Derivative securities trading product utilizing subsets of indices or portfolios

• US 6,947,901 B1
• Filed: 04/27/2000
• Issued: 09/20/2005
• Est. Priority Date: 04/27/2000
• Status: Expired due to Fees

• Current Assignee: Hunter IP LLC
• Original Assignee: Hunter IP LLC
• Inventors: McCabe, Daniel J., Mulheren, John A.
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): FELTEN, DANIEL S
• Application Number:
  US09/559,320
• Time in Patent Office: 1,972 Days
• Field of Search: 705/36, 705/35
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A first equity instrument which represents an ownership interest in a portfolio of stocks. The portfolio of stocks is a subset of a larger portfolio of stocks, which also has a corresponding second equity instrument representing an ownership interest in the larger portfolio of stocks. The weight of each stock in the smaller portfolio is substantially similar to its weight in the larger portfolio, divided by the combined weight of the smaller portfolio within the larger portfolio. Thus, trading in the equity instrument allows one to maintain the relative proportions of the stocks belonging to the smaller portfolio, in the larger portfolio without having to trade the individual stocks comprising the smaller portfolio.

Claims

1. A first financial instrument representing an ownership interest in a first portfolio, the first portfolio comprising units of an integer number M different securities selected from a second portfolio, the second portfolio comprising units of an integer number N different securities, N>

M, with the M different securities being a subset of the N different securities,

wherein the weight of each security in the first portfolio is similar to that security'"'"'s corresponding weight in the second portfolio, divided by the combined weight of the first portfolio within the second portfolio,

where all the first financial instrument, and a second financial instrument representing an ownership interest in the second portfolio, are traded on a securities market, and

wherein all of said M different securities in the first portfolio are traded on a first securities market, and none of the other N−

M different securities arc traded on said first securities market.

2. The first financial instrument according to claim 1, wherein the first and second financial instruments are both traded on the same securities market.

3. The first financial instrument according to claim 2, wherein the first and second financial instruments are both traded on the American Stock Exchange (AMEX).

4. A first financial instrument representing an ownership interest in a first portfolio, the first portfolio comprising units of an integer number M different securities selected from a second portfolio, the second portfolio comprising units of an integer number N different securities, N>

M, with the M different securities being a subset of the N different securities,

wherein the weight of each security in the first portfolio is similar to that security'"'"'s corresponding weight in the second portfolio, divided by the combined weight of the first portfolio within the second portfolio,

wherein the first financial instrument, and a second financial instrument representing an ownership interest in the second portfolio, are traded on a securities market, and

wherein the M different securities in the first portfolio are all traded on the National Association of Securities Dealers Automated Quotations System (NASDAQ) and none of the N−

M other securities in the second portfolio is traded on the NASDAQ.

5. The first financial instrument according to claim 4, wherein the second portfolio comprises stocks belonging to the Standard &

Poor'"'"'s 500 (S&

P

     500) and the first portfolio comprises only all of the stocks in the S&

P 500 that are traded on the NASDAQ.

6. A first financial instrument representing an ownership interest in a first portfolio the first portfolio comprising units of an integer number M different securities selected from a second portfolio, the second portfolio comprising units of an integer number N different securities N>

M, with the M different securities being a subset of the N different securities,

wherein the weight of each security in the first portfolio is similar to that security'"'"'s corresponding weight in the second portfolio, divided by the combined weight of the fast portfolio within the second portfolio,

wherein the first financial instrument and a second financial instrument representing an ownership interest in the second portfolio are traded on a securities market, and

wherein the M different securities in the first portfolio have the M lowest average trading volumes among the N different securities during a previous time period.

7. A first financial instrument representing an ownership interest in a first portfolio, the first portfolio comprising units of an integer number M different securities selected from a second portfolio second portfolio comprising units of an integer number N different securities N>

M with the M different securities being a subset of the N different securities,

wherein the weight of each security in the fast portfolio is similar to that security'"'"'s corresponding weight in the second portfolio divided by the combined weight of the first portfolio within the second portfolio,

wherein the first financial instrument, and a second financial instrument representing an ownership interest in the second portfolio are traded on a securities market, and

wherein the M different securities in the fast portfolio have the M highest price fluctuations among the N different securities during a previous time period.

8. A plurality of first financial instruments C_10q, C_20q, C_jeq, J>

1, each representing an ownership interest in a corresponding one of a first set of 1 portfolios {C₂, . . . C_j}, each member of said first set of portfolios comprising units of a corresponding integer number M different securities selected from a second portfolio, the second portfolio comprising units of an integer number N different securities, N>

M, with the M different securities being a subset of the N different securities for all j, wherein

the weight of each security in any one C_j is similar to that security'"'"'s corresponding weight in the second portfolio, divided by the combined weight of C_j within the second portfolio,

each of the first financial instruments, and a second financial instrument representing an ownership interest in the second portfolio, are traded on a securities market, and

all of said M different securities in at least one of the J portfolios are traded on a first securities market, and none of the other N−

M different securities are traded on said first securities market.

9. The plurality of first financial instruments according to claim 8, wherein the set of first portfolios have no securities in common.

10. The plurality of first financial instruments according to claim 9, wherein the set of first portfolios form a partition of the second portfolio such that all N securities in the second portfolio are distributed among the set of J first portfolios.

11. The plurality of first financial instruments according to claim 8, wherein at least two members of the set of first portfolios have securities in common.

12. The plurality of first financial instruments according to claim 11, wherein all N securities in the second portfolio are represented in at least one member of the set of first portfolios.

13. A method of facilitating an exchange in ownership of a security, the method comprising:

a step of providing a first financial instrument representing an ownership interest in a first portfolio, the first portfolio comprising units of an integer number M different securities selected from a second portfolio, the second portfolio comprising units of an integer number N different securities, N>

M, with the M different securities being a subset of the N different securities,

where the weight of each security in the first portfolio is similar to that security'"'"'s corresponding weight in the second portfolio, divided by the combined weight of the first portfolio within the second portfolio,

where all the first financial instrument, and a second financial instrument representing an ownership interest in the second portfolio, are traded on a securities market, and

wherein all of said M different securities in the first portfolio are traded on a first securities market, and one of the other N−

M different securities are traded on said first securities market;

a step of receiving a first offer to sell said first financial instrument;

a step of receiving a second offer to buy said first financial instrument; and

matching said first and second offers.

14. A first financial instrument representing an ownership interest in a first portfolio comprising an integer number M different stocks traded on the National Association of Securities Dealers Automated Quotations System (NASDAQ), wherein:

the M different stocks are included in an index based on market capitalization values of an integer number N different stocks, N>

M, with the M different stocks being a subset of the N different stocks and at least some of the N different stocks not being traded on the NASDAQ; and

the market capitalization weight of each of the M different stocks in the first portfolio is similar to that stock'"'"'s corresponding market capitalization weight in the index, divided by the combined market capitalization weight of the first portfolio within the index.

15. The first financial instrument according to claim 14, wherein the index is the Standard &

Poor'"'"'s 500 (S&

P

     500).

16. The first financial instrument according to claim 14, wherein the index is the Standard &

Poor'"'"'s 100 (S&

P

     100).

17. The first financial instrument according to claim 14, wherein at least some of the N different stocks are traded on the New York Stock Exchange.

18. The first financial instrument according to claim 14, wherein N−

M of the N different stocks are traded on the New York Stock Exchange.

19. The first financial instrument according to claim 18, wherein the index is the Standard &

Poor'"'"'s 500 (S&

P

     500).

20. The first financial instrument according to claim 18, wherein the index is the Standard &

Poor'"'"'s 100 (S&

P

     100).

21. A first financial instrument representing an ownership interest in a first portfolio comprising stocks in the National Association of Securities Dealers Automated Quotations System (NASDAQ)-only component of the Standard &

Poor'"'"'s 500 (S&

P

     500), wherein the market capitalization weight of each of the individual NASDAQ stocks in the first portfolio is similar to that stock'"'"'s corresponding market capitalization weight in the S&

P 500, divided by the combined market capitalization weight of the first portfolio within the S&

P 500.

22. A first financial instrument representing an ownership interest in a first portfolio comprising stocks in the National Association of Securities Dealers Automated Quotations System (NASDAQ)-only component of the Standard &

Poor'"'"'s 100 (S&

P

     100), wherein the market capitalization weight of each of the individual NASDAQ stocks in the first portfolio is similar to that stock'"'"'s corresponding market capitalization weight in the S&

P 100, divided by the combined market capitalization weight of the first portfolio within the S&

P 100.