Commodity futures index and methods and systems of trading in futures contracts that minimize turnover and transactions costs

a futures index and futures contract technology, applied in the field of financial services, can solve the problems of higher price of other strategies, and achieve the effects of reducing turnover (i.e., the number of transactions), reducing futures trading costs, and reducing turnover

Inactive Publication Date: 2006-09-21
PFDS HLDG
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  • Summary
  • Abstract
  • Description
  • Claims
  • Application Information

AI Technical Summary

Benefits of technology

[0012] In an embodiment, the instant invention may reduce the turnover (i.e., the number of transactions) in futures trading thereby reducing the costs of futures trading by employing a unique method of investing in futures contracts. In particular, in an embodiment, the method of the instant invention employs a transactions minimizing strategy (TMS) against indexing strategies and uses a dynamic asset allocation approach using futures contracts.
[0013] The transactions minimizing strategy (TMS) of the instant invention can result in lower turnover and lower transactions costs. For example, in comparison to a commodity index such as the GSCI (Goldman Sachs Commodity Index) the TMS may result in total turnover that is up to 30% lower. The resulting cost savings on an investment of $100 million may amount to $300,000 per year or more (e.g., a 30% reduction of 1% transactions costs).

Problems solved by technology

Other published strategies roll from 20% to 100% of their positions on a particular date, which means that these other strategies tend to be more expensive due to the higher transaction costs relative to the present invention.

Method used

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  • Commodity futures index and methods and systems of trading in futures contracts that minimize turnover and transactions costs
  • Commodity futures index and methods and systems of trading in futures contracts that minimize turnover and transactions costs
  • Commodity futures index and methods and systems of trading in futures contracts that minimize turnover and transactions costs

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Embodiment Construction

[0026] In an embodiment, the present invention provides an Index comprising at least one commodity futures contract. Generally, an index of the present invention will comprise a plurality of commodity futures contracts traded accorded to a method of the present invention. As understood by those of ordinary skill in the art, an index, refers to a statistical indicator providing a representation of the value of the commodity futures contracts which constitute it. Indices often serve as barometers for a given market or industry and benchmarks against which financial or economic performance is measured. An index may be used to measure the percent change in return. With respect to commodity futures, a return may comprise one or more of a spot return; a collateral return; and / or a roll return. The terms ‘spot return,’‘collateral return,’ and ‘roll return’ are used consistent with their usage by those of skill in the art.

[0027] In financial markets, the term commodity is often used to ref...

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PUM

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Abstract

This invention relates to methods and systems for reducing transaction costs and minimizes turnover in the trading of futures contracts. The invention further describes an algorithm whose output is a unique method of investing in futures contracts that reduces the rate of turnover, and thus the cost of trading, of certain common trading strategies. The primary application of this method is to a class of strategies referred to as indexing strategies that incorporate a dynamic asset allocation approach using futures contracts.

Description

CROSS REFERENCE TO RELATED APPLICATION [0001] This application claims priority to U.S. Provisional Application No. 60 / 663,648, filed Mar. 21, 2005, entitled “Commodity Futures Index And Methods And Systems Of Trading In Futures Contracts That Minimizes Turnover And Transactions Costs,” the entirety of which is incorporated herein by reference.FIELD OF THE INVENTION [0002] The present invention relates to financial services and more particularly to the trading, i.e. buying and selling, of securities and / or commodities. In an embodiment, the present invention provides a Commodity Futures Index. Embodiments of the present invention also provide methods and systems for trading commodity futures contracts. BACKGROUND OF THE INVENTION [0003] The rate of turnover in a portfolio of futures contracts, and the transaction costs that result from turnover, is a major issue with commodity futures trading and with the various indexes that are representative of futures trading. Turnover in traditi...

Claims

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Application Information

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Patent Type & Authority Applications(United States)
IPC IPC(8): G06Q40/00
CPCG06Q40/02G06Q40/04
Inventor SPURGIN, RICHARD B.SCHNEEWEIS, THOMAS R.KAZEMI, HOSSEIN B.MARTIN, GEORGE A.
Owner PFDS HLDG
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