IP Library › Granted Patent US 7,467,112
Granted Patent B2
US 7,467,112 · App. 11/967,719 · Granted Dec 16, 2008

Method for listing a futures contract that physically settles into a swap

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Quick Facts
Patent No.
US 7,467,112
App. No.
11/967,719
Granted
Dec 16, 2008
Kind
B2
Abstract

According to some embodiments, a futures contract is listed on a futures trading exchange. The futures contract physically settles upon expiration into a reference swap. The reference swap is cleared by a clearing house so that the physical settlement requires that the holder of a position in the futures contract upon expiration takes a specified side of the reference swap against the clearing house. The reference swap may be a credit default index swap.

Claims (9)

1. A method of operating an exchange, the method comprising:

listing a futures contract;

receiving an electronic signal that represents an order to buy or an order to sell the futures contract; and

upon settlement of the futures contract, requiring entry into a specified credit default index swap on a specified date against a specified counterparty, wherein

(a)(i) a long position in said futures contract entitles a holder of the long position to receive a fixed side of the specified credit default index swap on the specified date, and (ii) a short position in said futures contract entitles a holder of the short position to receive a floating side of the specified credit default index swap on the specified date; or

(b)(i) a short position in said futures contract entitles the holder of the short position to receive a fixed side of the specified credit default index swap on the specified date, and (ii) a long position in said futures contract entitles the holder of the long position to receive a floating side of the specified credit default index swap on the specified date;

said specified counterparty being a clearinghouse.

2. The method of claim 1 , wherein the specified credit default index swap is defined according to one of (a) a Dow Jones CDX index, and (b) an iTraxx index.

3. The method of claim 1 , wherein the specified credit default index swap is defined in terms of a tranche of a credit default index swap.