Method and apparatus for pricing a commodity

• US 7,200,572 B2
• Filed: 02/02/2001
• Issued: 04/03/2007
• Est. Priority Date: 02/02/2001
• Status: Expired due to Fees

• Current Assignee: Constellation Software Incorporated
• Original Assignee: E-Markets Incorporated (Constellation Software Incorporated)
• Inventors: Beurskens, Frank
• Primary Examiner(s): NGUYEN, NGA B
• Application Number:
  US09/776,162
• Publication Number:
  US 20050114252A1
• Time in Patent Office: 2,251 Days
• Field of Search: 705/7, 705/10, 705/26, 705/27, 705/35, 705/36, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/0206 Price or cost determination based on market factors
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• 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 method of pricing a commodity involving selecting a predetermined market factor, determining at a first time period a first market condition, and providing a formula capable of comparing a predetermined market factor to a market condition to determine the existence of a favorable pricing condition. The method prices a first portion of the commodity when the application of the formula to the predetermined market factor and the first market condition indicates the existence of a first favorable pricing condition. The method prices a second portion of the commodity when the application of the formula to the predetermined market factor and a second market condition indicates the existence of a second favorable pricing condition.

Claims

1. A computer-implemented method of pre-setting, in a contract, pricing conditions acceptable to a first party to the contract, where the contract defines a pricing period and is with a second party for future delivery of a predetermined quantity of an agricultural commodity, and where the commodity will have a future, unknown, periodic market price not controlled by the first party but established by a market for the commodity, comprising:

(a) selecting, by entry into a computer by the first party, at least one predetermined market factor related to the contract from a predetermined time factor, a predetermined price factor, a predetermined trend factor, a predetermined market status factor, and a predetermined market control factor;

(b) determining at a first time period during the pricing period at least one of a first market condition from a first time condition, a first price condition, a first trend condition, a first market status condition, and a first market control condition, and communicating the first market condition to a computer;

(c) providing a formula capable of comparing said predetermined market factor to said first market condition to determine the existence of a favorable pricing condition for a first portion of the predetermined quantity of the commodity;

(d) applying with a computer said formula to said predetermined market factor and said first market condition during the pricing period to determine the existence or not of a first favorable pricing condition;

(e) pricing a first portion of the predetermined quantity of the commodity at the market price established at that time by the market when said application of said formula to said predetermined market factor and said first market condition indicates the existence of said first favorable pricing condition, and storing the pricing of the first portion in a computer;

(f) determining at a second time period during the pricing period a second market condition from a second time condition, a second price condition, a second trend condition, a second market status condition and a second market control condition, and communicating the first market condition to a computer,

(g) applying with a computing device said formula to said predetermined market factor and said second market condition during the pricing period to determine the existence or not of a second favorable pricing condition; and

(h) pricing a second portion of the predetermined quantity of the commodity at a market price established by the market when said application of said formula to said predetermined market factor and said second market condition indicates the existence of said second favorable pricing condition, and storing the pricing of the second portion in a computer;

so that future pricing of different portions of the predetermined quantity of the commodity by criteria input by and acceptable to the first party are built into the contract for future delivery of the commodity at the formation of the contract, even though the future pricing will be controlled by the market, and not the first party.

2. The method of pricing a commodity of claim 1, further comprising receiving from the first party information relating to a specific type and amount of the commodity which said first party is willing to supply.

3. The method of pricing a commodity of claim 2, further comprising generating a contract for pricing of said specific type and amount of the commodity by said first party.

4. The method of pricing a commodity of claim 2, further comprising generating a contract for the pricing of said specific type and amount of the commodity according to the formula.

5. The method of pricing a commodity of claim 2, wherein said information is received from said first party across a global computer network.

6. The method of pricing a commodity of claim 2, further comprising automatically pricing said first portion of the commodity across a computer network when said application of said formula to said predetermined market factor and said first market condition indicates the existence of said first favorable pricing condition.

7. The method of pricing a commodity of claim 6, wherein said computer network is a global computer network.

8. The method of pricing a commodity of claim 1, further comprising:

(a) providing a computer with a database;

(b) storing said predetermined market factor and said formula on said database;

(c) determining at least two time periods and related market conditions from a related time condition, a related price condition, a related trend condition, a related market status condition and a related market control condition;

(d) applying said computer to said predetermined market factor and said related market conditions to determine the existence of favorable pricing conditions; and

(e) pricing portions of the predetermined quantity of the commodity when said computer indicates the existence of said favorable pricing conditions.

9. The method of pricing a commodity of claim 1, wherein said predetermined market factor is a predetermined time factor, wherein said first market condition is a first time condition, wherein said second market condition is a second time condition, further comprising pricing the first portion of the predetermined quantity of the commodity when said first market condition is met, and pricing the second portion of the predetermined quantity of the commodity when said second market condition is met.

10. The method of pricing a commodity of claim 9, wherein said first time condition is a trading day, and wherein said second time condition is the next consecutive trading day, and wherein said first portion of the predetermined quantity of the commodity is equal to said second portion of the predetermined quantity of the commodity.

11. The method of pricing a commodity of claim 9, wherein said first time condition is a trading day, and wherein said second time condition is the next consecutive trading day, and wherein said first portion of the predetermined quantity of the commodity is different than said second portion of the predetermined quantity of the commodity.

12. The method of pricing a commodity of claim 1, wherein said predetermined market factor is a predetermined trend factor comprising historical prices correlated with predetermined periods of time.

13. The method of pricing a commodity of claim 12, further comprising pricing a larger portion of the predetermined quantity of the commodity during a first time period associated with historically higher prices, and a smaller portion of the predetermined quantity of the commodity during a second time period associated with historically lower prices.

14. The method of pricing a commodity of claim 1, wherein said predetermined market factor is a predetermined trend factor comprising an algorithm capable of identifying market price trends.

15. The method of pricing a commodity of claim 14, wherein said algorithm is capable of identifying variances from said market price trends.

16. The method of pricing a commodity of claim 15, wherein said first favorable pricing condition is a variance from said market price trends greater than a predetermined amount.

17. The method of pricing a commodity of claim 15, wherein said first favorable pricing condition is a failure of an upward market price trend to continue to grow by a predetermined factor.

18. The method of pricing a commodity of claim 1, wherein said predetermined market factor is a predetermined market status factor related to the volatility of a market.

19. The method of pricing a commodity of claim 18, wherein said first favorable pricing condition is a condition wherein said volatility of said market exceeds a predetermined factor.

20. The method or pricing a commodity of claim 1, wherein said predetermined market factor is a predetermined market control factor related to a global climate in a predetermined geographic region at a predetermined time.

21. A computer-implemented method of pre-setting pricing conditions acceptable to a first party to a contract for future delivery of a predetermined quantity of a commodity that will have a future periodic market price established by a market for the commodity and a pricing period comprising:

(a) providing a computer having a database;

(b) receiving from the first party information relating to a specific type and quantity of the commodity and storing the information in the database;

(c) receiving from said first party a selection of a predetermined market factor from a predetermined time factor, a predetermined price factor, a predetermined trend factor, a predetermined market status factor and a predetermined market control factor and storing the information in the database;

(d) determining at a plurality of time periods during the pricing period, related market conditions selected from a related time condition, a related price condition, a related market status condition and a related market control condition;

(e) providing a formula capable of comparing said predetermined market factor to said related market conditions to determine the existence of favorable pricing conditions for portions of the predetermined quantity of the commodity;

(f) applying, in the computer, said formula to said predetermined market factor and said related market conditions during the pricing period to determine the existence of said favorable pricing conditions;

(g) automatically pricing, and storing in the database said portions of the predetermined quantity of the commodity at the market price established by the market when said application of said formula to said predetermined market factor and said related market conditions indicates the existence of said favorable pricing conditions.

22. The method of pricing a commodity of claim 21, wherein said information is received from said first party over a computer network.

23. The method of pricing a commodity of claim 21, wherein said information is received from said first party over a global computer network.

24. The method of pricing a commodity of claim 23, further comprising generating a contract for the pricing of said type and quantity of the commodity according to said predetermined market factor and said formula.

25. The method of pricing a commodity of claim 23, further comprising executing said contract with digital signatures.

26. The method of pricing a commodity of claim 23, wherein said time periods are at least two consecutive trading days of a commodity market.

27. The method of pricing a commodity of claim 23, further comprising pricing said portions of the commodity on at least two different days.

28. A system for pre-setting pricing conditions during a pricing period acceptable first party to a contract for future delivery of a predetermined quantity of a commodity that will have future periodic market prices established by a market for the commodity over a network comprising:

(a) a server,

(b) a remote terminal;

(c) a communication link between said server and said remote terminal;

(d) means coupled to said server for receiving from the first party, across said communication link, information relating to a specific type and quantity of the commodity;

(e) a predetermined market factor selected from a predetermined time factor, a predetermined price factor, a predetermined trend factor, a predetermined market status factor and a predetermined marker control factor,

(f) means for determining at a plurality of time related market conditions selected from a related time condition, a related price condition, a related market status condition and a predetermined market control condition;

(g) a formula capable of comparing said predetermined market factor to said related market conditions to determine the existence of favorable pricing conditions for portions of the predetermined quantity of the commodity;

(h) means for applying said formula to said predetermined market factor and said related market conditions to determine the existence of said favorable pricing conditions during the pricing period; and

(i) means for pricing said portions of the predetermined quantity of the commodity at the market price established by the market when said application of said formula to said predetermined market factor and said related market conditions indicates the existence of said favorable pricing conditions.

29. A computer-implemented method for one or more parties to capitalize on future volatility of market prices, set by a market and not by any of the parties, during a pricing period set in a contract that requires future delivery of a predetermined quantity of a substantially fungible commodity comprising:

(a) providing a computer having a database;

(b) receiving from a first party and storing in the database information relating to the contract, including a specific type and quantity of the commodity, the pricing period, and delivery time and location;

(c) receiving from said first parry and storing in the database a predetermined market factor selected by the first party, the predetermined market factor comprising one or more of a predetermined time factor, a predetermined price factor, a predetermined trend factor, a predetermined marker status factor and a predetermined market control factor;

(d) forming the contract between at least the first party and a second party and starting the pricing period;

(e) determining, at a plurality of time periods during the pricing period, related marker conditions selected from a related time condition, a related price condition, a related market status condition and a related market control condition;

(f) storing in the database a formula capable of comparing said predetermined market factor to said related marker conditions to determine the existence of a favorable pricing condition for different portions of the predetermined quantity of the commodity;

(g) applying, during said pricing period, said formula to said predetermined market factor and said related marker conditions to determine the existence of a said favorable pricing condition;

(h) automatically pricing said portions of the predetermined quantity of the commodity when said application of said formula to said predetermined market factor and said related market conditions indicates the existence of said favorable pricing conditions by acquiring market price for the commodity at that time and storing market price in the database;

(i) checking if all portions of the commodity have been priced or the pricing period is expired.