Patent ID: 8423446

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, through the interface of the exchange computer system, an initial performance bond of a protection buyer of the derivative product, wherein the derivative product has a digital outcome and comprises a predetermined number of constituents; updating, by the processing unit, a price of the derivative product through a mark-to-market process, including transferring at an interval a cash flow between the protection buyer and a protection seller based on the price of the derivative product; adjusting, by the processing unit, the cash flow including a part of a total 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; and for each of the predetermined number of constituents that experience a predetermined triggering event before an expiration date, applying, by the processing unit, a percentage of a final settlement price of the derivative product.