AU2005203109A1 - A financial instrument - Google Patents
A financial instrument Download PDFInfo
- Publication number
- AU2005203109A1 AU2005203109A1 AU2005203109A AU2005203109A AU2005203109A1 AU 2005203109 A1 AU2005203109 A1 AU 2005203109A1 AU 2005203109 A AU2005203109 A AU 2005203109A AU 2005203109 A AU2005203109 A AU 2005203109A AU 2005203109 A1 AU2005203109 A1 AU 2005203109A1
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- AU
- Australia
- Prior art keywords
- financial
- party
- financial instrument
- instrument
- long
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Description
AUSTRALIA
Patents Act 1990 SFE Corporation Limited COMPLETE SPECIFICATION Invention Title.
A Financial Instrument The invention is described in the following statement: 2 Title A Financial Instrument 00 Technical Field This invention concerns a financial instrument. Related financial instruments include a futures contract and an option contract. In other aspects the invention is a trading exchange for trading such a financial instrument, a financial institution for c offering for sale such a financial instrument, and a financial intermediary for assisting in transactions of such a financial instrument. Further aspects include a method of operating a financial intermediary to assist in the transactions of such a financial Sinstrument and a software program for performing the method.
Background Art A futures contract is an exchange traded agreement to buy or sell a standard type and grade of commodity on a specific future date at an agreed price determined at the time the contract is traded on an exchange.
An option contract is a right sold by one party to another that offers the buyer the right, but not the obligation, to purchase (call) or sell (put) a financial instrument at an agreed price during a certain period of time or on a specific date. In the case of an option contract traded on an exchange, the option taker may pay a premium for the right to buy or sell a financial instrument.
Disclosure of the Invention In a first aspect the invention is a financial instrument being a contract based on the price of a proxy physical instrument and is listed for trading or offered for sale, the financial instrument is created by a party in a long position which supports the financial instrument through the payment of the full value of the financial instrument, and a party in a short position which supports the financial instrument through the payment of a margin, the financial instrument, the full value of the financial instrument and the margin are invested to realise an interest income stream which is paid to the short position party, and the financial instrument has an attached yield income, which is paid by the short position party to the long position party.
If the price of the financial instrument falls below the price of the proxy physical instrument, the long position party may have the right to sell the long position to the short position party. In this case the long position party would receive the value of the proxy physical instrument at the time at which the long position party exercised its rights to sell.
0 If the price of the financial instrument rises more than a predetermined percentage above the proxy physical instrument, the short position party may have the right to purchase the short position from the long position party. In this case, the short position party has the right to purchase the short position at the price of the proxy physical instrument at the time at which the short position party exercised its right to Spurchase. The short position party would receive any remaining margin money and tV 10 any interest income payable, less any yield income payment required to be made to the Slong position party.
The price of the proxy physical instrument may be based on any asset, such as an index, security, currency, other financial instrument or real physical asset.
A clearing house may assist in the transactions of the financial instrument. In this case the clearing house receives the payment of the full value of the financial instrument from the long position party. Payment of the full value of the financial instrument is invested by the clearing house and the realised interest income stream is paid by the clearing house to the short party position. The clearing house would also receive the payment of the margin from the short position party. Further, the clearing house receives the yield income from the short position party, which is then paid by the clearing house to the long position party. Also, funds payable to the long position party when selling the long position pass through the clearing house.
Clearing participant may also assist in the transactions of the financial instrument.
The financial instrument may change in value in response to changes in value of the proxy physical instrument.
The long position party may have the right to sell the instrument to the short position party on a predetermined or random basis.
The financial instrument may have no maturity, and exists as a non-expiring contract, or a long dated contract, such as for three years.
The financial instrument may be listed for trading by an exchange or offered for sale by a financial institution. The exchange or financial institution may retain the ability to expire the financial instrument with a minimum notice period provided to the long position party and the short position party.
The financial instrument may be closed out on market by the long position party or the short position party trading an offsetting position to that already held.
The long position and/or short position may be held by one or more parties.
4 SIn a further aspect, the invention concerns a trading exchange for listing the 00 financial instrument described above.
In yet a further aspect, the invention is a financial institution for offering for sale the financial instrument described above.
In an even further aspect, the invention is a financial intermediary to assist in 10 transactions of a financial instrument described above.
In another aspect, the invention is a method of operating a financial intermediary for assisting in transactions of a financial instrument that is a contract based on the price of a proxy physical instrument and is listed for trading or offered for sale, the method comprising the steps of: receiving from a party of a long position payment of the full value of the financial instrument; receiving from a party of a short position payment of a margin; investing the full value of the financial instrument and the margin to realise an interest income stream; paying the interest income stream to the short position party; receiving from the short position party an attached yield income of the financial instrument; and paying the attached yield income to the long position party.
In yet another aspect, the invention is a software program to manage the method of operating the financial intermediary in assisting in transactions of a financial instrument described above.
Brief Description of the Drawings An example of the invention will now be described with reference to the accompanying drawing which is a block diagram of a financial instrument.
Best Modes of the Invention The financial instrument is a contract entered into between a Long Position Party 20 and a Short Position Party 60. It is a financial instrument and can be based on a proxy physical instrument such as an index, security, currency, other financial instrument or a real physical asset. It is listed on the financial market operated by Sydney Futures Exchange (the Exchange) 15 as a derivatives contract. The financial instrument is related to a futures and an options contract and is traded through the 00 Exchange's financial market via its computerised trading platform SYCOM.
The value of the financial instrument will change in response to the interaction of Long Position Parties 60 and Short Position Parties 20 in the financial market SThe instrument need have no maturity and may exist as a non-expiring contract, or a Cc long dated contract, for instance three years. The Exchange 15 retains the ability to expire the instrument with a minimum notice period provided to the users.
A long position in the instrument is purchased by the Long Position Party with the full value 30 of the instrument being paid to the Clearing House 10 via a Clearing Participant 5, being the traded price between the Long Position Party 20 and Short Position Party 60 at the time of purchase. The Short Position Party 60 now holds the short position. The Clearing House 10 operated by SFE Clearing Corporation invests 40 the funds received 30 to realise an interest income stream 50. This interest income stream 50 is paid by the Clearing House 10 to the Short Position Party 60 less any fees or charges deducted by the Clearing House The Short Position Party 60, pays the Clearing House 10 via a Clearing Participant 5 a percentage of the nominal value of the instrument in a manner similar to the margining of a futures contract. The margin 70 is also invested by the Clearing House All the transactions between the Long Position Party 20 and Short Position Party are performed using Brokers 80 that are participants of the Exchange 15. Those subsequent positions are then held on behalf of those Long Position Parties 20 Short Position Parties 60 at the Clearing House 10 by Clearing Participants 5, that are participants of the Clearing House Once entered into, the financial instrument returns capital gains and losses as the instrument increases or decreases in value. The instrument also yields a dividend, coupon or similar and these 90 are passed from the Short Position Party 60 to the Clearing House 10 which in turn pays the dividend, coupon or similar 90 the Long Position Party 20 less any fees or charges.
Interest income 50 eamrned by the Clearing House on the full value payment paid by the Long Position Party 20 and margins 70 paid by the Short Position Party are paid by the Clearing House 10 via the Clearing Participant 5 to the Short Position Party 60. The interest income 50 is calculated and paid to the Short Position Party on a daily basis less fees and charges retained by the Clearing House 10. In the event the interest income payable to the Short Position Party 60 is negative, then the interest t 6 income 50 will flow from the Short Position Party 60 to the Clearing House 10 via the Clearing Participant SIf the price of the financial instrument falls below the price of the proxy physical 00 instrument, the Long Position Party 20 has the right to sell the long position to the Short Position Party 60. The Long Position Party 20 then receives the value of the proxy physical instrument at the time at which the long position party exercised its rights to sell.
Cc If the price of the financial instrument rises more than a predetermined Spercentage above the price proxy physical instrument, the Short Position Party 60 has the right to purchase the short position from the Long Position Party 20. In this case, Sthe Short Position Party 60 has the right to purchase the short position at the price of the proxy physical instrument at the time at which the Short Position Party 60 exercised its right to purchase. The Short Position Party 60 receives any remaining margin money and any interest income payable 50, less any yield income 90 payment required to be made to the Long Position Party The trading exchange is operated by a computer system providing computeruser interfaces for trading, and inbuilt financial checking. The computer system is programmed to create and manage the cash flows 30, 50, 70 and 90 of this new financial instrument, calculating and executing the cash flows 30,. 50, 70 and between Long Position Party 20, Short Position Party 60 and Clearing House It will be appreciated by persons skilled in the art that numerous variations and/or modifications may be made to the invention as shown in the specific embodiments without departing from the spirit or scope of the invention as broadly described.
For example, the financial instrument could be offered for sale by a financial institution such as a bank. In this case, the bank may also choose to hold the position of the short party.
The present embodiments are, therefore, to be considered in all respects as illustrative and not restrictive.
Claims (44)
1. A financial instrument being a contract based on the price of a proxy physical instrument and is listed for trading or offered for sale, 00oO the financial instrument is created by a party in a long position which supports the financial instrument through the payment of the full value of the financial instrument, and a party in a short position which supports the financial instrument through the payment of a margin, the financial instrument, N, the full value of the financial instrument and the margin are invested to realise an interest income stream which is paid to the short position party, and the financial instrument has an attached yield income, which is paid by the short position party to the long position party.
2. A financial instrument according to claim 1, wherein if the price of the financial instrument falls below the price of the proxy physical instrument, the long position party has the right to sell the long position to the short position party.
3. A financial instrument according to claim 2, wherein the long position party receives the value of the proxy physical instrument at the time at which the long position party exercised its rights to sell.
4. A financial instrument according to claim 1, 2 or 3, wherein if the price of the financial instrument rises more than a predetermined percentage above the proxy physical instrument, the short position party has the right to purchase the short position from the long position party.
A financial instrument according to claim 4, wherein the short position party has the right to purchase the short position at the price of the proxy physical instrument at the time at which the short position party exercised its right to purchase.
6. A financial instrument according to claim 4 or 5, wherein the short position party receives any remaining margin money and any interest income payable, less any yield income payment required to be made to the long position party.
7. A financial instrument according to any one of the preceding claims, wherein the price of the proxy physical instrument is based on any asset, such as an index, security, currency, other financial instrument or real physical asset. 8 tt s
8. A financial instrument according to any one of the preceding claims, wherein a Sclearing house assists in the transactions of the financial instrument. 00
9. A financial instrument according to claim 8, wherein the clearing house receives the payment of the full value of the financial instrument from the long position party.
10. A financial instrument according to claim 8 or 9, wherein the payment of the full value of the financial instrument is invested by the clearing house and the realised t 10 interest income stream is paid by the clearing house to the short party position.
11. A financial instrument according to claim 8, 9 or 10, wherein the clearing house receives the payment of the margin from the short position party.
12. A financial instrument according to any one of claims 8 to 11, wherein the clearing house receives the yield income from the short position party, which is then paid by the clearing house to the long position party.
13. A financial instrument according to any one of claims 8 to 12, wherein a clearing participant also assists in the transactions of the financial instrument.
14. A financial instrument according to any one of the preceding claims, wherein the financial instrument changes in value in response to changes in value of the proxy physical instrument.
A financial instrument according to any one of the preceding claims, wherein the long position party has the right to sell the instrument to the short position party on a predetermined or random basis.
16. A financial instrument according to claim 2 or 3, wherein funds payable to the long position party when selling the long position pass through the clearing house.
17. A financial instrument according to claim 4, 5 or 6, wherein the funds payable to the short position party when purchasing the short position pass through a clearing house. 9
18. A financial instrument according to any one of the preceding claims, wherein N the instrument has no maturity, and exists as a non-expiring contract, or a long dated contract, such as for three years. 00
19. A financial instrument according to any one of the preceding claims, wherein financial instrument is listed for trading by an exchange or offered for sale by a financial institution.
A financial instrument according to claim 19, wherein the exchange or financial institution retain the ability to expire the financial instrument with a minimum notice Speriod provided to the long position party and the short position party.
21. A financial instrument according to any one of the preceding claims, wherein the financial instrument is closed out on market by the long position party or the short position party trading an offsetting position to that already held.
22. A financial instrument according to any one of the preceding claims, wherein the long position and/or short position is held by one or more parties.
23. A financial instrument according as substantially herein described with reference to the accompanying drawing.
24. A trading exchange listing the financial instrument according to anyone of the preceding claims.
A financial institution offering for sale the financial instrument according to any one of the preceding claims.
26. A financial intermediary to assist in transactions of a financial instrument according to anyone of the preceding claims.
27. A method of operating a financial intermediary for assisting in transactions of a financial instrument that is a contract based on the price of a proxy physical instrument and is listed for trading or offered for sale, the method comprising the steps of: receiving from a party of a long position payment of the full value of the financial instrument; receiving from a party of a short position payment of a margin; t investing the full value of the financial instrument and the margin to realise an interest income stream; paying the interest income stream to the short position party; 00 receiving from the short position party an attached yield income of the financial instrument; and paying the attached yield income to the long position party. c
28. A method of operating a financial intermediary according to claims 27, wherein if the price of the financial instrument falls below the price of the proxy physical instrument, the long positioned party has the right to sell the long position to the short Sposition party.
29. A method of operating a financial intermediary according to claim 28, the method further comprising the step of paying to the long position party the value of the proxy physical instrument at the time at which the long position party exercised its rights to sell.
A method of operating a financial intermediary according to claim 27, 28 or 29, wherein if the price of the financial instrument rises more than a set percentage above the proxy physical instrument, the short position party has the right to purchase the short position from the long position party at the price of the proxy physical instrument at the time the short position party exercised its rights to purchase.
31. A method of operating a financial intermediary according to claim 30, the method further comprising the step of paying to the short position party any remaining margin money and any interest income payable, less any yield income payment required to be made to the long position party.
32. A method of operating a financial intermediary according to any one of claims 27 to 33, wherein the price of the proxy physical instrument is based on any asset, such as an index, security, currency, other financial instrument or real physical asset.
33. A method of operating a financial intermediary according to any one of claims 27 to 32, wherein the financial intermediary is a clearing house and the financial instrument is listed for trade on an exchange. tt 11
34. A method of operating a financial intermediary according to any one of claims 27 to 32, wherein the financial intermediary is a bank or other financial institution and the financial instrument is offered for sale by the bank or other financial institution. 00
35. A method of operating a financial intermediary according to any one of claims 27 to 32 and claim 34, wherein the financial intermediary is also the short position party.
36. A method of operating a financial intermediary according to any one of claims 27 to 25, wherein any one or more of the receiving, investing and paying steps is O performed via a clearing participant.
37. A method of operating a financial intermediary according to any one of claims 27 to 36, wherein the financial instrument changes in value in response to changes in value of the proxy physical instrument.
38. A method of operating a financial intermediary according to any one of claims 27 to 37, wherein the long position party has the right to sell the instrument to the short position party on a predetermined or random basis.
39. A method of operating a financial intermediary according to any one of claims 27 to 38, wherein the instrument has no maturity, and exists as a non-expiring contract, or a long dated contract, such as for three years.
40. A method of operating a financial intermediary according to any one of claims 27 to 39, wherein the method further comprises expiring the financial instrument by notifying the short position party and the long position party and providing a minimum notice period.
41. A method of operating a financial intermediary according to any one of claims 27 to 40, the method further comprising the steps of listing for trading an offsetting position to that already held by the long position party or the short position party in order to close the financial instrument on the market.
42. A method of operating a financial intermediary according to any one of claims 27 to 41, wherein the long position and/or short position is held by one or more parties. tn 12 O 0
43. A method of operating a financial intermediary as substantially herein described with reference to the accompanying drawing. 00
44. A software program to manage the method of operating the financial intermediary in assisting in transactions of a financial instrument according to any one of claims 27 to 43. SDated this sixteenth day of July 2005 SSFE Corporation Limited Patent Attorneys for the Applicant: F B RICE CO
Priority Applications (1)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| AU2005203109A AU2005203109A1 (en) | 2004-07-19 | 2005-07-18 | A financial instrument |
Applications Claiming Priority (5)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| AU2004903978A AU2004903978A0 (en) | 2004-07-19 | A financial instrument | |
| AU2004903978 | 2004-07-19 | ||
| AU2004904128A AU2004904128A0 (en) | 2004-07-23 | A financial instrument | |
| AU2004904128 | 2004-07-23 | ||
| AU2005203109A AU2005203109A1 (en) | 2004-07-19 | 2005-07-18 | A financial instrument |
Publications (1)
| Publication Number | Publication Date |
|---|---|
| AU2005203109A1 true AU2005203109A1 (en) | 2006-02-02 |
Family
ID=35940776
Family Applications (1)
| Application Number | Title | Priority Date | Filing Date |
|---|---|---|---|
| AU2005203109A Abandoned AU2005203109A1 (en) | 2004-07-19 | 2005-07-18 | A financial instrument |
Country Status (1)
| Country | Link |
|---|---|
| AU (1) | AU2005203109A1 (en) |
-
2005
- 2005-07-18 AU AU2005203109A patent/AU2005203109A1/en not_active Abandoned
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Legal Events
| Date | Code | Title | Description |
|---|---|---|---|
| PC1 | Assignment before grant (sect. 113) |
Owner name: ASX OPERATIONS PTY LTD Free format text: FORMER APPLICANT(S): SFE CORPORATION LIMITED |
|
| MK5 | Application lapsed section 142(2)(e) - patent request and compl. specification not accepted |