HEDGING EXCHANGE TRADED MUTUAL FUND OR OTHER PORFOLIO BASKET PRODUCTS

• US 20090313178A1
• Filed: 08/10/2009
• Published: 12/17/2009
• Est. Priority Date: 03/27/2000
• Status: Active Grant

• Current Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Inventors: Norman, Terry, Gastineau, Gary L., Alexander, Carol, Weber, Clifford J., Baker, Charles A., MacQueen, Jason
• Granted Patent: US 7,814,001 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• 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
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A system for pricing and/or determining a basket of financial instruments for hedging investment risk in actively managed traded funds is described. The system uses a trusted computer system and includes a computer storage medium storing a computer program product. The product determines a basket of hedging instruments by applying statistical or economic based factor analysis to estimate the NAV or provide a hedging basket to track actual NAV of an actively managed traded fund.

Claims

1. A process for creating a modeling portfolio to model an actively managed exchange traded fund portfolio comprising:

(a) selecting or receiving the identities and weights of a first set of securities to create a first portfolio of securities;

(b) selecting or receiving the identities of a second set of securities;

(c) receiving or calculating a set of risk factors for the actively managed exchange traded fund, wherein the risk factors are calculated on a computer programmed to perform factor analysis;

(d) receiving or calculating a set of weights for the second set of securities to create a supplemental portfolio of securities, wherein the set of weights for the second set of securities is calculated on a computer programmed to perform factor analysis;

wherein the combination of the first portfolio of securities and the supplemental portfolio of securities creates the modeling portfolio, which substantially tracks the actively managed exchange traded fund portfolio over a period of time; and

wherein the modeling portfolio does not reveal the actively managed exchange traded fund portfolio.

2. The process of claim 1, wherein the factor analysis is a principal components analysis.

3. The process of claim 2, wherein the period of time is one trading day.

4. The process of claim 3, wherein step (c) is performed each trading day.

5. The process of claim 4, wherein the actively managed exchange traded fund company performs the process, step (a) is selecting, step (b) is receiving, and step (c) is calculating.

6. The process of claim 1, wherein the first portfolio of securities is a creation basket.

7. The process of claim 1, wherein the first portfolio of securities is a redemption basket.

8. The process of claim 4, wherein the first portfolio of securities is a creation basket.

9. The process of claim 4, wherein the first portfolio of securities is a redemption basket.

10. The process of claim 5, wherein the first portfolio of securities is a creation basket.

11. The process of claim 5, wherein the first portfolio of securities is a redemption basket.

12. A computer-readable product containing a computer program for creating a modeling portfolio to model an actively managed exchange traded fund portfolio, the computer program having instructions for causing a computer to:

(a) select or receive the identities and weights of a first set of securities to create a first portfolio of securities;

(b) select or receive the identities of a second set of securities;

(c) receive or calculate a set of risk factors for the actively managed exchange traded fund, wherein the risk factors are calculated on a computer programmed to perform factor analysis;

(d) receive or calculate a set of weights for the second set of securities to create a supplemental portfolio of securities, wherein the set of weights for the second set of securities is calculated on a computer programmed to perform factor analysis;

wherein the combination of the first portfolio of securities and the supplemental portfolio of securities creates the modeling portfolio, which substantially tracks the actively managed exchange traded fund portfolio over a period of time; and

wherein the modeling portfolio does not reveal the actively managed exchange traded fund portfolio.

13. The computer-readable product of claim 12, wherein the factor analysis is a principal components analysis.

14. The process of claim 13, wherein the period of time is one trading day.

15. The process of claim 14, wherein step (c) is performed each trading day.

16. The process of claim 15, wherein the actively managed exchange traded fund company performs the process, step (a) is selecting, step (b) is receiving, and step (c) is calculating.

17. The process of claim 12, wherein the first portfolio of securities is a creation basket.

18. The process of claim 12, wherein the first portfolio of securities is a redemption basket.

19. The process of claim 15, wherein the first portfolio of securities is a creation basket.

20. The process of claim 15, wherein the first portfolio of securities is a redemption basket.

21. The process of claim 16, wherein the first portfolio of securities is a creation basket.

22. The process of claim 16, wherein the first portfolio of securities is a redemption basket.