U.S. patent application number 13/939459 was filed with the patent office on 2013-11-21 for systems and methods for implementing post-matching trading.
This patent application is currently assigned to GFI Group Inc.. The applicant listed for this patent is GFI Group Inc.. Invention is credited to Francesco Cicero.
Application Number | 20130311350 13/939459 |
Document ID | / |
Family ID | 46163150 |
Filed Date | 2013-11-21 |
United States Patent
Application |
20130311350 |
Kind Code |
A1 |
Cicero; Francesco |
November 21, 2013 |
SYSTEMS AND METHODS FOR IMPLEMENTING POST-MATCHING TRADING
Abstract
Systems and methods for implementing post-matching trading are
provided. A financial instrument transaction system may include a
database configured to store financial instrument information for
reference entities; a memory for storing execution instructions;
and a processor. The processor may execute the instructions. The
processor may initiate a trading session for a predetermined
duration. Prior to and during the trading session, the processor
may receive from a plurality of trader clients trading instructions
associated with the reference entity. The instructions may include
either a buy or sell position and a price. At the end of the
trading session, the processor may determine, based on predefined
criteria, whether the trading session qualifies for a post-matching
session. If the trading session qualifies for a post-matching
session, the processor may provide a graphical user interface to a
selected group of traders for trading in the post-matching
session.
Inventors: |
Cicero; Francesco; (London,
GB) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
GFI Group Inc. |
New York |
NY |
US |
|
|
Assignee: |
GFI Group Inc.
New York
NY
|
Family ID: |
46163150 |
Appl. No.: |
13/939459 |
Filed: |
July 11, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
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13311311 |
Dec 5, 2011 |
8489495 |
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13939459 |
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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 financial instrument transaction system, comprising: a
database configured to store financial instrument information for a
reference entity; memory configured to store execution
instructions; and a processor coupled with the database and the
memory, the processor configured to execute the instructions, the
instructions configured to cause the processor to: initiate a
trading session for a predetermined duration; prior to and during
the trading session, receive from each one of a plurality of trader
clients a trading instruction associated with the reference entity;
establish a mid-price based on the instructions received from the
plurality of trader clients; and during the trading session,
execute trading for the reference entity at a matching price, said
matching price being different from the mid-price, said matching
price being based on at least a first buy position and at least a
first sell position, the first buy position being at a price that
is higher than the first sell position; wherein, when the first buy
position is more distant from the mid-price than the first sell
position, the processor is further configured to set the matching
price closer to the first sell position than to the first buy
position, and, when the first sell position is more distant from
the mid-price than the first buy position, the processor is
configured to set the matching price closer to the first buy
position than to the first sell position.
2. The system of claim 1, the instructions further configured to
determine at the end of the trading session, based on predefined
criteria, whether the trading session qualifies for a post-matching
session; and if the trading session qualifies for a post-matching
session, providing a graphical user interface to a selected group
of traders for trading in the post-matching session.
3. The system of claim 2, the instructions further configured to
terminate the trading session at the end of the trading session if
the trading session fails to qualify for the post-matching
session.
4. The system of claim 1, the instructions further configured to
determine the matching price based at least in part on the
mid-price.
5. The system of claim 4, the instructions further configured to
determine the matching price based at least in part on at least one
current bid.
6. The system of claim 4, the instructions further configured to
determine the trading price for the price other than the mid-price
based at least in part on at least one current offer.
7. The system of claim 6, the instructions further configured to
determine the matching price based at least in part on whether a
current bid and a current offer are crossed.
8. A financial instrument transaction system, comprising: a
database configured to store financial instrument information for a
reference entity; memory configured to store execution
instructions; and a processor coupled with the database and the
memory, the processor configured to execute the instructions, the
instructions configured to cause the processor to: initiate a
trading session for a predetermined duration; prior to and during
the trading session, receive from each one of a plurality of trader
clients a trading instruction associated with the reference entity;
establish a mid-price based on the instructions received from the
plurality of trader clients; and during the trading session,
execute trading for the reference entity at a matching price, said
matching price being different from the mid-price, said matching
price being based on at least a first buy position and at least a
first sell position, the first buy position being at a price that
is higher than the first sell position; wherein, when the
difference between first buy position and the mid-price is greater
than the difference between the first sell position and the
mid-price, the processor is further configured to set the matching
price closer to the first sell position than to the first buy
position, and, when the difference between the first sell position
and the mid-price is greater than the difference between the first
buy position and the mid-price, the processor is configured to set
the matching price closer to the first buy position than to the
first sell position.
9. The system of claim 8, the instructions further configured to
determine at the end of the trading session, based on predefined
criteria, whether the trading session qualifies for a post-matching
session; and if the trading session qualifies for a post-matching
session, providing a graphical user interface to a selected group
of traders for trading in the post-matching session.
10. The system of claim 9, the instructions further configured to
terminate the trading session at the end of the trading session if
the trading session fails to qualify for the post-matching
session.
11. The system of claim 8, the instructions further configured to
determine the matching price based at least in part on the
mid-price.
12. The system of claim 11, the instructions further configured to
determine the matching price based at least in part on at least one
current bid.
13. The system of claim 11, the instructions further configured to
determine the trading price for the price other than the mid-price
based at least in part on at least one current offer.
14. The system of claim 13, the instructions further configured to
determine the matching price based at least in part on whether a
current bid and a current offer are crossed.
Description
CROSS-REFERENCED TO RELATED APPLICATIONS
[0001] This application is a continuation application of U.S.
patent application Ser. No. 13,311,311, filed Dec. 5, 2011,
entitled "SYSTEMS AND METHODS FOR IMPLEMENTING POST-MATCHING
TRADING," which is a non-provisional application of U.S.
Provisional Patent Application No. 61/419,305, filed Dec. 3, 2010,
entitled "SYSTEMS AND METHODS FOR IMPLEMENTING POST-MATCHING
TRADING," which is hereby incorporated by reference herein in its
entirety.
BACKGROUND
[0002] This invention relates to trading systems and methods.
Specifically, this invention relates to trading systems and methods
for trading at, or close to, the mid-price. The mid-price of a
security is on or about the average of current bid and current
offer prices. The mid-price is typically quoted when it is
necessary to provide a single number for a financial instrument
price.
[0003] For the purposes of this disclosure, a matching session is a
timed process whereby traders, or brokers on behalf of traders, can
submit orders to buy or sell at an advertised price, or around a
fixing price within a predefined price interval, in order to
execute trades. The fixing price may be determined in a fixing
session--i.e., a timed process whereby traders, or brokers on
behalf of traders, submit bids and/or offers in a pool of liquidity
not displayed to session participants, for the main purpose of
determining a consensus-based price level that can be used for
benchmarking and trading in the matching session. Such a fixing
price may also be referred to herein, and treated as, a mid-price
to the extent that either the fixing price and/or the mid-price may
preferably offer a price for launching the matching session.
[0004] It would be desirable to allow trading during the matching
phase at a price other than the mid-price.
[0005] It would be further desirable to implement a post-matching
trading session for trading following the matching trading
session.
SUMMARY
[0006] It is an object of the invention to implement a
post-matching trading state for trading following the matching
trading session. Apparatus and methods for a financial instrument
transaction system are provided. The financial instrument
transaction system may include a database configured to store
financial instrument information for certain reference entities.
The financial instrument transaction system may also include a
memory configured to store execution instructions. The financial
instrument transaction system may additionally include a processor
coupled with the database and the memory. The processor may be
configured to execute the instructions. The instructions may be
configured to cause the processor to initiate a trading session for
a predetermined duration. The instructions may also be configured
to cause the processor, prior to and during the trading session, to
receive from each of a plurality of trader clients trading
instructions associated with a reference entity. The instructions
may include either a buy or sell position and a price. The
instructions may further be configured to, at the end of the
trading session, causes the processor to determine, based on
predefined criteria, whether the trading session qualifies for a
post-matching session. Furthermore, the instructions may be
configured to cause the processor to provide, if the trading
session qualifies for a post-matching session, a graphical user
interface to a selected group of traders for trading in the
post-matching session. The instructions may also be configured to
cause the processor to terminate the trading session if the trading
session fails to qualify for the post-matching session.
BRIEF DESCRIPTION OF THE DRAWING
[0007] The objects and advantages of the invention will be apparent
upon consideration of the following detailed description, taken in
conjunction with the accompanying drawings, in which like reference
characters refer to like parts throughout, and in which:
[0008] FIG. 1 shows a graphical user interface ("GUI") including an
interactive dialogue box for use with systems and methods according
to the invention.
DETAILED DESCRIPTION OF THE DISCLOSURE
[0009] Post matching trading according to the invention preferably
includes three main components: the ability to enter, and
preferably trade at, prices different from the mid-price, trading
at a level that is determined by a matching algorithm which sets
the trading price either at the mid-price or a price that is
different from "trading in the mid-price," and the ability to
generate a post-matching session.
[0010] Specifically, during matching, when traders enter orders at
alternative price levels, the traders are permitted according to
the invention to trade at different levels within a pre-defined
spread from the mid-price. Depending on what prices the traders
enter during the matching phase, the outstanding prices at the end
of the matching phase and pending validation of the maximum bid/ask
spread, systems and methods according to the invention may
preferably post the qualifying prices and lock and engage the best
bid and offer, in the post-matching phase.
[0011] Accordingly, this application addresses distinct aspects of
conventional electronic trading systems. Particularly, this
application addresses novel approaches to the action of determining
the mid-price (either via a fixing phase or via an
administratively-determined mid-price), and then the action of
trading at the resulting mid-price. Typically, fixing and matching
are two sequentially-organized phases. In addition, this
application considers post-matching phase trading.
[0012] In one exemplary circumstance that shows how mid-price
trading follows a fixing phase, if the fixing phase obtained a
price of 55, the following scenarios may be included in mid-price
trading: [0013] Buyer @ 55, Seller @ 55=Trade @ 55 [0014] Buyer @
56, Seller @ 55=Trade @ 55 (one may expect a trade @ 55.5, but
trade execution may occur at the fixing price to both reward the
most aggressive side and to emphasize the matching nature of the
process where trading preferably occurs at or around the fixing
level.) [0015] Buyer @ 56, Seller @ 54.5=Trade @ 55 (an additional
point of trading logic here is that by trading at the fixing price,
it may serve to protect the traders' original prices in secrecy.)
[0016] Buyer @ 56, Seller @ 55.5=Trade at 55.5 (here trading occurs
at the level that is closer to the fixing price between the two,
again to reward the most aggressive trader and to preferably
reinforce the matching character of the session).
[0017] The foregoing scenarios, as described above, occur during
the matching phase of a trading session according to the
invention.
[0018] In systems and methods according to the invention, an option
to allow order entry at price levels which vary from the fixing
price level by up to a predefined spread may be available for
post-matching sessions. If there are unfilled bids and offers at
alternate levels submitted during the matching session, then a
post-matching session may be initiated, subject to the maximum
bid-offer spread set for the session.
[0019] The post matching session may preferably allow order entry
and trade execution via a pricesheet which lists the unfilled bids
and orders and/or join-the-action ("JTA") popups.
[0020] JTA is a system which seeks to enhance liquidity of an
upcoming trading session as follows. JTA is like CreditMatch.TM.,
an electronic trading application manufactured by GFI Group of New
York, N.Y., or any similar traditional trading system to the extent
that quotes are visible to the market. Three main points that
distinguish JTA are:
[0021] 1) The JTA process includes a minimum duration and a maximum
duration. Being timed also implies that an individual may manually
launch a JTA session.
[0022] 2) JTA may utilize a "popup" --i.e., an interactive dialogue
box sent to selected traders to indicate that a JTA session is in
progress--in order to dynamically engage clients, without requiring
the clients to commit desktop real estate at all times.
[0023] 3) JTA trader entitlements may preferably be independent
from regular trader entitlements. For example, a trader can have a
screen in CreditMatch where he can advertise prices that traders
cannot execute electronically and that become fully interactive
only within the boundaries of the JTA session. Or, alternatively,
the trader can have a fully interactive screen for all users with a
special JTA access that is available only for selected clients.
[0024] A post-matching session according to the invention may
include an order clearing phase, during which the counterparties
with the best bid and best offer may have priority for trade
execution. The post matching session may follow modified JTA rules.
However, unlike JTA, traders do not require special permission to
participate in the post-matching session.
[0025] Such a post-matching session, according to the invention,
can be accessed either via a typical matching graphical user
interface ("GUI") or via a more specialized JTA GUI. Thus, JTA,
according to the invention, is a way for a trader to get involved
following the end of a matching session and to publish prices
entered during matching that would otherwise be held for no further
use.
Functional Details: Post-Matching Setup Fields Matching Price
Entry
[0026] A setting according to the invention may be implemented
which determines whether alternate price entry and post-matching
sessions are enabled for the matching/fixing group of participants
(hereinafter, "the group"). The matching price entry flag may be
enabled for fixing+matching or matching-only sessions. If such a
setting is flagged, then price entry different from the mid-price
during matching is permitted.
[0027] In certain embodiments of the invention, the mid-price used
during the matching phase can be either static and/or dynamic. In
such embodiments where the mid-price is dynamic, the mid-price can
change at predetermined intervals--e.g., resetting every 30 seconds
in five-minute matching phase--or change substantially
continuously. When the mid-price is dynamic, the mid-price may
change, at least in part, in response to trading activity.
[0028] In some embodiments of the invention, the mid-price may be
reset by a trade executed at an alternate level. The traded level
becomes the new mid-price and the spread may be applied to it.
Post-Matching Session Options
[0029] If the Matching Price Entry is enabled for the matching
group, the following additional options may be available for the
session:
Best Price Only
[0030] This setting can determine whether the post matching session
is restricted to the counterparties with the best unfilled bid and
best unfilled offer, preferably regardless of the market
depth--i.e., volume--associated with the best unfilled bid and best
unfilled offer. Order entry from other traders is typically
restricted during the clearing phase--i.e., the resolution state of
the post-matching session. At the end of the clearing phase of the
post-matching session, if neither side has been traded, both orders
can be held and the post-matching session ends.
Allow Pull Out
[0031] This setting determines whether the trader is permitted to
set his submissions to be excluded from the post-matching phase. If
this setting is enabled, the "post unfilled for matching" setting
determines whether unfilled matching submissions are included or
excluded from the post-matching phase.
Post Unfilled for Post-Matching
[0032] A post unfilled setting can be created according to the
invention. This setting determines whether a user's unfilled
matching request is posted into the market during the post-matching
phase. This setting preferably requires maximum spread conditions
to be met--i.e., the user's unfilled matching request is within the
predetermined spread--and "Allow Pull Out" is enabled for the
session. The default setting of this is that matching requests can
be posted by default if certain predetermined conditions are
met.
[0033] For traders, this setting can preferably only be available
for the following roles: Trader, Fixer--i.e., a trader that
contributes prices to form the fixed price--and Joiner--i.e., a
trader permissioned to join an ongoing, post-matching, trade state.
This setting can be available for all brokers. If "Allow Pull Out"
is disabled for the session, the post unfilled for matching setting
can be ignored and all unfilled submissions can be posted during
the post-matching phase, if conditions are met. The post unfilled
for post-matching setting may only be applicable to matching
sessions that have "Matching Price Entry" enabled.
Post-Matching Clearing Timer
[0034] A timeout setting may be added to the CreditMatch.TM.
Matching/Fixing setup dialog, which determines the order clearing
duration of the post-matching phase.
[0035] Once the post-matching clearing timer expires, if at least
one live-trader-created-bid and one live-trader-created-offer
exists on the interest, the session may continue as an extended
phase (no-timeout) until the interest becomes unquoted. (For the
purposes of this application, quoted means at least one bid and
offer exists that are firm and posted. "Subject to", "no-post", and
"held" orders preferably do not qualify for "quoted interest"
status. The Post-Matching Clearing Timer may only be editable if
"Matching Price Entry" is enabled for the group.
Post-Matching Spread
[0036] The post-matching spread setting may determine the
following:
1. The maximum spread permitted between the mid price and the user
entered bid or offer during the matching phase for each interest in
the group. 2. The maximum spread permitted between the best
unfilled bid and best unfilled offer that triggers a post-matching
session for each interest in the group.
[0037] The magnitude of the post-matching Bid/Offer spread may be
applied in Basis Points ("bps") or percent, or any other suitable
metric, depending on how the interest is quoted. The Post-Matching
Spread field may be disabled if the "Matching Price Entry" setting
is unchecked.
Functional Details: Matching Workflow
Workflow During the Matching Phase
[0038] If matching price entry according to the invention is
enabled for the session, then the matching session participants may
have the ability to submit alternate price levels from the fixing
level during the matching phase. This feature may be supported for
matching sessions initiated after fixing sessions or matching only
sessions.
[0039] In certain embodiments of the invention, users may have the
ability, during the matching phase, to enter an alternate bid or
offer from the fixing level. As noted above, the fixing level was
calculated based on spread submissions during the fixing phase or
fixing levels specified by a broker. Entering an alternate price
level is optional, and users may participate in the matching
session at the default fixing level.
[0040] If a user specifies an alternate price level, the submission
may not be considered active/tradable until the user also specifies
a size. Preferably only, but not exclusively, single-sided
submissions are permitted, regardless of whether an alternate price
level is specified--e.g., if a user enters a bid, and then enters
an offer, the bid may be canceled and replaced by the offer.
Alternate price levels may be worse than, equal to, or better than
the default fixing level. The Post-Matching Spread defined for the
interest in the setup dialog may determine the amount the bid or
offer can deviate from the default fixing level. The price tick
defined for the interest can determine the increments permitted for
the alternate price levels.
Example
Post-Matching Spread=2
[0041] Default fixing level=100 Price tick=0.5 Bids and Offers
permitted=98, 98.5, 99, 99.5, 100, 100.5, 101, 101.5, 102
Alternate Price Entry Validations
[0042] Orders that violate price validations can be rejected and an
error message displayed at the top of the matching window. The
price tick of the interest defined in the buffer may typically be
enforced.
Example
Settings
[0043] Price tick=0.5 Post matching spread=1 Fixing level=100
Permitted bids or offers=99, 99.5, 100, 100.5, 101
Orders
[0044] In one exemplary scenario, a user may submit a buy request
for 5 million (hereinafter "MM") at the fixing level, i.e., 100.
The user may then update the price of the buy request to 98. In
such a scenario, an update is rejected because the buy request is
more than the pre-determined spread away from the fixing price and
an error is generated.
[0045] At this point the original buy request at the fixing level
may remain in the system. The user can then update the price of the
buy request by reducing it to 99.75. The update may be rejected and
an error may be generated. Following the rejection, the original
buy request at the fixing level may remain in the system.
Aspects Relating to User Interface
General Requirements
[0046] The matching panel can preferably be modified to allow entry
of an alternate price level, either on the bid side or the offer
side. If alternate price submission is permitted for the matching
session, the trade status field can display the price of the trade:
<Bought/Sold> <Size> @ <Price>. An order ranking
timestamp can be retained if either the price or size is modified
as long as the user does not cancel and resubmit, or switch sides.
Single-sided order submissions are preferred, but, in certain
embodiments, two-sided submissions may also be permitted.
[0047] Bid/Offer columns in the matching popup can be enabled. Like
the fixing panel in which the fixing information is shown, users
may be provided access to bid and offer columns for entering an
alternate bid or offer from the default fixing level. The price
column that shows the fixing level can preferably be view-only.
[0048] Users may specify either a bid or offer price first, and
then specify a size, however the order will preferably not be
created until a size is entered. Users may specify a size first,
and then modify the price. If size is submitted without a price,
the default fixing level can be the submitted price and the default
fixing level can be shown in the bid or offer field on the side the
size was entered. Submitting either a price or size on the opposite
side of the current submission--e.g., the user switches sides--may
cancel the original submission.
[0049] When a user switches sides, the original order can be
canceled as soon as the user enters a price or size. However, a new
order will preferably not be created until the user enters a
size--i.e., entering a price cancels the original order, but the
new order will not be created until a size is entered. In some
embodiments, a user can also put in a two-sided order.
[0050] If the size is canceled, the price field can be reset to the
default fixing level. If the price is reset to the default price,
then the highlight may be removed. If the size of the side with the
alternate price is traded in full, the user-entered alternate price
may persist in the price field (the alternate price persists until
the order is canceled by the user).
[0051] A tooltip may be available in the price field, which will
show the default fixing price. Format of the tooltip info: "Fix:
<Fixing Price>". For alternate price entry during the
matching phase, the price field may append a percent ("%") sign to
the price if the interest is quoted in percentage terms.
Trade Execution at Alternate Price Levels
[0052] Orders submitted during the matching phase may be executed
in real time if preferably all of following conditions are met:
[0053] Bid is equal to or greater than the offer; counterparties
are from different institutions; and counterparties are not
restricted from trading with each other.
Exemplary Trading Rules
[0054] Bids and offers that cross can be executed based on the
following rules:
[0055] Bid at mid+Offer at mid=Trade @ Mid Example: (Fix=20;
entries 20/20=trade @ 20)
[0056] Worse bid+Worse Offer=No Trade, with possible follow-up
market
[0057] Example: (max spread=2; Fix=20; entries 19/21=follow up
market being cleared in JTA)
[0058] Worse bid+Offer at Mid=No Trade, with possible follow-up
market
[0059] Example: (max spread=2; Fix=20; entries 19/20=follow up
market being cleared in JTA)
[0060] Better Bid+Offer at mid=Trade @ Mid Example: (Fix=20;
entries 21/20=trade @ 20)
[0061] Better Bid+Better Offer=Trade @ Mid Example: (Fix=20;
entries 21/18=trade @ 20) (The trade is at the Mid rather than the
average to avoid atypical price levels)
[0062] Better Bid+Worse Offer (crossing)=Trade @ Offer
[0063] Example: (Fix=20; entries 22/21=trade at 21) (this
embodiment preferably allows trading relatively close to the fixing
price; this can also apply to multiple trades at different
levels)
Order Ranking By Price
[0064] In some embodiments, if there are multiple open orders on
one side, orders can be ranked by price then time.
Example
Fixing=20.5
[0065] BankA bids 5MM@20.5 BankB bids 5MM@21 BankC offers 5MM@20.5
Trade is executed between BankB and BankC for 5MM@20.5
Reserved Phase Order Ranking
[0066] Order ranking rules for the reserved phase--i.e., the
trading phase based on submissions during the fixing phase--can
preferably be honored.
Example
[0067] During the fixing phase, BankA submitted fixing levels but
BankB and BankC did not.
Fixing=20.5
[0068] BankA bids 5MM@20.5 BankB bids 5MM@21 BankC offers 5MM@20.5
Trade is executed between BankA and BankC for 5MM@20.5. Since BankB
did not participate during the fixing phase, BankA's order receives
priority even though BankB has a better bid.
Exemplary Functional Details: Post Matching Session Changes to
Trader Entitlements and Entity Access Level
[0069] The JTA trader role can preferably only determine whether a
trader receives the JTA popup during the post-matching phase. In
the event that the interest is not interactive, but the matching
session was initiated on the interest, the interest can be treated
as interactive for the duration of the post-matching session.
[0070] During the post-matching session, traders that were
permitted to participate in the matching session due to their
respective joiner and/or fixer role, but are not interactive, may
be permitted to create orders and execute trades on interests via
the pricesheet. Once the `Post-Matching Clearing Timer` expires,
the interest may be considered in the extended phase if there is at
least one live order on the interest, meaning the post-matching
session can continue until the interest is no-longer quoted.
[0071] During the "extended" phase for an interest, all traders
that are permitted to participate in matching for the interest may
be permitted to enter prices and execute trades, including traders
that did not participate in the matching session.
[0072] Once the post-matching session ends--e.g., the interest is
unquoted--i.e., either the bid side or offer side--or a
predetermined time period has elapsed--order management and trade
execution via the pricesheet may no longer be permitted for
non-interactive traders.
[0073] All traders that are entitled to price or trade the interest
may preferably be permitted to participate in the post-matching
session. This includes traders that did not participate during the
matching phase. One possible exception to this is the case where
"Best Price Only" option is enabled for the session.
[0074] If the trader has the interactive trader role for the
interest, the trader may be permitted to enter prices and execute
trades during the post-matching phase even if the trader did not
participate during the matching phase. In such a circumstance,
clearing restrictions may be applicable. It should be noted that,
in certain embodiments, a trader may join, but not trade, by taking
priority over original post-matching best buyer and/or best seller
positions.
[0075] FIG. 1 shows an exemplary layout that may serve as an
informative screen popup. Popup 100, which includes an exemplary
display of live prices, shows a credit column 102, which lists the
derivatives, such as credit default swap contracts, which are the
financial instruments which are represented in the popup 100. While
the examples described in this application relate to trading of
credit default swap contracts, it should be noted that the systems
and methods according to the invention preferably apply to all
suitable financial instruments.
[0076] Column 104 in FIG. 1 shows a current bid size, column 106
shows the current bid price, column 108 shows the current offer
price and column 110 shows the current offer size. The x inside the
.largecircle. indicates that the displayed prices are live and
tradeable. Columns 112-118 show the same information for the
trader, and/or broker's, own position.
[0077] In one embodiment, column 120 may show the time remaining in
the fixing session.
Post Matching Overview
[0078] If post-matching is initiated on an interest, then unfilled
bids and offers from the matching session may be posted to the
market at the end of the matching session for interests that
qualify for post-matching initiation.
[0079] When post-matching according to the invention is initiated,
order clearing can be initiated for preferably all interests that
qualify for post-matching.
[0080] Unlike conventional order clearing rules, order clearing
duration during the post-matching session according to the
invention may be determined by the "Post-Matching Clearing Timer"
setting for the matching group. Thus, preferably all interests that
qualified for post-matching can share the same order clearing
timeout duration.
[0081] Once the "Post-Matching Clearing Timer" expires, the
interest can go directly to the extended phase as long as there is
one live-trader-created-bid and one live-trader-created-offer on
the interest.
[0082] In certain embodiments, traders that have the JTA trader
role may receive the JTA popup for all interests after
post-matching was initiated.
[0083] Regardless of whether a trader has the JTA trader role or
interactive trader role, a trader may execute trades and manage
orders via a pricesheet--i.e., a listing of active prices on a
predetermined financial instrument--as long as the trader is
permitted to participate in the matching session. During the
post-matching session, any trades may generate workup sessions via
the live trade popup--as shown in FIG. 1--if workup is enabled for
the interest.
[0084] Live trade (referred to alternatively as "JTT") is triggered
by a posted trade, and allows other traders to join the trade,
preferably at the traded price, preferably following an exclusive
trading session between the original traders.
[0085] Preferably all traders that were permitted to participate
during the matching phase may generally be permitted to participate
in live trade sessions generated during the post-matching phase. At
post-matching clearing timer expiry (end of the clearing phase) the
post matching phase may go into an extended session, if the
following exemplary conditions are met:
1. Interest has at least one posted bid and one posted offer
created by a trader (broker created orders are not counted); and 2.
Live trade session is in progress (post-matching ends if order is
not created via post-unfilled at live trade expiry).
[0086] If the conditions required to extend the post matching
session are not met, the session may end and preferably all JTA
popups close.
[0087] During the post-matching session according to the invention,
the JTA indicator may be shown to all brokers and all traders next
to the credit name and entity market name of interests in the
pricesheet.
Post-Matching Initiation Rules
[0088] Post-matching may preferably only be initiated if the
following conditions are met:
a. There is an unfilled bid and an unfilled offer. b. Best unfilled
bid and best offer are not equal or crossed (this can happen if
counterparties are from the same institution or are counterparty
restricted).
[0089] Post matching will preferably not be initiated if the best
bid and best offer are from the same institution even if there are
unfilled orders in depth from other institutions.
Application of Post-Matching Spread
[0090] In some embodiments, the spread between the best bid and
best offer should preferably be within the post-matching spread
defined for the interest.
Example
[0091] Max post-matching spread=2 Fixing price=100 Permitted price
range during matching=98-102 If best bid and best offer is 98-100,
post-matching will preferably be initiated. If best bid and best
offer is 98-101, post-matching will preferably not be
initiated.
Post Matching Order Creation
[0092] Orders for the post matching phase may be created based on
the following exemplary criteria:
Exemplary General Rules
[0093] In some embodiments, unfilled bids and offers that are equal
or crossed but did not trade in the matching phase will preferably
be canceled and not carried over from the matching to post-matching
phase.
[0094] The size of orders shown to the market can be for the
default size of the interest, and any amount greater than the
default can be created as hidden size. If there are only unfilled
orders on one side, then post-matching will preferably not be
initiated.
"Best Price Only" Setting Disabled
[0095] Preferably all unfilled bids and offers that are not crossed
or equal may be carried over into the post-matching phase. Inline
depth--i.e., the available stack of bids or offers--can be disabled
in the JTA popup, but viewable in the pricesheet--i.e., viewable
via inline and docked depth. It should be noted that in an inline
depth with, for example, three bidders and two offerors, only a
portion of the buyers and/or the sellers may qualify for
post-matching trading, depending on the relationship of the
respective bids or offers to the matching price and the spread.
While the non-qualifying portion of the bidders and offerors may
not be posted for post-matching, nevertheless their respective bids
and offers may still be tradeable via the pricesheet.
"Best Price Only" Setting Enabled
[0096] Preferably only the best unfilled bid and best unfilled
offer that are not equal and not crossed can be carried over into
the post-matching session. In the best price only state, the prices
are unposted to the market. Accordingly, the eventual trade is
unposted and typically does not trigger a workup followed by a JTA
session.
Exemplary Order Clearing Phase
[0097] During the post-matching order clearing phase, only the
owner of the best bid may execute the offer or improve the existing
best bid and only the owner of the best offer may execute the bid
or improved the existing best offer. Other participants to the
session may enter joining bids at the best bid level or worse
levels, and/or joining offers at the best offer level or some level
worse than the best offer level. However, while these joining
traders may take priority over the original post-matching best
buyer and/or seller, they are not allowed to trade in their
stead.
[0098] An exception to these rules, according to the invention, is
the case where traders that are members of a group share matching
sessions, in which preferably all traders from a group that trade
as a single entity share execution rights during the order clearing
phase. The order clearing timer defined for the entity (financial
instrument) or bond preferably determines the duration of the order
clearing phase of the post-matching session.
[0099] In certain embodiments, both sides may be locked during the
order clearing phase of post-matching sessions. This aspect
preferably introduces simultaneous bid and offer creation.
Order Clearing Trigger Exceptions
[0100] Order clearing may not be triggered if the best bid and best
offer are from counterparty-restricted traders. Order clearing may
also not be triggered if the best bid and best offer are from
clearing method restricted traders--e.g., a bid associated with a
company that is restricted to clearing with an exchange such as
Intercontinental Exchange ("ICE") only vs. an offer associated with
a company that is restricted to bilateral trading only. Restricted
orders can be shown in the restricted format to applicable
users.
Order Management During Order Clearing
If Best Price Only is Disabled
[0101] Selected order management requirements during clearing can
be the same as the existing behavior. In addition, certain of the
order management requirements may be different according to the
invention.
Requirements for the Best Bid and Best Offer
[0102] When the best bid or offer is updated to a better level,
then the order clearing timer may reset and start again. During
order clearing, the size of the best bid or best offer may
preferably be updated, although in some embodiments the size may
not be updated. If the best bid is updated to the same level as the
best offer, or vice versa, the trade execution option may be
presented if an auto match setting is enabled for the interest.
[0103] In some embodiments, during order clearing, the broker may
not update the site or trader to different values via the price
update dialog. During order clearing, an order that is being
cleared will preferably not be held by hold all, or other similar,
actions. The best bid and best offer may preferably not be held or
deleted manually during the order clearing period.
[0104] In one aspect of the invention, during order clearing, if
the owner of the best bid or best offer attempts to hold their
order, the order may be held preferably only after the clearing
timer expires.
Orders in Depth During Order Clearing
[0105] Bids and offers in depth may be updated to a better
level--i.e., up to the level of the best bid or best offer.
However, a trader can only join, but not trade, by taking priority
over original post-matching best buyer and/or seller.
[0106] Orders in depth may be updated to a worse level, according
to the invention. Further, the size of orders in depth may be
updated. Orders in depth may be held.
Order Management if "Best Price Only" is Enabled
[0107] In certain embodiments, if a best price only feature is
enabled, then order management during the clearing phase may only
be permitted for the owners of the best bid and best offer. It
should be noted that, in such embodiments, group member
entitlements can be restricted from order management actions,
because group entitlements may not extend to order management in
the pricesheet.
Trade Execution
[0108] During order clearing, preferably only the counterparties
that own the best bid and own the best offer and group members may
be permitted to trade. If there is a trade during order clearing,
order clearing may terminate immediately at the end of a live trade
session and the interest can be open for all entitled participants
until the end of the post-matching session. This may also be true
independent of the best price only setting.
[0109] Live trade sessions can preferably only be initiated if live
trade is enabled for the entity and entity live trade default
settings are applied.
[0110] In certain embodiments, if best price only is enabled and
there is no trade between the counterparties with the best bid and
offer during the order clearing phase, the post-matching session
ends when the order clearing timer expires.
Post Order Clearing Phase
[0111] When the Post-Matching Clearing Timer expires, and the
post-matching session goes into an extended phase, the interest can
be open for all users for order entry and trade execution until the
interest becomes unquoted. Order management and trade execution
rules typically remain the same as the pricesheet rules with the
exception that all matching participants are entitled to order
management and trade execution privileges during the post-matching
session.
[0112] Any trade executions can generate live trade sessions if
workup is enabled for the interest. The post-matching session may
end once the post-matching timer expires if the interest is not
quoted at timer expiry.
[0113] If the interest is quoted at timer expiry, then the
post-matching session can continue until the interest is no longer
quoted with an order submitted by a trader. At post-matching
expiry, all JTA popups may close and the interest in the pricesheet
follows standard order management and trade execution rules.
[0114] During the post-matching session, fixing and matching
sessions may preferably not be initiated on the interest. Once the
post-matching clearing timer expires, matching and fixing sessions
may be initiated on the interest, even if there are live orders on
the interest.
Application of JTA Controls During Post-Matching
[0115] For brokers and traders, the "Popup Live Trade"
sector/workspace setting preferably determine whether JTA popups
are generated when initiated via post-matching sessions.
Brokers Specific Use Case
Matching Group Setup:
Post-Matching=Yes
Best Price Only=No
Allow Pull Out=Yes
Post Matching Clearing Timer=20 sec
DT 5y, Fix=100, Post-Matching Spread=2
BRITEL 5y, Fix=100, Post Matching Spread=2
F 5y, Fix=100, Post Matching Spread=2
Default Size=5MM
[0116] Users (all Users Preferably have Popups Enabled):
ABC1, Post Unfilled for Post Matching=Yes, Joiner
GS1, Post Unfilled for Post Matching=No, Interactive
DB1, Post Unfilled Post Matching=No, Joiner+JTA
[0117] DEFG1, Does not participate in Matching, Interactive All
users have post-unfilled for Live Trade enabled.
Matching Session Events:
[0118] The following orders, based on the foregoing, exemplary,
matching group setup, are submitted during matching:
TABLE-US-00001 DT 5y, Fix = 100, Post-Matching Spread = 2 Trader
Bids Offers ABC1 10 MM@100 GS1 10 MM@ 101 DB1 10 MM@100
No trades are executed. Post matching is initiated.
TABLE-US-00002 BRITEL 5y, Fix = 100, Post-Matching Spread = 2
Trader Bids Offers ABC1 10 MM@101 GS1 10 MM@ 100 DB1 10 MM@99
ABC1 trades with GS1 for 10MM@100. Post matching is not initiated
since there is only a one-sided market left.
TABLE-US-00003 DT 5y, Fix = 100, Post-Matching Spread = 2 Trader
Bids Offers ABC1 10 MM@99 GS1 10 MM@ 102 DB1 10 MM@99
No trades are executed. Post matching is not initiated since the
spread between the remaining bids and the remaining offer is
greater than 2.
Post Matching Session Events:
[0119] The following orders may be created in the pricesheet (if
unfilled size is greater than default, or in some other suitable
circumstance, then iceberg orders--i.e., orders with hidden
size--are created. Hidden size is shown below in parentheses):
TABLE-US-00004 DT 5y, Fix = 100, Post-Matching Spread = 2 Trader
Bids Offers Trader ABC1 (5 MM) 5 MM@100 (5 MM) 5 MM@ 101 GS1 DB1 (5
MM) 5 MM@100
ABC1's bid is clearing to GS1 and GS1's offer is clearing to ABC1.
GS1 and ABC1 are unable to pull their orders during clearing. DB1
is unable to execute either order. As stated above, ABC1 and GS1 do
not receive the JTA popup; therefore they manage their orders via
the pricesheet. DB1 receives the JTA popup.
[0120] After five seconds GS1 hits ABC1's bid for 5MM@100. A live
trade session is initiated and ABC1 is auto-worked up for buy 5MM
more.
[0121] DB1 is auto-joined to buy 10MM@100. GS1 works up to sell 5MM
more and is matched with ABC1. DEFG1 joins to sell 5MM and is
matched with DB1 for 5MM@100 after the reserved phase.
[0122] At the end of Live Trade the following orders are left:
TABLE-US-00005 DT 5y, Fix = 100, Post-Matching Spread = 2 Trader
Bids Offers Trader DB1 5 MM@100 (5 MM) 5 MM@ 101 GS1
Clearing is expired, but DT 5y is considered to be in the
"extended" phase, since there are live trader created orders on the
interest. ABC1 then enters a bid for 5MM@100.5.
[0123] The following orders are in the market:
TABLE-US-00006 DT 5y, Fix = 100, Post-Matching Spread = 2 Trader
Bids Offers Trader ABC1 5 MM@100.5 (5 MM) 5 MM@ 101 GS1 DB1 5
MM@100
On DT 5y (the entity (or, alternatively, the interest) name), all
traders that are entitled to participate in matching sessions for
the interest will be permitted to interactively price and trade the
interest, until the interest becomes unquoted. Since post-matching
was not initiated on BRITEL 5y or F 5y, order entry and trade
execution will not be permitted on these interests by
non-interactive traders.
[0124] Thus it has been shown that systems and methods for
implementing a matching session utilizing an algorithm to support
trades occurring at prices other than a mid-price and for
implementing post-matching trading have been provided. One skilled
in the art may appreciate that the present invention can be
practiced by other than the described embodiments, which are
presented for purposes of illustration rather than of limitation,
and the present invention is limited only by the claims which
follow.
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