The present invention relates generally to methods and apparatus for processing financial securities transactions, and, more particularly, to methods and apparatus for buying and selling financial securities over a network.
Historically, transactions involving the purchase and sale of financial securities, such as bonds, stocks, commercial paper and other equities, were only permitted using closely regulated exchanges and over-the-counter trading markets, such as the New York Stock Exchange (NYSE). Most transactions involving financial securities include two categories of participants, namely, the end-investors (buyers and sellers) and brokers (brokerage firms and security houses). The end-investors include individuals and institutions, such as insurance companies, pension finds, foreign governments, mutual fund and trust companies, and commercial banks.
The secondary market for most financial securities is not as closely regulated as the primary market. Thus, after the initial purchase and sale in the primary market, many financial securities are often resold in private transactions. Generally, investors buy and sell financial securities in the secondary market in anticipation of future favorable price changes. Brokerage firms and security houses often transact in financial securities with end-investors in the secondary market in two different roles. As principals, the brokerage firms and security houses buy and sell financial securities with anticipation of future price changes. As agents, on the other hand, the brokerage firms and security houses buy and sell financial securities on behalf of their customers, typically on a commission basis.
The wide availability of electronic networks, such as the World Wide Web and electronic bulletin boards, now permits end-investors to participate in financial security transactions directly without the aid of brokerage firms and security houses. In addition to providing a valuable resource for obtaining reference material, such electronic networks provide a mechanism for centralizing financial security transactions and a clearinghouse for buyers and sellers to post and review bids for the purchase and sale of financial securities.
A number of exchanges have been developed for processing transactions involving the purchase and sale of financial securities using a public bulletin board. A number of commercial banks, including Deutsche Bank, Bear Stearns, and Credit Suisse/First Boston have developed bulletin board systems with a focus on treasury bills. In addition, a number of bulletin board systems have been developed with a focus on various bonds, such as treasury, corporate and municipal bonds, including systems by Fuji Securities, Merrill Lynch Capital Markets, Morgan Stanley Dean Witter and Spear, Leeds & Kellogg.
It has been found, however, that the complexity or uniqueness of many financial securities prevents bids for such financial securities to be posted in a standardized manner. For example, many financial securities exhibit price fluctuations that make it difficult to post bids for such financial securities. Furthermore, each financial security typically has its own set of requirements and risks, making the evaluation and comparison of two different securities nearly impossible. Thus, it is often difficult to identify financial securities of interest from among all of the available options. Generally, once posted, a bid may be accepted or rejected by other participants. Although many points of negotiation typically remain, currently available electronic networks for the processing of financial securities transactions do not provide a mechanism for the participants to communicate.
In addition, when a bid for the purchase or sale of a financial security is posted on such an electronic network, the parameters of the bid, including the volume and total price, is typically available for the entire public to evaluate. When a bid is posted for a large transaction, however, the overall price of the financial security may be negatively impacted. A brokerage firm or security house typically divides such large transactions into smaller pieces that can be handled by a number of individual brokers who, for example, could simultaneously contact potential end-investors by telephone. Electronic networks that process financial securities transactions, however, do not provide a corresponding feature to prevent a negative price impact for a large transaction.
A need therefore exists for an electronic network for processing the purchase and sale of financial securities that permits individual investors to trade over a network without intermediate agents, brokerages, or security houses. A further need exists for a system for processing financial securities transactions that provides a network-based electronic bulletin board that permits participants to negotiate directly in order to complete transactions. Yet another need exists for a system for processing financial securities transactions that automatically identifies bids that are in proximity to one another and permits participants to negotiate in order to consummate a transaction. Another need exists for a system and method for providing a plurality of simultaneous real-time negotiation channels such that a buyer can negotiate with a plurality of sellers, and vice-versa. A further need exists for a system for processing financial securities transactions that permits a large bid (purchase or sale) for financial securities to be processed as a number of smaller transactions and that may be targeted to selected participants.
Generally, a centralized financial market management system and method are disclosed that permit individual investors to trade over a network without intermediate agents, brokerages, or security houses. According to one aspect of the invention, the disclosed centralized financial market management system and method automatically identify bids that are in proximity to one another and permit participants to negotiate directly in order to consummate a transaction. Generally, two bids are considered to be in proximity to one another if they correspond to the purchase and sale of the same financial security, and have a price and other parameters that are within a given threshold of one another. The given threshold may be predefined or empirically determined. In one implementation, the present invention provides a plurality of simultaneous real-time negotiation channels such that a buyer can negotiate with a plurality of sellers, and vice-versa.
According to another aspect of the invention, the disclosed centralized financial market management system and method permits each participant in the financial security trading market can have a unique definition of its market structure. A participant can establish various market segments within the push market where a given participant can post a bid (buy and sell) and can monitor responses to this bid. Each market segments corresponds to a group of other market participants to which the respective market participant is willing to announce its bids.
The personalized market segments of the present invention allow the submitter of a bid (buy or sell) for a financial security to narrowly focus the bid on select market participants. Thus, buyers and sellers can post their bids only to targeted groups of other market participants to minimize and otherwise control the range of exposure of the trading intention to others in the market. In addition, the personalized market segments can be dynamically adjusted by the respective market participant, as desired.
Furthermore, the market structure of the present invention allows a large transaction (buy or sell) to be divided by the bid submitter into smaller units and divided over a number of market segments. Thus, participants in one market segment will not be aware of bids associated with the same transaction in other market segments. In this manner, a submitter of a bid (buy or sell) associated with a large transaction can control the transaction in a manner that will not adversely impact the price.
A more complete understanding of the present invention, as well as further features and advantages of the present invention, will be obtained by reference to the following detailed description and drawings.
The present invention provides a network-based negotiable market for financial security trading. According to one aspect of the present invention, shown in
A push market 210 is the region where the market participants 400 posts their corresponding bids (buy and sell) and can monitor responses to these bids. As shown in
In this manner, the personalized market segments 215-N of the present invention allow the submitter of a bid (buy or sell) for a financial security to narrowly focus the bid on select market participants 400. Thus, buyers and sellers can post their bids only to targeted groups of other market participants 400 to minimize and otherwise control the range of exposure of the trading intention to others in the market. In addition, the personalized market segments 215-N can be dynamically adjusted by the respective market participant 400 as desired, in a manner discussed below in conjunction with
Furthermore, the market structure of the present invention allows a large transaction (buy or sell) to be divided by the bid submitter into smaller units and divided over a number of market segments 215-N. Thus, participants 400 in one market segment 215-N will not be aware of bids associated with the same transaction in other market segments 215-N. In this manner, a submitter of a bid (buy or sell) associated with a large transaction can control the transaction in a manner that will not adversely impact the price.
As shown in
According to another feature of the present invention, a new bid is compared to other bids that have been submitted to the centralized financial market management system 300 to identify bids that are in “proximity.” Generally, two bids are considered to be in proximity if they represent a buy and a sell, and have a price and other parameters that are within a given threshold of one another. The given threshold may be predefined or empirically determined. In one implementation, a real-time communication channel is automatically established between the buyer and seller of bids that are in proximity. Alternatively, an introduction may be provided between the two parties using electronic mail messages. Thus, one or more negotiation channels are provided between the parties over the network environment 100 to permit buyers to negotiate with a number of sellers simultaneously, and likewise, to permit sellers to negotiate with a number of buyers simultaneously. In this manner, buyers and sellers can compare their respective asking and offering prices in an efficient manner. Collaboration can be performed using any well-known methods of the prior art, such as those described in U.S. patent application Ser. No. 08/722,287, filed on Sep. 27, 1996 to Fin et al., entitled “Internet Web Page Sharing”, incorporated by reference herein.
As discussed further below in conjunction with
In addition, the data storage device 320 includes a market segment management process 800 and a server bid processing routine 900, each discussed further below in conjunction with
As discussed further below in conjunction with
As previously indicated, each market participant 400 executes a market segment definition process 700, shown in
A test is performed during step 730 to determine if the received market segment identifier corresponds to an existing market segment. If it is determined during step 730 that the received market segment identifier corresponds to an existing market segment, then the corresponding market segment information is retrieved from the market segment database 500 during step 740 and the additions and/or deletions for the existing market segment are processed during step 750 and forwarded to the centralized financial market management system 300.
If, however, it is determined during step 730 that the received market segment identifier does not corresponds to an existing market segment, then the list of authorized market participants 400 for the new market segment is received during step 760 and forwarded to the centralized financial market management system 300, before program control terminates.
As previously indicated, the centralized financial market management system 300 executes the market segment management process 800, shown in
Thereafter, a test is performed during step 820 to determine if the received market segment identifier corresponds to an existing market segment. If it is determined during step 820 that the received market segment identifier corresponds to an existing market segment, then the corresponding market segment information is retrieved from the market segment database 500 during step 830 and the additions and/or deletions for the existing market segment are processed during step 840 to update the market segment database 500.
If, however, it is determined during step 820 that the received market segment identifier does not corresponds to an existing market segment, then the list of authorized market participants 400 for the new market segment is received during step 850 and a record is created in the market segment database 500, before program control terminates.
As previously indicated, the centralized financial market management system 300 executes the server bid processing routine 900, shown in
Thereafter, a record is created for the bid in the market (bid) database 600 during step 920. The submitting market participant identifier (640) and the authorized market segment identifiers (650) of the bid are then compared during step 930 to the market participant identifier (530) and the market segment identifiers (540) of the market segment database 500. The bid is then posted during step 940 in the pull market 220 of each market participant 400 identified in the invitee list (550) of any record in the market segment database 500 identified during step 930.
As shown in FIG.>9b, the server bid processing routine 900 then compares the submitting market participant identifier (640) of the bid to the invitee list (550) of the market segment database 500 during step 950 to identify the market segments to which the submitter has been invited. Other bids in the market (bid) database 600 corresponding to market segments to which the current bid submitter has been invited are identified during step 960 (i.e., compare market participant identifier (530) and market segment identifiers (540) from identified market segments to bids in market database 600).
A test is performed during step 970 to determine if the new bid is “in proximity” to any existing bid(s) in market segments to which the current submitter has been invited. Generally, two bids are “in proximity” if they correspond to a buy and a sell, respectively, and have a price and other parameters that are within a given threshold of one another. The thresholds may be predefined or empirically determined.
If it is determined during step 970 that the new bid is “in proximity” to any existing bid(s) in market segments to which the current submitter has been invited, then responses are sent during step 980 to the submitter identifying the bids that are in proximity. In addition, as previously indicated, simultaneous communication channels can also be established between the parties to facilitate negotiation.
If, however, it is determined during step 970 that the new bid is not “in proximity” to any existing bid(s) in market segments to which the current submitter has been invited, then program control terminates.
As previously indicated, the market participants 400 can execute a client bid processing routine 1000 to assist a given market participant (user) 400 in generating and submitting a bid (buy or sell) and associating the bid with one or more desired market segments 215, 225. In addition, the client bid processing routine 1000, shown in
As shown in
The bid is then transmitted during step 1030 to the centralized financial market management system 300. A test is performed during step 1040 to determine if a response is received identifying one or more bids that are in proximity from the centralized financial market management system 300. If it is determined during step 1040 that a response is not received identifying one or more bids that are in proximity, then program control returns to continue executing step 1040 until a response is received or a time-out occurs.
If, however, it is determined during step 1040 that a response is received identifying one or more bids that are in proximity, then for each identified proximate bid, an icon is posted with information about the proximate bid during step 1050 on an appropriate push interface, such as the interface discussed below in conjunction with
As shown in
If, however, it is determined during step 1060 that the user does click on a response icon, then a channel is opened during step 1070 for message exchange with the corresponding other party. A test is then performed during step 1075 to determine if the user utilizes the channel within a predefined time period. If it is determined during step 1075 that the user does not use the channel within the predefined period (or deletes the channel), then the response icon and channel are deleted during step 1080 and program control terminates.
If, however, it is determined during step 1075 that the user does use the channel, then negotiation is facilitated between the parties during step 1085. A further test is performed during step 1090 to determine if the user accepts the offer. If it is determined during step 1090 that the user does not accept the offer, then program control returns to step 1085 for further negotiation (optionally, until the channel is deleted by one party or a time-out period is exceeded).
If, however, it is determined during step 1090 that the user does accept the offer, then the bid(s) are removed from the market (bid) database 600 during step 1095, before program control terminates.
It is to be understood that the embodiments and variations shown and described herein are merely illustrative of the principles of this invention and that various modifications may be implemented by those skilled in the art without departing from the scope and spirit of the invention.
This application is a divisional application under 37 CFR, §1.53(b) of U.S. application Ser. No. 09/710,999 filed Nov. 9, 2000 which claims the benefit of U.S. Provisional Application No. 60/164,795, filed Nov. 10, 1999.
Number | Date | Country | |
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60164795 | Nov 1999 | US |
Number | Date | Country | |
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Parent | 09710999 | Nov 2000 | US |
Child | 12512569 | US |