Exchange trading of mutual funds or other portfolio basket products

• US 8,341,070 B2
• Filed: 06/23/2011
• Issued: 12/25/2012
• Est. Priority Date: 03/27/2000
• Status: Expired due to Fees

• Current Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE American LLC (Intercontinental Exchange, Inc.)
• Inventors: Gastineau, Gary L., Weber, Clifford
• Primary Examiner(s): Shrestha, Bijendra K
• Application Number:
  US13/167,457
• Publication Number:
  US 20120101959A1
• Time in Patent Office: 551 Days
• Field of Search: 705/37
• 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 computer-implemented method for producing a hedging basket of securities for an actively managed fund on an exchange, comprising:

receiving, by a computer processor, information associated with an actively managed fund;

extracting factor information from the information;

applying a factor analysis to the extracted factor information;

selecting, based on application of the factor analysis, a hedging basket of securities, the hedging basket of securities selected such that the hedging basket of securities tracks the actively managed fund over the course of a trading day and do not disclose the assets of the actively managed fund; and

transmitting at least one of the extracted factor information and information associated with the hedging basket of securities to a trader, the transmitted information used by a trader for creating a hedging portfolio that manages investment risk in the actively managed fund;

wherein the fund assets are not disclosed to the trader.

2. The computer-implemented method of claim 1, wherein the factors that are examined by the factor analysis include factors related to at least one of measures of economic activity and inflation rates.

3. The computer-implemented method of claim 1, further comprising:

calculating an intra-day net asset value proxy for the actively managed fund.

4. The computer-implemented method of claim 3, wherein the prices are received from a quote feed.

5. The computer-implemented method of claim 1 wherein the applying the factor analysis is performed in a trusted computer system.

6. The computer-implemented method of claim 3, wherein calculating an intra-day net asset value proxy further comprises:

adjusting the actively managed fund to reflect any transactions made in the prior trading day.

7. The computer-implemented method of claim 6, wherein the adjusting the actively managed fund further comprises:

adjusting the actively managed fund using data identifying events including dividend credits and expenses incurred in the prior trading day.

8. The computer-implemented method of claim 5, wherein the trusted computer system includes a physical hardware and operating system configuration in which domain configuration and trust relationships are established to determine access to information in the trusted computer system.

9. The computer-implemented method of claim 8, wherein the trust relationships include code to deny unauthorized access to decrypted information associated with the actively managed fund.

10. A non-transitory computer-readable medium storing processor-executable process steps that, when executed by a processor, perform a method producing a hedging basket of securities for an actively managed fund on an exchange, wherein the method comprises:

receiving information associated with an actively managed fund;

extracting factor information from the information;

applying a factor analysis to the extracted factor information;

selecting, based on application of the factor analysis, a hedging basket of securities, the hedging basket of securities selected such that the hedging basket of securities tracks the actively managed fund over the course of a trading day and do not disclose the assets of the actively managed fund; and

transmitting at least one of the extracted factor information and information associated with the hedging basket of securities to a trader the transmitted information used by a trader for creating a hedging portfolio that manages investment risk in the actively managed fund;

wherein the fund assets are not disclosed to the trader.

11. The non-transitory computer-readable medium storing processor-executable process steps of claim 10, wherein the factors that are examined by the factor analysis include factors related to at least one of measures of economic activity and inflation rates.

12. The non-transitory computer-readable medium storing processor-executable process steps of claim 10, further comprising:

calculating an intra-day net asset value proxy for the actively managed fund by applying prices to at least a first security position in the actively managed fund as of the close of trading on the prior trading day.

13. The non-transitory computer-readable medium storing processor-executable process steps of claim 12, wherein the prices are received from a quote feed.

14. The non-transitory computer-readable medium storing processor-executable process steps of claim 10 wherein the applying the factor analysis is performed in a trusted computer system.

15. The non-transitory computer-readable medium storing processor-executable process steps of claim 12, wherein calculating an intra-day net asset value proxy further comprises:

adjusting the actively managed fund to reflect any transactions made in the prior trading day.

16. The non-transitory computer-readable medium storing processor-executable process steps of claim 15, wherein the adjusting the actively managed fund further comprises:

adjusting the actively managed fund using data identifying events including dividend credits and expenses incurred in the prior trading day.

17. The non-transitory computer-readable medium storing processor-executable process steps of claim 14, wherein the trusted computer system includes a physical hardware and operating system configuration in which domain configuration and trust relationships are established to determine access to information in the trusted computer system.

18. The non-transitory computer-readable medium storing processor-executable process steps of claim 17, wherein the trust relationships include code to deny unauthorized access to decrypted information associated with the actively managed fund.