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Patent 2284400 Summary

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(12) Patent Application: (11) CA 2284400
(54) English Title: METHOD AND APPARATUS FOR MULTI-CURRENCY FUNDS SETTLEMENT
(54) French Title: METHODE ET APPAREIL SERVANT AUX REGLEMENTS DE FONDS MULTIDEVISES
Status: Dead
Bibliographic Data
(51) International Patent Classification (IPC):
  • G06Q 20/10 (2012.01)
(72) Inventors :
  • VAN ROON, MARK (Canada)
  • BOOTH, JOHN (Canada)
(73) Owners :
  • VAN ROON, MARK (Canada)
  • BOOTH, JOHN (Canada)
(71) Applicants :
  • VAN ROON, MARK (Canada)
  • BOOTH, JOHN (Canada)
  • LANGLEY, PETER (Canada)
(74) Agent: NA
(74) Associate agent: NA
(45) Issued:
(22) Filed Date: 1999-09-13
(41) Open to Public Inspection: 2001-03-13
Availability of licence: N/A
(25) Language of filing: English

Patent Cooperation Treaty (PCT): No

(30) Application Priority Data: None

Abstracts

English Abstract




Cross border multi-currency payment obligations are met not with conventional
complex
and expensive FX transactions, but instead with legal persons (typically
corporations) in
different countries in effect swapping payment obligations so that funds of a
party in one
country remain in that country and are used to meet the payment obligations in
that
country of a party outside of that country


Claims

Note: Claims are shown in the official language in which they were submitted.




9
Claims
1. A method of multi-currency funds settlement comprising the following steps:
funds in a currency X of a first legal person who is situated in country X1
are
transferred in whole or part within country X1 to satisfy in whole or part the
currency X1
payment obligations of a second legal person, situated in a different country
Y1;
and the funds of that second legal person situated in country Y1 are
transferred in
whole or part within country Y1 to satisfy in whole or part the currency Y
payment
obligations of a legal person, who may be the first legal person or one or
more additional
legal persons.
2. A computer program receiving data defining the non-domestic payment
obligations of parties located in two or more countries, and programmed to
identify
opportunities to satisfy those non-domestic payment obligations by swapping
payment
obligations using the funds settlement method defined in Claim 1.

Description

Note: Descriptions are shown in the official language in which they were submitted.



CA 02284400 1999-09-13
10
Method and apparatus for multi-currency funds settlement
Field of the Invention
The present invention relates to a method of and apparatus for multi-currency
funds
settlement.
Description of the Prior Art
The Internet offers the promise of allowing buyers and sellers of goods and
services to
communicate directly with one another, eliminating the need for some of the
intermediaries and the associated economic inefficiencies present in
conventional selling.
Hence, for example, it is in 1999 possible to transact many kinds of business
using the
Internet, which formerly would have required a broker or agent. Examples
include the
purchase of insurance, airline tickets, books and holidays.
The Internet also enables new models of buying and selling as well: for
example, there
are now many Internet auction sites, on which a wide range of goods and
services are
auctioned to the highest bidder, with the seller merely setting a reserve
price or a bid start
price. The terms to 'buy' and 'sell' and related expressions should be broadly
construed
to include any kind of transfer of rights or interests; 'buyers' and 'sellers'
should be also
broadly construed to include any transferree and transferor of any kind of
right or interest.
The terms 'party' and 'counterparty' are commonly used to describe a situation
in which
a given party is both a buyer and simultaneously a seller. This can arise, for
example,
where a party wishes to exchange US$100 for the equivalent in Sterling. That
party is
simultaneously a seller of US$ and a buyer of Sterling.
Computer systems linking many potential buyers and sellers of goods and
services over
an extensive computer network also existed prior to the widespread adoption of
the
Internet, particularly in the financial services sector. One example is the
foreign
exchange dealing systems developed and run by organisations such as Reuters
plc and the
EBS Partnership. In these systems, banks post the prices at which they are
willing to buy


CA 02284400 1999-09-13
2
or sell defined quantities of currencies. The systems may automatically spot
matches -
i.e. where a buyer is willing to buy at a price at which a seller is willing
to sell - and
complete the trade. If a potential buyer of currency can find no-one willing
to sell at a
price it considers low enough, then typically, that potential buyer will
simply have to
either wait for the pricing in the market to become more favourable, or else
be prepared
to pay more. Such systems are commonly used for currency speculation, namely
taking
a trading position with respect to one or more given currencies to exploit
favourable
pricing movements.
Where a buyer and seller regularly trade with one another, it is normal to
aggregate all
transactions over a defined period of time and for just a single net payment
to be made.
Hence, for example, if party A buys 50 units at $1 from party B over a week,
and
counterparty B buys 20 units at $1 from party A over that same week, then the
respective
payment obligations can be netted off so that A pays $30 to B at the end of
the week.
This same principle applies to the more sophisticated environment of trading
foreign
exchange and other financial property. Where more than a single party and
counter-party
pair are involved, for example, a 3 way group or even higher orders,
multilateral netting
can be applied.
In addition to the need for speculative currency trading, there exists also a
very
substantial need for corporations to buy and sell foreign currency, for
example, to pay
overseas suppliers. Similarly, individuals travelling abroad or making foreign
investments need to obtain foreign currencies as well. Currently, corporations
and
individuals will approach a bank or foreign currency vendor (such as American
Express
Inc.) to obtain foreign currency. The bank or foreign currency vendor will in
turn often
have obtained its stocks of foreign currency from other banks, in many cases
having used
an inter-bank trading system such as the Reuters or EBS systems. Because of
the chain
of intermediaries, the transaction cost of buying or selling foreign exchange
in this way is
quite high: this is reflected in the commission charged and the difference
between the bid
and the offer prices: a bank will typically sell foreign currency at a rate
considerably


CA 02284400 1999-09-13
3
higher than the rate at which it will buy it back. For small transactions, the
difference can
be 4%. For larger transactions, the difference is typically 5 basis points.
The mechanics of mufti-currency cross border funds settlement is quite
complex. For
example, take the situation, where a company in the US, with US dollars in a
US account,
wishes to pay a supplier in England in Sterling. The typical steps required
for this to be
completed using a wire transfer process is the following: Assume that company
C
located in the US has to pay a supplier in Sterling but has no Sterling
receivables to do
so. The actual mechanics of the wire transfer are typically follows:
A. Funds are debited from C's US home bank account immediately on direction to
wire transfer and the US dollar funds credited to the US home bank, typically
in a general
account.
B. The wire transfer direction to pay is directed to the domestic payment
system of
the wire transfer receiver which would reconcile it through the international
clearing
system SWIFT with the domestic payment system of the wire transfer originator.
Each
country has at a minimum one international clearing bank that interfaces
domestically
with the payment system. (eg. Canada TD, US The Fed and Chase, UK Barclays).
The
wire transfer protocol ensures that the home bank is holding the funds, and,
as such, the
receiving bank can execute the transaction for the receiver.
C. Either, the UK clearer transfers the funds from the US bank's "nostra"
account
(either the home bank if it has a nostro account or the correspondent US bank
having a
nostra account) to the account with the UK correspondent bank and then to the
bank of
the wire transfer receiver (if they are not the same) through the UK domestic
payment
system. Hence C has met its obligation in the UK.
D . The US and UK international cleaners reconcile obligations and hence the
US
clearing authorities debit the originating banks clearing account in the US.


CA 02284400 1999-09-13
4
E. Transaction complete.
This process is relatively expensive and involves numerous participants: Two
international clearers, one per country, typically two correspondent banks
having nostra
accounts with each other, two home banks one each for receiver and originator,
and two
transactors, an originator and a receiver. Also, the home bank holding the
funds on the
overnight bears the transaction risk
Statement of the Invention
In accordance with a first aspect of the invention, the method of mufti-
currency funds
settlement comprises the following steps:
funds in a currency X of a first legal person who is situated in country X'
are
transferred in whole or part within country X' to satisfy in whole or part the
currency Xl
payment obligations of a second legal person, situated in a different country
Y1;
and the funds of that second legal person situated in country Yl are
transferred in
whole or part within country Y1 to satisfy in whole or part the currency Y
payment
obligations of a legal person, who may be the first legal person or one or
more additional
legal persons.
Hence, the essential principle is for cross border mufti-currency payment
obligations to
be met not with conventional complex and expensive FX transactions, but
instead with
legal persons (typically corporations) in different countries in effect
swapping payment
obligations so that funds of a party in one country remain in that country and
are used to
meet the payment obligations in that country of a party outside of that
country.
Clearly, full settlement of payment obligations is unlikely to occur where the
total system
involves only 2 parties and 2 countries, although this too is possible if both
parties have
corresponding bank accounts in both of the relevant jurisdictions (4 accounts
total). The
practical realisation of the present invention therefore likely occurs in
mufti-party, mufti
country situations, where, given sufficient fund volumes and diversity, all or
virtually all


CA 02284400 1999-09-13
payment obligations can be fully satisfied. With sufficient fund diversity and
volumes,
most if not all mufti-currency cross border settlements can be satisfied using
solely
domestic transactions: only the residual elements left over after all domestic
transactions
have been netted off require genuine cross-border settlement. This inherently
operates as
5 a risk reduction mechanism as the bank never takes a principal position, but
rather acts
solely as a custodian. It further reduces the amount that can ever be in
dispute by only
ever using precleared funds of the various participants. Therefore in the
event of a
problem which requires transaction unwinding, the most at risk for any party
is the gain
or loss associated with the interim movement in exchange rates between the
relevant
currencies.
In a second aspect, there is a computer program operable to perform the above
method,
namely a computer program receiving data defining the non-domestic payment
obligations of parties located in two or more countries, and programmed to
identify
opportunities to satisfy those non-domestic payment obligations by swapping
payment
obligations using the funds settlement method defined above.
The present invention utilises a peculiar aspect of currency dealing, namely
that the
currency of any country does not, typically, ever leave that country. That is
to say, for
example, a US dollar account in Canada is merely a Canadian dollar account
with a
conversion factor to a US dollar equivalent.
The present invention utilises a computer-based system to restructure the
method of
payment and settlement to reduce the number of participants, thereby
streamlining the
procedure and improving efficiency.


CA 02284400 1999-09-13
6
Detailed Description
The present invention will be described with reference to various examples, as
illustrated
in the attached Figures.
The simplest scheme involves 2 parties in 2 countries with equal and off
setting
obligations. In the United Kingdom, imagine that a party C' has ~lmillion GBP
(Great
Britain Pounds) in available funds in a bank account in the United Kingdom and
needs to
pay $l.5million (US dollars) to its supplier A in the US. In the US, party C2
has
$l.Smillion in available funds in a bank account and needs to pay ~lmillion to
its
supplier B in the UK. Assume for simplicity that the exchange rate is $1.5 per
GBP.
Conventionally, CI might wire transfer $l.Smillion (US dollars) to supplier A
in the US:
that process involve the complex steps involving numerous parties explained in
the
Description of the Prior Art section of this specification.
Likewise, C2 might wire transfer ~lmillion to supplier B in the UK, with
equivalent steps.
This prior art process is however relatively expensive and slow. In the system
of the
present invention, however, a central computer system is fed the payment
obligations of
each party, and rapidly spots that a simple swap of obligations is possible.
It then causes
party CI's ~lmillion to be paid to supplier B in settlement of CZ's payment
obligation to
supplier B and also causes CZ's $l.Smillion to be paid to supplier A in
settlement of C1's
payment obligation to supplier A.
As noted above, this rudimentary 2 party example is offered as an introductory
example
of the underlying concept. In practice, there will likely be many parties and
many
countries.
As a somewhat more complex example, a 3 party example would operate as
follows. In
this example, a new intermediary, BuyFX.com, is introduced. BuyFX.com operates
the
central computer system underlying the present invention.


CA 02284400 1999-09-13
Assume the following simple scenario, depicted in Chart 1.0 below:
~ Corporations: C', C2, C3
~ Corporation's Domestic Financial Institution: FI~1, FI~2, FI~3
~ Corporation's Foreign Financial Institution: FIFE', FIFC2, FIFC3
~ BuyFX.com's Correspondent Banking Partners: FIBFxy FIBFx2', FIsFx3
~ C' - Owns GBP; Requires USD;
~ C2 - Owns USD; Requires YEN;
~ C3 - Owns YEN; Requires GBP
Chart 1.0
In this example, C' cannot satisfy its requirements in whole or in part by
dealing with C2
exclusively. However, if C3 can be "linked" into the transaction, all three
corporations
can be satisfied to the value of the smallest available currency.
Therefore, in simple terms, if Cg's USD requirement could be satisfied via C2,
C2's YEN
requirement via C3, C3's GBP requirement via C', you could reduce the number
of
participants in any leg of a transaction. That is, the various "cross border"
elements of a
transaction become nothing more than a series of netted domestic transactions.
Where previously there could be 18 or more participants over 3 transactions,
there is now
a maximum of 15, with a minimum of 9 (assuming distinct financial institutions
in each
jurisdiction).
The relationship and methodology to achieve this end is depicted in Figure 1.
The fundamental requirements for this system are:
~ A central computer system, networking participating financial institutions,
which
calculates transfer amounts and electronically instructs financial
institutions in the
area of funds direction. (FEDI)
~ A network of financial institutions (one or more), which has available to it
the
mathematical and communications software to relay customer instructions
regarding
the transfer of funds to a payee.


CA 02284400 1999-09-13
~ A central computer system which uses batch file processing to execute
recorded
transactions and direct payments accordingly.

Representative Drawing
A single figure which represents the drawing illustrating the invention.
Administrative Status

For a clearer understanding of the status of the application/patent presented on this page, the site Disclaimer , as well as the definitions for Patent , Administrative Status , Maintenance Fee  and Payment History  should be consulted.

Administrative Status

Title Date
Forecasted Issue Date Unavailable
(22) Filed 1999-09-13
(41) Open to Public Inspection 2001-03-13
Dead Application 2001-12-14

Abandonment History

Abandonment Date Reason Reinstatement Date
2000-12-14 FAILURE TO RESPOND TO OFFICE LETTER
2001-07-17 FAILURE TO COMPLETE
2001-09-13 FAILURE TO PAY APPLICATION MAINTENANCE FEE

Payment History

Fee Type Anniversary Year Due Date Amount Paid Paid Date
Application Fee $150.00 1999-09-13
Owners on Record

Note: Records showing the ownership history in alphabetical order.

Current Owners on Record
VAN ROON, MARK
BOOTH, JOHN
Past Owners on Record
None
Past Owners that do not appear in the "Owners on Record" listing will appear in other documentation within the application.
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Document
Description 
Date
(yyyy-mm-dd) 
Number of pages   Size of Image (KB) 
Representative Drawing 2001-03-06 1 11
Description 1999-09-13 8 340
Abstract 1999-09-13 1 13
Claims 1999-09-13 1 24
Drawings 1999-09-13 1 47
Cover Page 2001-03-06 1 33
Correspondence 1999-10-22 1 2
Assignment 1999-09-13 1 18
Correspondence 2001-04-17 1 19