Chicago Mercantile Exchange Inc.

Dmitriy Glinberg

Edward M Gogol

Dale Michaels

Tae S Yoo

Feliks Landa

Edmund Li

Tae Seok C Yoo

Ketan Patel

Jalpan Shah

Udesh Jha

Jodi L Abudarham

Ari L Studnitzer

Paul Andrew Bauerschmidt

Stephen M Goldman

Jeffrey Robert Mitchell

Adam Olszewski

Paul I Lichter

Muhammed Hadi

Michal Koblas

Amy Stephen

Mohammed Hadi

Suneel Iyer

Sunil Kiran Cutinho

Keith Anguish

Jodi L Aburdarham

Amy Stephan

A computer implemented method determines a margin requirement for a financial product portfolio. Market conditions for the financial product portfolio are characterized by a zero curve. The method includes producing a plurality of scenario curves, each scenario curve reflecting a principal component analysis (PCA) model of the zero curve with a respective PCA factor of a plurality of PCA factors of the PCA model offset from a corresponding base value for the zero curve, calculating a respective projected value of the financial product portfolio for each scenario curve of the plurality of scenario curves, calculating a loss risk amount for each PCA factor based on the respective projected value and a current value of the financial product portfolio, and determining the margin requirement based on a sum of the loss risk amounts for the plurality of PCA factors.

PCA-based portfolio margining

A set of estimated allocations N(X) through N(X) of portfolio positions to products Xthrough Xmay be determined, with products Xthrough Xincluding portfolio products and spread-traded products based on some of the portfolio products. Utilizing the set of estimated allocations, an optimized liquidation cost LCmay be designated. Data indicating at least a portion of a performance bond based on the optimized liquidation LCmay be output.

Liquidation cost calculation

The disclosed systems and methods relate to allowing trading of over the counter ('OTC') foreign exchange ('FX') contracts on a centralized matching and clearing mechanism, such as that of the Chicago Mercantile Exchange's (&#x201c;CME&#x201d;'s) futures exchange system (the &#x201c;Exchange&#x201d;). The disclosed systems and methods allow for anonymous transactions, centralized clearing, efficient settlement and the provision of risk management/credit screening mechanisms to lower risk, reduce transaction costs and improve the liquidity in the FX market place. In particular, the disclosed embodiments increase speed of execution facilitating growing demand for algorithmic trading, increased price transparency, lower cost of trading, customer to customer trading, and automated asset allocations, recurring trades as well as clearing and settlement efficiencies.

System and method for centralized clearing of over the counter foreign exchange instruments

A hybrid cross-margining system is disclosed. The disclosed provides for both joint accounts, maintained by multiple exchanges, as well as non-joint accounts, whereby the system recognizes both intra-account offsets within the joint account and inter-exchange offsets between the joint account and accounts maintained by another exchange to minimize the margin requirement of the associated market participant with respect to the positions reflected in these accounts.

Hybrid cross-margining

A system and method for using asymmetrical offsets for products in a risk management analysis system are disclosed. Conventional systems assign symmetrical offsets for products, that is, if two products have an 80% correlation they each would be assigned an offset of 80% with respect to each other. However, it is desirable to allow for asymmetrical offsets. In the disclosed system and method, when two products have a correlation of 80%, one may be assigned an offset of 75% and the other may be assigned an offset of 80%. There are many reasons to vary the offset between the products. The varying offset may reflect an asymmetry in the risk in one of the products, such as being traded in an illiquid market or in a less desirable venue. The varying offset may correct for an imbalance in spread credits due to special charges from intra spreading.

System and method for asymmetric offsets in a risk management system

Growing community of inventors

Northbrook, IL, United States of America

Dmitriy Glinberg