Trading and settling enhancements to the standard electronic futures exchange market model leading to novel derivatives including on exchange ISDA type interest rate derivatives and second generation bond like futures based in part or entirely on them

A method of accessing deliverable bond futures type exposures linked to a product selected from the group consisting of swap interest rates alone and swap rates plus credit spreads, within an adapted electronic futures exchange market model, rules and legal environment comprising:

• listing on exchange interest rate swap linked bond type futures in various currencies with notional coupons defined in their contract specifications;
• also listing, credit rate linked bond type futures of various types depending on the credit exposure required, likewise with notional coupons defined in their contract specifications;
• such additional products expiring at the same time as the swap linked bond futures of the appropriate currency;
• providing access to exact OTC ISDA type debt related derivative exposures of the Adapted For Exchange New Interest Rate Swap type in the relevant currency;
• hence having available the standard par interest rate swap quotation for trading products;
• also providing, if needed, the appropriate exact OTC ISDA type debt related derivative exposures of the Adapted For Exchange New Credit Derivatives type;
• hence having available the appropriate Credit Product Spread Quotation For Trading products;
• defining a price to rate relationship algorithm from which the expiry day settlement price of each rate linked bond type futures can be used to calculate exchange delivery settlement rates for the standard par interest rate swap quotation for trading product and where relevant for the appropriate credit product spread quotation products;
• and
• creating and assigning relevant and exact OTC ISDA type debt related derivative exposures into each rate linked bond type futures contract at the expiry, via executing one or more transactions not pursuant to user command:—
• i) in the swap rate quotation for trading product of the relevant currency;
• and also
• ii) for credit rate linked bond type futures the appropriate credit product spread quotation product,
• such transactions being executed on behalf of exchange participants by reference to the rate linked bond type futures exposure they hold with:—
• a) prices defined by the rate relationship algorithm;
• b) term defined by the maturity;
• c) volumes defined in proportion to the number of those futures held;
• and
• d) buy or sell side defined by the direction exposure, of the specific futures exposures held,
• wherein the post trade products for clearing based on the executed trades at expiry are delivered to the same clearing accounts that held the expiring rate linked bond type futures contracts and with the same customer account references.

A method of accessing exact OTC ISDA type overnight indexed swap exposures within an electronic futures exchange type environment comprising:

• a listed for trading derivative product in an electronic futures exchange type environment (swap rate quotation product for trading) which gives overnight indexed swap exposure;
• executing a trade relative to the listed for trading swap rate quotation product pursuant to a user command;
• creating positions based on the executed trade in two different types of post trade for clearing products, wherein each distinct position so created consists of a Fixed Rate OIS Product paired and offset with Overnight Indexed Products of the same expiry, with each position created at zero price and in volumes based on the executed swap rate quotation product trade as determined by an algorithm comprising a set of parameterized mapping formulae;
• after a specified number of business days associated with the definition of spot in the relevant money market, using a standard overnight index rate benchmark such as the Fed Funds rate to augment via a parameterized formula the position sizes of the Overnight Indexed Products with additional contract positions created at zero price to simulate compounding;
• providing end of day valuation and risk management through the variation and initial margin calls of the central counterparty, wherein daily settlement prices for both Fixed Rate OIS and Overnight Indexed Products for clearing are set based on a parameterized algorithm using as its input the set of daily mark to market reference prices from the listed for trading swap rate quotation product market;
• and
• at expiry cash settling both the overnight indexed and fixed contracts to a price of 6%.