# US 12,008,648 B2 · Minimization of the consumption of data processing resources in an electronic transaction processing system via deferral of physical delivery

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- Number: US 12,008,648 B2
- Document ID: US12008648B2
- Status: Granted
- Kind: B2
- Application number: 18/197,822
- Filed: 2023-05-16
- Published: 2023-09-14
- Granted: 2024-06-11
- Earliest claimed: 2020-02-06
- Assignees: Chicago Mercantile Exchange Inc.
- Applicants: Chicago Mercantile Exchange Inc.
- Inventors: Florian Huchedé; Xinrui Wang
- Web page: https://patentgrep.com/patent/US12008648B2

## CPC

- G06Q 40/04: Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
- G06Q 40/06: Asset management; Financial planning or analysis
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## Abstract

The disclosed embodiments relate to automated enablement of deferred physical delivery of an asset, for which physical delivery is called for in a bilateral contract, by automatically settling the bilateral contract among the parties thereto with positions in specifically tailored futures contracts with a defined later delivery date and, based thereon, extinguishing the bilateral contract requirement for physical delivery. This electronic substitution of equivalent futures positions for both parties in place of the physical delivery requirement, the delivery and payment obligations are bifurcated enabling either party to continue, unpenalized, with their respective obligation irrespective of the other party's actions, enabling the resultant positions available for offsetting/netting, so as to readily exit a position or utilize it to reduce monetary requirements, e.g., for margin or other requirements, as well as reduce the data storage requirements and/or computational resource requirements associated with storing and/or processing the data indicative of those positions.

## Claims

### Claim 1

A computer implemented method comprising:
receiving, by a processor, from an external clearing system, a message indicating that a bilateral contract of a plurality of bilateral contracts stored in a bilateral database coupled with the processor has expired, the expired bilateral contract requiring a physical delivery of a first quantity of an asset on a particular date by a first participant to a second participant in exchange for a first payment, effected via transmission of an electronic transaction to the external clearing system, the expired bilateral contract being characterized at expiration by a profit and loss characteristic equal to a difference between a current value of the first quantity of the asset and the first payment;
identifying, by the processor upon receiving the message indicating that the bilateral contract has expired, a futures contract currently traded on an electronic trading system coupled with the processor which calls for delivery at a future date of a second quantity of the asset in exchange for a second payment, the second quantity being less than the first quantity;
determining, by the processor, a whole number of the identified futures contract, each for the second quantity, which approximates the first quantity, and an adjusted price to the futures contract needed to replicate the profit and loss characteristic of the expired bilateral contract;
calculating, by the processor, a difference between the profit and loss characteristic of the expired bilateral contract and a net value of the determined whole number of the identified futures contract which replicates the profit and loss characteristic of the expired bilateral contract;
generating, by the processor, a first position in each of the determined whole number of the identified futures contract for the first participant at the adjusted price and a second position opposite to the first position for the second participant, the first and second positions being independent from each other;
one of crediting and/or debiting, by the processor, an account of the first and/or second participant in the amount of the calculated difference; and
extinguishing, by the processor, the requirement of the bilateral contract for physical delivery of the first quantity of the asset by the first participant to the second participant and the requirement for the first payment, the electronic transaction therefore not being transmitted to the external clearing system.

### Claim 2 (depends on 1)

The computer implemented method of claim 1, wherein the adjusted price conforms with a minimum price increment, which, when multiplied by the determined whole number multiplied by the second quantity, results in the net value of the determined whole number of the identified futures contract which replicates the profit and loss characteristic of the expired bilateral contract.

### Claim 3 (depends on 1)

The computer implemented method of claim 1, wherein the determining of the adjusted price further comprises compensating for the following: a difference in a current price of the futures contract and the current value of the first quantity, a difference in the future date of delivery of the futures contract and the expiration of the bilateral contract, and a difference between the first quantity and the determined whole number of the identified futures contract multiplied by the second quantity of each contract.

### Claim 4 (depends on 1)

The computer implemented method of claim 1, wherein the asset comprises a first currency and the first payment is denominated in a second currency different from the first currency.

### Claim 5 (depends on 1)

The computer implemented method of claim 1, wherein the bilateral contract comprises a forward currency contract.

### Claim 6 (depends on 1)

The computer implemented method of claim 1, wherein the minimum price increment defines a series of incremental discontinuous price values beginning with an initial value, each subsequent value of which exceeds a previous value by the minimum price increment.

### Claim 7 (depends on 1)

The computer implemented method of claim 1, wherein the second participant is enabled to obtain the physical delivery of the asset independent of the first participant.

### Claim 8 (depends on 1)

The computer implemented method of claim 1, wherein the second position is sold without affecting the first position.

### Claim 9 (depends on 1)

The computer implemented method of claim 1, further comprising:
storing, by the processor, the first position in a first data record associated with the first participant and the second positions in a second data record associated with the second participant, the first and second data records being stored in a portfolio database of the electronic trading system.

### Claim 10 (depends on 9)

The computer implemented method of claim 9, wherein the second position is offset by a third position held by the second participant in the portfolio database opposite the second position without affecting the first position.

### Claim 11 (depends on 9)

The computer implemented method of claim 9, wherein the second position is netted with a third position held by the second participant in the portfolio database opposite the second position to determine a risk of loss of the second participant.

### Claim 12

A system comprising:
an exchange computer system including a processor and a memory coupled therewith, the memory storing computer executable program code which when executed by the processor cause the processor to:
determine, from an external clearing system, a message indicating that a bilateral contract of a plurality of bilateral contracts stored in a bilateral database coupled with the processor has expired, the expired bilateral contract requiring a physical delivery of a first quantity of an asset on a particular date by a first participant to a second participant in exchange for a first payment, effected via transmission of an electronic transaction to the external clearing system, the expired bilateral contract being characterized at expiration by a profit and loss characteristic equal to a difference between a current value of the first quantity of the asset and the first payment; and
identify, upon receiving the message indicating that the bilateral contract has expired, a futures contract currently traded on an electronic trading system coupled with the processor which calls for delivery at a future date of a second quantity of the asset in exchange for a second payment, the second quantity being less than the first quantity;
determine a whole number of the identified futures contracts, each for the second quantity, which approximates the first quantity, and an adjusted price to the futures contract needed to replicate the profit and loss characteristic of the expired bilateral contract;
calculate a difference between the profit and loss characteristic of the expired bilateral contract and a net value of the determined whole number of the identified futures contract which replicates the profit and loss characteristic of the expired bilateral contract;
generate a first position in each of the determined whole number of the identified futures contracts for the first participant at the adjusted price and a second position opposite to the first position for the second participant, the first and second positions being independent from each other;
one of credit and/or debit an account of the first and/or second participant in the amount of the calculated difference; and
extinguish the requirement of the bilateral contract for physical delivery of the first quantity of the asset by the first participant to the second participant and the requirement for the first payment, the electronic transaction therefore not being transmitted to the external clearing system.

### Claim 13 (depends on 12)

The system of claim 12, wherein the adjusted price conforms with a minimum price increment, which, when multiplied by the determined whole number multiplied by the second quantity, results in the net value of the determined whole number of the identified futures contracts which replicates the profit and loss characteristic of the expired bilateral contract.

### Claim 14 (depends on 12)

The system of claim 12, wherein the determination of the adjusted price further comprises compensating for the following: a difference in a current price of the futures contract and the current value of the first quantity, a difference in the future date of delivery of the futures contract and the expiration of the bilateral contract, and a difference between the first quantity and the determined whole number of the identified futures contracts multiplied by the second quantity of each contract.

### Claim 15 (depends on 12)

The system of claim 12, wherein the asset comprises a first currency and the first payment is denominated in a second currency different from the first currency.

### Claim 16 (depends on 12)

The system of claim 12, wherein the bilateral contract comprises a forward currency contract.

### Claim 17 (depends on 12)

The system of claim 12, wherein the minimum price increment defines a series of incremental discontinuous price values beginning with an initial value, each subsequent value of which exceeds a previous value by the minimum price increment.

### Claim 18 (depends on 12)

The system of claim 12, wherein the second participant is enabled to obtain the physical delivery of the asset independent of the first participant.

### Claim 19 (depends on 12)

The system of claim 12, wherein the second position is sold without affecting the first position.

### Claim 20 (depends on 12)

The system of claim 12, wherein computer executable program code, when executed by the processor further cause the processor to:
store the first position in a first data record associated with the first participant and the second positions in a second data record associated with the second participant, the first and second data records being stored in a portfolio database of the electronic trading system.

### Claim 21 (depends on 20)

The system of claim 20, wherein the second position is offset by a third position held by the second participant in the portfolio database opposite the second position without affecting the first position.

### Claim 22 (depends on 20)

The system of claim 20, wherein the second position is netted with a third position held by the second participant in the portfolio database opposite the second position to determine a risk of loss of the second participant.

### Claim 23

A system comprising:
means for receiving, from an external clearing system, a message indicating that a bilateral contract of a plurality of bilateral contracts stored in a bilateral database has expired, the expired bilateral contract requiring a physical delivery of a first quantity of an asset on a particular date by a first participant to a second participant in exchange for a first payment, effected via transmission of an electronic transaction to the external clearing system, the expired bilateral contract being characterized at expiration by a profit and loss characteristic equal to a difference between a current value of the first quantity of the asset and the first payment;
means for identifying, upon receiving the message indicating that the bilateral contract has expired, a futures contract currently traded on an electronic trading system which calls for delivery at a future date of a second quantity of the asset in exchange for a second payment, the second quantity being less than the first quantity;
means for determining: a whole number of the identified futures contracts, each for the second quantity, which approximates the first quantity, and an adjusted price to the futures contract needed to replicate the profit and loss characteristic of the expired bilateral contract;
means for calculating a difference between the profit and loss characteristic of the expired bilateral contract and a net value of the determined whole number of the identified futures contract;
means for generating a first position in each of the determined whole number of the identified futures contracts for the first participant at the adjusted price and a second position opposite to the first position for the second participant, the first and second positions being independent from each other;
means for one of crediting and/or debiting an account of the first and/or second participant in the amount of the calculated difference; and
means for extinguishing the requirement of the bilateral contract for physical delivery of the first quantity of the asset by the first participant to the second participant and the requirement for the first payment, the electronic transaction therefore not being transmitted to the external clearing system.