U.S. patent application number 10/890602 was filed with the patent office on 2005-03-10 for trading application program interface.
Invention is credited to Lutnick, Howard W., Sweeting, Michael.
Application Number | 20050055304 10/890602 |
Document ID | / |
Family ID | 34139836 |
Filed Date | 2005-03-10 |
United States Patent
Application |
20050055304 |
Kind Code |
A1 |
Lutnick, Howard W. ; et
al. |
March 10, 2005 |
Trading application program interface
Abstract
An electronic trading system including various rules is
described herein. Many of the rules relate to implementing periods
of exclusive priority in trading. For example, in one of the rules,
an exclusive period of trading may be controlled by an aggressor
and a designated passive participant. The aggressor may have
exclusive rights on his side of the trade at a particular price
point for a particular time. The aggressor may elect to change the
price point at which he controls the trade to a new price point
which is more favorable to him. Thereafter, another participant may
assume the exclusivity of the trade by entering the trade on the
same side of the aggressor at the old price point. In so doing, the
other participant also preferably truncates the aggressor's
exclusivity at the new price point.
Inventors: |
Lutnick, Howard W.; (New
York, NY) ; Sweeting, Michael; (Aldershot,
GB) |
Correspondence
Address: |
FISH & NEAVE IP GROUP
ROPES & GRAY LLP
1251 AVENUE OF THE AMERICAS
50TH FLOOR
NEW YORK
NY
10020-1105
US
|
Family ID: |
34139836 |
Appl. No.: |
10/890602 |
Filed: |
July 13, 2004 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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60502051 |
Sep 10, 2003 |
|
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60512879 |
Oct 20, 2003 |
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60513664 |
Oct 22, 2003 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/037 |
International
Class: |
G06F 017/60 |
Claims
What is claimed is:
1. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift, (b) provides
a period of exclusivity enabling the aggressor participant and a
designated passive participant to control subsequent trading by
executing transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading, and (c) during the period of exclusivity, allows
participants other than the aggressor participant and the
designated passive participant to hit or lift a bid or offer at a
price other than the defined price.
2. The system of claim 1, wherein the bids and offers, except for
the best bid and best offer, are capable of being displayed at a
non-standard price increment.
3. The system of claim 1, further comprising, during the period of
exclusivity, the programmed computer that provides an opportunity
for the participants other than the aggressor participant and the
designated passive participant to hit or lift one of the bids or
offers, wherein the one of the bids or offers was displayed before
the trade transaction occurred.
4. The system of claim 1, further comprising, during the period of
exclusivity, the programmed computer that provides an opportunity
for the participants other than the aggressor participant and the
designated passive participant to hit or lift one of the bids or
offers, wherein the one of the bids or offers was displayed after
the trade transaction occurred.
5. The system of claim 1, wherein, upon termination of the period
of exclusivity, the programmed computer executes new trade
transactions involving other participants at the defined price
without providing the other participants a period of exclusivity to
control trading.
6. The system of claim 1, further comprising, upon termination of
the period of exclusivity, the programmed computer that provides an
opportunity for other participants to hit or lift one of the bids
or offers having a different price than the defined price.
7. The system of claim 6, wherein, upon termination of the period
of exclusivity, new trade transactions involving the other
participants are tested for and executed at the defined price
without providing the other participants a period of exclusivity to
control trading.
8. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2) to
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(c) during the period of exclusivity, allows participants other
than the aggressor participant and the designated passive
participant to hit or lift a bid or offer at a price other than the
defined price.
9. The method of claim 8, further comprising displaying one of the
bids and offers at a non-standard price increment.
10. The method of claim 8, further comprising, during the period of
exclusivity, using the programmed computer to provide an
opportunity for the participants other than the aggressor
participant and the designated passive participant to hit or lift
one of the bids or offers, wherein the one of the bids or offers
was displayed after the trade transaction occurred.
11. The method of claim 8, further comprising, during the period of
exclusivity, using the programmed computer to provide an
opportunity for the participants other than the aggressor
participant and the designated passive participant to hit or lift
one of the bids or offers, wherein the one of the bids or offers
was displayed before the trade transaction occurred.
12. The method of claim 8, wherein, upon termination of the period
of exclusivity, using the programmed computer to execute new trade
transactions involving other participants at the defined price
without providing the other participants a period of exclusivity to
control trading.
13. The method of claim 8, further comprising, upon termination of
the period of exclusivity, using the programmed computer to provide
an opportunity for other participants to hit or lift one of the
bids or offers having a different price than the defined price.
14. The method of claim 13, wherein, upon termination of the period
of exclusivity, implementing the programmed computer to test for
and execute new trade transactions involving the other participants
at the defined price without providing the other participants a
period of exclusivity to control trading.
15. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item, the bids and offers, except for the best bid and best
offer, capable of being displayed at a non-standard price increment
and that, in response to a hit or lift of one or more of the
entered bids or offers, (2) transitions to a system trading state
which executes a trade transaction in accordance with the hit or
lift at a defined price set by the hit or lift.
16. The system of claim 15, wherein, the system trading state
provides a period of exclusivity enabling the aggressor participant
and a designated passive participant to control subsequent trading
by executing transactions between the aggressor and designated
passive participant of additional volume of the item at the defined
price to the exclusion of other participants desiring to
participate in the trading.
17. The system of claim 16, during the period of exclusivity,
queues participants that enter a hit or lift with respect to a bid
or offer at a price other than the defined price and guarantees the
completion of the queued hit or lift.
18. The system of claim 15, wherein, when a bid or offer is being
displayed at a non-standard price increment, this bid or offer is
only displayed to the trade participants.
19. The system of claim 15, wherein, when a bid or offer is being
displayed at a non-standard price increment, this bid or offer is
only displayed to select trade participants.
20. The system of claim 15, wherein, the bids and offers that are
capable of being displayed at a non-standard price increment may
only be viewed participants who qualify as market makers.
21. The system of claim 15, wherein, when a bid or offer is being
displayed at a non-standard price increment, this bid or offer is
only displayed to the participants who had entered a bid or offer
prior to the transitioning to the trade state.
22. The system of claim 15, wherein, when a bid is being displayed
at a non-standard price increment, this bid is only displayed to
the participants who had entered the best offer.
23. The system of claim 15, wherein, when an offer is being
displayed at a non-standard price increment, this offer is only
displayed to the participants who had entered the best bid.
24. The system of claim 15, wherein, when a bid is being displayed
at a non-standard price increment, and the bid being displayed at a
non-standard price is the best bid, then the bid being displayed at
a non-standard price is displayed at a standard price by reducing
the bid to the next best standard price.
25. The system of claim 15, wherein, when an offer is being
displayed at a non-standard price increment, and the offer being
displayed at a non-standard price is the best offer, then the offer
being displayed at a non-standard price is displayed at a standard
price by increasing the offer to the next best standard price.
26. The system of claim 15, wherein, the bid or offer is capable of
being displayed at a non-standard price increment only when the bid
or offer at a non-standard price is between the best bid and the
best offer.
27. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item, the bids and offers,
except for the best bid and best offer, capable of being displayed
at a non-standard price increment and that, in response to a hit or
lift of one or more of the entered bids or offers, and to (2)
transition to a system trading state which executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift.
28. The method of claim 27, wherein, the system trading state
provides a period of exclusivity enabling the aggressor participant
and a designated passive participant to control subsequent trading
by executing transactions between the aggressor and designated
passive participant of additional volume of the item at the defined
price to the exclusion of other participants desiring to
participate in the trading.
29. The method of claim 28, during the period of exclusivity,
queueing participants that enter a hit or lift with respect to a
bid or offer at a price other than the defined price and
guaranteeing the completion of the queued hit or lift.
30. The method of claim 27, wherein, when a bid or offer is being
displayed at a non-standard price increment, displaying the bid or
offer at a non-standard price increment only to the trade
participants.
31. The method of claim 27, wherein, when a bid or offer is being
displayed at a non-standard price increment, displaying the bid or
offer at a non-standard price increment only to select trade
participants.
32. The method of claim 27, wherein, displaying the bid or offer at
a non-standard price increment only to participants who qualify as
market makers.
33. The method of claim 27, wherein, when a bid or offer is being
displayed at a non-standard price increment, displaying the bid or
offer at a non-standard price increment only to the participants
who had entered a bid or offer prior to the transitioning to the
trade state.
34. The method of claim 27, wherein, when a bid or offer is being
displayed at a non-standard price increment, displaying the bid or
offer at a non-standard price increment only to the participants
who had entered the best offer.
35. The method of claim 27, wherein, when a bid or offer is being
displayed at a non-standard price increment, displaying the bid or
offer at a non-standard price increment only to the participants
who had entered the best bid.
36. The method of claim 27, wherein, when a bid is being displayed
at a non-standard price increment, and the bid being displayed at a
non-standard price is the best bid, then reducing the bid being
displayed at a non-standard price increment to the next best
standard price.
37. The method of claim 27, wherein, when an offer is being
displayed at a non-standard price increment, and the offer being
displayed at a non-standard price is the best offer, then
increasing the offer being displayed at a non-standard price
increment to the next best standard price.
38. The method of claim 27, wherein, the bid or offer being capable
of being displayed at a non-standard price increment only when the
bid or offer at a non-standard price is between the best bid and
the best offer.
39. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item, the bids and offers capable of being displayed
together with an indication of price improvement, the bids and
offers capable of being displayed to a select group of
participants, (2) transitions to a system trading state which (a)
executes a trade transaction in accordance with a hit or lift at a
defined price set by the hit or lift, (b) provides a period of
exclusivity enabling the aggressor participant and a designated
passive participant to control subsequent trading by executing
transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading.
40. The system of claim 39, wherein, the indication of price
improvement is viewable only by the trade participants.
41. The system of claim 39, wherein, the indication of price
improvement is viewable only by select trade participants.
42. The system of claim 39, wherein, the indication of price
improvement is viewable only by participants who qualify as market
makers.
43. The system of claim 39, wherein, the indication of price
improvement is viewable only by participants who had entered a bid
or offer prior to the transitioning to the trade state.
44. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item, the bids and offers
capable of being displayed together with an indication of price
improvement, the bids and offers capable of being displayed to a
select group of participants, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with a
hit or lift at a defined price set by the hit or lift, (b) provides
a period of exclusivity enabling the aggressor participant and a
designated passive participant to control subsequent trading by
executing transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading.
45. The method of claim 44, further comprising displaying the
indication of price improvement only to the aggressor participant
and a designated passive participant.
46. The method of claim 44, further comprising displaying the
indication of price improvement only to select trade
participants.
47. The method of claim 44, further comprising displaying the
indication of price improvement only to participants who qualify as
market makers.
48. The method of claim 44, further comprising displaying the
indication of price improvement only to participants who had
entered a bid or offer prior to the transitioning to the trade
state.
49. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift, and (b)
provides a period of exclusivity enabling the aggressor participant
and a designated passive participant to control subsequent trading
by executing transactions between the aggressor and designated
passive participant of additional volume of the item at the defined
price to the exclusion of other participants desiring to
participate in the trading, and (3) communicates a computer
readable message to each of the workstations wherein the computer
readable message includes an indication that a buy, sell, bid or
offer is clear only to a designated user for a predetermined time
period.
50. The system of claim 49, wherein the computer readable message
includes an indication that the item is available at a particular
price.
51. The system of claim 49, wherein the computer readable message
includes an indication that the item is available at a particular
size.
52. The system of claim 49, wherein the computer readable message
is communicated to an application programming interface that is
resident in each of the workstations.
53. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, and (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(3) communicate a computer readable message to each of the
workstations wherein the computer readable message includes an
indication that a buy, sell, bid or offer is clear only to a
designated user for a predetermined time period.
54. The method of claim 53, further comprising including an
indication in the computer readable message, the indication that
indicates the item is available at a particular price.
55. The method of claim 53, further comprising including an
indication in the computer readable message, the indication that
indicates the item is available at a particular size.
56. The method of claim 53, further comprising communicating the
computer readable message to an application programming interface
that is resident in at least one of the workstations.
57. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift, and (b)
provides a period of exclusivity enabling the aggressor participant
and a designated passive participant to control subsequent trading
by executing transactions between the aggressor and designated
passive participant of additional volume of the item at the defined
price to the exclusion of other participants desiring to
participate in the trading, and (3) communicates a computer
readable message to each of the workstations wherein the computer
readable message includes an indication that a buy, sell, bid or
offer will be available at a particular price to a designated user
within a pre-determined time.
58. The system of claim 57, wherein the computer readable message
includes an indication that the item is available at a particular
price.
59. The system of claim 57, wherein the computer readable message
includes an indication that the item is available at a particular
size.
60. The system of claim 57, wherein the computer readable message
is communicated to an application programming interface that is
resident in each of the workstations.
61. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, and (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(3) communicate a computer readable message to each of the
workstations wherein the computer readable message includes an
indication that a buy, sell, bid or offer will be available at a
particular price to a designated user within a pre-determined
time.
62. The system of claim 61, wherein the computer readable message
includes an indication that the item is available at a particular
price.
63. The system of claim 61, wherein the computer readable message
includes an indication that the item is available at a particular
size.
64. The system of claim 61, wherein the computer readable message
is communicated to an application programming interface that is
resident in each of the workstations.
65. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift, (b) provides
a period of exclusivity enabling the aggressor participant and a
designated passive participant to control subsequent trading by
executing transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading, and (c) during the period of exclusivity, queues
participants that enter a hit or lift with respect to a bid or
offer at a price other than the defined price and guarantees the
completion of the queued hit or lift.
66. The system of claim 65, wherein, upon termination of the period
of exclusivity, the programmed computer executes new trade
transactions involving other participants at the defined price
without providing the other participants a period of exclusivity to
control trading.
67. The system of claim 65, wherein, the trading system state
guarantees the completion of the queued hit or lift at a price no
worse than the price of the queued hit or lift.
68. The system of claim 65, wherein, the trading system state
guarantees the completion of the queued hit or lift at a price
between the price of the queued hit or lift and the defined
price.
69. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(c) during the period of exclusivity, queue participants that enter
a hit or lift with respect to a bid or offer at a price other than
the defined price and guarantees the completion of the queued hit
or lift.
70. The method of claim 69, further comprising, upon termination of
the period of exclusivity, executing new trade transactions
involving other participants at the defined price without providing
the other participants a period of exclusivity to control
trading.
71. The method of claim 69, guaranteeing the completion of the
queued hit or lift at a price no worse than the price of the queued
hit or lift.
72. The method of claim 69, guaranteeing the completion of the
queued hit or lift at a price between the price of the queued hit
or lift and the defined price.
73. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift when the
defined price is within a predetermined delta of the highest priced
passive participant's bid or the lowest priced passive
participant's offer, and (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading.
74. The system of claim 73, wherein, upon termination of the period
of exclusivity, the programmed computer executes new trade
transactions involving other participants at the defined price
without providing the other participants a period of exclusivity to
control trading.
75. The system of claim 73, further comprising, upon termination of
the period of exclusivity, providing an opportunity for other
participants to hit or lift one of the bids or offers having a
different price than the defined price.
76. The system of claim 73, wherein, upon termination of the period
of exclusivity, new trade transactions involving the other
participants are tested for and executed at the defined price
without providing the other participants a period of exclusivity to
control trading.
77. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift when the defined price is within a
predetermined delta of the highest priced passive participant's bid
or the lowest priced passive participant's offer, and (b) provides
a period of exclusivity enabling the aggressor participant and a
designated passive participant to control subsequent trading by
executing transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading.
78. The method of claim 77 wherein, upon termination of the period
of exclusivity, executing new trade transactions involving other
participants at the defined price without providing the other
participants a period of exclusivity to control trading.
79. The method of claim 77, further comprising, upon termination of
the period of exclusivity, providing an opportunity for other
participants to hit or lift one of the bids or offers having a
different price than the defined price.
80. The method of claim 77, upon termination of the period of
exclusivity, testing for and executing new trade transactions
involving the other participants at the defined price without
providing the other participants a period of exclusivity to control
trading.
81. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which (a) executes a trade transaction in accordance with the
hit or lift at a defined price set by the hit or lift, (b) provides
a period of exclusivity enabling the aggressor participant and a
designated passive participant to control subsequent trading by
executing transactions between the aggressor and designated passive
participant of additional volume of the item at the defined price
to the exclusion of other participants desiring to participate in
the trading, and (c) during the period of exclusivity, allows the
aggressor participant to transfer exclusivity to a different
price.
82. The system of claim 81, wherein, upon transfer of exclusivity
of the aggressor participant, the system trading state allows for
truncation of the aggressor participant's exclusivity at the
defined price by a participant other than the aggressor
participant.
83. The system of claim 81, wherein, upon transfer of exclusivity
of the aggressor participant, the system trading state allows for
assumption of the aggressor participant's exclusivity at the
defined price by a participant other than the aggressor
participant.
84. The system of claim 81, wherein, upon termination of the period
of exclusivity, the programmed computer executes new trade
transactions involving other participants at the defined price
without providing the other participants a period of exclusivity to
control trading.
85. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(c) during the period of exclusivity, allow the designated passive
participant to transfer exclusivity to a different price.
86. The method of claim 85, further comprising, upon transfer of
exclusivity of the designated passive participant, allowing for
truncation of the designated passive participant's exclusivity at
the defined price by a participant other than the aggressor
participant.
87. The method of claim 85, wherein, upon transfer of exclusivity
of the designated passive, allowing for assumption of the
designated passive participant's exclusivity at the defined price
by a participant other than the designated passive participant.
88. The system of claim 85, wherein, upon termination of the period
of exclusivity, executing new trade transactions involving other
participants at the defined price without providing the other
participants a period of exclusivity to control trading.
89. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(c) during the period of exclusivity, allows the aggressor
participant to transfer exclusivity to a different price.
90. The method of claim 89, further comprising, upon transfer of
exclusivity of the aggressor participant, allowing for truncation
of the aggressor participant's exclusivity at the defined price by
a participant other than the aggressor participant.
91. The method of claim 89, further comprising, upon transfer of
exclusivity of the aggressor participant, allowing for assumption
of the aggressor participant's exclusivity at the defined price by
a participant other than the aggressor participant.
92. The method of claim 89, further comprising, upon termination of
the period of exclusivity, executing new trade transactions
involving other participants at the defined price without providing
the other participants a period of exclusivity to control
trading.
93. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which (a) executes a trade
transaction in accordance with the hit or lift at a defined price
set by the hit or lift, (b) provides a period of exclusivity
enabling the aggressor participant and a designated passive
participant to control subsequent trading by executing transactions
between the aggressor and designated passive participant of
additional volume of the item at the defined price to the exclusion
of other participants desiring to participate in the trading, and
(c) during the period of exclusivity, allow the designated passive
participant to transfer exclusivity to a different price.
94. The system of claim 93, further comprising, upon transfer of
exclusivity of the designated passive participant, allowing for
truncation of the designated passive participant's exclusivity at
the defined price by a participant other than the aggressor
participant.
95. The system of claim 93, further comprising, upon transfer of
exclusivity of the designated passive, allowing for assumption of
the designated passive participant's exclusivity at the defined
price by a participant other than the designated passive
participant.
96. The system of claim 93, further comprising, upon termination of
the period of exclusivity, executing new trade transactions
involving other participants at the defined price without providing
the other participants a period of exclusivity to control
trading.
97. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which guarantees the execution of a trade transaction in
accordance with the hit or lift at a defined price set by the hit
or lift without confirming a passive participant.
98. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which guarantees the execution of a trade transaction in
accordance with the hit or lift at a defined price set by the hit
or lift without identifying a passive participant.
99. A system for trading an item between an aggressor participant
and one or more passive participants, comprising: a first
workstation that receives bids or offers from the passive
participants for the item at select prices and volumes; a second
workstation that receives a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and a programmed computer, coupled to the workstations, that
(1) provides a system bid/offer state enabling the passive
participants to participate by entering bids or offers with respect
to the item and that, in response to a hit or lift of one or more
of the entered bids or offers, (2) transitions to a system trading
state which guarantees the execution of a trade transaction in
accordance with the hit or lift without confirming the price of the
trade.
100. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which guarantees the execution
of a trade transaction in accordance with the hit or lift at a
defined price set by the hit or lift without confirming a passive
participant.
101. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which guarantees the execution
of a trade transaction in accordance with the hit or lift at a
defined price set by the hit or lift without identifying a passive
participant.
102. A method for trading an item between an aggressor participant
and one or more passive participants, the method comprising:
receiving on a first workstation bids or offers from the passive
participants for the item at select prices and volumes; receiving
on a second workstation a trade command from the aggressor
participant to hit or lift one or more of the bids or offers in
order to sell or buy a desired volume of the item at a desired
price; and using a programmed computer, the programmed computer
coupled to the workstations, to (1) provide a system bid/offer
state enabling the passive participants to participate by entering
bids or offers with respect to the item and that, in response to a
hit or lift of one or more of the entered bids or offers, (2)
transition to a system trading state which guarantees the execution
of a trade transaction in accordance with the hit or lift without
confirming the price of the trade.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application claims priority from U.S. Provisional
Patent Applications No. 60/502,051, filed Sep. 10, 2003,
60/512,879, filed Oct. 20, 2003, and 60/513,664, filed Oct. 22,
2003.
BACKGROUND OF THE INVENTION
[0002] This invention relates to trading application program
interfaces. More particularly, this invention relates to a trading
application program interface suitable for use with quantitative
analysis trading.
[0003] Quantitative analysis trading (colloquially known as
"program trading" or "quant trading") refers to a trading strategy
that makes use of information technology to substantially remove
the human element from the decision-making process involved in
trading. Such techniques typically depend on highly sophisticated
computer models that often draw elements from a broad range of
scientific and mathematical disciplines. Quantitative
implementations may make use of both fundamental and technical
data, and at their most complex, may balance multiple portfolios
over a broad range of markets, communicating electronically with
market makers, in real time, with substantially no human
intervention.
[0004] Because quantitative analysis involves electronic
communication and computer trading, it is critical that a trading
application program interface being used for quantitative trading
provides information regarding options available for immediate
trading.
[0005] It would therefore be desirable to provide a trading
application program interface suitable for quantitative analysis
trading.
[0006] It would also be desirable to provide a trading application
program interface that conforms to a set of preferably real-time
trading rules and is suitable for quantitative analysis
trading.
[0007] It would also be desirable to provide users with a trading
application program having an application program interface (API)
that is suitable for quantitative analysis trading and adapted to
take advantage of first buyer/first seller privileges afforded by
the trading application's interactive trading rules.
[0008] It would also be desirable to allow such users to identify
and trade prices outside the boundaries of a current trading
application's interactive trading rules and according to their
particular requirements and where suitable logic allows.
SUMMARY OF THE INVENTION
[0009] It is an object of this invention to provide a trading
application program interface suitable for quantitative analysis
trading.
[0010] It is another object of this invention to provide a trading
application program interface that conforms to a set of preferably
real-time trading rules and is suitable for quantitative analysis
trading.
[0011] It is yet another object of this invention to provide users
with a trading application program having an application program
interface (API) that is suitable for quantitative analysis trading
and adapted to take advantage of first buyer/first seller
privileges afforded by the trading application's interactive
trading rules.
[0012] It is still another object of this invention to allow such
users to identify and trade prices outside the boundaries of a
current trading application's interactive trading rules and
according to their particular requirements and where suitable logic
allows.
[0013] One embodiment of the invention preferably includes a system
for trading an item between an aggressor participant and one or
more passive participants. The system includes a first workstation
that receives bids or offers from the passive participants for the
item at select prices and volumes, a second workstation that
receives a trade command from the aggressor participant to hit or
lift one or more of the bids or offers in order to sell or buy a
desired volume of the item at a desired price and a programmed
computer.
[0014] The programmed computer is preferably coupled to the
workstations. The computer provides two different states. The first
state is a system bid/offer state enabling the passive participants
to participate by entering bids or offers with respect to the item
and that, in response to a hit or lift of one or more of the
entered bids or offers. The second state is a system trading state.
In the system trading state, a trade transaction is executed in
accordance with the hit or lift at a defined price set by the hit
or lift, a period of exclusivity is provided enabling the aggressor
participant and a designated passive participant to control
subsequent trading by executing transactions between the aggressor
and designated passive participant of additional volume of the item
at the defined price to the exclusion of other participants
desiring to participate in the trading, and, finally, during the
period of exclusivity, the other participants are allowed to hit or
lift a bid or offer at a price other than the defined price.
[0015] In other aspects of the invention, an exclusive priority
that may previously have been associated with the aggressor, the
designated passive participant or other suitable participant, may
be transferred by the aggressor, the designated passive participant
or other suitable participant to another price behind the touch
price of the original trade. Once transferred, the original
exclusive priority at the touch price may then be assumed by
another party, thereby truncating the priority of the aggressor,
the designated passive participant or other suitable participant at
the designated price.
[0016] In yet another aspect of the invention, a system delta may
be implemented whereby hits or lifts that are a predetermined
number of price levels away from the touch price are rejected.
[0017] In still another aspect of the invention, certain prices are
guaranteed by the system following certain sequences of events
which will be described in more detail below.
BRIEF DESCRIPTIONS OF THE INVENTION
[0018] Further features of the invention, its nature and various
advantages will be apparent from the following detailed description
of the preferred embodiments, taken in conjunction with the
accompanying drawings, in which like reference characters refer to
like parts throughout, and in which:
[0019] FIG. 1 is an illustration of an electronic implementation of
a system in accordance with some embodiments of the present
invention;
[0020] FIG. 2 is an illustration, in greater detail, of an
electronic implementation of a system in accordance with some
embodiments of the present invention;
[0021] FIG. 3 is an illustration of an electronic trading interface
in accordance with some embodiments of the present invention;
[0022] FIG. 4 is an illustration of another electronic trading
interface in accordance with some embodiments of the present
invention;
[0023] FIG. 5 is an illustration of yet another electronic trading
interface in accordance with some embodiments of the present
invention; and
[0024] FIG. 6 is an illustration of an electronic user interface in
accordance with some embodiments of the present invention.
DETAILED DESCRIPTION OF THE INVENTION
[0025] Referring to FIG. 1, exemplary system 100 for implementing
the present invention is shown. As illustrated, system 100 may
include one or more workstations 101. Workstations 101 may be local
or remote, and are connected by one or more communications links
102 to computer network 103 that is linked via communications links
105 to server 104. Server 104 is linked via communications link 110
to back office clearing center 112.
[0026] In system 100, server 104 may be any suitable server,
processor, computer, or data processing device, or combination of
the same. Server 104 and back office clearing center 112 may form
part of the electronic trading system. Furthermore, server 104 may
also contain an electronic trading system and application
programming interface and merely transmit a Graphical User
Interface or other display screens to the user at the user
workstation.
[0027] Computer network 103 may be any suitable computer network
including the Internet, an intranet, a wide-area network (WAN), a
local-area network (LAN), a wireless network, a digital subscriber
line (DSL) network, a frame relay network, an asynchronous transfer
mode (ATM) network, a virtual private network (VPN), or any
combination of any of the same. Communications links 102 and 105
may be any communications links suitable for communicating data
between workstations 101 and server 104, such as network links,
dial-up links, wireless links, hard-wired links, etc.
[0028] Workstations 101 may be personal computers, laptop
computers, mainframe computers, dumb terminals, data displays,
Internet browsers, Personal Digital Assistants (PDAs), two-way
pagers, wireless terminals, portable telephones, etc., or any
combination of the same. Workstations 102 may be used to implement
the electronic trading system application and application
programming interface according to the invention.
[0029] Back office clearing center 112 may be any suitable
equipment, such as a computer, a laptop computer, a mainframe
computer, etc., or any combination of the same, for causing
transactions to be cleared and/or verifying that transactions are
cleared. Communications link 110 may be any communications links
suitable for communicating data between server 104 and back office
clearing center 112, such as network links, dial-up links, wireless
links, hard-wired links, etc.
[0030] The server, the back office clearing center, and one of the
workstations, which are depicted in FIG. 1, are illustrated in more
detail in FIG. 2. Referring to FIG. 2, workstation 101 may include
processor 201, display 202, input device 203, and memory 204, which
may be interconnected. In a preferred embodiment, memory 204
contains a storage device for storing a workstation program for
controlling processor 201. Memory 204 also preferably contains an
electronic trading system application 216 according to the
invention.
[0031] Electronic trading system application 216 may preferably
include application program interface 215, or alternatively, as
described above, electronic trading system application 216 may be
resident in the memory of server 104. In this embodiment, the
electronic trading system may contain application program interface
215 as a discrete application from the electronic trading system
application which also may be included therein. The only
distribution to the user may then be a Graphical User Interface
which allows the user to interact with electronic trading system
application 216 resident at server 104.
[0032] Processor 201 uses the workstation program to present on
display 202 electronic trading system application information
relating to market conditions received through communication link
102 and trading commands and values transmitted by a user of
workstation 101. Furthermore, input device 203 may be used to
manually enter commands and values in order for these commands and
values to be communicated to the electronic trading system.
[0033] In one embodiment of this invention, Trade-Through-the-Stack
trading rules (TTS) preferably allow the user to identify and trade
prices outside the boundaries of the best prices shown by the
trading system. Such a trade may not invoke the trading system (or
alternatively, the trading application's) interactive trading rules
as will be described in more detail below. Preferably, price
improvement (PI) benefits, which are described in U.S. patent
application Ser. No. 10/171,009, filed on Jun. 11, 2002, which is
hereby incorporated by reference herein in its entirety, may also
be applicable in some form in TTS trading.
[0034] To fully understand the TTS system and method according to
the invention, it is important to understand an interactive trading
system according to the invention upon which the TTS rules are
implemented. One embodiment of an interactive trading system is
described in U.S. Pat. No. 6,560,580, which is hereby incorporated
by reference herein in its entirety.
[0035] Interactive trading may use a number of trading states to
define the ability of users to negotiate and trade with one
another. Each of the various states may be associated with a user
interface display screen. Alternatively, all of the various states
may be associated with a single display screen that includes
various indicators to denote the current system state. The user
interface may appear as follows:
[0036] FIG. 3 shows an illustrative trading interface 300 for
interactive trading that is adapted for implementing systems and
methods according to the present invention. The interface includes
a top line 301 (alternatively referred to herein as the touch line,
or the headline.) Top line 301 may preferably be adapted to include
the price that should be initially aggressed to start a trade or,
alternatively, top line 301 may show the status of the actual
aggressed trade (as shown below in FIG. 4). In either case, top
line 301 is typically located at the top of the quad (quad being
defined as the display area related to trading of a particular
instrument.) Top line 301 may include item 302, price 304, size 306
and last price 308. Interface 300 also includes market depth
information 310, which shows price and size for items that have not
yet been traded (commonly known as the book). Also shown in
interface 300 are bid and offer stacks 312 and 314, respectively.
Bid and offer stacks 312 and 314 may indicate the size of one or
many market participants are bidding or offering at the current
price 304. Note that price 304 (shown as 100.00+-100.012) in this
exemplary example is shown in a traditional United States
Government Bond pricing format.
[0037] In FIG. 3, interface 300 shows a bid/offer state. This state
enables participants to enter into the system bids and offers at
select prices and volumes for the item being traded.
[0038] A system trading state typically referred to as the workup
state is shown in FIG. 4. This shows interface 300 after receiving
a first hit--i.e., an acceptance of a pending bid--(or take--i.e.,
an acceptance of a pending offer--) trade command from an aggressor
participant--i.e., a participant who initiates a trade--responding
to presented bids and offers. The hit (or take) is for transacting
a trade of a desired volume of the item at a desired price. In
response to the hit (or take), the trading system preferably
transitions from the bid/offer system state to the workup state in
order to transact a trade of the item at a desired price.
[0039] It should be noted that once trading has commenced in the
workup state, the participant that posted the bid or offer and the
participant that responded with the hit or lift of the bid or offer
are generally awarded, under certain conditions, exclusive trading
privileges for some pre-determined period. Systems and methods
according to the invention, based on the TTS rules, preferably
allow others--i.e., that do not enjoy exclusive trading
privileges--to participate in trading the traded item during the
pre-determined period, as will be explained in more detail
below.
[0040] In one embodiment of the invention, the exclusivity of the
two priority participants is limited to trading at the price at
which the first hit or lift was transacted--i.e., the touch price.
Thus, the two priority participants, and other participants who may
join the trade following the termination of exclusive rights of one
(or both) of the first two participants, retain exclusivity only at
the touch price. The period of exclusivity may end either as a
result of the timing out of either of the participants or the
election by either or both of the participants to terminate their
exclusive trading session. Following the exclusive period, no one
can control the trade to the exclusion of others. The system then
tests for and executes any new transactions entered by new
Participants preferably at the touch price.
[0041] In one embodiment of interactive trading, any new bid or
offer is shown as clear to trade only to the highest price/time
priority existing contra order in the system for a predetermined,
preferably exclusive time period in bid/offer state. Another
trading state, referred to herein as a when state, is triggered by
a trading command in the workup state against an uncleared
bid/offer by an aggressor who is not one of the original
participants on the contra-side of the uncleared bid/offer.
[0042] As stated above in brief, system controls preferably do not
allow this trading command by the new aggressor to be
instantaneously executed. In accordance with system logic, the
trading processor creates a time interval or delay, and thereby
provides the original participants time to assess the new situation
and to respond to the uncleared entry on the passive side. In one
embodiment of the invention, the non-priority contraparties to the
aggressor's order--i.e., the contraparties that are listed in the
book at worse prices (or later times, or both worse prices and
later times) than the touch price may be prevented from canceling
their respective orders until either (a) the orders are executed or
(b) the aggressor's order is filled or canceled. The state in which
the non-priority contraparties are prevented from canceling their
respective orders is known as the guarantee state (which may
alternatively referred to herein as the hold state).
[0043] The guarantee state is described in detail as follows. If
the same or another participant elects to execute a trade and
enters an order for a price that is worse than an available touch
price and the currently available touch price is not clear to the
participant, then the contraparties to this order are prevented
from canceling their respective orders until either (a) those
orders of the contraparties are executed or (b) the order for the
price that is worse than the available touch price is filled or
canceled. The order from the aggressing contraparty, who
effectively created the when state, may also be prevented from
canceling until the conclusion of the when state as the system
transitions from the workup state into the next state in the
circumstance that the original aggressors decline to trade with the
new aggressor.
[0044] In systems and method based on the TTS rules of the
invention, participants other than the priority participants are
permitted to trade with other non-priority participants during the
exclusive period, with certain restrictions. Preferably, each of
these other, non-priority participants are restricted to trade at
prices other than the touch price in order to maintain exclusivity
for the priority participants at the touch price. To reiterate,
this type of trading by non-priority participants is referred to
herein as TTS (Trade-Through-the-Stack) trading.
[0045] The following principles may preferably guide TTS trading
rules according to the invention.
[0046] A first rule according to one embodiment of the claimed
invention is as follows: the priority participants or workers in
the workup state control priority at the touch price of the trade,
but desperate traders can "trade and run"--i.e., trade in a
one-time fashion, with preferably no ability to continue the trade
after that trade--at limit order prices behind them in the
book--i.e., at levels worse than the touch price. (A limit order is
an order to buy or sell a predetermined amount of an instrument at
a specified price or better than the specified price. Limit orders
also may allow an investor to set the length of time an order can
be outstanding before cancelled.)
[0047] Based in part on this understanding, the second rule,
according to the invention may be described. The second rule may
include implementing trading at finer pricing granularity--e.g.,
for the granularity to be 1/2 the normal listed minimum increment
for the traded security. For example, the normal granularity for a
five year note is 1/4 of one thirty-second of a point (one
one-hundredth of a percent of the total value of the
instrument).
[0048] In one embodiment of a system according to the invention,
{fraction (1/8)}ths of one thirty-second of a point may be
available in the 5 year note on a restricted view basis during
workup state. For example, these finer granularity prices may only
be available, preferably during workup state, to participants that
participate in a trade. Alternatively, these finer granularity
prices may be available to all viewers of the screen during when
state or guarantee state. Thus, instead of limiting pricing
granularity to 100.002, 100.00+, 100.006, other additional prices
such as 100.001, 100.003, 100.005, and 100.007 may also be
available to participants in TTS trading. These prices may also be
available to viewers of the screen, preferably only subject to the
conditions enumerated above.
[0049] In yet another group of alternative embodiments, the finer
granularity prices may be available to all viewers, yet the size
associated with the finer granularity prices may only be available
to the participants in the trade, or the size associated with the
finer granularity prices may not be available to anyone (excluding
the party who provided the finer granularity price). Alternatively,
a non-standard bid or offer may be displayed only when the bid or
offer is between the best bid and the best offer. In yet another
alternative embodiment, the trading system state may guarantee the
completion at a price between the price of the queued hit or lift
and the trading price.
[0050] In still another alternative embodiment, a hit or lift at a
defined price may be guaranteed to be traded without identifying,
or, alternatively, without confirming a passive participant. Such a
hit or lift at a defined price may be guaranteed to be traded
without identifying or, alternatively, confirming the price at
which the hit or lift will, in fact, be traded.
[0051] One particular example of a trade which implements the
second rule of TTS trading is one that in bid/offer state is at
100.00+/100.006 which then goes, in the workup state, to TAKE
100.006. The second rule states that, in such a trade, the
displayed 100.00+ bid may originally have been a 100.005 bid in the
book (more finely granular than the standard 1/4 increment, the
standard increment being defined as the smallest allowable price
difference (which may be a system set or exchange set value)
between the best bid and the best offer when the best bid and the
best offer are not the same) but is only shown in the touch line at
a standard increment. While it can be acted upon in the trade as
100.005, nevertheless, it was only displayed in bid/ask state (or,
alternatively, in the book at any time) as a 100.00+ bid in order
to maintain the displayed spread of 1/4 of a thirty-second a point.
Additionally, the more granular 100.005 may become part of the book
in the workup state. This price may be available either to the
priority participants or, alternatively, may be available in a when
state or trade (alternatively referred to herein as a
"hit-and-run")-and run-trade to non-priority participants during
workup state.
[0052] Such a trade carries on from the above-described trade as
follows: after the TAKE at 100.006 created a workup state at
100.006, a third, non-priority, participant may enter, for example,
a bid for 100.005 (or alternatively, the original touch line bid
may be now revealed to show that it was not a 100.00+ bid but
rather a 100.005 bid). Then, the priority participant who is contra
to the 100.005 bid may elect to hit the 100.005 bid if the seller
at 100.006 has terminated. When the priority participant elects to
sell at 100.005 to the new bidder, the workup state would
effectively go from 100.006 immediately to a workup state at
100.005. Or, alternatively, a non-priority participant may elect to
hit the 100.005 bid, and wait until the priority contra participant
either hits the bid, terminates or times out. This would also
effectively change the trade from 100.006 immediately to a workup
state at 100.005.
[0053] In yet another rule relating to pricing at finer
granularity, the following sequences may be implemented. While a
more granular price--i.e., the 100.005 price described above--may
be listed in the book and may be available in a hit and run or
other TTS trade, nevertheless, this price may never show (or in an
alternative embodiment, be available to trade) at the touch line.
Rather, whenever the price reaches the touch line, either because
it became the best bid or offer in the system or because it was
acted upon, it automatically shows at the nearest conventional
granularity--i.e., a bid of 100.005 shows as a bid of 100.004 in
the touch line and an offer of 100.005 shows as an offer of 100.006
in the touch line.
[0054] A third rule may be that the first/priority worker retains
priority rights--i.e., the exclusive ability to trade the
particular instrument on the side (buy/sell) for which the worker
entered--at the initial traded price, and may be able to
re-bid/offer at a slightly worse price during (or immediately
following) the workup state. If a better price comes in after the
priority worker has changed his price to a slightly worse price,
the better price does not assume priority, but may truncate the
exclusive first buyer/seller priority at the touch price.
Alternatively, in this particular scenario, the priority worker's
priority may preferably be truncated, while any new participant may
assume priority at the original touch price, if the new participant
entered his price after the priority worker changed his trading
price.
[0055] Price improvement may preferably be available on all finer
granularity price levels that may be available in the bid/offer
state. Thus, price improvement may be implemented on such {fraction
(1/8)}th prices as may be used for TTS trading. In one embodiment,
price improvement in general, and different levels of price
improvement in particular--e.g., where relatively more and less
aggressive levels of price improvement are permitted, may be (a)
revealed to--i.e., viewable by--participants in the trade, (b)
revealed to select participants in the trade (e.g., market makers,
the status of whom may be determined by a pre-selected criteria
(one such criteria may define market makers as being participants
whose bids or offers were displayed during bid/offer state, (or,
alternatively, market makers may be defined as the participants
whose bids or offers were displayed during bid/offer state within a
predetermined time before the transition to trade state) or other
suitable method), (c) revealed to viewers of the trade (d) or
revealed to any combination of (a), (b) and (c). (It should be
noted that participants may enter bids below the headline trading
price or at any other suitable price and offers above the headline
trading price or at any other suitable price into the book during
trade state. These bids and offers may or may not qualify the
associated participants as market makers.) Alternatively, the finer
granularity price levels themselves may be restricted in their
viewability in the same way that the price improvement restrictions
are defined above.
[0056] It should be noted that, with respect to price improvement
and interactive trading, the term aggressive characterizes a
willingness to trade at a price level beyond--i.e., worse than--the
touch price. Thus, when the more aggressive trader is a buyer, he
is willing to buy at price that is higher than the price offered in
the touch line. When the more aggressive trader is a seller, he is
willing to sell at a price that is lower than the price bid in the
touch line.
[0057] The following is a description of TTS trading in the workup
state. Limit orders from the book are accessible from the workup
state. The information on the status of each order for a user is
preferably shown to the user. It is also shown to the user when
that status is changed and when the limit order is promoted from
the book to the "touch price" position (and any corresponding
change in availability). This allows users to know not only when a
price is accessible to them, but also when a price is accessible to
only them.
[0058] TTS allows for users to trade through a price from bid/ask
state, to a limit price worse than the touch price, if the users
show enough size and aggression on the price (preferably, the
aggression is restricted to a pre-determined system delta from the
touch price. The delta may be a price difference, a size difference
or a price and size difference between the user-entered price and
the head line price. Alternatively, the delta may be a
predetermined number of book entries--e.g., three--away from the
head line. One advantage of this pre-determined system delta is
that it preferably protects against user error by preventing orders
that are too distant from the touch price from being executed).
This may encourage users to add prices to the order book, thereby
increasing liquidity and transparency, in the hope of having the
users' respective orders filled.
[0059] When a TTS in the workup state happens, all trades behind
the touch price at non-touch limit prices (preferably executed
without continuing priority) are treated as a substantially
simultaneous execution (or, alternatively, the TTS trades occur at
the end of the priority period or at any other suitable time) of a
trade together with the original trade rather than an individual
workup at a new trade price. Thus, an {fraction (1/8)}th
incremental price is preferably barred from becoming the touch
trading price, but rather the system carries on showing the
headline price trading, with {fraction (1/8)}th limit orders in the
book flashing HIT or TAKE underneath the headline price. This trade
is shown in FIG. 5.
[0060] FIG. 5 includes a TTS trade that occurs during a workup
state. Display 500 shows a display in which a TTS trade occurs
during a workup state. In this trade, a trade at 100.06 is
occurring in the touchline 502. Typically, the current participants
in the trade enjoy a priority. Line 504 shows an additional trade
(for a volume of ten of the item that shows that the bid price has
been hit) is occurring at a price--i.e., 100.57--that is worse than
the touch price.
[0061] The following are one set of possible rules for
Trade-Through-the-Stack trading. It should be noted that one or all
of the following rules may be used according to the invention. It
becomes important for users to also view the order book of prices
behind the touch price (even when the touch price is unclear--i.e.,
not available--to those users). Users can attempt to trade with the
prices in the limit book preferably according to one or more of the
following rules.
[0062] 1) If a TTS order exceeds the allowable system delta (from
the headline trading price), the order is preferably rejected
before any size is traded. The trade is likely to be an error even
if the size being hit or lifted is available in the book of
orders.
[0063] 2) Preferably, only one priority worker is allowed per side
on the touch line during a workup state. A priority worker can
carry on the priority strikes in the current manner. For example,
during the workup state when 100.00+ is trading, and first seller
can type <10 SELL> in order to trade more at 100.00+ or he
can carry on his priority at a different level. He can do this by
typing <100.005 10 SELL> to "back himself up" to 100.005 and
have priority at that level. Nevertheless, if he backs up beyond
the next limit order available, then he may be forced to lose
priority immediately because he has essentially made his price
worse than the existing market price.
[0064] Once the priority participant has backed up--i.e., made his
price worse by moving a bid/buy down, or an offer/sell up a small
increment to try to "do better" for himself at the expense of his
future contraparty--his price to 100.005, then, if someone else
types <100.00+ SELL>, the priority participant loses priority
at the original touch price. Nevertheless, priority preferably can
only be removed in this way when a priority worker has changed his
bid/offer to a level less competitive--i.e., puts in a bid lower
than the bid the priority worker put in originally, or puts in an
offer higher than the offer he put in originally--than the touch
line trading price. This preferably prevents gaming for advantage
by other users trading just a small volume of the item at an
{fraction (1/8)}th of a thirty second more aggressive than the
priority user at the touch line trading price, to truncate the
priority of that first user.
[0065] To reiterate, where a seller has backed up to a worse price,
he remains priority seller in the trade unless bettered. After the
trade is concluded, as a result of an expiration of a
pre-determined period of time, or some other suitable impetus, the
remaining priority participant should retain first priority "on the
follow"--i.e., in the bid/ask stack of the next trade at the same
price level according to existing last trader/last priority
rules.
[0066] 3) All sizes shown in the Buy and Sell "breakout stack"
(such as 312 and 314 in FIG. 3, 412 and 414 in FIGS. 4 and 512 and
514 in FIG. 5) are for the touch trading price only. Sizes
available outside the touch price (the limit book) may preferably
be shown aggregated next to their respective price levels.
[0067] 4) If priority is lost on both sides of a deal, and a trader
uses TTS while the trade is still working--i.e., during the period
of time wherein the system tests for and executes any new
transactions and no party can control the trade to the exclusion of
others--then all TTS trades are tested for and, if possible
executed at the touch price as well. Then all sizes are traded at
the touch price, and then, if necessary, trades are executed to the
limit price requested to fill the order (flashing the HIT or TAKE
accordingly at that limit price level).
[0068] 5) If priority is lost on the same side as the TTS attempt
but is still current on the contra side (e.g. a TTS HIT when the
first seller in the deal is done, but first buyer still has
exclusive priority), then the system preferably trades all contra
size at the touch price and then queues--i.e., holds, preferably
for a predetermined period of time--the remainder of the TTS order,
while disallowing further cancellation of the remainder of the TTS
order. The necessary limit amounts behind the first buyer will be
held from canceling the amounts that match the remainder of the TTS
order. These matching amounts will be held until the first buyer
has either bought the remainder of the TTS sell, elected to end his
order, or has timed out.
[0069] In one example of this rule, the touch line may show
[0070] "100.00+ HIT 10 10.times.zero"
[0071] There may be a further indication in the touch line that
shows that the seller is done.sup.1. .sup.1 At this point of the
trade, a termination of the seller's priority may occur either as a
result of the seller's election or because the seller times
out.
[0072] The buyer, on the other hand, retains priority. Then, there
may be a bid behind the priority buyer for 90 m (million) at
100.002 (a price which is, in fact lower than the outstanding bid
and, therefore, which is a price "behind" or "beyond" the priority
buyer (or bidder)).
[0073] Thereafter, a new seller sends a TTS "100.002 sell 50
m"--i.e., a sell order that is below the touch price. Immediately,
the TTS hits the bid for the remaining 10 m of the priority buyer's
order. This leaves the remainder of the TTS sell order to match
with 40 m bid at 100.002. Nevertheless, this trade for the
remaining 40 m is not yet executed because the priority buyer still
retains the right to buy at 100.00+.
[0074] Thereafter, a new seller sends "100.002 sell 50 m"--i.e., a
sell order that is below the touch price. Immediately, the TTS hits
the bid for the remaining 10 m of the priority buyer's order. This
leaves the remainder of the TTS sell order to match with the 40 m
bid at 100.002. Nevertheless, this trade for the remaining 40 m is
not yet executed because the priority buyer still retains the right
to buy at 100.00+.
[0075] In this particular example, the 100.002 bidder then cannot
cancel 40 m of his original order--i.e., 40 m of his bid is held
until the resolution of the priority buyer. At this point, the TTS
order (characterized as the 100.002 seller) is there to sell 40 m
more at 100.00+ if the priority buyer (or subsequently anyone else)
wants to buy them at 100.00+. The TTS seller also cannot cancel the
40 m remaining of his sell order because it will be matched at the
first opportunity (either at 100.00+ or later, by the next buyer
below in the stack, at 100.002). It is significant here that the
untraded, yet about-to-be matched orders cannot cancel. It should
be noted that in one embodiment of the invention, the guarantee
state may preferably only occur in workup state. Alternatively, the
guarantee state may be implemented in bid/offer state as well, as
will be explained in more detail below.
[0076] When the trade continues, a trading system according to the
invention preferably waits (up to 4 seconds in one embodiment for
United States government securities) for the initial priority buyer
to buy more out of the 40 m for sale at 100.00+ before the trading
system allows the HIT to occur at the 100.002 bid in the size
balance left over. Thereafter, the 100.002 limit bid is free to
cancel any untraded size that may still remain.
[0077] 6) If priority is current only on the same side as the TTS
attempt, the following rule may apply. The system preferably allows
the TTS order to trade immediately at the targeted limit price
behind the touch price, as a "trade and run and cleared" part of
the overall trade workup. Thus, the TTS order bypasses the size at
the best price (which is temporarily reserved for the priority
worker), and trades behind immediately. In this case, the TTS order
may be considered to have circumnavigated the first buyer, first
seller rules by trading at a more aggressive price.
[0078] For example, if the headline shows 100.00+ HIT 10 where the
buyer has no priority, and there is a 100.002 bid for 90 m behind,
and the first seller still has priority, then, if a new seller
sends "100.002 sell 50 m," the 100.002 bid trades immediately in 50
m at 100.002 with the new seller.
[0079] 7) In yet another rule, which applies to action occurring
during a workup state, if a TTS order has assumed the priority
position and exhausted all possible contra size available to its
price (within some range which may be predetermined by a system
delta), it preferably becomes the touch line order in the buy/sell
stack at the touch price (or alternatively, the TTS bid/offer
becomes the headline price beyond the touch price--i.e., at one of
the exhausted prices), albeit with no matching contra order. In one
embodiment, this TTS order may be adapted to re-engage any new
orders that are behind the touch price when they appear, to the
extent that its original price limit applies to match newly entered
orders.
[0080] 8) Another rule which applies to TTS trading relates to
"hidden size." A hidden size functionality in a trading system
according to the invention allows a user to show a predetermined
portion of a larger order size. In one embodiment of the invention,
hidden size contra orders, that are engaged in workup state TTS
according to the rules above, may be fully exposed up to the amount
that can be traded, before the next contra order, or price level,
is touched.
[0081] In another aspect of the invention, new approaches to
providing system transparency are provided. In an interactive
trading application interface according to the invention, users can
visually determine whether they are priority participants during
the trading system state by observing the screen colors in this
state with respect to the other participants. If they see a zero in
a predetermined color at the top of the breakout stacks referred to
above, users know they have the priority worker status. If users
see a zero in another predetermined color, they know someone else
has priority. Participants can also see the limit bid and offer
orders in the book below and above the trading price. Seeing the
limit orders allows the participants to make a judgment with
respect to what to do when the present trading system state
terminates if participants do not trade at the touch price.
[0082] Two approaches according to the invention preferably adapt a
trading system application trading interface (API) according to the
invention to help users, and user APIs (notably, in an automated
fashion), to see what the user eye & mind can deduce in
interactive trading systems. This preferably promotes system
transparency because it allows users, and user APIs, to access
information relating to priority. Then other non-priority users may
access the next price without waiting. This preferably increases
trading efficiency.
[0083] The following includes approaches to providing system
transparency according to the invention. When the trading system
API carries a price to a user, or user API, the following
attributes or flags may also be sent from the trading system to
that user so the users are cognizant of the manner of bid/ask,
workup state, or other suitable trading state that they presently
are operating in. In one alternative embodiment, these messages may
be sent as audio files whereby the workstation associated with a
participant may provide audio messages corresponding to the
messages in the following table.
1 Trade State Attributes Associated Message Price/Size Clear to You
A particular buy/sell/bid/offer is clear for a user to trade
immediately -- i.e., no order queuing delay would result from such
a trade attempt Price/Size Unclear to You A particular
buy/sell/bid/offer is not clear for a user to trade immediately --
i.e., another user has priority over the this user and a subsequent
trade attempt would result in a queued message from a trading
system, and a delay for this user for inclusion into a workup state
Price/Size Clearing to You A particular buy/sell/bid/offer is
clearing only to the particular user. Included with this message
may be an indication of how long the exclusive priority period may
last
[0084] It should be noted that the exclusive right to trade a
particular buy/sell/bid/offer is an option provided to the priority
user and may have considerable market use as well as substantial
cumulative net value. Traders who have priority in a particular
security or instrument can electronically trade related derivatives
markets, such as futures markets for the security or instrument,
with the knowledge that no other party can take over priority to
trade the security or instrument at that time (in the particular
trading system where the trader enjoys priority for the
instrument.)
[0085] In the embodiment of the invention that relates to audio
files being sent to the participant that correspond to the status
of trading that the participant is engaged in, the following
disclosure applies as well. Before electronic trading, voice
brokers provided a service not just in terms of execution, but also
in terms of confirmation in addition to providing other trade data.
Voice brokerage was supplemented by the electronic broadcast of
such information. However, to buy, sell or access market
information, one needed to call the voice broker.
[0086] With the advent of electronic trading, confirmation and
trading data are preferably all returned to the trader in text
form. While a number of alert sounds could be set up, these notify
the trader only that something has happened. Traders therefore use
sight and sound to gauge market conditions with the help of voice
brokering supplemented with electronic trade data.
[0087] The audio files described above form a part of systems and
methods for traders to receive instantaneous confirmation of trade
execution and post-trade execution data. Such information and other
market information may be relayed via a data to voice service in an
electronic trading system. Such a system may be implemented to
alert active market participants of the status of a trade in
real-time, and to provide instantaneous audio files relating to
trade confirmation.
[0088] The system may alert a designated active customer of the
availability of a better bid/offer than what was previously
available. The alerts may be reported by issue--i.e., any better
bid/offer in a particular issue--by side of market (bid or
offer)--i.e., by any better bid/offer on a particular side of the
market--by price--i.e., the best price available--by current
status--i.e., changes in status past a pre-determined delta--or by
any other suitable parameter.
[0089] FIG. 6 shows yet another aspect of the present invention.
This aspect of the invention preferably helps participants quantify
and execute a portfolio of bonds in middle market trading system
(MMTS)--i.e., a trading system for odd lots of holding of
securities. After a customer inputs size, price, and bid/offer
wanted, the program returns the value of the portfolio in an
easy-to-read dollar value format.
[0090] Display 600 includes portions 610 and 620. Portion 610 of
FIG. 6 shows the prices that are available for a particular issue
in the MMTS. These prices represent available prices--i.e., current
bids and offers--for odd lots--i.e., non-standard amounts--of
issues. Portion 620 of FIG. 6 shows a customer's portfolio of odd
lots of issues. In one embodiment of the invention, a spreadsheet,
such as an Excel spreadsheet, may be adapted whereby the customer
preferably inputs a target value--either a profit or loss--at which
the customer wishes to trade some or all of his portfolio of odd
lots of issues. When the spread sheet determines, based on the
values obtained from MMTS and the values input by the participant,
that the target value of the customer has been achieved, the system
may automatically execute the trades necessary to liquidate the
portfolio.
[0091] For example, even though the average price differential
between many of the odd lots and the available bid/offers on MMTS
may be large--e.g., 1.1 tics from what the participant desires--the
total loss incurred by trading all of the participant's portfolio
may be preferably limited because of the relatively small size of
the lots. In such a case, it may be highly likely that the customer
would execute this odd lot portfolio given the small total value
differential. This system preferably obtains advantage as an
extremely accurate gauge of the customer odd lot portfolio
position.
[0092] It will be understood that the foregoing is only
illustrative of the principles of the invention, and that various
modifications can be made by those skilled in the art without
departing from the scope and spirit of the invention.
* * * * *