Patent ID: 8447679

Claim:
An apparatus for trading an exchange traded derivative product using an exchange computer system, comprising: a processing unit; an interface comprising at least one of an input device, output device, and network interface; and a memory unit storing computer-executable instructions, which when executed by the processing unit, cause the computer system to perform a method comprising: receiving an initial performance bond of a protection buyer of a derivative product, wherein the derivative product has a binary outcome; updating, by a processing unit of an exchange computer system, a price of the derivative product at an interval through a mark-to-market process using a computer, including transferring a cash flow between the protection buyer and the protection seller based on the price of the derivative product; adjusting the cash flow including a part of a total fixed fee for the derivative product based on the price of the derivative product such that the fee component of the cash flow of a first interval, a second interval, and a third interval are each different; determining, by the processing unit of the exchange computer system, the occurrence of a predetermined triggering event before an expiration date; and applying, by the processing unit of the exchange computer system, a final settlement price of the derivative product.