AU2021107379A4 - System, Program, and Method for Loan Originating and Loan Financing - Google Patents

Abstract

SPV Loans ABSTRACT Embodiments include a system for loan origination and automated loan financing, the system being operated by or on behalf of a trading entity and comprising a computing apparatus configured to perform a method comprising: maintaining a user registry of user accounts, the system providing remote access to each user account via an authentication process, via which remote access a user of the user account accesses functionality including purchasing and trading financial instruments issued and/or traded by the trading entity; maintaining an investment registry of investment product instances, including instances of financial instruments, issued and/or traded by the trading entity, the investment registry assigning ownership of each investment product instance to a user account maintained by the user registry; maintaining a special purpose vehicle, SPV, being an amalgamation of secured loans originated by the system and meeting a condition for financing via the SPV; originating secured loans to borrower entities in accordance with lending criteria predefined by the system, the secured loans meeting the condition for financing via the SPV; issuing instances of financial instruments against the amalgamation of secured loans in the SPV. A process for issuing the instances of financial instruments includes: periodically at the end of each period, based on a periodicity of not longer than two business days: calculating a value of new instances of financial instruments to issue based on a change in loan assets and a change in loan liabilities in the period, loan assets being secured loans issued by the system and loan liabilities being instances of financial instruments previously issued by the system to fund the SPV and still active; determining a distribution of the calculated value among one or more new instances of financial instruments, and for each of the new instances of financial instruments, determining a duration, and determining an interest rate; broadcasting an offer to purchase the new instances of financial instruments to users of the system; and executing a transaction of the new instances of financial instruments to respective users of the system in exchange for assets in payment via the respective user account, including entering the new instance of financial instrument into the investment registry with ownership assigned to the respective user account. [FIGURE 1] 3/4 S301 Credit Supply, Data & bids Loan demand & Data Is imwqfr S306 Borrowers Loan aLenderst/eLoan Demand §m supply 20 awcirito)10D Loans repaid by borrowers A LecrIetean loae financial instruments upcon S302 successful bid S307 Approved Loans enter pool S303 and managed via system Financial instruments automatically issued by System according to funding requirements Real-time monitoring of loan pool, financing structure S30 (including interest rate & duration etc.) Warehouse funding SPV S304 52 FIGURE 3

Description

3/4

S301 Credit Supply, Data & bids Loan demand & Data Is imwqfr S306 Borrowers Loan aLenderst/eLoan Demand §m supply 20 awcirito)10D Loans repaid by borrowers A LecrIetean loae financial instruments upcon S302 successful bid S307 Approved Loans enter pool S303 and managed via system Financial instruments automatically issued by System according to funding requirements Real-time monitoring of loan pool, financing structure S30 (including interest rate &

duration etc.) Warehouse funding SPV

S304 52

FIGURE 3

535308 SPV Loans

System, Program, and Method for Loan Originating and Loan Financing

FIELD OF INVENTION

The invention lies in the field of financial technology, and in particular relates to technology for

originating and financing loans.

BACKGROUND

Warehouse financing is a form of financing where a financial services business can originate

and amalgamate loans into a 'warehouse' or special purpose vehicle (SPV) which in turn is

.0 financed by wholesale funding from larger financier/s. This form of financing is typically used

by organisations who wish to originate loans whilst recognising the flexibility and capital

efficiency inherent in a warehouse funding structure.

A special purpose vehicle is a distinct financial entity created by an organisation such as a

.5 loan originator to amalgamate and fund loans or other financial instruments sharing common

characteristics in isolation from the remainder of the balance sheet of the organisation. For

example, this enables loans having particular characteristics to be funded in a manner which

suits those particular characteristics.

Conventionally, a loan originator originates loans fulfilling the criteria for funding via the SPV,

which it funds itself until an investor is found to fund the SPV. The loan originator and investor

(financier) agree in advance on the criteria, that is, the particular characteristics of loans to be

funded via the SPV. The SPV reaches a critical value, say $50m, before an investor is found.

Warehousing refers to the act of amalgamating the loans into the SPV.

A key advantage of the warehouse funding structure is that it allows the originator to write

loans using mostly credit rather than its own balance sheet. The warehouse financier and

originator agree in advance on the characteristics of loans that may be funded by the

535308 SPV Loans

warehouse facility and this clarity permits the originator to write substantial volumes of

complying new loans, while giving the financier comfort on the use of their funding and

resulting exposure to credit risk.

Nonetheless, a warehousing financing structure, especially in the formative stages of its

growth, is exposed to concentration risk to the financier of the facility. This means that the

SPV may be materially affected by externalities such as the risk of the financier becoming

insolvent. Accordingly, warehouse financing structures tends to lack robustness unless large

enough to attract multiple financier counterparties.

.0

The SPV is exposed to the investor and lacks robustness.

Warehouse financing structures also may suffer from issues that may be encountered by any

other borrower. For example, there may be friction between the originator and the financier

.5 concerning: the criteria for new loans; the cost of the wholesale funding; and the mismatches

between the duration of loan assets and liabilities being three of the major considerations.

Essentially, this friction between the originator and financier can be characterised by an

economic theory known as the principal-agent problem. This situation occurs when two parties

have different interests and asymmetric access to information, where the principal cannot

ensure that the agent is always acting in the principal's best interest. Accordingly, warehouse

facilities are generally highly bespoke and require a great deal of negotiation over time to

protect the interests of both parties.

There is a principal agent issue where the interests of the investor are not aligned with the

interests of the loan originator. Conventionally, this is addressed by the loan originator funding

a share of the SPV themselves, say 10% in a first loss position. However, this has its own

535308 SPV Loans

problems, such as exposing the loan originator to risk. Furthermore, it provides merely a

symbolic rather than a substantive solution to the principal agent issue.

Investors not having sufficient funds to fully fund an SPV cannot participate in the investment.

This results in a lack of competition which effectively drives up the cost of funding SPVs and

thus the cost of borrowing from SPVs.

The conventional funding model is not well-suited to SPVs which demonstrate dynamism in

asset value, as typically funders of these facilities require a fixed term and a maximum funding

.0 amount which can restrict loan growth. This can place undue financial stress on the loan

originator due to high credit costs in the case of the facility being underutilised, and high equity

co-funding requirements in the case of strong loan growth. Consequently, this can lead to

elevated structural risks as the SPV grows.

.5 Embodiments address, wholly or partially, one or more issues with conventional SPV funding

technology.

SUMMARY OF INVENTION

Embodiments include a system for loan origination and automated loan financing, the system

being operated by or on behalf of a trading entity and comprising a computing apparatus

configured to perform a method comprising: maintaining a user registry of user accounts, the

system providing remote access to each user account via an authentication process, via which

remote access a user of the user account accesses functionality including purchasing and

trading financial instruments issued and/or traded by the trading entity; maintaining an

investment registry of investment product instances, including instances of financial

instruments, issued and/or traded by the trading entity, the investment registry assigning

ownership of each investment product instance to a user account maintained by the user

registry; maintaining a special purpose vehicle, SPV, being an amalgamation of secured loans

535308 SPV Loans

originated by the system and meeting a condition for financing via the SPV; originating secured

loans to borrower entities in accordance with lending criteria predefined by the system, the

secured loans meeting the condition for financing via the SPV; issuing instances of financial

instruments against the amalgamation of secured loans in the SPV. A process for issuing the

instances of financial instruments includes: periodically at the end of each period, based on a

periodicity of not longer than two business days: calculating a value of new instances of

financial instruments to issue based on a change in loan assets and a change in loan liabilities

in the period, loan assets being secured loans issued by the system and loan liabilities being

instances of financial instruments previously issued by the system to fund the SPV and still

.0 active; determining a distribution of the calculated value among one or more new instances of

financial instruments, and for each of the new instances of financial instruments, determining

a duration, and determining an interest rate; broadcasting an offer to purchase the new

instances of financial instruments to users of the system; and executing a transaction of the

new instances of financial instruments to respective users of the system in exchange for

.5 assets in payment via the respective user account, including entering the new instance of

financial instrument into the investment registry with ownership assigned to the respective

user account.

The broadcasting may be transmitting and/or transmitting via one or more transmission

mechanisms.

Optionally, determining the interest rate is performed by an algorithm or n-dimensional lookup

table based on factors or dimensions including: supply, wherein supply is measured by the

calculated value of new financial instruments to issue; demand, wherein demand is measured

by rate of executed transactions of new financial instruments to users of the system over a

relevant period; value, wherein value is the value of the respective financial instrument.

535308 SPV Loans

Optionally, determining the distribution of the calculated value among one or more new

financial instruments is performed by an algorithm based on complying with a plurality of

conditions including: maintaining a total number of financial instruments issued against the

SPV at more than 100, more than 1000, more than 5000, or more than 10000; maintaining a

predefined frequency distribution of values among the entirety of the financial instruments

issued against the SPV; issuing financial instruments against the amalgamation of secured

loans in the SPV.

Optionally, the method further comprises: receiving pledges to purchase the new financial

.0 instruments from users of the system and, for each of the new financial instruments, assigning

a unique right to purchase each financial instrument to a user of the system from which said

pledge was received on a first come first served basis.

Optionally, the condition for financing via the SPV, is that the loan is a margin loan traded by

.5 the trading entity and is secured against financial instruments listed in the investment registry.

Optionally, the periodicity is one from among:

not longer than one business day;

not longer than half a business day;

not longer than two hours;

not longer than one hour.

Optionally, calculating the value of new instances of financial instruments comprises:

calculating an imbalance between loan assets and loan liabilities in the SPV based on an

imbalance at the start of the period and a change in loan assets during the period and a change

in loan liabilities during the period; and if there is an imbalance of loan assets over loan

liabilities, the value of new instances of financial instruments is the value of the imbalance or

535308 SPV Loans

is based on the value of the imbalance; and if there is an imbalance of loan liabilities over loan

assets, the value of new instances of financial instruments is nil.

Optionally, the system is a distributed computing system comprising plural computing devices

each comprising memory hardware, processor hardware, and network interface, the plural

computing systems being configured to perform the method collectively using respective

processor hardware and memory hardware and exchanging data via the respective network

interfaces.

.0 Optionally, the system is a cloud computing system

Embodiments include a computer-implemented method for loan origination and automated

loan financing, the computer-implemented method being executed by or on behalf of a trading

entity, the computer-implemented method comprising: maintaining a user registry of user

.5 accounts, providing remote access to each user account via an authentication process, via

which remote access a user of the user account accesses functionality including purchasing

and trading financial instruments issued and/or traded by the trading entity; maintaining an

investment registry of investment product instances, including instances of financial

instruments, issued and/or traded by the trading entity, the investment registry assigning

ownership of each investment product instance to a user account maintained by the user

registry; maintaining a special purpose vehicle, SPV, being an amalgamation of secured loans

originated by the system and meeting a condition for financing via the SPV; originating secured

loans to borrower entities in accordance with lending criteria predefined by the system, the

secured loans meeting the condition for financing via the SPV; issuing instances of financial

instruments against the amalgamation of secured loans in the SPV. A process for issuing the

instances of financial instruments includes: periodically at the end of each period, based on a

periodicity of not longer than two business days: calculating a value of new instances of

financial instruments to issue based on a change in loan assets and a change in loan liabilities

535308 SPV Loans

in the period, loan assets being secured loans issued by the system and loan liabilities being

instances of financial instruments previously issued by the system to fund the SPV and still

active; determining a distribution of the calculated value among one or more new instances of

financial instruments, and for each of the new instances of financial instruments, determining

a duration, and determining an interest rate; broadcasting an offer to purchase the new

instances of financial instruments to users of the system; and executing a transaction of the

new instances of financial instruments to respective users of the system in exchange for

assets in payment via the respective user account, including entering the new instance of

financial instrument into the investment registry with ownership assigned to the respective

.0 user account.

Embodiments include a computer program or suite of computer programs which, when

executed, cause the executing computer device or devices to perform a computer

implemented method disclosed herein, or to operate as a system disclosed herein.

-5

The financial instruments may be fixed income instruments.

Advantageously, the system provides a technological platform enabling warehouse lending in

a closed loop, that is, the lending and investing are executed on the same system. The

platform opens up the facility for investor users to lend capital to aloan warehouse (i.e. special

purpose vehicle) via selecting one of a spread of financial instruments in which to invest, with

a fixed duration and fixed interest rate. Advantageously, the system operator, which is typically

the loan originator, is provided with a mechanism to fund the loans bundles into the SPV more

or less immediately. According to conventional schemes, no such technological platform for

funding SPVs exists, and loan originators fund loans themselves until a critical value is

reached, typically around $50m minimum, before a single lending entity can be found to invest

in the SPV. This is inefficient, volatile, and leads to the loan originator being exposed to

significant credit risk.

535308 SPV Loans

The system leverages a user base of individual investor users, or potential investor users, to

fund credit in the SPV via a distribution of small value (i.e. <1% of the value of the SPV)

financial instruments that the system operator has control over in terms of duration, value, and

interest rate. The SPV is funded by a large number of small value financial instruments, with

a high turnover (i.e. fixed durations of 1 month, 2 months, 3 months, means financial

instruments are maturing frequently relative to a traditional funding model. This high turnover

provides an element of control to the system operator. A maturing financial instrument (i.e. at

the end of its fixed term) may be repaid to the lender, or may be renewed (for example via

.0 acquiescence by the lender and the system operator). If repaid, a new financial instrument

may be issued by the system, depending on a change in SPV assets in the relevant period

(i.e. day).

The system operator has control to distribute newfinancial instruments over different durations

.5 and values, thereby to balance financial certainty (i.e. larger value of long term fixed income

financial instruments) vs ability to react quickly to changes in the SPV asset value (i.e. larger

value of short term fixed income financial instruments).

The system is particularly well configured for funding non-fixed-term loans such as margin

loans, since the ability to fund the SPV via alarge number of small loans introduces an element

of control which enables the system operator to be responsive. For example, should a large

value of margin loans be repaid on a particular day, the system operator may not issue any

new financial instruments on that day or the following day or days, until equilibrium is reached

between the assets and liabilities of the SPV. Wherein margin loans are assets to the SPV

and financial instruments issued to fund the SPV are liabilities (where financial instruments

are discussed in the context of the SPV it is assumed that they are financial instruments issued

to fund the SPV).

535308 SPV Loans

Embodiments provide an automated warehouse funding system, that is, SPV financing

system. Specifically, embodiments provide a low-touch, automated system that automatically

issues financial instruments against a secured pool of loans on a periodical basis to maintain

balance of the SPV. Embodiments operate within a closed loop, with both borrowers and

lenders/investors (purchasers of the issued financial instruments) accessing the system via

the system operator's platform. Accordingly, embodiments are capable of automatically

providing immediate price discovery for the issued instruments based on real-time supply and

demand, whilst concurrently also able to balance the duration of the warehouse structures

assets and liabilities by optimising the duration of the issued financial instruments without

.0 human intervention.

Conventionally, SPV financing is performed in a highly manual fashion via a specialised

treasury function, and with third parties usually involved in each various sub-process. The

removal of friction from this process and consequent material time savings has enormous

.5 implications from the cost side which will subsequently lead to a large competitive advantage

for the system operator over time.

Embodiments at least partially address issues previously highlighted with conventional SPV

financing, namely: the cost of funding and associated price discovery, the criteria for new

loans, and the balancing of loan assets and liabilities by duration. In addition, embodiments

address the principal-agent problem as the system operator (agent) is heavily incentivised to

act in the principal's best interests via the structural alignment of interests.

There is structural alignment of interests as the interest rate for the issued instruments is

determined by lender demand as well as the system operator being incentivised to set

appropriate loan criteria. If lenders do not have a consistently positive experience investing in

the issued financial instruments, then over time lender demand will drop thereby driving up

the interest rate required to attract investment. This would compress the interest margin and

535308 SPV Loans

consequent profits able to be achieved by the system operator. As the issued instruments are

only accessible via the system operator's platform, the operator has a vested and financial

interest in ensuring the sustainability and survive-ability of the system users.

Embodiments define a closed loop, in which it is possible for an individual to be both a

borrower and a lender. For example, Anne might hold 100 shares of CBA and she has

borrowed against this stock to increase her market exposure. She may also hold cash within

her portfolio that she requires in 30 days, but wishes to maximise her yield in the interim.

Accordingly, Anne may decide to purchase a financial instrument issued by the system that

.0 has a duration of 28 days, achieving her objectives. Accordingly, the system operator is

structurally aligned to acting in the best interest of both borrowers and lenders.

Embodiments allow the system operator to automatically balance and match the duration of

the warehouse structure's assets and liabilities on a short term or even daily basis. The

.5 mismatch of assets and liabilities in terms of duration, has led to the downfall of many financial

institutions throughout history and is still a key problem that exists today. The regular issuance

of short-term financial instruments to lenders is a powerful lever, as issuance of new

instruments can be ratcheted up in the case of system growth, or tapered down in the case of

system contraction - leading to an enormous reduction in systematic risk as well as credit risk.

This effectively allows the loan pool to accept loans that can have no fixed tenor and can be

repayable without penalty; thereby reducing costs and risk for all parties.

DETAILED DESCRIPTION

Embodiments are described below, with reference to the accompanying drawings, in which:

Figure 1 illustrates a hardware architecture of an embodiment;

Figure 2 illustrates a flow of processing in an embodiment;

Figure 3 illustrates hardware and a flow of processing in an embodiment; and

Figure 4 illustrates a computing apparatus of an embodiment.

535308 SPV Loans

Figure 1 illustrates a hardware architecture. A system 10 for executing and managing margin

loans comprises, for example, an HTTP layer 12, a messaging layer 14, and an application

layer 16. The individual layers and their respective functionality and interactions are discussed

in more detail below.

The system 10 may be implemented by a server such as a web server. The server may be

virtualized and operating on one or more physical servers. The system 10 is accessible to a

borrower entities 20 and users 100. For example, the system 10 and the borrower entities 20

.0 are in two-way data communication with one another, such as via a user interface provided

by the system 10. Furthermore, the users 100 and the system 10 are in two-way data

communication with one another, such as via a user interface provided by the system 10. The

system 10 may be operated by or on behalf of a brokerage, which also serves as a loan

originator at least for loans fulfilling criteria for membership of the SPV 52. Users 100 may also

.5 be referred to as investors or investor users in the context of the present disclosure.

The borrower entities 20 and users 100 are illustrated as computers since the computers

provide a mechanism to communicate with the system 10 and provide any inputs, such as

requests, approvals, required to apply for loans and to purchase financial instruments.

However, alternative devices such as smartphones, tablets, or server type computers may be

used by the borrower entities 20 and/or users 100 to interact with the system 10.

The system 10 is implemented by a computing apparatus which may be a distributed

computing system, with an architecture comprising a set of functional layers as illustrated by

the system 10 of Figure 1 comprising an HTTP layer 12, a messaging layer 14, and an

application layer 16, that work cooperatively to perform the methods disclosed herein, such

as illustrated by Figure 2. The HTTP layer 12 may be a manifestation of a user interface such

as a graphical user interface provided by the system 10 to users 100.

535308 SPV Loans

The system includes an application layer 16 which is the implementation of the rules

necessary for the origination of the loans to the borrower entities 20 and the trading of the

financial instruments with the users 100, and to other interactions between the system 10 and

users 100. The layers (or modules) interpret a loan application semantically from the borrower

entities 20 to perform a series of steps which will result in the creation of a new loan in the

SPV 52 and which will be taken into account in the next rebalancing of the SPV 52. The

messaging layer 14 is the interface to the functionality to the other layers.

.0 A messaging layer 14 acts as the interface to the computers of the borrowing entities 20 and

users 100. The messaging layer 14 receives messages, parses them and extracts valid values

from various fields. It then determines the appropriate software component in the application

layer 16 that handles the relevant stage of the process and interacts with that software

component to perform the necessary function. Conversely, the application layer 16 uses the

.5 functionality provided by the messaging layer 14 to construct valid messages and send them

to the intended recipients.

The HTTP layer 12 is a mechanism for receiving user interactions and may be interacted with

via a user interface. A user in this context is a user, as in an investor user 100, or a borrowing

entity 20. A user interface is provided by the system 10 for borrowing entities 20, and a user

interface is provided by the system 10 for investor users 100. Each user interface may be

implemented as a web-based interface, and they may be accessed via a single portal, for

example by logging in to a generic user account (generic in this context meaning regardless

of operation as borrowing entity 20 or investor user 100). Borrowing entities 20 and investor

users 100 interact with the system 10 by navigating through user interface screens in a web

browser application navigated to the user interface which inputs requests to the HTTP layer

12, or in a dedicated application. Each user action results in one or more HTTP requests that

are sent to a web server of the system 10 and reach the HTTP layer 12. The HTTP layer 12

535308 SPV Loans

receives requests made by the user through the web browser, parses and validates them and

interacts with the application layer 16 to perform associated functionality.

The term user is taken to be an investor user, as distinct from borrowing entities, which are

also users of the system, but are referred to as borrowing entities to provide a clear distinction

from investor users. A single legal entity may be a borrowing entity and an investor user. The

system 10 provides users logged in to their respective user accounts to access one or more

user interfaces, wherein one user interface enables them to operate as an investor user (that

is, to purchase financial instruments), and another user interface enables them to operate as

.0 a borrowing entity, i.e. to apply for a loan via the system 10. Wherein the loan may be a loan

fulfilling the criteria for funding via the SPV 52, such as being a margin loan issued by the

system and secured against investment product instances registered in the investment

registry 50.

.5 Communication between the borrower entities 20 and the system 10 may be over a network

such as a local area network, or a distributed network. Communication between the borrower

entities 20 and the system 10 may be over the internet.

Communication between the users 100 and the system 10 may be over a network such as a

local area network, or a distributed network. Communication between the users 100 and the

system 10 may be over the internet.

Market data 40 is one or more live data feeds accessible to the system 10, for example via

subscription. The market data 40 is information including live prices (i.e. valuations) of

investment product instances and specifically of components of investment product instances

such as stocks and shares.

535308 SPV Loans

Financial instruments is a generic term and includes generic products offered or otherwise

traded by a brokerage, including funds, stocks, bonds, options, derivatives, other financial

instruments, assets. The term instance is applied to distinguish a specific instrument or asset

from its corresponding generic. For example, the system uses financial instruments, such as

fixed income instruments, to fund the SPV. A user may purchase a fixed income instrument

instance via their user account. The financial instruments discussed in the context of the SPV

are financial instruments issued to fund the SPV, unless otherwise specified (for example it

may be specified that the SPV is for a particular type of financial instrument as loans, such as

mortgages or margin loans). The financial instruments issued to fund the SPV may be fixed

.0 income instruments.

In this document, the term investment product is used to refer to a generic product offered or

otherwise traded by a brokerage, including funds, stocks, bonds, options, derivatives, other

financial instruments, assets and other marketable securities (including cryptocurrencies and

.5 other emerging alternative assets). The term investment product instance is used to refer to a

specific investment in an investment product made by an investor and therefore being an

actual property owned by or on behalf of the investor and having an actual value/price. The

term trading entity refers to the brokerage or equivalent that packages, transacts and sells

investment products to investors. The trading entity runs the system 10, that is, the system 10

is operated for or on behalf of the trading entity. For example, the trading entity is a legal entity

executing transactions including stock transactions, which are considered secondary market

trading of stock that is already issued; and primary market stock issuances such as new share

subscriptions for a listed company.

The financial instruments may be a type of financial instrument referred to as a fixed income

instrument, traded by the trading entity. The system operator is a trading entity insofar as it

sells financial instruments, in other words, it enables investor users to invest in financial

535308 SPV Loans

instruments. Each fixed income instrument is for a particular value, at a particular interest rate,

and for a fixed term.

A margin loan is an investment loan facilitating a borrower entity borrowing money (credit)

from a lending entity to invest in shares, managed funds, and other approved financial

products. Security for the margin loan is shares, managed funds, and cash owned by the

borrower entity. The criteria for funding via the SPV 52 may be that the loan is a margin loan

originated by the system 10 and secured against investment product instances registered in

the investment registry 50.

.0

The system 10 maintains a user registry 80 and an investment registry 50. The investment

registry 50 and the user registry 80 may be registries stored on the same computing devices

or on separate computing devices. The computing devices on which the investment registry

50 and the user registry 80 are stored may be the server implementing the system 10 or may

.5 be remote from the system 10 and accessible by the system 10. Users 100 register for user

accounts, respectively, with the system 10. The accounts provide functionality within the

system to holders or operators of the accounts upon satisfaction of an authentication process.

For example, accounts may be protected by passwords, biometrics, and/or dynamic

authentication code.

Optionally, a separate registry may be maintained for borrower entities 20. Alternatively, the

borrower entities may have user accounts maintained by the user registry 80, with the option

to borrow being provided by one user interface and the option to invest being provided by

another interface. A single user account may both borrow and invest, wherein invest is

purchasing fixed term instruments from the SPV, or more broadly purchasing any financial

instrument from the system operator. In a particular example in which the SPV 52 is for margin

loans secured against investment product instances registered in the investment registry 50,

it is inherent that the borrowing entities 20 are already users of the system that hold investment

535308 SPV Loans

product instances registered in the investment registry. Therefore, in summary, the user

registry 80 may be for user accounts for users 100 and borrowing entities 20.

The system 10 may provide user interfaces for communication with the users 100 and

borrowing entities 20, for example to enable input of biometric data and to enable interaction

with the system functionality provided to the account operators. The system 10 and the

borrowing entity 20 are in two-way data communication with one another, such as via a user

interface provided by the system 10. The user interface may be provided as part of a web

page, web application, or client:server application. Said web page, web application, or

.0 client:server application may be served by the system 10 or by one or more servers operated

by or on behalf of the system 10.

Furthermore, the system 10 and the users 100 are in two-way data communication with one

another, such as via a user interface provided by the system 10. The user interface may be

.5 provided as part of a web page, web application, or client:server application. Said web page,

web application, or client:server application may be served by the system 10 or by one or more

servers operated by or on behalf of the system 10.

The system provides remote access to each user account via an authentication process. The

user interface includes a graphical user interface, via which graphical user interface the

system presents interactive representations of investment products (such as offers to invest

in an SPV via purchase of a fixed income instrument) to users, users interact with the

interactive representations of investment products to access functionality comprising trading,

including purchasing, selling, and bidding to purchase, instances of investment products. The

user interface also provides a broadcast interface, which is one or more mechanisms for

broadcasting content to the user population 100 and receiving interactions with the broadcast

content. It is noted that the broadcast content may link to relevant pages of the graphical user

interface, and the act of following the link from the broadcast is considered an interaction with

535308 SPV Loans

the interactive representation of the investment product. Further information regarding the

investment product may be provided in the graphical user interface, which the user may

interact with further, for example purchasing an instance thereof, or making a preliminary or

formal offer to purchase an instance thereof.

The investment registry 50 is a secure data store such as a server or servers operated by or

otherwise accessible to the system 10 (i.e. the trading entity and loan originator). The

investment registry 50 stores data representing investment product instances traded by or

purchased via the brokerage. The investment registry 50 is definitive in terms of reflecting the

.0 legal owners of investment product instances and the real time values thereof, which real time

values are updated by the system 10, or otherwise by or on behalf of the trading entity, using

data from the market datalive feeds 40. Data stored by the investment registry 50 is encrypted

and not accessible by parties other than the trading entity. For example, data stored by the

investment registry is accessible by the system 10 (and optionally also by other computers

.5 operated by or on behalf of the trading entity) but is not accessible by third parties. Access

may be, for example, via biometrics and/or temporally dynamic authentication code.

The investment registry may include a capital holding account linked to each user account of

the system 10. Investment product instances assigned to ownership of a user account, plus

capital held by the respectively linked capital holding account, compose the net worth of a user

in the context of the system 10.

The system 10 provides a technological platform via which the borrower entity 20 can borrow

credit from a lending entity to purchase investment product(s) from the trading entity using

investment products already owned by the borrower entity 20 and traded by the trading entity

as security, as evidenced by the investment registry 50. The system amalgamates such loans

into a special purpose vehicle 52, this amalgamation is known as warehousing. The special

purpose vehicle 52 is illustrated as a distinct server in Figure 1. The SPV 52 is effectively a

535308 SPV Loans

secure register or data store forming part of, or accessible to, the system 10. The SPV 52 is

an amalgamation of loans fulfilling criteria for funding via the SPV 52, the SPV 52 may also

be used to refer to the data manifestation of those loans, which is maintained by the system

10. It is noted that there is crossover in the investment registry 50 and the data manifestation

of the SPV 52. The data manifestation of the SPV 52 may be a portion of the investment

registry 50.

Figure 2 illustrates a flow of processing in a method for originating secured loans and financing

the loans via an SPV 52.

.0

At S201, the system maintains the user registry 80. The processing for maintaining and

updating the user registry 80 is ongoing regardless of activity relating to particular capital

raises. Thus, though illustrated as a distinct step in the flowchart of Figure 2, the maintaining

S201 the user registry 80 is an ongoing and continual process performed in parallel to steps

.5 S204 to S208, which steps can be considered a loan origination process S204 and an SPV

rebalancing process S205-S208. Maintaining steps S201 to S203 are precursors to the loan

origination process S204 and SPV rebalancing process S205-S208 insofar as the registries

store data and provide access to functionality required to perform the capital raise process.

The maintaining the user registry S201 may include keeping information such as ownership

of investment product instances (as recorded in the user registry) and other information that

may be used to assess an application for a secured loan. Maintaining the user registry S201

includes storing authentication information that is used to authenticate a login attempt by a

user to allow the user access to the user-side functionality of the system 10.

The maintaining the user registry S201 may further comprise maintaining a secure data

environment for the user registry 80 by encrypting the capital raiser registry data and restricting

535308 SPV Loans

decryption to parties providing, for example, biometric information satisfying an authentication

process and/or a time dynamic authentication code satisfying an authentication process.

The user registry 80 is effectively a mechanism to associate real life investor and borrower

user entities with user accounts in the system 10. By signing in to the respective user account,

an investor user entity 100 or borrowing entity 20 accesses functionality provided by the

system to participate in a loan origination process S204 and/or a SPV rebalancing process

S205 to S208.

.0 Step S201 includes the system 10 maintaining a user registry 80 of user accounts, the system

providing remote access to each user account via an authentication process, via which remote

access a user of the user account accesses functionality including purchasing and trading

financial instruments issued and/or traded by the trading entity. In particular, the financial

instruments include the financial instruments transacted at S208.

-5

At S202, the system 10 maintains the investment registry 50. The maintaining may be

relatively passive at times and active at other times. For example, the maintaining may be

updating the investment registry 50 when live feeds of market data indicate prices of

components of investment products have changed.

The maintaining S202 may include keeping information such as ownership information up to

date when investment product instances are bought/sold, and also indicating availability of

investment product instances to act as security in margin loans. For example, an investment

product instance cannot act as security to more than one margin loan at a time, so a flag or

other such datafield per entry can be used to track availability of investment product instances

to act as security in margin loans.

535308 SPV Loans

The maintaining S202 may further comprise maintaining a secure data environment for the

investment registry 50 by encrypting the investment registry data and restricting decryption to

parties providing, for example, biometric information satisfying an authentication process

and/or a time dynamic authentication code satisfying an authentication process.

Maintaining S202 the investment registry 50 may include maintaining an investment registry

50 of investment product instances, including instances of financial instruments, issued and/or

traded by the system operator as a trading entity, the investment registry 50 assigning

ownership of each investment product instance to a user account maintained by the user

.0 registry 80.

Maintaining the SPV at S203 refers to controlling which originated loans fulfil the criteria for

funding via the SPV 52. The loans must be secured loans. Optionally, the SPV is specifically

for margin loans issued by the system operator and secured against investment product

.5 instances also traded by the system operator and thus registered in the investment registry

10. Maintaining the SPV S203 includes managing loan repayments when borrower entities 20

repay some or all of their SPV loans. As disclosed above, the SPV 52 has a data manifestation

that may form part of the investment registry 50 of the system 10. A method step S205 is

effectively a periodical rebalancing of the SPV 52, which may be considered to be a

component of the maintaining S203.

Maintaining S203 the SPV 52 may include maintaining the special purpose vehicle, SPV, the

SPV being an amalgamation of secured loans originated by the system 10 and meeting a

condition for financing via the SPV 52. For example, the condition may be that the secured

loan is secured against investment product instances traded by the system operator and thus

registered in the investment registry 50. Such loans may be margin loans.

535308 SPV Loans

At S204 the system 10 originates secured loans to borrower entities 20 in accordance with

lending criteria predefined by the system 10, the secured loans meeting the condition for

financing via the SPV 52. The system 10 provides a user interface to users, who in this context

are borrowing entities 20, via which the borrowing entities 20 apply for secured loans. Security

may be, for example, property, cash, or other assets, or may be investment product instances

such as financial instruments traded to the borrowing entity 20 by the system operator and

registered in the investment registry 50. The application for a secured loan must pass lending

criteria controlled by the system operator and at least fulfilling the relevant legal and regulatory

framework of the jurisdiction in which the system 10 is operating. Loan applications not

.0 meeting the lending criteria are refused. Loans meeting the lending criteria are accepted and

funded by the loan originator via the SPV, depending on the status of the SPV at that time the

loan originator may provide the credit until the SPV is rebalanced at S205 to S208.

The steps S204 to S208 are performed repetitively. For example, new loans may be originated

.5 at any time during which the system 10 is active and accessible to borrowing entities. It may

be that a manual final approval is required so that new loans can only be originated at S204

during business hours of the system operator. The steps S205 to S208 finance loans via an

SPV rebalancing process.

Step S205 includes calculating a value of new instances of financial instruments to issue

based on a change in loan assets and a change in loan liabilities in the period, loan assets

being secured loans issued by the system and loan liabilities being instances of financial

instruments previously issued by the system and still active.

The SPV 52 is balanced when the assets and liabilities offset one another. The value of new

financial instruments calculated at S205 is based on the value of the current imbalance in the

SPV 52 at the start of the relevant period, and a change in the imbalance during the period. A

change in the imbalance is when there is a mismatch between change in loan assets and

535308 SPV Loans

change in loan liabilities. The change in loan assets is newly originated margin loans

compared with repaid margin loans. The change in loan liabilities is newly sold financial

instruments compared with matured (and recalled) financial instruments. If, taking those

factors into account, the SPV 52 is unbalanced and the loan asset value is greater than the

loan liability value, then new instances of financial instruments are generated and offered to

users 100. On the other hand, if the SPV 52 is balanced, or if loan liability value is greater than

the loan asset value, then no new instances of financial instruments are required and the

system 10 effectively waits for existing financial instruments to mature, which will reduce the

loan liability value.

.0

Once the value of new financial instruments is calculated at S205, the process includes

determining a distribution of the calculated value among one or more new instances of

financial instruments, and for each of the new instances of financial instruments, determining

a duration, and determining an interest rate. The system operator has control over how to

.5 distribute the financial instruments in terms of values, durations, interest rates. Low value and

short term financial instruments provide the system operator with fine-grained control of the

SPV 52, but impose an administrative burden and may not be desirable to all users. Higher

value and longer term financial instruments reduce the fine-grained control of the SPV 52 but

provide some certainty to the system operator. The method of Figure 2 allows a system

operator to distribute the new financial instruments over a range of values, time scales, and to

vary interest rates, according to supply, demand, volatility of the SPV 52, and control of credit

risk.

At S207, the system 10 broadcasts an offer to purchase the new instances of financial

instruments to users 100 of the system 10. For example, users may have opted-in to such

broadcast offers. The financial instruments may also be available via a page of the user

interface provided by the system 10 to logged in users 100.

535308 SPV Loans

At S208, response to the offer are received and processed, so that the financial instruments

are registered in the investment registry 50 as being in the ownership of the respective users.

In particular, the system 10 executes a transaction of the new instances of financial

instruments to respective users of the system in exchange for assets in payment via the

respective user account, including entering the new instance of fixed income instrument into

the investment registry 50 with ownership assigned to the respective user account.

The SPV rebalancing may be executed on a periodical basis, the period being hourly, 2-hourly,

3-hourly, half-daily, daily, or two-daily. Periods may be constrained to being during business

.0 hours of the system operator.

At the end of the period, the SPV rebalancing S205-S208 is performed based on changes to

the SPV 52 in the period. The steps may take some time to perform, which may go beyond

the next or subsequent periods. For example, it is not necessary that all new financial

.5 instruments are traded to users at S208 before the next rebalancing begins at S205. However,

the new rebalancing S205 takes into account any pending (i.e. unsold) financial instruments

insofar as they are not yet counted as liabilities of the SPV. Optionally, any financial

instruments unsold at the start of the next rebalancing may be removed from the market so

that the credit can be repackaged with the new financial instruments. Optionally, the unsold

financial instruments remain on the market.

Speed at which the financial instruments from the at least one previous rebalancing S205 to

S208 are being sold is recorded by the system 10 and used as a factor to calculate interest

rates for the new financial instruments at S206. For example, if sales are slow, then interest

rates may be increased to stimulate investor action. Otherwise, if sales are fast, then interest

rates may be decreased in order to reduce the costs of financing the SPV 52. A supply and

demand model is used to influence the determination of interest rates. The supply and demand

model may be based on the full population of financial instruments available for sale, or they

535308 SPV Loans

may be grouped according to characteristics such as value or duration. For example, demand

for short duration financial instruments may be high, so interest rates for those may be set to

a high level (from among a set of three interest rate levels for short duration financial

instruments being low, medium, and high). Demand for long duration financial instruments

may be low, so interest rates for those may be set to a low level.

Figure 3 illustrates an arrangement of parties and associated processes in an embodiment.

Borrowing entities 20 provide loan demand. The system 10 is in communication with the

borrowing entities 20, and the users 100 who lend to the SPV by purchasing the issued

.0 financial instruments. The SPV 52 is under the control of the system 10 and accessible to the

system 10.

Borrowing entities provide loan demand and data to the system at S301, such as is detailed

above in relation to S204. In addition, Figure 3 highlights the repaying of loans by borrowers

.5 at S302, which influences the automated rebalancing process. At S303 approved loans which

meet the criteria for financing via the SPV 52 enter the warehouse funding SPV 52.

At S304, which corresponds to S205 & S206 detailed above, real-time monitoring of the loan

pool, financing structure (including interest rates, duration, etc) is performed to determine

whether and what instances of financial instruments to issue for sale via the system at S305.

At S306 the users 100, acting as lenders or financiers in the context of the SPV 52, bid for the

new financial instruments, and at S307 the users settle, such as is disclosed above in

reference to S208.

A worked example:

1. System operator accepts loan requests from multiple borrowers on their platform for

$X.

535308 SPV Loans

2. The loans are added to the pool of loans within the warehouse structure - these are

considered assets of the warehouse

3. The system determines, using pre-set constraints by the system operator, that $X of

funding is required

4. The system analyses the active financial instruments that have been issued by the

warehouse - these are considered liabilities of the warehouse

5. The system then determines the interest rate and duration of the new financial

instrument being issued. For the interest rate setting, this is based on demand from

platform users. The duration is set according to the requirements of the warehouse

.0 structure.

6. The system finalises the terms of the new financial instrument issue and sends via

platform notifications and other means to potential lenders (investors in the financial

instrument) on the platform.

7. Lenders bid for an allocation of the $X available which is confirmed in real-time by the

.5 system

8. Lenders funds are then segregated and the transaction settled automatically on the

system

9. Lender is issued the financial instrument and can hold, trade or redeem the instrument

on the platform

Figure 4 is a schematic illustration of a hardware arrangement of a computing apparatus. The

borrowing entity 20 may interact with the system 10 by an apparatus having an arrangement

such as illustrated in Figure 4. The user 100 may interact with the system 10 by an apparatus

having an arrangement such as illustrated in Figure 4. The system 10 may be implemented

by a computing apparatus having an arrangement such as illustrated in Figure 4. The system

10 may be implemented by a distributed computing system comprising a plurality of computing

apparatus having an arrangement such as illustrated in Figure 4 cooperating with one another

to perform methods including those illustrated in Figures 2 and 3. The user registry 80 may be

535308 SPV Loans

implemented by a computing apparatus having an arrangement such as illustrated in Figure

4. The investment registry 50 may be implemented by a computing apparatus having an

arrangement such as illustrated in Figure 4.

The computing apparatus comprises a plurality of components interconnected by a bus

connection. The bus connection is an exemplary form of data and/or power connection. Direct

connections between components for transfer of power and/or data may be provided in

addition or as alternative to the bus connection.

.0 The computing apparatus comprises memory hardware 991 and processing hardware 993,

which components are essential regardless of implementation. Further components are

context-dependent, including a network interface 995, input devices 997, and a display unit

999.

.5 The memory hardware 991 stores processing instructions for execution by the processing

hardware 993. The memory hardware 991 may include volatile and/or non-volatile memory.

The memory hardware 991 may store data pending processing by the processing hardware

993 and may store data resulting from processing by the processing hardware 993.

The processing hardware 993 comprises one or a plurality of interconnected and cooperative

CPUs for processing data according to processing instructions stored by the memory

hardware 991.

Implementations may comprise one computing device according to the hardware arrangement

of Figure 4, or a plurality of such devices operating in cooperation with one another. For

example, a plurality of such devices operating in cooperation increases potential rate of data

throughput.

535308 SPV Loans

A network interface 995 provides an interface for transmitting and receiving data over a

network. Connectivity to one or more networks is provided. For example, a local area network

and/or the internet. Connectivity may be wired and/or wireless.

Input devices 997 provide a mechanism to receive inputs from a user. For example, such

devices may include one or more from among a mouse, a touchpad, a keyboard, an eye-gaze

system, and a touch interface of a touchscreen. Inputs may be received over a network

connection. For example, in the case of server computers, a user may connect to the server

over a connection to another computing apparatus and provide inputs to the server using the

.0 input devices of the another computing apparatus.

A display unit 999 provides a mechanism to display data visually to a user. The display unit

999 may display graphical user interfaces by which certain locations of the display unit become

functional as buttons or other means allowing for interaction with data via an input mechanism

.5 such as a mouse. A server may connect to a display unit 999 over a network.

Claims (19)

535308 SPV Loans CLAIMS

1. A system for loan origination and automated loan financing, the system being operated

by or on behalf of a trading entity and comprising a computing apparatus configured to perform

a method comprising:

maintaining a user registry of user accounts, the system providing remote access to

each user account via an authentication process, via which remote access a user of the user

account accesses functionality including purchasing and trading financial instruments issued

and/or traded by the trading entity;

.0 maintaining an investment registry of investment product instances, including instances

of financial instruments, issued and/or traded by the trading entity, the investment registry

assigning ownership of each investment product instance to a user account maintained by the

user registry;

maintaining a special purpose vehicle, SPV, being an amalgamation of secured loans

.5 originated by the system and meeting a condition for financing via the SPV;

originating secured loans to borrower entities in accordance with lending criteria

predefined by the system, the secured loans meeting the condition for financing via the SPV;

issuing instances of financial instruments against the amalgamation of secured loans in

the SPV, wherein a process for issuing the instances of financial instruments includes:

periodically at the end of each period, based on a periodicity of not longer than

two business days:

calculating a value of new instances of financial instruments to issue based

on a change in loan assets and a change in loan liabilities in the period, loan assets

being secured loans issued by the system and loan liabilities being instances of

financial instruments previously issued by the system to fund the SPV and still

active;

535308 SPV Loans

determining a distribution of the calculated value among one or more new

instances of financial instruments, and for each of the new instances of financial

instruments, determining a duration, and determining an interest rate;

broadcasting an offer to purchase the new instances of financial instruments

to users of the system; and

executing a transaction of the new instances of financial instruments to

respective users of the system in exchange for assets in payment via the

respective user account, including entering the new instance of financial

instrument into the investment registry with ownership assigned to the respective

.0 user account.

2. The system according to claim 1, wherein

determining the interest rate is performed by an algorithm or n-dimensional lookup table

based on factors or dimensions including:

.5 supply, wherein supply is measured by the calculated value of new financial

instruments to issue;

demand, wherein demand is measured by rate of executed transactions of new

financial instruments to users of the system over a relevant period;

value, wherein value is the value of the respective financial instrument.

3. The system according to claim 1 or 2, wherein

determining the distribution of the calculated value among one or more new financial

instruments is performed by an algorithm based on complying with a plurality of conditions

including:

maintaining a total number of financial instruments issued against the SPV at more

than 100, more than 1000, more than 5000, or more than 10000;

maintaining a predefined frequency distribution of values among the entirety of the

financial instruments issued against the SPV;

535308 SPV Loans

issuing financial instruments against the amalgamation of secured loans in the

SPV.

4. The system according to any of the preceding claims, wherein, following the broadcast of

the issuing of the new financial instruments to users of the system, the method further

comprises:

receiving pledges to purchase the new financial instruments from users of the system

and, for each of the new financial instruments, assigning a unique right to purchase each

financial instrument to a user of the system from which said pledge was received on a first

.0 come first served basis.

5. The system according to any of the preceding claims, wherein, the condition for financing

via the SPV, is that the loan is a margin loan traded by the trading entity and is secured against

financial instruments listed in the investment registry.

-5

6. The system according to any of the preceding claims, wherein, the periodicity is one from

among:

not longer than one business day;

not longer than half a business day;

not longer than two hours;

not longer than one hour.

7. The system according to any of the preceding claims, wherein calculating the value of new

instances of financial instruments comprises:

calculating an imbalance between loan assets and loan liabilities in the SPV based on

an imbalance at the start of the period and a change in loan assets during the period and a

change in loan liabilities during the period; and

535308 SPV Loans

if there is an imbalance of loan assets over loan liabilities, the value of new instances of

financial instruments is the value of the imbalance or is based on the value of the imbalance;

and

if there is an imbalance of loan liabilities over loan assets, the value of new instances of

financial instruments is nil.

8. The system according to any of the preceding claims, wherein:

the system is a distributed computing system comprising plural computing devices each

comprising memory hardware, processor hardware, and network interface, the plural

.0 computing systems being configured to perform the method collectively using respective

processor hardware and memory hardware and exchanging data via the respective network

interfaces.

9. The system according to claim 8, wherein the system is a cloud computing system

-5

10. A computer-implemented method for loan origination and automated loan financing,

the computer-implemented method being executed by or on behalf of a trading entity, the

computer-implemented method comprising:

maintaining a user registry of user accounts, providing remote access to each user

account via an authentication process, via which remote access a user of the user account

accesses functionality including purchasing and trading financial instruments issued and/or

traded by the trading entity;

maintaining an investment registry of investment product instances, including instances

of financial instruments, issued and/or traded by the trading entity, the investment registry

assigning ownership of each investment product instance to a user account maintained by the

user registry;

maintaining a special purpose vehicle, SPV, being an amalgamation of secured loans

originated by the system and meeting a condition for financing via the SPV;

535308 SPV Loans

originating secured loans to borrower entities in accordance with lending criteria

predefined by the system, the secured loans meeting the condition for financing via the SPV;

issuing instances of financial instruments against the amalgamation of secured loans in

the SPV, wherein a process for issuing the instances of financial instruments includes:

periodically at the end of each period, based on a periodicity of not longer than

two business days:

calculating a value of new instances of financial instruments to issue based

on a change in loan assets and a change in loan liabilities in the period, loan assets

being secured loans issued by the system and loan liabilities being instances of

.0 financial instruments previously issued by the system to fund the SPV and still

active;

determining a distribution of the calculated value among one or more new

instances of financial instruments, and for each of the new instances of financial

instruments, determining a duration, and determining an interest rate;

.5 broadcasting an offer to purchase the new instances of financial instruments

to users of the system; and

executing a transaction of the new instances of financial instruments to

respective users of the system in exchange for assets in payment via the

respective user account, including entering the new instance of financial

instrument into the investment registry with ownership assigned to the respective

user account.

11. The computer-implemented method according to claim 10, wherein

determining the interest rate is performed by an algorithm or n-dimensional lookup table

based on factors or dimensions including:

supply, wherein supply is measured by the calculated value of new financial

instruments to issue;

535308 SPV Loans

demand, wherein demand is measured by rate of executed transactions of new

financial instruments to users of the system over a relevant period;

value, wherein value is the value of the respective financial instrument.

12. The computer-implemented method according to claim 10 or 11, wherein

determining the distribution of the calculated value among one or more new financial

instruments is performed by an algorithm based on complying with a plurality of conditions

including:

maintaining a total number of financial instruments issued against the SPV at more

.0 than 100, more than 1000, more than 5000, or more than 10000;

maintaining a predefined frequency distribution of values among the entirety of the

financial instruments issued against the SPV;

issuing financial instruments against the amalgamation of secured loans in the

SPV.

-5

13. The computer-implemented method according to any of claims 10 to 12, wherein, following

the broadcast of the issuing of the new financial instruments to users of the system, the method

further comprises:

receiving pledges to purchase the new financial instruments from users of the system

and, for each of the new financial instruments, assigning a unique right to purchase each

financial instrument to a user of the system from which said pledge was received on a first

come first served basis.

14. The computer-implemented method according to any of claims 10 to 13, wherein, the

condition for financing via the SPV, is that the loan is a margin loan traded by the trading entity

and is secured against financial instruments listed in the investment registry.

535308 SPV Loans

15. The computer-implemented method according to any of claims 10 to 14, wherein, the

periodicity is one from among:

not longer than one business day;

not longer than half a business day;

not longer than two hours;

not longer than one hour.

16. The computer-implemented method according to any of claims 10 to 15, wherein

calculating the value of new instances of financial instruments comprises:

.0 calculating an imbalance between loan assets and loan liabilities in the SPV based on

an imbalance at the start of the period and a change in loan assets during the period and a

change in loan liabilities during the period; and

if there is an imbalance of loan assets over loan liabilities, the value of new instances of

financial instruments is the value of the imbalance or is based on the value of the imbalance;

.5 and

if there is an imbalance of loan liabilities over loan assets, the value of new instances of

financial instruments is nil.

17. The computer-implemented method according to any of claims 10 to 16, wherein:

the computer implementing the method is a distributed computing system comprising

plural computing devices each comprising memory hardware, processor hardware, and

network interface, the plural computing systems being configured to perform the method

collectively using respective processor hardware and memory hardware and exchanging data

via the respective network interfaces.

18. The computer-implemented method according to claim 17, wherein the distributed

computing system is a cloud computing system

535308 SPV Loans

19. A computer program which, when executed by a computing apparatus comprising

processor hardware and memory hardware, causes the computing apparatus to perform the

computer-implemented method of any of claims 10 to 18.