System for market hedging and related method

Abstract

A system includes a data collection module that collects data for a plurality of fuels. A selection module selects fuels from the plurality of fuels based on the properties of the fuels to generate sets of fuels. A benchmark generating module that generates fuel commodity benchmarks indicating aggregate qualities of the sets of fuels. A fuel commodity benchmark for a set of fuels is generated based on weighted averages of the properties of the fuels in the set of fuels. A communication module communicates the fuel commodity benchmarks to traders and that receives orders for derivatives contracts from the traders based on the fuel commodity benchmarks. An order processing module processes an order for derivatives contracts based on differences between actual properties of the fuel to be physically delivered under the terms of an operative derivatives contract and the aggregate qualities indicated by an operative fuel commodity benchmark.

1 . A system comprising:
 a data collection module that collects data for a plurality of fuels, wherein the data include geographic locations where the fuels are discovered, a rate of extraction of the fuels, and properties of the fuels;   a selection module that selects fuels from the plurality of fuels based on the properties of the fuels to generate sets of fuels comprising fuel commodity benchmarks;   a weight generating module that generates weights for generating weighted averages, wherein a weight for generating a weighted average for a fuel in a set is based on a rate of extraction of the fuel relative to an aggregate rate of extraction of the fuels in the set;   a benchmark generating module that generates the fuel commodity benchmarks indicating aggregate qualities of the sets of fuels, wherein a fuel commodity benchmark for a set of fuels is generated based on weighted averages of the properties of the fuels in the set of fuels;   a communication module that communicates the fuel commodity benchmarks to traders and that receives orders for derivatives contracts from the traders to buy or sell derivatives contracts based on the fuel commodity benchmarks; and   an order processing module that processes an order for derivatives contracts based on differences between actual properties of the fuel to be physically delivered under the terms of an operative derivatives contract and the aggregate qualities indicated by an operative fuel commodity benchmark.   
     
     
         2 . The system of  claim 1  wherein:
 the data collection module updates the data periodically; 
 the benchmark generating module generates updated fuel commodity benchmarks based on the updated data; and 
 the communication module communicates the updated fuel commodity benchmarks to the traders. 
 
     
     
         3 . The system of  claim 1  wherein:
 the fuels include crude oils; and 
 the properties include specific API gravity and sulfur content of the fuels. 
 
     
     
         4 . The system of  claim 1  wherein the orders for derivatives contracts encompass futures, options, forwards, swaps and spreads traded between the traders and fuel producers via an Exchange providing the system and without using intermediaries in a chain of Exchange communications, wherein the traders include fuel users and market speculators. 
     
     
         5 . The system of  claim 1  wherein the orders include derivatives contracts related to costs of transporting and warehousing the fuels stored onboard tankers. 
     
     
         6 . The system of  claim 1  wherein the fuels include crude oils, refined products derived from crude oil, natural gas, and coal. 
     
     
         7 . A server comprising the system of  claim 1  wherein the server communicates with a computing device used by one of the traders via a network including the Internet. 
     
     
         8 . A method comprising:
 collecting data for a plurality of fuels, wherein the data include geographic locations where the fuels are discovered, a rate of extraction of the fuels, and properties of the fuels;   selecting fuels from the plurality of fuels based on the properties of the fuels to generate sets of fuels comprising fuel commodity benchmarks;   generating weights for generating weighted averages, wherein a weight for generating a weighted average for a fuel in a set is based on a rate of extraction of the fuel relative to an aggregate rate of extraction of the fuels in the set;   generating the fuel commodity benchmarks indicating aggregate qualities of the sets of fuels, wherein a benchmark for a set of fuels is generated based on weighted averages of the properties of the fuels in the set of fuels;   communicating the benchmarks to traders and receiving orders for derivatives contracts for the fuels from the traders based on the benchmarks; and   processing an order for derivatives contracts based on differences between actual properties of the fuel to be delivered under the terms of an operative derivatives contract and the aggregate qualities indicated by an operative fuel commodity benchmark.   
     
     
         9 . The method of  claim 8  further comprising:
 updating the data periodically; 
 generating updated fuel commodity benchmarks based on the updated data; and 
 communicating the updated fuel commodity benchmarks to the traders. 
 
     
     
         10 . The method of  claim 8  wherein:
 the fuels include crude oils; and 
 the properties include specific API gravity and sulfur content of the fuels. 
 
     
     
         11 . The method of  claim 8  wherein the orders for derivatives contracts encompass futures, options, forwards, swaps and spreads, the method further comprising trading the orders between the traders and fuel producers via an exchange and without using intermediaries, wherein the traders include fuel users and market speculators. 
     
     
         12 . The method of  claim 8  wherein the orders include derivatives contracts related to costs of transporting and warehousing the fuels stored onboard tankers. 
     
     
         13 . The method of  claim 8  wherein the fuels include crude oils, refined products derived from crude oil, natural gas, and coal.