WO2001037122A2 - Method and apparatus for the receipt, combination, and evaluation of equity portfolios for execution by a sponsor at passively determined prices - Google Patents

Abstract

The present invention is directed to a system for the electronic trading of financial instruments, and in particular, a system and method for the receipt, combination, and evaluation of equity portfolios for possible simultaneous execution by a sponsor at passively determined prices. In accordance with an embodiment of the present invention, a method for trading securities portfolios includes receiving a first intended portfolio trade having an associated specified commission, evaluating a combination of the first intended portfolio trade and a second intended portfolio trade for possible execution; and transmitting a decision on whether to execute the combination of the first intended portfolio trade and the second intended portfolio trade.

Description

METHOD AND APPARATUS FOR THE RECEIPT, COMBINATION, AND

EVALUATION OF EQUITY PORTFOLIOS FOR EXECUTION BY A SPONSOR

AT PASSIVELY DETERMINED PRICES

FIELD OF THE INVENTION

The present invention is directed to a system for the electronic trading of financial

instruments, and in particular, a system and method for the receipt, combination, and

evaluation of equity portfolios for possible simultaneous execution at passively

determined prices by a sponsor.

BACKGROUND OF THE INVENTION

A portfolio trade (also known as a "basket trade") is the simultaneous execution of

a large number of individual stock trades. Because there are often significant transaction-

cost and other advantages to trading equities as baskets rather than as individual stocks,

portfolio trading has in recent years become increasingly popular with sophisticated

money managers (for example, pension funds and mutual funds) and other professional

market participants who use it to fund, rebalance, or liquidate equity portfolios. As used

herein, the terms "institutional investor" or "client" refer to any non-retail person or entity

who wishes to make a portfolio trade. In order to establish a context for discussing the transaction-cost advantages of

portfolio trading, a brief overview of equity trading costs is appropriate. In general terms,

the overall cost of trading can be divided into three components: commission, "slippage"

(also called "market impact"), and opportunity cost. Although some traders mistakenly

emphasize only the first of these costs, there are many trades for which slippage and

opportunity cost substantially outweigh the more explicit cost of commissions. Since the

overall cost of a trade can therefore vary widely even when the commission is fixed, it is

impossible to minimize transaction costs without a detailed understanding of these three

individual components.

• Commission. The most obvious component of trading costs (along with other

fixed costs, such as clearing), the commission is the charge per share that a

broker-dealer receives in exchange for handling an order. The magnitude of a

commission typically depends on a number of factors, including the size of the

order involved, the amount of capital at risk (if any), and the provision of

research and other services by the executing broker-dealer.

• Slippage. Slippage, or market impact, is the price effect produced by trading

Stated simply, the price of a stock tends to move adversely when you trade it -

buy orders normally push the price up and sell orders normally push the price

down. This price slippage can be considerable, especially if an order is for a significant fraction of the total number of shares normally traded in a given

stock over the course of a day.

• Opportunity Cost. A portfolio manager normally generates buy or sell

orders after coming to the conclusion that his portfolio will have a higher

intrinsic return ("alpha"), or a more favorable risk profile, after executing the

contemplated set of trades than before executing the trades. The longer the

portfolio stands in its pre-trade execution state, the longer the fund manager

sacrifices the higher expected alpha, or reduced risk, of the post-trade

portfolio. The stronger the portfolio manager's views about the post-trade

portfolio, the larger the expected opportunity cost if the required trading does

not take place quickly.

Minimization of overall transaction costs therefore requires that an institutional

investor have a detailed understanding of the slippage produced by its own trading. This

is difficult for many institutional investors because slippage is a complex phenomenon

for which many different measures are available. Similarly, in order to effectively

minimize opportunity cost, the institutional investor must have the ability to quantify the

relative importance of each individual trade - that is, determine when it is important to

have some orders executed more quickly than others. Because institutional investors are

generally more expert at evaluating companies and analyzing investments than at

understanding market microstructure as it relates to slippage and other esoteric transaction cost dynamics, an increasingly popular solution for institutional investors is to

offload the technical challenge of optimizing the implementation of their investment

decisions by trading entire portfolios with broker -dealers who use their own specialized

trading and transaction-cost expertise to handle these portfolios either as a principal or as

an agent.

There are two basic kinds of portfolio trades: agency trades and principal trades.

In an agency portfolio trade, an institutional investor asks an executing broker -dealer to

use its trading expertise and market access to complete the portfolio trade (by executing

all of the portfolio's component trades) on the most favorable terms possible. These

trades are sometimes subject to instructions regarding position or dollar-value ratios that

should be maintained as the portfolio is being traded. In an agency trade, the executing

broker-dealer does not assume any principal risk - that is, the executing broker-dealer

does not commit any of its own capital to buy or sell any portion of the portfolio for its

own account. As a result, the commission the broker-dealer receives from the

institutional investor for providing this service is typically quite low. The slippage and

opportunity costs (which, in the case of agency portfolio trades, are borne wholly by the

institutional investor), on the other hand, will vary from trade to trade, depending in part

on the amount of time the institutional investor allows for the trade to occur. An

institutional investor can establish a number of different "targets" for the average price at

which the executing broker-dealer should attempt to trade the agency portfolio (and therefore its component trades). In some cases, this target may be as general as "get it

done at the best price possible," but quite often, and especially in the case of index funds

or funds driven by asset-allocation models, a more objective benchmark for the broker-

dealer's performance is used. This benchmark might, for example, be linked to the day's

volume-weighted average price, or the closing price, of the stocks being traded in the

portfolio. Regardless of the target price the broker-dealer attempts to achieve, the

institutional investor's portfolio in an agency trade is executed at the actual prices

achieved by the executing broker-dealer. The executing broker-dealer is paid a

previously agreed-upon per-share commission for acting as the agent handling the

transaction.

In a principal portfolio trade, a broker-dealer commits its own capital to execute

an institutional investor's entire portfolio as principal, effectively transferring the entire

portfolio to the broker-dealer's own account. For example, an institutional investor re¬

balancing a portfolio might have a list of $50 million of equities to buy and a list of $50

million of equities to sell and desires to execute the trades with a broker-dealer as a

principal portfolio trade. To do this, the broker-dealer would purchase from the client,

for the broker-dealer's own account, all the stocks the institutional investor wished to sell

and sell to the institutional investor all the stocks the institutional investor wished to buy,

with all of the component trades occurring at passively determined prices. For example,

individual trades for exchange-listed stocks in the portfolio might occur at their closing prices on the relevant primary exchange (the New York Stock Exchange - "NYSE", or

the American Stock Exchange - "Amex"), and individual trades for over-the counter

("OTC") stocks might take place at the midpoint of their last National Best Bid and Offer

("NBBO") on Nasdaq.

Since all of the position risk (the risk associated with holding stock positions) in

the case of a principal portfolio trade is transferred from the client to the broker-dealer,

the commissions on these trades are usually higher than commissions for agency trades,

where the broker-dealer assumes no risk. Because the institutional investor's slippage

and opportunity costs are effectively reduced to zero, overall transaction costs are often

lower for an institutional investor with a principal portfolio trade than they would be with

other methods for trading the same portfolio of stocks. The amount of commission

charged for this type of principal trade depends largely on the level and type of risk

incurred by the broker-dealer. The portfolio risk factors the broker-dealer evaluates when

determining its commission for a principal portfolio trade include: liquidity, stock

diversity, industry-sector representation, ratio of Nasdaq to exchange-listed securities,

average bid/ask spread, price volatility, and the portfolio's correlation with indexes such

as the S&P 500.

Generally, an institutional investor wishing to conduct a principal portfolio trade

will put the intended portfolio out "for bid" by broker-dealers who are in the business of

committing their own capital to facilitate principal portfolio transactions. Because the amount of commission charged to execute a principal portfolio trade depends on the level

and type of risk incurred by the broker-dealer, an institutional investor wishing to conduct

a principal portfolio trade typically shares some information with potential broker-dealer

counter-parties concerning the risk characteristics of the overall portfolio it intends to

trade. However, the institutional investor shares this information without revealing to

bidding broker-dealers the specific stocks or position sizes the institutional investor

wishes to buy and sell, in order to prevent these broker-dealers from "front-running" the

institutional investor's portfolio trade. Front-running is a proscribed practice in which a

broker-dealer who is privy to confidential information regarding a client's current or

future trading activity uses this information to make profitable trades for the broker-

dealer's own account, ahead of the completion of the client's trades.

As described above, the portfolio risk factors normally evaluated by broker-

dealers bidding for principal portfolio trades include, for example: size of the portfolio

trade (both total number of shares and dollar value), liquidity, stock diversity, industry-

sector representation, ratio of Nasdaq to exchange-listed securities, average bid/ask

spread, price volatility, and the portfolio's correlation with indexes such as the S&P 500.

To aid in this evaluation, quantitative analysis of characteristics of combinations of

portfolios can be performed to analyze a total size in shares, a total dollar value, an

average individual position size, a median individual position size, a size in shares of a

largest individual position, a dollar value of said largest individual position, a total size as a percentage of average daily volume, an individual position sizes as a percentage of

average daily volume, a correlation/tracking-error with major market indices, an average

bid-ask spread, a breakdown by buy/sell orders, shares, and dollar value, a breakdown by

industry group, a breakdown by listing exchange, a hard to borrow analysis of individual

positions, risk calculations, a crossing with a sponsor's portfolio, a sponsor's proprietary

price forecasts or other proprietary data or analyses for individual positions or for the

combination as a whole, and volatility measures. In order to facilitate the evaluation of

these risk factors, bidding broker-dealers often provide institutional clients with special

software which allows the institutions to generate "portfolio risk reports." These

portfolio risk reports summarize certain risk factors for the entire portfolio the

institutional investor wishes to trade, without revealing any information about the

individual trades (for example, stock symbols or individual trade sizes) the portfolio trade

is composed of. These portfolio risk reports are then sent by institutional investors, either

via fax or email, to bidding broker-dealers, who use the risk reports to calculate and/or

otherwise prepare their principal bids. Because bidding broker-dealers have no specific

information about the individual trades in the subject portfolio (and therefore cannot

prepare their principal bids using such information), the portfolio risk report is intended

to convey enough information about the portfolio as a whole to allow broker-dealers to

prepare informed principal bids on a "blind" basis. By eliminating any concerns about

front-running the client portfolio, this "blind bidding" protocol guarantees the integrity of the bidding process. After preparing their principal bids, broker-dealers independently

submit their per-share commission (specified commission) bids to the institutional

investor. Each bid represents the per-share commission for which the submitting broker-

dealer is willing to execute the entire principal portfolio trade at market-closing prices.

Because all bidding broker-dealers would provide exactly the same execution for the

principal portfolio trade (that is, the portfolio's component trades would be executed in

full at the same passively determined prices regardless of which broker-dealer actually

wins the trade), the institutional investor normally awards the portfolio trade to the

broker-dealer submitting the lowest bid. Although the winning broker-dealer is notified

immediately (during normal trading hours) that it has won the portfolio trade, the actual

positions in the portfolio (that is, the portfolio's component trades, including specific

stock symbols and trade sizes) are not divulged to the broker-dealer until after the close

of trading on that day. Brokers profit from these transactions when the subsequent cost of

liquidating the purchased portfolio is lower than the commission received from the

institutional investor.

Unfortunately, the current system for requesting and calculating bids on

individual principal portfolio trades is inefficient because it does not allow any bidding

broker-dealer to aggregate, analyze, and bid on multiple portfolio trades simultaneously

in search of trading synergies which would reduce its risk, thereby making it possible to

lower the commissions it charges institutional investors for such trades. Therefore, what is needed is a system and method for the enhanced electronic trading of principal

portfolio trades that automatically aggregates multiple portfolkTtrades, analyzes the risk

characteristics of all possible combinations of these portfolio trades, and, without

increasing the disclosure of trade information by institutions, will make it possible for a

bidding broker-dealer to bid more competitively on multiple portfolio trades

simultaneously than it could bid on the same portfolio trades evaluated individually.

SUMMARY OF THE INVENTION

The present invention is directed to an electronic portfolio trading system (the

"System"), which can be operationally integrated within the principal trading desk of a

broker-dealer sponsor (the "Sponsor"), which will aggregate intended principal portfolio

trades submitted by institutional investors ("clients") who commit to trade their portfolios

with the Sponsor (at the Sponsor's sole discretion) at client-specified, per-share

commission rates. The System makes it possible for the Sponsor to effectively "bid"

more aggressively (that is, charge lower commissions) for some portfolios by

automatically identifying portfolio combinations whose combined risk profile is more

favorable than the aggregated risk profile of the same component portfolios evaluated

individually. The ability to bid more competitively on certain portfolio combinations is primarily the result of position crossing and diversification synergies, which would not

exist if the same portfolios were evaluated individually.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 illustrates a system block diagram of an embodiment of the overall

architecture of the portfolio trading system in accordance with the present invention.

FIG. 2 illustrates a portion of a sample principal portfolio trade which can be

uploaded to the System by an institutional investor.

FIG. 3 illustrates a portion of a sample format of a portfolio risk report describing

the sample portfolio trade in FIG. 2.

FIG. 4 illustrates a portion of a sample format of an execution report for the

sample principal portfolio trade shown in FIG. 2.

FIG. 5 illustrates an example of how a combined portfolio might have more

favorable risk characteristics than its component portfolios evaluated individually.

FIG. 6 is a system diagram of an embodiment of the present invention detailing

individual software and other technology sub-components in the system.

FIG. 7 is a flow chart diagram illustrating the trading process for submitted

portfolios in the representative embodiment. DETAILED DESCRIPTION

The embodiments of the present invention are described below in the context of

trading equity securities. However, the invention is not so limited and the contemplated

embodiments allow the trading of other liquid assets such as options, bonds, and other

securities. Accordingly, where the context permits, the terms "securities," "stock," and

"shares" when used herein includes other instruments that can be traded, such as, for

example, options and bonds. The terms "buy" and "sell" include, where appropriate, bid

and offer, cover and short, etc. Similarly, embodiments of the present invention include

systems for the aggregation and simultaneous analysis and trading of multiple portfolios

by one or more broker-dealers, regardless of the frequency with which such trades occur,

and regardless of whether the commission rates at which the portfolio trades are executed

are specified by the institutional clients themselves or are otherwise determined.

In accordance with an embodiment of the present invention, an electronic

portfolio trading system (the "System"), which can be operationally integrated within a

principal trading desk of a broker-dealer sponsor (the "Sponsor") can aggregate intended

principal portfolio trades submitted by institutional investors ("clients") who commit to

trade their portfolios with the Sponsor (at the Sponsor's sole discretion) at client-

specified, per-share commission rates. The System makes it possible for the Sponsor to

effectively "bid" more aggressively (that is, charge lower commissions) for some portfolios by automatically identifying portfolio combinations whose combined risk

profile is more favorable than the aggregated risk profile of the same component

portfolios evaluated individually. The ability to bid more competitively on certain

portfolio combinations is primarily the result of position crossing and diversification

synergies, which would not exist if the same portfolios were evaluated individually.

In accordance with an embodiment of the present invention, the System receives

from institutional clients, once per day: (1) each client's intended principal portfolio trade

("submitted portfolio"), and (2) the per-share commission price ("specified commission")

at which each client is willing to commit to the principal execution of its submitted

portfolio at market-closing prices by the Sponsor. Without revealing to the Sponsor (or

to any other market participant) the specific positions in any submitted portfolio, the

System, which incorporates the Sponsor's proprietary portfolio-bidding and risk analysis

software, can automatically evaluate the risk characteristics of all possible combinations

of submitted portfolios. If this analysis indicates that there is a combination of submitted

portfolios which could be simultaneously executed by the Sponsor at their client-

specified commission rates ("combined portfolio"), the System can automatically

generate a portfolio risk report for the combined portfolio along with a recommendation

to execute the combined portfolio and transmit this report and recommendation to the

Sponsor for final review and approval. Even when this analysis fails to result in a

recommendation to execute a combined portfolio, the System can still generate a portfolio risk report for the most "attractive" combined portfolio and transmits this to the

Sponsor for confirmation of rejection or, in rare cases, possible override. The trades that

make up a portfolio trade are referred to as "component trades." Similarly, the submitted

portfolios which make up a combined portfolio are referred to as "component portfolios."

If the Sponsor agrees to trade the combined portfolio proposed by the System at the

weighted average institutional investor-specified commission rate implied by the

component portfolios, the System can immediately inform the institutional investors

having submitted the component portfolios that their portfolio trades have been accepted

for principal execution by the Sponsor at market-closing prices for their specified

commissions. Clients having submitted portfolios to the System that were not chosen for

aggregation and execution by the Sponsor can be simultaneously notified that their

submitted portfolios will not be executed by the System. The "weighted average"

commission rate can be calculated by determining what percentage of the total shares in

the combined portfolio each component portfolio contributes, multiplying each

percentage by the institutional investor-specified commission rate for its associated

component portfolio, and then adding the results. For example, in a combined portfolio

that is made up of the following three component portfolios submitted by clients A, B,

and C: client A's portfolio contains 600,000 shares at a commission rate of $0.11 per

share, client B's portfolio contains 300,000 shares at a commission rate of $0.12 per

share, and client C's portfolio contains 100,000 shares at a commission rate of $0.14 per share. In this case, the weighted average commission rate would be calculated as follows:

[(600,000 *0.11) + (300,000 * 0.12) + (100,000 * 0.14)]/(600,0ϋ0 + 300,000 + 100,000),

or $0.116 per share.

In accordance with an embodiment of the present invention, the present invention

is intended to embrace any network or system that would permit broker-dealers to bid

more competitively than would otherwise be possible for principal portfolio trades by

realizing the crossing, diversification, and other synergies associated with the

simultaneous analysis and/or trading of multiple portfolios. Therefore, the present

invention is not limited to a system operated by a single Sponsor which analyzes and/or

trades equity principal portfolio trades once per day at client-specified commission rates.

Other embodiments of the present invention are applicable to any system or facility for

the aggregation and simultaneous analysis and/or principal trading at passively

determined prices of multiple portfolios of any type of security (for example, options,

bonds, futures, etc.) regardless of: (1) whether one or more broker-dealers act as System

Sponsor(s); (2) the frequency with which System trades occur; (3) whether the

commission rates at which portfolio trades are executed are specified by System clients,

specified by the Sponsor (requiring subsequent acceptance by System clients), specified

automatically by the System (requiring subsequent acceptance by System clients),

negotiated interactively through the System, or are otherwise determined; (4) whether the

Sponsor's own portfolio is included in the analysis and/or trading process which also includes one or more client portfolios; and (5) whether client portfolios are executed in

full, or whether a partial portfolio execution is negotiated through the System. It is

important to note that if the Sponsor proposes the partial execution of a submitted

portfolio which a client has already committed to trading in full, the client must explicitly

accept or approve the Sponsor-proposed partial execution before such a partial execution

would be permitted. Alternatively, in another embodiment, the client could submit

additional information detailing subsets of the submitted portfolio and related

commission rates that the client had committed to trade as a partial execution. In another

embodiment of the present invention, the System permits clients to submit "portfolios"

containing as few as one intended security trade.

Embodiments of the present invention are expected to be highly attractive to potential

System clients and Sponsors. In an embodiment of the present invention where only a

single Sponsor deploys the System to provide portfolio trading services to clients, the

Sponsor would enjoy the following advantages:

• By utilizing the System to bid for principal portfolio trades more aggressively

than would otherwise be possible, the System Sponsor would expect to win

more trades, thereby increasing traded volume, commission revenue, and

market share in the principal portfolio trading arena.

• Because the System makes it possible for the Sponsor to improve the average

risk characteristics of acquired portfolios, and because only a portion of the associated savings will be effectively passed on to clients in the form of

reduced commissions, the System Sponsor will benefit from the more

favorable risk profile of acquired positions.

• Automation of the portfolio aggregation, analysis, and bidding process will

allow the System Sponsor to realize significant time and resource savings as

compared to existing portfolio trading methodologies.

Similarly, in embodiments of the present invention, the clients would enjoy the

following advantages:

• Because the System will allow clients to designate their own commission rates

for principal portfolio trades, and because the System can make it possible for

the Sponsor to bid more aggressively for client portfolios, clients will enjoy

greater flexibility and incur lower transaction costs, for trades made through

the System rather than through traditional means.

• By making it possible for the Sponsor to reduce the Sponsor's level of risk

through the acquisition of combined portfolios, the System can enable the

Sponsor to acquire larger portfolios than would otherwise be possible using

current methods and systems, thereby increasing the amount of liquidity

available to clients. In an embodiment of the present invention the users of the system are typically

professional investors, such as institutional investors - for example, pension funds,

mutual funds, etc. - but may also be others who deal in or trade securities.

In an embodiment of the present invention, this entire process, from the upload of

client portfolios and commissions to final notification that the Sponsor has committed to

trading the combined portfolio or declined to trade other submitted portfolios, takes only

a few minutes. For example, in accordance with an embodiment of the present invention,

clients required to upload their portfolios and commission information by 3:00pm might

be notified as to whether or not their portfolio is accepted by the Sponsor for execution on

the System by 3:05pm. In keeping with standard principal portfolio trading practice, the

actual positions in component portfolios are divulged to the Sponsor only after the close

of trading on that day. Each component portfolio is executed at market-closing prices

and adjusted by the client-specified commission.

The present invention is expected to be very attractive to institutional clients who

conduct principal portfolio trades, as it is designed to facilitate the execution of the

institutional client's portfolio trades at lower per-share commissions than would

otherwise have been possible, thereby reducing overall transaction costs. In practice,

institutional clients are expected to submit their portfolios to the System after they have

gathered principal bids from broker-dealers in the traditional manner. For example, an

institutional investor might put its portfolio out "for bid" by four broker-dealers, such as, broker-dealers A, B, C, and D. After evaluating the overall risk characteristics of the

portfolio, broker-dealer A might submit a bid of 12.5 cents pershare, broker-dealer B a

bid of 13 cents per share, broker-dealer C a bid of 15 cents per share, and broker-dealer D

a bid of 12 cents per share. Since all four broker-dealers are offering exactly the same

execution, that is, a full execution of the portfolio at market-closing prices, the

institutional client in question would normally inform broker-dealer D, the low bidder,

that broker-dealer D had won the principal portfolio trade.

In an embodiment of the present invention, the institutional investor, after having

gathered the above four bids in the traditional manner, can upload the portfolio into the

System and indicate that it is willing to commit to a trade with the Sponsor at a

commission rate of, for example, 1 1 cents per share. In just a few minutes, the

institutional investor can be notified through the System whether the Sponsor (who would

likely also be among the broker-dealers bidding for the portfolio traditionally) is willing

to execute the institutional investor's portfolio trade as part of a combined trade for 11

cents per share. If the Sponsor is willing, the institutional investor will save one cent per

share in commission for the entire portfolio. If not, the institutional investor grants the

trade to broker-dealer D, the previous low bidder on the portfolio. At worst, therefore,

use of the System would result in no change to the outcome of the traditional principal

portfolio trade bidding process. At best, an institutional client would realize significant

transaction cost savings by trading the institutional client's portfolio at a lower (self- specified) commission than would otherwise have been possible. Similarly, the Sponsor

benefits from the more favorable risk characteristics of the combined portfolio by being

able to bid more aggressively, thus increasing the Sponsor's chances of winning

component portfolio trades in the combined portfolio that the Sponsor might not

otherwise have won.

In an embodiment of the present invention, the System would, in addition to

analyzing the risk characteristics of all possible combinations of client portfolios,

automatically incorporate information regarding the Sponsor's existing portfolio of stock

positions in the course of evaluating combined trades for bid. Using the Sponsor's

existing portfolio of stock positions can occur regardless of whether only one or multiple

client portfolios are submitted.

Referring now to the drawings, there is illustrated in FIG. 1 a block diagram of an

embodiment of the overall architecture of the portfolio trading systeTh in accordance with

the present invention. In an embodiment of the present invention, institutional client can

upload portfolios and commission information to a Portfolio Evaluation System ("PES")

100 via, for example, an Internet-based Institutional Interface 110. Although a Sponsor

Trading Desk 120 is generally run on a machine maintained by the Sponsor and

connected to the Sponsor's computer network, the PES 100 can be configured so that, in

the normal course of business, it is impossible for the Sponsor to view the portfolio and

commission information uploaded by the institutional clients. Using portfolio and commission data gathered from clients, along with quote/price data, risk-analysis

software, and other proprietary analysis tools supplied and maintained by the Sponsor

trading desk 120, the PES 100 can evaluate all possible combinations of portfolios

uploaded to the System. If there are one or more portfolio combinations whose

aggregated risk characteristics appear to be sufficiently favorable to allow the Sponsor to

trade the component portfolios as principal at the institutional client-specified

commission rates, the System can automatically generate a portfolio risk report for the

most attractive combined portfolio. The risk report can also indicate the weighted-

average per-share commission for the combined portfolio and can be automatically

transmitted to the Sponsor for final review. The Sponsor's management and/or trading

staff either approve or decline to trade the combined portfolio at the specified

commission. If approved, the PES 100 can immediately communicate through the

Institutional Interface the Sponsor's trade commitment to only those institutional clients

who submitted the component portfolios which were included in the accepted combined

portfolio. Likewise, the other institutional clients can be automatically notified that their

portfolio trades have been declined. Similarly, when the PES 100 fails to propose any

combined portfolio trade, or where the Sponsor Trading Desk 120 declines a combined

portfolio trade proposed by the PES 100, all clients can be immediately be notified

through the Institutional Interface that their portfolio trades have been declined. In the

case of approved combined portfolio trades, the PES 100 forwards the actual position files for component portfolios after the close of trading to the Sponsor, generally, the

Sponsor Trading Desk 120. The Sponsor can then transmit execution reports for these

portfolios from the trading desk to the corresponding clients.

In an embodiment of the present invention, the Institutional Interface 110 can be

is used to enter, modify, and cancel portfolio and commission information, and serve as

the mechanism used by the System to communicate trade execution and other

information to institutional clients. Possible business arrangements with other trading

systems, data providers, and technology vendors may permit third-party terminals or

electronic interfaces to be used by the institutional clients to communicate with the

System. Portfolios and commission information entered into the System by institutional

clients are, in general, completely invisible to all other System clients and market

participants. These portfolios, generally, are invisible to other market participants, that is,

the portfolios from one client can not be displayed on any screen, terminal, or quotation,

or otherwise communicated to any other client, person or entity. However, each

institutional client is able to view its own portfolio and commission information on the

System. Similarly, in the normal course of business, while the contents of the submitted

portfolio and commission information for each client will be completely invisible and

inaccessible to the principals, employees, and associated persons of the Sponsor, the

source of each portfolio is visible. In another embodiment of the present invention, the Sponsor staff approval or

rejection of the combined portfolio trades can be automated using, for example, an

artificial intelligence ("Al") approval program (not shown) which can reside at either the

PES 100 or the Sponsor Trading Desk 120 to permit Sponsor staff monitoring. The Al

approval program can be trained by the Sponsor staff to approve or reject trades based on

the same criteria used by the Sponsor staff. Additionally, in embodiments of the present

invention, the Al approval program can be configured to transmit some or all approved

trades to the Sponsor staff for review and potential override. However, if the approval is

not overridden within a specified time period, the System can be configured to

automatically notify the institutional clients that their trades have been accepted.

Likewise, some or all rejected trades can be routed to the Sponsor staff for review and

potential override. In these embodiments, a variety of threshold values can be set to

determine which trades are routed to the Sponsor staff. For example, these threshold

values can include, but are not limited to, a maximum dollar value of the portfolio trade, a

maximum commission rate, the risk factors, the total number of shares of the combined

trade, and the number of different securities in each portfolio. The contemplated

embodiments vary from partial automation, where the Sponsor staff can still approve or

reject each proposed trade, to a fully automated system where the PES 100 and the Al

approval program perform all of the analysis and make all of the decisions. The level of

automation that can be implemented in each embodiment is variable depending on how confident the Sponsor's management and staff are with the decision-making ability of the

Al approval program In fact, the level of implementation of the Al approval program

can be configured to fit individual Sponsor staff preferences and selection criteria

There is illustrated in FIG 2 a portion of a sample portfolio trade that can be

uploaded to the System by an institutional client The first column shows a Active

account name, in this case, "Execution" The second column shows the side, that is, buy

or sell, of each component trade The third column shows the ticker symbol for each

component trade The last column shows the number of shares for each component trade

FIG 3 illustrates a portion of a sample format of a portfolio πsk report that

describes the sample portfolio trade in FIG 2 Although the sample πsk report in FIG 3

descπbes only a single principal portfolio trade, it is similar in nature to a portfolio risk

report which would be generated by the PES 100 for the combined portfolios in

embodiments of the present invention Specifically, the Sponsor's Trading Desk 120 is

unable to determine, by reviewing the portfolio bidding report for a combined portfolio

generated by the PES 100, the number or composition of component portfolios, their

associated commission rates, or their source, that is, which institutional investors have

submitted them The portfolio risk report can include a variety of information describing

the risk characteristics of the portfolio as a whole, and can be reviewed by the Sponsor's

trading staff to facilitate final approval of the trade As discussed above, alternate

embodiments can include an automated portfolio trade approval process There is illustrated in FIG. 4 a portion of a sample format of an execution report

for the single principal portfolio trade illustrated in FIG. 2. Asϊtated above, the actual

stock trades making up the component portfolios of an approved combined portfolio can

be transmitted to the Sponsor only after the close of trading on the day of the trade.

Currently, the close of trading is 4:00pm, Monday through Friday, on the NYSE, Amex,

and Nasdaq markets. After receiving the actual information, each component portfolio

can be executed by the Sponsor at market-closing prices and adjusted by the client-

specified commission. FIG. 4, therefore, illustrates the type of execution report that is

sent through the Institutional Interface 1 10 to clients having submitted the component

portfolios making up the executed combined portfolio.

FIG. 5 is a diagram illustrating how a combined portfolio may have substantially

more favorable risk characteristics than when the component portfolios of the combined

portfolio are evaluated separately. Although FIG. 5 simply illustrates the risk-reduction

benefits of portfolio combination which result specifically from crossing stock trades

among component portfolios, it should be noted that aggregating component portfolios

into a combined portfolio also increases diversification, which serves to decrease certain

types of risk. "Crossing stock" trades occur when an individual stock trade from one

component portfolio in a combined portfolio trade either partially or totally satisfies

another individual stock trade from another component portfolio in the same combined

portfolio trade. In FIG. 5, a Portfolio A 510 and a Portfolio B 520 are shown with multiple component trades, each specifying a trading side, a ticker symbol of a stock to

be traded and the number of shares of the stock to be traded Associated with Portfolio A

510 can be a Portfolio A principal bid 515 that a Sponsor would charge to execute only

the Portfolio A 510 component trades Similarly, associated with Portfolio B 520 can be

a Portfolio B principal bid 525 that a Sponsor would charge to execute only the Portfolio

B 520 component trades Also, in FIG 5, a Combined Portfolio 530 shows the combined

Portfolio A 510 and Portfolio B 520 component trades and a Combined Portfolio

principal bid 535 that a Sponsor would charge to execute the Combined Portfolio 530

component trades In general, the Combined Portfolio principal bid 535 will be lower

than the average bid for the component portfolios of the Combined Portfolio 530, that is,

Portfolio A 510 and Portfolio B 520 For example, in FIG 5, Portfolio A 510 has a BUY

order 512 for 40,000 shares of a stock represented by the symbol EDS and Portfolio B

520 has an opposite trading side SELL order 522 for 40,000 shares of EDS, which results

in no position in the Combined Portfolio Thus, in this crossing stock trade, since the

BUY and SELL orders 512 and 522, respectively, are equal in size, both are completely

satisfied when Portfolios A and B 510 and 520, respectively, are combined. The

combined portfolio 530 reflects no net position 532 in EDS remaining to be executed

Similarly, in FIG 5, Portfolio A 510 has a SELL order 514 for 100,000 shares of a stock

represented by the symbol MSFT and Portfolio B 520 has an opposite trading side BUY

order 524 for 68,000 shares of MSFT, which results in a remaining SELL position of 32,000 shares of MSFT in the Combined Portfolio Thus, in this crossing stock trade,

since the BUY and SELL orders 514 and 524, respectively, are not equal in size, only the

BUY order of Portfolio B 520 is completely satisfied when Portfolios A and B 510 and

520, respectively, are combined The combined portfolio 530 reflects a net SELL order

534 position of 32,000 shares in MSFT remaining to be executed

The crossing stock trades, in FIG. 5, represent one of the factors that helps to

reduce the Sponsor's overall risk in a combined portfolio trade. This reduced risk results

in the Sponsor's ability to bid more competitively for the combined portfolio trade than

the Sponsor would have bid for the component portfolio trades evaluated separately It

should be noted, of course, that the BUY and SELL orders, for example, in EDS are

executed by the Sponsor, but the execution of these two orders is effectively riskless to

the Sponsor because these executions do not result in any net principal position for the

Sponsor

FIG 6 illustrates an embodiment of the present invention integrated into a

technical infrastructure of the Sponsor broker-dealer As shown in FIG. 6, the PES 100 is

implemented on a secure server that is located behind "firewalls" at the Sponsor's Web

site The firewalls restrict access to the site to authorized entities and interact with the

Institutional Interface In FIG 6, external clients 600 are coupled to public Internet 605,

which is in turn coupled to an outer firewall 610, which is in turn coupled to and controls

access to a Sponsor Public Internet server 620 The Sponsor Public Internet server 620 is coupled to a local storage 622 including a local database. While not required in

embodiments of the present invention, a Sponsor Public Internet server (Hot Spare) 625

is coupled to a local storage 627, the outer firewall 610 and the inner firewall 630. The

Sponsor Public Internet server (Hot Spare) 625 is, generally, configured to mirror and

backup the Sponsor Public Internet server 620 operation and data Inner firewall 630 is

further coupled to an internal web server 670 and the PES 100. The internal web server

670 and the PES 100 are coupled to each other and also coupled to a sponsor trading desk

640, a sponsor order management system 650 and multiple related sponsor databases 660

The related sponsor database can include, for example, a sponsor position and proprietary

technology database 662 and a sponsor web database 664

The PES 100 can be implemented on a single computer or a networked set of

computer systems, which could be either server platforms or workstations using standard

personal computer (PC) technology. For example, a computer hosting a software

application that comprises the PES 100 may be a Sun^® dual-processor UltraSPARC™-II-

based server operating at 450 MHz and with 512 to 4096 MegaBytes (MB) of random

access memory (RAM); a mass memory storage unit, such as a floppy disk, a zip disk, a

DVD disk, a hard disk drive, a rewritable optical disk, a flash memory and other components.

In another embodiment of the present invention, the computer hosting the software

application that comprises a piece of the PES 100 may be an Intel^® Pentium^®-based PC

operating at 500MHz and with 128 to 512 MegaBytes (MB) of random access memory (RAM); a mass memory storage unit, such as a hard disk drive; and sufficient

communication capabilities to connect the PES 100 to each of thelndividual investors 600

and other components shown in FIG_.. 6.

An incoming portfolio, which can include client-specified commission information,

from one of the external clients 600 is inspected by the Outer Firewall 610 to determine if it is

from a valid external client 600 before the incoming portfolio can proceed to the Sponsor's

"public" Internet server 620. If the portfolio is from a valid external client machine, the

portfolio can proceed to the Sponsor's "public" Internet server 620, where it is reformatted so

that it can be understood by the PES 100. The resulting reformatted information then passes

through the Inner Firewall 630, which further protects the Sponsor's internal systems by

verifying that only valid messages from the Sponsor's public web server 620 can pass

through, to the PES 100.

The PES 100 is linked internally to the Sponsor's Trading Desk 640, Order

Management System 650, and related databases 660, and to the internal Web server 670 that

controls the secure Web site and governs access to this site. The PES 100 is also linked

externally through firewall 630 to the "public" portion of the Sponsor's Web site located on

public Web server 620 as well as to the public Internet 605 in order to allow communication

with institutional clients. Institutional clients can connect to the PES 100 through the public

Internet 605 using the Institutional Interface, which consists of the Sponsor's public web

server 620 and protecting firewalls 610 and 630. The PES 100, in FIG 6, includes a portfolio and bid storage component 602 coupled

to a control program component 604, which is coupled to one or more bid engines 606, which

are in turn coupled to a resulting bid and portfolio combinations component 608 The

portfolio and bid storage component 602 can be configured to receive and store incoming

client portfolio trades and the associated client specified commission rates each client is will

to pay to execute that portfolio trade

FIG 7 is a flowchart that descπbes the method in an embodiment of the present

invention by which pπncipal portfolio trades are submitted and executed Although a variety

of passively determined execution-price protocols are possible, in the representative

embodiment, all approved portfolio trades are executed at market-closing pπces The Sponsor

generates propπetary revenue by collecting client-specified per-share commissions from

institutional clients whose portfolio trades are executed through the System Because the

Sponsor serves as counter-party for every portfolio trade executed through the System, the

anonymity of institutional clients will be preserved throughout the clearance and settlement

process

In FIG 7, the System receives 710 one or more institutional client intended portfolio

trades as well as the commission payable to the Sponsor for which each client is willing to

commit to the total execution of each portfolio trade, that is, the complete execution of each

component trade in the portfolio trade Similarly, the System receives 715 Sponsor pπce data,

Sponsor portfolio information and other Sponsor information, either before, concurrent with, or after the System receives 710 one or more institutional client intended portfolio trades. The

PES then, evaluates 720 all possible combinations of submitted client portfolio trades (and

their associated commissions) to determine whether there are any combinations of these

portfolios which might represent an attractive trading opportunity for the Sponsor. In block

725, the System automatically generates a combined portfolio risk report for the most

attractive of these combinations and transmits this report to the Sponsor Trading Desk for

approval or rejection by the Sponsor management or staff. In block 730, a check is made to

determine if the Sponsor staff approves a trade for the most attractive combined portfolio

submitted by the System. If the trade is not approved, flow continues with block 735 where

the System can automatically transmits a rejection notification to all institutional clients which

have submitted portfolio trades and then the System shuts down. If a trade is approved, flow

continues with block 740, where the System automatically transmits acceptance notifications

to the institutional clients whose portfolios were included in the approved combined portfolio

and, concuπently, with block 745, where the System automatically transmits rejection

notifications to those institutional clients whose portfolio trades were rejected, that is, not

included in the approved combined portfolio. Depending on the embodiment of the present

invention, flow continues with block 750 either immediately after the trade is approved or at a

later time. In an embodiment of the present invention, flow continues with block 750, when

accepted portfolios are actually transferred (and revealed) to Sponsor's trading desk, only

until after the close of trading on the day the combined portfolio is accepted. In other embodiments of the present invention, the accepted portfolios can be received prior to the end

of the trading day for trades that are to be executed before the market close Flow then

continues with block 755 where, upon execution of the actual portfolios, the System

automatically transmits execution reports to the institutional clients whose portfolios were

included m the accepted combined portfolio

In an embodiment of the present invention, a method for trading secuπties portfolios

includes receiving an intended portfolio trade, evaluating combinations of the intended

portfolio trade with at least one other intended portfolio trade for possible execution at

passively determined pπces, receiving approval to trade one of the combinations, and

transmitting the one combination to be executed after the close of trading on the day in which

the approval to trade was received

The above embodiments are merely illustrative of the numerous possible

embodiments and therefore should not be construed so as to limit the scope of the invention

Therefore, it should be understood that while the present invention has been described mainly

in terms of a sponsor-centralized PES, those skilled in the art would recognize that the

principles of the invention can be used advantageously with alternative embodiments

involving, for example, distributed systems as well Accordingly, all such implementations,

which fall within the spirit and scope of the appended claims, will be embraced by the

principles of the present invention

Claims

What is claimed is:

1 A method for trading securities portfolios comprising

receiving an intended portfolio trade,

evaluating combinations of said intended portfolio trade with at least one other

intended portfolio trade for possible execution at passively determined prices,

receiving approval to trade one of said combinations, and

transmitting said one combination to be executed after the close of trading on the day

in which said approval to trade was received

2 The method of claim 1 , wherein said receiving an intended portfolio trade

comprises one of

receiving an intended portfolio trade from a broker-dealer, and

receiving an intended portfolio trade from an institutional investor

3 The method of claim 1 , wherein said evaluating combinations of said

intended portfolio trade with at least one other intended portfolio trade for possible execution

at passively determined prices comprises

crossing component trades for each security in said intended portfolio trade and said at

least one other intended portfolio trade to create a combined portfolio trade, said combined

portfolio trade including crossed component trades for each security; and

determining a risk evaluation for said combined portfolio trade.

4. The method of claim 1 , wherein said receiving approval to trade one of said

combinations comprises:

requesting approval to trade said one combination; and

receiving a response to said request to trade said one combination.

5. The method of claim 1, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises:

transmitting said intended portfolio trade and said at least one other intended portfolio

trade included in said one combination.

6. The method of claim 5, wherein said transmitting occurs after the close of

trading on the day in which said approval to trade was received.

7 The method of claim 1, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises

transmitting said one combination to be executed as a principal trade

8 The method of claim 1, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises transmitting said one combination to be executed as an agency trade

9 The method of claim 1, further comprising receiving one of said at least one

other intended portfolio trade from a broker-dealer, said broker-dealer acting as a sponsor who

can execute all or part of said one combination

10 The method of claim 9, wherein receiving each of said intended portfolio

trades comprises

receiving at least one binding order to trade at least one security

11 The method of claim 10, wherein said receiving at least one security

comprises one of an equity,

a deπvative,

a warrant

an option,

a portfolio future, and

a portfolio bond

12 The method of claim 10, wherein said at least one binding order to trade at

least one security comprises

a trading symbol representing said security,

a side for said at least one binding order in said security, and

a quantity of said secuπty to be traded

13 The method of claim 10, wherein said receiving at least one binding order to

trade at least one secuπty compπses at least one of

receiving said at least one binding order to trade at least one security at a market

closing pπce,

receiving said at least one binding order to trade at least one secuπty at a volume-

weighted average pπce, and

receiving said at least one binding order to trade at least one security at a

predetermined pπce

14 The method of claim 13, wherein said receiving at least one binding order to

trade at least one security at a predetermined price comprises

receiving said at least one binding order to trade at least one security at a price

determined by a methodology, said methodology being determined prior to receiving said at

least one binding order to trade

15 The method of claim 10, wherein receiving any intended portfolio trade

comprises one of

receiving an intended portfolio trade from a broker-dealer, said intended portfolio

trade including a per-share commission specified by said broker-dealer, and

receiving an intended portfolio trade from an institutional investor, said intended

portfolio trade including a per-share commission specified by said institutional investor

16 The method of claim 15, wherein said broker-dealer specified per-share

commission and said institutional investor specified per-share commission each represent the

fee for which each said broker-dealer and said institutional investor agree in advance to trade

said first intended portfolio trade with a sponsor

17 The method of claim 1, further comprising proposing a per-share commission to at least one source of said intended portfolio

trades included in said one combination after evaluating said one^{^}combination

18. The method of claim 17, wherein said proposing a per-share commission to at

least one source of said intended portfolio trades included in said one combination after

evaluating said one combination comprises

generating automatically said per-share commission; and

transmitting said per-share commission to said at least one source of said intended

portfolio trades

19 The method of claim 17, wherein said per-share commission represents a fee

for which at least one sponsor is willing to execute at least one of said intended portfolio

trades at said passively determined price on behalf of said at least one source

20 The method of claim 17, wherein said intended portfolio trade is eligible for

said possible execution by at least one sponsor only if said source explicitly agrees to said per-

share commission proposed by said at least one sponsor

21. The method of claim 17, wherein said proposing a per-share commission to at

least one source of said intended portfolio trades included in said one combination after

evaluating said one combination comprises:

generating manually said per-share commission; and

transmitting said per-share commission to said source of said intended portfolio trade.

22. The method of claim 1, wherein said intended portfolio trades are invisible to

other market participants.

23. The method of claim 1 , wherein said evaluating combinations of said

intended portfolio trade with at least one other intended portfolio trade for possible execution

at passively determined prices comprises:

performing a quantitative analysis of characteristics of each of said combinations.

24. The method of claim 23, wherein said quantitative analysis is performed

automatically using data and other information supplied by a sponsor.

25. The method of claim 23, wherein said performing a quantitative analysis of

characteristics of each of said combinations comprises evaluating a per-share commission

rate, if specified by a source of said at least one intended portfolio trade. 26 The method of claim 23, wherein said performing-a quantitative analysis of

characteπstics of each of said combinations generates per-share commission bids for

executing each of said intended portfolio trades in said combinations, if said per-share

commissions are unspecified by a source of each of said intended portfolio trades

27 The method of claim 23, wherein said performing a quantitative analysis of

characteπstics of each of said combinations includes analysis of at least one of

a total size in shares,

a total dollar value,

an average individual position size,

a median individual position size,

a size m shares of a largest individual position,

a dollar value of said largest individual position,

a total size as a percentage of average daily volume,

an individual position sizes as a percentage of average daily volume,

a coπelation/tracking-error with major market indices,

an average bid-ask spread,

a breakdown by buy/sell orders, shares, and dollar value, a breakdown by industry group,

a breakdown by listing exchange,

a hard to boπow analysis of individual positions,

πsk calculations,

a crossing with a sponsor's portfolio,

a sponsor's proprietary pπce forecasts or other propπetary data or analyses for

individual positions or for the combination as a whole, and

volatility measures

28 The method of claim 23, wherein performing said quantitative analysis results

in a recommendation on whether to execute said combination

29 The method of claim 28, wherein said recommendation on whether to execute

said combination of said intended portfolio trades compπses at least one of

a recommendation to execute said combination only in part,

a recommendation to execute said combination, and

a recommendation to decline to execute said combination

30 The method of claim 29, further comprising transmitting to a source of said intended portfolio trade a notification of an offer to

execute a portion of said intended portfolio trade, wherein said notification permits said

source to choose whether to accept said offer to execute a portion of said intended portfolio

trade for said per-share commission

31 The method of claim 28, wherein said quantitative analysis results in the

generation of a report including said recommendation being sent to a sponsor

32 The method of claim 31, wherein said report includes statistics and

characteπstics for said combination

33 The method of claim 32, wherein said report does not identify a trading

symbol for any component trade included in said at least one combination, and does not

otherwise include information which would permit said sponsor to identify any of said

component trades

34 The method of claim 28, wherein said sponsor decides whether to accept said

recommendation on whether to execute said combination

35 The method of claim 34, wherein a decision by said sponsor to execute said

combination results in transmitting an immediate notification to said source of said intended

portfolio trade which is included in said combination that said intended portfolio trade has

been accepted for execution by said sponsor

36 The method of claim 34, wherein a decision by said sponsor to decline said

combination results in transmitting an immediate notification to said source of said intended

portfolio trade which is included in said combination that said intended portfolio trade has

been declined for execution by said sponsor

37 The method of claim 28, wherein a decision whether to accept said

recommendation whether to execute said combination occurs automatically

38 The method of claim 1, wherein said evaluating combinations of said

intended portfolio trade with at least one other intended portfolio trade for possible execution

at passively determined prices occurs at least once per calendar week

39 The method of claim 1 said intended portfolio trades being received over at

least one of

a telecommunications line, a wireless telecommunication,

an Internet-based upload, and

an electronic transfer

40 The method of claim 39, wherein said receiving an intended portfolio trade

comprises

receiving at least one invisible intended portfolio trade, said at least one invisible

intended portfolio trade being configured to prevent said sponsor from viewing the

contents of said at least one invisible intended portfolio trade

41 The method of claim 1, further comprising

transmitting a sponsor's promise to execute said intended portfolio trade included in said

combination at said passively determined price for a per-share commission

42 The method of claim 41, wherein said intended portfolio trades included in

said combination for which said sponsor has committed to trade, are transmitted to said

sponsor for execution and executed by said sponsor, after the close of trading on the day in

which said approval to trade was received

43 A method for trading securities portfolios compπsing receiving an intended portfolio trade,

evaluating combinations of said intended portfolio trade wkh at least one other

intended portfolio trade for possible execution at passively determined prices,

transmitting said one combination to be executed after the close of trading on the day

in which said approval to trade was received

44 The method of claim 43, wherein said receiving an intended portfolio trade

comprises one of

receiving an intended portfolio trade from a broker-dealer; and

receiving an intended portfolio trade from an institutional investor

45 The method of claim 43, wherein said evaluating combinations of said

intended portfolio trade with at least one other intended portfolio trade for possible execution

at passively determined prices comprises

crossing component trades for each security in said intended portfolio trade and said at

least one other intended portfolio trade to create a combined portfolio trade, said combined

portfolio trade including crossed component trades for each security, and

determining a risk evaluation for said combined portfolio trade

46 The method of claim 43, further comprising receiving approval to trade one of said combinations

47 The method of claim 43, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises

transmitting said intended portfolio trade and said at least one other intended portfolio

trade included in said one combination

48 The method of claim 47, wherein said transmitting occurs after the close of

trading on the day in which said approval to trade was received

49 The method of claim 43, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises:

transmitting said one combination to be executed as a principal trade

50 The method of claim 43, wherein said transmitting said one combination to be

executed after the close of trading on the day in which said approval to trade was received

comprises transmitting said one combination to be executed as an agency trade

51 The method of claim 43, further comprising receiving one of said at least one

other intended portfolio trade from a broker-dealer, said broker-dealer acting as a sponsor who

can execute all or part of said one combination

52 The method of claim 51 , wherein receiving each of said intended portfolio

trades compπses

receiving at least one binding order to trade at least one security