Claims:We Claim:
1. A system for facilitating securities trading comprising:
a. a computer;
b. a customer rules database accessible by said computer;
c. a set of customer risk assessment rules stored on said customer rules database;
d. software executing on said computer for receiving customer information from a customer
e. a trade rules database accessible by said computer;
f. a set of trade risk assessment rules stored on said trade rules database;
g. software executing on said computer for receiving trade details from a customer for a proposed trade
h. and software executing on said computer for automatically approving the proposed trade if the customer risk rating and the trade risk rating bear a predetermined relationship to one another.
2. The system for facilitating securities trading of Claim 1 wherein the customer risk rating and the trade risk rating include numerical indications of associated risk.
3. The system for facilitating securities trading of Claim 2 wherein the predetermined relationship between the customer risk rating and the trade risk rating for receiving automatic approval of the proposed trade is that the
customer risk rating be no greater than the trade risk rating.
4. The system for facilitating securities trading of Claim 1 wherein the system determines the customer risk rating and evaluates the relationship between the customer risk rating and the trade risk rating, for each party to the proposed trade.

, Description:Technical Field of the Invention
The present invention relates to an improved system and method for trading financial instruments such as bonds, as well as fractional portions of traded instruments.
Background of the Invention
The securities markets have not been hospitable to individual investors. This is especially true of the bond market. It is essentially an over-the-counter market, i.e., there is in practice no central exchange for bond trading. The prospects of a national bond exchange are dim since broker dealers are presently enjoying large profits through the status quo.
Fewer corporations are now listing their bonds, even though the listing service is free to stock-listed companies.
As a group, individual investors have an enormous asset base. At this size of trade, pricing for, and availability of, bonds is unattractive and therefore trading and participation by individual investors in the bond market is relatively infrequent. While there exists an active "odd-lot"
market, that is, a less-than-institutional sized market, for individual bond trades, the choices are limited (e.g., choice of issuer, credit rating, maturity, interest rate, call protection, etc.) unless the investment is an "individual round lot”. Even at this larger size of trade, however, attractive prices and bond selection are not assured. For individual investors, the spreads are large, with 2 to 6 points (i.e., % of principal amount) being common, and, when coupled with commission charges, the return-on-investment (ROl) can be significantly compromised. In addition, the time for execution ranges on the order of days rather than seconds as in the more liquid equity markets.

Individual investors have the same fixed costs in trading bonds as institutional investors. Such costs have also discouraged trading and direct ownership of bonds by individual investors.
Accordingly, the typical investors in the bond markets have been large institutional investors, primarily pension funds, mutual funds and insurance companies.
Another problem with the current securities markets is that there is currently no vehicle by which securities holders may readily trade securities, or fractional shares thereof, directly with one another. Buyers and sellers must, therefore, use an intermediate broker and incur the high fees and costs associated therewith. As discussed above, such fees and costs can be prohibitive, particularly when relatively small transactions are involved. Furthermore, as there is no central exchange for bonds, it may be difficult for a buyer who is seeking to purchase a specific bond to locate a seller who is selling that specific bond. This is particularly true when only a small number of bonds, or a fractional share of a bond, are at issue. Thus, the bond market is an illiquid market in that even if an investor is able to purchase a small number of bonds, or a fractional share of a bond, that investor may not readily sell such bonds if cash is quickly needed or desired. Ownership of bonds, therefore, has not been regarded as an attractive alternative to cash-on-hand for the individual investor.
A further problem with the current bond market relates to longstanding securities industry regulations which require that the firm through which the trade is made ensure that the customer's investing activity is suitable for that customer based upon the customer's financial situation and investing expertise.
Traditionally, these regulations have been met by intermediate brokers by manually reviewing and approving each trade prior to settlement. As far as the inventor is aware, this approach continues today with known Internet-based trading systems, such as those made available by E*Trade, Charles Schwab and Fidelity, with back office staff reviewing each order and manually approving same. Such manual review and approval increase the costs associated with securities trading.
What is desired, therefore, is a securities trading system which permits individuals to own and trade bonds directly through a cost effective trading system, which makes short-term bonds an attractive alternative to cash-on-hand for the individual investor, and which provides an expert system for effectuating automated trade approvals for each securities trade of each individual investor.
Object of the Invention
The object of the present invention is to provide a securities trading system which encourages trading and direct ownership of bonds by individual investors
Summary of The Invention
It is an object of the present invention to provide a securities trading system which is hospitable to individual investors. Another object of the present invention is to provide a securities trading system having the above characteristics and which capitalizes on the large asset base of individual investors as a group.
A further object of the present invention is to provide a securities trading system having the above characteristics and which facilitates the execution of relatively small bond trades. Still another object of the present invention is to provide a securities trading system having the above characteristics and which reduces the time and costs associated with executing bond trades.
Yet a further object of the present invention is to provide a securities trading system having the above characteristics and which provides a vehicle by which bond holders may readily trade bonds, or fractional shares of bonds, directly with one another. These and other objects of the present invention are achieved by provision of a system which combines economies-of-scale enjoyed by institutional investors and mutual funds with direct ownership of securities to permit individual investors to participate in the bond market in a cost-effective manner. Through team investing, institutional economies-of-scale are created for individuals by allowing groupings of individuals to buy and sell bonds as a "team," thereby executing one cost-efficient trade in the institutional market rather than many smaller trades in the inefficient retail market. Also, through customer-to-customer trading, customers can negotiate a trade directly with one another as an alternative to selling in the inter-dealer market.
In one respect, the invention provides a method for approving a proposed trade of a financial instrument which was received from a customer in an electronic form. This method takes advantage of the electronic transmission of orders to buy or sell a financial instrument by electronically parsing the trade ticket to obtain the transaction details of the proposed trade. Also, the automated system obtains account information for the customer who submitted the electronic form, including that customer's "risk rating." As described below, a risk rating is assigned to each customer participating in the trading system upon opening an account and characterizes the experience of the customer and the nature of the account. Periodically, the risk rating may be updated to reflect current financial conditions of the account or to comply with regulatory requirements.
Brief Description of Drawings
Fig. 1 illustrates a hardware arrangement that may be used to implement a system and method in accordance with the present invention
Detailed Description of Invention
By way of overview and introduction, a server which is configured to implement the system and method of the invention is illustrated in FIG. 1.
FIG. 1 shows a hardware arrangement including an automated trading/clearing server with a bilateral communication line for communication over the Internet or other networks. By way of the Internet the automated trading/clearing server communicates with plural customers using remote stations or personal computers. The server also communicates with Sponsoring Broker Dealers through the Internet. The customers and the SBDs connect to the Internet over respective communication line
A plurality of customers at widely dispersed geographic locations can communicate with the server through the Internet. Likewise, any number of SBDs can refer customers to the automated trading/clearing server through the Internet or other means. Each SBD has several its own customers that access the automated trading/clearing server through the SBD or through direct connections to the Internet by way of connection.