Financial Transaction Auditing System Using Volume-Price Data Segmentation
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Solution Overview
Problem
Current systems fail to ensure compliance with fiduciary duties in securities transactions, particularly in obtaining the best possible prices, due to lack of volume-traded information in historical data, leading to challenges in auditing and verifying transaction reasonableness.
Innovation Solution
A system and method that stores and compares historical transaction data including both price and volume data to evaluate transaction reasonableness, providing audit reports and trade confirmation services to verify transaction accuracy and compliance with fiduciary duties.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If historical price data is used for transaction auditing, then price comparison is possible, but volume-traded information is missing making audit ineffective
Solution Approach 1:
The patent segments transaction data into distinct components: price data and volume data. By separating these elements and storing them in different data structures, the system ensures that both price and volume information are captured and can be independently analyzed for audit purposes.
Solution Approach 2:
The patent adds a new dimension to historical data by incorporating volume information alongside price data. This transforms the data from a one-dimensional price timeline to a two-dimensional structure that includes both price and volume, enabling more comprehensive transaction analysis.
2Productivity
If manual comparison of transactions to price charts is used, then some audit capability is provided, but the process is inefficient and cannot verify volume-based reasonableness
Solution Approach 1:
The patent implements automated feedback mechanisms where transaction data is continuously compared against historical price and volume data. The system provides real-time feedback on transaction reasonableness, automatically flagging anomalies and generating audit reports without manual intervention.
Solution Approach 2:
The patent replaces the manual mechanical process of comparing transactions to price charts with an automated electronic system. This substitution uses computer algorithms to perform complex comparisons of price and volume data, dramatically improving both efficiency and measurement precision.
3Reliability
If three possible sources of prices are required for each order, then some price verification is achieved, but the process is cumbersome and does not ensure best execution
Solution Approach 1:
The patent creates a universal audit system that can evaluate transactions across multiple securities and time periods using a single integrated platform. The system performs multiple functions including price comparison, volume analysis, reasonableness verification, and report generation, replacing the need for multiple separate verification processes.
Data Source
AI summary
A data processing system that records detailed market information for one or more financial markets to facilitate the audit of executed trades for time, quantity, and price as being reasonable. The system receives and records data from financial markets, including the date and time trades are executed and the prices at which the financial instruments traded. The system provides users the ability to compare a particular transaction for a financial instrument to transaction data for the same and/or related financial instruments at around the same time, to determine whether the price paid for the financial instrument is reasonable for the time the trade was executed. A trade confirmation service is also provided to permit traders to verify the parameters of executed transactions.