UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`GAIN CAPITAL HOLDINGS, INC.,
`Petitioner,
`
`v.
`
`OANDA CORPORATION,
`Patent Owner.
`_____________________________
`
`Case No. CBM2020-00021
`Patent No. 8,392,311
`_____________________________
`
`DECLARATION OF BERNARD S. DONEFER
`
`GAIN CAPITAL - EXHIBIT 1008
`
`

`

`
`
`V. 
`VI. 
`
`I. 
`II. 
`III. 
`IV. 
`
`TABLE OF CONTENTS
`QUALIFICATIONS ............................................................................................ 1 
`SCOPE OF WORK ............................................................................................. 4 
`LEGAL STANDARDS ........................................................................................ 5 
`OVERVIEW OF THE ’311 PATENT ..................................................................... 6 
`Claims of the ’311 Patent ................................................................ 13 
` 
`Prosecution History of the ’311 Patent ........................................... 15 
` 
`LEVEL OF ORDINARY SKILL AND RELEVANT TIME ....................................... 16 
`THE STATE OF THE ART ................................................................................ 17 
`History of Currency Trading ........................................................... 18 
` 
`Currency Trading Markets and Standard Practices ........................ 19 
` 
`1.  Currency Trading Roles and Parties ........................................ 23 
`2.  Communications Between Parties ........................................... 27 
`3.  Placing Orders and Executing Trades ...................................... 28 
`Electronic Trading Systems ............................................................ 32 
` 
`VII.  CLAIM CONSTRUCTION ................................................................................. 50 
`VIII.  DISCUSSION OF CLAIMS ................................................................................ 50 
`Independent Claim 1 ....................................................................... 57 
` 
`1.  Step (i) ...................................................................................... 63 
`2.  Step (ii) ..................................................................................... 66 
`3.  Step (iii) ................................................................................... 67 
`4.  Step (iv) .................................................................................... 72 
`5.  Step (v) ..................................................................................... 75 
`6.  Step (vi) .................................................................................... 76 
`7.  Step (vii) ................................................................................... 79 
`Independent Claim 7 ....................................................................... 83 
`Dependent Claims 2-6 ..................................................................... 86 
`1.  Dependent Claim 2 .................................................................. 86 
`2.  Dependent Claim 3 .................................................................. 89 
`3.  Dependent Claim 4 .................................................................. 91 
`4.  Dependent Claim 5 .................................................................. 96 
`5.  Dependent Claim 6 .................................................................. 98 
`CONCLUDING STATEMENTS .......................................................................... 99 
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`IX. 
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`X. 
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`APPENDIX – LIST OF MATERIALS CONSIDERED .......................................... 101 
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`I, Bernard S. Donefer, declare as follows:
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`I. QUALIFICATIONS
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`1. My name is Bernard S. Donefer. I hold a B.A. in Economics from
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`Long Island University and an M.B.A. in Finance from the Stern School of
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`Business of New York University. I am currently an Adjunct Associate Professor
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`at the Stern Business School at New York University, a position I have held since
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`2004. From 2003 to 2018, I was also a Lecturer and Associate Director of the
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`Subotnick Financial Services Center at Baruch College of the City University of
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`New York, and I was promoted to Distinguished Lecturer during this period. I
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`teach graduate courses related to the use of technology in the financial services
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`industry, including trading, market data, market structure, risk management
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`systems, and financial information systems. I have also taught classes and
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`workshops on foreign-exchange trading, including the use of systems by Reuters,
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`Bloomberg, and FactSet.
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`2.
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`I am also the Principal of Conatum Consulting LLC, a position I have
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`held since 2004. I teach both public and in-house corporate courses, including
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`“Capital Markets Bootcamp,” “New U.S. Equity Markets,” and “Risk Management
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`for Non-Quants.” My clients include the Securities and Exchange Commission
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`(SEC), the Federal Reserve Bank (FRB), the Investment Industry Regulatory
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`Organization of Canada (IIROC) in Montreal and Toronto, Depository Trust and
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`Clearing Corp (DTCC), Options Clearing Corp. (OCC), JP Morgan Chase, KPMG,
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`Alliance Bernstein, and other banks and asset managers.
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`3.
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`I have more than 35 years of experience in the fields of software,
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`technology and financial services. Prior to beginning my teaching career in 2003, I
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`was Senior Vice President of Capital Markets Systems at Fidelity Investments
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`(1996-2002). My last major project at Fidelity Investments, their equity trading
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`system, won its President’s award. Other previous positions include: Executive
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`Vice President and CIO of Dai Ichi Kangyo Bank (1992-1996), then the world’s
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`largest bank; Principal of Financial Technology Advisory Group (1991-1992); and
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`President of BT Financial Services Information Systems (1987-1991).
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`4.
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`Through my education, training, and experience in the financial
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`services technology field, I am familiar with software development for trading,
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`order matching, order execution, market data, and related systems. For example,
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`my work at Fidelity included designing and implementing one of the industry’s
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`first paperless straight through processing (STP) equity trading order and execution
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`management systems. I was responsible for trading systems in foreign exchange,
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`listed options, and risk management at BT Financial Services Information Systems,
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`where I was responsible for 40 client sites in 14 cities and staff in the U.S., Europe,
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`and Asia, and where I marketed and supported the REMOS FX trading system
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`among other trading products. I was also responsible for the implementation of a
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`government securities order management system implementing an early use of
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`touch screen technology at Mizuho. Additionally, my work (1978-1982) at
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`Coopers & Lybrand, now Price Waterhouse Coopers, included designing new floor
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`and clearance procedures for the New York Stock Exchange and Milan Stock
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`Exchange to accommodate greater volume and improve auditability, as well as
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`redesigning an investment bank’s trading room for commercial paper and other
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`money market instruments.
`
`5. My technological experience extends back to the mid-1960s when I
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`programmed early (2nd generation) IBM computers such as the 1620, 1401,
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`7040/90 in Fortran, machine and symbolic (SPS) languages. I later worked in
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`assembler language for IBM’s System Development Division, developing
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`operating system components for the then new IBM 360 line of mainframes. Over
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`my career I have programmed, developed, or managed systems on computers by
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`IBM, DEC, Sun, Stratus and in languages that included BASIC, FORTRAN, IBM
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`360 Assembler, COBOL, RPG II, PL/1, APL, C, C++, and Python, and
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`communications protocols as esoteric as the vertical blanking interval (VBI) in
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`broadcast televisions signals.
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`6.
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`I have been admitted as an expert and have testified in federal court
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`(Northern District of Illinois), U.S. SEC hearings, and FINRA arbitrations. My
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`expertise is in software, technology, trading, exchanges, electronic trading and
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`business practices in the financial markets.
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`7.
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`I have published essays in the Journal of Trading, Tabb Review, and
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`Bloomberg View. I have been quoted in, among others, the New York Times, Wall
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`Street Journal, MIT Technology Review, The Atlantic Magazine, Reuters,
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`Businessweek, Wired, and publications in Europe and Asia. I have been an invited
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`speaker at the Council of Foreign Affairs in Washington D.C., The Conference
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`Board in New York, committees of the NY Bar Association, and numerous
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`industry events, including chairing duties at TradeTech’s annual conference from
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`2010-2014.
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`8.
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`A copy of my curriculum vitae, submitted as EX1010, contains
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`further details on my education, experience, publications, and other qualifications
`
`to render an expert opinion in this matter.
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`II. SCOPE OF WORK
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`9.
`
`I understand that a petition is being filed with the United States Patent
`
`and Trademark Office for Covered Business Method Review of U.S. Patent No.
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`8,392,311 (“the ’311 Patent,” attached as EX1001), entitled “Currency trading
`
`system, methods, and software.”
`
`10.
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`I have been retained by GAIN Capital Holdings, Inc. (“GAIN”) to
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`offer an expert opinion on the ʼ311 patent related to my experience and expertise.
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`I receive $650 per hour for my services. No part of my compensation is dependent
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`on my opinions or the outcome of this proceeding. I have also been retained by
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`GAIN to offer an expert opinion on U.S. Patent Nos. 7,146,336 (“the ʼ336 patent”)
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`and 7,496,534 (“the ’534 patent”). Apart from being retained to offer opinions
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`regarding these three patents, I do not have any other current or past affiliation as
`
`an expert witness or consultant with GAIN.
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`11. For purposes of this declaration, I have been specifically asked to
`
`provide my opinions on claims 1-7 of the ’311 patent. In connection with this
`
`analysis, I have reviewed the ’311 patent and its file history. I have also reviewed
`
`and considered various other documents in arriving at my opinions, and I may cite
`
`to them in this declaration. For convenience, the information relied upon in
`
`arriving at my opinions is listed in Appendix A.
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`III. LEGAL STANDARDS
`
`12.
`
`I have been advised that a patent qualifies as a covered business
`
`method patent only if it is (i) directed to a method or apparatus for data processing
`
`or other operations used in the practice, administration, or management of a
`
`financial product or service, and (ii) not a technological invention. I have also
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`been advised that a patent claim is considered a “technological invention” under
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`this rule only if it both (1) includes a technological feature that is novel and
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`unobvious over the prior art and (2) solves a technical problem using a technical
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`solution. 37 C.F.R. § 42.301(b).
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`13.
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`I have been advised that there is a two-part test for determining
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`whether a patent claim recites subject matter that is directed to patent-eligible
`
`subject matter under 35 U.S.C. §101. First, a claim is analyzed to determine
`
`whether it is directed to a patent-ineligible concept, which includes laws of nature,
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`natural phenomena, and abstract ideas. I understand that claims directed to a
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`longstanding economic practice have been deemed to be abstract ideas. I also
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`understand that reciting such a practice being performed by generic computer
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`components does not make the claim non-abstract. I understand that claims that
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`improve the functioning of the computer itself and that provide a technical solution
`
`to a technical problem have been deemed non-abstract. Second, if the claim is
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`directed to an ineligible concept, the elements of the claim are considered both
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`individually and as a whole to determine whether they include an inventive
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`concept that amounts to significantly more than the ineligible concept itself. I
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`understand that features that are routine or conventional do not amount to an
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`inventive concept.
`
`IV. OVERVIEW OF THE ’311 PATENT
`
`14. The ’311 patent is entitled “Currency trading system, methods, and
`
`software.” The patent states that the “present invention is related to currency
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`trading; more particularly, the invention is related to trading currency over a
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`computer network.” EX1001 (the ’311 patent), 1:13-17.
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`15. The specification goes on to describe a conventional computer
`
`implementation of the age-old practice of currency trading. The system “allows
`
`traders to trade currencies over a computer network,” as “[t]raders interface to the
`
`system using ordinary Web browsers running feature-rich Java applets….”
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`EX1001, 3:10-18. The capabilities of this system are similarly generic and
`
`conventional. Traders “obtain real-time data feeds of current exchange rates, they
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`can analyze past exchange rates using graphical tools, they can review their current
`
`portfolio and past trades, and they can place buy and sell orders in the real-time
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`market.” Id., 3:18-22. As I explain in §VI.C, these were existing features of
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`contemporary electronic trading systems.
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`16. The system architecture is similarly conventional. Figure 1 depicts a
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`three-tiered system in which client systems (“participants”) and “partner systems”
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`(which provide liquidity) connect to a trading system server:
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`Id., FIG. 1. This architecture essentially mirrors the dealer-broker-client
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`relationship, with the server standing in for the broker. Indeed, the specification
`
`acknowledges this similarity. Id., 3:49-56 (“A trader trades with the Trading
`
`System similar to the way she currently trades with a broker, except that the
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`trading is over the Web, occurs 24 hours a day, 7 days a week, and allows very
`
`small trades with very low spreads.”)
`
`17. The specification then describes the process of making a trade:
`
`In the present invention, trades can be initiated by the trader at the
`push of a button. A trading request form pops up with fields properly
`initialized so as to minimize the number of keystrokes required. A
`trader may elect to execute a trade right away, in which case the buyer
`of a currency will buy at the current exchange rate market offer price.
`Conversely, a trader can sell a currency at the current bid price. A
`range of automatic trading options is available, including setting
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`bid/offer prices with a certain duration and “all-or-nothing” rules.
`Furthermore, the trader can limit her risks by placing stop-loss orders
`that are executed automatically. Similarly, she can lock in profits, by
`issuing take-profit orders.
`
`Id., 4:24-35. This process mirrors conventional currency trading practices—as
`
`well as practices for other assets (e.g. stocks, options, and futures contracts)—
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`including the placing of market orders, limit orders, stop-loss orders and take-profit
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`orders. See infra, §VI.B.3. The specification then describes the various steps of
`
`completing these types of orders, which simply involve conventional computer
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`displays, user input mechanisms, order processing, and data communication. Id.,
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`4:42-5:30, FIGS. 5, 13-16. The conventional nature of the client system’s display
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`and user input is confirmed by the corresponding figures:
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`a ee etd
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`33705
`
`SBPUSD
`EURMUSD
`
`100000
`10000
`
`SiL
`1.4451
`0.8057
`
`Tie
`1.4517
`0.6710
`
`PRICE
`1.40868
`0.8884
`
`MARKET
`1.4484
`0.8602
`
`PROFIT
`
`AgGOUeT Buen ae
`
`
`curR/UsO + Oot Bs, 2000 -
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`tntews [AminT=]
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`Cuneney [EGRABS[+]
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`meiegee=Connected
`
`[Warning: AppletWindow
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`
`
`
`
` Pee EC aswell
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`ACTION
`
`CURRENCY
`UNITS
`
`RATE
`
`|
`
`[eurwso
`10000
`
`0.8548
`
`Warning: Applet Window
`
`
`
`Senver accepted market order.
`Ticket number: OF
`
` nai ENTRY
`
`
`
`
`
`[¥ Lower Limit fossss +| -|
`
`hn
`
`I¥ Upper Limit fossss +| -|
`
`
`S
`fo.e520 +|-|
`feumuar =]
`UPRENT
`‘co
`HITS
`I Take Prot [| | _|
`
`Rate
`/ansas
`+]
`.
`|
`
`
`
`Duration
`pac ey
`=]
`You are buying EUR
`
`
`[Posza —_I J
`PF Gtep Lem
`and selling USD
`fe (Faw Profit=feeara =|]:|
`
`
`
`Weu sro buying GU
` and me lithn g WBE
`
`
`
`[edoireree Apnlket wlnedke
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`Fig. 13
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`
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`Fig. 15
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`EX1001, FIGS. 5, 13-15; see also id., 11:8-17:51 (describing user interface with
`
`conventional functionality), FIGS. 6-12 (showing additional conventional
`
`displays).
`
`18. The specification then describes various software modules operating
`
`on the server, describing their functions in general terms. Id., 6:15-9:38. Here
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`again, the function of these modules mirrors conventional currency trading
`
`practices. Off-the-shelf computer hardware runs software that receives rate
`
`information from various external sources (i.e. the previously mentioned
`
`“partners”) and stores the information in a standard database, sets the exchange
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`rates that the traders see, manages trades/transactions, and performs other standard
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`economic functions (e.g., hedging, monitoring margin, and calculating interest).
`
`Id. To the extent any detail about these functions is provided, the details simply
`
`involve the use of longstanding practices. For example, the use of a daemon—i.e.
`
`a background server process—to monitor standing orders mirrors the longstanding
`
`practice of human brokers monitoring an order book. See EX1001, 8:32-51; infra,
`
`§§VI.B.2-3; EX1033, 238 (describing background processes that monitor and
`
`execute time-sensitive activities); EX1034, 415 (same).
`
`19.
`
`Indeed, the specification regularly acknowledges its use of known
`
`practices. For example, when describing the calculation of exchange rates, the
`
`specification points to methods known in the field. EX1001, 7:15-21 (“Various
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`methods of calculating such rates are known to those skilled in the art.”).
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`Similarly, when describing interest calculations, the specification acknowledges
`
`that “[i]nterest calculation formulas are known to those skilled in the art, and any
`
`appropriate formula can be used in the Interest Rate Manager without departing
`
`from the scope of the invention.” Id., 7:55-58. It then goes on to describe the use
`
`of the standard compound interest formula—well known even to first-year
`
`business students—to calculate interest at arbitrary time intervals. Id., 7:58-8:31.
`
`Describing margin functions, the specification simply refers to standard margin
`
`considerations that had long been part of margin trading. Id., 8:52-57. Describing
`
`hedging functions, the specification identifies factors that were routinely used by
`
`parties engaged in hedging—current positions, trading activity, and market
`
`behavior—and again acknowledges that “[v]arious methods of performing such
`
`calculations are known to those skilled in the art.” Id., 9:9-18. The specification
`
`thus merely provides high-level descriptions of software modules performing basic
`
`trading functions that had long been known and used in the field.
`
`20.
`
`I note that the specification alleges several advancements over
`
`existing systems, including a “two-way handshake” allowing users to set their own
`
`prices rather than having to accept a dealer’s quote within a time limit, low
`
`spreads, the ability to trade in small amounts, and 24/7 availability. EX1001,
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`3:23-33. As I explain in more detail below, however, none of these features were
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`technical innovations over the state of the art. See infra, §§VI.B-C, VIII.A. The
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`two-step protocol touted by the specification as new was in fact a conventional
`
`feature of many early electronic trading systems, and it merely reflected
`
`longstanding human trading communications. Id. Offering low spreads (i.e. the
`
`difference between the current buy and sell prices) and allowing small trades are
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`simply business choices, not technical features of an electronic trading system, let
`
`alone innovations. Regardless, dealers routinely competed by offering low
`
`spreads, and retail trading systems were already shifting the business conventions
`
`of inter-dealer trading to allow for smaller trades. Id. Lastly, the foreign exchange
`
`market had long been a 24/7 market, and numerous electronic trading systems
`
`already provided 24/7 access. Id.
`
` Claims of the ’311 Patent
`
`21. The ’311 patent has seven claims, two of which are independent:
`
`claims 1 and 7. Independent claim 1 is illustrative and recites:
`
`1. A method of trading currencies over a computer network
`connecting a trading system server and at least one trading client
`system, comprising the steps of:
`(i) at the trading system server, determining and dynamically
`maintaining a plurality of current exchange rates, each current
`exchange rate relating to a pair of currencies and including a first price
`to buy a first currency of the pair with respect to a second currency of
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`the pair and a second price to sell the first currency of the pair with
`respect to the second currency of the pair;
`(ii) transmitting data from the trading system server to a trading
`client system, the transmitted data representing at least one current
`exchange rate at the time of the transmission;
`(iii) at the trading client system, displaying the first and second
`prices for each received current exchange rate to a user;
`(iv) at the trading client system, accepting input from the user
`identifying a pair of currencies the user desires to trade, an amount of
`at least one currency of the pair desired to be traded and a requested
`trade price at which it is desired to effect the trade;
`(v) transmitting the accepted input from the trading client system
`to the trading system server;
`(vi) at the trading system server, comparing the requested trade
`price to the respective first price or second price of the corresponding
`current exchange rate at that time and, if the respective first price or
`second price of the corresponding current exchange rate at that time is
`equal to or better than the requested trade price, effecting the trade at
`the corresponding respective current exchange rate first price or second
`price and if the corresponding current exchange rate is worse than the
`requested trade price, refusing the trade; and
`(vii) transmitting from the trading system server to the trading
`client system an indication of whether the trade was refused or
`transacted and, if transacted, an indication of the price the trade was
`transacted at.
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`22.
`
`Independent claim 7 recites similar limitations but presents essentially
`
`the same steps from only the server’s perspective, whereas claim 1 also includes
`
`certain intervening steps from the client’s perspective. In particular, steps (iii)-(v)
`
`of claim 1 describe a client system displaying prices, accepting user input, and
`
`transmitting the accepted input to the server, while step (iii) of claim 7 simply
`
`describes the server “receiving input from a user of the trading client system…”
`
`where the user’s “input” is the same as recited in claim 1. Independent claims 1
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`and 7 thus reflect essentially the same method from slightly different perspectives.
`
`Dependent claims 2-6 depend directly or indirectly from claim 1 and further recite
`
`routine aspects of conventional orders such as limit orders, which I discuss in more
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`detail below in §VI.B.3.
`
`
`
`Prosecution History of the ’311 Patent
`
`23.
`
`I have been advised that the examination process, or prosecution
`
`history, of the application that led to the ’311 patent may be relevant to my
`
`analysis of the patentability of the claims. I understand that the application that led
`
`to the ’311 patent was filed on December 4, 2006. EX1001 (the ’311 patent),
`
`Cover. I understand that the ’311 patent is a continuation of U.S. Patent
`
`Application No. 09/858,610, filed on May 16, 2001, which has issued as U.S.
`
`Patent No. 7,146,336 (“the ’336 patent”; submitted here as EX1002). EX1001 (the
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`’311 patent), Cover. I understand that the ’311 patent further claims priority to
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`U.S. Provisional Patent Application No. 60/274,174, filed on March 8, 2001 (“the
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`’174 provisional”; submitted here as EX1003). EX1001 (the ’311 patent), Cover.
`
`V. LEVEL OF ORDINARY SKILL AND RELEVANT TIME
`
`24.
`
`I have been advised that “a person of ordinary skill” is a hypothetical
`
`person in the relevant field at a particular time to whom one could assign a routine
`
`task with reasonable confidence that the task would be successfully carried out. I
`
`have been advised that, for the purposes of my analysis, I should assume that the
`
`relevant time is March 8, 2001.1
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`25. By virtue of my education, experience, and training, I am familiar
`
`with the ordinary level of skill in the art of the ʼ311 patent. In my opinion, the
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`person of ordinary skill would include someone who had, through education or
`
`practical experience, obtained a working knowledge of electronic trading systems
`
`
`1 I understand that, during prosecution of the application that issued as the ’311
`
`patent, OANDA attempted to prove a date of invention several months earlier than
`
`March 8, 2001. EX1004 (’311 File History), 41-49. However, even if the relevant
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`time period were several months earlier, this would not change the opinions that I
`
`provide herein, because the aspects of the art that I identify as routine or
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`conventional did not meaningfully change during 2000 and 2001.
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`from both the computer science and finance perspectives. This would include
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`someone who had, through education or practical experience, the equivalent of a
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`bachelor’s degree in computer science, information systems, or a related field, and
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`at least two years of work experience developing electronic trading systems. This
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`would also include a person who had, through education or practical experience,
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`the equivalent of a bachelor’s degree in finance, economics, or a related field, and
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`who had obtained knowledge of computer systems equivalent to that described
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`above. Regardless of the basis of this person’s knowledge, the person of ordinary
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`skill would have been familiar with the currency trading practices and the aspects
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`of electronic currency trading systems that I describe in §§VI.B-C, as well as
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`analogous practices and electronic systems used for other asset classes.
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`VI. THE STATE OF THE ART
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`26.
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`In my opinion, and as explained in further detail below, the claims of
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`the ’311 patent, viewed as a whole, do not identify anything new or significantly
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`different from what was already known to individuals of ordinary skill in the field
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`as of March 8, 2001.
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`27.
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`In the following sections, I provide a brief overview of the origins of
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`currency trading, standard currency trading practices, and the computer technology
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`used in currency trading systems and other electronic trading systems. Throughout
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`this discussion, I cite to contemporaneous publications describing market practices
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`and various electronic systems that confirm my understanding, based on my
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`experience, of the currency trading field before March 2001. I also cite to certain
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`documents that published after March 2001 that describe currency trading practices
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`and systems that existed prior to March 2001. These documents also confirm my
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`understanding, based on my experience in the field, of the state of the art prior to
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`March 2001.
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` History of Currency Trading
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`28. Currency trading is the natural adjunct to the modern era of global
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`trade that began centuries ago. Long-distance trade in some form stretches back to
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`the stone age, and as different forms of currency were adopted by different
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`communities during subsequent eras, currency trading—also referred to as foreign
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`exchange—developed to establish relationships of value between these currencies.
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`29. The currency trading field also developed alongside global finance.
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`The start of the modern era of finance is most commonly attributed to England’s
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`search for a trade route to Asia and the Dutch spice trade in the 16th and early 17th
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`centuries. See EX1037 (Goetzmann), 316-19. These pursuits involved voyages
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`that were lengthy, risky, and expensive, which complicated efforts to raise capital
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`to fund the expeditions. In each case, funding was achieved by selling shares in a
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`company to groups of investors. Notably, shares of the Dutch East India Company
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`were eventually traded on the first stock market, the Amsterdam Exchange, which
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`created a physical market to bring together buyers and sellers of various assets. Id.
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`The liquidity offered by this exchange reduced risk to investors, making the
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`investments more valuable and enticing investors from other countries. These
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`foreign investors of course needed to convert their local currency into that of the
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`local market. Flourishing global trade therefore necessitated foreign currency
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`markets to support the merchants and investors of the day, a relationship that has
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`only grown stronger over the subsequent centuries as numerous other exchanges
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`and other types of global markets proliferated. See EX1013 (Iati), 6.
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` Currency Trading Markets and Standard Practices
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`30. Foreign currency transactions are commonly initiated as an adjunct to
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`a commercial transaction, such as a company importing goods from a foreign
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`country, a tourist paying for travel costs, or an investment in a foreign country
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`using loans that must be paid in the local currency (or the investor repatriating
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`earned profits and dividends). See EX1011 (Cross), 9-10. Additional liquidity is
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`provided by speculators (e.g., proprietary traders at investment banks, hedge funds,
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`other asset managers, and, more recently, individual traders) hoping to profit from
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`changes in currency values over time, and by dealers attempting to profit from the
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`spread (i.e., the difference between the current buy and sell price). See id., 10-11.
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`I discuss the various parties and their roles in more detail below in §VI.B.1.
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`31. Like other securities, currency trading involved several types of
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`instruments traded in different markets. For example, in “spot markets,”
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`currencies were traded for immediate value, though with a short settlement period
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`(typically up to two days after execution of the trade). See EX1011 (Cross), 9-10.
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`In “forward markets,” values are set immediately, but no funds moved until the
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`maturity date (e.g., three months, six months, or one year in the future, among
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`other timeframes). Id. Other markets involved currency options, futures contracts,
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`and swap agreements, though the ’311 patent does not address such instruments.
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`Unless I specify otherwise herein, I am referring to transactions in the spot or
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`forward markets. The foreign exchange market primarily operates over the counter
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`(“OTC”), meaning trades occur directly between parties without supervision by an
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`official exchange. Id., 21-22. This was true of all currency trading until the
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`1970’s, and it is still true for most types of currency trading, including the spot
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`market. Id.
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`32. Regardless of the instrument or the parties’ goals, a currency trade
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`generally involves two parties agreeing to trade a certain amount of one currency
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`for a certain amount of another currency (at slightly different rates, depending on
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`whether one is the buyer or seller). See EX1011 (Cross), 9-10. As Cross explains:
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`In the foreign exchange market there are always two prices for every
`currency—one price at which sellers of that currency want to sell, and
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`another price at which buyers want to buy. A market maker is
`expected to quote simultaneously for his customers both a price at
`which he is willing to sell and a price at which he is willing to buy
`standard amounts of any currency for which he is making
`a market.
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`Id., 32.
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`33. As a simple example, one US dollar (USD) might buy 100 Japanese
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`Yen. The ratio of one currency to the other is referred to as the exchange rate. As
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`the relative values of the currencies fluctuate over even short periods of time, the
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`advertised exchange rates also change. Global foreign exchange markets thus
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`involve parties dealing in various currency pairs, eac