WO2002075619A1

WO2002075619A1 - Method and system for electronic precious metals transactions

Info

Publication number: WO2002075619A1
Application number: PCT/AU2002/000327
Authority: WO
Inventors: Bron Mark Suchecki
Original assignee: Gold Corporation
Priority date: 2001-03-21
Filing date: 2002-03-21
Publication date: 2002-09-26
Also published as: AUPR386501A0

Abstract

A system and method of conducting an electronic transaction over a communications network (4) between a buyer and a seller for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency. A first processing terminal (6, 12) is used by said buyer and a second processing terminal (8, 14) is used by the seller. A server (10) linked to the network (4) is used to process the transaction and transfers the first item and second item between a buyer account and a seller account.

Description

METHOD AND SYSTEM FOR ELECTRONIC PRECIOUS METALS

TRANSACTIONS Field of the invention

This invention relates to a method and system of conducting an electronic transaction for the exchange of precious metal, allocated metal or currency, over a communications network between a buyer and seller. More particularly the invention relates to a method and system for electronically allowing individual retail investors and businesses to buy and sell precious metals, allocated metals and the like, lend and borrow precious or allocated metals and the like, and exchange precious metals and the like on an account for physical precious metal products. Background of the invention

To date, in order for retail investors and business to undertake transactions for either buying or selling precious metals such as gold, silver, platinum and palladium, they are required to act through a broker, such as a coin dealer or refinery. Customers unable to obtain credit from a broker will be required to pay in advance. As these brokers just wish to act as trading intermediaries, and not as speculators in precious metals in their own right, they offset their sale to (or purchase from) the customer by purchasing (or selling) to a larger broker. The difference between the purchase (or sale) price from the larger broker and the sale (or purchase) price to the customer is the broker's fee for undertaking the transaction on behalf of the customer. Brokers will normally maintain relationships with a number of larger brokers, to ensure they obtain the most competitive price. In turn, the larger brokers act through other brokers in a similar manner until the transaction is finally completed with a market maker. A market maker is an organisation with sufficient capital to be able to speculate on precious metal prices. Accordingly, they buy or sell from brokers without necessarily having the ability to immediately offset the transaction with another broker. Market markers protect themselves from this risk, and allow for a profit, by quoting buying (bid) prices that are lower than their quoted selling (ask) prices.

This structure of relationships is illustrated in Figure 1, with each arrow representing a buy/sell transaction. The result of this structure is that there is no such thing as a central exchange for precious metals trading. It is the interactions between numerous individual market makers and other brokers that constitute the precious metals "markets". A key feature of this structure is that the ultimate buyer and seller of precious metals never transact together, thereby allowing the various brokers and market makers to make a profit. This structure results in a number of problems, or inefficiencies:

(1) With each market maker and broker adding to the price, the ultimate investor faces a significant difference between the buy price charged and the eventual sell price given to them. This "spread" makes investment in precious metals less competitive with other investment classes, such as equities. (2) The "market" lacks transparency. With each customer, broker and market maker only involved in a fraction of the overall market, participants do not have access to complete information (such as the volume of buy and sell orders at various prices) on the market. They are thus unable to accurately determine supply and demand - crucial for establishing the price. (3) The "market" is not convenient to deal with. Without a central trading point, participants are required to establish trading relationships with numerous entities to ensure they obtain the most competitive price. The cost associated with establishing additional administrative and credit arrangements adds to overall precious metal transaction costs. (4) Liquidity is concentrated with market makers, resulting in concentrated trading power.

(5) The above points discourage not only the ultimate investor but potential brokers (such as equity brokers) from offering precious metals to their customers. This reduced distribution depresses overall demand for precious metals. To date, transactions for either borrowing or lending precious metals such as gold, silver, platinum and palladium, are structured in a similar manner to the buying and selling of precious metals. However, market makers dominate the lending market more than they do in the trading market and availability of precious metals is usually restricted to large organisations due to the higher credit risks involved. The lending market thus faces the same problems identified above for the trading market, but in a more severe form. The result is that almost all individual retail investors and small businesses are unable to access the precious metals lending market. To date, the exchange of precious metals and the like held in an account for physical precious metal products involves the customer (be they individual retail investors or businesses or brokers) establishing an account with each entity from whom they may wish to obtain physical precious metal products. These accounts may or may not correspond with accounts established by the customer for the purchase or borrowing of metal. The result is that customers are frequently required to transfer precious metals between entities with whom they hold accounts, adding to the administrative cost associated with acquiring physical precious metals.

To date, there have been attempts to apply Internet technologies to facilitate precious metals transactions. The first application copies existing Business to Consumer (B2C) Internet business models and applies them to the retailing of precious metals products, and in particular gold products. This approach or strategy merely creates an alternative communication medium for customers wishing to transact precious metals with a broker. It does not change the structure of the trading market and thus the problems identified above remain. Also, this approach does not address the lending market and the ability to exchange precious metals for physical product is usually restricted to the retailer's products.

The second application seeks to apply existing Business to Business (B2B) Internet business models to the market maker-broker relationship. Again, this approach does not address the structural problems inherent in the trading market, and most approaches merely seek to streamline transactions between the supplier and their customers. Accordingly, they are thus more accurately described as on-line enabled proprietary systems. Another variation of the B2B business model is the open system, where any broker can join. However, these approaches are closer to an on-line meeting place, as they require each participant to establish trading terms and credit with the other participants themselves. In both cases, the lending market is not addressed and participants still face the problems of maintaining multiple accounts for physical product acquisition. These B2B approaches also offer no solution to the trading market's problems from the perspective of the individual retail investor and small business.

A txiird application of Internet technologies seeks to create payment systems accessed over the Internet which are denominated in units of gold. These gold money systems, whilst simplifying the exchange of account balances for physical precious metals products (although they also target payment for non-precious metal goods and services), rely on appointing gold money market makers to establish the price at which users can convert their fiat currencies for gold money. They thus mirror the existing precious metals market trading structure of market makers and brokers and therefore have similar problems to those identified above. In addition, they do not offer any capability for users to lend or borrow gold money and in contrast, charge a storage fee on any balances held in the gold money system. This discourages the holding of gold money balances compared to fiat currencies, thus discouraging use of gold money as a payment medium.

In summary, current applications of Internet technologies to facilitate precious metals transactions merely involve the creation of alternative communication channels for market participants to use. No structural change is involved. A final problem common to all of these applications is weak security, usually in the form of passwords. The present invention substantially overcomes the above problems by creating a central precious metals account system upon which buy/sell, lend/borrow and exchange transactions can be performed. Figure 2 illustrates this new structure of relationships, of which a key feature is the single relationship between participants and the service provider, instead of multiple relationships as illustrated in Figure 1. To overcome substantially one or more of the above problems, the present invention may use any one or more of the following methods, policies and processes:

(1) Participant to Service Provider Relationship. Each participant establishes a relationship with the service provider in respect of administration, security, and credit terms, instead of with other participants.

(2) Participant to Participant Transactions. Participants establish prices with other participants, instead of with the service provider.

(3) Real-time Settlement. Debiting and crediting of participants' accounts occurs immediately.

(4) Pre-Payments unless Credit. Due to (3), the service provider will only allow transactions to proceed where the participants have money or metal balances available, unless they are able to establish credit with the service provider. Where credit has been established, settlement with the service provider will be on a next day basis.

(5) Participant Chosen Security. There is an inverse relationship between security and convenience. Participants choose the level that suits them and take responsibility for unauthorised use of their account.

(6) Physical Backing. Unlike brokerage accounts for cash or equities, which can be backed by virtual holdings, precious metal account balances held with the service provider will need to be backed by physical metal to ensure the integrity of the system.

(7) Storage of Physical Precious Metal in the Value Chain. Instead of storing physical precious metal in depositories where it is unutilised and where storage fees are charged, physical precious metal shall be deposited instead with selected participants in the value chain who meet appropriate credit criteria. As these participants shall benefit from being able to use this precious metal as working inventory, no storage fees shall be incurred by them or the service provider. (8) Physical Value Chain Retention. Whilst the system disintermediates market makers and brokers from the process of matching buyers and sellers, intermediaries are still required in the value chain for physical distribution of precious metal products.

(9) Open System. The system is open for use by both businesses and individual retail investors.

(10) Retail Market Focus. The system's focus is on the retail end of the precious metals markets, such as the coin and jewellery industries.

(11) Core Liquidity through Market Maker. The system will involve the participation of at least one market maker to ensure liquidity. (12) Separation of Precious Metal from its Form. With physical precious metal being stored in the value chain, account balances represent metal in an unallocated (unsegregated) unfabricated form. Participants therefore need to enter into a second exchange transaction if they wish to take physical delivery of their precious metal. (13) Fabrication Accounts. The capability exists for participants to transact with unallocated fabricated precious metals by pre-payment of fabrication, which is set aside in an account.

(14) Precious Metal and Cash Accounts. Whilst the system is focused on precious metals, the system will need to maintain cash accounts for participants to enable real-time settlement.

(15) Transferring. The system will allow manual transfers between accounts. Whilst this capability is essential for exchange of account balances for physical products, it can be used for settlement of off-system transactions.

(16) 24 Hour Availability. The system is available 24 hours a day, 7 days a week. (17) Free Market Information. The system will make information on the market as a whole freely available. Individual participants will also be able to authorise access to information on their transactions on the system to other participants. The combination of features (2) and (9) substantially eliminates the problem of significant differences between buy and sell precious metals prices, whilst feature (11) ensures that the prices are in line with the non-system market and that there will always be buyers or sellers in the system.

Feature (17) on the whole market eliminates the lack of transparency in the existing market.

Features (1) and (9) make trading convenient and minimise transaction costs.

Features (2) and (16) help to disperse liquidity and trading power.

The combination of features (3), (4), (5) and (14) ensures non-repudiation on transactions and when combined with feature (1), eliminates the risk to large organisations from dealing with individual retail investors.

The above combinations of features also help to substantially eliminate those same problems that affect the borrowing and lending market. Feature (17) in the case of individual participants will allow potential lenders to monitor in real-time the net value of a participant's account and trading volumes. This would give potential lenders greater insight into the state of a borrower's business and thus facilitate lending of cash and metals to borrowers.

In the case of the exchange of precious metals for physical product, features (1) and (15) eliminate the problem of customers having to maintain multiple accounts and the constant transferring between them. Features (7) and (8) ensure that the exchange transaction can occur efficiently, as precious metal is located close to the customer. Features (12) and (13) also help to facilitate the exchange process by allowing customers to minimise their costs by purchasing metal when they perceive prices to be low and paying for fabrication later, only when they need a physical product. In the case of organisations who have applied B2C and B2B Internet business models to the precious metals industry, the present invention creates an open and neutral platform on which they will be able to offer their services in a substantially more efficient manner. In the case of gold money systems, features (6) and (7) solve the problem of having to charge gold money holders a storage fee and the trading market offered by the present invention offers gold money systems a more efficient mechanism for converting the customers' fiat currencies for gold money. Summary of the invention According to a first aspect of the invention there is provided a method of conducting an electronic transaction for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency over a communications network between a buyer and a seller, said method comprising the steps of: accessing a server means linked to said communications network; requesting said server means to process said transaction whereupon said server means transfers said first item and said second item, between a buyer account and a seller account.

The buyer or seller may advertise on a website stored at said server means, or through a service provider software system stored at said server means, an amount at which a precious or allocated metal is to be sold or to be bought to alert a prospective buyer or seller to a potential transaction. Once an offer is accepted, the buyer or seller may interact with WWW pages on said website or said software system to enable required information to be entered on, for example a processing terminal such as a computer or mobile telephone, so that said server means can process said transaction.

According to a second aspect of the invention there is provided a system of conducting an electronic transaction over a communications network between a buyer and a seller for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency, said system comprising: a first processing terminal linked to said communications network for use by said buyer; a second processing terminal linked to said communications network for use by said seller; a server means linked to said communications network for enabling said transaction, said server means having processing means, memory means and data storage means; such that in order to process said transaction said server means processes and transfers said first item and said second item between a buyer account and a seller account.

The server means may store WWW pages comprising a website, or proprietary (service provider) software system, that is operated and managed by a service provider. Each of said buyer and seller may access said website, or said software system, through said first and second processing terminals respectively and have access to their own account stored in said data storage means through security measures selected by them such as a user identification code and password, or digital certificate, or smart card and the like.

Each of said buyer account and seller account stored in said data storage means of said server means may be accessed respectively by said buyer and said seller to deposit, withdraw or transfer funds including an amount of precious or allocated metal.

Thus, when a buyer wishes to purchase precious or allocated metal from a seller, whether it is a consumer, a bank or coin dealer, funds are transferred by the server means from the buyer's account to the seller's account and the equivalent amount in precious metal, such as gold, or allocated metal is transferred from the seller's account and into the buyer's account. With each transfer performed, the service provider that manages and owns the server means may be awarded a currency amount or percentage of the transaction value. When buying a precious metal, a buyer may pay a predetermined amount for fabrication of the metal, which predetermined amount is stored in a fabrication premium account against future fabrication.

A further embodiment of the invention may include the feature of lending or borrowing precious or allocated metal (electronically) between account holders.

The first or second processing terminals may be computers or PCs, or mobile telephones linked to the communication network by a cellular telecommunications network. Each mobile telephone may be WAP-enabled to allow users to manipulate and interact with web pages over the Internet. The communications network is preferably the Internet. Brief description of the drawings

The invention will hereinafter be described in a preferred embodiment, by way of example only, with reference to the drawings, wherein: Figure 1 is a block diagram showing the relationships between entities in various buy and sell transactions between the entities according to a prior art system;

Figure 2 is a block diagram showing the transactional relationships between entities using a service provider according to an embodiment of the present invention;

Figure 3 is a block diagram of a system used to facilitate precious or allocated metal transactions in accordance with the present invention;

Figure 4 is a block diagram showing examples of transactions that may be conducted using the system; Figure 5a is a table summarising the transactions undertaken with reference to Figure 4;

Figure 5b is a table summarising the closing balances of accounts with reference to Figure 4 stored in a server means operated by a service provider;

Figure 6 is a block diagram showing the steps involved in processing a transaction whereby a customer is purchasing precious metal from a bullion bank;

Figure 7 is a block diagram showing the steps involved in processing a transaction whereby a bullion bank is offering to purchase precious metal from a customer; and Figure 8 is a block diagram showing how the system allows for redeemability of physical metal between various users in a value chain. Detailed description of preferred embodiments

Shown in Figure 3 is a system that enables sellers and buyers to exchange any one of precious metal allocated metal or currency comprising a communications network 4, which may be the Internet, a first (buyer) processing terminal 6 and a second (seller) processing terminal 8 both of which are linked to the network 4. A server means 10 which is owned or operated by a service provider is also linked to the network 4 and has stored therein web pages pertaining to a website, or a proprietary software system (of a service provider), through which each of a buyer and seller can access. Furthermore the sellers and buyers may respectively use mobile telephone terminals 12 and 14 linked to mobile communications network 16 which in turn is linked to the communications network 4 through a gateway 18. Typically the gateway 18 may be a Wireless Application Protocol (WAP) gateway and each of the terminals 12 and 14 are WAP enabled terminals that allow connection to a network such as the Internet and enables manipulation of data on their terminals 12 or 14. Precious metal may include gold, silver, platinum or palladium for example, and allocated metals, that is, those metals allocated to a specific form, may include coins, jewellery and metal bars. In order to conduct a transaction on the website or proprietary software system of the service provider, each seller and buyer would require membership or access rights to the website or proprietary software system and this is commonly done through the application of a ID code and password or digital certificate. Sellers may offer to sell to prospective buyers, precious metals, such as gold by the ounce or multiples thereof or alternatively act as a buyer and request or offer a particular price to a potential seller to purchase precious metals from that potential seller. The buyer or seller can buy or sell precious metals to or from such organisations as bullion banks or coin dealers. Once the buyer, or for that matter seller, has entered their ID code and password, or other security measure, after logging on to the website or proprietary software system they may have the option of checking their cash balance, withdrawing funds or adding funds to their account or undertaking a transaction. In order to undertake a transaction the user (buyer or seller) will have the option of clicking on a link that would either allow the user to sell or buy precious metal. In situations where they wish to buy precious metal they would have information on the website or proprietary software system pertaining as to how much that precious metal sells per ounce and the various sellers, such as bullion banks or coin dealers, that is offering precious metal at a certain price per ounce. The process will be explained by an example hereinafter. Similarly for users wishing to sell precious metal this would be advertised on the website as to price per ounce and any interested buyers may directly liaise with that user (seller) in a process also to be described shortly. The above changes equally apply to exchange of allocated metal for precious metal and allocated metal for currency.

Referring to Figure 4 there is shown a series of sequential transactions that show how the system would operate. Figure 4 shows various entities, being a coin dealer 20, a bullion bank organisation 22, the service provider 24, a first customer 26 and a second customer 28. Users of the system will need to inform or request the service provider 24 of deposits or withdrawals and for security and audit reasons the staff will have to verify and enter deposits and withdrawals. This will generally be the largest staff expense for the service provider of the system.

As can be seen with each of the various entities there is shown an opening balance for each entity at 30 and a closing balance 32. Users of the system will operate by an account code only. No name, address or other personal details of users will be stored at server 10, but instead stored elsewhere offline. For each transaction conducted, the buyer and seller both pay a transaction fee to the service provider, in this instance $1. The following examples are a series of transactions that take place with reference to Figure 4. Transaction 1 In this transaction customer 26 accepts an offer from bullion bank 22 to sell an ounce of metal at $500. The bullion bank 22 has initially placed an offer to sell the metal on the website or proprietary software system of the service provider. Customer 26 has initially deposited an extra $1000 into their account (at step 34) which is located in the database at the service provider, typically located at server 10, and this has come from an existing bank account or the like. Thus customer 26 has $2000 in their account. On accepting the offer, the system transfers $501 from the customer 26 account (being $500 for the metal plus a $1 transaction fee payable to the service provider for undertaking the transaction) into the service provider's position account (at step 36). At the same time one ounce of metal is transferred out of the service provider's position (metal) account and into the customer 26 account. This results in an excess of cash and a shortfall in metal from a perspective of the service provider. In order to square this position, the system, at step 38, will transfer $499 into the bullion bank 22 account and withdraw one ounce of metal. The $499 is made up from $500 for the metal, less $1 in transaction fees. The end result is that the service provider made $2 from the two transaction fees.

Transaction 2 In this transaction the bullion bank accepts an offer from each of customers 26 and 28 that have advertised or made available on the website or proprietary software system of the service provider to buy metal at $500 per ounce. Although each of the customer 26 and 28 have independently placed offers to buy one ounce each, the system can actually aggregate these offers to make it 2 ounces at $500 per ounce. When the offers are accepted by the bullion bank 22, three transfers occur. Firstly between the bullion bank account and the service provider position account at step 40 whereby $999 is transferred from the service provider account to the account of the bullion bank 22 being $1000 for the two transactions combined less $1 service fee and at the same time 2 ounces of metal is transferred from the bullion bank account to the service provider's position or metal account. Then secondly at step 42 a transfer occurs between the service provider account and the account of customer 26 whereby one ounce is transferred to the customer account and in return $501 is taken from the customer 26 account and placed in the service provider position account, which includes a $1 transaction fee. Thirdly, a similar process happens with respect to customer 28 whereby $501 is taken from customer 28's account and placed in the service provider's account and one ounce of metal is transferred to the customer account 28 at step 44.

Transaction 3 In this transaction a coin dealer offers to sell an ounce of metal at $600 which customer 26 accepts. Since the last transaction the price of metal has moved from $500 to $600 per ounce. This transaction is an example of two users that bypass the bullion bank. At step 46, $601 is taken from the customer 26 account by the service provider which includes the $1 transaction fee and, at step 48, $599 is transferred to the account of the coin dealer 20 which also has removed $1 for the transaction fee. At the same time one ounce in metal is provided to the customer 26. Thus the service provider has $2 in its account for transactions undertaken and for the coin dealer 20. The coin dealer's offer to sell at $600 may have resulted from a physical buy back of one ounce from another customer at say $580. Although the coin dealer has lost one ounce from their account they have also gained one ounce physical and are therefore square from a metal point of view. Similarly the gain of $599 in the coin dealer account is balanced by the loss of $580 for the previous transaction. The end result is that the coin dealer has been able to offset the physical buy back using the system and take away profit of $19 and avoid any loss due to a change in the price of metal. This transaction illustrates how coin dealers can use the system as their own private treasury.

Transaction 4 In this transaction customer 28 accepts a bullion bank offer to buy metal at $600 per ounce. This transaction is similar to the first transaction but in reverse. At step 50 the single ounce of metal is transferred from the customer 28 to the service provider 24 which is then forwarded on to the bullion bank 22 at step 52. Simultaneously funds are transferred from the bullion bank account to the service provider position account and this is then transferred to customer 28 account with the service provider taking $2 for the two transactions involved. Although customer 28 was an astute investor and made a profit of $98 from the transactions (whereby the initial single ounce of metal was previously bought at $501 and now sold for effectively $599), it does not follow that there must be a corresponding loss made by another user. In customer 28' s case, the transactions were conducted with the bullion bank 22 and they would have offset them with other parties outside of the system. It is therefore entirely possible that all users can profit by using this system.

At the end of the day settlements must be made and for the bullion bank 22 transactions 1, 2 and 4 resulted in a cash balance of $897 and the shortfall of two ounces of metal. To square the bank's account, the service provider will withdraw $897 from the bullion bank's account at the service provider's server 10 to reflect actual payment to the bullion bank's bank account. The bullion bank 22 will arrange for two ounces of unallocated metal to be deposited into the service provider's metal account and this will be reflected by deposit of two ounces into the bullion bank's account at the service provider which is at the server 10.

Shown in Figures 5a and 5b is a summary of the transactions and closing balances. In the table of Figure 5a is a summary of the transactions occurring through the service provider 24 (on its real-world accounts) and in table 5b is a summary of the closing account balances of entities that have accounts stored at the service provider's website on server 10. In Figure 5a the transaction opening balances shown at 60 reflect the actual money held in the service provider's bank account and unallocated metals account. The total received by the service provider during the proceedings of the day was the $1000 paid by customer 26 and the two ounces of metal deposited by the bullion bank 22 in transaction 2. This is shown at 62. The total paid by the service provider is $897 paid to the bullion bank's 22 bank account which is shown at 64. Note that none of the other transactions are included as none of these resulted in any money or metal actually leaving or coming into the accounts of the service provider. The end result shown at 66 is that the service provider bank and metal account balances are $2103 and twelve ounces respectively. The figures shown in Figure 5b are equivalent to what is shown at the closing balances 32 in Figure 4 with the total dollars and ounces at 68 matching the balance as shown in 66. Thus the closing balance summary is simply the addition of each of the account balances stored at the server 10 at the end of the day. This equals the actual money and metal held by the service provider in its accounts. Thus this process illustrates that the service provider will not have to concern itself with all of the many buy and sell transactions that occur during the day. All that is required is to verify actual money and metal movements on the service provider's real world accounts and compare these balances with the service provider's system balances. In this way an independent audit of the service provider's system is possible on a daily balance and will help to ensure the security of the system.

Shown in Figure 6 is a further example of a transaction conducted using the system. In this example it shows how a purchase of metal by a customer from a bullion bank will be processed and how the service provider and system relate to the banking and bullion banking systems and also shows how a fabrication account option will operate.

At step 70 a purchase is made by a customer for one ounce of metal at $501 and this is transferred from the customer's bank 72 to the service provider account 74. It includes an extra $30 which is for fabrication of the metal, to be hereinafter explained. In order to reflect the deposit of cleared funds, the service provider credits the customer's account with $531 at step 76. Thus in the system, the bullion bank is offering to sell the metal at the spot price of $500 per ounce. The customer wishing to buy one ounce thereof requires $531 of which $500 is for the metal, $30 for fabrication and $1 for the transaction fee that goes to the service provider.

On acceptance of the offer by the customer the $501 is transferred into the service provider's position account at step 78. The $30 for fabrication is transferred to a fabrication premium account 80 via step 82. The premium will be held in this internal account until the metal it is attached to is sold or collected. The premium account will provide a cash balance which can earn interest or be used to fund the system's operation.

At the same time that the money is transferred from the customer's account, one ounce of the metal is transferred into the customer's account at step 84. At this stage, the service provider's internal position account is now short. In order to square this off, the service provider completes the trade with the bullion bank and $499 is transferred into the bullion bank's account at step 86, being $500 for the metal less $1 trade fee that goes to the service provider. At step 88 the one ounce of metal is transferred from the bullion bank's bank account which squares off the service provider's position leaving them with $2 profit from the transactions. At the end of the day the bullion bank has to settle its account. As they have a positive cash balance, the service provider transfers the $499 from its bank account 74 at step 90 and into the bullion bank's bank account 92. The service provider then debits the bullion bank's bank account at the service provider's system or the server 10 to reflect the cash paid. This is shown at step 94. At the same time, the bullion bank deposits one ounce of metal into the service provider's metal account at step 96. At step 98 the service provider will then credit the bullion bank's account at the service provider to reflect the metal deposited by the bullion bank. This squares off the bullion bank's account ready for the next day's trading.

The above example shows that customers can trade in "lots" of one ounce unallocated coins by paying a manufacturing premium per ounce. The premium is set aside by the service provider to reflect the liability to deliver coins to the customer. The customers will be able to receive the full premium back when selling the metal, thus offering no loss or spread on the coin premium.

Shown in Figure 7 is another example of how a sale of metal by a particular customer is processed. In this example the spot price for the metal has moved to $600 an ounce and the bullion bank is offering to buy back at this price. On acceptance of the bullion bank's offer, one ounce is transferred from the customer's account to the service provider position account at step 100. To reflect the metal component on this transaction, $599 is transferred into the customer's account being $600 for the metal less $1 trade fee that goes to the service provider. This is done at step 102. Reflecting the premium of $30, this is transferred into the customer's account from the premium account at step 104. The premium account mechanism thus allows the service provider to offer unallocated coins to some and not others, yet lets both trade with each other. Note that the premium paid back to the customer is the same as what was paid in, fabrication as a flat dollar amount and not a percentage. Thus the customer receives a total of $629.

At step 106, in order to square off this position, the service provider completes the trade with the bullion bank and one ounce of metal is transferred into the bullion bank's account. At the same time, $601 is transferred into the service provider's account at step 108, being $600 for the metal plus $1 trade fee and this squares off the service provider's position leaving a $2 profit from the trade fees. As with the previous example, at the end of the day the bullion bank has to settle its account and as they have a negative cash balance, the bullion bank transfers $601 from its bank account into the service provider's account at step 110. At step 112 the service provider credits the bullion bank's account held at the service provider to reflect the cash received. At the same time at step 114 the service provider deposits one ounce of metal into the bullion bank's metals account. The service provider then debits the bullion bank's account at the server 10 of service provider to reflect the metal deposited. This happens at step 116. This squares off the bullion bank's account held at the service provider ready for the next day of trading. Referring to Figure 8 this shows the relationship between the system and physical metal movements through the value chain. An enhanced feature of the system is the capability to redeem physical metal.

To show the process involved firstly a customer 120 purchases metal from a bullion bank 122 whereby cash is effectively transferred to the bullion bank at step 124 in return for the metal at step 126. The customer 120 now wishes to redeem the metal and undertakes a transaction with a coin dealer 128. The customer 120 at step 130 transfers metal into the coin dealer's account held at the service provider and at step 132 the coin dealer gives the customer physical metal. The coin dealer has now lost a physical asset but gained an unallocated asset but now needs more physical metal to replenish the coin dealer's stock. In order to do this the coin dealer will transfer the unallocated metal at step 134 to a mint 136 for example. In return the mint 136 delivers the physical metal to the coin dealer at step 138. This process continues down the value chain to for example a coin blank manufacturer 140 whereby the mint 136 transfers the unallocated metal to the^' blank manufacturer at step 142 in exchange for coin blanks from the manufacturer at step 144. In order to complete the loop the initial metal that was purchased by the customer would have come from manufacturers along the value chain and therefore the manufacturers and mint for example would need to be replenished or topped up with unallocated metal in order to produce more blanks or more coins. This occurs at step 146.

Another application of the redeemability feature includes the customers purchase of jewellery from a jeweller 150. The customer 152 transfers metal to the jeweller at step 154 and in return jewellery is provided from the jeweller 150 to the customer at step 156. The jeweller faces the same stock replenishment issue and needs to replace such stock. Thus at step 158 the jeweller transfers the metal received from the customer to the manufacturing jeweller 159 and in return at step 160 physical stock is received by the jeweller 150. Further down the chain the manufacturing jeweller will need stock from a refiner 162 and thereby the metal is transferred to the refiner at step 164 from the jeweller 159 and in exchange granules or wire etc are transferred from the refiner 162 to the jeweller 159 at step 166.

If the refinery is an acceptable credit risk then the service provider could lease some of the physical metal from the initial customer purchases to the refinery to fund its manufacturing. It can now be seen how the service provider facilitates and funds the physical movement of metal through the value chain.

Throughout each of the transactions that have just been explained, their may be a payment required to go to the service provider as well as payment of fabrication or a premium on the fabrication of the metal. Thus at the various steps 170 each transaction would involve a transfer of dollar amounts between the various participants.

It will also be appreciated that various modifications and alterations may be made to the preferred embodiments above, without departing from the scope and spirit of the present invention.

Claims

1. A method of conducting an electronic transaction for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency, over a communications network between a buyer and a seller, said method comprising the steps of: accessing a server means linked to said communications network; and requesting said server means to process said transaction whereupon said server means transfers said first item and said second item between a buyer account and a seller account.

2. A method according to claim 1 further comprising the step of accessing said buyer account and said seller account through said server means, said server means being owned and managed by a service provider.

3. A method according to claim 1 or claim 2 further comprising the step of said seller advertising or offering for sale an amount at which a precious metal, or allocated metal is to be sold.

4. A method according to claim 3 wherein said advertisement or offer for sale is made on a website stored at said server means or through a service provider software system stored at said server means.

5. A method according to claim 4 further comprising the step of said buyer offering or requesting a particular purchase price to a seller for an amount of precious metal or allocated metal at which said buyer wishes to purchase said precious metal or allocated metal.

6. A method according to claim 5 wherein said request or offer is made on a website stored at said server means or through said service provider software system stored at said server means.

7. A method according to any one of claims 3 to 6 further comprising the step once an offer is accepted, of said buyer or said seller interacting with web pages on said website or said service provider software system to enable information to be entered through a processing terminal so that said server means can process said transaction.

8. A method according to claim 7 wherein said processing terminal is a mobile telephone linked to said communications network through a mobile communications network.

9. A method according to claim 7 wherein said processing terminal is a computer terminal linked to said communications network.

10. A method according to any one of claims 7 to 9 wherein, on acceptance of an offer to either sell or buy precious or allocated metal at a purchase price, the method comprises the step of transferring a currency amount of said purchase price from said buyer account to said seller account, and temporarily storing the currency amount in a position account of said service provider.

11. A method according to any one of claims 7 to 10, further comprising the step of transferring the amount of precious metal or allocated metal from said seller account to said buyer account, temporarily storing the amount of precious or allocated metal in said position account of said service provider.

12. A method according to claim 11 wherein any account balances are backed by physical metal.

13. A method according to claim 12 wherein physical metal is deposited and stored with selected participants who meet appropriate credit criteria.

14. A method according to any one of claims 10 to 13 wherein the order of transfers varies.

15. A method according to any one of claims 10 to 14 further comprising the step of said service provider retaining a percentage or fraction of the currency value for each transfer made.

16. A method according to any one of claims 10 to 15, wherein at a predetermined elapsed time, the seller settles its bank account where the seller is owed a physical amount of currency.

17. A method according to claim 16 wherein said owed amount is withdrawn from the seller account at said service provider to reflect actual payment to the seller's bank account.

18. A method according to claim 16 or claim 17 wherein any unallocated metal is deposited into a metal account of said service provider reflected by depositing said unallocated metal in said seller account at said service provider.

19. A method according to any one of claims 10 to 18 further comprising the step of said buyer providing a fabrication currency amount to said service provider for fabrication of said precious metal or unallocated metal.

20. A method according to claim 19 wherein said fabrication currency amount is stored in a buyer fabrication account at said service provider.

21. A method according to claim 20 wherein said buyer receives the fabrication amount on selling the amount of precious or unallocated metal.

22. A method according to any one of claims 10 to 15 wherein at a predetermined elapsed time, said buyer settles its bank account where said buyer owes a physical amount of currency.

23. A method according to claim 22 further comprising the steps of said buyer transferring the amount of currency owing to the service provider's position account and the service provider crediting said buyer account at said service provider.

24. A method according to claim 22 or claim 23 further comprising the steps of said service provider depositing any unallocated metal, into a metal account of said buyer and debiting said buyer account by said unallocated metal, at said service provider to reflect the deposited metal.

25. A system of conducting an electronic transaction over a communications network between a buyer and a seller for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency, said system comprising: a first processing terminal linked to said communications network for use by said buyer; a second processing terminal linked to said communications network for use by said seller; a server means linked to said communications network for enabling said transaction, said server means having processing means, memory means and data storage means; and such that in order to process said transaction, said server mean processes and transfers said first item and said second item between a buyer account and a seller account.

26. A system according to claim 25 wherein said server means stores web pages accessed through a web site, or stores a service provider software system, each of which is operated and managed by said service provider.

27. A system according to claim 26 wherein said buyer account and said seller account are accessed through said server means.

28. A system according to claim 27 wherein said seller advertises a price at which said precious metal or allocated metal is to be sold to alert a prospective buyer to a potential transaction.

29. A system according to claim 28 wherein said seller advertises on said website stored at said server means, or through said service provider software system stored at said server means.

30. A system according to any one of claims 25 to 28 wherein said buyer makes a request or offer at a particular price for purchase of a precious metal or allocated metal to alert a prospective seller.

31. A system according to claim 29 wherein said buyer advertises said request or offer on said website stored at said server means or through said service provider software system stored at said server means.

32. A system according to any one of claims 26 to 31 wherein each of said buyer and said seller may access said website, or said service provider software system through said first and second processing terminals respectively in order to advertise an amount or make an offer for the selling and purchasing of said precious or allocated metal .

33. A system according to claim 31 or claim 32 wherein each of said buyer and said seller has respective access to said buyer account and said seller account stored in said data storage means via said first and second processing terminals using an identification means.

34. A system according to claim 33 wherein each of said buyer account and said seller account stored in said data storage means is accessed respectively by said buyer and said seller to either deposit, withdraw or transfer funds including an amount of precious metal or allocated metal.

35. A system according to any one of claims 26 to 34 wherein, on acceptance of an offer to either sell or buy precious or allocated metal at a purchase price, the currency amount of the purchase price is transferred from said buyer account to said seller account and temporarily stored in a position account of said service provider.

36. A system according to any one of claims 26 to 35 wherein said amount of precious metal or allocated metal is transferred from said seller account to said buyer account and temporarily stored in said position account of said service provider.

37. A system according to claim 36 wherein any metal account balances are backed by physical metal.

38. A system according to claim 37 wherein physical metal is deposited and stored with selected participants who meet appropriate credit criteria.

39. A system according to any one of claims 35 to 38 wherein the order of transfers varies.

40. A system according to any one of claims 35 to 39 wherein said service provider retains a percentage or fraction of the currency value for each transfer made.

41. A system according to any one of claims 35 to 40 wherein at a predetermined elapsed time, said seller settles its bank account where the seller is owed a physical amount of currency.

42. A system according to claim 41 wherein said owed amount is withdrawn from said seller account at said service provider to reflect actual payment to the seller's bank account.

43. A system according to claim 41 or claim 42 wherein any unallocated metal is deposited into a metal account of said service provider reflected by depositing said unallocated metal in said seller's account at said service provider.

44. A system according to any one of claims 35 to 43 further comprising said buyer providing a fabrication currency amount to said service provider for fabrication of said precious metal or unallocated metal.

45. A system according to claim 44 wherein said fabrication currency amount is stored in a buyer fabrication account at said service provider.

46. A system according to claim 45 wherein said buyer receives the fabrication currency amount on selling the amount of precious or unallocated metal.

47. A system according to any one of claims 35 to 40 wherein at a predetermined elapsed time said buyer settles its bank account where said buyer owes a physical amount of currency.

48. A system according to claim 47 wherein said buyer transfers the amount of currency owing to the service provider's position account, and said service provider credits the buyer's account at said service provider.

49. A system according to claim 47 or claim 48 wherein said service provider deposits any unallocated metal into a metal account of said buyer and debits said buyer account by the equivalent value in said unallocated metal at said service provider to reflect the deposited metal.

50. A system according to any one of claims 25 to 49 wherein said first and second processing terminals are mobile telephones linked to said communications network by a mobile telecommunications network.

51. A system according to any one of claims 25 to 49 wherein said first and second processing terminals are a computer terminal.

52. A system according to claim 50 wherein each mobile telephone is a WAP enabled telephone to allow said buyer or said seller to manipulate and interact with web pages.

53. A system according to any one of claims 25 to 52 wherein said communications network is the Internet.

54. A computer program element comprising computer program code means to control a server means to execute a procedure for conducting an electronic transaction for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency over a communications network between a buyer and seller according to any of the method claims 1 to

24.

55. A computer readable memory, encoded with data representing a computer program for directing a server means to execute a procedure for conducting an electronic transaction for the exchange of a first item and a second item taken from the group of precious metal, allocated metal or currency over a communications network between a buyer and a seller according to any of the method claims 1 to 24.