Automated systems for calibrating and managing a security-based deferred compensation incentive plan

A system for calibrating and managing a deferred compensation plan by a plan sponsor, wherein the plan includes, for each plan participant (i) phantom sponsor securities, (ii) phantom peer securities, and (iii) phantom investment assets, in reference to (i) sponsor securities, (ii) peer securities, and (iii) investment assets, respectively, the system comprising a plan administration computer including a processor and a non-transitory computer-readable medium, the non-transitory computer-readable medium storing instructions which, when executed by the processor, cause the processor to perform operations comprising:

• (a) maintaining phantom account data for the plan participants;
• (b) maintaining a periodically updated database of total return data;
• (c) transmitting a first instruction to a financial transactions engine that causes the financial transactions engine to automatically enter a bookkeeping debit entry of a predetermined amount of phantom sponsor securities to a phantom account of the plan participant to yield debit-entered phantom sponsor securities, wherein the bookkeeping debit-entry of phantom sponsor securities constitutes a long investment position and a security-based deferred compensation incentive award, and wherein the award has a fair market value;
• (d) operating on the total return database to determine quantities of a plurality of peer securities in which to establish a short investment position, to yield determined quantities of phantom peer securities, wherein the peer securities are distinct from the sponsor securities, according to a statistical procedure that fits N parameters, β1, . . . , βN, corresponding to N peer securities, over a sample of T time periods, to the following linear model:
• Rtsponsor=β1Rtpeer,1+ . . . +βNRtpeer,N+εt
• wherein Rtsponsor is the total return, including dividends, interest, and other income, of a fixed amount invested in the sponsor security during period t=1, . . . , T;
• wherein Rtpeer,n is the period total return of peer security n=1, . . . , N;
• and wherein εt is a statistical error term;
• and
• wherein the quantity of each phantom peer security to be entered as a bookkeeping credit entry, Qn, corresponds to:
• Q
• n
• =
• (
• β
• n
• P
• n
• )
• *
• (
• Q
• sponsor
• ⁢
• P
• sponsor
• )
• where Qsponsor and Psponsor are the respective quantity and price of the debit-entered Le phantom sponsor securities, and where βn and Pn are the respective estimated parameter and price of phantom peer security n at the time the short investment position is established;
• and
• (e) transmitting a second instruction to the financial transactions engine that causes the financial transactions engine to automatically enter a bookkeeping credit entry of the determined quantities of phantom peer securities to the phantom account of the plan participant, thereby establishing a short investment position in the plurality of peer securities, and to yield credit-entered phantom peer securities;
• and
• (f) transmitting a third instruction to the financial transactions engine that causes the financial transactions engine to automatically enter a bookkeeping debit entry of an amount of phantom investment assets that were previously selected by the plan participant to the phantom account of the plan participant, such that the fair market value of the incentive award remains the same;
• (g) periodically rerunning the statistical procedure to yield recalibrated quantities of phantom peer securities to be maintained as a bookkeeping credit entry in the phantom account of the plan participant;
• (h) transmitting a fourth instruction to the financial transactions engine that causes the financial transactions engine to enter a bookkeeping credit or debit entry, respectively, of phantom peer securities to the phantom account of the plan participant, such that the balances of credit-entered phantom peer securities is equalled to the recalibrated quantities of phantom peer securities;
• and
• (i) transmitting a fifth instruction to the financial transactions engine that causes the financial transactions engine to enter a bookkeeping debit or credit entry, respectively, of phantom investment assets, which were previously selected by the plan participant, to the phantom account of the plan participant.

A system for calibrating and managing a deferred compensation plan by a plan sponsor, wherein the plan includes, for each plan participant (i) sponsor securities, (ii) a total return swap in reference to peer securities, and (iii) a total return swap in reference to investment assets, the system comprising a plan administration computer including a processor and a non-transitory computer-readable medium, the non-transitory computer-readable medium storing instructions which, when executed by the processor, cause the processor to perform operations comprising:

• (a) maintaining account data for the plan participants;
• (b) maintaining a periodically updated database of total return data;
• (c) transmitting a first instruction to a financial transactions engine that causes the financial transactions engine to automatically contribute a predetermined amount of sponsor securities to an account of the plan participant to yield a contribution of sponsor securities, wherein the contribution of sponsor securities constitutes a long investment position and a security-based deferred compensation incentive award, wherein the award has a fair market value;
• (d) operating on the total return database to determine quantities of a plurality of peer securities in which to establish a short investment position to yield determined quantities of peer securities, wherein the peer securities are distinct from the sponsor securities, according to a statistical procedure that fits N parameters, β1, . . . , βN, corresponding to N peer securities, over a sample of T time periods, to the following linear model:
• Rtsponsor=β1Rtpeer,1+ . . . +βNRtpeer,N+εt
• wherein Rtsponsor is the total return, including dividends, interest, and other income, of a fixed amount invested in the sponsor security during period t=1, . . . , T;
• wherein Rtpeer,n is the period total return of peer security n=1, . . . , N;
• and wherein εt is a statistical error term;
• and
• wherein the quantity of each peer security in which a short investment position is to be established, Qn, corresponds to:
• Q
• n
• =
• (
• β
• n
• P
• n
• )
• *
• (
• Q
• sponsor
• ⁢
• P
• sponsor
• )
• where Qsponsor and Psponsor are the respective quantity and market price of the contributed sponsor securities, and where βn and Pn are the respective estimated parameter and market price of peer security n at the time the short investment position is established;
• (e) transmitting a second instruction to a swap administration engine that causes the swap administration engine to automatically contract on behalf of the plan participant for a total return swap agreement with a swap dealer for a short investment position in the determined quantities of peer securities;
• (f) transmitting a third instruction to the swap administration engine that causes the swap administration engine to automatically contract on behalf of the plan participant for a total return swap agreement with a swap dealer for a long investment position in an amount of investment assets that were previously selected by the plan participant, such that no further capital contributions to the account of the plan participant are required such that the fair market value of the incentive award remains the same;
• (g) periodically rerunning the statistical procedure to yield recalibrated quantities of peer securities, in which a short investment position is to be maintained;
• (h) transmitting a fourth instruction to the swap administration engine that causes the swap administration engine to contract for a total return swap agreement, or novate the existing total return swap agreement, with respect to the account of the plan participant, such that the balances of peer securities in which a short investment position is maintained is equalled to the recalibrated quantities of peer securities;
• and
• (i) transmitting a fifth instruction to the swap administration engine that causes the swap administration engine to contract for a total return swap agreement, or novate the existing total return swap agreement, with respect to the account of the plan participant, for a long investment position in an amount of investment assets, which were previously selected by the plan participant.