Multiple Coupon Interest Rate Futures Contracts

Abstract

The disclosed system makes available multiple interest rate futures contracts (“IRFC”) for a given set of interest rate securities, such as US Treasury Notes, which may be used to satisfy the delivery obligation. The terms on which the delivery obligation of each such IRFC are met are governed by an associated conversion factor yield (“CFY”) value which is associated, in turn, with a corresponding set of conversion factors (“CF”), each of which corresponds to one member of the set of securities eligible for delivery, and which may be used at the time of delivery of such eligible interest rate security, to determine the delivery invoice price. Offering different CFY's and corresponding CF's may enable a market participant who seeks to use such futures to acquire or shed financial risk exposure to select from such array of futures contracts the member contract that most closely mirror the participant's intended risk profile.

We claim: 
     
         1 . A computer implemented method of facilitating settlement of an interest rate futures contract that specifies a delivery obligation which may be satisfied by at least the delivery of any of a set of eligible interest rate securities within a specified delivery period, the method comprising:
 computing, by a processor, a price to be paid in exchange for the delivery, in satisfaction of the delivery obligation of the interest rate futures contract, of a selected eligible interest rate security selected from the set of eligible interest rate securities each of which is associated with a unique conversion factor calculated to result in a particular conversion factor yield, of a set of conversion factor yields, specified by the interest rate futures contract within the specified delivery period, the price to be paid for the selected eligible interest rate security being computed based on the unique conversion factor associated therewith.   
     
     
         2 . The computer implemented method of  claim 1  wherein the computing further comprises selecting those unique conversion factor yields for inclusion in the set of conversion factor yields which, for a particular market condition, a price dynamic of an associated interest rate futures contract, as a function of the unique conversion factor yield, approximates a price dynamic of any of the set of eligible interest rate securities. 
     
     
         3 . The computer implemented method of  claim 1  wherein the selected eligible interest rate security selected from the set of eligible interest rate securities to be delivered is not the lowest cost interest rate security of the set of eligible interest rate securities. 
     
     
         4 . The computer implemented method of  claim 1  wherein more than one eligible interest rate security of the set of eligible interest rate securities is selected to deliver in satisfaction of the delivery obligation. 
     
     
         5 . The computer implemented method of  claim 1  wherein each conversion factor of the set of conversion factors which determine the unique conversion factor yield is computed as a price at which a note with the same time to maturity as the member of the set of eligible interest rate securities, and with par on the basis of one (1) point, will yield the unique conversion factor yield per annum. 
     
     
         6 . The computer implemented method of  claim 1  wherein the specified delivery period occurs subsequent to the undertaking of the specified delivery obligation by a trader. 
     
     
         7 . The computer implemented method of  claim 1  wherein each selected eligible interest rate security selected from the set of eligible interest rate securities is characterized by an associated coupon and an associated maturity. 
     
     
         8 . The computer implemented method of  claim 7  wherein the coupon and maturity associated with the selected eligible interest rate security selected from the set of eligible interest rate securities may be different from the coupon and maturities associated with the others of the set of eligible interest rate securities. 
     
     
         9 . The computer implemented method of  claim 7  wherein the value of the selected eligible interest rate security selected from the set of eligible interest rate securities at the time the traded interest rate futures contract is traded may be different then the value thereof at the time of the delivery. 
     
     
         10 . The computer implemented method of  claim 1  wherein a particular market condition at a time of the computing comprises a yield of the selected eligible interest rate security selected from the set of eligible interest rate securities, the set of unique conversion factor yields including a first conversion factor yield lower than the yield of the selected eligible interest rate security selected from the set of eligible interest rate securities and a second conversion factor yield higher than the yield of the selected eligible interest rate security selected from the set of eligible interest rate securities. 
     
     
         11 . The computer implemented method of  claim 10  further comprising:
 monitoring, by the processor, changes in market conditions; and 
 automatically performing, by the processor responsive to a change in market conditions, the computing. 
 
     
     
         12 . The computer implemented method of  claim 1  wherein the set of unique conversion factor yields comprises all possible conversion factor yields. 
     
     
         13 . The computer implemented method of  claim 12  wherein the set of unique conversion factor yields comprises conversion factor yields selected by a plurality of traders from a set of traders. 
     
     
         14 . The computer implemented method of  claim 13  wherein the selection of the set of unique conversion factor yields is accomplished by voting among the plurality of traders from the set of traders. 
     
     
         15 . A system for facilitating settlement of an interest rate futures contract that specifies a delivery obligation which may be satisfied by at least the delivery of any of a set of eligible interest rate securities within a specified delivery period, the system comprising:
 a delivery processor configured to compute a price to be paid in exchange for the delivery, in satisfaction of the delivery obligation of the interest rate futures contract, of a selected eligible interest rate security selected from the set of eligible interest rate securities each of which is associated with a unique conversion factor calculated to result in a particular conversion factor yield, of a set of conversion factor yields, specified by the interest rate futures contract within the specified delivery period, the price to be paid for the selected eligible interest rate security being computed based on the unique conversion factor associated therewith.   
     
     
         16 . The system of  claim 15  wherein the delivery processor is further operative to select those unique conversion factor yields for inclusion in the set of unique conversion factor yields which, for a particular market condition, a price dynamic of an associated interest rate futures contract, as a function of the unique conversion factor yield, approximates a price dynamic of any of the set of eligible interest rate securities. 
     
     
         17 . The system of  claim 15  wherein the selected eligible interest rate security selected from the set of eligible interest rate securities to be delivered is not the lowest cost interest rate security of the set of eligible interest rate securities. 
     
     
         18 . The system of  claim 15  wherein more than one eligible interest rate security of the set of eligible interest rate securities is selected to deliver in satisfaction of the delivery obligation. 
     
     
         19 . The system of  claim 15  wherein each conversion factor of the set of conversion factors associated with a unique conversion factor yield is computed as a price at which a note with the same time to maturity as the associated eligible interest rate security, and with par on the basis of one (1) point, will yield the associated conversion factor yield per annum. 
     
     
         20 . The system of  claim 15  wherein the specified delivery period occurs subsequent to the undertaking of the specified delivery obligation by a trader. 
     
     
         21 . The system of  claim 15  wherein each selected eligible interest rate security selected from the set of eligible interest rate securities is characterized by an associated coupon and an associated maturity. 
     
     
         22 . The system of  claim 21  wherein the coupon and maturity associated with the selected eligible interest rate security selected from the set of eligible interest rate securities may be different from the coupon and maturities associated with the others of the set of eligible interest rate securities. 
     
     
         23 . The system of  claim 21  wherein the value of the selected eligible interest rate security selected from the set of eligible interest rate securities at the time the traded interest rate futures contract is traded may be different then the value thereof at the time of the delivery. 
     
     
         24 . The system of  claim 15  wherein a particular market condition at a time of the computation comprises a yield of the selected eligible interest rate security selected from the set of eligible interest rate securities, the set of unique conversion factor yields including a first conversion factor yield lower than the yield of the selected eligible interest rate security selected from the set of eligible interest rate securities and a second conversion factor yield higher than the yield of the selected eligible interest rate security selected from the set of eligible interest rate securities. 
     
     
         25 . The system of  claim 24  further comprising:
 a market monitoring processor operative to monitor changes in market conditions; and 
 wherein the computation processor is further coupled with the market monitoring processor and further operative to automatically compute the price to be paid in exchange for the delivery of an eligible interest rate security responsive to a change in market conditions. 
 
     
     
         26 . The system of  claim 15  wherein the set of unique conversion factor yields comprises all possible conversion factor yields. 
     
     
         27 . The system of  claim 26  wherein the set of unique conversion factor yields comprises conversion factor yields selected by a plurality of traders from a set of traders. 
     
     
         28 . The system of  claim 27  wherein the selection of the set of unique conversion factor yields is accomplished by voting among the plurality of traders from the set of traders. 
     
     
         29 . A system for facilitating settlement of an interest rate futures contract that specifies a delivery obligation which may be satisfied by at least the delivery of any of a set of eligible interest rate securities within a specified delivery period, the system comprising:
 logic stored in a memory and executable by a processor to compute a price to be paid in exchange for the delivery, in satisfaction of the delivery obligation of the interest rate futures contract, of a selected eligible interest rate security selected from the set of eligible interest rate securities each of which is associated with a unique conversion factor calculated to result in a particular conversion factor yield, of a set of conversion factor yields, specified by the interest rate futures contract within the specified delivery period, the price to be paid for the selected eligible interest rate security being computed based on the unique conversion factor associated therewith.   
     
     
         30 . A system for facilitating settlement of an interest rate futures contract that specifies a delivery obligation which may be satisfied by at least the delivery of any of a set of eligible interest rate securities within a specified delivery period, the system comprising:
 means for computing a price to be paid in exchange for the delivery, in satisfaction of the delivery obligation of the interest rate futures contract, of a selected eligible interest rate security selected from the set of eligible interest rate securities each of which is associated with a unique conversion factor calculated to result in a particular conversion factor yield, of a set of conversion factor yields, specified by the interest rate futures contract within the specified delivery period, the price to be paid for the selected eligible interest rate security being computed based on the unique conversion factor associated therewith.