Virtual OTC Exchange System for Derivatives Data

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Solution Overview

Problem

In Over-The-Counter (OTC) derivative markets, traders face challenges with gathering, consolidating, and analyzing information from multiple brokers in varying formats, lacking a real-time aggregated view of the market, which hinders market-to-market portfolio valuation, risk management, and compliance due to the absence of a centralized source for current and historical prices.

Innovation Solution

A virtual OTC exchange system that integrates and organizes derivatives market information from multiple brokers and electronic exchanges in real-time, converting financial product information into a standard format for storage and distribution to traders in various formats, including email, instant messaging, and proprietary interfaces, enabling real-time display of bids and offers and historical data.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If brokers send products via phone or instant messaging in OTC markets, then dealers can receive custom derivative products, but dealers do not receive products simultaneously and must reformat data manually

Engineering Contradiction:

Improvecustom derivative productsVSAvoiddata reformatting time

Core Design Contradiction:

Adaptability or versatilityVSLoss of time

Solution Approach 1:

The patent introduces a centralized electronic messaging system as an intermediary between brokers and dealers. This system automatically receives, standardizes, and distributes product information in a uniform format to all dealers simultaneously, eliminating the manual reformatting process while preserving the ability to handle custom derivative products.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The system changes the format parameter of product information from varied broker-specific formats to a standardized electronic format. This transformation occurs automatically through the centralized system, allowing dealers to receive all products in a consistent, analysis-ready format without manual intervention.

Inventive Principle:

Principle #35Parameter changes

2Adaptability or versatility

If brokers quote products individually to dealers, then custom products can be created, but dealers lack a dynamic aggregated view of the market across brokers

Engineering Contradiction:

Improvecustom product creationVSAvoidmarket view

Core Design Contradiction:

Adaptability or versatilityVSLoss of information

Solution Approach 1:

The patent merges product information from multiple brokers into a single centralized electronic messaging system. This consolidation provides dealers with a comprehensive, real-time view of the entire OTC market across all brokers, while still allowing each broker to create and distribute custom derivative products through the same platform.

Inventive Principle:

Principle #5Merging (Combining)

3Reliability

If OTC markets use decentralized communication methods, then privacy concerns are addressed, but traders face difficulties gathering and consolidating information from multiple brokers

Engineering Contradiction:

Improveprivacy protectionVSAvoidinformation gathering

Core Design Contradiction:

ReliabilityVSEase of operation

Solution Approach 1:

The patent creates a universal electronic messaging platform that serves multiple functions: it maintains privacy through controlled access while simultaneously enabling easy information gathering and consolidation. The system allows traders to receive product information from multiple brokers through a single interface, making the system both privacy-protective and operationally efficient.

Inventive Principle:

Principle #6Universality (Multi-functionality)

4Adaptability or versatility

If dealers use conventional OTC market methods, then custom trading can occur, but market-to-market portfolio valuation is difficult due to lack of centralized price source

Engineering Contradiction:

Improvecustom tradingVSAvoidportfolio valuation

Core Design Contradiction:

Adaptability or versatilityVSMeasurement precision

Solution Approach 1:

The centralized electronic messaging system acts as an intermediary that collects and standardizes price information from multiple brokers. This provides dealers with a reliable, centralized source for current and historical prices, enabling accurate market-to-market portfolio valuation while preserving the ability to engage in custom trading.

Inventive Principle:

Principle #24Intermediary (Mediator)

Data Source

PatentUS10552908B2Virtual over-the-counter financial product exchange system

Publication Date: 2020.02.04 ICE DATA LP

AI summary

A virtual over-the-counter exchange system that allows brokers to negotiate and complete exchanges of financial products between traders within a plurality of financial product markets includes a data converter that converts financial product market information received from a broker into a standard financial product data format, a virtual broker database that stores the financial product market information in the standard financial product data format, a plurality of virtual trader databases, each virtual trader database storing, in the standard financial product data format, at least a portion of the financial product market information selected by the broker to be distributed to a corresponding one of a plurality of traders, and a data distributor that distributes the at least a portion of the financial product market information in each of the virtual trader databases to a corresponding one of the plurality of traders in one of a plurality of proprietary formats.