Methods and apparatus relating to the formulation and trading of risk management contracts

• US 20050246197A1
• Filed: 06/27/2005
• Published: 11/03/2005
• Est. Priority Date: 05/29/1992
• Status: Active Grant

• Current Assignee: Alice Corporation Pty Limited
• Original Assignee: Alice Corporation Pty Limited
• Inventors: Shepherd, Ian Kenneth
• Granted Patent: US 7,725,375 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 10/06 Resources, workflows, human or project management; Enterprise or organisation planning; Enterprise or organisation modelling
• CPC Class Codes: G06Q 10/087 Inventory or stock management, e.g. order filling, procurement or balancing against orders
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• 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 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• 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
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 50/188 Electronic negotiation

Abstract

Methods and apparatus which deal with the management of risk relating to specified, yet unknown, future events are disclosed. ‘Sponsor’ stakeholders specify a particular product relating to an event or phenomenon for which there is a range of possible future outcomes. ‘Ordering’ stakeholders then offer contracts relating to the predetermined phenomenon and corresponding range of outcomes. The offered contracts specify an entitlement or (pay-off) at the future time of maturity for each outcome, and a consideration (or premium) payable, in exchange, to a ‘counter-party’ stakeholder. Independently of the offered contracts, the ‘counter-party’ stakeholders input data as to their view of the likelihood of occurrence of each outcome in the predetermined range into the future, or specifically at the predetermined date of maturity. Each offered contract is priced by the processing units by calculating counter-party premiums from the registered data, and a match attempted by a comparison of the offered premium with the calculated premiums. Matched contracts can be further traded until maturity, and at-maturity processing handles the exchange of entitlement as between the matched parties to the contract.

Claims

1-25. -25. (canceled)

26. A method of exchanging an obligation between parties, wherein an exchange obligation is administered by a supervisory institution, and wherein an account is maintained with an exchange institution, the method comprising:

(a) maintaining a shadow record for a first party to be held independently by the supervisory institution from the exchange institution;

(b) for every transaction resulting in an exchange obligation, the supervisory institution electronically adjusting said shadow record, allowing only those transactions that do not result in a value of said shadow record being less than zero; and

(c) exchanging at least one transaction between the supervisory institution and the exchange institution at the end of a period of time in accordance with said adjustments made in step (b).

27. The method of claim 26, wherein the exchange institution is a bank.

28. The method of claim 37, further comprising the step of obtaining from the bank a balance for said shadow record.

29. The method of claim 26, wherein said exchange obligation arises out of a currency exchange transaction.

30. The method of claim 26, wherein said shadow record includes a shadow credit record and a shadow debit record.

31. The method of claim 30, further comprising the step of obtaining from the exchange institution a balance for said shadow credit record and/or said shadow debit record.

32. The method of claim 26, wherein said first party holds one or more accounts with more than one exchange institution.

33. The method of claim 26, wherein the supervisory institution and exchange institution are legally and/or geographically domiciled in different countries.

34. The method of claim 26, further comprising debiting and/or crediting said shadow record based on said transaction.

35. The method of claim 26, further comprising the step of obtaining from the exchange institution a balance for said shadow record.

36. The method of claim 26, wherein exchanging said at least one transaction between the supervisory and the exchange institution at the end of a period of time represents netted adjustments made in step (b).

37. The method of claim 26, wherein each said adjustment takes place in chronological order.

38. The method of claim 26, wherein the exchange institution is a central bank.

39. The method of claim 38, further comprising the step of obtaining from said central bank a balance for said shadow credit record and/or said shadow debit record.

40. A method of exchanging a payment obligation between a buyer and a seller, wherein the exchange of the payment obligation is administered by a supervisory institution, and wherein the buyer and seller maintain an account with a bank, the method comprising:

(a) maintaining a shadow record for the buyer or the seller to be held independently by the supervisory institution from the bank;

(b) for every transaction resulting in a payment obligation, the supervisory institution electronically adjusting said shadow record, allowing only those payment transactions that do not result in a value of said shadow record being less than zero; and

(c) exchanging at least one account transaction between the supervisory institution and the bank at the end of a period of time in accordance with said adjustments made in step (b).

41. A method of exchanging an obligation between parties, wherein an exchange obligation is administered by a supervisory institution, the method performed by the supervisory institution, comprising:

maintaining a first account for a first party, independent from a second account maintained by a first exchange institution;

maintaining a third account for a second party, independent from a fourth account maintained by a second exchange institution;

electronically adjusting said first account and said third account in order to effect the exchange obligation between said first party and said second party after ensuring that said first party and said second party have adequate value in said first account and said third account, respectively; and

providing an instruction to said first exchange institution and said second exchange institution to adjust said second account and said fourth account in accordance with the adjustment of said first account and said third account.

42. The method of claim 41, wherein said first and/or second exchange institution is a central bank.

43. The method of claim 41, wherein said first exchange institution and said second exchange institution are the same.

44. The method of claim 41, wherein said second account and said fourth account are the same account.

45. The method of claim 41, wherein the exchange obligation involves currency.