Method for Managing Markets for Commodities Using Fractional Forward Derivative

• US 20080097888A1
• Filed: 10/07/2005
• Published: 04/24/2008
• Est. Priority Date: 10/08/2004
• Status: Abandoned Application

• Current Assignee: Regents of the University of California (University of California)
• Original Assignee: Regents of the University of California (University of California)
• Inventors: Sugihara, George
• Application Number:
  US11/576,815
• Publication Number:
  US 20080097888A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A fractional forward contract provides a financial instrument for managing trading of commodities that have variable and unpredictable availability at future dates by apportioning risk between parties (100, 170) by providing for parties (100, 170) to buy and sell a specified fraction of a commodity that the supplier (100) has in his inventory on a specific date, rather than a specified quantity. Trading is managed by a trading exchange or clearinghouse (130) via a computer network (120). The fractional forward contract provides a method for managing a market for a perishable commodity harvested from the wild by establishing a total allowable quantity of the perishable commodity that can be harvested over a pre-determined time period, permitting the harvester to contract for sale of some fraction of the actual harvest at a guaranteed price at a future date.

Claims

1. A method for managing a market for trading of a commodity having an inventory that is variable and unpredictable at a future date, the method comprising:

creating a plurality of fractional forward contracts for transferring one or more portions of the inventory from a first party to at least one second party at a per portion price at a specified future date, wherein the one or more portions comprises a specified fraction of the inventory that is available to the first party over a pre-determined period of time at the future date; and

providing a trading exchange for trading the plurality of fractional forward contracts.

2. The method of claim 1, further comprising:

maintaining within the trading exchange records comprising the available inventory of one or more first parties and fractional forward contracts entered between the one or more first parties and the at least one second party.

3. The method of claim 2, wherein the trading exchange further generates reports to the one or more first parties and the at least one second party comprising terms of the fractional forward contracts entered between the parties.

4. The method of claim 1, further comprising:

defining a plurality of transferable quotas, each comprising a fraction of a total available inventory from a specified source;

assigning one or more transferable quotas to one or more first parties and dividing each transferable quota into a plurality of equal fractions, wherein each fractional forward contract is for one or more equal fractions.

5. The method of claim 4, wherein the total available inventory is specified by a regulatory agency and wherein the trading exchange further receives the specified total available inventory and allocates the transferable quotas for assignment to the one or more first parties.

6. The method of claim 4, wherein the trading exchange further provides for exchanging transferable quotas between a plurality of first parties.

7. The method of claim 1, wherein the commodity is fish or seafood and the one or more first parties harvest the fish or seafood from the ocean.

8. The method of claim 1, wherein the commodity is fish or seafood and the one or more second parties are fish/seafood processors.

9. The method of claim 7, wherein the fish or seafood is squid.

10. The method of claim 1, wherein the commodity is manufactured goods.

11. The method of claim 1, wherein the commodity is a petroleum product.

12. The method of claim 1, wherein at least one of the first party and the at least one second party is a speculator.

13. The method of claim 1, wherein the first party and the at least one second party communicate with the trading exchange by way of a computer network.

22. The method of claim 8, wherein the fish or seafood is squid.

14. A method for exchanging assets having unpredictable and variable availability, comprising:

creating a trading exchange for the assets, wherein the trading exchange is operable for;

defining a plurality of transferable units, each comprising a fraction of a total available inventory of the asset from a specified source;

assigning one or more transferable units to one or more sellers and dividing each transferable unit into a plurality of equal fractions;

creating a plurality of fractional forward contracts for transferring one or more equal fractions from the one or more sellers to at least one buyer at a pre-determined date, wherein each equal fraction comprises a percentage of the asset within the transferable unit over a pre-determined period of time; and

recording fractional forward contracts entered into between the one or more sellers and the at least one buyer.

15. The method of claim 14, wherein the trading exchange is further operable for exchanging transferable units between a plurality of sellers.

16. The method of claim 14, wherein the asset is fish or seafood.

17. The method of claim 16, wherein the fish or seafood is processed.

18. The method of claim 14, wherein the asset is manufactured goods.

19. A system for trading a commodity having an inventory that is variable and unpredictable at a future date, the system comprising:

a trading exchange server connected to a computer network and a database for storing a plurality of fractional forward contract offers and transactions;

at least one first user interface connected to the network for submitting to the trading exchange server terms of one or more fractional forward contract offers for selling one or more fractions of the inventory that is available to a first party over a specified period at a specified future date at a specified price per unit of the available inventory;

at least one a second user interface connected to the network for viewing and communicating acceptance of terms of the offers for purchase of a selected fraction of the available inventory by at least one second party;

wherein the trading exchange server records the terms and the acceptance by the at least one second party for storage in the database, and after the specified future date has passed, records a total price paid by the at least one second party for the selected fraction of the available inventory.

20. The system of claim 19, wherein a total available inventory is specified by a regulatory agency and wherein the trading exchange server further receives the specified total available inventory from the regulatory agency and allocates the transferable quotas for assignment to the one or more first parties.

21. The system of claim 20, wherein the trading exchange further operates to permit trading of the allocated transferable quotes between a plurality of first parties.