WO2002047314A2 - Methode et systeme permettant d'harmoniser des positions boursieres a court terme et des positions boursieres a long terme - Google Patents

Methode et systeme permettant d'harmoniser des positions boursieres a court terme et des positions boursieres a long terme Download PDF

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Publication number
WO2002047314A2
WO2002047314A2 PCT/US2001/051322 US0151322W WO0247314A2 WO 2002047314 A2 WO2002047314 A2 WO 2002047314A2 US 0151322 W US0151322 W US 0151322W WO 0247314 A2 WO0247314 A2 WO 0247314A2
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WO
WIPO (PCT)
Prior art keywords
positions
short
long
terminal
code
Prior art date
Application number
PCT/US2001/051322
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English (en)
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WO2002047314A3 (fr
WO2002047314A9 (fr
Inventor
Josehph P. Blauvelt
Frank J. Curialle
Original Assignee
Morgan Guaranty Trust Company Of New York
Priority date (The priority date is an assumption and is not a legal conclusion. Google has not performed a legal analysis and makes no representation as to the accuracy of the date listed.)
Filing date
Publication date
Application filed by Morgan Guaranty Trust Company Of New York filed Critical Morgan Guaranty Trust Company Of New York
Priority to AU2002234185A priority Critical patent/AU2002234185A1/en
Publication of WO2002047314A2 publication Critical patent/WO2002047314A2/fr
Publication of WO2002047314A3 publication Critical patent/WO2002047314A3/fr
Publication of WO2002047314A9 publication Critical patent/WO2002047314A9/fr

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Classifications

    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/04—Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Definitions

  • the invention provides a method and system for automatically identifying a counter party position that has a short or long position.
  • the method comprises receiving at a first terminal at least two short positions. Also, receiving at the first terminal at least two long positions. Also, identifying at the first terminal a selected short position from the at least two short positions and a selected long position from the at least two long positions, the selected short position and the selected long position identified by parameters associated with the positions. Also, providing sufficient information from the first terminal to a second terminal and to a third terminal to allow a transaction between the selected short position and the selected long position.
  • FIG. 1 illustrates an embodiment of a system that may be used with the invention
  • FIG. 2 illustrates an embodiment of steps in a method of the invention
  • FIG. 3 illustrates an embodiment of a system and method according to one embodiment of the invention.
  • inventions described below may be practiced by a small group of members, such as members of a group or consortium.
  • the embodiments may also be practiced more generally by investors individually or through their broker, dealer, agents, in conjunction with a smaller member group.
  • a short position generally means that an investor has sold more of a particular asset or security than they own.
  • a long position generally means that an investor owns more of a particular asset or security than they have sold.
  • the asset or security might be an equity security, such as a stock, or it might be a debt security, such as a bond.
  • the investor will eventually have to get the rest of the assets they sold, but don't currently own.
  • an investor may be willing to "lend" some of those securities to another investor who has a short position in the same security.
  • lending generally implies some form of interest or compensation in return to the party owning the securities.
  • the investor with a long position has an opportunity to earn a profit in the form of interest from their long position
  • the investor with a short position has an opportunity to pay a known amount, in the form of interest, to reduce their borrowing costs by covering their short position.
  • a repo is an agreement between two parties whereby one party sells a security to the other at a specified price and stated finance rate with a commitment to repurchase the security at a later date.
  • the finance rate may be fixed or variable.
  • the duration of the trade may be for 1 day (called an Overnight deal), or for a specified duration (called a term deal), or for an indeterminate time, but usually less than 1 year (which is called an Open deal).
  • a repo is a secured loan.
  • the party purchasing the security is making funds available to the seller and holds the security as a form of collateral.
  • Reverse repo is a term used to describe the other side of a repo transaction.
  • the party selling and later repurchasing the security is said to perform a repo.
  • the other party ⁇ one that purchases and later resells the security — is said to perform a reverse repo.
  • an embodiment of a system 100 used in the invention includes a number of computers or terminals 102, 103, 104, 105.
  • Computers 102, 103, 104, 105 are interconnected to another computer 106 by a network 108.
  • Computers 102, 103, 104, 105, 106 include at least one processor 110, memory 112, fixed and removable storage for data and/or code 114, 116, input/output devices 118 and network interface devices 120.
  • Interconnection network 108 is the Internet, a direct connection, wired, wireless, infrared or other type of secure or unsecure data and information exchange.
  • Position Billboard For purposes of the description herein, the various embodiments of the method and system of the present invention may be referred to as "Position Billboard".
  • Position Billboard there is described herein a third party or an entity "NewCo" that participates in or expedites various aspects of Position Billboard.
  • the invention is a securities short covering facility that allows members to cover their short positions at more attractive financing rates than current industry alternatives.
  • the invention systematically obtains long and short position information from each participant or member, processes the information in accordance with any system or member- controlled parameters, matches the short positions of participants with the long positions of other participants, and feeds the resultant activity back to each participant in the form of system-generated finance trades.
  • NewCo acts as a third party agent, thus allowing the invention to provide anonymity among its participants.
  • the various embodiments of the invention provide a number of benefits. Some of those benefits are: reduced borrowing costs to participants through reduced fees; reduced margin requirements, thereby saving working capital for the borrower; attracting collateral by enabling participants to further reduce their borrow costs and/or earn incremental revenue for their non-tight lending; and creating balance sheet netting opportunities by booking both trades as Repos / Reverse Repos with a counter party, such as Government Securities Clearing Corporation ("GSCC").
  • GSCC Government Securities Clearing Corporation
  • GSCC is an industry service organization that serves to ensure orderly settlement in the government securities market. It should be understood that while the present description of the invention refers to GSCC and the United States securities market, this invention can be implemented for foreign securities markets as well that employ similar netting and counterparty risk criteria.
  • an objective of some embodiments of the invention is to provide the NewCo members with a centralized mechanism to pool their long inventory for the purpose of covering short positions and generating the appropriate finance transactions to support those coverings.
  • Finance trades generated by the various matching processes of the invention are done on an overnight basis at an agreed upon overnight financing rate.
  • the various embodiments of the invention provide members with an efficient and less expensive "market" for short term financing. Without the invention, the majority of this activity is executed through inter-dealer brokers, dealer-to-dealer, and securities lenders. With the invention, participants and members of the NewCo entity save fees paid and margin costs on these transactions.
  • NewCo In order to maintain trading anonymity and facilitate settlement of on-side finance transactions, members of NewCo generally agree that the counterparty to their on-side transactions will be NewCo as agent. Members of NewCo also generally agree to partake in settlements through an Omnibus clearance account under the name of NewCo. This helps to assure that the members' and participants' long and short positions, hence their trading strategies, are kept anonymous throughout the settlement cycle. As in the securities lending market, members do have the right to inquire about the identity of the member on the other side of their trades.
  • NewCo members also have the ability to establish certain "filters” which have the effect of excluding some long or short positions.
  • filters can be by notional size (high, low or a range), security identifier (such as CUSIP number), security type, maturity range and other parameters, which are apparent to one of ordinary skill in the art.
  • CUSIP Committee on Uniform Securities Identification Procedures, and this committee supplies a unique nine-character identification, called the CUSIP number, for each security approved for trading in the U.S., to facilitate clearing and settlement.
  • the filters can also be modified intra-day and any subsequent position refreshes would be applied to the revised filters.
  • the maintenance of filtering parameters is the responsibility of each member, thus insuring that only desired positions are downloaded.
  • each member downloads their long and short positions, as well as their term repo and reverse repo transactions. Based upon members' parameters and agreed upon processing rules, the invention first attempts to cover a participant or member's short positions by substituting collateral that is out on term and open repo (with other members). NewCo keeps track of original start of day positions it has received from its members, as well as positions that result from the substitution transactions.
  • the process matches the remaining short positions with the long positions of other members and generates the appropriate repo/reverse transactions.
  • An overnight repo transaction is generated for the member with the long position
  • an overnight reverse repo is generated for the member with the short position, each with the agreed upon overnight interest rate.
  • the lending occurs on a pro-rata basis.
  • the borrowing occurs on a pro-rata basis.
  • NewCo keeps track of original start of day positions it has received from its members, as well as positions that result from short covering transactions.
  • the matching process runs once per day. In other embodiments, more than one batch per day is run.
  • the invention also obtains vendor prices, which are used for calculating the market value on (substitution and) borrow/loan transactions.
  • one embodiment of the invention process flow begins at steps 202, 204, where members or participants at terminals 2 and 3 (represented in FIG. 1 by computers 102, 103, 104, 105) identify their long and short positions. As described above, in one embodiment, this occurs on a daily basis. In other embodiments, this occurs at intervals during the trading day.
  • the members or participants each send the short and long positions that they identified to terminal 3 (represented in FIG. 1 by computer 106).
  • terminal 3 receives the short and long positions from terminals 1 and 2. The respective positions are handled by terminal 3 in a manner such that they can be individually tracked or traced to the sending participant or member.
  • terminal 3 filters the positions. This filtering is described generally above, and is according to the parameters that are established by the submitting member or participant. For example, one participant may require that their positions for a particular security be matched only with certain other participants. Or, they may require that the matching be according to certain allocation percentages. Or they may require that some percentage of their position not be matched.
  • terminal 3 matches short positions with long positions. This matching occurs on a CUSIP basis until all positions that can be matched have been matched.
  • terminal 3 considers any filters that have been established and allocates the long positions for each CUSIP to the short positions for that CUSIP. As discussed above, if there are more long positions than short positions, the lending is on a pro-rata basis. Alternatively, if there are more short positions than long positions, the borrowing is on a pro-rata basis.
  • terminal 3 creates the appropriate finance trades and informs terminals 1 and 2 of the trades. Finally, at steps 226, 228, terminals 2 and 3 receive the position match information.
  • the various elements of system 100 of the invention generally use an open-ended architecture to facilitate and expedite the exchange of information with its clients.
  • Features provided include standardized message formats, instantaneous restart and recovery, real-time connectivity to clients and a global web- oriented network.
  • the invention operates within pre-scheduled processing cycles but is designed for real-time execution.
  • Anonymity among its clients is also a feature of some embodiments of the invention.
  • Each member can view only their data and cannot gain access to other clients' data.
  • Client access is achieved through rigorous sign-on security features such as encrypted sign-on IDs and passwords.

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  • Business, Economics & Management (AREA)
  • Accounting & Taxation (AREA)
  • Finance (AREA)
  • Engineering & Computer Science (AREA)
  • Marketing (AREA)
  • Economics (AREA)
  • Development Economics (AREA)
  • Strategic Management (AREA)
  • Technology Law (AREA)
  • Physics & Mathematics (AREA)
  • General Business, Economics & Management (AREA)
  • General Physics & Mathematics (AREA)
  • Theoretical Computer Science (AREA)
  • Financial Or Insurance-Related Operations Such As Payment And Settlement (AREA)
  • Management, Administration, Business Operations System, And Electronic Commerce (AREA)

Abstract

Cette invention concerne un système et une méthodes permettant d'harmoniser automatiquement chez des parties prenantes des positions à court terme et des positions à long terme et de produire automatiquement des pensions sur titres ('repo') et des prises en pension de titres ('reverse repo'). Ce système et cette méthodes garantissent l'anonymat des opérations et diverses possibilités de filtrage pour les parties prenantes.
PCT/US2001/051322 2000-11-13 2001-11-13 Methode et systeme permettant d'harmoniser des positions boursieres a court terme et des positions boursieres a long terme WO2002047314A2 (fr)

Priority Applications (1)

Application Number Priority Date Filing Date Title
AU2002234185A AU2002234185A1 (en) 2000-11-13 2001-11-13 Method and system for matching short trading positions with long trading positions

Applications Claiming Priority (2)

Application Number Priority Date Filing Date Title
US24813300P 2000-11-13 2000-11-13
US60/248,133 2000-11-13

Publications (3)

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WO2002047314A2 true WO2002047314A2 (fr) 2002-06-13
WO2002047314A3 WO2002047314A3 (fr) 2004-02-26
WO2002047314A9 WO2002047314A9 (fr) 2004-05-06

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Cited By (2)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US7660762B1 (en) 2003-03-28 2010-02-09 Citigroup Global Markets, Inc. Method and system for efficiently matching long and short positions in securities trading and transacting a series of overnight trades for balance sheet netting
US11023972B2 (en) * 2017-01-11 2021-06-01 Nomura Research Institute, Ltd. Financial transaction management system and financial transaction management method

Citations (4)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
EP0399850A2 (fr) * 1989-05-26 1990-11-28 Reuters Limited Système d'appariement anonyme
US5924082A (en) * 1994-08-17 1999-07-13 Geneva Branch Of Reuters Transaction Services Limited Negotiated matching system
US20010037284A1 (en) * 2000-03-27 2001-11-01 Finkelstein Ephraim Brian Negotiated right exchange system and method
US20020035531A1 (en) * 2000-08-14 2002-03-21 Push Robert C. Common margin settlement vehicle and method of margining exchange-traded futures contracts

Patent Citations (4)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
EP0399850A2 (fr) * 1989-05-26 1990-11-28 Reuters Limited Système d'appariement anonyme
US5924082A (en) * 1994-08-17 1999-07-13 Geneva Branch Of Reuters Transaction Services Limited Negotiated matching system
US20010037284A1 (en) * 2000-03-27 2001-11-01 Finkelstein Ephraim Brian Negotiated right exchange system and method
US20020035531A1 (en) * 2000-08-14 2002-03-21 Push Robert C. Common margin settlement vehicle and method of margining exchange-traded futures contracts

Cited By (3)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US7660762B1 (en) 2003-03-28 2010-02-09 Citigroup Global Markets, Inc. Method and system for efficiently matching long and short positions in securities trading and transacting a series of overnight trades for balance sheet netting
US7797223B1 (en) 2003-03-28 2010-09-14 Citigroup Global Markets, Inc. Method and system for efficiently matching long and short positions in securities trading and transacting a series of overnight trades for balance sheet netting
US11023972B2 (en) * 2017-01-11 2021-06-01 Nomura Research Institute, Ltd. Financial transaction management system and financial transaction management method

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Publication number Publication date
WO2002047314A3 (fr) 2004-02-26
WO2002047314A9 (fr) 2004-05-06

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