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| Authored by: Anonymous on Tuesday, July 10 2012 @ 10:16 AM EDT |
I thought of the services offered by The Poor Fellow-Soldiers of Christ and the
Temple of Solomon, before the burning of him who called the Pope to hell.
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| Authored by: Wol on Tuesday, July 10 2012 @ 05:52 PM EDT |
Unfortunately now, a lot of people seem to have redefined "real time"
as "online" or "immediate".
Why oh why do people think they have to take words with clearly understood
meanings, and pollute them to mean something else that has a clearly understood
word of its own!
Cheers,
Wol[ Reply to This | Parent | # ]
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| Authored by: Anonymous on Wednesday, July 11 2012 @ 06:15 AM EDT |
Actually, Swift only transmits the orders using a secure messaging protocol.
Settlement is not part of its service portfolio...[ Reply to This | Parent | # ]
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| Authored by: sproggit on Thursday, July 12 2012 @ 02:53 AM EDT |
hardmath, I can see where the idea and the similarities might occur to you, but
in reality the claims of this patent are significantly different from the
services offered by SWIFT.
First, looking at the description of the
patent, we find the following text:-
"This invention relates
to methods and apparatus, including electrical computers and data processing
systems applied to financial matters and risk management. In particular, the
invention is concerned with the management of risk relating to specified, yet
unknown, future events. "
This is distinct and different
from the services offered by SWIFT, such as InterACT, FileACT and SWIFTNet Mail,
although there is in fact a SWIFTNet CLS Third Party Service, but this is
actually a gateway link between SWIFT and CLS
Bank.
Oversimplifying...
What SWIFT does is move money and
data between banks. Historically this was done using SWIFT's proprietary MT
(MessageType) formatting, but this is now being replaced with an ISO standard
based on XML. Using SWIFT services, you can send a simple electronic file of a
few hundred bytes to move essentially unlimited funds from one account in one
bank to a different account with another bank. Using related services, you can
send email, statements, or even attach other electronic
files.
Obviously the main participants on the SWIFT network are big
banks, but large corporations can now also get their own web-based SWIFT
workstation.
The important point from a SWIFT perspective is that
nothing happens to the transaction whilst it is traversing the SWIFT network
(indeed, this is part of SWIFTs value to the banks - the network guarantees to
deliver un-tampered messages, and to not lose anything en route).
CLS
Bank is different because it actually provides a currency exchange service... it
is I believe the biggest wholesale ForEx (Foreign Exchange) marketplace in the
world.
CLS bank is different because unlike SWIFT, where submissions to
the SWIFT cloud are immediately processed and released, CLS trades can be
"booked" in advance. Bookings can take multiple forms... for
example:-
- you might agree with a counter-party to exchange one
currency (dollars) for another (pounds sterling) whenever the exchange rate
falls within a specified range. With CLS, you can book the trade with those
criteria, post it to CLS [this requires both counter-parties to book matching
trades] and then CLS will execute the trade when the specified conditions
match
- you might agree a date and time for a trade with a
counter-party, essentially allowing CLS to act as an escrow agent for the span
of time between posting the trade and it's execution.
This second
example is a bit contrived because in practice CLS doesn't act like a
traditional escrow agent. In the original, once a party deposits funds in
escrow, they can't unilaterally pull them out again without the agreement of the
counter-party. With CLS bank (if I understand correctly), either party of a
pre-booked trade can cancel "their half" of the transaction and back out. If CLS
bank can't find a "match" on it's systems, then obviously it can't execute the
transaction, which will fail.
The reason for giving you so much detail
and the bit that makes this interesting is that the patent seems to wax lyrical
about how the unique invention is that it somehow is a method and apparatus for
predicting and managing future, unknown risks.
Bunkum, pure and simple
hogwash.
This patent seems to try and infer that just because the
operational rules of CLS trades allow participants to put restrictions on the
potential, future transaction (i.e. agreeing an exchange rate trigger, or a date
trigger) in advance of the actual transaction, that this somehow confers a risk
management feature to the user.
How, pray tell?
What if you
and I agree a trigger event will occur when the UK pound to US dollar rate hits
£1:$2, but this rate is never achieved? Our trade will sit on the books at
CLS forever...
What if we agree a trade on August 1st between the same
currencies, but on July 31st the rate drops from £1:$1.65 to £1:$5.00? [
Answer, great if you're the one receiving the dollar amount... ]
Before
we even get to the technical mechanisms of the patent, this is patent is
entirely specious in it's fundamental claim.
Right, having got that
hugely boring detour out of the way, let's have some fun attacking this from a
purely technical perspective...
The X/Open Group specified XA
Compliance years and years ago. XA, eXtended Architecture, denotes a system in
which data integrity can only be preserved when multiple, discrete but loosely
connected participating systems, remain synchronised with one another.
This standard in turn came about when data processing moved from an
all-in-one-box model typified by the traditional IBM mainframes and moved
instead to a distributed computing model that may involve more than one discrete
RDBMS database on more than one physical host. Preserving referential integrity
required all parties to this *data* transaction to subscribe to a particular
commit. Once the commit had been set up and agreed (Phase 1), the execute signal
would be released and each of the individual systems would perform their portion
of the transaction (Phase 2). This is where we got the name "2-Phase Commit"
from.
A number of technologies are XA-compliant... for obvious reasons
major databases feature highly on this list, as do certain items of middleware
such as IBM's WebSphere MQ.
What CLS Bank appear to be doing with this
patent is saying that the idea of taking "multi-stage commits" [as implemented
in XA systems] and applying it to foreign exchange trading... should somehow be
deemed a unique and innovative invention worthy of a patent.
Come
on... this is just hogwash...
One of the reasons that this is such a
specious claim will be apparent if you think about the original background from
which the CLS service came about. Try and picture it like this...
Back
in the day, banks need to exchange currencies for international deals. This is
something they did before electronic computers were mainstream. Then along came
computers and some of the steps could be automated. Then the X/Open Group
established XA. Bearing in mind that the distribution of databases being used by
multiple banks to perform this service for clients would be held by different
parties, and you can see that it would not take long for the technologists
working for each bank to say, "Gee... maybe we can use this XA technology to
build something that allows us to perform ForEx swaps with that other bank
safely..."
Then a little while later, when there is the design for
multiple point-to-point XA links between lots of major banks, and the design is
getting more like a plate of spaghetti every day, someone says,
"Hang
on... rather than create this endless number of discrete links to all our
counter-party banks, why don't we each have one link to a central broker. We can
put some intelligence in the broker and let them do the matching and routing...
You know, like we have one telephone line to an exchange, instead of discrete
wires to every number we might want to call..."
And thus CLS was
formed.
Did you know that CLS bank is actually owned by a number of
the major participant banks, as opposed to being some wholly discrete entity?
Ah... now we get to the interesting bit, to the reason for the patent
in the first place. Not every bank that uses CLS is a shareholder. So if
CLS increases it's fees, then the clients and "user" banks all have to pay more
in charges. However, the *shareholder* banks that own a portion of CLS get to
claw back those costs via the profits being made by CLS. The non-shareholder
banks are out of pocket.
So what would you do if you were a
non-shareholder bank?
Umm... how about setting up an alternative to the
CLS service? A ForEx PEPSI to rival CLS' "Cocoa Cola"???
Ah, but wait a
minute. CLS might want to keep the market cornered, and stop anyone else from
introducing their own brand of ForEx cola... But how could they do that?
Ah, how about filing a patent that describes the principles of ForEx
trading in such generic terms that pretty much anyone who participates in such
an activity can be said to infringe? And then maybe use that patent to control
potential competition?
You know, all this is starting to sound mighty
familiar...
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