Facilitation of payments between counterparties by a central counterparty

Patent metadata

Field	Value
Publication number	US-9311675-B2
Application number	US-201414573455-A
Country	US
Kind code	B2
Filing date	Dec 17, 2014
Priority date	Jun 17, 2011
Publication date	Apr 12, 2016
Grant date	Apr 12, 2016

Abstract

A system for moving money between accounts of traders by a central counterparty to facilitate payments, i.e. the movement of funds, there between is disclosed which provides a flexible mechanism which supports simpler accounting, new types of derivatives contracts as well new types fees. The disclosed futures contract, referred to as a “payer” contract, comprises a “no-uncertainty” futures contract, i.e. the initial value and settlement value parameters are defined, that leverages the mechanisms of the clearing system to, for example, accommodate related payments. Accordingly, a 1-to-many relationship between contracts and prices is provided whereby each price component may be assigned its own payer contract. The function of the payer contract may be to guarantee the movement of money from related positions. In one embodiment, payer contracts are dynamically created whenever a payment is needed.

First claim

We claim:

1. A computer implemented method of facilitating a payment between a first trader and a second trader by a central counterparty which requires the first and second traders to each maintain associated accounts in which funds are deposited to cover trading losses, the central counterparty comprising a payment processor, a settlement processor, a margin processor, and a memory coupled with the payment, settlement and margin processors, the method comprising:
providing, by the central counterparty, an account database stored in the memory, the account database comprising a first account record associated with the first trader which includes data reflecting funds maintained on account to cover trading losses by the first trader, and a second account record associated with the second trader which includes data reflecting funds maintained on account to cover trading losses by the second trader;
performing, periodically by the central counterparty, based on a first position in a first instrument held by the first trader to which the second trader is a counterparty:
determining, by the payment processor, the amount of a payment to be made from one of the first or second trader to the other of the first or second trader in advance of settlement thereof based on accrued dividends associated with a reference index;
assigning, automatically by the payment processor, the first trader a second position in a futures contract characterized by a settlement date, a quantity and a price, the second position being characterized by a value based on the quantity and the price of the futures contract as of the assigning;
assigning, automatically by the payment processor, the second trader a third position, counter to the second position, in the futures contract, the first and second traders not being identified to each other, wherein the assigning to the first and second traders is automatically performed by the central counterparty based on a another position in another instrument held by the first trader to which the second trader is a counterparty;
valuing, by the settlement processor upon occurrence of the settlement date, the futures contract at a spot value different from the price of the futures contract, the spot value being based on the determined payment amount;
modifying, by the margin processor, the first and second account records in the account database to reflect a credit to the account of the first trader and a debit from the account of the second trader in the amount of the difference between the value of the second position and the spot value when the difference represents a loss for the second trader; and
modifying, by the margin processor, the first and second account records in the account database to reflect a debit from the account of the first trader and a credit to the account of the second trader in the amount of the difference between the value of the second position and the spot value when the difference represents a loss for the first trader; and

wherein the first position and the periodic payment amounts are characterized by economic characteristics similar to economic characteristics of an Exchange Trade Fund.

2. The computer implemented method of claim 1 wherein the reference index comprises one of the S&P 500, the DJIA or the NASDAQ 100.

3. The computer implemented method of claim 1 further comprising:
when the account of the first trader is credited and the account of the second trader is debited:
determining, by the payment processor, the amount of an interest payment to be made from the first to the second trader in advance of settlement thereof based on the amount credited to the first trader;
assigning, by the payment processor, the first trader a fourth position in a futures contract characterized by a settlement date, a quantity and a price, the fourth position being characterized by a value based on the quantity and the price of the futures contract as of the assigning;
assigning, by the payment processor, the second trader a fifth position, counter to the fourth position, in the futures contract, the first and second traders not being identified to each other;
valuing, by the settlement processor upon occurrence of the settlement date, the futures contract at a spot value different from the price of the futures contract, the spot value being based on the determined interest payment amount; and
modifying, by the margin processor, the first and second account records in the account database to reflect a debit from the account of the first trader and a credit to the account of the second trader in the amount of the difference between the value of the second position and the spot value; and

when the account of the first trader is debited and the account of the second trader is credited:
determining, by the payment processor, the amount of an interest payment to be made from the second to the first trader in advance of settlement thereof based on the amount credited to the first trader;
assigning, by the payment processor, the first trader a sixth position in a futures contract characterized by a settlement date, a quantity and a price, the sixth position being characterized by a value based on the quantity and the price of the futures contract as of the assigning;
assigning, by the payment processor, the second trader a seventh position, counter to the sixth position, in the futures contract, the first and second traders not being identified to each other;
valuing, by the settlement processor upon occurrence of the settlement date, the futures contract at a spot value different from the price of the futures contract, the spot value being based on the determined interest payment amount; and
modifying, by the margin processor, the first and second account records in the account database to reflect a credit to the account of the first trader and a debit from the account of the second trader in the amount of the difference between the value of the second position and the spot value.

4. The computer implemented method of claim 1 wherein the quantity of futures contract is 1, the assigning of the second and third positions to the first and second traders respectively, further comprising assigning the second and third positions in a plurality of the futures contract, the quantity of the plurality of the futures contract being determined based on the payment amount.

5. The computer implemented method of claim 1 wherein the value of the second and third positions as of the assigning is zero.

6. The computer implemented method of claim 1 wherein the value of the second and third positions as of the assigning is non-zero.

7. The computer implemented method of claim 1 wherein the determining of the payment amount occurs upon occurrence of the settlement date.

8. The computer implemented method of claim 1 wherein the performing occurs one of quarterly, semiannually, or annually.

9. The computer implemented method of claim 1 wherein the quantity of the futures contract is 1, the assigning of the second and third positions to the first and second traders respectively, further comprising assigning the second and third positions in a plurality of the futures contract, the quantity of the plurality of the futures contract being determined based on the payment amount.

10. The computer implemented method of claim 1 wherein the spot value is valued based on a multiplier and a final settlement value.

11. The computer implemented method of claim 1 wherein the first instrument comprises a futures contract.

12. A system for facilitating a payment between a first trader and a second trader by a central counterparty which requires the first and second trad

Assignees

• Chicago Mercantile Exchange

Inventors

• Labuszewski John
• Nyhoff John
• Boberski David
• Kamradt Mike
• Paffaro Roberta
• Gogol Edward
• Wiley John
• Co Richard
• Youngren Steve

Classifications

• G06Q20/10

  specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems · CPC title

• G06Q20/28 Primary

  Pre-payment schemes, e.g. "pay before" · CPC title

• G06Q40/04 Primary

  Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange · CPC title

• G06Q40/00

  Finance; Insurance; Tax strategies; Processing of corporate or income taxes · CPC title