Automated ADR Swap Matching System

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Solution Overview

Problem

Current methods for swapping American Depositary Receipts (ADRs) with underlying shares are manual, inefficient, and limited by reliance on phone calls and personal relationships, leading to imbalanced swap requests and reduced availability of swap opportunities.

Innovation Solution

An automated electronic system that matches and executes ADR swaps using a first-in, first-out algorithm, allowing for request aggregation and eliminating manual processes, enabling secure, confidential, and timely matching and execution of trades.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Ease of operation

If manual phone calls and emails are used to facilitate ADR swaps, then personal relationships and market knowledge can be leveraged, but the process becomes manually intensive and limits the availability of swap opportunities

Engineering Contradiction:

Improveability to leverage personal relationshipsVSAvoidavailability of swap opportunities

Core Design Contradiction:

Ease of operationVSProductivity

Solution Approach 1:

The system enables participants to independently enter swap requests and have them automatically matched with counterparty requests through the electronic platform, eliminating the need for manual broker intervention while maintaining the ability to leverage personal relationships through the digital interface

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The patent replaces the mechanical manual process of phone calls and emails with an automated electronic system that uses algorithms to match swap requests, thereby increasing productivity and availability of swap opportunities while removing manual intensity

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

2Adaptability or versatility

If manual processes are used to create and match swap requests, then flexibility in negotiation is maintained, but the process is slow and inefficient

Engineering Contradiction:

Improvenegotiation flexibilityVSAvoidswap execution speed

Core Design Contradiction:

Adaptability or versatilityVSProductivity

Solution Approach 1:

Participants pre-enter their swap requests with specified terms and conditions into the electronic system before the matching process begins, allowing the system to automatically evaluate and match requests against predefined criteria, thus maintaining negotiation flexibility while accelerating execution speed

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system provides automated feedback to participants regarding the status of their swap requests, including matches found and execution details, enabling them to monitor and adjust their strategies while the system handles the time-consuming matching process efficiently

Inventive Principle:

Principle #23Feedback

3Duration of action of moving object

If traditional ITM processes are used, then continuous trading throughout the day is possible, but imbalances between swap requests cannot be aggregated to create matches

Engineering Contradiction:

Improvetrading continuityVSAvoidswap match creation

Core Design Contradiction:

Duration of action of moving objectVSProductivity

Solution Approach 1:

The system merges multiple unbalanced swap requests for the same security into aggregated positions, allowing matches to be created from combined demand and supply that would not be matchable individually, thereby increasing swap match creation while maintaining continuous trading capability

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The patent introduces a new dimension of request aggregation at the security level, where unbalanced requests are combined across different participants before matching, enabling the system to create matches from imbalanced requests that traditional one-to-one matching could not handle

Inventive Principle:

Principle #17Another dimension (Dimensionality change)

4Reliability

If manual clerical processes are used for trade confirmation and correction, then error handling is possible, but the process requires multiple days and reduces efficiency

Engineering Contradiction:

Improveerror correction capabilityVSAvoidsettlement time

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The system replaces manual clerical processes for trade confirmation and correction with automated electronic verification and algorithmic error detection, maintaining reliability through systematic validation while reducing settlement time from multiple days to near-real-time processing

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Data Source

PatentUS7512560B2American depositary receipts crossbook

Publication Date: 2009.03.31 JPMORGAN CHASE BANK NA

AI summary

A system and method for conducting ADR swaps is disclosed where ADR swap requests are read into a queue. The swap requests are then matched by security type. For example, a swap request can be made to exchange ADRs in a first security for underlying shares in the same security. The matching swap requests are then executed and the ADRs and underlying shares are exchanged.