Mapping An Over The Counter Trade Into A Clearing House
A method and system converts OTC positions into contracts clearable at a futures clearing house. Each OTC position has a maturity date. The method comprises: a) defining a plurality of tenors. The plurality of tenors is fewer in number than the OTC maturity dates of the OTC positions. The method also comprises: b) defining a contract, which is clearable at the clearing house, corresponding to each tenor defined in step a); c) mapping each OTC position, as it is executed, into one or more of the contracts, based on the maturity date of the OTC position; and d) between business days, re-mapping each contract mapped at step c) to account for the move of calendar day. The invention finds particular application as a method and system to convert OTC Foreign Exchange (FX) positions into futures contracts clearable at a futures clearing house. The OTC FX positions may include OTC FX spot positions and OTC FX forwards positions.
1 . A method in a computerized clearing system for conversion of OTC FX forwards positions from one or more OTC platforms, into standard futures contracts clearable at a computerized futures clearing house, each OTC FX forwards position having a future value date, the method comprising the steps of:
a) defining, in a computer processor, x tenors and x corresponding standard futures contracts clearable at the clearing house, wherein x is a predefined number determined from the number and spread of value dates of the OTC FX forwards positions;
b) weighting each OTC FX forwards position between two of the x contracts, based on the point in time of the OTC FX forwards position's future value date relative to the point in time, with respect to the current business day, of the tenor corresponding to the first of the two of the x contracts and the point in time, with respect to the current business day, of the tenor corresponding to the second of the two of the x contracts;
c) mapping a first portion of the OTC FX forwards position into the first contract, based on the weighting of the first contract;
d) mapping a second portion of the OTC FX forwards position into the second contract, based on the weighting of the second contract, wherein the sum of the first and second portions equals the whole OTC FX forwards position; and
e) at the end of the current business day, before a new business day, repeating steps b), c) and d) for the new business day.
2 . The method of claim 1 , wherein step e) comprises, when an FX forwards position's future value date has become equal to two days after the new business day, treating the FX forwards position as an FX spot position having a value date of two days after the current business day.