Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
1998-11-02
2003-01-07
Choi, Kyle J. (Department: 3623)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
C705S035000, C705S03600T, C705S001100
Reexamination Certificate
active
06505174
ABSTRACT:
COPYRIGHT NOTICE
A portion of the disclosure of this patent document contains material which is subject to copyright protection. The copyright owner has no objection to the facsimile reproduction by anyone of the patent document or of the patent disclosure as it appears in the Patent and Trademark Office patent files or records, but otherwise reserves all copyright rights whatsoever.
BACKGROUND OF THE INVENTION
1. Field of the Invention
This invention relates in general to computer-implemented financial systems, and in particular to an improved automated securities trading system.
2. Description of Related Art.
Computer-implemented securities trading systems are well known in the art. One such system is that disclosed in U.S. Pat. No. 4,674,044, issued to Kalmus et al., entitled “Automated Securities Trading System”, and incorporated by reference herein. These computer-implemented securities trading systems obtain bid and asked trades based on the bid and asked prices. However, there is generally still a human component to such systems.
For example, most financial markets also employ one or more market makers called “specialists.” These specialists fill customer orders from the specialist's inventory position if there are no matches for the customer orders in the open market. In the prior art, the specialist function is not automated, but is performed by a firm or individual. Thus there is a need in the art for an improved computer-implemented trading system that includes an automated specialist function to create a market for the securities traded and to lessen the volatility of smaller securities markets.
SUMMARY OF THE INVENTION
Accordingly, it is an object of this invention to solve the problems with existing systems described above.
Another object of the present invention is to lessen the price volatility of derivative financial instruments traded in narrower markets.
Another object of the present invention is to provide an on-line virtual trading system.
Another object of the present invention is to provide a virtual specialist program that engages in trading in the market to offset the price volatility and to provide liquidity to the market.
Another object of the present invention is to provide a security instrument pricing system which depends from buy-sell trade imbalances.
Another object of the present invention is to provide a security instrument price control system which controls volatility of a security.
Another object of the present invention is to provide a security instrument trade halting system to prevent extreme price volatility for a security instrument.
Another object of the present invention is to provide a ghost trader for a security in order to generate trading activity so that adjusted market control factors take effect.
Another object of the present invention is to provide a virtual reserve bank program to control money market interest rates and global volatility for the virtual market.
Another object of the present invention is to provide an on-line market research tool which researchers can access to obtain statistical information based on trading behavior.
To overcome the limitations in the prior art, and to overcome other limitations that will become apparent upon reading and understanding the present specification, the present invention discloses a method, apparatus, and article of manufacture for a computer-implemented financial management system that permits the trading of securities via a network. In accordance with the present invention, a server computer receives buy and sell orders for derivative financial instruments from a plurality of client computers. The server computer matches the buy orders to the sell orders and then generates a market price through the use of a virtual specialist program executed by the server computer. The virtual specialist program responds to an imbalance in the matching of the buy and sell orders.
In one embodiment, a database of securities is provided for trading in an open, computerized, exchange. Securities are listed which relate to movies, actors, products or service companies.
Users may access the system over a network, using a standard interface. An exemplary system comprises a Web server with an SQL compliant back-end database, with a standardized Web browser interface. Using the Web browser, the user may register for the on-line trading system over a network, providing demographic information, such as age, sex, location, occupation, income, hobby interest, and the like. Once registered, the user is given the option of choosing a unique userID which will be used for logging in after registration. In providing the demographic information, the user also provides an e-mail address to which a randomly assigned password and other instructional information can be forwarded.
Once the user has received a password, the user may freely log in and out of the system over the Web by selecting a start button present on a Web home page for the system. However, while the password is being forwarded to the new user, the new user is given temporary access to the system so that trading can begin instantaneously.
Automatically, the user is provided with a fixed quantity of virtual currency in virtual dollars (V$) from a reserve bank program, described below, to begin trading with. This quantity can either be considered a loan from the reserve bank program, for which interest is charged, or a gift.
After logging in, the user's portfolio summary page is displayed which displays the user's current cash balance, amount held in stocks, bonds, and other types of securities. When the new user logs in, the cash value of the user's portfolio is represented solely in cash, or in a money market account. The cash in the user's portfolio accrues at an interest rate set by a virtual reserve bank program.
The user may trade security instruments by typing in the symbol for the instrument for which a purchase is desired in a buy-sell area of the page. A quantity is also specified in the buy sell area. If the user does not know the symbol for a particular instrument, a lookup or search function is provided in another area of the screen using standard graphical user interface (GUI) features such as drop-down list boxes, text search boxes, or slider bar lists. Alternatively, a ticker tape style updating menu at the bottom of the screen displays available instruments with the corresponding instrument prices.
Once the user has successfully entered the symbol for an available instrument, a buy button may be pressed in the buy-sell area of the page. If the user has enough cash on account, and if the instrument is available for trading, then a confirmation screen appears before execution of the transaction. Upon confirmation, the trade is executed, and the cash is debited from the user's account.
If the user wishes to sell a security instrument, the same procedure is followed, except, a sell button is clicked on in the buy-sell area of the Web page. After confirmation, the market price for the shares sold is added to the user's account, and the shares are made available in the system for fulfilling purchase orders.
The system includes a virtual specialist program which, among other things, handles fulfillment of buy and sell orders. In the embodiment of the present system, the virtual specialist program controls the economy, and provides it with liquidity. In one embodiment, the virtual specialist program provides instantaneous liquidity by fulfilling all orders, whether or not there are equal and matching sell orders to offset buy orders, and vice versa. The system keeps a running net movement balance for the quantity of buy or sell trades which the virtual specialist program had to fulfill without offsetting sell or buy trades. The imbalance is stored as a positive number if the buy-sell imbalance represents more buy trade orders executed than sell orders, or a negative number if the buy-sell imbalance represents more sell orders executed than buy orders.
Unlike the case with non-virtual markets, the virtual
Burns Michael R.
Keiser Timothy M.
Brown & Raysman Millstein Felder & Steiner LLP
Choi Kyle J.
HSX, Inc.
Robinson-Boyce Akiba
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