U.S. patent application number 13/748259 was filed with the patent office on 2014-07-24 for currency trading platform with improved risk management.
This patent application is currently assigned to FXDIRECTDEALER, LLC. The applicant listed for this patent is FXDIRECTDEALER, LLC. Invention is credited to Shawn Vulte DILKES.
Application Number | 20140207640 13/748259 |
Document ID | / |
Family ID | 51208496 |
Filed Date | 2014-07-24 |
United States Patent
Application |
20140207640 |
Kind Code |
A1 |
DILKES; Shawn Vulte |
July 24, 2014 |
CURRENCY TRADING PLATFORM WITH IMPROVED RISK MANAGEMENT
Abstract
Systems, methods and software for processing and displaying
information associated with a plurality of currency exchange
transactions to a forex dealer in real time, i.e. substantially
simultaneously with the receipt or placement of the associated
transactions orders or position requests.
Inventors: |
DILKES; Shawn Vulte;
(Mountainside, NJ) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
FXDIRECTDEALER, LLC |
New York |
NY |
US |
|
|
Assignee: |
FXDIRECTDEALER, LLC
New York
NY
|
Family ID: |
51208496 |
Appl. No.: |
13/748259 |
Filed: |
January 23, 2013 |
Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. A method of displaying information associated with currency
exchange transactions in real time, comprising: receiving with a
computer a plurality of currency exchange orders from a set of
customers, each order characterized by a currency pair including a
base currency to be exchanged for a counter currency, a customer
exchange rate for the currency pair provided by a trader to the
respective customer, an amount of currency to be exchanged, and an
indication of whether the base currency is to be bought or sold;
determining with a processor of the computer, substantially
simultaneously with receiving the orders, a cumulative amount of
the base currency of each currency pair to be exchanged in all of
the orders; determining with the processor, substantially
simultaneously with receiving the orders, a cumulative amount of
the counter currency of each currency pair to be exchanged in all
of the orders; determining with the processor, substantially
simultaneously with receiving the orders, an instantaneous
potential profit associated with the orders, based on the
cumulative amount of the base currency of each currency pair to be
exchanged, based on the cumulative amount of the counter currency
of each currency pair to be exchanged, based on the customer
exchange rates for each currency pair provided by the trader to
each customer, and based on dealer exchange rates for each currency
pair provided to the trader by at least one financial institution;
receiving with the computer information sufficient to assign each
customer of the set to one of a plurality of groups, including at
least a high risk group and a low risk group; receiving with the
computer information sufficient to select a subset of the groups to
which to restrict the instantaneous potential profit to be
displayed; and displaying on a graphical user interface of the
computer, substantially simultaneously with receiving the
information sufficient to select the subset, the instantaneous
potential profit associated only with the orders received with the
computer from the customers in the selected subset.
2. The method of claim 1, wherein the plurality of groups further
includes at least one group based on a geographic distinction of
the customers in the group.
3. The method of claim 2, wherein the geographic distinction is a
country in which the order was received.
4. The method of claim 1, further comprising: covering a subset of
the orders by carrying out currency exchanges with the financial
institution; determining with the processor, substantially
simultaneously with covering the subset of the orders, an
instantaneous actual profit associated with each currency pair and
corresponding to the covered subset of orders; determining with the
processor, substantially simultaneously with covering the subset of
the orders, a revised instantaneous potential profit associated
with each currency pair based on the instantaneous potential profit
associated only with the orders placed by customers in the selected
subset and the instantaneous actual profit; and displaying on the
graphical user interface, substantially simultaneously with
covering the subset of the orders, at least one of the
instantaneous actual profit and the revised instantaneous potential
profit.
5. The method of claim 1, wherein the customer exchange rates
provided to each customer are based at least partially on whether
or not the customer is assigned to the high risk group.
6. The method of claim 1, wherein the customer exchange rates
provided to each customer are based at least partially on a risk
group to which the customer is assigned and at least partially on a
volume of the order expected to be received from the customer.
7. The method of claim 1, wherein the customer exchange rates
provided to each customer are based at least partially on a
predefined setting associated with the customer, in combination
with the dealer exchange rates.
8. The method of claim 1, wherein the customer exchange rates
provided to each customer are based at least partially on a market
condition.
9. The method of claim 1, wherein the customer exchange rates
provided to each customer are based at least partially on a volume
of the order expected to be received from the customer.
10. A system for managing currency exchange transactions,
comprising: a computer including a processor configured to
calculate profit and risk information relating to a plurality of
currency exchange transactions substantially in real time, and a
graphical user interface configured to display the profit and risk
information; a first electronic communication channel configured to
transmit customer currency exchange orders to the computer; and a
second electronic communication channel configured to transmit
dealer currency exchange orders from the computer to at least one
financial institution; wherein each currency exchange order is
characterized by a currency pair including a base currency to be
exchanged for a counter currency, a customer exchange rate for the
currency pair, an amount of currency to be exchanged, and an
indication of whether the base currency is to be bought or sold;
wherein the processor is configured to calculate, substantially
simultaneously with receiving the customer currency exchange
orders: (i) a cumulative amount of the base currency of each
currency pair to be exchanged in all of the customer currency
exchange orders; (ii) a cumulative amount of the counter currency
of each currency pair to be exchanged in all of the customer
currency exchange orders; and (iii) an instantaneous potential
profit associated with the customer currency exchange orders, based
on the cumulative amount of the base currency of each currency pair
to be exchanged, the cumulative amount of the counter currency of
each currency pair to be exchanged, the customer exchange rates
provided by a dealer to each customer, and dealer exchange rates
provided by a financial institution to the dealer; wherein the
computer is configured to receive a group indicator for each
customer associating each customer with one of a plurality of
groups, including at least a high risk group and a low risk group;
wherein the computer is configured to receive subset selection
information corresponding to a dealer's selection of a subset of
the groups; and wherein the computer is configured to display on
the graphical user interface, substantially simultaneously with
selection of the subset of the groups, the instantaneous potential
profit associated with each currency pair and corresponding to the
customer orders received with the computer from the customers in
the selected subset.
11. The system of claim 10, wherein the first and second electronic
communication channels are secure internet connections.
12. The system of claim 10, wherein the customer exchange rates
provided to each particular customer are based at least partially
on a risk group to which the particular customer is assigned.
13. The system of claim 10, wherein the customer exchange rates
provided to each particular customer are based on a risk group to
which the particular customer is assigned, in combination with the
dealer exchange rates.
14. The system of claim 10, wherein the customer exchange rates
provided to each particular customer are based at least partially
on a predefined setting associated with the particular customer, in
combination with the dealer exchange rates.
15. The system of claim 10, wherein the customer exchange rates are
based at least partially on a market condition.
16. A non-transitory machine-readable medium containing program
instructions for determining risk associated with currency exchange
transactions between a customer, a dealer and a financial
institution, wherein execution of the program instructions by one
or more processors of a computer system causes the processors to
carry out the steps of: receiving a plurality of currency exchange
orders from customers, each order characterized by a currency pair
including a base currency to be exchanged for a counter currency, a
customer exchange rate for the currency pair, an amount of currency
to be exchanged, and an indication of whether the base currency is
to be bought or sold; determining, substantially simultaneously
with receiving the orders, a cumulative amount of the base currency
of each currency pair to be exchanged in all of the orders;
determining, substantially simultaneously with receiving the
orders, a cumulative amount of the counter currency of each
currency pair to be exchanged in all of the orders; determining,
substantially simultaneously with receiving the orders, an
instantaneous potential profit associated with each currency pair,
based on the cumulative amount of the base currency of each
currency pair to be exchanged, based on the cumulative amount of
the counter currency of each currency pair to be exchanged, based
on the customer exchange rates for each currency pair provided by a
dealer to each customer, and based on dealer exchange rates for
each currency pair provided to the dealer by at least one financial
institution; receiving a group indicator assigning each of the
customers to one of a plurality of groups, including at least a
high risk group and a low risk group; receiving a subset selection
indicator corresponding to selection of a subset of the groups; and
displaying on a graphical user interface of the computer system,
substantially simultaneously with selecting the subset of the
groups, the instantaneous potential profit associated with each
currency pair and corresponding to the orders received with the
computer system from the customers in the selected subset.
17. The non-transitory machine-readable medium of claim 16, wherein
the customer exchange rates for each customer are based at least
partially on a risk group to which the customer is assigned.
18. The non-transitory machine-readable medium of claim 16, wherein
the customer exchange rates for each customer are based at least
partially on a volume of the order expected to be received from the
customer.
19. The non-transitory machine-readable medium of claim 16, wherein
the customer exchange rates for each customer are based at least
partially on a predefined rate setting associated with the
customer, in combination with the dealer exchange rates.
20. The non-transitory machine-readable medium of claim 16, wherein
the customer exchange rates are based at least partially on a
market condition.
Description
[0001] The foreign exchange ("forex") market is a global
decentralized market for trading international currencies, wherein
traders attempt to profit from currency pair (CP) exchange rate
fluctuations. The present disclosure generally relates to
presenting and managing risk factors when brokering foreign
exchange trades.
[0002] Financial institutions around the world function as anchors
of forex trading, as they are individually capable of determining
relative values and exchange rates of different currencies. This
means that different financial institutions often offer different
exchange rates for any given currency pair at any given moment in
time. This is in sharp contrast to the securities market, which is
centralized, meaning that a security at any given moment in time
has a single price.
[0003] In a typical forex trade, a trader buys a quantity of a
first or counter currency from a financial institution for a
quantity of a second or base currency determined by an exchange
rate set by the financial institution. This is commonly referred to
as opening a position in the base currency of an X/Y currency pair
("CP"), where X is the base currency and Y is the counter currency.
If the trader later uses the purchased counter currency to
re-purchase the base currency, this is commonly referred to as
closing the previously opened position.
[0004] Throughout the present disclosure, the symbol Z will be used
to represent a "bid rate" offered at the time of the trade for a
particular currency pair X/Y by financial institution F. This means
that 1 unit of currency X may be used to purchase Z units of
currency Y. Traders can open and close positions in either the base
currency or the counter currency of a currency pair.
[0005] The trader can subsequently wait for the market to
appreciate the value of currency Y relative to currency X and then
sell a quantity of Y to financial institution F or to another
financial institution for a quantity of X determined by an exchange
rate Z' which is set by whatever financial institution with which
the trader decides to trade. This is commonly referred to as
closing a position in the base currency of X/Y, where rate Z' is
the "ask rate" at the time of the trade for the said CP, meaning
that Z' units of currency Y may be used to purchase 1 unit of
currency X. Throughout the present teachings, the term "exchange
rate" will be used to represent either a "bid rate" or an "ask
rate."
[0006] If rate Z' is less than rate Z, then the trader profits.
However, if rate Z' is greater than rate Z, then the trader suffers
a loss. In this case, since the trader closed their position with
the subsequent trade, any profit or loss would be realized, whereas
if the trader did not place the subsequent trade, the trader may
have potential or unrealized profit or loss due to any difference
between rate Z and rate Z'.
[0007] The potential profit or loss will be a function of time that
varies whenever Z' varies, and the potential profit or loss at any
particular instant of time will sometimes be referred to herein as
the "instantaneous potential profit" associated with one or more
currency exchange transactions or orders. On the other hand, any
profit or loss realized through closed trades will be referred to
as the "instantaneous actual profit" associated with one or more
transactions or orders. When considering a plurality of currency
exchange transactions or orders, only some of which have been
closed, there will be both instantaneous potential profit (for open
orders) and instantaneous actual profit (for closed orders).
[0008] Forex trades may also be brokered by a third party dealer.
The dealer may receive exchange rate information from multiple
financial institutions, each exchange rate typically having a
spread between bid and ask rates for each currency pair. For
instance, a first financial institution may quote USD/JPY exchange
rates of 78-81, wherein 78 is the bid rate, meaning that 1 USD buys
78 JPY, and 81 is the ask rate, meaning that 81 JPY sells for 1
USD; while a second financial institution may quote USD/JPY
exchange rates of 79-80. Because dealers typically trade in higher
volumes than an average retail customer, the dealer often receives
better quotes (e.g., narrower spreads, higher bid, and/or lower
ask) than a retail customer would receive.
[0009] Typically, the quoted spreads that the dealer receives from
financial institutions (dealer quotes, or dealer exchange rates)
are shifted by the dealer to form quoted spreads provided by the
dealer to a customer (customer quotes, or customer exchange rates).
Customer quotes may still be better than the quotes that the retail
customer would otherwise receive directly from a financial
institution, and the retail customer may therefore decide to become
a client of the dealer and to open and close positions through the
dealer, rather than directly through a financial institution.
Brokering such deals may result in profit for the dealer and/or the
client.
[0010] A currency exchange order received from a customer will
sometimes be referred to herein as a "position request." The dealer
may decide to cover a CP position request (e.g., in the form of
hard currency, contract, etc.) from a client by placing a
corresponding order or position request with a financial
institution. In this manner, the dealer is offsetting his position
risk, because if the exchange rate for the CP fluctuates, the
dealer will not suffer any loss--any loss will instead be covered
by either the financial institution or the client who placed the
initial CP position request.
[0011] Alternatively, the dealer may decide to accumulate a
position requested by a first client (i.e., customer) by not
placing a corresponding position request with a financial
institution. The dealer may want to accumulate this position if the
dealer has a second client placing a position request for the same
CP in an opposite direction (i.e., the first client requests to buy
JPY with USD and the second client requests to sell JPY for USD),
thereby creating realized profit for the dealer due to the client
quote spread for that CP.
[0012] Even if the dealer does not currently have a client with a
position request in the opposite direction, the dealer may predict
that the position requested by the client will later depreciate,
and by not covering the position by placing a corresponding
position request with a financial institution, the dealer
accumulates a net position, thus creating possible future
unrealized profit for the dealer, which may subsequently be
realized.
[0013] For instance, a first client may open a position of 10 in
the base currency of X/Y, and a second client may open a position
of 12 in the base currency of X/Y and subsequently close a position
of 7 in the base currency of X/Y. If the dealer does not otherwise
cover these positions, the dealer will have a net position of 15
(i.e., 10+12-7) in the base currency of X/Y for a position group
corresponding to these position requests from the first and second
clients. However, accumulating position exposes the dealer to
risk--if the exchange rate fluctuates contrary to the dealer's
prediction, the dealer may suffer a loss. Thus, a dealer's
decisions about whether (or when) to cover particular customer
orders by placing analogous position requests with a financial
institution determines the dealer's financial risk, and ultimately
determines the dealer's profits.
[0014] Accordingly, there exists a need for a system and method of
presenting risk assessment information and managing risk when
brokering foreign exchange trades.
SUMMARY
[0015] The present teachings generally relate to systems, methods
and software for processing and displaying information associated
with a plurality of currency exchange transactions to a forex
dealer in real time, i.e. substantially simultaneously with the
receipt or placement of the associated orders or position
requests.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016] FIG. 1 is a block diagram depicting a risk management system
for brokering foreign exchange trades, according to aspects of the
present teachings.
[0017] FIG. 2 is a simplified screenshot depicting an embodiment of
a quote manager screen displayed on a graphical user interface of a
computer, according to aspects of the present teachings.
[0018] FIG. 3 is a simplified screenshot depicting an embodiment of
price control screen displayed on a graphical user interface of a
computer, according to aspects of the present teachings.
[0019] FIG. 4 is a simplified screenshot depicting an embodiment of
a risk manager screen displayed on a graphical user interface of a
computer, according to aspects of the present teachings.
[0020] FIG. 5 is a flow diagram schematically depicting methods of
managing risk when brokering foreign exchange trades, according to
aspects of the present teachings.
[0021] FIG. 6 schematically depicts a computer-readable medium
containing program instructions for determining risk associated
with currency exchange transactions between a customer, a dealer
and a financial institution, according to aspects of the present
teachings.
DETAILED DESCRIPTION
I. Overview
[0022] This section describes the general features of managing
complex currency exchange transactions in real time, according to
aspects of the present teachings; see FIG. 1.
[0023] FIG. 1 schematically depicts a system, generally indicated
at 10, for managing currency exchange transactions. System 10
includes a dealer (or trader) regime generally indicated at 12, a
customer (or client) regime generally indicated at 14, and a
financial institution regime generally indicated at 16.
[0024] The dealer regime includes a computer 20, which is connected
to the customer regime by at least a first electronic communication
channel 22, and which is connected to the financial institution
regime by at least a second electronic communication channel 24.
The electronic communication channels may be of any suitable form
for transmitting account information, exchange rate quotes, and/or
currency exchange orders, such as a secure internet or intranet
connection. Furthermore, each electronic communication channel
depicted in FIG. 1 may in fact include a plurality of separate
channels, to connect the dealer electronically to a plurality of
customers and a plurality of financial institutions.
[0025] Computer 20 includes a processor 26 configured to determine
(i.e., calculate) profit and risk information relating to a
plurality of currency exchange transactions substantially in real
time, and a graphical user interface 28 configured to display the
profit and risk information to the dealer. The manner in which
information is calculated and displayed by computer 20 will be
described in more detail below.
[0026] Processor 26 is generally configured (i.e., by receiving and
executing suitable program instructions) to perform various
calculations and risk management functions, or in other words to
embody various risk management tools that provide information to a
dealer 32 within dealer regime 12. These risk management tools are
then displayed as screens of information by graphical user
interface 28. According to the present teachings, these include a
quote manager tool or screen 34, a price control tool or screen 36,
and/or a position risk monitor tool or screen 38. Through the use
of tools (i.e., screens) 34, 36 and/or 38, dealer 32 may control
the manner in which information is displayed by the computer, and
the manner in which currency exchange orders are transmitted
between the dealer regime computer, the customers and the financial
institutions.
[0027] Client regime 14 generally includes one or more retail
customers 39 or market takers ("MT"), such as MT 40, MT 42, and/or
MT 44. A typical customer or MT may include one or more trading
entities, such as a single forex trader working from home or over a
mobile connection, or a group of forex traders connected through a
local area network or a wide area network.
[0028] Financial institution regime 16 generally includes one or
more financial institutions 45 or market makers ("MM"), such as MM
46, MM 48, and/or MM 50. A typical MM may include any entity
capable of liquidating capital in a currency pair (CP), such as a
bank, hedge-fund, privately held financial institution, publicly
held financial institution, government office, or any other
suitable entity.
[0029] Dealer 32 may have one or more currency pair accounts in any
number of market makers, such as accounts 52, and each account may
correspond to any CP, such as USD/JPY, EUR/USD, or any other CP so
desired. For example, as shown in FIG. 1, dealer 32 may have three
CP accounts in MM 46, such as an account 52a which may be a USD/JPY
account, an account 52b which may be a EUR/USD account, and an
account 52c which may be a GBP/USD account; dealer 32 may have four
CP accounts in MM 48, such as an account 52d which may be a USD/JPY
account, an account 52e which may be a EUR/USD account, an account
52f which may be a GBP/USD account, and an account 52g which may be
a USD/CHF account; and dealer 32 may have two CP accounts in MM 50,
such as an account 52h which may be a USD/JPY account, and an
account 52i which may be a USD/CHF account. The dealer accounts
depicted in FIG. 1 are merely exemplary. A dealer may have any
number of CP accounts in any number of financial institutions.
[0030] Dealer 32 may receive one or more customer currency exchange
orders or position requests through the first electronic
communication channel, such as position requests 54, 56 from MT 40;
position requests 58, 60, 62, 64 from MT 42; and position request
66 from MT 44. For example, position requests 54, 58 may correspond
to buy requests for USD/JPY; position request 56 may correspond to
a sell request for EUR/USD; position request 60 may correspond to a
buy request for EUR/USD; position request 62 may correspond to a
buy request for GBP/USD; and position requests 64, 66 may
correspond to sell requests for USD/CHF. Again, the customer orders
depicted in FIG. 1 are merely exemplary.
[0031] Graphical user interface 28 may display account and rate
data received by computer 20 through communication channel 24 from
each MM, such as data 68a from MM 46, data 68b from MM 48, and data
68c from MM 50 for each CP. Based on input from the dealer and/or
default settings, computer 20 then may communicate with the MMs to
close and/or open positions in dealer accounts 52, such as by
communicating a close and/or open position request 70a to MM 46, a
close and/or open position request 70b to MM 48, and a close and/or
open position request 70c to MM 50, in order to cover positions
requested by the one or more market takers (MT).
[0032] Of course, customers placing currency exchange orders must
first know the bid and ask exchange rates being offered by the
dealer for each currency pair. These rates offered to the customer,
or customer exchange rates, will generally be less favorable than
the most favorable dealer exchange rates offered to the dealer by
financial institutions, but more favorable than the exchange rates
the customer could obtain directly from financial institutions.
[0033] Setting customer exchange rates can be thought of as
including two types of considerations. First, the dealer must
evaluate the plurality of quotes or exchange rates being offered to
the dealer by financial institutions, including not only the quoted
rates, but also factors such as the estimated reliability of the
quote, the time since the quote was last updated, the volatility of
the quote, and any limitations on orders associated with the quote,
among others. This evaluation enables the dealer to estimate the
best rate the dealer could obtain from a financial institution for
a given currency pair at a given instant of time. The factors
described above, and the resulting exchange rates that the dealer
expects to be available from financial institutions, may be
processed and managed by processor 20 through price control tool or
screen 36, as will be described in more detail below.
[0034] In addition, before setting customer exchange rates, the
dealer must determine how much to modify the best rate the dealer
can obtain from financial institutions, or "widen the spread" (or
otherwise shift the spread, such as by shifting both the bid and
the ask in the same direction, or determine not to shift the spread
at all) before offering exchange rates to each customer. This also
may involve a number of factors, such as the past trading history
of the customer, the volume or expected volume of the customer
order, the current condition of the market, relevant current events
that the dealer believes may affect the market in the future, or a
general risk group to which the customer is assigned, among others.
These factors, and the resulting customer exchange rates, may be
processed and managed by processor 20 through quote manager tool or
screen 34, as will also described in more detail below.
[0035] After receiving quotes or customer exchange rates from the
dealer, customers may place orders with the dealer. As described
previously, dealer 32 may process customer currency exchange
orders, such as position requests 54, 56, 58, 60, 62, 64, either by
placing a corresponding order with a financial institution and thus
"covering" the position, or by not placing such a corresponding
order and "accumulating" the position. The dealer's decision about
whether or not to cover a particular customer order, or all orders
or a subset of orders from all customers or a subset of customers,
will again be based on a number of factors, which could be
generally similar to the factors involved in setting the customer
exchange rates. These factors, and the resulting dealer decision
about whether or not to cover a position request, or an
accumulation of position requests, may be processed and managed by
processor 20 through risk monitor tool or screen 38, the features
of which will be described in more detail below.
II. Quote Manager
[0036] This section describes features of a quote manager tool or
screen that may be used by a dealer to analyze factors, including
risk factors, relating to customer exchange rates offered by a
dealer; see FIG. 2.
[0037] FIG. 2 depicts a simplified screen shot of an embodiment of
quote manager tool 34, generally indicated in FIG. 2 at 100. Quote
manager tool 100 may include a currency pair quote manager table,
generally indicated at 102, having a currency pair symbol column
104, a dealer quote or dealer exchange rate column 106, a
transformation selector column 108, a spread shift column 110, a
bid shift column 112, an ask shift column 114, a parallel shift
column 116 which dealer 32 may use to shift bid and ask rates in a
parallel direction (i.e., shift both the bid and the ask in the
same direction), a client quote or client exchange rate column 118,
a client quote spread column 120, a sell processing selector column
122, and a buy processing selector column 124.
[0038] Column 104 may display symbols for currency pairs with which
dealer 32 desires to broker trades. As shown in FIG. 2, column 104
may display USD/JPY, EUR/USD, GBP/USD, and USD/CHF, for example.
Typically, dealer 32 brokers a vast array of currency pairs, but
only four pairs are shown in FIG. 2 for simplicity.
[0039] As discussed above in regard to FIG. 1, dealer 32 may
receive data from each financial institution or market maker, such
as account information and exchange rate quotes, which may include
dealer quotes for currency pairs. The best available bid and ask
rates for each currency pair may then be displayed in column 106 in
real time (see discussion of FIG. 3 below for how dealer 32 may
determine the best available rate for each currency pair).
[0040] Dealer 32 may use a pull down menu in each row of
transformation selector column 108 to select an equation for how
each dealer quote will be transformed into a corresponding client
quote. For example, each pull down menu may have the following
options: Float Transformation (FLT), Float Maximum Transformation
(FLX), Fixed Bid Transformation (FXB), Fixed Ask Transformation
(FXA), Fixed Middle Transformation (FXM), Fixed Rounded Middle
Transformation (FXR), and Float Rounded Maximum Transformation
(FLR). Each of these transformations may use the dealer 32
determined data from columns 110, 112, 114, 116, and 120 to
calculate client quotes in column 118. In FIG. 2, dealer 32 has
selected the FLX transformation for each currency pair, but more
generally, dealer 32 may choose different transformations for
different currency pairs.
[0041] For instance, FXA may calculate an ask client quote of
column 118 by adding an ask shift value from column 114 to the ask
quote from the dealer quote of column 106, and may calculate a bid
client quote of column 118 by subtracting a spread shift value of
column 110 from the bid quote from the dealer quote of column 106;
FXB may calculate an ask client quote by adding an spread shift
value of column 110 to the bid quote from the dealer quote of
column 106, and may calculate a bid client quote by subtracting a
spread shift value from the bid quote from the dealer quote of
column 106.
[0042] In the following examples of transformation equations from
transformation selector column 108, "CTQuote.ask" may correspond to
an ask client quote in column 118; "CTQuote.bid" may correspond to
a bid client quote in column 118; "DDQuote.ask" may correspond to
an ask dealer quote in column 106; "DDQuote.bid" may correspond to
a bid dealer quote in column 106; "spread" may correspond to a
spread shift value from column 110; "bid_shift" may correspond to a
bid shift value from column 112; "ask_shift" may correspond to an
ask shift value from column 114; "CTQuote.spread" may correspond to
a value for a client quote spread from column 120;
"min_spread_value" and "max_spread_value" may respectively
correspond to a minimum and maximum spread values for each currency
pair determined by dealer 32; "ResultedCTQuote.ask" and
"ResultedCTQuote.bid" may respectively correspond to recalculated
ask and bid client quotes of column 118; and
"TransformatedCTQuote.ask" and "TransformatedCTQuote.bid" may
respectively correspond to transformed ask and bid client quotes
from column 118.
[0043] The following equations are examples only. More generally,
column 108 may access any transformation so desired by dealer
32:
Fixed Ask (FXA):
[0044] CTQuote.ask=DDQuote.ask+ask_shift
CTQuote.bid=CTQuote.ask-spread
Fixed Bid (FXB):
[0045] CTQuote.bid=DDQuote.bid+bid_shift
CTQuote.ask=CTQuote.bid+spread
Fixed Middle (FXM):
[0046]
CTQuote.ask=0.5*(DDQuote.ask+DDQuote.bid+spread)+bid_shift
CTQuote.bid=0.5*(DDQuote.ask+DDQuote.bid-spread)+bid_shift
Float Minimum (FLT):
[0047] FLT transformation limits minimum spread.
CTQuote.ask=DDQuote.ask+ask_shift
CTQuote.bid=DDQuote.bid+bid_shift
CT Quote.spread=CTQuote.ask-CTQuote.bid
Check if CTQuote.spread<min_spread_value, then the system should
apply "Fixed Middle" transformation with bid_shift=0 and
min_spread_value:
ResultedCTQuote.ask=0.5*(CTQuote.ask+CTQuote.bid+min_spread_value)
ResultedCTQuote.bid=0.5*(CTQuote.ask+CTQuote.bid-min_spread_value)
Float Maximum (FLX):
[0048] FLX transformation equals FLT but limits maximum spread
instead of minimum. If the bank price is inverted
(DDQuote.ask<DDQuote.bid) then the middle is used to
calculate
CTQuote.ask=0.5*(DDQuote.ask+DDQuote.bid)+ask_shift
CTQuote.bid=0.5*(DDQuote.ask+DDQuote.bid)+bid_shift
Otherwise:
CTQuote.ask=DDQuote.ask+ask_shift
CTQuote.bid=DDQuote.bid+bid_shift
Then CTQuote.spread=CTQuote.ask-CTQuote.bid;
Check if CTQuote.spread>max_spread_value and
CTQuote.spread>=0, then the system should apply "Fixed Middle"
transformation with bid_shift=0 and max_spread_value:
ResultedCTQuote.ask=0.5*(CTQuote.ask+CTQuote.bid+max_spread_value)
ResultedCTQuote.bid=0.5*(CTQuote.ask+CTQuote.bid-max_spread_value)
If CTQuote.spread<0, then the system should apply "Fixed Middle"
transformation with bid_shift=0 and spread_value=0:
ResultedCTQuote.ask=ResultedCTQuote.bid=0.5*(CTQuote.ask+CTQuote.bid)
Fixed Round Transformation (FXR):
[0049] CTQuote.spread=floor(spread)*PipPrice;
CTQuote.bidshift=floor(bid_shift)*PipPrice;
Round_factor=abs(log(10,PipPrice)); where PipPrice for
corresponding CP is used.
CTQuote.ask=round((0.5*(DDQuote.ask+DDQuote.bid)),Round_factor);
CTQuote.bid=round((0.5*(DDQuote.ask+DDQuote.bid)),Round_factor);
ResultedCTQuote.bid=CTQuote.bid-0.5*CTQuote.spread+CTQuote.bidshift;
ResultedCTQuote.ask=CTQuote.ask+0.5*CTQuote.spread+CTQuote.bidshift;
In the transformation the following math operations are used:
[0050] floor (A) is a function which rounds the elements of A to
the nearest integers less than or equal to A; [0051] abs( ) is an
absolute value (magnitude); [0052] log(10,N) is a decimal
logarithm; [0053] round( ) is function which rounds to nearest
integer;
Float Round Transformation (FLR):
[0054] FLR transformation equals to FLX but the resulted quotes are
rounded: If the bank price is inverted (DDQuote.ask<DDQuote.bid)
then the middle is used to calculate
CTQuote.ask=0.5*(DDQuote.ask+DDQuote.bid)+ask_shift
CTQuote.bid=0.5*(DDQuote.ask+DDQuote.bid)+bid_shift
Otherwise:
CTQuote.ask=DDQuote.ask+ask_shift
CTQuote.bid=DDQuote.bid+bid_shift
Then CTQuote.spread=CTQuote.ask-CTQuote.bid; Check if
CTQuote.spread>max_spread_value and CTQuote.spread>=0, then
the system should apply "Fixed Middle" transformation with
bid_shift=0 and max_spread_value:
TransformatedCTQuote.ask=0.5*(CTQuote.ask+CTQuote.bid+max_spread_value)
TransformatedCTQuote.bid=0.5*(CTQuote.ask+CTQuote.bid-max_spread_value)
If CTQuote.spread<0, then the system should apply "Fixed Middle"
transformation with bid_shift=0 and spread_value=0:
TransformatedCTQuote.ask=TransformatedCTQuote.bid=0.5*(CTQuote.ask+CTQuo-
te.bid)
And as a result:
RoundFactor=abs(log(10,PipPrice)); where PipPrice for corresponding
CP is used.
ResultedCTQuote.bid=floor(TransformatedCTQuote.bid*1/PipPrice)*PipPrice;
ResultedCTQuote.ask=ceil(TransformatedCTQuote.ask*1/PipPrice)*PipPrice;
In the transformation the following math operations are used:
[0055] floor (A) is a function which rounds the elements of A to
the nearest integers less than or equal to A (round down); [0056]
ceil (A) is a function which rounds the elements of A to the
nearest integers more than or equal to A (round up); [0057] abs( )
is an absolute value (magnitude); [0058] log(10,N) is a decimal
logarithm;
[0059] Client quotes from column 118 may be communicated to any
number, group, or tier of customers or market takers, such as MT
40, MT 42, and MT 44. Any of these market takers may then place
orders to sell or buy the base currency or the counter currency in
any of the corresponding currency pairs. Generally, the exchange
rates offered to each customer will be based at least partially on
various factors chosen by the dealer, such as whether or not the
customer is assigned to a high risk group, the volume of the order
received from the customer, a predefined setting associated with
the customer (for instance, based on the past order history or
order performance of the customer), and/or a market condition at
the time the customer places the order, among others. Some examples
of how these factors may be used to influence customer exchange
rates are discussed below.
[0060] By using pull down tabs in respective sell processing
selector column 122 and buy processing selector column 124, dealer
32 may separately select a process by which sell orders are
processed and by which buy orders are processed. For example,
dealer 32 may select to accumulate (ACC) position requested for
USD/JPY in the sell direction by selecting ACC in column 122 for
USD/JPY, and may select to straight through process (STP) position
requested for USD/JPY in the buy direction by selecting STP in
column 124 for USD/JPY. Alternatively dealer 32 may select to apply
a default mode of processing (DEF) which may apply a client
selected account mode for processing, which may include a
preference for STP or ACC corresponding or not corresponding to any
or all currency pairs in either direction.
[0061] Dealer 32 may adjust any of the values and/or selections in
columns 108, 110, 112, 114, 116, and 120, and by doing so may
adjust corresponding client quotes in column 118. Dealer 32 may
save adjustments to columns 108, 110, 112, 114, 116, and 120 by
clicking on an apply button 138, and dealer 32 may undo adjustments
to columns 110, 112, 114, 116, and 120 by clicking on reset button
140. As shown in FIG. 2, quote manager 100 may include market
condition presets 126, such as preset 128 which may correspond to a
standard market condition (e.g., when trade volume, rates, and/or
other market conditions are at substantially average levels),
preset 130 which may correspond to a slow market condition (e.g.,
when trade volume, rates, and/or other market conditions are
substantially below average levels), preset 132 which may
correspond to a fast market condition (e.g., when trade volume,
rates, and/or other market condition are substantially higher than
average levels), preset 134 which may correspond to an event market
condition (e.g., a scheduled or unscheduled government report
relating to an economic factor such as gross domestic product or
quantitative easing), and preset 136 which may correspond to a news
flash market condition (e.g., breaking news of political unrest,
etc.). Dealer 32 may preset values in columns. Presets 126 may
allow dealer 32 to quickly modify client quotes in column 118 in
reaction to quickly changing market conditions, which may result in
higher profits for dealer 32. Although five presets are depicted in
FIG. 2, this is arbitrary. More generally, quote manager 100 may
incorporate any desired number of presets, corresponding to any
desired predetermined treatment of client exchange rates.
[0062] Dealer 32 may save adjustments to columns 108, 110, 112,
114, 116, and 120 into one or more market condition presets 126 by
clicking and holding down for a predetermined amount of time any
one of one or more market condition presets 126. At a later time,
if dealer 32 determines that the market is operating under a market
condition corresponding to one of presets 126 (e.g., a news flash
of political unrest occurs), dealer 32 may click on the
corresponding preset (e.g., preset 136), which then substantially
simultaneously adjusts client quote exchange rate spreads that were
predetermined by dealer 32 for that market condition (e.g.,
substantially widens client quote spreads to offset risk of
political unrest causing abnormal fluctuations in dealer
quotes).
[0063] Quote manager 100 may also include one or more tier tabs
142, which may allow dealer 32 to adjust table 102 for different
tiers of clients, such as a tab 144 corresponding to a first tier
of clients, and a tab 146 corresponding to a second tier of client.
For example, dealer 32 may desire to communicate relatively
narrower spread client quotes (i.e., relatively more favorable
customer exchange rates) to market takers who typically deal in
higher volumes of position, and relative wider spread client quotes
(i.e., relatively less favorable customer exchange rates) to market
takers who typically deal in lower volumes of position. Thus,
dealer 32 may desire to separate market takers into different tiers
or classes, where each class of customer receives different
exchange rates that depend on the likelihood that the customer will
place an order having a volume in a particular range. Dealer 32 may
also save these adjustments for different client tiers in market
condition presets 126.
III. Price Control
[0064] This section describes features of a price control tool or
screen that may be used by a dealer to analyze factors, including
risk factors, relating to dealer exchange rates offered to a dealer
by financial institutions; see FIG. 3.
[0065] FIG. 3 depicts a simplified screen shot of an embodiment of
a price control tool or screen, generally indicated at 200. Price
control tool 200 may include a currency pair price control section
for each currency pair that dealer 32 desires to trade, such as a
first currency pair price control section 202 and a second currency
pair price control section 204, which are shown to respectfully
correspond to a first currency pair 206, shown here as USD/JPY, and
a second currency pair 208, shown here as EUR/USD. Each section may
list market makers available to dealer 32, such as MM 46, MM 48,
and MM 50.
[0066] Each control section may also include a quote generation
strategy pull down menu 214, which may be used by dealer 32 to
specify which price algorithm will be selected when several market
makers send quotes to dealer 32. Price control 200 may provide one
or more types of quote generation strategy, such as a general quote
strategy 220 shown before the slash in menu 214, and a two banks
quote strategy 222 shown after the slash in menu 214. Dealer 32 may
select quote strategies with each menu 214 for each section, each
section corresponding to a different currency pair.
[0067] As shown in FIG. 3, general quote strategy 220 may support a
BEST strategy and a MEDIAN strategy, and two banks quote strategy
222 may support the BEST strategy, the MEDIAN strategy, and a
CLOSEST strategy. Two banks quote strategy 222 may be used when
only two banks quote bid and ask rates. The BEST strategy may
select a highest bid rate and a lowest ask rate available from
selected market makers. The CLOSEST strategy may select a rate from
a market maker that is closest to a previous rate quoted by that
market maker. The MEDIAN strategy may select a rate in one of two
ways. For example, if an even number of market makers send quotes,
the MEDIAN strategy may calculate a bid rate that is an
arithmetical mean (average) of bid rates from those quotes and an
ask rate that is an arithmetical mean (average) of ask rates from
those quotes. However, if an odd number of market makers send
quotes, then the values may be sorted in ascending order and the
value that is in the middle of that order may be selected as the
MEDIAN strategy rate.
[0068] Price control tool 200 may also include a selection
mechanism, generally indicated at 215, allowing the dealer to
selectively determine whether a particular rate will be considered
in the algorithm for determining the effective exchange rate
offered to the dealer. For example, the price control tool may
include two check boxes for each market maker in each section, such
as bid rate checkboxes 216 and ask rate checkboxes 218,
respectively corresponding to a bid quote and an ask quote received
by dealer 32 from each market maker. If dealer 32 checks one of
these check boxes, then a quoted rate associated with that checkbox
will be factored into the selected quote generation strategy, but
if dealer 32 un-checks one of these checkboxes then the quoted rate
associated with that checkbox will not be factored into the
selected quote generation strategy.
[0069] Selection mechanism 215 may allow dealer 32 to selectively
generate a best available rate for the currency pair of each
section, such as best available rate 224 for section 202. It should
be appreciated that the selection mechanism, such as checkboxes
216, 218, may allow dealer 32 to selectively form a best available
rate that may not otherwise be available from a single market
maker, such as best available rate 224 which is indicated to have a
bid rate of 79.829 and an ask rate of 78.839. On the other hand,
the selection mechanism embodied by checkboxes 216, 218 also allows
the dealer to ignore some or all of the rates offered by particular
financial institutions, for instance if the dealer believes the
rates are unreliable or likely to change quickly.
[0070] After determining which rates offered by financial
institutions to consider, a best available rate, such as best
available rate 224, may then be automatically entered for a
corresponding currency pair in dealer quote column 106 of quote
manager 100 (see FIG. 2 and accompanying description above).
[0071] In price control tool 200, quotes matching a quote
generation strategy may be indicated to dealer 32 with a background
color that is lighter, darker, or has a distinctive shade or some
other distinctive property. For example, the BEST strategy bid and
ask rates for section 202 may be shown in a lighter shade, and the
MEDIAN strategy bid and ask rates for section 202 may be shown in a
darker shade. Indications such as these may allow dealer 32 to more
effectively choose a quote generation strategy and check/uncheck
checkboxes 216, 218.
[0072] Each section of price control tool 200 may also include a
time indication field 218 for each market maker quote, which may
show the amount of time that has elapsed since the corresponding
quote has been updated. As such, field 218 may indicate a level of
accuracy for the corresponding quote, and may assist the dealer in
determining whether to exclude certain quotes from the quote
determination algorithm.
[0073] Each section of price control tool 200 may also have a field
226 for displaying the total net position dealer 32 has in marker
maker accounts, such as accounts 52; a column 228 for displaying
how much open position dealer 32 has in each associated market
maker; and a column 230 for displaying a maximum trade associated
with rates quoted by the market makers.
IV. Risk Monitor
[0074] This section describes features of a risk monitor tool or
screen that may be used by a dealer to analyze factors, including
risk factors, relating to a dealer's decision regarding whether or
not to cover a customer position by placing an analogous order with
a financial institution; see FIG. 4.
[0075] FIG. 4 depicts a risk monitor tool or screen, generally
indicated at 500, which is an embodiment of risk monitor tool 38
depicted in FIG. 1 and previously described more generally. Risk
monitor tool 500 may allow dealer 32 to assess and manage
accumulated position risk in real time, by displaying information
associated with currency exchange transactions in real time. As
shown in FIG. 4, risk monitor tool 500 includes a table 501 for
conveying risk assessment; two or more checkboxes 512 that may
allow dealer 32 to segregate risk groups; a capital field 524; and
a daily profit loss indicator 526.
[0076] Table 501 includes a currency pair column 502, which lists
the names of all currency pairs brokered by dealer 32 and may be
sorted by currency pair importance or demand; an amount of
cumulative position in base currency column 503; an amount of
cumulative position in counter currency column 504; a profit loss
column 506; a daily breakeven rate column 508; and a position
threshold column 510.
[0077] In the exemplary embodiment of FIG. 4, check boxes 512
include box 514 corresponding to a first group of customers or
market takers, box 516 corresponding to a second group of customers
or market takers, box 518 corresponding to a risk group (or high
risk group) of customers or market takers, box 520 corresponding to
a non-risk group (or low risk group) of customers or market takers,
and box 522 corresponding to accumulated net positions of dealer 32
in market maker (MM) accounts--some or all of which may cover at
least a portion of the accumulated position of dealer 32 from
corresponding market takers (MT).
[0078] More generally, the risk monitor tool may include any
mechanism allowing a dealer to assign each customer to one or more
groups and to select a subset of the groups to which to restrict
the information to be displayed. These groups may include one or
more groups based on different levels of perceived risk to the
dealer associated with orders received from the customer, one or
more groups based on a geographic distinction of the customers in
the group, such as the country or region in which the customer's
order was placed or received, and any other desired groups
representing different distinctions the dealer may wish to make
between customers, for purposes of displaying information relating
to customer orders.
[0079] In the specific example of FIG. 4, by checking or
un-checking one, all, or a subset of two or more checkboxes 512,
dealer 32 can select specific groups of market takers (MT) and/or
market makers (MM) and the corresponding net positions of dealer 32
to be included in the calculation of data in columns 503, 504, 506,
508, 510 for each currency pair in currency pair column 502. For
example, if dealer 32 only checked box 514, which may correspond to
a first group of MT net positions (i.e., net positions that dealer
32 has as a result of accumulating position from the first group of
MT), then only the net positions of dealer 32 corresponding to
positions accumulated from position requests from that group of
market takers will factor into data displayed in columns 503, 504,
506, 508, 510.
[0080] More generally, computer 20 is configured to receive a group
indicator for each customer associating each customer with one or
more of a plurality of groups, including at least a high risk group
and a low risk (or non-risk) group. The group indicator may, for
example, be provided through a separate customer data entry screen,
or it may be provided through a drop-down menu or some other
feature related to or stemming from the risk monitor tool. Through
the risk monitor screen, the computer is then configured to receive
subset selection information corresponding to a dealer's selection
of a subset of the groups, for example through selection by the
dealer of a desired subset of check boxes 512. The computer is then
configured to display on the graphical user interface of risk
monitor screen 500, substantially simultaneously with selection of
the subset of the groups, various desired information including the
instantaneous potential profit associated with each currency pair
and restricted to the customer orders placed by customers in the
selected subset.
[0081] More specifically, column 503 displays the cumulative
amounts of open positions for each currency pair in the base
currency of each currency pair. If the total cumulative amount of
position is in the buy direction, then the amount is shown without
parentheses. If the total cumulative amount of position is in the
sell direction, then the amount is shown in parentheses.
[0082] Column 504 displays the cumulative amount of open positions
for each currency pair in the counter currency of each currency
pair. If the total cumulative amount of position is in the buy
direction, then the amount is shown without parentheses. If the
total cumulative amount of position is in the sell direction, then
the amount is shown in parentheses.
[0083] Column 506 displays the profit or loss value in USD for
positions of dealer 32 in each currency pair. These values are
recalculated automatically after new rates are received, such as
best available rates formed by dealer 32 with price control tool
200. Values in column 506 are positive when shown without
parentheses and negative when shown in parentheses.
[0084] Column 508 displays daily break even rates for each currency
pair in order for the profit loss value for that currency to be
zero.
[0085] Column 510 displays position threshold level indicators,
which dealer 32 can set up for each currency pair in order to alert
dealer 32 that some larger than normal position risk is present in
the data of table 501. Examples of threshold levels may include
absolute, relative, maximum, and/or minimum amounts of base
currency, counter currency, and/or profit loss value for each
currency pair, but each currency pair need not have the same type
of position threshold nor the same position threshold levels. The
indicators may be numbers, such as 0-1-2-3-4, where 0 indicates
normal risk and 3 representing unusually high risk. The levels may
also be indicated with color to help alert dealer 32, such as a
background color for 0, yellow for 1, orange for 2, and red for
3.
[0086] A capital field 524 displays an amount of capital of dealer
32 in USD, which may be a total, partial, estimated, or calculated
amount of capital determined in any manner suitable to dealer 32. A
daily profit loss field 526 displays a total amount of profit loss
value from column 506 for a current forex day. At the end of the
forex day, field 526 may be set to zero.
[0087] By checking all of checkboxes 512, it may be possible to
view the overall instantaneous position risk of dealer 32 in each
currency pair, because in this case the information shown in table
501 and in boxes 524, 526 will reflect all of the positions
accepted or ordered by the dealer, including all open customer
orders and also including all covered customer orders.
[0088] Alternatively, dealer 32 may check a subset of checkboxes
512, thus allowing dealer 32 to segregate one or more groups of
accumulated net positions. For example, dealer 32 may view position
risk assessment corresponding to groups previously identified as
high risk customers by checking box 518 and thus selecting the risk
group subset of customers. If this is the only box checked by the
dealer, then the amount displayed in profit/loss box 526 will be
the instantaneous potential profit associated with each currency
pair and corresponding to orders placed by customers in the risk
group. In general, by selecting a desired subset of one or more
groups to which to restrict the instantaneous profit to be
displayed, the dealer can cause the computer to display on screen
500 a restricted instantaneous potential profit associated with
each currency pair and corresponding to the orders placed by
customers in the selected subset. This can be done substantially
simultaneously with receiving the information sufficient to select
the subset.
[0089] On the other hand, if the dealer has covered a subset of
customer orders by carrying out currency exchanges with financial
institutions, then the dealer can check box 522 to see the effect
of covering these positions. For example, if box 522 is the only
box checked, then the amount displayed in profit/loss box 526 will
be the instantaneous actual profit associated with each currency
pair and corresponding to the covered subset of orders. If another
of boxes 512 is also checked, corresponding to selection of a
subset group of customers, then a revised instantaneous potential
profit will be displayed in box 526, associated with each currency
pair based on the restricted instantaneous potential profit and the
instantaneous actual profit. Computer 20 will generally be
configured to update and display information on the risk management
screen simultaneously with accepting and/or covering orders, i.e.,
substantially in real time.
[0090] Similar to table 501, the value of this field also depends
on which of checkboxes 512 dealer 32 checks. During the forex day,
risk monitor 500 may continually or at intermitted times check the
amount in daily profit loss field 526 against the amount of capital
displayed in capital field 524. If the amount of daily profit/loss
is less than a first percentage of capital, such as 32%, then the
risk monitor 500 may indicate this to dealer 32, such as by
flashing yellow in capital field 524. If the amount of daily
profit/loss is less than a second percentage of capital, such as
40%, then the risk monitor 500 may indicate this to dealer 32, such
as by flashing red in capital field 524.
[0091] Risk monitor 500 may help dealer 32 to decide whether or not
to cover positions or customer orders, thus offsetting risk. If
dealer 32 determines that the assessed position risk of a currency
pair shown in table 501 is too high, then dealer 32 may cover this
position by clicking on the currency pair row thus accessing a
covering ticket, which may be preset with a market maker account
that may have a best available rate from price control 200, the
total amount in base currency for the selected currency pair, and a
direction that is opposite of a total direction for the selected
currency pair. This position may then be covered online or offline,
such as over the phone.
V. Exemplary Methods
[0092] This section describes in more detail methods that may be
performed according to the present teachings; see FIG. 5.
[0093] Specifically, FIG. 5 is a flow diagram depicting a method,
generally indicated at 600, of displaying information associated
with currency exchange transactions in real time. At 602, method
600 includes receiving with a computer a plurality of currency
exchange orders from customers, each order characterized by a
currency pair including a base currency to be exchanged for a
counter currency, an amount of currency to be exchanged, and an
indication of whether the base currency is to be bought or sold.
Customer orders may be transmitted to the computer by any suitable
communications channel.
[0094] At 604, method 600 includes determining with a processor of
the computer, substantially simultaneously with receiving the
customer orders, a cumulative amount of the base currency of each
currency pair to be exchanged in all of the orders, and at step
606, method 600 includes determining with the processor,
substantially simultaneously with receiving the orders, a
cumulative amount of the counter currency of each currency pair to
be exchanged in all of the orders. The calculations of steps 604
and 606 typically involve simply aggregating the customer orders as
they are received. However, doing this substantially simultaneously
with receiving the orders, i.e., in "real time," generally cannot
be done by a technologically unaided dealer, but rather requires
the use of a computer.
[0095] At step 608, method 600 includes determining with the
processor, substantially simultaneously with receiving the orders,
an instantaneous potential profit associated with the orders, based
on the cumulative amount of the base currency of each currency pair
to be exchanged, the cumulative amount of the counter currency of
each currency pair to be exchanged, customer exchange rates for
each currency pair provided by a trader to each customer, and
dealer exchange rates for each currency pair provided to the trader
by at least one financial institution. Step 608 generally involves
calculating the theoretical or potential profit associated with the
customer orders, if the dealer were to cover all of the orders by
requesting corresponding exchanges with financial institutions at
the best available rates. This calculation depends on the customer
orders, the customer exchange rates, and the dealer exchange rates,
all of which are functions of time.
[0096] At step 610, method 600 includes receiving with the computer
information sufficient to assign each customer to one of a
plurality of groups, including at least a high risk group and a low
risk group. As described above with regard to risk management tool
500, a customer may be assigned to a group based on many factors,
such as the volume of the customer's current or past orders, the
customer's past trading performance, the customer's geographic
location (or the location of the customer's account), such as a
country, or for any other reason at the dealer's discretion.
[0097] At step 612, method 600 includes receiving with the computer
information sufficient to select a subset of the groups to which to
restrict the instantaneous potential profit to be displayed. This
step generally involves displaying to the dealer all of the groups
to which customers have been assigned, and providing an interface,
such as checkboxes, through which the dealer may select one or more
of the groups for which to display information about customer
orders. For instance, one reason to perform this step would be to
restrict the displayed information to a high risk group of
customers or transactions.
[0098] At step 614, method 600 includes displaying on a graphical
user interface of the computer, substantially simultaneously with
receiving the information sufficient to select the subset, a
restricted instantaneous potential profit associated with each
currency pair and corresponding to the orders placed by customers
in the selected subset. In other words, immediately upon selecting
the desired subset of groups, the display of transaction
information, including the potential profit associated with the
orders, is restricted to just those orders placed by customers in
that subset of groups. Again, exemplary uses of this feature would
be to check on the potential profit associated with orders placed
by only high risk customers, low risk customers, or customers
having some other distinction, such as a geographic
distinction.
[0099] At step 616, method 600 optionally may include covering a
subset of the orders by carrying out currency exchanges with the
financial institution(s) offering the best rates corresponding to
the subset of orders. For example, the dealer may wish to cover
orders associated with high risk customers, if it appears that the
potential profit is below some desired threshold. Similarly, the
dealer may wish to cover some other subset of the customer orders
based on the potential profit of that subset at a point in
time.
[0100] If the dealer covers a subset of the customer orders, then
at step 618, method 600 may include determining with the processor,
substantially simultaneously with covering the subset of the
orders, an instantaneous actual profit associated with each
currency pair and corresponding to the covered subset of orders.
This is profit based on a comparison of the order received from the
customer and the corresponding order placed with the financial
institution, which determines the profitability of the order for
the dealer.
[0101] Subsequently, at step 620, method 600 may include
determining with the processor, substantially simultaneously with
covering the subset of the orders, a revised instantaneous
potential profit associated with each currency pair based on the
restricted instantaneous potential profit and the instantaneous
actual profit. In other words, the processor may be instructed to
remove the effects of the covered transactions from the previously
determined potential profit, since the covered transactions have
been completed.
[0102] Finally, at step 622, method 600 may include displaying on
the graphical user interface, substantially simultaneously with
covering the subset of the orders, at least one of the
instantaneous actual profit and the revised instantaneous potential
profit. Thus, the dealer can stay informed regarding both any
realized profits and the current potential profit based on
accumulated risk positions. It should be apparent that throughout
the entirety of the discussion above, the "profit" (either actual
or potential) at any instant of time could be either a positive
number or a negative number, in which case it could also be
described as a loss.
VI. Exemplary Computer Readable Media
[0103] This example discusses ways in which the present teachings
may be embodied in computer programs which are stored on a computer
readable medium and then executed by one or more processors of a
computer system; see FIG. 6.
[0104] Specifically, FIG. 6 depicts a computer system, generally
indicated at 700, which includes a processor 702 capable of
executing program instructions to carry out methods according to
the present teachings. A computer readable medium in the form of a
compact disc containing program instructions is depicted at 704.
Disc 704 may be read by a peripheral device such as a CD reader
associated with computer system 700, and the instructions contained
on disc 704 may be provided to processor 702.
[0105] In addition, however, computer system 700 may be configured
to receive program instructions, and to provide the instructions to
processor 702 for execution, in a variety of other ways. For
instance, computer system 700 also includes a wired internet
connection 706, and a wireless internet connection 708, each of
which may allow program instructions to be transmitted to computer
system 700 for execution by processor 702. For example, executable
program instructions may be stored at a dedicated website or in the
"cloud."
[0106] In any case, execution of the program instructions by
processor 702 causes the processor to perform methods, according to
aspects of the present teachings, of determining risk associated
with currency exchange transactions between a customer, a dealer
and a financial institution. Exemplary methods have been described
above in Section V and will not be reiterated in this section.
[0107] Although the present invention has been shown and described
with reference to the foregoing operational principles and
preferred embodiments, it will be apparent to those skilled in the
art that various changes in form and detail may be made without
departing from the spirit and scope of the invention. The present
invention is intended to embrace all such alternatives,
modifications and variances that fall within the scope of the
appended claims.
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