Apparatus and accompanying methods for automatically modifying a financial portfolio through dynamic re-weighting based on a non-constant function of current capitalization weights

• US 5,819,238 A
• Filed: 12/13/1996
• Issued: 10/06/1998
• Est. Priority Date: 12/13/1996
• Status: Expired due to Term

• Current Assignee: Diversitypatent LLC
• Original Assignee: Enhanced Investment Technologies, Inc.
• Inventors: Fernholz, Erhard Robert
• Primary Examiner(s): Stamber, Eric W.
• Application Number:
  US08/764,232
• Time in Patent Office: 662 Days
• Field of Search: 705/35, 705/36, 705/37
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Apparatus and methods for automatically modifying a financial portfolio having a pre-defined universe of securities, such as, e.g., an index fund, that tracks a given capitalization weighted index, through dynamic re-weighting of a position held in each such security. Specifically, in a computer system (50, 60), a target weight is accorded to each such security, relative to others in the portfolio, in proportion to a non-constant function of current capitalization weights of the securities in the index. Once these target weights are determined, then, in response to both the target weight of each such security and an actual weight, as a proportion of the portfolio, in which that security is currently held, a trade will be generated by the system in order to conform, within a predefined band, the actual weight to the target weight so as to rebalance the holdings in the portfolio. The system can selectively operate in either one of two modes: a dynamic rebalancing mode for calculating new target weights and issuing appropriate trades, or a cash investment mode for issuing one or more trade(s) to consume excess cash then held in the portfolio.

Claims

1. Apparatus for managing a portfolio having a set of financial securities, wherein said set comprises a plurality of said securities contained as members within a predetermined capitalization weighted index, said apparatus comprising:

circuitry, responsive to signals containing data having current price information on each of said securities and on constituent securities currently contained within said index, for providing digital data containing the price information and containing share information for each of the constituent securities that currently forms the index; and

a computer system, the computer system having a processor and a memory, the memory storing computer executable instructions therein, wherein the processor in response to the executable instructions and to said digital data;

determines a variable weighting for each of the securities in the set so as to define a set of variable weights, distinct from a set of current capitalization weights associated with the index, such that each of the variable weights is a non-constant mathematical function of solely the current capitalization weights; and

issues, in response to the set of variable weights, digital trading instructions which are in turn executed to effectuate securities transactions such that current assets held in the portfolio are to be distributed amongst the securities in the set in proportion to and as defined by the variable weights so as to dynamically rebalance the portfolio, each of said digital trading instructions representing a desired trade in a corresponding one of the securities in the set thereby defining a plurality of trades to be executed.

2. The apparatus in claim 1 wherein said each of the variable weights, V_i (for i=1, 2, . . . n), is given by the following equation:

##EQU7## wherein;

W₁, W₂, . . . , W_n are the current capitalization weights for securities in the set;

D_i and D_j are partial derivative operators with respect to i^th and j^th ones of the current capitalization weights, respectively;

S is a twice continuously differentiable function;

and n is a number of securities in the set.

3. The apparatus in claim 2 wherein the computer system has computer executable instructions for selectively operating in either a rebalancing or cash investment mode, during the rebalancing mode said variable weights are determined and, in response thereto, said digital trading instructions are issued so as to dynamically rebalance the portfolio, and during the cash investment mode at least one other digital trading trading instruction is issued so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

4. The apparatus in claim 3 wherein the rebalancing mode is invoked at periodic intervals and the cash investment mode is invoked selectively whenever the cash in the portfolio exceeds the predefined threshold.

5. The apparatus in claim 3 wherein the computer system has computer executable instructions for, during operation in said cash investment mode:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

6. The apparatus in claim 2 wherein the computer system has computer executable instructions for:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

7. The apparatus in claim 6 wherein the computer system has computer executable instructions for:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

8. The apparatus in claim 2 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

9. The apparatus in claim 2 wherein said circuitry comprises first and second data sources for providing first and second digital data streams, respectively, wherein:

said first data source comprises a satellite receiver, a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server; and

said second data source comprises a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server.

10. The apparatus in claim 9 wherein said first data source further comprises a satellite receiver, connected to a satellite antenna, for receiving terrestrially broadcast signals distributed by satellite and containing said current price information, for producing a received signal and forming, in response to the received signal, the first digital data stream containing said price information.

11. The apparatus in claim 2 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.

12. The apparatus in claim 2 wherein the function S is given by the following equation:

##EQU8##

13. The apparatus in claim 12 wherein the computer system has computer executable instructions for selectively operating in either a rebalancing or cash investment mode, during the rebalancing mode said variable weights are determined and, in response thereto, said digital trading instructions are issued so as to dynamically rebalance the portfolio, and during the cash investment mode at least one other digital trading instruction is issued so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

14. The apparatus in claim 13 wherein the rebalancing mode is invoked at periodic intervals and the cash investment mode is invoked selectively whenever the cash in the portfolio exceeds the predefined threshold.

15. The apparatus in claim 13 wherein the computer system has computer executable instructions for, during operation in said cash investment mode:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

16. The apparatus in claim 12 wherein the computer system has computer executable instructions for:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

17. The apparatus in claim 16 wherein the computer system has computer executable instructions for:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

18. The apparatus in claim 12 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

19. The apparatus in claim 12 wherein said circuitry comprises first and second data sources for providing first and second digital data streams, respectively, wherein:

said first data source comprises a satellite receiver, a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server; and

said second data source comprises a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server.

20. The apparatus in claim 19 wherein said first data source further comprises a satellite receiver, connected to a satellite antenna, for receiving terrestrially broadcast signals distributed by satellite and containing said current price information, for producing a received signal and forming, in response to the received signal, the first digital data stream containing said price information.

21. The apparatus in claim 12 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.

22. The apparatus in claim 2 wherein function S is given by the following equation:

##EQU9## where;

p is a predefined constant.

23. The apparatus in claim 22 wherein the computer system has computer executable instructions for selectively operating in either a rebalancing or cash investment mode, during the rebalancing mode said variable weights are determined and, in response thereto, said digital trading instructions are issued so as to dynamically rebalance the portfolio, and during the cash investment mode at least one other digital trading instruction is issued so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

24. The apparatus in claim 23 wherein the rebalancing mode is invoked at periodic intervals and the cash investment mode is invoked selectively whenever the cash in the portfolio exceeds the predefined threshold.

25. The apparatus in claim 23 wherein the computer system has computer executable instructions for, during operation in said cash investment mode:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

26. The apparatus in claim 22 wherein the computer system has computer executable instructions for:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

27. The apparatus in claim 26 wherein the computer system has computer executable instructions for:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

28. The apparatus in claim 22 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

29. The apparatus in claim 22 wherein said circuitry comprises first and second data sources for providing first and second digital data streams, respectively, wherein:

said first data source comprises a satellite receiver, a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server; and

said second data source comprises a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server.

30. The apparatus in claim 29 wherein said first data source further comprises a satellite receiver, connected to a satellite antenna, for receiving terrestrially broadcast signals distributed by satellite and containing said current price information, for producing a received signal and forming, in response to the received signal, the first digital data stream containing said price information.

31. The apparatus in claim 22 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index and p has a value of 0.76.

32. The apparatus in claim 1 wherein the computer system has computer executable instructions for selectively operating in either a rebalancing or cash investment mode, during the rebalancing mode said variable weights are determined and, in response thereto, said digital trading instructions are issued so as to dynamically rebalance the portfolio, and during the cash investment mode at least one other digital trading instruction is issued so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

33. The apparatus in claim 32 wherein the rebalancing mode is invoked at periodic intervals and the cash investment mode is invoked selectively whenever the cash in the portfolio exceeds the predefined threshold.

34. The apparatus in claim 1 wherein the computer system has computer executable instructions for:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

35. The apparatus in claim 34 wherein the computer system has computer executable instructions for:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

36. The apparatus in claim 1 wherein the computer system has computer executable instructions for:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

37. The apparatus in claim 1 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

38. The apparatus in claim 1 wherein said circuitry comprises first and second data sources for providing first and second digital data streams, respectively, wherein:

said first data source comprises a satellite receiver, a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server; and

said second data source comprises a radio or television receiver, or a telephonic or dedicated connection, through a computer network, to a remote server.

39. The apparatus in claim 38 wherein said first data source further comprises a satellite receiver, connected to a satellite antenna, for receiving terrestrially broadcast signals distributed by satellite and containing said current price information, for producing a received signal and forming, in response to the received signal, the first digital data stream containing said price information.

40. The apparatus in claim 1 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.

41. A method for managing a portfolio having a set of financial securities, wherein said set comprises a plurality of said securities contained as members within a predetermined capitalization weighted index, said method comprising the steps of:

providing, in response to signals containing data having current price information on each of said securities and on constituent securities currently contained within said index, digital data containing the price information and containing share information for each of the constituent securities that currently forms the index; and

in a computer system having a processor and a memory, the memory storing computer executable instructions therein, wherein the method further comprises the steps, in response to the stored instructions and the digital data, of, in the processor;

determining a variable weighting for each of the securities in the set so as to define a set of variable weights, distinct from a set of current capitalization weights associated with the index, such that each of the variable weights is a non-constant mathematical function of solely the current capitalization weights

issuing, in response to the set of variable weights, digital trading instructions such that current assets held in the portfolio are to be distributed amongst the securities in the set in proportion to and as defined by the variable weights so as to dynamically rebalance the portfolio, each of said digital trading instructions representing a desired trade in a corresponding one of the securities in the set thereby defining a plurality of trades to be executed; and

executing each of said digital trading instructions so as to effectuate the trades.

42. The method in claim 41 wherein said each of the variable weights, V_i (for i=1, 2, . . . n), is given by the following equation:

##EQU10## wherein;

W₁, W₂, . . . , W_n are the current capitalization weights for securities in the set;

D_i and D_j are partial derivative operators with respect to i^th and j^th ones of the current capitalization weights;

S is a twice continuously differentiable function; and

n is a number of securities in the set.

43. The method in claim 42 further comprising the steps, in the computer system, of selectively operating in either a rebalancing or cash investment mode, wherein

during the rebalancing mode:

determining said variable weights and,

issuing, in response to said variable weights, said digital trading instructions so as to dynamically rebalance the portfolio, and

during the cash investment mode;

issuing at least one other digital trading instruction so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

44. The method in claim 43 further comprising the steps, in the computer system, of:

invoking the rebalancing mode at periodic intervals; and

invoking the cash investment mode selectively whenever the cash in the portfolio exceeds the predefined threshold.

45. The method in claim 43 further comprising the steps, in the computer system during said cash investment mode, of:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

46. The method in claim 42 further comprising the steps, in the computer system of:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

47. The method in claim 46 further comprising the steps, in the computer system during said instruction generating step and during said rebalancing mode, of:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

48. The method in claim 42 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

49. The method in claim 42 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.

50. The method in claim 42 wherein the function S is given by the following equation:

##EQU11##

51. The method in claim 50 further comprising the steps, in the computer system, of selectively operating in either a rebalancing or cash investment mode, wherein

during the rebalancing mode:

determining said variable weights and,

issuing, in response to said variable weights, said digital trading instructions so as to dynamically rebalance the portfolio, and

during the cash investment mode;

issuing at least one other digital trading instruction so as to consumes an amount of cash then existing in the portfolio that exceeds a predefined threshold.

52. The method in claim 51 further comprising the steps, in the computer system, of:

invoking the rebalancing mode at periodic intervals; and

invoking the cash investment mode selectively whenever the cash in the portfolio exceeds the predefined threshold.

53. The method in claim 51 further comprising the steps, in the computer system during said cash investment mode, of:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

54. The method in claim 50 further comprising the steps, in the computer system of:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

55. The method in claim 54 further comprising the steps, in the computer system during said instruction generating step and during said rebalancing mode, of:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

56. The method in claim 50 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

57. The method in claim 50 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.

58. The method in claim 42 wherein function S is given by the following equation:

##EQU12## where;

p is a predefined constant.

59. The method in claim 58 further comprising the steps, in the computer system, of selectively operating in either a rebalancing or cash investment mode, wherein

during the rebalancing mode:

determining said variable weights and,

issuing, in response to said variable weights, said digital trading instructions so as to dynamically rebalance the portfolio, and

during the cash investment mode;

issuing at least one other digital trading instruction so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

60. The method in claim 59 further comprising the steps, in the computer system during said cash investment mode, of:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

61. The method in claim 58 further comprising the steps, in the computer system, of:

invoking the rebalancing mode at periodic intervals; and

invoking the cash investment mode selectively whenever the cash in the portfolio exceeds the predefined threshold.

62. The method in claim 58 further comprising the steps, in the computer system of:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

63. The method in claim 62 further comprising the steps, in the computer system during said instruction generating step and during said rebalancing mode, of:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

64. The method in claim 58 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

65. The method in claim 58 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock indices and p has a value of 0.76.

66. The method in claim 41 further comprising the steps, in the computer system, of selectively operating in either a rebalancing or cash investment mode, wherein

during the rebalancing mode:

determining said variable weights and,

issuing, in response to said variable weights, said digital trading instructions so as to dynamically rebalance the portfolio, and

during the cash investment mode;

issuing at least one other digital trading instruction so as to consume an amount of cash then existing in the portfolio that exceeds a predefined threshold.

67. The method in claim 66 further comprising the steps, in the computer system, of:

invoking the rebalancing mode at periodic intervals; and

invoking the cash investment mode selectively whenever the cash in the portfolio exceeds the predefined threshold.

68. The method in claim 66 further comprising the steps, in the computer system during said cash investment mode, of:

generating a list of possible trades for each security in the set;

selecting one of the possible trades that consumes, amongst all of the possible trades, a largest amount of the cash;

issuing an electronic instruction, to an electronic trading network, containing said selected one trade so as to execute said one possible trade; and

removing said selected one trade from said list and repeating said selecting, issuing and removing operations, in seriatim, to generate additional trades for execution until said cash decreases below said predefined threshold.

69. The method in claim 41 further comprising the steps, in the computer system of:

determining, in response to the share information and to the current price information for each of the securities in the index, a normalized current capitalization weighting for each of said securities in the index;

determining, in response to said normalized capitalization weighting, the variable weighting for each security in the set;

ascertaining a current proportion for each of said securities in the set, said current proportion being reflective of a proportion of a total value of the portfolio attributable to said each security in the set; and

generating, in response to a predefined relationship between said variable weighting and said current weighting, for each corresponding one of the securities in the set, a corresponding one of the digital trading instructions, the corresponding one digital trading instruction representing an associated trade involving said corresponding one security such that a proportion of the portfolio that will be held in said one security, after said associated trade is executed, will approximate the variable weighting determined for said one security.

70. The method in claim 69 further comprising the steps, in the computer system during said instruction generating step of:

calculating a number of shares in said one security to be traded;

rounding said number to a round lot of shares so as to form a rounded share number; and

incorporating said rounded share number within the corresponding one digital trading instruction.

71. The method in claim 41 wherein the share information comprises an identifier of each of said securities in the index and a number of shares currently outstanding for said each security.

72. The method in claim 41 wherein the capitalization weighted index is the S &

P 500, Financial Times Stock Exchange 100, TOPIX or Russell 1000 stock index.