Open end mutual fund securitization process

• US 7,698,192 B2
• Filed: 04/20/2001
• Issued: 04/13/2010
• Est. Priority Date: 10/12/1995
• Status: Expired due to Fees

• Current Assignee: Leveraged Innovations LLC
• Original Assignee: Kenneth Kiron
• Inventors: Bander, Kevin S., Kiron, Kenneth
• Primary Examiner(s): Havan; Thu Thao
• Application Number:
  US09/839,888
• Publication Number:
  US 20020013755A1
• Time in Patent Office: 3,280 Days
• Field of Search: 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• 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 mutual fund securitization process permitting the trading of open end mutual funds and linked derivative securities on or off the floor of a National Securities Exchange. The targeted individual open end mutual fund or group of open end mutual funds, selected through a screening process is securitized through the creation of a new, separate security. This new security is preferably a “closed end fund of funds” and linked derivative securities, which synthetically replicate the statistical relationship of the defined individual or group of open end mutual funds. The maintenance of financial records for the new security is maintained by electronically storing dividend, capital gains and income received from the open end funds which have been invested in, and calculating pro-forma financial statements to disseminate to shareholders and all relevant parties.

Claims

1. A computer system for creating a leveraged exchange traded product comprising a leveraged portfolio of securities, the system comprising:

a computer memory comprising a set of user defined criteria and a computer database containing data representing characteristics of a plurality of securities; and

,

a processor for selecting at least two of the securities for inclusion in the leveraged exchange traded product based on market capitalization data contained in the database, the processor weighting the selected securities within the exchange traded product based on the set of user defined criteria;

wherein the leveraged exchange traded product is configured for trading of shares of the leveraged exchange traded product at a real time determined price of the shares related to the underlying price of each of the selected securities comprising the leveraged exchange traded product and related to the respective weightings of the selected securities.

2. The computer system of claim 1 further comprising an exchange computer for listing the shares of the exchange traded product available for purchase or sale.

3. The computer system of claim 2 wherein the exchange computer also lists derivatives available for purchase or sale, the derivatives having a price related to the real time determined price of the exchange traded product.

4. The computer system of claim 1 further comprising an accounting system for calculating financial statements for dissemination to the owners of the shares.

5. The computer system of claim 2 wherein the exchange computer is configured for electronic trading of the shares.

8. The computer system of claim 1 wherein the processor interacts with the computer database to monitor changes in the selected securities.

9. The computer system of claim 8 wherein the processor alters the securities which make up the exchange traded product in response to data in the computer database representing changes in the selected securities.

10. The computer system of claim 1 wherein said processor calculates a net asset value of the exchange traded product.

11. The computer system of claim 1 wherein the exchange traded product comprises at least one product selected from the group consisting of puts and calls, futures, caps and floors, total return swaps, collars, warrants, equity swaps, options and knock-out options.

12. The computer system of claim 1 wherein the exchange traded product is not a unit investment trust.

13. The computer system of claim 1 wherein the processor is configured to select only securities in a specific index.

14. The computer system of claim 13 wherein the index is the Dow Jones Industrial Average.

15. The computer system of claim 13 wherein the index is the S&

P 500.

16. The computer system of claim 1 wherein the exchange computer is further configured to execute a hedge trade that can be traded for a price related to the price of the shares of the exchange traded product.

17. The computer system of claim 1 wherein the user defined criteria comprises at least one of the group consisting of fund net asset value (N.A.V.) for each year, portfolio composition, investment objective, load adjusted and unadjusted return, maximum sales charge, median market capitalization, daily, monthly, quarterly, yearly, multi-year returns, mpt, beta, sharpe, R squared, standard deviation, historical risk/reward ratios, N.A.V. distribution adjusted earning, payout ratio, potential capital gains exposure, price/book ratio, price/earnings ratio, prospectus, purchase constraints, redemption fees, sector weighting, shareholder fees, total return, total return percentile, turnover ratio, deferred fees, debt % total capitalization, dividends, distributor, telephone number, manager name, manager tenure, class of shares, and brokerage availability.

18. The computer system of claim 1 wherein the processor is configured to select only securities from within a substantially similar industry.

6. A computer implemented system for exchanging shares in an exchange traded product, the system comprising:

a display for displaying data representing shares of an exchange traded product comprising a leveraged portfolio of securities satisfying market capitalization criteria, the securities within the portfolio being weighted, wherein the leveraged exchange traded product is configured for trading shares of the leveraged exchange traded product at a real time determined price of the shares related to the underlying price of each of the selected securities comprising the leveraged exchange traded product and related to the respective weightings of the selected securities; and

an exchange computer for processing the exchange of the shares at a price related to the price of the securities within the leveraged portfolio, the exchange computer configured to transmit data indicative of trades which occur intra-day over a communication network to an exchange clearing computer.

7. The computer implemented system of claim 6 wherein the display also displays data representing at least one derivative product having a price related to the price of the shares.

19. The computer system of claim 6 wherein the display is also provided for displaying information indicative of the value of the exchange traded product on at least an end of day basis in humanly readable format.

20. The computer implemented system of claim 6 wherein the exchange clearing computer is comprised to compute and transmit data resulting from trades of shares of the exchange traded product to third party accounting systems that manage the securities which make up the exchange traded product.

21. The computer implemented system of claim 6 wherein the display is located on the floor of a public exchange.

22. The computer implemented system of claim 6 wherein the exchange traded product further comprises at least one product selected from the group consisting of puts and calls, futures, caps and floors, total return swaps, collars, warrants, equity swaps, options and knock-out options.

23. The computer implemented system of claim 6 wherein the exchange traded product is not a unit investment trust.

24. The computer implemented system of claim 6 further comprising a processor for correlating the price of the shares to the price of the securities within the leveraged portfolio.

25. The computer implemented system of claim 6 wherein the securities within the leveraged portfolio satisfy a user defined risk criteria.

26. The computer implemented system of claim 25 wherein the user defined risk criteria comprises at least one of the group consisting of fund net asset value (N.A.V.) for each year, portfolio composition, investment objective, load adjusted and unadjusted return, maximum sales charge, median market capitalization, daily, monthly, quarterly, yearly, multi-year returns, mpt, beta, sharpe, R squared, standard deviation, historical risk/reward ratios, N.A.V. distribution adjusted earning, payout ratio, potential capital gains exposure, price/book ratio, price/earnings ratio, prospectus, purchase constraints, redemption fees, sector weighting, shareholder fees, total return, total return percentile, turnover ratio, deferred fees, debt % total capitalization, dividends, distributor, telephone number, manager name, manager tenure, class of shares, and brokerage availability.

27. The computer implemented system of claim 6 wherein the system is adapted to implement an over the counter market for buying and selling a derivative having a price related to the price of the exchange traded product.

28. The computer implemented system of claim 6 wherein the display also displays a hedge that can be bought and sold for a price related to the price of the shares of the exchange traded product.

29. The computer implemented system of claim 6 wherein the exchange computer is configured to facilitate electronic trading of the shares of the exchange traded product.

30. The computer implemented system of claim 6 wherein the exchange computer is configured to facilitate buying and selling of the shares of the exchange traded product at a mutually agreed upon price.

31. The computer implemented system of claim 6 wherein the exchange traded product is open ended.

32. A computer system for creating a leveraged exchange traded product comprising a leveraged portfolio of securities, the system comprising:

a computer memory comprising a set of defined criteria and a computer database containing data representing characteristics of a plurality of securities; and

a processor for selecting at least two of the securities for inclusion in the leveraged exchange traded product based on market capitalization data contained in the database, the processor weighting the selected securities within the exchange traded product based on the set of defined criteria;

wherein the leveraged exchange traded product is configured for trading of shares of the leveraged exchange traded product at a real time determined price of the shares related to the underlying price of each of the selected securities comprising the leveraged exchange traded product and related to the respective weightings of the selected securities, and wherein the leveraged exchange traded product is open ended.

33. The computer system claim of 32 further comprising an exchange computer for listing shares of the exchange traded product available for purchase or sale.

34. The computer system of claim 32 wherein the processor is configured to select only securities from within a substantially similar industry.

35. The computer system of claim 32 wherein the leveraged exchange traded product is a unit investment trust.

36. The computer system of claim 32 wherein the leveraged exchange traded product is not a unit investment trust.

37. The computer system of claim 32 wherein the exchange traded product is a fund.

38. The computer system of claim 32 wherein the exchange traded product is not a fund.

39. The computer system of claim 32 wherein the leveraged exchange traded product has a class of shares.

40. A computer implemented system for exchanging shares in an exchange traded product, the system comprising:

a display for displaying data representing shares of an exchange traded product, comprising a leveraged portfolio of securities satisfying market capitalization criteria, the securities within the portfolio being weighted, wherein the leveraged exchange traded product is configured for trading shares of the leveraged exchange traded product at a real time determined price of the shares related to the underlying price of each of the selected securities comprising the leveraged exchange traded product and related to the respective weightings of the selected securities, and wherein the exchange traded product is open ended; and

an exchange computer for processing the exchange of the shares at a price related to the price of the securities within the leveraged portfolio, wherein the exchange computer is configured to transmit data indicative of trades which occur intra-day over a communication network to an exchange clearing computer.

41. The computer implemented system of claim of 40 wherein the exchange computer is configured to facilitate electronic trading of the shares of the exchange traded product.

42. The computer implemented system of claim 40 wherein the exchange computer is configured to facilitate buying and selling of the shares of the exchange traded product at a mutually agreed upon price.

43. The computer implemented system of claim 40 wherein the display also displays data representing at least one derivative product having a price related to the price of the shares.

44. The computer implemented system of claim 40 wherein the display is located on the floor of a public exchange.

45. The computer implemented system of claim 40 wherein the securities within the leveraged portfolio satisfy a performance criteria.

46. The computer implemented system of claim 45 wherein the securities within the portfolio have an expected future performance return greater than a group of securities comprising a benchmark on a daily basis.

47. The computer implemented system of claim 46 wherein the leveraged portfolio provides return greater than the group of securities comprising the benchmark on a daily basis.

48. The computer implemented system of claim 47 wherein the benchmark is an index.

49. The computer implemented system of claim 47 wherein the benchmark is not an index.

50. The computer implemented system of claim 40 wherein the securities within the leveraged portfolio satisfy a risk criteria.

51. The computer implemented system of claim 50 wherein the risk criteria is a risk percentage that is smaller than the risk for a group of securities comprising a benchmark.

52. The computer implemented system of claim 50 wherein the risk criteria is a risk percentage that is greater than the risk for a group of securities comprising a benchmark.

53. The computer implemented system of claim 52 wherein the percentage is at least 50%.

54. The computer implemented system of claim 50 wherein the risk criteria is beta.

55. The computer implemented system of claim 54 wherein the beta of the leveraged portfolio is at least 50% greater than the beta of a group of securities comprising a benchmark.

56. The computer implemented system of claim 40 wherein the leveraged exchange traded product is a unit investment trust.

57. The computer implemented system of claim 40 wherein the leveraged exchange traded product is not a unit investment trust.

58. The computer implemented system of claim 40 wherein the leveraged exchange traded product is a fund.

59. The computer implemented system of claim 40 wherein the leveraged exchange traded product is not a fund.

60. The computer implemented system of claim 40 wherein the processor is configured to select only securities from within a substantially similar industry.

61. The computer implemented system of claim 40 wherein the exchange traded product further comprises at least one product selected from the group consisting of puts and calls, futures, caps and floors, total return swaps, collars, warrants, equity swaps, options and knock-out options.

62. The computer implemented system of claim 40 wherein the leveraged exchange traded product has a class of shares.

63. A computer implemented system for exchanging shares in an exchange traded product, the system comprising:

a display for displaying data representing shares of an exchange traded product, comprising a leveraged portfolio of securities satisfying market capitalization and performance criteria, the securities within the portfolio being weighted and having an expected future performance return greater than a group of securities comprising a benchmark index;

wherein the leveraged exchange traded product is configured for trading shares of the leveraged exchange traded product at a real time determined price of the shares related to the underlying price of each of the selected securities comprising the leveraged exchange traded product and related to the respective weightings of the selected securities, and wherein the exchange traded product is open ended; and

an exchange computer for processing the exchange of the shares at a price related to the price of the securities within the leveraged portfolio, wherein the exchange computer is configured to transmit data indicative of trades which occur intra-day over a communication network to an exchange clearing computer.

64. The computer implemented system of claim 63 wherein the benchmark index is the S&

P 500.

65. The computer implemented system of claim 63 wherein the benchmark index is the Dow Jones Industrial Average.

66. The computer implemented system of claim 63 wherein the leveraged exchange traded product provides a return greater than a group of securities comprising a benchmark index on at least a daily basis.

67. The computer implemented system of claim 63 wherein the leveraged exchange traded product provides a return greater than a group of securities comprising a benchmark index on at least a monthly basis.

68. The computer implemented system of claim of 63 wherein the exchange computer is configured to facilitate electronic trading of the shares of the exchange traded product.

69. The computer implemented system of claim 63 wherein the exchange computer is configured to facilitate buying and selling of the shares of the exchange traded product at a mutually agreed upon price.

70. The computer implemented system of claim 63 wherein the exchange computer is further configured to list derivatives available for purchase or sale, the derivatives having a price related to the real time determined price of the exchange traded product.

71. The computer implemented system of claim 63 wherein the securities within the leveraged portfolio satisfy a risk criteria.

72. The computer implemented system of claim 71 wherein the risk criteria is a risk percentage that is smaller than the risk of the group of securities comprising the benchmark index.

73. The computer implemented system of claim 71 wherein the risk criteria is a risk percentage that is greater than the risk of the group of securities comprising the benchmark index.

74. The computer implemented system of claim 73 wherein the percentage is at least 50%.

75. The computer implemented system of claim 71 wherein the risk criteria is beta.

76. The computer implemented system of claim 75 wherein the beta of the leveraged portfolio is at least 50% greater than the beta of the group of securities comprising the benchmark index.

77. The computer implemented system of claim 63 wherein the exchange traded product further comprises at least one product selected from the group consisting of puts and calls, futures, caps and floors, total return swaps, collars, warrants, equity swaps, options and knock-out options.

78. The computer implemented system of claim 63 wherein the leveraged exchange traded product is a unit investment trust.

79. The computer implemented system of claim 63 wherein the leveraged exchange traded product is not a unit investment trust.

80. The computer implemented system of claim 63 wherein the leveraged exchange traded product is a fund.

81. The computer implemented system of claim 63 wherein the leveraged exchange traded product is not a fund.

82. The computer implemented system of claim 63 wherein the leveraged exchange traded product has a class of shares.