U.S. patent application number 12/401084 was filed with the patent office on 2009-11-12 for system and method for specified pool trading.
Invention is credited to James W. Toffey, Jonathon Williams.
Application Number | 20090281952 12/401084 |
Document ID | / |
Family ID | 41065786 |
Filed Date | 2009-11-12 |
United States Patent
Application |
20090281952 |
Kind Code |
A1 |
Toffey; James W. ; et
al. |
November 12, 2009 |
SYSTEM AND METHOD FOR SPECIFIED POOL TRADING
Abstract
A computer system and related computer-implemented methods are
designed and configured to store and deliver, upon request,
information related to a plurality of asset-backed security pools,
and to execute transactions between one or more parties relating to
at least one of the plurality of asset backed security pools. The
computer system generally comprises a computer including a computer
usable medium storing a computer readable program and a network
interface that includes software modules and a data storage system
in communication with the computer via the network interface, the
data storage system storing information relating to the plurality
of asset backed securities, and account information related to at
least the one or more parties. The computer is operative with the
computer readable program to provide information related to a
plurality of asset-backed security pools to at least one of the
parties, enable the at least one party to select one or more
asset-backed security pools for inclusion in a specified pool,
provide aggregate pool data related to the selected specified pool,
provide information related to the selected specified pool to at
least one other party, receive pricing information from the at
least one other party, and execute a trade for the asset-backed
security pools in the specified pool.
Inventors: |
Toffey; James W.; (Summit,
NJ) ; Williams; Jonathon; (Huntington, NY) |
Correspondence
Address: |
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK
NY
10038
US
|
Family ID: |
41065786 |
Appl. No.: |
12/401084 |
Filed: |
March 10, 2009 |
Related U.S. Patent Documents
|
|
|
|
|
|
Application
Number |
Filing Date |
Patent Number |
|
|
61035295 |
Mar 10, 2008 |
|
|
|
61047644 |
Apr 24, 2008 |
|
|
|
Current U.S.
Class: |
705/80 ; 705/35;
705/37 |
Current CPC
Class: |
G06Q 40/00 20130101;
G06Q 40/04 20130101; G06Q 40/06 20130101; G06Q 50/188 20130101 |
Class at
Publication: |
705/80 ; 705/37;
705/35 |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A computer-implemented method for creating specified pool lists
of asset-backed security pools using a computer system capable of
communication with an buyer computer and a plurality of seller
computers, the method comprising: providing information from the
computer system relating to a plurality of asset-backed security
pools to the buyer computer; receiving from the buyer computer a
first signal indication, a selection of one or more asset-backed
security pools; creating a specified pool list of asset-backed
security pools based on the selection of one or more asset-backed
security pools received from the buyer computer; causing the
specified pool list to be displayed on at least one of the
plurality of seller computers; receiving a second signal indicative
of pricing for at least one asset-backed security pool in the
specified pool list from at least one of the plurality of seller
computers; and executing a transaction for at least one
asset-backed security pool in the specified pool lists for which
pricing was received from the at least one of the plurality of
seller computers.
2. The method of claim 1, wherein the step of providing information
relating to a plurality of asset-backed security pools to an
investor using the buyer computer comprises: retrieving information
for each of the asset-backed security pools from a source; and
causing the display of the information on the buyer computer.
3. The method of claim 2, wherein the source is a database.
4. The method of claim 2, wherein the source is an external
information provider.
5. The method of claim 2, further comprising receiving a third
signal indicating a criteria for the asset-backed security pools
from the buyer computer and wherein the retrieving step comprises
retrieving information for each of the asset-backed security pools
from the source based on the criteria.
6. The method of claim 1, wherein the asset-backed security is a
mortgage-backed security.
7. The method of claim 6, wherein the information includes a CUSIP
number.
8. The method of claim 6, wherein the information includes a pool
number.
9. The method of claim 6, wherein the information includes a
weighted average maturity.
10. The method of claim 6, wherein the information includes a
weighted average coupon.
11. The method of claim 6, wherein the information includes a
constant prepayment rate.
12. The method of claim 6, wherein the information includes an
originator identifier.
13. The method of claim 6, wherein the information includes an
average loan size.
14. The method of claim 6, wherein the information includes a
maximum loan size.
15. The method of claim 6, wherein the information includes one or
more geographic loan locations.
16. The method of claim 6, wherein the information includes an
average FICO score.
17. The method of claim 1, wherein the creating step further
comprises: generating a matrix of asset-backed security pools based
on the selection of one or more asset-backed security pools; and
calculating aggregate information related to the matrix of one or
more asset-backed security pools.
18. The method of claim 17, wherein the aggregate information
includes an aggregate original face value.
19. The method of claim 17, wherein the aggregate information
includes an aggregate call value.
20. The method of claim 17, wherein the aggregate information
includes an aggregate market value.
21. The method of claim 17, wherein the aggregate information
includes aggregated data related to at least one indicator for the
one or more asset-backed security pools.
22. The method of claim 21, wherein the at least one indicator is
selected from the group consisting of a CUSIP number, a pool
number, a weighted average maturity, a weighted average coupon, a
constant prepayment rate, an originator identifier, an average loan
size, a maximum loan size, one or more geographic loan locations,
and an average FICO score.
23. The method of claim 17, wherein the step of causing the
specified pool list to be displayed on at least one of the
plurality of seller computers comprises causing the matrix of
asset-backed security pools to be displayed on one or more seller
computers.
24. The method of claim 1, wherein pricing for the specified pool
list is received in the form of a spread from the at least one
seller.
25. The method of claim 24, wherein a plurality of sellers submit
pricing for the specified pool list.
26. The method of claim 25, wherein the investor selects pricing
from one of the plurality of sellers for all of the asset-backed
security polls in the specified pool list.
27. The method of claim 25, wherein the investor selects pricing
from at least two of the plurality of sellers for a portion of the
asset-backed security polls in the specified pool list.
28. A computer-implemented method for a creating specified pool of
assets using a system capable of communication with an buyer
computer and a plurality of seller computers, the method
comprising: receiving from the buyer computer criteria related to
the specified pool of assets; transmitting the criteria to one or
more seller computers; receiving from at least one of the seller
computers, information relating to a pool of assets; and
transmitting the information relating to the pool of assets to the
buyer computer.
29. The method of claim 28, wherein the pool of assets is in
inventory.
30. The method of claim 28, wherein the pool of assets is a pool of
assets to be created.
31. The method of claim 28, wherein the pool of assets is a
mortgage-backed security.
32. A computer program product, comprising a computer usable medium
having a computer readable program code embodied therein, said
computer readable program code comprising: (i) a pool selection
module comprising programming to cause a computer to: retrieve
information relating to a plurality of asset backed securities from
a database in communication with the database, transmit the
information through a network to a buyer computer, and receive a
selection signal from the buyer computer, the selection signal
including an indication of at least one or more asset backed
security pools; (ii) a order creation module comprising programming
to cause the computer to: create a specified pool list based on the
selection signal received from the buyer computer; (iii) a trade
negotiation module comprising programming to cause the computer to:
transmit the specified pool list to at least one dealer computer
and receive a price signal from the dealer computer representing a
dollar amount for the asset backed securities in the specified pool
list identified; and (iv) an execution module comprising
programming to cause the computer to: transmit the price signal to
the buyer computer, receive an authorization signal from the buyer
computer in response to the price signal, and execute a transaction
based on the specified pool list and the price signal.
33. A computer program product, comprising a computer usable medium
having a computer readable program code embodied therein, said
computer readable program code adapted to be executed to implement
a method for a creating specified pool of assets, said method
comprising: providing a system, wherein the system comprises
distinct software modules, and wherein the distinct software
modules comprise a order creation module, a trade negotiation
module, a list response manager, and an execution module;
retrieving information relating to a plurality of asset backed
securities from a database in communication with the system through
a network to a buyer computer, and causing the display of the
information on a remote computer, and wherein the retrieving is
performed by the order creation module in response to a pool
selection initiation signal received from the remote computer;
receiving a selection signal from the remote computer, the
selection signal including an indication of at least one or more
asset backed security pools selected from the plurality of asset
backed securities, and wherein when the selection signal is
received, the order creation module creates a specified pool list
based on the selection signal received from the remote computer,
and wherein the order creation module then calls the trade
negotiation module; causing the display of the specified pool list
on at least one seller computer, along with an interface prompting
input of a price for the asset backed securities represented in the
specified pool list, and receiving from the seller computer a price
signal representing the inputted price for the asset backed
securities represented in the specified pool list, wherein the
causing and receiving is performed by the trade negotiation module
in conjunction with the list response manager; and causing the
price signal to be displayed on the remote computer, along with an
interface for reviewing and accepting or rejecting the price signal
at the remote computer, and executing a transaction based on the
specified pool list and the price signal in response to receipt of
an authorization signal received at the system from the remote
computer.
34. A computer system designed and configured to store and deliver,
upon request, information related to a plurality of asset-backed
security pools, and to execute transactions between one or more
parties relating to at least one of the plurality of asset backed
security pools, the computer system being capable of communication
with one or more remote computers accessed by the one or more
parties, the computer system comprising: a computer including a
computer usable medium storing a computer readable program and a
network interface, wherein the computer readable program comprises
software modules including a pool selection module, an order
creation module, a trade negotiation module, and an execution
module; a data storage system in communication with the computer
via the network interface, the data storage system storing
information relating to the plurality of asset backed securities,
and account information related to at least the one or more
parties; and wherein the computer, operative with the computer
readable program, provides information related to a plurality of
asset-backed security pools to at least one of the parties, enables
the at least one party to select one or more asset-backed security
pools for inclusion in a specified pool, provide aggregate pool
data related to the selected specified pool, provide information
related to the selected specified pool to at least one other party,
receive pricing information from the at least one other party, and
execute a trade for the asset-backed security pools in the
specified pool.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application claims priority under 35 U.S.C. .sctn.
119(e) to co-pending Provisional Patent Application No. 61/035,295,
filed Mar. 10, 2008, and Provisional Patent Application No.
61/047,644, filed Apr. 24, 2008, the entire disclosures of which
are incorporated herein by reference.
BACKGROUND OF THE INVENTION
[0002] 1. Field of the Invention
[0003] The embodiments of the present invention relate to a system
and method for specified pool trading and, in particular, to a
system and method for the creation, communication, price quotation,
and execution of trades for specified pools of asset-backed
securities.
[0004] 2. Description of the Related Arts
[0005] Asset-backed securities are bonds that are backed by, or in
other words "invested" in, a pool of assets, such as mortgages.
Asset-backed securities use a pool of assets to diversify the
security's holdings and reduce risk that the failure of any one
asset in the pool will have a disproportional effect on the value
of the whole.
[0006] The trading of asset-backed securities, such as
mortgage-backed securities (MBS), has typically been performed on a
to-be-announced (TBA) basis in which the buyer (also known as the
"liquidity taker") and seller (also known as the "liquidity
provider") agree on the general terms of the trade for a pool of
assets. However, the specific assets that will be included in the
security are not selected and are only revealed by the seller days
after the trade, but in advance of the settlement of the trade.
Thus, while the buyer can achieve a general investment objective
through TBA trading, the buyer is unable to truly customize the
security.
[0007] In the alternative, specified pool trading permits the buyer
to select specific asset-backed securities to be included in the
pool such that the details of the pool of assets is known to the
buyer at the time of the trade. Thus, unlike TBA trading, the
seller provides information to buyers about various asset-backed
securities and the buyer makes its selections from the group of
asset-backed securities provided by the seller. Due to the
transparency, specified pool trading is generally higher cost than
TBA trading.
[0008] In the recent market environment, buyers of asset-backed
securities may begin to focus on the need to pick and choose the
specific asset pools, namely specified pools, that may outperform
or meet more particularized goals than generic TBAs. The ability to
more accurately forecast the behavior of individual pools by better
understanding the specific characteristics of the loans (and their
respective borrowers in the case of MBS) can provide buyers with an
additional ability to develop trading strategies virtually
regardless of the market environment. This is one, among many,
objectives of the present invention.
[0009] One of the technical problems with the current state of
specified pool trading, particularly, in the mortgage-backed
security markets, for example, is a lack of liquidity to adequately
meet the needs of a growing focus on this type of financial
instrument. This is because current systems and methods for trading
specified pools of mortgage-backed securities are cumbersome and
fail to provide an efficient and accessible platform for permitting
liquidity providers (e.g., dealers; also known as market-makers) to
offer various types of mortgage-backed securities, and for
permitting liquidity takers (e.g., other dealers, investors and
buy-side customers) to access a database of MBS, either specify
criteria for stipulated pools or select one or more mortgage-backed
securities to create a specified pool list, or select criteria for
a to be created specified pool. Moreover, other systems fail to
provide mechanisms permitting market participants to submit the
selected pool(s) to one or more sellers, receive quotes from the
sellers, and conduct trades for the specified pools. Additionally,
current systems and methods fail to provide customers of
asset-backed securities, such as MBS, the ability to specify
criteria for a pool that is not currently listed in a seller's
inventory, and submit that criteria to the seller for creation of a
stipulated pool. The current methods for trading specified pools of
asset-backed securities also fail to permit the
straight-through-processing of specified pool trades. The lack of
liquidity may ultimately lead to increased transaction costs and
premiums over TBAs, and other inefficiencies. It, therefore, is
another objective of the present invention, among others, to
overcome some or all of the technical problems in the art.
SUMMARY OF THE EMBODIMENTS OF THE INVENTION
[0010] Embodiments of the present invention generally comprise a
computer-implemented method for creating specified pools lists of
asset-backed security pools, or alternatively creating
characteristic sets for a customized specified pool to be created,
and thereafter communicating, exchanging price quotations, and
executing trades for specified pools of asset-backed securities
using a system capable of communication with a buyer computer and a
plurality of seller computers. Although certain examples provided
herein describe the embodiments of the invention in the context of
mortgages, persons skilled in the art will recognize that other
assets may be utilized within the scope of the invention. One
advantage, among others, of the present invention is that it
reduces risk on the operational side of the trading, purchase or
sale of asset-backed securities, and provides increased
availability and liquidity in such products.
[0011] Generally speaking, as known to industry and market
participants, a "specified pool" is a specific security in which
the buyer knows in advance what assets comprise the specified pool.
In the case of mortgage-related securities, these pools are
typically guaranteed (also known as "stamping") by one of the three
mortgage-related agencies or GSEs: (1) Fannie Mae, (2) Freddie Mac,
and (3) Ginnie Mae. In the context of certain embodiments of the
present invention (e.g., those where a set of characteristics for a
yet to be created specified pool are defined by a buyer) the term
"specified pools" is used more broadly to include asset-backed
securities in which a buyer and seller come to an agreement on a
specific grouping or pool of assets even though that pool may not
yet have been, in the case of MBS, guaranteed and given a CUSIP by
one of the GSEs. In accordance with embodiments of the present
invention, it is intended that such specified pools created using
the methods and systems disclosed herein will be submitted to the
appropriate GSE or other agency or entity, as applicable, to be
guaranteed as is known in the art.
[0012] In one embodiment, a method in accordance with such a system
generally comprises: (i) providing information relating to a
plurality of asset-backed security pools (e.g., pools of mortgages)
to buyer using the buyer computer; (ii) receiving from the buyer
computer a selection of one or more asset-backed security pools;
(iii) creating a specified pool list of asset-backed security pools
based on the selection of one or more asset-backed security pools;
(iv) causing the specified pool list to be displayed on at least
one of the plurality of seller computers; (v) receiving pricing
from the at least one of the plurality of seller computers for the
specified pool list; and (vi) executing a transaction for the
specified pool lists at the pricing received from the at least one
of the plurality of seller computers for the specified pool
list.
[0013] The method may further comprise retrieving information for
each of the asset-backed security pools from a source, and causing
the display of the information on the buyer computer. Moreover,
such a method may include receiving a criteria for the asset-backed
security pools from the buyer computer and wherein the retrieving
step comprises retrieving information for each of the
mortgage-backed security pools from the source based on the
criteria.
[0014] In some embodiments, the method of creating the specified
pool of asset-backed securities further comprises: generating a
matrix of asset-backed security pools based on the selection of one
or more asset-backed security pools, and calculating aggregate
information related to the matrix of one or more asset-backed
security pools. The aggregate information may include aggregated
data related to at least one indicator for one or more of the
selected asset-backed security pools, wherein, at least in some
instances, such as in connection with mortgage-backed securities,
the indicator is selected from the group consisting of a CUSIP or
other identifier number, a pool number, a weighted average
maturity, a weighted average coupon, a constant prepayment rate, an
originator identifier, an average loan size, a maximum loan size,
one or more geographic loan locations, and an average FICO
score.
[0015] In accordance with various embodiments, such methods may
further comprise causing the specified pool list to be displayed on
at least one of the plurality of seller computers, such the display
of a matrix of asset-backed security pools. In this way, one or
more sellers can provide pricing for the specified pool list (e.g.,
in the form of a spread from the at least one seller). The buyer
may then select pricing from one of the plurality of sellers for
all of the asset-backed security polls in the specified pool list,
or select pricing from at least two of the plurality of sellers for
a portion of the asset-backed security polls in the specified pool
list.
[0016] In an alternative embodiment, a method of creating the
specified pool of asset-backed securities comprises: receiving an
inquiry message from a buyer wherein the inquiry message includes
one or more characteristics for a pool of assets; generating an
inventory request message and causing the display of said inventory
request message on a seller computer; and receiving an offer
message from the seller computer including information related to
an asset-backed security that corresponds to at least a portion of
the characteristics for a pool of assets included in the inquiry
message. As will be described in greater detail, the asset-backed
security may be a security existing in the inventory of the seller
or a new pool of assets created by the seller for the purpose of
meeting the buyer's requested characteristics.
[0017] A system in accordance with the various embodiments of the
present invention generally comprises a computer system designed
and configured to store and deliver upon request information
related to a plurality of asset-backed security pools. The computer
system is capable of communication with one or more buyers and one
or more sellers at any given time. The computer system is
preferably programmed to provide information related to a plurality
of asset-backed security pools, enable a buyer to select one or
more pools for inclusion in a specified pool list, provide
aggregate pool data related to the selected specified pool list,
provide information related to the selected specified pool list to
one or more sellers, receive pricing information from the one or
more sellers, and execute a trade for one or more selected
mortgage-backed securities in the specified pool list.
[0018] In addition, an embodiment of the invention comprises a
computer program embodied on a computer readable medium for
creating a specified pool of asset-backed securities, which
includes (i) a pool section module comprising programming to cause
a computer to: retrieve information relating to a plurality of
asset-backed securities from a database in communication with the
computer; transmit the information through a network to a buyer
computer, and receive a selection signal from the buyer computer,
the selection signal including an indication of at least one or
more asset-backed security pools or individual asset-backed
securities; (ii) an order creation module comprising programming to
cause the computer to: create a specified pool list based on the
selection signal received from the buyer computer; (iii) a trade
negotiation module comprising programming to cause the computer to:
transmit the specified pool list to at least one seller computer
and receive a price signal representing a dollar amount for the
asset-backed securities in the specified pool list identified from
the seller computer; and (iv) an execution module comprising
programming to cause the computer to: transmit the price signal to
the buyer computer; receive an authorization signal from the buyer
computer in response to the price signal, and execute a transaction
based on the specified pool list and the price signal.
[0019] Additional features and advantages of the present invention
are described further below. This summary section is meant merely
to illustrate certain features of the invention, and is not meant
to limit the scope of the invention in any way. The failure to
discuss a specific feature or embodiment of the invention, or the
inclusion of one or more features in this summary section, should
not be construed to limit the invention as claimed.
BRIEF DESCRIPTION OF THE FIGURES
[0020] Embodiments of the invention will be described and shown in
detail by way of example with reference to the accompanying
drawings in which:
[0021] FIG. 1 is a schematic diagram of an embodiment of a system
in accordance with the present invention;
[0022] FIG. 2 is an alternate view of a system in accordance with
the present invention;
[0023] FIG. 3 is an inventory filter graphical user interface for
creating a security query in accordance with the present
invention;
[0024] FIG. 4 is a graphical user interface for reviewing the
results of an inventory query in accordance with the present
invention;
[0025] FIG. 5 is a graphical user interface of a trade matrix in
accordance with the present invention;
[0026] FIG. 6 is a graphical user interface of a "list in" ticket
in accordance with the present invention;
[0027] FIG. 7 is a graphical user interface of a first type of "bid
list" ticket in accordance with the present invention.
[0028] FIG. 8 is a graphical user interface of a second type of
"bid list" ticket in accordance with the present invention;
[0029] FIG. 9 is a flow diagram showing an embodiment of a quoting
protocol in accordance with the present invention;
[0030] FIG. 10 is a graphical user interface for setting spot
prices in accordance with the present invention;
[0031] FIG. 11 is a trade completion message box in accordance with
the present invention; and
[0032] FIG. 12 is a graphical user interface for specifying the
attributes of an asset-backed security in accordance with the
present invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0033] In accordance with various embodiments of the invention, and
as shown in the FIGS., various systems and methods are disclosed
which generally provide a platform for the creation, communication,
price quotation, and execution of trades for specified pools of
asset-backed securities.
[0034] With reference to FIG. 1, there is shown a preferred
embodiment of a system 10, which generally comprises one or more
computer systems and databases and related database management
systems. One skilled in the art will recognize that the computer
systems may as a matter of design choice include any number and
configurations of computers and databases, which may be used
separately or in tandem to support the traffic and processing needs
necessary in operation at one time. If multiple computers are used,
the computer may be configured using a round-robin configuration to
handle end user traffic.
[0035] Although not depicted in the figures, the one or more
computers of computer system 10 generally include such art
recognized components as are ordinarily found in such computer
systems, including but not limited to processors, RAM, ROM, hard
disks or other computer readable mediums, clocks, hardware drivers,
associated storage, and the like. References herein to the term
"database" or "database system" generally refer to one or more
storage devices or computers with storage media storing a
collection of records or data, as well as software for managing
such records or data (commonly known as a database management
system (or DBMS)). The database may take the form of a relational,
hierarchical, network, or other known structure as may be deemed to
be most efficient. In a preferred embodiment, the present invention
employs a relational database to store the various associations of
data described herein.
[0036] Furthermore, each of the computer systems described herein
preferably includes a network connection (not shown). The network
connection may be a gateway interface to the Internet or any other
communications network through which the systems can communicate
with other systems and user devices. The network connection may
connect to the communications network through use of a conventional
modem (at any known or later developed baud rate), an open line
connection (e.g., digital subscriber lines or cable connections),
satellite receivers/transmitters, wireless communication
receivers/transmitters, or any other network connection device as
known in the art now or in the future.
[0037] With reference to FIG. 2, there is shown another view of a
system architecture in accordance with a preferred embodiment of
the present invention in which system 10 is interconnected via
network 50 to one or more buyer and seller computer systems 25, 35.
Moreover, as illustrated in FIG. 2, the system 10 preferably
utilizes a distributed software application arrangement to provide
the processing of transactions involving asset-backed securities.
Although the embodiments described herein are described in terms of
a distributed, networked software solution operative in a
client-server environment, a wholly server-based or client-based
approach could be adopted, so long as the system was configured to
provide the functionality disclosed herein. As noted above, network
50 may be a gateway interface to the Internet or any other
communications network through which the systems can communicate
with other systems and user devices. The connection may also be a
direct connection for security purposes.
[0038] Buyer and seller computers 25, 35 can be any type of
personal or network computer such as an IBM-compatible computer
running an Intel chipset and having an operating system, such as
Microsoft Windows NT, 2000, XP, Vista and the like, and,
preferably, running a browser program such as Microsoft Internet
Explorer, Netscape Navigator, or Mozilla Firefox. Apple-based
computer systems can also be used within the context of the system
being disclosed. It is also within the scope of the present
invention that computers 25, 35 may be handheld or table computing
devices, such as a personal digital assistant (PDA), pocket PC, and
tablet PC, iPhone device, or the like. Computers 25, 35 preferably
have access to a communications network via a modem or broadband
connection to permit data communication between the participants
and the system 10.
[0039] Various input and output devices are preferably provided
with the buyer and seller computers 25, 35 including, by way of
non-limiting example, a display (e.g., cathode ray tube (CRT),
liquid crystal display (LCD), etc.), and an input device (e.g., a
keyboard, mouse, touch pad, or light pen). The buyer and seller
computers 25, 35 would also preferably include a storage device
such as, for example, a magnetic disk drive and magnetic disk, a
CD-ROM drive and CD-ROM, DVD, or other equivalent device. The
specific hardware combination/configuration may vary as a matter of
design choice within the functional parameters disclosed herein.
Buyer and seller users of the system 10 typically interact with the
GUI's displayed by the software modules by "clicking" on numbers or
graphics (e.g., buttons) that are displayed on the GUI's. Persons
of skill will understand that the present invention is not limited
to clicking with a computer mouse, but includes use of any other
device for indicating an action with graphics-based software, such
as a touch pad, light pen, touch sensitive display screen and the
like.
[0040] With reference back to FIG. 1, system 10 is also preferably
interconnected with a straight-through-processing system 5, as is
disclosed by U.S. Pat. No. 7,433,842 issued on Oct. 7, 2008, and
entitled "Method and System for Effecting
Straight-Through-Processing of Trades of Various Financial
Instruments," the entire disclosure of which is incorporated herein
by reference.
[0041] System 10 generally includes an order creation module 12, a
trade negotiation module 14, a list response manager 15, and an
execution module 16, as well as a database 18 for storing data
related to asset-backed securities, market data, buyer account
information, and related data. The order creation module 12, trade
negotiation module 14, list response manager 15, and execution
module 16 generally comprise computer programming operative on one
or more computers to perform the functions described herein.
[0042] In general, order creation module 12 has two modes of
functionality. In a first mode, order creation module 12 permits a
buyer to search a database of specified pools and to select one or
more pools from the inventory for pricing by a selected group of
sellers. It will be understood from the following disclosure that,
although multiple pools are selected, and number of pools less than
the total number selected (or none at all) may be quoted and
ultimately traded. In a second mode, a buyer is provided with the
option to select the characteristics of a desired specified pool.
These characteristics may be transmitted through system 10 to one
or more sellers. The sellers can identify one or more pools in
their respective inventories that substantially meet the buyers
specified set of characteristics or agree to create a specified
pool meeting such characteristics.
[0043] With reference of a first mode of order creation module 12,
system 10 can provide functionality to buyers to review the details
of various asset-backed securities which are stored in database 18.
Such details typically include, for instance in connection with a
mortgage-backed security, a CUSIP number (or other identifier), a
pool number, a weighted average maturity, a weighted average
coupon, a constant prepayment rate, an originator identifier, an
average loan size, a maximum loan size, one or more geographic loan
locations, and an average FICO score. By way of example, as shown
in FIG. 3, an inventory filter GUI 300 provides a number of filter
options to enable the buyers to search for mortgage-backed
securities meeting defined criteria. In the example shown, GUI 300
includes a criteria zone 310 and a dealer list zone 350. The
criteria zone 310 is used to define the criteria according to which
the desired securities will be pulled from database 18. The dealer
list zone 350 includes a list of sellers and corresponding
graphical toggle buttons 352 to enable the buyer to select the
sellers (e.g., dealers) for which the buyer desires to view
appropriate securities. In other words, by defining the criteria in
criteria zone 310 and selecting dealers in dealer list zone 350,
the buyer can return specific securities meeting the defined
criteria and being offered by the selected dealers.
[0044] The criteria, as shown in FIG. 300, preferably includes a
minimum size field 312, a weighted average loan to value 314, a
coupon size field 316, a weighted average coupon field 318, a
weighted average maturity field 320, a weighted average loan age
322, FICO score 324, state limiters 326, 328, 330, and an interest
only drop down menu 332. In a preferred embodiment, GUI 300 also
includes a maximum loan balance field 334, which includes a
plurality of max loan balance levels selectable through use of
radio buttons. As a further feature, in a preferred embodiment, GUI
300 also includes a sort order field 336, which enables the buyer
to customize the sort order of the results by various criteria,
including but not limited to face value, issuer, weighted average
coupon, weighted average maturity, coupon, and FICO score.
[0045] In operation, by setting various criteria and through
selection of one or more sellers, through the operation of order
creation module 12, buyers can create a customized inventory query
which will return available asset-backed securities from database
18. In the alternative, as described further below, the query can
be submitted directly to the seller in order to determine whether
the seller has or can stipulate to an asset-backed security meeting
the buyer's requirements. This feature may be used when a security
meeting the buyer's requirements is not in the inventory of one or
more sellers.
[0046] With reference now to FIG. 4, there is shown a preferred
embodiment of graphical interface 400 (generated by order creation
module 12) for viewing the result of an inventory query submitted
through GUI 300. Inventory offering GUI 400 comprises an inventory
list section 410 and a security data section 450. The inventory
list section 410 preferably includes a number of fields related to
the display of asset-backed securities; namely, a seller identifier
412, issuer identifier 414, pool number 416, coupon rate 418,
original face value 420, current face value 422, factor 424, spread
426, benchmark 428, benchmark price 430 and other information know
in the art to be pertinent to the trading of the particular
asset-backed security at issue.
[0047] Security data section 450 preferably also displays a variety
of data relevant to the trading of the security. In the case of
mortgage-backed securities, security data section 450 can include
the following data, among other pertinent information: a CUSIP
number (or other identifier), a pool number, a weighted average
maturity, a weighted average coupon, a constant prepayment rate, an
originator identifier, an average loan size, a maximum loan size,
one or more geographic loan locations, and an average FICO score.
Table I below sets forth a preferred embodiment of the list
creation columns and various options:
TABLE-US-00001 TABLE I Column Hide if Default Global Name
Description OUTRIGHGT Control Value Setting Select Box Check Box
Check Box Selected Yes # Dealers The number of dealers Output only
Not selectable No currently selected for the line item Buy/Sell
Clicking B/S button Toggle Not selected Yes flips field. Button
unless user cut For AON Swap list, the and pastes the benchmark
& pool value from or directions must be EXCEL inversed Original
Minimum value = 1k Input None Yes - Pool Qty Existing limits on
applies (000) outright tickets should same be respected. quantity
to entire column CUSIP/ User can enter pool Input None No
Identifier description or CUSIP. System will "look up" security
from user entry Multiple matches will display in the benchmark
field. Summary line will display total number of pools Pool Desc.
If a partial match is Output TWEB No found during a paste or
Standard manual entry, this field description will display Choose
Security Current Summary line displays Output Pool current No Face
the total current face of face from all pools security database
Benchmark If AON is set, the user Drop Down Use the Yes - can enter
a single benchmark benchmark in the associated GLOBAL field to set
with the first for the entire list. pool in the list If individual,
the user can change any issue Benchmark YES Input Same as Orig Qty
pool Qty Type Defaults from user Toggle User Yes preference Button
preference Only appears on the summary line for AON lists. Displays
on each line for individual lists Pool Settle Global setting
applies to Dropdown Same as Yes pools only benchmark TBA Settle Yes
Output TBA settle No Brkdn Opens the account Toggle No breakdown
page Button Note Max characters is Input This column should be
added to all products and associated dealer software list
tickets.
[0048] In one embodiment, on inventory offering GUI 400, a buyer
can select one of the specified pools or a plurality of pools to be
included in a specified pool list. In a preferred embodiment, order
creation module 12 can be programmed to display the selected
securities on a trade matrix GUI 500, as shown in FIG. 5. The trade
matrix GUI 500 preferably includes a security list section 510,
which preferably contains similar information and layout to the
inventory list section 410 of inventory offering GUI 400. The
security list section 510 can include one or more additional
features for defining the type of transaction (e.g., buy, sell, or
swap), as depicted by graphical button 512, or for defining the
settlement date, as depicted by field 514, or for performing an
action, as depicted by action button 516.
[0049] GUI 500 can also include an aggregate pool data section 550
in addition to a static security data section 570. Aggregate pool
data section 550 preferably displays aggregate data for the
asset-backed securities in the security list section 510, in order
to provide the buyer an indication of the nature of the pool being
created by including one or more of the securities listed in the
security list section 510. In this way, order creation module 12,
in a preferred embodiment, can be programmed to generate aggregated
pool data for the selected pools, so that the buyer can efficiently
and effectively customize the desired order. In a preferred
embodiment, aggregate pool data section 550 includes an aggregate
original face value field 552, an aggregate current face value
field 554, and an aggregate market value field 556.
[0050] In an alternative embodiment, wherein one or more desired
securities are not in inventory order creation module 14 can be
programmed to permit, a buyer to send an inquiry message to one or
more sellers inquiring as to the availability of a security meeting
the buyer's needs. In this embodiment, a buyer typically creates an
order query using system 10's order creation module 12 to determine
whether the desired security is listed in database 18. As
previously described in connection with FIG. 3, such query details
typically include, for instance in connection with a
mortgage-backed security, a CUSIP number (or other identifier), a
pool number, a weighted average maturity, a weighted average
coupon, a constant prepayment rate, an originator identifier, an
average loan size, a maximum loan size, one or more geographic loan
locations, and an average FICO score. While the buyer will
generally first use inventory filter GUI 300, as shown in FIG. 3,
to enable the buyer to search for mortgage-backed securities
meeting defined criteria, in some instances, the desired security
may not be available. In those instances, the buyer can use
criteria zone 310 to define the criteria according to which an
inquiry message will be generated and transmitted to one or more
sellers. The dealer list zone 350 includes a list of dealers,
acting as sellers, and corresponding graphical toggle buttons 352
to enable the buyer to select the dealers to which the inquiry
message will be transmitted.
[0051] Once the buyer completes the process of inputting desired
criteria and selecting dealers, the criteria and dealer data is
transmitted to and received by system 10. System 10 then generates
an inquiry message which includes the characteristics for the pool
of assets defined by the buyer. The data in the inquiry message is
then transmitted to the selected dealer computer 35. FIG. 12
depicts a preferred embodiment of an inventory request message that
includes data in the inquiry message and which is caused to be
displayed on the dealer computer 35. As shown in FIG. 12, on the
top portion of GUI 1200, several desired characteristics of a
desired security are displayed. In the example shown in FIG. 12,
such characteristics for a mortgage-backed security include, but
are not limited to, size 1202, max loan balance 1204, issuer 1206,
program 1208, coupon range 1210, weighted average coupon 1212,
weighted average maturity 1214, weighted average loan age 1216,
FICO score 1218, weighted loan to value 1220, and geographic
percentages 1222.
[0052] Using the inventory request GUI 1200, the dealer can review
the criteria desired by the buyer and either offer a pool from the
dealer's inventory or stipulate to a new pool by defining some or
all of the pool's characteristics. An inventory pool can be
selected using the "pool #" drop-down menu 1230, which includes a
plurality of available pool securities in the dealer's internal
inventory. Alternatively, the dealer can use the mine functionality
(see graphical button 1275) to search for additional available pool
securities. In another alternative, the dealer can define certain
characteristics of a stipulated, to be created pool, using the
fields located on the lower half of GUI 1200. Specifically, in a
preferred embodiment for a mortgage-backed security, such fields
include, but are not limited to, a CUSIP/Identifier field 1232,
coupon rate 1234, weighted average maturity 1236, weighted average
coupon 1238, weighted average loan age 1240, size 1242, spread
1244, maximum loan balance 1246, benchmark 1248, and factor
1250.
[0053] The data defined by the dealer is then transmitted to system
10 and on to the buyer computer 25. The securities defined by the
dealer can then preferably be reviewed side-by-side with the
securities initially found in the inventory listing of database
18.
[0054] Once the buyer is satisfied with the list of asset-backed
security pools (e.g., MBS pools), the specified pool list can be
transmitted through system 10 to the list of selected sellers. In a
preferred embodiment, this action causes the calling of trade
negotiation module 14, which operates in conjunction with list
response manager 15 and execution module 16 to spot (or price) the
specified pool list, otherwise negotiate the trade details, and
ultimately execute a trade for the requested specified pool list.
In operation, the trade negotiation module 14 will call the list
response manager 15 to enable the seller, using the seller computer
35, to provide quotes in response to the receipt of a specified
pool list. Preferably, the trade negotiation module 14 then
transmits the quoted list information back to the buyer for review
and acceptance. If there are multiple competing sellers, the buyer
will need to choose between the buyers. Once there is acceptance,
trade negotiations module 14 will call execution module 16 which
will execute a trade and provide any "last look" options, as
described in greater detail below, that may be optionally
programmed into execution module 16.
[0055] On the seller computer 35, in a preferred embodiment, a
list-in ticket 600, as shown in FIG. 6, can be caused by system 10
to be displayed on the seller computer 35. List-in ticket 600 can
include a "due at" time 605, a buyer identifier 610, an aggregate
size indicator 615, and a number of items indicator 620 (e.g., to
identify the number of specified pools in the list). List-in ticket
600 can also include an "open list" selection item 625 and a "defer
list" selection item 630. As shown in FIG. 6, selection items 625,
630 are preferably graphical buttons.
[0056] If the "open list" selection item 625 is "clicked" by a
seller, a bid list ticket 700, as shown in FIG. 7 can be displayed.
From the seller perspective, a list response manager module 15
(depicted on FIG. 1) preferably provides traders with the ability
to "construct" their bid list responses. As shown in FIG. 7, a bid
list ticket 700 preferably includes a pool list section 705, which
includes relevant data (e.g., pool quantity, pool identifier,
benchmark, benchmark quantity, type, spread, etc.) concerning the
pools selected at the buyer computer 25 to be included in the
specified pool. Additionally, several graphical selection items
710, 712, and 714 can be included to permit the seller to customize
the transaction. For example, using "+/-" buttons 710, the seller
can enter spread in the spread field 707. The "+/-" button 710
preferably increments spread in 1/8th of a 32nd. The send buttons
712, cause the spread to be transmitted through system 10 to the
buyer computer 25. Clicking on the pass buttons 714 will send a
pass to the buyer. It is preferred, however, that the seller can
"UnPass" a trade and resubmit a spread to the buyer. With reference
to the top right hand corner of GUI 700, a "due in" time indicator
720 and a "good for" time indicator 722 are preferably displayed to
the seller to facilitate timely creation of the trade. As shown in
FIG. 7, a portion 730 of the bid list ticket can be a context
sensitive area that preferably shows some fundamental data about
the security.
[0057] With reference now to FIG. 8, the seller can use the bid
list ticket 800 to input the individual spot trade for each
specified pool (unless the trade has been designated as an AON
trade). In a preferred embodiment, bid list ticket 800 includes a
spot field 805 that preferably defaults to the TBA composite price
generated by system 10's pricing engine. The seller can increase or
decrease the spot pricing by using "+/-" buttons 810. The "send"
button 815 transmits the spot price to the buyer for
negotiation.
[0058] A preferred embodiment of a quoting protocol will now be
described with reference to FIG. 9. In one embodiment, the quoting
protocol is all or none (i.e., AON). In other words, the seller
submits a spread for the entire specified pool list, such that the
spread is applied to each individual pool in the list, and the
final pool price is computed after the TBA is spotted.
Alternatively, a buyer can request spot prices for multiple trades.
In a preferred embodiment, the trades must be from the same
specified list, of the same direction (e.g., buy or sell), and
share the same benchmark. Referring back to FIG. 9, the `Due In`
time is preferably set at the discretion of the buyer. Once the
specified `Due In` time is equal to zero, in step 905, the buyer
defined "Trading Session" will begin ticking to zero, in step 910.
As this point, selling traders can (i) update quotes any time prior
to expiration of "Trading Session" (step 915); or (ii) send an
initial quote any time prior to the end of the "Trading Session"
(step 920).
[0059] During the execution phase, as operative by the execution
module 16, it is preferred that when a buyer executes, the seller
will have a "last look" option in order to accept, pass, or counter
the trade, in step 925. Seller can preferably manage the "last
look" actions via the bid list ticket. Thus, if an individual trade
is being executed, the relevant trade for which the buyer is
attempting to execute will be highlighted and active and all other
trades will be disabled.
[0060] If the buyer requests spot prices, in step 930, the system
10 can cause the display of a GUI 1000, as shown in FIG. 10, with
the selected pools to be spotted 1010, relevant information for the
list 1020, and "+/-" buttons 1030 for setting the spot price. As
each individual pool is spotted, in step 935, another GUI 1100, as
shown in FIG. 11, can be caused to be displayed to either or both
of the buy-side or sell-side users indicating that the trade is
completed. GUI 1100 preferably includes several details of the
trade, including without limitation a description 1105, face value
1110, current face value 1115, spread 1120, spot 1125, price 1130,
and the settlement date 1135. At this point in the process, in step
940, the trade(s) can be imported into the system 10's
straight-through-processing module.
[0061] In a preferred embodiment, as a further feature, the list
response manager 15 is programmatically configured to provide
various aggregation features that generally permit certain like
pool trades to be aggregated for spotting purposes. Typically, if a
specified pool list has not been designated all-or-none, then each
individual pool in the list must be spotted to a benchmark, i.e.,
the seller will provide a spread for each pool. However, this
process is highly inefficient. In the preferred embodiment being
described, these inefficiencies are technically solved through the
addition of a logical aggregation component to the list response
manager 15 wherein, for example, similar pools in a list (e.g.,
Fannie Mae 51/2 mortgage backed securities) are aggregated and
spotted as a group. In this way, a single spread can be applied by
a seller to an entire group of like securities. Alternatively, the
aggregation component of the list response manager 15 preferably
may be configured to provide aggregation across multiple trade
requests that include like securities and which are submitted to
the same seller. For instance, a buyer may create two specified
pool lists wherein each list includes Fannie Mae 51/2 MBSs and
wherein the lists are both received by the same dealer. Here, a
single spread quote can be efficiently applied to all of the Fannie
Mae 51/2 MBSs even though the securities are in separate lists. In
the AON context, in a preferred embodiment, a seller must take all
or none and, therefore, the quoting protocol is preferably
performed as a single pay-up for the entire list, as opposed to
providing spread quotes for individual or aggregated
securities.
[0062] While there have been shown and described fundamental novel
features of the invention as applied to the exemplary embodiments
thereof, it will be understood that omissions and substitutions and
changes in the form and details of the disclosed invention may be
made by those skilled in the art without departing from the spirit
of the invention.
* * * * *