Exchange trading of mutual funds or other portfolio basket products

• US 7,970,687 B2
• Filed: 03/23/2001
• Issued: 06/28/2011
• Est. Priority Date: 03/27/2000
• Status: Active Grant

• Current Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE Amex LLC (Intercontinental Exchange, Inc.)
• Inventors: Weber, Clifford, Gastineau, Gary L.
• Primary Examiner(s): Kazimi; Hani
• Assistant Examiner(s): Shrestha; Bijendra K
• Application Number:
  US09/815,589
• Publication Number:
  US 20010025266A1
• Time in Patent Office: 3,749 Days
• Field of Search: 705 35- 37
• US Class Current: 705/37
• 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 40/04 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: Y10S 707/99932 Access augmentation or optimizing
• CPC Class Codes: Y10S 707/99933 Query processing, i.e. searching

Abstract

A system for determining a basket of financial instruments for hedging investment risk in actively managed exchange traded funds is described. The system uses a trusted computer system and includes a computer storage medium storing a computer program product. The product determines the basket of hedging instruments by extracting factor information from a portfolio of the actively managed exchange traded fund and determining factors that affect the price of the exchange traded fund. The program can select a portfolio of instruments with similar behavior with respect to the determined factors to produce a hedging portfolio that tracks the price of the exchange traded fund.

Claims

1. A system for producing a hedging basket of securities for an actively managed fund on an exchange comprising:

a connection to a communications network; and

a computer system including a processor, a memory executing computer instructions and a storage storing a computer program product with instructions extract factor information from the actively managed fund by the computer system and apply factor analysis to the extracted factor information producing the hedging basket of securities, where the hedging basket of securities tracks the actively managed fund closely enough over the course of a trading day that a trader manages investment risk in the actively managed fund and the hedging basket of securities does not reveal the fund assets, and the fund assets are not disclosed to the trader; and

where the computer system sends the factor information or the hedging basket of securities to the trader.

2. The system of claim 1 wherein

the factors that are examined by factor analysis include factors related to measures of economic activity or inflation rates.

3. The system of claim 1 wherein

an intra-day net asset value proxy for the actively managed fund is calculated by applying prices to the security positions in the actively managed fund portfolio as of the close of trading on the prior day.

4. The system of claim 1 further comprising:

a second computer system which is a trusted computer system including a second processor and second memory executing computer instructions and storage storing a computer program product with instructions determine an intra-day net asset value proxy for the fund by the computer system by applying prices to security positions in the fund portfolio as of the close of trading on the prior day.