Patent ID: 8478679

Claim:
A computer-implemented method for mitigating counterparty credit risk exposure in a trade of a financial instrument between a pledgor and a secured party, the method comprising: establishing a custodian's computer system comprising a processor, a network connection to the processor, and a memory coupled to the processor and containing a database therein; receiving, over the network connection, an initial margin payment from the pledgor and electronically posting the initial margin payment in a custody account record maintained in the database; establishing a control agreement between the pledgor and the secured party and storing information relating to the control agreement in the database, wherein the control agreement gives control of the custody account to the pledgor if the secured party defaults on obligations related to the trade of the financial instrument, and wherein the control agreement gives control of the custody account to the secured party if the pledgor defaults on obligations related to the trade of the financial instrument; and investing, by the custodian's computer system, the initial margin payment directly through the network connection into one or more investment vehicles during a life of the trade.