Trade allocation

• US 7,089,206 B2
• Filed: 06/26/2001
• Issued: 08/08/2006
• Est. Priority Date: 06/30/2000
• Status: Active Grant

• Current Assignee: UBS Business Solutions AG (UBS Ag)
• Original Assignee: UBS Ag
• Inventors: Martin, William
• Primary Examiner(s): Poinvil, Frantzy
• Application Number:
  US09/891,945
• Publication Number:
  US 20030110113A1
• Time in Patent Office: 1,869 Days
• Field of Search: 705 30- 42
• 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
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

A trade allocation system includes a computer system having a network interface over which messages can be exchanged with an order management system. The computer system is also coupled to a first database that stores data associating portfolios with risk classes and target ratios. A second database stores instructions to configure the system to receive from order management systems messages describing trades of financial instruments. Each message can include a financial instrument identifier, a size of the trade, and a risk class identifier. The instructions also configure the processor to query the first database to determining a portfolios that are associated with a risk class identified by a risk class identifier in a message as well as to determine a target ratio for each of the portfolios. The processor then allocates the trade of the financial instrument among each of the portfolios based on the target ratios. Allocating a trade of a financial instruments among a group of portfolios include receiving a message descriptive of a trade of a financial instrument. The message can include a financial instrument identifier and a size of the trade. A collection of portfolios are then identified based on a match between a risk class of the portfolio and the risk class of the traded financial instrument. The trade is then allocated among each of the portfolios based on a target ratio associated with each portfolio.

Claims

1. A computer-implemented method of allocating a trade of a number of same financial instruments among a plurality of different, concurrently available portfolios, the method comprising the steps of:

receiving, at an allocating management system from an order management system, a message descriptive of a trade of a number of same financial instruments, the message comprising a financial instrument identifier and a size of the trade;

determining a risk class associated with an identified financial instrument;

determining a first plurality of portfolios associated with the risk class and a target ratio for each of the portfolios, wherein each of the first plurality of portfolios is different from the others of the first plurality of portfolios and is concurrently available for holding one or more of the financial instruments; and

allocating the trade of the number of financial instruments among each of the first plurality of portfolios based on the target ratio associated with each of said portfolios, such that each of the first plurality of portfolios is allocated a portion of the number of the financial instruments based on the target ratio,

wherein at least one of said steps is performed by a computer.

2. The method of claim 1 wherein the message further comprises an identifier of a risk class and determining the risk class associated with the identified financial instrument comprises determining based on the identifier of the risk class.

3. The method of claim 1 further comprising:

computing a target ratio for each of the first plurality of portfolios based on available capital in each portfolio and available capital in other portfolios in the first plurality.

4. The method of claim 3 wherein:

a first portfolio in the first plurality comprises a multi-strategy portfolio that is further associated with a second risk class;

computing a target ratio for the first portfolio further comprises computing a second target ratio based on the second risk class.

5. The method of claim 4 wherein computing the second target ratio comprises computing based on available capital comprising a portion of the first portfolio associated with the second risk class and available capital in other portfolios associated with the second risk class.

6. The method of claim 1 wherein allocating the trade further comprises:

allocating a quantity to each of the first plurality of portfolios such that a sum of the allocated quantities equals the size of the trade.

7. The method of claim 6 wherein allocating comprises allocating the size among each of the first plurality of portfolio based on a multiple of a predetermined lot size.

8. The method of claim 6 further comprising:

for each one of the first plurality of portfolios, generating a trade message comprising the financial instrument identifier, the quantity allocated to the one of the portfolios, and an identifier of the one of the portfolios; and

sending each of the generated trade messages to a portfolio management system.

9. The method of claim 1 further comprising:

receiving trade correction data at the allocation management system, the trade correction data identifying the trade of the identified financial instrument;

querying a trade allocation history database to identify the target ratios used for allocating the trade among the first plurality of portfolios; and

generating a plurality of trade correction messages, each correcting the allocation of the trade of the first financial instrument to a different one of the first plurality of portfolios.

10. The method of claim 9 further comprising sending the trade correction messages to a portfolio management system.

11. The method of claim 10 wherein the portfolio management system maintains an accounting of the financial instruments in each portfolio and free capital associated with each portfolio.

12. The method of claim 9 wherein the target ratios associated with the first plurality of portfolios at a time of receipt of the trade correction data is different from the target ratios used for allocating the trade.

13. The method of claim 1 wherein the message further comprises a trade type selected from the group consisting of a buy order and a sell order.

14. The method of claim 1 wherein the order management system is one of a plurality of order management systems, each order management system being able to exchange messages with the allocation management system, the messages comprising messages descriptive of trades of financial instruments.

15. The method of claim 14 wherein each message is exchanged over a network interface using a standard message exchange protocol.

16. The method of claim 15 wherein the standard message exchange protocol comprises the FIX protocol.

17. The method of claim 1 further comprising:

receiving at the allocation management system a second message descriptive of a trade of a second financial instrument, the second message comprising a financial instrument identifier, a size of the trade, and allocation data;

allocating the trade of the second financial instrument among a second plurality of portfolios based on the allocation data in the second message.

18. The method of claim 17 wherein the allocation data comprises target ratio data.

19. A trade allocation system for allocating a trade of a number of same financial instruments among a plurality of different, concurrently available portfolios, the system comprising:

a computer system comprising a network interface configured to receive trading messages from an order management system;

a first database coupled to the computer and comprising first data associating each of a plurality of portfolios with a risk class and a target ratio;

a second database storing instruction to configure the computer system to;

receive from the order management systems a message descriptive of a trade of a number of same financial instruments, the message comprising a financial instrument identifier, a size of the trade, and a risk class identifier;

query the first database to determining a first plurality of portfolios that are associated with a risk class identified by the risk class identifier, wherein each of the first plurality of portfolios is different from the others of the first plurality of portfolios and is concurrently available for holding one or more of the same financial instruments;

query the first database to determine a target ratio for each of the first plurality of portfolios; and

allocate the trade of the number of the financial instruments among each of the first plurality of portfolios based on the determined target ratio for each of said portfolios.