CA2286151A1 - Method and system for improved collateral monitoring and control - Google Patents
Method and system for improved collateral monitoring and control Download PDFInfo
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- CA2286151A1 CA2286151A1 CA002286151A CA2286151A CA2286151A1 CA 2286151 A1 CA2286151 A1 CA 2286151A1 CA 002286151 A CA002286151 A CA 002286151A CA 2286151 A CA2286151 A CA 2286151A CA 2286151 A1 CA2286151 A1 CA 2286151A1
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- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q20/00—Payment architectures, schemes or protocols
- G06Q20/04—Payment circuits
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- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q20/00—Payment architectures, schemes or protocols
- G06Q20/08—Payment architectures
- G06Q20/10—Payment architectures specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
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- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q20/00—Payment architectures, schemes or protocols
- G06Q20/38—Payment protocols; Details thereof
- G06Q20/40—Authorisation, e.g. identification of payer or payee, verification of customer or shop credentials; Review and approval of payers, e.g. check credit lines or negative lists
- G06Q20/403—Solvency checks
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- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q40/06—Asset management; Financial planning or analysis
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Abstract
A system and method is provided for advanced multi-currency collateral monitoring and controlling for use in a variety of businesses. The system maintains portfolios of collateral accounts and liability information. It supports transaction processing whether by manual or SWIFT (122) messaging.
The system has the ability to apply acceptance rules in determining whether a security purchase by a client is of a sufficient quality as to have collateral value. Additionally, the system may hold up or prevent a security sale based upon insufficient collateral remaining in the client's accounts. Tables, preferably located in a relational database are included within the system for assessing the risk associated with holding securities of a particular type, and the risk associated with holding securities in currencies other than the liability currency.
The system has the ability to apply acceptance rules in determining whether a security purchase by a client is of a sufficient quality as to have collateral value. Additionally, the system may hold up or prevent a security sale based upon insufficient collateral remaining in the client's accounts. Tables, preferably located in a relational database are included within the system for assessing the risk associated with holding securities of a particular type, and the risk associated with holding securities in currencies other than the liability currency.
Description
METHOD AND SYSTEM E'OR IMPROVED
COLLATERAL MONITORING AND CONTROL
BACKGROUND OF THE INVENTION
This invention relates to a method and system for improved collateral monitoring and control and, more particularly, to a computerized system which automatically receives transaction messages, reviews account information, and determines whether sufficient collateral is provided in accounts in view of risk considerations associated with the collateral, investments and currencies.
There are many computerized systems on the market today used in banks, securities firms, and the like. For example, U.S.
Patent No. 4,346,442, entitled Security Brokerage-Cash Management System, was assigned to Merrill Lynch, Pierce, Fenner & Smith Inc. of New York and issued in 1982. This patent is directed to an early cash management system which used data processing to improve securities brokerage/cash management supervision. It allows the financial services firm to provide for automatic investment of free credit cash balances in interest bearing accounts, so that an investor that has free cash in his/her investment account automatically receives appropriate interest payments.
U.S. Patent No. 5,262,942 entitled Financial Transaction Network is directed to a financial network for maintaining a number of mutual fund portfolios operating in different currencies. The host processor acts as a communications switch validating incoming transaction requests and routing them to a central transfer agent system for execution. The host processor maintains central records that can be queried through the host.
U.S. Patent No. 4,713,761 entitled System for Centralized Processing of Accounting and Payment Functions is directed to a computer implemented system for determining and accounting for the cost of transactions . The system particularly determines and accounts for the cost of shipping goods. The system requirements include an input device which is located at a shippers location and a central data processing facility. In other words, this system tracks expenses as well as products.
U.S. Patent No. 5,025,373 entitled Portable Personal-Banking System is directed to a portable personal banking system comprising a host computer and at least one portable terminal among a variety of terminals including automatic teller machines and personal computers. The portable terminal provides a range of banking services over an automatic dial-up telephone connection to the host bank computer. The personal terminal comprises a keyboard and display capability with minimal key requirements and display capacities. This patent deals with concerns regarding remote computers versus bank servers and issues of capability and access.
In today's global marketplace, banks, financial institutions, securities firms, insurance companies and other financial institutions must be concerned with maintaining appropriate collateral for securing loans and the like. Each institution sets up its own lending requirements, and collateral needs for each of its customers. However, in today's global marketplace, the collateral may depreciate in value faster than the repayment of loaned funds; for example, if a loan in U.S.
dollars is being secured against a foreign security, the foreign security could depreciate in dollar terms by a decrease in price of the security, or a decrease in the foreign currency value against the U.S. dollar. Accordingly, it is desirable to provide a collateral management tool that controls and tracks collateral against liabilities and can be used to determine whether or not to extend margin against securities or other products such as derivatives, tri-party agencies and insurance letters of credit.
SUMMARY OF THE INVENTION
The present invention provides a system and method for the management and tracking of collateral using a computer system. The system and method accesses a plurality of databases which are preferably relational databases to allow for the following collateral processing actions: validation of an account's existence within the system; the validation of the securities' existence within the system; retrieval of all confirmed and unconfirmed account positions effecting available collateral for the account and an account in its collateral group; retrieval of the account's security, cross-currency haircut and acceptability tables; the validation of the securities' acceptability by its depository, class, tenor and rating in the acceptable table; the retrieval of all threshold ' and minimum call information for the account; calculation of the optimal haircut application by multiplying the security haircut table by the cross-currency haircut table and sorting the resulting figures and currency security class pairs in descending order; the calculation of the local market value for each position and proposed position; the conversion of the market values to U.S. dollars, retaining an indicator of the local currency; applying security haircuts to the resulting U. S . dollar market values; retrieving collateral requirements (resulting from liabilities) in the U.S. dollar, grouped by originating currency;
matching of like currency collateral to collateral requirements;
matching remaining requirements to remaining collateral by finding the highest currency/security class pair in the remainders and working down the optimization list; and applying minimum calls or thresholds and reporting any remaining shortfalls.
Taken together, the foregoing collateral processing method validates that the collateral in an account satisfies requirements based on acceptability rules; determines if the movement creates a shortfall; and provides approval or rejection processes to manage the transaction message through the acceptance and settlement cycle.
The front end of the system is defined by a plurality of personal computers running a graphic user interface (GUI) .
The back end of the system, which handles the processing, is a client/server based network designed to communicate with the personal computers over conventional telecommunication lines.
The personal computers communicate over a network to a message router, which receives all incoming requests and data and forwards them to the appropriate server. The message router also communicates with a switch which enables it to transmit data and requests to SWIFT and to custody systems such as COSMOS and SECORE, and to receive data and requests from them.
Accordingly, it is an object of the present invention to provide an efficient intra-day, paperless collateral movement and control processing system.
It is an additional object of the invention to provide a system and method that produces on-line client statements to avoid report production and delivery.
Another obj ect of the invention is to allow for the performance of real-time collateral position, valuation, shortfall and acceptability checks, thereby permitting tighter haircuts, reduced risk exposure, and more competitive pricing.
Still another object of the invention is to provide enhanced security, such as requiring dual signatures for most operations, such as creating tables and entering collateral movement instructions.
Still another object of the invention is to allow enhanced user control over the system by allowing users to set up a variety of rules and haircuts, based on client/counterparty agreements, to control the movement of collateral, such as acceptability rules, shortfall rules, security haircuts, and cross-currency haircuts. The system automatically blocks all collateral movement that does not meet the criteria specified in the rules and haircuts.
Still other objects and advantages of the invention will in part be obvious and will in part be apparent from the specification.
The invention accordingly comprises the several steps and the relation of one or more of such steps with respect to each of the others, and the apparatus embodying features of construction, combination of elements and arrangement of parts which are adapted to effect such steps, all as exemplified in the following detailed disclosure, and the scope of the invention will be indicated in the claims.
COLLATERAL MONITORING AND CONTROL
BACKGROUND OF THE INVENTION
This invention relates to a method and system for improved collateral monitoring and control and, more particularly, to a computerized system which automatically receives transaction messages, reviews account information, and determines whether sufficient collateral is provided in accounts in view of risk considerations associated with the collateral, investments and currencies.
There are many computerized systems on the market today used in banks, securities firms, and the like. For example, U.S.
Patent No. 4,346,442, entitled Security Brokerage-Cash Management System, was assigned to Merrill Lynch, Pierce, Fenner & Smith Inc. of New York and issued in 1982. This patent is directed to an early cash management system which used data processing to improve securities brokerage/cash management supervision. It allows the financial services firm to provide for automatic investment of free credit cash balances in interest bearing accounts, so that an investor that has free cash in his/her investment account automatically receives appropriate interest payments.
U.S. Patent No. 5,262,942 entitled Financial Transaction Network is directed to a financial network for maintaining a number of mutual fund portfolios operating in different currencies. The host processor acts as a communications switch validating incoming transaction requests and routing them to a central transfer agent system for execution. The host processor maintains central records that can be queried through the host.
U.S. Patent No. 4,713,761 entitled System for Centralized Processing of Accounting and Payment Functions is directed to a computer implemented system for determining and accounting for the cost of transactions . The system particularly determines and accounts for the cost of shipping goods. The system requirements include an input device which is located at a shippers location and a central data processing facility. In other words, this system tracks expenses as well as products.
U.S. Patent No. 5,025,373 entitled Portable Personal-Banking System is directed to a portable personal banking system comprising a host computer and at least one portable terminal among a variety of terminals including automatic teller machines and personal computers. The portable terminal provides a range of banking services over an automatic dial-up telephone connection to the host bank computer. The personal terminal comprises a keyboard and display capability with minimal key requirements and display capacities. This patent deals with concerns regarding remote computers versus bank servers and issues of capability and access.
In today's global marketplace, banks, financial institutions, securities firms, insurance companies and other financial institutions must be concerned with maintaining appropriate collateral for securing loans and the like. Each institution sets up its own lending requirements, and collateral needs for each of its customers. However, in today's global marketplace, the collateral may depreciate in value faster than the repayment of loaned funds; for example, if a loan in U.S.
dollars is being secured against a foreign security, the foreign security could depreciate in dollar terms by a decrease in price of the security, or a decrease in the foreign currency value against the U.S. dollar. Accordingly, it is desirable to provide a collateral management tool that controls and tracks collateral against liabilities and can be used to determine whether or not to extend margin against securities or other products such as derivatives, tri-party agencies and insurance letters of credit.
SUMMARY OF THE INVENTION
The present invention provides a system and method for the management and tracking of collateral using a computer system. The system and method accesses a plurality of databases which are preferably relational databases to allow for the following collateral processing actions: validation of an account's existence within the system; the validation of the securities' existence within the system; retrieval of all confirmed and unconfirmed account positions effecting available collateral for the account and an account in its collateral group; retrieval of the account's security, cross-currency haircut and acceptability tables; the validation of the securities' acceptability by its depository, class, tenor and rating in the acceptable table; the retrieval of all threshold ' and minimum call information for the account; calculation of the optimal haircut application by multiplying the security haircut table by the cross-currency haircut table and sorting the resulting figures and currency security class pairs in descending order; the calculation of the local market value for each position and proposed position; the conversion of the market values to U.S. dollars, retaining an indicator of the local currency; applying security haircuts to the resulting U. S . dollar market values; retrieving collateral requirements (resulting from liabilities) in the U.S. dollar, grouped by originating currency;
matching of like currency collateral to collateral requirements;
matching remaining requirements to remaining collateral by finding the highest currency/security class pair in the remainders and working down the optimization list; and applying minimum calls or thresholds and reporting any remaining shortfalls.
Taken together, the foregoing collateral processing method validates that the collateral in an account satisfies requirements based on acceptability rules; determines if the movement creates a shortfall; and provides approval or rejection processes to manage the transaction message through the acceptance and settlement cycle.
The front end of the system is defined by a plurality of personal computers running a graphic user interface (GUI) .
The back end of the system, which handles the processing, is a client/server based network designed to communicate with the personal computers over conventional telecommunication lines.
The personal computers communicate over a network to a message router, which receives all incoming requests and data and forwards them to the appropriate server. The message router also communicates with a switch which enables it to transmit data and requests to SWIFT and to custody systems such as COSMOS and SECORE, and to receive data and requests from them.
Accordingly, it is an object of the present invention to provide an efficient intra-day, paperless collateral movement and control processing system.
It is an additional object of the invention to provide a system and method that produces on-line client statements to avoid report production and delivery.
Another obj ect of the invention is to allow for the performance of real-time collateral position, valuation, shortfall and acceptability checks, thereby permitting tighter haircuts, reduced risk exposure, and more competitive pricing.
Still another object of the invention is to provide enhanced security, such as requiring dual signatures for most operations, such as creating tables and entering collateral movement instructions.
Still another object of the invention is to allow enhanced user control over the system by allowing users to set up a variety of rules and haircuts, based on client/counterparty agreements, to control the movement of collateral, such as acceptability rules, shortfall rules, security haircuts, and cross-currency haircuts. The system automatically blocks all collateral movement that does not meet the criteria specified in the rules and haircuts.
Still other objects and advantages of the invention will in part be obvious and will in part be apparent from the specification.
The invention accordingly comprises the several steps and the relation of one or more of such steps with respect to each of the others, and the apparatus embodying features of construction, combination of elements and arrangement of parts which are adapted to effect such steps, all as exemplified in the following detailed disclosure, and the scope of the invention will be indicated in the claims.
BRIEF DESCRIPTION OF TH,~ DRAWINGS
For a fuller understanding of the invention, reference is had to the following description taken in connection with the . accompanying drawings, in which:
Fig. 1 is a block diagram of a collateral monitoring and control system in accordance with the present invention;
Fig. 2 is a detailed block diagram illustrating the system layout of a collateral monitoring and control system in accordance with the present invention;
Fig. 3 is a flowchart illustrating an overview of the collateral processing methodology in accordance with the present invention;
Fig. 4 is a detailed process flow diagram illustrating the steps carried out in a collateral monitoring system in accordance with the present invention;
Fig. 5A is an exemplary screen printout for a notification letter indicating a margin call;
Fig. SB is an exemplary screen printout of a trade initiation form for entering trade data into a computerized system in accordance with the present invention;
Fig. SC is a transaction master template for use in the present invention;
Fig. SD is a template for adding a margin agreement into the collateral monitoring and control system in accordance with the present invention;
Fig. SE is a template for adding an additional client into the collateral monitoring and control system in accordance with the present invention;
Fig. 6 is a block diagram illustrating a system and network architecture in accordance with the present invention;
Fig. 7 is an entity relationship and data source diagram in accordance with the present invention;
Fig. 8 is a functional flow diagram of a risk ' information system in accordance with the present invention; and Fig. 9 is a block diagram indicating the links between the collateral monitoring and control system and the remaining system architecture of a lending institution.
_ CA 02286151 1999-10-06 ~~5 1 ~ ~ U L 199.
_ _ DETAILED DES RIPTION OF TIDE PREFERRED
Reference is now made to the figures, which illustrate a system and method in accordance with the present invention.
With particular reference to Fig. 1, a collateral monitoring and control system, generally indicated at 100, constructed in acccr3a-~c~ w~t'~ the instant invention, is depicted. System 100 includes a plurality of user interfaces 102 running a GUI. In the preferred embodiment, user interfaces 102 are personal computers that run on, for example, the windows operating system by Microsoft Corporation. This is the front end of system 100.
:;ser interfaces 102 are coupled to network 104 which is preferably a local area network. Network 104 is electZ;onically coupled via communication lines 106 to message router 108.
Message router 108 is coupled to a plurality of servers including collateral server 110, TPA server 112 (tri-party agreement), GPS
server 114, report server 116 ar.d swift server 118.
Message router 108 is also electrically coupled to switch 120 via curve.~.tional tel eccmmunication lines or the 1_ke.
Switch 120 is coupled to SWIFT 122. Switch 120 is also coupled to custody system 124.
Referring generally to Figure 1, system 100 is accessed by users via user interfaces 102. User interfaces 102 are networked via a local area network or a wide area network. The network is preferably a Novell Ethernet. Message router 108 "...
receives all incoming requests and data and forwards them to the appropriate server 110-118. The router also communicates with switch 120 which transmits data and requests to SWIFT 122 and custody systems 124. Message router 108 is preferably a router network with routing capability at locations where servers are located; far example, in a global network separate routing capability is provided on each continent where servers are located. Custody systems 124 could include COSMOS, a cash custodial system in London, or SECORE, a securities custodial system also in London.
Particular reference is next directed to Fig. 2 which is a block diagram illustrating a system layout. Collateral monitoring and control system, generally indicated at 200, A~NDf D SHEEN
3 JUL ~g~.
___:
_ includes four main parts, a front end system 202, a data processing system 204, a portfolio valuation system 206 and a reconciliation system 208. Front end system 202, portfolio valuation system 206 and reconciliation system 208 are each coupled to data processing system 204.
F,.~nt end ws~e~~ 202 irc_udes vis~.:a= bas'_c Gui 2;0 which sits upcn an I'='S plat's=-n 2.2. Visual basic GLi 2i0 is also electrically coupled via wire 214 to open database connectivity 216. Open database connectivity 216 is electrically coupled to database library 218.
Front end system 202 is coupled to data processing system 204 via two secarate links. Firstly, visual basic GUI 210 is coupled to message routers 230 via ITS platfo:m 212 and Mlayer 213. - (Note that two message routers 230 are illustrated;
however, additional Tessage routers may be required depending upon the size of the app'ication.) Additionally, database library 218 is direc=ly coup=ed to ccllateral database 232 and try-par~y agreeTe.~.t ca~aLase 233.
Data processing system 204 receives inputs from the user via message routes 230 and collateral database 232.
Collateral database 232 is electrically coupled to collateral product server 234 which is in turn electrically coupled to message routes 230. Additionally, collateral product server 234 is electrically coupled to password file 236. Password file 236 must be in a s'_m=1 a. format to the various databases . In the preferred embodimer.~, the databases use Sybase technology.
Message routers 230 are a'_so electrically coupled to security manager 240. Security manager 240 is coupled to security manager error file 242, aut:.orization file 244 and VAX UAF 246. The message routers 230 are also electrically coupled to GPS batch server 248, BST batch serve. 250 and BCT batch server 252. HST
batch server 250 and BC'~ batch server 252 are each electrically coupled to reconciliation system 208. Alternatively, GPS batch server 248 is electrical) y coupled to portfolio valuations system 206 through prices, rates, rating, assets 254.
Reconciliation system 208 receives data feeds such as SECORE which are forwarded to BST batch server 250 and COSMOS
~~U S~',~cv ~I , CA 02286151 1999-10-06 7 ~ 0 8 4 7 _ _ . ~3~UL1 __.:
feeds forwarded to BCT batch server 252. SECORE and COSMOS are securities custodial systems provided in London and are preferred systems for use in the present invention. The process of reconciliation is generally one wherein records are sent to the collateral server and the collateral server reads the SECORE
n~~;r:-~r ~~'o~-~:a''_on and compares with its own security positions. If a dif°erence is found, then a report is sent to a report file. The report file also has information on non-zero security positions that were not on the reconciliation file, and positions or. the reconciliation file that were not found in data processi::g system 204. A report is automatically printed at the end of t'.~.e reconciliation process. -F_..~.a=ly, a : externa'_ feed 260 is received from a ser-v=ce suc:: as Exte; or Muller which is forwarded to a valuation system 252 w::ic'.~. is then fcrwarded to prices, rates, ratings, assets 2~4.
Speaking more generally of system 200, it is based upon the _ITS platfor~; a~d ooe.~. database connectivity 216. The ITS
ccmpore.~.. 2~2 is respons'_ble for system security, report requests, a..~.d all batch sewer communications. Open database connectivity 2.5 is responsible for all database operations betwee.~. front end system 202 and the servers.
Imple~ne.~.tation of the ITS messaging architecture requires a plurality of servers communicating using a number of message routers 230. The network con.-section between the servers (i.e., ccylatera'_ server 234, GPS batch server 248, BST batch server 250 a:~d BCT batch se=-ver 252) and the message routers 230 enables t'.~.e ITS system to be d'_stributed over a number of VAX
processors. T:~e servers perform their computation tasks according to messages received from their adjacent message routes. T!:e se=-ver transmits the results back to the user, or onto the next server using the same message routes network.
Communication is prohibited between servers other than through the message routers. Each server is a single VAX process, or a collection of vAX processes that performs a specific task within the ITS system. Preferably, there are plural ITS servers functioning as batch servers. All batch servers feed external a '~F~~ ~~ ~ 1~.. ~.
~G~'~ 9 7 ~ Q 8 ~ ? 0 information to the collateral server during nightly batch processing. The GPS batch server moves securities information, including prices and exchange rates to and from portfolio valuation system 206. Portfolio valuation system 206 is responsible for receiving prices and exchange rates from external ,. curia master _ee s . - ~ ' on a daily basis.
Open database connectivity 216 allows most client server communication to bypass the ITS server, and channel traffic directly to the databases via database library 218. The client application trus establishes three server connections: one to the message router 230, one to collateral database 232 and another database connection to tri-party database 233.
Particular reference is next directed to Fig. 3 which is a flowchart illustrating the collateral processing methodology. The process begins at block 300 with the receipt of a collateral movement instruction. The process then proceeds to decision block 302 and asks whether the collateral moveme.~..
instruction is a receive or deliver. If the instruction in b~occ 300 is a deliver, then the process moves from decision block 302 to decision block 304 and checks whether there is a shortfall.
If there is no shortfall, decision block 304 issues a "no"
response ar.d proceeds to block 306. Block 306 causes the process to send back the collateral movement to the custody system for settlement. The process then proceeds to block 315 where an instruction goes to the pending queue . The process then proceeds to block 320 when the instruction is settled and proceeds to block 322 to confirn message.
Alternatively, if the instructicn is a collateral receipt in block 300, the process moves from decision block 302 to decision block 308 and asks whether the receipt is acceptable .
If the receipt is acceptable, a "yes" response in decision block 308, the process proceeds to block 306 and sends back the collateral movement instruction to the custody system for settlement. Then the process moves to block 316 through 322 as described above.
_ CA 02286151 1999-10-06 . . _ . ~-~~ ; . ~ ..
~ 3 JUL 1999 If the response in block 308 is "no" that the received collateral is determined unacceptable, the process moves to block 310. Additionally, if a shortfall is found in block 304, a "yes"
response, the process proceeds to block 310 and an instruction is sent to the exception queue. The process then proceeds to ~i~i.o,n-hl~k 3~ 2 and asks wheeze= a user v'_ew or ove=ride exception is desired. I' a "..~.c" response is received in block 312, the process proceeds to block 318 and the exception is remedied. The process then proceeds back to decision block 302.
Alternatively, if a "yes" response is received in decision block 312, the process proceeds to dec_s:.on block 314 and asks whether the override is verified. If the override is verified', a "yes"
response, t'.~.e process proceeds to decision block 302.
Alternatively, i' the override is not ver~'ied, a "no" response in decision b:cck 314, the process re:.::r.~.s to block 310 as described above.
More ge~erally, F'_g. 3 illust:ates that the system receives co?'_a=seal ~~cveTe.~.e ;ressaces 3~~0 from a nu;n'.~,er of product and custodial syste~a through ou_ the orga_rization in which it is employed. First a dete~nina:.io~ is made whether the message is receive o. deliver collateral i.~. decision block 302.
If the message is to receive collateral, a determination must be made whether it is acceptable in decis_on block 308. If it is acceptable, it goes to the pending queue is block 316 and a ,:
release message is sent to t'.~.e c:aecdy system to perni~
settlement in block 320 . Al teraatively, i= it is not acceptable, it goes to the exception queue in block 3_~.
Aloe=::atively, if the collateral mcvemene instrsction is to deliver in block 302, fi=st a deter-n;nation is made wrethe=
there is a shortfall in decision bloc: 304. If there is a shortfall, an i:atruction is sent to the exception queue in block 310. Alternatively, if there is no shortfall, it goes to pending queue in block 316, and a release message is sent to the custody system to permit settlement. In each instance, when an instruction is routed to the exception queue in block 310, the only way it can leave is to remedy the problem that caused the exception. or override the exception.
QED S~E~
. CA 02286151 1999-10-06 ~~~ ~w'= ___ Particular attention is next directed to Fig. 4 which illus~rates the collateral processing actions in greater detail.
The process is initiated with a collateral movement instruction at b=ock 400. The process then moves to block X02 and validates the account's existence in the system. After validation of the r _O
accc::.~.~ _.. ~ -ex'_s~erce in the system at bicck 404. Then, the process moves to block 406 and retrieves all confirmed and unconfirmed account Doss=ions affecting available collateral (delivers) for the acccuzt and any account in its collateral group. The process ::ex~ mcves to block 408 and retrieves the account's security, cress-currency haircut and acceptability tables. These are tables located i~. the relational database.
Af ten bl ock 408, the process continues to block 410 and val_dates the security's acceptability by its depository, class, tenor and rating in the acceptability table (for receive messages). A=ten block 410, the process proceeds to block 412 a.-.~ :etrieves a.l threshold and minimum call information foz the account . The ::ccess proceeds to block 414 and ffinds the optimal haircut apcl'_caticn by multiplying the security haircut table by the cross-currency haircut table and sorting the resulting figures and currency security class pairs in descending order.
Af ~er block 414 , the process proceeds to block 416 and calc::lates the local market value for each position and proposed pcs_ticn. The local market value is the market value in the country in which the position is held. The process next proceeds to block 418 and converts the local market value to the base currency. For a G.S. company, the base currency will preferably be L.S. dollars. However, an indicator must be maintained of the local currency. T_n block 420, a security haircut is applied to the resulting base currency market value. The process then proceeds to block 422 and retrieves collateral requirements (resulting from liabilities) in the base currency, grouped by originating currency. The process then proceeds to block 424 and matches like currency collateral to collateral requirements.
Next the process moves to block 426 and matches the remaining requirements to the remaining collateral by finding the highest ~?ED
_ CA 02286151 1999-10-06 ~ ~~97/0847L?
_ ~~~;~~ '~ J U L 1999 currency/security class pair in the remainders and working down the optimizing list.
The process then moves to block 428 and applies minimum calls or thresholds for delivers. Finally, the process moves to block 430 and reports any remaining shortfalls (for delivers).
.. T1 T
message.
Taken together, the process as disclosed in Fig. 4 validates that the collateral satisfies the requirements based on the acceptability rules. Additionally, the process determines if the movement of collate=al creates a shor:.fa~l and provides approval or rejection processes to manage the message through the _~ acceptance and settlement cycle.
If any cf the processing actions shcw shortfalls, the message is forwarded for override approval cr further monitoring (for future messages that will correct the situation) to t':e appropriate monitoring group.
In practice, the mcnitoring group is set up and the computer program gives off an alarn or. the screen indicating than a new message requires group atter_tion. The monitoring group is enabled with the ability to retrieve any message requiring consideration at any time. The reviewer can then approve or continue to hold the message for further action.
r=''=,) When the main process requests collateral position retrieval, such as block 406 0~ : ig. 4, the following information is obtained from the relational databases Lhat a=a accessed by the process.
ia~ i ateral Vai uatian IT'.~Or~ldtion 1. Security identifier 2. Units 3. Price multiplier (price per units i:~dicator) 4. Extender (foreign exchange dominance indicator) 5. Latest exchange rate 6. Security class code 7. Rating 8. Effective maturity date ,~.~ ~'w 9. Pricing currency code 10. Unconfirmed-Confirmed indicator 11. Not valid indicator . 12. Price 13. Price date The system retrieves the most recent price and price date for all unconfirmed and confirmed security positions within the specified collateral group. The system also retrieves the cash positions of all currencies in the collateral group.
The system then determines available collateral by taking the values of all conffi rmed positions and subtracting the values of all unconfirmed deliver messages, including the pending message that initiated the valuation request.
When the process calculates the local market value, such as in block 416 of Fig . 4 , the system f first checks that each position is valid and then performs the following steps:
1. Computing a market price portion as shown below:
when Price Multiplier Flag equals zero, local market value equals units * extender * price;
when Price Multiplier Flag equals one, local market value equals units * extender /
price;
2. Adding the accrued interest applicable for the appropriate fixed income securities, based upon the account setting for the accrued f lag;
3. Converting the market value to the system's base currency (U.S. dollars), using the formula ;
base market value equals local market value (plus accrued) / latest exchange rate.
When applying a security haircut as required by block 420 of Fig. 4, the system retrieves the haircut table for the ' collateral group being revalued and then takes the following steps:
~ \ CA 02286151 1999-10-06 _ . E:.-~ ~rn~ 97~08~.70 1 ~ JUI.1999 ____ The system checks whether the position is valid and applies a zero valuation for invalid positions. For all valid positions the system takes the following steps:
1. Calculating the years until maturity by taking the system date and subtracting it °--om t'.:e cosi~;or?s ef~ec;.ive maturity date;
2. ~etrievi:~g t::e record in the haircut table containing the position's security class, rating and maturity (if applicable);
3. Using the contents of the record to cal curate t'.~.e position' s margin contribution, as shown below:' - . when margin type indicator equals P;
contribution equals base market value minus margin);
whe.~. margin type indicator equals E;
cor.c=ibutior. equals (100 * base market va'_ve / marg'_:~i .
W'.~.er. tae main process requests the cross-currency haircut as described in block 408 of Fig. 4, after retrieving liability information, the process matches collateral to liabilities, using the currency of the liabilities and the currency of tie col=ateral position. The process performs the match in a ma..~.ner t at minim'_zes the applied haircut, in order ~, ~,~:' . , to maxi~n~ze t~:e col'_atera~ ma=gir. contribution.
'.''.:e following example is provided to explain how the match works. The system begins with U.S. dollar liabilities.
,_ matcres the car.~~=med U.S. dollar collateral to the U.S.
dollar trade colla~eral requirements until the margin requirement is met cr the U.S. do'_lar collateral is used. The system then performs the same match far each currency in the liability portfolio against confirmed cull ateral . Next, the system applies any excess confirmed collateral by currency to any existing requirements from different liability currencies minus the cross-currency haircut. It starts with the cross-currency pair that maximizes the collateral contribution against the liability, as determined by the cross-currency haircuts. when the requirement 4MENDED SHE~~
_ CA 02286151 1999-10-06 f~ ~~''~ ~~~~~8~.~'A
~1~~13 J U L 1999 _ is met or the confirmed collateral runs out, the system chooses the next most beneficial cross-currency pair to fill the collateral requirement (i.e., the pair that next maximizes the collateral contribution).
The system determines the currency pair that ,. ~ ' he _ __ percentage decimals for each combination of security class and currency pair in the security and cross-currency haircut tables.
It then sorts the figures that result in descending order (least haircut first) and applies collateral in the order determined in the list, selecting the collateral of the currency and class indicated by the pair with the highest percent.
The system tracks the liability margin requirement satisfied by ccnfirmed available collateral and the net contribution margin (risk adjusted value) of the available confirmed collateral. The ~available confirmed collateral~ is def fined as the cor.~ irned collateral position, minus any depending deliver-y message (i~cluding the pending message).
Furthermore, when a receive collateral movement message reaches the system, the system reviews the relevant accounts or collateral group accounts to determine if the concentration limits, as defined in the appropriate acceptability table, have been breached.
If a request of an acceptability check is issuing a ',~....
report request, the system will retrieve the appropriate acceptability table and all the positions in the associated account . The account will be valued as previously described, and totals for all values under consideration in a table are filled with the collateral contribution values in the accounts for each limit category.
The system also performs a number of shortfall processing actions to determine whether the confirmed collateral held in an account satisfies the collateral requirements, as described by the account's liabilities. The system performs these actions whenever it receives a new pricing that effects existing collateral positions, a deliver or cash withdrawal . , I3 JUL ~99g message, and requests by system report processes that they require these actions.
Shortfall processing requires collateral revaluation, haircut application, cash application, comparison, and reporting.
The system retrieves the minimum call amount for the collateral Qro~tn recor3. The mi.~.i~num ca.'_ ' s added to the cor.f i~.-.ned margin contribution. result fol'_owi:~g ha'_rcut application. The total is then used to compare for the shortfall check. The system then subtracts the outstanding liabilities from the total net collateral margin. contribution to determine the shortfall. If the result is negative, te~ a shortfall warning is issued.
Alternatively, if the result is zero or greater, then no shortfall exists. Accit'_enai~y, if to shortfall check was initiated by t'.~.e receipt of a message, t'~e system will return the results to t~:e izitia=i:~g process. , par~icu'_ar reference is next directed to Figs. SA-5E
which each il_ustrate exemplary templates or forms generated by the compute= syste~: 'c= i-:=°-=ac=_-g with: the users.
Par=ic~.:lar=y, Fig. 5A is a for-n margin call notice that is ge~.erated by the sys~em when a bank's customer has overextended their margin ba'_ance.
Fig. 53 is a trade initiation computer screen in accordance wi~'.~. t'.~.e prese.~.t invention. which enables a user to enter the appropriate i:formation to begin a message process.
Fig. SC is a ccr~puter sc=een for the transaction master which indicates all trar_sactiens for a particul ar client under a given margi.~. agreement and file .
Fig. 5~ is a template o. computer screen for adding a margin agreement to the system. The template illustrates all the required parameters, and each parameter is then stored in an appropriate look-up table of the relational database.
Fig. SE is yet another exemplary template or computer screen for adding a client to the system. The template indicates the required information for adding a client to the system, and the information input is also added to appropriate tables of the relational database.
AA~EhiDED SHEE'1 f:..:.
Particular reference is next made to Fig. 6 which is a block diagram illustrating the system including the international letter of credit system and network architecture.
The architecture is broken up into three main sections which include the main data processing center, generally indicated at sot, a r~mote use_- system, generally indicated at 504, and the reconciliation system, generally indicated at 506.
Reccnciliation system 506 is electrically coupled to data processing center 502 by global network 508 and remote user system 504 is connected to data processing center S02 by global =outer network 510. In some embodiments, global network 508 and global =outer network 510 may be the same global route= network.
''' Data processing center 502 includes a VAX cluster 512 which is essentially similar to the servers of Fig. 2 a.~r~ s disk storage array 514 and a VAX 6630 running a Sybase relational database indicated at reference numeral 516. These units are all electrically coupled via an ethernet indicated at 518 and are electricall~~ coupled to a hub 520. In the preferred embodiment, hub 520 is manufactured by Synoptic. Hub 520 is also coupled to fire wall 522 whicz is additionally coupled to a =outer 524 (in the preferred embodiment route=s 524 are manufactured by Cisco Systems Inc.). Route=s 524 are then coupled to global =outer network 510. Additionally, hub 520 is coupled to LAT 526 which is electrically coupled to global network 508. Global network 508 is electrically coupled to reconciliation system 506 which S~a includes a switch for receiving and transmitting SWIFT megsages~
Additionally, the COSMOS and SECORE feeds 530, 532 respectively are received and are tape transferred to VAX 534. VAX 534 is also referred to as a transactor. From VAX 534, the reccnciliation information is transmitted over global network 508 to data processing center 502.
Remote user system 504 includes a plurality of user interface devices 540 (personal computers) , a network file server 542, and a plurality of printers 544. User interface device 540, file server 542 and printers 544 are ali electrically coupled via an ethernet and are coupled to a hub 546. Hub 546 is ~MEPI~~D SN~x electrically coupled to a router 548 which is additionally connected to global router network 510.
Particular attention is next directed to Fig. 7 which illustrates an entity relationship and data source diagram. This diagram illustrates the interconnection of the various elements of the collateral monitoring and control system, with the majority of the blocks indicating particular table database entities. Of course, the bank 602 and client 604 represent a lending institution and a client that borrows, respectively. The tables are broken into two types of tables. Single record tables are the simp=est tables. They contain a single record with all the information in the table. Geographic sector table 606 is an example of a single record table.
Geographic sector table 606 consists of a single record that includes the code for each geographic region and a brief description of the region. There is no other information in the table. Other examples of single record tables are currency table 608, country table 610, and industrial class table 612.
Multiple record tables contain more information than single record tables. In a multiple record table, the identity of the record must first be identified. This would generally be located in an ID field. The additional records depend upon the type of table and information required.
Attention is next directed to Fig. 8 which is a functional flow diagram for the risk information system. It illustrates an overview of risk management in a lending institution. The data flow diagram specifically illustrates where the collateral management component 710 f its within the risk information system. Transactions and account set up information is entered through interface 700 which is electrically coupled to a standards server 702. Standards server 702 is electrically coupled to rapid credit administration 704.
Rapid credit administration 704 additionally receives information from credit workstation and agreement workstations through interface 708. New agreements received by rapid credit administration 704 are input into the collateral management system 710. Rapid credit administration 704 then transmits ~'G~~,~ 97/08470 1 ~ ~UL 1999.
facility, limits, tenors, and agreements to credit engine 706 and transmits facility, risk ratings, SIC, etc. to rapid portfolio management 726. Credit engine 706 in turn transmits information on outstanding issues to rapid port~olio management 726 and «edit er~a,~iv~g 706 transmits information on facility ~_ nu ers, lim' _ .. y ' ' ~ ~ 'r '~ r° 728 . Collateral management system 710 transacts with credi~ engine 706 and receives gross margin requirements and transmits net margin requirements. A main transactor 722 (which may be a VAX) communicates with credit engine 706 arid market risk engine 718.
Market risk engi.~.e 718 also receives ma=ket factor product rates from standards server 702, and standards server 702 also receives :..
customer product instruments and rate information from server 716. Market risk engine 718 receives additional information from NTR/MFVC server 720, and outputs global management reports 732.
From Fig. 8 it can be seen that the operations of a global institution require all types of risk management. The prese~.t invention provides one type of risk management that requires proper collateral in accordance with agreements with clients and continuously updates and manages the collateral taking into account market swings and currency swings to prevent unnecessary risk taking by a lending institution.
Fig. 9 is a block diagram providing an overview of the integrated systems used in a global lending institution.
Particularly, Fig. 9 illustrates an overview of the integration of a collateral management platform within the overall network system. A collateral management platform 800 is electrically coupled to a central switch 802. Additionally, the collateral management platform is electrically coupled to a transactor 804 and files are transferred therebetween by file transfer protocol.
Central switch 802 is electrically coupled to the reconciliation function indicated as COSMOS 806 and SECORr 808.
COSMOS 806 and SECORE 808 are electrically coupled to transactor 804 and transfer information through file transfer protocol.
Additionally, COSMOS 806 transacts with CBII client screen 812.
CHII client screen 812 allows clients to review information.
~'i'~v~7 EF ~ :;- v In other words, information passed through central switch 802 is transferred intra-day through the central switch 802 in SWIFT format. Information transferred through transactor 804 is transferred as batch data in ASCII flat-file format.
It will thus be seen that the objects set forth above, among those made apparent from the preceding description, are efficiently attained and, since certain changes may be made in carrying out the above method and in the construction set forth without departing from the spirit and scope of the invention, it is intended that all matter contained in the above description and shown in the accompanying drawings shall be interpreted as illustrative and not in a limiting sense.
It is also understood that the following claims are intended to cover all of the generic and specific features of the invention herein described and all statements of the score of the invention which, as a matter of language, might be said to fall therebetween.
For a fuller understanding of the invention, reference is had to the following description taken in connection with the . accompanying drawings, in which:
Fig. 1 is a block diagram of a collateral monitoring and control system in accordance with the present invention;
Fig. 2 is a detailed block diagram illustrating the system layout of a collateral monitoring and control system in accordance with the present invention;
Fig. 3 is a flowchart illustrating an overview of the collateral processing methodology in accordance with the present invention;
Fig. 4 is a detailed process flow diagram illustrating the steps carried out in a collateral monitoring system in accordance with the present invention;
Fig. 5A is an exemplary screen printout for a notification letter indicating a margin call;
Fig. SB is an exemplary screen printout of a trade initiation form for entering trade data into a computerized system in accordance with the present invention;
Fig. SC is a transaction master template for use in the present invention;
Fig. SD is a template for adding a margin agreement into the collateral monitoring and control system in accordance with the present invention;
Fig. SE is a template for adding an additional client into the collateral monitoring and control system in accordance with the present invention;
Fig. 6 is a block diagram illustrating a system and network architecture in accordance with the present invention;
Fig. 7 is an entity relationship and data source diagram in accordance with the present invention;
Fig. 8 is a functional flow diagram of a risk ' information system in accordance with the present invention; and Fig. 9 is a block diagram indicating the links between the collateral monitoring and control system and the remaining system architecture of a lending institution.
_ CA 02286151 1999-10-06 ~~5 1 ~ ~ U L 199.
_ _ DETAILED DES RIPTION OF TIDE PREFERRED
Reference is now made to the figures, which illustrate a system and method in accordance with the present invention.
With particular reference to Fig. 1, a collateral monitoring and control system, generally indicated at 100, constructed in acccr3a-~c~ w~t'~ the instant invention, is depicted. System 100 includes a plurality of user interfaces 102 running a GUI. In the preferred embodiment, user interfaces 102 are personal computers that run on, for example, the windows operating system by Microsoft Corporation. This is the front end of system 100.
:;ser interfaces 102 are coupled to network 104 which is preferably a local area network. Network 104 is electZ;onically coupled via communication lines 106 to message router 108.
Message router 108 is coupled to a plurality of servers including collateral server 110, TPA server 112 (tri-party agreement), GPS
server 114, report server 116 ar.d swift server 118.
Message router 108 is also electrically coupled to switch 120 via curve.~.tional tel eccmmunication lines or the 1_ke.
Switch 120 is coupled to SWIFT 122. Switch 120 is also coupled to custody system 124.
Referring generally to Figure 1, system 100 is accessed by users via user interfaces 102. User interfaces 102 are networked via a local area network or a wide area network. The network is preferably a Novell Ethernet. Message router 108 "...
receives all incoming requests and data and forwards them to the appropriate server 110-118. The router also communicates with switch 120 which transmits data and requests to SWIFT 122 and custody systems 124. Message router 108 is preferably a router network with routing capability at locations where servers are located; far example, in a global network separate routing capability is provided on each continent where servers are located. Custody systems 124 could include COSMOS, a cash custodial system in London, or SECORE, a securities custodial system also in London.
Particular reference is next directed to Fig. 2 which is a block diagram illustrating a system layout. Collateral monitoring and control system, generally indicated at 200, A~NDf D SHEEN
3 JUL ~g~.
___:
_ includes four main parts, a front end system 202, a data processing system 204, a portfolio valuation system 206 and a reconciliation system 208. Front end system 202, portfolio valuation system 206 and reconciliation system 208 are each coupled to data processing system 204.
F,.~nt end ws~e~~ 202 irc_udes vis~.:a= bas'_c Gui 2;0 which sits upcn an I'='S plat's=-n 2.2. Visual basic GLi 2i0 is also electrically coupled via wire 214 to open database connectivity 216. Open database connectivity 216 is electrically coupled to database library 218.
Front end system 202 is coupled to data processing system 204 via two secarate links. Firstly, visual basic GUI 210 is coupled to message routers 230 via ITS platfo:m 212 and Mlayer 213. - (Note that two message routers 230 are illustrated;
however, additional Tessage routers may be required depending upon the size of the app'ication.) Additionally, database library 218 is direc=ly coup=ed to ccllateral database 232 and try-par~y agreeTe.~.t ca~aLase 233.
Data processing system 204 receives inputs from the user via message routes 230 and collateral database 232.
Collateral database 232 is electrically coupled to collateral product server 234 which is in turn electrically coupled to message routes 230. Additionally, collateral product server 234 is electrically coupled to password file 236. Password file 236 must be in a s'_m=1 a. format to the various databases . In the preferred embodimer.~, the databases use Sybase technology.
Message routers 230 are a'_so electrically coupled to security manager 240. Security manager 240 is coupled to security manager error file 242, aut:.orization file 244 and VAX UAF 246. The message routers 230 are also electrically coupled to GPS batch server 248, BST batch serve. 250 and BCT batch server 252. HST
batch server 250 and BC'~ batch server 252 are each electrically coupled to reconciliation system 208. Alternatively, GPS batch server 248 is electrical) y coupled to portfolio valuations system 206 through prices, rates, rating, assets 254.
Reconciliation system 208 receives data feeds such as SECORE which are forwarded to BST batch server 250 and COSMOS
~~U S~',~cv ~I , CA 02286151 1999-10-06 7 ~ 0 8 4 7 _ _ . ~3~UL1 __.:
feeds forwarded to BCT batch server 252. SECORE and COSMOS are securities custodial systems provided in London and are preferred systems for use in the present invention. The process of reconciliation is generally one wherein records are sent to the collateral server and the collateral server reads the SECORE
n~~;r:-~r ~~'o~-~:a''_on and compares with its own security positions. If a dif°erence is found, then a report is sent to a report file. The report file also has information on non-zero security positions that were not on the reconciliation file, and positions or. the reconciliation file that were not found in data processi::g system 204. A report is automatically printed at the end of t'.~.e reconciliation process. -F_..~.a=ly, a : externa'_ feed 260 is received from a ser-v=ce suc:: as Exte; or Muller which is forwarded to a valuation system 252 w::ic'.~. is then fcrwarded to prices, rates, ratings, assets 2~4.
Speaking more generally of system 200, it is based upon the _ITS platfor~; a~d ooe.~. database connectivity 216. The ITS
ccmpore.~.. 2~2 is respons'_ble for system security, report requests, a..~.d all batch sewer communications. Open database connectivity 2.5 is responsible for all database operations betwee.~. front end system 202 and the servers.
Imple~ne.~.tation of the ITS messaging architecture requires a plurality of servers communicating using a number of message routers 230. The network con.-section between the servers (i.e., ccylatera'_ server 234, GPS batch server 248, BST batch server 250 a:~d BCT batch se=-ver 252) and the message routers 230 enables t'.~.e ITS system to be d'_stributed over a number of VAX
processors. T:~e servers perform their computation tasks according to messages received from their adjacent message routes. T!:e se=-ver transmits the results back to the user, or onto the next server using the same message routes network.
Communication is prohibited between servers other than through the message routers. Each server is a single VAX process, or a collection of vAX processes that performs a specific task within the ITS system. Preferably, there are plural ITS servers functioning as batch servers. All batch servers feed external a '~F~~ ~~ ~ 1~.. ~.
~G~'~ 9 7 ~ Q 8 ~ ? 0 information to the collateral server during nightly batch processing. The GPS batch server moves securities information, including prices and exchange rates to and from portfolio valuation system 206. Portfolio valuation system 206 is responsible for receiving prices and exchange rates from external ,. curia master _ee s . - ~ ' on a daily basis.
Open database connectivity 216 allows most client server communication to bypass the ITS server, and channel traffic directly to the databases via database library 218. The client application trus establishes three server connections: one to the message router 230, one to collateral database 232 and another database connection to tri-party database 233.
Particular reference is next directed to Fig. 3 which is a flowchart illustrating the collateral processing methodology. The process begins at block 300 with the receipt of a collateral movement instruction. The process then proceeds to decision block 302 and asks whether the collateral moveme.~..
instruction is a receive or deliver. If the instruction in b~occ 300 is a deliver, then the process moves from decision block 302 to decision block 304 and checks whether there is a shortfall.
If there is no shortfall, decision block 304 issues a "no"
response ar.d proceeds to block 306. Block 306 causes the process to send back the collateral movement to the custody system for settlement. The process then proceeds to block 315 where an instruction goes to the pending queue . The process then proceeds to block 320 when the instruction is settled and proceeds to block 322 to confirn message.
Alternatively, if the instructicn is a collateral receipt in block 300, the process moves from decision block 302 to decision block 308 and asks whether the receipt is acceptable .
If the receipt is acceptable, a "yes" response in decision block 308, the process proceeds to block 306 and sends back the collateral movement instruction to the custody system for settlement. Then the process moves to block 316 through 322 as described above.
_ CA 02286151 1999-10-06 . . _ . ~-~~ ; . ~ ..
~ 3 JUL 1999 If the response in block 308 is "no" that the received collateral is determined unacceptable, the process moves to block 310. Additionally, if a shortfall is found in block 304, a "yes"
response, the process proceeds to block 310 and an instruction is sent to the exception queue. The process then proceeds to ~i~i.o,n-hl~k 3~ 2 and asks wheeze= a user v'_ew or ove=ride exception is desired. I' a "..~.c" response is received in block 312, the process proceeds to block 318 and the exception is remedied. The process then proceeds back to decision block 302.
Alternatively, if a "yes" response is received in decision block 312, the process proceeds to dec_s:.on block 314 and asks whether the override is verified. If the override is verified', a "yes"
response, t'.~.e process proceeds to decision block 302.
Alternatively, i' the override is not ver~'ied, a "no" response in decision b:cck 314, the process re:.::r.~.s to block 310 as described above.
More ge~erally, F'_g. 3 illust:ates that the system receives co?'_a=seal ~~cveTe.~.e ;ressaces 3~~0 from a nu;n'.~,er of product and custodial syste~a through ou_ the orga_rization in which it is employed. First a dete~nina:.io~ is made whether the message is receive o. deliver collateral i.~. decision block 302.
If the message is to receive collateral, a determination must be made whether it is acceptable in decis_on block 308. If it is acceptable, it goes to the pending queue is block 316 and a ,:
release message is sent to t'.~.e c:aecdy system to perni~
settlement in block 320 . Al teraatively, i= it is not acceptable, it goes to the exception queue in block 3_~.
Aloe=::atively, if the collateral mcvemene instrsction is to deliver in block 302, fi=st a deter-n;nation is made wrethe=
there is a shortfall in decision bloc: 304. If there is a shortfall, an i:atruction is sent to the exception queue in block 310. Alternatively, if there is no shortfall, it goes to pending queue in block 316, and a release message is sent to the custody system to permit settlement. In each instance, when an instruction is routed to the exception queue in block 310, the only way it can leave is to remedy the problem that caused the exception. or override the exception.
QED S~E~
. CA 02286151 1999-10-06 ~~~ ~w'= ___ Particular attention is next directed to Fig. 4 which illus~rates the collateral processing actions in greater detail.
The process is initiated with a collateral movement instruction at b=ock 400. The process then moves to block X02 and validates the account's existence in the system. After validation of the r _O
accc::.~.~ _.. ~ -ex'_s~erce in the system at bicck 404. Then, the process moves to block 406 and retrieves all confirmed and unconfirmed account Doss=ions affecting available collateral (delivers) for the acccuzt and any account in its collateral group. The process ::ex~ mcves to block 408 and retrieves the account's security, cress-currency haircut and acceptability tables. These are tables located i~. the relational database.
Af ten bl ock 408, the process continues to block 410 and val_dates the security's acceptability by its depository, class, tenor and rating in the acceptability table (for receive messages). A=ten block 410, the process proceeds to block 412 a.-.~ :etrieves a.l threshold and minimum call information foz the account . The ::ccess proceeds to block 414 and ffinds the optimal haircut apcl'_caticn by multiplying the security haircut table by the cross-currency haircut table and sorting the resulting figures and currency security class pairs in descending order.
Af ~er block 414 , the process proceeds to block 416 and calc::lates the local market value for each position and proposed pcs_ticn. The local market value is the market value in the country in which the position is held. The process next proceeds to block 418 and converts the local market value to the base currency. For a G.S. company, the base currency will preferably be L.S. dollars. However, an indicator must be maintained of the local currency. T_n block 420, a security haircut is applied to the resulting base currency market value. The process then proceeds to block 422 and retrieves collateral requirements (resulting from liabilities) in the base currency, grouped by originating currency. The process then proceeds to block 424 and matches like currency collateral to collateral requirements.
Next the process moves to block 426 and matches the remaining requirements to the remaining collateral by finding the highest ~?ED
_ CA 02286151 1999-10-06 ~ ~~97/0847L?
_ ~~~;~~ '~ J U L 1999 currency/security class pair in the remainders and working down the optimizing list.
The process then moves to block 428 and applies minimum calls or thresholds for delivers. Finally, the process moves to block 430 and reports any remaining shortfalls (for delivers).
.. T1 T
message.
Taken together, the process as disclosed in Fig. 4 validates that the collateral satisfies the requirements based on the acceptability rules. Additionally, the process determines if the movement of collate=al creates a shor:.fa~l and provides approval or rejection processes to manage the message through the _~ acceptance and settlement cycle.
If any cf the processing actions shcw shortfalls, the message is forwarded for override approval cr further monitoring (for future messages that will correct the situation) to t':e appropriate monitoring group.
In practice, the mcnitoring group is set up and the computer program gives off an alarn or. the screen indicating than a new message requires group atter_tion. The monitoring group is enabled with the ability to retrieve any message requiring consideration at any time. The reviewer can then approve or continue to hold the message for further action.
r=''=,) When the main process requests collateral position retrieval, such as block 406 0~ : ig. 4, the following information is obtained from the relational databases Lhat a=a accessed by the process.
ia~ i ateral Vai uatian IT'.~Or~ldtion 1. Security identifier 2. Units 3. Price multiplier (price per units i:~dicator) 4. Extender (foreign exchange dominance indicator) 5. Latest exchange rate 6. Security class code 7. Rating 8. Effective maturity date ,~.~ ~'w 9. Pricing currency code 10. Unconfirmed-Confirmed indicator 11. Not valid indicator . 12. Price 13. Price date The system retrieves the most recent price and price date for all unconfirmed and confirmed security positions within the specified collateral group. The system also retrieves the cash positions of all currencies in the collateral group.
The system then determines available collateral by taking the values of all conffi rmed positions and subtracting the values of all unconfirmed deliver messages, including the pending message that initiated the valuation request.
When the process calculates the local market value, such as in block 416 of Fig . 4 , the system f first checks that each position is valid and then performs the following steps:
1. Computing a market price portion as shown below:
when Price Multiplier Flag equals zero, local market value equals units * extender * price;
when Price Multiplier Flag equals one, local market value equals units * extender /
price;
2. Adding the accrued interest applicable for the appropriate fixed income securities, based upon the account setting for the accrued f lag;
3. Converting the market value to the system's base currency (U.S. dollars), using the formula ;
base market value equals local market value (plus accrued) / latest exchange rate.
When applying a security haircut as required by block 420 of Fig. 4, the system retrieves the haircut table for the ' collateral group being revalued and then takes the following steps:
~ \ CA 02286151 1999-10-06 _ . E:.-~ ~rn~ 97~08~.70 1 ~ JUI.1999 ____ The system checks whether the position is valid and applies a zero valuation for invalid positions. For all valid positions the system takes the following steps:
1. Calculating the years until maturity by taking the system date and subtracting it °--om t'.:e cosi~;or?s ef~ec;.ive maturity date;
2. ~etrievi:~g t::e record in the haircut table containing the position's security class, rating and maturity (if applicable);
3. Using the contents of the record to cal curate t'.~.e position' s margin contribution, as shown below:' - . when margin type indicator equals P;
contribution equals base market value minus margin);
whe.~. margin type indicator equals E;
cor.c=ibutior. equals (100 * base market va'_ve / marg'_:~i .
W'.~.er. tae main process requests the cross-currency haircut as described in block 408 of Fig. 4, after retrieving liability information, the process matches collateral to liabilities, using the currency of the liabilities and the currency of tie col=ateral position. The process performs the match in a ma..~.ner t at minim'_zes the applied haircut, in order ~, ~,~:' . , to maxi~n~ze t~:e col'_atera~ ma=gir. contribution.
'.''.:e following example is provided to explain how the match works. The system begins with U.S. dollar liabilities.
,_ matcres the car.~~=med U.S. dollar collateral to the U.S.
dollar trade colla~eral requirements until the margin requirement is met cr the U.S. do'_lar collateral is used. The system then performs the same match far each currency in the liability portfolio against confirmed cull ateral . Next, the system applies any excess confirmed collateral by currency to any existing requirements from different liability currencies minus the cross-currency haircut. It starts with the cross-currency pair that maximizes the collateral contribution against the liability, as determined by the cross-currency haircuts. when the requirement 4MENDED SHE~~
_ CA 02286151 1999-10-06 f~ ~~''~ ~~~~~8~.~'A
~1~~13 J U L 1999 _ is met or the confirmed collateral runs out, the system chooses the next most beneficial cross-currency pair to fill the collateral requirement (i.e., the pair that next maximizes the collateral contribution).
The system determines the currency pair that ,. ~ ' he _ __ percentage decimals for each combination of security class and currency pair in the security and cross-currency haircut tables.
It then sorts the figures that result in descending order (least haircut first) and applies collateral in the order determined in the list, selecting the collateral of the currency and class indicated by the pair with the highest percent.
The system tracks the liability margin requirement satisfied by ccnfirmed available collateral and the net contribution margin (risk adjusted value) of the available confirmed collateral. The ~available confirmed collateral~ is def fined as the cor.~ irned collateral position, minus any depending deliver-y message (i~cluding the pending message).
Furthermore, when a receive collateral movement message reaches the system, the system reviews the relevant accounts or collateral group accounts to determine if the concentration limits, as defined in the appropriate acceptability table, have been breached.
If a request of an acceptability check is issuing a ',~....
report request, the system will retrieve the appropriate acceptability table and all the positions in the associated account . The account will be valued as previously described, and totals for all values under consideration in a table are filled with the collateral contribution values in the accounts for each limit category.
The system also performs a number of shortfall processing actions to determine whether the confirmed collateral held in an account satisfies the collateral requirements, as described by the account's liabilities. The system performs these actions whenever it receives a new pricing that effects existing collateral positions, a deliver or cash withdrawal . , I3 JUL ~99g message, and requests by system report processes that they require these actions.
Shortfall processing requires collateral revaluation, haircut application, cash application, comparison, and reporting.
The system retrieves the minimum call amount for the collateral Qro~tn recor3. The mi.~.i~num ca.'_ ' s added to the cor.f i~.-.ned margin contribution. result fol'_owi:~g ha'_rcut application. The total is then used to compare for the shortfall check. The system then subtracts the outstanding liabilities from the total net collateral margin. contribution to determine the shortfall. If the result is negative, te~ a shortfall warning is issued.
Alternatively, if the result is zero or greater, then no shortfall exists. Accit'_enai~y, if to shortfall check was initiated by t'.~.e receipt of a message, t'~e system will return the results to t~:e izitia=i:~g process. , par~icu'_ar reference is next directed to Figs. SA-5E
which each il_ustrate exemplary templates or forms generated by the compute= syste~: 'c= i-:=°-=ac=_-g with: the users.
Par=ic~.:lar=y, Fig. 5A is a for-n margin call notice that is ge~.erated by the sys~em when a bank's customer has overextended their margin ba'_ance.
Fig. 53 is a trade initiation computer screen in accordance wi~'.~. t'.~.e prese.~.t invention. which enables a user to enter the appropriate i:formation to begin a message process.
Fig. SC is a ccr~puter sc=een for the transaction master which indicates all trar_sactiens for a particul ar client under a given margi.~. agreement and file .
Fig. 5~ is a template o. computer screen for adding a margin agreement to the system. The template illustrates all the required parameters, and each parameter is then stored in an appropriate look-up table of the relational database.
Fig. SE is yet another exemplary template or computer screen for adding a client to the system. The template indicates the required information for adding a client to the system, and the information input is also added to appropriate tables of the relational database.
AA~EhiDED SHEE'1 f:..:.
Particular reference is next made to Fig. 6 which is a block diagram illustrating the system including the international letter of credit system and network architecture.
The architecture is broken up into three main sections which include the main data processing center, generally indicated at sot, a r~mote use_- system, generally indicated at 504, and the reconciliation system, generally indicated at 506.
Reccnciliation system 506 is electrically coupled to data processing center 502 by global network 508 and remote user system 504 is connected to data processing center S02 by global =outer network 510. In some embodiments, global network 508 and global =outer network 510 may be the same global route= network.
''' Data processing center 502 includes a VAX cluster 512 which is essentially similar to the servers of Fig. 2 a.~r~ s disk storage array 514 and a VAX 6630 running a Sybase relational database indicated at reference numeral 516. These units are all electrically coupled via an ethernet indicated at 518 and are electricall~~ coupled to a hub 520. In the preferred embodiment, hub 520 is manufactured by Synoptic. Hub 520 is also coupled to fire wall 522 whicz is additionally coupled to a =outer 524 (in the preferred embodiment route=s 524 are manufactured by Cisco Systems Inc.). Route=s 524 are then coupled to global =outer network 510. Additionally, hub 520 is coupled to LAT 526 which is electrically coupled to global network 508. Global network 508 is electrically coupled to reconciliation system 506 which S~a includes a switch for receiving and transmitting SWIFT megsages~
Additionally, the COSMOS and SECORE feeds 530, 532 respectively are received and are tape transferred to VAX 534. VAX 534 is also referred to as a transactor. From VAX 534, the reccnciliation information is transmitted over global network 508 to data processing center 502.
Remote user system 504 includes a plurality of user interface devices 540 (personal computers) , a network file server 542, and a plurality of printers 544. User interface device 540, file server 542 and printers 544 are ali electrically coupled via an ethernet and are coupled to a hub 546. Hub 546 is ~MEPI~~D SN~x electrically coupled to a router 548 which is additionally connected to global router network 510.
Particular attention is next directed to Fig. 7 which illustrates an entity relationship and data source diagram. This diagram illustrates the interconnection of the various elements of the collateral monitoring and control system, with the majority of the blocks indicating particular table database entities. Of course, the bank 602 and client 604 represent a lending institution and a client that borrows, respectively. The tables are broken into two types of tables. Single record tables are the simp=est tables. They contain a single record with all the information in the table. Geographic sector table 606 is an example of a single record table.
Geographic sector table 606 consists of a single record that includes the code for each geographic region and a brief description of the region. There is no other information in the table. Other examples of single record tables are currency table 608, country table 610, and industrial class table 612.
Multiple record tables contain more information than single record tables. In a multiple record table, the identity of the record must first be identified. This would generally be located in an ID field. The additional records depend upon the type of table and information required.
Attention is next directed to Fig. 8 which is a functional flow diagram for the risk information system. It illustrates an overview of risk management in a lending institution. The data flow diagram specifically illustrates where the collateral management component 710 f its within the risk information system. Transactions and account set up information is entered through interface 700 which is electrically coupled to a standards server 702. Standards server 702 is electrically coupled to rapid credit administration 704.
Rapid credit administration 704 additionally receives information from credit workstation and agreement workstations through interface 708. New agreements received by rapid credit administration 704 are input into the collateral management system 710. Rapid credit administration 704 then transmits ~'G~~,~ 97/08470 1 ~ ~UL 1999.
facility, limits, tenors, and agreements to credit engine 706 and transmits facility, risk ratings, SIC, etc. to rapid portfolio management 726. Credit engine 706 in turn transmits information on outstanding issues to rapid port~olio management 726 and «edit er~a,~iv~g 706 transmits information on facility ~_ nu ers, lim' _ .. y ' ' ~ ~ 'r '~ r° 728 . Collateral management system 710 transacts with credi~ engine 706 and receives gross margin requirements and transmits net margin requirements. A main transactor 722 (which may be a VAX) communicates with credit engine 706 arid market risk engine 718.
Market risk engi.~.e 718 also receives ma=ket factor product rates from standards server 702, and standards server 702 also receives :..
customer product instruments and rate information from server 716. Market risk engine 718 receives additional information from NTR/MFVC server 720, and outputs global management reports 732.
From Fig. 8 it can be seen that the operations of a global institution require all types of risk management. The prese~.t invention provides one type of risk management that requires proper collateral in accordance with agreements with clients and continuously updates and manages the collateral taking into account market swings and currency swings to prevent unnecessary risk taking by a lending institution.
Fig. 9 is a block diagram providing an overview of the integrated systems used in a global lending institution.
Particularly, Fig. 9 illustrates an overview of the integration of a collateral management platform within the overall network system. A collateral management platform 800 is electrically coupled to a central switch 802. Additionally, the collateral management platform is electrically coupled to a transactor 804 and files are transferred therebetween by file transfer protocol.
Central switch 802 is electrically coupled to the reconciliation function indicated as COSMOS 806 and SECORr 808.
COSMOS 806 and SECORE 808 are electrically coupled to transactor 804 and transfer information through file transfer protocol.
Additionally, COSMOS 806 transacts with CBII client screen 812.
CHII client screen 812 allows clients to review information.
~'i'~v~7 EF ~ :;- v In other words, information passed through central switch 802 is transferred intra-day through the central switch 802 in SWIFT format. Information transferred through transactor 804 is transferred as batch data in ASCII flat-file format.
It will thus be seen that the objects set forth above, among those made apparent from the preceding description, are efficiently attained and, since certain changes may be made in carrying out the above method and in the construction set forth without departing from the spirit and scope of the invention, it is intended that all matter contained in the above description and shown in the accompanying drawings shall be interpreted as illustrative and not in a limiting sense.
It is also understood that the following claims are intended to cover all of the generic and specific features of the invention herein described and all statements of the score of the invention which, as a matter of language, might be said to fall therebetween.
Claims (34)
1. A method of monitoring collateral positions in an account using a computer system for accessing a plurality of tables from a database comprising the steps of:
receving a transaction message including a transaction type and an account identification;
validating account and collateral existence within the system;
retrieving account specific parameters from predetermined account tables;
calculating an optimal haircut using at least one of said predetermined account tables;
calculating a market value for each collateral position using at least one of said predetermined tables;
applying the optimal haircut to the market value for each collateral position to obtain an adjusted collateral value;
retrieving collateral requirements from at least one of said predetermined account tables for an account;
matching the adjusted collateral value to the collateral requirements on a country-by-country basis;
matching unmatched collateral requirements to unmatched collateral; and reporting any remaining unmatched collateral requirements.
receving a transaction message including a transaction type and an account identification;
validating account and collateral existence within the system;
retrieving account specific parameters from predetermined account tables;
calculating an optimal haircut using at least one of said predetermined account tables;
calculating a market value for each collateral position using at least one of said predetermined tables;
applying the optimal haircut to the market value for each collateral position to obtain an adjusted collateral value;
retrieving collateral requirements from at least one of said predetermined account tables for an account;
matching the adjusted collateral value to the collateral requirements on a country-by-country basis;
matching unmatched collateral requirements to unmatched collateral; and reporting any remaining unmatched collateral requirements.
2. The method of monitoring collateral as claimed in claim 1, including the step of retrieving confirmed and unconfirmed account positions affecting available collateral for the account.
3. The method of monitoring collateral as claimed in claim 1, wherein said predetermined account tables include a security table, a cross-currency haircut table, and an acceptability table.
4. The method of monitoring collateral as claimed in claim 3, wherein said acceptability table includes entries for each security including a depository, a class, a tenor and a rating.
5. The method of monitoring collateral as claimed in claim 4, including the step of validating a security's acceptability by its depository, class, tenor and rating in said acceptability table.
6. The method of monitoring collateral as claimed in claim 1, wherein said account specific parameters include threshold and minimum call information for an account.
7. The method of monitoring collateral as claimed in claim 1, wherein said predetermined account tables include a security haircut table and a cross-currency haircut table, and the step of calculating an optimal haircut includes a step of multiplying a plurality of values from a security haircut table by a plurality of values from a cross-currency haircut table and receiving a plurality of results and creating an optimization list of the plurality of results and currency security class pairs sorted in descending order.
8. The method of monitoring collateral as claimed in claim 7, wherein the step of calculating a market value for each collateral position includes the steps of calculating a local market value for each collateral position and proposed collateral position, and converting the local market value to a base market value in a predetermined base currency.
9. The method of monitoring collateral as claimed in claim 8, including the step of providing an indicia of the local currency along with the base market value.
10. The method of monitoring collateral as claimed in claim 9, wherein the step of applying the optimal haircut to the market value is applied to the base market value to obtain an adjusted base collateral value.
11. The method of monitoring collateral as claimed in claim 10, wherein the step of matching adjusted base collateral value to collateral requirement is accomplished on a country-by-country basis in the base currency.
12. The method of monitoring collateral as claimed in claim 11, wherein the unmatched collateral requirements are matched to the unmatched collateral by finding the highest currency/security class pair in the remainders and working down the optimization list.
13. The method of monitoring collateral as claimed in claim 1, wherein the step of calculating market value includes a step of determining whether a collateral position date and a price date are valid, and if invalid setting the collateral position value to zero.
14. The method of monitoring collateral as claimed in claim 1, wherein the step of calculating market value includes a step of checking a price multiplier flag and if the price multiplier flag equals zero, then local market value = units *
extender * price, and if the price multiplier flag equals one, then local market value = units * extender/price.
extender * price, and if the price multiplier flag equals one, then local market value = units * extender/price.
15. The method of monitoring collateral as claimed in claim 14, further including the step of adding accrued interest to the local market value to obtain an adjusted local market value.
16. The method of monitoring collateral as claimed in claim 15, further including the step of dividing adjusted local market value by base currency exchange rate to obtain base, market value.
17. The method of monitoring collateral as claimed in claim 1, wherein the step of calculating the optimal haircut includes the steps of:
subtracting a system date from the positions effective maturity date;
retrieving a record in one of said tables containing the position's security, class, rating and maturity;
calculating the position's margin contribution as follows:
when margin type indicator = P, contribution = base market value * (1-margin);
when margin type indicator = E;
contribution = (100 * base market value/margin).
subtracting a system date from the positions effective maturity date;
retrieving a record in one of said tables containing the position's security, class, rating and maturity;
calculating the position's margin contribution as follows:
when margin type indicator = P, contribution = base market value * (1-margin);
when margin type indicator = E;
contribution = (100 * base market value/margin).
18. A method of monitoring collateral positions in an account using a computer system for accessing a plurality of tables from a database comprising the steps of:
receiving a transaction message including a transaction type and an account identification;
validating account and collateral existence within the system;
retrieving account specific parameters from predetermined account tables;
calculating an optimal haircut by multiplying a plurality of values from a first of said predetermined account tables by a plurality of values from a second of said predetermined account tables and receiving a plurality of results and creating an optimization list of the plurality of results and currency security class pairs sorted in descending order;
calculating a local market value for each collateral position and converting the local market value to a base market value;
applying the optimal haircut to the base market value for each collateral position to obtain an adjusted collateral value;
retrieving collateral requirements from at least one of the predetermined account tables for an account;
matching the adjusted collateral value to the collateral requirements on a country-by-country basis in said base currency;
matching unmatched requirements to unmatched collateral in the base currency by finding the highest currency/security class pair in the unmatched collateral and working down the optimization list; and reporting any remaining unmatched collateral requirements
receiving a transaction message including a transaction type and an account identification;
validating account and collateral existence within the system;
retrieving account specific parameters from predetermined account tables;
calculating an optimal haircut by multiplying a plurality of values from a first of said predetermined account tables by a plurality of values from a second of said predetermined account tables and receiving a plurality of results and creating an optimization list of the plurality of results and currency security class pairs sorted in descending order;
calculating a local market value for each collateral position and converting the local market value to a base market value;
applying the optimal haircut to the base market value for each collateral position to obtain an adjusted collateral value;
retrieving collateral requirements from at least one of the predetermined account tables for an account;
matching the adjusted collateral value to the collateral requirements on a country-by-country basis in said base currency;
matching unmatched requirements to unmatched collateral in the base currency by finding the highest currency/security class pair in the unmatched collateral and working down the optimization list; and reporting any remaining unmatched collateral requirements
19. The method of monitoring collateral as claimed in claim 18, wherein the step of calculating market value includes a step of determining wr.ether a collateral position date and a price date are valid, and if invalid setting the collateral position value to zero.
20. The method of monitoring collateral as claimed in claim 18, wherein the step of calculating market value includes a step of checking a price multiplier flag and if the price multiplier flag equals zero, then local market value = units *
extender * price, and if the price multiplier flag equals one, then local market value = units * extender/price.
extender * price, and if the price multiplier flag equals one, then local market value = units * extender/price.
21. The method of monitoring collateral as claimed in claim 20, further including the step of adding accrued interest to the local market value to obtain an adjusted local market value.
22. The method of monitoring collateral as claimed in claim 21, further including the step of dividing adjusted local market value by base currency exchange rate to obtain base market value.
23. The method of monitoring collateral as claimed in claim 18, wherein the step of calculating the optimal haircut includes the steps of:
subtracting a system date from the positions effective maturity date;
retrieving a record in one of said tables containing the position's security, class, rating and maturity;
calculating the position's margin contribution as follows:
when margin type indicator = P, contribution = base market value * (1-margin);
when margin type indicator = E;
contribution = (100 * base market value/margin).
subtracting a system date from the positions effective maturity date;
retrieving a record in one of said tables containing the position's security, class, rating and maturity;
calculating the position's margin contribution as follows:
when margin type indicator = P, contribution = base market value * (1-margin);
when margin type indicator = E;
contribution = (100 * base market value/margin).
24. A computerized system for monitoring collateral positions in an account comprising:
an input device which receives transaction messages including a transaction type and an account identification;
a database including a plurality of tables defining processing rules for each account and collateral type including at least a haircut table and collateral requirements; and a collateral processing unit for processing transactions;
said collateral processing unit accessing said database and validating account and collateral existence within the system, accessing a haircut table within said database and calculating an optimal haircut, calculating a market value for each collateral position, said collateral position having a market value, applying the optimal haircut to the market value for each collateral position to obtain an adjusted collateral value, retrieving collateral requirements from said database for the account, matching the adjusted collateral value to the collateral requirements on a country-by-country basis, matching unmatched collateral requirements to the unmatched collateral, and reporting any remaining unmatched collateral requirements.
an input device which receives transaction messages including a transaction type and an account identification;
a database including a plurality of tables defining processing rules for each account and collateral type including at least a haircut table and collateral requirements; and a collateral processing unit for processing transactions;
said collateral processing unit accessing said database and validating account and collateral existence within the system, accessing a haircut table within said database and calculating an optimal haircut, calculating a market value for each collateral position, said collateral position having a market value, applying the optimal haircut to the market value for each collateral position to obtain an adjusted collateral value, retrieving collateral requirements from said database for the account, matching the adjusted collateral value to the collateral requirements on a country-by-country basis, matching unmatched collateral requirements to the unmatched collateral, and reporting any remaining unmatched collateral requirements.
25. The computerized system of monitoring collateral as claimed in claim 24, wherein said collateral processing unit retrieves confirmed and unconfirmed account positions affecting available collateral for the account.
26. The computerized system of monitoring collateral as claimed in claim 25, wherein said database includes an acceptability table including entries for each security including a depository, a class, a tenor and a rating.
27. The computerized system of monitoring collateral as claimed in claim 26, wherein said collateral processing unit validates a security's acceptability by its depository, class, tenor and rating in said acceptability table.
28. The computerized system of monitoring collateral as claimed in claim 24, wherein said collateral processing unit accesses one of said plurality of tables to retrieve threshold and minimum call information for the account.
29. The computerized system of monitoring collateral as claimed in claim 24, wherein said collateral processing unit calculates the optimal haircut by multiplying a plurality of values from a first of said plurality of tables from the database by a plurality of values from a second of said plurality of tables from the database and receives a plurality of results, and creating an optimization list of the plurality of results and currency security class pairs sorted in descending order.
30. The computerized system of monitoring collateral as claimed in claim 29, wherein said collateral processing unit calculates the market value for each collateral position by calculating a local market value for each collateral position and proposed collateral position, and converting the local market value to a base market value in a predetermined base currency.
31. The computerized system of monitoring collateral as claimed in claim 30, wherein said collateral processing unit provides an indicia of the local currency along with the base market value.
32. The computerized system of monitoring collateral as claimed in claim 31, wherein the haircut is applied to the base market value of the collateral to obtain an adjusted base collateral value.
33. The computerized system of monitoring collateral as claimed in claim 32, wherein said adjusted collateral value is matched to the collateral requirement on a country-by-country basis in the base currency.
34. The computerized system of monitoring collateral as claimed in claim 32, wherein the unmatched collateral requirements are matched to the unmatched collateral by finding the highest currency/security class pair in the remainders and working down the optimization list.
Applications Claiming Priority (1)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| PCT/US1997/008470 WO1998053417A1 (en) | 1997-05-19 | 1997-05-19 | Method and system for improved collateral monitoring and control |
Publications (1)
| Publication Number | Publication Date |
|---|---|
| CA2286151A1 true CA2286151A1 (en) | 1998-11-26 |
Family
ID=22260924
Family Applications (1)
| Application Number | Title | Priority Date | Filing Date |
|---|---|---|---|
| CA002286151A Abandoned CA2286151A1 (en) | 1997-05-19 | 1997-05-19 | Method and system for improved collateral monitoring and control |
Country Status (4)
| Country | Link |
|---|---|
| EP (1) | EP0996919A4 (en) |
| AU (1) | AU3071997A (en) |
| CA (1) | CA2286151A1 (en) |
| WO (1) | WO1998053417A1 (en) |
Families Citing this family (7)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| US7130823B1 (en) | 1995-09-14 | 2006-10-31 | Citibank Aktiengesellschaft | Computer system for data management and method for operation of the system |
| JP4394786B2 (en) * | 1998-12-04 | 2010-01-06 | シティバンク アクツィアンゲゼルシャフト | Data management computer system and operation method thereof |
| US7139730B1 (en) * | 1999-04-20 | 2006-11-21 | David Shimko | System, method, and computer program product for collateral management operations |
| US6236973B1 (en) * | 1999-06-02 | 2001-05-22 | Greg Dillard | Apparatus and method for providing collateral construction loan insurance coverage |
| WO2001069468A1 (en) * | 2000-03-14 | 2001-09-20 | Eontec R & D Limited | A transaction control system |
| US7577601B1 (en) | 2000-03-30 | 2009-08-18 | Ubs Ag | Leverage margin monitoring and management |
| US7970686B1 (en) | 2000-09-15 | 2011-06-28 | Citigroup Global Markets, Inc. | System and method of interfacing for client application programs to access a data management system |
Family Cites Families (4)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| US5644727A (en) * | 1987-04-15 | 1997-07-01 | Proprietary Financial Products, Inc. | System for the operation and management of one or more financial accounts through the use of a digital communication and computation system for exchange, investment and borrowing |
| US4953085A (en) * | 1987-04-15 | 1990-08-28 | Proprietary Financial Products, Inc. | System for the operation of a financial account |
| US5262942A (en) * | 1990-06-05 | 1993-11-16 | Bankers Trust Company | Financial transaction network |
| US5802499A (en) * | 1995-07-13 | 1998-09-01 | Cedel Bank | Method and system for providing credit support to parties associated with derivative and other financial transactions |
-
1997
- 1997-05-19 AU AU30719/97A patent/AU3071997A/en not_active Abandoned
- 1997-05-19 EP EP97925641A patent/EP0996919A4/en not_active Withdrawn
- 1997-05-19 WO PCT/US1997/008470 patent/WO1998053417A1/en not_active Application Discontinuation
- 1997-05-19 CA CA002286151A patent/CA2286151A1/en not_active Abandoned
Also Published As
| Publication number | Publication date |
|---|---|
| AU3071997A (en) | 1998-12-11 |
| WO1998053417A1 (en) | 1998-11-26 |
| EP0996919A4 (en) | 2001-07-04 |
| EP0996919A1 (en) | 2000-05-03 |
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| Date | Code | Title | Description |
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| EEER | Examination request | ||
| FZDE | Discontinued |