Trading and settling enhancements to the standard electronic futures exchange market model leading to novel derivatives including on exchange ISDA type credit derivatives and entirely new recovery products including novel options on these

Abstract

A set of linked methods allows accessing derivative products other than traditional futures and options within an adapted electronic futures exchange type market model, rules and legal environment. One embodiment comprises a linkage of such new methods which provides exchange members with access to several new products giving either entirely new or exact OTC ISDA type credit related derivative exposures.

1 . A method of accessing derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 providing listed for trading derivative products in an electronic futures exchange type environment;    executing a trade relative to the listed for trading derivative product pursuant to a user command; and    creating a plurality of post trade contracts for clearing based on the executed trade whose prices are related to the executed trade quotation.    
   
   
       2 . The method according to  claim 1 , wherein the listing of the derivative product omits a listing for trading of individual legs that are created pluraly for post trade clearing.  
   
   
       3 . The method according to  claim 2 , wherein the listing of the derivative product is a term product and the omitted legs are such as would have served no suitable hedging purpose for individual spot related exposures in the term market being hedged.  
   
   
       4 . The method according to  claim 1 , wherein a front office fill report for the executed trade in the listed for trading derivative product includes price and volume information on the plurality of post trade contracts for clearing created to assist with front office versus back office reconciliation.  
   
   
       5 . The method according to  claim 1 , wherein a back office report of the plurality of post trade contracts for clearing created includes price and volume information on the executed trade in the listed for trading derivative product, to assist with front office versus back office reconciliation.  
   
   
       6 . The method according to  claim 5 , wherein the executed trade in the listed for trading derivative product is passed as a marker through to the exchange's post trade management system and ultimately the clearing house as if it were a contract for clearing contract.  
   
   
       7 . The method according to  claim 6 , wherein the marker is registered with the clearing house but is not charged margin.  
   
   
       8 . The method according to  claim 6 , wherein the marker is used for calculating open interest reports for front office systems.  
   
   
       9 . The method according to  claim 6 , wherein the marker is used for efficient give ups acting as a reference in the exchange's post trade management system allowing the plurality of post trade contracts for clearing based on the marker trade to be transferred along with it as a group.  
   
   
       10 . The method according to  claim 9 , wherein executed trade markers can be given up in the exchange's post trade management system whilst individual post trade contracts based on the executed trade cannot.  
   
   
       11 . The method according to  claim 1 , wherein the prices of the post trade contracts for clearing are related to the executed trade quotation of the listed for trading derivative product through an algorithm comprising a set of parameterized mapping formulae.  
   
   
       12 . The method according to  claim 11 , wherein the price of the post trade contracts for clearing have a linear relationship with their economic value.  
   
   
       13 . The method according to  claim 12 , wherein the relationship between the close out profitability of an executed trade in the listed for trading derivative product on the one hand and the final trade out quotations on the other is a non-linear one.  
   
   
       14 . The method according to  claim 11 , wherein the listed for trading derivative product is a term product that gives exact OTC ISDA type debt related derivative exposures and is quoted for execution purposes in a manner consistent with normal market practice for the product in question.  
   
   
       15 . The method according to  claim 1 , wherein daily mark to market reference prices are generated for the listed for trading derivative products according to the normal daily settlement procedures of the exchange.  
   
   
       16 . The method according to  claim 15 , wherein daily settlement prices for the post trade contracts for clearing are based on the set of daily reference prices of the listed for trading derivative products and are generated via an algorithm comprising a set of parameterized mapping formulae.  
   
   
       17 . The method according to  claim 15 , wherein the set of daily reference prices generated by the exchange relative to the listed for trading derivative products are distributed electronically as if they were normal daily settlement prices for clearing to assist with front office versus back office reconciliation.  
   
   
       18 . The method according to  claim 1 , wherein the plurality of post trade contracts for clearing are such that the occurrence of one or more external triggering events creates new post event products for clearing that are assigned to holders of the existing post trade contracts for clearing that were based on the executed trades in the listed for trading derivative product.  
   
   
       19 . The method according to  claim 18 , wherein the external triggering event is a credit event and the listed for trading derivative product comprises a credit derivative product.  
   
   
       20 . The method according to  claim 19 , wherein a single credit event creates multiple post event products for clearing of different types.  
   
   
       21 . The method according to  claim 20 , wherein the post event products for clearing are listed for trading after predefined periods.  
   
   
       22 . The method according to  claim 1 , wherein the listed for trading derivative product is selected from the group consisting of interest rate swaps and money market products.  
   
   
       23 . The method according to  claim 22 , wherein the plurality of post trade contracts are of at least two different types.  
   
   
       24 . A method of accessing derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 providing listed for trading derivative products in an electronic futures exchange type environment;    executing a trade relative to the listed for trading derivative product pursuant to a user command; and    creating one or more post trade contracts for clearing based on the executed trade whose prices are related to the executed trade quotation by an algorithm comprising a set of parameterized mapping formulae.    
   
   
       25 . The method according to  claim 24 , wherein the price of the post trade contracts for clearing have a linear relationship with their economic value.  
   
   
       26 . The method according to  claim 25 , wherein the relationship between the close out profitability of an executed trade in the listed for trading derivative product on the one hand and the final trade out quotations on the other is non-linear one.  
   
   
       27 . The method according to  claim 24 , wherein the listed for trading derivative product is a term product that gives exact OTC ISDA type debt related derivative exposures and is quoted for execution purposes in a manner consistent with normal market practice for the product in question.  
   
   
       28 . The method according to  claim 27 , wherein a set of expiries of the same type of a listed for trading derivative product and their related Post Trade Contracts for clearing do not all have the same specified, fixed and standardized notional terms of exposure.  
   
   
       29 . The method according to  claim 28 , wherein a set of listed for trading derivative products of the same type but of differing terms are displayed for trading as forward curves or spot curves and not as forward-forward curves.  
   
   
       30 . The method according to  claim 29 , wherein only an on-the-run subset of the listed for trading derivative products of the same type but of differing terms are made available in the central market on each new trading day, such that on each new trading day off-the-run listed for trading derivative products will only be available away from the central market through privately negotiated wholesale trades, block or basis trades.  
   
   
       31 . The method according to  claim 30 , wherein the exchange rules are such that reduced or zero minimum volume thresholds for block trades apply in the off-the-run listed for trading derivative products.  
   
   
       32 . The method according to  claim 30 , wherein the exchange rules are such that variable minimum volume thresholds for block trades apply in the on-the-run listed for trading derivative products, such that they vary according to the term of the on-the-run listed for trading derivative product concerned.  
   
   
       33 . The method according to  claim 27 , wherein the listed for trading derivative product comprises a credit derivative product quoted as an annualized spread and the parameterized mapping formulae use actual days and, for products with multiple underlying referenced names, surviving notional principal for all post trade coupon contracts.  
   
   
       34 . The method according to  claim 33 , wherein the actual day term of a specified as effective post trade coupon contract decays with time to expiry resulting in decay of its economic value at constant quoted spread and, for products with multiple underlying referenced names, constant surviving notional principal.  
   
   
       35 . The method according to  claim 27 , wherein the listed for trading derivative product comprises an interest rate swap product quoted as an annualized swap rate and the parameterized mapping formulae use market conventional day counts based on the true number of day's exposure underlying each post trade coupon contract.  
   
   
       36 . The method according to  claim 27 , wherein the listed for trading derivative product comprises a money market product quoted as an annualized FRA or OIS rate and the parameterized mapping formulae use market conventional day counts based on the true number of day's exposure underlying the relevant post trade coupon contract period.  
   
   
       37 . A method of order placement for term derivatives within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 providing listed for trading term derivative products in an electronic futures exchange type environment displayed and arranged for trading via a front office trading system as one or more curves selected from the group consisting of forward curves and the spot curve;    placing an explicit order in the listed for trading derivative products pursuant to a user command via the front office trading system;    transforming the placed front office order quotation into an internal matching engine representation equivalent price via an algorithm comprising a set of parameterized mapping formulae of such a type that the internal representation prices have a linear relationship with their ultimate economic value, and equal price changes in this internal representation having equal present value regardless of expiry date or term;    harnessing existing futures matching engine technology particularly as used for STIR futures to generate linked outright and spread orderbooks via implied orders within the internal representation of the matching engine; and    transforming the internal representation of linked outright and spread orderbooks and filled order information back into their front office quotation equivalents via an algorithm comprising a set of parameterized reverse mapping formulae thereby generating Two Step Implied Order Linkage in the exchange's listed for trading forward curves and where relevant the spot curve.    
   
   
       38 . The method according to  claim 37 , wherein one or more front office orderbook tick size variables are used in the parameterized mapping and reverse mapping formulae to help concentrate liquidity.  
   
   
       39 . The method according to  claim 38 , wherein a front office orderbook tick size variable is used to limit the permissible prices allowed in placing explicit orders into a forward or spot listed for trading derivative product.  
   
   
       40 . The method according to  claim 38 , wherein a front office orderbook tick size is used for rounding and aggregation of the internal matching representation's orderbook as part of the reverse mapping formulae, such that the bid prices for display are rounded down to the nearest front office orderbook tick and volumes aggregated, whilst displayed ask prices are rounded up and volumes aggregated.  
   
   
       41 . The method according to  claim 40 , wherein explicit orders when filled are also rounded to the nearest front office orderbook tick thereby allowing the exchange to keep any improvements caused by rounding of displayed prices.  
   
   
       42 . The method according to  claim 38 , wherein the orderbook tick size does not apply to filled orders allowing improvements caused by implied order linkage in the internal matching representation's orderbook to fully benefit market participants.  
   
   
       43 . The method according to  claim 37 , wherein the listed for trading derivative product comprises a credit derivative product quoted as an annualized spread and the parameterized mapping formulae use actual days and, for products with multiple underlying referenced names, surviving notional principal for all post trade coupon contracts.  
   
   
       44 . The method according to  claim 43 , wherein the actual day term of a specified as effective post trade coupon contract decays with time to expiry resulting in decay of its economic value at constant quoted spread and, for products with multiple underlying referenced names, constant surviving notional principal.  
   
   
       45 . A method of daily marking to market of derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 providing listed for trading derivative products in an electronic futures exchange type environment wherein execution of user commands will create one or more post trade contracts for clearing purposes based on the executed order;    generating daily mark to market reference prices relative to the listed for trading derivative products according to the normal daily settlement procedures of the exchange; and    creating daily settlement prices for the post trade contracts for clearing based on the set of daily reference prices of the listed for trading derivative products via an algorithm comprising of a set of parameterized mapping formulae.    
   
   
       46 . The method according to  claim 45 , wherein the listed for trading derivative product comprises a credit derivative product quoted as an annualized spread and the parameterized mapping formulae use actual days and, for products with multiple underlying referenced names, surviving notional principal for all post trade coupon contracts.  
   
   
       47 . The method according to  claim 46 , wherein the actual day term of a specified as effective post trade coupon contract decays with time to expiry resulting in decay of its economic value at constant quoted spread and, for products with multiple underlying referenced names, constant surviving notional principal.  
   
   
       48 . The method according to  claim 45 , wherein the listed for trading derivative product comprises an interest rate swap product quoted as an annualized swap rate and the parameterized mapping formulae use market conventional day counts based on the true number of day's exposure underlying each post trade coupon contract.  
   
   
       49 . The method according to  claim 45 , wherein the listed for trading derivative product comprises a money market product quoted as an annualized FRA or OIS rate and the parameterized mapping formulae use market conventional day counts based on the true number of day's exposure underlying the relevant post trade coupon contract period.  
   
   
       50 . A method of accessing occurrence driven derivative exposures within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 defining one or more designated triggering events not pursuant solely to either user command or the price history in an underlying reference market or a combination of both of these factors;    providing listed for trading derivative products in an electronic futures exchange type environment either prior to or as a result of these designated triggering events;    executing a trade relative to the listed for trading derivative product pursuant to a user command; and    creating one or more post trade contracts for clearing based on the executed trade.    
   
   
       51 . The method according to  claim 50 , wherein the occurrence of a designated triggering event results in the setting or resetting of expiry related contract specification parameters for listed for trading derivative products already provided prior to the occurrence.  
   
   
       52 . The method according to  claim 50 , wherein the occurrence of a designated triggering event results in the creation and assigning of Post Event Contracts for clearing to the same clearing accounts that hold the one or more post trade contracts for clearing based on the executed trade, such post event products being assigned in proportion to the post trade contract positions held; being created, assigned and managed in accordance with exchange defined procedures; and being of a type dependent on the detailed contract specifications of the executed trade.  
   
   
       53 . The method according to  claim 52 , wherein the occurrence of a designated triggering event can lead to the listing for trading the various types of post event products for clearing that have been so assigned.  
   
   
       54 . The method according to  claim 52 , wherein the post trade contracts for clearing cash settle at expiry to a predetermined constant, and derive substantially their entire ultimate economic value from the post event products for clearing they contingently deliver.  
   
   
       55 . The method according to  claim 54 , wherein the initial margin applied by the exchange's clearing house to the individual post trade contracts for clearing properly reflect the probability weighted economic impact of contingent assignment of post event products, such initial margin being applied to reflect asymmetric assignment risk for long or short position holders of post trade contracts through asymmetric calls on those positions held.  
   
   
       56 . The method according to  claim 52 , wherein the post event products for clearing are cash settled at expiry by reference to other addition contracts generated by the occurrence of the designated triggering event, leading to the occurrence of one of a) one or more listing(s) for trading of new reference product(s); and b) the setting or resetting of expiry related contract specification parameters for one or more previously listed reference product(s).  
   
   
       57 . The method according to  claim 50 , wherein a set of Premium Protected Knock Out Options are listed with reference to a prior-to-occurrence listed for trading derivative product, such options being listed in margined premium format and having the property that the occurrence of the designated triggering event results in the deletion of the options from the clearing house register with no further variation margin calls being made.  
   
   
       58 . The method according to  claim 51 , wherein a new event contingent exercise style of options is defined for options on such newly listed or redefined products, wherein the exercise date is left undefined unless the designated triggering event occurs, in which case the event contingent option sets its expiry date and exercise date to the newly defined expiry date for its underlying product.  
   
   
       59 . The method according to  claim 58 , wherein the options are Premium Return Knock Out Options, such options being listed in premium paid format and having the property that the lack of an occurrence of the designated triggering event prior to option expiry leads to options sellers having to return the premium paid by options buyers.  
   
   
       60 . The method according to  claim 59 , wherein the premium is held at the clearing house and is returned with or without interest.  
   
   
       61 . The method according to  claim 52 , wherein the triggering event is designated a credit event and the listed for trading derivative product comprises a credit derivative product.  
   
   
       62 . The method according to  claim 61 , wherein a single credit event creates and assigns more than one type of post event product for clearing.  
   
   
       63 . The method according to  claim 62 , wherein the multiple post event products for clearing of different types cash settle to formulae based on one or more factors selected from the group consisting of a) the exchange delivery settlement price of a recovery product that physically delivers debt; b) the type of post event product for clearing held; and c) such historic loss parameters as are maintained by the exchange.  
   
   
       64 . The method according to  claim 51 , wherein the triggering event is designated a credit event and the listed for trading derivative product which previously had no expiry date defined comprises a recovery rate product.  
   
   
       65 . A method of cash settling derivative exposures robustly within an adapted electronic futures exchange market model, rules and legal environment comprising: 
 providing listed for trading derivative products of one type in an electronic futures exchange type environment wherein execution of user commands can create one or more post trade contracts for clearing purposes based on the executed order that are of a cash settled at expiry type;    further providing listed for trading derivative products of another type in an electronic futures exchange type environment wherein execution of user commands can create one or more post trade contracts for clearing purposes based on the executed order that are of a physically delivery at expiry type; and    relating the expiry day settlement price of the cash settled contract type to the exchange delivery settlement price of the physically deliverable contract type via a formula.    
   
   
       66 . The method according to  claim 65 , wherein the listed for trading derivative products that produce post trade contracts for clearing of the physically delivery at expiry type have restricted user access, such that users are restricted to those that are capable of making or taking delivery in the relevant underlying.  
   
   
       67 . The method according to  claim 65 , wherein the listed for trading derivative products that produce post trade contracts for clearing of the cash settled at expiry type are of more than one type and each has its own formula based on factors in addition to the exchange delivery settlement price of the physically deliverable contract type.  
   
   
       68 . A method for creating a fully integrated broad based organized credit derivatives market based on an adapted electronic futures exchange market model, rules and legal environment comprising a preferred embodiment of: 
 a standing Credit Event Committee that from time to time announces that a notional credit event has occurred in a defaulting reference entity or group of related entities, based on both its own prevailing definitions and protocols and on external actual events;    providing from time to time a new type of listed for trading debt derivative products known as a recovery product, whose expiry date and other relevant product properties are contingently defined relative to the notional credit event occurrence; such recovery products being similar to existing bond futures but designed to physically deliver a broader range of defaulted debt at expiry;    providing access to exact OTC ISDA type credit default swap like exposures via a group of linked products known collectively as Adapted For Exchange New Credit Derivatives wherein each derivative product from time to time listed for trading is of a variety known as a Credit Product Spread Quotation For Trading which gives credit event protection comprising:    a) executing a trade relative to the listed for trading credit product spread quotation pursuant to a user command;    b) creating one or more post trade coupon contracts for clearing based on the executed trade whose prices are related to the executed credit product spread quotation and each of which are cash settled at full term expiry to a constant of zero;    c) upon a notional credit evect announcement contingently creating and assigning Event Protection Futures to the same clearing accounts that hold relevant post trade coupon contracts;    d) listing or redefining for trading an appropriate recovery product such that this product expiries at the same time as the related event protection futures;    e) cash settling the Event Protection Futures at expiry to a formula that uses as a major component the exchange delivery settlement price of the related recovery product; and where the post trade coupon contracts for clearing are linked to the Credit Product Spread Quotation For Trading in b) above via an intermediate internal matching engine representation equivalent with each linkage being performed via a set of related algorithms each comprising of a set of parameterized mapping formulae; 
 i) providing risk management through variation and initial margin calls through the central counterparty, wherein daily settlement prices for post trade coupon contracts for clearing are also set algorithmically based on the relevant set of daily mark to market reference prices generated within each Credit Product Spread Quotation For Trading market;  
 ii) providing in addition to the credit product spread quotation spot curve for trading various other listed for trading forward curves; and  
 iii) providing Two Step Implied Order Linkage between their various forward orderbooks and the spot orderbook via traditional matching engine technology applied to the intermediate internal matching engine representation.  
   
   
   
       69 . The method according to  claim 68 , wherein the electronic futures exchange market model, rules and legal environment eliminates the need for bilateral post trade confirmations that are essential in the ISDA style credit derivatives alternative in that the receiving of a filled order report from the exchange implies agreement on all product specification details.  
   
   
       70 . The method according to  claim 68 , wherein the Credit Event Committee's decisions, definitions and protocols are contractually agreed to be uncontestable, thereby creating legal certainly within the credit derivative dealing community when using these listed for trading derivative products.  
   
   
       71 . The method according to  claim 68 , wherein the Credit Event Committee's definitions and protocols are contractually agreed to be changeable and updateable by the exchange in partnership with the credit derivative dealing community and the Credit Event Committee itself, thereby creating structured flexibility and consensus within the credit derivative dealing community.  
   
   
       72 . The method according to  claim 68 , wherein Event Protection Futures are not assigned to post trade coupon contracts if the date of the notional credit event is prior to the effective date of the respective post trade coupon contract.  
   
   
       73 . The method according to  claim 68 , wherein Event Protection Futures are assigned at zero price after the notional credit event is called, with holders of long positions in the relevant effective post trade coupon contracts being assigned long positions in Event Protection Futures from the corresponding short position holders of those post trade coupon contracts and accordingly being assigned short positions in those event protection futures.  
   
   
       74 . The method according to  claim 68 , wherein the assignment of positions to members is followed by these various types of Event Protection Futures being listed for trading on the exchange, thereby allowing position holders to take profit prior to expiry.  
   
   
       75 . The method according to  claim 68 , wherein the various types of listed credit product spread quotations for trading have credit event protection characteristics that indirectly arise from the types of post trade coupon contracts they respectively create upon trade execution as defined in the exchange's contract specification for the particular listed for trading derivative product in question, because these different types of post trade coupon contracts can only deliver correspondingly different types of event protection futures.  
   
   
       76 . The method according to  claim 75 , wherein the Credit Event Committee's decisions are applied consistently to all post trade coupon contracts of various types that have related or identical underlying reference entities, thereby creating in their corresponding listed for trading derivative products consistent margining and hence consistent and efficient trading performance for the arbitrageur and spread trading community.  
   
   
       77 . The method according to  claim 75 , wherein the initial margin applied by the exchange's clearing house to the various types of post trade coupon contracts properly reflects the probability weighted economic impact of contingent assignment of their respective types of Post Event Contracts, such initial margin being applied to reflect asymmetric assignment risk for long or short position holders of post trade contracts through asymmetric calls on those positions held.  
   
   
       78 . The method according to  claim 75 , wherein the various types of listed for trading derivative products are selected from the group consisting of: single name credit products, full and sector index credit products, nth to default basket credit products, tranched index credit products, and synthetic CDO credit products, such that upon trade execution the characteristic contractual protection of these products arises via exchange defined contract specifications that correspond to their existing OTC ISDA equivalents.  
   
   
       79 . The method according to  claim 78 , wherein a set of Traded Spread Premium Protected Options may be listed for trading referenced to the single name credit product, wherein such options are a) traded in margined premium format; and b) ‘knock out’ if a credit event occurs in the referenced entity by both expiring the option early and making no further variation margin calls.  
   
   
       80 . The method according to  claim 75 , wherein the listed for trading derivative product is of a new type with no existing OTC ISDA equivalent known as a resetting index credit product, in which the underlying reference entities are not fully specified at time of trade but are nonetheless well defined via their exchange contract specifications and the index composition rules, such that the resetting index credit product creates post trade coupon contracts of a type whose underlying reference entities are only specified on about their respective effective date based on the then prevailing reference entities within the index.  
   
   
       81 . The method according to  claim 75 , wherein a notional credit event leads for contracts with multiple entities underlying them to the updating of one or more surviving notional principal numbers, one for each basket, index, sector index or synthetic CDO that includes the relevant reference entity, the surviving notional principal numbers being of use in the various parameterized mapping formulae linking the Credit Product Spread Quotation For Trading to the other elements of the Adapted For Exchange New Credit Derivatives.  
   
   
       82 . The method according to  claim 81 , wherein European style options may be defined for any products which uses such a surviving notional principal number in its credit product spread quotation definition by applying the same definition to the option spread quotation strike prices, such that following the notional credit event the affected reference entity will effectively knock out of options on baskets, indices, sector indices, synthetic CDOs and other multiple underlying products.  
   
   
       83 . The method according to  claim 68 , wherein the expiry and physical delivery process resulting from the recovery product expiry is governed by decisions, definitions and protocols laid down by the Credit Event Committee or other relevant exchange body, wherein such governance is contractually agreed to be uncontestable yet from time to time changeable and updateable.  
   
   
       84 . The method according to  claim 83 , wherein the recovery products can be of different types for the same reference entity depending on seniority of debt and the currency in which the debt is denominated.  
   
   
       85 . The method according to  claim 83 , wherein the physical delivery process resulting from the recovery product expiry is substantially the same as the physical delivery resulting from existing bond futures but with price conversion factors set to unity.  
   
   
       86 . The method according to  claim 83 , wherein the physical delivery process resulting from the recovery product expiry allows the delivery of a range of debt types from the reference entity which is selected from the list of instruments consisting of loans, bonds, convertible bonds, and debt pass through clearing house securities.  
   
   
       87 . The method according to  claim 83 , wherein the recovery products are listed for only a short period of time on the same day that the physical delivery process is initiated for recovery auction products.  
   
   
       88 . The method according to  claim 83 , wherein the recovery products are listed prior to the notional credit event for recovery rate products.  
   
   
       89 . The method according to  claim 88 , wherein a new event contingent exercise style of options is defined for options on recovery rate products, wherein the exercise date is left undefined unless a relevant notional credit event occurs, in which case the event contingent option sets its expiry date and exercise date to the newly defined expiry date for its underlying product.  
   
   
       90 . The method according to  claim 89 , wherein the options are Recovery Rate Premium Return Options, such options being listed in premium paid format and such premium being retained by the clearing house, and further having the property that the lack of an occurrence of the notional credit event prior to option expiry leads to the return of the premium paid by options buyers at expiry.  
   
   
       91 . The method according to  claim 68 , wherein the cash settlement equation of an Event Protection Futures is formulated such that it cannot yield negative event protection regardless of the expiry day settlement price of the related recovery product.  
   
   
       92 . The method according to  claim 91 , wherein the cash settlement equation of a threshold related index or basket event protection future is formulated such that it yields event protection only if the expiry day settlement price of the related recovery product takes total losses since original listing above a certain threshold known as the attachment point, which being predefined was known at the time of trading in the corresponding credit product spread quotation.  
   
   
       93 . The method according to  claim 92 , wherein the expiry day settlement price of a recovery product is used to update one or more total event loss index numbers, one for each basket, index, sector index or synthetic CDO on which threshold products are listed and that include the relevant reference entity.  
   
   
       94 . The method according to  claim 92 , wherein tranched products are created from spreads of threshold products.  
   
   
       95 . The method according to  claim 75 , wherein a notional credit event leads for contracts with single entities underlying them to the early expiry of their post trade coupon contracts, the relevant effective Credit Coupon Product positions will be expired early but to exactly zero as usual and all other relevant but ineffective Credit Coupon Products will simply expire early with no further variation margin calls being imposed.