System and method for proportional interest distribution in fixed-income securities

Abstract

A modular computer system allocates income payments for financial instruments based on the precise duration of investor ownership. An ownership ledger stores records for digital fractional ownership units, including investor identifiers and time-stamped ownership intervals. An allocation engine retrieves ownership data and income payment information from a custodial entity, calculates an income amount per fractional unit using a fractionalization factor, determines time-weighted proportional income amounts for units held during a payment period, and aggregates the results to obtain total income per investor. The engine generates structured, machine-readable payment instructions identifying the instrument, investor account, payment period, and computed amount, and transmits the instructions to a disbursement system that updates internal ledgers and electronically distributes payments. The system supports fixed and variable interest rate transactions, off-exchange trades, and centralized or blockchain-based ownership records.

Description

SYSTEM AND METHOD FOR PROPORTIONAL INTEREST DISTRIBUTION IN FIXED-INCOME SECURITIESCROSS-REFERENCE TO RELATED APPLICATIONS

[0001] The present application claims the priority benefit of U.S. provisional patent application number 63 / 726,303 filed November 28, 2024, and entitled “System and Method for Proportional Interest Distribution in Fixed-Income Securities,” the entire contents of which are incorporated herein by reference.SUMMARY

[0002] The present invention provides a system and method for managing fixed-income securities and distributing interest payments proportionally to investors based on the precise duration of their ownership. The system addresses key technical problems in fixed-income markets, such as the inability of prior systems to allocate earned interest to sellers who sell securities during the payment period and the requirement for buyers to pay accrued interest at the time of purchase, which increases transaction costs and reduces capital utilization.

[0003] The embodiments of the invention introduce a modular computer system (system 100) composed of multiple subsystems, including an allocation engine, an ownership ledger, and a transaction module. The allocation engine calculates interest payments based on ownership data, the ownership ledger maintains comprehensive records of investor holdings, and the transaction module facilitates buying, selling, and transferring ownership interests while ensuring that trades are validated and accurately recorded. The system also interacts with external entities such as custodial entities and investor devices to enable secure communication and facilitate interest payment disbursements.

[0004] The allocation engine computes interest payments based on data retrieved from both the ownership ledger and the custodial entity. These payments are calculated according to a proportional interest distribution method, which ensures that each investor receives interest commensurate with the duration of their ownership. Interest payment instructions are generatedand transmited to the custodial entity, which uses the disbursement system to transfer payments to investor accounts. The embodiments of the invention eliminate the need for buyers to compensate sellers for accrued interest at the time of purchase, significantly reducing transaction costs and improving the efficiency of capital deployment.

[0005] The system incorporates ledger nodes to support the use of distributed ledger technologies for storing ownership information

[0006] The system supports multiple transaction types, including but not limited to fixed interest rate transactions, where the interest rate earned by the buyer and seller of a security is fixed, and variable interest rate transactions, where the interest rates earned by the buyer and the seller may differ, such as in repurchase (repo) transactions.

[0007] These and other features and advantages of the embodiments of the invention will be beter understood by reference to the following detailed description and the accompanying drawings, wherein:

[0008] FIG. 1 is a block diagram of the proportional interest distribution system.

[0009] FIG. 2 is a flowchart depicting the operational workflow of the proportional interest distribution system.

[0010] FIG. 3 is a block diagram of the transaction module.

[0011] FIG. 4 is a block diagram of the ownership ledger.

[0012] FIG. 5 is a block diagram of the allocation engine.

[0013] FIG. 6 is a flow chart for a method of proportionally distributing interest for fixed interest rate transactions.

[0014] FIG. 7 is a flow chart for a method of proportionally distributing interest for variable interest rate transactions.DETAILED DESCRIPTION

[0015] In the following description, for purposes of explanation and non-limitation, specific details are set forth, such as particular modules, components, techniques, and workflows, in order to provide an understanding of the described technology. It will be apparent to one skilled in the art that other embodiments may be practiced apart from the specific details described below. In some instances, detailed descriptions of well-known methods, devices, and techniques are omited so as not to obscure the description with unnecessary detail.

[0016] The embodiments of the invention provide a technical solution to at least two keytechnical problems in fixed-income markets. First, prior art systems are configured to compensate only the last holder of record, lacking the technical capability to allocate earned interest to sellers who sold securities during the payment period. Second, buyers are required to pay sellers accrued interest at the time of purchase, substantially increasing transaction costs, reducing buying power and investment returns, and diminishing capital utilization.

[0017] In certain example embodiments, a modular computer system (i.e., system 100) is used to manage fixed-income securities and the proportional distribution of interest payments to investors. The system comprises multiple interacting subsystems, including an allocation engine, an ownership ledger, and a transaction module. The allocation engine is responsible for calculating interest payments based on ownership data, while the ownership ledger maintains comprehensive records of investor holdings, including fractional ownership details. The transaction module facilitates the buying, selling, and transferring of ownership interests, ensuring that all trades are validated and accurately recorded. Each of these subsystems plays a specific role, and their interactions are designed to ensure a seamless and secure process for managing trades, updating ownership information, calculating interest allocations, and distributing payments. The system also interacts with external entities, such as custodial entities and investor devices, to facilitate secure communication and interest payment disbursements.

[0018] An investor refers to an individual or entity that engages with the system either directly or through a financial intermediary. A financial intermediary may include, but is not limited to, brokers, custodians, financial advisors, banks, financial institutions, or any other third-party service providers that facilitate the Investor's interaction with the system. Alternatively, a financial intermediary may engage with the system directly, either with or without investors.

[0019] For the purpose of this application, fixed income refers to any security that pays income, interest, or other cash flows to investors. Examples of fixed-income securities include, but are not limited to corporate bonds, government bonds (such as Treasury bonds and notes), municipal bonds, equity securities, fixed annuities, investment funds, floating rate notes, asset- backed securities, mortgage-backed securities, hybrid securities, commercial paper, certificates of deposit, income trusts, structured notes, loans, swaps and preferred equity. In the context of this patent, "fixed income" is broadly defined to encompass any financial instrument that generates regular income streams for investors, regardless of the specific legal structure or underlying asset. These instruments can include, for example, bilateral or syndicated credit facilities and securitieslending or collateral upgrade transactions in which one party lends securities to another in exchange for a fee or rebate that accrues over the duration of the transaction. As used herein, the term ‘financial instrument’ encompasses fixed-income securities and other income-producing securities and arrangements described in this application.

[0020] Each whole unit of a fixed income security may be divided into digital fractional ownership units (“fractional ownership units”) using a fractionalization factor, possessing unique identifiers. Each fractional ownership unit represents an ownership interest in the underlying bonds held by a custodial entity. A fractional ownership unit refers to a portion of ownership in a fixed- income security or other financial instrument, which may be either fractional (divisible) or whole (indivisible). For example, by applying a fractionalization factor of ten, a single bond can be divided into ten equal fractional ownership units.

[0021] Alternatively, using a fractionalization factor of one, the single bond can be traded as a whole unit. A whole unit is a complete, indivisible fixed-income security that has not been fractionalized. This standardized fractionalization factor ensures uniformity in the division process, allowing each whole unit to consistently yield the same number of fractional units across all fixed-income securities. The system is configured to handle both fractionalized and nonfractionalized fixed-income securities interchangeably. Within this application, the term "fractionalized" is used to represent both fractional and whole ownership units. These digital fractional ownership units may comprise one or more of an electronic record, a digital security, a token, a fractional share, and any other type of digital records representing ownership in a security. Each unit entitles the holder to a proportionate share of the interest payments, voting rights, and any other benefits associated with the underlying financial instrument.

[0022] Embodiments of the invention comprise the ownership ledger, which accurately records and tracks fractional ownership of fixed-income securities in real time. For example, the ownership ledger uses one or more ledger technologies. For example, the ownership ledger uses one or more of a tax lot methodology, a digital transaction record, a digital ledger, and a blockchain-based system. The ownership ledger assembles and maintains a complete security-holder record, ensuring that the entire history of each investor's holdings is accurately captured and accessible. In some embodiments, the digital fractional ownership units are represented as digital tokens recorded on a blockchain-based ledger maintained by ledger nodes 122, such that transfers of the tokens correspond to updates in the ownership ledger 114 and areused as the basis for the proportional interest calculations described herein.

[0023] Complementing the ownership ledger is the allocation engine, operable to calculate proportional interest payments based on the exact duration of ownership of the fractional ownership units.

[0024] A transaction module functions as an electronic trading platform configured to match and execute one or more of an order to buy a fractional ownership unit and an order to sell the fractional ownership unit. The transaction module facilitates order execution and tracking. Upon trade execution, the transaction module updates the ownership ledger in real time, maintaining synchronization and data integrity across all system components. Moreover, the transaction module is adapted to support off-exchange transactions, enabling direct peer-to-peer trades and facilitating multi-party customizable transaction executions without relying on centralized exchange platforms.

[0025] The disbursement system is configured to securely and electronically disburse calculated interest payments to investors or their designated financial intermediaries. Alternatively, interest payments can be sent by non-electronic payment methods.

[0026] The system is configured to process one or more of a fixed interest rate transaction and a variable interest rate transaction. These transactions can occur on-exchange or off-exchange.

[0027] In a fixed interest rate transaction, the buyer and the seller have an identical interest rate that applies uniformly to both parties for the duration of the transaction. This means that the interest earned or paid is consistent and predetermined.

[0028] Variable interest rate transactions permit the buyer and the seller to earn interest at different rates, as specified in the negotiated terms of the transaction. An example of a variable interest rate transaction is a repurchase agreement (repo) or a reverse repurchase agreement. In a repurchase transaction, the seller transfers ownership of securities to the buyer with an agreement to repurchase the same securities at a later date. Despite the transfer of ownership, the seller may continue to earn interest on the securities during the interim period. For instance, if the underlying securities yield an annual interest rate of 5%, the buyer may require a return at a rate of 3% annualized interest. Consequently, the seller would earn the remaining 2% interest, even though they do not hold the securities during that period. The system records the specific terms agreed upon by the parties and allocates the interest accordingly, allowing for various interest rate arrangements as per the negotiated agreement. When the seller repurchases the securities, the selleris not required to pay the buyer accrued interest. The buyer will be compensated when the securities issue their interest payment.

[0029] The system supports on-exchange transactions by using the transaction module in combination with an order matching engine. The transaction module manages the submission, processing, and recording of orders, while the order matching engine automatically pairs compatible buy and sell orders based on predefined parameters. This integration enables efficient execution of transactions on the on-exchange platform, ensuring that orders are matched and settled.

[0030] The system also supports off-exchange transactions, allowing investors to engage in direct peer-to-peer transactions without the need for centralized exchange platforms. The embodiments of the invention enable direct transactions between parties without the need for intermediaries, allowing for seamless and autonomous trading activities. The system manages the negotiation and formulation of agreements among multiple stakeholders, ensuring that all parties' terms and conditions are accurately captured and agreed upon and verifies the authenticity and integrity of off-exchange and multi-party variable interest rate transactions before they are recorded in the ownership ledger. The transaction module securely verifies and validates each transaction, maintaining the integrity and compliance of off-exchange and multi-party transactions. These components work together to manage and validate transactions securely and efficiently. Additionally, the system facilitates multi-party variable interest allocations using a proportional allocation method, enabling interest payments to be distributed according to specific agreements and negotiated terms among multiple stakeholders involved in a transaction.

[0031] The system supports a market structure that accommodates various trading models, including direct participant-to-participant transactions and multi-party interactions. It is compatible with execution management systems (EMS) and order management systems (OMS), ensuring that financial institutions can integrate the platform into their existing trading workflows. This integration allows market participants to manage orders, execute trades, and synchronize ownership data in real time. By leveraging the Application Programming Interface (API) and other connectivity options, the system allows interaction with both internal and external platforms.

[0032] The embodiments of the invention facilitate the tracking and recording of security ownership transactions on-exchange and off-exchange throughout the payment period, capture the interest or income payments made by the securities held in the custodial entity, calculateproportional income payments payable to each investor, and initiate payments to current and previous owners of the fractional ownership units, thereby eliminating the need for security buyers to pay accrued interest to security sellers at the time of purchase.

[0033] An illustrative example involving investor A and investor B engaging in a fixed interest rate transaction, further described in FIG 6: Investor A is the buyer of fixed-income securities, and investor B is the seller of these securities, such as bonds. In a prior art "last holder of record" payment system, when investor A purchases bonds from investor B, they must pay not only the market price of the bonds but also an additional $20,000 in accrued interest. This accrued interest represents the interest investor B earned from the last interest payment date up to the sale date. Consequently, investor A incurs an extra cost of $20,000, which does not provide any return and could have been used to purchase more bonds or invest in other securities. This requirement exists because the prior art system cannot facilitate interest payments to investor B when the bonds distribute their periodic interest because investor B no longer owns the securities.

[0034] Under this prior art system, investor A faces increased transaction costs, reducing their available capital for further investments and potentially diminishing their overall returns. Meanwhile, investor B receives the accrued interest directly from investor A at the time of sale, which may not align with the bond's contractual interest payment schedule.

[0035] In contrast, the embodiments of the invention offer a more efficient and equitable solution. When investor A purchases the bonds from investor B using this system, they pay only the market price of the bonds without the additional $20,000 in accrued interest. The ownership ledger records the transfer of ownership in real-time, accurately reflecting investor A as the new holder of the bonds.

[0036] The allocation engine then calculates the exact duration of ownership for each bond held by investor A within the designated interest payment period. Instead of requiring investor A to pay the accrued interest upfront, the system ensures that interest payments are proportionally distributed based on the actual time investor A and investor B holds the bonds. As a result, investor A retains the full $20,000 that would have otherwise been paid to investor B as accrued interest, allowing investor A to invest this amount in additional bonds or other financial instruments to enhance their investment portfolio's potential returns.

[0037] Simultaneously, the system ensures that investor B is compensated for the accrued interest earned during their period of ownership. When the bond issues its next interest payment,the complete security-holder record maintained by the ownership ledger accurately reflects investor B's entitlement to the $20,000 of accrued interest corresponding to their holding period. This interest payment is disbursed to investor B in accordance with the bond's contractual obligations, without necessitating a direct transfer of funds from investor A at the time of sale.

[0038] An illustrative example of an off-exchange variable interest rate transaction involving Party X and Party Y further described in FIG 7: The underlying security being sold generates a total interest payment of $100,000 for a 30-day ownership period. Party X has an agreed-upon annualized interest rate of 5%, while Party Y has an annualized interest rate of 3%. The total annualized interest rate of the underlying security is 8%.

[0039] The system calculates the proportional interest allocation ratio for each party by dividing their respective interest rates by the total interest rate. For Party X, the ratio is 5% divided by 8%, resulting in 0.625. For Party Y, the ratio is 3% divided by 8%, resulting in 0.375. Subsequently, the interest allocated to each party is calculated by multiplying their respective ratios by the total interest payment. Party X receives 0.625 multiplied by $100,000, which equals $62,500, while Party Y receives 0.375 multiplied by $100,000, which equals $37,500. This allocation ensures that each party receives interest payments proportional to their agreed-upon annualized interest rates, maintaining fairness and ensuring that the total interest distributed matches the interest earned from the underlying security. Importantly, the combined annualized interest rates for the parties of a transaction do not exceed the annualized interest rate of the underlying security. If the annualized interest rates of the parties were to exceed the underlying security's rate, the system can adjust the repurchase price of the securities accordingly to account for the excess interest amount, thereby preserving the integrity of the interest distribution mechanism.

[0040] FIG. 1 illustrates a non-limiting example block diagram of a modular computer system 100, which interacts with various internal and external components to manage fixed- income securities and facilitate interest payments. The system interfaces with a custodial entity, investor devices, and other external components via a network. FIG. 2 illustrates an example workflow performed by the transaction module, ownership ledger, and allocation engine, showcasing the steps involved from placing an order to distributing interest payments. FIG. 3 provides a detailed view of the transaction module, while FIG. 4 shows the ownership ledger and its role in recording validated transaction data. FIG. 5 illustrates the allocation engine, which calculates and allocatesinterest payments based on investor ownership. FIGS. 6 and 7 depict example methods for fixed and variable interest distribution, respectively, highlighting how interest payments are calculated and distributed according to ownership details and negotiated terms.

[0041] FIG. 1 shows a block diagram of an exemplary modular computer system 100 configured to interact with both internal and external components for managing the proportional interest distribution system. The system 100 interfaces with external entities, including a custodial entity 126 and various investor devices, via an external network 118 (e.g., the Internet). The components and interactions depicted in FIG. 1 provide a comprehensive framework for processing and distributing interest payments, maintaining ownership records, and enabling seamless investor engagement.

[0042] System 100 includes a centralized processing system 104 that is responsible for executing the primary computational tasks within the overall system architecture. The processing system 104 is coupled to RAM 108, and volatile or non-volatile storage 106, both of which are responsible for temporarily and permanently storing electronic data, respectively. The processing system 104 connects and enables communication and control with the internal network 110 and with the external components of the system using the network interface 102.

[0043] System 100 is further divided into several functional sub-systems housed on an internal network 110 necessary for transferring data and instructions within the system. These subsystems include the allocation engine 116, ownership ledger 114, and transaction module 112, each of which plays a critical role in ensuring the proper functioning of the overall system. The allocation engine 116 is a fully functional computing system configured to calculate and allocate interest payments to investors based on the duration of ownership of fixed-income securities. The ownership ledger 114 is configured to maintain detailed records of each investor's holdings, including information on fractional ownership of fixed-income securities. The transaction module 112 is responsible for processing transactions involving the buying, selling, and transferring of ownership interests.

[0044] The custodial entity 126, positioned outside the system 100, serves as the central repository for holding fixed-income securities on behalf of investors. The custodial entity 126 also receives cash interest payments from fixed-income security issuers 124 and disburses these payments to investors through the disbursement system 128, which also falls outside system 100. The disbursement system 128 facilitates various electronic money transfer technologies to enablepayments to investor accounts, whether those accounts are held with the custodial entity 126 or with third-party custodians or other entities.

[0045] System 100 interacts with investor devices, including investor 1 device 132A and investor 2 device 132B, which are used by individual investors to access the system. Investor devices interface with the internal system via external network 118, enabling investors to interact with the system 100, monitor their holdings, execute transactions, and receive updates. Each investor account is represented as investor 1 account 130A and investor 2 account 130B, respectively. These accounts are linked to the ownership ledger 114 and allocation engine 116 to maintain up-to-date information on ownership of fixed-income securities and the real-time interest earned.

[0046] The allocation engine 116 interacts directly with the ownership ledger 114 to determine each investor's share of interest payments. The allocation engine 116 receives interest payment information 514 from the custodial entity 124 and utilizes the ownership data stored in the ownership ledger 114 to apply appropriate allocation rules to calculate distributions. Once the calculations are complete, the allocation engine 116 produces a set of payment instructions, which are then sent to the custodial entity 126. The disbursement system 128 disburses the funds to the appropriate investor accounts according to these instructions.

[0047] Ledger nodes 122 are also depicted in FIG. 1 and, optionally, serve as a distributed means of verifying and recording transactions within the ownership ledger 114 using distributed ledger technologies. These nodes help ensure data integrity and provide redundancy, supporting the reliability of the ownership records, but are not necessary for the core functionality of the system. Regulatory agencies 120 are depicted as entities that may interact with the system 100 to provide oversight, receive reports, or validate compliance with financial regulations.

[0048] External network 118 facilitates communication between system 100 and components external to the system. The network enables secure data transfer, ensuring that critical information such as ownership records, interest payment distributions, and investor instructions are properly transmitted and received.

[0049] The application programming interface (API) 134 allows third-party financial services firms, such as brokers, custodians, investment managers, and data providers, to connect with and interact with the system. This API supports integration with execution management systems (EMS) and order management systems (OMS), enabling these financial institutions to seamlesslyincorporate the platform into their existing trading workflows. By leveraging the API, market participants can manage orders, execute trades, and synchronize ownership data in real-time, facilitating efficient interactions with both internal and external platforms. Additionally, the system-generated data can be transferred to third-party data providers and made available to the public via the API, ensuring transparency and accessibility of key financial information.

[0050] FIG. 2 illustrates the workflow of the embodiments of the invention, showcasing the sequence of operations from the placement of a buy or sell order 202 to the allocation of interest payments to investors. The workflow depicts the interaction between the internal components of the system and external entities, highlighting how the system manages transactions and disbursements efficiently.

[0051] The workflow begins when a buy or sell order 202 is placed, initiating the process. This order is processed by the transaction module 112, which is responsible for executing trades and generating the data needed to update the ownership ledger 114. The transaction module 112 verifies the validity of the incoming order and facilitates the transaction accordingly.

[0052] Following the successful execution of the order, the ownership ledger 114 is updated using the data received from the transaction module 112 to reflect the new ownership details. The ownership ledger 114 maintains comprehensive records of the fractional ownership of fixed- income securities by various investors, ensuring that all transactions are accurately recorded.

[0053] The allocation engine 116 receives the ownership data from the ownership ledger 114 and the interest payment information 514 from the custodial entity 126. The allocation engine 116 then calculates the interest payment allocation based on the methods depicted in FIG 6 or FIG 7.

[0054] After performing the necessary calculations, the allocation engine 116 produces a set of payment instructions, which are sent to the custodial entity 126. The disbursement system 128 then utilizes these instructions to initiate payments to the respective investor accounts. The disbursement system 128, which operates outside system 100, is configured to handle various electronic money transfer technologies to ensure the timely distribution of payments.

[0055] The workflow concludes with the allocation of funds to investor 1 account 130A and investor 2 account 130B. These accounts are updated to reflect the interest payments received, and the investors are notified of the successful transactions.

[0056] FIG. 3 illustrates a block diagram of the transaction module 112, which is a sub-system of system 100 as described in FIG. 1. The transaction module 112 is responsible for facilitatingtrading between buyers and sellers, acting as an exchange, and creating detailed records of every trade made and validating the authenticity of trades prior to updating the ownership ledger. The transaction module 112 may function as an electronic trading, brokerage and clearing platform wherein investors place buy and sell orders for digital fractional ownership units of the fixed- income securities. It manages both on-exchange and off-exchange transactions. FIG. 3 depicts the internal components and workflow of the transaction module 112, as well as its interactions with other parts of the system and external entities.

[0057] The network interface 302 allows the transaction module 112 to communicate with other components within system 100 and with components outside the system 100 using the external network 118. This network interface 302 facilitates secure data exchange, ensuring that all trade-related information is accurately transmitted between internal components and external devices such as investor device 1 (132A) and investor device 2 (132B).

[0058] The transaction module 112 includes a processing system 304, which is configured to control the overall operations of the transaction module, coordinating the various tasks required for trade execution and record maintenance. The processing system 304 is coupled with both storage 306 (which may be volatile or non-volatile) and RAM 308, which store data and instructions required for processing trades. The internal network 310 connects these components, enabling efficient data transfer and communication within the transaction module 112.

[0059] The workflow within the transaction module 112 begins when a trade is processed, either on-exchange or off-exchange. For on-exchange trades, the order matching engine 312 is utilized to match buy and sell orders. The order matching engine 312 ensures that all orders are processed according to predefined matching rules, facilitating efficient and accurate trade execution.

[0060] For off-exchange trades, transactions are classified as fixed interest rate transactions and variable interest rate transactions. If the trade is a fixed interest rate transaction, it is directed to the time stamping module 316, which records the time at which the transaction was executed and other trade- related information. The time stamping module 316 is critical for maintaining an accurate record of the transaction timeline, ensuring compliance with regulatory requirements, and supporting audit processes. The Time-Stamping Module is configured to produce timestamps using any reasonable unit of time, including but not limited to milliseconds, seconds, minutes, hours, or other suitable time increments. This flexibility ensures the chronological accuracy andintegrity of transaction records, enabling reliable duration tracking for proportional interest calculations and maintaining consistency across distributed systems. The time stamping Module 316 ensures that the duration of ownership for each digital fractional ownership unit is accurately recorded. This precise timing is critical for the subsequent calculation of proportional interest payments by the allocation engine 116.

[0061] If the trade is a variable interest rate transaction, it is processed by the variable interest rate processor 314. This processor compiles and stores all of the custom terms of the transaction, including variable interest rates and other relevant terms, ensuring that all transaction terms are properly processed and recorded. An example of such a transaction is a repo transaction, where the seller may continue to earn interest even after transferring ownership of the security. The variable interest rate processor 314 ensures that all relevant terms of the transaction are properly processed and recorded. When the variable interest rate processor finishes processing and validating the transaction it is sent to the time stamping module 316 to record the time of the transaction.

[0062] Once the necessary processing is completed for on-exchange transactions, off- exchange transactions and for variable interest rate transactions, the transaction details are sent to the order confirmation module 318, which generates and transmits a trade confirmation message to the involved parties and stores the validated transaction data that will be transmitted to the ownership ledger 114. This confirmation is communicated to the respective investor devices (132A and 132B) through the network interface 302, and the external network 118, providing investors with a record of the executed transaction.

[0063] FIG. 4 illustrates a block diagram of the ownership ledger 114, which is a sub-system of system 100 as described in FIG. 1. The ownership ledger 114 is responsible for maintaining records of validated transaction data, ensuring that ownership information for fixed-income securities is accurately stored and readily accessible. FIG. 4 depicts the internal components and workflow of the ownership ledger 114, as well as its interactions with other components of system 100.

[0064] The network interface 402 allows the ownership ledger 114 to communicate with other components within system 100, particularly for receiving validated transaction data from the transaction module 112. This data, referred to as transaction module data 412, is transferred securely through the network interface 402, allowing the ownership ledger to retrieve the necessaryinformation for updating ownership records.

[0065] The ownership ledger 114 includes a processing system 404, which coordinates and manages all internal operations. The processing system 404 is coupled with storage 406 (which may be volatile or non-volatile) and RAM 408 to store data and execute instructions required for maintaining the ownership records. The internal network 410 connects these components, facilitating efficient communication and data transfer within the ownership ledger sub-system.

[0066] The transaction module 112 communicates with the ownership ledger 114 by sending trade data to the appropriate ledger technology layer, depending on the system's configuration and the ledger technology in use. Once the transaction module data 412 is received from the transaction module 112 by the ownership ledger 114, it is processed by the ledger technologies layer 414. The ledger technologies layer 414 is responsible for processing the transaction data and integrating it into the ownership records. The ledger technologies layer 414 includes several types of ledger systems, including but not limited to tax lot methodologies, digital transaction records, digital ledgers, and blockchain-based systems. Each of these ledger technologies is represented as a distinct layer within the ownership ledger 114, indicating the system's capability to utilize any of these technologies interchangeably or simultaneously. If distributed ledger technology is utilized, the transaction module data 412 is sent via the external network 118 to the ledger nodes 122 for distributed storage. This ensures that ownership information is maintained in a decentralized manner.

[0067] In addition to the use of distributed ledger technology, the transaction module data 412 is also stored in the ownership records database 416. The ownership records database 416 is a central repository that holds detailed ownership information for all investors, ensuring that accurate records of each investor's holdings and custom terms of a transaction are maintained. The ownership records database 416 aggregates data from the various ledger technologies, thereby ensuring a unified and comprehensive view of ownership statuses. The storage of transaction data within the ownership records database 416 allows for quick and reliable retrieval of ownership information when required.

[0068] A significant enhancement of the ownership records database 416 is its capability to assemble and maintain a complete security-holder record. Unlike prior art systems that rely solely on the last holder of record, the complete security-holder record captures and stores the entire history of each investor's ownership transactions that take place within the system. Thiscomprehensive record ensures that every change in ownership is meticulously documented, providing an immutable and transparent ledger that enhances transparency, accountability, and traceability within the fixed-income securities market. By maintaining a complete security-holder record, the system eliminates ambiguities and discrepancies associated with fragmented ownership data, thereby promoting greater trust and reliability among market participants.

[0069] FIG. 5 illustrates a block diagram of the allocation engine 116, which is a sub-system of system 100 as described in FIG. 1. The allocation engine 116 is responsible for calculating interest payments to investors based on their ownership of fixed-income securities, using proportional interest distribution methods. FIG. 5 depicts the internal components and workflow of the allocation engine 116, as well as its interactions with other components within system 100 and external entities.

[0070] The allocation engine's network interface 502 enables the allocation engine 116 to communicate with other components within system 100, as well as external entities through the external network 118. This network interface facilitates the retrieval of critical information needed for interest calculations, ensuring that data is securely exchanged with the necessary sub-systems.

[0071] The allocation engine 116 includes a processing system 504, which is configured to control the overall operations of the allocation engine, managing the processes required for interest calculation and instruction generation. The processing system 504 is coupled with both storage 506 (which may be volatile or non-volatile) and RAM 508, which stores data and execute instructions required for performing the calculations. The internal network 510 connects system components, allowing for efficient communication and data transfer within the allocation engine 116.

[0072] The workflow within the allocation engine 116 begins with the retrieval of ownership data 512. This data is retrieved from the ownership ledger 114 and the ledger nodes 122 through the external network 118. The ownership data 512 includes information about the fractional ownership of fixed-income securities by various investors, providing the necessary basis for calculating interest payments. The ownership data 512 encompasses comprehensive information, which includes, but is not limited to each investor's holdings, including the number of digital fractional ownership units owned, the initial purchase price, repurchase price, agreed-upon annualized interest rates, duration of the transaction, account data, investor data, fixed-income security data and specific timestamps marking the initiation and termination of ownership for eachunit.

[0073] The allocation engine 116 also retrieves interest payment information 514 from the custodial entity 126 via the external network 118. The interest payment information 514 represents the cash interest payments received from fixed-income security issuers, which are to be distributed among the investors based on their respective ownership.

[0074] The calculation engine 516 is responsible for processing the ownership data 512 and interest payment information 514. Using the proportional interest distribution methods described in FIG. 6 and FIG. 7, the calculation engine 516 computes the interest payments that each investor is entitled to receive using the duration of ownership and the specific terms associated with each fixed-income security transaction.

[0075] Once the interest payments are computed, the calculation engine 516 creates interest payment instructions 518. These instructions detail how the calculated interest payments should be disbursed to the respective investors. The interest payment instructions 518 are subsequently sent to the ownership ledger 114 through the network interface 502, where they are stored for future reference and use. Additionally, the interest payment instructions 518 are transmitted to the custodial entity 126 through the network interface 502 and the external network 118.

[0076] In some embodiments, each interest payment instruction 518 is implemented as a structured, machine-readable message that specifies, for each investor, at least: (i) an identifier of the fixed-income security or other underlying financial instrument, (ii) an identifier of the investor or target account, (iii) an identifier of the relevant payment period, and (iv) the computed monetary amount of interest to be disbursed to that investor for the period. The message format allows the custodial entity 126 and disbursement system 128 to automatically apply the instruction to update their internal ledgers and effect the corresponding payments without manual re-calculation of the interest amounts.

[0077] The custodial entity 126 utilizes the interest payment instructions 518 to facilitate the distribution of interest payments to the appropriate investor accounts. Specifically, the custodial entity 126 uses the disbursement system 128, which transfers the interest payments to investor 1 account 130A and investor 2 account 130B.

[0078] FIG. 6: Proportional Interest Distribution Method

[0079] Figure 6 is a flow chart of a method 600 for proportionally distributing interest payments to investors engaging in fixed interest rate transactions. The order of the steps in themethod 600 is not constrained to that shown in Figure 6 or described in the following discussion. Several of the steps could occur in a different order without affecting the final result.

[0080] In step 605, the allocation engine retrieves ownership data from the ownership ledger. Block 605 then transfers control to block 610.

[0081] In step 610, the allocation engine acquires interest payment information from the custodial entity. Block 610 then transfers control to block 615.

[0082] In step 615, utilizing the interest payment information, the allocation engine calculates the interest payable to each fractional ownership unit by dividing the total interest payable to one whole unit of the security by the fractionalization factor of the security. Block 615 then transfers control to block 620.

[0083] In step 620, the allocation engine aggregates the total number of fractional ownership units of a security held by each investor for the designated payment period. Block 620 then transfers control to block 625.

[0084] In step 625, using the ownership data, the allocation engine determines the proportion of the payment period during which each fractional ownership unit was held by dividing the duration of ownership by the total length of the payment period. Block 625 then transfers control to block 630.

[0085] In step 630, the allocation engine computes the interest earned by each fractional ownership unit owned by an investor for the payment period by multiplying the determined proportion by the interest payable to each fractional ownership unit. Block 630 then transfers control to block 635.

[0086] In step 635, the allocation engine consolidates the interest earned by each fractional ownership unit held by an investor to generate interest payment instructions for the investor. Block 635 then transfers control to block 640.

[0087] In step 640, the allocation engine transmits the interest payment instructions to the custodial entity. Block 640 then transfers control to block 645.

[0088] In step 645, using the transmitted interest payment instructions, the custodial entity disburses interest payments to investor accounts through the disbursement system. Block 645 then terminates the process.

[0089] Figure 7 is a flow chart of a method 700 for proportionally distributing interest for variable interest rate transactions. The order of the steps in the method 700 is not constrained tothat shown in Figure 7 or described in the following discussion. Several of the steps could occur in a different order without affecting the final result. In certain embodiments of the invention investors enter into repurchase agreements or reverse repurchase agreements. The parties of a repurchase agreement may agree to share in the interest earned by a security. In certain embodiments, variable-interest transactions (e.g., repo) specify, for each party, an annualized interest rate and an allocation rule; the allocation engine computes each party’s payout by time-weighted ownership of fractional units and by applying the agreed proportional interest allocation ratio described with reference to FIG. 7

[0090] In step 705, one or more investors negotiate and establish customized payment instructions, defining annualized interest rates and other agreed-upon transaction terms and enter into a transaction. Block 705 then transfers control to block 710.

[0091] In step 710, the allocation engine retrieves ownership data from the ownership ledger. Block 710 then transfers control to block 715.

[0092] In step 715, the allocation engine acquires interest payment information from the custodial entity. Block 715 then transfers control to block 720.

[0093] In step 720, using the acquired interest payment information, the allocation engine computes the interest payable to each fractional ownership unit by dividing the total interest payable to one whole unit of the security by the fractionalization factor of the security. Block 720 then transfers control to block 725.

[0094] In step 725, the allocation engine aggregates the total number of fractional ownership units of a security held by each investor for the designated payment period. Block 725 then transfers control to block 730.

[0095] In step 730, using the ownership data, the allocation engine computes the proportion of the payment period during which each fractional ownership unit was held by dividing the duration of ownership by the total length of the payment period. Block 730 then transfers control to block 735.

[0096] In step 735, the allocation engine calculates the interest earned by each fractional ownership unit owned by an investor for the payment period by multiplying the computed proportion of the payment period by the interest payable to each fractional ownership unit. Block 735 then transfers control to block 740.

[0097] In step 740, the allocation engine calculates each investor's interest payment bydetermining their proportional interest allocation ratio. The proportional interest allocation ratio is computed by dividing each investor's individual annualized interest rate by the total annualized interest rate of the underlying security. The resulting ratio is then multiplied by the total interest payable to each fractional ownership unit to calculate the interest payment earned by each investor. Block 740 then transfers control to block 745.

[0098] In step 745, for every fractional ownership unit, the allocation engine compiles the interest earned by each investor holding the unit and creates individual interest payment instructions. Block 745 then transfers control to block 750.

[0099] In step 750, the allocation engine transmits the interest payment instructions to the custodial entity. Block 750 then transfers control to block 755.

[0100] In step 755, using the transmitted interest payment instructions, the custodial entity disburses interest payments to investor accounts through the disbursement system. Block 755 then terminates the process.TECHNICAL ADVANTAGES OF DESCRIBED SUBJECT MATTER

[0101] The embodiments of the invention introduce a transformative advancement in the management and transaction of fixed-income securities by eliminating the requirement for buyers to pay sellers accrued interest at the time of purchase. In both fixed-income and repurchase (repo) markets, the necessity for buyers to compensate sellers for the interest that has accrued on a security since the last coupon payment has resulted in significant capital inefficiencies. Specifically, this practice immobilizes vast amounts of capital, in transactions that functionally act as zero-interest loans between buyers and sellers. This immobilization restricts market participants from deploying these funds into higher-yielding investments or other productive financial activities, thereby hindering overall market efficiency and economic growth.

[0102] By removing the obligation to account for and transfer accrued interest during fixed- income transactions, the embodiments of the invention liberates a substantial volume of capital, allowing it to remain within the financial system and be reinvested to generate returns. This elimination of accrued interest payments yields broad and multifaceted benefits across various market participants and financial instruments. In the context of the repo markets, which are pivotal for global financial liquidity, participants such as banks, governments, investment funds, and institutional investors often need to secure additional funds by borrowing money to cover accrued interest payments when engaging in repo transactions. This requirement not only elevatesfinancing costs for these institutions but also diminishes the overall efficiency of the repo market.

[0103] Furthermore, the elimination of accrued interest payments in repo markets directly contributes to lowering the cost of capital for governments and banks. By removing the need for additional borrowing to cover accrued interest, these institutions can secure funding at reduced costs. The resultant lower cost of capital can be passed along to retail and institutional borrowers in the form of lower interest rates on loans. This reduction in borrowing costs can have a profound impact on financial markets and the broader economy by making loans more affordable, stimulating investment, and fostering economic growth.

[0104] The removal of accrued interest obligations delivers several key technical improvements to the repo and fixed-income markets. First, it reduces financing costs for participants by obviating the need for additional borrowing to cover interest payments, thereby enhancing the profitability and attractiveness of repo transactions. Second, it enhances collateral efficiency by freeing up collateral previously tied to interest payments, enabling its redeployment in a more efficient manner that supports a higher volume of transactions and contributes to increased market liquidity. Third, it simplifies operational processes by reducing the complexity associated with managing and settling interest payments, thereby streamlining collateral management, minimizing the potential for operational errors, and accelerating transaction settlements.

[0105] Another technical advantage of the embodiments of the invention is its ability to assemble and maintain a complete security-holder record through the ownership ledger. Unlike prior art systems that rely on last holder of record payments, the ownership ledger provides a comprehensive and immutable record of all ownership and transactions. This ensures that the entire history of an investor's holdings is accurately captured and readily accessible, enhancing transparency, accountability, and traceability within the fixed-income securities market. By maintaining a complete security-holder record, the system eliminates ambiguities and discrepancies associated with fragmented ownership data, thereby promoting greater trust and reliability among market participants.

[0106] Beyond the immediate benefits to the repurchase markets, the technical advancements of this invention extend to the broader fixed-income markets, particularly in the secondary trading of bonds. By removing accrued interest payments, transaction costs are significantly reduced, and market liquidity is enhanced. This reduction in friction facilitates faster transaction times becausecalculating accrued interest due at the time of purchase is no longer necessary, lowers the costs associated with financing and executing trades, and simplifies the settlement process by eliminating the need for additional calculations, negotiations, and cash flows related to interest payments. Consequently, both large institutional investors and smaller investors stand to benefit from lower transaction costs and increased access to fixed-income markets, fostering a more inclusive and efficient financial environment.

[0107] Governments, banks, corporations, and investors alike benefit from the enhanced efficiency and reduced costs engendered by this invention. Governments can manage debt issuance more effectively and potentially secure lower borrowing costs, while banks can optimize their funding strategies, reduce operational risks, and enhance liquidity management. Corporations gain access to capital markets with lower transaction costs, supporting their financing strategies and growth initiatives. Investors, both institutional and retail, benefit from reduced financing burdens and the ability to deploy capital more effectively into higher-yielding or more productive investments, thereby enhancing overall returns.

[0108] A pivotal technical advantage lies in the integration of the ownership ledger and the allocation engine. The ownership ledger is configured to accurately record and track fractional ownership of fixed-income securities in real time, utilizing various ledger technologies such as tax lot methodologies, digital transaction records, digital ledgers, and blockchain systems. This flexibility allows for seamless adaptation to different technological environments and regulatory requirements, ensuring precise ownership tracking and data integrity. The allocation engine operates as the computational core of the system, calculating proportional interest payments based on the exact duration of ownership of digital fractional ownership units. By employing advanced computational algorithms and supporting multiple digital ownership record types and ledger technologies, the allocation engine ensures accurate and fair interest distribution. It is capable of handling complex scenarios involving fractional holdings, multiple transactions, and corporate actions

[0109] Because investors earn interest in real time, the system transmits the earned but not yet paid interest to investors and financial services firms using the application programming interface and external network. This enables investors to monitor their accrued interest instantaneously and potentially utilize it to make additional purchases in real time using margin, depending on their account configurations. This real-time interest earning and utilization featureenhances investor engagement and capital deployment efficiency, providing comprehensive access to investment performance data and facilitating informed decision-making. Being able to leverage their earned, but not yet paid interest, allows investors to increase their compound annual returns.

[0110] Moreover, the system's facilitation of off-exchange transactions introduces additional technical advantages. By enabling peer-to-peer and multi-party variable interest rate transactions outside exchange platforms, the system enhances market flexibility and accessibility.

[0111] The modular and flexible design of the system's architecture is another significant technical advantage. Components such as the ownership ledger, allocation engine, transaction module, and disbursement system are designed to function cohesively while maintaining independence. This modularity allows for independent operation and implementation using diverse technologies without affecting overall functionality. The system supports multiple ledger technologies, enabling seamless transitions or upgrades from previous systems to blockchainbased systems as needed. This flexibility ensures scalability and adaptability, accommodating future technological advancements and integration with emerging technologies such as the Internet of Things (loT) and artificial intelligence (Al) enhancements.

[0112] Furthermore, embodiments of the invention improve the speed and efficiency of trade execution and settlement. The transaction module facilitates efficient execution of buy and sell orders for on-exchange transactions using an Order Matching Engine, thereby enhancing market liquidity and responsiveness by minimizing execution latency. For off-exchange transactions, the transaction module executes trades based on agreed-upon terms without requiring the Order Matching Engine, simplifying the process and reducing system complexity. Upon trade execution, ownership records are updated in real-time within the ownership ledger, ensuring synchronization and immediate reflection of ownership changes. This real-time processing reduces settlement times compared to prior art systems, which often involve delays due to intermediary processes.

[0113] The disbursement system enhances transaction security and compliance by implementing robust security measures such as multi-factor authentication, end-to-end encryption, and intrusion detection systems. These measures safeguard financial transactions and protect sensitive data, ensuring compliance with Anti -Money Laundering (AML) and Know Your Customer (KYC) regulations. Additionally, the disbursement system maintains comprehensive audit trails and generates detailed reports for regulatory compliance, ensuring transparency and adherence to financial regulations.

[0114] Investors can engage in direct trades that better align with their investment preferences and strategies, without being constrained by the operational limitations of centralized exchanges. This capability supports a more diverse and dynamic financial market, fostering innovation and competition among market participants.

[0115] By addressing the inherent inefficiencies of prior art fixed-income markets, the embodiments of the invention transform the operational dynamics of fixed-income securities markets. It offers a scalable, efficient, and equitable solution for interest payment allocation, thereby enhancing market liquidity, reducing transaction and financing costs, simplifying operational processes, and mitigating financial risks. These improvements collectively foster a more seamless, cost-effective, and capital-efficient framework for managing fixed-income transactions, promoting greater liquidity, reducing cost burdens on market participants, and enabling more effective capital deployment.

[0116] In summary, the elimination of accrued interest payments in fixed-income and repo market transactions constitutes a significant technical innovation that addresses and rectifies the inherent inefficiencies and technical problems of prior systems. By enabling the release of large amounts of capital that would otherwise remain immobilized in accrued-interest components of trades, the described system enhances market liquidity, reduces transaction and financing costs, and simplifies operational processes executed by the trading, ledger, and disbursement components. The consequent lowering of the cost of capital for governments and banks allows these savings to be passed on to retail and institutional borrowers in the form of lower interest rates. This reduction in borrowing costs can have a profound impact on financial markets and the broader economy by making loans more affordable, stimulating investment, and fostering economic growth. The integration of real-time ledger technologies and adaptive algorithms not only ensures precise interest distribution but also significantly improves the security, transparency, and operational effectiveness of financial transactions. These technical advancements establish the embodiments of the invention as a groundbreaking innovation in the management of fixed-income securities, offering substantial benefits to governments, banks, corporations, and investors alike.

[0117] Although the embodiments of the invention have been primarily described in the context of fixed-income securities, the system and method disclosed herein are equally applicable to any financial instrument or contractual arrangement that produces periodic or event-driven income payments, including but not limited to, equity securities, fixed annuities, investment fundunits, floating rate notes, asset-backed securities, mortgage-backed securities, hybrid securities, commercial paper, certificates of deposit, income trusts, structured notes, loans, swaps, revenue sharing interests, royalty interests and preferred equity. In such alternative embodiments, these securities can be divided into digital fractional ownership units analogous to fixed-income securities, enabling the proportional distribution of dividends, capital gains, or other equity-based income, cash flows, or distributions based on the precise duration of ownership. The embodiments of the invention allow financial instruments to declare daily dividends and capital gains, thus removing accrued income from the security’s value. The embodiments of the invention thereby extend to a broader range of financial instruments and investment vehicles while retaining the same technical mechanisms for time-stamped ownership tracking and proportional allocation of income.

[0118] In various embodiments, the functionality of the allocation engine 116, ownership ledger 114, transaction module 112, and disbursement system 128 is implemented as program instructions stored on one or more non-transitory computer-readable media and executed by one or more processors. When executed, the program instructions cause the processors to perform the methods described herein, including the steps illustrated in FIGS. 6 and 7, such as retrieving ownership data 512 from the ownership ledger 114, computing proportional interest amounts based on time-stamped transaction records, generating interest payment instructions 518, and transmitting those instructions over the external network 118 to the custodial entity 126 and investor devices 132A and 132B.

Claims

CLAIMSWhat is claimed is:

1. A computer-implemented method for allocating income payments associated with a financial instrument that produces income payments, the method being performed by one or more processors of a modular computer system (100) comprising an ownership ledger (114) and an allocation engine (116), the method comprising: receiving trade data representing buy and sell transactions of digital fractional ownership units of the financial instrument, the financial instrument being divisible into the digital fractional ownership units according to a fractionalization factor that specifies a number of the digital fractional ownership units corresponding to one whole unit of the financial instrument; maintaining, in the ownership ledger (114), ownership records for the digital fractional ownership units, each ownership record comprising at least: an identifier of an investor or of an account associated with the investor; an identifier of the financial instrument; a quantity of the digital fractional ownership units; and timestamp data comprising a start timestamp indicating when ownership of the quantity of the digital fractional ownership units by the investor begins and an end timestamp indicating when ownership of the quantity of the digital fractional ownership units by the investor ends; for a payment period associated with the financial instrument, retrieving, by the allocation engine (116) from the ownership ledger (114), ownership data (512) comprising the ownership records and the timestamp data corresponding to the payment period; for the payment period, retrieving, by the allocation engine (116) from a custodial entity (126) that holds the financial instrument, income payment information (514) representing an amount of income payable to one whole unit of the financial instrument for the payment period; computing, by the allocation engine (116), an income amount per digital fractional ownership unit by dividing the amount of income payable to the one whole unit of the financial instrument by the fractionalization factor; for each of the digital fractional ownership units and for each investor that held that digital fractional ownership unit during the payment period, determining, from the timestamp data in the ownership data (512), a duration of ownership of that digital fractional ownership unit by that investor within the payment period, computing a proportion of the payment period duringwhich that investor held that digital fractional ownership unit as a ratio of the duration of ownership to a length of the payment period, and computing a proportional income amount for that digital fractional ownership unit and that investor as a product of the proportion of the payment period and the income amount per digital fractional ownership unit; for each investor, aggregating, by the allocation engine (116), the proportional income amounts computed for the digital fractional ownership units held by that investor during the payment period to obtain a total income payment amount for the investor for the payment period; generating, by the allocation engine (116), for each investor, an income payment instruction (518) implemented as a structured, machine-readable message specifying at least: the identifier of the financial instrument; the identifier of the investor or of the account associated with the investor; an identifier of the payment period; and the total income payment amount for the investor for the payment period; and transmitting the income payment instructions (518) over an external network (118) to the custodial entity (126) for consumption by a disbursement system (128) associated with the custodial entity (126), the income payment instructions (518) including sufficient information for the disbursement system (128) to update internal ledgers of investor accounts and to electronically disburse the total income payment amounts to the investor accounts without requiring manual recalculation of the total income payment amounts at the disbursement system (128).

2. The method of claim 1 , wherein maintaining the ownership records in the ownership ledger (114) comprises operating, by the modular computer system (100), a ledger technologies layer (414) of the ownership ledger (114) that processes the trade data and stores the ownership records using one or more ledger technologies selected from a tax lot methodology, a digital transaction record, a digital ledger and a blockchain-based system.

3. The method of claim 1, wherein the ownership ledger (114) comprises an ownership records database (416), and maintaining the ownership records in the ownership ledger (114) comprises assembling and maintaining, in the ownership records database (416), a complete security-holder record that stores, for each financial instrument managed by the modular computer system (100), an entire history of ownership transactions for each investor, and wherein retrieving the ownership data (512) for the payment period comprises selecting, from thecomplete security-holder record, ownership records having timestamp data corresponding to the payment period.

4. The method of claim 1, wherein the digital fractional ownership units are represented as digital tokens recorded on a blockchain-based ledger maintained by a plurality of ledger nodes (122), and wherein maintaining the ownership records in the ownership ledger (114) comprises recording transfers of the digital tokens on the blockchain-based ledger, the transfers corresponding to updates to the ownership records in the ownership ledger (114) that are used as a basis for computing the proportional interest amounts in the method of claim 1.

5. The method of claim 1, wherein the modular computer system (100) further comprises a time-stamping module (316), and maintaining the ownership records in the ownership ledger (114) comprises, for each of the buy and sell transactions represented by the trade data, generating, by the time-stamping module (316) at a time of execution of the transaction, a timestamp that is stored as the start timestamp or the end timestamp in the timestamp data for a corresponding quantity of the digital fractional ownership units in the ownership records in the ownership ledger (114).

6. The method of claim 5, wherein the time-stamping module (316) is configured to generate the timestamp data using time units including milliseconds, seconds, minutes, hours or days and optionally other time increments, for use in determining the durations of ownership employed in the proportional interest calculations performed by the allocation engine (116).

7. The method of claim 1, wherein the trade data further represent a variable interest rate transaction in which at least a first investor and a second investor specify respective annualized interest rates, and the method further comprises: storing, in association with the ownership records in the ownership ledger (114), the annualized interest rate specified for each of the first investor and the second investor; computing, for each of the first investor and the second investor, a proportional interest allocation ratio equal to the annualized interest rate specified for that investor divided by a total annualized interest rate of the financial instrument; andfor each of the digital fractional ownership units that is subject to the variable interest rate transaction and for each of the first investor and the second investor, computing a variable-rate interest amount as a product of the proportional interest allocation ratio for that investor, the interest amount per digital fractional ownership unit and the proportion of the payment period during which that investor is recorded in the ownership ledger (114) as holding that digital fractional ownership unit, and using the variable-rate interest amounts as the proportional interest amounts that are aggregated in the aggregating step of claim 1 to obtain the total interest payment amount for each of the first investor and the second investor.

8. The method of claim 7, wherein the annualized interest rates specified for the investors in the variable interest rate transaction are selected such that a sum of the annualized interest rates does not exceed an annualized interest rate of the financial instrument, and wherein, in response to determining that a set of specified annualized interest rates would cause the sum of the annualized interest rates to exceed the annualized interest rate of the financial instrument, the method further comprises adjusting a repurchase price of the financial instrument to account for an excess interest amount.

9. The method of claim 1, wherein the modular computer system (100) further comprises a transaction module (112), and wherein receiving the trade data representing the buy and sell transactions comprises receiving, by the transaction module (112), off-exchange transaction terms negotiated among a plurality of investors, the off-exchange transaction terms including, when the off-exchange transaction is a variable interest rate transaction, respective annualized interest rates specified for the plurality of investors, and the method further comprises: verifying, by the transaction module (112), authenticity and integrity of the off-exchange transaction based on the off-exchange transaction terms; and in response to successful verification, causing the ownership ledger (114) to record the off-exchange transaction as ownership records that are included in the ownership data (512) used by the allocation engine (116) to perform the proportional interest calculations and aggregation of the total interest payment amounts as recited in claim 1.

10. The method of claim 1, further comprising:for each investor, computing, by the allocation engine (116) on an ongoing basis during the payment period, an accrued but unpaid interest value derived from the ownership data (512) and the proportional interest amounts computed for the digital fractional ownership units held by the investor; and transmitting, via an application programming interface (134) over the external network (118), data representing the accrued but unpaid interest value to one or more investor devices (132A, 132B) or third-party financial services systems in real time.

11. The method of claim 1, wherein buy and sell transactions of the financial instrument that are represented by the trade data are settled without requiring a buyer of the financial instrument to pay, at a time of purchase, an accrued interest amount to a seller of the financial instrument, and wherein interest corresponding to a period of ownership of the financial instrument by the seller prior to the purchase is disbursed to the seller when the financial instrument pays an interest amount for the payment period, the disbursing being performed based on a total interest payment amount computed for the seller for the payment period and specified for the seller in an interest payment instruction (518) generated by the allocation engine (116) and transmitted to the custodial entity (126).

12. A modular computer system (100) for allocating interest payments associated with a financial instrument that produces income payments, the system comprising: one or more processors (104) and memory (106, 108) storing instructions which, when executed by the one or more processors (104), configure the one or more processors (104) to implement: an ownership ledger (114) configured to maintain ownership records for digital fractional ownership units of the financial instrument, each ownership record comprising at least: an identifier of an investor or of an account associated with the investor; an identifier of the financial instrument; a quantity of the digital fractional ownership units; and timestamp data comprising a start timestamp indicating when ownership of the quantity of the digital fractional ownership units by the investor begins and an end timestamp indicating when ownership of the quantity of the digital fractional ownership units by the investor ends; and an allocation engine (116) comprising a calculation engine (516) and configured to, for a payment period associated with the financial instrument: retrieve ownership data (512) from theownership ledger (114), the ownership data (512) comprising the ownership records and the timestamp data corresponding to the payment period; retrieve, from a custodial entity (126) that holds the financial instrument, interest payment information (514) representing an amount of interest payable to one whole unit of the financial instrument for the payment period; compute an interest amount per digital fractional ownership unit by dividing the amount of interest payable to the one whole unit of the financial instrument by a fractionalization factor that specifies a number of digital fractional ownership units corresponding to the one whole unit of the financial instrument; for each of the digital fractional ownership units and for each investor that held that digital fractional ownership unit during the payment period, determine, from the timestamp data in the ownership data (512), a duration of ownership of that digital fractional ownership unit by that investor within the payment period, compute a proportion of the payment period during which that investor held that digital fractional ownership unit as a ratio of the duration of ownership to a length of the payment period, and compute a proportional interest amount for that digital fractional ownership unit and that investor as a product of the proportion of the payment period and the interest amount per digital fractional ownership unit; for each investor, aggregate the proportional interest amounts computed for the digital fractional ownership units held by that investor during the payment period to obtain a total interest payment amount for the investor for the payment period; generate, for each investor, an interest payment instruction (518) implemented as a structured, machine-readable message specifying at least: the identifier of the financial instrument; the identifier of the investor or of the account associated with the investor; an identifier of the payment period; and the total interest payment amount for the investor for the payment period; and transmit the interest payment instructions (518) over an external network (118) to the custodial entity (126) for consumption by a disbursement system (128) associated with the custodial entity (126), the interest payment instructions (518) including sufficient information for the disbursement system (128) to update internal ledgers of investor accounts and to electronically disburse the total interest payment amounts to the investor accounts without requiring manual recalculation of the total interest payment amounts at the disbursement system (128).

13. The modular computer system (100) of claim 12, wherein the ownership ledger (114) is implemented using a distributed ledger system comprising a plurality of ledger nodes (122)interconnected via the external network (118), the ledger nodes (122) being configured to store and verify, in a blockchain-based ledger, records that represent transfers and current ownership of the digital fractional ownership units and that correspond to the ownership records maintained by the ownership ledger (114).

14. The modular computer system (100) of claim 12, wherein the ownership ledger (114) comprises an ownership records database (416), and the ownership records database (416) is configured to store, for each investor and for each digital fractional ownership unit or quantity of the digital fractional ownership units, fields including at least: a number of the digital fractional ownership units, an initial purchase price, a repurchase price, an agreed-upon annualized interest rate, a duration of a transaction, account data, investor data, fixed-income security data and timestamps marking initiation and termination of ownership, and to assemble and maintain, from the stored fields, a complete security-holder record for each financial instrument that stores an entire history of ownership transactions for each investor.

15. The modular computer system (100) of claim 12, further comprising an application programming interface (134) configured to provide, via the external network (118), to one or more investor devices (132A, 132B) or third-party financial services systems real-time data derived from the ownership ledger (114) and the allocation engine (116), the real-time data including at least: current holdings of the digital fractional ownership units for each investor and an accrued but unpaid interest value computed for each investor based on the ownership records stored in the ownership ledger (114) and the proportional interest amounts computed by the allocation engine (116).

16. The modular computer system (100) of claim 12, wherein the disbursement system (128) is configured, upon consuming the interest payment instructions (518), to authorize and execute electronic disbursements of the total interest payment amounts using multi-factor authentication and encrypted communications, to maintain audit logs of the disbursement operations, and to generate compliance information to support anti-money-laundering (AML) and know-your-customer (KYC) regulations.

17. A non- transitory computer-readable storage medium having stored thereon instructions that, when executed by one or more processors of a modular computer system (100), cause the modular computer system (100) to perform the method of claim 1.

18. The non-transitory computer- readable storage medium of claim 17, wherein the instructions, when executed by the one or more processors of the modular computer system (100), further cause the modular computer system (100) to: when the trade data represent a fixed interest rate transaction of the financial instrument, perform a proportional interest distribution sequence comprising: retrieving ownership data (512) from the ownership ledger (114) and interest payment information (514) from the custodial entity (126), computing an interest amount per digital fractional ownership unit based on a fractionalization factor and the interest payment information (514), determining, from timestamp data stored in the ownership records, durations of ownership and corresponding proportions of a payment period for digital fractional ownership units held by investors, computing proportional interest amounts for the digital fractional ownership units, aggregating the proportional interest amounts per investor to obtain total interest payment amounts for the investors for the payment period, and generating interest payment instructions (518) specifying the total interest payment amounts; and when the trade data represent a variable interest rate transaction of the financial instrument in which at least a first investor and a second investor specify respective annualized interest rates, perform a variable-interest proportional distribution sequence comprising: storing, in association with ownership records in the ownership ledger (114), the annualized interest rate specified for each investor participating in the variable interest rate transaction, computing, for each such investor, a proportional interest allocation ratio equal to the annualized interest rate specified for that investor divided by a total annualized interest rate of the financial instrument, applying the proportional interest allocation ratios to interest amounts determined from the ownership data (512) and the interest payment information (514) together with the proportions of the payment period to compute variable-rate interest amounts for the investors, and aggregating the variable-rate interest amounts to obtain total interest payment amounts for the investors.

19. A machine- readable interest payment instruction (518) for controlling a disbursement of interest associated with fractional ownership of a financial instrument that produces income payments, the interest payment instruction (518) comprising: a first field storing an identifier of a fixed-income security or other underlying financial instrument; a second field storing an identifier of an investor or of a target account associated with the investor; a third field storing an identifier of a payment period associated with the fixed-income security or other underlying financial instrument; and a fourth field storing a monetary amount of interest computed for the investor for the payment period based on ownership data (512) representing time-stamped records of digital fractional ownership units of the fixed-income security or other underlying financial instrument and a fractionalization factor that specifies a number of the digital fractional ownership units corresponding to one whole unit of the fixed-income security or other underlying financial instrument; the interest payment instruction (518) being structured as a machine-readable message for consumption by a custodial entity (126) and a disbursement system (128) to cause the disbursement system (128) to update internal ledgers of investor accounts and to electronically disburse the monetary amount of interest to the target account without recalculating the monetary amount of interest.

20. The machine-readable interest payment instruction (518) of claim 19, wherein the interest payment instruction (518) is generated by a calculation engine (516) of an allocation engine (116) of a modular computer system (100) based on ownership data (512) retrieved from an ownership ledger (114) and interest payment information (514) retrieved from a custodial entity (126), the ownership data (512) comprising time-stamped records of digital fractional ownership units of the fixed-income security or other underlying financial instrument, and the interest payment information (514) representing an amount of interest payable to one whole unit of the fixed-income security or other underlying financial instrument for the payment period.

21. The machine-readable interest payment instruction (518) of claim 19 or claim 20, wherein the interest payment instruction (518) is stored in an ownership ledger (114) of a modular computer system (100) and transmitted over an external network (118) to a custodial entity (126) that operates a disbursement system (128), the disbursement system (128) being configured to use fields of the interest payment instruction (518), including the identifier of the financial instrument, the identifier of the investor or of the target account, the identifier of the payment period and the monetary amount of interest, to update internal ledgers of investor accounts and to perform electronic transfers of the monetary amount of interest to the target account.

22. A computer-implemented method for allocating interest payments associated with a fixed-income security that produces income payments, the method being performed by one or more processors of a modular computer system (100) comprising a transaction module (112), a time-stamping module (316), an ownership ledger (114), an allocation engine (116), an application programming interface (134) and a network interface coupled to a disbursement system (128), the modular computer system (100) further interacting over an external network (118) with a custodial entity (126) and with a plurality of ledger nodes (122), the method comprising: receiving, by the transaction module (112) as an off-exchange transaction, trade data representing a variable interest rate transaction of the fixed-income security between at least a first investor and a second investor, the trade data including at least: an identifier of the fixed- income security, a quantity of digital fractional ownership units of the fixed-income security to be transferred, and respective annualized interest rates specified for the first investor and the second investor; representing, by the modular computer system (100), the fixed- income security as a plurality of the digital fractional ownership units defined by a fractionalization factor that specifies a number of the digital fractional ownership units corresponding to one whole unit of the fixed-income security, each of the digital fractional ownership units being represented as a digital token recorded on a blockchain-based ledger maintained by the plurality of ledger nodes (122); for each buy or sell transaction of the digital fractional ownership units represented by thetrade data, generating, by the time-stamping module (316) at a time of execution of the transaction, timestamp data including a start timestamp or an end timestamp using time units including milliseconds, seconds, minutes, hours or days, and storing the timestamp data in association with an investor identifier, an account identifier, the identifier of the fixed-income security and a quantity of the digital fractional ownership units in ownership records maintained by the ownership ledger (114); assembling and maintaining, in an ownership records database (416) of the ownership ledger (114), a complete security holder record that stores, for the fixed-income security, an entire history of ownership transactions for each investor, including the investor identifiers, quantities of the digital fractional ownership units and the timestamp data; settling, by the transaction module (112), the off-exchange variable interest rate transaction by updating the ownership records in the ownership ledger (114) such that a buyer of the fixed-income security is recorded as holding the quantity of the digital fractional ownership units without requiring the buyer to pay, at a time of purchase, an accrued interest amount to a seller of the fixed-income security; for a payment period associated with the fixed-income security, retrieving, by the allocation engine (116) from the ownership ledger (114), ownership data (512) comprising the ownership records from the complete security holder record and the timestamp data corresponding to the payment period; for the payment period, retrieving, by the allocation engine (116) from the custodial entity (126) that holds the fixed-income security, interest payment information (514) representing an amount of interest payable to one whole unit of the fixed-income security for the payment period; computing, by the allocation engine (116), an interest amount per digital fractional ownership unit by dividing the amount of interest payable to the one whole unit of the fixed- income security by the fractionalization factor; storing, in association with the ownership records in the ownership ledger (114), the annualized interest rate specified for each of the first investor and the second investor, and computing, for each of the first investor and the second investor, a proportional interest allocation ratio equal to the annualized interest rate specified for that investor divided by a total annualized interest rate of the fixed-income security;for each of the digital fractional ownership units that is subject to the variable interest rate transaction and for each of the first investor and the second investor, determining, from the timestamp data in the ownership data (512), a duration of ownership of that digital fractional ownership unit by that investor within the payment period, computing a proportion of the payment period during which that investor held that digital fractional ownership unit as a ratio of the duration of ownership to a length of the payment period, and computing a variable-rate interest amount as a product of the proportional interest allocation ratio for that investor, the interest amount per digital fractional ownership unit and the proportion of the payment period; for each investor, aggregating, by the allocation engine (116), variable-rate interest amounts and any fixed-rate proportional interest amounts computed for the digital fractional ownership units held by that investor during the payment period to obtain a total interest payment amount for the investor for the payment period; generating, by the allocation engine (116), for each investor, an interest payment instruction (518) implemented as a structured, machine-readable message specifying at least: the identifier of the fixed-income security; an identifier of the investor or of an account associated with the investor; an identifier of the payment period; and the total interest payment amount for the investor for the payment period; transmitting the interest payment instructions (518), via the network interface over the external network (118), to the custodial entity (126) for consumption by the disbursement system (128), the interest payment instructions (518) including sufficient information for the disbursement system (128) to update internal ledgers of investor accounts and to electronically disburse, when the fixed-income security pays the amount of interest for the payment period, interest corresponding to respective periods of ownership of the fixed-income security by the investors, including disbursing to the seller interest corresponding to a period of ownership of the fixed-income security by the seller prior to the purchase; and computing, by the allocation engine (116) on an ongoing basis during the payment period, for each investor an accrued but unpaid interest value derived from the ownership data (512) and the interest amounts computed for the digital fractional ownership units held by the investor, and transmitting, via the application programming interface (134) over the external network (118), data representing the accrued but unpaid interest value to one or more investor devices (132A, 132B) or third-party financial services systems in real time.

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