Methods for Post-Trade Allocation
Inactive Publication Date: 2013-01-10
HEIDARI MASSOUD +1
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- Summary
- Abstract
- Description
- Claims
- Application Information
AI Technical Summary
Benefits of technology
The present invention provides a computerized method for reducing bias in allocation of trades. This method ensures that trades are allocated in a fair and optimal manner, meaning that profits and losses are distributed amongst accounts based on their relative allocation factors. The method also ensures that managed accounts have a net position that is positive or negative, and that the allocation is consistent with the last filled order of the day. Overall, the method reduces bias in trade allocation and ensures an efficient and equitable distribution of profits and losses.
Problems solved by technology
Exchanges do not allow for fractional contract sizes.
As a result, allocation of block trades between different accounts requires rounding of positions, which can result in biased allocations.
However, not all exchanges recognize average prices such as EUREX.
Alternative allocation procedures that have been suggested for exchanges that do not recognize average prices can result in a biased allocation between trades.
These alternative allocation procedures do not guarantee convergence towards the respective accounts' appropriate allocated portion of the returns, regardless of the number of separately managed accounts, even when the number of filled orders grows sufficiently large.
One such methodology which fails to necessarily converge or guarantee a fair outcome is the “High Account High Price” methodology.
Method used
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Embodiment Construction
[0017]FIG. 1 includes one allocation processing apparatus 100 with an allocation computing part 100a and output part 100b, as well as five other network devices 14-1 through 14-5 connected to a network 11. The network 11 can include one or more of a secure intranet or extranet local area network, a wide area network (WAN), any type of network that allows secure access, or a combination thereof. Further, other secure communications links (such as a virtual private network, a wireless link) may be used as well as the network connections. In addition, the allocation processing apparatus 100 may be connected to a network that employs TCP / IP (Transmission Control Protocol / Internet Protocol), but other protocols such as SNMP (Simple Network Management Protocol) and HTTP (Hypertext Transfer Protocol) can also be used. How devices can connect to and communicate over the networks is well-known in the art and is discussed for example, in “How Networks Work”, by Frank J. Derfler, Jr. and Les F...
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A computer-implemented method for providing an allocation of a filled order made at a particular time, that involves receiving at least a price of a filled order made at a later time; generating a starting allocation across multiple managed accounts based at least in part on allocation factors of each of the multiple managed accounts; generating at least one additional allocation based at least in part on the starting allocation; determining a closest-fitting allocation according to a metric from amongst the starting allocation and the at least one additional allocation, the metric being based at least in part on the price of the filled order made at the later time and on a price of the filled order made at the particular time; and outputting the closest-fitting allocation.
Description
FIELD OF THE INVENTION[0001]The present invention relates in general to the post-trade allocation of trades between multiple accounts, and specifically to a method for nonbiased allocation of trades.BACKGROUND OF THE INVENTION[0002]Exchanges do not allow for fractional contract sizes. As a result, allocation of block trades between different accounts requires rounding of positions, which can result in biased allocations. The recognition of average prices can lessen the amount of bias to some degree. However, not all exchanges recognize average prices such as EUREX. Alternative allocation procedures that have been suggested for exchanges that do not recognize average prices can result in a biased allocation between trades. These alternative allocation procedures do not guarantee convergence towards the respective accounts' appropriate allocated portion of the returns, regardless of the number of separately managed accounts, even when the number of filled orders grows sufficiently lar...
Claims
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Login to View More IPC IPC(8): G06Q40/00
CPCG06Q40/06G06Q40/04
Inventor HEIDARI, MASSOUDHIRSA, ALI
Owner HEIDARI MASSOUD