Distributed Ledger System for Real-Time FX Collateral Valuation

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Solution Overview

Problem

Current markets for managing Foreign Exchange (FX) forward contracts are fundamentally disconnected, lacking a common infrastructure between market participants, leading to inefficiencies in collateral management, counterparty exposure, and increased costs due to manual processes and lack of integration between trading entities and their banks.

Innovation Solution

A distributed ledger technology (DLT) system that integrates the creation of collateral-linked contracts for currency forwards, enabling real-time recordkeeping, automation of valuation, and collateral movement through a blockchain network, synchronizing ongoing valuation and collateral mechanisms via smart contracts, and providing a permission-based network for consensus.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Productivity

If a distributed ledger technology system is implemented to integrate collateral management and trading operations, then real-time valuation and collateral movement capability is improved, but system complexity increases

Engineering Contradiction:

Improvereal-time valuation and collateral movement capabilityVSAvoidsystem complexity

Core Design Contradiction:

ProductivityVSDevice complexity

Solution Approach 1:

The patent merges previously disconnected trading operations and collateral management functions into a single integrated distributed ledger system. The blockchain network combines transaction recording, real-time valuation, and collateral movement capabilities in one unified infrastructure, eliminating the need for separate manual processes and systems while enabling simultaneous execution of multiple functions.

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The distributed ledger system performs multiple functions simultaneously: it records transactions, conducts real-time valuation of collateral, manages collateral movements, and maintains audit trails. This multi-functional platform replaces several specialized systems with a single universal infrastructure that handles diverse operations through smart contracts and standardized protocols.

Inventive Principle:

Principle #6Universality (Multi-functionality)

2Productivity

If manual processes are used for collateral management and transaction recording, then system simplicity is maintained, but operational costs increase and efficiency decreases

Engineering Contradiction:

Improveoperational efficiencyVSAvoidimplementation complexity

Core Design Contradiction:

ProductivityVSEase of manufacture

Solution Approach 1:

The system enables automated self-service operations where the distributed ledger automatically validates transactions, performs real-time valuation of collateral assets, determines compliance with thresholds, and executes collateral movements without manual intervention. Smart contracts encode business rules that automatically trigger actions when conditions are met, eliminating the need for manual processing while maintaining system control.

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The patent replaces manual mechanical processes with automated electronic systems. Physical document handling, manual valuation calculations, and paper-based collateral tracking are substituted with digital blockchain operations, automated valuation algorithms, and electronic collateral movement protocols, dramatically improving speed and accuracy while reducing operational costs.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

3Loss of information

If disconnected market infrastructure is used, then individual entity autonomy is preserved, but information sharing and coordination between participants deteriorate

Engineering Contradiction:

Improveinformation sharing efficiencyVSAvoidintegration complexity

Core Design Contradiction:

Loss of informationVSDevice complexity

Solution Approach 1:

The system segments information access and processing while maintaining unified ledger integrity. Each participant maintains autonomous control over their own assets and operations, yet the distributed ledger provides all participants with real-time visibility into relevant transactions and collateral status. This segmentation allows entities to preserve autonomy while achieving transparent information sharing through cryptographic verification and consensus mechanisms.

Inventive Principle:

Principle #1Segmentation

Data Source

PatentUS20240296446A1Device, method, and computer readable medium for large scale electronic processing

Publication Date: 2024.09.05 THE VANGUARD GRP INC

AI summary

A system, method and computer-readable storage medium that add at least one transaction block to a chained sequence of one or more blocks, including receiving a request message having data of an electronic transaction, broadcasting, to nodes in a blockchain network, a consensus request message for generating at least one transaction block including creating a block header that contains a hash pointer to a previous block, and concurrently with updating transaction block data, comparing and performing an action based on the comparing, performing periodic valuation and transmission of an item having a value that is tied to the transaction data, including establishing transmission links with the external entities, determining a value of the item, and establishing movement of the item between the external entities based on the determined value of the item and predetermined thresholds.