Real-time settlement of securities trades over append-only ledgers

Abstract

Various of the disclosed embodiments concern systems and methods for expediting the settlement of securities traded on an exchange. A settlement system can generate electronic records of financial transactions by bundling a trade report, clearing instructions, etc., into a cryptographic ledger. The settlement system is also able to verify the source (e.g., broker, trader) of the order by using cryptographic hash functions. In some embodiments, a public/private key structure is used to validate whether transactions were made by a particular broker or trader. A validated, or matching, signature guarantees that a particular broker generated and authorized the order instructions. Consequently, brokers no longer require the opportunity to dispute order information in a trade and the traditional review period becomes unnecessary. If, however, the signature is not validated as matching, the trade falls back to the traditional three-day settlement process.

1 . A distributed system architecture for automatically clearing securities trades in real-time using immutable transaction logs thereby avoiding the classic T+3 trade settlement process comprising:
 a plurality of custodian nodes each populating secondary cryptographic append-only ledgers associated with the ownership of securities, and configured to receive trade reports that match up to cryptographically-signed instructions;   a plurality of exchange nodes configured to communicate with the plurality of custodian nodes and configured to deliver trade reports to the plurality of custodian nodes;   a cryptographic key generator for providing cryptographic keys to cryptographically-sign the cryptographically-signed instructions;   a distributed clearing server containing a primary cryptographic append-only ledger associated with trade records, the distributed clearing server in communication with the plurality of custodian nodes and configured to receive the trade reports and the cryptographically-signed instructions therefrom to append as data blocks, the distributed clearing server executing:
 a series of worker programs responsible for processing each trade clearing request; and 
   wherein the secondary cryptographic append-only ledgers supplement the primary cryptographic append-only ledger.   
     
     
         2 . The distributed system architecture of  claim 1 , further comprising:
 A plurality of trader nodes populating a plurality of tertiary append-only ledgers referencing specific assets; and   asset locking flags controlled by trader nodes configured to lock assets belonging to a given trader to a trade wherein locked assets cannot be withdrawn on the tertiary append-only ledgers.   
     
     
         3 . The distributed system architecture of  claim 1 , the distributed clearing server further comprising:
 a series of supervisor programs for allocating clearing requests to worker programs, ensuring each clearing request is only processed once, and that each clearing request is processed correctly, the series of supervisor programs configured in lambda architecture with the series of worker programs.   
     
     
         4 . The distributed system architecture of  claim 1 , wherein the plurality of custodian nodes are configured to execute on a plurality of custodian servers 
     
     
         5 . The distributed system architecture of  claim 1 , further comprising:
 an affirmation module in communication with the distributed clearing server configured to:
 tag the transaction as verified if the validation module determines the particular cryptographic signature is valid; and 
 tag the transaction as unverified if the validation module determines the particular cryptographic signature is invalid. 
   
     
     
         6 . The system of  claim 1 , wherein the distributed clearing server containing the primary cryptographic append-only ledger is supported by a plurality of clearing nodes, each clearing node is a receiving point for clearing requests, and upon receipt of a clearing request, each clearing node is configured to cryptographically insert the clearing request into the primary cryptographic append-only ledger and seek consensus with all other clearing nodes on the contents of the primary cryptographic append-only ledger. 
     
     
         7 . A method for expediting settlement of securities traded on an exchange, the method comprising:
 enabling, by an exchange module, an order and clearing instructions for a securities transaction to be cryptographically-signed by a broker device;   generating, by the exchange module, a trade report summarizing the securities transaction;   recording the trade report and the clearing instructions into data blocks on a distributed, append-only, cryptographic ledger along with other trade reports and other clearing instructions;   verifying the data blocks on the distributed, append-only, cryptographic ledger with a settlement system, wherein the settlement system is configured to verify the validity of the cryptographic signature used by the broker device; and   propagating the distributed, append-only, cryptographic ledger to smaller, side ledgers.   
     
     
         8 . The method of  claim 7 , wherein the exchange module is instantiated on the broker device. 
     
     
         9 . The method of  claim 7 , further comprising:
 flagging, by the exchange module, particular securities managed by a broker as locked for a trade where locked securities cannot be withdrawn from the securities transaction.   
     
     
         10 . A distributed system of append-only ledgers comprising:
 a primary ledger operated by a plurality of clearing nodes;   a plurality of secondary ledgers operated by a plurality of custodian nodes, the secondary ledgers supplement the primary ledger and contain data blocks describing the ownership of securities managed by a given financial custodian;   an order management module configured to receive trade requests and generate trade reports that identify securities described by the secondary ledgers ;   wherein the primary ledger is configured to receive trade reports and append trade instructions, appended trade instructions to the primary ledger are configured to filter down into the secondary ledgers associated with securities included in the trade reports.   
     
     
         11 . The distributed system of  claim 10 , further comprising:
 a plurality of tertiary ledgers operated by a plurality of trader nodes, the tertiary ledgers each supplement a specific secondary ledger and the primary ledger and contain data blocks describing the ownership of securities managed by a given trader.   
     
     
         12 . The distributed system of  claim 11 , wherein each tertiary ledger further comprises:
 a first level ledger corresponding to a given investment manager;   a plurality of second level ledgers each corresponding to a particular fund managed by the given investment manager;   a plurality of third level ledgers each corresponding to a particular trader's trades within the particular fund; and   wherein the trade reports that filter down into each tertiary ledger additionally filter down into the first level ledger, second level ledgers, and third level ledgers as identified by the trade reports.   
     
     
         13 . The distributed system of  claim 12 , wherein prior to generation of the trade reports, securities relevant to the trade reports are locked on the third level ledgers. 
     
     
         14 . The distributed system of  claim 10 , wherein errors in any of the ledgers are repaired by appending additional data blocks with the opposite effect of an erroneous data block. 
     
     
         15 . The distributed system of  claim 10 , wherein each node is maintained on a computer and the computer stores a complete copy of the ledger relevant to that node. 
     
     
         16 . The distributed system of  claim 15 , wherein each data block on each of the complete copies of the ledger includes an encrypted checksum such that corrupted or erroneous data blocks in each ledger are identifiable. 
     
     
         17 . A method for operating automatically clearing securities trades in real-time using immutable transaction logs comprising:
 generating, by exchange nodes, a trade report corresponding to order instructions signed with cryptographic keys;   receiving at one of a plurality of custodian nodes the trade report from an exchange node and populating a secondary cryptographic append-only ledger associated with the ownership of securities with the trade report;   receiving, by a distributed clearing server from a custodian node, clearing requests to process trade reports on a primary append-only ledger:   executing by the distributed clearing server a series of worker programs responsible for processing each trade clearing request the series of worker programs configured in lambda architecture; and   wherein the secondary cryptographic append-only ledgers supplement the primary cryptographic append-only ledger.   
     
     
         18 . The method of  claim 17 , further comprising:
 flagging, by trader nodes, particular assets belonging to a given trader as locked, wherein locked assets cannot be withdrawn from a trade.   
     
     
         19 . The method of  claim 17 , wherein the plurality of custodian nodes are configured to execute on a plurality of custodian servers 
     
     
         20 . The method of  claim 17 , further comprising:
 verifying, by the distributed clearing server, the cryptographic keys.   
     
     
         21 . The method of  claim 17 , wherein each node is maintained on a computer and the computer stores a complete copy of the ledger relevant to that node.