Systems and methods for performing two-way one-to-many and many-to-many auctions for financial instruments

Abstract

A switch engine module receive interest rate risk portfolios from a plurality of traders, and for each prospective trader, provides available switches based on positions in other counterparty portfolios that offset the viewing traders' positions. The offsetting positions are encoded with credit preference information in order to identify eligible trades based on both counterparties credit preferences. In particular, an embodiment provides for a switch auction whereby users can use an auction process to trade for forward rate agreement switches with other counterparties, for example, in a two-way or many-to-many auction. In the switch auction, the price is predetermined by the system prior to the auction so that parties can opt out of the transaction if desired. The credit preferences of the participating traders are taken in consideration in making matches.

1 . A system for performing a two-way one-to-many or many-to-many auction for financial instruments, comprising: 
 a plurality of auction modules, each being associated with a trader, that receive orders for financial instruments from respective said traders, wherein said orders comprise a price, a quantity, and an action;    an auction mechanism that receives the orders from the auction modules and credit preferences for each trader submitting an order, determines an auction price based on the prices of the received order, and matches orders at and above said auction price based on said credit preferences of said traders.    
     
     
         2 . The system of  claim 1 , wherein the auction merchandise generates a transition confirmation for each matched order, and delivers said transaction confirmation to said trader associated with said matched order.  
     
     
         3 . The system of  claim 1 , where said auction mechanism gives relative priority to said order having a higher price than other said orders.  
     
     
         4 . The system of  claim 1 , wherein said action comprises one of a bid and an ask.  
     
     
         5 . The system of  claim 1 , wherein the auction mechanism receives said credit preferences of said traders from said auction modules associated with respective said traders.  
     
     
         6 . A method for a two-way one-to-many or many-to-many auction of financial instruments, comprising: 
 receiving orders for a financial instrument and trader credit preference from at least a first trader and a second trader, wherein said orders include a price, a quantity, and an action;    calculating an auction price based on said prices associated with said orders;    matching said orders at and above said auction price based on said credit preferences of said trader associated with said order at and above said auction price.    
     
     
         7 . The method of  claim 6 , further comprising generating a transaction confirmation for each matched order.  
     
     
         8 . The method of  claim 7 , further comprising delivering said translation confirmation to said traders associated with said matched orders.  
     
     
         9 . The method of  claim 6 , wherein the step of matching said orders comprising matching said orders with relative priority to said orders at and above said auction price which have a higher price than other said orders.  
     
     
         10 . The method of  claim 6 , wherein said step of matching results in transactions for each pair of matched orders at said auction price.  
     
     
         11 . The method of  claim 6 , wherein said step of receiving a plurality of orders including an action, includes receiving a plurality of orders, wherein said action is one of a bid and an ask.