Method and system for automated auction and tender of complex multi-variable commodities

Abstract

A system and method for the auction and tender of complex multi-variable commodities, which are defined as commodities having a plurality of characteristics with each characteristic's value contributing to the determination of the commodity price. The system and method are implemented using an exception handling process whereby a tender participant requests exceptions to the terms and conditions of the original tender. The original tender serves as the baseline tender all participants bid on. Exceptions are changes that are priced in addition to the baseline bid. The suggested auction and tender winners are determined based on their baseline bids. The winner can execute accepted exceptions for an additional fee.

Description

CROSS REFERENCE TO RELATED APPLICATIONS[0001]This application is a continuation of application Ser. No. 09 / 496,389, filed Feb. 2, 2000, the contents of which is herein incorporated by reference in its entirety.FIELD OF THE INVENTION[0002]The present invention relates to a method and system for the automated auction and tender of complex multi-variable commodities. More particularly, it relates to a system and method, which facilitates transactions in prerefined petroleum and other petroleum products.BACKGROUND OF THE PRESENT INVENTION[0003]Complex commodities may include any commodity whose price determination is based on a variation of each one of a plurality of variable characteristics. Simple commodities, on the other hand, are commodities whose characteristics are expected to match the quality requirement for a single characteristic. For example, steel is a simple commodity, where a steel gauge value denotes a number of characteristics, which meet a minimum quality requirement. ...

AI Technical Summary

Benefits of technology

[0015]By using the system and method according to the present invention, the traditional bidding process can be greatly improved, thereby providing the tender initiators and the tender recipients and buyers with numerous advantages. The internet communications offers instantaneous and consistent information to all prospective clients. For example, using such communications, each company receives the same information at the same time. Problems such as, e.g., an access to fax machines, unclear faxes, inability to contact the individuals with the necessary telephone calls are reduced. Additionally, the tender validity period and the time parameters of the tender can be tailored to match the time zones of the market for the anticipated buyers. These efficiency benefits also apply in the converse situation where a buyer creates a tender for sellers (such as the NOCs) to supply the petroleum products.

[0016]In addition to these exemplary efficiency gains, the system and method of the present invention a flexibility improvement. For example, a host site provides a clearinghouse for the auctions and a standardized location for interested parties to be interconnected. This host site permits a timely distribution and update of information to all of the interested parties. The flexibility of altering customer profiles, authorized participants for a tender, or users authorized viewing privileges for a tender provides a considerable improvement over the conventional practice.

[0017]Other advantages of the system and method include facilitating an integrity over the data for allowing the bids to be anonymously provided until the tender adjudication is performed following the conclusion of the tender validity period. The bids can be entered on a real-time basis with an instantaneous feedback to other bidders for providing a more efficient system yielding more accurate and optimal results from both the seller and the buyer perspectives. These benefits can also reduce the transaction costs related to the sale the products, thereby increasing the profit margin for the product or decreasing the price (depending on whether a tender is provided for the purchase or the sale of, e.g., the petroleum products). Additionally, the tracking of the tender and the bidding information is a valuable feature, and cannot be as easily or as thoroughly accomplished using the conventional systems and methods.

[0018]The present invention also provides a system in which a buyer or seller can post a tender. The tender participants (e.g., the tender recipients) can be limited by the tender initiator, and those who are granted access to view (but not bid on) the tender can also be controlled and limited by the tender initiator. The authorized users can also view the open tenders with the current bid information except for viewing the sealed envelope bidding. The designated participants may also bid on the tenders. Another exemplary feature of the present invention is the exception handling, which allows the complex multi-variable commodities to be traded according to the different buyer and seller demands, terms and specifications that determinethe value of the particular commodity.

[0019]The exception handling may be accomplished by, e.g., maintaining a baseline tender as posted by the tenderer. The initial conditions and terms with the posted tender remain as the baseline. The participants in the tender can request the exceptions from the tenderer. If the tenderer agrees, the accepted exceptions are added to the tender and are provided in addition to the baseline. For example, in a tender for fuel oil number 6, the posted tender may specify a viscosity of 350 SSF. This becomes the baseline viscosity for the tender. Then, the tender recipient may request an exception, which requires a viscosity of 300 SSF. If the exception is accepted, it is maintained as an additional item for the tender. When the tender recipient bids on the tender, they enter the “per barrel” price that they are willing to pay for the product with a viscosity of 350 SSF. The winning bidder has the option to take delivery of such fuel oil. However, the accepted exception for a viscosity of 300 SSF may exist for an additional cost of $0.10 / barrel. Therefore, the winner could also take delivery of fuel oil number 6 with the viscosity of 300 SSF for $0.10 per barrel above their winning bid. This exception-handling feature of the system according to the present invention allows each user to request the exceptions that may be important to them while the tenderer is not required to accept any exceptions, and may do so for an additional fee if they are able to comply.

Problems solved by technology

Numerous auction Internet web sites exist for simple commodities but do not offer varying specifications for the plurality of characteristics which are part of the complex commodities.

However, the exchanges providing the auctions for the complex commodities are uncommon because the variation of several characteristics that determine price often frustrates exchanges grouping multiple buyers with multiple sellers.

However, this system does not relate to the physical characteristics of the commodity being transported.

The system, as it currently exists, often causes various problems, which range from simple communication problems to more serious situations.

In particular, the lack of the standardized and thorough distribution of information along with the possible exclusion or marginalization of potential bidders makes the current bidding process less than optimal.

The current Internet based sites are, at best, bulletin boards posting information, but do not allow for the online automated auctions and tenders to take into account the multiple characteristics of the complex commodities.

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