Method and system for calculating an intraday indicative value of a leveraged bullish and bearish exchange traded funds

• US 20060253376A1
• Filed: 04/05/2006
• Published: 11/09/2006
• Est. Priority Date: 04/06/2005
• Status: Active Grant

• Current Assignee: Profund Advisors LLC
• Original Assignee: Profund Advisors LLC
• Inventors: Seale, William E., Lee, Taeyong
• Granted Patent: US 8,041,625 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/02 Marketing; Price estimation or determination; Fundraising
• CPC Class Codes: G06Q 30/0201 Market modelling; Market analysis; Collecting market data
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A computer implemented method, system, and software for calculating and using an intraday indicative value of a leveraged Bullish or Bearish exchange traded fund (“ETF”) for arbitrage purposes, includes calculating an intraday current value of all the equity securities in the ETF (applicable only to Bullish ETFs), calculating mark to market gains or losses of at least one derivative product, and retrieving an accumulated loss or gain of the at least one derivative product and other cash equivalent amounts. The intraday indicative value of the ETF is determined by combining the calculated intraday current value of all the equity securities (applicable only to Bullish ETFs), the accumulated loss or gain, the mark to market gains of the at least one derivative product and other cash equivalent amounts. The determined intraday value of the ETF is used, by a party, for arbitrage purposes.

Claims

1. A computer implemented method of calculating and using an intraday indicative value of a Bullish exchange traded fund (“

ETF”

) for arbitrage purposes, comprising the steps of;

calculating or having calculated an intraday current value of all the equity securities in the ETF;

calculating, or having calculated, mark to market gains or losses of at least one derivative product;

retrieving, or having retrieved, an accumulated loss or gain of at least one derivative product;

determining, or having determined, the intraday indicative value of the ETF by combining the calculated intraday current value of all the equity securities, the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

using the determined intraday value of the ETF, by a party, for performing an arbitrage transaction, wherein one or more of the above steps are performed on a computing system.

2. A computer implemented method according to claim 1, further comprising:

providing the calculated intraday current value of all the equity securities, the accumulated loss or gain and the mark to market gains of the at least one derivative product and the total shares outstanding of the ETF in an intraday indicative value (IIV) file;

summing the calculated intraday current value of all the equity securities, the accumulated loss or gain and the mark to market gains of the at least one derivative product, as provided in the IIV file, to an estimated cash amount, which cash amount includes swap costs, to arrive at a unit value; and

dividing the unit value by the total shares outstanding, as provided in the IIV File, to obtain a current IIV per share.

3. The computer implemented method according to claim 1, wherein the derivative product comprises one or more of a swap contract, a forward contract, a futures contract, an options contract or the like.

4. The computer implemented method according to claim 1, wherein the step of determining the intraday value is performed in near real time.

5. The computer implemented method according to claim 1, further comprising:

comparing, by the party, of the determined intraday value of the ETF to a traded market price of the ETF; and

performing, by the party, of the arbitrage transaction if the difference between the determined intraday value of the ETF and the traded market price of the ETF exceeds a threshold value.

6. The computer implemented method according to claim 1, further comprising:

calculating a balancing amount for purposes of ETF share creation or redemption that comprises the gain or loss of at least one derivative product.

7. A computer implemented method of using an intraday indicative value file (“

IIV File”

) of a Bearish Exchange Traded Fund (“

ETF”

) for arbitrage purposes, comprising the steps of;

receiving, or having received, an IIV File comprising values for;

notional value of at least one derivative product;

an accumulated loss or gain of the at least one derivative product;

determining, or having determined, the intraday value of the ETF by combining the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

using the determined intraday value of the ETF, by a party, for an arbitrage transaction, by comparison to a traded market price of a share of the ETF.

8. A computer implemented method according to claim 7, further comprising:

summing the accumulated loss or gain and the mark to market gains of the at least one derivative product to other cash equivalent amount, the cash equivalent amount includes the swap costs, as provided in IIV File to arrive at a unit value; and

dividing the unit value by the total shares outstanding, as provided in the IIV File, to obtain the current IIV per share.

9. The computer implemented method according to claim 7, wherein the derivative product comprises one or more of a swap contract, a forward contract, a futures contract, an options contract or the like.

10. The computer implemented method according to claim 7, wherein the step of determining the intraday value is performed in near real time.

11. The computer implemented method according to claim 7, further comprising:

comparing, by the party, of the determined intraday value of the ETF to a traded market price of the ETF; and

performing, by the party, of an arbitrage transaction if the difference between the determined intraday value of the ETF differs from the traded market price of the ETF by a threshold value.

12. The computer implemented method according to claim 7, further comprising:

calculating a balancing amount for purposes of fund share creation or redemption that is comprised largely by the gain or loss of at least one derivative product.

13. A computer implemented method of using an intraday indicative value file (“

IIV File”

) of a Bullish ETF for arbitrage purposes, comprising the steps of;

receiving, over a network, an IIV File comprising values for;

value of all the equity securities in the ETF;

notional value of at least one derivative product;

an accumulated loss or gain of the at least one derivative product; and

other cash equivalent amounts, and

using the IIV File to determine an intraday value of the ETF by combining the calculated intraday current value of all the equity securities, the accumulated loss or gain, other cash equivalent amounts, and the mark to market gains or losses of the at least one derivative product.

14. The computer implemented method according to claim 13, further comprising the steps of using the determined intraday value of the ETF for performing an arbitrage transaction.

15. The computer implemented method of providing an IIV File for Bullish ETF, comprising:

periodically creating an IIV File comprising values for;

value of all the equity securities in the ETF;

notional value of at least one derivative product;

an accumulated loss or gain of the at least one derivative product; and

other cash equivalent amounts; and

periodically sending, over a network, the created IIV File to other parties.

16. A computer implemented method of using an IIV File of a Bearish ETF for arbitrage purposes, comprising the steps of:

receiving, over a network, an IIV File comprising values for;

notional value of at least one derivative product; and

an accumulated loss or gain of the at least one derivative product; and

other cash equivalent amounts,

using the IIV File to determine an intraday value of the ETF by combining the accumulated loss or gain and the mark to market gains or losses of the at least one derivative product.

17. The computer implemented method according to claim 16, further comprising the step of using the determined intraday value of the ETF for performing an arbitrage transaction.

18. The computer implemented method of providing an IIV File for Bearish ETF, comprising:

periodically creating an IIV File comprising values for;

notional value of at least one derivative product; and

an accumulated loss or gain of the at least one derivative product; and

other cash equivalent amounts; and

periodically sending, over a network, the created IIV File to other parties.

19. A computer implemented method of calculating and using an intraday indicative value of a bearish exchange traded fund (“

ETF”

) for arbitrage purposes, comprising the steps of;

calculating, or having calculated, mark to market gains or losses of at least one derivative product;

retrieving, or having retrieved, an accumulated loss or gain of at least one derivative product;

determining, or having determined, the intraday indicative value of the ETF by combining the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

using the determined intraday value of the ETF, by a party, for performing an arbitrage transaction, wherein one or more of the above steps are performed on a computing system.

20. A computer readable medium having program code recorded thereon for calculating and using an intraday indicative value of a bullish exchange traded fund (“

ETF”

) for arbitrage purposes when executed on a computing system, the program code comprising;

code for calculating an intraday current value of all the equity securities in the ETF;

code for calculating mark to market gains or losses of at least one derivative product;

code for retrieving an accumulated loss or gain of at least one derivative product;

code for determining the intraday indicative value of the ETF by combining the calculated intraday current value of all the equity securities, the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

code for using the determined intraday value of the ETF, by a party, for arbitrage purposes.

21. A computer readable medium having program code recorded thereon for calculating and using an intraday indicative value of a bearish exchange traded fund (“

ETF”

) for arbitrage purposes when executed on a computing system, the program code comprising;

code for calculating mark to market gains or losses of at least one derivative product;

code for retrieving an accumulated loss or gain of at least one derivative product;

code for determining the intraday indicative value of the ETF by combining the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

code for using the determined intraday value of the ETF, by a party, for arbitrage purposes.

22. A system for calculating and using an intraday indicative value of a bullish exchange traded fund (“

ETF”

) for arbitrage purposes, comprising;

a communication unit configured to receive an IIV file comprising a value of all equity securities in the ETF, the notional value of at least one derivative product. an accumulated gain or loss of the at least one derivative product, and other cash equivalent amounts; and

a computing unit configured to calculate an intraday current value of all the equity securities in the ETF, calculate mark to market gains or losses of at least one derivative product, and determine the intraday indicative value of the ETF by combining the intraday current value of all the equity securities, the accumulated loss or gain and the mark to market gains of the at least one derivative product; and

said computing unit configured to compare the intraday indicative value of the ETF to a market value of the ETF on a per share basis to make a determination for arbitrage purposes.

23. A system for calculating and using an intraday indicative value (“

IIV”

) of a bearish exchange traded fund (“

ETF”

) for arbitrage purposes, comprising;

a communication unit configured to receive an IIV file comprising a notional value of at least one derivative product, an accumulated loss or gain of the least one derivative product, and other cash equivalent amounts;

a computing unit configured to calculate mark to marked gains or losses of the at least one derivative product, retrieve an accumulated loss or gain of the at least one derivative product, and determine the IIV of the ETF by combining the accumulated loss or gain and the mark to marked gains of the at least one derivative product and the other cash equivalent amount, and

said computing unit configured to compare the IIV of the ETF to a market value of the ETF on a per share basis to make a determination for arbitrage purposes.