Financial instrument trading

Abstract

A data processing system receives a continuous stream of real time transactional data regarding market transactions of fixed income securities. The incoming data is qualified and then used to determine the term structure of interest rates based on price information. The system provides linear interpolation techniques to complete an operative data set. This set is updated with current trade data, with term structure shifting using pivot points from newly qualified data. An index value for a pre-select portfolio of securities is then calculated and expressed in terms of price relative to par, yield to maturity and duration. In a specific implementation using U.S. Treasuries as the monitored security, the index value supports an automated trading function for futures and/or options contracts based on the change in value of the index. The index provides a more accurate barometer of market changes and a more useful tool in measuring portfolio management for plan sponsors.

1 . A method comprising steps of:
 receiving, by at least one processor of an automated trading system, bids and offers for a financial instrument, the financial instrument comprising a cash security that tracks an index, the index based on a portfolio of fixed income securities;   making the bids and offers available, by the at least one processor, to traders; and   receiving, by the at least one processor, trading orders that result in executed trades of the financial instrument.   
     
     
         2 . The method of  claim 1 , further comprising determining, based on the index, a deliverable portfolio of fixed income securities. 
     
     
         3 . The method of  claim 1 , wherein the fixed income securities of the portfolio have varying terms. 
     
     
         4 . The method of  claim 3 , wherein the portfolio includes fixed income securities having terms comprising at least one of:
 three and fewer years,   less than ten years,   ten and fewer years, and   less than ten years and greater than two years.   
     
     
         5 . The method of  claim 3 , wherein the portfolio includes fixed income securities having terms of two, three, five, and ten years. 
     
     
         6 . The method of  claim 1 , wherein the portfolio comprises a generic portfolio of fixed income securities. 
     
     
         7 . The method of  claim 1 , wherein the portfolio comprises US treasuries. 
     
     
         8 . The method of  claim 1 , wherein the portfolio comprises corporate bonds. 
     
     
         9 . The method of  claim 1 , wherein the portfolio comprises municipal bonds. 
     
     
         10 . The method of  claim 1 , wherein the portfolio comprises securities auctioned by a government foreign to the US government. 
     
     
         11 . The method of  claim 1 , further comprising distributing the executed trades to a clearing processor. 
     
     
         12 . The method of  claim 1 , further comprising distributing market data for the financial instrument to entities for subsequent distribution to users. 
     
     
         13 . The method of  claim 12 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         14 . The method of  claim 1 , further comprising displaying market data for the financial instrument. 
     
     
         15 . The method of  claim 14 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         16 . A method comprising:
 receiving, by at least one processor, from a trading system market data for a financial instrument, the financial instrument comprising a cash security that tracks an index, the index based on a portfolio of fixed income securities; and   distributing, by at the least one processor, the market data to users.   
     
     
         17 . The method of  claim 16 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         18 . The method of  claim 16 , further comprising determining, based on the index, a deliverable portfolio of fixed income securities. 
     
     
         19 . The method of  claim 16 , wherein the fixed income securities of the portfolio have varying terms. 
     
     
         20 . The method of  claim 19 , wherein the portfolio includes fixed income securities having terms comprising at least one of:
 three and fewer years,   less than ten years,   ten and fewer years, and   less than ten years and greater than two years.   
     
     
         21 . The method of  claim 19 , wherein the portfolio includes fixed income securities having terms of two, three, five, and ten years. 
     
     
         22 . The method of  claim 16 , wherein the portfolio comprises a generic portfolio of fixed income securities. 
     
     
         23 . The method of  claim 16 , wherein the portfolio comprises US treasuries. 
     
     
         24 . The method of  claim 16 , wherein the portfolio comprises corporate bonds. 
     
     
         25 . The method of  claim 16 , wherein the portfolio comprises municipal bonds. 
     
     
         26 . The method of  claim 16 , wherein the portfolio comprises securities auctioned by a government foreign to the US government 
     
     
         27 . The method of  claim 16 , further comprising distributing at least one value for the index to users. 
     
     
         28 . The method of  claim 27 , wherein the at least one index value comprises at least one of:
 a price,   a yield to maturity, and   a duration.   
     
     
         29 . An apparatus comprising an automated trading system having at least one processor, the automated trading system operable to:
 receive bids and offers for a financial instrument, the financial instrument comprising a cash security that tracks an index, the index based on a portfolio of fixed income securities;   make the bids and offers available to traders; and   receive trading orders that result in executed trades of the financial instrument.   
     
     
         30 . The apparatus of  claim 29 , operable to determine, based on the index, a deliverable portfolio of fixed income securities. 
     
     
         31 . The apparatus of  claim 29 , wherein the portfolio comprises a generic portfolio of fixed income securities. 
     
     
         32 . The apparatus of  claim 29 , wherein the automated trading system is further operable to distribute the executed trades to a clearing processor. 
     
     
         33 . The apparatus of  claim 29 , wherein the automated trading system is further operable to distribute market data for the financial instrument to entities for subsequent distribution to users. 
     
     
         34 . The apparatus of  claim 33 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         35 . The apparatus of  claim 29 , wherein the automated trading system is further operable to display market data for the financial instrument. 
     
     
         36 . The apparatus of  claim 35 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         37 . An apparatus comprising a data distribution system having at least one processor, the data distribution system operable to:
 receive from a trading system market data for a financial instrument, the financial instrument comprising a cash security that tracks an index, the index based on a portfolio of fixed income securities; and   distribute the market data to users.   
     
     
         38 . The apparatus of  claim 37 , wherein the market data comprises trade prices for the financial instrument. 
     
     
         39 . The apparatus of  claim 37 , operable to determine, based on the index, a deliverable portfolio of fixed income securities. 
     
     
         40 . The apparatus of  claim 37 , wherein the portfolio comprises a generic portfolio of fixed income securities. 
     
     
         41 . The apparatus of  claim 37 , wherein the data distribution system is further operable to distribute at least one value for the index to users. 
     
     
         42 . The apparatus of  claim 41 , wherein the at least one index value comprises at least one of:
 a price,   a yield to maturity, and   a duration.