# US 8,788,403 B1 · Method and system for managing exchange traded funds using an intraday indicative value

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- Number: US 8,788,403 B1
- Document ID: US8788403B1
- Status: Granted
- Kind: B1
- Application number: 14/035,403
- Filed: 2013-09-24
- Published: 2014-07-17
- Granted: 2014-07-22
- Earliest claimed: 2005-04-06
- Assignees: Profund Advisors LLC
- Applicants: Profund Advisors LLC
- Inventors: William E. Seale; Taeyong Lee
- Web page: https://patentgrep.com/patent/US8788403B1

## CPC

- G06Q 40/04: Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
- G06Q 30/02: Marketing; Price estimation or determination; Fundraising
- G06Q 30/0201: Market modelling; Market analysis; Collecting market data
- G06Q 40/00: Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## Abstract

A computer implemented method, system, and software for calculating and using an intraday indicative value of a leveraged Bullish or Bearish exchange traded fund (“ETF”) for arbitrage purposes, includes calculating an intraday current value of all the equity securities in the ETF (applicable only to Bullish ETFs), calculating mark to market gains or losses of at least one derivative product, and retrieving an accumulated loss or gain of the at least one derivative product and other cash equivalent amounts. The intraday indicative value of the ETF is determined by combining the calculated intraday current value of all the equity securities (applicable only to Bullish ETFs), the accumulated loss or gain, the mark to market gains of the at least one derivative product and other cash equivalent amounts. The determined intraday value of the ETF is used, by a party, for arbitrage purposes.

## Claims

### Claim 1

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, cause the computing system to perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
determining, by the computing system, an intraday change in value of the at least one derivative product included in the ETF, the ETF also including at least one equity security;
retrieving, by the computing system, an accumulated value of the at least one derivative product, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
determining, by the computing system, the intraday indicative value of the ETF based on:
the accumulated value of the at least one derivative product; and
the intraday change in value of the at least one derivative product.

### Claim 2 (depends on 1)

The nontransitory computer-readable medium of claim 1, wherein the at least one equity security includes at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 3 (depends on 2)

The nontransitory computer-readable medium of claim 2, wherein determining the intraday indicative value of the ETF comprises determining the intraday indicative value of the ETF in near real time.

### Claim 4

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, cause the computing system to perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
determining, by the computing system, an intraday change in value of the at least one derivative product included in the ETF, the ETF also including at least one fixed-income security;
retrieving, by the computing system, an accumulated value of the at least one derivative product, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
determining, by the computing system, the intraday indicative value of the ETF based on:
the accumulated value of the at least one derivative product; and
the intraday change in value of the at least one derivative product.

### Claim 5

A system for calculating an intraday indicative value (IIV) of an exchange traded fund (“ETF”), the system comprising:
a communication device configured to receive an intraday indicative value (IIV) file, the IIV file comprising:
an intraday change in value of at least one derivative product;
a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day; and
cash equivalent amounts; and
a computing device configured to:
calculate an intraday ETF value by summing:
the intraday change in value of the at least one derivative product;
the daily accumulated change in value of the at least one derivative product; and
the cash equivalent amounts; and
divide the intraday ETF value by a total number of shares outstanding to obtain a current intraday per share value of the ETF.

### Claim 6 (depends on 5)

The system of claim 5, wherein the IIV file further comprises an intraday current value for at least one fixed-income security included in the ETF, and wherein the computing device is further configured to calculate the intraday ETF value by also summing the intraday current value for the at least one fixed-income security.

### Claim 7

A computer system, comprising:
a computing processor configured to:
process data for share creation and redemption and near-real time share valuation for an Exchange Traded Fund (“ETF”) that invests in at least one derivative product and at least one equity security; and
create an intraday indicative value (“IIV”) file for the ETF based on the data processed, the IIV file comprising an accumulated change in value of the at least one derivative product in which the ETF invests, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day;
a publication processor configured to:
publish the IIV file to an authorized participant such that the authorized participant can utilize the IIV file to calculate an intraday indicative value of the ETF; and
an order processor configured to receive a request to create or redeem a block of shares in the ETF.

### Claim 8 (depends on 7)

The computer system of claim 7, wherein the order processor is further configured to communicate with a settlement processor configured to execute the request based on a balancing amount.

### Claim 9 (depends on 8)

The computer system of claim 8, further comprising at least one electronic network coupling the order processor to a computer that issues the request, wherein the computer that issues the request is remote with respect to the settlement processor.

### Claim 10 (depends on 8)

The computer system of claim 8, wherein the order processor is further configured to communicate with a distributor processor configured to receive the request to create or redeem a block of shares and to forward the request to the order processor.

### Claim 11 (depends on 8)

The computer system of claim 8, wherein the published IIV file is configured for use by a share accounting processor configured to calculate a near-real time value of a share of the ETF based on near-real time value data for the at least one derivative product in which the ETF invests and a number of outstanding shares of the ETF.

### Claim 12 (depends on 8)

The computer system of claim 8, wherein the published IIV file is configured for use by a derivative valuation processor configured to determine a near-real time value for the at least one derivative product.

### Claim 13 (depends on 9)

The computer system of claim 9, wherein the at least one electronic network further couples the computer issuing the request to the settlement processor.

### Claim 14 (depends on 11)

The computer system of claim 11, wherein the near-real time value data for the at least one derivative product comprises a value of the at least one derivative product relative to the accumulated change in value of the at least one derivative product.

### Claim 15 (depends on 11)

The computer system of claim 11, wherein the near-real time value data for the at least one derivative product comprises a current marked-to-market value of the at least one derivative product.

### Claim 16 (depends on 7)

The computer system of claim 7, wherein the at least one equity security includes at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 17 (depends on 16)

The computer system of claim 16, wherein the order processor is further configured to communicate with a settlement processor configured to execute the request based on a balancing amount.

### Claim 18 (depends on 16)

The computer system of claim 16, wherein the published IIV file is configured for use by a derivative valuation processor configured to determine a near-real time value for the at least one derivative product.

### Claim 19 (depends on 17)

The computer system of claim 17, further comprising at least one electronic network coupling the order processor to a computer that issues the request, wherein the computer that issues the request is remote with respect to the settlement processor.

### Claim 20 (depends on 17)

The computer system of claim 17, wherein the order processor is further configured to communicate with a distributor processor configured to receive the request to create or redeem a block of shares and to forward the request to the order processor.

### Claim 21 (depends on 17)

The computer system of claim 17, wherein the published IIV file is configured for use by a share accounting processor configured to calculate a near-real time value of a share of the ETF based on near-real time value data for the at least one derivative product in which the ETF invests and a number of outstanding shares of the ETF.

### Claim 22 (depends on 21)

The computer system of claim 21, wherein the near-real time value data for the at least one derivative product comprises a value of the at least one derivative product relative to the accumulated change in value of the at least one derivative product.

### Claim 23 (depends on 21)

The computer system of claim 21, wherein the near-real time value data for the at least one derivative product comprises a current marked-to-market value of the at least one derivative product.

### Claim 24

A computer system, comprising:
a computing processor configured to:
process data for share creation and redemption and near-real time share valuation for an Exchange Traded Fund (“ETF”) that invests in at least one derivative product and at least one fixed-income security; and
create an intraday indicative value (“IIV”) file for the ETF based on the data processed, the IIV file comprising an accumulated change in value of the at least one derivative product in which the ETF invests, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day;
a publication processor configured to:
publish the IIV file to an authorized participant such that the authorized participant can utilize the IIV file to calculate an intraday indicative value of the ETF; and
an order processor configured to receive a request to create or redeem a block of shares in the ETF.

### Claim 25 (depends on 24)

The computer system of claim 24, wherein the order processor is further configured to communicate with a settlement processor configured to execute the request based on a balancing amount.

### Claim 26 (depends on 25)

The computer system of claim 25, further comprising at least one electronic network coupling the order processor to a computer that issues the request, wherein the computer that issues the request is remote with respect to the settlement processor.

### Claim 27 (depends on 25)

The computer system of claim 25, wherein the order processor is further configured to communicate with a distributor processor configured to receive the request to create or redeem a block of shares and to forward the request to the order processor.

### Claim 28 (depends on 25)

The computer system of claim 25, wherein the published IIV file is configured for use by a share accounting processor configured to calculate a near-real time value of a share of the ETF based on near-real time value data for the at least one derivative product in which the ETF invests and a number of outstanding shares of the ETF.

### Claim 29 (depends on 25)

The computer system of claim 25, wherein the published IIV file is configured for use by a derivative valuation processor configured to determine a near-real time value for the at least one derivative product.

### Claim 30 (depends on 26)

The computer system of claim 26, wherein the at least one electronic network further couples the computer issuing the request to the settlement processor.

### Claim 31 (depends on 28)

The computer system of claim 28, wherein the near-real time value data for the at least one derivative product comprises a value of the at least one derivative product relative to the accumulated change in value of the at least one derivative product.

### Claim 32 (depends on 28)

The computer system of claim 28, wherein the near-real time value data for the at least one derivative product comprises a current marked-to-market value of the at least one derivative product.

### Claim 33

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
retrieving an intraday current value for equity securities included in the ETF;
calculating an intraday change in value of at least one derivative product included in the ETF;
retrieving a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day;
determining the intraday indicative value of the ETF by combining:
the intraday current value for the equity securities;
the daily accumulated change in value of the at least one derivative product; and
the intraday change in value of the at least one derivative product;
comparing the intraday value of the ETF to a current market price of the ETF; and
identifying one or more intraday arbitrage opportunities based on the comparison,
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 34

A system for calculating an intraday indicative value (IIV) of an exchange traded fund (“ETF”), the system comprising:
a communication device configured to receive an intraday indicative value (IIV) file, the IIV file comprising:
(a) an intraday current value for equity securities included in the ETF;
(b) a notional value of at least one derivative product included in the ETF;
(c) a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day; and
(d) cash equivalent amounts; and
a computing device configured to:
(i) calculate an intraday change in value of the at least one derivative product;
(ii) determine an intraday indicative value of the ETF by combining:
the intraday current value for the equity securities;
the daily accumulated change in value of the at least one derivative product; and
the intraday change in value of the at least one derivative product;
(iii) compare the intraday indicative value of the ETF to a current market price of the ETF on a per share basis; and
(iv) identify one or more intraday arbitrage opportunities based on the comparison,
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 35

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
retrieving an intraday current value for equity securities included in the ETF;
calculating an intraday change in value of at least one derivative product included in the ETF;
retrieving a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day; and
determining the intraday indicative value of the ETF by combining:
the intraday current value for the equity securities;
the daily accumulated change in value of the at least one derivative product; and
the intraday change in value of the at least one derivative product,
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 36 (depends on 35)

The nontransitory computer-readable medium of claim 35, wherein the method further comprises:
calculating an intraday ETF value by summing:
the intraday current value for the equity securities;
the daily accumulated change in value of the at least one derivative product;
the intraday change in value of the at least one derivative product; and
an estimated cash amount including swap costs; and
dividing the intraday ETF value by a total number of shares outstanding to obtain a current intraday per share value of the ETF.

### Claim 37 (depends on 36)

The nontransitory computer-readable medium of claim 36, wherein calculating the intraday ETF value comprises calculating the intraday ETF value in near real time.

### Claim 38 (depends on 36)

The nontransitory computer-readable medium of claim 36, wherein the method further comprises:
conducting an arbitrage transaction if the current intraday per share value of the ETF and a current market price of the ETF differ by more than a predetermined threshold value.

### Claim 39 (depends on 35)

The nontransitory computer-readable medium of claim 35, wherein the method further comprises:
calculating a balancing amount for at least one of ETF share creation or ETF share redemption, the balancing amount comprising the intraday change in value of the at least one derivative product.

### Claim 40

A system for calculating an intraday indicative value (“IIV”) of an exchange traded fund (“ETF”), the system comprising:
a communication device configured to:
receive an IIV file, the IIV file comprising:
(a) an intraday current value for equity securities included in the ETF;
(b) a notional value of at least one derivative product included in the ETF;
(c) a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day;
and (d) cash equivalent amounts; and
a computing device configured to:
(i) calculate an intraday change in value of the at least one derivative product; and
(ii) determine an intraday indicative value of the ETF by combining:
the intraday current value for the equity securities;
the daily accumulated change in value of the at least one derivative product; and
the intraday change in value of the at least one derivative product,
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 41

A computer system for calculating an intraday indicative value (“IIV”) of an exchange traded fund (“ETF”), the computer system comprising:
a communication processor configured to receive an intraday indicative value (“IIV”) file, the IIV file comprising:
a closing value for equity securities included in the ETF;
an accumulated value of at least one derivative product in which the ETF is invested, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
a computing processor configured to determine an intraday indicative value of the ETF based on intraday value information regarding the at least one derivative product,
wherein the intraday value information regarding the at least one derivative product comprises the accumulated value of the at least one derivative product and an intraday change in value of the at least one derivative product, and
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 42

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, cause the computing system to perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
retrieving, by the computing system, intraday performance information regarding the equity securities included in the ETF;
determining, by the computing system, an intraday change in value of at least one derivative product included in the ETF;
retrieving, by the computing system, an accumulated value of the at least one derivative product, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
determining, by the computing system, the intraday indicative value of the ETF based on:
the intraday performance information regarding the equity securities;
the accumulated value of the at least one derivative product; and
the intraday change in value of the at least one derivative product,
wherein the equity securities include at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 43

A computer system, comprising:
a computing processor configured to:
process data for share creation and redemption and near-real time share valuation for an exchange traded fund (“ETF”) that invests in at least one derivative product; and
create an intraday indicative value (“IIV”) file for the ETF based on the data processed, the IIV file comprising an accumulated change in value of the at least one derivative product in which the ETF invests, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
a publication processor configured to:
publish the IIV file to an authorized participant such that the authorized participant can utilize the IIV file to calculate an intraday indicative value of the ETF,
wherein the ETF also invests in at least one equity security, the at least one equity security including at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund.

### Claim 44

A nontransitory computer-readable medium, having instructions recorded thereon which, when executed on a computing system, perform a method for calculating an intraday indicative value of an exchange traded fund (“ETF”), the method comprising:
calculating, by the computing system, an intraday change in value of at least one derivative product included in the ETF;
retrieving, by the computing system, a daily accumulated change in value of the at least one derivative product, wherein the daily accumulated change includes a gain or loss of the at least one derivative product during a previous trading day;
calculating, by the computing system, a net asset value of the ETF by summing:
the daily accumulated change in value of the at least one derivative product;
the intraday change in value of the at least one derivative product; and
an estimated cash amount; and
dividing, by the computing system, the net asset value of ETF by a total number of shares outstanding to obtain a current intraday indicative value per share for the ETF,
wherein the ETF further includes at least one equity security, the at least one equity security including at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund, and the method further comprises:
retrieving, by the computing system, an intraday current value for the at least one equity security included in the ETF,
wherein calculating the net asset value of the ETF includes summing:
the intraday current value for the at least one equity security;
the daily accumulated change in value of the at least one derivative product;
the intraday change in value of the at least one derivative product; and
the estimated cash amount, and
wherein the estimated cash amount includes swap costs.

### Claim 45

A computer system, comprising:
a computing server configured to periodically create an intraday indicative value file (“IIV File”) for an exchange traded fund (“ETF”), the IIV File comprising:
a notional value of at least one derivative product in which the ETF invests;
an accumulated loss or gain of the at least one derivative product, wherein the accumulated value includes a gain or loss of the at least one derivative product during a previous trading day; and
other cash equivalent amounts; and
a publication server configured to periodically publish, over a network, the IIV File, such that an authorized participant can use the IIV File to calculate an intraday indicative value of the ETF,
wherein the ETF invests in at least one equity security, the at least one equity security including at least one of a share of a stock, a share of a mutual fund, or a share of another exchange traded fund, and
wherein the IIV file includes an intraday current value for the at least one equity security.

### Claim 46 (depends on 45)

The computer system of claim 45, further comprising a security publication processor configured to publish an identification of the at least one equity security.

### Claim 47 (depends on 45)

The computer system of claim 45, wherein the at least one derivative product comprises at least one of a swap contract, a forward contract, a futures contract, or an options contract.