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 system for conversion of OTC FX positions from one or more OTC platforms, into standardized futures contracts processable at a traditional futures clearing house, each OTC FX position having a value date, the method comprising the steps of:
defining, in a first computer processor, a plurality of tenors, the number of tenors being less than the number of OTC value dates of the OTC FX positions;
defining, in a second computer processor, a standardized futures contract processable at the clearing house, corresponding to each defined tenor;
mapping each OTC FX position, as it is executed on one of the OTC platforms, into one or more processable standardized futures contract positions, based on the value date of the OTC FX position;
forwarding the mapped standardized futures contract positions to the clearing house;
on change of business days, generating a futures contract position opposite to the mapped futures contract position, thereby closing out the mapped futures contract position, and generating a new processable standardized futures contract position based on the value date of the OTC position being one business day closer; and
forwarding the generated new standardized futures contract positions to the clearing house.
2. The method of claim 1 , wherein the step of defining a plurality of tenors comprises defining three tenors for OTC FX spot positions and x tenors for OTC FX forwards positions.
3. The method of claim 2 , wherein the step of defining a standardized futures contract corresponding to each defined tenor, comprises defining three futures contracts corresponding to the three tenors defined for OTC FX spot positions, and defining x futures contracts corresponding to the x tenors defined for OTC FX forwards positions.
4. The method of claim 3 , wherein the step of mapping each OTC FX position into one or more futures contract positions comprises:
mapping each OTC FX spot position into one of the three contract positions, wherein OTC FX spot positions having a value date of the current business day are mapped to a position in a first contract, OTC FX spot positions having a value date of the day after the current business day are mapped to a position in a second contract, and OTC FX spot positions having a value date of two days after the current business day are mapped to a position in a third contract; and
mapping each OTC FX forwards position into two of the x contract positions, wherein a first share of each OTC FX forwards position is mapped to a first of the two contracts, and a second share of each OTC FX forwards position is mapped to a second of the two contracts, based on the point in time of the value date of the OTC FX forwards position relative to the points in time of the two tenors of the x tenors, corresponding to the two contracts of the x contracts.