Electronic netting system for bilateral trades

Abstract

An electronic netting system. The system may include: (a) a plurality of individual, segregated counterparties for providing bilateral trades, (b) a multi-lateral transaction hub, and (c) a trading system in communication with the transaction hub. The multi-lateral transaction hub may be for (i) providing an aggregation of trades between the counterparties, (ii) providing for multi-lateral netting of selected and authorized bilateral trades, and (iii) apportioning the accumulated trade values among the counterparties according to pre-determined netting parameters including a weighted distribution selectable by at least one of the counterparties. The transaction hub may include: (i) a trade processing system and (ii) a netting system in communication with the trade processing system for providing for the optimized, multi-lateral netting of selected and authorized bilateral trades and apportioning the accumulated trade values among the counterparties.

1 . A multi-lateral transaction hub for providing an aggregation of trades between a plurality of individual, segregated counterparties and providing for the multi-lateral netting of selected and authorized bilateral trades, the transaction hub comprising:
 (a) a trade processing system; and   (b) a netting system in communication with the trade processing system for providing for the optimized, multi-lateral netting of selected and authorized bilateral trades and apportioning the accumulated trade values among the counterparties according to pre-determined netting parameters including a weighted distribution selectable by at least one of the counterparties.   
     
     
         2 . The transaction hub according to  claim 1 , wherein the trade
 processing system includes an input of the bilateral trades, a database for storing the input and an output of the completed trades.   
     
     
         3 . The transaction hub according to  claim 2 , wherein the input includes the parties, the instrument, the price, the size, and the upfront fee. 
     
     
         4 . The transaction hub according to  claim 3 , wherein the input further includes additional trade details. 
     
     
         5 . The transaction hub according to  claim 2 , wherein the input includes data from E-trading. 
     
     
         6 . The transaction hub according to  claim 2 , further including external trade input. 
     
     
         7 . The transaction hub according to  claim 2 , wherein the output includes trade confirmations. 
     
     
         8 . The transaction hub according to  claim 2 , further including a trade verification module. 
     
     
         9 . The transaction hub according to  claim 8 , wherein the trade verification module is bilaterally verified. 
     
     
         10 . The transaction hub according to  claim 1 , wherein the netting system includes an input of trades (T 1 , T 2 , . . . T N ), a recursive optimization engine, and an output of netted trades. 
     
     
         11 . The transaction hub according to  claim 10 , wherein the recursive optimization engine further includes a first netting interval. 
     
     
         12 . The transaction hub according to  claim 11 , wherein the recursive optimization engine further includes at least one subsequent netting interval for netting the remainder of unnetted trades from the preceding netting interval. 
     
     
         13 . The transaction hub according to  claim 10 , further including an input of additional netting parameters. 
     
     
         14 . The transaction hub according to  claim 13 , wherein the additional netting parameters include at least one counterparty trading limit. 
     
     
         15 . The transaction hub according to  claim 10 , wherein the output of netted trades further includes a payment output. 
     
     
         16 . The transaction hub according to  claim 5 , wherein the payments are netted. 
     
     
         17 . The transaction hub according to  claim 15 , wherein the payments are collected by a central party. 
     
     
         18 . The transaction hub according to  claim 10 , wherein the output of netted trades further includes a reconciliation output. 
     
     
         19 . The transaction hub according to  claim 13 , wherein the additional netting parameters include netting constraints. 
     
     
         20 . The transaction hub according to  claim 19 , wherein the netting constraints are selected from the group consisting of limits of trades; limits of notionals and combinations thereof. 
     
     
         21 . The transaction hub according to  claim 13 , wherein the additional netting parameters include netting objectives. 
     
     
         22 . The transaction hub according to  claim 21 , wherein the netting objectives are selected from the group consisting of total gross notionals; number of trades; variance of the notional and combinations thereof. 
     
     
         23 . The transaction hub according to  claim 10 , further including an input of additional algorithm parameters. 
     
     
         24 . The transaction hub according to  claim 23 , wherein the additional algorithm parameters include a notional change selector. 
     
     
         25 . The transaction hub according to  claim 23 , wherein the additional algorithm parameters include a party search order.