Append-Only Ledgers for Real-Time Securities Settlement

Resolve Bottlenecks,
Find Innovative SolutionsGenerate Solutions

Solution Overview

Problem

The traditional settlement process for securities trades is costly, time-consuming, and prone to errors, with many trades being disputed and never settled due to the lengthy three-day settlement period.

Innovation Solution

Implementing a real-time gross settlement system using cryptographic hashes and append-only ledgers, where trades are verified through cryptographically-signed instructions and processed in a distributed network, allowing for immediate audit and validation of transactions.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Loss of time

If traditional settlement process is used, then trade validation and dispute resolution can be performed manually, but settlement time is extended to three business days and costs increase

Engineering Contradiction:

Improvesettlement timeVSAvoidsettlement process complexity

Core Design Contradiction:

Loss of timeVSDevice complexity

Solution Approach 1:

The patent replaces the manual mechanical review process with cryptographic verification. Cryptographically-signed instructions and hash-based validation automatically verify trade authenticity, eliminating the need for manual broker review and dispute resolution processes, thereby reducing settlement time from three days to near-real-time while maintaining security

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The patent introduces a distributed ledger system with cryptographically-signed instructions as an intermediary between trade execution and settlement. This intermediary layer automatically validates trades through cryptographic verification and records them in an immutable ledger, enabling faster settlement without requiring manual intervention while reducing complexity of coordination between parties

Inventive Principle:

Principle #24Intermediary (Mediator)

2Reliability

If manual review and dispute resolution processes are used, then trade validity can be verified, but the process becomes costly and time-consuming

Engineering Contradiction:

Improvetrade validation reliabilityVSAvoidsettlement throughput

Core Design Contradiction:

ReliabilityVSProductivity

Solution Approach 1:

The patent substitutes manual trade validation with cryptographic verification mechanisms. Each trade includes cryptographically-signed instructions that can be automatically verified using public key infrastructure, ensuring trade authenticity and validity without manual review. This maintains high reliability while dramatically increasing settlement throughput by processing validations in near-real-time

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The patent implements automatic feedback loops where the distributed ledger system continuously validates trades through cryptographic verification and provides real-time confirmation of settlement status. This automated feedback mechanism ensures trade validity while increasing productivity by eliminating manual dispute resolution delays

Inventive Principle:

Principle #23Feedback

3Ease of operation

If three-day settlement period is used, then manual dispute resolution is possible, but failed transactions increase and costs rise

Engineering Contradiction:

Improvedispute resolution easeVSAvoidsettlement costs

Core Design Contradiction:

Ease of operationVSLoss of energy

Solution Approach 1:

The patent replaces manual dispute resolution processes with cryptographic verification. The cryptographically-signed instructions and immutable ledger records provide tamper-proof evidence of trade authenticity, making disputes rare and easily resolvable through cryptographic verification rather than manual investigation, thereby reducing operational complexity and costs

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The patent performs preliminary cryptographic verification of trade instructions before settlement by validating digital signatures and recording transactions in the distributed ledger. This preliminary validation prevents invalid trades from proceeding to settlement, eliminating the need for costly dispute resolution and reducing failed transactions while maintaining ease of operation through automated verification

Inventive Principle:

Principle #10Preliminary action

Data Source

PatentUS11455685B2Settlement of securities trades using append only ledgers

Publication Date: 2022.09.27 DOMUS TOWER INC

AI summary

Various of the disclosed embodiments concern systems and methods for expediting the settlement of securities traded on an exchange. A settlement system can generate electronic records of financial transactions by bundling a trade report, clearing instructions, etc., into a cryptographic ledger. Current cryptographic ledgers do not handle transactions at the rate which securities are traded. In order to improve rate processing for cryptographic ledgers sharded transaction trees are used.