Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
1999-01-11
2001-08-21
Hafiz, Tariq R. (Department: 2143)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
C705S03600T, C705S035000, C705S001100, C705S500000
Reexamination Certificate
active
06278983
ABSTRACT:
CROSS-REFERENCES
There are no applications related to this application filed in this or any foreign country.
BACKGROUND
It is a well-known characteristic of most markets that short-term price fluctuations may be expected. Such fluctuations are typically present even where the long-term trend may result in price movement in substantially one direction. Such price fluctuations may result in part because the market players may disagree on the speed and degree with which the market is moving in the expected direction. As a result, the cumulative total of the day-to-day price increases of a stock, commodity or similar financial instrument, may be large over any give period, relative to the price of the item. However, when offset by the cumulative total of the day-to-day price decreases, the overall shift in price may be relatively modest.
Given such short-term price volatility, it is natural that one may desire to repeatedly enter the market positioned to profit from short-term price movement, and then to timely reposition to benefit from short-term price movement in the opposite direction. Given this natural desire, it may be expected that a number of automated resource allocation and management systems have been developed which attempt to exploit short term price movements in either or both directions. Such automated systems attempt to move in and out of the market in a short-term manner whereby short-term movement in the price may result in gain. Such movements into market and out of the market are generally made with little overall consideration to the long-term direction of the market, and are intended to benefit specifically from short-term price volatility.
A number of automated resource allocation and management systems are known. U.S. Pat. No. 5,563,783 discloses a computer-implemented method and system for securities pool allocation. In this reference, a rule-based greedy algorithm optimizes the allocation of mortgage-backed securities from pools to contracts. U.S. Pat. Nos. 4,346,442, 4,597,046, 4,774,663 and 4,376,978 disclose securities brokerage-cash management systems. U.S. Pat. No. 4,674,044 discloses an automated securities trading system.
What is needed is an automated resource allocation and management system which is adapted for use in a market wherein short-term market volatility provides an opportunity for a correctly-positioned investor to benefit from market movement in both directions over short periods of time. The automated resource allocation and management system must provide for the coordination of the relative levels of investment of several liquid investments, and provide triggers to indicate the need to move capital between the investments to maximize the return from short-term price movement of the various investments.
SUMMARY
The present invention is directed to an apparatus that satisfies the above needs. A novel automated resource allocation and management system is disclosed that is adapted to optimizing the allocation of capital invested between at least two accounts. A preferred version of the system includes the following accounts and operates on known data processing hardware, and provides software routines to execute the following functionality:
(A) A first “invested” account “A” includes units of ownership, such as equity, debt or other instruments, and may include shares of stock or bonds, in a market such as a stock exchange or bond market. The shares or other investment instruments should have a variable value responsive to market conditions.
(B) An “uninvested” account “B”, such as an interest bearing savings account or similar investment, includes little or no risk of capital loss and typically provides a low rate of return.
(C) A buy trigger routine, supportable by data processing hardware, executes a transaction wherein money from the uninvested account is transferred to the invested account, resulting in the purchase of stock. The buy-trigger routine is responsive to a buy-indicating price movement in the value of the shares in the first invested account. Typically, a downward price movement that is greater than brokerage costs (typically assumed to be 1%) and less than the average price movement in a given period is a satisfactory trigger.
(D) A sell-trigger routine, supported by data processing hardware, executes a transaction wherein stock from the invested account is sold and the money transferred to the uninvested account. The sell-trigger is responsive to a sell-indicating price movement in the value of the first invested account. Typically, an upward price movement that is greater than the brokerage costs and less than the average price movement in a given period is a satisfactory trigger.
(E) Deposited money is distributed between the first invested account and the uninvested account according to a routine supported by data processing hardware. According to the routine, one of the following is performed:
(a) A first subroutine determines if the deposited money is regular in timing and amount, and if so executes the investment of the deposited money in the first invested account.
(b) If not, a second subroutine determines if the sell-trigger means is about to execute, and if so executes the investment of 25% of the deposited money in the first invested account and 75% of the money in the uninvested account.
(c) If not, a third subroutine determines if the buy-trigger means is about to execute, and if so executes the investment of 75% of the deposited money in the first invested account and 25% of the deposited money in the uninvested account.
(d) If none of the above, a fourth subroutine executes the investment of 50% of the deposited money in the first invested account and 50% of the money in the uninvested account.
(F) A withdrawal from the system is made from the uninvested account.
It is therefore a primary advantage of the present invention to provide a novel automated resource allocation and management system which reduces risk to capital, and which is adapted to any market having some price volatility, whereby prices move in the short term in both directions.
Another advantage of the present invention is to provide a novel automated resource allocation and management system which will provide modest gains even in mild bear markets where the market index falls, and which will provide substantial gains in a bull market.
Another advantage of the present invention is to provide a novel automated resource allocation and management system which allocates deposits of money into the system partly as a function of whether the buy or sell triggers are soon to be activated.
A still further advantage of the present invention is to provide a novel automated resource allocation and management system which is automated and rules-based, and which therefore requires little effort to manage a set of accounts.
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Hafiz Tariq R.
Robinson-Boyce Akiba
Thompson David S.
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