Transfer Fee Processing for Securities Lending Income
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Solution Overview
Problem
Collective investment vehicles and security issuers face challenges in capturing fees for securities loaned, as these transactions often result in increased notional exposure and deprive them of potential income, with existing systems lacking efficient mechanisms to track and compensate for these loans.
Innovation Solution
A method and system that access and correlate loan data with transfer fee data to calculate and debit accounts for transfer fees, allowing collective investment vehicles to accrue and bill fees for securities loaned, using databases and algorithms to manage and update records in real-time.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If securities are loaned to increase notional exposure, then trading capacity and market participation are improved, but income from the securities is lost and fee capture is reduced
Solution Approach 1:
The patent introduces a fee calculation system that acts as an intermediary between the securities lending market and collective investment vehicles. This system calculates and captures transfer fees that compensate for the income lost when securities are loaned, thereby enabling trading capacity expansion without direct income loss to the investment vehicle.
Solution Approach 2:
The system implements feedback mechanisms by continuously monitoring securities loans and automatically calculating the associated transfer fees. This feedback loop ensures that income loss from securities lending is compensated through automated fee capture and allocation back to the collective investment vehicle.
2Loss of energy
If a system is implemented to track and bill transfer fees, then fee capture and income compensation are improved, but system complexity and operational burden increase
Solution Approach 1:
The patent implements a self-service system where the fee calculation and billing process is automated through computer algorithms that independently track securities loans, calculate transfer fees based on predefined parameters, and generate bills without requiring manual intervention. This reduces operational burden while maintaining comprehensive income compensation.
Solution Approach 2:
The system is designed with multi-functionality to handle various aspects of transfer fee management within a single platform: tracking securities loans, calculating fees using different algorithms, maintaining databases of loan data and fee parameters, and generating billing information. This universal approach reduces overall system complexity by consolidating multiple functions.
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 of a security for a right to loan one or more units of the security; accessing loan data on a loan of units of the security, calculating an amount of a Transfer Fee for the right to loan the security; generating data for debiting an account or sending a bill for the Transfer Fee; sending or having sent data on revenue from one or more of the Transfer Fees to be paid to an issuer of the security; updating the database with data on the Transfer Fee.