Transfer Fee Processing for Repurchase Agreements
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Solution Overview
Problem
Current systems fail to effectively capture and compensate collective investment vehicles for securities loaned or sold in repurchase agreements, leading to lost fees that could benefit actual unit holders, as these transactions often result in increased notional exposure without corresponding management fee payments.
Innovation Solution
A method and system that register and track repurchase agreement transactions in databases, enabling collective investment vehicles to debit accounts and bill parties involved for a 'Transfer Fee' based on pre-defined algorithms, ensuring fee accrual and payment for securities loaned or sold, thereby capturing lost fees.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If securities are loaned or sold in repurchase agreements, then notional exposure increases, but management fee payments are not received
Solution Approach 1:
The patent introduces an intermediary system (transfer fee processing system) that mediates between the securities lending/repurchase transactions and the collective investment vehicle. This system captures transfer fees from the transactions and routes them to compensate the collective investment vehicle for lost management fees, thereby resolving the contradiction between increased notional exposure and loss of fee revenue
Solution Approach 2:
The patent extracts the transfer fee component from the securities lending and repurchase agreement transactions. By separating and capturing this specific fee element, the system ensures that collective investment vehicles receive compensation for the use of their securities, preventing the loss of revenue that would otherwise occur when securities are loaned or sold
2Loss of energy
If transfer fees are captured and accrued, then revenue for collective investment vehicles increases, but system complexity increases
Solution Approach 1:
The patent implements a universal fee processing system that handles multiple types of transactions (securities lending, repurchase agreements, short sales) through a single integrated platform. This multi-functional approach consolidates what would otherwise require separate tracking and processing systems, reducing overall complexity while enabling comprehensive fee capture and accrual across diverse transaction types
Solution Approach 2:
The system employs automated algorithms that self-calculate transfer fees based on pre-defined parameters, automatically accrue fees to the appropriate collective investment vehicles, and generate billing information without manual intervention. This self-service capability reduces operational complexity and ensures consistent, error-free fee processing
Data Source
AI summary
A method, system and program product, the method comprising: accessing Transfer Fee data to be paid to a third party that is not the borrower or the lender or the buyer or seller in a repurchase agreement transaction of a security for a right to loan or repo one or more units of the security; accessing data on a loan or repo of units of the security, calculating an amount of a Transfer Fee for the right to loan or repo the security; generating data for debiting an account or sending a bill for the Transfer Fee; and updating the database with data on the Transfer Fee.