Periodic Reset Total Return Index Futures Contracts

Abstract

A periodic reset total return index may be based on a standard index, such as an equity index. The value of the periodic reset total return index may be the sum of the standard index plus the income flow generated by the index, such as dividends generated by stocks. The periodic reset total return index valuation may be deployed as the basis for a futures contract. On a periodic basis, the income flow accrued for the preceding period are passed from the short to the long position holder, with a corresponding adjustment of the settlement price of the contract. The expiration of the contract may be settled at the sum of the underlying index quotation plus the income flow accrual for the previous period. A buyer of a futures contract based on a periodic reset total return index receives the performance of the index plus the intervening income flow accrual.

1 . A system for clearing a futures contract based on a periodic reset total return index, the system comprising:
 an interface that receives a set of terms for a futures contract based on a periodic reset total return index, wherein the periodic reset total return index is recalibrated to an underlying index on a periodic basis, the periodic basis being identified in the set of terms;   a service provider server programmed with instructions to facilitate formation of a futures contract between a short position holder and a long position in accordance with the set of terms and based on a valuation of the periodic reset total return index, wherein the valuation of the periodic reset total return index comprises a sum of a valuation of the underlying index and an income flow generated by the underlying index for a current period;   a database that stores terms of the futures contract;   a service provider server programmed with instructions to transmit on the periodic basis, the income flow generated by the underlying index for the current period from the short position holder to the long position holder;   a processor programmed with instructions to recalibrate upon transferring the income flow, the periodic reset total return index to the underlying index; and   a service provider server programmed with instructions to settle the futures contract upon expiration, wherein the futures contract settles to the sum of the valuation of the underlying index and the income flow generated by the underlying index for the current period.   
     
     
         2 . The system of  claim 1 , wherein recalibrating, upon transferring the income flow, the periodic reset total return index in accordance with the underlying index further comprises subtracting the income flow generated by the underlying index for a previous period from the valuation of the periodic reset total return index. 
     
     
         3 . The system of  claim 1 , wherein the index comprises an equity index or a fixed income index. 
     
     
         4 . The system of  claim 3 , wherein the income flow generated by the underlying index comprises a dividend or a coupon payment. 
     
     
         5 . The system of  claim 1  wherein the periodic basis comprises a monthly basis, a quarterly basis, or an annual basis. 
     
     
         6 . The system of  claim 1  wherein the index comprises a weighted index. 
     
     
         7 . The system of  claim 1  wherein the weighted index comprises a plurality of constituents. 
     
     
         8 . The system of  claim 1  wherein the index comprises a stock index. 
     
     
         9 . The system of  claim 1 , further including a match engine programmed to match orders. 
     
     
         10 . A system for clearing a futures contract based on a periodic reset total return index, the system comprising:
 means for providing a set of terms for a futures contract based on a periodic reset total return index, wherein the periodic reset total return index is recalibrated to an underlying index on a periodic basis, the periodic basis being identified in the set of terms;   means for facilitating formation of a futures contract between a short position holder and a long position in accordance with the set of terms and based on a valuation of the periodic reset total return index, wherein the valuation of the periodic reset total return index comprises a sum of a valuation of the underlying index and an income flow generated by the underlying index for a current period; means for providing a mechanism for transferring, on the periodic basis, the income flow generated by the underlying index for the current period from the short position holder to the long position holder;   means for recalibrating, upon transferring the income flow, the periodic reset total return index to the underlying index; and   means for facilitating, upon expiration of the futures contract, settlement of the futures contract, wherein the futures contract settles to the sum of the valuation of the underlying index and the income flow generated by the underlying index for the current period.   
     
     
         11 . The system of  claim 10 , wherein recalibrating, upon transferring the income flow, the periodic reset total return index in accordance with the underlying index further comprises subtracting the income flow generated by the underlying index for a previous period from the valuation of the periodic reset total return index. 
     
     
         12 . The system of  claim 10 , wherein the index comprises an equity index or a fixed income index. 
     
     
         13 . The system of  claim 12 , wherein the income flow generated by the at least one of the plurality of constituents comprises a dividend or a coupon payment. 
     
     
         14 . The system of  claim 10 , wherein the periodic basis comprises a monthly basis, a quarterly basis, or an annual basis. 
     
     
         15 . The system of  claim 10 , wherein the index comprises a weighted index. 
     
     
         16 . The system of  claim 15  wherein the weighted index comprises a plurality of constituents. 
     
     
         17 . A method for clearing a futures contract based on a periodic reset total return index, the method comprising:
 receiving at an interface a set of terms for a futures contract based on a periodic reset total return index, wherein the periodic reset total return index is recalibrated to an underlying index on a periodic basis, the periodic basis being identified in the set of terms;   facilitating at a service provider server formation of a futures contract between a short position holder and a long position in accordance with the set of terms and based on a valuation of the periodic reset total return index, wherein the valuation of the periodic reset total return index comprises a sum of a valuation of the underlying index and an income flow generated by the underlying index for a current period;   storing at a database terms of the futures contract; service provider server programmed with instructions to transmit on the periodic basis, the income flow generated by the underlying index for the current period from the short position holder to the long position holder;   recalibrating at a processor s upon transferring the income flow, the periodic reset total return index to the underlying index; and   settling at a service provider server the futures contract upon expiration, wherein the futures contract settles to the sum of the valuation of the underlying index and the income flow generated by the underlying index for the current period.   
     
     
         18 . The method of  claim 17 , wherein recalibrating, upon transferring the income flow, the periodic reset total return index in accordance with the underlying index further comprises subtracting the income flow generated by the underlying index for a previous period from the valuation of the periodic reset total return index. 
     
     
         19 . The method of  claim 17 , wherein the index comprises an equity index or a fixed income index. 
     
     
         20 . The method of  claim 17 , wherein the income flow generated by the underlying index comprises a dividend or a coupon payment.