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Unified trading system

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unified trading system

An embodiment of the present invention provides a system, method, process, software and standards that enable a unified trading and control process utilized by sponsoring organizations and asset managers money managers for sub advised or externally managed investment portfolios as to increase control Try the new Google Patents, with machine-classified Google Scholar results, and Japanese and South Korean patents. System and method for facilitating unified trading and control for a sponsoring organization's money management process US A1. An embodiment of the present invention provides a system, method, process, software and standards that enable a unified trading and control process utilized by sponsoring organizations and asset managers money managers for sub advised or externally managed investment portfolios as to increase control over the trading process by a sponsoring organization, enhance regulatory compliance, substantially lower trading costs and improve investment performance on a recurring basis for the shareholders and beneficiaries investing in registered and non registered mutual funds and institutional investment portfolios. A method for facilitating unified trading and control for a sponsoring organization's money management process using a plurality of asset managers to manage the sponsoring organization's investment portfolios, the method comprising: The method of claim 21further comprising executing the low-touch orders, and the modified orders expected to have low market impact, at the lowest possible total trading cost or mark-up consistent with the regulatory requirements of the securities industry. The method of claim 21further comprising reconciling trades executed by the sponsoring organization with the plurality of asset managers, a plurality of trading organizations, and a plurality of custody firms for the investment portfolio's assets. The method of claim 21wherein receiving the recommendations for the investment portfolio comprises: The method of claim 21wherein assets of the investment portfolio comprise one of registered mutual funds, non-registered mutual funds, institutional investment portfolios, variable insurance funds, variable fund LLCs, regulated investment company funds, separately managed accounts, defined contribution plans, plans, hedge funds, group annuities, collective investments, deferred compensation plans, institutional investment accounts, institutional funds, separate accounts of insurance companies, pension plans, endowments, and trusts. The method of claim 21further comprising providing a standard protocol for use by a plurality of sponsoring organizations and their plurality of asset managers, wherein the standard protocol is implemented in at least one designated order management system. The method of claim 21further comprising providing a standard protocol for use by a plurality of sponsoring organizations and their plurality of asset managers, wherein the standard protocol is implemented in at least one designated communications engine. The method of claim 21further comprising providing a standard protocol for use by a plurality of sponsoring organizations and their plurality of asset managers, wherein the standard protocol is implemented in at least one designated communications protocol. The method trading claim 21further comprising providing a standard protocol for use by a plurality of sponsoring organizations and their plurality of asset managers, wherein the standard protocol is implemented in at least one designated communications network. The method of claim 21wherein determining the random trade order rotation includes: The method of claim 21wherein the defined procedure comprises random selection. The method of claim 21wherein the defined procedure comprises sequential selection. The method of claim 21wherein the defined procedure comprises algorithmic random selection. The method of claim 21wherein the determination of the most cost effective strategy for an order comprises an optimization analysis of share price, liquidity, execution cost or mark-up, expected price improvement, and execution speed. The method of claim 21wherein the determination of the most cost effective strategy for an order comprises an optimization analysis of execution cost or mark-up. The method of claim 21wherein the determination of the most cost effective strategy for an order comprises an optimization analysis of expected price improvement. The method of claim 21wherein the determination of the most cost effective strategy for an order comprises an optimization analysis of execution speed. The method of claim 21wherein determining the random trade order rotation according to a defined procedure is applicable when an asset manager places a plurality of orders in a given security for execution across a plurality of investment portfolios. The method of claim 21wherein the random trade order rotation rotates trade orders among the asset manager given discretion and the sponsoring organization or a plurality of sponsoring organizations. The method of claim 21further comprising determining the expected market impact in real time according to a set of logical rules that are customizable and adjustable in real time. This application claims the benefit of U. The present invention relates to the management and trading of investment portfolios and, in particular, to a system, method, process, software and standards for facilitating a trading organization's unified trading and control of a money management process. More particularly, an embodiment of the present invention provides a system e. This system referred to as the unified trading and control systemmethod, process, software, and standards are applicable to registered mutual funds, non-registered mutual funds, and institutional investment portfolios and could be, for example, utilized by: For purposes of describing the present invention, FIG. It is important to note that the advisor or administrator and associated board of trustees boards have a fiduciary responsibility to the shareholders and beneficiaries to properly control minimize fund and plan operating expenses, as these expenses reduce the returns performance of the investment portfolios to these same fund shareholders and plan beneficiaries. The use herein of any of these terms, as shown in FIG. Many large and small financial institutions outsource, in part or whole, the responsibility of managing money for their investment portfolios to outside organizations in order to capitalize on the expertise of the asset management organizations and to enable the financial institutions to focus on their core competencies. The approximate assets in the investment industry by various markets, along with their sub advised assets, are summarized in Table 1 below. These investment options are similar to mutual funds in legal structure and operations and are required by the SEC to register as mutual funds. A single mutual fund company or institutional asset management firm may sub advise manage between one and five of the thirty to sixty investment options available to retail investors in a single variable insurance product such as a variable annuity. The sub advisor is paid according to an annual fee schedule based on assets in the fund or investment portfolio. The sub advisor is paid to manage the assets determine which securities to hold in the fund or portfolio and make related buy and sell trading decisionsbut is not required to provide client service and administrative functions such as opening and closing client accounts, processing contributions and withdrawals on behalf of clients, processing movement of funds between sub accounts as an investor buys and sells funds within the annuity producthandling calls and special service requests from clients, maintaining client addresses, providing tax reporting to clients, and printing and mailing client statements. Thus, in a sub advisory relationship, the client service and administrative functions including extensive back office system processing required to support these functions are provided through the sponsoring organization advisor for the investment product, such as an insurance company, pension plan, or other financial institution and not the sub advisor. A sub advisor's fee for managing the fund or account may vary with the type of assets, the selected investment strategy, and the size of the investment portfolio, but an annual fee of 0. The trading of stocks and bonds by sub advisors in a sub advised fund or investment account is a complex process. When trading securities, as a general process, asset managers money managers often incur additional trading costs that are over and above the cost of the trade alone. For example, referring to FIG. Executing brokers are often selected for the additional services beyond executing the trade that they can provide to the asset manager mutual fund company or institutional asset manager. The cost of these additional goods and services from executing brokers such as company and market research, market data feeds, trade analytics, and software is added over and above the trade's cost of execution and results in a higher trade cost than what would otherwise be incurred by the fund or investment portfolio. Since many asset managers trade billions of shares per year, these additional few cents per share in system costs cumulatively create a substantial pool of revenue for the asset manager. As such, a fund's trades are often directed to executing brokers as to maximize the benefits received by the mutual fund company or institutional asset manager In fact, most shareholders in mutual funds are not aware that a fund's trading costs are in addition to the fund's annual operating expense as disclosed in the prospectus and, as such, serve to lower the performance return of their funds. In essence, the insurance company responsible for regulatory compliance is notified of the trades only after their execution, usually well after the close of the trading day. Pension plans and other entities utilizing sub advised portfolio management, in a manner similar to the insurance companies, employ a similar structure and experience similar challenges. Typically, the complex process shown in FIG. The process in FIG. The data for each trade, such as number of shares, price per share, total value, execution costs, and contra broker, is transmitted through a number of electronic data repositories. These trades are usually executed at an average cost 3. The back office system, through the overnight batch processing cycle, will reconcile the trades, calculate updated portfolio account values or fund NAVs Net Asset Valuesand subsequently update the holdings and values for each client investing in their products. An insurance company as advisor for regulatory purposes may implement some form of compliance review during the reconciliation process. Most importantly, the sponsoring organization has little, if any, control over the sub advisor's choice of executing broker and the associated additional costs incurred by their funds or accounts through the use of soft dollars. Likewise, the sponsoring organization has no opportunity to review the trades for compliance with prospectus and regulatory requirements until hours after the close of the market or the next day when trade issues and errors are more expensive to address and correct. Overall, the current process was established decades ago when the sub advised industry was in its infancy and, despite its impressive current assets, has never been restructured to recognize that the true beneficiaries of this entire process should be the fund shareholders and plan beneficiaries whose hard earned dollars constitute the assets in these investment portfolios. An embodiment of the present invention provides a system e. In particular, the present invention provides a superior trading and control method for the sub advised industry. The system, method, process, software, and standards of the present invention address a number of existing shortcomings in the current trading and operational processes in the sub advised industry, resulting in substantially lower trading expenses on a recurring basis, improved performance, a more simplified operational model, and superior compliance oversight. The benefit of these lower trading expenses, by regulatory requirement, must pass directly to the fund shareholders retail investors in these funds and plan beneficiaries in the form of lower trading expenses. The lower trading expenses result in improved investment performance for the funds and plans, thereby attracting additional investments for the sponsoring organization. Further embodiments of the invention provide similar systems, methods, processes, software, and standards for the defined contribution market, plans, hedge funds, collective investments, deferred compensation plans, institutional accounts, separate accounts of insurance companies, defined benefit pension plans, endowments and trusts. The data for this table was compiled from documents filed by each fund trust with the SEC, including the prospectus, trading report, and statement of additional information. An embodiment of the present invention provides a unified trading and control system. The following numbered steps correspond to the arrows and their associated reference numerals shown in FIG. Once these decisions and the resulting orders are determined by the sub advisor or money managerthe sub advisor calculates the resulting number of shares to buy or sell for each security and communicates the desired orders to the sponsoring organization Through an embodiment of the present invention, the sponsoring organization is able to select executing brokers providing the lowest possible execution cost which presently could be one cent or less per share consistent with regulatory requirements for Best Execution best share pricethereby generating additional savings for the fund shareholders and plan beneficiaries and improving fund performance. The sponsoring organization also has, in an embodiment of the present invention, the option of implementing a pre-trade compliance review and an immediate post execution review to ensure the trade is compliant with prospectus, SEC, and board requirements. If the trade is not compliant with these regulatory requirements, the sponsoring organization as advisor for regulatory purposes is able to prevent the order from being executed or immediately address any violations following execution rather than waiting until the next day as in the prior art. Cost, Coverage, Liquidity, Technology and Service. An embodiment of the present invention is shown in FIG. This standardization eliminates the extraordinary potential for unmanageable complexity created for sub advisors and executing brokers as a multiplicity of sponsoring organization select and implement their own individual method and process utilizing a wide variety of vendors, systems, procedures, communications engines, communications protocols, and communications networks. The process works in the following steps corresponding to the arrows and their associated reference numerals shown in FIG. Each order is directed to the compliance engine that reviews the order with respect to prospectus, board, and SEC regulations and requirements. The sub advisor receives the trade fill report. The standard system for facilitating the sponsoring organization's unified trading and control of their money management process consists of the following components in an integrated format: An alternative embodiment of the present invention with an alternative standard system consists of the following components in an integrated format: An alternative embodiment of the present invention is shown in FIG. The likelihood of increasing compatibility of systems over time, and increased industry acceptance of the system of the present invention, could potentially ease the standardization requirement and allow these additional options to become feasible. The standard system and comprises the following standard components in an integrated format: An alternative embodiment of the standard system consists of a communications engine and communications protocol Finally, it is conceivable that, over time, communications integration across the industry evolves to the point where the standard consists solely of a communications protocol The present invention, in the embodiments illustrated in FIGS. Exemplary System and Process of the Present Invention. The present invention provides a system, method, process, software, and standards for achieving a desired social utility of creating significant and recurring cost savings and the resulting improved investment performance for fund shareholders and plan beneficiaries. An exemplary system is based on a number of components and includes an order entry system, compliance engine, order management system, a high touch—low touch engine, a price—liquidity—cost—quality engine, trade reconciliation system, communications engines, communications protocols, and communications networks, as further described below. The process works in the following steps corresponding to the arrows and their adjacent reference numerals in FIG. The individual who is the portfolio manager for the investment portfolio is typically an employee of the mutual fund company or institutional asset manager acting as sub advisor. The order entry GUI displays, among other data, the investment portfolio's total value, cash, and securities along with the number of shares, share price, and dollar value of each position The order entry system provides important functionality in two respects:. The order entry system provides options for the order type for each trade, for example: Also, the system can allow a portfolio manager to freeze a security's current shares, that is, exclude the security from any and all future trading. ENTER on the order entry screenthe order entry system calculates the necessary number of shares and dollars for each security to buy or sell. Given that the order is determined at the investment portfolio level, the order entry system does not have nor require access to information at the account level for individual fund shareholders or plan beneficiaries. The record of the order is entered into the trade blotter This process is repeated for each buy and sell order implemented by the portfolio manager. The order routing table directs the order to, among other venues, a market makeran electronic commerce network ECNa direct market access DMA vendoror an exchange The compliance analysis occurs both prior to and immediately following the execution of each trade or group of trades as well as at the close of each trading day for compliance with prospectus, regulatory, and unified requirements. The order or group of orders in question, subsequent to the review of the violation, may be amended, killed, or approved for execution. Trades or groups of trades that are executed are also analyzed to ensure that the resulting metrics of the trades do not violate any requirements for the portfolio. Post-execution price changes could subsequently trigger a violation not present at the time of execution. Approved orders are routed to the order management system OMS to begin the execution process. In the instance for this operating fund trust, there are a total of individual restrictions that could apply to all, many, or a single investment portfolio or fund. The exemplary compliance review process works as described in the following steps corresponding to the arrows and their adjacent reference numerals as shown in FIG. Exemplary restrictions and their frequencies are illustrated in table of FIG. The order may be killed at this point, revised, or allowed to be executed in its existing form Overall, in an embodiment of the present invention, the sponsoring organization the advisor with direct regulatory responsibility for the investment portfolios has the option, which was not available in the prior art, to review all pending orders and prevent violations of prospectus, regulatory, and board requirements prior to the orders being executed. The sponsoring organization, in an embodiment of the present invention, also has the option, which was not available in the prior art, to review all executed trades on a real-time basis to prevent post-execution violations of prospectus, regulatory, or board requirements. Finally, for the first time, the sponsoring organization, as advisor or plan administrator, has the means to place each fund or account and each sub advisor on the sponsoring organization's implementation of a common, centrally operated compliance engine, process and set of restrictions as opposed to each different sub advisor or money manager performing compliance reviews on as many different systems. The sponsoring organization, as advisor to the fund or administrator to the pension plan, has a regulatory SEC responsibility to ensure compliance of its funds and plan with all regulatory requirements and to certify, in writing, that these investment portfolios do not violate the securities laws. Thus, in contrast to conventional systems, the present invention enables the advisor or administrator to fulfill such responsibilities prior to execution of an order, enables an immediate review of all executed trades, and allows a single standardized compliance review process to be implemented across all sub advisors and the funds or accounts. The present invention therefore empowers the advisor or administrator to properly fulfill their regulatory SEC responsibilities. The order management system is a computerized processing system with a graphical user interface GUI and associated software program s enabling the organization conducting the trading activity to maintain a real-time trade blotter for all their pending orders and executed trades. An order management system can comprise one or more of the following modules: The order routing table is a central database for maintaining the instructions for directing orders to selected executing brokers. The communications engine is used to create data formats acceptable to other order management systems. The order management system also provides logical workflow solutions to assist in maintaining proper communication between the various front, middle, and back office functions and systems for allocations of large orders as well as keeping track of partial fills of trade orders. Finally, the order management system utilizes market data sources and provides robust and flexible compliance, regulatory and audit reporting capabilitiesincluding NYSE RuleOATs, ACT, Short Sale, and Limit Order Handling Rule reports, as well as capturing, time-stamping, and archiving all activity for timely reconciliation and trouble-shooting. The order management system functions as described in the following steps, which correspond to the arrows and their associated reference numerals shown in FIG. The compliance review process, as illustrated in FIG. Importantly, in an aspect of the present invention, the primary responsibility for operating the order management system for processing orders shifts from the sub advisor, who operated the order management system in the prior art, to the sponsoring organization. The high touch—low touch engine is a graphical user interface GUI and associated software program s linked to a computerized rules-based logic engine that enables each buy or sell order or combinations of buy and sell orders to be analyzed in real time, according to a set of customizable logical rules, to: In a preferred embodiment, these logical rules can be adjusted in real time. Orders are categorized as high touch or low touch orders depending on their expected market impact. As such, the large order could drive up the price of the equity by several dollars per share. A possible result is that the purchasers of theshares will experience an immediate loss on their investment. On the other hand, there may be situations in which an order represents a very small portion of a measure such as daily trade volume. For example, an order to buy 5, shares for an equity trading several million shares daily will have little or no expected market impact on the price of that equity. Finally, once an execution strategy is selected for a high touch order, the order may be broken up into several smaller orders that are executed system a period of time. These smaller orders may now qualify as low touch orders, as each individual order, when executed over a period a time, may now result in little or no market impact. The process works as described in the following steps, which correspond to the arrows and their adjacent reference numerals shown in FIG. These rules can be changed in real-time. Although the high touch—low touch engine is illustrated as located within the unified trading and control system, one of ordinary skill in the art would appreciate that the high touch—low touch engine could be located elsewhere, such as at the sub advisor or sponsoring organization These worked orders are routed for review by the sponsoring organization's compliance engine and, once approved, are ready for execution. Steps through constitute the high touch order processing loop. For example, a single order for a single fund would not require a trade rotation order. For example, when an asset manager places a plurality of orders in a given security for execution across a plurality of investment portfolios, trade order rotation is required. Such trade order rotation is preferably random. The trade order rotation could be, for example, a defined procedure comprising random selection, sequential selection, or algorithmic random selection. The trade rotation order could also be determined as a single trade rotation order between the sub advisor and sponsoring organizations and Although, for clarity, FIG. Steps through constitute the low touch order processing loop. The high touch—low touch engine HLE is unique in that it performs an expected market impact analysis and assigning of discretion over order execution and selection of executing brokers to different organizations utilizing real-time market data and customizable rules. The high touch—low touch engine's HLE automated, real-time capability does not exist in the prior art and represents a technology innovation in the system of the present invention. In an embodiment of the present invention, the high touch—low touch engine enables the sponsoring organization to select the executing brokers and direct the pending orders for execution at brokers providing the lowest cost execution consistent with regulatory requirements such as Best Execution. The result is that, in an embodiment of the present invention, the sponsoring organizations are able to direct order flow as to eliminate soft dollar costs and achieve substantial and recurring cost savings and improved investment performance for their fund shareholders and plan beneficiaries. The high touch—low touch engine would, under circumstances approved by the sponsoring organization, enable the sub advisor to assume discretion to direct trades to their selected executing brokers. The price—liquidity—cost—quality engine is a graphical user interface GUI and associated software program s linked to a computerized, real-time and customizable rules-based logic engine that enables each buy or sell order or combinations of buy and sell orders to be analyzed, according to a set of customizable logical rules, to determine, through an optimization process, the most cost effective order composition in terms of one or more of share price, number of shares, execution cost or mark-up, expected price improvement, and execution speed. The output of the price—liquidity—cost—quality engine is a list of the executing brokers, share price, number of shares, execution cost or mark-up, expected price improvement, and execution speed for the sponsoring organizations and sub advisor to utilize unified selecting executing brokers for their orders. The price per share, number of shares and execution costs or mark-ups are based on actual data gathered through real-time market data feeds and inputs from executing brokers. The price per share and number of shares reflect current market data. The execution cost or mark-up per share reflects the real-time cost entered into the price—liquidity—cost—quality engine by the executing brokers and can vary on a security by security basis and over time as executing brokers adjust their executions costs or mark-ups to reflect their desire to accumulate, reduce, or liquidate their position in a security. The trade quality analysis engine provides a real-time and customizable analysis of the historical and expected price improvement for each security, by executing broker, in an order. Currently, orders are executed at the National Best Bid and Offer Ask or NBBO. As such, the ideal price point between the bid and offer is the Mid Point between Bid and Offer MPBO. The trade quality engine performs a real-time analysis of the share prices and times of execution for recently executed trades to determine how close the share price for a trade was to the MPBO. While it is possible, orders are rarely executed below the MPBO. The effective-to-quoted analysis is performed for each order and the time period utilized for this analysis is customizable and performed for periods of time ranging from sub-seconds to minutes, hours, days, and longer, according to the desires of the user. This data is then utilized by an optimization engine to calculate the most cost effective group of executing brokers for the order. This data is then transmitted to the order management system of the sub advisor or sponsoring organization. The quality data can also include factors such as speed of execution, which reflects the time that is required for an executing broker, upon receipt of the order, to complete the execution of the order. The price—cost—liquidity—quality engine's capacity to factor in additional real-time and customizable factors, such as execution cost and expected price improvement, represents a considerable step forward in providing shareholders and plan beneficiaries with the lowest total execution cost in a routine and automated fashion. The execution cost data can be changed on a real-time basis for each security. The execution cost data is incorporated trading the price—liquidity—cost database The price—cost—liquidity—quality engine is unique in that it performs a real-time computer analysis and subsequent assigning of execution costs and expected execution quality relative to current share price and liquidity offered by a network of executing brokers. This automated, real-time, and customizable capability does not exist in the prior art and represents a technology innovation in the system of the present invention. The trade reconciliation system is a computerized trade processing system that functions in the back office system for the investment portfolios. The trade reconciliation system can comprise general ledger and accountingposition managerand stock record modules. The position manager can comprise an auto cage that connects to clearing organizations The position manager module and stock record module support the trade processing module that provides commission accounting and trade processing The stock record also supports the purchase and sales modulewhich incorporates data through external data providers and market connections The trade reconciliation system provides real-time, multi-currency trade settlement rules, trade comparisons, trade confirmation and affirmations, purchases and sales, trade exception processing, commission calculations, accruals, cash flows, and trial balances. In essence, the trade reconciliation system operates in an automated fashion through the incorporation of real-time and batch data feeds from a variety of different sources. In its simplest form, the trade reconciliation process ensures that: At the conclusion of this process, the entire system is ready for the next day's trading activity. In the prior art, the trade reconciliation process is the responsibility of both the sub advisor and the sponsoring organization while the balancing of accounts is the responsibility of the sponsoring organization. In an embodiment of the present invention, the responsibility for both the trade reconciliation process and the balancing of accounts shifts to the sponsoring organization. The system of the present invention can also include additional systems to support order execution processing. These systems include a communications engine to translate and direct all messages between the appropriate parties; a communications protocol for specifying message format as to eliminate confusion as to message content, instructions, and destination; and a communications network to connect all sub advisors, sponsoring organizations, and executing brokers with real-time, reliable, and scalable connectivity. In an embodiment of the present invention, the functional responsibilities, personnel requirements, system requirements, regulatory responsibilities, and data flows are dramatically different from the prior art. From a perspective of responsibility for the sub systems, Table 3 below illustrates how the operating responsibilities for the various systems change from the prior art to an embodiment of the present invention. TABLE 3 Operating Responsibilities of the Present Invention System Responsibility Prior Art Present Invention Order Entry Sub Advisor Sub Advisor Compliance Engine Sub Advisor Sponsoring Organization Has Compliance Option Order Management System Sub Advisor Sponsoring Organization High Touch-Low Touch Not Applicable Sponsoring Organization Engine Real-Time Automated Process Price-Liquidity-Cost-Quality Not Applicable Sponsoring Organization Engine Real-Time Automated Process Trade Reconciliation Sub Advisor Sponsoring Organization Communications Engine Sub Advisor Sponsoring Organization Communications Protocol Sub Advisor Sponsoring Organization Communications Network Sub Advisor Sponsoring Organization. With respect to the responsibilities of the sub advisor, there are substantial differences between the prior art and the embodiment of the present invention. These differences are summarized in FIG. The unified trading and control system is flexible in its implementation in that trading responsibility for certain funds or portfolios, such as an emerging markets or micro cap stocks, may remain with the sub advisors assuming the sub advisor has proficiency with these less liquid issues that the sponsoring organization may not possess. Also, the money manager or portfolio manager may desire more control over the trading of specific assets or issues, the utilization of certain trade strategies or the direction of orders to a specific executing broker. The authorization of such exceptions remains with the sponsoring organization as the sponsoring organization can authorize those exceptions that benefit the fund shareholders or plan beneficiaries. Overall, in an embodiment of the present invention, there are multiple benefits for the sub advisor with respect to lower operating expenses, less operating and trade error risk and, of course, superior fund performance. Finally, an important user group that must be comfortable with the system implementation of the present invention is the portfolio managers making the daily buy and sell decisions in the fund or investment portfolio. The system of the present invention addresses the portfolio managers' concern that their asset management process not be interfered with as new systems, processes, and procedures are implemented. The result is that the system of the present invention, as shown below in Table 4, addresses the concerns of the portfolio managers in a positive and comprehensive fashion. TABLE 4 Portfolio Manager Concerns Addressed by the Present Invention Portfolio Manager Concern Unified Trading and Control System Performance Substantial, Recurring Improvement in Performance Control of High Remains with Sub Advisor through Touch Trades high touch-low touch engine Anonymity Enhanced as positions are held in multiple sub advised portfolios Latency Improved as automated process replace manual processes Chaos from Standards create a single image across Multiple Systems all sub advised accounts Trade Rotation Implemented by trade order rotation engine Order Entry Remains sub advisor responsibility Management Fees Not impacted by change in process Best Execution SEC Rule NMS mandates Best Execution on all trades. Rationale for Implementation of a Standard in the System of the Present Invention. An embodiment of the present invention provides a standard system comprising one or more of the following components: The standard for the system of the present invention provides simplicity, reliability, scalability, and cost effectiveness in contrast to the complexity, expense, and potentially chaotic processing caused a plurality of sponsoring organizations making individual systems decisions without regard to the burden that the plurality of systems and configuration places on their sub advisors and executing brokers. The result is that the standard, as a single group of specific components for use by all parties, vastly simplifies the implementation process for all parties and creates a far more reliable, cost effective, and scalable system. Currently, a single mutual fund company such as AIM, Janus, or Oppenheimer. As such, a mutual fund company may manage twenty to sixty separate sub advised funds alongside their thirty to fifty proprietary mutual funds and as many or more institutional and private accounts. A money manager at a mutual fund company making a single trade such as: In order to simplify this vast complexity, the mutual fund company selects and utilizes a single integrated system to execute trades across all proprietary, sub advised, and private portfolios. This single system calculates the number of shares of IBM to purchase for each of a plurality of large cap growth portfolios and aggregates a plurality of share purchases into a single buy order. The single aggregated buy order and associated trading strategies are entered into the single system's order management interface. At that point, if the buy order is large, this trading and order management system may split the trade and direct portions of the buy order to a plurality of executing brokers to complete the buy transaction. These orders are communicated to their executing brokers through a single communications engine and communications network. The shares that are bought are later allocated among the various proprietary funds, sub advised funds, and institutional and private accounts according to pre-determined instructions. While this process may have disadvantages, it is clear that the money manager achieves a high level of automation and significant reduction in operating risk and associated trading lossesas trading across a plurality of accounts is implemented through a single integrated system. In comparison, the potential complexity of the various implementations of the system of the present invention reflects the following factors. The National Association of Variable Annuities NAVAthe variable insurance industry trade group, indicates that it has over fifty members acting as sponsoring organizations for their mutual fund, variable annuity, and defined contribution kb and financial products see FIG. The number of additional sponsoring organizations, such as private and public pension funds, easily adds several hundred more sponsoring organizations to the list shown in FIG. The Investment Company Institute ICIthe mutual fund industry trade group, has over three hundred member mutual fund companies suitable to provide money management services to sub advised funds see FIGS. There are also over forty providers of order management systems see FIG. In addition, system are over 75 companies offering over different communications engines for trade order messaging, translation, and destination routing. As such, despite the common industry protocol, there remain substantial challenges in the interoperability and ease of communications between the pluralities of communications engines. Finally, there are over 25 communications networks available for sponsoring organizations to utilize as their means of connectivity to sub advisors and executing brokers, thereby requiring each sub advisor and executing brokers to link as a node to each system selected by at least one sponsoring organization. Given the plurality of sponsoring organizations as shown in FIG. Given that the sub advisor is required to compensate an investment portfolio for all losses resulting from their errors of any kind, the likely result of an absence of a standard is the refusal by sub advisors to cooperate with an implementation of the system of the present invention. In this illustration, twenty-two different sponsoring organizations select ten different order management systems The sponsoring organizations utilize a total of forty-two different sub advisors in their financial product or pension portfolios along with eight different executing brokers while in actual practice the actual number of sponsoring organizationssub advisorsand executing brokers would be considerably higher than the illustration in FIG. Each sub advisor is asked to move from a single system to a plurality of systems as there are over forty systems available to a sponsoring organization as shown in FIG. As a result, a single trade by a single sub advisor may require order entry into ten or more different systems selected by sponsoring organizations. Such a process could be complex, chaotic, costly, and rife with errors. The associated expense for resolving the errors as the fund shareholders and plan beneficiaries are not responsible for such errors and must be reimbursed for any losses could make sub advisors unwilling to implement such a process. The illustration demonstrates, even at the small scale of a single sub advisor, the inherent complexity and potential unified of such an implementation without the use of a standard system. Therefore, to reduce this complexity, an embodiment of the present invention provides a single standard. The standard system and single network node connection by a single party to all parties reflects a vast improvement in the operating reliability, costs, and ease of implementation and operation. As shown, a single system e. A standard—implemented through, for example, a designated order management system, communications engine, or communications protocol—creates the leverage for allowing rapid industry adoption of the system of the present invention. Exemplary System Components, Services, and Data of a Sponsoring Organization. In an embodiment of the present invention, the following systems, services, and data are preferably in place for a sponsoring organization's investment portfolios: Custody firm to hold the securities and cash for benefit of the funds and plans. Daily net cash contribution or withdrawal per investment portfolio—e. Security master data service. Best execution monitoring service. Transaction cost accounting system. Connectivity among the sponsoring organization, sub advisors and executing brokers. Exemplary Implementation of the Present Invention. With reference to FIG. The system includes a unified trading and control system including a portfolio modeling systeman order entry systema sub advisor compliance engine SA, a sub advisor order management system OMS SA, the high touch—low touch enginethe trade order rotation engine andthe sponsoring organization standard order management system OMS SO, a sponsoring organization compliance system SO, the price—liquidity—cost—quality enginethe sponsoring organization's communications networkthe network of executing brokers supporting the sponsoring organizationthe individual executing brokersand the trade reconciliation system The violation is also reported to the sponsoring organization compliance group not shown and to any or all of the sub advisor groups shown in steps, and These high touch trades are routed to the sponsoring organization's compliance engine SO for pre-execution review and approval and, once approved, are ready for execution. The sponsoring organization compliance review step is not shown. Step starts the sub advisor rerouting loop. For example, an order involving several sub advisor funds and several sponsoring organization funds would require a trade rotation order. As another example, when an asset manager places a plurality of orders in a given security for execution across a plurality of investment portfolios, trade order rotation is required. This step is illustrated for an exemplary sponsoring organization with a similar process implemented by all sponsoring organizations SO x The sponsoring organization also performs a post-execution compliance check through the compliance engine SO. Overall, as shown by the various embodiments described above, the system and process of the present invention provide clear, substantial, quantifiable, recurring, and compounding cost savings and the resulting improved investment performance to fund shareholders and plan beneficiaries. The present invention provides a highly desirable social utility of considerable, recurring, and compounding shareholder and plan beneficiary savings. Indeed, a reasonably effective implementation of the embodiment of the present invention could easily benefit millions of Americans through substantially improved performance of their investment portfolios. Given that sponsoring organizations as advisor for regulatory purposes and the associated fund board of directors and plan investment consultants have a fiduciary responsibility to control minimize operating expenses, there exists a fiduciary obligation to evaluate and, if appropriate, implement any process such as those provided by the system of the present invention that provides substantial, recurring, and quantifiable cost savings and improved performance to fund shareholders and plan beneficiaries. Furthermore, the savings to the fund shareholder and plan beneficiaries occur each year that the funds and accounts utilize the system and process of the present invention. Thus, these benefit of these savings compound and become increasingly more valuable over time. Such improved performance could, potentially, improve the decile ranking by tenths or quartile ranking by quarter performance ratings of these funds relative to their peers who are not utilizing the embodiment of the present invention. Given that these investment portfolios are associated with personal goals for each fund shareholder and plan beneficiary such as a comfortable retirement, higher education, and improved health care, the social utility created by the embodiment of the present invention is potentially dramatic for millions of Americans. For illustration purposes, portions of this specification describe the present invention in the context of variable insurance including variable fund LLCs and registered investment companies RICsmutual fund, or pension plan market. However, as one of ordinary skill in the art would appreciate, the systems and methods described herein apply equally well to other similar markets, such as a sub advised mutual fund market, the defined contribution market, plans, hedge funds, collective investments, deferred compensation plans, institutional accounts, separate accounts of insurance companies, defined benefit pension plans, endowments, and trusts. The foregoing disclosure of the preferred embodiments of the present invention has been presented for purposes of illustration and description. It is not intended to be exhaustive or to limit the invention to the precise forms disclosed. Many variations and modifications of the embodiments described herein will be apparent to one of ordinary skill in the system in light unified the above disclosure. The scope of the invention is to be defined only by the claims appended hereto, and by their equivalents. However, to the extent that the method or process does not rely on the particular order of steps set forth herein, the method or process should not be limited to the particular sequence of steps described. As one of ordinary skill in the art would appreciate, other sequences of steps may be possible. Therefore, the particular order of the steps set forth in the specification should not be construed as limitations on the claims. Year of fee payment: USUSUSUSUSUSUSUSUSUSUS ChiulliTom H. BiBTeXEndNoteRefMan. Patent Citations 35Referenced by 16Classifications 14Legal Events 3. USPTOUSPTO AssignmentEspacenet. Computer method and system for intermediated exchange of commodities. Method and apparatus for enabling small investors with a portfolio of securities to manage taxable events within the portfolio. Computer method and apparatus for optimizing portfolios of multiple participants. Method, system, and apparatus for managing taxable events within a portfolio. Method and apparatus for enabling individual or smaller investors or others to create and manage a portfolio of securities or other assets or liabilities on a cost effective basis. Systems and methods for performing integrated financial transaction. Derivative securities trading product utilizing subsets of indices or portfolios. Method and system for providing integrated brokerage and other financial services through customer activated terminals. Method, apparatus and program for evaluating financial trading strategies and portfolios. Method and apparatus for providing investment advice to multiple investors. Method and apparatus for converting collectively owned investment accounts and pooled investment accounts and vehicles into individually owned accounts. Online trading system and method supporting heirarchically-organized trading members. System and method for optimizing product development portfolios and integrating product strategy with brand strategy. System and method for processing data related to management of financial assets. System and method for using trader lists in an electronic trading system to route a trading order with a reserved size. System and method for routing trading orders in an electronic trading system using trader lists. Method and System for Calculating and Reporting Fund Values for Omnibus Investment Accounts. Systems and Methods for Matching One or More Incoming Order to a Standing Order as a Function of an Inner Market Parameter. Market-Based Adjustment of Premium Amounts for the Generation of an Annuity Based on a Pension Plan.

Introducing Unigy from IPC

Introducing Unigy from IPC unified trading system

2 thoughts on “Unified trading system”

  1. agatakristi says:

    We were so attached to one other many times things happened through telepathy.

  2. alisaruska says:

    During the tenth century card playing to the Chinese were paper dominoes.

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