System and Method for Assigning Responsibility for Trade Order Execution

Abstract

An embodiment of the present invention provides a system and method for a sponsoring organization to: (1) utilize a rules-based computer system to capture trade orders from sub-advisors (money management firms) in order to implement a pre trade compliance review process, thereby enabling the sponsoring organization to prevent the execution of trade orders by a sub advisor that violates securities laws and/or account restrictions; and (2) determine and assign, based on expected market impact of a trade order to buy or sell securities, whether responsibility (discretion over the decisions related to how, when and with whom a trade order is executed) for executing the trade order is assigned to the money management firm for an investment portfolio or to the sponsoring organization of that portfolio. Trade orders are categorized in real-time as “high touch” (significant effort and market impact) or “low touch” (insignificant effort and market impact).

What is claimed is: 
     
         1 . A computer-implemented method of trade message routing among a sponsoring organization, an asset management firm, and a plurality of trading organizations, the method comprising:
 receiving messages at an execution discretion assignment engine, the messages received through a computer-based order management system, the messages each containing data corresponding to a trade order from the asset management firm, and the data incorporating data from an account of the sponsoring organization in the order management system and including data of asset name and number of asset units,   wherein at least one of the order management system and the execution discretion assignment engine provides a computer-based graphical user interface and associated software program to asset management firms,   wherein the order management system is in communication with a plurality of first trading organizations designated by the asset management firm, and a plurality of second trading organizations designated by the sponsoring organization, and   wherein the first and second trading organizations each operate a respective soft dollar administration system that records total brokerage costs, execution costs, and soft dollar costs associated with the asset management firm;   for each message, suspending, by the order management system, the trade order associated with the each message to prevent the asset management firm from routing a trade order message associated with the trade order to a trading organization until receipt of a return report message corresponding to the trade order from the execution discretion assignment engine, the return report message instructing routing of the trade order to either the plurality of first trading organizations or the plurality of second trading organizations;   determining, with the execution discretion assignment engine, for each message, whether the data corresponding to the trade order indicates a low touch order expected to have low market impact or a high touch order expected to have high market impact;   when the data corresponding to the trade order indicates a high touch order:
 formatting, by the execution discretion assignment engine, the each message as a high touch return report message instructing routing of the high touch order to the plurality of first trading organizations, 
 routing the high touch return report message from the execution discretion assignment engine to the order management system, allowing the order management system to discontinue the suspending of the high touch order to allow execution of the high touch order, and 
 routing, by the order management system and based on the high touch return report message, a high touch order message associated with the high touch order to a first trading organization of the plurality of first trading organizations, for execution of the high touch order by the first trading organization, and for determination, by the soft dollar administration system of the first trading organization, of a first total brokerage cost for the high touch order for the sponsoring organization's account in the order management system based on a sum of the recorded execution and soft dollar costs associated with the asset management firm; and 
   when the data corresponding to the trade order indicates a low touch order:
 formatting, by the execution discretion assignment engine, the each message as a low touch return report message instructing routing of the low touch order to the plurality of second trading organizations, 
 routing the low touch return report message from the execution discretion assignment engine to the order management system, allowing the order management system to discontinue the suspending of the low touch order to allow execution of the low touch order, 
 implementing instructions, by the order management system receiving the low touch return report message, that prevent, in the absence of override instructions, routing of a low touch order message associated with the low touch order to a first trading organization of the plurality of first trading organizations, and 
 routing, by the order management system and based on the low touch return report message, the low touch order message associated with the low touch order to a second trading organization of the plurality of second trading organizations, for execution of the low touch order by the second trading organization, and for determination, by the soft dollar administration system of the second trading organization, of a second total brokerage cost for the low touch order for the sponsoring organization's account in the order management system based on the recorded execution cost associated with the asset management firm. 
   
     
     
         2 . The method of  claim 1 , further comprising, when the data corresponding to the trade order indicates a high touch order, receiving from the first trading organization a first report that indicates execution of the high touch order and the first total brokerage cost, and when the data corresponding to the trade order indicates a low touch order, receiving from the second trading organization a second report that indicates execution of the low touch order and the second total brokerage cost. 
     
     
         3 . The method of  claim 1 , wherein the order management system is the asset management firm's order management system. 
     
     
         4 . The method of  claim 1 , wherein determining whether the data corresponding to the trade order indicates a low touch order expected to have low market impact or a high touch order expected to have high market impact, comprises applying logical rules to market data to determine an expected market impact of the trade order. 
     
     
         5 . The method of  claim 1 , further comprising reviewing, by the order management system, the trade order using a rules-based compliance engine to prevent compliance violations. 
     
     
         6 . The method of  claim 1 , further comprising executing, by the first trading organization, the high touch order, and executing, by the second trading organization, the low touch order. 
     
     
         7 . The method of  claim 1 , further comprising discontinuing the suspending of the trade order upon receiving one of the high touch return report message and the low touch return report message from the execution discretion assignment engine. 
     
     
         8 . The method of  claim 1 , further comprising preventing, by the order management system, routing of the low touch order to the first trading organization. 
     
     
         9 . The method of  claim 8 , further comprising overriding, by the order management system, the preventing of the routing of the low touch order to the first trading organization. 
     
     
         10 . The method of  claim 1 , further comprising:
 conducting, by a compliance system associated with the order management system, a rules-based compliance review of a trade order for compliance violations prior to the trade order being sent to the execution discretion assignment engine;   conducting, by the compliance system associated with the order management system, a rules-based compliance review of the low touch order for compliance violations prior to sending the low touch order message associated with the low touch order to the second trading organization; and   conducting, by the compliance system associated with the order management system, a rules-based compliance review of the high touch order for compliance violations prior to sending the high touch order message associated with the high touch order to the first trading organization.   
     
     
         11 . The method of  claim 1 , further comprising conducting, by a compliance system associated with the order management system, a pre-trade compliance process that at least one of suspends and cancels a trade order determined to violate compliance rules and that releases a previously suspended trade order that no longer violates compliance rules. 
     
     
         12 . A system for trade message routing among a sponsoring organization, an asset management firm, and a plurality of trading organizations, the system comprising:
 a computer-based order management system,   wherein the order management system creates a trade order message containing data corresponding to a trade order from the asset management firm, the data incorporating data from an account of the sponsoring organization in the order management system and including data of asset name and number of asset units, and   wherein the order management system is in communication via a computer network with a plurality of first trading organizations designated by the asset management firm, and a plurality of second trading organizations designated by the sponsoring organization; and   a computer-based execution discretion assignment engine in communication with the order management system,   wherein the execution discretion assignment engine receives from the order management system the trade order message,   wherein the execution discretion assignment engine determines, for the trade order message, whether the data corresponding to the trade order indicates a low touch order expected to have low market impact or a high touch order expected to have high market impact,   wherein the order management system suspends the trade order associated with the trade order message to prevent the asset management firm from routing the trade order message to a trading organization until receipt of a return message report corresponding to the trade order from the execution discretion assignment engine,   wherein when the execution discretion assignment engine determines, for the trade order message, that the data corresponding to the trade order indicates a high touch order:
 the execution discretion assignment engine formats the trade order message as a high touch return report message instructing routing of the high touch order to the plurality of first trading organizations, 
 the execution discretion assignment engine routes the high touch return report message to the order management system, 
 the order management system receives the high touch return report message and discontinues the suspending of the high touch order to allow execution of the high touch order, and 
 the order management system routes, based on the high touch return report message, a high touch order message associated with the high touch order to a first trading organization of the plurality of first trading organizations, for execution of the high touch order by a trading system of the first trading organization, and for a determination, by a soft dollar administration system of the first trading organization, of a first total brokerage cost for the high touch order for the sponsoring organization's account in the order management system based on a sum of execution and soft dollar costs associated with the asset management firm recorded by the soft dollar administration system of the first trading organization, and 
   wherein when the execution discretion assignment engine determines, for the trade order message, that the data corresponding to the trade order indicates a low touch order:
 the execution discretion assignment engine formats the trade order message as a low touch return report message instructing routing of the low touch order to the plurality of second trading organizations, 
 the execution discretion assignment engine routes the low touch return report message to the order management system, 
 the order management system receives the low touch return report message and discontinues the suspending of the low touch order to allow execution of the low touch order and implements instructions that prevent, in the absence of override instructions, routing of a low touch order message associated with the low touch order to a first trading organization of the plurality of first trading organizations, and 
 the order management system routes, based on the low touch return report message, a low touch order message associated with the low touch order to a second trading organization of the plurality of second trading organizations, for execution of the low touch order by a trading system of the second trading organization, and for a determination, by a soft dollar administration system of the second trading organization, of a second total brokerage cost for the low touch order for the sponsoring organization's account in the order management system based on an execution cost associated with the asset management firm recorded by the soft dollar administration system of the second trading organization. 
   
     
     
         13 . The system of  claim 12 , further comprising the first trading organization and the second trading organization. 
     
     
         14 . The system of  claim 12 , wherein the execution discretion assignment engine determines whether the data corresponding to the trade order indicates a low touch order expected to have low market impact or a high touch order expected to have high market impact by applying logical rules to market data to determine an expected market impact of the trade order. 
     
     
         15 . The system of  claim 12 , wherein the order management system reviews the trade order using a rules-based compliance engine to prevent compliance violations. 
     
     
         16 . The system of  claim 12 , wherein a compliance system associated with the order management system conducts a rules-based compliance review of the trade order for compliance violations prior to routing the trade order message associated with the trade order to the execution discretion assignment engine. 
     
     
         17 . The system of  claim 12 , wherein a compliance system associated with the order management system conducts a rules-based compliance review of the low touch order for compliance violations prior to sending the low touch order message associated with the low touch order to the second trading organization, and conducts a rules-based compliance review of the high touch order for compliance violations prior to sending the high touch order message associated with the high touch order to the first trading organization. 
     
     
         18 . The system of  claim 12 , wherein a compliance system associated with the order management system conducts a pre-trade compliance process that at least one of suspends and cancels a trade order determined to violate compliance rules and that releases a previously suspended trade order that no longer violates compliance rules. 
     
     
         19 . A computer-implemented method of trade message routing among a sponsoring organization, an asset management firm, and a plurality of trading organizations, the method comprising:
 generating trade messages at an order management system, the messages each containing data corresponding to a trade order from the asset management firm, and the data incorporating data from an account of the sponsoring organization in the order management system and including data of asset name and number of asset units,   wherein the order management system provides a computer-based graphical user interface and associated software program to asset management firms,   wherein the order management system is in communication with a plurality of first trading organizations designated by the asset management firm, and a plurality of second trading organizations designated by the sponsoring organization, and   wherein the first and second trading organizations each operate a respective soft dollar administration system that records total brokerage costs, execution costs, and soft dollar costs associated with the asset management firm;   for each message, suspending the trade order associated with the each message to prevent the asset management firm from routing a trade order message associated with the trade order to a trading organization until directions are created to route the trade order to either the plurality of first trading organizations or the plurality of second trading organizations;   when the data corresponding to the trade order indicates a high touch order expected to have high market impact:
 formatting the each message as a high touch order message instructing routing of the high touch order to the plurality of first trading organizations, 
 releasing the suspension of the high touch order to allow execution of the high touch order, 
 implementing instructions that prevent, in the absence of override instructions, routing of a high touch order message associated with the high touch order to a second trading organization of the plurality of second trading organizations, and 
 routing the high touch order message to a first trading organization of the plurality of first trading organizations, for execution of the high touch order by the first trading organization, and for determination, by the soft dollar administration system of the first trading organization, of a first total brokerage cost for the high touch order for the sponsoring organization's account in the order management system based on a sum of the recorded execution and soft dollar costs associated with the asset management firm; and 
   when the data corresponding to the trade order indicates a low touch order expected to have low market impact:
 formatting the each message as a low touch order message instructing routing of the low touch order to the plurality of second trading organizations, 
 releasing the suspension of the low touch order to allow execution of the low touch order, 
 implementing instructions that prevent, in the absence of override instructions, routing of a low touch order message associated with the low touch order to a first trading organization of the plurality of first trading organizations, and 
 routing the low touch order message associated with the low touch order to a second trading organization of the plurality of second trading organizations, for execution of the low touch order by the second trading organization, and for determination, by the soft dollar administration system of the second trading organization, of a second total brokerage cost for the low touch order for the sponsoring organization's account in the order management system based on the recorded execution cost associated with the asset management firm. 
   
     
     
         20 . The method of  claim 19 , further comprising, when the data corresponding to the trade order indicates a high touch order, receiving from the first trading organization a first report that indicates execution of the high touch order and the first total brokerage cost, and when the data corresponding to the trade order indicates a low touch order, receiving from the second trading organization a second report that indicates execution of the low touch order and the second total brokerage cost.