US007725375B2
`
`(12) United States Patent
`Shepherd
`
`(10) Patent No.:
`(45) Date of Patent:
`
`US 7,725,375 B2
`*May 25, 2010
`
`(54) SYSTEMS AND COMPUTER PROGRAM
`PRODUCTS FOR EXCHANGING AN
`OBLIGATION
`
`(75)
`
`Inventor:
`
`Ian Kenneth Shepherd, Victoria (AU)
`
`(73) Assignee: Alice Corporation Pty Ltd (AU)
`
`( * ) Notice:
`
`Subject to any disclaimer, the term of this
`patent is extended or adjusted under 35
`U.S.C. 154(b) by 738 days.
`
`This patent is subject to a terminal dis-
`claimer.
`
`(21) Appl.No.: 11/166,387
`
`(22)
`
`Filed:
`
`Jun. 27, 2005
`
`(65)
`
`Prior Publication Data
`
`US 2005/0246197 A1
`
`Nov. 3, 2005
`
`Related U.S. Application Data
`
`(63) Continuation of application No. 09/567,507, filed on
`May 9, 2000, now Pat. No. 6,912,510, which is a
`continuation of application No. 08/870,691, filed on
`Jun. 6, 1997, now Pat. No. 6,134,536, which is a con-
`tinuation-in-part of application No. 08/070,136, filed
`on May 28, 1993, now Pat. No. 5,970,479, which is a
`continuation-in-part of application No. PCT/AU95/
`00827, filed on Dec. 7, 1995.
`
`(30)
`
`Foreign Application Priority Data
`
`May 29, 1992
`Jun. 30, 1992
`Dec. 7, 1994
`Jul. 7, 1995
`
`(AU)
`(AU)
`(AU)
`(AU)
`
`.................................... .. PL2677
`PL3216
`
`.................................. .. PM9922
`................................... .. PN4060
`
`(51)
`
`Int. Cl.
`(2006.01)
`G06Q 40/00
`(52) U.S. Cl.
`...................................................... .. 705/35
`(58) Field of Classification Search ................. .. 705/37,
`705/35
`
`(56)
`
`References Cited
`U.S. PATENT DOCUMENTS
`
`3,573,747 A
`
`4/1971 Adams et al.
`
`(Continued)
`FOREIGN PATENT DOCUMENTS
`
`EP
`
`0 276 816 A2
`
`8/1988
`
`(Continued)
`
`Primary Examiner—James A Kramer
`Assistant Examiner—Eric T Wong
`(74) Attorney, Agent, or Firm—Sterne, Kessler, Goldstein &
`Fox P.L.L.C.
`
`(57)
`
`ABSTRACT
`
`Methods and apparatus which deal with the management of
`risk relating to specified, yet unknown, future events are
`disclosed.
`
`‘Sponsor’ stakeholders specify a particular product relat-
`ing to an event or phenomenon for which there is a range
`of possible future outcomes.
`‘Ordering’ stakeholders then offer contracts relating to the
`predetermined phenomenon and corresponding range of
`outcomes. The offered contracts specify an entitlement
`or (pay-off) at the future time of maturity for each out-
`come, and a consideration (or premium) payable, in
`exchange, to a ‘counter-party’ stakeholder.
`Independently of the offered contracts, the ‘counter-party’
`stakeholders input data as to their view of the likelihood
`of occurrence of each outcome in the predetermined
`range into the future, or specifically at the predetermined
`date of maturity.
`Each offered contract is priced by the processing units by
`calculating counter-party premiums from the registered
`data, and a match attempted by a comparison of the
`offered premium with the calculated premiums.
`Matched contracts can be further traded until maturity, and
`at-maturity processing handles the exchange of entitle-
`ment as between the matched parties to the contract.
`
`47 Claims, 117 Drawing Sheets
`See application file for complete search history.
`5200
`
`Transfer Entities
`
`Stan ofday
`PAYACC
`management
`
`Consideration!
`Entitlement
`
`Apple Exhibit 1026
`
`Page 00001
`
`Apple Exhibit 1026
` Page 00001
`
`

`
`US 7,725,375 B2
`Page 2
`
`U.S. PATENT DOCUMENTS
`
`2003/0191707 A1
`
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`4,412,287
`4,484,304
`4,648,037
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`4,722,055
`4,739,478
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`4,766,539
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`4,823,264
`4,823,265
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`RE32,985
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`4,916,605
`4,931,932
`4,933,842
`4,953,085
`4,975,840
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`5,012,077
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`5,021,967
`5,025,138
`5,038,284
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`5,077,665
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`5,101,353
`5,126,932
`5,126,936
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`2001/0039527
`2003/0023546
`
`>D>>>>>>>>D>>>D>>>>>>>>D>>>>>>>>D>>>>>>D>D>D>D>D>D>D>>D>>>D>F1'1D>D>D>D>D>>D>D>D>D>D>D>D>>D>D>>D>D>D>
`
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`Shepherd ................... .. 705/37
`Shepherd
`0rdish
`Shepherd
`
`FOREIGN PATENT DOCUMENTS
`
`EP
`EP
`EP
`EP
`EP
`GB
`GB
`GB
`GB
`GB
`GB
`W0
`W0
`W0
`W0
`W0
`W0
`W0
`
`0 407 026 A2
`0411748
`0 434 224 A2
`0 448 800 A1
`0 512 702 A2
`1 489 571
`1 489 572
`1 489 573
`1 489 574
`2 066 540 A
`2 180 380 A
`W0 90/10910
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`US 7,725,375 B2
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`US 7,725,375 B2
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`“BIS Committee Produces “Discussion Paper” Slamming Multilat-
`eral Netting: Wither Echo?”, FX Week Waters Information Services,
`May 8, 1992.
`“Banks
`Join in Foreign Exchange Clearing Venture”, The
`Independent—London, Jul. 1, 1992.
`“BBA, FX Net, Echo Draft Responses to BIS’ Farrant Report on
`Netting”, FX Week Waters Inforn1ation Services, Aug. 3, 1992.
`“Chemical and Citibank Race to Market Rival Corporate Confirma-
`tions Systems”, FX Week Waters Information Services, Aug. 24,
`1992.
`“UK: Current Law—City Index Ltd. v. Leslie; Gaming Contracts are
`Unenforceable Unlike Business Contracts,” Chartered Surveyor Law
`Report, Oct. 18, 1990, p. 132.
`“UK: Court of Appeal Rejects Market Gambler Case,” Financial
`Times, The Financial Time Limited, Mar. 15, 1991, p. 7.
`“UK: Personal Finance (Savings Snips)—City Saver—City Index
`Link,” Observer, Mar. 7, 1993, p. 35.
`“UK: SpreadYour Bets for Dodgy Deregulation,” Evening Standard,
`Apr. 7, 1995.
`“UK: How to Make a Winning Spread Bet This Summer—The New
`Gambling—Cover Story,” The Times, Apr. 8, 1995.
`“UK: Family Finance—Do you Fancy a Financial Flutter?” Sunday
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`Nigel Cope, “UK: Where Bookie Meets Broker,” Management
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`Jonathan Davis, “UK: Your Money—Spread Betting—Risk and
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`1995, p. 21 .
`“UK: Register—Meal Quarterly Summary—Jun. 1995—City Index
`Ltd.,” Register-Meal, Jun. 14, 1995.
`“UK: Scrum on Down for New Way ofBetting,” Mail on Sunday, Jun.
`18, 1995.
`Lucy Roberts, “UK: City Diary—City Index Weather Forecasts,”
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`“UK: Christmas Day Snow Index Launched,” Evening Standard,
`Dec. 8, 1995.
`Joe Saumarez Smith, “Australia: City—Bookie’s Move to Hit Bet-
`ting Duty,” Sunday Telegraph, The Sunday Telegraph Limited, Lon-
`don, Dec. 24, 1995, p. 2.
`“UK: City Diary—Spreading the Word,” Daily Telegraph, The Tele-
`graph plc, London, Mar. 21, 1996, p. 21.
`“UK: City Diary—Index Link a Fairly Safe Bet,” Daily Telegraph,
`The Telegraph plc, London, Jul. 16, 1996, p. 25.
`“UK: IG Index Comments on Rivals Merger Plans,” Evening Stan-
`dard, Jul. 17, 1996.
`“UK: City Index—Partners,” Financial Times, Financial Times Lim-
`ited, Oct. 14, 1996, p. 14.
`“UK: Reuters Launches Two UK Stock Indices,” Reuters Limited,
`Nov. 8, 1996.
`Paul Stokes, “UK: New Index Sparks aWorldwide Market for Scot-
`land,” Scotsman, Nov. 9, 1996, p. 21.
`
`Page 00004
`
`Page 00004
`
`

`
`US 7,725,375 B2
`Page 5
`
`“UK: City Diary—Bookmarker Chief Appointed,” Daily Telegraph,
`Telegraph Group Limited, London, Mar. 24, 1997, p. 26.
`“UK: Family Finance—Bond Pep From Age Concern—Savings
`Scene,” Sunday Telegraph, Telegraph Group Limited, London, Sep.
`14, 1997, p. 10.
`Raymond Snoddy, “UK: Mirror to Launch Online Betting Service
`with PA—The Mirror Group—PA News,” The Times, Times News-
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`31, 1989.
`Richard Murphy, “Soffex Well-Established After First Six Months,”
`Business Briefing published by Reuters News Service, Zurich, Nov.
`16, 1988.
`“A New Futures and Options Exchange to Come into Effect in 1990.
`(2 of 3),” Business Briefing published in Euromoney Supplements,
`Nov. 17, 1989.
`“A New Futures and Options Exchange to Come into Effect in 1990.
`(3 of 3),” Business Briefing publishing in Euromoney Supplements,
`Nov. 17, 1989, p. 14.
`“The Success of Soffex—The World’s First Fully Automated
`Exchange,” Business Briefing, Nov. 17, 1989.
`Curtis M. Elliott and Emmett J. Vaughan: “Fundamentals of Risk and
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`William A. Spurr and Charles P. Bonini: “Statistical Analysis for
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`Edgar E. Peters: “Chaos and Order in the Capital Markets—A New
`View of Cycles, Prices, and Market Volatility,” John Wiley & Sons,
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`David Mayers and Clifford Smith: “The Corporate Insurance
`Decision”—j ournal article reprinted in “The Revolution in Corporate
`Finance” edited by Joel M. Stern & Donald H. Chew, Jr., Blackwell
`Finance, 1992.
`“Managing Financial
`Charles Smithson and Clifford Smith:
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`Finance” edited by Joel M. Stern & Donald H. Chew, Jr., Blackwell
`Finance, 1992.
`Donald R. Lessard: “Finance and Global Competition: Exploiting
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`article reprinted in “The Revolution in Corporate Finance” edited by
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`American Banker, Sep. 25, 1987.
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`28, 1988.
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`American Banker, Jun. 14, 1988.
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`Mar. 7, 1989.
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`Ernst Deeg, “A Proposal for a Multi-Currency Netting System,”
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`TSE”, The Globe and Mail, Jun. 25, 1979.
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`ofFinancial Economics, Sep. 1979.
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`
`“The Financial Times has examined the advantages offered by the
`National Securities Trading System (NSTS),
`the world’s most
`advanced electronic stock exchange”, Financial Times, Mar. 10,
`1986.
`
`Stephen Taub, “The Big Board: New Vigor; The Pre-eminant Arena
`for Equity Trading Intends to Stay That Way”, FW, Sep. 16, 1986.
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`“The Swedish Optionsmaeklarna, the Private Options Market, Will
`Launch an Index Options Contract by the End oftheYear”, Financial
`Times, Dec. 4, 1986.
`“NYSE Readies to Handle June Expiration: Increases OARS, Earlier
`Hours”, Securities Week, May 18, 1987.
`“Blackbox—The Worldwide Report on Automated Trading Sys-
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`“Get Ready for the Phoenix”, The San Fransisco Chronicle, Jan. 20,
`1988.
`
`Priscilla Ann Smith, “NASD Approves “Limit” Order System, Other
`Quotation and Trading Measures”, The Wall Street Journal, Jan. 25,
`1988.
`
`“A Massive Computer Project is Under Way to Keep London in
`Control of the World’s Richest and Fastest Growing Financial Mar-
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`“A Breakthrough in the development ofAutomated Trading Systems
`for the Futures Markets is Being Claimed by LIFFE”, Financial
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`Yakov Amihud et al., “Liquidity, Volatility and Exchange Automa-
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`Kalman J. Cohen et al., “Realizing the Potential of an Electronic
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`Making”, Conference Presentation, May 17, 1988.
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`Leading and Why?”, The Peake/Ryerson Consulting Group Inc.,
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`tion on Regulation of Trading Practice, Institute For International
`Research, New York, NY, Aug. 18, 1988.
`“Options Market to Start New Instrument”, Reuters News, Sep. 27,
`1988.
`
`“Electronic Trading and the Stock Exchange ofthe Future”, 1989(?),
`source unknown, pp. 49-70.
`“Futures Exchange in Europe: MatifAgree to Join Globex”, The Wall
`Street Journal, Mar. 3, 1989.
`Michael W. Miller et al., “The Second Century—Wiring Up:
`Computerised Trading Starts
`to Make Inroads at Financial
`Exchanges—Reuters, Telerate and Others Seek to Connect Sellers
`Directly with Buyers—Bad News For Midd1emen?”, The Wall Street
`Journal, Apr. 24, 1989.
`“Financial Futures/Commodities report: CBT Plans to Begin Testing
`Prototype For New Order-Routing System Jun. 1”, Securities Week,
`May 15, 1989.
`“Nymex Has Placed On a 3 Month Trial, The Automated Trading
`System, ATS/2”, Banking Technology, Nov. 9, 1989.
`Richard Layne, “SEC Allows Morgan’s Debt-Underwriting System
`Series”, American Banker, Dec. 15, 1989.
`“Philadelphia Exchange Rebuts Amex, CBOE Criticisms of
`Tellefsen Study”, Securities Week, Jan. 8, 1990.
`Michael Shields, “Nestle Clears Way for New Era of Euroshare
`Trading”, Reuters News, Feb. 9, 1990.
`“NASD Welcomes SEC Approval of Rule 144A and Portal Market:
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`19, 1990.
`
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`
`US 7,725,375 B2
`Page 6
`
`Screen-Trade
`
`CBOE, AMEX, CSE & Reuters to Develop an Electronic Network
`for After-Hours Trading in Stocks and Options:, PR Newswire, Jun.
`18, 1990.
`“The Toronto Stock Exchange Revolutionizes Real-Time Trading
`Environment”, Canada News-Wire, Oct. 24, 1990.
`“NASD Awaits SEC Go Ahead On OCT Enhancements Called
`SelectNet”, Securities Week, Nov. 12, 1990.
`Ivy Schmerken, “New Credit Suisse Venture Pitches Global Deriva-
`tives (New Credit Suisse Financial Products Joint Venture Employs
`Technology to Mange Products For Hedging Interest-rate Instru-
`ments)”, Wall Street & Technology, Dec. 1, 1990.
`“ICCH and Devon in Joint Venture”, Financial Technology Bulletin,
`Dec. 6, 1990.
`“Australia Introduces Exchange-Traded Warrants”, Reuters News,
`Jan. 11, 1991.
`Ivy Schmerken, “NASDAQ Revamps to Keep Up”, Wall Street and
`Technology, Jul. 1, 1991.
`Sign
`to
`Set
`Sharman
`Esarey,
`“Nymex
`Contract—Chairman”, Reuters News, Oct. 16, 1991.
`Ivy Schmerken, “Cleansing the Treasury Auction: Automating The
`Treasury Auction is One Way to Police Markets”, Wall Street and
`Technology, Nov. 1, 1991.
`Jenna Michaels, “Buy Side Clamors for Back-Office Clout”, Wall
`Street and Technology, Dec. 1, 1991.
`Ginger Szala, “Futuristic Automation Now at Traders’ Fingertips”,
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`“Thomson Financial Services Named as Preferred Vendor of Elec-
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`Business Wire, Feb. 13, 1992.
`“DTC Proposes ID Upgrade, Targeting Thomson’s OASYS”, Invest-
`ment Management technology, vol. 1, No. 11, Feb. 21, 1992.
`“Exchanges and Regulators: Former Wunsch Auction Systems, AZX
`Opens in Arizona”, Trading Systems technology, Apr. 6, 1992.
`Craig Torres, “Drop in Tokyo Stocks Spurs US Investors to Bet on
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`“Trax”, Financial Technology Insight Elsevier Advanced Technology
`Publications, May 1, 1992.
`“New York Stock Exchange Faces Threat From Technology Devel-
`opments Creating New Ways of Trading Stocks”, Banking Technol-
`ogy, Jun. 11, 1992.
`Linda Stern, “What Online Services Have to Offer for Investors”, St
`Louis Post-Dispatc