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 for calculating benchmark prices for trades in an instrument, the method being carried out by one or more programmed computers, the method comprising:
 receiving, by the one or more programmed computers, information indicating actual prices which occurred on one or more electronic trading systems, the actual prices being quote and/or deal prices;   calculating, by the one or more programmed computers, a new benchmark price at each of a plurality of successive time instants, each new benchmark price being calculated as a function of (a) a previously calculated benchmark price, (b) a market price determined as a function of the actual prices which occurred since the previous benchmark price was calculated, and (c) a phantom price, wherein the phantom price is:
 equal to the previous benchmark price if no actual prices occurred since the previous benchmark price was calculated; and 
 calculated as a function of the actual prices which occurred since the last benchmark price was calculated, if such actual prices occurred; and 
   delivering, by the one or more programmed computers, the calculated new benchmark price to at least one recipient.   
     
     
         2 . A method according to  claim 1 , wherein the prices include both quote prices and deal prices. 
     
     
         3 . A method according to  claim 1 , wherein a weight is assigned to each of the prior benchmark price, the market price and the phantom price when calculating the new benchmark price, the weight assigned to the phantom price being sufficiently less than the weight assigned to the previous benchmark price and the market price such that the phantom price has substantially no effect on the newly calculated benchmark price if actual prices occurred since the last benchmark was calculated. 
     
     
         4 . A method according to  claim 3 , wherein the weight of the phantom price is greater than zero but not more than 0.5*10 −6 . 
     
     
         5 . A method according to  claim 3 , wherein a scatter is assigned to each of the prior benchmark price, the market price and the phantom price when calculating the new benchmark price, the scatter assigned to the phantom price being sufficiently less than the scatter assigned to the previous benchmark price and the market price such that the phantom price has substantially no effect on the newly calculated benchmark price if actual prices occurred since the last benchmark was calculated. 
     
     
         6 . A method according to  claim 5 , wherein the scatter of the phantom price is between zero and 1% of the big figure of the instrument being traded. 
     
     
         7 . A method according to  claim 1 , wherein the recipient is a trading entity. 
     
     
         8 . A method according to  claim 1 , wherein the recipient is a trader. 
     
     
         9 . A method according to  claim 1  wherein the actual price is the same as the quote price when there are no deal prices. 
     
     
         10 . A method according to  claim 1  wherein the one or more programmed computers form a market rate feeder server. 
     
     
         11 . The method of  claim 1 , wherein the actual price is the same as the quote price when there arc no read prices. 
     
     
         12 . The method of  claim 1 , wherein the one or more programmed computers form a market rate fee server.