Method and system for optimal pricing and allocation for a set of debt instruments to be offered

• US 7,877,314 B2
• Filed: 03/04/2005
• Issued: 01/25/2011
• Est. Priority Date: 03/05/2004
• Status: Active Grant

• Current Assignee: Barry Forman
• Original Assignee: URSO Limited
• Inventors: Avery, N. Caleb
• Primary Examiner(s): Kazimi; Hani
• Assistant Examiner(s): Graham; Clement B
• Application Number:
  US11/073,300
• Publication Number:
  US 20050197857A1
• Time in Patent Office: 2,153 Days
• Field of Search: 705 35- 38
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/00 Commerce
• CPC Class Codes: G06Q 30/02 Marketing; Price estimation or determination; Fundraising
• CPC Class Codes: G06Q 30/0601 Electronic shopping [e-shopping]
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• 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 method and system for the determination of optimal pricing and allocation of securities in an open, competitive environment. The method and system may also be used in developing pre-markets of other items that are difficult to price and allocate in a competitive manner, such as the underwriting/securitization of contracts for property; future revenue/earning streams from an asset and/or group of assets; underwritten insurance portfolios, intellectual property and other goods and services. The system of price optimization and allocation is accomplished by interactive feedback of information using a display and including competitive participation of individual members of the public (and/or their agents) or institutional buyers over a data network e.g., the Internet, uncovering the nature and identification of demand in a self-organizing fashion. Demand emerges through participants'"'"' interaction with the system and with each other, via a graphically-supported, interactive reservation process.

Claims

1. A computer-implemented method for generating an order book of reservations for potential debt instrument purchasers in a set of debt instruments to be offered by an issuer comprising the steps of:

(a) storing, on one or more computer readable media that are operatively coupled to one or more processors, a database comprising information relating to a plurality of units of a debt offering of one or more types at one or more yields that are available for reservation, wherein

(i) each of said units of the debt offering is intended to be offered as a debt instrument for later sale to the potential debt instrument purchasers, and

(ii) for at least one of the types having at least one of the yields, a plurality of units is available for reservation;

(b) transmitting, from the one or more processors which are operatively connected to one or more communication devices, a first set of one or more signals to at least a first plurality of the potential debt instrument purchasers that identify the status of the plurality of units of the debt offering, wherein the status comprises an identification of units of the debt offering at each type and each yield that are available;

(c) receiving, at the one or more processors, a second set of one or more signals that indicate a request by a first potential debt instrument purchaser to reserve a first group of one or more of said units of the debt instrument offering;

(d) determining, at the one or more processors, using the second set of one or more signals, a first reservation comprising units within the first group that are available for reservation;

(e) updating the database on the one or more computer readable media to reflect the first reservation;

(f) transmitting, from the one or more processors, a third set of one or more signals to at least a second plurality of potential debt instrument purchasers that identify at least the following

(i) units within the plurality of units of the debt instrument offering that are available for request for reservation, and

(ii) the first reservation as being reserved;

(g) receiving, at the one or more processors, a fourth set one or more signals that indicate a request by a second potential debt instrument purchaser to reserve a second group of one or more units of the debt instrument offering;

(h) determining, at the one or more processors, using the fourth set of one or more signals, a second reservation comprising units within the second group that are available for reservation;

(i) updating the database on the one or more computer readable media to reflect the second reservation;

(j) transmitting, from the one or more processors, a fifth set of one or more signals to at least a third plurality of potential debt instrument purchasers that identify at least the following;

(i) units within the plurality of units of the debt instrument offering that are available for request for reservation,

(ii) the first reservation as being reserved, and

(iii) the second reservation as being reserved;

(k) terminating, upon the occurrence of a condition, the transmission of signals that identify the plurality of debt units that are intended to be offered for later sale; and

(l) generating the order book that comprises reservations that are stored on said database.

2. The method of claim 1, wherein prior to the first reservation, there is a plurality of reservations.

3. The method of claim 1, wherein between the first reservation and the second reservation, there is a plurality of reservations.

4. The method of claim 1, wherein between the second reservation and the condition, there is a plurality of reservations.

5. The method of claim 1, wherein the yield comprises one or more of the following:

a yield rate, an interest rate, a coupon rate, a yield equivalent, a yield-to-maturity rate, a yield-to-call rate, a yield-to-worst-call rate, and a spread from an index.

6. The method of claim 1, further comprising the step of setting a threshold yield for requests for reservations.

7. The method of claim 1, wherein the number of units of a particular type of the debt instrument offering available at a particular yield is limited to less units than the total number of units of the debt instrument offering.

8. The method of claim 1, wherein the first reservation is predetermined as being binding.

9. The method of claim 1, wherein the second reservation is predetermined as being binding.

10. The method of claim 1, wherein the first reservation is predetermined as being nonbinding.

11. The method of claim 1, wherein the second reservation is predetermined as being nonbinding.

12. The method of claim 1, further comprising, prior to step (b), the steps of:

receiving, at the one or more processors, a sixth set of one or more signals from the first potential debt instrument purchaser comprising information associated with the first potential debt instrument purchaser; and

registering the first potential debt instrument purchaser as an authorized user based on the sixth set of one or more signals.

13. The method of claim 1, further comprising, prior to step (g), the steps of:

receiving at the one or more processors a seventh set of one or more signals from the second potential debt instrument purchaser comprising information associated with the second potential debt instrument purchaser; and

registering the first potential debt instrument purchaser as an authorized user based on the seventh set of one or more signals.

14. The method of claim 1, further comprising the step of accepting, at the one or more processors, signals from the first potential debt instrument purchaser based on a predetermined set of suitability requirements.

15. The method of claim 1, further comprising the step of accepting, at the one or more processors, signals from the second potential debt instrument purchaser based on a predetermined set of suitability requirements.

16. The method of claim 1, wherein the issuer is a single issuer.

17. The method of claim 1, wherein the issuer comprises a plurality of issuers.

18. The method of claim 1, wherein the issuer is a representative of an issuer.

19. The method of claim 18, wherein the representative is an underwriter.

20. The method of claim 1, wherein the second set of one or more signals is received from one or more computers of one or more of the following:

the first potential debt instrument purchaser; and

one or more agents of the first potential debt instrument purchaser.

21. The method of claim 1, wherein the third set of one or more signals is transmitted to one or more computers of one or more of the following:

one or more of the potential debt instrument purchasers; and

one or more agents of one or more of the potential debt instrument purchasers.

22. The method of claim 1, wherein the fourth set of one or more signals is received from one or more computers of one or more of the following:

the second potential debt instrument purchasers; and

one or more agents of the second potential debt instrument purchasers.

23. The method of claim 1, wherein the fifth set of one or more signals is transmitted to one or more computers of one or more of the following:

one or more of the potential debt instrument purchasers; and

one or more agents of one or more of the potential debt instrument purchasers.

24. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise corporate bonds.

25. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise commercial paper.

26. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise municipal bonds.

27. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise international bonds.

28. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise sovereign debt.

29. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise sub-sovereign debt.

30. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise public debt.

31. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise securitization of assets.

32. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise notes.

33. The method of claim 1, wherein the debt instruments, when offered for later sale, comprise convertible debt securities.

34. The method of claim 1, wherein the one or more types comprise debt instruments of a series.

35. The method of claim 1, wherein the one or more types comprise debt instruments having the same maturity.

36. The method of claim 1, wherein the one or more types comprise debt instruments having the same coupon rate.

37. The method of claim 1, wherein the one or more types comprise debt instruments available for reservation by a predetermined investor class.

38. The method of claim 37, wherein the predetermined investor class comprises one or more institutional investors.

39. The method of claim 37, wherein the predetermined investor class comprises one or more retail investors.

40. The method of claim 37, wherein the debt instruments for the predetermined investor class have a predetermined yield.

41. The method of claim 37, wherein the number of units of debt instruments for the predetermined investor class is fixed.

42. The method of claim 37, wherein the debt instruments for the predetermined investor class have one or more yields calculated based on the yields of other reservations outside the predetermined investor class.

43. The method of claim 1, wherein the first reservation comprises all of the units of the first group.

44. The method of claim 1, wherein the first reservation comprises less than all of the units of the first group.

45. The method of claim 1, wherein the second reservation comprises all of the units of the second group.

46. The method of claim 1, wherein the second reservation comprises less than all of the units of the second group.

47. The method of claim 1, wherein the condition is the expiration of a predetermined time.

48. The method of claim 1, wherein the condition is the expiration of a second predetermined time.

49. The method of claim 1, wherein the condition is no more reservation requests are received from the potential debt instrument purchasers for a predetermined period of time.

50. The method of claim 1, wherein the condition is receipt at the one or more processors of a sixth set of one or more signals from the issuer indicating the offering should be terminated.

51. The method of claim 1, wherein the first group of units in the debt instrument offering comprise a first specific quantity of units of a first type of debt instrument at one or more first specific yields.

52. The method of claim 1, wherein the first group of units in the debt instrument offering comprises a first specific quantity of units of a first type of debt instrument at one or more first specific yields and a second specific quantity of units of the first type of debt instrument at one or more second specific yields.

53. The method of claim 1, wherein the first group of units in the debt instrument offering comprises a first specific quantity of units of a first type of debt instrument at one or more first specific yields and a second specific quantity of units of a second type of debt instrument at one or more second specific yields.

54. The method of claim 1, wherein the second group of units in the debt instrument offering comprises a first specific quantity of units of a first type of debt instrument at one or more first specific yields.

55. The method of claim 1, wherein the second group of units in the debt instrument offering comprises a first specific quantity of units of a first type of debt instrument at one or more first specific yields and a second specific quantity of units of the first type of debt instrument at one or more second specific yields.

56. The method of claim 1, wherein the second group of units in the debt instrument offering comprises a first specific quantity of units of a first type of debt instrument at one or more first specific yields and a second specific quantity of units of a second type of debt instrument at one or more second specific yields.

57. The method of claim 1, further comprising, prior to step (k), the step of:

transmitting, from the one or more processors, a sixth set one or more signals that indicate to the first potential debt instrument purchaser information relating to the status of the first reservation.

58. The method of claim 57, wherein the sixth set of one or more signals is transmitted periodically.

59. The method of claim 1, further comprising, prior to step (k), the step of:

transmitting, from the one or more processors, a sixth set one or more signals that indicate to the second potential debt instrument purchaser information relating to the status of the second reservation.

60. The method of claim 59, wherein the sixth set of one or more signals is transmitted periodically.

61. The method of claim 1, further comprising the step of:

(m) allocating the units of the debt instrument offering based on reservations in the order book.

62. The method of claim 61, wherein the step of allocating is based on one or more of the following:

the quantity of units;

the yield; and

the value of each reservation.

63. The method of claim 1, further comprising the steps of:

(m) determining if one or more of the first and second reservations comprise a total quantity of units in excess of a predetermined number; and

(n) allocating units among one or more of the first and second reservations.

64. The method of claim 63, wherein the step of allocating further comprises the step of providing additional units within the debt instrument offering.

65. The method of claim 63, wherein the step of allocating further comprises the step of canceling at least part of a reservation.

66. The method of claim 1, further comprising the step of setting the yield for each unit in the order book at the yield of its corresponding reservation.

67. The method of claim 63, further comprising the step of setting the yield for each unit in the order book at the yield of its corresponding reservation.

68. The method of claim 61, wherein all units of the debt instrument offering are set at a single yield.

69. The method of claim 68, wherein the single yield for at least some of the units is different than the yield of at least one of the reservations.

70. The method of claim 61, further comprising the step of pricing units at different yields to different potential debt instrument purchasers.

71. The method of claim 1, further comprising the step of setting a yield of the units as a function of aspects of all the reservations in the order book.

72. The method of claim 71, wherein the function is based on an average of the yields of the reservations in the order book.

73. The method of claim 71, wherein the function is based on adjusting the average of the yields to set terms of the debt instrument yield.

74. The method of claim 73, wherein the average is a weighted average.

75. The method of claim 1, further comprising the step of rewarding potential debt instrument purchasers whose requests for reservation are early in time.

76. The method of claim 75, wherein the reward comprises a favorable yield.

77. The method of claim 75, wherein the reward comprises an additional allocation of the units.

78. The method of claim 75, wherein the reward comprises post-sale price support.

79. The method of claim 1, further comprising the step of not accepting a request for reservation that fails to meet a predetermined condition.

80. The method of claim 1, wherein a commission on the later-sale of the units is a function of the value of the units of the order book.