REAL TIME TRADING OF FOREIGN FINANCIAL INSTRUMENTS IN LOCAL CURRENCY

• US 20080147569A1
• Filed: 12/04/2007
• Published: 06/19/2008
• Est. Priority Date: 12/04/2006
• Status: Abandoned Application

• Current Assignee: Penson Worldwide, Inc.
• Original Assignee: Penson Worldwide, Inc.
• Inventors: KAHAN, MICHAEL ALAN, SLADE, JOHN MORGAN, FERGUSON, RALPH BRUCE, TAYLOR, GRANT MARCUS, WILLIAMS, DANIEL SETH
• Application Number:
  US11/950,081
• Publication Number:
  US 20080147569A1
• Time in Patent Office: Days
• US Class Current: 705/36R
• CPC Class Codes: G06Q 30/0283 Price estimation or determination
• 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 method for producing quotes in a first currency for a financial instrument traded in a second currency. At least one substantially real time series of currency conversion quotes for converting the second currency to the first currency is received. This series of currency conversion quotes is applied to a currency conversion model adapted to estimate future currency conversion quotes. An offered conversion price within a settlement time window is determined using the estimated future currency conversion quotes. The settlement time window begins at the current time and extends through the financial instrument settlement period. A substantially real time series of quotes for the financial instrument, in the second currency, is received. A substantially current time quote for the financial instrument is multiplied by the offered conversion price to determine a hedged quote for the foreign financial instrument in the first currency. The hedged quote is displayed.

Claims

1. A method for producing quotes in a first currency for a financial instrument traded in a second currency, the method comprising the steps of:

a) receiving at least one substantially real time series of currency conversion quotes for converting the second currency to the first currency;

b) applying the at least one substantially real time series of currency conversion quotes to a currency conversion model adapted to estimate a plurality of future currency conversion quotes;

c) determining an offered conversion price for converting the second currency to the first currency within a settlement time window using the plurality of estimated future currency conversion quotes, the settlement time window beginning at a current time and extending for a financial instrument settlement period;

d) receiving a substantially real time series of quotes for the financial instrument, quotes of the substantially real time series of quotes being in the second currency;

e) multiplying i) a quote of the substantially real time series of quotes for the financial instrument substantially corresponding to the current time by ii) the offered conversion price to determine a hedged quote for the foreign financial instrument in the first currency; and

f) displaying the hedged quote for the foreign financial instrument.

2. The method according to claim 1, wherein determining the offered conversion price in step (c) includes:

c1) using an algorithm that includes parameters for the plurality of future currency conversion quotes estimated in step (b) to determine a best estimated conversion price within the settlement time window and an associated commission price; and

c2) adding the best estimated conversion price to the associated commission price to obtain the offered conversion price.

3. The method according to claim 1, wherein:

the currency conversion model is further adapted to estimate a plurality of risk values associated with the plurality of future currency conversion quotes; and

determining the offered conversion price in step (c) includes using an algorithm that includes parameters for the plurality of future currency conversion quotes estimated in step (b) and the plurality of risk values associated with the plurality of future currency conversion quotes to determine a best estimated conversion price within the settlement time window.

4. The method according to claim 1, further comprising the steps of:

g) accepting an order placed in the first currency for an amount of the foreign financial instrument from a client, the order to be filled using the hedged quote.

5. The method according to claim 4, wherein determining the offered conversion price in step (c) includes using an algorithm that includes parameters for the plurality of future currency conversion quotes estimated in step (b) and the amount of the order accepted in step (g).

6. The method according to claim 1, further comprising the steps of:

g) selecting a spot currency conversion quote from the substantially real time series of currency conversion quotes, the currency conversion quote being a best quote for converting the foreign currency to the local currency at approximately the current time;

h) multiplying i) the quote of the substantially real time series of quotes for the financial instrument substantially corresponding to the current time by ii) the spot currency conversion quote to determine a spot quote for the foreign financial instrument in the second currency; and

i) displaying the spot quote for the foreign financial instrument.

7. The method according to claim 6, further comprising the steps of:

j) accepting an order placed in the first currency for an amount of the foreign financial instrument from a client; and

k) allowing the client to select a hedge percentage of the order to be filled using the hedged quote, the remainder of the order to be filled using the quote of the substantially real time series of quotes for the financial instrument substantially corresponding to the current time and a settlement conversion price, the settlement conversion price based on a best currency conversion quote for converting the second currency to the first currency at a settlement time of the order.

8. A method for purchasing a financial instrument traded in a first currency using a second currency, a predetermined amount of the first currency being purchased with the second currency to settle an order for the financial instrument placed in the first currency, the method comprising the steps of:

a) applying at least one substantially real time series of currency conversion quotes to a currency conversion model adapted to estimate a plurality of future currency conversion quotes and a plurality of risk values associated with the plurality of future currency conversion quotes, each future currency conversion quote including a conversion price and a transaction time;

b) using an algorithm that includes parameters for the plurality of future currency conversion quotes and the associated plurality of risk values estimated in step (a) to determine an expected transaction time, the expected transaction time being before a settlement time of the order and determined to obtain a minimum conversion price within a set of risk criteria;

c) repeating steps (a) and (b) to update the expected transaction time until a current time is approximately the expected transaction time; and

d) purchasing the predetermined amount of the first currency with the second currency at a best current conversion price.

9. The method according to claim 8, wherein:

the algorithm used in step (b) further includes a parameter for the predetermined amount of the first currency to be purchased; and

the set of risk criteria depend on the predetermined amount of the first currency to be purchased.

10. The method according to claim 8, wherein the set of risk criteria depend on a time period between the current time and the settlement time.

11. The method according to claim 8, wherein:

the set of risk criteria include a plurality of subsets of partial purchase risk criteria, each subset of partial purchase risk criteria being associated with a partial purchase of the predetermined amount of the first currency;

step (b) includes the steps of;

b1) selecting a subset of partial purchase risk criteria; and

b2) using the algorithm to determine the expected transaction time such that obtains the minimum conversion price within the selected subset of partial purchase risk criteria; and

step (d) includes the steps of;

d1) purchasing a portion of the predetermined amount of the first currency with the second currency at a best current conversion price;

d2) removing the selected subset of partial purchase risk criteria from the set of risk criteria; and

d3) repeating steps (a), (b), (c), and (d) until the entire predetermined amount of the first currency is purchased.