Tokenizing Corporate Actions via Distributed Ledger

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Solution Overview

Problem

Current systems for recording and processing corporate actions, such as stock splits and dividends, are complex and require manual reconciliation and settlement, lacking transparency and efficiency in investor entitlements and ownership transfers.

Innovation Solution

The use of distributed ledgers and smart contracts to tokenize corporate actions, allowing for the generation, distribution, and expiration of digital event tokens that represent investor entitlements, streamlining capture, reconciliation, and settlement processes, and enabling direct transfer and execution of options without intermediaries.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Ease of manufacture

If manual reconciliation and settlement processes are used for corporate actions, then systems can process corporate actions with existing infrastructure, but the process becomes complex and requires significant manual effort

Engineering Contradiction:

Improveease of processing corporate actionsVSAvoidsystem complexity

Core Design Contradiction:

Ease of manufactureVSDevice complexity

Solution Approach 1:

The patent replaces manual mechanical reconciliation processes with automated digital token-based settlement on a distributed ledger. Tokens representing corporate action entitlements are automatically transferred and settled through smart contracts, eliminating the need for manual processing and significantly reducing system complexity while maintaining ease of processing.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The system enables self-service through automated token generation, distribution, and settlement processes. Corporate actions are automatically tokenized and settled through the distributed ledger without requiring manual intervention, allowing the system to service itself and reducing operational complexity.

Inventive Principle:

Principle #25Self-service

2Reliability

If manual reconciliation processes are used, then existing infrastructure can be utilized, but transparency and efficiency in investor entitlements and ownership transfers are reduced

Engineering Contradiction:

Improvetransparency of investor entitlementsVSAvoidefficiency of corporate action processing

Core Design Contradiction:

ReliabilityVSProductivity

Solution Approach 1:

The patent replaces opaque manual reconciliation with transparent automated token transfers on a distributed ledger. Each corporate action entitlement is represented by a token whose movement is permanently recorded and visible on the ledger, providing full transparency while simultaneously improving processing efficiency through automation.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The distributed ledger acts as an impartial intermediary that automatically records and verifies all token transfers representing corporate action entitlements. This intermediary provides transparent, tamper-proof recording of ownership transfers while efficiently processing settlements without manual intervention.

Inventive Principle:

Principle #24Intermediary (Mediator)

3Productivity

If digital tokens are used to represent corporate actions, then transparency and efficiency are improved, but the system requires distributed ledger technology infrastructure

Engineering Contradiction:

Improveefficiency in corporate action processingVSAvoidinfrastructure requirements

Core Design Contradiction:

ProductivityVSDevice complexity

Solution Approach 1:

The patent creates a universal token framework that can represent various types of corporate actions (dividends, stock splits, rights issues) on a single distributed ledger platform. This multi-functional approach improves efficiency across different corporate action types while consolidating infrastructure requirements into a single versatile system.

Inventive Principle:

Principle #6Universality (Multi-functionality)

Solution Approach 2:

The system uses self-service automation through smart contracts that automatically execute token generation, distribution, and settlement based on predefined rules. This automation dramatically improves processing efficiency while the self-Executing nature of smart contracts reduces the need for complex intermediary systems.

Inventive Principle:

Principle #25Self-service

Data Source

PatentUS20230385786A1Systems and methods for tokenizing corporate actions

Publication Date: 2023.11.30 JPMORGAN CHASE BANK NA

AI summary

Systems and methods for tokenizing corporate actions are disclosed. In one embodiment, in an information processing apparatus for an issuer comprising at least one computer processor, a method for tokenizing corporate actions, may include (1) generating a plurality tokens for each participating share in an offering, each token associated with an exclusive option for an investor to take in response to the offering; (2) distributing the plurality of tokens to an electronic wallet associated with each investor; (3) receiving one of the plurality of plurality of tokens from an investor; (4) expiring the plurality of tokens that were not received from the investor; and (5) executing the option associated with the received token.