WO2007034170A2 - An online exchange system - Google Patents

Abstract

Art. 17 (2) (a): nothing to translate

Description

An Online Exchange System

BACKGROUND OF THE INVENTION

The present invention relates to an on-line exchange system for providing foreign exchange transactions directly between counterparties of any size, allowing them to trade directly with each other without the need for an intermediary and without credit risk.

For decades the main banks around the world have been making a large amount of money with their stranglehold over the Foreign Exchange market. They have shown a lack of willingness to offer value to all customers but their largest. This does not only affect the average person on the street, exchanging money for their annual summer holiday, but also affects more professional investors and corporations with larger sums to exchange or speculate with.

Currently banks act as counterparty every time a user wishes to exchange currencies, and have to take several types of risk into consideration, such as credit risk, settlement risk and liquidity risk. AU these risks make it impossible for a user to deal with each other directly.

In order to avoid using brokers as an intermediary, some known automated dealing systems have been developed. One such system is described in US 2003/0061069, wherein each user of the system can identify potential counterparties to a transaction - using criteria input by each user. This system also enables the users to negotiate with each other via a communication link. This system has a number of disadvantages.

Firstly, the matching computer in the above system needs to handle a huge amount of information from each user and match the information accordingly. This requires an increased capacity of processing and storage, which may end up overloading the system. Second, this system is not adapted to make trades of currency because the "product" is the same everywhere and a list of other possible users that want to trade is already available so a better price for the requested currency can be obtained if necessary. Consequently, negotiation of a currency is unnecessary and time consuming.

Further, the above system also entails a "ranking" system, which is not necessary in the fully automated system of the present invention as all clients are guaranteed to settle. This system has also been designed for interbank trading in a dedicated network and not for the normal Internet user.

Thus, the on-line currency exchange system of the present invention is adapted to provide currency exchange transactions directly between counterparties of any size and allowing them to trade directly with each other without the risk of credit and without overloading the system. This overcomes the disadvantages of the prior art.

SUMMARY OF THE INVENTION

In view of the above-described problems associated with known currency exchange dealing systems, a first specific object of the present invention is to allow online-users to make their own prices and sizes for a currency and to trade without having any credit risk on the trade. This is because the money has to be available before a trade can be entered into the system.

A second specific object is to provide each user with web accounts that are not physically separated from other users' web accounts, but allow people to trade and use the money again almost immediately. In other words, no physical movement of money is made until the user requests the money to be paid out of their web account to a third party bank.

To attain the above object, according to the first aspect of the present invention, there is provided an exchange system for providing currency trading in a non-dedicated network comprising a plurality of user terminals connected to a server, each operated by different users; an interface between the server and user terminals for displaying a trading request of currency exchange of the users and for automatically matching said request on a time stamp basis, a storage section for storing information about each user and the matched trading request; wherein the system makes a determination before a trade whether the request is possible and sends a message to the users for either proceeding or cancelling the trade depending on the determination.

Preferably, the non-dedicated network is an Internet connection and the interface is a website.

Preferably, each user deposits a trading amount in a virtual account available through the website.

Preferably, the storage section of the exchange system includes a plurality of databases interacting with each other, each having a different task in the system.

Preferably, the above system removes a fee from the user's virtual account, after a buying transaction is executed.

According to a second aspect of the present invention, there is an automatic exchange method for providing time-based currency trade of requested amounts between user accounts registered on a website comprising the steps of: confirming for each user whether the requested amount is available in the corresponding user account or said trade is cancelled; monitoring all trades sequentially starting from a recent trade so a match with the exact requested amount, type of currency and exchange rate can be found; matching partial amounts of the request sequentially starting from said recent trade when an exact match is not found; and removing a service fee when a trade is fulfilled.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is an overview of the present invention.

FIG. 2 is a flowchart according to the first aspect of the present invention.

FIG. 3 A is a flowchart describing how the system of the present invention processes a sell trade.

FIG 3B is showing a trading screen according to first aspect of the present invention.

FIG 4 shows a second aspect of the present invention. DESCRIPTION OF THE PREFERRED EMBODIMENTS

Below, preferred aspects of the present invention are explained with reference to the accompanying drawings.

According to the invention and with the help of the Internet, it is now possible to offer users, the average person / business / professional investor, the ability to buy and sell currencies at a rate close to (or better than) the spot market rate. The rate at which the transaction is done will be set by the user themselves and the rate will be matched by the user accepting that rate, to an amount that they wish to exchange. In this manner both sides to the trade will benefit. The main benefit will be that as users are keen to get their trades matched first they will post aggressive prices, and also since there is no intermediary party, this means that although a user may sell at worse than spot the buyer would be receiving better than spot. This will immediately lead to users selling as close to spot price as possible, otherwise the buyer will be receiving a rate that is better than spot. A user selling a currency may soon start posting at prices better than spot (for themselves) and still have their trades taken by buyers, the market will be pure and driven only by demand there will be no external influences to corrupt the market place. Such a system can be open to all people allowing maximum liquidity, with major players involved and increased liquidity, the buy/sell spread will decrease rapidly therefore offering best value to all customers with very small spread over those of inter-bank rates. Currently a private individual can expect a large spread of up to 20% on even the most liquid currency exchange, with this decreasing to a 1% or 2% spread for a small to medium business. With an active website and a large user base, this would quickly move to a 0% spread.

FIG. 1 is an overview of the system of the first embodiment of the present invention. The system shown in FIG. 1 includes a network 101 (for instance Internet, Intranet, etc) to communicate between users and a server 102 via an interface 100.

In the present invention, an Internet connection 101 is used, however the invention is not limited to this network and other types of non-dedicated network are also possible. The interface or website 100, hereinafter called FXFAIR.com, is connected to the Internet 101 via a server 102 and has the task to validate the deal between users (seller/buyers) by checking whether adequate funds corresponding to the requested trade are in place or not.

If the funds are missing either partially or in total, the user will be offered the opportunity to cancel the trade or enter a smaller amount.

FXFAIR.COM 100 will not operate on the same level as banks in the current Foreign Exchange markets. FXFAIR.COM 100 will operate as an easily accessible "exchange" for users to use when and where they want to, for this reason, no risk of intra-day exchange rate movements will affect FXFAIR.COM 100. Also users can trade with any other user, without any counterparty credit risk, this is because all monies must already need to be sitting in the user's web account, trades cannot be entered into without sufficient funds available to meet the payment and any associated fees. Monies held in the account will be ring fenced once allocated to a trade and the funds cannot be used for further trades unless the original trade is cancelled. As trades are only input electronically through FXFAIR.COM 100, all account management, auditing, cash flow management and price reporting can be managed electronically and shown in real time.

The interface 100 or website has been designed to be as simple to use as possible, with clear and simple instructions and an intuitive and easy-to-use format for people to sell or buy currencies. There are clear and easily understandable trading rules; trades will be matched primarily on a time stamp basis followed by trade size. In order to process all available information in an organised and efficient way, a plurality of databases are needed. The databases have the task to interact continuously with the server 102 so all available information can be stored and retrieved easily by the server.

Each user 103 has a user terminal that is connected to the interface or website FXFAIR.com 100 via the network 101 so users can view the latest currency rate entered by other users. In order to start trading, the user will be required to register with an account by entering personal details such as name, address and bank accounts with the relevant proof.

The user must deposit the relevant currency with FXFAIR.com 100 in a ring fenced account (custodian account) or virtual account and the deposit can be paid directly into the account from a bank account in this currency, by a cash deposit at a bank or from a credit card.

There are also rules as to how money can be held. The accounts will need to be held separately, but not in a physical way because of the costs and inefficiency that would be involved for such structure.

A user is able to pay or receive money out of their web account at any time, unless the money is set aside for a current live trade. If the user wants to have access to the credited money, the money will be paid back to same place where it came from, e.g. a bank account or a credit card.

The money, when credited to the websites account can then be used for trading. The user will choose the rate at which they wish to trade another currency against their "credit".

For each currency that the user is buying, a bank account must have been registered or the user will be unable to physically receive the money. However, the user will still be able to receive the money to his/her custodian account in FXFAIR.com.

The website 100 will also include safety measures to ensure that prices cannot be entered in error, people will be able to choose the level of protection they need. Sell trades which can be matched against a buy in the alternative currency will be automatically matched by the system. Any trade entered by a user will be cancelled at the user discretion and users will be able to enter a time limit on any trade.

The front page ofFXFAIR.com gives a brief introduction to the website 100 and how a login / registration box works. Every registration follows standard safety procedures and does not allow any password to be remembered on the website. However, the login name can be stored if requested by the user by ticking a "lost , login/forgotten password" box in FXFAIR.com. Users will also be required to have a "trading password" further to their login password in order to carry out a trade or offer an amount to sell.

On the main page (whether it is showing prices against one currency or multiple currencies) an option to click a sell click box is available. This option allows a user, who wants to sell the main currency against other currencies, to enter into a specific trading page. Here, the user is asked to enter a trading password, which should be different from the initial password and not storable. After entering the password the person will be met with a screen that allows them to tag in a box on the screen the amount and currency the user wish to sell.

The user will then receive a summary of the trade on the screen. This will show the amount sold and its currency, the amount bought (if trade is successful) and its currency, the trade rate and duration of the trade. All trades are settled immediately according to a priority rule. This priority rule consists in first match the whole amount of the trade on a time stamp basis. If this is not possible, the system will try to match the requested amount partially on a time stamp basis until the full requested amount is matched.

This is possible because the transfer will only take place between different virtual web accounts allocated to each user internally within the system.

This screen will also confirm the trade size and the fees. At this time the system should confirm there are sufficient funds to transact the trade - including fees. There will be two "click" boxes on this screen one to amend and one to confirm. Once the trade is confirmed the information about the trade will be entered onto the system and made visible to other users.

Since FXFAIR.com takes no positions, a trade which is not covered by the right amount will not be allowed. In other words, FXFAIR.com acts as an escrow agent guaranteeing that all trades will always settle. The system needs to be fully compliant with all. legislation and regulating bodies for any currencies it chooses to trade in.

FIG. 2 is a flowchart of a system of the present invention describing how the system processes a sell trade.

After a seller enters the currency to be sold into the interface in the computer, the system receives the information and confirms it to the user.

The confirmation involves confirming details about the trade 200, such as the currency to be sold 200a, the currency to be bought 200b, the rate of exchange 200c, the length of trading time 200d before being deleted from the system, and whether the trade can be done in part or has to be matched for the total amount called "All or Nothing" 20Oe.

The system also confirms 201 that there are sufficient funds to be entered. This must cover amount of trade plus any associated fees to FXFAIR.COM to cany out trade. These details will be taken from a storage later described in Fig 4. Funds can only be sold in the currency held in the account and fees will be charged in the bought currency.

FIG. 3A is a flowchart of a system according to the present invention describing how the system processes a buy trade.

As for the sell trade, the system confirms that the user has sufficient funds to buy the requested currency including fees 301.

The system works then through all registered sell trades on a time stamp priority 302 to match the requested amount, type of currency and exchange rate by the buyer.

The time stamp priority consists in matching the sell trades with the requested amount at time U _ι where i is an index that varies from start 1 to the maximum time N a sell trade is allowed to be in the system, in order to be matched. The system checks every sell trade for starting from t\ to fø to match the requested type of currency, exchange rate and exact amount 303. When a match is found, the fees are removed from buy side trades and the requested money is transferred between web accounts. If no match is found for the exact amount, the system continues to proceed with the next time t_t until a match is found.

If the system reaches the time t^ without being able to match the requested amount, it will automatically start checking all registered sell trades from time tj that can partially be matched 304. This continues until the whole amount of the requested currency is matched 306.

When the system encounters a sell trading amount that is larger than the required amount, it will first check that the seller has authorised a partial trade and then proceed with the partial trade.

However, if a partial trade is not allowed, the system returns to next time t_t until a match is found and fees are removed 308.

If after time t^, no match has been found, the system will cancel the trade 309 and the user is allowed to enter trade as "sell" for the amount that is left over.

All details of the money transfer, of the trade (clients, price, proceeds), and money movements are stored in different databases in order to avoid overloading the system. Any remaining funds in the buyer's web account are available to be traded immediately. Funds that have been credited into the web account can also be traded again immediately. This is because the funds do not move between banks but is transferred internally on the web accounts.

An example of a layout of a trading screen is shown in Figure 3B. The first table shows the screen that appears when a buyer wants to buy GBP and sell Euros and the second table is the layout that appears when a buyer wants to buy Euros and sell GBP.

The exchanging rates appear on the left side of each table and the best value rate is on the top of this column. The middle column shows the amount of money that is for sale. Prices are always shown as those being the most advantageous to those buying the currency.

Fees will only be charged on the buy side by FXFAIR.COM and there will only be one fee based on the total amount traded in the one transaction. Therefore if a person buys £100,000 Vs € (at 1.66), but this is made up of 100 trades of £1,000 he/she will not be charged for 100 separate trades but one trade for buying £100,000.

On the other side, if a user is buying €1,660 at 1.66, he/she will be charged for one trade when buying €. The fees charged will be in the currency the users are buying (€) and are taken from their total receipts.

Trade matching of orders will be based on a "time stamp" of when the trade was entered. If a trade is an "ALL OR NOTHING" the system will check if it can match the trade. If the trade can meet the criteria of ALL OR NOTHING then match the trade is matched and the system moves to the next trade in the queue (as per time posted). If the ALL OR NOTHING trade cannot be matched in its entirety then it will be passed over and left on the screen.

Each trading line will have a "BUY" button to the right. This can be clicked by the user where they can enter into a buy at the given price.

When the client hits the buy button they will be taken to a screen - here they will automatically have the exchange rate selected already filled in along with the currency being bought and the currency being sold. They will enter

1) The amount they wish to buy

2) Whether it is an ALL or PART trade.

The "All or Nothing" trades and PART trades, i.e. those that can be done in full or partially, are available when the user moves the mouse over the trade line. The "ALL" prices will be shown in time stamp order but the PART trades will be shown as one total. This will give the buyer the detail he needs for eventually completing the trade and avoid the risk of uncovered exposure. The trading screen will also show the users how much they have in their web account of the currency to be sold.

At all times, users will be able to "Cancel" the trade by hitting a relevant button on the trading window. After they have filled in all the details they will hit the "Confirm" button. The users will be given a summary screen where they can check the details including the amount the trade will cost i.e. how much they will have to sell and the amount of fees (in the buy currency). The screen will also show them how much of the "sold" currency they have in their web account post trade.

The system will confirm they have the relevant amount of currency to sell and post a warning message if they have not registered to an external account to pay bought currency into. The users will be told that they will have a web account set up automatically but will not be able to physically pay the money out of the web account until they have registered a verified bank account or credit / debit card. They will then hit the "trade" button and the trade will be entered into the system.

If it is an ALL trade the system will work through the available Sells and only fill the order if it can be matched in totality, if not the trade will go uncompleted and the buyer will be offered the option of entering the trade as a sale trade. If they wish it to be entered as a Sell trade it will be posted on the relevant screen. The new Sell trade will be taken as a fresh order with respect to fees.

If the trade is a PART trade the system will match the trades meeting the requirements up until the order is filled. If the order cannot be totally filled the client will be offered the opportunity to post the trade amount remaining on the relevant sell screen or be offered the chance to put in a new buy order at another price (this will be taken as being a fresh trade with respect to fees) but will be time stamped at the time of the final completed buy trade.

When, the trade is completed, the currency bought will be credited to the clients web account and the fees taken out. The system will then create a fall audit trail of transaction, such as trade time, date price, currencies and counterparties to be stored in the database. The details of the trade are sent to a separate storage to be analysed by users.

In terms of payment, the user will physically pay/receive monies through their account management screen and not at time of trade. The money will be automatically received or transferred to the user web account. However, the user can request to receive the money from buy trades or additional funds to a registered bank account of the client's choice or transferred between registered internal users bank accounts for a minimal fee.

Every time money is paid out, the system verifies that the money is available and not tied up in a trade. If a trade is ongoing, the user can request cancellation of the trade so the money can be paid out.

Regarding the timing of payment, close of business will vary between currencies traded but will be based on banking close of business day for each currency respectively. Settlement between the various Web accounts post trade will be close to simultaneous. If clients wish to pay monies out of their web account it will follow standard banking business days. For larger amounts a client may choose to pay monies by chaps or swift for an additional cost.

FIG 4 shows a second aspect of the present invention including six databases to store information received from users via the interface 100.

However, the present invention is not limited to this number of databases and databases could be added to the system if the system requires more storage for additional features, services, etc.

Each database 400 handles different information, such as current trading 401, client web account 402, previous trading history 403, trading audit trail 404, client details 405, and FXFAIR.com fees^anking details 406. The current trading database 401 contains details of all live trades. It will be responsible for verifying amounts available from the user web account details and whether accounts have been registered to the buy side of the trade. If the funds are not available on the web account, a warning message will be posted about paying funds out.

The database 401 will also post details of available trades, match trades by working through orders, post trade details in a stripped down format previous trading day history details, post an audit trail of trade to "trading audit trail" database, removing trades from internet screen when done and manage fee rates per currency. These fees will be changeable at short notice to allow maximum marketing flexibility and they will also link into the client details databases to allow individual clients to receive "one off' benefits or promotions.

The Client Web Account Details database 402 holds details on monies held in client web accounts. The database 402 is responsible for verifying receipt of monies into the FXFAIR.com account from clients as shown in the FXFAIR.com fees/banking database, makes sure the clients accounts are kept safe and segregated within the FXFAIR.COM bank accounts, makes those monies available to trade when they are physically credited to the account, ensures the monies are suspended once allocated to a trade, posts amounts available to the current trading database, holds details of where monies were paid from by client (credit card or bank account etc.), makes sure monies are returned in the order they were received when repaying monies, makes payments to verified accounts of clients when they are received as proceeds of buy, notes if client has details of a bank account if buying a currency and, if not, a warning message to the trading database is posted if such a trade should take place, and then holds an audit trail of money movements between the client web accounts and external accounts.

The Previous trading history database 403 holds historical information of trading for analytical purposes. It will not hold account details of the people involved in the trading, just the currencies exchanged, the amounts and the date it will also hold information of the spot rate at time of trade to monitor spread over spot for each currency. The Trading Audit Trail database 404 holds accountancy and reporting procedures. It shows what money was traded by whom and links with the Web Account database.

The Client database 405 holds all details of clients it will show there personal details and will link to the Client web Account database.

The FXFAIR.com fees/banking database 406 holds details of the fees taken for each trade and from which client. It will also link with the Client Web account to ensure monies are available to trade and have been segregated properly.

Claims

WHAT I CLAIM IS:

1. An exchange system for providing currency trading in a non-dedicated network comprising: a plurality of user terminals connected to a server, each operated by different users; an interface between the server and user for displaying a trading request of currency exchange of said users and for automatically matching said request on a time stamp basis; a storage section for storing information about each said user and the matched trading request; wherein the system makes a determination before a trade whether the request is possible and sends a message to the users for either proceeding or cancelling the trade depending on the determination.

2. An exchange system according to claim 1 wherein said non-dedicated network is an Internet connection and said interface is a website.

3. An exchange system according to claim 2 wherein each user deposits a trading amount in a virtual account available through the website.

4. An exchange system according to any of the previous claims where the storage section is a plurality of databases interacting with each other, each having a different task in the system.

5. An exchange system according to claims 2, 3 or 4, which removes a fee from the user virtual account, after a buying transaction is executed.

6. An automatic exchange method for providing time-based currency trade of requested amounts between user accounts registered into a website comprising the steps of:

a) confirming for each user whether said requested amount is available in the corresponding user account or the trade is cancelled. b) monitoring all trades sequentially starting.from a recent trade so a match with the exact requested amount, type of currency and exchange rate can be found; c) matching partial amounts of said request sequentially starting from said recent trade when an exact match is not found; d) removing a service fee when a trade is fulfilled.

7. An exchange system substantially as herein described with reference to the accompanying figures.

8. An automatic exchange method substantially as herein described with reference to the accompanying figures.