# US 8,751,350 B2 · Conversion and liquidation of defaulted positions > Agents: this data is available as JSON from the patentgrep API and MCP server — see https://patentgrep.com/llms.txt - Number: US 8,751,350 B2 - Document ID: US8751350B2 - Status: Granted - Kind: B2 - Application number: 11/954,656 - Filed: 2007-12-12 - Published: 2009-06-18 - Granted: 2014-06-10 - Earliest claimed: 2007-12-12 - Assignees: Chicago Mercantile Exchange Inc. - Applicants: Muhammed Hadi; Dale Michaels; Amy Stephen; Suneel Iyer; Ketan Patel - Inventors: Muhammed Hadi; Dale Michaels; Amy Stephen; Suneel Iyer; Ketan Patel - Web page: https://patentgrep.com/patent/US8751350B2 ## CPC - 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 A method of liquidating defaulted positions associated with centrally cleared financial product is disclosed. The method includes identifying a defaulted position associated with a centrally cleared financial product, calculating a value differential between the defaulted position and a standard position, offering the value differential and the standard position to a party such that the value differential and the standard position represent a converted position, and settling the converted position upon acceptance of the offer by the party. ## Claims ### Claim 1 A method of liquidating defaulted positions associated with centrally cleared illiquid financial product, the method comprising: identifying, by a program logic executable by a processor, a defaulted position associated with a centrally cleared financial product offered by a clearing counterparty; calculating, by the processor, a value differential between the defaulted position and a standard position; offering, by the processor, the value differential and the standard position to a party, wherein the value differential and the standard position represent a converted position; and settling, by the processor, the converted position upon acceptance of the offer by the party. ### Claim 2 (depends on 1) The method of claim 1, wherein identifying the defaulted position includes identifying a defaulted position associated with an interest rate swap. ### Claim 3 (depends on 2) The method of claim 2, wherein the interest rate swap comprises an exchange listed financial product. ### Claim 4 (depends on 1) The method of claim 1, wherein identifying the defaulted position includes identifying at least one non-defaulting party to be the party, wherein the non-defaulting party holds at least one position determined to be similar to the defaulted position. ### Claim 5 (depends on 1) The method of claim 1, wherein calculating the value differential includes calculating a net present value differential. ### Claim 6 (depends on 1) The method of claim 1, wherein offering the value differential and the standard position to the party include auctioning the value differential and the standard position. ### Claim 7 (depends on 6) The method of claim 6, wherein the auction is selected from the group consisting of a Dutch auction and an English auction. ### Claim 8 (depends on 1) The method of claim 1, wherein the centrally cleared illiquid financial product is cleared by a central counterparty that interacts with a each party to a transaction in illiquid financial product. ### Claim 9 A method of liquidating defaulted positions associated with centrally cleared illiquid financial product, the method comprising: identifying, by a program logic executable by a processor, a defaulted position associated with a centrally cleared financial product offered by a clearing counterparty; identifying, by the processor, at least one non-defaulting party, wherein the non-defaulting party holds at least one position determined to be similar to the defaulted position; calculating, by the processor, a net present value differential between the defaulted position and a standard position; establishing, by the processor, an auction for the at least one non-defaulting party based on the value differential and the standard position to a party, wherein the value differential and the standard position represent a converted position; and settling, by the processor, the converted position upon acceptance of an offer by the at least one non-defaulting party. ### Claim 10 (depends on 9) The method of claim 9, wherein identifying the defaulted position includes identifying a defaulted position associated with an interest rate swap. ### Claim 11 (depends on 10) The method of claim 10, wherein the interest rate swap comprises an exchange listed financial product. ### Claim 12 (depends on 9) The method of claim 9, wherein auctioning the value differential and the standard position includes auctioning the value differential and the standard position in either a Dutch auction or an English auction format. ### Claim 13 (depends on 9) The method of claim 9, wherein the centrally cleared illiquid financial product is cleared by a central counterparty that interacts with a each party to a transaction in illiquid financial product. ### Claim 14 A default position auction system for auctioning defaulted positions associated with illiquid financial instruments, the system comprising: a processor in communication with a computer readable medium, the computer readable medium storing instructions executable by the processor, the instructions configured to: clear transactions associated with illiquid financial products, wherein at least one of the transactions results in an open position associated with the illiquid financial product held by a party to the transaction; determine a performance bond requirement associated with the open position; calculate a default position according to a failure of the party to comply with the performance bond requirement; convert the defaulted position to a financial equivalent position having a converted term; establish an auction for the converted defaulted position in an open market for a financial instrument having the converted term, the converted defaulted position being offered in an electronic trading system. ### Claim 15 (depends on 14) The system of claim 14, wherein the defaulted position is associated with an interest rate swap. ### Claim 16 (depends on 15) The system of claim 15, wherein the interest rate swap comprises an exchange listed financial product. ### Claim 17 (depends on 14) The system of claim 14, wherein the instructions are further configured to: identify at least one non-defaulting party to participate in the auction, wherein the non-defaulting party holds at least one position determined to be similar to the defaulted position. ### Claim 18 (depends on 14) The system of claim 14, wherein calculating the default position includes calculating a net present value differential. ### Claim 19 (depends on 14) The system of claim 14, wherein the auction is selected from the group consisting of a Dutch auction and an English auction.