Exchange for derivative products contingent on odds-based markets
AssigneeMarketmaker Software Limited
InventorsMarc Butterly, David Edelman
Life of this patent
Estimating the term…
Abstract
A method and system are described for creating an exchange for futures products for odds markets based on binary outcomes. The futures product is based on the value of a particular fixed index or an exchange delivery settlement price in odds form, as recorded or computed at the end of a pre-assigned event or time-horizon. A particular use of this product would be on an exchange for sporting events, where for a given event, an identical interface to that which would currently be available for odds markets is made available, but which would be settled differently from the former, in such a manner as to allow investors to take positions on the movement of the odds without exposure to the final outcome of the event.
Claims12
A system for processing futures trades contingent on odds-based sporting event markets to allow trade parties to take positions on the movement of sporting event odds without being exposed to the final outcomes of the sporting events, the system comprising:
- a central processing unit (CPU);
- and
- storage coupled to the CPU for storing instructions that configure the CPU to:
- receive odds ST for at least one sporting event, wherein odds ST correspond to a specified sporting event outcome to be decided at a time later than a specified time T;
- adjust the odds ST so that the sum of the inverse ST odds for all possible outcomes in the sporting event is as close as possible to 1, thereby creating a 100% market;
- make the adjusted odds ST available to trade parties;
- receive, from trade parties, forecasts Ft and investment amounts at at time t, for settlement of the adjusted odds ST for the sporting event as of the specified time T, wherein the trade parties comprise at least one trade party for a positive investment amount at and at least one trade counter-party for a negative investment amount at;
- register at least one futures trade (Ft, at) between the trade parties prior to time T, the registered futures trade having a conditional value equal to zero at any time prior to time T;
- and
- confirm, in response to the adjusted odds ST, payoff to or liability of the at least one trade party as equal to at(Ft/ST−1), and respectively, liability of or payoff to the at least one trade counter-party as equal to −at(Ft/ST−1).
A system for processing futures trades contingent on odds-based sporting event markets, the system comprising:
- storage coupled to a processor, the storage comprising instructions that configure the processor to:
- receive a trade party offer from a trade party, the trade party offer comprising an investment amount at and a forecast Ft of a value for ST that will be offered, at a time T, by an exogenous market, wherein ST represents odds that a certain outcome of a sporting event will occur and time T is prior to the sporting event;
- receive an counter-party offer from a counter-party;
- match the counter-party offer to the trade party offer;
- register the matched counter-party offer and trade party offer as a futures trade;
- obtain, at time T, the odds ST from the exogenous market;
- process, prior to the sporting event, a settlement value of at((Ft/ST)−1) for the futures trade;
- and
- credit and debit, prior to the sporting event, the settlement value to accounts of the trade party and counter-party, respectively.
Dependencies are inferred from the claim text.