By a News Reporter-Staff News Editor at Investment Weekly News -- According to news reporting originating from Alexandria, Virginia , by VerticalNews journalists, a patent by the inventor Studnitzer, Ari ( Northbrook, IL ), filed on December 6, 2011 , was published online on January 7, 2014 . The assignee for this patent, patent number 8626639, is Chicago Mercantile Exchange Inc. ( Chicago, IL ). Reporters obtained the following quote from the background information supplied by the inventors: "In the financial industry, credit default swaps (CDSs), request for quotes (RFQs), spread orders, and implied orders are well known. "A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay). Less commonly, the credit event that triggers the payoff can be a company undergoing restructuring, bankruptcy, or even just having its credit rating downgraded. There are two competing theories usually advanced for the pricing of credit default swaps. The first, referred to as the `probability model`, takes the present value of a series of cash flows weighted by their probability of non-default. This method suggests that credit default swaps should trade at a considerably lower spread than corporate bonds. The second model, proposed by Darrell Duffle, but also by John Hull and White, uses a no-arbitrage approach. Various techniques for valuing credit default swaps and determining their settlement price are known in the industry. "In addition, traders (and others) may submit a request for quote (RFQ) to an exchange and/or a regulated trading platform. RFQs are similar to orders submitted to an exchange, however, RFQs differ from an order in that an RFQ is not binding and not actionable. RFQs are well known in the art and commonly used by traders, clearing houses, and/or exchanges to inquire as to the current market for a particular financial instrument. RFQs, however, are sometimes abused. For example, a trader may flood the market with RFQs in an attempt to ascertain other traders' positions on particular financial instruments without binding himself to an order. Those that respond to RFQs (e.g., market makers, other traders, etc.) may disregard the RFQs due to the enormous quantity of RFQs. Unfortunately, a non-abusive RFQ may be left unresponded to because of such behavior. Furthermore, in some scenarios, market makers, which although they are under a contractual obligation to respond to RFQs, may still be less than diligent in responding to RFQs, thus resulting in a negative perception of an exchange. "In addition, traders sometimes desire to trade multiple financial instruments in combination using what is often called a spread order. Each component of the combination is called a leg. Traders can define the combination (e.g., an exchange-defined combination) and submit orders for each leg or in some cases can submit a single order for multiple financial instruments to avoid leg risk. Such orders may be called a strategy order, a spread order, or a variety of other names. For example, a spread is an order for the price difference between two contracts with the objective of profiting from a change in the price relationship. The counterparty orders that are matched against the aforementioned combination orders may be individual, 'outright' orders or may be part of other combination orders. In the case of spread orders, the matching system may imply the counter party order by using multiple orders to create the counter party order. Examples of spreads include crack, crush, straddle, strangle, butterfly, calendar, and pack spreads. "Implied orders can fill in gaps in the market and allow spread and outright traders to share liquidity in a product where there would otherwise have been little or no available bids and asks. Thus, the liquidity of a product may be enhanced by the use of implied orders. For example, by linking the spread and outright markets, implied spread trading increases market liquidity. Examples of implied spread trading include those disclosed in U.S. patent application Ser. No. 10/986,967, entitled 'Implied Spread Trading System,' which is incorporated herein by reference. Large exchanges typically have order books for numerous spread products and legs of the spread products. The identification and processing of potential implied spreads inside electronic trading systems consumes sometimes substantial processing resources. U.S. Pat. No. 7,584,140, entitled 'Method and System for Providing Option Spread Indicative Quotes,' which is incorporated by reference in its entirety herein, describes systems and methods for, among other things, minimizing communication bandwidth consumption among parties trading derivative products and other types of financial instruments. "Finally, the Commodity Futures Trading Commission ('Commission' or 'CFTC') is proposing new rules, and guidance and acceptable practices to implement new statutory provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed rules, guidance, and acceptable practices, which apply to the registration and operation of a new type of regulated entity named a swap execution facility (SEF), implement the new statutory framework that, among other things, adds a new Section 5h to the Commodity Exchange Act ('CEA') concerning the registration and operation of swap execution facilities, and new Section 2(h)(8) to the CEA concerning the listing, trading and execution of swaps on swap execution facilities." In addition to obtaining background information on this patent, VerticalNews editors also obtained the inventor's summary information for this patent: "The present disclosure overcomes limitations of the prior art by providing methods and systems that provide for, among other things, an enhanced financial instrument comprising at least a clearinghouse attribute or desired clearing outcome. In one example, a method is disclosed for receiving, from a computing device of a user, an order for an enhanced financial instrument which identifies first and second clearinghouses. The order may be matched and processed using a matching engine module and order processing module. The enhanced financial instrument may correspond to an over-the-counter financial (OTC) financial product available at a plurality of clearinghouses including at least the first and second clearinghouses. A computer processor may determine that orders of the user at the first clearinghouse are non-actionable, but that orders of the user at the second clearinghouse are actionable. The computer processor may submit the matched order to the second clearinghouse. In addition, in some examples, the aforementioned method may also include receiving, from an exchange, market data records (e.g., order data, etc.) that include a clearinghouse designation (e.g., a first clearinghouse, a second clearinghouse, etc.) The computer processor may generate information formatted for transmission and display at the user's computing device. Such information may, in some examples, comprise at least a part of the received market data records and be formatted to gray out those portions corresponding to the first clearinghouse, but render as selectable those portions corresponding to the second clearinghouse. "In another example, a computer processor may accesses a user data store or a user database to retrieve a user's settings. The user's settings may comprise one, two, or more of: a first indication of one or more of a plurality of clearinghouses at which prices are non-actionable but viewable; a second indication of one or more of the plurality of clearinghouses at which the prices are actionable; and a third indication of one or more of the plurality of clearinghouses restricted from the user. In the foregoing example, the system may receive from the user's computing device a financial identifier corresponding to an enhanced financial instrument for an over-the-counter product available at a plurality of clearinghouses including at least the first clearinghouse, second clearinghouse, and third clearinghouse. The system may then send market data records (e.g., order data) of the financial identifier that include the first indication (e.g., the first clearinghouse) and the second indication (e.g., the second clearinghouse) to the user's computing device. The market data records, in some examples, may include at least an attribute configured to identify a clearinghouse, a price (e.g., order price) attribute, and a financial identifier attribute. The system may generate information formatted for transmission and display at the user's computing device. Such formatting may, in some examples, be based on the user's settings including at least one of: a first style of graying out those portions corresponding to the first clearinghouse, and a second style of rendering as selectable those portions corresponding to the second clearinghouse. In addition, in some examples, the transmitted information may be formatted to be compatible for display as part of a scrolling, text-based messaging interface. In other examples the formatted transmitted information may be displayed as part of a matrix of clearinghouses. "Furthermore, in some examples, the price attribute of the received market data records may store at least bid and ask prices of the financial identifier of the enhanced financial instrument. The bid and ask prices may be specific to the clearinghouse identified in the clearinghouse attribute. Moreover, in some examples, the bid and ask prices of particular clearinghouse may be multiple levels deep or market by order. In one example, the data records may be level 2 records showing order by order. While level 2 records may be for non-anonymous markets, the can also be provided for anonymous markets in some scenarios in accordance with various embodiments of the disclosure. "In yet another example, a computer system may register with an exchange to automatically receive up-to-date market data including a clearinghouse identifier (e.g., clearinghouses identified in the second indication, clearinghouses identified in the first indication) and a financial identifier. As a result, the exchange may transmit market data, which comprises at least a price attribute, a financial identifier attribute, and/or a clearinghouse attribute, to the computer system. "Of course, the methods and systems of the above-referenced embodiments may also include other additional elements, steps, computer-executable instructions or computer-readable data structures. In this regard, other embodiments are disclosed and claimed herein as well. For example, the computer system may comprise a computer processor and a tangible, non-transitory computer memory storing computer-executable instructions, which when executed by the processor, causes the computer system to perform one or more of the steps described herein. The details of these and other embodiments of the present disclosure are set forth in the accompanying drawings and the description below. Other features and advantages of the disclosure will be apparent from the description and drawings and from the claims." For more information, see this patent: Studnitzer, Ari. Trade Matching Platform with Variable Pricing Based on Clearing Relationships. U.S. Patent Number 8626639, filed December 6, 2011 , and published online on January 7, 2014 . Patent URL: http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=26&u=%2Fnetahtml%2FPTO%2Fsearch-bool.html&r=1288&f=G&l=50&co1=AND&d=PTXT&s1=20140107.PD.&OS=ISD/20140107&RS=ISD/20140107 Keywords for this news article include: Banking and Finance, Finance and Investment, Investment and Finance, Chicago Mercantile Exchange Inc. . Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC
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