Cliquet Combo Generation via Intermediary Trading Engine

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Solution Overview

Problem

In electronic and hybrid financial exchanges, many market participants lack the technological means and knowledge to effectively generate, trade, and exercise complex financial instruments like forward and options contracts, leading to inefficiencies and increased computational burdens.

Innovation Solution

The implementation of user-friendly graphical interfaces allows market participants to generate and trade cliquet combos, a series of contracts with adjustable strike prices and reset periods, reducing the number of orders and computational resources required, thereby enhancing control and flexibility in trading complex financial instruments.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Ease of operation

If market participants use specialized software and hardware to generate and trade complex financial instruments, then trading control and flexibility are improved, but device complexity and accessibility worsen

Engineering Contradiction:

Improvetrading controlVSAvoidspecialized software and hardware

Core Design Contradiction:

Ease of operationVSDevice complexity

Solution Approach 1:

The exchange computer system acts as an intermediary that automatically generates cliquet combos based on simple user inputs (underlying asset, direction, expiry, frequency). The system mediates between the user's simple request and the complex series of contracts, eliminating the need for users to have specialized trading software while maintaining full trading control and flexibility.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The exchange computer system provides self-service by automatically generating the complex series of cliquet contracts without requiring user intervention in the complex processes. Users simply provide basic parameters, and the system handles all the complex contract generation, pricing, and management automatically.

Inventive Principle:

Principle #25Self-service

2Adaptability or versatility

If market participants manually create series of contracts to achieve complex trading strategies, then trading flexibility is improved, but productivity and computational efficiency worsen

Engineering Contradiction:

Improvetrading flexibilityVSAvoidorder processing efficiency

Core Design Contradiction:

Adaptability or versatilityVSProductivity

Solution Approach 1:

Multiple individual contract orders are merged into a single cliquet combo order. Instead of processing numerous separate orders for individual contracts, the system processes one consolidated order that represents the entire series of contracts, dramatically improving productivity while maintaining all the flexibility of custom contract series.

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The exchange computer system performs preliminary action by pre-generating the cliquet combo structure and pricing based on simple user inputs before trading occurs. This preliminary setup eliminates the need for manual creation of each contract in the series during live trading, enhancing both productivity and flexibility.

Inventive Principle:

Principle #10Preliminary action

3Ease of operation

If the exchange processes many individual orders for complex financial instruments, then market participant control is improved, but use of computing resources and bandwidth worsen

Engineering Contradiction:

Improvemarket participant controlVSAvoidcomputing resources

Core Design Contradiction:

Ease of operationVSUse of energy by moving object

Solution Approach 1:

The system merges multiple individual order processing operations into a single cliquet combo processing operation. By consolidating the representation of series of contracts into one tradable instrument, the exchange significantly reduces bandwidth consumption and computing resource usage while preserving full market participant control over trading parameters.

Inventive Principle:

Principle #5Merging (Combining)

4Adaptability or versatility

If sophisticated trading strategies are implemented with multiple contracts, then trading versatility is improved, but device complexity and operational difficulty worsen

Engineering Contradiction:

Improvetrading strategy complexityVSAvoidsoftware and hardware requirements

Core Design Contradiction:

Adaptability or versatilityVSDevice complexity

Solution Approach 1:

The exchange computer system serves as an intermediary that handles all the complexity of generating and managing series of contracts. Users can implement sophisticated trading strategies with full versatility while the system manages the underlying complexity, eliminating the need for users to possess specialized software or deep technical knowledge.

Inventive Principle:

Principle #24Intermediary (Mediator)

Data Source

PatentUS12165203B1Dynamic, efficient, and continuous generation and handling of cliquet combinations

Publication Date: 2024.12.10 CBOE EXCHANGE INC

AI summary

An exchange computer system configured to continuously, securely, dynamically, and efficiently generate cliquet combos includes a trading engine that receives related data from one or more remote user computing devices, determines various parameters for the cliquet combos from the received data, and generates the cliquet combos from those parameters. The trading engine then securely transmits data related to the generated cliquet combos to the one or more remote user computing devices via a computer network, each of those devices being configured to display that data within a graphical user interface. The same system is further configured to handle transactions involving generated cliquet combos, based on orders received from the devices.