Method and system for generating and trading composite contracts

Abstract

The disclosed embodiments provide a system and method for automatically generating a composite contract characterized by at least one parameter. A first subset of eligible component contracts is identified from a set of available component contracts wherein each of the available component contracts is characterized by at least one attribute. A second subset of component contracts is then selected from the first subset to generate the composite contract.

1 . A method comprising:
 receiving an instruction to generate a composite futures contract;   identifying a first subset of eligible component contracts from a set of available component contracts;   selecting a second subset of component contracts from the first subset; and   generating the composite futures contract based on the second subset, the composite futures contract characterized by a value determined based on a value of at least one contract of the second subset of component contracts, wherein the value of the composite futures contract, once determined, is linked with attributes of the second subset of component contracts and is free to fluctuate as the attributes of the second subset of component contracts fluctuate.   
     
     
         2 . The method of  claim 1 , wherein the generating further comprises:
 determining at least one value of the at least one attribute of each of the component contracts in the second subset; and   defining the at least one parameter of the composite futures contract as a function of each of the values.   
     
     
         3 . The method of  claim 2 , wherein the at least one attribute comprises a price of the component contract and the at least one parameter comprises a price of the composite futures contract. 
     
     
         4 . The method of  claim 1 , further comprising: providing notification that the composite futures contract is available for trading. 
     
     
         5 . The method of  claim 1 , wherein the selecting further comprises selecting an eligible component contract from the first subset component contract for inclusion in the second subset based on a volatility of the eligible component contract. 
     
     
         6 . The method of  claim 1 , wherein the selecting further comprises selecting an eligible component contract from the first subset component contract for inclusion in the second subset based on the at least one attribute of the eligible component contract. 
     
     
         7 . The method of  claim 1 , wherein the selecting further comprises selecting an eligible component contract from the first subset component contract for inclusion in the second subset based on a trading volume of the eligible component contract. 
     
     
         8 . The method of  claim 1 , wherein identifying further comprises identifying an available component contract from the set available component contracts for inclusion in the first subset based on at least one attribute of the set available component contracts, wherein the set available component contracts are represented by data stored on a data storage. 
     
     
         9 . The method of  claim 1 , wherein the selecting further comprises receiving at least one vote from a market participant, wherein the at least one vote represents a choice by at least one market participant to select at least one of the eligible component contracts for inclusion in the second subset. 
     
     
         10 . The method of  claim 9 , further comprises obligating the at least one market participant, based on the at least one vote, to generate a minimum trading volume for the composite futures contract. 
     
     
         11 . The method of  claim 10 , wherein the minimum trading volume for the, at least one market participant is a function of a number of votes received from the at least one market participant. 
     
     
         12 . The method of  claim 9 , further comprising selecting an eligible component contract from the first subset of eligible component contract for inclusion in the second subset based on the votes. 
     
     
         13 . The method of  claim 9 , further comprising allocating votes to each of the market participants based on trading volumes of at least one previously traded composite futures contract. 
     
     
         14 . The method of  claim 13 , further comprising selecting an eligible component contract from the first subset of eligible component contracts for inclusion in the second subset based on the votes. 
     
     
         15 . The method of  claim 1 , wherein the instruction is a first instruction and the composite futures contract is a first composite futures contract, and wherein the method further comprises:
 receiving a second instruction to generate a second composite futures contract;   identifying a third subset of eligible component contracts from the set of available component contracts, each of the available component contracts being characterized by the at least one attribute; and   selecting a fourth subset of component contracts from the third subset; and   generating the second composite futures contract based on the fourth subset.   
     
     
         16 . The method of  claim 15 , wherein the generating the second composite futures contract further comprises:
 determining at least one value of the at least one attribute of each of the second composite contract in the fourth subsets; and   defining the at least one parameter of the second composite contract as a function of each of the values.   
     
     
         17 . A system comprising:
 a composite futures contract generator operative to receive an instruction to generate a composite futures contract;   further wherein the composite futures contracts generator is operative to identify a first subset of eligible component contracts from a set of available component contracts, the composite futures contracts generator being further operative to select a second subset of component contracts from the first subset, and generate the composite futures contract based on the second subset, and the composite futures contract characterized by a value determined based on a value of at least one contract of the second subset of component contracts, wherein the value of the composite futures contract, once determined, is linked with attributes of the second subset of component contracts and is free to fluctuate as the attributes of the second subset of component contracts fluctuate; and   a trading engine coupled with the composite futures contract generator, wherein the trading engine is operative to receive the composite futures contract for trading.   
     
     
         18 . The system of  claim 17 , further comprising a composite contract terminator coupled to the composite futures contract generator, wherein the composite contract terminator is operative to receive information from the composite contract generator. 
     
     
         19 . A apparatus comprising:
 a first interface operative to receive an instruction to generate a composite contract;   a processor coupled to the first interface, wherein the processor is operative to receive the instruction;   an identifier coupled to the processor, wherein the processor accesses the identifier to identify a first subset of eligible component contracts from a set of available component contracts; and   wherein, responsive to an identified first subset of eligible components contracts, the processor is operative to select a second subset of component contracts from the first subset, wherein the processor is further operative to generate a composite futures contract based on the second subset, the composite futures contract being characterized by a value determined based on a value of at least one contract of the second subset of component contracts, wherein the value of the composite futures contract, once determined, is linked with attributes of the second subset of component contracts and is free to fluctuate as the attributes of the second subset of component contracts fluctuate.   
     
     
         20 . The apparatus of  claim 19 , further comprising a data storage coupled to the identifier, wherein the data storage includes data representative of the available component contracts.