System and method for specified pool trading

Abstract

A computer system and related computer-implemented methods are designed and configured to store and deliver, upon request, information related to a plurality of asset-backed security pools, and to execute transactions between one or more parties relating to at least one of the plurality of asset backed security pools. The computer system generally comprises a computer including a computer usable medium storing a computer readable program and a network interface that includes software modules and a data storage system in communication with the computer via the network interface, the data storage system storing information relating to the plurality of asset backed securities, and account information related to at least the one or more parties. The computer is operative with the computer readable program to provide information related to a plurality of asset-backed security pools to at least one of the parties, enable the at least one party to select one or more asset-backed security pools for inclusion in a specified pool, provide aggregate pool data related to the selected specified pool, provide information related to the selected specified pool to at least one other party, receive pricing information from the at least one other party, and execute a trade for the asset-backed security pools in the specified pool.

Description

CROSS-REFERENCE TO RELATED APPLICATIONS[0001]This application claims priority under 35 U.S.C. § 119(e) to co-pending Provisional Patent Application No. 61 / 035,295, filed Mar. 10, 2008, and Provisional Patent Application No. 61 / 047,644, filed Apr. 24, 2008, the entire disclosures of which are incorporated herein by reference.BACKGROUND OF THE INVENTION[0002]1. Field of the Invention[0003]The embodiments of the present invention relate to a system and method for specified pool trading and, in particular, to a system and method for the creation, communication, price quotation, and execution of trades for specified pools of asset-backed securities.[0004]2. Description of the Related Arts[0005]Asset-backed securities are bonds that are backed by, or in other words “invested” in, a pool of assets, such as mortgages. Asset-backed securities use a pool of assets to diversify the security's holdings and reduce risk that the failure of any one asset in the pool will have a disproportional eff...

AI Technical Summary

Benefits of technology

[0010]Embodiments of the present invention generally comprise a computer-implemented method for creating specified pools lists of asset-backed security pools, or alternatively creating characteristic sets for a customized specified pool to be created, and thereafter communicating, exchanging price quotations, and executing trades for specified pools of asset-backed securities using a system capable of communication with a buyer computer and a plurality of seller computers. Although certain examples provided herein describe the embodiments of the invention in the context of mortgages, persons skilled in the art will recognize that other assets may be utilized within the scope of the invention. One advantage, among others, of the present invention is that it reduces risk on the operational side of the trading, purchase or sale of asset-backed securities, and provides increased availability and liquidity in such products.

Problems solved by technology

Thus, while the buyer can achieve a general investment objective through TBA trading, the buyer is unable to truly customize the security.

Due to the transparency, specified pool trading is generally higher cost than TBA trading.

One of the technical problems with the current state of specified pool trading, particularly, in the mortgage-backed security markets, for example, is a lack of liquidity to adequately meet the needs of a growing focus on this type of financial instrument.

This is because current systems and methods for trading specified pools of mortgage-backed securities are cumbersome and fail to provide an efficient and accessible platform for permitting liquidity providers (e.g., dealers; also known as market-makers) to offer various types of mortgage-backed securities, and for permitting liquidity takers (e.g., other dealers, investors and buy-side customers) to access a database of MBS, either specify criteria for stipulated pools or select one or more mortgage-backed securities to create a specified pool list, or select criteria for a to be created specified pool.

Moreover, other systems fail to provide mechanisms permitting market participants to submit the selected pool(s) to one or more sellers, receive quotes from the sellers, and conduct trades for the specified pools.

Additionally, current systems and methods fail to provide customers of asset-backed securities, such as MBS, the ability to specify criteria for a pool that is not currently listed in a seller's inventory, and submit that criteria to the seller for creation of a stipulated pool.

The current methods for trading specified pools of asset-backed securities also fail to permit the straight-through-processing of specified pool trades.

The lack of liquidity may ultimately lead to increased transaction costs and premiums over TBAs, and other inefficiencies.

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