Method and apparatus for deriving benchmarks for trading instruments

Abstract

Benchmarks for the price of a financial instrument such as FX spot rate for a currency pair are calculated by an algorithm based on a previous benchmark and a market price. The market price is derived from a deal price and a quote price. The deal price is based on deals conducted since the last benchmark and the quote price is based on bids and offers entered since the last benchmark. For each of the deal and quote prices, a price, weight and scatter is calculated which is used to calculate a benchmark price, weight and scatter and a benchmark error.

1 . A method of establishing a benchmark price for trades in an instrument at a given time, comprising the step of: periodically calculating the benchmark price from a previous benchmark price and a measure of deal prices occurring since the previous benchmark price, wherein the benchmark price is further calculated with respect to a phantom price, and wherein the phantom price is equal to the previous benchmark price if no prices are entered into the market since the previous benchmark was established, and zero when prices have been entered into the market since the last benchmark was established. 
     
     
         2 . A method according to  claim 1 , wherein the phantom price is weighted with a weight equal to a very small constant. 
     
     
         3 . A method according to  claim 2 , wherein the weight of the phantom price is 0.5*10 −6 . 
     
     
         4 . A method according to  claim 2 , wherein the phantom price has a scatter equal to a small constant. 
     
     
         5 . A method according to  claim 4 , wherein the scatter of the phantom price is equal to 1% of the big figure of the instrument being traded. 
     
     
         6 . A method of establishing a benchmark price for trades in an instrument at a given time, comprising the step of:
 periodically calculating the benchmark price from a previous benchmark price and a measure of deal prices occurring since the previous benchmark price, wherein the deal prices are weighted in accordance with their age.   
     
     
         7 . A method according to  claim 6 , comprising calculating a Quote Price from the measure of quote prices. 
     
     
         8 . A method according to  claim 7 , wherein the Quote Price including a weighting. 
     
     
         9 . A method according to  claim 8 , wherein the weighting is based on at least one of the quote size, quote age and distance from the best quote in the market of quotes from which the Quote Price is calculated. 
     
     
         10 . A method according to  claim 7 , comprising calculating a scatter for the Quote Price. 
     
     
         11 . A method according to  claim 6 , comprising calculating a Deal Price from the measure of deal prices. 
     
     
         12 . A method according to  claim 11 , wherein the Deal Price including a weighting based on the weighting of the deal prices. 
     
     
         13 . A method according to  claim 11 , comprising calculating a scatter for the Deal Price. 
     
     
         14 . A method according to  claim 6 , comprising calculating a Benchmark Price Weight. 
     
     
         15 . A method according to  claim 6 , comprising calculating a Benchmark Price scatter. 
     
     
         16 . A method according to  claim 6 , comprising calculating a Benchmark Price Error. 
     
     
         17 . A method of establishing a benchmark price for trades in an instrument at a given time, comprising the step of: periodically calculating the benchmark price from a previous benchmark price and a measure of deal prices occurring since the previous benchmark price, wherein the deal prices are weighted in accordance with their volume. 
     
     
         18 . A method according to  claim 17 , comprising calculating a Quote Price from the measure of quote prices. 
     
     
         19 . A method according to  claim 18 , wherein the Quote Price including a weighting. 
     
     
         20 . A method according to  claim 19 , wherein the weighting is based on at least one of the quote size, quote age and distance from the best quote in the market of quotes from which the Quote Price is calculated. 
     
     
         21 . A method according to  claim 18 , comprising calculating a scatter for the Quote Price. 
     
     
         22 . A method according to  claim 17 , comprising calculating a Deal Price from the measure of deal prices. 
     
     
         23 . A method according to  claim 18 , wherein the Deal Price including a weighting based on said weighting of the deal prices. 
     
     
         24 . A method according to  claim 22 , comprising calculating a scatter for the Deal Price. 
     
     
         25 . A method according to  claim 17 , comprising calculating a Benchmark Price Weight. 
     
     
         26 . A method according to  claim 18 , comprising calculating a Benchmark Price scatter. 
     
     
         27 . A method according to  claim 19 , comprising calculating a Benchmark Price Error. 
     
     
         28 . A method of establishing a benchmark price for trades in an instrument at a given time, comprising the step of:
 periodically calculating the benchmark price from a previous benchmark price and a measure of deal prices occurring since the previous benchmark price, wherein the deal prices are weighted in accordance with their age and volume.   
     
     
         29 . A method according to  claim 28 , comprising calculating a Quote Price from the quote prices. 
     
     
         30 . A method according to  claim 29 , wherein the Quote Price including a weighting. 
     
     
         31 . A method according to  claim 30 , wherein the weighting is based on at least one of the quote size, quote age and distance from the best quote in the market of quotes from which the Quote Price is calculated. 
     
     
         32 . A method according to  claim 29 , comprising calculating a scatter for the Quote Price. 
     
     
         33 . A method according to  claim 28 , comprising calculating a Deal Price from the deal prices. 
     
     
         34 . A method according to  claim 33 , wherein the Deal Price including a weighting based on the weighting of the deal prices. 
     
     
         35 . A method according to  claim 28 , comprising calculating a scatter for the Deal Price. 
     
     
         36 . A method according to  claim 28 , comprising calculating a Benchmark Price Weight. 
     
     
         37 . A method according to  claim 28 , comprising calculating a Benchmark Price scatter. 
     
     
         38 . A method according to  claim 28 , comprising calculating a Benchmark Price Error.