US 8,131,632 B2Granted

Multi-basket structure for exchange traded fund (ETF)

AssigneeBlackRock Institutional Trust Company, N.A.

InventorsGregory A. Friedman, Tony E. Kelly, Joanna M. Callinicos

Life of this patent

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Abstract

An exchange-traded fund (ETF) has a multi-basket structure that allows shares of the ETF to be created using a different basket of assets than the basket of assets required to redeem shares of the ETF. A method for administering a multi-basket ETF comprises providing shares of the ETF to investors in exchange for assets defined in a published creation basket, providing assets defined in a published redemption basket to investors in exchange for shares of the ETF, and publishing a holdings basket that represents the assets held in the ETF. The multi-basket ETF can be used to implement an ETF holding assets that have a relatively low liquidity and/or accessibility. The multi-basket structure also enables financial strategies such as to minimize transaction costs, increase tax efficiency, access less liquid or less accessible markets or securities, and meet regulatory requirements and ETF investment objectives.

Claims23

Dependent claims

A method for administering a multi-basket exchange traded fund (ETF), comprising:

receiving in a computer system information specifying a creation basket of assets and a redemption basket of assets, wherein the redemption basket and the creation basket specify different assets;
storing an electronic portfolio composition file on a non-transitory computer readable medium by the computing system, the portfolio composition file identifying the specified creation basket of assets and the specified redemption basket of assets;
electronically receiving in a trading system a creation request from a first authorized participant;
responsive to the creation request, initiating an ETF creation transaction on a primary market by the trading system, the ETF creation transaction providing shares of the ETF from a fund advisor to the first authorized participant in exchange for the assets in the creation basket specified in the portfolio composition file;
electronically receiving a redemption request from a second authorized participant at the trading system;
and
responsive to the redemption request, initiating an ETF redemption transaction on the primary market by the trading system, the ETF redemption transaction providing the assets in the redemption basket specified in the portfolio composition file to the second authorized participant in exchange for shares of the ETF.

4 more elements

A method for administering an exchange traded fund (ETF), the method comprising:

for each of a number of trading days, determining a creation basket, a redemption basket, and a holdings basket, wherein the redemption basket and the creation basket specify different assets;
storing a portfolio composition file on a non-transitory computer readable medium by a computing system, the portfolio composition file specifying the determined creation basket and redemption basket;
for each of one or more of the trading days, accepting creation orders received from one or more authorized participants at a trading system, each creation order requesting to create an aggregation unit for the ETF based on the creation basket for that trading day, and responsive to one or more of the creation orders order initiating an ETF creation transaction on a primary market by the trading system, the ETF creation transaction providing shares of the ETF from the fund advisor to the first authorized participant in exchange for the assets in the creation basket specified in the portfolio composition file for that trading day;
and
for each of one or more of the trading days, accepting redemption orders received from one or more authorized participants at the trading system, each redemption order requesting to redeem an aggregation unit for the ETF based on the redemption basket for that trading day, and responsive to one or more of the creation orders initiating an ETF redemption transaction on the primary market by the trading system, the ETF redemption transaction providing the assets in the redemption basket specified in the portfolio composition file for that trading day to the second authorized participant in exchange for shares of the ETF.

2 more elements

Dependencies are inferred from the claim text.

Facts

Application: 13/053,710Filed 22 Mar 2011 · continuation
Priority: 3 Jul 2007
Published: US 2011/0196777 A111 Aug 2011
Granted: 6 Mar 2012
Term ends: Not estimatedThe source records don’t support an estimate.

Classification5 codes

G06Q 40/06
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: asset management; Financial planning or analysis
G06Q 40/04
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: trading; Exchange, e.g. stocks, commodities, derivatives or currency…
G06Q 40/0545
Trading investment funds, e.g. mutual funds or hedge funds: trading exchange traded funds
G06Q 40/10
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: tax strategies

Family

Application60/947,722Us provisional application · filed 3 Jul 2007
Application12/168,036Parent of this continuation · filed 3 Jul 2008
US 2011/0196777 A1Pre-grant publication · published 11 Aug 2011
US 7,937,316 B2Parent of this continuation
US 2009/0063366 A1Published application
US 8,131,632 B2This patent

From the US filing history. Foreign family members aren’t listed.