System for processing withholding payments
Systems and methods are provided for efficiently processing withholding payments for constructive dividends. A party that receives constructive dividend payments also has a corresponding short position in a withholding financial instrument. A clearing house computer system adjusts the value of a withholding financial instrument in response to receipt of constructive dividend payments. The clearing house computer system determines a variation margin amount for the short party and processes a variation margin payment from the short party to a withholding account through the variation margin settlement system.
1 . A computer system comprising:
a processor coupled via a network with a market data component configured to collect and transmit a market data feed; and
a non-transitory memory coupled with the processor and having stored therein computer-executable instructions that, when executed by the processor, cause the processor to:
analyze the market data feed to determine receipt of a constructive dividend payment for a derivative financial instrument;
create a withholding financial instrument corresponding to the derivative financial instrument and having a short party thereto which is also a long party to the derivative financial instrument and wherein the long party to the withholding financial instrument is an account for holding a variation margin amount;
adjust a value of the withholding financial instrument by the amount of the received constructive dividend payment, the adjusted value being equal to an accumulation of the amounts of all constructive dividend payments thus far received for the derivative financial instrument;
determine the variation margin amount for the short party to the withholding financial instrument; and
credit the determined variation margin amount to the long party to the withholding financial instrument, the long and short parties not being identified to each other by the processor,
wherein the credit by the processor of the variation margin to the long party to the withholding financial instrument eliminates a requirement for the short party to directly pay the accumulation of the amounts of all constructive dividend payments to the long party and thereby limits a consumption of bandwidth of data collected and transmitted by the market data component.
2 . The system of claim 1 , wherein the derivative financial instrument comprises an index futures financial instrument.
3 . The system of claim 1 , wherein the derivative financial instrument comprises a swap financial instrument.
4 . The system of claim 1 , wherein the computer-executable instructions are further executable by the processor to cause the processor to apply government rules for determining the constructive dividend payment.
5 . The system of claim 1 , wherein the constructive dividend payment is determined as a function of a dividend payment of at least one underlying financial instrument.
6 . The system of claim 1 , wherein the variation margin amount is a percentage of the constructive dividend payment for one trading period.
7 . The system of claim 1 , wherein the computer-executable instructions are further executable by the processor to cause the processor determine a daily settlement price for the withholding financial instrument.
8 . A computer implemented method comprising:
analyzing, by a processor, a market data feed, collected and transmitted by a market data component, to determine receipt of a constructive dividend payment for a derivative financial instrument;
creating, by the processor, a withholding financial instrument corresponding to the derivative financial instrument and having a short party thereto which is also a long party to the derivative financial instrument and wherein the long party to the withholding financial instrument is an account for holding a variation margin amount;
adjusting, by the processor, a value of the withholding financial instrument by the amount of the received constructive dividend payment, the adjusted value being equal to an accumulation of the amounts of all constructive dividend payments thus far received for the derivative financial instrument;
determining, by the processor, the variation margin amount for the short party to the withholding financial instrument in response to the constructive dividend payments; and
crediting, by the processor, the determined variation margin amount to the long party to the withholding financial instrument, the long and short parties not being identified to each other by the processor,
wherein the credit of the variation margin to the long party to the withholding financial instrument eliminates a requirement for the short party to directly pay the accumulation of the amounts of all constructive dividend payments to the long party and thereby limits a consumption of bandwidth of data collected and transmitted by the market data component.
9 . The computer implemented method of claim 8 , wherein the derivative financial instrument comprises an index futures financial instrument.
10 . The computer implemented method of claim 8 , wherein the derivative financial instrument comprises a swap financial instrument.
11 . The computer implemented method of claim 8 , further comprising applying government rules for determining the constructive dividend payment.
12 . The computer implemented method of claim 8 , wherein the constructive dividend payment is determined as a function of a dividend payment of at least one underlying financial instrument.
13 . The computer implemented method of claim 8 , wherein the variation margin amount is a percentage of the constructive dividend payment for one trading period.
14 . The computer implemented method of claim 8 , further comprising determining, by the processor, a daily settlement price for the withholding financial instrument.
15 . A tangible computer-readable medium containing computer-executable instructions that when executed by a processor coupled therewith, cause a central counterparty based exchange computer system to perform steps comprising:
analyzing a market data feed, collected and transmitted by a market data component coupled with the processor, to determine receipt of a constructive dividend payment for a derivative financial instrument;
creating a withholding financial instrument generated corresponding to the derivative financial instrument and having a short party thereto which is also a long party to the derivative financial instrument and wherein a long party to the withholding financial instrument is an account for holding a variation margin amount;
adjusting a value of the withholding financial instrument by the amount of the received constructive dividend payment, the adjusted value being equal to an accumulation of the amounts of all constructive dividend payments thus far received for the derivative financial instrument;
determining the variation margin amount for the short party to the withholding financial instrument in response to the constructive dividend payments; and
crediting the determined variation margin amount to the long party to the withholding financial instrument, the long and short parties not being identified to each other by the exchange computer system,
wherein the credit of the variation margin to the long party to the withholding financial instrument eliminates a requirement for the short party to directly pay the accumulation of the amounts of all constructive dividend payments to the long party and thereby limits a consumption of bandwidth of data collected and transmitted by the market data component.
16 . The tangible computer-readable medium of claim 15 , wherein the derivative financial instrument comprises an index futures financial instrument.
17 . The tangible computer-readable medium of claim 15 , wherein the derivative financial instrument comprises a swap financial instrument.
18 . The tangible computer-readable medium of claim 15 , wherein the constructive dividend payment is determined as a function of a dividend payment of at least one underlying financial instrument.
19 . The tangible computer-readable medium of claim 15 , wherein the variation margin amount is a percentage of the constructive dividend payment for one trading period.