Electronic credit default futures market

A method for exchanging futures contracts comprising:

• recording, on a computer readable storage medium, a completed transaction including:
• at least one first trade order requesting a long position on a series of REC futures contracts, each of the series of futures contact having at least one of reference entity and a settlement value at a maturity date, the settlement value at the maturity date being based at least in part on solvency of the at least one reference entity and on a value of a random variable, none of the series of futures contracts sharing a common maturity date;
• and
• at least one second trade order requesting a short position on the series of futures contracts;
• and
• clearing the completed transaction using a clearing house.

A computer readable medium comprising computer readable instructions that, as a result of being executed by a processor, instruct the processor to perform a method, the method comprising:

• receiving a first trade order requesting a long position on a bond recovery rate futures, the REC futures having a reference entity, a maturity date and a settlement value at the maturity date based at least in part on solvency of the reference entity and on the value of a random variable;
• receiving a second trade order requesting a short position on the REC futures;
• matching the first trade order with the second trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order and the second trade order.

A system for providing a bond recovery rate futures contract exchange comprising:

• an order interface configured to receive trade requests for positions on a futures contract, the futures contact having at least one reference entity, a maturity date and a settlement value at the maturity date based at least in part on solvency of the at least one reference entity and a random variable and a portion of the trade requests being offsetting trade requests;
• an auction engine configured to match the offsetting trade requests and store the offsetting trade requests as completed transactions;
• and
• a settlement engine configured to settle at least a portion of the completed transactions.

A method for exchanging an index of bond recovery rate futures contracts

• comprising:
• receiving a first trade order requesting a long position on the index, the index having a settlement value based at least in part on a plurality of REC futures;
• receiving a second trade order requesting a short position on the index;
• matching the first trade order with the second trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order and the second trade order.

A method for exchanging a tranche in a tranche in an index of bond recovery rate futures contracts comprising:

• receiving a first trade order requesting a long position on the tranche, the tranche having a settlement value based at least in part on a settlement value of the index;
• receiving a second trade order requesting a short position on the tranche;
• matching the first trade order with the second trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order and the second trade order.

A method for exchanging a series of futures contracts comprising:

• receiving a first trade order requesting a long position on at least one of the series of futures contracts, the series of futures contracts having a risk period substantially equivalent to a risk period of a previously traded futures contract, each of the series of futures contracts having a maturity date, none of the series of futures contracts sharing a common maturity date;
• receiving a second trade order requesting a short position on the at least one of the series of futures contracts;
• matching the first trade order with the second trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order and the second trade order.

A method of creating a financial position comprising:

• receiving a first trade order from a user, the first order requesting a short position on a POD™ futures, the POD™ futures having a reference entity, a maturity date and a settlement value at the maturity date based at least in part on the solvency of the reference entity, the order received from a user holding a financial instrument in the reference entity;
• receiving a second trade order from the user, the second order requesting a short position on REC futures with a notional amount equal to the financial instrument exposure, the REC futures having the same reference entity and a settlement value at the maturity date based at least in part on solvency of the reference entity and on a random variable receiving a third trade order requesting a long position on the POD™ futures;
• receiving a fourth trade order requesting a long position on the REC futures;
• matching the first trade order and the third trade order;
• matching the second trade order and the fourth trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, the third trade order, and the fourth trade order.

A method of creating a financial position comprising

• receiving a first trade order from a user, the first order requesting a long position on a POD™ futures, the POD™ futures having a reference entity, a maturity date and a settlement value at the maturity date based at least in part on the solvency of the reference entity;
• receiving a second trade order from the user, the second order requesting a long position on REC futures, the REC futures having the same reference entity and a settlement value at the maturity date based at least in part on solvency of the reference entity and on a random variable such as the realized bond recovery rate of a funded bond of the reference entity;
• receiving a third trade order requesting a short position on the POD™ futures;
• receiving a fourth trade order requesting a short position on the REC futures;
• matching the first trade order and the third trade order;
• matching the second trade order and the fourth trade order;
• and
• recording, on a computer readable storage medium, a completed transaction, the completed transaction indicating the first trade order, the second trade order, the third trade order, and the fourth trade order;
• whereby the combination of the completed transaction and a government bond provide the user with the returns of a synthetic corporate bond.