Chicago Mercantile Exchange Inc.

Scott Johnson

James W Farrell

Charlie Troxel, Jr

John Falck

Arjuna Ariathurai

David Salvadori

Agnes Shanti Thiruthuvadoss

Agnes Shanthi Thiruthuvadoss

Systems and methods are provided for executing a hedge transaction in connection with the execution of a derivative product order in which the price of the derivative product is defined by one or more variables. The hedge transaction may be executed at an exchange or match engine that is different from the exchange or match engine executing the derivative product order. The execution of derivative product transaction may be contingent on the existence of an appropriate hedge transaction. Alternatively, a best efforts approach may be used to fill the hedge transaction order after executing the derivative product transaction.

Derivatives trading methods that use a variable order price and a hedge transaction

Systems and methods are provided for processing derivative product orders at an exchange. Traders provide derivative product order risk data to the exchange. The order risk data may include maximum delta, gamma and/or vega utilization values for derivative product contracts based on the same underlying product. Before executing a trade, a match system analyzes the trader's current utilization state and the utilization that would result after the trade. The match system may then execute all or a portion of the trade.

Order risk management for derivative products

Order risk management for financial product processing

Hedge transactions using variable order prices

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Oak Park, IL, United States of America

Scott Johnson