Aggregated Fund Allocation for FDIC Insurance Coverage
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Small self-clearing broker dealers face challenges in finding program banks willing to maintain aggregated accounts due to high maintenance costs and unstable account balances, making it difficult to obtain FDIC insurance for single large accounts, especially when balances are below $1-5 million.
Innovation Solution
A system where a self-clearing broker dealer allocates funds from multiple broker dealers across multiple program banks to create aggregated accounts, utilizing an intermediary bank for settlement and reconciliation, allowing for FDIC insurance coverage beyond the standard limit while managing account balances and interest distribution efficiently.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a program bank maintains an aggregated account for a small self-clearing broker dealer, then the broker dealer can obtain FDIC insurance coverage, but the program bank incurs high maintenance costs and faces unstable account balances
Solution Approach 1:
The patent combines multiple broker dealers into a single pooled account at the program bank, aggregating their respective customer funds. This merging approach increases the total account balance to a level that justifies the program bank's maintenance costs while providing FDIC insurance coverage to each participating broker dealer through the consolidated structure.
2Reliability
If a program bank maintains an aggregated account for a small self-clearing broker dealer, then the broker dealer can obtain FDIC insurance coverage, but the account balance remains unstable making it difficult to attract program banks
Solution Approach 1:
By pooling funds from multiple broker dealers into a single aggregated account, the system creates a more stable total balance that is less susceptible to fluctuations from individual broker dealer transactions. This stability makes the account more attractive to program banks while maintaining FDIC insurance coverage for all participants.
3Reliability
If funds are allocated across multiple program banks for a single broker dealer, then FDIC insurance coverage is maximized, but the system complexity and reconciliation burden increase
Solution Approach 1:
The patent segments the system into two distinct levels: multiple broker dealers are consolidated into a single pooled account at each program bank, eliminating the need for complex multi-bank allocations for each individual broker dealer. This segmentation simplifies the structure while maintaining FDIC insurance coverage through the aggregated account framework.
4Productivity
If a self-clearing broker dealer serves multiple broker dealers, then economies of scale are achieved, but the burden of managing aggregated accounts and performing reconciliations increases
Solution Approach 1:
The patent merges all broker dealer accounts into pooled accounts at program banks, consolidating the management structure. This approach achieves economies of scale by reducing the number of individual accounts to be managed and reconciled, while the self-clearing broker dealer maintains operational efficiency through centralized control of the pooled account structure.
Data Source
AI summary
A computer-implemented method, system and program product for managing funds for a plurality of broker dealers, the method comprising: maintaining or having maintained a separate account for each of a plurality of customers of a plurality of broker dealers; receiving by a self clearing broker dealer deposit sweep data; maintaining a plurality of FDIC-insured and interest-bearing aggregated accounts, with aggregated accounts held at a plurality of different program banks, with at least one of the aggregated accounts at one of the program banks holding funds of a plurality of broker dealers; accessing an aggregated account electronic database, containing information on funds of each of a plurality of the customers in the plurality of aggregated deposit accounts; accessing an accounting electronic database, containing information on one or more accounting parameters to be applied when performing accounting functions relating to funds of a plurality of the customers of a plurality of the broker dealers; plus additional aspects.