Deferred Physical Delivery via Futures Conversion in Transaction Processing

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Solution Overview

Problem

Existing financial transaction systems face inefficiencies due to physical delivery requirements, which can be inconvenient, costly, and create regulatory burdens, while also consuming network bandwidth and processing resources.

Innovation Solution

A system that automates the conversion of bilateral contracts with physical delivery obligations into financially equivalent futures contracts, allowing parties to defer delivery and maintain economic attributes, reducing reliance on external clearing systems and minimizing network bandwidth utilization.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If physical delivery is implemented for bilateral contracts, then contract fulfillment is achieved, but network bandwidth consumption increases and processing resources are consumed

Engineering Contradiction:

Improvecontract fulfillmentVSAvoidnetwork bandwidth consumption

Core Design Contradiction:

ReliabilityVSLoss of energy

Solution Approach 1:

The patent creates a virtual copy of the physical delivery process through futures contracts. Instead of physically transferring assets, the system uses electronically recorded futures contract positions that replicate the economic outcome of physical delivery, thereby eliminating the need for actual asset movement while maintaining contract fulfillment integrity

Inventive Principle:

Principle #26Copying

Solution Approach 2:

The patent introduces futures contracts as an intermediary mechanism between bilateral contracting parties. These futures contracts serve as a mediating instrument that allows parties to settle their obligations through financial instruments rather than direct physical delivery, reducing network bandwidth consumption and processing resource requirements

Inventive Principle:

Principle #24Intermediary (Mediator)

2Reliability

If physical delivery is required for bilateral contracts, then delivery obligations are met, but transaction processing delays increase

Engineering Contradiction:

Improvedelivery obligation fulfillmentVSAvoidtransaction processing delays

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The patent enables parties to take preliminary action by establishing futures contract positions before the actual delivery date. This allows the economic settlement to be prepared and positioned in advance, eliminating the need for time-consuming physical delivery processes at the final settlement stage while ensuring delivery obligations are ultimately met

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system creates a temporal copy of the delivery obligation through futures contracts with different expiration dates. Parties can settle obligations by transferring futures positions across different time periods rather than executing immediate physical delivery, thereby reducing transaction processing delays while maintaining fulfillment reliability

Inventive Principle:

Principle #26Copying

3Reliability

If external clearing systems are used for physical delivery, then settlement is achieved, but system complexity and resource consumption increase

Engineering Contradiction:

ImprovesettlementVSAvoidclearing system complexity

Core Design Contradiction:

ReliabilityVSDevice complexity

Solution Approach 1:

The patent merges the clearing function directly into the exchange matching engine. By integrating futures contract creation and management within the existing exchange system, the patent eliminates the need for separate external clearing systems, thereby reducing overall system complexity while maintaining reliable settlement through unified processing

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The patent makes the exchange matching engine multi-functional by enabling it to perform both order matching and futures contract clearing functions. This universal approach allows a single system to handle multiple functions that previously required separate specialized systems, reducing complexity while maintaining settlement reliability

Inventive Principle:

Principle #6Universality (Multi-functionality)

Data Source

PatentUS12505483B2Minimization of the consumption of data processing resources in an electronic transaction processing system via deferral of physical delivery

Publication Date: 2025.12.23 CHICAGO MERCANTILE EXCHANGE INC

AI summary

The disclosed embodiments relate to automated enablement of deferred physical delivery of an asset, for which physical delivery is called for in a bilateral contract, by automatically settling the bilateral contract among the parties thereto with positions in specifically tailored futures contracts with a defined later delivery date and, based thereon, extinguishing the bilateral contract requirement for physical delivery. This electronic substitution of equivalent futures positions for both parties in place of the physical delivery requirement, the delivery and payment obligations are bifurcated enabling either party to continue, unpenalized, with their respective obligation irrespective of the other party's actions, enabling the resultant positions available for offsetting/netting, so as to readily exit a position or utilize it to reduce monetary requirements, e.g., for margin or other requirements, as well as reduce the data storage requirements and/or computational resource requirements associated with storing and/or processing the data indicative of those positions.