Fractional share order execution method

Abstract

To provide a method for executing a fractional-based buy order.SOLUTION: A processor may: receive an estimated fractional share component of a notional-based buy order having a first amount; recalculate the estimated fractional share component for defining a recalculated estimated fractional share component when the estimated fractional share component is located in a predetermined position of a queue; execute a buy of fractional shares from a fractional share database, based on a user imposed parameter and the recalculated estimated fractional share component, if the quantity of fractional share stored in the fractional share database is at least equal to the recalculated estimated fractional share component, the user imposed parameter being related to the quantity of share in the fractional share database; and adjust the recalculated estimated fractional share component using an adjustment factor based on the recalculated estimated fractional share component and the buy of fractional shares.SELECTED DRAWING: Figure 5

Description

[Technical Field]

[0001] CROSS-REFERENCE TO RELATED APPLICATIONS This application claims priority to U.S. Provisional Patent Application No. 62 / 456,253, filed February 8, 2017, entitled "Fractional Shares Trading System and Method," and U.S. Provisional Patent Application No. 62 / 547,174, filed August 18, 2017, entitled "Hybrid Facilitation Account System and Methods," both of which are incorporated by reference.

[0002] The present invention relates to a method for mitigating fractional inventory account exposure and removing implicit barriers to participation in notional (i.e., currency-based) buy or sell orders for securities in a real-time manner. The present invention further relates to a system that ensures that clients do not oversell or overbuy when trading in notional amounts, thereby providing more efficient order handling. [Background technology]

[0003] Fractional shares are stock interests that are less than a full share. Fractional shares typically arise from stock splits, dividend reinvestment plans (DRIPs), and similar corporate activities. Fractional shares are typically not available on the market and, while valuable to investors, can be difficult to sell.

[0004] Brokerage firms generally do not have the means to manage their fractional inventory positions to maintain less inventory than is needed to satisfy all existing orders in a real-time manner. Existing methods are not designed around micro-investing. Equity orders may need to be "bundled" or purchased and held as a unit share inventory position in anticipation of future needs. Bulk orders are an inactive form of investing and are not active and real-time, and therefore do not provide for or match best execution requirements.

[0005] Predicting the inventory of shares needed to satisfy a dynamic number of orders by clients based on past trading activity increases the number of "off-exchange" proprietary orders and the number of securities that a brokerage firm must position to facilitate the execution of odd-lot trading programs on behalf of its clients, which increases the firm's trading costs and its risk exposure in its inventory account to intraday price fluctuations.

[0006] Brokerage firms generally have no way of ensuring that a client's notional order does not exceed the amount of the requested buy or sell. Trading methods and systems are not designed for real-time micro-investing, and therefore create problems when attempting to split a unit of stock into fractional portions, while significantly increasing costs for the brokerage firm and its clients.

[0007] Brokerage firms generally lack the means to provide real-time allocations at the micro-investment level for managed accounts. As mentioned above, fractional share trading methods may require firms to either batch orders or purchase unit share positions. Deviations in portfolio allocation are not easily or efficiently accounted for in portfolio allocation. As an example, a client with a desired portfolio weighted 70% to a first holding and 30% to a second holding will deviate from the desired weightings based on market fluctuations. Rebalancing typically occurs at the end of the day or at predetermined intervals. At that point, the portfolio is rebalanced to approximate the client's desired 70 / 30 portfolio, but not exactly due to the presence of fractional share restrictions.

[0008] Brokerage firms generally have no way of accounting for "residual fractional shares" (i.e., remaining fractional portions of shares that cannot be allocated to subaccounts). Existing methods can require fractional shares to remain in the brokerage firm's proprietary account until full shares can be accumulated, without allowing for micro-level adjustments. Even then, after full shares are sold, new fractional shares may still remain. Summary of the Invention [Means for solving the problem]

[0009] Embodiments of the inventive concepts disclosed herein are directed to methods that may (1) provide improved systems and management of real-time fractional inventory; (2) improve systems and methods for trading fractional share portions; (3) improve systems and methods for efficiently executing fractional share transactions as they relate to incurring notional orders, taking into account market price movements throughout the transaction's lifecycle; (4) improve systems and methods for allocating fractional share portions to managed accounts; and (5) improve systems and methods for conducting securities transactions at notional amounts in a manner that prevents buy or sell orders from exceeding their requested amounts.

[0010] In one aspect, embodiments of the inventive concepts disclosed herein are directed to a method of executing fractional buy or sell orders. When appropriately configured, a fractional share processing unit (FPU) may receive fractional share portions of the buy or sell order, provide the fractional share portions to a first queue, provide the fractional share portions to a second queue once the whole share portion is executed, and execute the buy or sell order for the fractional share portion, in part, using the fractional share database.

[0011] In a further aspect, embodiments of the inventive concepts disclosed herein are directed to a method of executing a notional buy order. When properly configured, the FPU may receive an estimated fractional share portion of the notional buy order, provide the estimated fractional share portion to a first queue and recalculate the quantity of the estimated fractional share portion, provide the recalculated estimated fractional share portion to a second queue once the estimated whole share portion is executed, execute the purchase of the fractional share from the fractional share database if a sufficient quantity is stored, recalculate a second estimated fractional share portion, and adjust the second estimated fractional share portion according to the first amount.

[0012] In a further aspect, embodiments of the inventive concepts disclosed herein are directed to a method of executing a notional sell order. When properly configured, an FPU may receive a quantity of executed share lots of the notional sell order, calculate a second amount of the executed share lots, and execute a first transaction if an oversold condition exists and a second transaction if an oversold condition does not exist.

[0013] In a further aspect, embodiments of the inventive concepts disclosed herein are directed to a method of executing fractional share trades in a managed account. When properly configured, an account processing unit may receive reports indicating executions of buy and sell orders for funds or securities, determine allocations of the executed funds or securities, provide a first portion of the executed funds or securities allocable according to the allocation listing to one or more first subaccounts, and provide any second portion of the executed funds or securities that cannot be accounted for to one or more second subaccounts (e.g., a cleanup account), such that the executed funds or securities in the one or more second subaccounts are available for purchase by the FPU. [Brief explanation of the drawings]

[0014] [Figure 1] 1 illustrates a functional block diagram of a quantity-based and notional-based order execution system in accordance with the inventive concepts disclosed herein. [Figure 2] 1 illustrates an order gateway in accordance with the inventive concepts disclosed herein. [Figure 3] 1 illustrates a fraction handling unit according to the inventive concepts disclosed herein. [Figure 4] 1 illustrates an exemplary embodiment of a flowchart disclosing a method for executing fractional-based buy or sell orders in accordance with the inventive concepts disclosed herein. [Figure 5] 1 illustrates an exemplary embodiment of a flowchart disclosing a method for executing a notional buy order in accordance with the inventive concepts disclosed herein. [Figure 6] 1 illustrates an exemplary embodiment of a flowchart disclosing a method for executing a notional sell order in accordance with the inventive concepts disclosed herein. [Figure 7] 1 illustrates a functional block diagram of a managed account system in accordance with the inventive concepts disclosed herein. [Figure 8]1 illustrates an exemplary embodiment of a flowchart disclosing a method for fully executing fractional share trades for a managed account in accordance with the inventive concepts disclosed herein. DETAILED DESCRIPTION OF THE INVENTION

[0015] In the following description, certain specific details are presented to provide a thorough understanding of embodiments of the inventive concepts disclosed herein. However, it will be apparent to one skilled in the art that embodiments of the inventive concepts disclosed herein can be practiced without one or more of the specific details, or in combination with other components, etc. In other instances, well-known implementations or operations have not been shown or described in detail to avoid obscuring aspects of various embodiments of the inventive concepts disclosed herein.

[0016] Referring now to Figure 1, an embodiment of a quantity-based and notional-based order execution system 100 suitable for implementing the inventive concepts described herein includes a first communication unit 110, a second communication unit 120, an order gateway 130, an execution management system (EMS) 140, a fraction processing unit (FPU) 150, and a market data source 160.

[0017] The first communication unit 110 and the second communication unit 120 may include one or more communication devices / systems, each configured to be used by the first and second participants, respectively, to communicate with other portions of the system 100, including, but not limited to, the order gateway 130, the EMS 140, and the FPU 150. In some embodiments, the first and second participants may include, but are not limited to, individuals, entities, off-exchange brokers performing agency-side execution of fractional share orders, and / or other financial institutions. Note that while FIG. 1 shows a single first communication unit 110 of the first participant and a single second communication unit 120 of the second participant, these may represent two or more communication units of two or more participants, each having different locations. That is, the first communication unit 110 communicatively coupled to the order gateway 130 and the first communication unit 110 communicatively coupled to the EMS 140, as well as the second communication unit 120 communicatively coupled to the order gateway 130 and the second communication unit 120 communicatively coupled to the FPU 150, may be owned and / or operated by different first and second participants, respectively, having different locations.

[0018] The order gateway module 130 could include any module configured to receive quantity-based and / or notional-based requests, including buy and / or sell orders. In some embodiments, quantity-based orders could include orders for whole shares (e.g., 1 share, 50 shares, 200 shares, etc.), and fractional-based orders could include orders with whole and fractional portions (e.g., 1.5000 shares, 50.6667 shares, 200.0001 shares, etc.). In some embodiments, notional-based orders could be submitted at a notional value (e.g., $500.00 USD (Units States dollars) security).

[0019] The order gateway module 130 could act as the primary risk manager for all order types. In some embodiments, the order gateway module 130 could perform a series of risk queries and checks based on various inputs and risk thresholds set by the brokerage firm. In some embodiments, the order gateway module 130 could be configured with a smart order routing system that knows whether to (a) reject the trade and return a response to the first participant based on the risk management results, (b) forward the request directly to a second participant for execution, or (c) forward the request to the FPU 150.

[0020] Referring now to FIG. 2, the order gateway module 130 could include an order queue 132, a risk checker 134, and a partial router 136. The order queue 132 could be configured to initiate the onboarding process by receiving one or more orders provided by the first communication unit 110. The order queue 132 could be configured to process any or all of these orders in a first-in, first-out (FIFO) manner. In some embodiments, these orders could include quantity-based buy orders, quantity-based sell orders, notional-based buy orders, and / or notional-based sell orders. Once received, the orders may be provided to the risk checker 134, which subjects the orders to one or more internal risk checks.

[0021] The risk checker 134 could include a module configured to subject the order to a risk management plan that includes one or more internal risk checks. In some embodiments, the internal risk checks could include "account rules," "customer profile information," "approved securities list," and / or "notional value and estimated quantity conversion."

[0022] "Account rules" could include rules based on the type of account and the activities permitted from a regulatory perspective. As an example, a rule could prohibit "short" trades from being executed in an individual retirement account (IRA).

[0023] "Customer profile information" could include information obtained from internal databases during the account onboarding process. In some embodiments, customer profile information could be integrated into risk-based checks, for example, to assess whether an account has sufficient purchasing power to execute an intended transaction.

[0024] An "approved securities list" could include the benchmark securities approved for trading on the trading platform. The list may vary based on the counterparty, and some counterparties may only be able to offer a limited subset of the entire large number of securities included on the approved securities list.

[0025] The "Convert Notional Value and Estimated Quantity" could include instructions for converting notional orders into estimated share quantities and using such calculations to determine whether there are sufficient funds in the account. In some embodiments, real-time prices and / or National Best Bid or Offer (NBBO) prices provided by market data sources 160 may be used in the estimation.

[0026] The fraction router 136 could include a module configured with instructions for determining whether to reject or accept an order and submit it for later execution. In some embodiments, the fraction router 136 could report the rejection of the order to the EMS 140 (e.g., an unfavorable risk management outcome), which could then report the rejection of the order to the first communication unit 110. In some embodiments, the share quantity of a fractional-based order could be split into a whole share portion and a fractional share portion, and the whole share portion and fractional share portion could be routed / provided to the second market participant 120 for agency execution and to the FPU 150 for principal execution, respectively; agency trading and principal trading are trading methods well known to those skilled in the art. In some embodiments, the estimated share quantity of a notional-based order could be split into an estimated whole share portion and an estimated fractional share portion, and the estimated whole share portion and fractional share portion could be routed / provided to the second market participant 120 and the FPU 150, respectively.

[0027] Referring again to Figure 1, the EMS 140 may be configured to provide reports to the first communication unit 110. In some embodiments, the EMS 140 may be configured to receive responses provided by the order gateway module 130, the second participant 120, and / or the FPU 150.

[0028] Reference is now made to FIG. 3. FPU 150 may include pending queue 152, in-progress queue 154, odd-lot balancer 156, and / or odd-lot database 158. FPU 150 may be configured as a primary engine for executing instructions for odd-lot trading. FPU 150 and / or account processing unit (APU) 510 (described below) could include any electronic data processing unit that executes software or computer instruction code that can be stored permanently or temporarily on a digital memory storage device or non-transitory computer-readable medium, including, but not limited to, random access memory (RAM), read-only memory (ROM), compact disc (CD), hard disk drive, diskette, solid-state memory, secure digital card, and compact flash card. FPU 150 and / or APU 510 may be driven by the execution of software or computer instruction code, including algorithms developed for specific functions embodied herein. FPU 150 and / or APU 510 may be application-specific integrated circuits (ASICs) customized for the embodiments disclosed herein. Common examples of electronic data processing units are microprocessors, digital signal processors (DSPs), programmable logic devices (PLDs), programmable gate arrays (PGAs), and signal generators, although for the embodiments herein, the term "processor" is not limited to such processing units and is not intended to be narrowly interpreted. By way of example, FPU 150 and / or APU 510 could further include two or more electronic data processing units.In some embodiments, the FPU 150 and / or APU 510 could be a processor(s) used by or in conjunction with the order gateway module 130, the EMS 140, and / or any other system, including but not limited to the managed account system 500 (described below).

[0029] In some embodiments, the terms “programmed” and “configured” are synonymous. FPU 150 and / or APU 510 may be electronically and / or communicatively coupled to systems and / or sources to facilitate receipt of input data. In some embodiments, operatively coupled may be considered interchangeable with electronically coupled. A direct connection is not required; instead, such receipt of input data and provision of output data could be provided via a bus, via a wireless network, or as signals received and / or transmitted by FPU 150 and / or APU 510 via physical or virtual computer ports. FPU 150 and / or APU 510 may be programmed or configured to perform methods described in detail below. In some embodiments, FPU 150 may be programmed or configured to receive data from various systems and / or units, including, but not limited to, second participant 120 and / or market data source 160, and APU 510 may be programmed or configured to receive data from various systems and / or units, including, but not limited to, EMS 140.

[0030] Referring again to Figure 3, the pending queue 152 may be configured to receive one or more fractional stock portions, including but not limited to fractional stock portions and estimated fractional stock portions, from the order gateway module 130. In some embodiments, the pending queue 152 may be configured to provide a single fractional stock portion to the in-progress queue 154. In some embodiments, the single fractional stock portion could be located at the head of the queue if the pending queue 152 is configured to process fractional stock portions in a FIFO manner.

[0031] In-progress queue 154 may be configured to receive odd-lot portions from pending queue 152. In some embodiments, odd-lot portions in in-progress queue 154 may be executed by odd-lot balancer 156 in a manner disclosed in detail below.

[0032] The fractional balancer 156 may be a module configured to execute fractional portion(s) on a principal basis. In some embodiments, the fractional balancer 156 may be configurable with user-imposed parameters, which may include controls to adjust and set inventory risk exposure. In effect, a user may choose to hold more than one share of a particular security in the fractional share database 158. This may allow the FPU 150 to trade more efficiently during times of high demand. The rule is to hold no more than is needed to execute current orders. Based on this parameter, the fractional balancer 156 may buy or sell shares held in the fractional share database 158.

[0033] Referring again to FIG. 1 , market data source 160 could include any source of market data representing a real-time market feed. Both order gateway 130 and FPU 150 could use best bid / offer (NBBO) price feeds when performing their respective functions to comply with the requirements of the Regulation National Market System (RegNMS) and / or any regulatory body. RegNMS is a financial regulation promulgated and described in the United States by the Securities and Exchange Commission (SEC) as "a series of initiatives designed to modernize and enhance NMS for equities." RegNMS is intended to promote competition in the marketplace, thereby ensuring that investors receive execution of their orders at discretionary prices.

[0034] Reference is now made to FIGS. 4-6. Flowcharts 200-400 disclose example methods for executing fractional and / or notional trades, and FPU 150 may be programmed or configured with instructions corresponding to the modules embodied in the flowcharts. In some embodiments, FPU 150 may be a processor or combination of processors, such as, for example, in order gateway module 130 and / or EMS 140, or any other system suitable for performing tasks. Furthermore, FPU 150 may be a processor in a module, such as, but not limited to, a printed circuit card having one or more input interfaces to facilitate two-way data communication, i.e., data reception and provision, of FPU 150. As necessary to implement the following modules embodied in the flowcharts, terms such as "obtain data" and "receive data" may be synonymous with and / or interchangeable with "receive data" and / or "retrieve data," and terms such as "provide data" may be synonymous with and / or interchangeable with "make available" or "provide data."

[0035] 4 illustrates a flowchart 200 disclosing an example method for executing a fractional buy or sell order, wherein the FPU 150 may be programmed or configured with instructions corresponding to the modules embodied in the flowchart 200. The method of flowchart 200 begins with module 202, in which the FPU 150 receives a fractional share portion provided by the order gateway module 130. In some embodiments, the first communication unit 110 may have provided the order gateway module 130 with a fractional buy or sell order originating from a first participant, whereupon the order gateway module 130 may have separated the order quantity into a fractional share portion and a corresponding whole share portion, the latter of which is provided to the second communication unit 120 for agency buy or sell execution of the whole share portion by a second participant.

[0036] The method of flowchart 200 proceeds to module 204 where FPU 150 provides the fractional portion to holding queue 152. In some embodiments, if holding queue 152 is already populated with other fractional portions received from prior orders, the fractional portion may be placed at the end of holding queue 152 using a FIFO approach.

[0037] The method of flowchart 200 proceeds to module 206, where FPU 150 provides the fractional share portion to in-progress queue 154 after the corresponding full share portion of the fractional share portion is executed by second communication unit 120 at a first price and / or after a first report regarding the execution is generated and provided to EMS 140 for later distribution to the first participant via first communication unit 110. The first price may be provided to FPU 150. In some embodiments, in-progress queue 154 may receive the fractional share portion when the fractional share portion reaches the head of a pending queue after a preceding fractional share portion has been processed by in-progress queue 154.

[0038] The method of flowchart 200 proceeds to module 208 or module 214 depending on whether the order is a buy order or a sell order. If it is a buy order, the method of flowchart 200 proceeds to module 208, and if it is a sell order, the method of flowchart 200 proceeds to module 214.

[0039] Proceeding to module 208 , odd lot balancer 156 may determine whether odd lot database 158 has sufficient quantity to process the odd lot quantity in in-progress queue 154 .

[0040] If there is sufficient quantity, the method of flowchart 200 proceeds to module 210 where the fractional balancer 156 executes the fractional portion at a first price. In some embodiments, the execution may be performed at the real-time NBBO (i.e., the second price) if there is a price improvement (i.e., the NBBO price is lower than the first price). The method of flowchart 200 then moves to module 216.

[0041] If there is not enough quantity, the method of flowchart 200 proceeds to module 212 where the odd lot balancer 156 determines the quantity of share(s) to purchase from the market, receives the share(s), and stores the share(s) in the odd lot database 158. In some embodiments, the quantity of share(s) may be determined by summing the quantities in both the in progress queue 154 and the pending queue 152. The method of flowchart 200 then proceeds to module 210.

[0042] Proceeding from module 206, the method of flowchart 200 proceeds to module 214 where the fractional balancer 156 executes the fractional portion at the first price, or, if there is an improvement, at the second price.

[0043] The method of flowchart 200 proceeds to module 216 where fractional balancer 156 generates a second report regarding the execution of the fractional share portion. In some embodiments, the second report may be generated by fractional balancer 156 and provided to EMS 140 for later distribution to the first participant via first communication unit 110. The method of flowchart 200 then ends.

[0044] 5 shows a flowchart 300 disclosing an example method for executing a notional buy order, wherein the FPU 150 may be programmed or configured with instructions corresponding to the modules embodied in the flowchart 300. The method of flowchart 300 begins with module 302, in which the FPU 150 receives a first estimated fractional share portion provided by the order gateway module 130. In some embodiments, the first communication unit 110 may have provided the order gateway module 130 with a notional buy order originating from a first participant, whereupon the order gateway module 130 may have calculated an estimated quantity for the order and converted the estimated quantity into a first estimated fractional share portion and a corresponding estimated whole share portion, the latter of which is provided to the second communication unit 120 for execution of a sell of the estimated whole share portion by a second participant.

[0045] The method of flowchart 300 proceeds to module 304 where FPU 150 provides the first estimated fractional share portion to holding queue 152. In some embodiments, if holding queue 152 is already populated with other fractional share portions received from prior orders, the first estimated fractional share portion may be placed at the end of holding queue 152 using a FIFO approach to holding queue 152.

[0046] The method of flowchart 300 proceeds to module 306 where FPU 150 recalculates the quantity of the first estimated fractional share portion after the corresponding estimated full share portion of the fractional share portion is executed by second communication unit 120 at the first price and / or after a first report regarding the execution is generated and provided to EMS 140 for later distribution to the first participant via first communication unit 110, where the first price may be provided to FPU 150. In some embodiments, the recalculation may be performed at the real-time NBBO (i.e., the second price). In some embodiments, the recalculation may be performed when the estimated fractional share portion reaches the head of pending queue 152 after the preceding fractional share portion has been processed by in-progress queue 154.

[0047] The method of flowchart 300 proceeds to module 308 where the FPU 150 provides a second fractional portion of the recalculated quantity to the in-progress queue 154 .

[0048] The method of flowchart 300 proceeds to module 310 where odd lot balancer 156 determines whether odd lot database 158 has sufficient quantity to process the quantity of the second odd lot portion in in-progress queue 154 .

[0049] If there is sufficient quantity, the method of flowchart 300 proceeds to module 312 where the fractional balancer 156 executes the second fractional portion at the first price, or at the real-time NBBO if there is an improvement. The method of flowchart 300 then moves to module 316.

[0050] If there is not enough quantity, the method of flowchart 300 proceeds to module 314 where the odd lot balancer 156 determines the quantity of share(s) to purchase from the market, receives the share(s), and stores the share(s) in the odd lot database 158. In some embodiments, the quantity of share(s) may be determined by summing the quantities in both the in progress queue 154 and the pending queue 152. The method of flowchart 300 then proceeds to module 312.

[0051] Proceeding from module 312, the method of flowchart 300 proceeds to module 316 where the fractional balancer 156 determines the amount of the second fractional share portion to be executed in module 312. In some embodiments, an adjustment factor may be determined if the amount is greater than the amount of the notional buy order, and in such case, the quantity of shares may be reduced to make the amount of the second fractional share portion equal to or slightly less than the amount of the notional buy order to prevent overbuying.

[0052] The method of flowchart 300 proceeds to module 318 where fractional balancer 156 generates a second report regarding the execution of the first estimated fractional share portion of module 302. In some embodiments, the second report may be generated by fractional balancer 156 and provided to EMS 140 for later distribution to the first participant via first communication unit 110. The method of flowchart 300 then ends.

[0053] 6 shows a flowchart 400 disclosing an example method for executing a notional sell order, wherein FPU 150 may be programmed or configured with instructions corresponding to the modules embodied in flowchart 400. The method of flowchart 400 begins with module 402, in which FPU 150 receives an executed share fraction quantity provided by order gateway module 130, where the executed share fraction may be the share fraction quantity resulting from conversion of the notional sell order amount received via first communication unit 110 and provided to second communication unit 120 for execution at a first price.

[0054] The method of flowchart 400 proceeds to module 404 where the FPU 150 calculates the amount of the executed share unit fraction. In some embodiments, the calculation may be performed at the real-time NBBO (i.e., second price).

[0055] The method of flowchart 400 proceeds to module 406, where FPU 150 determines whether the notional sell order has become oversold. In some embodiments, an oversold condition may occur when the amount of the executed share lot quantity exceeds the amount of the notional sell order.

[0056] If an oversold condition exists, the method of flowchart 400 proceeds to module 408 where the fractional balancer 156 provides the quantity of the executed unit share portion that corresponds to the oversold to the fractional share database 158. The method of flowchart 400 then moves to module 418.

[0057] If an oversold condition does not exist, the method of flowchart 400 proceeds to module 410 where fractional balancer 156 recalculates the quantity of share(s) that represents the difference between the amount of the notional sell order and the calculated amount of the executed full share portion. In some embodiments, the calculation may be performed at the real-time NBBO (i.e., third price).

[0058] The method of flowchart 400 proceeds to module 412 where the fractional balancer 156 determines whether the recalculated quantity of share(s) meets the minimum quantity required for execution.

[0059] If the minimum quantity is met, the method of flowchart 400 proceeds to module 414 where the fractional balancer 156 executes a sale of the recalculated quantity of share(s) at the third price. The method of flowchart 400 then moves to module 418.

[0060] If the minimum quantity is not met, the method of flowchart 400 proceeds to module 416 where the fractional balancer 156 cancels the execution for the recalculated quantity of share(s) and returns an amount equivalent to the recalculated quantity of share(s) to the EMS 140.

[0061] The method of flowchart 400 proceeds to module 418 where fractional balancer 156 generates a report regarding the execution performed in module 408 or 414 or the cancellation performed in module 416. In some embodiments, the report may be generated by fractional balancer 156 and provided to EMS 140 for later distribution to the first participant via first communication unit 110. The method of flowchart 400 then ends.

[0062] Referring now to Figure 7, a managed account system (MAS) 500 may be an account for an individual and / or entity, such as, but not limited to, a registered investment advisor (RIA), and may include an account processing unit (APU) 510 communicatively coupled to an order gateway 130 and / or an EMS 140, a trading advisor account 520, allocation listings 530, subaccounts 540, and a liquidation account 550. In some embodiments, the MAS 500 could be used by a first participant that owns and / or operates a first communication unit 110 communicatively coupled to the order gateway 130, the EMS 140, and / or the FPU 150 as shown.

[0063] The trading advisor account 520 could be a module configured to calculate the amount of funds and / or securities available for trading by the subaccounts 540 in the aggregate. Individuals and / or entities may generate orders in the trading advisor account 520. In some embodiments, the orders may be quantity-based orders. In some embodiments, the orders may be notional-based orders. The trading advisor account 520 may be configured to provide the orders to the order gateway 130 after the orders are generated. The trading advisor account 520 may be configured to receive execution reports provided by the EMS 140 after the orders are executed.

[0064] Allocation listing 530 could include a module configured to inform trading advisor account 520 which of subaccounts 540 are allocated fractional funds and / or securities. Subaccount 540 could include a module configured to receive allocated and fractional funds and / or securities.

[0065] The sweep account 550 could include a module configured to receive funds and / or securities that cannot be allocated or fractionally distributed. In some embodiments, the FPU 150 could be configured to buy or sell fractional portions of funds and / or securities from the sweep account 550 to liquidate the account. In some embodiments, these fractional portions could be bought or sold at scheduled intervals (e.g., at the end of the trading day, before the trading day begins, etc.), thereby reducing the fractional positions held in the individual's and / or entity's sweep account 550 to zero. Currently, companies have no way to do this at a micro level and can only do so once full shares have been accumulated, which would likely still result in some fractional portions being left behind.

[0066] FIG. 8 illustrates a flowchart 600 disclosing an example method for executing fractional share trades; the APU 510 may be programmed or configured with instructions corresponding to the modules embodied in the flowchart 600. The method of flowchart 600 begins with module 602, in which the trading advisor account 520 receives a report from the communication unit of the EMS 140 detailing the quantity of funds and / or securities executed and the average price of the execution in response to a buy / sell order being entered by the trading advisor account 520 into the communication unit of the order gateway 130 for execution. In some embodiments, the orders could include fractional buy or sell orders, notional buy orders, and / or notional sell orders. In some embodiments, the communication units of the order gateway 130 and the EMS 140 may be the same unit. In some embodiments, the communication units of the order gateway 130 and the EMS 140 may be different units.

[0067] The method of flowchart 600 proceeds to module 604 where APU 510 determines whether the funds and / or securities are eligible for fractional distribution, and if so, the funds and / or securities are allocated to subaccounts 540 based on allocation listing 530. If a sufficient number of funds and / or securities are available for fractional distribution by FPU 150, the eligible portion may be allocated to subaccount 540; if not, the non-eligible portion may be provided to liquidation account 550 as "remaining fractional shares." For any eligible portion, the method of flowchart 600 then proceeds to module 606 where APU 510 provides that portion of the funds and / or securities to subaccount 540. For any non-eligible portion, the method of flowchart 600 then proceeds to module 608 where APU 510 provides that portion of the funds and / or securities to liquidation account 550, at which point the funds and / or securities become available for liquidation by FPU 150.

[0068] For purposes of illustration and not limitation, assume that a first participant (e.g., an RIA) has four subaccounts 540, each with an equal amount of funds available for buying and selling. Assume that notional buy orders are submitted to the order gateway 130 for the four accounts, and in response, a report indicating a quantity of 16.0019 shares is received at module 602. Assuming that the allocation listing 530 indicates a 100 percent allocation to each account and that the FPU 150 is configured to provide the smallest divisible share quantity of 1 / 10,000 (or four decimal points), the APU 510 may allocate a quantity of 4.004 shares (i.e., the fractional amount) to the subaccount 540, and each of the four subaccounts may receive 1.0001 shares. The remaining quantity of shares in the amount of 0.0003 shares (16.0019-16.0004) may not be fractionally allocable to the smallest divisible quantity of shares pursuant to APU 510's instructions, and therefore APU 510 may provide this remaining fractional share to clean-up account 550.

[0069] The method of flowchart 600 proceeds to module 610 where APU 150 buys and / or sells remaining fractional shares in the clearing account 550 to FPU 150, which may be configured to liquidate the clearing account 550. In the previous description, FPU 150 could buy a quantity of 0.0003 shares. In some embodiments, this may be performed at scheduled intervals. In some embodiments, the purchase and / or sale of remaining fractional shares could increase and / or decrease the quantity of fractional shares in fractional share database 158, respectively. The method of flowchart 600 then ends.

[0070] It should be noted that each step of the above-described method may be embodied in computer instruction code stored on a non-transitory computer-readable medium. The method may include one or more of the steps described herein, which may be performed in any desired order, including concurrently with one another. For example, two or more of the steps disclosed herein may be combined into a single step, and / or one or more of the steps may be performed as two or more sub-steps. Furthermore, it will be apparent to one of ordinary skill in the art having the benefit of this disclosure that steps not explicitly disclosed herein or inherently absent herein may be incorporated into or added to, or substituted for, one or more of the steps described herein.

[0071] As used herein, the term "embodiment" means an embodiment that serves to illustrate by way of example and not limitation.

[0072] Those skilled in the art will appreciate that the preceding examples and embodiments are illustrative and not limiting on the broad scope of the inventive concepts disclosed herein. All modifications, permutations, extensions, equivalents, and improvements thereto that become apparent to those skilled in the art upon reading this specification and studying the drawings are intended to be included within the broad scope of the inventive concepts disclosed herein. Accordingly, the appended claims are intended to cover all such modifications, permutations, extensions, equivalents, and improvements that fall within the broad scope of the inventive concepts disclosed herein.

[0073] This application discloses various implementations, particularly the implementations shown below in (1)-(32). (1) A method of executing a buy or sell order based on a fraction, comprising: receiving, by a processing unit including at least one processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, a fractional share portion of a buy or sell order comprising fractional shares; providing the odd lot portion to a first queue; providing the fractional share portion to a second queue after the full share portion of the buy or sell order corresponding to the fractional share portion is executed at a price; For buy orders, determining whether a sufficient number of odd lot shares are stored in the odd lot database; and buying fractional shares for said fractional share portion in said second queue from said fractional share database if sufficient quantity exists; executing a first transaction comprising: For sell orders, selling the odd lot shares of the odd lot portion in the second queue to the odd lot database. executing a second transaction comprising: generating a report upon completion of the first transaction or the second transaction; A method comprising:

[0074] (2) the buy or sell order is submitted through a first communication unit of a first participant; The method of (1), wherein the execution of the unit share portion is reported through a second communication unit of a second participant.

[0075] (3) The method of (1), wherein the step of buying the fractional shares is executed at the price at which the full lot portion was executed, or at a real-time price if there is an improvement in the price.

[0076] (4) The first transaction further includes: determining the quantity of the share portion to purchase if a sufficient quantity does not exist; purchasing a portion of said quantity of shares; storing a portion of the purchased quantity of shares in the odd lot database; executing a purchase of a fractional share from the fractional share database for the fractional share portion in the second queue; The method according to (1), comprising:

[0077] (5) The method of (4), wherein the quantity of fractional shares to purchase is determined based on the quantity of fractional shares in the first queue and the quantity of shares in the second queue.

[0078] (6) The method of (4), wherein the purchase of the fractional share is executed at the price at which the whole share portion was executed, or at the real-time price if there is an improvement in the price.

[0079] (7) The method of (1), wherein the report is included in a buy or sell order report provided to a first communication unit of the first participant.

[0080] (8) purchasing at least one fractional share of the cleanup account from a managed account system used by the first participant and including an account processing unit. The method according to (1), further comprising:

[0081] (9) The method of (8), wherein the account processing unit is configured to execute a method for executing odd-lot transactions.

[0082] (10) A method of executing a notional buy order, comprising: receiving, by a processing unit including at least one processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, a first estimated fractional share portion of a notional buy order having a first amount; the receiving step, wherein the first estimated fractional portion comprises a calculated quantity; providing the first estimated fractional portion to a first queue; recalculating the calculated quantity of the estimated fractional share; providing a second estimated fractional share portion of the recalculated quantity to a second queue after the estimated whole share portion of the notional buy order has been executed; determining whether a sufficient number of fractional shares are stored in the fractional share database; executing a purchase of the odd lot from said odd lot database if a sufficient quantity is stored; determining a second amount of the second estimated fractional share portion; adjusting the second estimated fractional share portion according to the first amount; generating a report upon completion of the purchase of the fractional shares; A method comprising:

[0083] (11) the notional buy order is provided through a first communication unit of a first participant; The method of (10), wherein the execution of the unit share portion is reported through a second communication unit of a second participant.

[0084] (12) The method of (10), wherein the estimated fractional share quantity is recalculated according to the first amount and real-time prices.

[0085] (13) The method comprises: determining the quantity of shares to purchase if sufficient quantity does not exist; purchasing said quantity of shares; storing the purchased quantity of shares in the odd lot database prior to the execution of the purchase of the odd lot; The method according to (10), further comprising:

[0086] (14) The method of (13), wherein the quantity of shares to purchase is determined according to the quantity of odd lots in the first queue and the quantity of shares in the second queue.

[0087] (15) The method of (13), wherein the purchase of the fractional share is executed at the price at which the whole share portion was executed, or at the real-time price if there is a price improvement.

[0088] (16) The method of (10), wherein the report is included in a notional buy order report provided to a first communication unit of the first participant.

[0089] (17) purchasing at least one fractional share of the cleanup account from a managed account system used by the first participant and including the account processing unit. The method according to (10), further comprising:

[0090] (18) The method of (17), wherein the account processing unit is configured to execute a method for executing odd-lot transactions.

[0091] (19) A method of executing a notional sell order, comprising: receiving, by a processing unit including at least one processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, a quantity of executed full share portions of a notional sell order having a first amount; calculating a second amount of the executed unit share portion; determining whether an oversold condition exists for the notional sell order; If an oversold condition exists, providing the quantity of the executed lot portion corresponding to the oversold amount to a fractional share database; executing a first transaction comprising: If there is no oversold condition, calculating a quantity of shares representing the difference between the first amount and the second amount; executing the execution if the calculated quantity meets the minimum quantity for execution; and canceling the execution if the calculated quantity does not meet the minimum quantity for execution; executing a second transaction comprising: A method comprising:

[0092] (20) The method according to (19), wherein the notional sell order is provided through a communication unit of a participant.

[0093] (21) The method of (19), wherein the calculation of the second amount is performed according to real-time prices.

[0094] (22) The method of (19), wherein the existence of an oversold condition is determined according to the first amount and the second amount.

[0095] (23) The method of (19), wherein the calculation of the second transaction is performed according to real-time prices.

[0096] (24) The method comprises: generating a report upon completion of the first transaction or the second transaction; and so that: 19. The method of claim 18, wherein the report is included in a notional sell order report provided to a first communication unit of the first participant.

[0097] (25) The method comprises: purchasing at least one fractional share of the cleanup account from a managed account system used by the first participant and including an account processing unit; The method according to (24), further comprising:

[0098] (26) The method of (25), wherein the account processing unit is configured to execute a method for executing odd lot transactions.

[0099] (27) A method of executing odd lot transactions, comprising: receiving, by a first processing unit including at least one processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, a report from a first communication unit to a second communication unit indicating execution of an order to buy or sell a fund or security provided by the first processing unit; determining whether the executed portion of the fund or security is eligible for fractional distribution; allocating the fractional first portion to at least one first subaccount; providing any non-fractionable second portion to at least one second subaccount, thereby: the providing step, wherein the funds or securities of at least one second subaccount are made available for settlement by a second processing unit; A method comprising:

[0100] (28) The method according to (27), wherein the first communication unit and the second communication unit are the same communication unit.

[0101] (29) The method according to (27), wherein the determination is made according to the minimum number of shares that can be divided.

[0102] (30) The method of (27), wherein the second processing unit is a rounding unit configured to purchase the fund or security of at least one second subaccount.

[0103] (31) The method of (30), wherein the fractional part handling unit is configured to execute at least one of a method for executing a fractional part-based buy or sell order, a method for executing a notional part-based buy order, and a method for executing a fractional part trade.

[0104] (32) The method of (31), wherein the funds or securities of at least one second subaccount are purchased at scheduled intervals.

Claims

1. 1. A method of executing a notional buy order, comprising: receiving, at a processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, an estimated fractional share portion of a notional buy order having a first amount; recalculating the estimated fractional portion when the estimated fractional portion is in a predetermined position in a queue to define a recalculated estimated fractional portion; if the quantity of odd-lot shares stored in the odd-lot share database is at least equal to the recalculated estimated odd-lot share fraction, executing a purchase of the odd-lot share from the odd-lot share database based on user-imposed parameters and the recalculated estimated odd-lot share fraction, wherein the user-imposed parameters are related to the quantity of shares in the odd-lot share database; adjusting the recalculated estimated fractional share portion based on the recalculated estimated fractional share portion and the purchase of the fractional share using an adjustment factor; A method comprising:

2. 2. The method of claim 1, wherein the user-imposed parameters limit the number of shares held in the fractional share database to less than the total associated with current orders including the recalculated estimated fractional share portion.

3. 3. The method of claim 2, wherein the user-imposed parameter limits the number of shares maintained in the odd lot database to one share.

4. The method comprises: determining that the quantity of fractional shares stored in the fractional share database is less than the recalculated estimated fractional share portion; purchasing a second quantity of shares to define a purchased quantity of shares; storing the purchased quantity of shares in the odd lot database prior to the execution of the purchase of the odd lot; The method of claim 1 further comprising:

5. The method of claim 4 , wherein the second quantity of shares is purchased from a liquidation account.

6. 5. The method of claim 4, wherein the second quantity of shares is determined as a function of the quantity of fractional shares in the queue and a recalculated estimated quantity of fractional shares.

7. 5. The method of claim 4, wherein the purchase of the fractional share is executed at a first price at which the purchase of the estimated full share portion of the notional buy order was executed, or at a real-time price if there is a price improvement from the first price.

8. The method comprises: generating a report upon completion of the purchase of the fractional shares; transmitting the report to a first communication unit associated with the notional buy order so that the report may be provided to a participant; The method of claim 1 further comprising:

9. 1. An apparatus comprising: one or more memories; one or more processors communicatively coupled to the one or more memories storing processor-executable code; wherein, when executing the processor-executable code, the one or more processors: receiving an estimated fractional portion of a notional buy order having a first amount; providing an updated estimated fractional share portion to a queue in response to an execution of a trade of the estimated whole share portion of the notional buy order, the updated estimated fractional share portion being based on the estimated fractional share portion; in response to determining that the quantity of odd-lot shares stored in a odd-lot share database is less than the updated estimated odd-lot share portion, and when the updated estimated odd-lot share portion is in a predetermined position in the queue, purchasing a quantity of shares associated with the updated estimated odd-lot share portion quantity to define a purchased quantity of shares; storing the purchased number of shares in the odd lot database; if the quantity of odd-lot shares stored in the odd-lot share database is at least equal to the updated estimated odd-lot share fraction, executing a purchase of odd-lot shares from the odd-lot share database based on user-imposed parameters and the updated estimated odd-lot share fraction, wherein the user-imposed parameters are related to the quantity of shares in the odd-lot share database; and adjusting the updated estimated fractional share portion based on the updated estimated fractional share portion and the purchase of the fractional share using an adjustment factor; 10. An apparatus configured to:

10. 10. The apparatus of claim 9, wherein the user-imposed parameters limit the number of shares maintained in the odd lot database to less than the total associated with current orders including the updated estimated odd lot portion.

11. 10. The apparatus of claim 9, wherein the purchased quantity of shares is determined as a function of the quantity of odd-lot shares in the odd-lot share database and the quantity of shares in the updated estimated odd-lot share portion.

12. 10. The apparatus of claim 9, wherein the purchase of the fractional share is executed at a first price at which the purchase of the estimated full share portion of the notional buy order was executed, or at a real-time price if there is a price improvement from the first price.

13. The apparatus of claim 9 , wherein the purchased quantity of shares is purchased from a liquidation account.

14. the one or more processors further generating a report upon completion of the purchase of said fractional shares; 10. The apparatus of claim 9, configured to:

15. the one or more processors further transmitting the report to a first communication unit associated with the notional buy order so that the report may be provided to a participant; 1. An apparatus configured to:

16. 1. A method of executing a notional buy order, comprising: receiving, at a processor communicatively coupled to a non-transitory processor-readable medium having processor-executable code stored thereon, a first estimated fractional share portion of a notional buy order having a first amount; recalculating the first estimated fractional portion to define a recalculated estimated fractional portion when the estimated fractional portion is in a predetermined position in a queue; responsive to determining that the quantity of fractional shares stored in a fractional share database is less than the recalculated estimated fractional share quantity, purchasing a quantity of shares associated with the recalculated estimated fractional share quantity to define a purchased quantity of shares; storing the purchased number of shares in the odd lot database; if the quantity of odd-lot shares stored in the odd-lot share database is at least equal to the recalculated estimated odd-lot share fraction, executing a purchase of odd-lot shares from the odd-lot share database based on user-imposed parameters and the recalculated estimated odd-lot share fraction, wherein the user-imposed parameters are related to the quantity of shares in the odd-lot share database; A method comprising:

17. 17. The method of claim 16, wherein the user-imposed parameter limits the quantity of shares maintained in the odd lot database to one share.

18. 17. The method of claim 16, wherein the purchase of the fractional share is executed at a first price at which the purchase of the estimated full share portion of the notional buy order was executed, or at a real-time price if there is a price improvement from the first price.

19. 17. The method of claim 16, wherein the purchased quantity of shares is purchased from a cleanup account.

20. 20. The method of claim 19, wherein the purchased quantity of shares is determined according to the quantity of fractional shares in the queue and a recalculated notional fractional share quantity.

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