WO2001033485A9

WO2001033485A9 - System and method of managing collateral

Info

Publication number: WO2001033485A9
Application number: PCT/US2000/030462
Authority: WO
Inventors: Elise M Wood
Original assignee: Elise M Wood
Priority date: 1999-11-03
Filing date: 2000-11-03
Publication date: 2002-08-01
Also published as: AU1465601A; WO2001033485A1

Abstract

An apparatus and a method of managing collateral (10). The method comprises the steps of providing at least one broker (102) desiderous of borrowing at least one item of collateral; providing at least one lender (101) capable of lending at least one item of collateral, maintaining data pertaining to at least one of the at least one lender, broker and item of collateral; receiving a query pertaining to the borrowing of at least one item of collateral; and determining a most desirable lender from the provided at least one lender based upon the maintained data (12, 14, 17, 20).

Description

TITLE OF THE INVENTION

SYSTEM AND METHOD OF MANAGING COLLATERAL

BACKGROUND OF THE INVENTION

1. Field of the Invention

The invention is directed in general to a system for performing, tracking and analyzing (i.e. managing) a global collateral market , and more particularly to a computer network based system for performing, tracking, implementing and analyzing transactions in global collateral markets. Of course, the system can be expanded to other financial markets as well, using the principles identified below, including derivative markets, options markets, futures markets and foreign exchange markets, to name a few..

2. Background Art

The global collateral market has long utilized different systems for the tracking and analyzing the transactions in the global collateral market. Currently the tracking systems have several drawbacks. First, the currently used tracking systems do not permit any realtime tracking and error correction. Rather, error correction and communication is done at a later date manually comparing large print-outs. One of the problems is that a large number of personnel and constant telephone communication is required to correct the errors.

Further, data of past transactions and past deals is maintained for a relatively short period of time, such as a month. Thus, it is difficult to analyze information which occurred at some time in the past. In addition, it is difficult to assemble the information so as to perform general analysis relative to a particular client or lender.

In addition, is difficult to track a particular collateral transaction to establish rates, etc.

Further still, such systems generally are utilized only for tracking single markets (i.e. the securities market). With the realities of a global market and a global economy, it has become necessary to extend beyond a single type of financial market and to provide a system which is capable of handling various types of collateral.

Thus, it would be an advantage to provide a system for facilitating, tracking and analyzing information in the global collateral market, especially to provide usable information and to provide information.

These and other principles and objects will be understood in light of the specification appended hereto.

SUMMARY OF THE INVENTION

One aspect of the invention comprises a method of management of collateral. Such a method includes the steps of providing at least one broker desirous of borrowing at least one item of collateral; providing at least one lender capable of lending at least one item of collateral; maintaining data pertaining to at least one of the at least one lender, broker and item of collateral; receiving a query pertaining to the borrowing of at least one item of collateral; and determining a most desirable lender from the provided at least one lender based upon the maintained data. In a preferred embodiment, the method further includes the steps of transmitting the query to the most desirable lender; and receiving a response to the query from the lender to whom the query has been transmitted. In such a preferred embodiment, the step of determining comprises the step of ranking the at least one lender in order of desirability. In one such embodiment, the step of ranking comprises the step of analyzing at least one parameter associated with at least one of the lender, the broker and the item of collateral. In another such embodiment, the method further comprises the step of transmitting the query to the at least one lender according to the results of the step of ranking, wherein the response to the query from the lender to whom the query has been transmitted responds negatively. In such an embodiment, the method further comprises the step of repeating the step of transmitting until such time that a response to the query from the lender to whom the query has been transmitted responds positively.

In a preferred embodiment, the method further comprises the step of completing a transaction upon receiving a positive response to the query from the lender to whom the query has been transmitted. In such an embodiment, the method further comprises the step of monitoring the transaction. Preferably, the step of monitoring the transaction comprises the steps of obtaining information pertaining to the item of collateral; comparing the information pertaining to the item of collateral to the transaction; and alerting at least one of the broker and the lender if at least one parameter of the item of collateral (i.e. price) changes. In one such embodiment, the method further comprises the step of adjusting the transaction due to changes associated with the at least one parameter of the item of collateral.

Preferably, the method further includes the step of storing information pertaining to the transaction. In one preferred embodiment, the method further comprises the step of providing access to the stored information pertaining to the transaction to at least one of the broker and the lender. In another such preferred embodiment, the method further comprises the step of precluding unauthorized access to the stored information. In yet another such preferred embodiment, the method further comprises the step of analyzing the transaction relative to at least one parameter by at least one of the broker and the lender.

It will be understood that the method operates in an environment wherein the at least one broker comprises a plurality of brokers, and the at least one lender comprises a plurality of lenders, and the at least one item of collateral comprises a plurality of items. In another aspect of the invention, the invention comprises a system for facilitating the borrowing of an item of collateral. The system comprises means for associating at least one broker and at least one lender; means for facilitating pre-trade communication or dealing between the at least one lender and the at least one broker relative to at least one item of collateral; means for performing a transaction between the at least one lender and the at least one broker relative to the at least one item of collateral; and means for rectifying the transaction on an on-going basis during the pendency of the transaction.

In a preferred embodiment, the facilitating means further comprises means for ranking the lenders relative to desirability as pertaining to the at least one lender and the at least one item of collateral. In one such embodiment, the rectifying means comprises means for comparing the transaction relative to outside parameters; and means for alerting at least one of the broker and the lender upon satisfaction of a predetermined condition (i.e. change in value of the collateral).

In another preferred embodiment, the system further comprises means for storing data pertaining to the transaction. BRIEF DESCRIPTION OF THE DRAWINGS

The invention is further described with respect to the drawings in which: Fig. 1 of the drawings is a schematic view of the present invention; and Fig. 2 of the drawings is a schematic view of the general operation of a collateral lending transaction.

DETAILED DESCRIPTION OF THE DRAWINGS

While this invention is susceptible of embodiment in many different forms, there is shown in the drawings and will herein be described in detail a specific embodiment with the understanding that the present disclosure is to be considered as an exemplification of the principles of the invention and is not intended to limit the invention to the embodiment illustrated.

Global collateral management system 10 is shown in Fig. 1 as comprising means 12 for facilitating pre-trade communication and/or dealing between any one of lenders 101 and brokers 102 relative to one or more items of collateral, means 14 for providing support for trading between lenders 101 and brokers 102, means 16 for rectifying accounts between the various lenders 101 and brokers 102, means 17 for storing data accumulated from data receiving means, means 20 for performing a transaction and means 22 for receiving data pertaining to the collateral. System 10 may comprise one or more server based computers 25 which include various software for accomplishing the below-explained steps and methods. Such computers will have adequate computation speed and capacity, as well as, adequate data storage space and manipulation means. Such servers are available from a variety of manufacturers, such as Compaq, IBM, Sun, etc. Each of lenders 101 and brokers 102, as shown in Fig. 1 are associated with system 10. For example, each lender and broker may be associated with a computer, such as computers 24 which is networked over network 26 to the computer servers of system 10. To facilitate ease of connectivity and ease of use, network 26 may utilize the resources of the Internet and the World Wide Web. However dedicated network (WAN/LAN) system are likewise contemplated for use. It will be understood that the use of an Internet based system, however, facilitates integration and access to the system by unlimited persons on virtually a worldwide basis.

Means 12 for facilitating pre-trade communication and/or dealing between any one of lenders 101 and brokers 102 comprises means 60 for receiving a query, means 62 for analyzing the query, and means 64 for transmitting the query to at least one broker. As will be explained below, a query is received by the system from a broker as to the purchase of a particular item of collateral. In turn, the query analyzing means analyzes the query and determines the lender in the best position to complete the transaction. The transmitting means then transmits the query to the appropriate broker. Indeed, the analyzing means may rank the possible lenders in order of desirability inasmuch as it is often necessary to contact more than one lender before agreement is reached as to a transaction.

Transaction performing means 20 comprises means 70 for finalizing the transaction and means 72 for providing a record of the transaction. As will be explained, the transaction performing means performs a transaction which has been formulated and negotiated by way of pre-trade facilitating means 12. Additionally, the record storing means 17 then stores the transaction information for further analysis and for tracking (as the various parameters of the transaction fluctuate over time).

Means 22 for receiving data pertaining to the collateral and the transaction comprises a link to collateral data server 30. Collateral data server 30 includes data pertaining to the present costs of certain items of collateral in the market, such as the present market value of the collateral. Such data can be transmitted realtime to server 25 for storage. Similarly, the data can be sent to server 25 on a particular schedule, or at a particular time each business day. It will be understood that collateral can comprise a multitude of different classes of collateral in a worldwide market. Indeed, the system is capable of handling different classes of collateral individually, as well as collectively. Indeed, the operation of the system is not governed by the type of transaction; rather, the substance of the transaction (i.e. the collateral) is not particularly relevant to the overall operation. Means 18 for storing data comprises a plurality of data storage units which can retain information which are received from subscriber data receiving means 20 and collateral data receiving means 22. The data is used by the lenders and the brokers for all aspects of the transaction from the pre-transaction negotiation, to the transaction itself, to the post-transaction monitoring. Indeed, various aspects of the performance of various transactions and various lenders and various borrowers, as well as the status of the collateral is crucially important for each stage of a transaction. Such storage devices can comprise hard drives, tape storage units, CD's, optical storage units or other types of storage devices. The data is generally stored for longer terms than is currently available, such as, for example for a plurality of years or the like, and are on-line so that they can be accessed from any computer associated with the internet. The data storage means comprises a compilation of a multitude of factors, including information pertaining to each lender, broker, all transaction, performance of various transactions, performance of various collateral, etc. Of course, the data is available to brokers and lenders on a restricted basis. Specifically, one lender will have access to certain global information and to certain information regarding transactions (i.e. transactions of that particular lender), while the same lender will be precluded from access to data of other lenders and other brokers.

Rectification means 16 comprises means 33 for comparing data received from various subscribers pertaining to a particular transaction, means 34 for alerting subscribers as to a problem with a particular transaction, means 37 for tracking and storing identified problems, means 34 for communicating the problem to the subscribers pertaining to a particular transaction and means 36 for correcting the problem. As will be explained below, the system can immediately identify problems associated with particular transactions, such as problems associated with incorrectly typed information, changes in the value of the collateral or differences in the subscriber information pertaining to a particular transaction. Moreover, the rectification means continues to monitor existing (open) transactions so that as circumstances fluctuate, the rectification means can facilitate the modification/alteration of the transactions as needed. The operation of the system will be described with respect to a sample transaction in Fig. 2. For such a transaction, it will be understood that a plurality of brokers and lenders are associated with system 10. In such an example, broker 102 is desirous of borrowing a stock for a client who is selling the stock short. Broker 102 utilizes pre-trade facilitating means, and more particularly query receiving means 60 to, in turn, input the desired stock into the system as a query. Analyzing means 62 then optimizes the query by reviewing various factors as performance of particular lenders, availability, cost, fees, etc. to determine the lender which is the best (according to the particular parameters) suited for the transaction. Generally, the lenders are ranked in order from most desirable to least desirable. At such time, the system, through query transmitting means transmits the request (query) to the most desirable lender. The lender can then accept or reject the query (i.e. based on any factors that the lender desires, the lender can decide to lend the collateral or to not lend the collateral). If the lender decides not to lend the collateral, the system is informed of same, and the query is transmitted to the next most desirable lender (as the lenders for a particular desired transaction are ranked by the system). This progression continues either until all possible lenders have refused, or until a lender accepts the offer.

In other embodiments of the system, the lender may submit to the system availability information as pertaining to different brokers such that different brokers have different items of collateral available from a single lender (i.e. the lender may be more willing to lend collateral A to a first broker than to a second broker). Past performance, performance on other deals, etc. which is retrieved from the data storage means and reviewed by the lender assists the lender with the determination of relationships between the various brokers. For example, there are instances wherein the collateral must be recalled to the lender (i.e. the collateral has been sold). While certain brokers will immediately return the collateral, certain brokers may retain the collateral for a period of time (to the detriment of the lender). The data storage system can maintain recall data, and the lender can review the data. Subsequently, the lender can make adjustments relative to the collateral offered to such a broker based on past poor performance which was ascertained by a review of data from the data storage means.

In such an embodiment, as the broker submits a query, the system can automatically determine the optimal lender with the knowledge of the lender's acceptable terms relative to the particular broker. As such, the transaction can be completed automatically, without the need to transmit the query to the lender for approval (i.e., the lender will have a series of parameters for various lenders for which pre-approval has been given).

Regardless of the method of acceptance, once an agreement is reached, the stock 170 is provided to broker 101 from lender 101 and, in return broker 102 pays amount 180 to lender for the collateral. Typically amount 180 is about 102% to 105% of the value of the collateral, however, it is not limited thereto. Lender 101 provides the collateral to the broker from, for example, pension fund 110 which retains the collateral. Broker 102 provides the stock 230 to client 150 in exchange for payment 220. The transaction performing means 20 monitors the transaction, wherein the transaction is finalized and a record is created and maintained relative to the transaction. The transaction details are then stored in the data storing means and the information is accessible to the lender and the broker (as well as to other authorized individuals).

With respect to the transaction Lender 101 then takes amount 180 received from broker 102 and invests the amount with outside market 130. The interest received from outside market 130 is then distributed to broker 102, lender 101 and pension 110. These transactions typically have a duration of a few days to a few months. However, the deals are not limited to any particular duration.

From the acceptance of the offer through the completion of the transaction, the transaction performing means monitors the transaction to confirm that no errors are associated with the transaction (i.e. that the proper collateral has been maintained and that the proper exchange has taken place).

For example, over time, the value of the collateral may change. At that time it is necessary to adjust the amount 180 which was transferred to lender 101. Specifically, comparing means 33 analyzes the value of the stock as received from the data receiving means 22. As the price of the stock changes, the comparing means triggers the alert means, to, in turn, alerts the broker and lender that the transaction requires revision and the circumstances have changed due to the change in value of the collateral. The lender and the broker can then, through communicating means 34, arrange for the adjustment of the amount. Such communication can be made over telephone/in person conversations, or, alternatively, the communication can be entirely electronic (in the form of electronic communication such as e-mail or communication through system 10). In addition, other changes, such as collateral, interest paid on the collateral, corporate action, dividend payment, etc. may likewise occur during the pendency of the transaction. These changes must likewise be reflected in the system.

Similarly, if the comparing means identifies a problem, such as the broker believing that 100 shares were purchased whereas the lender believes that 98 shares were traded, the alert means can alert the two subscribers. The two subscribers can then, in realtime, through correcting means, correct the problem. Again, such communication can take place electronically. All of the information pertaining to the changing of transactions, the modification of transactions and the performance of the transactions are stored in the data storage means so that they can be reviewed by particular authorized lenders and brokers as necessary. In addition to the features of the system which facilitate the maintenance of the transaction, the system provides for vast analysis and review tools. Specifically, the system is configured to store vast quantities of data, and to make the data available to subscribers on a realtime basis. For example, a request for a particular collateral is received by lender. With the present system, through the analysis means, the lender can immediately determine the value of the collateral and relevant information pertaining to the collateral, the quality and the assets of the broker currently outstanding with the particular lender, and other information.

Specifically, any such information can be retrieved from the storage means and then it can be analyzed by either of the lender and the broker. As a result, the individuals making the transaction can have more information, in realtime, so as to make a better decision as to the interest rate required for transaction of the collateral.

In addition, after the transaction has been initiated, or after a transaction has been pending for a particular period of time, either the broker or the lender can review data pertaining to the transaction, including any adjustments made to the transaction itself, or any changes that have occurred to the collateral. With this information, the broker and the lender can have unprecedented information pertaining to the transaction and pertaining to the broker and the lender. With such information, the broker and the lender have a better understanding of the transaction and the profitability of the transaction. The system is a vast improvement over the prior art. For example, the subscribes are easily able to compare and to amend information provided to the system on a realtime basis. With the prior art systems, the information is downloaded for compilation, and print-outs are sent to individual subscribers for review. Not only is the information rigid, but the information is not available immediately, nor is the information correctable on-line on a realtime basis.

Additionally, by placing the information on line, the information is available to anyone on a world wide basis. Costs can therefore be reduced, and satellite offices abroad can be incorporated into the system without an additional burden.

Furthermore, information can be tracked by the storage means relative to the broker and the lender negotiating the deals. As a result, rather than the current focus on efficiency, performance (profit) by the broker and the lender can be focused on the performance of the deals that have been structured.

Essentially, the data storage means can store a plethora of information pertaining to the collateral, the transaction, the broker and the lender so that the information (or any portion of the information) can be downloaded to an individual computer and manipulated into a format where the information can be analyzed.

The information that can be included comprises among other things, the embedding of calculations into the database to allow the user to quickly assess trends, rankings, predictions and other relationships. The information also includes data mining tools that enable a user to search for preconceived trends as well as trends of which they may not be aware. Further, the database can include market variables which are embedded into the database to provide the opportunity for timely risk and, profitability analysis. Lastly, additional information can be added into the system if and when such information becomes important. Moreover, the information and data stored can be applied to other industries other than the collateral lending market. The foregoing description merely explains and illustrates the invention and the invention is not limited thereto except insofar as the appended claims are so limited, as those skilled in the art who have the disclosure before them will be able to malce modifications without departing from the scope of the invention.

Claims

CLAIMSWhat is claimed is:

1. A method of managing collateral comprising: - providing at least one broker desirous of borrowing at least one item of collateral;

- providing at least one lender capable of lending at least one item of collateral;

- maintaining data pertaining to at least one of the at least one lender, broker and item of collateral;

- receiving a query pertaining to the borrowing of at least one item of collateral; and

- determining a most desirable lender from the provided at least one lender based upon the maintained data.

2. The method of claim 1 further comprising the steps of:

- transmitting the query to the most desirable lender; and

-receiving a response to the query from the lender to whom the query has been transmitted.

3. The method of claim 2 wherein the step of determining comprises the step of:

- ranking the at least one lender in order of desirability.

4. The method of claim 3 wherein the step of ranking comprises the step of: - analyzing at least one parameter associated with at least one of the lender, the broker and the item of collateral.

5. The method of claim 3 further comprising the step of:

- transmitting the query to the at least one lender according to the results of the step of ranking, wherein the response to the query from the lender to whom the query has been transmitted responds negatively.

6. The method of claim 5 further comprising the step of:

- repeating the step of transmitting until such time that a response to the query from the lender to whom the query has been transmitted responds positively.

7. The method of claim 1 further comprising the step of:

- completing a transaction upon determining the most desirable lender.

8. The method of claim 7 further comprising the step of:

- monitoring the transaction.

9. The method of claim 8 wherein the step of monitoring the transaction comprises the steps of: • - obtaining information pertaining to the item of collateral;

- comparing the information pertaining to the item of collateral to the transaction; and

- alerting at least one of the broker and the lender if at least one parameter of the item of collateral (i.e. price) changes.

10. The method of claim 9 wherein further comprising the step of:

- adjusting the transaction due to changes associated with the at least one parameter of the collateral.

11. The method of claim 7 further comprising the step of:

- storing information pertaining to the transaction.

12. The method of claim 11 further comprising the step of:

- providing access to the stored information pertaining to the transaction to at least one of the broker and the lender.

13. The method of claim 12 further comprising the step of:

- precluding unauthorized access to the stored information.

14. The method of claim 12 further comprising the step of:

- analyzing the transaction relative to at least one parameter by at least one of the broker and the lender.

15. The method of claim 1 wherein the at least one broker comprises a plurality of brokers, and the at least one lender comprises a plurality of lenders, and the at least one collateral comprises a plurality of items of collateral.

16. A system for facilitating the management of collateral comprising:

- means for associating at least one broker and at least one lender; - means for facilitating pre-trade communication or dealing between the at least one lender and the at least one broker relative to at least one item of collateral;

- means for performing a transaction between the at least one lender and the at least one broker relative to the at least one item of collateral; and

- means for rectifying the transaction on an on-going basis during the pendency of the transaction.

17. The system of claim 156 wherein the facilitating means further comprises:

- means for ranking the lenders relative to desirability as pertaining to the at least one lender and the at least one item of collateral.

18. The system of claim 16 wherein the rectifying means comprises:

- means for comparing the transaction relative to outside parameters; and

- means for alerting at least one of the broker and the lender upon satisfaction of a predetermined condition (i.e. change in value of the item of collateral).

9. The system of claim 16 further comprising:

- means for storing data pertaining to the transaction.