FORM 2
THE PATENTS ACT, 1970
(39 of 1970)
&
THE PATENTS RULES, 2003
COMPLETE SPECIFICATION
(See section 10, rule 13)
1. Title of the invention:
MANAGEMENT OF CLEARING ACTIVITIES
2. Applicant(s)
NAME NATIONALITY ADDRESS
TATA CONSULTANCY Indian Nirmal Building, 9th Floor, Nariman Point,
SERVICES LIMITED Mumbai-400021, Maharashtra, India

3. Preamble to the description
COMPLETE SPECIFICATION
The following specification particularly describes the invention and the manner in which it
is to be performed.

TECHNICAL FIELD
[0001] The present subject matter, in genera!, relates to clearing activities and, in
particular, to a system and a computerized method for management of ciearing activities.
BACKGROUND
[0002] Clearing and settlement of various financial instrument transactions involving
securities transactions and derivatives transactions are done through clearing houses. Financial instrument transactions include at least two parties - a buyer and a seller. Each of the transacting party, i.e., the buyer and the seller is responsible to the other for the transaction. In case one party defaults or does not performs in the transaction, the other would be left with a worthless claim. Therefore, to guarantee the buyer that the seller will perform, and to guarantee the seller that the buyer will perform, the clearing house assumes the role of central counterparty (CCP) for each transaction.
[0003] Typically, a clearing house is an independent organization having clearing
firms as its stakeholders or customers, also known as clearing members. The clearing members may have various individual traders and firms as its clients. Each client of the clearing member may further have one or more clients, and so on. Further, the clearing house has visibility to positions or transactions of its clearing members, and the clearing members have visibility to transactions made by its clients. With the increasing awareness regarding financial instruments, clients of the clearing members, client of clients, and so on (collectively referred to as market participants), are also increasing at a steady pace. With the in creasing number of market participants, the clearing houses and clearing members may not able to efficiently manage clearing activities related to the financial instruments.
SUMMARY
[0004] This summary is provided to introduce concepts related to management of
ciearing activities. These concepts are further described below in the detailed description. This summary is not intended to identify essential features of the claimed subject matter nor is it intended for use in determining or limiting the scope of the claimed subject matter.

[0005] The subject matter described herein relates to a computerized method for
management of clearing activities. The method comprises creating at least one position account for each of a plurality of market participants, based on account generation information corresponding to the market participants. The plurality of market participants may include clearing members and non-clearing members. Further, the method comprises tagging the at least one position account of each of non-clearing members to a corresponding parent position account in order to create one or more hierarchies of position accounts. Based on the one or more hierarchies of position accounts, a market association is obtained. The obtained market association inter-links the plurality of market participants in the one or more hierarchies of position accounts. Further, based on the market association, market management data pertaining to one or more clearing activities is generated.
BRIEF DESCRIPTION OF THE DRAWINGS
[0006] The detailed description is provided with reference to the accompanying
figures. In the figures, the left-most digit(s) of a reference number identifies the figure in
which the reference number first appears. The same numbers are used throughout the
drawings to reference like features and components.
[0007] Fig. 1 illustrates a network environment implementing a clearing system, in
accordance with an embodiment of the present subject matter.
[0008] Fig. 2a illustrates components of the clearing system, in accordance with an
implementation of the present subject matter.
[0009] Fig. 2b illustrates an exemplary hierarchy of position accounts, in accordance
with an implementation of the present subject matter.
[00010] Fig. 2c illustrates an exemplary market association, in accordance with an
implementation of the present subject matter.
[00011] Fig. 2d illustrates exemplary access restrictions on a market association.
[00012] Fig. 3 illustrates an exemplary method for creating a market association for
managing clearing activities, in accordance with an implementation of the present subject
matter.

DETAILED DESCRIPTION
[00013] The subject matter described herein relates to systems and methods for
management of clearing activities.
[00014] Conventionally, the clearing members perform transactions on behalf of their
clients such as, individual traders and firms, and the clearing house interacts with the clearing
members to manage clearing and settlement of these transactions. The individual traders and
firms associated with clearing members are usually referred to as non-clearing members. Each
non-clearing member may further have one or more non-clearing members as its client. Thus,
a hierarchy of members, referred to as market participants, operating at different levels exist.
[00015] Generally, the clearing house monitors or keeps a record of the transactions of
an uppermost level of the hierarchy of market participants only, i.e., the clearing members, which are its immediate clients. The remaining market participants or the transactions of the remaining market participants, i.e., market participants at the lower levels of the hierarchy, are not visible to the clearing house. Similarly, the clearing members can only monitor the transactions of its clients.
[00016] Owing to lack of visibility of the clearing house and clearing members to the
transactions of the market participants at lower levels of the hierarchy, the transactions of all
the market participants in the hierarchy may not be tracked or monitored. Therefore,
managing clearing activities including margin computation, settlement, and delivery of the
transactions, and identifying defaulters becomes difficult. For example, clearing members
who typically clear all the transactions on behalf of non clearing members may not be able to
compute margins at each level of the hierarchy of market participants as the clearing members
only have visibility to one level below the clearing members and not to the remaining levels
of the hierarchy. Further, it is to be noted that the clearing members compute margins
manually, which may become cumbersome when the market participants are large in number.
Similarly, the clearing members also face difficulty while settling the transactions. During
settlement of the transactions, if the clearing members observe any unsettled transactions,
then identifying one or more defaulters responsible for such unsettled transactions also
becomes difficult. A defaulter, as referred herein, may be understood as a market participant
who fails to perform in the transaction.

[00017] To this end, systems and methods for managing clearing activities. In one
implementation, a market association is created for managing the clearing activities. Such
market association inter-links the market participants trading across different combinations of
exchange, market, and segment. The market association facilitates monitoring of transactions
or positions of market participants involving both clearing members and non-clearing
members. The clearing member may be understood as a market participant, also known as
clients or stakeholders, having a membership agreement with the clearing house, and having
eligibility for clearing transactions via the clearing house. The non-clearing member, on the
other hand, may be understood as a market participant not having a membership agreement
with the clearing house, and not eligible for clearing transactions via the clearing house. By
monitoring transactions of all the market participants, various clearing activities, such as
position reporting, margin computation, premium settlements, cash expiry settlements,
delivering positions, and identifying a defaulter, may be easily and efficiently managed.
[00018] In one implementation, to generate the market association, a hierarchy of
position accounts is created based on account generation information associated with the market participants. The account generation information may indicate account details, market details, and hierarchical details corresponding to the market participants. To create the hierarchy of position accounts, at least one position account for each market participant can be created, based on the account generation information corresponding to the market participant under consideration.
[00019] Upon creating the position account, the position account of the market
participant is tagged to its parent's position account. The position account of the parent may be determined from the hierarchical details specified in the account generation information. The creation of the position accounts for each of the market participants and tagging of the position accounts to the position accounts of their respective parent market participants results in creation of the hierarchy of position accounts.
[00020] It is to be understood that one hierarchy of position accounts is created for each
combination of exchange, market, and segment. Therefore, different hierarchies of position accounts may be created for different combinations of exchange, market, and segment. For example, for an XYZ exchange in derivatives segment in an auction market, a hierarchy of position account is created. However, if any of the exchange, segment, or market is different,

a separate hierarchy of position account is created, for instance, for XYZ exchange in commodity segment and in auction market, a separate hierarchy of position accounts is created.
[00021] For the purpose of explanation and not as a limitation, an exchange may be
understood as a marketplace in which shares, options and futures on stocks, bonds, derivatives, commodities, indexes and the like are traded; a segment may be understood as a division of the marketplace into various groups according to the product being traded, for example, stocks, bonds, derivatives, commodities, and the like; and a market is the subdivision of the segment into different categories, according to the distinct characteristics of the market, for example, an auction market, a negotiable market, a retail debt market and the like.
[00022] Subsequent to creation of the hierarchy or hierarchies of position accounts,
each position account in the hierarchy or hierarchies may be tagged to the margin account and the settlement account of its corresponding clearing member to create or obtain the market association. Therefore, the market association may be understood as an association that interlinks the market participants in the one or more hierarchies of position accounts, where the market participants are trading across different exchanges, markets, and segments. The market association as explained herein achieves transparency in the clearing activities and enables the clearing house to track the positions of all the market participants. The margin account and the settlement account of the clearing member can be determined from the hierarchical details specified in the account generation information.
[00023] The market association, thus obtained, may be used for managing clearing
activities, such as position tracking, margin calculation, identifying a default situation or a defaulter, performing settiement activities including premium settlements, cash expiry settlements, and delivery of positions. Since the market association contains the hierarchy of position accounts, where each position account is tagged to its parent's position account, the clearing house can access the transactions performed by all the market participants in the hierarchy. Similarly, the market participants, such as clearing members and other parents, may have access to the transactions of the market participants lying below them in the hierarchy.

[00024] Further, market management data indicative of all the transactions made by the
market participants may be generated after a predetermined time period, such as at the end of the day or at certain time intervals during the day. Such market management data may either be automatically reported to or accessed by the clearing house or the market participants identified as parents. This makes the hierarchy of market participants transparent to the clearing house. Further, the market participants may not need to manually gather the information about the transactions or positions of one or more market participants below them in the hierarchy. The positions of the market participants may be automatically collated and reported to the market participants.
[00025] Further, since position account of each market participant in the market
association is tagged to their corresponding clearing member margin's account, the margins
may be computed automatically for one or more of the market participants by referring to the
transactions or positions in the position accounts. In one implementation, data obtained as a
result of margin computation may be stored in the market management data.
[00026] Furthermore, since each position account in the market association is tagged to
the clearing member's settlement account, the clearing members may easily perform settlement activities such as premium settlements, cash expiry settlements, and delivery of positions. The market management data may also include details pertaining to settlement activities for each of the clearing members. In case there are any unsettled transactions, the same may be identified and reported to the clearing members. Also, information about the defaulter(s) responsible for such unsettled transactions may also be reported to the clearing member. Once defaulter is identified, an appropriate action can be taken. For example, the positions of the defaulter may be transferred to some other clearing members account, based on preferences of the clearing member. In an example, the clearing members may request the clearing house to transfer the positions of the defaulter from the defaulter's account to some other clearing member account in the hierarchy. The market association, therefore, facilities easy management of the clearing activities.
[00027] While aspects of systems and methods for management of clearing activities
can be implemented in any number of different computing systems, environments, and/or configurations, the embodiments are described in the context of the following exemplary system architecture(s).

EXEMPLARY SYSTEMS
[00028] Fig. 1 illustrates an exemplary network environment 100 a clearing system
102, in accordance with an embodiment of the present subject matter. In one implementation, the network environment 100 can be a company network, including thousands of office personal computers, laptops, various servers, such as blade servers, and other computing devices connected over the network 106. In another implementation, the network environment 100 can be a home network with a limited number of personal computers and laptops connected over the network 106.
[00029] The clearing system 102 is connected to a plurality of user devices 104-1,104-
2...104-N, collectively referred to as the user devices 104 and individually referred to as a user device 104. The clearing system 102 and the user devices 104 may be implemented as any of a variety of conventional computing devices, including, for example, servers, a desktop PC, a notebook or portable computer, a workstation, a mainframe computer, a mobile computing device, an entertainment device, and an internet appliance.
[00030] The clearing system 102 is connected to the user devices 104 over a network
106 through one or more communication links. The communication links between the
clearing system 102 and the user devices 104 are enabled through a desired form of
communication, for example, via dial-up modem connections, cable links, digital subscriber
lines (DSL), wireless or satellite links, or any other suitable form of communication.
[00031] The network 106 may be a wireless network, a wired network, or a
combination thereof. The network 106 can also be an individual network or a collection of many such individual networks, interconnected with each other and functioning as a single large network, e.g., the Internet or an intranet. The network 106 can be implemented as one of the different types of networks, such as intranet, local area network (LAN), wide area network (WAN), the internet, and such. The network 106 may either be a dedicated network or a shared network, which represents an association of the different types of networks that use a variety of protocols, for example, Hypertext Transfer Protocol (HTTP), Transmission Control Protocol/Internet Protocol (TCP/IP), etc., to communicate with each other. Further, the network 106 may include network devices, such as network switches, hubs, routers, HBAs, for providing a link between the clearing system 102 and the user devices 104.

[00032] The network devices within the network 106 may interact with the clearing
system 102 and the user devices 104 through the communication links. The users, such as clearing house members and market participants may interact through the user devices 104 with the clearing system 102 for creating position accounts, monitoring positions, calculating margins, performing settlement activities, such as premium settlements, cash expiry settlement, delivering positions, managing default situations, transferring positions etc. The clearing system 102 may be in form of an application server, which can be accessed by various user devices 104 via a suitable network protocol, such as Hypertext Transfer Protocol (HTTP).
[00033] The clearing system 102, according to an implementation of the present subject
matter, creates a market association based on account generation information corresponding to various market participants. The market participants include, for example, clearing members and non-clearing members associated with the market. The account generation information includes, for example, account details, market details, and hierarchical details. In one implementation, the account generation information is received from the users, such as clearing members. The clearing system 102 includes, amongst other things, a market association generation module 108 configured to generate a market association based on the account generation information. The market association generation module 108 creates at least one position account for each market participant based on the account generation information.
[00034] Subsequent to creation of the position accounts, the market association
generation module 108 creates one or more hierarchies of the position accounts by tagging each position account of each market participant to the position account of a corresponding parent of the market participant based on the hierarchical details in the account generation information. For example, in case it is determined that the market participant is a clearing member, no tagging is performed. In said example, the market association module 108 ascertains that name of a clearing member name is same as that of the account owner. Accordingly, it may be determined that the market participant is a clearing member and is to be placed at the top level of the hierarchy.
[00035] In another example, if the market participant is a non-clearing member, the
account of the market participant is tagged to its parent's position account. Such tagging

facilitates the clearing house to track the positions of all the market participants including both clearing members and non-clearing members.
[00036] In one implementation, the market association generation module 108 tags
each position account in the hierarchy or hierarchies to a margin account and a settlement account of the corresponding clearing member. The tagging of the position accounts to the margin account and the settlement account may be performed based on the account generation information. The tagging of the position account to the margin account and the settlement account facilitates generation of the market association.
[00037] Once the market association is created, the clearing system 102 may generate
market management data. For example, the clearing system 102 market data include details pertaining to transactions or positions of the market participants, margin computation data, and information pertaining to settlement and delivery of the positions/transactions. Owing to the generation of the market association, the market data can be generated in an efficient manner, in terms of time consumption and complexity.
[00038] Further, in one implementation, the clearing house or any other authorized user
may define one or more access rights for the market participants in the clearing system 102 to access one or more position accounts in the hierarchy. Such access rights may be defined based on the type of market participants, such as a clearing member or a parent. For example, each parent market participant may be provided with access rights to access the position account of the market participants lying below them in the hierarchy. The position accounts of the market participants, for example, may be accessed to monitor the transactions of the market participants.
[00039] Fig. 2a illustrates exemplary components of the clearing system 102 for
managing clearing activities, according to an embodiment of the present subject matter. In said embodiment, the clearing system 102 includes one or more processor(s) 202, a memory 204 coupled to the processor 202, and interface(s) 206. The processor 202 can be a single processing unit or a number of units, all of which could include multiple computing units. The processor 202 may be implemented as one or more microprocessors, microcomputers, microcontrollers, digital signal processors, central processing units, state machines, logic circuitries, and/or any devices that manipulate signals based on operational instructions.

Among other capabilities, the processor 202 is configured to fetch and execute computer-readable instructions and data stored in the memory 204.
[00040] The interfaces 206 may include a variety of software and hardware interfaces,
for example, interface for peripheral device(s) such as a keyboard, a mouse, an external
memory, a printer, etc. Further, the interfaces 206 may enable the clearing system 102 to
communicate with other computing devices, such as web servers and external databases. The
interfaces 206 may facilitate multiple communications within a wide variety of protocols and
networks, such as a network, including wired networks, e.g., LAN, cable, etc., and wireless
networks, e.g., WLAN, cellular, satellite, etc. The interfaces 206 may include one or more
ports for connecting the clearing system 102 to a number of computing devices.
[00041] The memory 204 may include any computer-readable medium known in the art
including, for exampJe, volatile memory such as static random access memory (SRAM) and
dynamic random access memory (DRAM), and/or non-volatile memory, such as read only
memory (ROM), erasable programmable ROM, flash memories, hard disks, optical disks, and
magnetic tapes. The memory 204 also includes module(s) 208 and data 210.
[00042] The modules 208 include routines, programs, objects, components, data
structures, etc., which perform particular tasks or implement particular abstract data types. The modules 208 further include, for example, a market association generation module 108, a market management module 212, and other modules 214. The other modules 214 may include programs or coded instructions that supplement applications and functions on the clearing system 102, for example, programs in the operating system.
[00043] The data 210, amongst other things, serves as a repository for storing data
processed, received, and generated by one or more of the module(s) 208. The data 210 includes, for example, market association data 216, market management data 218, and other data 220. The other data 220 may include data generated as a result of the execution of one or more modules in the other modules 214.
[00044] In operation, the market association generation module 108 creates one or
more position accounts based on the account generation information corresponding to one or more market participants. For the sake clarity, a brief description of the position account and different types of position accounts that can be created using the clearing system 102 is provided below:

Position Account
[00045] A position account may be understood as an account that holds positions for a
market participant, which can be a clearing member or a non-clearing member. Each of the
market participants may hold at least one position account. The market participant may use
the same position account for trading across exchanges, markets, and segments. The position
account may be categorized as a final account and a non-final account. The final position
account may be understood as a position account that holds the positions of the market
participant itself. The final position account may be subject to clearing transactions,
[00046] On the other hand, the non-final position account may be understood as an
omnibus position account, which holds one or more positions accounts, such as one or more position accounts of the clients. The non-final position accounts are not subject to clearing transactions and may only be used for informational purpose, such as position monitoring. The non-final position account of each market participant, for example, may have one or more final position accounts of their underlying market participants tagged to it. Examples of, different types of final and non final position accounts that may be created are described in Table 1. The different types of position accounts described in Table 1 are only for the purpose of explanation and it will be understood that various other types of position accounts may also be generated.

Final / Non-Final Indicator Position Account Type Description
Final account Unallocated account(U) Unallocated account is used to allocate trades which do not have a valid segregation type at the time of trade acceptance. Such trades can be subsequently moved to other position accounts by using internal give-ups.
Final account House account (H) House account is used to hold proprietary positions of the market participant.
Final account Direct client
account (C) Direct client account is used by the market participant as omnibus without detail account to aggregate positions of multiple clients in a single account.
Final account Market- maker account (M) Market-maker account is used by market participant to separate the positions arising out of Market-maker
trades.
Non-final account Segregated client account (S) Segregated client account is used by the market participant as an omnibus with detail account to segregate client positions.
Non final account Additional segregated client account (SI) Additional segregated client account is used by the market participant as an omnibus with detail account to segregate client positions. This can be used in addition to S.
Table 1
[00047] In order to create one or more above mentioned position accounts, the clearing
system 102 receives the account generation information associated with each market participant. The account generation information included one or more of account details, market details, and hierarchical details. The account details, for example, include market participant name, type of account, a gross/net indicator, and a final/non-final account

indicator. The gross/net indicator indicates weather positions in the position account should be
kept and displayed as gross positions or net positions. The market details, for example, may
include details pertaining to the exchange, market, and segment. The hierarchical details, for
example, may include clearing member name, clearing member ID, margin account number
of the clearing member, settlement account number of the clearing member, name of parent,
account type of the parent, default trading member, and override trading member. The default
trading member may be understood as a trading member, such as a broker agent, who can
trade for the market participant's position account. The override trading member may be
understood as a trading member that, if set to 'Yes,' allows any trading member to place
trades in the market participant's position account, and if set to 'No,' allows only specified
trading member to place trades in the market participant's position account. The parent may
be understood as a market participant having one or more market participants as its clients.
[00048] The account generation information may be gathered from various sources, for
example, the account generation information corresponding to the market participants. The
account generation information may be provided by one or more users, such as, clearing
members or any other user who has the authority to provide such information. Thus, the users
may provide the account generation information for creating their own position accounts or
position accounts of other market participants. In an implementation, the account generation
information may be gathered from internal or external data storage devices storing such data.
In an example, various users may provide account generation information to a central
repository from where such data can be fetched by the clearing system 102. In another
implementation, the account generation information may be gathered from an uploaded file
having such information. It will be understood that the details in the account generation
information may either be provided by any of the above mentioned sources, or may be
gathered from a combination of such sources. Further, the account generation information
may be stored in a repository, hereinafter referred as market association data 216.
[00049] Based on the account generation information, the market association
generation module 108 creates at least one position account for each of the market participants. In one example, the market association generation module 108 may create more than one position accounts for the market participants. Each position account may have a unique position account number, which can be used across exchanges, markets and segments.

In an implementation, information pertaining to the position accounts may be stored in the market association data 216. Thus, the market association data 216 includes the details pertaining to the position accounts and the account generation information. The market association data 216 may also include pre-stored information, such as margin account and settlement account number, pertaining to all the clearing members.
[00050] Typically, each clearing member has a margin account and a settlement
account. Information regarding the margin accounts and the settlement accounts may be stored in the market association data 216. Based on the market association data 216, a hierarchy or hierarchies of the position accounts is created. Before explaining creation of such hierarchy of position account, for the sake clarity, a brief description of such margin account and settlement account is provided below:
Margin Account
[00051] A margin account is set-up by the clearing house for each clearing member
based on a membership agreement of the clearing member with the clearing house. A margin account may be understood as a brokerage account in which a broker lends a customer cash to purchase securities. The loan in the margin account is collateralized by the securities and cash. If value of the purchased securities drops sufficiently, the margin account holder is required to deposit more cash or sell a portion of the purchased securities. Examples of different types of margin accounts include, but are not limited to, a house account (H), a direct client account (C), and a market maker account (M).
Settlement Account
[00052] A settlement account is set-up by the clearing house for each clearing member
based on a membership agreement between the clearing member and the clearing house. The
settlement account will be used to report the positions for physical delivery settlements and
cash settlements. Examples of different types of settlement account include, but are not
limited to, the house account (H), the direct client account (C), and the market maker account
(M).
[00053] Returning to the creation of the hierarchy of position accounts, for a specified
combination of exchange, market, and segment, the market association generation module
108 creates a hierarchy of position accounts by tagging position account of each market

participant, based on the account generation information. In an implementation, final position accounts of one or more market participants may be tagged to the non-final position account of the corresponding parent market participants. In another implementation, non-final position accounts of one or more market participants may be tagged to the non-final position account of the corresponding parent market participants. Further, the position accounts of the clearing members may not be tagged to any other position account since they are present at the topmost level of the hierarchy and have no parent associated with them.
[00054] Thus, by tagging the position account of each market participants to its
parent's position account, a hierarchy of position accounts is created with clearing member at the top of the hierarchy. For the purpose of explanation, it may be understood that the entire hierarchy is represented in the form of a tree having a plurality of parent nodes and a plurality of child nodes. The nodes referred herein represent the position accounts. Each child node in the hierarchy is linked to its parent node and a child node may act as a parent node for a different child node. The hierarchy may thus include a plurality of levels with each clearing member at the top most level of the hierarchy.
[00055] An exemplary hierarchy of position accounts is illustrated in the Fig. 2b with
reference to the Table 1 containing different types of exemplary position accounts that can be created. As illustrated in the Fig. 2b, a clearing member, i.e., CMI, holds an unallocated account U, a house account H, a direct client account C, a market maker account M, and a segregated account S. The clearing member CMI represents the top most level of the hierarchy, i.e., level 0. A level below the level 0, i.e., level 1, in the hierarchy includes trading members, say, TM1 and TM2. Each of the trading members TM1 and TM2 hold an Unallocated account U, a house account H, a direct client account C, a market maker account M, and a segregated account S. The position accounts of the trading members TM1 and TM2 are tagged to the position account, which in the present example is the segregated account S of the parent market participant, i.e., the clearing member CM1. The clearing member CM1 can, therefore, have access to the position accounts of both TM1 and TM2.
[00056] Further, as illustrated next lower level in the hierarchy, i.e., the level 2
comprises a member client, say, CLA and another member client, say, CLB. The member client CLA holds an unallocated account U, a house account H, a direct client account C, and a market maker account M. The position accounts of the member client CLA are tagged to the

[00061] In one implementation, since a clearing member is eligible to clear transactions
for an exchange, market, and segment combination, the market association generation module
108 tags each position account in the hierarchy of position accounts to a margin account and a
settlement account of the clearing member. The market association generation module 108
obtains the details pertaining to the margin account and the settlement account from the
hierarchical details provided in the account generation information. If the hierarchical details
are insufficient to determine the margin account and the settlement account, the market
association generation module 108 obtain such details from the market association data 216
having information about the clearing members and their margin and settlement accounts. By
tagging of each position account, such as each final position account in the hierarchy of the
position accounts to the corresponding clearing member margin account and settlement
account, the market association generation module 108 creates a market association.
[00062] For the purpose of explanation and not as a limitation, a market association is
explained with reference to Fig. 2c. Fig. 2c represents the market participants in a hierarchy 222, for example, trading member TMl, a trading member TM2, a client A (CLA), and a client B (CLB). For the sake of clarity, a certain number of the market participants and their position accounts (as shown in positions 224) are shown in the Fig. 2c; however, it will be appreciated that there can be n number of market participants having one or more position accounts. Similarly, there can be n number of margin accounts (as shown in margins 226) and settlement accounts (as shown in settlements 228) in the hierarchy depending on the number of clearing members.
[00063] As illustrated in Fig. 2c, each position account in the hierarchy of position
accounts is tagged to the corresponding clearing member's margin account and settlement account. In said example, one or more position accounts can be tagged to the same or different margin and settlement accounts. For example, the position account H of the market participant TM1 is tagged to the margin account I and the settlement account 2. Likewise, the position account C of the market participant TM2 is tagged to the margin account 2 and the settlement account 2. Further, the position account D of the market participant CLA is tagged to the margin account 2 and the settlement account 3. Furthermore, the position account S of the market participant CLB is tagged to the margin account 3 and the settlement account 1.

[00064] It can be observed that each position account in a hierarchy of the position
account is tagged to its corresponding clearing member's margin account and settlement account. Such hierarchy position accounts and tagging of each position account in the hierarchy creates the account market association. Although the market association represented in Fig. 2c is with reference to a single hierarchy of the position accounts, however, it will be understood that the multiple hierarchies are created based on different combinations of exchange, market, and segment.
[00065] In an implementation, the users, such as the clearing house and he clearing
member have a provision of defining the number of levels in the hierarchy of the position accounts- For example, if the users desire to create a hierarchy of the position accounts for only two levels below them, that is, till clients of the clearing members, the users may define a level indicating parameter in the clearing system 102. The market association generation module 108 may then generate a hierarchy based on the level specified in the level indicating parameter.
[00066] The market association generation module 108 may also refer to one or more
predefined business rules stored in market association data 216, while creating or maintaining the market association. The predefined business rules may include, for example, the account owner should be a valid active market participant, each position account in the market association should be a valid account, and if the market participant is a clearing member, the position account need not be tagged to the parent. The users may also add new rules or delete or alter already available rules.
[00067] Once the market association is created, the market association generation
module 108 may update the market association by modifying the status of the position accounts in the hierarchy upon receiving updating information from the users, such as market participants and the clearing house. For example, the position account for an exchange, market, and segment may be created with an initial status as 'In-capture'. The 'In-capture' status reflects that the account details are captured for the first time. The users may query the clearing system 102 and may change the status of the account to 'Active', 'Suspended' or 'To be deleted'.
[00068] For example, if a defaulter is identified, the users may request the clearing
system 102 to suspend or delete the position account of the defaulter for the exchange market

and segment in order to block or stop further transaction from the defaulter's position account.
In said example, the market association generation module 108 suspends or deletes the
requested position account, and update the status of the position accounts in the market
association accordingly. The market association generation module 108 may make such
modifications after a predetermined period of time, for example, at the end of each day.
[00069] In addition to the status, other detail such as the hierarchical details associated
within the market participants in the hierarchy may also be modified upon receiving updating information from the users. For example, the parent of a market participant may change if the market participant wishes to trade or invest in the market via some other market participant. Accordingly, the clearing members, margin accounts of the clearing members, and settlement accounts of the clearing members may also change. The changes in the hierarchical details may modify the tagging of the position accounts with the market association. Such modifications in the tagging provides for recreation of the hierarchy.
[00070] For example, if a parent of the market participant is changed, the tagging of the
market participant's position account with the previous parent's position account may be
removed, and the position account of the market participant may be tagged to the position
account of a new parent. The market association generation module 108 checks for updates
after a certain period of time, such as at the end of each day, and updates the market
association accordingly to reflect such changes. Further, an effective date on which such
changes needs to be incorporated in the hierarchy may also be specified.
[00071] In operation, the market participants may provide updating information, i.e.,
the information regarding such changes in the hierarchy to the clearing system 102. The clearing system 102 may refer to one or more predefined business rules stored in other data 220 while making such modifications in the hierarchy. Based on these predefined business rules, the clearing system 102 may decide whether the hierarchy is to be modified or not. Such predefined business rules, for example, may include rules for checking if there are any pending transactions in the position account, which is subject to modification. In said case, if there are any pending transactions, the market association generation module 108 does not make the requested modification in the hierarchy before all the pending transactions are settled.

[00072] In an implementation, one or more access rights or restrictions may be defined
for the market participants in the hierarchy, depending upon the type of market participant or status of the position accounts for different combinations of exchange, market, and segment or a combination thereof Based on such access rights and restrictions, the market participant's access or restrictions to the clearing system 102, one or more position accounts in the market association, eligibility of market participants to perform transactions on behalf of the other market participants, etc., may be decided. The access rights and restrictions may be stored in the market association data 216. The access rights and restrictions may be same or different depending upon a type of market participant or a current status of the position account or a combination of both. The access rights define the rights of the market participants to access the one or more position accounts in the market association.
[00073] In an example, the access rights may include rights to view the positions in the
position account, rights to perform the transactions via the position account, etc. The access rights may be defined in terms of flags, such as positions view access flag, transactions access flags, etc. The restrictions define the restrictions imposed on the market participants for using the position accounts. For example, the restrictions may include restrictions of performing the transactions via the position account, restrictions to delete or activate the account, etc. The information pertaining to the access rights and restrictions may be provided by the users, such as the clearing house. Further, the access rights may be altered if there are any updafions or modifications in the market association.
[00074] Thus, based on the pre-defined access rights and restrictions, each of the
market participants may be assigned corresponding access rights and restrictions. Further, the access rights and restricdons may be altered if there are any updations or modifications in the market association, for example, when there is a change in the tagging or a change in the current status of the position accounts for different combinations of exchange, market and segment. The restrictions associated with a position account are explained with reference to Fig. 2d.
[00075] Fig. 2d illustrates exemplary access restricdons on a market association. The
access restrictions are based on the status of the position account for a combination of exchange, market and segment. The position accounts for each combination of exchange, market and segment may have various statuses, for example, in capture status 230, active

status 232, invalid status 234, suspended status 236, to be deleted status 238, and deleted status 240. The in capture status 230 indicates that the position account generation details for the exchange, market and segment are captured for the first time. The restrictions associated with the in capture status 230 may be that no transactions from the position account in the in capture status 230 is allowed.
[00076] The Active status 232 may be understood as a status of the position account for
an exchange, market and segment combination upon confirmation of captured position account details. The restriction in the Active status 232 may be that the account can only be activated, when a confirmation is received by the clearing house, or by the other users that are not the creator of the position account. In an implementation, a check may be conducted to verify if the user activating the position account is different from the user who created the position account.
[00077] The suspended status 236 may be understood as the status of the position
account for an exchange, market and segment combination when the position account rests suspended for that exchange, market and segment. In the same way, the to be deleted status 238 may be understood as the status of the position account for an exchange, market and segment combination when an active status 232 or a suspended status 236 of the position account is deleted for that exchange, market and segment. In one implementation, the restrictions in the suspended status 236 or the to be deleted status 238 are that no transactions initiated by the account holder will be allowed.
[00078] The position account may be moved to deleted status 240 from the to be
deleted status 238 when there are no open positions in the position account. The deleted status 240 indicates that the position account is deleted for the exchange, market and segment. The position account will be deleted when there is no open position for the position account that is in process of deletion. The invalid status 234 may be understood as the status of the position account, when the position account is deleted during in capture state 230. The transactions will not be allowed when the position account is in the deleted status 240 or the invalid status 234.
[00079] Therefore, based on the access rights and restrictions, the market participants
may access or have some restrictions on accessing the position accounts for different combinations of exchange, market, and segment. Further, status of the position account for

one combination of exchange, market, and segment may be different from the status of the
position account from another combination of exchange, market, and segment. It will be
understood that restrictions described herein are only for the purpose of explanation and the
restrictions may change from application to application. For example, the clearing house may
also allow the transactions even in the suspended ox to be deleted status.
[00080] Since the market participants can access the one or more position accounts in
the market association based on the access rights, the market participants may monitor the
transactions of one or more other market participants lying below them in the hierarchy,
Further, the market participants may have access to set a position reporting notification, which
facilitates the market participants to automatically receive the transactions details of the
market participants below them in the hierarchy. In an implementation, position reporting data
may be generated for all the market participants or for every parent in the hierarchy. For
example, each parent may receive the position reporting data corresponding to the market
participants below them in the hierarchy. Such position reporting data may be stored in a
repository and may be accessed by or reported to the concerned market participants.
[00081] In operation, the market management module 212 generates and reports the
positions of one or more market participants using the market association. The position reporting data may be stored in the repository, hereinafter referred as market management data 218. The market management module 212 may generate such position reporting data for the market participants at a predetermined period of time, for example, at the end of each day or at certain time intervals during the day. The generated position reporting data may either be automatically reported to or accessed by the clearing house and/or respective parents of the market participants. In an example, the market management module 212 may report positions of all the market participants in the market association to the clearing house. In another example, the market management module 212 may also report the positions of one or more market participants to their respective parents in the hierarchy.
[00082] The market management module 212 may further compute margins for one or
more market participants and, based on the market association, generate margin computation data. Such margin computation data may also be stored in the market management data 218 and may be accessed by or reported to the clearing members. In an implementation, for each clearing member, the market management module 212 generates the margin computation data

by computing margins of the market participants lying below the clearing member in the
hierarchy. The market management module 212 may efficiently compute the margins as the
position account of each market participant is tagged to their respective clearing members in
the market association.
[00083] The market association enables the clearing members to efficiently perform
settlement and delivery activities for all the market participants lying below them in the
hierarchy.
[00084] The settlement activities may involve premium settlements, cash expiry
settlements, and delivery positions. The premium settlements may involve computing and
settling premiums that each position account holder is required to pay or receive, depending
on whether the market participant is buying or settling one or more option instruments. The
cash expiry settlements involve cash settlements pertaining to contracts that are expiring.
Accordingly, such cash settlement may be performed on the date of expiry of such contracts.
The delivery positions involve settlements pertaining to what needs to be delivered as a
physical product.
[00085] In an implementation, the market management module 212 generates a
premium settlement data for the market participants lying below the clearing member in the
hierarchy. Such premium settlement data is indicative of the total premium that each market
participant is required to pay or receive. The market management module 212 may efficiently
compute the premium as the position account of each market participant is tagged to their
respective clearing members in the market association.
[00086] Likewise, the market management module 212 may generate the cash expiry
settlement data and delivery positions settlement data. The cash expiry settlement data is
indicative of cash settlements pertaining to contracts that are expiring. Such cash settlement is
generally performed on the date of expiry of such contracts. The delivery positions data is
indicative of the settlements pertaining what is being delivered as a physical product. Such
premium settlement data, cash expiry settlement data, and delivery positions settlement data
facilitates settling transactions of the market participants.
[00087] In an example, if there are any unsettled transactions, the market management
module 212 identifies the defaulter(s) responsible for such unsettled transactions. In an
implementation, the market management module 212 generates default identification data

indicating the defaulter responsible for the unsettled transaction. Once the defaulter is detected, the positions or transactions of the defaulter may be moved to some other market participant's account, which takes charge of the positions of the defaulter. Such position transfer may take place with a prior agreement between the two parties, i.e., the party who wants to transfer the transactions and the party who agrees to take charge of such positions. In an example, the position transfer may be initiated by the clearing member. In another example, the clearing house performs such position transfer.
[00088] The position transfer becomes easier with the market association, as the market
association allows market participants to segregate their own positions and the positions of their clients with the configuration of final and non-final types of position accounts. Further, by creating the non-final position account having a plurality of position accounts tagged to it, such as position accounts of the underlying market participants, the market participants may further segregate the position details of each of the underlying market participants. Thus, identifying the positions or transactions of the defaulter in case of a default situation becomes simpler as the transaction details are segregated. Further, since the details are easily identified and already segregated, the transactions of the defaulter may, therefore, be transferred to some other market participant's account quickly.
[00089] Although embodiments for clearing system have been described in language
specific to structural features and/or methods, it is to be understood that the invention is not necessarily limited to the specific features or methods described. Rather, the specific features and methods are disclosed as exemplary implementations for the clearing systems and methods.
[00090] Fig. 3 illustrates an exemplary method 300 for creating a market association
for managing clearing activities, in accordance with an implementation of the present subject matter. The exemplary method may be described in the general context of computer executable instructions. Generally, computer executable instructions can include routines, programs, objects, components, data structures, procedures, modules, functions, etc., that perform particular functions or implement particular abstract data types. The method may also be practiced in a distributed computing environment where functions are performed by remote processing devices that are linked through a communications network. In a distributed

computing environment, computer executable instructions may be located in both local and remote computer storage media, including memory storage devices.
[00091] The order in which the method is described is not intended to be construed as a
limitation, and any number of the described method blocks can be combined in any order to implement the method, or an alternative method. Additionally, individual blocks may be deleted from the method without departing from the spirit and scope of the subject matter described herein. Furthermore, the method can be implemented in any suitable hardware, software, firmware, or combination thereof. The method 300 is explained with reference to a single market participant; however it will be understood that the method 300 can be implemented for all the market participants in a market environment. In one implementation, the market association module 108 implements the method 300 to generate a market association associated with the market environment.
[00092] At block 302, account generation information associated with a market
participant is received. The account generation information indicates one or more of the account details, hierarchical details, and market details. In an example, the account generation information is received by the clearing system 102. Further, the account generation information is stored in the market association data 216.
[00093] At block 304, it is determined whether the market participant for whom the
account needs to be created is a clearing member, based on the account generation information. If it is determined that the market participant is a clearing member, block 304 branches to (Yes Branch) block 306, where the position account for the clearing member is created. On the other hand, if it is determined that the market participant is not the clearing member, participant i.e., the market participant is a non-clearing member, block 304 branches to block 308, where position account for the non-clearing member is created at block 308. In an implementation, details regarding position accounts, such as unique account numbers for a combination exchange, market, and segment associated with each of the market participant, are stored in the market association data 216.
[00094] At block 310, a position account of a parent market participant of the market
participant under consideration is determined, based on the market association data, such as the market association data 216. In an example, details pertaining to the parent's position

account are provided in the hierarchical details included in the account generation
information.
[00095] Upon determining the position account of the parent market participant, at
block 312, for a specified combination of exchange, market and segment, the position account
of the non-clearing member is tagged to the position account of the parent market participant.
In one implementation, the position account of the market participant is tagged to a non-final
position account of the parent market participant.
[00096] At block 314, a margin account and a settlement account of a clearing member
associated with the non-clearing member is determined based on market association data, for
example, the market association data 216. In an example, details pertaining to such margin
account and settlement account of the clearing member may be gathered from the hierarchical
details provided in the account generation information.
[00097] Once the margin account and the settlement account of the clearing member is
determined, the position account of the non-clearing member may be tagged to the margin
account and the settlement account of the clearing member at block 316.
[00098] The method 300 can be repeated for each market participant, thereby tagging
of the position account of each non-clearing member to its parent's position account. Such
tagging of the position accounts to the parent's position account creates a hierarchy of
position accounts for each combination of exchange, market, and segment with the clearing
members at the top level of the hierarchy. Further, the position account of each non-clearing
member in each hierarchy can also be tagged to the margin account and settlement account of
their corresponding clearing member. The tagging of position accounts of the market
participants to the position accounts, margin accounts, and settlement accounts of the clearing
members, generates an account market association, which facilitates efficient management of
clearing activities, such as position tracking, margin computation, settling transactions and
default management,
[00099] Although the present subject matter has been explained with respect to a
hierarchy having clearing members at the top level, however, it will be understood that any
other market participant having eligibility to clear the transactions with the clearing house
may also be placed at the top level and the levels of the hierarchy may vary for different
applications.

[000100] Although embodiments for management of clearmg activities have been described in language specific to structural features and/or methods, it is to be understood that the invention is not necessarily limited to the specific features or methods described. Rather, the specific features and methods are disclosed as exemplary implementations for the clearing systems and methods.

I/We claim:
1. A computerized method for management of clearing activities comprising:
creating at least one position account for each of a plurality of market participants based in part on account generation information associated with a corresponding market participant, wherein the plurality of market participants include at least one of clearing members and non-clearing members;
tagging the at least one position account of each of the non-clearing members to a corresponding parent position account for creating one or more hierarchies of position accounts;
obtaining a market association based on the one or more hierarchies of position accounts, wherein the market association inter-links the plurality of market participants in the one or more hierarchies of position accounts; and
generating market management data based on the market association, wherein the market management data includes data pertaining to at least one clearing activity.
2. The method as claimed in claim 1, wherein the obtaining comprises tagging the position account of each of the non-clearing members, in the one or more hierarchies of position accounts to a margin account and a settlement account of the corresponding clearing member.
3. The method as claimed in claim I, wherein the method further comprises updating the market association based on updating information.
4. The method as claimed in claim 1, wherein the market management data includes at least one of position reporting data, margin computation data, premium settlement data, cash expiry settlement data, delivery positions data, and default identification data.
5. The method as claimed in claim 1, wherein the market management data is generated at a predetermined time period.
6. The method as claimed in claim 1, wherein the method further comprises assigning at (east one access right to each of the plurality of the market participants, wherein the at least one access right defines access of the market participants to the market management data.

7. The method as claimed in claim 1, wherein the position account is one of a final position account and a non-final position account.
8. The method as claimed in claim 7, wherein the final position account includes one of an unallocated account, a house account, a direct client account, and a market maker account.
9. The method as claimed in claim 7, wherein the non-final position account includes a segregated client account.
10. A clearing system (102) comprising:
a processor (202); and
a memory (204) coupled to the processor (202), the memory (204) comprising:
a market association generation module (108) configured to,
create at least one position account for each of a plurality of market participants based in part on account generation information associated with a corresponding market participant, wherein the plurality of market participants include at least one of clearing members and non-clearing members;
tag the at least one position account of each of the non-clearing
members to a corresponding parent position account to create one or more
hierarchies of position accounts; and
obtain a market association based on the'one or more hierarchies of position accounts,, wherein the market association inter-links the plurality of market participants in the one or more hierarchies of position accounts; and a market management module (212) configured to generate market management data based on the market association, wherein the market management data includes data pertaining to at least one clearing activity.
11. The clearing system (102) as claimed in claim 10, wherein the market management data includes at least one of position reporting data, margin computation data, premium settlement data, cash expiry settlement data, delivery positions data, and default identification data.
12. The clearing system (102) as claimed in claim 10, wherein the market association generation module (108) is further configured to assign at least one access right to

each of the plurality of the market participant, wherein the at least one access right defines access to the market management data by the market participants. 13. A computer-readable medium having embodied thereon a computer program for executing a method for management of clearing activities, the method comprising:
creating at least one position account for each of a plurality of market participants based in part on account generation information associated with a corresponding market participant, wherein the plurality of market participants include at least one of clearing members and non-clearing members;
tagging the at least one position account of each of the non-clearing members to a corresponding parent position account for creating one or more hierarchies of position accounts;
obtaining a market association based on the one or more hierarchies of position accounts, wherein the market association inter-links the plurality of market participants in the one or more hierarchies of position accounts; and
generating market management data based on the market association, wherein the market management data includes at least one of position reporting data, margin computation data, premium settlement data, cash expiry settlement data, delivery positions data, and default identification data.