U.S. patent application number 13/784092 was filed with the patent office on 2013-07-11 for managing hedge orders for synthetic spread trading.
This patent application is currently assigned to TRADING TECHNOLOGIES INTERNATIONAL, INC.. The applicant listed for this patent is TRADING TECHNOLOGIES INTERNATIONAL, INC.. Invention is credited to Patricia A. Messina, Sagy Pundak Mintz, Thomas R. Zagara.
Application Number | 20130179323 13/784092 |
Document ID | / |
Family ID | 45467693 |
Filed Date | 2013-07-11 |
United States Patent
Application |
20130179323 |
Kind Code |
A1 |
Mintz; Sagy Pundak ; et
al. |
July 11, 2013 |
Managing Hedge Orders for Synthetic Spread Trading
Abstract
Hedge legs for synthetic spread trading strategies are managed
as attached or detached from a synthetic spread order. A legged
hedge order may be changed, adjusted, deleted, cancelled or
otherwise managed according to changes, adjustments, deletions
ad/or cancellations of the synthetic spread order upon which the
legged spread order was submitted.
Inventors: |
Mintz; Sagy Pundak;
(Lincolnshire, IL) ; Messina; Patricia A.;
(Chicago, IL) ; Zagara; Thomas R.; (LaGrange,
IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
TRADING TECHNOLOGIES INTERNATIONAL, INC.; |
Chicago |
IL |
US |
|
|
Assignee: |
TRADING TECHNOLOGIES INTERNATIONAL,
INC.
Chicago
IL
|
Family ID: |
45467693 |
Appl. No.: |
13/784092 |
Filed: |
March 4, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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12836474 |
Jul 14, 2010 |
8417621 |
|
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13784092 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. A method for synthetic spread trading, comprising: receiving,
via an input device associated with a client device, a user command
to change a target price for a synthetic spread to a new target
price for the synthetic spread, where the synthetic spread includes
an unfilled hedge order with an unfilled quantity pending execution
at an electronic exchange at a hedge price; and in response to
receiving the user command, submitting, via the client device, an
update message to the electronic exchange to change the hedge price
to a new hedge price determined based on the new target price.
2. The method of claim 1 where the unfilled hedge order is derived
from a target price for the synthetic spread and a working order of
the synthetic spread.
3. The method of claim 1 where the update message comprises a
cancel/replace order.
4. The method of claim 1 where submitting the message comprises
cancelling the unfilled hedge order and submitting a new hedge
order for the unfilled quantity at the new hedge price.
5. The method of claim 1 where an inside market for a hedge leg of
the synthetic spread is between the hedge price and the new hedge
price.
6. The method of claim 1 where the new hedge price is further based
on user parameters for the synthetic spread.
7. The method of claim 1 where the unfilled hedge order is
associated with the synthetic spread according to user
preferences.
8. The method of claim 1 where the unfilled hedge order is for a
hedge leg of the synthetic spread.
9. The method of claim 8 further comprising displaying, via the
client device, an indicator representing the unfilled hedge order
at price level of a plurality of axially aligned price levels for
the hedge leg.
10. A non-transitory computer readable medium having instructions
stored thereon which when executed by a processor cause the
processor to carry out acts comprising: receiving a user command to
change a target price for a synthetic spread to a new target price
for the synthetic spread, where the synthetic spread includes an
unfilled hedge order with an unfilled quantity pending execution at
an electronic exchange at a hedge price; and in response to
receiving the user command, submitting an update message to the
electronic exchange to change the hedge price to a new hedge price
determined based on the new target price.
11. The non-transitory computer readable medium of claim 10 where
the unfilled hedge order is derived from a target price for the
synthetic spread and a working order of the synthetic spread.
12. The non-transitory computer readable medium of claim 10 where
the update message comprises a cancel/replace order.
13. The non-transitory computer readable medium of claim 10 where
submitting the message comprises cancelling the unfilled hedge
order and submitting a new hedge order for the unfilled quantity at
the new hedge price.
14. The non-transitory computer readable medium of claim 10 where
an inside market for a hedge leg of the synthetic spread is between
the hedge price and the new hedge price.
15. The non-transitory computer readable medium of claim 10 where
the new hedge price is further based on user parameters for the
synthetic spread.
16. The non-transitory computer readable medium of claim 10 where
the unfilled hedge is associated with the synthetic spread
according to user preferences.
17. The non-transitory computer readable medium of claim 10 where
the unfilled hedge is for a hedge leg of the synthetic spread.
18. The non-transitory computer readable medium of claim 17 further
comprising displaying an indicator representing the unfilled hedge
order at price level of a plurality of axially aligned price levels
for the hedge leg.
19. A spread order management apparatus, comprising: an order
manager configured to submit an update message to an electronic
exchange in response to receiving a user command to change a target
price for a synthetic spread to a new target price, where the
synthetic spread includes an unfilled hedge order and where the
update message includes instructions to change a hedge price for an
unfilled quantity of the hedge order pending execution at the
electronic exchange to a new hedge price determined based on the
new target price.
20. The spread order management apparatus of claim 19 where the
update message comprises a cancel/replace order.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation of U.S. patent
application Ser. No. 12/836,474, filed Jul. 14, 2010, entitled
"Managing Hedge Orders for Synthetic Spread Trading," the contents
of which are fully incorporated herein by reference.
TECHNICAL FIELD
[0002] The present invention relates generally to electronic
trading, and particularly to managing hedge orders for synthetic
spread trading.
BACKGROUND
[0003] Electronic trading systems have one or more networked
computers, servers, gateways, processors, and related devices to
couple a user (e.g., a trader) to one or more exchanges (also
referred to as an electronic exchange, or host exchange). The
exchange has one or more centralized computers for receiving,
matching and processing orders from traders, other electronic
trading systems and/or other exchanges for one or more tradeable
objects traded, listed, and/or exchanged at the exchange. The
exchange administers information for the tradeable objects and
supplies, or broadcasts, the information via a real-time, or
substantially real-time, streaming data feed, or other suitable
form. The information generally includes at least a portion of an
order book and order fill information. Traders may have one or more
client devices connected to the electronic exchange for viewing the
information and submitting orders.
[0004] A tradeable object includes an item or quantity of the item
that can be traded, swapped of otherwise exchanged at a price,
including but are not limited to, all types of traded events,
goods, wares and/or financial product such as stocks, bonds,
options, futures, commodities, currencies, repos, indexes,
warrants, funds, derivatives thereof, collections or combinations
thereof and the like. The tradeable object may be "real," (i.e.,
products listed by an exchange), or "synthetic" (i.e., a
combination of real products).
[0005] The trader may employ one or more trading strategies for
entering into trades for one or more tradeable objects. A complex
trading strategy (known as a spread), includes simultaneous, or
substantially simultaneous, buying and/or selling of one or more
tradeable objects (also known as outright markets or legs). A
spread may be exchange-defined or synthetic, where an
exchange-defined spread is listed and priced as a whole, and a
synthetic spread and its parameters are generally identified by the
trader. Spreads may be inter- or intra-commodity and include a
butterfly, bear, bull, calendar, crack, horizontal, vertical,
basis, bundles, packs, strips, straddles, strangles, and ratio
spreads.
[0006] A trader may use a trading tool to compile and present the
information, define parameters of a spread, select a target spread
price, enter orders, and re-price or requote working order, in
response to changes in the inside market for the hedge to achieve
the target spread. The trading tool also may send a hedge order for
the hedge leg at the inside market of the hedge leg based on the
trader's parameters and/or the trading strategy. If the inside
market for the hedge order does not change before the hedge order
is received and executed, and there is sufficient quantity
available for the hedge order, the hedge order can be filled. A
portion of the hedge order that exceeds the quantity available at
the inside market may not be filled. In addition, if the inside
market changes, the hedge order may not be filled, at least not
immediately, if at all. In this instance, the trader, and the
spread, is said to be legged, because at least a portion of the
hedge order (i.e., leg) did not get filled.
[0007] On occasion, a trader may change or adjust a target spread
price, or for a legged spread. Because the working orders, hedge
orders and fills of working and hedge orders may not be reported,
tracked, managed, administered or otherwise recorded as part of a
spread trading strategy, the trader may need to account for the
legged order. That is, the trader may need to adjust, and/or
cancel/replace, the legged order to match a changed target spread
price. In this instance, the trader may need to recalculate a new
price for the legged order based on the new target spread price
other parameters of the spread. Thus, multiple time-consuming steps
and additional resources may be necessary for the trader to achieve
the new target spread price.
[0008] Accordingly, tools to improve assistance for a trader to
employ synthetic spread trading strategies are desirable.
SUMMARY
[0009] Managing hedge orders for synthetic spread trading may
include methods, systems, and apparatuses.
[0010] In an embodiment for managing hedge orders for synthetic
spread trading, a hedge order for a synthetic spread may be
considered to be attached or detached to the synthetic spread from
which the hedge order derived. For example, the trader of the
synthetic spread may use a trading tool to set parameters for the
synthetic spread, where one or more legs are identified as attached
or detached to the synthetic spread. After the synthetic spread is
submitted, a hedge order may be pending execution, or otherwise
considered legged. An attached hedge order pending execution may be
adjusted in response to adjustments to the synthetic spread order
from which the pending hedge order derived. For example, a price
for hedge order pending execution that derives from a synthetic
spread may change in response to changes in the synthetic order
while the hedge order is pending. A hedge order that is not is
attached may not be affected by changes and/or adjustments to the
synthetic spread order from which the pending hedge order
derived.
[0011] A hedge order for a hedge leg of a synthetic spread may be
detected, such as by a client device, a trading device or any other
device having a processor and/or configurable to monitor and manage
electronic orders. The hedge order is derived or otherwise
generated based on a target price for the synthetic spread and a
working order of the synthetic spread on which the hedge order is
based. The hedge order may be pending execution at an electronic
exchange for some or all of an original quantity of the hedge
order. For example, the hedge order is for an unfilled quantity
that is pending execution at an electronic exchange at a hedge
price.
[0012] A price at which the synthetic spread was entered and/or
submitted for trading may be changed. For example, a command to
change or otherwise adjust the target price for the synthetic
spread may be received. The command may be received by the client
device via an input device associated with the client device. The
command may be configured to initiate a change to the price for the
synthetic spread to a new target price for the synthetic spread.
The client device may determine a new hedge order price. The new
hedge order price may be determined or otherwise calculated based
on the new target price and an update message is submitted to the
electronic exchange to change the hedge price to a new hedge
price.
[0013] In an embodiment, the message may cancel the hedge order and
replace the hedge order with a new hedge order at the new hedge
price, such as by a cancel/replace order. In an alternative or
additional embodiment, the message includes script for changing the
hedge price of the hedge order to the new hedge price. In response
to an inside market for the hedge leg being between the hedge order
price and the new hedge order price, some or all of the unfilled
quantity of the hedge order may be filled at that inside
market.
[0014] In an embodiment, the new hedge order price is determined
based on the new target price for the synthetic spread order and
user parameters for the synthetic spread. The user parameters may
be input and stored by the client device. The user parameters may
be input before or after the synthetic spread is entered or
otherwise submitted. The parameters also may include identifying
the synthetic spread attached/detached, and or all or some of the
legs of the synthetic spread as attached/detached.
[0015] In an embodiment, the client device includes one or more
displays, such as a monitor, for displaying prices for the
synthetic spread. In addition or alternatively, the display may
display prices for some or all legs of the synthetic spread based
on or derived from market information received from the electronic
exchange for each leg. The prices for the synthetic spread may be
based on or derived from market information for each leg of the
synthetic spread, and also may be based on user parameters. The
prices may be displayed axially aligned to form a price axis or
ladder. A synthetic spread order indicator for the synthetic spread
may be displayed along axially aligned prices for the synthetic
spread at a price level corresponding to the hedge price. A hedge
order indicator may be displayed along axially aligned prices for
the hedge leg corresponding to the hedge price. The indicator may
distinguish whether the hedge order is attached. The indicator also
may identify a quantity associated with the hedge order.
[0016] Other embodiments of the present invention are described
below. In addition, modifications may be made to the described
embodiments without departing from the spirit or scope of the
invention.
BRIEF DESCRIPTION OF THE FIGURES
[0017] Managing hedge orders for synthetic spread is described and
illustrated via exemplary embodiments, which are not limited by the
accompanying figures. Figures having like reference numerals
indicate similar elements.
[0018] FIG. 1 illustrates an exemplary electronic trading
environment for managing hedge orders for synthetic spread
trading.
[0019] FIG. 2 illustrates a flowchart for an exemplary method for
facilitating synthetic spread trading.
[0020] FIG. 3 illustrates a flow chart for an exemplary method for
filling and executing trades for synthetic spread trading.
[0021] FIG. 4 illustrates a block diagram for synthetic spread
trading.
[0022] FIG. 5 illustrates a spread window display for a synthetic
spread and constituent legs of the synthetic spread.
[0023] FIG. 6 shows a spread window display for a synthetic spread
after a quoting order has been filled and child hedge orders has
been legged.
[0024] FIG. 7 illustrates a spread window display for a synthetic
spread after a quoting order is filled, at least one corresponding
hedge order is unfilled, and a price for the synthetic spread is
adjusted.
[0025] FIG. 8 illustrates an example of a Spread configuration
window.
DETAILED DESCRIPTION
I. Electronic Trading Environments
[0026] FIG. 1 illustrates an exemplary electronic trading
environment for managing hedge orders for synthetic spread trading.
The electronic trading environment includes a client device 102, a
gateway 106, an electronic exchange 104, and a router 108. The
client device 102 is operatively coupled with the electronic
exchange 104 through one or more devices such as the gateway 106
for communication of information. Router 108 is configured to route
messages between the gateway 106 and the electronic exchange
104.
[0027] The electronic exchange 104 may list one or more tradeable
objects for trading. The electronic exchange 104 includes at least
one processor or central computer. The electronic exchange 104 is
configured to receive orders from client devices 102 and match the
orders against contra orders. An order for a tradeable object that
is not immediately matched may be stored and arranged in an order
book for order matching according to a match algorithm for the
tradeable object. The electronic trading environment may include
various electronic trading environments having the same, additional
or alternative features as described and illustrated with respect
to FIG. 1. The exemplary embodiment of FIG. 1 represents electronic
trading environments having features, such as computer programs
and/or systems that do not necessarily relate to electronic trading
(e.g., operating systems, gaming systems, and/or other software
applications).
[0028] The electronic exchange 104 also may distribute information
related to orders pending at the electronic exchange 104 and
matched orders. The information may be distributed or broadcast and
may include data representing a current inside market (e.g., the
lowest sell price (best ask) and the highest buy price (best bid)).
The information also may include all or a portion of the market
depth, which may include quantities of the tradeable object
available at the inside market and/or quantities of the tradeable
object available at prices away from or outside of the inside
market, to the extent that such quantities are available. The
information also may include news, charting data, and/or
order-related information from an exchange or other data
source.
[0029] A quantity available at a price level may be provided in
aggregate sums, where a total buy quantity and a total sell
quantity available in the market at a price level is provided. The
extent that the market depth is provided generally depends on the
exchange and/or other parameters, such as volume. Other types of
information, such as the last traded price (LTP), last traded
quantity (LTQ), and order fill information also may be provided.
Information related to order fills (also referred to as order
execution, and order completion) may be referred to as market
data.
[0030] The client device 102 may be one or more devices such as
multiple work stations or a network of devices and may execute one
or more applications. Examples of the client device 102 include one
or more mainframe, desktop, notebook, tablet PC, handheld, personal
digital assistant, Smartphone, server, gateway, combination
thereof, or other computing device having one or more processors or
central processing units. For example, the client device may be
include a Pentium.RTM. class processor and/or may use one or more
of a Windows.RTM. or MAC OS operating system, and include one or
more memory or data storage devices, an data input interface for
receiving data from a communications network, a user input
interface for receiving input signals from one or more input
devices, such as a keyboard, a trackball, pen device, microphone,
gazing detection device, mouse for click-based trading and/or other
device for configured to receive input from a user, and an output
interface for communications with at least one output device (e.g.,
a monitor or display device, audio device, or combination thereof)
suitable for presenting information.
[0031] The client device may receive and display the market
information from one or more exchanges or other sources. For
example, the display device may include a CRT-based video display,
an LCD-based or a gas plasma-based flat-panel display, a display
that shows three-dimensional images, audio devices, and/or Braille
output devices or some other type of output device or mechanism.
The display device may include an input device to provide for
interaction between the user and the information.
[0032] The client device 102 may be used by a user, or a trader, to
submit one or more orders for one or more tradeable objects for
trading. An order may include instructions or messages to place or
submit a new order, cancel an existing order, change an existing
order, initiate query about orders or order book for one or more
tradeable objects, test a connection to, or communication with, an
exchange, combinations thereof and the like. A trader may send an
order, such as by supplying one or more commands using one or more
input devices associated with the client device, including a
keyboard, a mouse or pointing device, a portion of the display,
touching or controlling an area of the display or area controlled
by the display. The client device 102 may generate transaction
information in response to the user input, which may be sent to one
or more exchanges.
[0033] Instructions for carrying out acts for managing hedge order
for synthetic spread trading may be stored or otherwise recorded on
a computer readable medium, such as non-volatile media, volatile
media and transmission media, including floppy disks, flexible
disks, hard disks, magnetic tape, punch cards, CD-ROM, a RAM, a
PROM, an EPROM, a FLASH-EPROM, and any other memory chip or
cartridge, or medium from which a computer can read. The processor
may have sufficient processing capability for available market
information and for carrying out the acts. In an exemplary
embodiment, software may create interactive trading screens on
associated display devices of the client device 102 for viewing the
market information, entering and submitting orders, obtaining
market quotes, and monitor positions. Additionally or
alternatively, the client device may automate trading.
[0034] An example of such trading tool is available from Trading
Technologies International, Inc. of Chicago, Ill. as X_TRADER.RTM.,
which also provides an electronic trading interface, referred to as
MD Trader.RTM.. Portions of the X_TRADER and the MD Trader style
display are described in U.S. Pat. No. 6,772,132 for a "Click Based
Trading With Intuitive Grid Display of Market Depth," U.S. Pat. No.
6,938,011 for a "Click Based Trading with Market Depth Display"
U.S. Pat. No. 7,127,424 for a "Click Based Trading With Intuitive
Grid Display of Market Depth and Price Consolidation," U.S. Pat.
No. 7,389,268 for "Trading Tools For Electronic Trading," and U.S.
Pat. No. 7,228,289 for "A System and Method for Trading and
Displaying Market Information in an Electronic Trading
Environment," U.S. Pat. No. 7,437,325 titled "System and Method for
Performing Automatic Spread Trading," U.S. patent application Ser.
No. 12/637,517, filed Dec. 14, 2009 and titled Synthetic Spread
Trading, and U.S. patent application Ser. No. 12/637,536, filed
Dec. 14, 2009 and titled Cover-OCO Orders for a Legged Order, the
contents of each are incorporated fully herein by reference. In
addition or alternatively, other trading tools may be used to view
market data and/or to place order. Additionally, the preferred
embodiments are not limited to any particular product that performs
translation, storage, and display function. A system bus, or an
equivalent, may provide communications.
[0035] The gateway 106 may be a computing device having one or more
processors or central processing units, memory or data storage
devices, communication interfaces, user input interfaces, and
output interfaces. The gateway 106 may include or access a
database. The gateway may execute one or more gateway applications,
the gateway 106 may execute application programs of the client
device 102, and/or the gateway applications may be performed by the
client device 102.
[0036] The electronic trading environment may include one or more
electronic exchanges 104 at which a trader may trade. The client
device 102 may access the one or more electronic exchanges 104
through one or more gateway 106, and/or a combined gateway that
provides access to multiple electronic exchanges. In addition or
alternatively, router 108 may routes data between gateways and
electronic exchanges.
II. Spread Trading
[0037] In general, a complex trading strategy involving multiple
tradeable objects is referred to as a spread. Each of the tradeable
objects, or orders or potential orders for each tradeable object,
may be referred to as a leg or outright. An order or trade for a
spread may be considered a buy or sell, where a buy defines which
leg of the spread is bought--typically the first or front leg--a
sell defines which leg is sold--also typically the first or front
leg.
[0038] The spread may be based on a defined, or known, relationship
between tradeable objects, such as a spread ratio, which indicates
the quantity of each leg in relation to other legs of the spread.
For example, a spread having legs A and B may be defined by a 3:2
ratio, where 3 units of leg A may be bought and 3 units of leg B
are sold. The spread ratio may be implied, or implicit such that
the spread ratio for a leg of a trading strategy is not be
explicitly specified, but rather implied or defaulted to be "1" or
"-1" (a positive nomenclature denotes bought leg and negative
nomenclature denotes a sold leg).
[0039] One or more legs of the spread may also have a multiplier
for a price relationship. The multiplier may be the same as or
different from the spread ratio. For example, the multiplier
associated with leg A may be "2" and the multiplier associated with
leg B may be "-3," both of which match the corresponding spread
ratio for the legs.
[0040] In an example, a trading strategy includes "N" legs, where
the relationship between tradeable objects for each leg is defined
according to spread ratio and multiplier associated with each leg.
A strategy price, or target price, also may be determined according
to the definition of the trading strategy. The price is considered
the sum of price of the tradeable object multiplied by the
multiplier for each of the legs, as follows:
Strategy Price=.SIGMA..sub.i=1.sup.NMulti(i)*Price(i) Eq. 1
Where Mult(i) is the multiplier associated with leg i and Price(i)
is the price for the tradeable object for leg i. One skilled in the
art will also recognize that the price for a trading strategy may
be affected by price tick rounding and/or pay-up ticks.
[0041] Orders for each leg may be submitted according to parameters
and/or relationship defined by the trading strategy. As an example,
a market for one unit of Leg A has a price of 45, and the market
for Leg B has one unit at a price of 40. The current spread price,
using Equation 1, would then be (1)(45)+(-1)(40)=5. Thus, a trader
that buys 1 unit of the spread, buys 1 unit of Leg A at a price of
45 and sells 1 unit of Leg B at 40.
[0042] If the typical price difference is restored, such as where
price of Leg A is 42 and the price of Leg B is 32, the price of the
spread would be 10. If the trader sells 1 unit of the spread to
close out the position (that is, sells 1 unit of Leg A and buys 1
unit of Leg B), the trader may profit on the total transaction.
That is, the trader bought Leg A at 45 and sold at 42, losing 3,
the trader also sold Leg B at 40 and bought at 32, for a profit of
8. Thus, the trader made 5 on the buying and selling of the
spread.
[0043] Generally, a spread strategy may be based on a desired price
where one or more legs are bought and/or sold at appropriate prices
using an automated spread trading tool that administers trades
according to the strategy. For example, a trader may enter an order
to buy or sell a trading strategy at a price (also referred to as a
desired strategy price, desired spread price, desired price and/or
a target price), and the automated trading tool may automatically
place an order (also referred to as a quoting, or working order)
for at least one of the tradeable objects to achieve the price for
the trading strategy.
[0044] The leg for which the order is placed is referred to as the
quoting leg and the other leg is referred to as a lean leg and/or a
hedge leg. The price that the quoting leg is quoted at, or working
at, is based on the best price that an order could be filled at in
the hedge leg, which is typically at the inside market of the hedge
leg. That is, the best price is typically the best bid price of the
hedge leg when selling and the best ask price of the hedge leg when
buying. The best price in the hedge leg is also known as the leaned
on price, lean price, or lean level. The trading strategy may be
quoted in a single quoting leg or in multiple (or even all) legs of
a spread where each quoted leg leans on at least one of the other
legs of the spread. When one of the quoted legs is filled, the
orders in the other quoted legs are typically cancelled and
appropriate hedge orders are placed.
[0045] As the leaned on price changes, the price for the order in
the quoting leg may also change in order to maintain the desired
strategy price and/or may change according to changes in the hedge
leg being within a limit, or would result in a change to the quote
leg within a limit. When the quoting leg is filled, the automated
trading tool may submit an order in the hedge leg to complete the
strategy, also referred to as an offsetting or hedging order.
[0046] The price of a quoted leg may also or alternatively be based
on less than all of other legs of a spread. The order parameters of
an order in a quoted leg may lean on other types of market
conditions in the other legs such as the last traded price (LTP),
the last traded quantity (LTQ), a theoretical value, multiple
quantities such as quantities closer to the inside market, or some
other reference point.
[0047] When a quoting leg is filled, but at least one of the hedge
legs cannot be filled, (or filled sufficiently to achieve the
desired price of the trading strategy) the spread may be determined
to be legged. The hedge leg may not be filled because the inside
market for the hedge moved away before the hedge order was entered,
and/or there may not be sufficient volume to fill the order at the
inside market.
III. Spread Trading Tool
[0048] The orders and fills for the synthetic spread, including the
orders for each leg of the synthetic spread, may be managed,
compiled, recorded, viewed and the like through one or more spread
trading tools, such as Autospreader.RTM., of Trading Technologies
International, Inc. A spread trading tool may be used to view
market information for the spread and its legs, administer the
strategy for trading the legs (outright or working orders) and/or
sending orders in one or more legs.
[0049] The spread trading tool also may generate spread data based
on information for its constituent legs and spread parameters. The
data may be formatted and presented in a visual format, such as in
a graphical user interface manager ("GUI manager"). That is, the
data for the spread and/or data for one or more legs of the spread
may be displayed in one or more windows for the spread and/or using
the GUI. The data for the spread and the data for each leg may be
displayed in the same or different windows. Orders can be entered
or submitted for trading in the spread window, and the spread
trading tool will submit and/or initiate submission of
corresponding orders according to the spread to obtain the desired
or target price of the spread.
[0050] An exemplary a spread trading tool is provided in U.S. Pat.
No. 7,437,325 for "System and Method for Performing Automatic
Spread Trading," U.S. patent application Ser. No. 10/804,631 for
"System and Method for Estimating a Spread Value," filed Mar. 19,
2004, U.S. Pat. No. 7,389,264 for "System and Method for Performing
Automatic Spread Trading," U.S. Pat. No. 7,424,450 for "System and
Method for Performing Automatic Spread Trading," U.S. patent
application Ser. No. 12/410,759 for "Systems and Methods for
Multiplier-Adjusted Lean Levels for Trading Strategies, filed Mar.
25, 2009, all of which are incorporated fully herein by reference.
Other spread trading tools may be used and the described
embodiments are not limited to any particular product.
[0051] FIG. 2 illustrates a flowchart 200 for an exemplary method
for facilitating spread trading. The method is exemplary and may
include more or fewer acts, may occur an order different from that
shown. In the exemplary embodiment, market information feeds are
received 210 from one or more exchanges for one or more tradeable
objects. The market information generally includes the price,
order, and may include fill information for one or more tradeable
objects the inside market for the tradeable object, including the
highest bid price (HBP) and the lowest ask price (LAP), in addition
to current bid and ask prices and quantities in the market at other
prices, referred to as "market depth." The information may include
all or some of the market depth.
[0052] The spread data also may be configured, established and/or
presented 212 according to user preferences. For example, the user
may customize an estimation of spread prices and spread market
depth based on bids and offers from markets for the legs and the
spread setting parameters. The user also may re-configure existing
spreads, and/or create new spreads to configure by selecting the
legs for the spread. The legs may be selected, and the spread
configured, according to spread setting parameters in a
configuration window. The user also or alternatively may determine
a relationship between legs, order submission for a leg, and/or
administration for orders for a leg.
[0053] The spread trading tool may generate the spread data 214
based on the market information and the spread setting parameters.
The spread data may include spread prices and spread depth. The
spread data may also include the last traded price (LTP) and/or the
last traded quantity (LTQ), in addition to other items such as
open, close, settlement, daily high/low, periodic high, market
depth, market snapshots, and the like. The data may be included
according to parameters set, identified or otherwise selected by
the user, limits of the exchange from which the market data feed
came, and the like. Generating a spread data may occur on a
real-time basis, or substantially real-time basis, where
information that is relayed from the market is presented to the
user as soon as feasible. For example, the information is processed
and presented within a sufficient or reasonable amount of time to
display the information. Additionally or alternatively, the spread
data may be generated on a periodic time or semi-periodic time
basis.
[0054] A spread window is generated and displayed 216, which also
may include a window for each corresponding leg of the spread. The
spread window may display a spread price and an indicator for the
total quantity as well as the LTP/LTQ.
[0055] Orders for the spread, and its legs, may be entered 218 for
a desired quantity at a target price in the spread window. In an
example, an order is entered according to manipulating one or more
input devices, such as a mouse, keyboard, light pen, combinations
thereof and the like to cause an input indicator (e.g., a cursor)
to position the cursor relative to the desired quantity and/or
target price. The desired quantity additionally or alternatively
may be preset, predefined, predetermined, or preselected.
[0056] FIG. 3 illustrates a flow chart for an exemplary method for
filling and executing synthetic spread trades. The method is
exemplary and may include more or fewer acts, may occur an order
different from that shown. In the example, an order for one leg is
working (quoting or being quoted) at an exchange and corresponds to
a first tradeable object. A complete or partial fill, match or
execution, at the exchange for the quoting order is detected 320,
and a hedge order is determined 322. In response to the fill of the
quoting order, the hedge order is generated at 324, and is sent to
the exchange for the tradeable object of the hedge order 326. The
electronic exchange for the hedge order may be the same or
different electronic exchange. Order parameters for the hedge
order, such as a hedge order price, may be determined to achieve
the spread price.
[0057] FIG. 4 illustrates a block diagram for a synthetic spread
trading system 400 having an applications program interface ("API")
432, exchanges 430, client devices, communications 428 between the
API 432 and client devices, and communications 434 between the API
606. The communications 434,428 may include information and data
concerning tradeable objects which is generally translated by the
API 432. The GUI manager 442 may be employed with an input device
for receiving commands from a user. The system is generally
unlimited in the number of exchanges and client devices.
[0058] Client device 436 further illustrates a more detailed block
diagram having a trading application 438, an automatic spreader
440, and GUI manager 442, all or any of which may be implemented
with software, hardware, or a combination thereof. Fewer or more
components may be included and the trading application 438 and
automatic spreader 440 may be hosted on the client device 436 or
other device, may be the same software or separate software
applications on the same or different client devices 436.
[0059] The automatic spreader 440 generates spread data based on
market information for one or more tradeable objects and provide
the information in a spread window. The spread data may include
spread price and market depth and may include other items, such as
the last traded price (LTP) and the last traded quantity (LTQ),
high price, low price for a time or period of time and the
like.
IV. Spread Trading
[0060] According to a method of managing a hedge order(s) for
synthetic spread trades, a hedge order for a synthetic spread may
be considered to be attached or detached to the synthetic spread
from which the hedge order derived. For example, a trader of the
synthetic spread may use a spread trading tool to set parameters
for the synthetic spread, where one or more legs are identified as
attached or detached to the synthetic spread. A hedge order that is
derived from the synthetic spread order may be attached or detached
to the synthetic spread order.
[0061] For example, parameters of a synthetic spread are
established and a synthetic spread order is submitted, where a
working order is at least partially filled or executed, and an
associated hedge order derived from the synthetic spread order may
be pending execution, or otherwise considered legged. The
associated hedge order may have all or a portion of the original
quantity of the hedge order pending or unfilled.
[0062] When the associated hedge order is designated or identified
as an attached hedge order, the hedge order may be adjusted in
response to adjustments to the synthetic spread order from which
the pending hedge order derived. For example, a price for the
associated hedge order pending execution that derives from the
synthetic spread is changed in response to changes in the price for
the synthetic order while the associated hedge order is pending. A
hedge order that is not is attached may not be affected by changes
and/or adjustments to the synthetic spread order from which the
pending hedge order derived.
[0063] FIG. 5 illustrates an example of a spread window 500 of a
spread trading tool for a spread strategy having two legs (a
two-leg spread). The first leg is displayed in window 502 and the
second leg is displayed in window 504. The first leg window 502
corresponds to a tradeable object for an FJUN10 contract, and the
second leg window 504 corresponds to an FDEC10 contract. Though
examples are discussed with respect to the spread window 500 and
two leg windows 502, 504 for sake of simplicity and clarity, the
number of windows displayed may depend on the number of legs in the
spread and/or the user's preferences. Any number of legs of the
spread may be possible. For example, a spread may have 2, 3, 4 or
any number of legs, where a window is displayed for each, all, some
or none of the legs of the spread.
[0064] The spread window 500 shows an inside market and market
depth for the generated spread. The inside market includes the best
bid, or highest bid price, and the best ask, or lowest sale price
for the tradeable object. The legs windows 502, 504 also show the
inside market for the respective tradeable object. The windows 500,
502, 504 include a buy order column 506, 508, 510 and a sell order
column 512, 514, 516 for buy orders and the ask order for the
respective spread/tradeable object.
[0065] Indicators may be displayed in the columns. The indicators
may be graphic, iconic, numeric, color-coded or any form or format
for representing an order. The indicators may identify one or more
orders for a quantity of the tradeable object at a price. The
orders may be whole or partial orders. For example, an indicator
may be provided in column 506 to indicate a buy order in the market
for the tradeable object of the first leg, and/or an indicator may
be provided in column 514 to indicate a buy order for the second
tradeable object in the market for the tradeable object of the
second leg.
[0066] The windows 500, 502, and 504 have a respective price column
518, 520, 522 for identifying price levels for the respective
synthetic spread/tradeable object. The price levels may be axially
aligned, linearly aligned, curvilinearly aligned, or in any other
alignment showing a progression of price levels for synthetic
spread/tradeable object. The price levels may be static, dynamic or
a combination of static and dynamic. For example, one or more of
the price levels may not change position with respect to the
window, may change position with respect to the window in response
to an automatically generated instruction, may change position with
respect to the window in response to a user instructions and/or
settings, may change position with respect to the window in
response to market data or changes, may change position with
respect to the window in response to any combination of automatic
instructions, user instructions and/or setting, market data and the
like, may never change position, may drift in a display, may be
displayed centered, and/or may be centered on an item of interest
such as a bid, offer, last traded price and the like.
[0067] The indicators may be located along a corresponding or
associated price level along price columns 518, 520, and 522 to
represent or identify a price for the order corresponding to the
indicator. As shown in FIG. 5, an indicator for "2" displayed in
column 508 at 0.97 represents an order in the market for the for a
quantity of 2 for the tradeable object of the second leg of the
spread at a price of 0.97.
[0068] The displays may include additional forms for identifying
market information. In an embodiment, columns 530, 532, and 534
display indicators to represent a last trade quantity and/or last
traded price for the tradeable object. For example, a "17"
displayed in column 532 at a price level of 0.97 represents the
last traded order for a quantity of 17 at a price of 0.97 of the
tradeable object of the first leg of the spread trading
strategy.
[0069] The windows 500, 502, and 504 may display one or more icons
or fields of interest to the user according to personal
preferences, settings and/or interests. Some icons or items that
are displayed or hidden by the user include a system clock that
shows the current time. In addition, icons or buttons may be
displayed to represent functions. The icons or buttons may be
selected to perform one or more corresponding functions. For
example, a Stop Market (SM) button and/or a Stop Limit (SL) button
may be displayed. The button may be selected to enable stop limit
and stop market orders, respectively. A "Del All" button also may
be provided to delete bids and offers from the market. A "Del Bids"
and/or "Del Asks" button may be selected to delete all bids/asks
from the market. Instead of displaying "Bids" or "Asks," each
button may include an additional indicator representing a total
number of bids/asks in the market to be deleted. More or fewer
buttons may be included.
V. Synthetic Spread Indicators
[0070] Columns 524, 526, and 528 provide indicators for working
orders for the user. In an example, an indicator is displayed in a
column 524, 526, 528 at a price level of the corresponding price
column 518, 520, 522 to identify an order for quantity of the
tradeable object at the price corresponding to the price level. The
indicator may be any indicator, such as a status indicator that
identifies one or more corresponding orders. For example, the
indicator may be numerical, iconic, graphic, color coded or
combinations thereof to identify the status of one or more
orders.
[0071] The indicator may identify the status of all or part of the
corresponding order, including how many orders are placed and/or
pending, whether or how many all or part of the order is working,
pending, legged, whether and/or how many orders or how much of the
tradeable object is bought, sold, executed, completed, combinations
thereof, and the like. For example, an indicator for a legged
synthetic spread order, or a legged portion of the synthetic spread
order may be numerically displayed in a red colored font to show
the quantity of the synthetic spread order that is legged.
[0072] FIG. 5 shows indicator 536 illustrates an order for the
synthetic spread that has been entered or otherwise submitted for
trading. The indicator 536 may be positioned and/or displayed in
column 524 to indicate the status of the synthetic order. As shown,
indicator 536 illustrates that the order represents a quantity of 2
that is working ("W 2") to buy the spread at the price of -0.030,
and that none of the order has been filled, or completed, legged or
pending execution ("B 0").
[0073] An order may be entered and a resulting order submitted for
trading by identifying the price and quantity. The order may be
entered according to a selection of a quantity and a price along
the price column 518. The order also or alternatively may be
entered according to selecting a price along the price column where
a quantity is preselected or predetermined. The selection of the
price may occur in response to one or more clicks or other
manipulation or activation of an input device to send an
instruction to send at a price.
VI. Working Order Indicators
[0074] The synthetic spread trade order may have one or more
working orders in one or more legs of the synthetic spread. An
indicator may be displayed in a leg to identify the corresponding
working order of the synthetic spread for the leg.
[0075] FIG. 5 further shows indicators 538 in each leg of the
spread to identify a working order for the synthetic spread in that
leg. The indicator 538 may be similar to status indicator 536 and
may represent one or more orders for the corresponding tradeable
object of the leg and may be iconic, graphic, numeric, combinations
thereof or the like. The first leg window 702 includes an indicator
538 located at 0.97 of the price column 720, and the second leg
window 504 includes an indicator at 1.05 of the price column 522.
In addition, an outright order for the leg may be identified, such
as by an indicator 538 or the like.
[0076] As discussed, the synthetic spread order was entered to buy
a quantity of 2 at -0.030. Because the synthetic spread is defined
as a 3:2 ratio, the quoting order in the first leg to buy a
quantity of 6 was submitted at a price of 0.97 for the tradeable
object of the first leg 502. In addition, because the synthetic
spread is established to work both legs of the spread, a quoting
order in the second leg for a quantity of 4 was submitted at a
price of 1.05 for the tradeable object of the second leg.
[0077] The indicators also may identify whether a working is
associated with a synthetic spread, such as by leg status
indicators 540. For example, a leg status indicator 540 is located
at 0.97 of the first leg 502 of the synthetic spread and 1.05 of
the second leg 504. The synthetic spread order may be associated
with the working orders of the synthetic spread, and hedge orders
derived from and/or to be derived from the synthetic spread
according to a parent child relationship. For example, a synthetic
spread order may be considered to have one or more parent orders
and the orders in each leg of the synthetic spread order may be
represented by, or associated with, child orders. Child quoting
orders and hedge orders may be associated with one of the parent
orders and a parent order may have multiple child orders. A number
of parent orders may depend on the number of legs of the synthetic
spread, the number of quoting legs of the synthetic spread, user
preferences, combinations thereof and the like.
[0078] FIG. 6 shows the example of FIG. 5 after a portion of the
quoting order has been filled and at least one corresponding hedge
order is unfilled. In the example, a portion of the quoting order
in the first leg representing three quoting orders have been
filled, and a portion of a corresponding hedge order in the second
leg has also been submitted and filled. In addition, because the
synthetic spread was being quoted in both legs, a portion of the
working orders in the second leg is not desirable, and therefore,
quoting orders at 1.05 in the second leg have been deleted or
cancelled. Because at least a portion of the hedge order remains
unfilled, the synthetic spread order (and the trader), may be
considered legged. In addition, the unfilled hedge order may be
considered a legged hedge order.
[0079] Indicators 536 and 538 in FIG. 6 reflect changes to the
orders over the orders identified in FIG. 7 to reflect the changes.
Indicator 536 at -0.030 for the synthetic spread order reflects
that one of the orders is working ("W 1"), and the other order is
legged ("L 1"). Indicator 538 at 0.97 in the first leg 502 reflects
that three orders are working ("W 3"), and three orders have been
bought ("B 3"). Indicator 538 also has been positioned at 1.00 to
represent that a hedge order derived from the synthetic order in
response to at least a partial fill of the corresponding working
order is working ("W 2"), or unfilled. In addition, indicator 538
at 1.05 for a working order in the second leg 504 reflects that
zero orders have been sold ("S 0") and two orders are working ("W
2").
[0080] The identifier for the unfilled hedge order 538 at the price
of 1.00 may identify the hedge order as being attached or detached.
In an embodiment, the indicator 538 may be color-coded or include a
numerical, alphabetical, and/or alphanumerical identifier showing
the status of the hedge order as attached or detached. In an
additional or alternative embodiment, indicator 542 may be
displayed to identify the status of the hedge order as attached or
detached. The indicator 542 may represent one or more hedge orders
and may be iconic, graphic, numeric, combinations thereof or the
like. In addition, the indicator for the order 538 and/or indicator
542 may be selected to designate all or part of the order as
attached or detached.
[0081] The synthetic spread order may be managed during its
lifetime, including when one or more legs of the synthetic spread
may be legged or otherwise unfilled. The synthetic spread order may
be maintained, adjusted, changed, managed, reported and otherwise
administered during its lifetime, which generally ends when all
orders of the synthetic spread have been filled, and/or
deleted.
VII. Attached and Detached Hedge Orders
[0082] According to embodiments for managing hedge orders of the
synthetic spread, unfilled hedge orders may also be managed
according to user preferences and/or parameters of the synthetic
spread from which the hedge order derived. FIG. 7 illustrates the
example of FIGS. 5 and 6 after a portion of the quoting order is
filled, at least one corresponding hedge order is unfilled, and a
price for the synthetic spread has been changed. As shown, the
price of the synthetic spread order was changed to -0.040 from
-0.030. The change for the synthetic spread may be affected by
moving the indicator 536 associated with the synthetic spread
order, or otherwise by inputting a command to the spread trading
tool to change the price of the synthetic spread order.
[0083] In response to the change of the synthetic spread order, the
trading tool may identify a pending hedge order having an unfilled
quantity and associated with the synthetic spread order. If the
hedge order has been designated as attached, the spread trading
tool may make corresponding changes to the pending hedge order. In
the example of FIG. 7, because the price for the synthetic spread
order has been changed to -0.040, and the corresponding working
order in the first leg was filled at 0.97, the price of the pending
hedge order with the unfilled quantity also may be changed or
adjusted to a corresponding price. FIG. 7 show that the pending
hedge order in the second leg has been changed to a price of 1.01
from 1.00 as illustrated by the corresponding indicator 538 being
displayed at 1.01. The change in the price of the pending order may
be affected by submitting a cancel/replace order to the exchange
for the tradeable object of the hedge leg, by cancelling the hedge
order and submitting a new hedge order, and/or by submitting a
change message to the electronic exchange to change the price of
the pending hedge order. Again, indicator 542 may be displayed to
identify the status of the hedge order as attached or detached, may
represent one or more hedge orders, and may be iconic, graphic,
numeric, combinations thereof or the like. In an additional or
alternative embodiment, the spread trading tool may not change a
pending hedge order with the hedge order designated as detached.
For example, with a price change for a synthetic spread order, the
price of the pending hedge order with the unfilled quantity will
not be adjusted or changed.
[0084] When the changed price for the pending hedge order a crosses
the inside market for the hedge leg, all or a portion of the
pending hedge order may be filled according to a quantity available
at the inside market. For example, when the price of the pending
hedge order is changed, or otherwise adjusted, from 1.00 to 1.01,
and the inside market is at 1.01, or a contra order was pending at
the inside market, the pending hedge order could be filled against
the quantity of the contra order. Accordingly, the pending hedge
order also may be filled in response to a change in the price of
the synthetic spread order.
[0085] Other tools such as order book tools also may be used to
illustrate synthetic spread order and the constituent orders of the
spread. The tools also may be used to designate the synthetic
spread, and/or any or all legs of the spread as being attached or
detached. In addition, a leg of an order may be changed from
attached to detached before or subsequent to a synthetic spread
being entered, a working order being submitted, and/or a hedge
order being submitted. Similarly, changes to a synthetic spread
order that are affected using one or more tools may affect
corresponding changes to hedge orders having an unfilled
quantity.
[0086] A price change to a synthetic spread may be effected using a
spread trading tool, such as Auto spreader, that launched the
synthetic spread or otherwise submitted its hedge orders. When a
synthetic order has been adjusted after being submitted, such as
when a price of the synthetic order is changed, a price for one or
more of the corresponding hedge orders may be adjusted to reflect
the price of the adjusted synthetic spread order according to the
relationship between the parent orders and the child orders of the
spread, a definition of the spread, and/or user
preferences/settings.
[0087] A quantity for a working parent order also may be affected.
The quantity may be changed according to a selection of a revised
quantity using the spread trading tool, such as Auto spreader, that
launched the synthetic spread or otherwise submitted its child
orders. The quantity may be changed within a range of values.
Limits on the quantity may be determined according to one or more
factors, including user preferences/settings, limits set for by an
exchange, clearinghouse, or other third-party and/or limits set by
a regulating body. Where a quantity of the synthetic spread order
is adjusted after it is entered, a quantity for one of more of the
hedge orders may also be adjusted according to a relationship, a
definition of the spread and/or settings.
[0088] Additionally or alternatively, a change to a legged hedge
order that has been attached may affect a change to the spread
and/or working order from which the legged hedge order derived. For
example, a price of a legged hedge order may be changed via a
window for the legged hedge order. When the legged hedge order is
attached, and a change in the price for the legged hedge order is
made, a corresponding change to a working order and/or the spread
order may also be affected.
VIII. Spread Configuration
[0089] FIG. 8 illustrates an example of a spread configuration
window 800. The spread configuration window 800 may be used to
establish or set parameters of a synthetic spread, for managing a
synthetic spread and/or for managing and setting up the legs of the
synthetic spread individually. The parameters include inside and
outside slop configuration, pricing choices, the legs of the
spread, customer account, whether to adjust a leg, offset, payup
ticks, ratio for the synthetic spread, whether to check a price,
whether a leg may be attached or detached and the like. The type
and number of parameters to be established may vary.
[0090] A parameter may be set by entering a desired setting in a
corresponding data entry area for the spread and/or leg of the
spread, by selecting one or more options from a drop down menu, by
selecting from an array or list of choices or radio buttons or the
like. Additionally or alternatively, an order may be changed from
attached to detached, and vice versa, via a spread window, a window
for the legged order, a window for the working order, and/or an
indicator for the spread, the working order and/or legged hedge
order. In the example of FIG. 8, both legs of the spread have been
identified as attached by selecting the corresponding setting 902.
A description of a spread configuration window is provided in U.S.
Pat. No. 7,437,325, titled "System and Method for Performing
Automatic Spread Trading," which is incorporated by reference
herein in its entirety.
[0091] It will be apparent to those of ordinary skill in the art
that methods involved in the system and methods described above may
be embodied in a computer program product that includes one or more
computer readable media. For example, a computer readable medium
can include a readable memory device, such as a hard drive device,
a CD-ROM, a DVD-ROM, or a computer diskette, having computer
readable program code segments stored thereon. The computer
readable medium can also include a communications or transmission
medium, such as, a bus or a communication link, either optical,
wired or wireless having program code segments carried thereon as
digital or analog data signals.
[0092] The claims should not be read as limited to the described
order or elements unless stated to that effect. Therefore, all
embodiments that come within the scope and spirit of the following
claims and equivalents thereto are claimed as the invention.
* * * * *