Trading and settling enhancements to the standard electronic futures exchange market model leading to novel derivatives including on exchange ISDA type credit derivatives and entirely new recovery products including novel options on these

A method of accessing derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising:

• providing listed for trading derivative products in an electronic futures exchange type environment;
• executing a trade relative to the listed for trading derivative product pursuant to a user command;
• and
• creating one or more post trade contracts for clearing based on the executed trade whose prices are related to the executed trade quotation by an algorithm comprising a set of parameterized mapping formulae.

A method of order placement for term derivatives within an adapted electronic futures exchange market model, rules and legal environment comprising:

• providing listed for trading term derivative products in an electronic futures exchange type environment displayed and arranged for trading via a front office trading system as one or more curves selected from the group consisting of forward curves and the spot curve;
• placing an explicit order in the listed for trading derivative products pursuant to a user command via the front office trading system;
• transforming the placed front office order quotation into an internal matching engine representation equivalent price via an algorithm comprising a set of parameterized mapping formulae of such a type that the internal representation prices have a linear relationship with their ultimate economic value, and equal price changes in this internal representation having equal present value regardless of expiry date or term;
• harnessing existing futures matching engine technology particularly as used for STIR futures to generate linked outright and spread orderbooks via implied orders within the internal representation of the matching engine;
• and
• transforming the internal representation of linked outright and spread orderbooks and filled order information back into their front office quotation equivalents via an algorithm comprising a set of parameterized reverse mapping formulae thereby generating Two Step Implied Order Linkage in the exchange's listed for trading forward curves and where relevant the spot curve.

A method of daily marking to market of derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising:

• providing listed for trading derivative products in an electronic futures exchange type environment wherein execution of user commands will create one or more post trade contracts for clearing purposes based on the executed order;
• generating daily mark to market reference prices relative to the listed for trading derivative products according to the normal daily settlement procedures of the exchange;
• and
• creating daily settlement prices for the post trade contracts for clearing based on the set of daily reference prices of the listed for trading derivative products via an algorithm comprising of a set of parameterized mapping formulae.

A method of accessing occurrence driven derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising:

• defining one or more designated triggering events not pursuant solely to either user command or the price history in an underlying reference market or a combination of both of these factors;
• providing listed for trading derivative products in an electronic futures exchange type environment either prior to or as a result of these designated triggering events;
• executing a trade relative to the listed for trading derivative product pursuant to a user command;
• and
• creating one or more post trade contracts for clearing based on the executed trade.

A method of cash settling derivative exposures robustly within an adapted electronic futures exchange market model, rules and legal environment comprising:

• providing listed for trading derivative products of one type in an electronic futures exchange type environment wherein execution of user commands can create one or more post trade contracts for clearing purposes based on the executed order that are of a cash settled at expiry type;
• further providing listed for trading derivative products of another type in an electronic futures exchange type environment wherein execution of user commands can create one or more post trade contracts for clearing purposes based on the executed order that are of a physically delivery at expiry type;
• and
• relating the expiry day settlement price of the cash settled contract type to the exchange delivery settlement price of the physically deliverable contract type via a formula.

A method for creating a fully integrated broad based organized credit derivatives market based on an adapted electronic futures exchange market model, rules and legal environment comprising a preferred embodiment of:

• a standing Credit Event Committee that from time to time announces that a notional credit event has occurred in a defaulting reference entity or group of related entities, based on both its own prevailing definitions and protocols and on external actual events;
• providing from time to time a new type of listed for trading debt derivative products known as a recovery product, whose expiry date and other relevant product properties are contingently defined relative to the notional credit event occurrence;
• such recovery products being similar to existing bond futures but designed to physically deliver a broader range of defaulted debt at expiry;
• providing access to exact OTC ISDA type credit default swap like exposures via a group of linked products known collectively as Adapted For Exchange New Credit Derivatives wherein each derivative product from time to time listed for trading is of a variety known as a Credit Product Spread Quotation For Trading which gives credit event protection comprising:
• a) executing a trade relative to the listed for trading credit product spread quotation pursuant to a user command;
• b) creating one or more post trade coupon contracts for clearing based on the executed trade whose prices are related to the executed credit product spread quotation and each of which are cash settled at full term expiry to a constant of zero;
• c) upon a notional credit evect announcement contingently creating and assigning Event Protection Futures to the same clearing accounts that hold relevant post trade coupon contracts;
• d) listing or redefining for trading an appropriate recovery product such that this product expiries at the same time as the related event protection futures;
• e) cash settling the Event Protection Futures at expiry to a formula that uses as a major component the exchange delivery settlement price of the related recovery product;
• and where the post trade coupon contracts for clearing are linked to the Credit Product Spread Quotation For Trading in b) above via an intermediate internal matching engine representation equivalent with each linkage being performed via a set of related algorithms each comprising of a set of parameterized mapping formulae;
• i) providing risk management through variation and initial margin calls through the central counterparty, wherein daily settlement prices for post trade coupon contracts for clearing are also set algorithmically based on the relevant set of daily mark to market reference prices generated within each Credit Product Spread Quotation For Trading market;
• ii) providing in addition to the credit product spread quotation spot curve for trading various other listed for trading forward curves;
• and
• iii) providing Two Step Implied Order Linkage between their various forward orderbooks and the spot orderbook via traditional matching engine technology applied to the intermediate internal matching engine representation.