Processing Binary Options in Future Exchange Clearing

Abstract

Systems and methods are disclosed for processing binary options (also referred to as digital options) in existing clearing systems, such as futures clearing systems. The binary option is treated, or processed, similar to standard options on a non-tradeable cash-settled underlying futures contract. A hypothetical instrument, referred to as a book instrument is created to facilitate clearing of the binary option. The book instrument has an expiration date after the expiration of the binary option, such as the day after the expiration of the binary option. For each binary option that expires in the money, a transaction is created for the book instrument future. The underlying book future has an assigned price that is a fixed amount less that the final price for the underlying statistical or actual value of the binary option at expiration. Transactions are loaded in the clearing system and processed and all positions are liquidated.

1 . A futures clearing system comprising:
 a processor;   a computer-readable medium containing computer-executable instructions that when executed cause the processor to perform the steps comprising:
 (a) assigning a book instrument for a corresponding binary option, the book instrument having an expiration after the expiration of the binary option; 
 (b) determining a price of the book instrument at the expiration date of the binary option; and 
 (c) clearing the binary option according to the book instrument for the binary option. 
   
     
     
         2 . The futures clearing system of  claim 1 , wherein (b) comprises determining a price of the book instrument as an incremental amount of a statistical price for the corresponding binary option at the expiration of the binary option. 
     
     
         3 . The futures clearing system of  claim 1 , wherein the binary option comprises a binary option contract. 
     
     
         4 . The futures clearing system of  claim 1 , wherein the underlying instrument comprises a futures contract. 
     
     
         5 . The futures clearing system of  claim 1 , wherein the book instrument comprises a non-tradeable cash-settled underlying contract. 
     
     
         6 . The futures clearing system of  claim 1 , wherein the book instrument has a fixed price of one U.S. dollar. 
     
     
         7 . A clearing system comprising:
 a processor;   a computer-readable medium containing computer-executable instructions that when executed cause the processor to perform the steps comprising:
 (a) assigning a non-tradeable cash-settled book instrument for a corresponding binary option, the book instrument having an expiration after the expiration of the binary option; 
 (b) determining a price of the book instrument at the expiration date of the binary option; and 
 (c) clearing the binary option according to the book instrument for the binary option. 
   
     
     
         8 . The futures clearing system of  claim 7 , wherein (b) comprises determining a price of the book instrument as an incremental amount of a statistical price for the corresponding binary option at the expiration of the binary option. 
     
     
         9 . The futures clearing system of  claim 7 , wherein the binary option comprises a binary option contract. 
     
     
         10 . The futures clearing system of  claim 7 , wherein the underlying instrument comprises a futures contract. 
     
     
         11 . The futures clearing system of  claim 7 , wherein the book instrument comprises a non-tradeable cash-settled underlying contract. 
     
     
         12 . The futures clearing system of  claim 7 , wherein the book instrument has a fixed price of one U.S. dollar. 
     
     
         13 . A system comprising:
 a processor;   a computer-readable medium containing computer-executable instructions that when executed cause the processor to perform the steps comprising:
 (a) assigning a book instrument for a corresponding binary option, the book instrument being non-tradeable and having an expiration after the expiration of the binary option; 
 (b) determining a price of the book instrument at the expiration date of the binary option; and 
 (c) clearing the binary option according to the book instrument for the binary option. 
   
     
     
         14 . The system of  claim 13 , wherein (b) comprises determining a price of the book instrument as an incremental amount of a statistical price for the corresponding binary option at the expiration of the binary option. 
     
     
         15 . The system of  claim 13 , wherein the binary option comprises a binary option contract. 
     
     
         16 . The system of  claim 13 , wherein the underlying instrument comprises a futures contract. 
     
     
         17 . The system of  claim 13 , wherein the book instrument comprises a non-tradeable cash-settled underlying contract. 
     
     
         18 . The system of  claim 13 , wherein the book instrument has a fixed price of one U.S. dollar.