Pricing mechanism for security valuation
View Patent ↗Techniques and systems for determining a valuation for securities that do not have an established valuation mechanism are described herein. Derivative securities based on underlying employee stock options where the maturity of the derivative security is tied to exercise and forfeiture behaviors of individuals owning the stock options are also described herein.
1. A computer-implemented method comprising:
determining, by a computer-implemented auction system, a market price of a derivative security that represents exposure to the economic value of an employee stock option by:
providing, by the computer-implemented auction system, to a potential investor, a maturity schedule that associates expected employee behavior with the performance of the derivative security;
receiving, by an exchange system interface port, bids or offers at a pre-determined time prior to the start of an auction, the received bids being based at least in part on the maturity schedule and the expected employee behavior;
determining, by the computer-implemented auction system, price information for the derivative security prior to a scheduled auction close;
disseminating, by the exchange interface port, the determined price information for the derivative security to auction participants; and
closing, by the computer-implemented auction system, the auction and executing on a computer orders and bids for the security at the determined price.
2. The method of claim 1 wherein the method receives multiple bids against a single offer.
3. The method of claim 1 wherein the method receives multiple offers and a single bid.
4. The method of claim 1 wherein the method receives multiple bids and multiple offers.
5. The method of claim 1 wherein the method receives a single bid and a single offer.
6. The method of claim 1 further comprising:
recording, in a non-volatile storage of the computer, settlement information of the derivative security based on the number of shares or a representation of a cash amount.
7. The method of claim 1 wherein the auction information includes a price, paired units, and unexecuted units at a determined price.
8. The method of claim 1 wherein the auction information is disseminated at a specified time, prior to the executing and information is posted at a first rate during a first period.
9. The method of claim 1 wherein an execution priority is determined based on price and timestamp of entered bids or offers.
10. The method of claim 1 wherein an amount of time monitoring prices of the security is increased when a percentage change in the price of the security prior to the release is greater than a threshold value during a predetermined interval prior to a scheduled close of the auction.
11. The method of claim 1 , further comprising posting information at a second rate during a second period.
12. A computer-implemented auction system comprising:
an auction engine, implemented by one or more computers and in communication with an exchange system interface port, configured to determine a market price of a derivative security that represents exposure to the economic value of an employee stock option by:
providing to a potential investor a maturity schedule that associates expected employee behavior with the performance of the derivative security;
receiving, by the exchange system interface port, bids or offers at a pre-determined time prior to the start of an auction, the received bids being based at least in part on the maturity schedule and the expected employee behavior;
determining price information for the derivative security prior to a scheduled auction close;
disseminating, via the exchange interface port, the determined price information for the derivative security to auction participants; and
closing the auction and executing orders and bids for the security at the determined price.
13. The auction system of claim 12 , wherein the auction engine is configured to receive multiple bids against a single offer.
14. The auction system of claim 12 , wherein the auction engine is configured to receive multiple offers and a single bid.
15. The auction system of claim 12 , wherein the auction engine is configured to receive multiple bids and multiple offers.
16. The auction system of claim 12 , wherein the auction engine is configured to receive a single bid and a single offer.
17. The auction system of claim 12 , further comprising a memory, wherein the auction engine is configured to record in the memory information of the derivative security based on the number of shares or a representation of a cash amount.
18. The auction system of claim 12 , wherein the auction information includes a price, paired units, and unexecuted units at a determined price.
19. The auction system of claim 12 , wherein the auction engine is configured to disseminate the auction information at a specified time, prior to the execution, and post information at a first rate during a first period.
20. The auction system of claim 19 , wherein the auction engine is configured to post information at a second rate during a second period.
21. The auction system of claim 12 , wherein the auction engine is configured to determine an execution priority based on a price and a timestamp of entered bids or offers.
22. The auction system of claim 12 , wherein the auction engine is configured to increase an amount of time monitoring prices of the security when a percentage change in the price of the security prior to the release is greater than a threshold value during a predetermined interval prior to a scheduled close of the auction.