading platform system
100 may fill a spread order and split the order such that sixty
contracts are cleared with clearing house 140A and another forty
contracts with clearing house 140B.
[0071] Regarding risk management module 134, in another embodiment
in accordance with various aspects of this disclosure, a regulated
trading platform (e.g., system 100) may interact with numerous
clearing houses (e.g., 140A, 140B, 140C, etc.) and other entities
(e.g., non-SEF system 212, DCMs, etc.) The trading platform 100 may
include a risk management module 134 as described herein. The risk
management module 134 may compute and determine the amount of risk
associated with a financial product or portfolio of financial
products. Moreover, in some examples, risk management by the module
may be done for a specific clearing house risk value or across a
user-defined set of clearing houses (e.g., 140A-104C). In other
examples, it may be done by user/trader, clearing firm, product,
margin, etc. In yet another example, the risk may be aggregated as
described in Appendix C of U.S. Provisional Patent Application Ser.
No. 61/438,933. For example, FIGS. 7, 8, and 9 of Appendix C of
U.S. Provisional Patent Application Ser. No. 61/438,933 illustrate
a system where risk (e.g., corresponding margin requirements) may
be calculated and adjusted based on calculations performed by the
module 134. While those figures of Appendix C of U.S. Provisional
Patent Application Ser. No. 61/438,933 reference a system
interacting with numerous exchanges, it will be appreciated that
the same type of interactions are applicable in this disclosure
where a system 100 may interact with numerous clearing houses
(e.g., 140) and/or other entities (e.g., non-SEF systems 212).
[0072] For example, applying the teachings of Appendix C of U.S.
Provisional Patent Application Ser. No. 61/438,933, system 100 may
send messages alerting users and/or other entities about risk
thresholds and risk levels. For example, a SEF (e.g., trading
system 100) may have access and exposure to multiple clearing
houses. As such, the SEF may set a single credit limit across one
or more of the clearing houses. The SEF may set a limit on the
amount of risk allowed at one clearing house (140A), but allow
other clearing houses (140B) to allow greater risk. The SEF may
recognize that a user/trader holds a long position in a financial
instrument at clearing house A (140A) and a short position in the
same financial instrument at clearing house B (140B). As a result,
the SEF may uniquely assess the risk of the user's positions and
may approve or reject the processing of the user's trades or
requests.
[0073] In one example, a system for monitoring risk associated with
orders placed at a trading platform is disclosed. The system may
comprise: an interface to a plurality of clearing houses, one or
more of these clearing house including a total credit parameter
associated with a maximum aggregate risk parameter for the clearing
house; and at least one credit control module communicable with the
plurality of clearing houses, the credit control module receiving
orders/trades and communicating a quantity definition to determine
the value of orders placed on each individual clearing house;
wherein if the value of orders exceeds a predetermined amount of
the quantity definition, the credit control module requests an
increase in credit from the order routing mechanism to another
clearing house. In an alternate embodiment, the credit control
module may route, based on user/system preferences, orders to be
cleared to another clearing house with available credit.
[0074] As referenced in Appendix C of U.S. Provisional Patent
Application Ser. No. 61/438,933, a credit control module may assist
in implementing one or more of the aforementioned features. It will
be appreciated that although some of the credit controls described
in Appendix C of U.S. Provisional Patent Application Ser. No.
61/438,933 may be described with respect to exchanges or trading
engines, the disclosure herein additionally contemplates credit
control modules with respect to multiple clearing houses,
users/traders, and other party (e.g., clearing firms). In addition,
a clearing house 140B in communication with multiple trading
platforms (e.g., SEF 200 and non-SEF system 212) may provide
asynchronous credit controls (through a credit control module
executing on its computing systems) across different SEFs and
non-SEF systems.
[0075] FIG. 1 depicts an illustrative operating environment that
may be used to implement various aspects of the invention. The
operating environment is only one example of a suitable operating
environment and is not intended to suggest any limitation as to the
scope of use or functionality of the invention. Aspects of the
present invention are preferably implemented with computing devices
and networks for exchanging, transmitting communicating,
administering, managing and facilitating trading information
including, but not limited to performance bond amount requirements
and trading information. An exchange computer system 100 receives
market data, analyzes historical data, calculates, and disseminates
various values, e.g., accrued amounts associated with the declining
balance methodology, historical accrual amounts, daily settlement
price adjustments, cash payment etc., in accordance with aspects of
the invention.
[0076] Exchange computer system 100 may be implemented with one or
more mainframes, servers, gateways, controllers, desktops or other
computers. The exchange computer system 100 may include one or more
modules, processors, databases, mainframes, desktops, notebooks,
tablet PCs, handhelds, personal digital assistants, smartphones,
gateways, and/or other components, such as those illustrated in
FIG. 1. Moreover, computer system 100 may include one or more
processors 208 (e.g., Intel.RTM. microprocessor, AMD.RTM.
microprocessor, risk processor, etc.) and one or more memories 204
(e.g., solid state, DRAM, SRAM, ROM, Flash, non-volatile memory,
hard drive, registers, buffers, etc.) In addition, an electronic
trading system 138, such as the Globex.RTM. trading system, may be
associated with an exchange 100. In such an embodiment, the
electronic trading system includes a combination of globally
distributed computers, controllers, servers, networks, gateways,
routers, databases, memory, and other electronic data processing
and routing devices. The trading system may include a trading
system interface having devices configured to route incoming
messages to an appropriate devices associated with the trading
system. The trading system interface may include computers,
controllers, networks, gateways, routers and other electronic data
processing and routing devices. Incoming messages may be received
directly or indirectly (e.g., over the Internet, over a wired or
wireless network, etc.) from a computing device 120 of a user and
sent to a trading platform system 100. Orders that are placed with
or submitted to the trading system are received at the trading
system interface. The trading system interface routes the order to
an appropriate device. A trading engine computer system 100
receives orders and transmits market data related to orders and
trades to users.
[0077] A user data store (e.g., user database 102) may include
information identifying traders and other users of exchange
computer system 100. Such information may include user names and
passwords. A trader operating an electronic device (e.g., computer
devices 114, 116, 118, 120 and 122) interacting with the exchange
100 may be authenticated against user names and passwords stored in
the user database 112. Furthermore, an account data module 104 may
process account information that may be used during trades. The
account information may be specific to the particular trader (or
user) of an electronic device interacting with the exchange
100.
[0078] A match engine module 106 may match bid and offer prices for
orders configured in accordance with aspects of the invention.
Match engine module 106 may be implemented with software that
executes one or more algorithms for matching bids and offers for
financial instruments in accordance with aspects of the invention.
The match engine module 106 and trading system interface may be
separate and distinct modules or component or may be unitary parts.
Match engine module may be configured to match orders submitted to
the trading system. The match engine module may match orders
according to currently known or later developed trade matching
practices and processes. In an embodiment, bids and orders are
matched on price, on a FIFO basis. The matching algorithm also may
match orders on a pro-rata basis or combination of FIFO and pro
rata basis. Other processes and/or matching processes may also be
employed.
[0079] Moreover, a trade database 108 may be included to store
historical information identifying trades and descriptions of
trades. In particular, a trade database may store information
identifying or associated with the time that an order was executed
and the contract price. The trade database 108 may also comprise a
storage device configured to store at least part of the orders
submitted by electronic devices operated by traders (and/or other
users). A confirmation message may be sent when the match engine
module 106 finds a match for an order and the order is subsequently
executed. The confirmation message may, in some embodiments, be an
e-mail message to a trader, an electronic notification in one of
various formats, or any other form of generating a notification of
an order execution.
[0080] Furthermore, an order book module 110 may be included to
compute or otherwise determine current bid and offer prices. The
order book module 110 may be configured to calculate the price of a
financial instrument. A risk management module 134 may be included
in computer system 100 to compute and determine the amount of risk
associated with a financial product or portfolio of financial
products. An order processor module 136 may be included to receive
data associated with an order for a financial instrument (e.g., an
enhanced financial instrument). The module 136 may decompose delta
based and bulk order types for processing by order book module 110
and match engine module 106. The order processor module 136 may be
configured to process the data associated with the orders for
financial instruments or additional attributes to handle post-trade
routing. In some examples, the order processor module 136 may
process the enhanced financial instrument by removing a clearing
house attribute in the enhanced financial instrument before sending
to a clearing house. At least one reason, among others, for
removing the clearing house attribute in the enhanced financial
instrument before sending to the clearing house may be for
backwards compatibility reasons; the clearing house does not
necessarily need to be aware of this attribute in order to perform
its functions.
[0081] Similar to an order processor module 136, a request for
quote (RFQ) processor module 142 may receive requests for quotes
(referred to as RFQs or eRFQs) from traders operating computer
devices 114, 116, 118, 120, 122. The RFQ processor module 142 may
also receive RFQs from other sources, including, but not limited to
an exchange, regulated trading platform (e.g., SEF), and/or
clearing houses 140. RFQs may include information about the terms
related to a financial instrument, such as price, instrument
identifier, CCP attribute, expiration date (in the case of an
options contract), external trading platform attribute (e.g., other
SEFs and non-SEF systems to use) and/or other terms known to those
skilled in the art. The RFQ processor module 142 may receive the
RFQ and communicate with market makers 130 and/or traders to obtain
a response to the RFQ. For example, the RFQ processor module 142
may broadcast RFQs to subscribers (e.g., market makers 130,
traders, etc.) to inform them that quotes are requested on
particular financial instruments. In some instances no response may
be obtained and the RFQ may remain unanswered. In other
embodiments, the RFQ processor module 142 may be able to provide
information to the requesting entity/individual (e.g., a
trader).
[0082] Exchange computer system 100 may also include an implied
spread determination module 210. The implied spread determination
module 210 may be used to determine if an enhanced order (e.g., an
order including at least a CCP attribute) in combination with one
or more pending unmatched orders (i.e., resting orders) in an order
book creates an implied spread. The implied spread determination
module 210, 218 may perform the determination in parallel with
and/or apart from the electronic match engine 106 in the exchange.
Furthermore, as graphically depicted in FIG. 5, the implied spread
determination module 210, 218 may be located inside or outside the
exchange computer system 100. For example, the implied spread
determination module 218 may be located in a remote computer system
120 outside the exchange computer system 100. In another
embodiment, the module 210A, 210B, 218 may have multiple instances
running inside and outside the exchange. One skilled in the art
will recognize that the implied spread determination module 210,
218 may be implemented using programming code (e.g., C++, C, Java,
etc.) and executed on a processor located in a computing device.
The programming code may include common elements of software
programming, such as "for loops", "do-while loops", function calls,
if-else syntax, "switch" syntax, and other well known elements.
Similar such programming code may be found in the various other
modules and computer-readable instructions described throughout the
disclosure.
[0083] In addition, a market data module 112 may be included to
collect market data and prepare the data for transmission to users.
In one embodiment, the market data module 112 may publish the value
of the current accrual amount, and/or the daily settlement price
adjustment amount, and/or the cash payment amount. The market data
module 112 may regularly disseminate updates to a financial
instrument, including updates to the financial instrument that may
occur as values (e.g., dividend announcements) are reported. The
market data may be reported anonymously, clearing firm specific,
and/or broker/trader specific in some examples. In some embodiments
in accordance with aspects of the invention, the market data module
112 may update the market data records of a financial instrument on
a daily basis (e.g., at the end of each trading day).
[0084] The trading network environment shown in FIG. 1 includes
computer (i.e., electronic) devices 114, 116, 118, 120 and 122. The
computer devices 114, 116, 118, 120 and 122 may include one or more
processors, or controllers, that control the overall operation of
the computer. The computer devices 114, 116, 118, 120 and 122 may
include one or more system buses that connect the processor to one
or more components, such as a network card or modem. The computer
devices 114, 116, 118, 120 and 122 may also include interface units
and drives for reading and writing data or files. Depending on the
type of computer device, a user can interact with the computer with
a keyboard, pointing device, microphone, pen device or other input
device. For example the electronic device may be a personal
computer, laptop or handheld computer, tablet pc and like computing
devices having a user interface. The electronic device may be a
dedicated function device such as personal communications device, a
portable or desktop telephone, a personal digital assistant
("PDA"), remote control device, personal digital media system and
similar electronic devices.
[0085] Computer device 114 is shown directly connected to exchange
computer system 100. Exchange computer system 100 and computer
device 114 may be connected via a T1 line, a common local area
network (LAN) or other mechanism for connecting computer devices.
Computer device 114 is shown connected to a radio 132. The user of
radio 132 may be a trader or exchange employee. The radio user may
transmit orders or other information to a user of computer device
114. The user of computer device 114 may then transmit the trade or
other information to exchange computer system 100.
[0086] Computer devices 116 and 118 are coupled to a local area
network (LAN) 124. LAN 124 may have one or more of the well-known
LAN topologies and may use a variety of different protocols, such
as Ethernet. Computers 116 and 118 may communicate with each other
and other computers and devices connected to LAN 124. Computers and
other devices may be connected to LAN 124 via twisted pair wires,
coaxial cable, fiber optics or other media. Alternatively, a
wireless personal digital assistant device (PDA) 122 may
communicate with LAN 124 or the Internet 126 via radio waves. PDA
122 may also communicate with exchange computer system 100 via a
conventional wireless hub 128. As used herein, a PDA includes
mobile telephones and other wireless devices that communicate with
a network via radio waves.
[0087] FIG. 1 also shows LAN 124 connected to the Internet 126. LAN
124 may include a router to connect LAN 124 to the Internet 126.
Computer device 120 is shown connected directly to the Internet
126. The connection may be via a modem, DSL line, satellite dish or
any other device for connecting a computer device to the
Internet.
[0088] The operations of computer devices and systems shown in FIG.
1 may be controlled by computer-executable instructions stored on
computer-readable storage medium. Embodiments also may take the
form of electronic hardware, computer software, firmware, including
object and/or source code, and/or combinations thereof. Embodiment
may be stored on computer-readable media installed on, deployed by,
resident on, invoked by and/or used by one or more data processors
(e.g., risk processor), controllers, computers, clients, servers,
gateways, networks of computers, and/or any combinations thereof.
The computers, servers, gateways, may have one or more controllers
configured to execute instructions embodied as computer software.
For example, computer device 120 may include computer-executable
instructions for receiving updated settlement prices, accrued
amounts, and other information from computer system 100 and
displaying to a user. In another example, computer device 118 may
include computer-executable instructions for receiving market data
from computer system 100 and displaying that information to a user.
In yet another example, a processor of computer system 100 may be
configured to execute computer-executable instructions that cause
the system 100 to perform methods disclosed herein.
[0089] One or more market makers 130 may maintain a market by
providing bid and offer prices for a derivative or security to
exchange computer system 100. Exchange computer system 100 may also
exchange information with other trade engines, such as trade engine
138. One skilled in the art will appreciate that numerous
additional computers and systems may be coupled to exchange
computer system 100. Such computers and systems may include
clearing, regulatory and fee systems, such as clearing house 140.
Coupling can be direct as described or any other method described
herein.
[0090] A clearing house 140 enables an exchange computer system 100
to provide contracts with mutualized risk of counterparty credit
risk than over-the-counter (OTC) products. A clearing house 140
arranges for transactions to be settled and cleared. Clearing is
the procedure through which a clearing house 140 becomes buyer to
each seller of a contract (e.g., futures contract, equities,
currencies, interest rate products, etc.), and seller to each
buyer, and assumes responsibility for protecting buyer and seller
from financial loss by assuring performance on each contract. A
clearing house 140 may settle trading accounts, clear trades,
collect and maintain performance bond funds, regulate delivery and
report trading data. In some scenarios an exchange may operate its
own clearing house 140 through a division of the exchange through
which all trades made are confirmed, matched, and settled each day
until offset or delivered. In other words, the exchange computer
system 100 may be internal to the clearing house 140.
Alternatively, one or more other companies may be provided the
responsibility of acting as a clearing house 140 with the exchange
(and possibly other exchanges). An exchange may have one or more
clearing houses associated with the exchange. An exchange may offer
firms qualified to clear trades to provide a clearing house 140 for
the exchange computer system 100. In some instances, these clearing
members may be designated into different categories based on the
type of commodities they can clear and other factors.
[0091] The clearing house 140 may establish minimum performance
bond (i.e., margin) requirements for the products it handles. A
customer may be required to deposit a performance bond with the
clearing house 140 (or designated account) for the purpose of
insuring the clearing house 140 against loss on open positions. The
performance bond helps ensure the financial integrity of brokers,
clearing houses, and exchanges as a whole. If a trader experiences
a drop in funds below a minimum requirement, the clearing house 140
may issue a margin call requiring a deposit into the margin account
to restore the trader's equity. A clearing house 140 may charge
additional performance bond requirements at the clearing house's
discretion. For example, if a clearing house's potential market
exposure grows large relative to the financial resources available
to support those exposures, the clearing house 140 may issue a
margin call.
[0092] In another embodiment, the clearing house 140 may require a
larger performance bond based on a credit check (e.g., an analysis
of the credit worthiness, such as using a FICO.TM. or comparable
score, inter alia) of the customer/trader. The credit check may be
performed (i.e., initiated) by a clearing house 140 or an exchange
100. In the example where the clearing house 140 performs the
credit check, the clearing house 140 may send a message (e.g.,
enforcement message) to the exchange 100. If the credit check
indicates that a customer/trader is a high risk, the enforcement
message may increase the margin requirements of the
customer/trader, or otherwise adjust the capabilities/constraints
of the customer/trader commensurate with the higher risk. In the
example where the exchange 100 initiates the credit check, the
exchange 100 may send a message to one or more clearing houses
associated with the exchange 100 to update them on the
increased/decreased risk associated with the customer/trader.
[0093] In recognition of the desire to promote efficient clearing
procedures and to focus on the true intermarket risk exposure of
clearing houses, a cross-margining system may be used. By combining
the positions of joint and affiliated clearing houses in certain
broad-based equity index futures and options into a single
portfolio, a single performance bond requirement across all markets
may be determined. The cross-margining system may greatly enhance
the efficiency and financial integrity of the clearing system.
[0094] The principal means by which a clearing house 140 mitigates
the likelihood of default is through mark-to-market (MTM)
adjustments. The clearing house 140 derives its financial stability
in large part by removing debt obligations among market
participants as they occur. Through daily MTM adjustments, every
contract is debited or credited based on that trading session's
gains or losses. For example, as prices move for or against a
position, funds flow into or out of the trading account. This cash
flow is known as settlement variation.
[0095] Of course, numerous additional servers, computers, handheld
devices, personal digital assistants, telephones and other devices
may also be connected to exchange computer system 100. Moreover,
one skilled in the art will appreciate that the topology shown in
FIG. 1 is merely an example and that the components shown in FIG. 1
may be connected by numerous alternative topologies.
[0096] "Financial instruments" may include, but are not limited to,
swap agreements, credit defaults swaps (CDS), interest rate swaps
(IRS), forward rate agreements (FRAs), OTC equities, OTC foreign
currency, derivative contracts, equities, currency swaps (FX),
bilateral financial agreements, financial agreements involving a
central clearing party/central counterparty (CCP), and other
comparable financial instruments apparent to one of ordinary skill
in the art after review of the entirety disclosed herein.
[0097] Of course, the methods and systems of the above-referenced
embodiments may also include other additional elements, steps,
computer-executable instructions, or computer-readable data
structures. In this regard, other embodiments are disclosed and
claimed herein as well. In other embodiments, the systems and
methods may be partially or wholly implemented on a
computer-readable medium, for example, by storing
computer-executable instructions or modules, or by utilizing
computer-readable data structures. These instructions may be
executed by a processor of a computing device to perform one or
more steps of the methods disclosed herein. The details of these
and other embodiments are set forth in the accompanying drawings
and the description herein. Other features and advantages of the
disclosed method, systems, and apparatus will be apparent from the
description, drawings, and appendices.
[0098] In addition, the present disclosure overcomes limitations of
the prior art by providing methods and systems that provide for,
among other things, an enhanced financial instrument comprising at
least a clearing house attribute or desired clearing outcome. In
one example, a method is disclosed for receiving, from a computing
device of a user, an order for an enhanced financial instrument
which identifies first and second clearing houses. The order may be
matched and processed using a matching engine module and order
processing module. The enhanced financial instrument may correspond
to an over-the-counter (OTC) financial product available at a
plurality of clearing houses including at least the first and
second clearing houses. A computer processor may determine that
orders of the user at the first clearing house are non-actionable,
but that orders of the user at the second clearing house are
actionable. The computer processor may submit the matched order to
the second clearing house. In addition, in some examples, the
aforementioned method may also include receiving, from an exchange,
market data records (e.g., order data, etc.) that include a
clearing house designation (e.g., a first clearing house, a second
clearing house, etc.) The computer processor may generate
information formatted for transmission and display at the user's
computing device. Such information may, in some examples, comprise
at least a part of the received market data records and be
formatted to gray out those portions corresponding to the first
clearing house, but render as selectable those portions
corresponding to the second clearing house. Moreover, although the
example above refers to market data (e.g., order data), the
disclosure is not so limited. For example, a request for quote
(RFQ) may be substituted in the prior example such that a user
submits an enhanced RFQ that includes a CCP attribute to a request
for quote processor module. In response, market makers and/or
others may provide quote data/prices (e.g., indicative quotes) to
users.
[0099] In another example, a computer processor may accesses a user
data store or a user database to retrieve a user's settings. The
user's settings may comprise one, two, or more of: a first
indication of one or more of a plurality of clearing houses at
which prices are non-actionable but viewable; a second indication
of one or more of the plurality of clearing houses at which the
prices are actionable; and a third indication of one or more of the
plurality of clearing houses restricted from the user. In the
foregoing example, the system may receive from the user's computing
device a financial identifier corresponding to an enhanced
financial instrument for an over-the-counter product available at a
plurality of clearing houses including at least the first clearing
house, second clearing house, and third clearing house. The system
may then send market data records (e.g., order data) of the
financial identifier that include the first indication (e.g., the
first clearing house) and the second indication (e.g., the second
clearing house) to the user's computing device. The market data
records, in some examples, may include at least an attribute
configured to identify a clearing house, a price (e.g., order
price) attribute, and a financial identifier attribute. The system
may generate information formatted for transmission and display at
the user's computing device. Such formatting may, in some examples,
be based on the user's settings including at least one of: a first
style of graying out those portions corresponding to the first
clearing house, and a second style of rendering as selectable those
portions corresponding to the second clearing house. In addition,
in some examples, the transmitted information may be formatted to
be compatible for display as part of a scrolling, text-based
messaging interface. In other examples the formatted transmitted
information may be displayed as part of a matrix of clearing
houses. Moreover, although the example above refers to market data
(e.g., order data), the disclosure is not so limited. For example,
the data formatted and/or rendered based on user settings may
include quote data/prices from market makers and/or others, as
described herein.
[0100] Furthermore, in some examples, the price attribute of the
received market data records may store at least bid and ask prices
of the financial identifier of the enhanced financial instrument.
The bid and ask prices may be specific to the clearing house
identified in the clearing house attribute. Moreover, in some
examples, the bid and ask prices of particular clearing house may
be multiple levels deep or market by order. In one example, the
data records may be level 2 records showing order by order. While
level 2 records may be for non-anonymous markets, the can also be
provided for anonymous markets in some scenarios in accordance with
various embodiments of the disclosure.
[0101] In yet another example, a computer system may register with
an exchange to automatically receive up-to-date market data
including a clearing house identifier (e.g., clearing houses
identified in the second indication, clearing houses identified in
the first indication) and a financial identifier. As a result, the
exchange may transmit market data, which comprises at least a price
attribute, a financial identifier attribute, and/or a clearing
house attribute, to the computer system.
[0102] Regarding enhanced RFQs, a computer-assisted method is
disclosed comprising one or more of the following steps: receiving,
using a request for quote (RFQ) processor module in a computer
system, an enhanced request for quote for a financial instrument
(e.g., an outright order for a futures contract, a spread order for
a futures contract, and an outright order for an options contract),
wherein the enhanced request for quote comprises an attribute
configured to identify at least one clearing house; accessing, by a
computer processor in the computer system, a user data store to
retrieve settings, which are described herein; accessing, using the
RFQ processor module, the attribute of the enhanced request for
quote to determine whether or not it identifies a third clearing
house, which is defined in the settings; sending, using the RFQ
processor module, the enhanced request for quote to one or more
dealer systems (or a plurality of systems corresponding to market
makers); receiving, from the one or more dealer systems (or market
makers), a quoted price of the financial instrument with respect to
each clearing house identified in the enhanced request for quote;
sending, using the RFQ processor module, a message to at least one
subscriber, wherein the message comprises a plurality of price
quotes of the financial instrument with respect to different
clearing houses, and wherein the behavior/distribution of the
message varies based on whether the RFQ is a directed RFQ, open
RFQ, or a hybrid RFQ (e.g., request for indicative quotes);
sending, using the RFQ processor module, the enhanced request for
quote to at least one of: a remote regulated trading platform and a
remote DCM platform; and displaying the message on a user's
computing system such that portions corresponding to a first
clearing house are grayed out and portions corresponding to a
second clearing house are rendered as selectable. One of skill in
the art after review of the entirety disclosed herein, including
U.S. Provisional Patent Application Ser. No. 61/438,933, which was
previously incorporated by reference herein, will appreciate that
one or more of the steps described herein may be optional and may
be performed in an order different than recited above.
[0103] The present disclosure has been described herein with
reference to specific exemplary embodiments thereof. It will be
apparent to those skilled in the art that a person understanding
this disclosure may conceive of changes or other embodiments or
variations, which utilize the principles disclosed herein without
departing from the broader spirit and scope of the disclosure as
set forth in the appended claims. For example, although numerous
examples recite swap agreements, one skilled in the art will
appreciate that the novel principles disclosed herein may be
applied to other types of financial instruments and still fall
within the scope of the invention contemplated herein. In another
example, the operation of generally determining and executing an
implied spread is depicted for illustrative purposes in steps 620,
606, and 616 of FIG. 6; however, in some embodiments in accordance
with various aspects of the disclosure, these aforementioned steps
may be illustrated as a single high-level step for determining and
clearing an implied spread associated with a financial instrument
provided by the RFQ processor module 142. One or more of the steps
may be optional and may be omitted from various embodiments. For
example, in some embodiments locking may be omitted or replaced by
a step that performs an equivalent function (i.e., of preventing
legging risk), as described in U.S. patent application Ser. No.
12/176,130 (Attorney Docket No. 006119.00131), which was previously
incorporated by reference in a priority application to this
filing.
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