NZ252066A - Formulation and trading of risk management contracts - Google Patents

Description

New Zealand No. 252066 International No. PCT/AU93/00250 Priority Date(s): Complete Specification r.tcd: Class: (6) Publication Date: 2.tf.0.C.t..1996 P.O. Journal No: NEW ZEALAND PATENTS ACT 1953 COMPLETE SPECIFICATION Title of Invention: Methods and apparatus relating to the formulation and trading of risk management contracts Name, address and nationality of applicant(s) as in international application form: IAN KENNETH SHEPHERD, an Australian citizen of 2 Glyndebourne Avenue, Toorak, VIC 3142, Australia "WO 94/28496 252066 Methods and Apparatus Relating to the Formulation and Trading of Risk Management Contracts TECHNICAL FIELD This invention relates to methods and apparatus, including electrical computers anddata processing systems applied to financial matters and risk management. In particular, the Invention is concerned with the management of risk relating to specified, yet unknown, future events.

BACKGROUND ART Individuals and enterprises are continually exposed to risk because of future events beyond their control. The outcome of those events can either positively or negatively Impact on their wellbelng. 15 Individuals and enterprises should generally prefer not to face exposure to the possibility of adverse consequences, regardless of their perception of the likelihood of such events occurring. It Is in their interest to consider foregoing 'resources' they currently possess 1f doing so would reduce the possibility of being so greatly exposed to 20 future outcomes.

Risk can take many forms in view of the large range and type of future events which might result 1n adverse consequences. Risk can be categorised, in one Instance, as 'economic' In nature. Phenomena that constitute economic risk Include: commodity prices, currency exchange 25 rates, interest rates, property prices, share prices, Inflation rates, company performance, and market event based indices.

Another characterisation of risk concerns 'technical' phenomena. This can include things like the breakdown of an electricity generation plant, aircraft engine failure, and the damage to, or failure of, 30 orbiting telecommunications satellites. The outcomes for each of these phenomena will be adverse for the users and/or supplier.

Other forms of risk defy ready characterisation, such as weather-based (viz., rain damage or lightning strike), or other natural occurrences (viz., earthquakes or iceberg collision with sea-go1ng 35 vessels). ' There are also less tangible risks associated with, for example, the emission of atmospheric pollutants or the disposal of intractable toxic wastes, in the sense that the future consequences are unknown, save that there is a notion, based on current information, that they could be adverse.

The capability to manage risk Is more Important today than it was in the past, and is likely to become ever-more important into the future, because there 1s an ever Increasing exposure to a wider generic range of future phenomena beyond the control of Individuals or enterprises. There is also a wider feasible range of possible future 10 events, and greater uncertainty about the likelihood of occurrence, associated with any single future phenomenon viz., an Increasing vol at 111ty.

It 1s also thought that Individuals are now more risk-averse in recessionary times, when there are fewer available discretionary 15 resources to trade-off to protect themselves from such adverse future events.

In the prior art, individuals and enterprises faced with 'technical' risk have hedged against future outcomes by mechanisms such as the adoption of quality assurance practices, warranties, Increased 20 research and development activity (and associated Intellectual property rights such as patents, utility models and registered designs), the purchase of modernised plant and equipment, and improved Inventory, occupational health and safety and employer/employee relations practices.

Consider a manufacturer of, say, Integrated circuits (ICs), which 25 has many clients wishing to purchase Its ICs. The demand may result 1n a delay 1n delivery due to limited manufacturing capacity, thereby requiring advance production scheduling for orders already 1n-hand. Typically, the manufacturer will give a warranty to a purchaser as to measurable performance criteria for Its ICs; 1f a batch does not perform 30 to the specified criteria, the manufacturer 1s required by contract to replace that batch. That 1s, a purchaser may have no interest 1n obtaining monetary compensation for the poor quality ICs, as the purchaser needs the components for their own products. In that case, the 'consideration* the warranty makes Is the priority scheduling of a 35 substitute batch of that type of IC, possibly displacing other scheduled production runs, or deferring delivery to another purchaser.

Such contractual arrangements are piece-meal 1n nature, and can only be struck between the manufacturer and each individual purchaser. They also leave the manufacturer exposed to claims from other customers whose orders are delayed by the re-scheduling. The manufacturer has no 5 convenient mechanism available to It to hedge against such claims, perhaps by way of reserving production rights with another manufacturer, in lieu of unavailability of their own manufacturing facility.

In the face of such 'economic' risk, it 1s known for individuals and enterprises to hedge against adverse outcomes by Indirect means such 10 as self-insurance, and directly by means such as futures contracts, forward contracts, and swaps.

There are disadvantages or limitations associated with such available economic risk management mechanisms. Particularly, they provide, at best, only Indirect approaches to dealing with the risk 15 management needs. The available mechanisms are relatively expensive, and provide limited phenomenon coverage, and therefore cannot meet the requirements of the party seeking to hedge against such wide-ranging future risk. The Infrastructure and pay-out costs associated with switching between, say, a commodities market and a stock market are 20 often prohibitive for entitles small and large alike. As a consequence, entitles find themselves saddled with obligations they have little control over and cannot escape.

In respect of the "less tangible" forms of risk, an example In the prior art of a form of management of that risk 1s that of 'pollution 25 rights' sold by the U.S. Environmental Protection Agency (EPA) in March 1993 for the atmospheric emission of sulphur dioxide. This was done by an auction of "allowances" permitting the release Into the atmosphere. By the year 1995, any company or organisation emitting sulphur dioxide in the U.S. without enough allowances to cover their total emissions 30 will face prosecution. This means polluters must either buy further allowances, or else modify or replace their plant and equipment to reduce these emissions. The EPA will regulate the total number of allowances able to be obtained. The existing allowances have already become a valuable tradeable 'property' as between sulphur dioxide 35 emitters, that 1s, even before the time when no further allowances will be able to be purchased.

PCT / AU93/00250 Management techniques for the "less tangible" forms of risk are in their infancy. The existing forms indicate an emerging demand for systems and methods to enable effective management.

Specific examples in the prior art of patents relating to methods 5 and apparatus which deal with various forms of risk management include British Patent No. 2 180 380, in the name of Merrill Lynch Pierce Fenner and Smith Incorporated, directed to an Automated Securities Trading Apparatus (corresponding to U.S. Patent No. 4,674,004, and further related to U.S. Patents No. 4,346,442 and 4,376,978). Other examples 10 include U.S. Patent No. 4,739,478 assigned to Lazard Freres and Co., directed to Methods and Apparatus for Restructuring Debt Obligations, U.S. Patent No. 4,751,640 assigned to Citibank, N.A., directed to An Automated Investment System, and U.S. Patents No. 4,752,877, 4,722,055, and 4,839,804 assigned to College Savings Bank directed to Methods and 15 Apparatus for Funding Future Liability of Uncertain Cost.

The present invention comes about 1n view of the shortcomings of existing risk management mechanisms, and the perceived increasing importance of the management of risk relating to specified, yet unknown, future events.

In this sense, the Invention is directed to something having economic value to individuals, enterprises and societies as a whole. Methods and apparatus that provide for the management of risk offer material advantages by, for example, minimising adverse future outcomes, providing both a form of compensation in the event of adverse future 25 outcomes, and forms of risk management not otherwise supported or available 1n the prior art, and thus have value 1n the field of economic endeavour.

DISCLOSURE OF THE INVENTION 30 The invention encompasses methods and apparatus enabling the management of risk relating to specified, yet unknown, future events by enabling entities (parties) to reduce their exposure to specified risks by constructing compensatory claim contract orders on yet-to-be-identified counter-pairtles, being contingent on the occurrence 35 of the specified future events. The entitles submit such orders to a 'system' which seeks to price and match the most appropriate counter-party, whereupon matched contracts are appropriately processed through to their maturity.

Therefore, the Invention enables parties to manage perceived risk, in respect of known, yet non-predictable, possible future events. These 5 future events may relate to measurable phenomena whose outcome is verifiable,"and cannot be materially influenced by any other entity having a stake in that outcome.

The ability to price and match risk aversion contracts essentially comes about because of the nature of risk Itself. Any number of people 10 will each have differing views as to the likelihood of an outcome of some future event. This means that when each person Is required to independently assess a range of outcomes for a specified future date, there almost always will be a variance 1n those assessments. Thus 1t 1s possible to match these expectations as between parties to form a 15 contract. The potential counter-parties to an offered contract have the motivation of taking up an opportunity to exploit differing views of future outcomes to their advantage, either for some gain or, again, as a form of risk management.

It 1s Important that the assessments as to future outcomes of 20 events are made Independently of any other party who could be a counter-party to a contract. The nature of the pricing and matching, therefore, 1s totally different to conventional negotiation or bidding as between parties.

The present Invention enables entitles to better manage risk, as 25 they are able to think more expHcity about possible future events beyond their control which they perceive will have adverse consequences for them. They will have the capacity to utilise existing resources to reduce exposure to a specific risk, and have access to a generally available mechanism by which they can expHcity trade-off existing 30 assets for Increased certainty about the future. They are also free to decide upon the degree to which they should make such trade-offs, and to actually effect and subsequently manage such trade-offs In a simple and low cost manner.

The present invention also provides an automated infrastructure to 35 which parties have afccess without restrictions relating to nationality or residential requirements. This allows the parties to participate directly without requiring an intermediary.

Therefore, in accordance with one aspect of the present invention, there is disclosed a data processing system to enable the formulation of multi-party risk management contracts, the system comprising: 5 at least one stakeholder input means by which ordering , stakeholders can Input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a range of future outcomes, and said contract data specifying a future time of maturity, entitlements due at maturity for the range of 10 outcomes, and a consideration due to a counter-party stakeholder; at least one counter-party stakeholder Input means by which at least one counter-party stakeholder can Input registering data as to a respective view of the outcomes In said predetermined range of outcomes in the future for one or more of said predetermined phenomena; 15 a data storage means linked with each said stakeholder Input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said 20 registering data, said pricing Including selecting the registering data corresponding to the time of maturity for each predetermined phenomenon, and calculating a counter-consideration derived from said entitlements, and said matching Including comparing said consideration and said counter-consideration to match an offered contract with at least one of 25 said counter-party stakeholders.

In accordance with a second aspect of the present Invention there is disclosed a method to enable the formulation of multi-party risk management contracts, the method comprising the steps of: (a) Inputting Into data processing apparatus, by at least one 30 ordering stakeholder Input means thereof, contract data representing at. least one offered contract in at least one predetermined phenomenon having a range of future outcomes, and said contract data specifying a future time of maturity, entitlement due at maturity for the range of outcomes, and consideration due to a counter-party stakeholder; 35 (b> Inputting Into said data processing apparatus, by at least one counter-party stakeholder input means thereof, counter-party PCT / AU93/00250 reglstering data as to a respective view of each outcome 1n said predetermined range of outcomes in the future for one or more of said predetermined phenomena; <c) storing, in a data storage means of said data processing 5 apparatus linked with each said stakeholder means and linked with each said counter-party stakeholder input means, said contract data and said registering data; and (d) pricing and matching at least one of the offered contracts, by data processing means of the data processing apparatus linked with 10 said data storage means said pricing and matching comprising the steps, for each offered contract, of: (I) selecting, the registering data corresponding to the time of maturity for a predetermined phenomenon; (II) calculating a counter-consideration derived from the 15 said entitlement; (III) comparing the said consideration and the said counter-consideration; and (1v) matching a contract on the basis of the said comparison. In preferred embodiments, the ordering stakeholders and 20 counter-party stakeholders can be considered to be contract buyers and contract sellers respectively. The entitlement for each outcome can be 1n the form of 'money' payoffs (both positive and negative) at maturity of a matched contract, or can be other types of compensation, possibly In the form of goods, services, promises, credits or warrants. The 25 consideration, whether buyer specified or seller calculated, can again be In the nature of a premium or payments, or can relate to other 'non-money' forms of property or obligations, typically transferable when a contract Is matched, although possibly deferable, until, and potentially beyond, the time of maturity.

In the period between the match of a contract and maturity the various buyers, sellers and other contract stakeholders can review any contract to which they are a party and seek to trade that contract to other parties by the pricing and matching procedure, or variations on the pricing and matching procedure. They would tend to do so 1f their 35 view of the future outcome of the phenomenon, being the subject of the contract, had changed markedly, or as a means to minimise expected PCT/AU93/002S0 losses if some unforseen adverse trend in the present day outcome of the phenomenon has occurred. As well as trading existing contracts, further contracts can be offered to 'lay off' or avert risk. Stakeholder parties can build up a portfolio of matched contracts and offered 5 contracts, which are continually traded to obtain the best possible position at any time, and that position can be continually reviewed with time.

It is further possible for offered contracts to be based on the difference between phenomena, and so manage perceived risk as between 10 the phenomena. Elemental contract phenomena can therefore be developed to meet the most particular needs of buyers and sellers, thus creating great flexlbl11ty.

In most Instances the date of maturity will be predetermined by a 'product sponsor' stakeholder, who otherwise cannot be a buyer or seller 15 of contracts they sponsor. Even so, it 1s conceivable that the date of maturity can be tied to a specified time from the Instant a contract 1s matched. This may be appropriate where the time of maturity 1s 1n the near future,-In which case offered contracts could otherwise remain unmatched following initial offer even up until the time of maturity. 20 Other stakeholders have executive roles 1n administration, guaranteeing the performance of buyers and seller, regulation, supervision and so on. In this way the number and types of buyers and sellers that can be considered 1n pricing and matching offered contracts can be controlled.

The invention also encompasses apparatus and method dealing with the handling of contracts at maturity, and specifically the transfer of entitlement.

Therefore, in accordance with a further aspect of the invention, there is disclosed a method of exchanging obligations as between 30 parties, each party holding a credit record and a debit record with an exchange Institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of: (a) creating a shadow credit record and debit record for each party to be held independantly from the exchange Institutions by a 35 supervisory institution; \ (b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and debit record; Cc) for every transaction resulting in an exchange obligation, the supervisory institution adjusts each respective party's shadow 5 credit record or debit record, allowing only those transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and <d> at the end-of-day, the supervisory institution instructing 10 ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the r,aid permitted transactions, the credits and debits being irrevocable, t\m invariant obligations placed on the exchange institutions.

BRIEF DESCRIPTION OF THE DRAWINGS AND APPENDICES A number of embodiments of the Invention will now be described with reference to the accompanying drawings, 1n which; F1g. 1 shows a block diagram of a generic 'system' embodying the 20 invention; Fig. 2 shows a block diagram of an indicative hardware platform supporting the system of F1g. 1; Fig. 3 shows a representation of INVENTCO and Its main component parts; Fig. 4 shows a block diagram of a subset of the components of an INVENTCO system's markets-depository (M-INVENTCO); F1g. 5 shows a block diagram of the process components of a subset of one type of 'market' (termed CONTRACT APP) which can reside within M-INVENTCO; Fig. 6 shows a timeline applicable to Example I; Fig. 7 shows a timeline applicable to Example II; F1gs. 8 to 16 show flow diagrams of the contract pricing and matching methodology; F1g. 17 shows a timeline applicable to Example III; and 35 Figs. 18 to 40 show flow diagrams of the first to ninth process components for a CONTRACT APP.

There are a number of 'appendices' supporting the described embodiments all of which form an integral part of this specification. The appendices are: Appendix A is a glossary of nori-conventional terms; 5 Appendix B is a detailed description of CONTRACT APPS, and the stakeholders thereto; Appendix C is a detailed description of each of the nine processes of a CONTRACT APP; Appendix D is a detailed description of the nature of risk 10 management contracts; Appendix E has tables and charts associated with Example I; Appendix F has tables and charts associated with Example II; Appendix G has tables and charts associated with Example III; and Appendix H Is a listing of the main variables and data files used 15 by process 2 of a CONTRACT APP.

DETAILED DESCRIPTION OF A BEST MODE FOR CARRYING OUT THE INVENTION 1• Introduction 20 The description firstly discusses the relation of the various users (stakeholders) of the 'system', followed by a consideration of a hardware data processing platform and peripheral input/output devices by which stakeholders interact with each other and the system.

This 1s followed by a discussion of the scops of the 25 'applications' that can be supported by the system In relation to the various stakeholders, and the Interrelation of component parts thereof.

Details as to software methodologies for Implementation of the applications supported by the system are also described, including a number of worked examples relating to the formulation and trading of 30 risk management contracts.

In the course of the detailed description reference 1s made to a number of non-conventional expressions and terminologies. For convenience, an explanation of these 1s listed In Appendix A. 2. 'System?' Configurations Fig. 1 shows a block diagram of a generic 'system' embodying the PCT/A.U93/00250 inventlon. The various stakeholders or parties to the system 10 each have access to a centralised processing unit 20. The processing units 20 can be constituted by one or more data processing apparatus, with each one thereof providing access for any one or more of the various 5 stakeholders to applications software supported by the system 10, as all the processing units would be Interconnected. Access to the one or "more data processing apparatus is controlled by a generic form of communications co-ordination and security processing unit 25.

Fig. 1 also Indicates that there are a number of types of 10 stakeholder, and a number of individual stakeholders within each stakeholder type. The basic types of stakeholder" are described as: applications promoters 11, product sponsors 12, product ordering parties (buyers) 13, potential product counter-parties (sellers) 14, counter-party guarantors 15, regulators 16, consideration/entitlement 15 transfer ('accounting') entities 17, and miscellaneous parties 18. The detailed roles of each of these stakeholders will be subsequently described 1n greater detail at a later time. The number of types of stakeholder represented In Fig. 1 1s typically the largest that will be supported by the system 10.

An embodiment of a computer system for the system 10 Is shown In Fig. 2. The core of the system hardware 1s a collection of data processing units. In the embbdlment described, the processing unit 20 comprises three 1ntev-linked data processors 93,97,104, such as the Sun 670 MP manufactured by Sun Microsystems, Inc. of the USA. Each 25 processing unit 93,97,104 runs operational system software, .such as Sun Microsystems OS 4.1.2, as well as applications software. The applications software Is, in part, written around the flow diagrams subsequently described 1n Figs. 8 to 16, and F1gs. 18 to 40, and accesses, or otherwise creates, the data files as summarised in Appendix 30 H. The processor configuration shown in F1g. 1 represents a large system designed to handle the transactions of thousands of stakeholders, the input and output data generated by those stakeholders, and risk management contract pricing, matching and subsequent processing functions - Each processing unit 93,97,104 is operably connected with 1t one or more mass data storage units 95,100,110 to store all data received PCT / AU93/00250 from stakeholders, and other data relating to all other software operations generating or retrieving stored information. Suitable mass storage units are, for example, such as those commercially available from Sun Microsystems.

A number of communications controllers 80,84,87, forming the communications co-ordination and security processing unit 25, are coupled with the processing unit 20. These controllers effect communications between the processing units 93,97,104 and the various external hardware devices used by the stakeholders to communicate data 10 or instructions to or from the processing units. The communications controllers are such as the Encore ANNEX II, the IBM AS/400 server or the CISCO Systems AGS +.

A large range of communications hardware products are supported, and collectively are referred to as the stakeholder input/output devices 15 70. One amongst many of the communication devices 70 are personal computers 51 and associated printers 52, which have communications connection with the communlcations controller 80 by means of a modem 50. There can also be an external host device 53, such as a mini or mainframe computer, again linked with the communications controller 80 20 by means of a modem 54. In other forms, communications can be established simply by means of a tone dialing telephone 56, which provides for the Input of Instructions or data by use of the tone dialing facility Itself. In the alternative, a voice connection via an operator 75 can be effected by a conventional telephone 58. 8oth these 25 external devices are shown connected with the communications controller 84. A further possibility Is to have data transfer by means of a facsimile machine 65, 1n this case shown linked to the communications controller 87.

In all cases, users of the Input devices are likely to be required 30 to make use of system access password generation and encryption devices such as the Racal RG 500 Watchword Generator 66,67,68,69, (for personal use) and the Racal RG 1000, which is Incorporated in a mainframe computer 53. The corresponding decoding units for these devices are incorporated in the communications controllers 80,84,87. 35 The generic processing unit 20 also includes a large number of 'portable' information recordal devices, such as printers, disc drives, PCT / AU93/00250 and the like, which allow various forms of information to be printed or otherwise written to storage media to be transferable. This is particularly appropriate where confirmatory documentation of matched risk contracts is required to be produced, either for safekeeping as a 5 hard copy record, else to be forwarded to any one or more of the stakeholders that are a party to each individual matched contract.

The generic system 10 shown in Fig. 1 encompasses many varied configurations, relating not only to the number and types of stakeholders, but also the 'architectures' realisable by the system 10 hardware and software in combination. In that sense the arrangement shown 1n Fig. 2 is to be considered only as broadly indicative of one . type of hardware configuration that may be required to put the invention into effect.

The 'virtual' level of the system 10 is termed INVENTCO. INVENTCO 15 is a collection of one or more potentially Interrelated systems, as shown in Fig. 3. Each INVENTCO system (INVENTCO SYSTEM #1... INVENTCO SYSTEM #N) enables the formulation and trading of a wide range of contractual obligations, including risk management contracts. The hardware configuration shown 1n Fig. 2, 1s to be understood both as a 20 realisation for a single INVENTCO system, and equally can represent a number of INVENTCO SYSTEMS, where the processing unit 20 1s common to all and supports a number of communications co-ordination and security units 25, others of which are not shown, together with associated external communications devices 70, also not shown.

While INVENTCO allows the formulation and trading of risk management contracts, 1t 1s also responsible for processing of such contracts through to, and Including, their maturity, and 1n some respects, subsequent to maturity.

Where there are a number of INVENTCO systems, those systems may be 30 Inter-dependent or stand-alone in nature. If Inter-dependent, INVENTCO (10) Is responsible for transactions between those systems.

INVENTCO and all of Its component parts can be legally or geographically domiciled 1n separate countries or states. The supra-national nature of INVENTCO enables the stakeholders to avail 35 themselves of the risk management mechanisms Independently of legal domicile or other such restrictions that are often a feature of some PCT / AU93/00250 conventlonal risk management mechanisms, subject to meeting certain criteria regarding credit worthiness and such. Indeed, the legal domicile, location, ownership and participating stakeholders of INVENTCO, or any of the sub-systems, can be continually changing. 5 F1g. 3 further shows that each INVENTCO SYSTEM comprises an Infrastructure component, termed I-INVENTCO, and a markets depository component M-INVENTCO. I-INVENTCO 1s concerned with coordination of communications and other security considerations, that part termed AXSCO, and also provides a network and general management system, termed 10 VIRPRO. M-INVENTCO is a depository of authorised product-market (applications) software residing within INVENTCO under the authorisation of VIRPRO, and as distributed using I-INVENTCO.

One or more local or wide area telecommunication networks may link VIRPRO and M-INVENTCO to AXSCO, and thus to each other. In this way 15 both VIRPRO and M-INVENTCO effectively reside around AXSCO.

AXSCO therefore comprises multiple, uniquely addressed communications controllers linked together In a number of possible ways. In one embodiment, AXSCO Is represented by the communications co-ordination and security processing unit 25 shown in Fig. 2. The 20 component hardware, such as the three controllers 80,84,87 shown In F1g. 2, typically are responsible for three types of operational applications. The first 1s 1n respect of time stamping data received from other parts of INVENTCO and data similarly transmitted to entitles external of INVENTCO. The second 1s 1n respect of protecting the 25 identity and/or location of entitles within INVENTCO from one another, and from entitles external to INVENTCO. The third Is responsible for overall management of the routing of data received and to be transmitted within INVENTCO and to external entitles thereto.

Referring now to Fig. 4, within M-INVENTCO reside different 30 collections of system sponsored phenomena or 'markets', one collection of which is termed CONTRACT APPS. Each CONTRACT APP within the CONTRACT APPS 'markets' collection is essentially related to a specific type of risk management phenomenon. The purpose of individual CONTRACT APPS 1s two-fold. First, to effect the trading/exchange/transfer of risk 35 management contracts (and derivatives of these transactions) between participating product ordering parties and counter-parties on terms acceptable to the parties involved, as well as to others within INVENTCO registered as having a legitimate Interest In +he nature, size and composition of these trades/exchanges/transfers. And second, to appropriately manage all matched/confirmed contracts through to their 5 time of maturity.

Individual CONTRACT APPS are responsible for performing the above-described tasks according to the specific rules they embody, defined by their applicable stakeholders.

The role played by the various stakeholders to CONTRACT APPS, 10 remembering that in many cases it would not be necessary to have the involvement of all the possible types of stakeholder, briefly stated 1s as follows: (a) An application promoter is an entity having overall responsibility for the functioning of a CONTRACT APP, having being granted that responsibility by VIRPRO. (b) A product sponsor 1s an entity which promotes and administers the rules of trading, and subsequent management of defined "products" selected for Inclusion 1n a CONTRACT APP by its application promoter. (c) An ordering party (buyer) 1s an entity seeking to acquire a CONTRACT APP product from a potential counter-party (seller), (d) A counter-party (seller) Is an entity potentially prepared to satisfy the CONTRACT APP product needs of an ordering party (buyer). (e) A guarantor 1s an entity guaranteeing a seller's ability to settle or meet obligations as a result of a CONTRACT APP effected match. (f) Regulators are entitles overseeing the on-going performance of all other stakeholders involved 1n a CONTRACT APP, and especially guarantors. (g) Consideration/entitlement transfer ('accounting') entitles are those parties with which all other CONTRACT APP stakeholders maintain 'accounts' to transfer required considerations/entitlements to or from each other. (h) Other miscellaneous parties are those having1 some other defined stake in the functioning of a CONTRACT APP. >Y0 94/28496 In any Implementation of the system, multiple numbers of each form of stakeholder are accommodated. A detailed consideration of the nature of CONTRACT APPS and the types of stakeholders to a CONTRACT APP is given in Appendix B.

As shown 1n Fig. 5, any one CONTRACT APP consists of a cluster of nine (and potentially more, or fewer) specific processes, these Include: (a) a process handling file administration and updating tasks supporting all other processes (termed Process 1); (b) a process handling the receipt and processing of "primary" 10 risk aversion contract transactions (termed Process 2); (c) a process handling the receipt and processing of "secondary" risk aversion contract transactions (termed Process 3); (d) a process handling the receipt and processing of "derivative-primary" risk aversion contract transactions (termed Process 4); (e) a process handling the receipt and processing of "derivative-secondary" risk aversion contract transactions (termed Process 5); (f) a process handling the "back office" management of all four 20 types of risk aversion contract transactions, and transactions handled by Processes 7 to 9 (termed Process 6); (g) a process handling non-CONTRACT APP-transactlon related consideration, entitlement, and other "payment" obligation transfers between stakeholders (termed Process 7); (h) a process handling CONTRACT APP (and authorised other INVENTCO) stakeholder access to specialist systems to assist the stakeholder concerned to decide how best to Interface with a defined element of INVENTCO (termed Process 8); and (1) a process handling CONTRACT APP (and authorised other 30 INVENTCO) stakeholder access to a range of INVENTCO-facHitated "value added services" (termed Process 9).

A detailed discussion of the nine CONTRACT APP processes is given 1n Appendix C.

All these processes collectively access multiple data files and 35 multiplte records within these files. A description of the variables and PCT / AU93/00250 data files used by Process 2, a key component process of a CONTRACT APP, is provided in Appendix H.

The foregoing description Identifies the essential inter-reaction between the hardware platform and the applications computer software run 5 thereon.

A first example of the life-cycle of a risk management contract will now be described. A further detailed discussion of the nature of risk management contracts is given in Appendix D. 3. Life Cvcle of Risk Management Contract: Example I The first example of a risk management contract describes a contract to manage risk associated with faults 1n microprocessors. In 5 summary, the example shows how the system could enable one party, such as a supplier of military standard equipment seeking to avoid the adverse consequences of faulty microprocessors (specifically, 64—b1t microprocessors) used In that equipment to make a contract with another party, such as a manufacturer of these microprocessors, who 1s seeking 10 to exploit an opportunity based on their view of the future incidence of faults In the microprocessors they produce.

The specific offering 1s one which provides a contract ordering party with a specified contingent entitlement to "exclusive production warrants" (XPWs). That 1s, warrants providing the holder with priority 15 access to a specified quantity of replacement and additional microprocessors sourced, immediately, from a defined, different, guaranteed high-quality, production line available to the supplier 1n consideration of payment of a money amount. The XPW entitlement 1s contingent on the value, at contract maturity date, of a percentage 20 Index of the proportion of 64—blt microprocessors shipped by the manufacturer, during a specified prior period, which are subsequently determined to be faulty to a defined degree. The defined degree, 1n this case, 1s the microprocessor being fault-free, as determined by successful completion of self-tests.

In this example, the relevant key stakeholders are: an application promoter (Demdata Inc); various product sponsors (the relevant one for the example being Demdata Inc Itself); various primary product ordering parties (the relevant one for the example being Denlsons); a single potential counterparty (Demdata Inc again); and an application regulator 30 (the Department of Defence).

The timeline depicting the steps in the contract from the first step, Application Specification, to the final step, Contract Settlement, 1s shown 1n Fig. 6. Appendix E contains eight detailed explanatory charts supporting F1g. 6. This Appendix should be read together with 35 the following description.

Looking at the first step in the timeline (Application SpecifIcation) In conjunction with chart E2, it can be seen that Demdata Inc established a Contract APP (Application ID 100) on 92.02.10.17.00.00 (that is, in Inverse order, 5pm on February 10, 1992) to deal with defect liability management. Application ID 100 supports a range of 5 products (Applicable Product ID's 1200-1250).

Looking at the second step in the timeline (Product Specification) In conjunction with chart E3, it can be seen that Demdata was also Product Sponsor of Product 1210 at the same time (92.02.10.17.00.00). This Product relates to the market termed: Factory Output Quality 10 Indices, and to the sub-market termed 64-b1t Microprocessor Fault Tolerance Index. The maturity date for Product 1210 1s 95.02.10.17.00.00.00. The consideration for a specific contract Involving Product 1210 is 1n the form of money (commercial bank deposits denominated 1n Australian dollars). The entitlement 1s In the form of 15 Exclusive Product Warrants (XPWs); these entitle the contract ordering party to priority access over the forward production capacity of a defined, guaranteed-h1gh-qual1ty, 64-bit microprocessor production line. Product 1210 specifies a range of 0% to 100% 1n 21 Increments In respect of the sub-market outcomes.

Looking at the third step In the timeline (Potential Counterparty Product Pricing Specifications), 1t can be found that Demdata Is acting as the sole potential counterparty for forthcoming primary product orders dealing with Product 1210. At this point in the timeline (93.07.01.14.00.00.00), 17 months after the specification of Product 25 1210, Demdata has currently-specified parameters for pricing potentially forthcoming orders for the product.

Looking at the fourth step in the timeline (Primary Order Specification) 1n conjunction with chart E4, it can be seen that an Ordering Party, Denlsons, 1s seeking a contract (from the offering 30 party, Demdata) 1n Product 1210 at that time (93.07.01.14.25.30.00). chart E4 shows the specific 'pay-off1 parameters that Denlsons has defined for the contract 1t is seeking at this time, Including a maximum acceptable contract consideration (premium) amount of 32,000 (denominated 1n commercial bank, Australian dollars).

Looking at the fifth step In the tlmfeline (Order Specification Pricing) 1n conjunction with chart E5, 1t can be seen that Demdata (using the specified pricing parameters set at 93.07.01.14.00.00.00) prices the Denison order at 93.07.01.14.26.40.00. Demdata's pricing parameters indicate that their appropriate Defined Circumstances ID for Denlsons is 14. As 1s shown, this ID 1n turn implies a Commission Rate 5 of 1.10%, a Discount Rate of 9.90%, a particular set of Component product prices and a particular set of Assessed Probabilities of Occurrence over the range of feasible product values (outcomes).

The Contract Bid Price is calculated automatically by the application software in the following manner: The ordering 10 party-specified desired contingent entitlement amounts, I.e. the "registered data", (covering the feasible product definition value range) are multiplied by the potential counterparty-specified component product prices (which will rarely add to "1" because each counterparty is endeavouring to 'game' potential ordering parties in different ways) 15 to yield the corresponding number of Implied contingent entitlement amounts. When added together, these figures sum to (34.110), where the brackets signify a negative value. This figure represents an expected future counterparty-entitlement payout amount (as at the designated contract maturity date of 95.02.10.17.00.00). The present day value of 20 this figure, calculated using the specified discount rate of 9.90% per annum, is 29,220. To this amount 1s added the potential counterparty's desired flat commission amount of 1.10%, yielding a contract Bid Price (In the consideration/entitlement denomination of the product, commercial bank-denominated Australian dollars) of 29,540. No exchange 25 rates are applicable 1n this case, because the ordering party, Denlsons, is not seeking to deal in a consideration or entitlement denomination different to the denominations formally specified for the product. Demdata's parameters calculate that a consideration bid price of 29,540 will yield them a base margin on the contract of 3,180 (again 30 denominated in commercial bank, Australian dollars).

This margin amount 1s calculated in the following manner: The ordering party-specified desired contingent entitlement amounts (covering the feasible product definition value range) are multiplied by the potential counterparty-specified assessed probabilities of 35 occurrence to yield a corresponding number of net contingent entitlement valuation amounts. When added together, these sum to (30.770).

This amount represents an expected future counterparty-entitlement loss-on the contract (as at the designated contract maturity date of 95.02.10.17.00.00). The present value of this amount, calculated using the specified discount rate of 9.90% per annum, is 26,360. Thus, 5 (ignoring for this example the margin Demdata may gain from using, in some manner, the consideration amount of 29,540 through to the time the contract expires, and various transaction fees) the margin Demdata can expect from entering Into this contract with Denlsons 1s their calculated present-value Indifference price of 29,540 less their 10 calculated present-value expected loss on the contract of 26,360 (or 3,180).

The amounts in the last two rows of the table contained on E5 are used for checking that this contract, 1f entered Into by Demdata, will not result in them violating any self imposed portfolio valuation or 15 composition limits. This notion 1s explained In detail in Example III.

Looking at the sixth step in the timeline (Order Matching), It can be found that Demdata's contract bid price of 29,540 1s below Denison's specified maximum consideration price of 32,000, leading to a matching of the order at 93.07.01.14.29.10.00.

The seventh step 1n the timeline (Order/Contract Confirmation) can be seen to take place twelve minutes later at 93.07.01.14.38.50.00, after the system has determined that Denlsons 1s able to (and then does) Immediately pay the required consideration funds amount of 29,540 to Demdata.

Looking at the eighth step in the timeline (Contract Valuation) In conjunction with chart E6, 1t can be seen that a contract valuation report for Denlsons was published not much longer than one hour after confirmation of the contract, that is, at 93.07.01.16.00.00.00. As can be seen, the market estimate of the future product value of the 64BMFT 30 Index at this moment Is 38 (with a standard deviation of 4), which Implies that this contract has an expected future value of 29,330 XPWs (with a standard deviation of 6,213).

On chart E7 1t can be seen the equivalent report for Demdata Inc of their expected future entitlement payout Is Identical to Denlsons' 35 expected future entitlement receipt (Ignoring future fee payments which may be netted against these payments/receipts). The above-described market estimate of the future product value is determined by the system applying a defined composite of contract-counterparty assessed probabilities of occurrence figures drawn from the collection of all like contracts recently matched/confirmed by the system. 5 The ninth step in the timeline (Contract Valuation) refers to a contract valuation report published for Denlsons sixteen months later, at 94.11.15.10.00.00,00 (see chart E8). As can be seen, the market estimate of the future product value of the 64BMFT Index at this moment is 58 (with a standard deviation of 5), which implies that this contract 10 now has an expected future value of 42,160 XPWs (with a standard deviation of 6,209). This is an increase 1n expected future value of 12,830 XPWs for Denlsons since the former valuation date/time.

The tenth step in the timeline, Contract Maturity, refers to the actual determination of the product value at time of maturity, 15 95.02.10.17.00.00.00. As can be seen on chart E9, this product value of the 64BMFT Index was specified by Demdata (as Product Sponsor) to be 74, implying a contract value of 100,660 XPWs to Denlsons and a corresponding obligation on Demdata. The amount of 74 represents the percentage of 64—bit microprocessors shipped by Demdata, during a 20 specified period some time before the designated contract maturity date, which are subsequently determined (possibly by the application regulator, The Department of Defence) to be faulty.

The eleventh step In the timeline involves the formal assignment of 100,660 XPWs by Demdata to Denlsons (ignoring possible fee payments 25 by one or both parties).

PCT / AU93/00250 4. Life Cvcle of Risk Management Contract: Example II The second example describes a risk management contract associated with the utilisation of telecommunications carrying capacity. In 5 summary, the example shows how the system could enable one party (a telecommunications carrier) seeking to avoid the adverse consequences of under and over-committing their call carrying capacity between specified points (say, between the two cities. New York and Boston) to make a* contract with another party (say, another telecommunications carrier 10 with call carrying capacity between the same two cities) similarly prepared to hedge against the consequences of this occurring.

The specific offering 1s one which provides a contract ordering party with a specified contingent entitlement to transmission time units between the hours 1200-1800 daily on the NY-Boston link within a defined 15 future period (termed, Prime TTU's) upon assignment by the ordering party - to the counterparty - of a calculated consideration amount of Prime TTUs on the ordering party's own NY-Boston line within another defined future period (these defined TTUs may or may not be convertible to TTUs on other city links). The TTU entitlement 1s contingent on the 20 value, at contract maturity date, of the log of the difference between the ordering party's utilisation of the counterparty's network and the counterparty's utilisation of the ordering party's network, during a specified prior period ending on the contract maturity date.

In this example, the relevant key stakeholders are: an application 25 promoter (Newcom Inc); various product sponsors (the relevant one for the example being Newcom Inc Itself); various primary product ordering parties (the relevant one for the example being Basstel Co.); two potential counterparties (Tasnet and Aarcom); and an application regulator (ITT).

The timeline depicting the steps in the contract from the first step, Application Specification, to the final step, Contract Settlement, Is shown in Fig. 7. Appendix F contains nine detailed explanatory charts supporting Fig. 7. This Appendix should be read together with the following description.

Looking at the first, step 1n the timeline (Application Specification) in conjunction with chart F2, 1t can be seen that Newcom Inc established a Contract APP (Application ID 001) on 93.11.01.17.00.00 (that is, 5pm on November 1,1993) to deal with hardware capacity management. Application ID 001 supports a range of products (Applicable Product ID'S 2001-2020).

Looking at the second step in the timeline (Product Specification) in conjunction with chart F3, 1t can be seen that Newcom Inc was also Product Sponsor of Product 2001 at the same time (93.11.01.17.00.00). This Product relates to the market termed Telecommunications Carrying Capacity and to the sub-market termed Prime TTUs. The maturity date for 10 Product 2001 is 96.11.01.17.00.00.00. The consideration for a specific contract involving Product 2001 is 1n the form of "Ordering Party TTUs". The entitlement is in the form of "Counterparty TTUs"; these entitle the contract ordering party to "transmission time units between the hours 1200-1800 daily on the NY-Boston link (within a defined future 15 period)". The feasible values of PRIME TTUs are normalised In the range of -1.0 to +1.0, respectively signifying the proportionate utilisation of respective networks as between the parties to a contract.

Looking at the third step in the timeline (Potential Counterparty Product Pricing Specifications), one can find two other carriers, 20 Tasnet and Aarcom, acting as potential counterparties for forthcoming primary product orders dealing with Product 2001. At this point 1n the timeline (94.06.01.14.00.00.00), 7 months after the specification of Product 2001, both Tasnet and Aarcom have currently-specified parameters for pricing potentially forthcoming orders for the product. 25 Looking at the fourth step 1n the timeline (Primary Order Specification) In conjunction with chart F4, 1t can be seen that an Ordering Party, Basstel Co., 1s seeking a contract, from an offering party. In Product 2001 at that time (94.06.01.14.25.30.00). Chart F4 shows the specific parameters (entitlements) that Basstel Co. has 30 defined for the contract It 1s seeking at this time, Including a maximum acceptable contract consideration amount of 58,000 (denominated 1n Its own TTUs).

Looking at the fifth step in the timeline (Order Specification Pricing) 1n conjunction with chart F5, 1t can be seen that Tasnet (using 35 the specified pricing parameters set at 94.06.01.14.00.00.00) prices the ~25" Basstel Co. order at 94.06.01.14.26.40.00. Tasnet's pricing parameters Indicate that their appropriate Defined Circumstances ID for Basstel Co. is 8. As 1s shown, this ID in turn Implies a Commission Rate of 1.00%, a Discount Rate of 9.90% per annum, a particular set of Component 5 product prices and a particular set of Assessed Probabilities of Occurrence. In a similar process to that described for Example I, this results In a Contract Bid Price of 55,180 (denominated in Basstel Co. TTUs), which Tasnet's parameters calculate will yield them a base margin on the contract of 10,760 (again denominated In Basstel Co. TTUs). 10 Still looking at the fifth step in the timeline, 1n conjunction with chart F6, it can be seen that Aarcom (again using the specified pricing parameters set at 94.C6.01.14.00.00.00) also prices the Basstel Co. order at 94.06.01.14.26.40.00. Aarcom's pricing parameters indicate that their appropriate Defined Circumstances ID for Basstel Co. is 9. 15 As Is shown, this ID in turn implies a Commission Rate of 0.90%, a Discount Rate of 8.50% per annum, a particular set of Component product prices and a particular set of Assessed Probabilities of Occurrence.

This results In a Contract Bid Price of 55,390 (denominated in Basstel Co. TTUs), which Aarcom's parameters calculate will yield them a base 20 margin on the contract of 9,430 (again denominated 1n Basstel Co. TTUs).

Looking at the sixth step in the timeline (Order Matching) it car; be found that Tasnet's price bid of 55,180 1s below Aarcom's bid of 55,390 and, In turn, that the 55,180 amount 1s below Basstel Co.'s specified maximum consideration price of 58,000. This leads to a formal 25 matching of Basstel Co,'s order by Tasnet at 94.06.01.14.29.10.00.

The seventh step 1n the timeline (Order/Contract Confirmation) can be seen to take place nearly ten seconds later at 94.06.01.14.38.50.00, after the system has determined that Basstel Co. 1s able to (and then does) immediately assign the required consideration amount of 55,180 30 TTUs to Tasnet.

Looking at the eighth step In the timeline (Contract Valuation) in conjunction with chart F7, one can see a contract valuation report for Basstel Co. published about two hours after confirmation of the contract, that 1s, at 94.06.01.16.00.00.00. As can be seen, the market 35 estimate of the future product value of the log of the difference between Basstel Co.'s utilization of Tasnet's network and Tasnet's utilization of Basstel Co.'s network (during a specified prior period ending on the contract maturity date) at this moment is (0.150) (with a standard deviation of 0.023), which implies that this contract has an 5 expected future value of 54,236 Tasnet TTUs (with a standard deviation of 9,207). On chart F8 one can see in the equivalent report for Tasnet that their required expected future entitlement payout is Identical to Basstel Co.'s expected future entitlement receipt (ignoring future fee payments which may be netted against these payments/receipts). 10 The ninth step in the timeline (Contract Valuation) refers to a contract valuation report published for Basstel Co. five months later, at 94.11.22.10.00.00.00 (see chart F9). As can be seen, the market estimate of the future product value of the log of the difference between Basstel Co.'s utilization of Tasnet's network and Tasnet's 15 utilization of Basstel Co.'s network (during a specified prior period ending on the contract maturity date) at this moment is (0.400) (with a standard deviation of 0.010), which Implies that this contract now has an expected future value of 350,181 Tasnet TTUs (with a standard deviation of 74,200). This 1s an Increase in expected future value of 20 295,945 TTUs for Basstel Co. since the former valuation date/time.

The tenth step in the timeline (Contract Maturity) refers to the actual determination of the product value at time of maturity, 96.11.01.17.00.00.00. As can be seen on chart F10, this product value of TTU's was specified by Newcom Inc (as Product Sponsor) to be (0.400), 25 unchanged from the prior valuation date/time, implying a contract value of 368,340 Tasnet TTUs to Basstel Co. and a corresponding obligation on Tasnet. The amount is higher than the prior valuation figure due to the actual determination figure being naturally without a standard deviation element.

The eleventh step in the timeline Involves the formal assignment of the 368,340 TTUs by Tasnet to Basstel Co. (ignoring possible fee payments by one or both parties).

PCX/AU93/00250 . PRIMARY PRODUCT ORDER PROCESSING Before describing the third, and most detailed, example, consideration will be given to the 'core1 product (contact) ordering, 5 pricing and matching processes. Note that expressions such as (PORD NEW) represent file names.

The flow charts in FIGS 8 to 16 depict the processing flow of the matching system for primary product orders submitted by ordering party stakeholders to a CONTRACT APP, where this APP 1s based upon: an EV-CE 10 counterparty pricing regime (assuming paid consideration amounts do not yield an income stream 1n their own right); a sequential order matching process; consideration/entitlement value dates which are Immediately after a product sponsor-designated date/time; and matching rules which do three things: First, Identify, for each ordering party's order, a 15 counterparty offering the lowest price bid for an order, subject to this price being at or below the specified maximum price the ordering party has indicated it 1s prepared to pay. Second, accommodate portfolio expected loss constraints on an 'equivalent maturity date products', 'same-month maturity products', and 'all-products' basis. And third, 20 apply the above-described matching rules on a pre-tax basis, with partial matching of product orders, and without conditional order matching rules.

As shown in Fig. 8, starting at block 610, and proceeding to block 625, the system determines which set of orders to process, authorises 25 these orders, matches them with counterparties where possible, and then confirms them. As shown in blocks 1010 to 1070 in F1g. 9, the system holds newly submitted orders (PORD NEW), and all previously submitted, but as yet unmatched, orders which are defined as queued orders (PORD QUEUE). Parameters and algorithms can be implemented to give the system 30 the ability to determine whether new or queued orders are to be processed at any time. For example, a simplistic algorithm would be to alternate between PORD NEW and PORD QUEUE one order at a time. Another example would be to load queued orders only when there is a change 1n the counterparty parameters. Test 1020 checks the decision made in block 35 1010. ' For new orders, the system moves to block 1030. Details of the next recorded new order are loaded from the PORD NEW master file (block 1040). The order data fields Include: the ordering party identification (BID); the ordering party's own reference (BREF); the product identification (PID) specified by the ordering party; the entitlement 5 "payoff" function type (PAYFUNC); the parameters for the entitlement "pay off" function (PAYPARAM); a "deal type" identifier (DTID); the anonymous and manual deal identifiers (OANON and OMANUAL); the order retention time limit (RET LIM); the maximum consideration the ordering party is prepared to pay (MAXCONSID); the number of the account from 10 which the consideration Is to be "paid" (ACC CONSID); and the number of the account to which any entitlement "pay off" amount 1s to be paid (ACC ENTITL). With this information set, the system's next step 1s to authorise the order. This occurs at block 1050.

Order Authorisation Blocks 1100 to 1162 in Fig. 10 provide an expansion of block 1050. Starting at block 1100 the order 1s assigned a unique identification, which 1s set in the order data field OID. Before verifying the order, additional Information 1s required by the system. At block 1110, details 20 of the product (order data field PID) are loaded from the master file PPRODUCT (block 1120). The Information Includes the product maturity date (PMAT); the product consideration/entitlement denomination (PC/ED); the product currency denomination (PCUR) and national currency denomination (PNCUR); and the product limits and parameters (PMIN, PMAX, 25 and PSTEP). The test 1130 checks that the order parameters are consistent with the master file parameters implied by the defined product identification (PID). Orders which fall this test are rejected at block 1140, with details of these orders being stored 1n the master file PORD REO (block 1150). In turn, the ordering party 1s informed of 30 this event (block 1160). Processing then returns to the start of the flow chart (block 1010), ready to load the next order. When an order 1s authorised, processing continues at block 640.

In the case of a queued order being loaded (block 1060), the order fields are set using the details stored in the queue file PORD QUEUE 35 (block 1070). This data 1s a combination of new order data (as described 1n block 1030) and the data loaded/set when the order was originally verified (block. 1110). Authorised order processing continues with the order matching process at block 640.

Order Matching Blocks 1200 to 1616 in Figs. 11 to 15 provide an explanation of block 640. Orders have retention time limits , stored in the order variable RET LIM. Test 1200 checks that the order retention time has not expired. If it has, the order is rejected at block 1210, with the order details copied to the rejected order file (PORD RE3). The ordering party 10 is then informed of the rejection at block 1230, and processing returns to the main loop via connector "A". If the order is still valid, the order matching process proceeds. The aim now is to find a suitable counterparty (or counterparties) who "prices" the ordering party's "entitlement function" within the limits set by the ordering party. 15 Starting at block 1240, the matching process described 1s one which seeks to identify, for each ordering party's order, a counterparty offering the lowest "price bid" for an order subject to this price being at or below the specified maximum "price" the ordering party has indicated it 1s prepared to pay.

Blocks 1300 to 1370 in Fig. 12 provide an explanation of block 1240. The first step 1s to narrow down a group of counterparties prepared to at least deal with the ordering party. This Is described as obtaining the available counterparty short 11st. First the counterparty short list is wiped (block 1300). Next, the order data fields BID 25 (ordering part Identification) and PID (product identification) are used to search the PDEAL LIST master file (block 1320) for all counterparties prepared to consider dealing with the ordering party in the specified product. Any stakeholders who have set a MANUAL or ANON flag are also loaded. For each counterparty selected, SID is set to the corresponding 30 identification. Test 1330 commences a loop which allows every counterparty available to be dealt with in turn. For any currently selected counterparty (with identification set 1n SID), the data flow proceeds to test 1365. Where the order data field OANON has been set by the ordering party and some stakeholder requires manual confirmation 35 (MANUAL (SID)), the current potential counterparty is not Included 1n the short 11st. Likewise 1f the ordering party set 0MANUAL and some PCT / AU93/00250 other stakeholder required anonymity (ANON (SID)). In both cases, data flow returns to test 1330, Otherwise, flow continues at block 1335. At this point, the system determines the applicable "defined circumstances" for the order. It uses the order data fields currently loaded and 5 parameters set in the PSEL DC masterfile (block 1336) to determine this. At block 1340, pricing parameters Including consideration/entitlement exchange rates (if applicable), commission rates, and discount rates are selected from the PSEL PRICE master file (block 1350). Using the "defined circumstances" identification (set in DCID) all potential 10 counterparties can have different sets of pricing parameters specified based on any of the order data fields of each order. Test 1360 checks that all the necessary parameters have been found. It is possible that the counterparty, though prepared to deal with the ordering party, does not have a complete set of pricing parameters for the current order 15 specifications. Such a counterparty is not included in the counterparty short 11st, and processing returns to test 1330. At block 1370, the counterparty Is added to the counterparty short list by including the pricing details In the variables: PRICEFUNC(SID), CR(SID), DR(SID), C-CZEDXCHANG(SID), C-CXCHANG(SID), C-NCXCHANG(SID), E-C/EDEXCHANG(SID), 20 E-CXCHANG(SID), E-NCXCHANG(SID), MANUAL(SID), and ANON(SID). Processing then returns to test 1330 where the next selected potential counterparty 1s dealt with. When all selected potential counterparties have been processed, program flow returns to block 1250. At this point a potential counterparty short list has been obtained.

Blocks 1400 to 1550 in F1gs. 13 and 14 depict block 1250 in more detail, where every potential counterparty has its price offer calculated, based on their Individual pricing parameters, for the currently loaded order. At block 1400 a loop commences allowing each potential counterparty 1n the potential counterparty shortlist to be 30 dealt with in turn. SID 1s set to the Identification of the counterparty currently selected. Test 1410 checks whether any counterparties are left for processing. At block 1420, the potential counterparty's price bid 1s calculated. Blocks 1490 to 1550 describe this calculation in more detai1. At block 1490 the variable, INDEX, is assigned the starting 35 value of the product value range (j.PMIN). Also, "price" is Initialised to zero. Test 1500 commences a loop, where every index point in the product range is traversed. Block 1520 calculates the pricing value returned by the potential counterparty's pricing function, PRICEFUNC, as stored in (PRICEFUNC(SID)), at the current index point, and stores the value in PI. Block 1530 determines the pay-off amount required by the ordering 5 party at the current index point and stores this value 1n P2. At block 1540, the total price at the current Index point is calculated by multiplying PI by P2. This value Is added to the running total stored in PRICE(SID). At block 1550, the index counter (INDEX) is incremented by the product step size (PSTEP), and flow returns to the test 1500. When 10 the end of the product range has been reached (PMAX), flow proceeds to block 1510, where the calculated price bid is modified by the following calculation: PRICE(SID) - PRICE(SID) * E-C/EDXCHANG(SID) * E-CXCHANG(SID) * E-NCXCHANG(SID).

Returning to block 1430, the price bid stored in PRICE(SID) will be in the applicable product's consideration/entitlement denomination, currency denomination, and national currency denomination. The following steps (block 1430-1470) determine and apply the applicable discount rate to the calculated price bid (currently in future value terms) to yield a 20 price bid in present value terms. This Is done as follows: At block 1430 the number of days to product maturity 1s determined. Block 1440 Initialises the loop counter and discount rate divisor. For each day (or appropriate part thereof) between the current date/time and the product maturity date/tlme, the divisor is changed according to the formula 25 (block 1460): DIV ■ DIV * (1 + ((DR(SID) / 100) / 365)) At block 1470, the price bid 1s adjusted according to the formula: PRICE(SID) - PRICECSID) /DIV Once the price bid in present value terms is known, the potential 30 counterparty's defined commission 1s added to the price (block 1480). Given that CR(SID) is a percentage commission rate, the formula is: PRICE(SID) - PRICE(SID) + ((CR(SID) / 100) * PRICE (SID)) When test 1410 confirms that every potential counterparty has been priced, program flow continues at 1255. 3!? ! The test at 1255 checks whether the order was a "quote only" order. If so, flow continues at block 1256 where one or more of the PCT/AU93/002S0 counterparty bid prices are selected. At block 1230, the ordering party is informed of the pricing information gathered. If the order was not a quote order (that is, it was a real product order), an attempt is now made to identify a counterparty from the potential counterparty short 5 11st matching the requirements of the current order. This is done at block 1260. Blocks 1560 to 1616 in Fig 15 describe this process 1n detai 1.

Starting at test 1560, a check is made to ensure the potential counterparty shortlist is not empty. If 1t is, no match 1s possible and 10 flow continues at block 1612. At this point SID is assigned "0" to indicate that no counterparty was selected from the potential counterparty short 11st, before moving to block 1614 where the entire order (as no part was matched) 1s queued. When the list 1s not empty, program flow continues at block 1570, where the lowest priced 15 counterparty is selected from the counterparty short.list. This determination 1s done based upon each potential counterparty's bid price (PRICE(SID)), being converted to the consideration/entitlement type, currency, and national currency consideration "payment" denominations sought by the ordering party (that is, PRICE(SID) -.PRICECSID)' * 20 C-C/EDXCHANGCSID) * C-CXCHANG(SID) * C-NCXCHANGCSID)). The counterparty identification is stored in SID, and its price offer 1s stored in BPRICE. At block 1580, the following check is made: BPRICE > MAXCONSID If the selected price is greater than the ordering party's 25 specified maximum consideration payment (MAXCONSID) limit, a match with the current potential counterparty.1s not deemed possible. This must also be true for any of the remaining counterparties in the counterparty short list. This part of the matching process returns without any potential counterparty in the short list having been selected for a 30 match (block 1612). Otherwise, the current price 1s acceptable, and the process proceeds to attempt a match with the current selected counterparty.

The next step (block 1590), requires all the applicable contract, product, and portfolio absolute loss, expected loss, expected value 35 limits, and maximum composition limits to be read from the PSEL LIMIT master file (block 1600) and stored in ALL!(SID), ALL2(SID), ELLl(SID), ELL2(SID), ELL3(SID), ELL4(SID), ELL5(SID), EVL1CSID), MC(SID) and MCC(SID). The current absolute and expected losses accumulated are also read and stored in CAL2(5ID), CEL2(SID), CEL3(SID), CEL4(SID), and CEL5(SID>.The ELFUNC(SID) and EVFUNC(SID) values are also set for use 5 when calculating the expected loss and expected value for the current order. Block 1602 calculates the price of the order entitlement function using the counterparty product expected loss and expected value parameters ELFUNC(SID) and EVFUNC(SID). The order's expected loss 1s stored in EL(SID>; the order's expected value 1s stored in EV(SID). The 10 absolute loss function is also determined at block 1602 and it is stored in AL(SID). Proceeding to block 1604, the portion of the order which will not violate the counterparty limits 1s calculated. This check 1s made at test 1606. If no part of the order Is matched, process flow continues at block 1608. The potential counterparty is removed from the 15 counterparty shortlist.

If some portion of the order 1s matched with the current counterparty, processing continues at block 1610. Here the SID 1s set to the identification of the matching counterparty. The unmatched portion (if any) 1s stored at block 1614 as a new order in the PORD QUEUE 20 masterflle (block 1616). Flow then returns to test 1261 in Fig. 11. When a match occurs, program flow returns to block 650. The matched order must now be confirmed by carrying out a number of additional steps, as shown 1n Fig. 16, blocks 1620 to 1641. If no match occurred, processing of the current order steps, and program flow returns to the beginning 25 via connector "A". The system 1s ready to load the next available order.

Matched Order Confirmation For matched orders to become a contract, a number of additional actions are required. First, at test 1620, a check for manual 30 authorisation Is made. If required, program flow moves to block 1621 where authorisation requests are sent to the relevant stakeholders.

Block 1623 then tests the replies for any rejections. If one or more rejections were received, program flow continues at block 1627 where the order 1s rejected. Otherwise, flow continues at 1624. Block 1624 effects 35 the consideration payment by creating transactions In the payment shadow file (PAYACC SHADOW - block 1625). However, this may fall if the accounts specified do not exist or 1f at least the required consideration amount is shown not to be available. Test 1626 checks that "consideration payment" was effected successfully. If "consideration payment" fails, the matched order 1s rejected (block 1627), with details 5 stored 1n the rejected order master file, PORD REJ (block 1628). The ordering party is then informed of this event at block 1640.

With successful payment, program flow proceeds to block 1630 where the counterparty's current accumulated absolute and expected loss figures are updated (masterfile PSEL LIMIT - block 1631). At block 1632, 10 the order data field OPRICE 1s set to the price given by the counterparty PRICE(SID), and SPRICE set to the counterparty's identification, SID. At block 1634, the matched order is certified as confirmed, with full details recorded in the masterfile PORD CONF (block 1636). The next step, block 1638, reports details of the newly created 15 contingent contract to all stakeholders concerned. Program flow then returns to the beginning, via connector "A". The system is now ready to start processing the next order submitted by a specified ordering party. 6. Life Cvcle of Risk Management Contract: Example III The third example of a risk management contract describes a contract to manage risk associated with potential future movements in 5 the value of a specified index of share prices (termed the PTSE 75 index). In summary, the example shows how the system could enable one party (such as an institutional fund manager) seeking to avoid the adverse consequences of a significant decline in the future value of the PTSE 75 Index (specifically a decline by June 1994, relative to the 10 assumed current (January 1993) value of the index) to make a contract with another, as-yet-unknown, party, such as another fund manager seeking to avoid the adverse consequences of a significant corresponding increase in PTSE 75 index value.

The specific offering is one which provides a contract ordering 15 party with a specified contingent entitlement to a compensatory Australian dollar future payout upon payment of a calculated up-front consideration money amount by the ordering party to the as-yet-unknown counterparty. The future money entitlement is contingent on the value, at contract maturity date, of the Independently-determined value of the 20 PTSE 75 Index.

In this example, the relevant key stakeholders are: an application promoter (BLC Inc); various product sponsors (the relevant one for the example being BLC Inc itself); various product ordering parties (the relevant ones for the example being Abbotts & Taylor and Shearer & 25 Associates); various potential counterparties (the relevant ones for the example being Abrahamsons and Carpenters Inc); a counterparty guarantor (CNZ Banking Corporation); and an application regulator (the Pacific Central Bank).

The timeline depicting the steps in the contract from the first 30 step (Application Specification) to the final step (Contract Settlement) 1s shown 1n F1g.l7. Appendix G contains thirteen detailed explanatory charts supporting F1g.l7. This Appendix should be read together with the following description.

Looking at the first step in the timeline (Application 35 Specification) 1n conjunction with chart G2, it can be seen that BLC Inc established a Contract APP (Application ID 001) on 91.06.03.17.00.00 (that is, 5pm on June 3, 1991) to deal with economic risk management. Application ID 001 supports a range of products (Applicable Product ID'S 10020-11400).

Looking at the second step in the timeline (Product Specification) 5 in conjunction with chart G3, it can be seen that BLC Inc was also Product Sponsor of Product 10061 at the same time (91.06.03.17.00.00). This Product relates to the Market termed Stock Indices and to the Sub-market termed PTSE 75. The maturity date for Product 10061 1s 94.06.03.17.00.00.00. The consideration for a specific contract 10 involving Product 10061 1s in the form of money (commercial bank deposits denominated in Australian dollars). The entitlement is also In the form of commercial bank deposits denominated 1n Australian dollars, payable (if necessary) immediately after the Product's specified maturity date/time.

Looking at the third step in the timeline (Potential Counterparty Product Pricing Specifications), one can find two entitles, Abrahamsons and Carpenters Inc, acting as potential counterparties for forthcoming primary product orders dealing with Product 10061. At this point 1n the timeline (93.01.01.17.00.00.00), 19 months after the specification of 20 Product 10061, both Abrahamsons and Carpenters Inc have currently-specified parameters for pricing potentially forthcoming orders for the product.

Looking at the fourth step 1n the timeline (Primary Order Specification), in conjunction with chart G4, It can be seen that an 25 Ordering Party, Abbotts & Taylor, is seeking a contract, from an offering party, In Product 10061 at that time (93.01.01.17.37.06.00). chart G4 shows the specific parameters (entitlement) that Abbotts & Taylor has defined for the contract it 1s seeking at this time, including a maximum acceptable contract consideration amount of 54,000 30 (denominated 1n commercial bank, Australian dollars).

In order to provide a more detailed explanation of the following fifth to seventh steps In the timeline, selected processing block numbers from F1gs. 8-16 will be referred to 1n brackets as follows: "t ]".

Looking at the fifth step in the timeline (Order Specification Pricing) in conjunction with chart G5, It can be seen that Abrahamsons' specified pricing parameters, as set at 93.01.01.17.37.06.00 are used to price the Abbotts & Taylor order at 93.01.01.17.38.02.00. Abrahamsons' pricing parameters indicate that their appropriate Defined Circumstances ID for Abbotts & Taylor is 26 [1240]. As 1s shown, this ID in turn 5 implies a Commission Rate of 1.25%, a Discount Rate of 10.00% per annum, a particular set of Component product prices and a particular set of Assessed Probabilities of Occurrence. In a similar process to that described for Example I, this results in a Contract Bid Price of 51,920 (denominated in commercial bank, Australian dollars), which Abrahamsons' 10 parameters calculate will yield them a base margin on the contract of 4,580 (again denominated in commercial bank, Australian dollars) C12503.

Still looking at the fifth step In the timeline, in conjunction with chart G6, it can be seen that Carpenters Inc specified pricing parameters, as set at 93.01.01.17.37.06.00, are also used toprice the 15 Abbotts & Taylor order at 93.01.01.17.38.02.00. Carpenters Inc's pricing parameters Indicate that their appropriate Defined Circumstances ID for Abbotts & Taylor 1s 17 [1240]. As Is shown, this ID 1n turn Implies a Commission Rate of 1.30%, a Discount Rate of 9.80% per annum, a particular set of Component product prices and a particular set of 20 Assessed Probabilities of Occurrence. This results 1n a Contract Bid Price of 53,050 (denominated In commercial bank, Australian dollars), which Carpenters Inc's parameters calculate will yield them a base margin on the contract of 5,610 (again denominated In commercial bank, Australian dollars) [1250].

Again, still looking at the fifth step in the timeline, 1n conjunction with chart G7, 1t can-be seen that Abrahamsons' pricing-related parameters (also set at 93.01.01.17.37.06.00) for determining the acceptability of ordered-contracts on the basis of their absolute loss, expected loss, expected value, and maximum portfolio 30 composition attributes are satisfied by Abbotts & Taylor's order [1604]. From Abrahamsons' perspective, this qualifies Abbotts & Taylor's order for inclusion 1n their product/contract portfolio, as long as Abrahamsons' consideration price bid turns out to be lower than Carpenters Inc's price bid, and, in turn, this bid 1s below the maximum 35 consideration price that Abbotts & Taylor has specified, 1n Its order specification (chart G4), it 1s prepared to pay.

PCT7AU93/00250 Finally, still looking at the fifth step 1n the timeline, but now in conjunction with chart G8, it can be seen that Carpenters Inc's pricing-related parameters (set at 93.01.01.17.37.06.00) for determining the. acceptabll1ty of ordered-contract on the basis of their absolute 5 loss, expected loss, expected value, and maximum portfolio composition attributes are also satisfied by Abbotts & Taylor's order. Now, from Carpenters Inc's perspective, this qualifies Abbotts & Taylor's order for inclusion in their product/contract portfolio, 1n this case, as long as Carpenters Inc's consideration price bid turns out to be lower than 10 Abrahamsons' price bid, and, 1n turn, this bid 1s below the maximum consideration price that Abbotts & Taylor has specified, 1n its order specification (Page G4), it 1s prepared to pay.

Looking at the sixth step in the timeline (Order Matching), It can be found that Abrahamsons' price bid of 51,920 Is below Carpenters Inc's 15 bid of 53,050 and, In turn, that the 51,920 amount 1s below Abbotts & Taylor's specified maximum consideration price of 54,000. This leads to a formal matching of Abbotts & Taylor's order by Abrahamsons' at 93.01.01.17.38.07.00 [1260].

The seventh step In the timeline (Order/Contract Confirmation) 20 takes place five seconds later at 93.01.01.17.38.11.00, after the system has determined that Abbotts & Taylor is able to (and then does) immediately pay the required consideration funds amount of 51,920 to Abrahamsons [650].

Looking at the eighth step 1n the timeline (Contract Valuation) In 25 conjunction with chart G9, one can see a contract valuation report for Abbotts & Taylor published nearly six hours after confirmation of the contract, that Is, at 93.01.01.23.00.00.00. As can be seen, the market estimate of the future product value of the PTSE 75 Index at this moment 1s 1970 (with a standard deviation of 333), which Implies that this 30 contract has an expected future value of 53,000 commercial bank-denominated Australian dollars (with a standard deviation of 21,160). On chart G10 one can see in the equivalent report for Abrahamsons that their required expected future entitlement payout is Identical to Abbotts & Taylor's expected future entitlement receipt 35 (Ignoring future fee payments which may be netted against these payments/receipts).

The ninth step In the timeline (Secondary Order Specification), detailed on chart Gil, occurs nearly six months after the above-described contract valuation event; that Is, at 93.06.06.08.00.00.00. At this time, Abbotts & Taylor 1s seeking to sell 5 Its position In the contract which was matched/confirmed at 93.01.01.17.38.11.00 (and at that time assigned the Order ID of 9156515800 by the system) at a price better than 57,000. Shearer & Associates is prepared to pay 60,000 (commercial bank deposit-denominated Australian dollars) for this position. In all other 10 respects the contract's attributes remain unchanged. On chart G12, the tenth step In the timeline, a contract sale 1s seen to have occurred at a price of 58,300, just below the above-described 60,000 upper limit purchase-price amount specified by Shearer & Associates. This amount 1s the current best estimate of the contract's expected future value, with 15 the standard deviation of this expected future value calculated by the system, utilizing other recent transaction data, as being 10,610.

Shearer & Associates has now formally taken the place of Abbotts & Taylor as a stakeholder to the contract.

The eleventh step 1n the timeline (Contract Valuation) refers to a 20 contract valuation report published for Shearer & Associates seven months later, at 94.01.01.17.00.00.00 (see chart G13). As can be seen, the market estimate of the future product value of the PTSE 75 Index at this moment is 1800 (with a standard deviation of 283), which Implies that this contract now has an expected future value of 162,360 25 commercial bank deposit-denominated Australian dollars (with a standard deviation of 35,160). This 1s an Increase 1n expected future value of 104,060 for Shearer & Associates since the former valuation date/time. The above-described market estimate of the future product value 1s determined by the system applying a defined composite of 30 contract-counterparty assessed probabilities of occurrence figures drawn from the collection of all like contracts recently matched/confirmed by the system.

The twelfth step 1n the timeline (Contract Maturity) refers to the actual determination of the product value at time of maturity, 35 94.06.03.17.00.00.00. As can be seen on chart G14, this product value of the PTSE Index was specified by BLC Inc (as Product Sponsor) to be * 1820, implying a contract value of 187,200 (commercial bank deposit-denominated Australian dollars) to Shearer & Associates, and a corresponding obligation on Abrahamsons. The figure of 1820 represents the actual value of the PTSE share price index at 94.06.03.17.00.00.00 5 as obtained by BLC Inc from the Independently verifiable Information source, the Identity of which they would have disclosed at the time they first announced their sponsorship of trading 1n the PTSE 75 share Index product.

The thirteenth step In the timeline Involves the formal payment of 10 187,200 (commercial bank deposit-denominated Australian dollars) by Abrahamsons to Shearer & Associates (Ignoring possible fee payments by one or both parties). 7. Description of Consideration/Entitlement Payment Process The purpose of the CONTRACT APP consideration/entitlement (and related transactions) payment/receipt process is to effect debits and 5 credits to INVENTCO stakeholder accounts, typically at maturity of a contract, with participating consideration/entitlement transfer (or exchange) entities, reflecting payment/receipt entitlements and obligations originated within INVENTCO. The process effects these payments/receipts in a two-stage process. First, by debiting/crediting, 10 on a real-time basis, the relevant shadow records (in the data file PAYACC SHADOW) of the applicable stakeholder accounts with a participating consideration/entitlement transfer entity (C/E entity), external to INVENTCO, with which they maintain an account. And second, by periodically effecting, via existing and potential payment 15 mechanisms, corresponding payment instructions to the payment entitles concerned.DetalIs of the above-described mechanism are as follows.

All INVENTCO stakeholders maintain (a minimum of) two special-purpose (net-credit balance only) accounts with (at least) one selected, VIRPRO authorised, C/E transfer entity. The purpose of 20 special-purpose accounts is to ensure that only INVENTC0-1n1t1ated debits and credits are capable of being effected to the accounts. Thus, at any time the balance of each PAYACC SHADOW file account record should be equivalent to the true, but usually unknown, tlme-of-day balance of the actual account maintained by the C/E transfer entity. 25 The purpose of two accounts 1s to enable only credits to be effected through one account and only debits through another account. And the purpose of "net-credit balance only" accounts 1s to ensure that accumulated debits to the debits-only account never exceed the account opening balance plus accumulated credits to the credits-only account. 30 C/E transfer entitles will typically be (but do not need to be) institutions of any/all of six types: public/private record-registries of various types; credit card companies (typically for retail transactions only); commercial banks; central banks; taxation authorities; and non-bank clearing houses and depositories. 35 The resources transferred by these entitles may be of any type.

However, most typically, they will be deposits appropriate for the entity concerned: With respect to public/private record-registries -entitlement deposits (Including shares 1n financial or physical assets, participation rights In wagers, and so on). With respect to credit/debit card companies - normal card company deposits (denominated in national 5 currencies or synthetic currencies (for example, SDRs)). With respect to commercial banks - normal bank deposits (denominated in national currencies or synthetic currencies (for example, SDRs)). With respect to central banks - exchange settlement account (or equivalent) deposits. With respect to taxation authorities - taxation account deposits. And 10 with respect to non-bank clearing houses and depositories - deposits of financial instruments, precious metals and the like. CONTRACT APP potential counterparties will also effectively be C/E transfer entities, as will ordering party guarantors (external to INVENTCO) where they offer credit to product ordering parties. Also, some accounts will be 15 trust accounts maintained on behalf of potential counterparties (and some product ordering parties) Involved 1n applications requiring the periodic payment of collateral to independent third parties to serve as an additional security device.

Immediately after the completion of Its dally - or more frequent -20 transaction processing, and their associated settlement functions, each C/E transfer entity electronically notifies the applicable CONTRACT APP of the "opening balances" of all the debit and credit INVENTCO accounts 1t maintains (At this stage, the debit account balance should be zero and the credit account balance should be greater than or equal to zero). 25 Where an INVENTCO stakeholder has an overdraft or 11 ne-of-cred11 with Its C/E transfer entity, the credit value of this will be reflected In the non-zero balance of Its credit account at this time.

Upon receipt of the above-described notifications, the applicable CONTRACT APP updates/confirms its stakeholder shadow balances. Thus, at 30 this po1nt-1n-t1me, all credit and debit shadow account balances should be equivalent to their actual debit and credit account balances.

Progressively throughout the day (where "day" here is likely-to be different for each C/E transfer entity due to a combination of differences 1n the time-zone locations of payment entitles 1n relation 35 to the applicable CONTRACT APP, and the likely different account processing cycles of these entitles), INVENTCO-stakeholder- authorised debits and credits to INVENTCO stakeholder shadow accounts are effected on a real-time basis - debits to debit accounts and credits to credit accounts. At all times, the CONTRACT APP ensures that the cumulative debit balance of each stakeholder's debits account does not exceed the 5 "opening balance" plus the cumulative credit balance of the stakeholder's credit account. Thus, at any time, for every INVENTCO stakeholder, the combination of each stakeholder's debit account and credit account will represent the "true", net, t1me-of-day value of the stakeholder's two actual special-purpose accounts maintained external to 10 INVENTCO.

Debits and credits to INVENTCO stakeholder accounts are effected according to strict rules and conditions, being different for credits and debits. Credits can be made to any INVENTCO stakeholder's credit account with Its nominated C/E transfer entity by any other INVENTCO 15 stakeholder for any reason. Naturally, as INVENTCO stakeholders will not know the account details of other stakeholders, such credits will be effected either automatically, according to information and rules known by the applicable CONTRACT APP, or semi-automatically by way of an INVENTCO stakeholder requesting from VIRPRO, as they need to do so, a 20 credit-account number of the stakeholder to which they wish to transfer assets. This account number may only be valid for a nominated period and would not typically be the specified stakeholder's actual account number with Its nominated consideration/entitlement transfer entity - 1t would only be a reference to an INVENTCO file containing this number. 25 On the other hand, debits can only be made to an INVENTCO stakeholder's debit account with Its nominated C/E transfer entity by the stakeholder itself, and by other stakeholders explicitly granted this right by each stakeholder, subject to these other stakeholders exercising this right according to the rules and conditions specified 30 for them.

Where an INVENTCO stakeholder seeks to initiate/authorise debits to its nominated account(s) on Its own, this can only be done through the stakeholder satisfactorily completing the Identification and security procedures set down by their C/E consideration/entitlement 35 transfer entity (and reflected In VIRPRO-speclfied INVENTCO communication procedures). The type of procedure set down by all participating C/E transfer entities involves (at least) the following: First, the consideration/entitlement transfer entity supplying VIRPRO with a confidential file of account Pin numbers corresponding to each of its INVENTCO stakeholder debit accounts, and a similarly confidential 5 "black box" which, by Initiating any of a number of possible proprietary password request-response processes involving any one of its customers possessing the appropriate devlce(s), confirms that remote messages received from that customer, and processed by the "black box", are authentic. Second, the consideration/entitlement transfer entity 10 supplying their INVENTCO customers with a programmable smart card (or equivalent device) enabling each customer, remotely - via telephone or direct computer line, to unambiguously confirm their identity with their INVENTCO-maintained account, thereby having the capability to authorise debits to their account within predefined parameters concerning factors 15 such as maximum transaction amounts, possible transaction types, account usage patterns and so on. Third, INVENTCO providing the mechanisms for direct, confidential, stakeholder communications with their C/E transfer entity shadow debit accounts, and the formal updating of these accounts, through non real-time processes, utilizing the unique time-stamped 20 reference numbers created as/when stakeholders authorise access to their account records.

Where an INVENTCO stakeholder has authorised other INVENTCO stakeholders to initiate debits to (any of) Its nominated account(s) according to a standing authority of some type, this can only be done 25 through the authorised stakeholder Itself satisfactorily completing the identification and security procedures set down by the authorisation-granting stakeholder's nominated C/E transfer entity (and reflected In VIRPR0-spec1f1ed INVENTCO communication procedures). Once again, the type of procedure, set down by all participating C/E transfer 30 entities in this respect, Involves (at least) the following: First, the C/E transfer entity supplying VIRPRO with a confidential file of account Pin numbers corresponding to each of its INVENTCO stakeholder debit accounts and each other INVENTCO stakeholder which has bsen authorised to effect debits (within defined parameters) to these accounts. Second, 35 the C/E transfer entity supplying VIRPRO with a similarly confidential black box which, by initiating any of a number of possible proprietary password request-response processes involving an entity nominated by any of its customers possessing the appropriate device(s), confirms that remote messages received from that authorised entity, and processed by the black box, are authentic. Third, the C/E transfer entity supplying 5 their INVENTCO customers with a collection of programmable smart cards (or equivalent devices), for distribution to these authorised entities, enabling each authorised entity, remotely - via telephone or direct computer line - to unambiguously confirm their Identity with the customer's PAYACC SHADOW account, thereby having the capability to 10 authorise debits to this account (again, within predefined parameters concerning factors such as maximum transaction amounts, possible transaction types, account usage patterns and so on). And four, INVENTCO providing the mechanisms for direct, confidential, authorised stakeholder communications with a stakeholder's C/E transfer entity 15 shadow debit account(s).

At the end of each C/E transfer entity's specified day (or part of a day), the applicable CONTRACT APP transfers (at least) two things to the entity:-First, 1f required, a series of figures representing the exchange settlement (or equivalent) accounting entries It has or will 20 communicate to the C/E transfer entity's appropriate clearing authority (for each of the applicable consideration/entitlement denomination, currency and national currency types of the payments/receipts involved) where these figures represent the balancing net debit or credit figure corresponding to the aggregation of all of the entity's INVENTCO 25 customer transactions In the prior day. And second, a detailed file of all customer transactions effected during the day (corresponding, If required, to the above-described net figures). Upon their receipt of these transactions and summary figures, the C/E transfer entity then debits/credits each transaction to the appropriate actual customer 30 accounts, enabling new "closing" account balances to be calculated (these "closing" balances should be exactly the same as the end-of-day balances cormnumicated by the applicable CONTRACT APPS with It's file of customer transactions). In turn, these "closing balances" become tha C/E transfer entity's account "opening balances" for the next day. The 35 CONTRACT APPS notification process then repeats itself.

Where applicable, at days-end for the "clearing house" of clusters PCT7A.TJ93/00250 of like C/E transfer entitles (for example, a national central bank), CONTRACT APP transfers netted exchange settlement accounting entries to the clearing houses concerned. These entries serve to "balance the Individual customer account entries transferred to each associated C/E 5 transfer entity individually. 8. Industrial Applicability The invention has Industrial application in the use of electrical computing devices and data communications. The apparatus and methods 10 described allow the management of risk in an automated manner by means of programming of the computing devices. The types of events associated with the risk management apparatus and methodologies Includes physical and technical phenomena, and therefore have value in the field of economic endeavour.

PCT / AU93/00250 appendix a glossary of key terms Alpha (X) The Ordering party-sped fled event value corresponding to the Xth 10 future product event value contract entitlement payoff (payout) Inflection point.

Application Promoter An entity authorised by VIRPRO that specifies and administers defined rules and regulations underlying a defined CONTRACT APP -including the specific products offered for trading; categories of, and conditions of Involvement, of stakeholders; nature of Involvement and dispute resolution procedures of stakeholders.

Automatic/manual deal and no deal flags Indicators notified by each stakeholder to CONTRACT APP specifying the manner 1n which that stakeholder wishes to deal with each 25 other stakeholder.

AXSCO A communications co-ordination and security system, linked to all 30 stakeholders and component applications.

Base Pricing probabilities The prices set by sellers for unit entitlement payoffs of a contract at each of its possible future index values denominated in the contract's formally specified consideration/entitlement, currency and national currency.

Beta (X) The Ordering party-specified desired entitlement payoff (payout) amount in the desired currency denomination of contract entitlement payout (payoff) and national currency denomination of 10 contract entitlement payout (payoff) corresponding to the Xth event value inflection point.

Bilateral Obligations Netting indicator An indicator that individual 'rolling' net present values of 15 future payment/receipt commitments to/from all pairs of participating stakeholders are to be netted.

Bilateral Payments Netting Indicator An Indicator that Individual end-of-day gross payments/receipts to/from all pairs of participating INVENTCO stakeholders are to be netted.

C.

Commission rate The minimum required percentage profit margin required by a Potential Counterparty above the "breakeven" bid price for an 30 Ordering party purchase order.

Consideration/Entitlement Transfer Entity An entity acceptable to VIRPRO and the Application Promoter, satisfying defined minimum standards of financial strength, credit standing, and Integrity, able to maintain Consideration/entitlement accounts on behalf of stakeholders and effect transfers of those assets as directed.

CONTRACT APP stakeholder types Expected stakeholder types are Application Promoter, Product Sponsor, Product Ordering party, Counterparty, Counterparty-Guarantor, Regulator, Consideration/entitlement Transfer Entities and Miscellaneous other parties.

Contract and Product "absolute loss" limit A value limit specified by a potential counterparty of the maximum absolute loss It 1s prepared to sustain on a contract/product 15 irrespective of the assessment of the likelihood of any particular level of possible loss being Incurred.

Contract and Product "expected loss" limit A value limit specified by a potential counterparty of the maximum expected loss it 1s prepared to sustain on a contract/product based on the counterparty's assessment of the likelihood of all levels of possible loss being Incurred.

Contract Authorisation A process of verifying that an Ordering Party product purchase order contains data appropriate to the product being sought and that the Ordering Party 1s accurately Identified and credentlailed. 3° Contract Collateralisatlon indicator A descriptor set by the Application Promoter specifying whether and on what basis, counterparties may be required to periodically transfer assets/monies (collateral) to an Independent trust fund to ensure they will be able to meet their potential entitlement payoff obligations on the maturity dat': of a contract.

Contract Confirmation The process of securing the positive agreement of all affected stakeholders to a purchase order, Including acknowledgement by the relevant Consideration/entitlement transfer entity of the Ordering party's ability to pay the required product consideration and 10 fees, either automatically or through manual approvals.

Contract Matchlng See Ordering party/Potential counterparty matching process.

Contractual Obligation a. A binding commitment one entity (or group of entitles) has to provide products or services or Information to another entity (or group of entitles) 1n exchange for an agreed quantity of other products, services or Information. b. A binding commitment all entitles have to the network and general management system entity VIRPRO and thus to each other, to accept constraints on their activities Imposed by other authorised entitles on terms specified and agreed to by them as a condition of their participation 1n one or more of the component systems.

Contract Portfolio Netting A term used to describe the process of "setting-off" or "netting", the future payment entitlement obligations between Ordering parties and Counterparties, either b1-laterally or multi-laterally.

PCT / AU93/00250 Currency and National Currency exchange rates The rates used to convert contract consideration/entitlement currency and national currency requirements Into the product's 5 consideration/entitlement currency and national currency denomination.

D.

Deal flag An Indicator or "flag" notified to CONTRACT APP signifying that the stakeholder is satisfied to deal unreservedly with the stakeholder against whom the flag has been set.

Defined Circumstances The possible combinations of the categories of product-order Information provided by Ordering parties.

Defined Probability Distributions A set of pricing probability parameters specified by an Ordering party and Including at least, a probability distribution type 25 Identifier, the expected value of the distribution, the standard deviation of the distribution and a probability distribution adjustment value or function.

Desired Currency Denomination of Contract Entitlement A term indicating the currency 1n which an Ordering party wishes to receive potential entitlement payments from the sought contract.

Desired Currency Denomination of Consideration Payment A term Indicating the currency 1n which an Ordering party wishes to pay the required consideration for the contract sought.

Desired National currency Denomination of Contract Entitlement A term Indicating the National currency 1n which an Ordering party 5 wishes to receive potential entitlement payments from the sought contract.

Desired National currency Denomination of Consideration Payment A term indicating the National currency 1n which the Ordering party wishes to pay the required consideration for the contract being sought.

Discount rate The rate used to determine the present value of a potential counterparty's expected future entitlements.

E.

Entitlement The payout expected by the offering party at maturity as specified for each outcome 1n the range of outcomes. The payout can be both 25 positive and negative 1n value over the range of outcomes, and can be 1n the form of money or other non-money types of goods, services, promises, credits or warrants.

EV-CE pricing A price discovery mechanism for primary contracts meaning "expected value certainty equivalent pricing" being the calculated expected present value or future value of the contract.

Expected Value A function 1n EV-CE pricing which means the sum of the products of all possible contract entitlement payoff/payout amounts and the 5 Ordering party's/Counterparty's assessment of the probability of occurrence of the future events which would contractually give rise to these entitlement payoff amounts.

Expected value limits on a Counterparty's aggregate product portfolio Optional value limits specified by a Potential counterparty at any one time, where time can be specified in terms including "equivalent maturity date"; "same-month maturity date" and "all possible maturity dates" including product expected loss limits 15 and maximum (and possibly minimum) proportion of the expected total loss of the aggregate of the Counterparty's product portfolio that can be accounted for by the expected loss on the individual contract/product.

G.

Gamma(X) The Ordering party-specified desired shape of the function between 25 each of the co-ordinates Alpha(l), Beta(l) and Alpha(2), Beta(2) and so on; such that Gamma can represent all possible mathematically definable shapes.

I- I-INVENTCO The Infrastructure component of INVENTCO.

INVENTCO A collection of one or more (potentially interrelated) systems, where each system 1s the combination of a telecommunications, computing and 5 other forms of Infrastructure, and a variety of markets and support services distributed by this Infrastructure.

M.

M-INVENTCO A depository of VIRPRO authorised "markets" application software. Manual deal flag An indicator or "flag" notified to CONTRACT APP by a stakeholder signifying that the stakeholder wishes to manually approve a transaction involving the other stakeholder against whom the flag has been set.

Multilateral Payments Netting Indicator An indicator that Individual end-of-day gross payments/receipts to/from all participating stakeholders from/to a specified third 25 party trustee/clearing entity are to be netted.

Multilateral Obligations Netting indicator An Indicator that Individual 'rolling' net present values of 30 future payment/receipt commitments to/from all participating stakeholders from/to a third party trustee/clearing entity are to be netted.

PCT / AU93/00250 N.

Negative Contract Payoffs A type of contract in which the contract Ordering party may have a contingent payoff to the contract's Potential counterparty (1.e. the reverse of a normal contract).

No Deal flag An indicator or "flag" notified to a CONTRACT APP by a stakeholder signifying that the stakeholder does not wish to deal 1n any way with the other stakeholder against whom the flag has been set.

Ordering party Contingent Claims Function Specifications of a product payoff or a mathematical function to 20 calculate an Ordering party's product payoff requirement.

Portfolio Product "expected loss" limit A value limit, specified by a potential Counterparty, of the maximum expected loss the potential Counterparty 1s prepared to sustain on its product portfolio based on the Counterparty's assessment of the likelihood of all levels of possible loss being 30 Incurred.

Product Ordering party An entity acceptable to VIRPRO and the Application Promoter, 35 Interested In and able to acquire a CONTRACT APP product.' Product Establishment date/time The date/time an Application Promoter first offers a defined product for trading.

Product future event value "density" indicator An Indicator specifying the number of intermediate points between the minimum and maximum future event product definition values 10 specified for the product by the Application Promoter/Product Sponsor.

Product event value "width" Indicator An indicator specifying the range (minimum-maximum) of future ev«nt values accommodated by the product as set by the Application Promoter/Product Sponsor.

Product future event value A term used to indicate the actual value of a defined product at Its date/time of maturity.

Product Maturity date/time The date-time at which the Application Promoter is required to make a determination of the actual event value to enable entitlement and related payoffs on successful contracts.

Product Price Quote requests A type of product purchase order for which the matching process 1s terminated and the result communicated to the Ordering party, when a desired price bid or range of price bids has been obtained.

Product Purchase Orders Specific product purchase orders for which the Ordering party 1s seeking a potential Counterparty match, which may be of three 5 types: automatic orders; manual orders and "hide" orders.

Product Purchase Order withdrawals Ordering party-Initiated requests to withdraw from processing 10 pre-subm1tted but as yet unconfirmed product purchase orders.

Product potential Counterparty An entity acceptable to VIRPRO and the Application Promoter, 15 exceeding a defined minimum standard of financial strength, credit standing and Integrity, offering defined CONTRACT APP products to product Ordering parties.

Product Sponsor An entity acceptable to VIRPRO and the Appl1 cation Promoter, having responsibility for detailed definition of product parameters Including the continual determination of product values over time.

R.

Regulator An entity acceptable to VIRPRO having local, state, national or international jurisdiction over one or more CONTRACT APPS.

Set of Pricing Probabilities The range of probabilities a potential Counterparty applies to a class of Ordering party order, specified by the value of "defined circumstances" and applying to every feasible future product event defined for that product by an Application Promoter.

Stakeholder An entity that is a registered participant in one or more of INVENTCO's component parts.

V.

Value Dates The respective dates/times at which matched contract consideration and entitlements are agreed to be made by the relevant Ordering party/Counterparty to a contract.

VIRPRO The network and general management system component of INVENTCO.

X.

A term Indicating the number of contract payoff (payout) Inflection points the Ordering party 1s seeking within the allowable range of future product event values (Including the 35 value range extremity points). -59-APPENDIX B CONTRACT APPS Overview CONTRACT APPS is a term used to refer to certain types of units of applications software which can, but do not need to, reside within an INVENTCO system's (M-INVENTCO) depository of "markets" software. The purpose of individual CONTRACT APPS is two-fold: First, to effect the 10 trading/exchange/transfer of risk aversion transactions (and derivatives of these transactions) between participating ordering parties and counterparties on terms acceptable to the parties Involved as well as to others within INVENTCO registered as having a legitimate Interest in the nature, size and composition of these trades/exchanges/transfers. And 15 second, to appropriately manage all matched/confirmed contracts through to their time of maturity, Including their ultimate settlement.

Individual CONTRACT APPS perform theses tasks according to the specific rules they embody, defined by their own stakeholders. CONTRACT APPS effectively reside upon AXSCO and within M-INVENTCO.

Stakeholder Types CONTRACT APPS accommodate eight (and potentially fewer) generic types of their "own" stakeholders (as distinct from other INVENTCO stakeholders) termed: application promoter, product sponsors, product 25 ordering parties, potential product counterparties, counterparty-guarantors, regulators, consideration/entitlement transfer entities, and other miscellaneous parties.

Some details of these stakeholders are as as follows: an application promoter 1s an entity having overall responsibility for the 30 functioning of a CONTRACT APP (that responsibility having been granted by VIRPRO); a product sponsor Is an entity which promotes and administers the rules of trading, and subsequent management, of defined contingent claims contracting product(s) selected for Inclusion in a CONTRACT APP by Its application promoter; a product ordering party 1s an entity seeking 35 to acquire a CONTRACT APP product from a potential product counterparty (where a product ordering party can also be a product counterparty); a potentlal product counterparty is an entity potentially prepared to sati sfy the CONTRACT APP product needs of a product ordering party (where a potential product counterparty can also be a product ordering party); a counterparty-guarantor 1s an entity guaranteeing a product counterparty's 5 ability to settle any/all of Its potential entitlement transfer obligations to a product ordering party to which it has become a counterparty as a result of a CONTRACT APP effected "match"; regulators are entities overseeing the on-going performance of all other stakeholders involved In a CONTRACT APP, especially 10 counterparty-guarantors; consideration/entitlement transfer entitles are entities with which all other CONTRACT APP stakeholders maintain "accounts" to transfer required considerations/entitlements to/from all each other; and miscellaneous parties are all other entities having a defined stake 1n the functioning of a CONTRACT APP.

Miscellaneous parties include: Independent entitles contracted by application promoters or product sponsors to formally determine the "value" of products on their date-of-matur1ty; multilateral obligations and payment netting trustee/clearing entity organisations; Independent (non-regulator) taxation and other governmental authorities; electronic 20 "gateway" providers (external to INVENTCO); and host system organizations (1n the case of CONTRACT APPS within INVENTCO systems linked to a common host system). CONTRACT APPS accommodate any number of their own stakeholders of each of the above-defined generic types.

Product Types CONTRACT APPS can support risk aversion contract "product types" with any combination of values of multiple attributes. Including: the fundamental nature/purpose of the product; the establishment/maturity date/time of the product; the consideration/entitlement denomination 30 type, currency (1f applicable), and national currency Of applicable) consideration/entitlement Identifiers associated with the product; the "width" and "density" Identifiers of possible future event values of the product; and miscellaneous other product descriptors.

The "fundamental nature/purpose of the product" attribute may 35 Incorporate Identifiers including: a conditional entitlement-payoff dimensloins identifier; a market identifier; a sub-market Identifier; and a market-type Identifier. The "conditional entitlement-payoff dimensions identifier" specifies the number of dimensions to an ordering party's sought-after conditional entitlement-payoffs. The market Identifier specifies whether the product relates to an "actual" or "perceived" 5 phenomenon (or phenomena), the number of such phenomena (If applicable), and the applicable phenomenon category (for example, Industrial, scientific, financial market hedging, and so on). The sub-market identifier provides a more specific description of the product concerned. The market-type identifier specifies the applicable future period 10 date/time (where this can be anything - for example, "at a defined contract maturity date/time", "at a specified time on or before contract maturity date/time", and so on), and type-of-future event Involved (where, again, this can be anything - for example, as an indicator of some relative value of a phenomenon (spot valr;e, average value and so 15 on), or as an indicator of the "rate-of-change" of some value of a phenomenon.

The "establishment and maturity date/time of the product" attribute specifies, respectively, the date/time an application promoter first offered a product for trading, and the date/time at which the defined 20 product matures (that 1s, the date/time at which the product sponsor is required to make a determination of the actual event value at that date/time so enabling contract entitlement transfers to be effected).

The "consideration/entitlement denomination type, currency (if applicable), and national currency (1f applicable) 25 consideration/entitlement identifiers associated with the product" attribute specify: the type of consideration/entitlement involved (where this can include rights and entitlements, physical assets, and "money" of all possible types); 1n the case of a "money" consideration/entitlement type, the currency of the consideration/entitlement (where such currency 30 types can Include: public/private record-depository deposits, commercial credit card company deposits, commercial bank deposits, central bank deposits, taxation authority deposits, and deposits in non-bank clearing houses and depositories, and the like); and, again, 1n the case of a "money" consideration/entitlement type, the national currency of the 35 consideration/entitlement Identifier (where such national currency types can be in any national currency, or form of synthetic currency).

PCT / AU93/00250 ihe "width and density Identifiers of possible future event values of the product" attribute specifies, respectively: the minimum and maximum values of the allowable range of future event values accommodated by a product; and the number of Intermediate points between the defined 5 minimum and maximum future event values accommodated by the product.

The "miscellaneous other product descriptors" attribute specifies such things as: the degree of stakeholder access granted the product by the application promoter in question; the forms of trading-services granted the product by the application promoter 1n question (where this 10 product attribute specifies the accessibility of the product to a range of feasible "stakeholder services" with respect to such things as contract portfolio netting, contract collateralsation, consideration credit provision, ordering party ability to specify negative contract entitlements, and availability of secondary/derivative market product 15 trading) ; and the degrees of trading, clearing and settlement "transparency" granted the product by the application promoter 1n question.

Transaction Types 20 A range of primary, secondary, derivative-primary, and derivative-secondary risk aversion contract transactions are accommodated by CONTRACT APPS.

The range of "primary" (and derivative-primary (options, for example)) risk aversion contract transaction-types (handled principally 25 by Processes 2 and 4 - described 1n Appendix C) Include: ordering party product orders (and option orders) for which the ordering party 1s seeking a counterparty "match", ordering-party price quote (and options price quote) requests; and orderlng-party withdrawals of existing product orders (and withdrawal of options on product orders). Ordering party 30 product orders consist of: automatic orders and manual orders. Automatic orders consist of: normal-automat1c orders (being orders the ordering party 1s prepared to have matched automatically, subject only to the constraints defined In the ordering party's order. In addition to whatever "match" constraints other CONTRACT APP stakeholders have 35 prespeclfled); and anonymous-automatic orders (being orders the ordering party 1s prepared to have matched automatically, subject to the PCT / AU93/00250 constraints defined 1n the ordering party's order, in addition to whatever "match" constraints other CONTRACT APP stakeholders have prespecified, provided that no CONTRACT APP stakeholder has sought to manually authorise the transaction and, through so doing, being able to 5 potentially Identify the ordering party). Manual orders consist of normal-manual orders (being orders the ordering party wishes to manually authorise before they are finalised - that 1s, after a counterparty "match" has been effected but before the contract has been "confirmed" -subject only to the constraints defined In the orderlng party's order, 1n 10 addition to whatever "match" constraints other CONTRACT APP stakeholder^ have presoeclfled); and anonymous-manual orders (being orders the ordering party wishes to manually authorise before they are finalised -that is, after a counterparty "match" has been effected but before the contract has been "confirmed" - subject to the constraints defined in the 15 ordering party's order, in addition to whatever "match" constraints other CONTRACT APP stakeholders have prespeclfied, provided that no CONTRACT APP stakeholder has also sought to manually authorise the transaction and, through so doing, potentially identify the ordering party).

The range of "secondary" (and derivative-secondary (options, for 20 example) risk aversion contract transaction-types (handled principally by Processes 3 and 5 - described 1n Appendix B) Include: acquiring party product orders (and option orders) for which the acquiring party 1s seeking to "acquire" the position of a specified "risk counterparty" stakeholder 1n an existing contract; acquiring-party product price 25 indications (and option price indications); and acquiring-party withdrawals of existing product orders (and option withdrawals).

Acquiring party product orders for which the acquiring party Is seeking to "acquire" the position of a specified "risk counterparty" stakeholder 1n an existing contract, consist of automatic orders and 30 manual orders.

Automatic orders consist of: normal-automatic orders (being orders the acquiring party 1s prepared to have matched automatically, subject only to the constraints defined in the acquiring party's order, in addition to whatever "match" constraints other CONTRACT APP stakeholders 35 have prespeclfied); and anonymous-aiitomatlc orders (being orders the acquiring party 1s prepared to have matched automatically, subject to the constralnts defined in the acquiring party's order, in addition to whatever "match" constraints other CONTRACT APP stakeholders have prespeclfied, provided that no CONTRACT APP stakeholder has sought to manually authorise the transaction and, through so doing, being able to 5 potentially Identify the acquiring party).

Manual orders consist of normal-manual orders (being orders the acquiring party wishes to manually authorise before they are finalised -that 1s, after a "match" has been effected but before the contract "sale" Is "confirmed" - subject only to the constraints defined 1n the acquiring 10 party's order, 1n addition to whatever "match" constraints other CONTRACT APP stakeholders have prespeclfied); and anonymous-manual orders (being orders the acquiring party wishes to manually authorise before they are finalised - that 1s, after a "match" has been effected but before the contract "sale" is "confirmed" - subject to the constraints defined 1n 15 the acquiring party's order, 1n addition to whatever "match" constraints other CONTRACT APP stakeholders have prespeclfied, provided that no CONTRACT APP stakeholder has also sought to manually authorise the transaction-and, through so doing, potentially Identify the acquiring party).

Primary Product Pricing Process Types CONTRACT APPS enable potential counterparties to automatically establish "bids" on any defined (primary and derivative-primary) product order according to either an "expected value/utHlty-certalnty 25 equivalent" (EV/U-CE) pricing regime, or any other mathematically-definable pricing regime.

In the case of an "expected value-certainty equivalent" (EV-CE) pricing regime, each potential counterparty specifies, amongst other things: an Indicator of certain defined attributes of an as-yet-unknown 30 product order; a base commission rate; a base discount rate; (if applicable) a set of base consideration/entitlement denomination, currency, and national currency exchange rates; base unit product prices; and desired adjustments to the preceding base-b1d-pr1ce determinants dependent on any specific order (submitted by a specified ordering party). 35 The above-described Indicator of certain defined attributes of an as-yet-unknown product order (termed, defined circumstances) may reflect any combination of the multiple characteristics of an order (Irrespective of the ordering party concerned), Including: the multiple attributes of the contingent claims function sought; the ordering party's Interest or otherwise 1n being granted credit by a counterparty; the ordering party's 5 Interest or otherwise In participating 1n the possible netting and col lateralIsatlon features of the APP; and the maximum (and possibly minimum) consideration amount the ordering party is prepared to pay for their defined product. The above-described base commission rate specifies the minimum required percentage profit margin required by the • 10 counterparty above their breakeven consideration bid price for a product order.

The above-described base discount rate determines the present value of the counterparty's expected future entitlement associated with a contract (net of the ordering party's consideration, and making allowance 15 for the future Income stream this consideration is expected to generate). The above-described set of base consideration/entitlement denomination, currency and national currency -exchange rates are used, where applicable, to convert an ordering party's contract requirements Into the base consideration/entitlement denomination, currency and national currency of 20 the product so enabling the contract matching process to make like comparisons of counterparty bids for product orders.

The above-described base unit product prices are prices set by potential counterparties for unit entitlement-payoffs of a contract at each of Its possible future values, denominated in the contract's 25 formally specified consideration/entitlement type and, If applicable, currency type and national currency type (where these unit prices can be specified as directly Input figures for every feasible future product event (the sum of which may or may not add to 1), or as parameters of defined mathematical functions). The above-described desired adjustments 30 to the preceding base-bid-price determinants dependent on the specific ordering party submitting a specific order can Include: a commission rate adjustment; a discount rate adjustment; a consideration/denomination exchange rate adjustment; a currency exchange rate adjustment; and a national currency exchange rate adjustment.

In the case of an "expected utility-certainty equivalent" (EU-CE) pricing regime, each potential counterparty specifies all of the PCT / AU93/00250 above-descrlbed parameters applicable to a EV-CE pricing regime as well as "utility bench-mark" figures for all possible consideration and entitlement "payment amounts" which could, conceivably, be associated with a product/contract.

Primary Product Matching Process Types CONTRACT APPS may si ml 1arly accommodate any of a number of possible (primary and derivative-primary) order matching processes where these processes can be of multiple types, Including sequential processes and 10 simultaneous processes.

Sequential order matching processes can be characterised according to the "sequence determining" and "matching" rules they embody, where "sequence" rules may be of various types: "last-1n-f1rst-out (LIFO)", "f1rst-1n-first-out" (FIFO)", priced priority, and so on; and matching 15 rules may also be of various types - for example, a specific matching process could seek, for each product ordering party, a counterparty (or counterparties) offering a product price at or below the maximum price the ordering party 1s prepared to pay (where the determined contract price could be either the lowest price offered by a potential 20 counterparty, the m1d-po1nt between the an ordering party's specified "maximum consideration amount" and the lowest price offered by a potential counterparty, and so on); or seek for each potential product counterparty an ordering party prepared to pay the maximum price above a price at which the counterparty 1s prepared to deal (here, the determined 25 contract price could be either: the ordering party's "maximum consideration amount " price, the mid point between the minimum price the counterparty is prepared to receive and the ordering party's "maximum consideration amount" price, and so on).

Simultaneous order matching processes are those seeking some type 30 of optimum solution according to pre-defined objectives. For example: "maximise the number of ordering party-counterparty matches"; "maximize the aggregate consideration and/or entitlement value of ordering party-counterparty matches"; or "minimize the value of a function specifying the sum of the differences (possibly weighted according to 35 their perceived Importance) between the actual and desirted values of match attributes of ordering parties and counterparties".

Both of the above-described sequential and simultaneous matching processes can also accommodate conditional contract matching rules; and pre and post tax price optimisation mechanisms.

Application Types CONTRACT APPS may be: "in-house" APPS or "public" APPS; "single potential counterparty" APPS or "multiple potential counterparty" APPS; APPS with differing degrees and forms of "regulator" oversight of other application stakeholders; and APPS with differing degrees and forms of 10 "counterparty-guarantor" oversight of product potential counterparties.

CONTRACT APPS support consideration "payment" value dates being "immediate" (meaning exactly the time at which a contract match 1s confirmed); or deferred until a defined time 1n the future, measured in terms of seconds, minutes, hours, or days. Similarly, CONTRACT APPS 15 support entitlement "payment" value dates being "immediate" (meaning exactly the time at which the applicable application promoter formally notifies other CONTRACT APP stakeholders of the "result" of a maturing contract); or deferred until a defined time after the "result" of a maturing contract Is known.

CONTRACT APPS allow contracts to be modified and liquidated after their creation. Contracts can be modified through: direct negotiation by the relevant "risk counterparties" to a particular contract; or the purchase/sale of "derivative" secondary risk aversion contract transactions (See Process 5 description 1n Appendix C). Contracts can be 25 similarly liquidated after their creation through sale of the contract (within or outside INVENTCO); and through direct negotiation between the initial ordering party and counterparties to the contract. They can also be effectively liquidated through the ordering party/counterparty acquiring a mirror image of the contract to which they are a party 30 (within or outside of INVENTCO).

Post Order Process Types CONTRACT APPS undertake various generic types of "post-order-process" management functions for aM the above-described 35 generic types of "transactions", Including: a function which maintains a formal record, of contractual commitments entered Into by all CONTRACT APP stakeholders with one another, and with VIRPRO-authorlsed entitles external to either the applicable CONTRACT APP or INVENTCO overall; a function which effects the Independent valuation of consideration and entitlement obligations between CONTRACT APP stakeholders, and between 5 CONTRACT APP stakeholders and VIRPRO-authorlsed entitles external to each applicable CONTRACT APP; a function which determines and effects "collateralisatlon" consideration/entitlement transfers between CONTRACT APP stakeholders, and between CONTRACT APP stakeholders and VIRPRO-authorlsed entities external to each applicable CONTRACT APP, 10 based on above-described valuations of consideration and entitlement obligations associated with CONTRACT APP transactions; a function which determines and effects, as required, the b1-lateral netting of accumulated "consideration/entitlement" obligations " between CONTRACT APP stakeholders, and between CONTRACT APP stakeholders and 15 VIRPRO-authorlsed entitles external to each applicable CONTRACT APP; a function which determines and effects, as required, the multi-lateral netting of accumulated "consideration/entitlement" obligations" between CONTRACT APP stakeholders, and between CONTRACT APP stakeholders and VIRPRO-authorlsed entitles external to each applicable CONTRACT APP 20 (Involving a nominated third-party "clearing house" entity); a function which manages the processing, accounting, reporting, and entitlement "payment" tasks associated with maturing contracts; a function which determines system usage and access fees payable to/from all CONTRACT APP (and other INVENTCO) stakeholders, and to/from VIRPRO-authorlsed entities 25 external to INVENTCO; a function which determines and effects, as required, "bl-laterally netted" consideration/entitlement transfers from/to CONTRACT APP stakeholders themselves, and from/to CONTRACT APP stakeholders and VIRPRO-authorlsed entitles external to each applicable CONTRACT APP; a function which determines and effects, as required, 30 "multl-laterally netted" consideration/entitlement transfers from/to CONTRACT APP stakeholders themselves, and from/to CONTRACT APP stakeholders and VIRPRO-authorlsed entitles external to each applicable CONTRACT APP (involving a nominated third-party "clearing house" entity); and a function which compiles and distributes CONTRACT APP (and other 35 INVENTCO) stakeholder customised information.

SuppIementarv Process Types CONTRACT APPS undertake various other types of support processes, Including: enabling stakeholders to transfer consideration, entitlement and other "payment" obligations to and from one another, Independently of 5 transfers Initiated by CONTRACT APP transactions (See Process 7 description In Appendix C); providing CONTRACT APP (and other INVENTCO) stakeholders with shared access to specialist systems to assist them to decide how best to Interface with the multiple aspects of INVENTCO (See Process 8 description In Appendix C); and providing CONTRACT APP (and 10 other INVENTCO) stakeholders with access to a range of INVENTC0-fac1lItated "value added services" (See Process 9 description in Appendix C).

Order Matching Constraint Tvp&s 15 For their operation, CONTRACT APPS require all stakeholders to a specific APP to specify, amongst other things, which other stakeholders they do and do not want to have Interactions with, and the conditions under which they wish to manually authorise some aspect of a transaction Involving any other CONTRACT APP stakeholder over which they have control 20 authority of some form.

In specifying which other stakeholders they do and do not want to have interactions with, CONTRACT APP stakeholders have various options. Application promoters can specify acceptable product sponsors, products, ordering parties and potential counterparties within their application -25 Individually and by type. Similarly, product sponsors can specify acceptable application promoters, products, ordering parties, potential counterparties and counterparty-guarantors within their application -Individually and by type.

Product counterparties and ordering parties (collectively) can 30 specify: ordering parties/potential counterparties they do and do not want to deal with - Individually and by type; the extent of their preparedness to be Involved in contract netting and col lateral 1satlon arrangements provided for by their application promoter; application promoters, product sponsors, products, and consideration/entitlement 35 transfer entitles they do and do not want to deal with - individually and by type; ordering parties/potential counterparties they prefer to deal with, and those with which they wish to deal exclusively; the degree of trading transparency they require; and their wish or otherwise to manually authorise order matches before they are confirmed.

Potential counterparties can specify which ordering parties, or 5 classes of ordering parties, they are prepared to offer credit to (and under what terms), and ones they are prepared to allow "ordering party-guarantors" to offer credit to and under what terms. Similarly, product ordering parties (uniquely) can specify: counterparty-guarantors with which they do and do not want to deal (Individually and by type); 10 counterparties with which they wish to deal exclusively or preferentially to obtain a particular form of counterparty-credit; and potential "ordering party-guarantors" (external to INVENTCO) with which they do and do not want to deal.

Counterparty-guarantors can specify which potential counterparties 15 have their authority to operate and which application promoters, product sponsors and ordering parties they are prepared, Indirectly, to have relationships with. Similarly, regulators can specify which counterparty-guarantors, potential counterparties, ordering parties, application promoters, product sponsors and products have their authority 20 to operate. Finally, consideration/entitlement transfer entitles can monitor and maintain up-to-date rules with respect to ordering parties, counterparties, application promoters, product sponsors, counterparty-guarantors, and regulators they are and are not prepared to deal with - Individually and by type.

Ordering Party Requirements For their operation, CONTRACT APPS require primary product ordering party stakeholders to a CONTRACT APP, 1n registering an order for a product of their choice, to specify: the above-described "product type" 30 and "other stakeholder Involvement" information; multiple attributes of the specific order they aire seeking; their Interest or otherwise In being granted credit by potential counterparties for their contract consideration amount, or in availing themselves of the possible netting and collaterallsatlon features of the APP concerned; the maximum land 35 possibly minimum) consideration "price" they are prepared to pay for their defined product; and various other dimensions of their needs, where these Include: the name/title by which they wish to be identified by other APP stakeholders; the time at which they wish their order to be submitted; the period of time after an order has been submitted that they wish the order to be retained before 1t is automatically withdrawn; 5 whether or not they are prepared to accept partial matches of their order; the degree of market transparency they wish to be exposed to; whether or not they wish wish to have the option of trading a matched contract on an authorised INVENTCO secondary market (See Process 5 description in Appendix C); whether or not they wish to manually 10 consider/authorise potential counterparty quotes on an order; 1n the case where potential counterparty quotes are required to be manually considered/authorised, the maximum time after potential counterparty quote details are provided to the ordering party that the ordering party wishes to consider the quote(s); and the consideration/entitlement 15 transfer entity accounts from which/to which they wish to have relevant "payments" made/received.

The above-mentioned multiple attributes of a specific primary order an ordering party Is seeking Include: their wish or otherwise to directly input the entitlement "coordinates" of their desired contingent claim 20 order; their wish or otherwise to mathematically specify an entitlement function reflecting their desired product order, where such functions can be single or multidimensional (Indicating a contingent contract entitlement conditional on two or more phenomena); the "consideration/entitlement unit", "currency" (If applicable), and 25 "national currency" <1f applicable) 1n which they wish to "pay"/"rece1ve" their contract consideration/entitlement. Where an ordering party wishes to mathematically specify their desired primary product order as a single-dimensional entitlement function: the Input term "X" can Indicate the number of contract entitlement "Inflection points" the ordering party 30 1s seeking within the allowable range of future product event values (Including the value range extremity points); the Input term "Alpha (X)" can Indicate the ordering party-specified event value corresponding to the Xth future product event value contract entitlement Inflection point; the Input term "Beta (X)" can Indicate the ordering party-specified 35 desired' entitlement amount (1n the desired "consideration/entitlement form", "currency" and "national currency" entitlement denomination) corresponding to the Xth event value Inflection point; and the input term "Gamma (X-l)" can indicate the ordering party-specified desired shape of the function between each of the co-ordinates: [Alpha (1), Beta (1)3 and [Alpha (2), Beta (2)], [Alpha (2), Beta (2)] and [Alpha (3), Beta (3)], 5 and so on (as applicable), where Gamma can represent all possible, mathematically definable, shapes.

Potential Counterparty Requirements For their operation, CONTRACT APPS also require primary product 10 "potential counterparty" stakeholders to a CONTRACT APP to define various parameters on the basis of which they can automatically price orders, including parameters with which they wish to establish a "consideration bid" on a defined product order; possible Individual contract and product constraints they require to be satisfied if they were to become a 15 counterparty to a defined product ordering party order; and possible expected-value product-portfolio constraints they require to be satisfied if they were to become a counterparty to a defined product ordering party order.

In defining parameters with which they wish to establish a 20 "consideration bid" on a defined product order under a "EV-CE" pricing regime (described above), each potential counterparty Is required to specify, amongst other things: an Indicator of the appropriate "defined circumstances" of all possible product orders; a base "commission rate"; a base "discount rate"; (if applicable), a set of base 25 "consideration/entitlement denomination", "currency" and "national currency" exchange rates; base "unit product prices"; and desired adjustments to the base commission rate, discount rate, exchange rates, and unit product prices on specific product orders according to the determined-value of the "defined circumstances" Indicator (based on a 30 specific product order).

Possible Individual contract and product constraints the potential counterparty requires to be satisfied 1f they were to become a counterparty to a defined product ordering party order, Include: an absolute loss limit constraint (this constraint being specified as a 35 single-figure constraint and/or as a function constraint); an expected loss limit constraint (this constraint defining the maximum "expected" PCT / AU93/00250 aggregate loss the potential counterparty is prepared to incur on a contract/product, taking Into account their assessment of the likelihood of all feasible future product values occurring); and a constraint on the maximum proportion of the expected total loss of the aggregate of the 5 potential counterparty's contracts/products that can be accounted for by the expected loss of the defined individual contract/product. Similarly, possible expected-value product-portfolio constraints the potential counterparty requires to be satisfied if they were to become a counterparty to a defined product ordering party order include the 10 maximum (and possibly minimum) proportion of the expected total loss of the aggregate of the potential counterparty's product portfolio that can be acccounted for by the expected loss of an individual contract/product.

Communications CONTRACT APP stakeholders communicate with their applicable APP via AXSCO. Individual "stakeholder-to/from-AXSCO" communications can be by way of any/all of the following: voice communications with an AXSC0-1Inked "live operator" or "recorded messaging" system; touch-telephone communication with AXSCO directly; or 20 computer-to-computer link with AXSCO (via a dedicated or dial-up communications line). With all three forms of communication, CONTRACT APP stakeholders may be required to utilize specified computer hardware and/or software mechanisms 1n their communications with AXSCO (Including "payments" authorisation "black box" devices referred to In Appendix H).

Component Processes In their manifestation as telecommunications/computer software residing on telecommunications/computer hardware, individual CONTRACT APPS consist of a cluster of processes (detailed In Appendix C), 30 utilizing a number of data files, residing on one or more processing units. A cluster of nine (and potentially more or fewer) specific processes and their related data files reside within a CONTRACT APP: a process handling file administration and updating tasks supporting all other processes (termed Process 1); a process handling the receipt and 35 processing of "primary" risk management contract transactions (termed Process 2); a process handling the receipt and processing of "secondary" risk management contract transactions (termed Process 3); a process handling the receipt and processing of'derivatl ve-prlmary" risk management contract transactions (termed Process 4); a process handling the receipt and processing of "derivative-secondary" risk management 5 contract transactions (termed Process 5); a process handling the "back office" management of all four types of risk management contract transactions (termed Process 6); a process handling non-transaction related consideration, entitlement, and other "payment" obligation transfers between stakeholders (termed Process 7); a process handling 10 CONTRACT APP (and other INVENTCO) stakeholder access to specialist systems to assist these stakeholders decide how best to interface with the multiple aspects of INVENTCO (termed Process 8); and a process handling CONTRACT APP (and other INVENTCO) stakeholder access to a range of INVENTCO-faciHtated "value added services" (termed Process 9). These 15 processes may function concurrently. -75-APPENDIX C DESCRIPTION OF CONTRACT APP PROCESSES Process 1 Process 1 handles file administration and updating tasks supporting all other processes (Fig. 18). The PRODUCT, PRODUCT TRANS, DEAL LIST and DEAL LIST TRANS files referred to in Fig. 18 are applicable, Individually or collectively, to primary, secondary, 10 derivative-primary, and derivative-secondary contract orders. The SEL PRICE, SEL PRICE TRANS, SEL LIMIT and SEL LIMIT TRANS files are applicable only to primary and derivative-primary contract orders. The TRADE PRICE, TRADE PRICE TRANS, TRADE LIMIT and TRADE LIMIT TRANS files are applicable only to secondary and derivative-secondary 15 contract orders.

The file administration and updating tasks handled by Process 1 comprise: dealing with general data-file Information received from CONTRACT APP stakeholders; dealing with general data-file and order processing Information received from relevant other INVENTCO 20 stakeholders, particularly VIRPRO and AXSCO; dealing with trading support Information received directly from CONTRACT APP stakeholders; dealing with potential counterparty primary, and derivative primary, product order "consideration bid" parameters and order-natch constraints; dealing with ex1sting-contract offering party secondary, 25 and derivative secondary, order match conditions; and dealing with miscellaneous Information from entities external to INVENTCO.

Existing and prospective stakeholders are required to supply their applicable CONTRACT APP with specified Identification and other Information, and to continually maintain the Integrity of this 30 information. For each stakeholder, this information includes: applicable name(s), addresses, contact numbers, and references; their desired system access medium; their consideration/entitlement transfer entity account details; and, If applicable, their required schedule of fees and charges payable by other INVENTCO stakeholders.This 35 Information 1s maintained 1n the data file ADMIN, updated Information being received by way of the transaction file ADMIN TRANS.

VIRPRO is required to supply the applicable CONTRACT APP with various forms of general data-file information including: identification data relating to the application promoter for (each) CONTRACT APP; details of the permitted types of system access mediums; 5 and consideration/entitlement denominations available in each application. Again, this information is maintained in the data file ADMIN, updated information being received by way of the transaction file ADMIN TRANS.

VIRPRO is similarly required to supply the applicable CONTRACT 10 APP with various forms of general data-file information including: information on all data received by and sent from the various parts of INVENTCO to one another and to entities external to INVENTCO; and statistical information of various types, including data traffic volumes, data file location Information and so on.This information is 15 continuously collected by AXSCO and maintained 1n the data file HISTORY.

Trading support information received directly from CONTRACT APP stakeholders comprises stakeholder relationship Information of a general nature, and specific information from individual stakeholders 20 (detailed 1n Appendix B).

Stakeholder relationship Information of a general nature comprises "transaction communication parameters" and automatic/manual deal and no deal flags". Transaction communication parameters are parameters set by all (registered) CONTRACT APP stakeholders defining 25 the bounds within which they wish, for security reasons, all of their communications within INVENTCO to fall. Automatic/manual deal and no deal flags are "flags" set*-as required, by all (registered) CONTRACT APP stakeholders Indicating their requirements with respect to dealing with other CONTRACT APP stakeholders. This Information is maintained 30 1n the data file DEAL LIST, updated Information being received by way of the transaction file DEAL LIST TRANS.

Specific Information from Individual stakeholders differs according to the category of stakeholder involved.

Application promoters provide, amongst other things: Information 35 for the data file, PRODUCT (updated transactions being received from the file, PRODUCT TRANS), and further information for the data file ADMIN (updated transactions being received from the file, ADMIN TRANS). Information for the data file, PRODUCT includes details of the specific products application promoters offer for trading/exchange/transfer. Information for the data file, ADMIN 5 includes: the order pricing and matching process upon which the application is based; the consideration/entitlement "value date" regime upon which their application is based; the categories of other stakeholders allowed to participate 1n the application and the conditions under which they can do this; the specific rules of 10 engagement of counterparty-guarantors by potential counterparties; the availability and, 1n turn, the terms and conditions for CONTRACT APP stakeholder utilization of "consideration credit", "collateralisation", and "netting" features of the application (embodied in the various post-order-processing management routines); 15 and details of the consideration/entitlement transfer entitles involved In the application and relevant security Information concerning account access.

Product sponsors provide full details of the product(s) they are sponsoring; product ordering parties and potential counterparties 20 (collectively) Indicate, with respect to each other, the parties they either prefer to deal with or wish to deal with exclusively. Potential counterparties (exclusively) provide a variety of specific Information, including: details of the Application promoter, Product sponsor, and Counterparty-guarantor rules under which they have chosen 25 to operate; data recording the lines of credit (1f any) offered to ordering parties and the general and specific terms and conditions of these credit lines (applicable to ordering parties Individually and/or to defined classes of ordering parties); parameters with which a potential counterparty wishes to determine Its consideration "bids" on 30 orders. Counterparty-guarantors provide details of the potential counterparties (If any) they have agreed to guarantee and the nature of such guarantees. Regulators provide details of: all entitles having a stake in the application and their relationships to one another (for example, which counterparty-guarantors cover which counterparties, 35 which potential counterparties offer which products, and so on>; specific regulations developed for the regime; and parameters defining the taxation treatment of all types of orders and related transactions. Consideration/entitlement transfer entities provide "set-up" and on-going account access and balance-updating services. All of the above-described information is maintained in the data file, 5 ADMIN, updated information being received by way of the transaction file ADMIN TRANS.

In dealing with potential counterparty primary product order "consideration bid" parameters and order-match constraints, potential product order counterparties are required, amongst other things, to: 10 define various parameters with which they wish to establish a "consideration bid" on a defined product order; and define parameters-with which the potential counterparty wishes to determine adjustments to the "base-price" bids on product orders according to the specific ordering party involved (this information is maintained in the data 15 file SEL PRICE; updated information is received by way of the transaction files SEL PRICE TRANS); define possible Individual contract and product constraints the potential counterparty requires to be satisfied if they are to become a counterparty to a defined product ordering party order; and define possible expected-value 20 product-portfolio constraints the potential counterparty requires to be satisfied 1f they are to become a counterparty to a defined product ordering party order (these latter two categories of information are maintained In the data files SEL LIMIT and BUY LIMIT; updated . Information being received by way of the transaction file SEL LIMIT 25 TRANS) (See Appendix B for further details).

In dealing with ex1sting-contract offering party secondary order match conditions, offering parties are required, amongst other things, to specify: the Order IDs of the contracts In which the entity concerned wishes to "sell" Its position as a contract stakeholder, 30 and, for each such contract, the pricing and other parameters it requires to be satisfied before a contract position "sale" Is effected.This Information is maintained in the data file TRADE PRICE; updated Information is received by way of the transaction file TRADE PRICE TRANS.

In dealing with potential counterparty derivative-primary product order "consideration bid" parameters and order-match constraints, potential product order counterparties are required to provide essentially the same Information described above In relation to primary product orders. However, in addition, Information directly applicable to the relevant type of derivative-primary transaction 5 concerned (say, an option to establish a primary product order at a later date) is also required.

In dealing with exlsting-contract-offering party derivative-secondary order match conditions, offering parties are required to provide essentially the same information described above 10 1n relation to secondary product orders. However, in addition, information directly applicable to the relevant type of derivative-secondary transaction concerned (say, an option to sell a position in a primary product order at a later date) 1s also required.

In dealing with miscellaneous Information from entities external 15 to INVENTCO, this information can be of any type and may, potentially, be used by any part of INVENTCO; the information 1s maintained in the data-file ADMIN with updated Information being received by way of the transaction file ADMIN TRANS Process 2 Process 2 handles the receipt and processing of "primary" risk management contract transactions (this term being defined in Appendix D), such transactions being of multiple types (detailed in Appendix . B). Various sub-processes of Process 2 handle the receipt and 25 processing of all possible types of these transactions, Including product order processing, price quote requests, and withdrawals of existing product orders.

Primary "product orders" constitute the core "primary" risk management contract transaction type (Fig. 19 provides a summary flow 30 chart, and the document text provides a detailed flow chart and description of the processing of this transaction type).

Primary product orders Incorporate the following key Items of Information: ordering party Identification Information; CONTRACT APP application and product Identification Information; "other stakeholder 35 Involvement" Information; the ordering party's desired form of product specification (directly Input as entitlement coordinates or as mathematical functlon(s)); when the order specification is by way of a single-dimensional mathematical function, the parameters of such a function (which can Include: the term "X", the term "Alpha (X)", the term "Beta (X)", the term "Gamma (X-l>"; the contract consideration 5 and entitlement "denomination type", "currency (if applicable)" and "national currency (1f applicable)"; the ordering party's interest or otherwise in being granted credit by potential counterparties for the yet-to-be-determined contract consideration amount; the ordering party's interest or otherwise in availing themselves of the possible 10 netting and collaterallsatlon features of the APP concerned; the consideration "price" range within which the ordering party 1s prepared to "pay" for their defined product; miscellaneous other dimensions of the ordering party's needs, and the consideration/entitlement transfer entity accounts from which/to which 15 they wish to have relevant "payments" made/received). Upon its receipt, all of this information 1s written to - and subsequently processed from - the file PORD NEW.

Three sub-processes are involved 1n processing primary product orders - order authorisation, order matching, and matched order 20 confirmation . In the case of the anticipated most typical form of order, termed a "normal-automatic" primary product order these sub-processes function as follows: The primary product order authorisation sub-process verifies that all orders contain data appropriate to the product being sought 25 and that each ordering party 1s accurately Identified and credentlalled (this sub-process draws principally on the data-file, PPRODUCT).

The primary product order matching sub-process locates the best possible counterpartydes) for the ordering party's transaction 30 according to the application promoter-spec1f1ed"matchlng rules" embodied 1n the APP; 1t does this utilizing three component sub-processes, termed: short-listing of potential-counterparties, Individual potential-counterparty "pricing" calculations, and counterparty selection.

The "short-listing of potential counterparties" sub-process component establishes a list of potential counterparties (1f any) willing to offer the product sought by the ordering party, upon their receipt from the ordering party of a consideration they deem to be appropriate (this sub-process draws principally on the data-file, PDEAL LIST).

The individual potential-counterparties pricing calculations sub-process component utilises the above-described pricing parameters pre-specified by each short-listed potential counterparty to calculate the "bid" each of them is prepared to make on the orderlng-party's product order (or part thereof), and to add these to the potential 10 counterparties short-list file (this sub-process draws principally on the data-file, PSEL PRICE).

The "counterparty selection" sub-process component extracts from the above-described "potential-counterparties short-list" file the best possible counterparty(ies) for the ordering party's transaction, 15 according to the application promoter-specified "matching rules" embodied in the APP, taking into account whatever matching constraints all applicable APP stakeholders may have prespeclfied. This selection being made, and the price bid being within the allowable limits specified by the ordering party, and there being no requirements for 20 manual-approval Intervention by any relevant stakeholder, a matched order 1s deemed to be In existence (this sub-process draws principally on the data-file, PSEL LIMIT).

The matched order confirmation sub-process effectively secures, automatically, the positive agreement of all affected stakeholders to 25 the contract, Including confirmation of the product ordering party's ability to Immediately pay (or be granted counterparty credit, or ordering party guarantor credit, for) the required contract consideration (and possible other applicable fees). Automatic approvals of contracts are made by the CONTRACT APP electronically 30 transferring resources recorded 1n the ordering party's applicable consideration/entitlement transfer entity account to the account of the applicable counterparty (See Appendix H for a description of the consideration/entitlement "payment" process). In turn, automatic updates of the counterparty's matching constraints maintained in the 35 file PSEL LIMIT are made. » Upon completion of the above-described processing steps: unmatched order transactions are written to the file, PORD QUEUE, for subsequent match attempts; matched and confirmed order transactions are confirmed to the relevant CONTRACT APP stakeholders (this process 5 drawing principally on the data-file, ADMIN) and are written to the file PORD CONF for subsequent "back-office" processing; and relevant CONTRACT APP stakeholders are notified of rejected orders (again,this process drawing principally on the data-file, ADMIN), records of this being written to the file PORD REJ for subsequent "back-office" 10 processing. A copy of all processing outputs is written to the file, HISTORY.

Process 3 Process 3 handles the receipt and processing of "secondary" risk 15 management contract transactions (this term being defined 1n Appendix D). Like "primary" risk management contracts, "secondary" risk management contracts are of multiple types (detailed 1n Appendix B); various sub-processes of Process 3 handle the receipt and processing of all possible types of these transactions. Including product order 20 processing, product price indications, and withdrawals of existing product orders.

"Secondary product orders" constitute the core "secondary" risk management contract transaction type (Fig. 20 provides a summary flow chart of the processing of this transaction type). 25 "Secondary" product orders incorporate the following key Items of Information: potential acquiring party identification Information; the pre-established Order ID reference to the sought-after primary contract; the potential acquiring party's interest or otherwise 1n being granted credit by offering parties for the yet-to-be-determined 30 contract acquisition amount; the acquiring party's interest or otherwise 1n availing themselves of the possible netting and other features of the APP concerned; the acquisition "price" range within which the potential acquiring party 1s prepared to "pay" for the contract they have specified; other dimensions of the potential 35 acquiring1 party's needs; and the consideration/entitlement transfer entity accounts from which/to which they wish to have relevant PCT / AU93/00250 "payments" made/received. The above-described information is, upon receipt, written to - and subsequently processed from - the file SORD NEW.

Three sub-processes are involved in processing secondary product 5 orders -order authorisation, order matching, and matched order confirmation. In the case of the anticipated most typical form of order, termed a "normal-automatic" secondary product order these sub-processes function as follows: The secondary product order authorisation sub-process verifies 10 that all orders contain data appropriate to the contract sought and that each potential acquiring party is accurately identified and credentialled (this sub-process draws principally on the data-file, SPRODUCT).

The secondary product order matching sub-process locates 15 sought-after contract records and, based on the contents of these records, determines whether a "sale" of the position of the specified stakeholder 1n the contract to the potential acquiring party 1s possible - 1n particular, whether the acquisition "price" range within which the potential acquiring party has specified 1t is prepared to 20 "pay" for the position of the specified current stakeholder is equal to, or 1n excess of, the "allowable sale price" figure prespeclfied by the applicable contract stakeholder. If a contract "sale" Is found to be possible, and there being no requirements for manual-approval intervention by any relevant stakeholder, a "match" 1s deemed to have 25 occurred.

The secondary product matched order confirmation sub-process effectively secures, automatically, the positive agreement of all affected stakeholders to the contract position "sale", Including confirmation of the contract acquiring party's ability to immediately 30 pay (or be granted current stakeholder credit, or acquiring party guarantor credit, for) the required "sale price" consideration (and possible other applicable fees). Automatic approvals of such "sales" are made by the CONTRACT APP electronically transferring resources recorded 1n the acquiring party's applicable consideration/entitlement 35 transfer entity account to the account of the applicable current contract stakeholder.

Upon completion of the above-described processing steps: unmatched order transactions are written to the file, SORD QUEUE, for subsequent match attempts; matched and confirmed order transactions are confirmed to the relevant CONTRACT APP stakeholders (this process 5 drawing principally on the data-file, ADMIN), required records being written to the file SORD CONF for further "back-office" processing as required; and rejected order transactions are similarly notified to the relevant CONTRACT APP stakeholders (again, this process drawing principally on the data-file, ADMIN), required records being written 10 to the file SORD REJ for further"back-off1ce" processing. A copy of all processing outputs 1s written to the file, HISTORY.

Process 4 Process 4 handles the receipt and processing of 15 "derivative-primary" risk management contract transactions (this term being defined 1n Appendix D). Like "primary" risk management contracts, "derivative-primary" risk management contracts are of multiple types (detailed in Appendix B); various sub-processes of Process 4 handle the receipt and processing of all possible types of 20 these transactions, Including product order processing, product price Indications, and existing product order withdrawals.

"Product option orders" 1s one Illustrative "derivative-primary" risk management contract transaction type (Fig. 21 provides a summary flow chart of the processing of this transaction type). 25 "Derivative-primary" product option orders Incorporate the following key Items of Information (detailed 1n Appendix B): ordering party identification Information; CONTRACT APP application and product Identification Information; "other stakeholder Involvement" information; the ordering party's desired form of product 30 specification (directly Input as entitlement coordinates or as mathematical functlon(s)); when the order specification is by way of a single-dimensional mathematical function, the parameters of such a function (which can Include: the term "X", the term "Alpha (X)", the term "Beta (X)", the term "Gamma (X-l)"; the contract consideration 35 and entitlement "denomination type", "currency (If applicable)" and "national currency (if applicable)"; the ordering party's Interest or otherwise In being granted credit by potential counterparties for the yet-to-be-determined contract option consideration amount; the ordering party's interest or otherwise in availing themselves of the possible netting and col lateral 1sation features of the APP concerned; 5 the consideration "price" range within which the ordering party 1s prepared to "pay" for their defined product option; miscellaneous other dimensions of the ordering party's needs, and the consideration/entitlement transfer entity accounts from which/to which they wish to have relevant "payments" made/received). Upon Its 10 receipt, all of this information is written to — and subsequently processed from - the file DPORD NEW.

Three sub-processes are involved in processing derivative-primary product orders - order authorisation, order matching, and matched order confirmation . In the case of the most 15 likely form of the above-mentioned illustrative option order, termed a "normal-automatic" derivative-primary product option order (see Appendix 5 for details) these sub-processes function as follows: The primary product option order authorisation sub-process verifies that all orders contain data appropriate to the product 20 option being sought and that each ordering party 1s accurately identified and credentlalled (this sub-process draws principally on the data-file, DPPRODUCT).

The primary product option order matching sub-process locates the best possible counterpartydes) for the ordering party's 25 transaction according to the application promoter-specified "matching rules" embodied in the APP; 1t does this utilizing three component sub-processes, termed: short-listing of potential option-counterparties, Individual potential option-counterparty "pricing" calculations, and option-counterparty selection. 30 The "short-11 sting of potential option-counterparties" sub-process component establishes a 11st of potential option-counterparties Of any) willing to offer the product option sought by the ordering party, upon their receipt from the ordering party of an option consideration they deem to be appropriate (this 35 sub-process draws principally on the data-file, DPDEWL LIST).

PCT / AU93/00250 The "Individual potential option-counterparties pricing calculations" sub-process component utilises the above-described pricing parameters prespecified by each short-listed potential option-counterparty to calculate the "bid" each of them is prepared to 5 make on the ordering-party's product option order (or part thereof), and to add these to the potential option-counterparties short-list file (this sub-process draws principally on the data-file, DPSEL PRICE).

The "option-counterparty selection" sub-process component 10 extracts from the above-described "potential option-counterparties short-list" file.the best possible counterpartydes) for the ordering party's transaction, according to the application promoter-specified "matching rules" embodied in the APP, taking into account whatever matching constraints all applicable APP stakeholders may have 15 prespeclfied. This selection being made, and the price bid being within the allowable limits specified by the ordering party, and there being no requirements for manual-approval intervention by any relevant stakeholder, a matched option order is deemed to be in existence (this sub-process draws principally on the data-file, DPSEL LIMIT). 20 The matched option order confirmation sub-process effectively secures, automatically, the positive agreement of all affected stakeholders to the options contract, including confirmation of the product-option-ordering party's ability to Immediately pay (or be granted counterparty credit, or ordering party guarantor credit, for) 25 the required option product consideration (and possible other applicable fees). Automatic approvals of contracts are made by the CONTRACT APP electronically transferring resources recorded 1n the ordering party's applicable consideration/entitlement transfer entity account to the account of the applicable counterparty (this process 30 being detailed 1n Appendix H). In turn, automatic updates of the option-counterparty's matching constraints maintained 1n the file DPSEL LIMIT are made.

Upon completion of the above-described processing steps: unmatched option-order transactions are written to the file, DPORD 35 QUEUE,vfor subsequent match attempts; matched and confirmed option-order transactions are confirmed to the relevant CONTRACT APP stakeholders (this process drawing principally on the data-file, ADMIN) and are written to the reference file DP MSTR, and the file DPORD CONF for subsequent "back-office" processing; and relevant CONTRACT APP stakeholders are notified of rejected orders (again, this 5 process drawing principally on the data-file, ADMIN), records of this being written to the file DPORD REJ for subsequent "back-office" processing. A copy of all processing outputs is written to the file, HISTORY.

If/when an option-holder wishes to exercise its option over a 10 pre-established contract, it does so by appropriately notifying the CONTRACT APP which, In turn, retrieves the contract record from DPMSTR, effects the necessary additional consideration payments, and writes a new record to PORD CONF for subsequent back office processing. As described above, the appropriate HISTORY and other 15 files are updated in this process.

Process 5 Process 5 handles the receipt and processing of "derivative-secondary" risk management contract transactions (this 20 term being defined in Appendix D). Like "secondary" risk management contracts, "derivative-secondary" risk management contracts are of multiple types (detailed in Appendix B); various sub-processes of Process 5 handle the receipt and processing of all possible types of these transactions, Including product order processing, product price 25 Indications, and withdrawals of existing product orders.

"Product option orders" is an illustrative "derivative-secondary" risk management contract transaction type <F1g. 22 provides a summary flow chart of the processing of this transaction type).

"Derivative-secondary" product option orders Incorporate the following key Items of information: potential acquiring party identification Information; the pre-established Order ID reference to the sought-after primary contract (in relation to which an option 1s to be purchased or sold); the potential acquiring party's interest or 35 otherwise In being granted credit by offering parties for the yet-to-be-determlned option contract acquisition amount; the acquiring party's interest or otherwise in availing itself of the possible netting and other features of the APP concerned; the acquisition "price" range within which the potential acquiring party is prepared to "pay" for the contract option they have specified; other dimensions 5 of the potential acquiring party's needs; and the consideration/entitlement transfer entity accounts from which/to which they wish to have relevant "payments" made/received. The above-described information 1s, upon receipt, written to - and subsequently processed from - the file DSORD NEW. 10 The subprocesses involved in the processing of derivative-secondary product option orders are essentially a combination of the processes described above in the case of secondary product orders (Process 3) and derivative-primary product option orders (Process 4). At the completion of the matching process, matched 15 orders are written to the reference file DSMSTR and the file DSORD CONF for subsequent back office processing.

If/when an option holder wishes to exercise its option over a pre-established contract, It does so by appropriately notifying the CONTRACT APP which, in turn, retrieves the contract record from 20 DSMSTR, effects the necessary additional consideration payments, and writes a new record to SORD CONF for subsequent back office processing. As described above, the appropriate HISTORY and other files are updated in this process.

Process 6 Process 6 handles the "back office" management of "matched/confirmed" primary, secondary, derivative-primary, and derivative-secondary risk management contract transactions and transactions handled by Processes 7-9. The process incorporates 30 multiple sub-processes, collectively accessing multiple data files (Fig. 23): primary risk management contract back office processing; secondary risk management contract back office processing; derivative-primary risk management contract back office processing; derivative-secondary risk management contract back office processing; 35 "Process 7" transactions back office processing; "Process 8" transactions back office processing; and "Process 9" transactions back office processing.

In relation to the back-off1ce management of confirmed/matched primary risk management contracts - a number of sub-processes are 5 involved, including: Receipt of the previous operating day's "matured-contract actual product event value" sub-process; "Start-of-day PAYACC managemant" sub-process; Contract maturity management sub-process; Confirmed contract processing sub-process; Information compilation and dt.tribution sub-process; Information 10 extraction from primary orders sub-process; Contract valuation sub-process; Contract col lateralisation payments sub-process; System Access and usage fee determination and payments sub-process; Bilateral obligations netting sub-process; Multilateral obligations netting sub-process; Bilateral payments netting sub-process; Multilateral 15 payments netting sub-process; and "end-of-day PAYACC management" sub-process.

Receipt of the previous operating day's "matured-contract actual product event value" details. This sub-process Is flowcharted 1n Fig. 24; 1t Involves the applicable CONTRACT APP receiving 20 "matured-contract actual product event value" details from the relevant product sponsors (external to INVENTCO).The primary data-file, MAT PROD VALUES, 1s updated with this Information. The support data-files, ADMIN, HISTORY, and INFO are similarly updated with applicable Information.

"Start-of-day" PAYACC management. This sub-process is flowcharted in Fig. 25; it Involves the applicable CONTRACT APP receiving consideration/entitlement "actual account" opening-balances from participating consideration/entitlement transfer entitles (external to INVENTCO) (see Process 7 for details). The primary 30 data-files, PAYACC SHADOW and PAYACC FINAL are updated with this information. The support data-files, HISTORY, INFO and ADMIN, are similarly updated with applicable Information.

Contract maturity management. This subprocess Is flowcharted 1n F1g. 26; 1t Involves the applicable CONTRACT APP determining and 35 giving effect to primary and related entitlenient-transfers to/from applicable CONTRACT APP stakeholders, applicable other INVENTCO stakeholders, where such transfers are principally reflected in entries to the data-file, PAYACC SHADOW. CONTRACT APP determines and gives effect to these transfers, principally by drawing upon product/contract Information maintained in the data files, INTREG, MAT 5 PROD VALUES, COLLAT, CREDIT MGMT, BILAT OBLIG NET, and MULTILAT OBLIG NET. These data-files are appropriately updated in the process as are the support data-files, ADMIN, HISTORY, TAX/SUB, PAYACC SHADOW and INFO.

Confirmed contract processing. This sub-process, flowcharted 1n 10 Fig. 27, operates continually throughout each operating day. Details of new matched/confirmed contracts are read from the file PORD CONF and are then time-stamped and written to the file INTREG as two records - one record pertaining to the contract ordering party and the other to the contract counterparty. The support data files, INFO, 15 ADMIN, and HISTORY are appropriately updated in the process.

Information compilation and distribution. This sub-process, flowcharted In F1g. 28, operates continually (beyond a defined operating day ), drawing on the data-file INFO. As already described, INFO is updated continually as CONTRACT APP and other INVENTCO events 20 occur, including pertinent AXSCO message information written 1n the first Instance to HISTORY. All relevant INVENTCO stakeholders have access to preauthorised parts of INFO.

Information extraction from primary orders. This sub-process, flowcharted 1n Fig. 29, 1s effected after the completion of the 25 defined operating day. Essentially, 1t Involves the single task of processing the data-file, HISTORY, to yield pertinent Information for the data-file INFO. One of the most important Items of Information drawn from HISTORY Is (confidential) Information on all of the prior day's potential counterparty consideration bid parameters, 1n 30 particular the data Items termed "assessed probabilities of occurrence". This information yields "market" Information for the subsequent contract valuation sub-process.

Contract valuation. This sub-process, flowcharted in Fig. 30, draws principally upon the above-described "markets" Information 35 previously written to INFO. Pertinent data from this file is "applied against" all outstanding contracts maintained In INTREG, thereby yielding updated "future product value (FPV)", "expected value" and "distribution" value information for all contracts and, from this, revaluations of all future entitlement "expected values" and "distribution" values. All these revaluation figures are maintained in 5 INTREG with applicable information also being written to INFO and HISTORY.

Contract collateralisatlon payments. This sub-process, flowcharted in Fig. 31, draws principally on the data-file INTREG. Following the contract valuation process, this col lateral 1satlon 10 process involves relevant INTREG records being read and, depending (amongst other things) on the precalculated "present value" of the expected future entitlement associated with each relevant contract, a calculated portion of the present value of the expected future consideration amount Is debited or credited to the PAYACC SHADOW file 15 of the applicable collateral 1sation trustee entity, and the product ordering party and/or counterparty as Is applicable.

Generally, 1f the most recent precalculated "present value" of the expected future entitlement associated with each relevant contract indicates a negative contract value, and if this negative value 20 exceeds the prior contract valuation figure, the applicable entity's trust account 1s credited with the funds difference, with the entity's own consideration/entitlement transfer entity account being debited correspondingly. If this negative value does not exceed the prior contract valuation figure, the applicable entity's trust account 1s 25 debited with the funds difference, with the entity's own consideration/entitlement transfer entity account being credited correspondingly. On the other hand, if the most recent precalculated "present value" of the expected future entitlement associated with each relevant contract Indicates a positive contract value, the only 30 col lateral!satlon payment adjustment called for is one In which all funds (If any) 1n the applicable entity's trust account are transferred to the entity's own consideration/entitlement transfer entity account. In each of the above-described cases, a record of all entries effected is written to the data-file, COLLAT, and a subset of 35 this Information 1s written to the data-files HISTORY and INFO.

System Access and usage fee determination and payments. This subprocess, flowcharted 1n Fig. 32, deals with the determination and payment of system access and usage fees (as distinct from contract maturity date fee payments). The function draws principally on the 5 data-files ADMIN, and HISTORY. Fee payment parameters are maintained in data-file ADMIN. These parameters are applied against the day's new records already written to HISTORY. Debits and credits for fees so determined are written to PAYACC SHADOW with summary Information written to INFO and HISTORY.

Bilateral obligations netting. This subprocess, flowcharted In Fig. 33, effectively maintains an up-to-date matrix of the present values of expected future entitlement (and other) obligations between pairs of participating ordering parties and counterparties (as well as other participating CONTRACT APP and INVENTCO stakeholders), 15 continually adjusted on the basis of required current consideration, entitlement and other payments/receipts as they occur. As required, the function updates the above-described matrix 1n two stages. First, with the most recent contract revaluation figures contained within INTREG. And second, with the end-of-day payment/receipt amounts 20 contained within PAYACC SHADOW. Consideration/entitlement transfer entity transfers from/to applicable entitles are determined (according to the application-promoter specified parameters for so doing) on the basis of whether or not any/all of the adjusted bilateral present value figures are in excess of their allowable limits. These entries 25 are written to PAYACC SHADOW, with the data-files BILAT OBLIG NET, INTREG, HISTORY, and INFO being subsequently updated.

Multilateral obligations netting. This subprocess, flowcharted In Fig. 34, is essentially the same as the bilateral netting function except that a specified "clearing/trustee" entity 1s effectively 30 Interposed between all bilateral counterparties and, as such, netted obligations are only between the specified "clearing house/trustee" entity and each participating entity.

Bilateral payments netting. This subprocess, flowcharted in F1g. 35, Is Independent of the above-described bilateral and 35 multilateral obligations netting subprocesses. The subprocess operates by producing a matrix of bilaterally netted payments/receipts based on WO 94/2S496" records contained In the data-file, PAYACC SHADOW. Single netted payment/receipt figures are then rewritten to PAYACC SHADOW, with the data-files BILAT PYMTS NET, ADMIN, HISTORY and INFO being subsequently updated.

Multilateral payments netting. Like bilateral payments netting, this subprocess, flowcharted 1n Fig. 36*, 1s Independent of the above-described bilateral and multilateral obligations netting subprocesses. The subprocess operates by producing a matrix of bilaterally netted payments/receipts to/from the applicable "clearing 10 house/trustee" entity based on records contained In the data-file, PAYACC SHADOW. Single netted payment/receipt figures (to/from the "clearing house/trustee" entity) are then rewritten to PAYACC SHADOW, with the data-files MULTILAT PYMTS NET, ADMIN, HISTORY and INFO being subsequently updated.

"End-of-day" PAYACC management. This subprocess, flowcharted 1n Fig. 37, involves a three-stage process. First, the preparation of Inter-consideration/entitlement transfer entity "balancing" transactions. Second, the transfer of the final contents of the PAYACC SHADOW data-file to the data-file, PAYACC FINAL. And third, the 20 electronic transmission of the contents of PAYACC FINAL to the applicable consideration/entitlement transfer entitles (external to INVENTCO). In turn, the subsidiary data-files, ADMIN, HISTORY, and INFO are updated.

Process 7 Process 7 handles non-CONTRACT APP-related obligation transfers between applicable INVENTCO stakeholders, that 1s, the transfer of ownership title over "assets" registered by INVENTCO - typically matched/confirmed contracts (recorded as CONTRACT APP INTREG records) 30 and consideration/entitlement transfer entity resources (recorded as PAYACC records). Both of the above-mentioned items have value to their holder. This process enables holders of these Items to assign or lend any portion of their holdings to others at thslr will through initiating the appropriate transactions a;s NCAROT TRANS. The process 35 accesses a relatively small number of data files (See F1g. 38). NCAROT TRANS received result in appropriate updates to the primary PCT / AU93/00250 data-files, PAYACC SHADOW and INTREG. In turn, the subsidiary data files, HISTORY, ADMIN and INFO are updated.

Process 8 Process 8 (flowcharted In Fig. 39) handles CONTRACT APP (and 5 other INVENTCO) stakeholder shared-access to specialist systems to assist them decide how best to interface with one or more aspects of INVENTCO. In the case of CONTRACT APP stakeholders, the most likely users of this process, one collection of such specialist systems are termed "decision support systems". The purpose of these systems is to 10 guide a user-stakeholder as to how it should react to/deal with the continually changing circumstances within the CONTRACT APP with which they are dealing. Different clusters of systems are applicable for different CONTRACT APP stakeholders. These systems involve a hierarchy of potentially any number of value-added components. 15 An example of one such system, useful to primary product ordering parties, 1s a system which helps an ordering party determine which of Its prespeclfied, but as yet un-matched, orders 1t should withdraw and which of Its potential new product orders it should submit. This system Is in the form of a "utility optimization" 20 mechanism which seeks to Identify the best possible composition of outstanding orders (and thus, which existing, unmatched orders should be withdrawn and which new orders should be submitted) based on two things. First, an objective function which seeks to minimize the difference between a weighted sum of actual and desired values of a 25 series of attributes (involving single or multiple products, covering the ordering party's "real business exposure" to each product, the ordering party's portfolio of contracts which have been "matched" but are not yet confirmed, orders which have been submitted but not yet matched, and potential yet-to-be-submitted orders (collectively termed 30 the "buyer's objective portfolio"), these attributes Including, amongst other things: the "expected value" of the objective portfolio; the "standard deviation" of the objective portfolio; the "incremental cash outflow" attribute of the objective portfolio; the "maximum absolute loss" attribute of the objective portfolio; the "expected 35 loss" attribute of the objective portfolio; the "implied minimum return on investment" of the objective portfolio; and the "implied expected return on investment" of the objective portfolio. And second, a series of constraints specifying, amongst other things: the required "minimum values" of each objective function attribute; and required minimum product-shares In the ordering party's overall product 5 portfolio. The mathematical form of this "optimization" could take any of a number of alternative forms.

An optimization mechanism similar to the one described above can also aid potential counterparties in defining their pricing parameters for application against incoming product orders.

Effectively, systems of the above-described type are collectively maintained as a software "library" within the applicable CONTRACT APP (although they may also be loaned by VIRPRO-authorlsed entities independent of INVENTCO and/or acquired by VIRPRO-authorlsed parties whether they are INVENTCO stakeholders or not). CONTRACT APP 15 (and other INVENTCO) stakeholder requests to make use of software within this library are received by way of records in the file, S5A TRANS. These requests result in the appropriate records 1n the file SSA being accessed and made available for use via AXSCO and the applicable entity's authorised electronic link to INVENTCO. 20 Appropriate records of the utilization of SSA records are written to the data-files HISTORY, ADMIN and INFO.

Process 9 Process 9 (flowcharted 1n F1g. 40) handles CONTRACT APP (and 25 other INVENTCO) stakeholder shared-access to a range of INVENTCO-faciHtated value added services. These services can include: accounting, reconciliation, and Information services; value added Information reseller services; financial services of multiple types; and data processing and telecommunications services. Effectively, 30 software relating to these services Is maintained as a software "library" within the applicable CONTRACT APP (although they may also be loaned by VIRPRO-authorlsed entities Independent of INVENTCO and/or acquired by VIRPRO-authorlsed parties whether they are INVENTCO stakeholders or not ). CONTRACT APP (and other INVENTCO) stakeholder 35 requests to make use of software within this library are received by way of records 1n the file, VAS TRANS. These requests result in the appropriate records 1n the file VAS being accessed and made available for use via AXSCO and the applicable entity's authorised electronic link with INVENTCO. Appropriate records of the utilization of VAS records are written to the data-files HISTORY, ADMIN and INFO. -97-APPENDIX D RISK MANAGEMENT CONTRACTS Risk, management contracts 1s a term used to refer to one type of contractual obligation which can be, but does not need to be, traded/exchanged/transferred, and subsequently processed and settled, using an INVENTCO system. Risk management contracts consist of "primary" risk management contracts; "secondary" risk management contracts; 10 "derivative-primary" risk management contracts; and "derivative-secondary" risk management contracts.

"Primary" risk management contracts can be "simple" and "complex" in nature ("simple" contracts being derivatives of "complex" contracts).

A "simple" primary risk management contract 1s a tradeable or 15 untradeable contract conveying an obligation on an entity, upon that entity being granted a consideration by another entity (or accepting a pledge to be granted a consideration by the other entity), to make an entitlement to that other entity depending on the value of a defined phenomenon, determined at a defined time in the future. 20 A "complex" primary risk management contract is a tradeable or untradeable contract conveying an obligation on either or both of two entitles, upon one entity [usually] being granted a consideration by the otner entity (or accepting a pledge to be granted a consideration by the other entity), to make an entitlement to pay/receive an entitlement from 25 one another, depending on the value of a defined phenomenon, determined at a defined time in the future. A "complex" contract may, In turn, be "basic" or "advanced" in nature: a "complex-basic" contract being one that does not involve ordering party and/or matched order counterparty "collaterallsatlon payments" to a third-party trustee or clearing entity 30 during the life of a contract; and a "complex-advanced" contract being one that does Involve ordering party and/or matched order counterparty "collateralisation payments" to a third-party trustee or clearing entity during the life of a contract.

"Secondary" risk management contracts are pre-existing "primary" 35 risk management contracts offered for trade (Individually or as a "WO 94/28496 PCT / AU93/00250 portfollo) by a "rlsk-counterparty" stakeholder to the underlying contract.

"Derivative-primary" risk management contracts are options contracts, or futures contracts, or forward contracts, or forward rate 5 agreements, or swaps, or like financial instruments based on specified, but yet-to-be-established, primary risk management contracts.

"Derivative-secondary" risk management contracts are options contracts, or futures contracts, or forward contracts, or forward rate agreements, or swaps, or like financial Instruments based on 10 pre-existing primary risk management contracts (which may have been traded since they were first established), Including Instruments based on: specified, but yet-to-be established, secondary risk management contracts; and the Intended tertiary trading/exchange/transfer of specified, established, secondary risk management contracts.

SAMPLE PRODUCT ORDER/CONTRACT TIME LINE' EXAMPLE I: MICRO PROCESSORS CASE APPLICATION SPECIFICATION AS AT 92.02.10.17.00.00.00 P«rt A Application ID: 100 Applicable Product ID'S 1200-1230 Application Access Limitations Ampliation Promoter: Deadatahe Preferred/preferential dealing? Unavailable Primary Application Un: Dcfect liability afiagi hi H Pre or Poit Tax Matching? Pretax Contract Ordering Parties: Feasible Counterparty Ncte Single counterparty Tax deduction/subsidy at source? Not Applicable Nil Public/private use?: Public Depec of Trading transparency: Nil favfjiwMm enmm. niwtillw, • Computer to computer Secondary trading allowed? No Retul/WhobakUK Whokrale Derivative trading allowed? No Pricing and Malting Minimis* consideration Deferred Order Submissions possible? Yes Proetss : payment under n EWCE P«U(1 Matches possible? Yes Conlnci Counterparties- reguoe Settlement lam: Nil - considewions Immediate • entitlements Immediate Contract Revaluation Frequency Daly Manual Approvals possible? No Ordering Parly consideration credit? No Ordering Pwtjes allowed mgHive Collateral isslion Piyaenli? Counetjarty Gusrsntorc: contract payofis 7 No • Counterparties No Nil Application Acccaa Lrmitalkim: Nil • Ordering sanies No Bilateral Obligations Netting? No Bilateral Payments Netting? No Others: Multilateral Obligations Netting? No Nil Muhilstenl Payments Netting? No Netting Details (tf applicable) Callatrralhatlon Details(If applicable) Valuation DrUth Consideration Credit Details Applicable Discowl Rale: Not Applicable Obligation Netting tri®tr. Not Applicable Mm required settlement? Not AmliaMf Trustee: Not Applicable Applicable Discount Rate: % pa.

Ordering Party Gucanlor. Not Applicable Orderta* Party Considerstl«n-Credit Options 1 /.

Ker- /1 Counterparty: Counterparty provided? — Participating Basis: — Ord. Party-gusnmtor protected 'pMlictprting 1. Interest rate (% pj.) • Non*pirtkipaImg 2. Pifticipetion nte (%) — Unprotected - Non-P«nicip»tir% basis: - OnL Party-guarantor protected • Pvtictptfing ' Order Picty-gu«rintof - Ncn-p«rticjpet ing (.Interest nte (Kp.i) — Unprotected 2. Pgtieipelkm rate (%) Ordering Party guarantor provided? - Participating baiis: - NotHMrtkipattnc batii: PRODUCT SPECIFICATION as at 9102.10.17.00.00.00 Iproduct id: mo Product Sununarr * Application ID; 100 Praduct Sponsor: Demdata Inc Product Specification Market: Factory Output Quality Indices Sub-ourtct: 64-bil Microprocessor Fault Tolerance Index Consideration denom. type : Money Mufcdtype: Spot Entitlement damn, type ; Exclusive Production WunnUfXPWt) EiUbfahraoit dale/time: 92.02.10.17.00.00.00 Currency type (ifippBc.) : Com Bnk Dep.

Maturity date/time: 93.ozio.i7.oo.oaoo National currency type (if applic.): AUD Minimum Product Definition Value: 0.00 Maximum Product Definition Value: 100 Product Step Value: 02 Product DcUOs ConcEtional Payoff Dimensions ID : One ActuaVPerceivcd Maid Identifier: Actual Elemental/compound Market Phenomena data Identifier: Fault Toterancc Index Specific Phenomenon: Dcpt of Defence Reject Summaries Market Identifier: Single Market EtenwntiVcompound tub-market Identifier — Sub-market Phenomenon Class Identifier: - Future Period Date/time Identifier: A! Contract Maturity due/lime Event Type Identifier: Spot value Minimum Product Definition Value: 0 Maximum Product Definition Value: 100 Product Step Value: 02 Product Eatabfiihmenl Date/time: 92.02.10.17.00.00.00 Product Maturity Due/time: 95.02.10.17.00.00.00 Consideration denomination of Product: Money.

Currency type denomination of Product (if applic) Com Bnk Dep.

National currency type denomination Entitlement denom. of Product: Exclusive Production Warrants (XPWs) of Product (if applic.) AUD 9 E4 PRIMARY ORDER SPECIFICATION AS AT: 93.07.01.14.25.30.00 Ordering Parly: Denisoos Own reference: 5096263 | Application ID : 100 Product: (ID t 1210 ) Application Prcmater Demdata Ino Product Sponsar Demdata Inc C«uaterparty-|uarantar — Regulator Dcpt of Dcfcncc Market Factory Output Quality Indioes Sub-Market 64B.M.F.T.Index Market Typ* Spot EstabbdatcAIm* 92.02.10.17.00.00.00 Maturity daU/tlme 95.0Z10.17.00.00.00 -X-Value: S X Range Value Alpha (X) Beta (X) I 2 3 4 6 0 22 . 48 94 too 0 21.040 21.040 161.900 161.900 C a m m a 1 6 1 2 V . 3 . 3 4 11 CwiMmllon/ Eattl femes! DfoomJuttea C«a«lderaUMi Entitlement Consideration type Entitlement type Currency type (If applic.) National Curr. type (If applic.) Mas. Consld. Amount Money XPWs Com Dnk Dcp AUD N.A Money N.A Com Dnk Dcp AUD 32,000 N.A XPWs Com Bnk Dcp AUD As below Pricing and Matching Process Minimise consideration payment under «n EV/CE regime SPECIAL DEAL TYPE: Not Applicable ORDER SUPPORT DETAILS Computer-to-conipuler No romwuHiftiljflffl wwtiiw ; Consideration Credit Knight 7 Deiircd Fonnof Consideration Credit (if »ppl.) Not Applicable Counterparty Collateral italion payments required 7 No Preparedness to make 'own' oollatcraliiatioa payments (if applieable)7 Applicable Marginal Tax rate (if applicable)? • Consideration: Not Applicable • Entitlement!: Not Applicable Netting System Participation 7 - Bilateral Obligations netting 7 (if applio.) No -Bilateral Payments netting 7 (if applic.) No - Multilateral Obligations netting 7 (if applic.) No - Multilateral Payments netting 7 (if applic.) No Not Applicable Partial Matches desired 7 No Manual Approval of Matehcs desired 7 No Desired degree of trading transparency (if applicable) * Not Applicable Applicable ConsicL/Enlitlcmenl Transfer Entity Account details: ABC Banking Corp Operating A/c 1 -t-S0?326-«l7634-i (and 2) Desired date/time of Order Submission: Immediate Desired Order intention period: 00.00.01.00.00.00 Desired Max. time for counterparty manual order approval (if applic.): Not Applicable Preferred/Preferential Dealing: Not Applicable Unacceptable Counterparties and Other Stakeholders Not Applicable ORDER SPECIFICATION PRICING By: Demdata Jnc AS AT 93.07.01. H.26.40.00 Consideration fcxchangr Rates (If apnllc) : Cfli .

□ COUNTERPARTY PRICING SPECIFICATION Application ID: Product ID: 100 1210 CuilciKy Nnt. Cufi....

Defined Clrcanta acta ID 1 Coaualnloii Rate II Discount Rate Entitlement Exchange 1 14 1 1.10% M it.... _ 9.90 lip j.

Rates: (If applic) :C/E ... ..

... Currency - Nal Curt - | Feasible Oroas OP/CP Net Component Implied Assessed Net Net Contingent Maximum Pro&xt Contingent C/Credii Conlmgent Product Conlingcnl Probabilities Contingent Negative Unlilloncnt Absolute Definition Adjust Entitlement Prices Entitlement of FntiUcmcnt (Valuation) Negative Entitlement Values Amounts Amounts Amounts Occurrcnce (Valuation) Amis.

Amounts Amount 0-20 0.000 0.00 0.000 0149511 0000 0.195375 0.000 0.000 22-48 (21.040) aoo (21.040) 0666056 (14.014) 0.620536 (13056) (13056) 50 (27.160) 0.00 (27.160) 0.020458 (0555) 0.008358 (0227) (0227) 52 (33.290) 0.00 (33.290) 0.020396 (0678) 0.008295 (0276) (0 276) 54 (39.410) aoo (39.410) 0020321 (0801) 0.008228 (0324) (0.324) « (45.540) 0.00 (45.540) 0020258 (0.923) 0008158 (0372) (0.372) 58 (51.660) aoo (51.660) 0.020180 (1.043) 0.008084 (0418) (0.418) 60 (57.790) aoo (57,790) 0.008007 (0.463) 0.008007 (0.463) (0.463) 62 (63.910) 0.00 (63.910) tt007927 (0.507) 0.007927 (O 507) (0 507) 64 (70.030) 0.00 (70.030) 0.007844 (0.549) 0007844 (0.549) (0549) 66 (76.160) aoo (76.160) 0.007758 (0.591) 0.007758 (0.591) (0.591) 68 (82280) 0.00 (82 280) 0007669 (0631 0007669 (0 631) (0 631) 70 (88.410) aoo (88.410) 0.007578 (0670) 0.007578 (0670) (0.670) 72 (94.530) aoo <94.530) 0007484 (0 707) 0.007484 (0 707) (0 707) 74 (100.660) 000 (100.660) 0.007387 (0744) 0007387 (0744) (0.744) 76 (106.780) 0.00 (106.780) 0007288 (0 778) 0.007288 (0.778) (0.778) 78 (111910) 0.00 (111910) 0 007187 (0 811) 0.007187 (0111) (0.811} 80 (119.030) 000 (119.030) 0.007084 (0 843) 0.007084 (0.843) (0 843) 82 (125.130) 0.00 (125.150) 0006979 (O 873) 0006979 (0.873) (0 873) 84 (131.210) 0.00 (131.280) 0 006872 (0902) 0.006872 (0902) (0.902) 86 (137.400) 0.00 (137.400) 0.006703 (0929) 0006763 (0.929) (0.929) 88 (143.530) 0.00 (143.530) 0006653 (0.955) 0.006653 (0955) (0.955) 90 (149.650) 0.00 (149.650) 0 006542 (0979) 0006542 (0.979) (0979) 92 (155.710) 0.00 (155.710) 0.006429 (1002) 0.006429 (1.002) (1002) 94-100 (161.900) 0.00 (161.900) 0019515 (3.159) 0.019515 (3.159) (3.159) <101.900) 1.06023 (34.110) 1.0000 (30.770) (30.770) 1161.900) i Applle. Enllllc. Exchange Rain (- ) I OE Curacy Bi>< contract bid price On Product Dftioa. tcrau) Net Present Value (at 9.90 %p.a. „) + Flat Coauilsslon (_ I.I0K _) Contract Bid Prict (la Product Dcnoa. tcrau) x Applk. Coniid. Exctisngr Rates ( ) (_ OE Contract Bid Prica (la OP requested terms) (If applic.) Implied Base 'Margin' an Contract + Exchange Rate and CaniideraUsa Inrcstnitnl Margin Implied Contrad Value (to CP) ~) ( Ntl. Cot. 34.110 29.220 0J20 29.540 26J60 Qvrtacy --) (- man. 29-540 3.180 3.180 CONTRACT VALUATION AS AT 93.07.01.16.00.00.00 Report for: Denisons E6 CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Denisons Appllrallon IDs 100 Counterparty; Demdata Inc O.F.Oim reference: 3096263 Product: (ID 1210 ) Application Promoter Demdata I no Market Factory Output Quality Indlcct Product Spa mot Demdata Ino Sub-Market. 64B.VLF.T.Index Market T>pe Spot Counterparty-guarantor - Eitab. date/time 92.02.10.17.00.00.00 / • Regulator Dcpt of Defence Maturity daU/Ume 93.02.10.17.00.00.00 CaatMcrmtUof Intltlimint Dcnemlnalltn CauMtraUaa Entitlement ConsJEntltlemenl type Money/XPWi Money XPW» Currency type (ir app) Com Bnk dep.

Com Bnk dep.

N.A.

National Curt, type (If applic.) AUD AUD N.A Amount N.A 29.540 A* below Valuattana a» at 93.07.01.16.00.00.00 Order m or app.) S5746235 Conf. dalt/tliM (If app.) 93.07.01.14.38.50.00 Contract Trod net nntnt t 1 of 1 Expected Value Std. Deviation F.P.Vi Contract Pricing and Matching Proem: Minimite consideration payment under in EV/CE regime 98 4 J9J3D M1J Spcdal Deal Type: Not Applioable XPWi 180 160 140 120 100 80 60 40 L ' « « 2 « : » ; S (1 5 fiS s a J S S S « 55 5 8 S ! ! S S S 3 n 2 c ; S S 8 S 3 S 3 8 U S S 8 I Feiible Product Value) (F.P.V^) • • • • CONTRACT VALUATION AS AT 93.07.01.16.00.00.00 Report for: Demdata Inc CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Denisons Counterparty: Demdata Inc Product: (ID 1210 ) Market Factory Otitput Quality Indices Sob-Martet 64B.MJ\T.Index Market Type Spot EMaK dataAbm • 92.0ZI0.17.00.00.00 Maturity date/llme 93.02.10.17.00.00.00 Application ID: 100 C.P. Own Reference: MD2-D Application Promoter Demdata Ino Praduet Sponsor Demdata Inc Cottnlffparty-guaranlsr - Regulator Dept of Defence Order ID Of app.) 8S746235 Conf. date/time (If app.) 93.07.01.14JS.30.00 Contract/Product context t 1 of 1 Valuations as at 93.07.01.14.00.00.00 Expected Value Std. Deviation F.P.Vi Contract 31 4 (29J30) ((J 13) C*ntl4mtUa/ Entitlement Dtntmlnatton CtnildersHut Entitlement ConsTEntllltmcnt type Money/XPWi Money XPWs Currency type Of app) Com Bnk dep.

Com Bnk dcp.

N.A.

National Curr. type (If applic.) AUD AUD N.A.

Amount N.A. 29.340 As below Pricing and Matching Prorm: Minimise consideration payment under an EV/CE regime Spedal Deal Type: Not Applicable „?«;»«RtissR8nsjt????na5nnnKc;i;i!S3n88S5 o -20 ■ -40 - -W ■ -100 -120 ■ •140 -160 -«M> XPW.

X I * Feasible Product Values (F.P.Vtl CONTRACT VALUATION AS AT 94.11.1 J.lO.OO.OO.CfO Report for; Denisons CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Denisons Counterparty: Demdata Inc Product: (ID 1110 J Mattel FaoUxy Output Quality Indices S»b-M»rtot MBMFXIndex Market Typo Spot btahdateftimo 92.02.10.17.00.00.00 Maturity datt/U mo 93.02.10.17.00.00.00 Order ID (If app.) 85746235 CMif. d»te/tlmo (If *PP-) 93.07.01.14.38.30.00 Cwrtrtt/Product wrtnt i 1 of 1 Special Deal Type: Not Applicable Application ID: 100 O.F.Owtt references 3096263 Application Promoter Demdata Inc Product Spooler Demdata Inc CounteTp«rty-gu«r*ntor - Regulator Dept of Defence Valuation! ms at 94.11.15.10.00.00 F.P.Vi Contract Eipecttd Value 58 42.160 Std. Deviation 6.209 ComMmttoii/ Entitlement Denomination ConiltfentjMi Entitlement CeiuVEnUtlement type Money/XPWi Money XPWi Currency type (If app) Com Bnk dep.

Com Bnk dep.

N.A.

National Out. type (If applic.) AUD AUD N.A.

Amount N.A 29.540 As below Pricing and Matching Fnccni Minimiic coraidenition payment under an EV/CE regime CONTRACT MATURITY AS AT 9J.02.)o.i7.00.00.00 Report for: Denisons ICONTRACT SUMMARY (GRAPHICAL) Ordering Ptrty: Denisons Counterparty: Demdata Inc Product: (ID 1210 ) Mariwt Faotory Output Quality lndioet Sub-Market 64B.M.F.T.lndex Market Type Spot Eitih. date/time 92.02.10.17.00.00.00 Maturity date/tlmi 93.02.10.17.00.00.00 Application ID: 100 O.F.Onm reference: 5096263 Application Promoter Demdata lno Product Spenior DemdiUlnc Counterparty-guarantor - Regulator Dept of Defence Order ID (If app.) 85746235 C«nf. date/tlrae (If app.) 93.07.01.14..18.50.00 Contract/Product contcit: 1 of 1 Valuation! »i at 95.02.10.17.00.00.00 Expected Value Std. Deviation F.P.V* Contract 74 0 100.(60 0 Ctnildmllon/ Entitlement Denomination Ctntlder«\i«* Entitlement ConiTEnlltlrmrnt type Money/XPWi Money XPWs Currency type (If app) Com Bnk dcp.

Com Bnk dep.

NA National Curr. type (If applic.) AUD AUD N.A.

Amount N.A. 29.540 As below Pricing anil Matching Proccii: Minimise consideration payment under an EV/CE regime Special Deal Type: Not Applicable XPWi 180 160 140 120 100 80 60 40 -{ 0 I o n « « 8 H S 8 8 S 3 S S S3 2 3 5 3 8 8 3 USUHS ( FcaajtfoProduct Valuca (F.P.Vi) 1 7 to CD 5SS8S5SS8 * 0 to 1 Cv SAMPLE PRODUCT ORDER/CONTRACT'TIME LINE* ^ EXAMPLE n: TELECOMMUNICATIONS CAPACITY USE I APPLICATION SPECIFICATION as at 9111.01.17.00 00.00 Part A Application ID! >01 Applicable Product ID'S 2001 -2020 Application Access Limitations Application Promoter. Newcom Inc PrefenttVpRferemul dealing? Available Primary Application Uie •. Hardware capacity management Pre or Pott Tax Matching? Not applicable Contract Ordering Parties: Feasible Counterparty No's: Multiple counterparties Tax deduction/subsidy at tource? Not applicable Nil Public/private use? : Private Degcc of Trading Ham pam 11.7: Nil Acceptable cmms medham: Computer to compiler Secondary trading allowed? Yes RetrfVWboteaaleUBe: Wholesale Derivative trading allowed? Yes mu|miMwnn| MBiunise oonnocnuon Deferred Order Submissions possible? Yes ntmH: payment under an EV/Cfi regime Partial Matches possible? Yes Contract Counterparties: Settlement terns: Nil • consMcnlions Immediate -ertMenwrta Immediate Contract Revaluation Frequency: Duly Manual Approvals possible? No Ordering Party eoraideralion credit? No Oniering Parties slkrwtd negative CoUateralisstkm Payments? Counterparty Guarantors: contract payofls 7 • Yes • Counterparties No Nil Application Asceu Lkaititians: Nil • Ordering Parties No Bilateral Obligations Netting? No Bilateral Payments Netting? No Others: Multilateral Obligation Netting? No Nil Multilateral Payments Netting? No Netting Details (IT applicable) CoflaUraDsitlan Details (If ipplltible) Valuation Details Consideration Credit Details Applicable Eiiscour* Rale: Not qiplicable Obligation Netting trigger Not applicable Min required settlements: Not applicable Trustee: Not Applicable Applicable Discount Rate: 6.50% Ordering Party Guarantor. Not Applicable Ordering Party Consideration-Credit Options 1 /> /< / Key: / 1 Counterparty.

Cowtaparty provided? - Participating Dasir.

- Old. Party-guarantor protected • Participating 1. Interest rate (H p a.) • Non-participating 2. Participation rate (%) - Unprotected - Non-Participating basil: - Ord Psrty-gutrantor protected • Participating Order Party-guarantor -Non-participating 1. Interest rate (% p.a.) —Unprotected X Participation rate (%) Ordering Party Guarantor provided? — Participating basis: -- Non-participating basis: 1— 3? O F3 ■fck.

PRODUCT SPECIFICATION AS AT 93.11.01.17.00.00.00 IfRODUCT IDs 2001 1 Product Summary Application ID i 001 Product Sponsor: Newcom Ino Product SpedScaHon Marled: Telecommunications Carrying Capacity Sub-market: Prime T.T.U.'t (Transmission time units 1200-1800 hr> daily NY-Boiton link) Consideration denom. type : Ordering party T.T.U.'s Mated type: Spot Entitlement denom. type Counterparty T.T.U.'t Establishment date/time: 93.11.01.17.00.00.00 Currency type (ir applic.): Not applicable Maturity dtteA'une: H6.11.0U7.00.00.00 National currency type (if applic.): Not applicable Minimum Product Definition Value: -t.000 Maximum ProJuct Definition Value: 1.000 Product Step Value: 0.05 Product Details Conditional Payoff Dimensions ID : One Actual/Perceived Market Identifier: Actual Elemental/compound Market Phenomena Clan Identifier: Primary Specifio Phenomenon: (Log ol) difference in Ihe OP 'i Market Idenlifier Single Market utilisation oflhe CP's nelwork and Ihe CP's utilisation oflhe OP'S network Elemental/compound sub-market Identifier — Sub-market Phenomenon Class Identifier: - Future Period DateAime Identifier: At Contract Maturity date/time Event Type Identifier: Spot value Minimum Product Definition Value: •1.000 Maximum Product Definition Value: 1.000 Product Step Value 0.03 Product Establishment Da tcAlme: 93.11.01.17.00.00.00 Product Maturity DtteAme: 06.11.01.17.00.00.00 Consideration denomination of Product Ord Party T.T.U.'S Currency type denomination of Product (if applic) Not applicable National currency type denomination Entitlement denom. of Product: Counterparty T.T.U.'s (Transmission lime uniti) of Product (if applic.) Not applicable *0 n H > n vo u» o N> in F4 PRIMARY ORDER SPECIFICATION ASAT: M.06.01.14.25.30.00 3 o i3 Ordering Patty: Baulel Co Own reference: 06H582 Application ID: 001 Product: (ID: 2001 ) Market Telecommunications Canying Capacity Sub-Market Prime T.T.U.V Market Type Spot Estak data/Hax 93.11.01.17.00.00.00 Maturity date/Haw 96.11.0U7.00.00.00 Application Prtwwtfr Newcom Inc Product Spenser Newcom Inc Ceunlerpariy-fuarantor — Rccutator I.T.T.

"X" Value: 4 X Rany Value Alpha (X) Beta (X) t 2 3 4 (1.00) «UJ1 0.20 1.00 386.340 386J40 (498.43) (498.43) G a m m a I 11 2 8 3 II 4 1 1 1 CauMnaltm/ Eattlkment Dtmalnattm CmldtnllM EnlllltBtnl Consideration type T.T.U.'s T.T.U.'s T.T.U.'s Entitlement type T.T.U.'s T.T.U.'s T.T.U.'s Currency type (ir applic.) N.A.

N.A.

N.A.

National Curr. type (If applic.) N.A.

N.A.

N.A.

Mai. Comld. Amount N.A. 58.000 As below Pricing ind Matching Proce»: Minimise consideration payment under in EV/CE regime SPECIAL Ordering party negitive entitlement allowed. DEAL TYPE: ORDER SUPPORT DETAILS Communication* medium: Computer-lo-computcr Consideration Credit (ought ? No Denied Fonn of Considention Credit (if appl.) Not Applicable Counterparty Collatenlisation paymenti required ? No Prepatedeess to make 'own' colUteralisatlon payments (if applicable)? Applicable Marginal Tax rate (if applicable)? - Consideration: • Not Applicable •Entitlement): Not Applicable Netting System Participation ? - Bilateral Obligations netting ? (if applic.) .'to - Bilateral Payments netting ? (if applic.) No • Multilateral Obligitiora netting ? (if applic.) No - Multilateral Payment! netting ? (If applic.) No Not Applicable Partial Matches desired ? No Manual Approval of Matches desired ? No Desired degree of trading transparency (if applicable) Not Applicable Applicable ConsidVEnlitlcmcnt Truster Entity Account details : ADC Ranking Corp Operating A/c '1-1-502026- 345896 -0 Paired date/lime of Order Submission: immediate Desired Order retention period : 00.00.01.00.00.00 Desired Max. time for counterparty manual order approval (if applic.): Not Applicable Preferred/Preferential Dealing Nil Unacceptable Counterparties and Other Stakeholders Not Applicable ORDER SPECIFICATION PRICING By: Tasnet ajai:94.06.0}.14.26.40.00 COUNTERPARTY PRICING SPECIFICATION Application ID i 001 Product ID: 2001 Consideration Enhanp Rafts (If applic) : C/E - Currency - Nat. Curr • Defined Circumstances ID 8 Commlnlon Rate: 1.00% Discount Rate: 9.90% p Entitlement Exchange Rates: (If applic) : C/E - Currency - NmL Curr. — Feasible Grew OP/CP Net Component Implied Assessed Net Net Contingent Maximum Prodnet Contingent C/Ciedit Contingent Product Contingent Probabilities Contingent Negative Entitlement Absolute Definition Entitlement Adjust Entitlement Prices Entitlement of Entitlement (Valuation) Negative Entitlement Values Amounts Amounts Amount* Occurence (Valuation) Amis.

Amounts Amount (1.00) -(0.35) (386.340V 0.00 (386.340) 0.567639 (219.302) 0.544514 (210.3675) (210.3675) (0.30) (305.910) 0.00 (305.910) 0.022156 (6.777) 0.016838 (S.IS1) (5.151) 0.23) (225.470) 0.00 (225.470) 0.021499 (4.847) 0.016793 (3.786) (3.786) .20) (145.040) 0.00 (14:5.040) 0.019S44 (2.8346) 0.016718 (2.425) (2.425) (0.15) (64.610) 0.00 (64.610) 0.017349 (1.1209) 0.016614 (1.073) (1.073) (0.10) .830 0.00 .830 0.017241 0.2729 0.016481 0.361 (MS) 96.260 0.00 96260 0.016989 1.63S4 0.016320 1.S71 0 176.700 0.00 176.700 0.016258 Z8727 0.016132 2.851 0.05 257.130 0.00 257.130 0.016001 4.1143 0.015918 4.093 0.10 337.560 0.00 337.560 0.015847 5J493 0.015678 .292 0.15 418.000 0.00 418.000 0.015654 6.5433 0.015414 6.443 0.20.1.00 498.430 1 0.00 499.430 0.290238 144.6633 0.29237 145.825 ■ (498.43) 1.036416 ( 69.432 ) 1.0000 ( 56.463 ) (222.8025) (498.430) x AppHc. Entitle. Exchange Rates ^11---11-mill„miUm) {mil in m|-fin-niJ ( -) C/E " Base contract.bid prkc (In Product Denom. terms) Currency Nil. Curr. 69.432 Net Present Value (at 9.90% P-«~) 54.630 44.420 + Flat Commission ( 1.00% -) 0.550 55.180 - vomract ura ran (in rroauct venom, terms j x Applie. Consld. Exchange Rates (ill II 1 III II II 1 1 llll Ill} i «l 1 t OE Curacy Nil. Cm. j 1 - Contract BM Price (In OP requested terms) (If applic.) 55. ISO | Implied Base 'Margin* on Contract .760 + Exchange Rate and Consideration Investment Margin ; » Implied Contract Vah»e(toCF) ^ .760 3 0 F5 £ 1 vo c\ I H H N) I >13 > M Ul o ORDER SPECIFICATION PRICING By: Aarcom At Al: 94.06.01.14.26.40.00 F6 CO UNTERPARTY PRICING SPECIFICATION Application ID < 001 Product ID: 2001 Consideration Exchange Rales (If applic) ; OE • Currency -. Nal. Curr. - Defined 1 Commission Clrrams tances ID 9 (Rate: 0.90% Discount Rate: 8.50% p.*.

Entitlement Exchange Rates: (If applic) : C/E — Currency Nil. Curr. - NO 00 vc ON Feasible Grots OP/CP Net Component Implied Assessed Net Nel Contingent Maximum Product Conlingcnl CCredii Contingent Product Contingent Probabilities Conlmgent Negalive Entitlement Absolute Definition Entitlement Adjust.

Entitlement Prices Entitlement of Entitlement (Valuation) Negative Entitlement Values Amounts Amounts Amounts Occurrence (Valuation) Amts.

Amounts Amount (1.00) -(0.35) (386.340) 0.00 (386.340) 0.366603 (218.901) 0.543013 (210.561) (210.561) (0.30) (303.910) 0.00 (303.910) 0.018337 (3.616) 0.017545 (5.3672) (5.3672) 0.23) (223.470) 0.00 (223.470) 0.018492 (4.169) 0.017020 (3.83749) (3.83749) (0.20) (143.040) 0.00 (145.040) 0.018417 (2.671) 0.016978 (2.4625) (2.4625) (O.li; (64.610) 0.00 ' (64.610) 0.018313 (1.183) 0.016875 (1.0902) (1.0902) (0.10) 13.830 0.00 13.830 0.016481 0.261 0.016754 0,265 (0.05) 96.260 0.00 96.260 0.016320 1.571 0.016256 1.563 0 176.700 0.00 176.700 0.016132 2.831 0.015689 2.772 0.05 257.130 0.00 257.130 0.015911 4.093 0.015456 3.974 0.10 337.360 0.00 337.560 0.013678 3.292 0.015623 .274 0.13 418.000 0.00 418.000 0.013414 6.443 0.015401 6.438 0.20-1.00 498.430 0.00 498.430 0.292377 145.829 0.291395 145.240 (498.430) 1.029702 ( 6&200 ) 1.0000 ( 57.790 ) (223318) (498.430) x Applic. Entitle. Exchange Rates (■ ) C/E Dau contract btd price (in Product Denom. term*) Net Present Value (at 8JW» P-a—) + Flat Commission ( 0.90% -) - Contract Did Price (In Product Denom. terms) x AppHc. Consld. Exchange Rates ( ) (.

C/E Contract Bid Price (In OP requested terms) (If applic.) Implied Base 'Margin' on Contract + Exchange Rate and Consideration Investment Mar-gin • Implied Contract Vatut (to CP) Currency Nil Cm. 6&200 54.900 0.490 Currency -) (- NalCwt. 55J90 "T~ 45.960 SSJ90 9.430 9.430 I H I—' U) I ►■3 n H e vo Ui o o t~> l/l o CONTRACT VALUATION AS AT 04.06.01.16.00.00.oo Repo rt fo r: Basstel Co F7 vo Pi 00 so C\ ICDNTRACT SUMMARY (GRAPHICAL) Ordering Party: Basstel £o Counterparty: Tasnet Product: (ID 2001 ) Market TeteoommuntatioRi carrying capacity Sob-Mariut Prime T.T.U1 Mirktt Typt Spot btth. dttefflmt PX)).D).)7.D0.D0.D0 Maturity dtlt/Umt 96.11.01.17.00.00.00 Application ID: CP. Own rcrmntci 001 17M036 Application Promoter Newcom Inc Product Spornor Newcom Ino Counterparty-guarantor - JteguiMler I.T.T.

OrdtrlDOfapp.) 92837465 Conf. date/time (If app.) 94.06.01.I4J8.50.00 Contract/Product contort t 1 of 1 Valuation* aa at 94.06.01.16.00.00.00 Eipcctcd Value Sid. Dtriallan F.r.Vi Contract (0.150) 0.023 54.236 9J07 Caiuldrratlinf Cnttilimnt Denomination ConilitnlloB EnUUtmtnt ConsJEnlllltmtnl type T.T.U.'l T.T.tfa T.T.U.'l Currtncy type (ITapp) N.A.

N.A.

N.A NiIIotiI Curr. typr 11TMppDc.) N.A N.A N.A N.A JJ.180 Aa below Pricing mil Matching Proctii: Minimise consideration payment under an EV/CE regime Special Deal Type: Ordering party negative entitlement allowed I T.T.lTi 400 300 isa ■ 100 - •100 -200 -300 -400 -500 -4 1 1 1 1 1 1 1- -i 1 1 1 1 1 1- h 1 1 1- -t 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I I I I I H I I f I H | I H I IS| I M M H § ? § S § M M M S llleSoIdS&esSSSSoe* oooo ooooooooo oooooo- T> n H c V© (» e e Kl in CONTRACT VALUATION asat 94.o6.oi.i6.oo.oo.oo Report for: Tasnel F8 3 O vo etk. s (0 C\ CONTRACT SUMMARY (GRAPHICAL ) Ordering Party: Counterparty; Basstel Co Tasnet Product: (IP 2001 MnW TeleooaummicatioracifTymg capacity Sub-MnkH Prime T.T.U.'t MartetTjpe Spot toUKdaltNm* 95,U.O\.VT.OO.OO.OO Mrturttj dale/lhne 96,\l.0\.M.00.00.00 Application ID: 001 O.P. Own Refcrencc: 06HJ82 Application Promoter Neweom Inc Product Spainer Newcom (no Coantcrparty-Kuanntsr - l.T.T.

VtMhnuil M.06.«t.\6.0a.00.00 Order ID (ir app.) 92837465 C»nT.dat»Mnw(U»PP.> 94.06.0U 431.50.00 Cantrad/PradMt cantnrt i 1 of 1 ElfNlelVdw Std. Deviation F.P.Vt Contract (0.Y50) 0.023 (S4.136) (9.207) CsnridcratUn/ EatitlrmrBt DcMmlnitUn C«n«ldemtiMi Entitlement CoiuJEntiUement type T.T.U.'t T.T.LTi T.T.U.'t Cuntncy typ« (If app) N.A.

N.A.

N.A.

NfcUonm\ Curr. tyj* {It tppllc) N.A.

N.A.

N.A.

Amount N.A.

JS.J80 As below Pricing and Matching Proctu: Minimite consideration payment under «n EV (CE rcgiinc Special Deal Type: Ordering party negative entitlement allowed T.T.lTt 500 400 • 300 300 100 0 loo- a&ei.g.g.g.g.8.eg.g.6S.&e.g.e., -200 ■300 •400 illllllllllfflf if Jf9SliiSSli!li3lli!!lSlSi o o o o o o o o o o o o •- H Ul n H > c vo i>J o tJ l/l CONTRACT VALUATION AS AT w.i 1.22.10.00.00.00 Report for: Basslel Co F9 O VO g \o ICONTRACT SUMMARY (CRAP1IICAL) Ordering Party: Basstel Co Counterparty: Tasnet Product: (ID 1001 ) Market Telecommunications oarrying capacity Sufc-Mariut Prime T.T.U.'t Markrt Type Spot Estab. date/Urn 93.ll.0t.17.00.00.00 Maturity date/time 96.11.01.17.00.00.00 Application II): 001 C.P. Own reference: I7M036 Application Promoter Ncwooot Ins Product Sponsor Newcom Inc CounltTpirty-gutrtnlor - Regulator LT.T.

Order ID (Ifa pp.) Conf. daft/Mm* (If *pp.) Ceatraft/Prodart c*nfcit t 92837465 94.06.01.14.38.50.00 I of 1 Valuation! at at 94.11.22.10.00.00.00 F.P.Vi Contract Eipertcd Value Sid. Deviation (0.400) 0.010 350.810 74.200 CMildtnlUi^ Entitlement Consideration Entitlement Cons/Entitlement type T.T.U.'t T.T.LPt T.T.U.'t Currency type Of app) N.A.

N.A.

N.A.

National Curr. type (If applic.) N.A.

N.A.

N.A.

Amount N.A. 55,180 As below Fitting md Witching Vntw.

Minimus cawidention ptymart under in EV/CE regime Spedal Deal Type: Ordering party negative entitlement allowed T.T.IT* 400 T 300 ■ 300 100 -0 •100 ■TOO -300 --400 -500 -f 1 f 1 f 1 ( 1 f 1 1 1 1 1- -V i i 1 > 1 i 1 ) 1 i ) |||??ff|fffS?f|S!|f|rvilI18!8|8!||||l|?0?lII c#ss> o 33303030030030 ooooooooooi 000000 I FeatiblcProductVtluq (F.P.Vi) "I CONTRACT MATURITY as at 96.ii.oi. 17.00.00.00 Report for; Basstel Co CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Basstel Co Counterparty: Tasnet Product: (10 2001 > Market Telnnommunfaatiom carrying capacity Sob-Market Prime T.T.U.'t Market type Spot Kdib. dfttc/llmt 93.11.01.17.00.00.00 96.11.01.17.00,00.00 Application ID: 001 CP. Own reference! I7M036 Apptleatian Preaieter Newcom Inc Product Spamar Newcom Inc Ceantfrparty-guanntar - Ratalater LT.T.

OrxUr ID (If *pp-) 92837465 Conf. date/time »?<>.) 94.06.01.14 J8.50.00 Cuwti rtt/Tr^diKl contest r t of I ValtuUsM at at M.I I.0I.17.00.00.00 Eipcded Value Sfd. Drrlmtloa F.P.V't Contract (0.403) 0 386340 0 Caaildtrallea/ Entitlement Dfaaailn*1.'*n CtfliMiritlifl Entitlement CoiuTEntlOemtnt type T.T.U.'t T.T.tTs T.T.U.'t Currency type (IFapp) N.A.

NA.

N.A.

National Curr. type (if applic) NJL NJL N.A.

Amount NJL SS.ISO At below Pricing and Matching Praeeta; Minimite eonj/derali'on payment under an EV/CE regime Special Deal Type: Ordering patty negative entitlement allowed T.T.Ir$ <00 300 200 100 0 -too -200 400 -400 -500 —I 1 1 1 1 1 C—«■ 1 1 1 1 1 1 1 1 1 1—V 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 8l'3ffff&ffff&99**irff?r<S!l3iiSSSSSiiSSSlSSH oo.e.s.s.^sea.s^a^.aa;dse.s oaooooooooooooooooo- SAMPLE PRODUCT ORDER/CONTRACT 'TIME LINE' EXAMPLE HI: SHARE PRICE INDICES APPLICATION SPECIFICATION AS AT 91.06.03.17.00.00.00 Part A Applkatlan ID: 001 Applicable Prodact ID'i: 10020- 1 MOO Application Acctsi Limitations Application Promoter: B.L.C. Inc Preferred/Preferential dealing 7 Available Contract Ordering Parties Prims? AppOnlion Use; Economic risk management Pre or Post Tax Matching 7 Prc-Tax Feasible Counterparty numbers: Multiple counterparties Tax deductiontoibsidy at source ? Not Applicable NIL PobSc/privale use; Public Use Degree of Trafing Transparency: NIL Acceptable comms medians: Computer-computer Unk Secondary trading Allowed 7 Yes RetailAVholesale Use: Wholesale Derivative trading Allowed ? Yes Pricing A Mslching Minimise pre-lu considefillon Defend Order Submissions potsMe 1 Yea Process : payment under in EV/CE regime Partial Matches possible 7 Yes Contract Counterparties Settlement tenra: Contract revaluation frequency: Daily - Considerations Immediate NIL • Entitlements: Immediale Ordering Parties allowed negative Manual Approvals possible 7 No contract payofla 1 Yes Ordering Party consideration credk available? Yes Application Access Rjnilaliuns* Na CotUferaEsation payments rcquired7 Counterparty Guarantors - Counterparties Yes • Ordering Parties Yes NIL Dilalcral Obligations Netting 7 Yes Bilateral Payments Netting 7 Yes Olhen: Multilateral Obligations Netting 7 No Multilateral Payments Netting 7 No NIL Netting Details (If appUc.) CollaltralisaOon Details (if applic.) VilttiUon Details Consideration Credit Details (If applicable) Applicable Discount rate: 9.80* pa.

Trustee: Applicable discount rale: Ordering Party guarantor Obligation netting trigger: 100.000 NOT APPLICABLE 9.10% ADVENTCOIne Mm required sctticnacnti: .000 Ordering Party Conridcralhm-Crcdlt Options Counterparty provided 7 Ordering Party Guarantor provided? — Participating basis: - Non-pirtieip»tmg basis : - Participating basis: • Non-parllcipaiing basis: • Ord. I'arty-juaranlor pmlccted - Unprotected • Ord. Party-guarantor protected - Unprotected • Participating • non-part basis - Participating •non-part, basis 7 7 ~~ 1 "1 0.5 <o 0.3 s I 11 0.3 0.3 11 0.5 19 •. • • ' • 16 1 Key- Counterparty: I. Interest rale (% p.i.) 2. Participation rate (K) Ord. Paity-Ouarantor 3. Interest rale pa.) 4. Participation rite (%) G3 3 O so £ 2 PRODUCT SPECIFICATION AS AT 91.06.03.17.00.00.00 PRODUCT I D > 10061 1 Product Summary Application ID > 001 - Product Sponsor i B.L.C. Inc Product Spedflcatkm Market: Slock Indices Subsnaricet: PTSE 75 Consideration/entitlement denom. type: Money Market type: Spot Establishment date/lime: 91.06.03.17.00.00.00 Currency type (if applic.): Com Bnk Dep.

Maturity date/time: 94.06.03.17.00.00.00 National currency type (if applio.) : AUD Minimum Prtxtooi Definition Vahie: 1600 Maximum Product Definition Value: 2200 Product Step Value: 0010 Product Details Conditional Payoff Dimensions ID : One Actual/Perceived Market Identifier: Actual Market Phenomena Clan Identifier: Share Price Index Specific Phenomenon: PTSE 75 Elemental/compound Market Identifier Single Market Etemental/oompound tub-market Identifier — Sub-market Phenomenon Class Identifier: - • Future Period DateAime Identifier: At Contract Maturity date/time Event Type Identifier: Spot Value Minimum Product Definition Value: 1600 Maximum Product Definition Value: 2200 Product Step Value 0010 Prodoot Establishment DateAime: 91.06.03.17.00.00.00 Product Maturity Date/time: 94.06.03.17.00.00.00 Cm/entitlement denomination of Product: Money Currency lype denomination ofProduct (if applic) Com Hnk Dep.

National currency type denomination ofProduct (ifapplic.) AUD * n H > d vo o K) in O G4 PRIMARY ORD£R SPECIFICATION ASAT: 93.01.01.17.37.06.00 Ordering Parly: Abbotts <fc Taylor Application ID: 001 Own reference: PQZ260 Product: (IDs 10061 ) Application Promoter B.LC. Inc Market Stock Indioes Product Sponsor B.LC Inc SuWHarkel PTSE 73 Market Type Spot Cotmtcfparty-iuirantor CNZ Banking Corporation Estab. date/Urn* 91.06.03.17.00.00.00 Regulator Paoiflo Central Bank Maturity date/time 94.06.03.17.00.00.00 CauldtrattM/ EatUtanmt Dtoomlaitton C«ul4tratloa Entitlement ConsVEnlltlemtnt lype Currency type (If applic) National Curr. type (irapplic.) Max. Consld. Amount Money Com BnkDep AUD N.A Money Com BnkDep AUD 54,000 Money Com BnkDep AUD See Below X Range Value Alpha (X) Bcta(X) G a m 1600 187.200 1930 187.200 II 1990 37.440 2200 37.440 "X" Value Pricing and Matching Process : Minimiic pre-tax consideration payment under an EV/CE regime 1 n SPECIAL Collateralisation Payments DEAL TYPE t ORDER SUPPORT DETAILS Computer-l&-oomputer No Cooununioationi medium: Consideration Credit tough! 7 Desired Form of Consideration Credit (if ippl.) Not Applicable Counterparty Collaleraliialion payment* required 7 Yet Preparedness to make 'own' oollateralisalion payments (if applicable)? Applicable Marginal Tax tale (if applicable)? - Consideration: Not Applicable - Entitlements: Not Applicable Netting System Participation 7 - Bilateral Obligations netting 7 (if applio.) No • Bilateral Payments netting 7 (if applic.) No • Multilateral Obligations netting 7 (if applio.) No -Multilateral Payments netting 7 (if applic.) No Not Applicable Partial Matches desired 7 Yes Manual Approval ofMatchei desired 7 No Desired degree of trading Transparency (if applicable) Not Applicable Applicable ConsidJEnlitlenienl Transfer Entity Account details: ADC Banking Corp Operating A/c 1 -1 -502026-619930-0 Desired date/time of Order Submission: Immediate Desired Order retention period: 00.00.01.00.00.00 Desired Max, lime for counterparty manul_on^j^oyil(jfapplic.): Not Applicable Preferred/Preferential Deal In j: NIL Unacceptable Counterparties and Other Stakeholders NIL ORDER SPECIFICATION PRICING By: Abrahamsoiu AsAt9J.01.0I.17J8.02.00 ] G5 Application ID: 001 Consideration Exchange COUNTERPARTY PRICING SPECIFICATION Product ID: 10061 Rata (If applic) : C/E - Denned Ctrctnasiaace* ID 1 Commission Rate Dbcoont Rile Entitlement Exchange 26 1 1.25% .00% p.«.

Rates: (if applic) :OE • Feasible Groat OP/CP Net Component Implied Assessed Net Net Contingent Maximum Product Contingent C/Credil Contingent Product Contingent Probabilities Contingent Negative Entitlement Absolute Definition Entitlement Adjust Entitlement Prices Entitlement of Entitlement (Valuation) Negative Entitlement Values ■ Amounts Amounts Amounts Occurrence (Valuation) Amis.

Amounts Amount < 0.00 0.00 0.00 1600 (187.200) 0.00 (117.200) 0.000220 (0.041) 0.000020 (0.004) (0.004) (187.200) 1610 (U7.200) 0.00 (187.200) 0.000227 (0.042) 0.000027 (0.005) (0.005) 1620 . (187.200) 0.00 (187.200) 0.000237 (0.044) 0.000037 (0.007) (0.007) 1630 (187.200) 0.00 (117.200) 0.000249 (0.047) 0.000049 (0.009) (0.009) 1640 (187.200) 0.00 (187.200) 0.000266 (0.050) 0.000066 (0.012) (0.012) 1650 (187.200) 0.00 (187.200) 0.000287 (0.054) 0.000087 (0.016) (0.016) 1660 (187.200) 0.00 (117.200) 0.000314 (0.059) 0.000114 (0.021) (0.021) < ■<, A v A < / / / / / / / / s / 2130 (37.440) 0.00 (37.440) 0.029642 (1.110) 0.029442 (1.102) (1.102) 2140 (37.440) 0.00 (37.440) 0.028625 (1.072) 0.028425 (1.064) (.1.064) 2150 (37.440) 0.00 (37.440) 0.027469 (1.028) 0.027269 (1.021) (1.021) 2160 (37.440) 0.00 (37.440) 0.026193 (0.981) 0.025993 (0.973) (0.973) 2170 (37.440) 0.00 (37.440) 0.024819 (0.929) 0.024619 (0.922) (0.922) 2180 (37.440) 0.00 (37.440) 0.023369 (0.875) 0.023169 (0.867) (0.867) 2190 (37.440) 0.00 (37.440) 0.021865 (0.819) 0.021665 (0.811) (0.811) 2200 (37.440) 0.00 (37.440) 0.020330 (0.761) 0.020130 (0.754) (0.754) > 0.000 0.000 0.000 0.146635 0.000 0.158835 0.000 0.000 1.0402 (59.580) 1.0000 (55.000) (55.000) (187.200) 3? 0 1 vo a\ Cm. x Applic. Entitle. Exchange Rates ( ) ( — C/E « Base contract bid price (In Product Denom. terms) Net Present Value (at 10.0011 P-*-) - + Flat Commission ( , 1.25% ) ~ Contract Bid Price (In Product Denom. terms) — x Applic. Cottsld. Exchange Rale* (..„...__——.—) (.

OE Contract Bid Price (In OP requested terms) (If applic.) Implied Base 'Margin' on Contract + Exchsnge Rate and Consideration Investment Margin - Implied Contract Value (to CP) ' N*. Cuit. ^ Can.

)(- Ntl Curr 51.920 4.580 4.580 59 580 51.280 1 47J40 0.640 51.920 I K N> I TJ O H > e VC S o NJ l/i o ORDER SPECIFICATION PRICING By: Carpenters Inc 1 PottnU Court crwrty No. 1) As At 33.01.01.17J8.02.00 COUNTERPARTY PRICING SPECIFICATION Application ID: 001 Product ID: 10061 Consideration Exchange Rates (ir applic) : CW. - Defined Ctrcwnstancei ID 1 Commission Rate 17 | 1.30% Discomt Rale 9.8% p.a.

Entitlement Exchange Feasible Grots OP/CP Net Component Implied.

Assessed Net Nel Contingent Maximum Product Contingent C/Credit Contingent Product Contingent Probabilities Contingent Negative Entitlement Absolute Definition Entitlement Adjust Entitlement Prices Entitlement of Entitlement (Valuation) Negative Entitlement Values Amounts Amounts Amounts Occurence (Valuation) Amis.

Amounts Amount < 0.00 0.00 0.00 1600 (187.200) 0.00 (187.200) 0.000220 (0.041) 0.000020 (0.004) (0.004) (187.200) 1610 (187.200) 0.00 (187.200) 0.000226 (0.042) 0.000028 (0.005) (0.005) 1620 (187.200) 0.00 (187.200) 0.000237 (0.044) 0.000037 (0.007) (0.007) 1630 (187.200) 0.00 (187.200) 0.000249 (0.047) 0.000049 (0.009) (0.009) 1640 (187.200) 0.00 (187.200) 0.000265 (0.050) 0.000065 (0.012) (0.012) 1650 (187.200) 0.00 (187.200) 0.000287 (0.054) 0.000087 (0.016) (0.016) 1660 (187.200) 0.00 (187.200) 0.000314 (0.059) 0.000114 (0.021) (0.021) V . ^ / > s / / / < s / / ✓ / ✓ 2130 (37.440) 0.00 (37.440) 0.029641 (1.110) 0.029442 (1.102) (1.102) 2140 (37.440) 0.00 (37.440) 0.028625 (1.072) 0.028425 (1.064) (1.064) 2150 (37.440) 0.00 (37.440) 0.027469 (1.028) 0.027266 (1.021) (1.021) 2160 (37.440) 0.00 (37.440) 0.026192 (0.981) 0.025993 (0.973) (0.973) 2170 (37.440) 0.00 (37.440) 0.024819 (0.929) 0.024619 (0.922) (0.922) 2180 (37.440) 0.00 (37.440) 0.023369 (0.875) 0.023169 (0.867) (0.867) 2190 (37.440) 0.00 (37.440) 0.021864 (0.819) 0.021666 (0.811) (0.811) 2200 (37.440) 0.00 (37.440) 0.020330 (0.761) 0.020130 (0.754) (0.754) > 0.00 0.00 O.Ofl 0.146635 0.000 0.158834 0.000 0.000 1.0300 (60.840) 1.0000 (55.120) (55.120) (187.200) * Applic. Enlill*. Exchange Rate* ( —.....—...) (~ at Rise contract bid price (In Prodnd Denom. terms) — Net Present Value (at 9.8% p.«. ) + Flat Commission („ — 1.3014 ) - Contract Old Pric* (In Product Dhmih l«mi) x Applic. Comld. Exchange Rates ( ) (— C/E Contract BM Price (In OP requested terms) (If applic.) Implied Base 'Margin* on Contract + Exchange Rate and Consideration Investment Margin - Implied Contract Value (to CP) Can. (_ ) Ntt Cur.

Cist.

„)(.... Nil Curr. (60.840) 51.370 [ 0.680 53.050 t 53.050 47.440 .610 .610 • • • • G7 I CONTRACT SPECIFICATION LIMITS By: Abrahamsons AS AT 93.01.01.17.38.0200 C O UN TERPARTY CONSTRAINTS VERIFICATION \ DetaBs Iuuiawulal tepact Measure \ AkaaloteLaea 187.200 ClfctMlMB 55.000 Eip. her. Vatao 4.580 \ Details Incremental laipact Measure \ AMattLoa ExpecMLats 55.000 En. Ibct. Vata* Individual Contract Conitralnt Impact Single Product Portfolio Constraint Impact Mtatai nqulrad lucreamtal Impact of contract Status Check Allowable Incrawntal Impact ofcontract Status Cheek 500.000 (max) Y NOT APPLICABLE 100.000 (max) Y 600.000 (max) Y 300.000 (min) Y NOT APPLICABLE "Equivalent" Maturity Date Total Product Portfolio Conitralnt Impact Allowable Incremental Impact Status of Contract Check not applicable 497.000 (max) Y NOT APPLICABLE All Mil Dates Total Fred ltd Portfolio Comlralnt lanact Allowable Incremental Impact of Contract Statu* Check NOT APPLICABLE 210.000 (max) not appucablb Y "Same Month" MaL Date Total Product Portfolio Com train! Impart Allowable Incremental Impart of Contract not applicable 1046.000 (max) NOT APPLICABLE Current Limit Status Check Contract expected loas as a proportion of the 6% 7% Y expected loas of all contracts/products Prtdutl eiperted ton ai s proportion of the 62% 65 Vo Y cipected lota of ill contracts/products S Statui Check G8 CONTRACT SPECIFICATION LIMITS By: Carpenters Inc AS AT 93.01.01.17.38.02.00 [COUNTERPARTY CONSTRAINTS VERIFICATION Detail! Measure \ Incremental Impact AMOl Lett 187700 bpdMUi 55.200 Bf. (Her. Vataa .610 \ Detalh Measure \ Incremental Impart A&Mtaf* Lhi Expected Lata 55.120 ExpJacr. Valat Indliridual Contract Constraint Impact Single Product Portfolio Constrain! Impact MWau repaired laco aunts! Imntrt af cantrwrt Status Check Allowable Incremental Impact | Statai af contract I Cktck 460.000 (max) Y NOT APPLICABLE 93.000 (max) Y 414.000 (max) Y 280.000 (min) Y NOT APPLICABLE All Mat Ditea Total Product Portfolio Constraint Impact Allowable Incremental Impart or Contract Slatui Cheek NOT APPLICABLE 661.000 (max) NOT APPUCADI.B "Equivalent" Maturity Date Total Product Portfolio Conitralnt Impact Allowable Incremental Impact Slatui of Contract Check NOT APPLICABLE 280.000 (max) Y NOT APPLICABLE "Same Month" MaL Date Total Product Portfolio Conitralnt Impart Allowable Incremental Impact of Contract HOT APPLICABLE 370.000 (max) NOT APPLICABLE Current Umlt Status Check Contract expected lost at a proportion of the expect td loii of all contracts/products 4.5% % Y Product expected lots aa a proportion of the expected loss of all contracts/products 50 V. 55% Y SUIus Check CONTRACT VALUATION as at . 93.oi.oi.23.oo.oo.oo Report for: Abbotts &. Taylor G9 CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Abbotts A Taylor Application ID: 001 Counterparty: Abrmhamsooj O.P. Own reference: PQZ260 Product: (ID (OKI ) AppUcatlaa Pronator B.L.C. Inc Market Stock Mioa Product Spaniar B.L.C. Inc SMMfeffcrt PTSE 73 M*rfcrt Type Spot Comtrrpmrty-guanntor CNZ Banking Corp.

KsUb. 91.06.03.17.00.00.00 Recobtor Paelfio Central Bank daicAim* 94.06.03.17.00.00.00 VaEontlom h at 93.01.01.23.00.00.00 Order ID (If app.) 9156515899 % F.P.V.

Contract Conf. date/time (Ifapp.) 93.01.01.17J8.11.00 Expected Value 1970 33.000 CnttKt/TndiKt context: 1 of 1 Std. Deviation 333 21.160 C«fidmlM EatMcawot PlMWllHtl— Caollfcnttw Entitlement ConxJEntlttement type Currency type (If app) National Curr. type (If applic.) Amount Money Com Bnk dep. AUD N.A.

Money Com Bnk dep. AUD Jt.920 Money Com Bnk dep. AUD Ax below 3 O vo vo 0\ Pricing «id Matching Proem: Minimise prc-l»x considerilion payment under in EV/CE regime SpetUl Deal Type: Collateral itation Payment! % •:v: : •••.. . •• . - AUD von 200 180 160 140 120 100 80 SO 40 O 8s83388gg8ggggagggggg|gmii!iiiiii!mii|l.lil§ I Fcaxible Product Valoca (F.P.Vil I 828898SSS88 inmmnnnnnnnN I M NJ <Ti I 3 H > e! vo o K> Ul CONTRACT VALUATION AS AT 93.01.01.23.00.00.00 Report for: Abrahamsons G10 CONTRACT SUMMARY (GRAPHICAL) I Ordering Parly: Abbott* ft Taylor Application ID: 001 Counterparty: Abrahamsons C.P. Own reference: FFR-263 Product: (ID 100C1 1 Applkatlm Promoter B.l.C. Inc Market Stock Indisct Praduct SpMnor B.L.C. Inc Sab-Market PTSE 7 J Market Type Spot Caonterparty-fpiaranter CNZ Banking Corp.

Ettab. date/Una 91.06.03.17.00.00.00 Regulator Pacific Central Bank Maturity datr/tlme 94.06.03.17.00.00.00 : - Vahmttoni" at 93.01.01.23.00.00.00 Order ZIJ (If app.) 9156515899 F.P.Va Contract Conf. datt/thn* (If app.) 93.0t.01.17jlll.00 Eipccttd Valot 1970 (33.000) CmtrMt/frtdurt content t lof 1 Std. Deviation 333 (21.160) * O vo 4* £ CwiMmtM EmttWfacnt Dnmntnaltan CMfttfcratton Entitlement ConiTEntltlcmrnt type Currency type (If app) National Curr. type (If applic.) Amount Money Com Bnk dep. AUD N.A.

Money Com Bnk dcp. AUD 51.920 Money Com Bnk dep. AUD As below Pricing anil Matching Proem: Minimite pre-tax consideration payment under an EV/CE regime Deal Type: CollalcraliutKxi Payments ll§IIg|s§|8gggsgsg|g||§3|»§SiS8S§S?8IIIS|l|eil||||§=|S???|||| t"f*t*f"t*T,rr*»i"i"r^ri,T*T,f"r*,t»t»»«rrr^rr^rrr»"T*»*rrfrNNNNNNNNNWNNNNNNNNNNN -20 •40 -eo -80 •100 -120 •140 •160 -180 •200 AUD VOW to I 9 i V© Ui N) in I Fctiblo Product Values (F.P.Vi) I Gil SECONDARY ORDER SPECIFICATION AS AT: 93.06.06.08.00.00.00 3 0 vo 1 vo o\ Acquiring Party: Shearer ft Associates Own reference: 61932076 Product: (ID: toOii ) Mariut Stock Indices Sub-Market PTSE 7 J Market Type Spot EstakdaU/Hm 91.06.03.17.00.00.00 Maturity date/Uae 94.06.03.17.00.00.00 Application ID: 001 CMildmllcaf Order ID: 9156515899 EatHUmMrt CMitdmltM Entitlement Acq. P. Own reference: 667-3 DcMcnlnaflM Application Proooltr B.L.C Inc ComJEjitillf ment type Money Money Money Product Sponsor B.L.C. Inc Currency tj-pt (If applic.) Com Bnk Dep Com BnkDep Com Bnk Dep Caunttrpariy-tusrantor CNZ Banking Corporation National Curr. type (If applic.) AUD AUD AUD Regulator Pacific Central Bank Mas. Comld, Amount N.A. 60.000 .

See Below ' . • •• • •? ; " -X" Value: 4 X Range Value Alpha (X) Beta (X) I 2 3 4 J 6 1600 1930 1990 2200 187.200 187.200 37.440 37.440 G a m m a I 11 2 8 3 II 1 4 J Pricing and Matching Procrss: Minimite pre-tax consideration payment under an EV/CE regime SPECIAL Collatcralisation Payments DEAL TYPE: H W 00 CONTRACT CONDITIONS Computer-to-computer No Communications medium: Consideration Credit sought ? Desired FomofComidenHon Credit (if ippl.) Not Applicable Counterparty Collaleraliaalion payments required ? Yet Preparedness lo make 'own' collaleraliution payments (if applicable)? Applicable Marginal Tax nte (if applicable)? - Consideration: Not Applicable - Entitlements: Not Applicable Netting System Participation ? - Bilateral Obligations ndting? (if applic.) No • Bilateral Payineata netting? (if applic.) No - Multilateral Obligations netting? (if applic.) No - Multilateral Payments netting ? (if applic.) No Not Applicable Partial Matches desired ? Yes Manual Approval of Matches desired 7 No Desired degree of trading Transparency (if applicable) Not Applicable Applicable ConsidTEntillement Transfer lintily Account details: ABC Banking Corp Operating A/c 1-1-502026-846752-0 (and 1) Desired date/time of Order Submission: Immediate Desired Order retention period : 00.00.01.00.00.00 Desired Max. time for counterparty manual order approval (if applic.): Not Applicable Preferred/Preferential Dealing: Nil.

Unacceptable Counterparties and Other Stakeholder* NIL ►3 n H a VO Oi W in CONTRACT VALUATION AS AT 93.o6.06.o9.oo.oo.oo Report for: Shearer & Associates G12 CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Shearer ft Associates Counterparty: Abrahamsons Product: (10 10061 ) Market Stock Indies Sub-Market PTSE 73 Market Type Spot Eatab. date/lime 91.06.03.17.00.00.00 Maturity daU/tlmf 94.06.03.17.00.00.00 Order ID (If app.) 9156515899 Coat date/time (If app.) 93.01.01.I7J8.1I.00 Cootnct/ProdiKt context t 1 of 1 Application ID: 001 .

A. P. Own Reference: 667-3 Application Pra meter B.L.C. tno Product Sponsor B.L.C. Ino Counterparty-guarantor CNZ Banking Corp.

Regulator Paetlio Central Bank Valuations aa at 93.06.06.09.00.00.00 Expected Value Std. Deviation F.P.Vi Contract 1960 306 38JOO 10.610 CoaildmikfV Entitlement Dcnaoilaatloo CMt^mflM Entitlement ConiJEntlllemenI type Currency type (If app) National Curr. type (If applic.) Amount Money Com Bnk dep. AUD N.A.

Money On Bnk dep. AUD 58JOO Money Com Bnk dep. AUD As below 3 O vo is 8 <o o\ Pricing and Matching Process: Minimite pre-tax coiuidcralion payment tinder an EV/CE regime Spcdal Deal Type CollaleralisaUon Payment* AUDWO't 200 180 160 140 120 100 80 60 40 0 ssms§sisggmsg£m§i§mgmsiiigiiiigo ■■ ; I Feasible Product Values fF.P.VQ ~~| 11 g| 0 p O O 2S S3! 8SSS3SSSS88 r«T*?-T,r'i-T*rrrN NNNMNNNNNNN b to I *0 n > c *o ui in CONTRACT VALUATION AS AT 94.oi.oi.i7.oo.oo.oo Report for: Shears:' i Associates G13 CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Counterparty: Shearer & Associates Abrahamsons Product; (ID 100C1 JL Markrt Stock Iadioa Sab-Market PTSE 75 MarkrtTypt Spot KrtaKdaWllmt 91.06.03.17.00.00.00 Maturity daU/Uroo 94.06.03.17.00.00.00 Application ID: 001 A.P. Own Reference: 667-3 Application Promoter B.L.C. Ino Product Sponsor B.L.C. Ino Counterparty-guarantor CNZ Banking Corp.

Regulator Paoifio Central Bank Order ID (irapp.) Canf. date/time (If app.) Contract/Product context i 9156515899 93.01.01.17.3B.11.00 1 of 1 Valuation* ai at 94.01.01.17.00.00.00 Expcctcd Value Std. Deviation F.P.Va Contract 1800 283 162.360 33.160 CMitdcratlMi/ Eettrtmrat l)tMmlnattoA C«niltffTvttoa Entitlement ConsJEnllUemtnl type Currency type (If ipp) National Curr. type (ir applic.) Amount Money Com Bnk dep. AUD N.A.

Money Com Bnk dep. AUD 58,300 Money Con Bnk dep. AUD As below Tricing and Matching Proctu: Minimiie pre-tax consideration payment under an EV/CE regime Spedal Deal Type: Co)liter*)iMlioo Payment* AUDWHTi 200 180 160 140 120 100 60 60 40 0 gggSSggggSs§SSSS§§8S§sgiSSSlSiiiSiSliil§S§SSS§S3Sg ** <• «- t- ffNNNNNNNNNWNNNNNNNNNNN I Feasible Product Value* (F.P.VI) I 3 O vo vo 9\ U) © I *0 n H a vo Lft O CONTRACT MATURITY AS AT 94.04.03.17.00.00 Report for: Shearer A. Associates G14 CONTRACT SUMMARY (GRAPHICAL) Ordering Party: Shearer & Associates Application ID: 001 CMildmttoo/ Counterparty: Abrahamsons A.P. Orni Rtrntncti 667-3 Entitlement CaoiMmttaa Entitlement Product: (ID 100(1 ) Application Promoter B.L.C. Inc DtoomliurtM Market Stock Indioet Product Spoiuor B.L.G Ino ConL/EnUllement type Money Money Money Sub-Market PTSE 73 Market Type Spot Camttwparty-gaaranlor CNZ Banking Corp.

Currency lype (If app) Com Bnk dep.

Com Bnk dep.

Com Bnk dep.

Eitak date/time 91.06.03.17.00.00.00 Rctulatar Paoific Central Dank National Curr. lype (If applic.) AUD AUD AUD Maturity datcAim* 94.06.03.17.00.00.00 Amount N.A 58J00 As below Valua Umu a> at 94.06.03.17.00.00.00 Order ID (If app.) 9156515899 F.P.Vi Cenlrart Tricing and Matching Proceii: Minimiie pre-tax consideration payment Caaf. date/time (if app.) 93.01.01.17J8.11.00 Expected Value 1120 187.200 under an EV/CE regime Contract/Predact context i 1 of 1 Std. Deviation 0 0 Special Deal Type: Collaleralitation Payments AUDWi «00 180 160 140 120 100 -80 60 40 20 0 8S88'SBIE8§gcg8Smg88SSBS885i8-BS8S388g88gilg§§8i§8SSSSSSigg88 . ' I Fmible Product Values (F.P.Va) I OINrtNCINNNN n w n w n n n 3 0 NO 1 vo C\ I H U) H I •V n H > e vo UJ o © K> t/i O -132-APPENDIX H PROCESS 2 VARIABLES AND DATA FILES This Appendix lists the file name and description therefor.

Order Data fields OID BID BF;EF PID PMAT 15 PC/ED PCUR PNCUR PPARAM MAXCONSID PAYFUNC PAYPARAM 25 ACC CONSID ACC ENTITL RET LIM OPRICE Unique Identification assigned by CONTRACT APP to every new order submitted.

Ordering party Identification.

Ordering party's own reference for this order.

Order field specifying the required product.

Product maturity date.

Product consideration/entitlement denomination.

Product currency denomination.

Product national currency denomination.

Product specification parameters (eg. minimum value (PMIN), maximum value (PMAX), and the step size (PSTEP)). Maximum consideration the ordering party will pay for this contract.

Pay-off function type, contingent on one or more index variables.

Parameters associated with the PAYFUNC.

The ordering party account the consideration is to be paid from. Implied is the account consideration/entitlement, currency, national currency. The ordering party account the contract entitlement 1s to be paid Into. Implied is the account consideration/entitlement, currency, national currency. Retention time limit for the order, which sets an expiration time for the order whilst remaining un-matched.

Price calculated and selected for this order (this value will be the matching price). 1 SPRICE PAY TRAN DCID 5 OANON OMANUAL DTID Counterparty Identification v/1th which the order was matched.

Payment transaction number.

Defined circumstances identification.

Anonymous flag, set by the ordering party when seeking to avoid manual authorisation requests by other stakeholders.

Manual authorisation request flag. If set, the ordering party requires manual authorisation before the matched order is fully confirmed.

Deal type Identification which codes a combination of miscellaneous flags such as collateralisatlon, bilateral and multilateral netting requirements.

Counterparty Short List Arrays PRICEFUNC(SID) ELFUNC(SID) EVFUNC(SID) CR(SID) DR(SID) PRICE(SID) EL(SID) AL(SID) EV(SID) MCCCSID) Pricing function: function type and associated parameters.

Expected loss determination function: function type and associated parameters.

Expected value determination function: function type and associated parameters.

Commission rate to be used for the current defined circumstances.

Discount rate to be used for the current defined circumstances.

Price calculated by each counterparty.

Expected loss calculated for the current order by each counterparty.

Absolute loss calculated for the current order by each counterparty.

Expected values determined for the current order by each counterparty.

Maximum composition any contract <as an expected loss) can ha'ye of the entire portfolio.

MC(SID) ELLl(SID) ELL2(SID) ELL3(SID) ELL4(SID) ELL5(SID) CEL2(SID) CEL3CSID) CEL4(SID) CEL5(SID) ALLHSID) 20 ALL2(SID) CAL2(SID) EVLl(SID) . C-C/EDXCHANG(SID) C-CXCHANG(SID) C-NCXCHANG(SID) Maximum composition the product (as an expected loss) can have of the entire portfolio.

Order expected loss limit.

Expected loss limits set by the counterparty for the product.

Expected loss limits set by the counterparty for equivalent maturity date products.

Expected loss limits set by the counterparty for same month maturity products.

Expected loss limits set by the counterparty for orders In all products.

Current accumulated expected losses for the product. Current accumulated expected losses for equivalent maturity date products.

Current accumulated expected losses for same month maturity products.

Current accumulated expected losses for orders in all products.

Absolute loss limit function for each contract. Absolute loss limit function set for the product. Current absolute limit function accumulated for the product.

Expected value limit on each order.

Counterparty consideration/entitlement denomination exchange rates which convert the ordering party's consideration denomination of ACC CONSID (and MAXCONSID) Into the product's consideration denomination.

Counterparty currency exchange rates which covert the ordering party's currency of ACC CONSID (and MAXCONSID) into the product's denominated currency. Counterparty national currency exchange rates which convert the ordering party's national currency of ACC CONSID (and MAXCONSID) into the product's denominated national currency.

E-C/EDXCHANG(SID) Counterparty consideration/entitlement denomination exchange rates which convert the ordering party's consideration denomination of ACC ENTITLInto the product's consideration denomination. 5 E-CXCHANG(SID) Counterparty currency exchange rates which covert the ordering party's currency of ACC ENTITL Into the product's denominated currency.

E-NCXCHANG(SID) Counterparty national currency exchange rates which convert the ordering party's national currency of 10 ACC ENTITL Into the product's denominated national currency.

Miscellaneous Variables BPRICE Best price selected from the PRICE(SID) array.

SID The currently selected or viewed counterparty Identification.

INDEX Index counter variable required for calculating order prices.

PI Value calculated by a pricing function at an Index point.

P2 Value calculated by a pay-off function at an index point.

Master File? FILE DESCRIPTION/CONTENTS PORD NEW Holds details of all new orders submitted by ordering 30 parties: BID Ordering party Identification.

BREF Ordering party's own reference for this order.

PID Order field specifying the required product.

MAXCONSID Maximum consideration the ordering party will pay for 35 this contract.

PAYFUNC PAYPARAM ACC CONSID ACC C/ED ACC CUR ACC NCUR ACC ENTITL RET LIM OANON OMANUAL DTID Pay-off function type, contingent on one or more Index variables.

Parameters associated with the PAYFUNC.

The ordering party account the consideration 1s to be paid from.

The ordering party account consideration/entitlement.

The ordering party account currency.

The ordering party account national currency.

The ordering party account the contract entitlement 1s to be paid Into.

Retention time limit for the order, which sets an expiration time for the order whilst remaining un-matched.

Anonymous flag, set by the ordering party when seeking to avoid manual authorisation requests by other stakeholders.

Manual authorisation request flag. If set, the ordering party requires manual authorisation before the matched order 1s fully confirmed.

Deal type identification which codes a combination of miscellaneous flags such as collaterallsatlon, bilateral and multilateral netting requirements.

PORD QUEUE OID PMAT C/ED PCUR PNCUR PPARAM DCID This master file holds details of orders which have already been authorised, and have attempted to match once before. Fields as 1n ORD NEW plus some additional fields: Unique identification assigned by P-CONTRACT to every new order submitted.

Product maturity date.

Product consideration/entitlement denomination.

Product currency denomination.

Product national currency denomination.

Product specification parameters (eg. minimum value (PMIN), maximum value (PMAX), and the step size (PSTEP)) Defined circumstances identification.

PORD REJ ERRCODE 5 PORD CONF OPRICE 10 SPRICE PAY TRAN PPRODUCT PID PMAT PC/ED PCUR 20 PNCUR PPARAM PDEAL LIST BID PID SID ANON MANUAL PCT / AU93/00250 All rejected orders reside in this file. Fields as in ORD QUEUE plus some additional fields: Error code indicating why the order was rejected.

When an order is matched and fully confirmed, full details are stored in this master file. Fields as In ORD QUEUE plus some additional fields: Price calculated and selected for this order. This value will be the matching price.

Counterparty identification with which the order was matched.

Payment transaction number.

This master file holds information (definition details) about each product known to the system: Product identification.

Product maturity date.

Product consideration/entitlement denomination.

Product currency denomination.

Product national currency denomination.

Product specification parameters (eg. minimum value (PMIN), maximum value (PMAX), and the step size (PSTEP)).

This file holds a list of the ordering party/product/counterparty tuples of allowable deals to occur. Thus by specifying an ordering party (BID) and product (PID), a list of counterparties who are prepared to enter into a deal with the ordering party/product combination, can be obtained: Ordering party Identification Product Identification Counterparty Identification All stakeholder Identifications requiring anonymous confirmation.

All stakeholder Identifications requiring manual authorisation PCT/AU93/OO250 PSEL DC DCID BID PAYFUNC PAYPARAM ACC CONSID ACC ENTITL DTID PC/ED PCUR PNCUR This file allows counterparties to define Identifications for sets of potential order parameters. Any order data field can be used to define an order.

Each defined circumstance identification is then used to set unique pricing parameters: Defined circumstances Identifications.

Ordering party identification Pay-off function type, contingent on one or more Index variables.

Parameters associated with the PAYFUNC.

The ordering part account the consideration 1s to be paid from.

The ordering party account the contract entitlement is to be paid into.

Deal type Identification.

Product consideration/entitlement denomination.

Product currency denomination.

Product national currency denomination.

PSEL PRICE Contains all counterparty pricing parameters, Including commission rates, discount rates and exchange rates: Counterparty Identification Product Identification Defined circumstances identification Pricing function: function type and associated parameters.

Commission rate to be used for the current ordering party 1n the current product.

Discount rate to be used for the current ordering party in the current product.

C-C/EDXCHANG Counterparty consideration/entitlement denomination exchange rates which convert the ordering party's consideration denomination of ACC CONSID (and MAXCONSID) into the product's consideration denomination. Counterparty currency exchange rates which covert the ordering party's currency of ACC CONSID (and MAXCONSID) SID PID DCID PRICEFUNC CR DR C-CXCHANG Into the product's denominated currency.

C-NCXCHANG Counterparty national currency exchange rates which convert the ordering party's national currency of ACC CONSID (and MAXCONSID) into the product's denominated national currency.

E-C/EDXCHANG Counterparty consideration/entitlement denomination exchange rates which convert the ordering party's consideration denomination of ACC ENTITL into the product's consideration denomination.

E-CXCHANG Counterparty currency exchange rates which covert the ordering party's currency of ACC ENTITL into the product's denominated currency.

E-NCXCHANG Counterparty national currency exchange rates which convert the ordering party's national currency of ACC ENTITL into the product's denominated national currency.

PSEL LIMIT SID PID DATE MCC MC ELL1 ELL2 ELL3 ELL4 35 ELL5 Holds all counterparty portfolio limits and current accumulated exposures 1n the various mathematical forms allowed by the system: Counterparty identification Product identification Product maturity date.

Maximum composition any contract (as an expected loss) can have of the entire portfolio.

Maximum composition the product (as an expected loss) can have of the entire portfolio.

Order expected loss limit.

Expected loss limits set by the counterparty for the product.

Expected loss limits set by the counterparty for equivalent maturity date products.

Expected loss limits set by the counterparty for same month maturity products.

Expected loss limits set by the counterparty for orders in all products.

CEL2 Current accumulated expected losses for the product.

CEL3 Current accumulated expected losses for equivalent maturity date products.

CEL4 Current accumulated expected losses for same month maturity products.

CEL5 Current accumulated expected losses for orders in ail products.

ALL! Absolute loss limit function for each contract.

ALL2 Absolute loss limit function set for the product.

CAL2 Current absolute limit function accumulated for the product.

EVL1 Expected value limit on each order.

PAYACC Payment accounts for all registered stakeholders (inc. balances and previous SHADOWtransactlons), are stored in this master file: ID Stakeholder identification.

NO Account number.

ACC C/ED The ordering party account consideration/entitlement.

ACC CUR The ordering party account currency.

ACC NCUR The ordering party account national currency.

BALANCE Available funds.

GID Stakeholder Identification guaranteeing the account. 141 - 2520 66

Claims (41)

CLAIMS:

1. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising: at least one stakeholder input means by which ordering stakeholders can Input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a range of future outcomes, and said contract data specifying a future time of maturity, entitlements due at maturity for the range of outcomes, and a consideration due to a counter-party stakeholder; at least one counter-party stakeholder input means by which at least one counter-party stakeholder can Input registering data as to a respective view of the outcomes in said predetermined range of outcomes in the future for one or more of said predetermined phenomena; a data storage means linked with each said stakeholder input means and linked wtth each said counter-party stakeholder Input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said registering data, said pricing including selecting the registering data corresponding to the time of maturity for each predetermined phenomenon, and calculating a counter-consideration derived from said entitlements, and said matching Including comparing said consideration and said counter-consideration to match an offered contract with at least one of said counter-party stakeholders.

2. The system as in claim 1, further comprising at least one other-stakeholder Input means linked with the data storage means, and by which phenomena and associated range of outcomes can be Input to be stored in the data storage means to be ones of the said predetermined phenomena and the predetermined range of outcomes therefor.

3. The system as in claim 2, wherein each other-stakeholder input means 1s configured so that each said predetermined phenomenon and associated range of outcomes further 'include a predetermined time WO 94/28496 PCT/AU93/00250 - 142 - of maturity, and the said contract data and the said registering data are for the predetermined date of maturity.

4. The system as in claim 2 or claim 3, wherein said registering data for each outcome represents a probability of that outcome eventuating at the date of maturity, and the said counter-consideration is calculated by elemental multiplication of entitlements and the respective probability, all summed over the predetermined range, and adjusted at least to calculate the present day value thereof.

5. The system as in claim 4, wherein the said other-stakeholder Input means is configured to receive updating data as to a present day outcome of each of the phenomena, 1n turn to be passed to the data storage means for recordal.

6. The system as 1n claim 5, wherein, on maturity of the contract, the data processing means retrieves the updated present day outcome of the respective phenomenon from the data storage means, determines an entitlement due for that outcome, and passes the entitlement to output means of the data processing system for exchange of the entitlement between the matched stakeholders.

7. The system as In claim 6, wherein said output means 1s linked with data communications means to remote locations where stakeholder accounts reside, and the data processing means causes transaction of the entitlement between respective stakeholder accounts.

8. The system as in claim 4, wherein said other-stakeholder input means receives qualification data which places qualification on which of the counter-party registering data can be used to price and/or match an offered contract, the said qualification data being stored 1n the data storage means.

9. The system as 1n claim 8, wherein said qualification data 1s input to the Input means by parties including stakeholder guarantors, and financial or institutional regulators. WO 94/28496 PCT / AU93/00250 - 143 -

10. The system as in claim 4, wherein the data processing means 1s configured so that a match of an offered contract 1s made on the basis only of a counter-consideration being less than or equal to the said consideration.

11. The system as 1n claim 10, wherein the data processing means is configured so that a match of an offered contract Is made with a preferred one of a counter-consideration being less than or equal to the said consideration.

12. The system as 1n claim 4, further comprising a credit record and a debit record for each stakeholder held with an exchange institution, the credit records and debit records for exchange of entitlements; and the data storage means of the data processing apparatus being configured to include a shadow credit record and a shadow debit record for each stakeholder, the data processing means being configured to obtain a start-of-day balance for each shadow credit record and shadow debit record, and for every transaction resulting 1n an exchange obligation, adjusting the respective shadow credit record or shadow debit record, allowing only those transactions that do not result In the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place 1n chronological order, and the data processing means further being configured to, at the end-of-day, instruct ones of the exchange Institutions to exchange transacted credits or debits to the credit record and debit record of the respective stakeholders 1n accordance with the adjustments of the said permitted transactions, the credits and debits be Irrevocable, time invariant obligations placed on the exchange Institutions.

13. The system as In claim 1, wherein, on a match of an offered contract, the data processing means passes the matched contract to the data storage means for recordal. WO 94/28496 PCT / AU93/00250 - 144 -

14. The system as in claim 13, wherein the output means generates confirmatory documentation for each stakeholder to a matched contract.

15. A system to enable the formulation of multi-party risk management contracts, the system comprising: a plurality of main data processing devices interconnected by at least one data communications link, each said data processing device running an operating system and applications software; one or more data storage devices to which each data processing device has access; a plurality of data input/output channels providing connection to a plurality of stakeholder locations, each said location having data processing means, and the system being programmed for: regulating input of data, specifying a risk phenomenon, a range of outcomes for the phenomenon, and a time of maturity; stakeholders Inputting to a said data storage device by ones of the stakeholder data processing locations contract data for an offered contract, specifying an entitlement due at maturity for each outcome In the predetermined range of outcomes for a one of the predetermined phenomena, and an amount payable to a seller; counter-party stakeholders Inputting to a data storage device by ones of the stakeholder data processing locations registering data as to a respective view of occurrence of each outcome In the predetermined range of outcomes for at least one of the predetermined phenomena; pricing and matching a contract by the main data processing devices for at least one of the offered contracts from the seller registered data by: for an offered contract, selecting the registering data for the respective phenomenon and, in response to entitlements specified for each outcome in the range of outcomes for the phenomenon, calculating a counter-consideration, and, by comparison of the calculated counter-consideration with the consideration, matching an offered contract with at least one counter-party stakeholder. i RECEIVED '0 8 BEC 199V - 145 - 252066

16. The system as in claim 15, further comprising output means for each distributed data processing location whereby, on a match of a contract, confirmation is output In the form of data or documentation to respective output means for the matched stakeholders.

17. A method to enable the formulation of multl-party risk management contracts, the method comprising the steps of: (a) Inputting Into data processing apparatus, by at least one ordering stakeholder Input means thereof, contract data representing at least one offered contract 1n at least one predetermined phenomenon having a range of future outcomes, and said contract data specifying a future time of maturity, entitlements due at maturity for the range of outcomes, and consideration due to a counter-party stakeholder; (b) Inputting Into said data processing apparatus, by at least one counter-party stakeholder Input means thereof, counter-party registering data as to a respective view of each outcome In said predetermined range of outcomes 1n the future for one or more of said predetermined phenomena; <c> storing, in a data storage means of said data processing apparatus linked with each said stakeholder Input means and linked with each said counter-party stakeholder Input means, said contract data and said registering data; and (d) pricing and matching at least one of the offered contracts by data processing means of the data processing apparatus linked with said data storage means, said pricing and matching comprising the steps, for each offered contract, of: (I) selecting the registering data corresponding to the time of maturity for a predetermined phenomenon; (II) calculating a counter-consideration derived from the said entitlements; (III) comparing the said consideration and the said counter-consideration; and (1 v> matching a contract on the basis of said comparison. BFD/237K AMENDED SHEET IPEA/AU n.z. patent orricr: 2 2 NOV 1995 RECEIVED WO 94/28496 PCT/AU93/00250 - 146 -

18. The method as in claim 17, comprising the further step, before step (a), of: (aa) Inputting into said data processing apparatus, by at least one other other-stakeholder input means thereof, predetermining data of a said phenomenon and an associated range of outcomes.

19. The method as in claim 18, wherein the step (aa) further comprises inputting a predetermined time of maturity for each predetermined phenomenon and associated range of outcomes.

20. The method as in claim 19, wherein the registering data for each outcome represents a probability of that outcome eventuating at the time of maturity, and the step (d)(1i) calculating by multiplying elemental entitlements for each outcome with the respective probabilities; summing the products for the predetermined range of outcomes; and adjusting the sum at least to calculate a present day value thereof to give the counter-party consideration.

21. The method as in claim 18, comprising the further step following step (d) of: (e) Inputting, by the other-stakeholder Input means, data representing a present day outcome of each phenomenon.

22. The method as in claim 21, comprising the further steps, following step (e) of, at the time of maturity: (f) calculating the entitlement for the updated present day outcome; and (g) exchanging the entitlement between matched stakeholders.

23. The method as 1n claim 20, comprising the further steps, following step (d), of: WO 94/28496 PCT/AU93/00250 - 147 - (h) inputting, by the other-stakeholder Input means, qualification data on which of the counter-party registering data can be used to price an offered contract.

24. The method as in claim 20, wherein the step (d)(1v> 1s performed by considering those counter-considerations being only less than or equal to the said consideration.

25. The method as 1n claim 24, wherein the step (d)(1v) 1s performed by matching a preferred one of the counter-considerations being less than or equal to the said consideration.

26. The method as In claim 17, wherein each stakeholder holds a credit record and a debit record with an exchange institution, the credit record and debit record for exchange of entitlements, the method comprising the further steps, following step (d), of: (1) creating a shadow credit record and a shadow debit record for each stakeholder to be held Independently by the data processing apparatus from the exchange Institutions; (j) obtaining from each exchange Institution a start-of-day balance for each shadow credit record and shadow debit record; (k) for every translation resulting 1n an exchange obligation, the supervisory Institution adjusting each respective shadow credit record or shadow debit record, allowing only those transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place 1n chronological order; and (1) at the end-of-day, the data processing apparatus Instructing ones of the exchange Institutions to exchange transacted credits or debits to the credit record and debit record of the respective stakeholders 1n accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange Institutions. WO 94/28496 PCT/AU93/00250 - 148 -

27. The method as 1n claim 26, wherein the end-of-day instructions represent credits and debits netted throughout the day for each stakeholder in respect of all the transactions of that day.

28. The method as 1n claim 17 or claim 18, comprising the further step, following step (d), and before maturity, of: (m) a party to a matched contract offering a stake in the contract toother parties in exchange for a consideration, and, on acceptance of the stake and exchange of the consideration by another party, that other party becoming a stakeholder to the contract.

29. The method as 1n claim 17, comprising the further step following step (d) of: (n) passing matched contracts to the data storage means for recordal.

30. The method as 1n claim 29, comprising the further step following step (n) of: <o> generating confirmatory documentation for each stakeholder for each matched contract.

31. A method of making a computer system, the method comprising the steps of: (a) Interconnecting at least one stakeholder data input means and at least one counter-stakeholder data input means to data storage means; (b) interconnecting the data storage means with data processing means; <c) Interconnecting the data processing means with output means; and (d) programming the data processing means to: (1) accept stakeholder Input data of contract data representing at least one offered contract, each offered contract - 149 - specifying a predetermined phenomenon, each phenomenon having a predetermined range of future outcomes, and each said contract data specifying a future time of maturity, an entitlement due for each outcome in said range of outcomes, and a consideration payable to a counter-party stakeholder; 5 (ii) accept counter-stakeholder registering data as to a respective view of each outcome in said predetermined range of outcomes in the future for each one or more of said phenomena; (iii) process the contract data and the registering data to price and match a contract, the said pricing including: selecting the registering data 10 corresponding to the time of maturity for each predetermined phenomenon, and calculating a counter-consideration derived from the said entitlements; and said matching including comparing said consideration and the said counter-consideration to match an offered contract with at least one of said counterparty stakeholders; and 15 (iv) output confirmatory data or documentation for each matched contract.

32. A data processing system as in claim 1, wherein, for one or more phenomena, the entitlements specified are the same for the entire range of outcomes. 20

33. A system as in claim 15, wherein, for one or more said phenomena, the entitlements specified are the same for the entire range of outcomes.

34. A method as in claim 17, wherein, for one or more said phenomena, 25 the entitlements specified are the same for the entire range of outcomes.

35. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising: N.Z. PATENT •. 10 SEP 1996 RECEIVED — , r , |NjJBICinQAg7;BFP 150- 252066 at least one stakeholder input means by which ordering stakeholders can input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and said contract data specifying an entitlement due at maturity and a consideration due to a counter-party stakeholder; at least one counter-party stakeholder input means by which at least one counter-party stakeholder can input registering data for one or more of said predetermined phenomena; a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said registering data, said pricing including calculating a counter-consideration derived from said registering data, and said matching including comparing said consideration and said counter-consideration to match an offered contract with at least one of said counter-party stakeholders.

36. A method to enable the formulation of multi-party risk management contracts, the method comprising the steps of: (a) inputting into data processing apparatus, by at least one ordering stakeholder input means thereof, contract data representing at least one offered contract in at least one predetermined phenomenon having a future outcome at a time of maturity, said contract data specifying an entitlement due at maturity and consideration due to a counter-party stakeholder; (b) inputting into said data processing apparatus, by at least one counterparty stakeholder input means thereof, counter-party registering data as to for one or more of said predetermined phenomena; 'Tl-r. ■ • - w.-Tr f.rj- n.z. patent q:~ 1 0 SEP 1995 ;,r, bece1v£d.. .jt. , • (N:\UBK)00427:BFD 252066 (c) storing, in a data storage means of said data processing apparatus linked with each said stakeholder input means and linked with each said counter-party stakeholder input means, said contract data and said registering data; and (d) pricing and matching at least one of the offered contracts by data processing means of the data processing apparatus linked with said data storage means, said pricing and matching comprising the steps, for each offered contract, of: (i) calculating a counter-consideration derived from the said registering data; (ii) comparing the said consideration and the said counter-consideration; and (iii) matching a contract on the basis of said comparison.

37. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising: at least one stakeholder input means by which ordering stakeholders can input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and said contract data specifying an entitlement due at maturity for each outcome in a predetermined range; at least one counter-party stakeholder input means by which at least one counter-party stakeholder can input registering data for one or more of said predetermined phenomena; a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said registering data, said pricing including calculating counter-considerations derived from said registering data relating

[N:\UBK|00427:BFD 252066 to the phenomenon of the contract data, and said matching including comparing said counter-considerations to match an offered contract with at least one of said counterparty stakeholders. 5 38. A data processing system to enable the formulation of potential multi party risk management contracts, the system comprising: at least one stakeholder input means by which ordering stakeholders can input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and 10 said contract data specifying an entitiement due at maturity for each outcome in a predetermined range; at least one counter-party stakeholder input means by which at least one counter-party stakeholder can input registering data for one or more of said predetermined phenomena; 15 a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing contracts from said contract data and said registering data, said pricing including 20 calculating counter-considerations derived from said registering data relating to the phenomenon of the contract data.

39. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising: 25 at least one stakeholder input means by which ordering stakeholders can input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and N,2t. patent office 1 0 SEP 1996 received - 153 - said contract data specifying an entitlement due at maturity for each outcome in a predetermined range; at least one counter-party stakeholder input means by which at least one counter-party stakeholder can input registering data for one or more of said 5 predetermined phenomena; a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and 10 matching contracts from said contract data and said registering data, said pricing including calculating counter-considerations for each outcome in said range derived from said registering data relating to the phenomenon of the contract data, and said matching including comparing said counter-considerations for each outcome in said range and over said range to match an offered contract with at least one of said counter-15 party stakeholders.

40. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising: at least one stakeholder input means by which ordering stakeholders can input 20 contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and said contract data specifying an entitlement due at maturity for each outcome in a predetermined range; at least one counter-party stakeholder input means by which at least one 25 counter-party stakeholder can input registering data for one or more of said predetermined phenomena; I.'.Z r i or* ICE;1 0 SEP 1996;RECEIVED;IN:\LIBK]00427:BFD;52066;a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said registering data, said pricing including dividing the entidement into integer components, and, for each component, calculating counter-considerations derived from said registering data relating to the phenomenon of the contract data, and said matching including comparing each component said counter-considerations to match an offered contract with at least one of said counter-party stakeholders.;

41. A data processing system to enable the formulation of multi-party risk management contracts, the system comprising:;at least one stakeholder input means by which ordering stakeholders can input contract data representing at least one offered contract in at least one predetermined phenomenon, each said phenomenon having a future outcome at a time of maturity, and said contract data specifying an entidement due at maturity for each outcome in a predetermined range;;at least one counter-party stakeholder input means by which at least one counter-party stakeholder can input registering data for one or more of said predetermined phenomena;;a data storage means linked with each said stakeholder input means and linked with each said counter-party stakeholder input means to store said contract data and said registering data; and data processing means, linked with the data storage means, for pricing and matching contracts from said contract data and said registering data, said pricing including calculating counter-considerations derived from said registering data relating to the phenomenon of the contract data, and said matching including comparing said in:\l1sk]00427:bfd;- 155;252066;counter-considerations to match an offered contract with at least one of said counterparty stakeholders, and further for periodically repricing the ordering data of matched contracts, said repricing including calculating counter-considerations derived from at least some of said registering data relating to the phenomenon of the contract.;DATED THIS DAY OF SafJesnL*.f A J. PARKA SON PER QC't AGENTS FORTHE/PPUCANT n.z. pattzmt office 1 0 SEP 1996 ^received [N:\LIBK]00427:BFD