Pricing cash settled on-the-run treasury futures contracts

Abstract

The disclosed embodiments relate to determining a listing date, an expiration date and the cash settlement price of a futures contract, i.e. a Treasury Futures, for the delivery of the most recently issued, referred to as an on-the-run, US treasury Note of a particular maturity by reference to the U.S. Treasury Auction cycle and the difference between a resultant industry surveyed swap rate and a resultant industry surveyed swap spread of the respective tenors (time remaining until maturity) of the on-the-run treasury futures.

We claim: 
     
         1 . A computer implemented method of computing a settlement price at an expiration date of a cash settled futures contract for the delivery of an underlying most recently issued U.S. Treasury note for a selected tenor, the method comprising:
 deriving, by a processor, the settlement price based on a present value of the most recently issued U.S. Treasury note of the selected tenor determined by calculating the difference between a swap spread value and a swap rate value therefore, the swap spread value and the swap rate value having been determined so as to be immune from skew by any one market participant.   
     
     
         2 . The computer implemented method of  claim 1  wherein the underlying most recently issued U.S. Treasury note is characterized by a notional face value of $100,000 and the selected tenor comprises on of a 2, 5 or 10 year term to maturity. 
     
     
         3 . The computer implemented method of  claim 1  wherein the determination of the swap spread value and swap rate value further comprises obtaining a surveyed resulting swap spread and surveyed resulting swap rate for the underlying most recently issued US treasury note of the selected tenor from the International Swaps and Derivatives Association. 
     
     
         4 . The computer implemented method of  claim 1  wherein the determination of the swap spread value and swap rate value is based on a plurality of swap spread quotes and swap rate quotes of a plurality of contributing dealers thereof. 
     
     
         5 . The computer implemented method of  claim 4  wherein the contributing dealers are selected based on one of reputation among dealers, perceived expertise, credit ratings, scale of US dollar swap market activity, or combinations thereof. 
     
     
         6 . The computer implemented method of  claim 4  wherein the swap spread quote comprises midpoint of the contributing dealer's actual bid/offer spread for a notional amount of $50 million. 
     
     
         7 . The computer implemented method of  claim 4  wherein the swap spread value is further determined as a trimmed means of the plurality of swap spread quotes 
     
     
         8 . The computer implemented method of  claim 4  wherein the swap rate value is determined as a trimmed means of the plurality of swap rate quotes 
     
     
         9 . The computer implemented method of  claim 1  wherein the determination occurs during a polling interval. 
     
     
         10 . The computer implemented method of  claim 1  wherein the deriving is not based on a yield to maturity of the underlying most recently issued U.S. Treasury note of the selected tenor. 
     
     
         11 . The computer implemented method of  claim 1  wherein the deriving further comprises computing the final settlement price as:
 100*[C/(SY−SP)+(1−C/(SY−SP))*(1+(SY−SP)/200) −2*m ]; where m comprises the selected tenor, C comprises the notional semi-annual coupon rate and (SY−SP) comprises the difference between the determined swap rate value and the determined swap spread value of the underlying most recently issued U.S. Treasury note for the selected tenor. 
 
     
     
         12 . The computer implemented method of  claim 1  wherein the settlement price is rounded to the nearest ¼ of 1/32 of one point. 
     
     
         13 . A system for computing a settlement price at an expiration date of a cash settled futures contract for the delivery of an underlying most recently issued U.S. Treasury note for a selected tenor, the system comprising:
 a settlement price calculator operative to derive the settlement price of the most recently issued U.S. Treasury note of the selected tenor base on a present value determined based on a calculation of the difference between a swap spread value and a swap rate value therefore, the swap spread value and the swap rate value having been determined so as to be immune from skew by any one market participant.   
     
     
         14 . The system of  claim 13  wherein the underlying most recently issued U.S. Treasury note is characterized by a notional face value of $100,000 and the selected tenor comprises one of a 2, 5 or 10 year term to maturity. 
     
     
         15 . The system of  claim 13  wherein the swap spread value determination processor and the swap rate value determination processor are coupled with the International Swaps and Derivatives Association, the swap spread value and swap rate value being determined based on a surveyed resulting swap spread and surveyed resulting swap rate for the underlying most recently issued US treasury note of the selected tenor provided thereby. 
     
     
         16 . The system of  claim 13  wherein the swap spread value and swap rate value are determined based on a plurality of swap spread quotes and swap rate quotes of a plurality of contributing dealers thereof. 
     
     
         17 . The system of  claim 16  wherein the contributing dealers are selected based on one of reputation among dealers, perceived expertise, credit ratings, scale of US dollar swap market activity, or combinations thereof. 
     
     
         18 . The system of  claim 16  wherein the swap spread quote comprises midpoint of the contributing dealer's actual bid/offer spread for a notional amount of $50 million. 
     
     
         19 . The system of  claim 16  wherein the determination of swap spread value further comprises determination of a trimmed means of the plurality of swap spread quotes 
     
     
         20 . The system of  claim 16  wherein the determination of the swap rate value further comprises determination of a trimmed means of the plurality of swap rate quotes 
     
     
         21 . The system of  claim 13  wherein the determination of the surveyed resulting swap spread and surveyed resulting swap rate occurs during a polling interval. 
     
     
         22 . The system of  claim 13  wherein the deriving is not based on a yield to maturity of the underlying most recently issued U.S. Treasury note of the selected tenor. 
     
     
         23 . The system of  claim 13  wherein the derivation of the settlement price further comprises computation the final settlement price as:
 100*[C/(SY−SP)+(1−C/(SY−SP))*(1+(SY−SP)/200) −2*m ]; where m comprises the selected tenor, C comprises the notional semi-annual coupon rate and (SY−SP) comprises the difference between the determined swap rate value and the determined swap spread value of the underlying most recently issued U.S. Treasury note for the selected tenor. 
 
     
     
         24 . The system of  claim 13  wherein the settlement price is rounded to the nearest ¼ of 1/32 of one point. 
     
     
         25 . A system for computing a settlement price at an expiration date of a cash settled futures contract for the delivery of an underlying most recently issued U.S. Treasury note for a selected tenor, the system comprising a processor and a memory coupled therewith, the system further comprising:
 first logic stored in the memory and executable by the processor to derive the settlement price of the most recently issued U.S. Treasury note of the selected tenor base on a present value determined based on a calculation of the difference between a swap spread value and a swap rate value therefore, the swap spread value and the swap rate value having been determined so as to be immune from skew by any one market participant.   
     
     
         26 . A system for computing a settlement price at an expiration date of a cash settled futures contract for the delivery of an underlying most recently issued U.S. Treasury note for a selected tenor, the system comprising:
 means for deriving the settlement price based on a present value of the most recently issued U.S. Treasury note of the selected tenor determined by calculating the difference between a swap spread value and a swap rate value therefore, the swap spread value and the swap rate value having been determined so as to be immune from skew by any one market participant.