U.S. patent application number 13/926324 was filed with the patent office on 2014-02-06 for electronic trading system supporting indicators of interest.
The applicant listed for this patent is Bloomberg L.P.. Invention is credited to Kim Bang, Kevin Foley.
Application Number | 20140040096 13/926324 |
Document ID | / |
Family ID | 23632848 |
Filed Date | 2014-02-06 |
United States Patent
Application |
20140040096 |
Kind Code |
A1 |
Foley; Kevin ; et
al. |
February 6, 2014 |
ELECTRONIC TRADING SYSTEM SUPPORTING INDICATORS OF INTEREST
Abstract
A system conducts anonymous negotiations and supports
indications of interest in trading stock. The system includes a
database for storing public orders received from a public stock
trading system; and a server for receiving hidden orders from a
plurality of users and for conducting anonymous negotiations
between first and second users with the hidden orders. The server
repeatedly accesses the database to determine a match of any one of
the hidden orders with any one of the public orders, and to execute
a pair of orders selected from the hidden orders and the public
orders. The system also transmits indications of interest (IOIs)
into a trading environment using the server for processing a
trading order from a first user and for maintaining a profile of a
user. The profile includes a current IOI setting for controlling
transmission of the IOI from the user. The server responds to a
toggle command from the first user to control transmission of the
RN opposite to the current RN setting. The server responds to the
ICH setting being set to allow transmission by transmitting the IOI
of the first user associated with the trading order.
Inventors: |
Foley; Kevin; (New York,
NY) ; Bang; Kim; (Englewood, NJ) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Bloomberg L.P. |
New York |
NY |
US |
|
|
Family ID: |
23632848 |
Appl. No.: |
13/926324 |
Filed: |
June 25, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
12192253 |
Aug 15, 2008 |
8504483 |
|
|
13926324 |
|
|
|
|
09412408 |
Oct 5, 1999 |
7475046 |
|
|
12192253 |
|
|
|
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 20/383 20130101;
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. A non-transitory computer readable medium having executable code
stored thereon, that when executed, causes a computing device to
perform operations comprising: determining whether to transmit an
executable indication of interest for an order for a stock based on
information relating to the order; transmitting the executable
indication of interest to at least one user station based on the
determination; executing without negotiation a trade for the
order.
2. The non-transitory computer readable medium of claim 1, wherein
the operation of determining whether to transmit an executable
indication of interest for an order for a stock based on
information relating to the order comprises: determining a value of
an indication of interest setting from a user profile or an
initiator who transmitted the order.
3. The non-transitory computer readable medium of claim 1, wherein
the operation of determining whether to transmit an executable
indication of interest for an order for a stock based on
information relating to the order comprises: determining, from a
user profile of an initiator who transmitted the order, whether the
initiator is an institutional trader.
4. The non-transitory computer readable medium of claim 1, wherein
the operation of transmitting the executable indication of interest
to at least one user station based on the determination comprises:
comparing the order to a threshold quantity; and the order exceeds
the threshold quantity, transmitting the executable indication of
interest.
5. The non-transitory computer readable medium of claim 1, wherein
the operation of transmitting the executable indication of interest
to at least one user station based on the determination comprises:
determining if a combined quantity of a same stock as the stock
from the order from all uncancelled orders exceeds a predetermined
threshold; and transmitting the executable indication of interest
if the combined quantity exceeds the predetermined threshold.
6. The non-transitory computer readable medium of claim 1, wherein
the operation of executing without negotiation a trade for the
order comprises: matching the order with an order retrieved from a
database storing public orders to generate a matched trade
associated with the executable indication of interest; executing
the matched trade based on execution of the indication of interest
from at least one user station.
7. The non-transitory computer readable medium of claim 1, wherein
the order is a hidden order.
8. A method for trading stock between user stations connected by an
electronic trading system including at least one computing device,
comprising: determining, by the at least one computing device,
whether to transmit an executable indication of interest for an
order for a stock based on information relating to the order;
transmitting, by the at least one computing device, the executable
indication of interest to at least one user station based on the
determination; executing, by the at least one computing device,
without negotiation a trade for the order.
9. The method of claim 8, wherein determining whether to transmit
an executable indication of interest for an order for a stock based
on information relating to the order comprises: determining a value
of an indication of interest setting from a user profile or an
initiator who transmitted the order.
10. The method of claim 8, wherein transmitting the executable
indication of interest to at least one user station based on the
determination comprises: comparing the order to a threshold
quantity; and if the order exceeds the threshold quantity,
transmitting the executable indication of interest.
11. The method of claim 8, wherein transmitting the executable
indication of interest to at least one user station based on the
determination comprises: comparing the order to a threshold
quantity; and if the order exceeds the threshold quantity,
transmitting the executable indication of interest.
12. The method of claim 8, wherein transmitting the executable
indication of interest to at least one user station based on the
determination comprises: determining if a combined quantity of a
same stock as the stock from the order from all uncancelled orders
exceeds a predetermined threshold; and transmitting the executable
indication of interest if the combined quantity exceeds the
predetermined threshold.
13. The method of claim 8, wherein executing without negotiation a
trade for the order comprises: matching the order with an order
retrieved from a database storing public orders to generate a
matched trade associated with the executable indication of
interest; executing the matched trade based on execution of the
indication of interest from at least one user station.
14. The method of claim 8, wherein the order is a hidden order.
15. An electronic trading system for trading stock, comprising: a
server comprising: a memory; and a server configured for:
determining whether to transmit an executable indication of
interest for an order for a stock based on information relating to
the order; transmitting the executable indication of interest to at
least one user station based on the determination; executing
without negotiation a trade for the order.
16. The system of claim 15, wherein the server is further
configured for: determining a value of an indication of interest
setting from a user profile or an initiator who transmitted the
order.
17. The system of claim 15, wherein the server is further
configured for: determining, from a user profile of an initiator
who transmitted the order, whether the initiator is an
institutional trader.
18. The system of claim 15, wherein the server is further
configured for: comparing the order to a threshold quantity; and if
the order exceeds the threshold quantity, transmitting the
executable indication of interest.
19. The system of claim 15, wherein the server is further
configured for: determining if a combined quantity of a same stock
as the stock from the order from all uncancelled orders exceeds a
predetermined threshold; and transmitting the executable indication
of interest if the combined quantity exceeds the predetermined
threshold.
20. The system of claim 15, wherein the server is further
configured for: matching the order with an order retrieved from a
database storing public orders to generate a matched trade
associated with the executable indication of interest; executing
the matched trade based on execution of the indication of interest
from at least one user station.
21. The system of claim 15, wherein the order is a hidden order.
Description
[0001] This application is a continuation of application Ser. No.
12/192,253, filed Aug. 15, 2008 (issued Aug. 8, 2013 as U.S. Pat.
No. 8,504,483), which is continuation of application Ser. No.
09/412,408, filed Oct. 5, 1999 (issued Jan. 6, 2009 as U.S. Pat.
No. 7,745,056). The priorities of application Ser. Nos. 12/192,253
and 09/412,408 are hereby claimed, and the disclosures of
application Ser. Nos. 12/192,253 and 09/412,408 are hereby
incorporated herein by reference.
COPYRIGHT NOTICE
[0002] A portion of the disclosure of this patent document contains
material which is subject to copyright protection. The copyright
owner has no objection to the facsimile reproduction by anyone of
the patent document or the patent disclosure, as it appears in the
U.S. Patent and Trademark Office patent files or records, but
otherwise reserves all copyright whatsoever.
BACKGROUND OF THE INVENTION
[0003] The present invention relates to electronic trading systems,
and, more particularly, to a system and method which acts as an
introducing broker to arrange electronic trades in financial
instruments.
[0004] Alternative trading systems are being implemented with
capabilities beyond the traditional exchanges for commodities,
stocks, and financial instruments. For example, electronic trading
systems can perform trade-matching between buyers and sellers,
which increases the communications and liquidity of capital for
greater market efficiencies.
[0005] In the financial arts, electronic communications networks
(ECNs) refer to computerized trade-matching systems which are
capable of uniting the best bid and offer prices, as well as
providing investors with anonymity and reduced transaction costs.
For example, such ECNs may bypass broker-dealer commissions as well
as exchange fees. An ECN allows its participants such as
brokers/dealers, market makers, and buy-side institutions to post
bids and offers into a market quote, such as the "NATIONAL
ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS" (NASDAQ)
system.
[0006] Order handling rules have been implemented by the Securities
and Exchange Commission (SEC), which mandate disclosure by market
makers of any ECN order in a trade quote at the time of the trade.
The lack of anonymity may expose, for example, excessive trades by
specific institutions and companies which may, in turn, have a
negative impact on the markets, such as causing runs in stocks and
wild and volatile swings in markets. Accordingly, such exposure may
chill trading by market makers of ECN orders, and so reduces
liquidity and efficiency in trading systems.
[0007] A need exists for an anonymous trading system which complies
with applicable market disclosure rules.
[0008] Trading systems also support messaging and displayed
information as indications of interest (IOI) of an entity willing
to enter into a trade and soliciting opposite parties or contras in
a trade. Anonymous indications increase trading liquidity. However,
on occasion brokers use IOIs, and especially anonymous IOIs, to
perform fishing; that is, to send empty or insincere IOIs to
solicit half of a transaction, and then to seek to fill the other
half.
[0009] A need exists for a trading system which promotes IOIs and
their benefits but which discourages fishing IOIs.
OBJECTS AND SUMMARY OF THE INVENTION
[0010] Objects of this invention are to fill the needs described
above.
[0011] These and other objects are achieved in accordance with the
invention by an electronic trading system and method which support
anonymous negotiation complying with order-handling rules, and
which support indications of interest (IOI) while discouraging
fishing IOIs.
[0012] In accordance with one embodiment of the invention, stocks
are electronically traded using an electronic trading system while
supporting anonymous negotiation and maintaining the identity of
the trading parties anonymous with respect to each other and with
respect to users of the trading system. In this embodiment, trades
may be executed between two users of the system (between hidden
orders) and between a user of the system and a third party (between
a hidden order and a public order).
[0013] In accordance with this embodiment, a first party offers to
buy or sell over the system a number of shares of stock selected by
the first party at a price selected by the first party from or to
one or more counterparties selected by the first party. In the
preferred embodiment, anonymous negotiations may be conducted
between a first party and a plurality of prospective counterparties
(second users) selected by the first party. The first party and a
counterparty electronically agree to trade up to an agreed number
of shares of the stock at an agreed price. However, if there is no
better trade in at least one stock order originating from outside
the system for the particular stock for either the first party or
the counterparty, the system electronically executes the trade
agreed to by the first party and the counterparty, otherwise the
system executes the better trade. A trade may be executed where the
number of shares on the buy side of an order is less than on the
sell side, with the system executing a trade for the number of
shares on the buy side.
[0014] The first party offering to buy shares from or sell shares
to one or more selected counterparties selects the one or more
counterparties from the users identified by the system as engaging
in recent trade or order activity in particular stocks. User
stations may be provided having an input device and an output
device, and available anonymous negotiation partners may be
selected by a user from a list provided by the system using an
input device. The first party and the counterparty electronically
negotiate the price of the stock or the number of shares of the
stock, or both, over the system prior to agreeing to the trade, and
whether there is a better trade in the particular stock for either
the first party or the counterparty is determined at least once
during the negotiating step and at least once after completion of
the negotiating step and before any trade is executed between the
first party and the counterparty. Preferably this is determined
repeatedly during the course of a negotiation.
[0015] Thus, a trade is not executed between users of the system if
there is a better trade with a third party. Whether a better trade
is available, i.e., whether there is a match of any one of the
hidden orders with any one of the public orders, may be repeatedly
determined. Depending upon whether a better trade is available, a
pair of orders selected from the hidden orders and the public
orders is executed. A trade is executed in accordance with a
priority when the same trade becomes available between two orders
originating within the system and an order originating from within
the system and an order originating from outside the system. In the
preferred embodiment, priority of trade execution is given to
orders originating within the system.
[0016] In accordance with another embodiment of the invention,
interest may be determined in a stock among users of an electronic
stock trading system only in association with an order entered by a
user. In this embodiment, the electronic trading system comprises
at least one computer with associated computer memory and a
plurality of user stations coupled thereto via a communications
network. The at least one computer is programmed to match orders
entered into the user stations by users and to execute trades of
matched orders, and has a listing of system users accessible by any
system user via a user station. Responsive to user input via user
stations, the at least one computer is programmed to create a
subset or profile of system users selected by a user to which that
user authorizes the system to transmit an indication of interest
(TOT) in a stock for which that user has entered an order. A user
at a user station selects users from the list of users, and the
system transmits the IOI to the selected users only when the user
enters an order at the user station for the particular stock. Thus,
in this embodiment, an indication of interest (IOI) is transmitted
only in association with an order entered by a user.
[0017] The IOI may be transmitted automatically in association with
the order unless overridden by a command entered with the order, or
pursuant only to a command entered with the order. The transmit or
override command is preferably entered via a keyboard in the user
station. Preferably, an IOI will be transmitted in association with
an order only if the order exceeds a threshold quantity, or if that
order and any uncancelled orders for the same stock entered by the
same user exceed a threshold quantity.
[0018] The trading system includes a database for storing public
orders received from a public stock trading system; and a server
for receiving hidden orders from a plurality of users and for
conducting anonymous negotiations between first and second users
with the hidden orders. The server repeatedly accesses the database
to determine a match of any one of the hidden orders with any one
of the public orders, and to execute a pair of orders selected from
the hidden orders and the public orders. The system also transmits
indications of interest into a trading environment using the server
for processing a trading order from a first user and for
maintaining a profile of a user. The profile includes a current IOI
setting for controlling transmission of the IOI from the user. The
server responds to a toggle command from the first user to control
transmission of the IOI opposite to the current IOI setting. The
server responds to the IOI setting being set to allow transmission
by transmitting the IOI of the first user associated with the
trading order.
BRIEF DESCRIPTION OF THE DRAWINGS
[0019] FIG. 1 illustrates the disclosed trading system;
[0020] FIG. 2 illustrates the system of FIG. 1 in greater detail
with modules used for negotiated trades;
[0021] FIG. 3 illustrates the system of FIG. 1 in greater detail
with modules used for processing indications of interest;
[0022] FIG. 4 illustrates a flowchart for performing negotiated
trades;
[0023] FIG. 5 illustrates a flowchart for processing indications of
interest;
[0024] FIG. 6 illustrates a screen display of a TRADEBOOK quote
monitor;
[0025] FIG. 7 illustrates a screen display showing stock price
status;
[0026] FIG. 8 illustrates a screen display of available trades for
negotiation;
[0027] FIG. 9 illustrates a screen display of FIG. 8 with trades
selected for negotiation;
[0028] FIG. 10 illustrates a pop-up window for setting negotiation
terms;
[0029] FIG. 11 illustrates a screen display of a TRADEBOOK
negotiations monitor;
[0030] FIG. 12 illustrates the screen display of FIG. 11 with
additional trades and their status;
[0031] FIG. 13 illustrates a pop-up window for accepting or
declining a negotiated trade;
[0032] FIG. 14 illustrates the screen display of FIG. 12 with
additional trades and their status as expired;
[0033] FIG. 15 illustrates a screen display for viewing the
settings of a user's profile;
[0034] FIG. 16 illustrates the screen display of FIG. 15 with a
pop-up window for changing a setting of a user profile;
[0035] FIG. 17 illustrates a screen display of multiple trades;
[0036] FIG. 18 illustrates a screen display of a log of daily
trading activity; and
[0037] FIG. 19 illustrates a screen display of posted indications
of interest.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
[0038] Referring to FIG. 1, the disclosed trading system 10
includes a "TRADEBOOK" server 12 executing the "TRADEBOOK" software
available from "BLOOMBERG TRADEBOOK LLC" to receive trading
information from a plurality of users using the user stations 14-16
through a gateway 18 and a communications network 20, which may be,
for example, an intranet, or a public services telephone network
(PSTN). Alternatively, the communications network 20 may be the
Internet. In addition to the gateway 18, the system 10 and/or the
communications network 20 in any embodiment may provide appropriate
data security; for example, using encryption and firewalls.
[0039] The server 12 displays information on stocks and other
securities to the users through the monitors 22-24, and the users
may enter selections and commands such as buy and offer messages
using the data inputs 26-28, which may be input devices which may
include a keyboard, a mouse, or other input devices such as a
graphic user interface (GUI).
[0040] The server 12 includes a processor 30 for executing the
"TRADEBOOK" software to conduct trading with anonymous negotiation
and indications of interest features as described herein, such that
the system 10 acts as an introducing broker to arrange transactions
with the "NASDAQ" trading system 32 and/or the "AUTEX" system 34.
The "TRADEBOOK" software may be stored in the memory 36 and is
capable of acting as an agent for both sides of each trade, with
fees charged to both participants and non-participants of the
system 10 on a per-transaction-basis. The securities which may be
traded on the system 10 may include NASDAQ, NASDAQ Small Cap, and
exchange-listed U.S. equity securities, as well as American
Depository Receipts (ADRs), such as pink sheet and bulletin board
types of securities which are eligible for continuous net
settlement by book entry through the National Securities Clearing
Corporation and the Depository Trust Company.
[0041] In an alternative embodiment, the system 10 may include an
indication of interest (IOI) server 38, shown in FIG. 1, for
processing IOIs through the TRADEBOOK server 12, as described
herein, to provide IOI functionality to the "BLOOMBERG TRADEBOOK"
system 10 and to users thereof.
[0042] Referring to FIG. 2, the TRADEBOOK server 12 includes
various modules, which may be hardware and/or software, for
processing TRADEBOOK orders and data and for interfacing the users
40 using the user stations 14-16 to the NASDAQ trading system 32 as
well as to other systems such as a client's open market system
(OMS) 42. The modules may be referenced with file names and/or
designations beginning, for example, with "BT" for "BLOOMBERG
TRADEBOOK".
[0043] User inputs and data from the uses 40 and user stations
14-16 are processed in real-time using the processor 30 executing
the BTBIG module 44 and the BT2LINE module 46, which receive and
format the input data for orders and messages for use by the
TRADEBOOK server 12. Data to be displayed back to the user 40 is
sent to the BTMON module 46, which is a monitoring module for
translating information to the format used by BTBOOK 54 and for
sending output data to the monitors 22-24 and for controlling the
data displayed on the monitors 22-24 of the user stations 14-16,
respectively. The monitors 22-24 provide outputs to respective
users through portions 50 of the screen, with the BTBIG module 44
for processing data from the lower portion of the screen, and the
BT2LINE module 46 for handling and displaying the data from the
first two lines in the upper portion of the screen, shown in FIG.
6.
[0044] FIG. 6 illustrates a typical "BLOOMBERG TRADEBOOK" screen
display for use by traders to efficiently and quickly provide a
significant amount of up-to-date information upon entry of simple
commands. In addition, the activation of commands and the display
of additional information is also provided by using a GUI with
GUI-based input devices such as a mouse. For example, text,
numbers, and regions of the screen may be active for actuation by
the user. In one example, double-clicking the stock name "INTC" may
generate a chart of activity of prices of the "INTEL CORPORATION"
stock. In another example, double-clicking a mouse over the market
maker name "BTRD" may generate information about the market maker,
such as the full name and contact information, in which "BTRD"
corresponds to "BLOOMBERG TRADEBOOK" as the source of the 62.5 bid
for 70,000 shares of INTC shown in FIG. 6.
[0045] The particular example screen shown in FIG. 6 is a TRADEBOOK
quote monitor screen which is generated by the trader entering the
command BTMQ which may stand for "BLOOMBERG TRADEBOOK" market (or
monitor) quote, with the command mnemonic "BTMQ" which generated
the present screen in FIG. 6 being displayed, for example, in the
upper right corner of the screen of FIG. 6. Other types of screens
may be provided to users of "BLOOMBERG TRADEBOOK", such as screens
showing order tickets, order blotters, monitoring of a single
security, monitoring of a composite or set of securities in one's
portfolio or field of trading, and multiple buy and sell orders in
the same security.
[0046] Referring to FIG. 2, the BT2LINE module 46 of the system 10
displays input commands back to the user. For example, to buy
10,000 shares of "INTEL CORPORATION" shares having the trading
symbol INTC at $62 per share, a user 40 may input the command line:
<BUY>INTC 10000 62<GO> through the data input 26. The
keywords <BUY> and <GO> may be input as text, or may be
predetermined hotkeys or function keys or combinations thereof on a
standard keyboard, or alternatively may be specialized keys on a
customized keyboard available, for example, through "BLOOMBERG LP".
For example, the <GO> command may be the traditional ENTER or
RETURN key, or may be a customized keyboard button with the word
"GO" imprinted as indicia thereupon. The indicated command line is
processed by BT2LINE 46, which in turn is processed by BTMON 48 to
display the command on a tool line, for example, at the top of a
predetermined displayed screen through the monitor 22 as shown in
the example screen shown in FIG. 6.
[0047] Any input commands such as orders corresponding to
negotiations between traders are processed through a BTNEGOT module
52 which processes the negotiation messages as described herein in
conjunction with FIG. 4. BTNEGOT 52 consults a book of trades
processed by the BTBOOK module 54 and stored in the memory 34,
which may be a database such as the BTRADE-DB 56, which is
accessible by the BTBOOK module 54. Through BTBOOK 54, the book in
BTRADE-DB 56 is updated to reflect orders, current prices, and data
available from the NASDAQ trading system 32, as well as
cancellations of orders and logs of activity. In particular, the
BTBOOK module 54 is operatively connected to the NASDAQ trading
system 32 through a BTFEED module 58, which feeds data such as
order and quote data from NASDAQ 32. In addition, the BTBOOK module
54 is connected to the SELECTNET system of NASDAQ 32 through a
"BLOOMBERG TRADEBOOK" NASDAQ WORKSTATION (BTNWS) computer-computer
interface (CCI) 60, which connects BTBOOK 54 to SELECTNET to
receive and transmit orders.
[0048] BTBOOK 54 also receives order and trading data from the
client OMS 42 through a BTFIXCCI module 62 and a BTFIXSRV module
64, which are respectively a financial information exchange (FIX)
CCI application and a FIX receiver application for feeding
financial data to BTBOOK 54. In particular, the BTFIXCCI module 62
translates and/or formats the received financial data to a format
for use by BTBOOK 54. The BTFIXSRV module 64 acts as a local node
for the TRADEBOOK server 12 for identification of the server 12
with other systems and components.
[0049] Since trades may also be associated with indicators of
interest (IOI), BTBOOK 54 may optionally be connected to a BTIOI
module 66 for processing IOIs in conjunction with trades with
anonymous negotiations through BTNEGOT 52. The BTIOI module 66 may
be connected to the RN server 38 shown in FIG. 1.
[0050] In an alternative embodiment shown in FIG. 3, the TRADEBOOK
server 12 may support IOIs associated with trades executed without
anonymous negotiations. For example, the BTIOI module 66 may be
connected to the IOI server 38 through the BTFIXSRV module 64 of
the TRADEBOOK server 12 and also to the AUTEX automatic trade
execution system 34. The IOI server 38 may be connected to the user
40 through the communications network 20 and to the TRADEBOOK
server 12 through various modules. For example, the IOI server 38
may include a corresponding BTFIXSRV 70 which interfaces with the
BTFIXSRV 64 to access and to post IOIs to the AUTEX system 34.
[0051] A corresponding BTFIXSRV module 68 connects the IOI server
38 to external systems such as the TRADEBOOK server 12, and so the
BTFIXSRV module 68 identifies the IOI server 68 to such external
systems. The BTFIXSRV modules 64, 68 may be identical in
implementation. The IOI server 38 of "BLOOMBERG TRADEBOOK" (BTRD)
includes a decoder (BTRDDCD) module 70 which performs
auto-execution of the IOI software to take messages received
through the BTFIXSRV module 68 and to translate such messages into
a format for use by the IOISERV module 72 to process the IOIs.
[0052] The IOISERV module 72 also posts the IOIs for display with
associated data to the monitor of the user 40 through an equity
order monitor (EOMON) module 76 separate from the monitor module
BTMON 52 of the TRADEBOOK server 12. In particular, the EOMON
module 76 may be configured to filter IOIs according to the
settings of each particular user, for example, to prevent the
display of certain brokers.
[0053] At the request of the user, the IOISERV module 72 also
causes the display of all IOIs. In addition, the BTMON module 48
operates with the IOISERV module 72 to determine and to display,
for each particular user, the most recent IOIs involving the
particular user, such as the two most recent IOIs sent by the
user.
Anonymous Negotiations
[0054] In operation, as shown in FIG. 4, the system 10 supports
negotiation features, which allow broker-dealers and institutional
participants to initiate anonymous negotiations on a one-on-one
basis with other participants of the system 10. A participant may
designate whether or not to receive negotiation messages, and may
initiate a negotiation with another participant having an open
order, an expired order, or an executed trade on the system 10.
Such negotiations may be performed in conjunction with the
indications of interest (IOI) feature of the system 10, as
described herein.
[0055] When a trader enters an order, the processor 30 of the
TRADEBOOK server 12 using, for example, BTBIG 44, checks the book
of orders in BTBOOK 54 reflecting NASDAQ orders for a match to the
trader's order. If no match exists, anonymous negotiations may
occur, as shown in step 78 of FIG. 4, with the book being checked
constantly and/or regularly for a match with the negotiated
orders.
[0056] By entering a "BTP" command, a trader is then presented with
a BTP stock price status screen shown in FIG. 7, which lists for
the indicated stock, such as INTC for "INTEL CORPORATION", the most
recent activity of the stock such as orders for selling and buying
in screen portions 116-118, respectively. If the trader viewing the
status screen of FIG. 7 wishes to negotiate to buy or sell an
unmatched order, the trader may select and actuate the commands
"NEGOTIATE TO SELL" or "NEGOTIATE TO BUY", at screen portions
120-122, respectively. For example, the trader, as the first
participant of the negotiation, may use a predetermined function
key, or may actuate, through a GUI, the text at portions
120-122.
[0057] For example, for negotiating to buy the INTC stock,
activation of text 122 causes BTNEGOT 52 to generate the
Negotiate-to-Buy screen shown in FIG. 8 for display on the
respective one of the monitors 22-24 associated with the first
participant. The Negotiate-to-Buy screen may display the total
shares bought that day by the first participant, and the quantity
of shares of the first participant displayed to others.
[0058] On the screen shown in FIG. 8, the most recent trading
activity of orders for the stock, for example, TNTC, is displayed
with the date, quantity, and price. The first participant may
select one or more of the orders to engage in negotiations, for
example, by actuating the empty box icons 124 through a GUI. The
empty boxes are then changed to filled or X-ed boxes 126 as shown
in FIG. 9. The first participant may select any number of available
orders for negotiation, or alternatively only a predetermined
number of orders may be selected, such as eight or ten.
[0059] During negotiation, a participant enters a firm negotiation
order in step 80 of FIG. 4, which is an order which results in a
trade if accepted by the recipient of the negotiation message. To
enter the negotiation order, for example, for a negotiation to buy,
the system 10 generates a pop-up window 128 or sub-screen, such as
shown in FIG. 10, for inputting a negotiation price as well as
limits to exposure of the first participant in the negotiations.
For example, as shown in FIG. 10, Participant A sends a negotiation
message to sell 50,000 shares of a designated security at, for
example, $84.25 per share to Participant B and other participants
who entered the sale orders in FIG. 9. Through the pop-up window
128 of FIG. 10, the first participant may limit his/her trading
exposure to 60,000 shares. A second participant such as Participant
B may then conduct anonymous negotiations with the first
participant using firm acceptances or counter-offers in step 82 of
FIG. 4.
[0060] Once negotiations have begun, the first participant who
initiated the negotiation may view the action on the negotiation
through a negotiations monitor screen shown in FIG. 11. As
responses from other participants provide counter-offers or
acceptances, such action is also then displayed on the negotiations
monitor screen of the first participant shown in FIG. 12. The first
participant may then select which counter-offer or acceptance to
accept or decline by actuation of the respective text in FIG. 12
using a GUI. For example, when the first participant double-clicks
a mouse when a cursor is positioned over action number 1 of FIG. 12
with an offer for 3000 shares at a price of 77 from a second
participant, a pop-up window 130 is generated as shown in FIG. 13.
Using the window 130 in FIG. 13, the first participant can accept
or decline the offer of 3000 shares at 77, and the negotiation in
that instance is then complete. If the negotiation is accepted on
both sides, then the order is executed automatically unless there
is a match with the book of public orders.
[0061] As shown in FIG. 14, the various orders may have time
limitations for matching, negotiation and/or acceptance.
Accordingly, stale negotiations may be cancelled as expired, as in
action items 3-4 in FIG. 14. The first participant may re-initiate
negotiations on different terms, such as the more favorable prices
of 77 per share as shown in action item 1 in FIG. 14.
[0062] In the described example with Participant A, if Participant
B responds to the negotiation message to buy only 20,000 shares of
the offered security at the offered price, the server 12 matches
the two orders in step 84 of FIG. 4, and a trade for the 20,000
shares is executed without further action by either participant if
no match is in the book as per steps 86-90.
[0063] Alternatively, if Participant B responds to the negotiation
message with a counter-offer in step 82 instead of communicating an
acceptance, the counter-offer may also to be a firm offer, and may
propose a different quantity and/or a different price per share for
the same security. In other alternative embodiments, the offers,
acceptances, and counter-offers may not be film and so may be
subject to confirmation by the last accepting party.
[0064] All negotiation initiators and counter-offerors may be
required to enter and accept firm quantities and firm prices to
ensure that the participants conduct good-faith negotiations and so
to prevent participants from testing the waters; for example, by
sending insincere negotiation bids or offers, or even
counter-offers, and then backing out of the trade if the
contra-side participant communicates an acceptance.
[0065] A negotiation order may be all-or-none as to terms, may
specify a minimum which is to be taken, or may state that the
initiator of the negotiation is open to a counter-offer with a
quantity of a different size. The system 10 may also support the
use of reserves for trading; for example, if Participant A's
negotiation order is over a predetermined threshold, such as 10,000
shares, Participant A may designate a reserve, which is not
displayed to Participant B who received the negotiation message.
During negotiation in which Participant A sends an order with a
displayed quantity and a non-displayed reserve quantity, if
Participant B responds with a counter-offer indicating a match on
price but with a quantity which is greater than the displayed
quantity yet within the total reserve amount, then the reserve of
Participant A is automatically drawn to allow the trade to go
forward to meet the quantity of the counter-offer.
[0066] However, using reserves, if the counter-offer quantity
exceeds the reserve quantity, the counter-offer is executed up to
the amount of the reserve, unless the counter-offer is specified by
Participant B as being all-or-none. In an all-or-none situation,
execution does not occur without a subsequent communication from
Participant A of an increase in the offered display quantity or of
an increase in the reserve quantity.
[0067] When a trader sets a cap for his/her exposure, such as
10,000 shares split among multiple parties in negotiation, the
system 10 ensures that the cap is not exceeded during negotiation
by hidden messages and during trading with the public trades in the
book. In particular, the caps are enforced by determining when the
cap is met or would be exceeded by additional trades, and then by
canceling all outstanding hidden messages reflecting orders which
exceed or would exceed the cap.
[0068] Negotiation orders are independent of other displayed orders
on the system 10 unless the negotiation process is complete. When a
negotiation order is initially entered by Participant A using, for
example, user station 14 of FIG. 1 through a data input device 26,
the displayed portion of the negotiation order is only displayed to
the participant designated by the initiator of a trade, but the
negotiated order is capable of interacting with publicly displayed
orders, for example, during matching, when such orders are at the
same price.
[0069] For example, if the best displayed bid in the system 10 is
at 84.25 and the negotiation bid is entered at 84.375, a subsequent
offer entered into the system 10 by the participant at 84.375
automatically hits the 84.375 negotiation bid, up to the full
amount of the negotiation quantity and reserve. Such matching and
hitting of bids occurs even for anonymous and/or invisible bids.
For example, although the negotiation bid in the above example is
not displayed to the participant as part of the anonymous
negotiation method, the negotiation bid is still able to be matched
with the 84.375 offer.
[0070] The negotiation feature using anonymous bids and offers is
intended to comply with the ECN Alternative for alternative trading
systems specified in Order Execution Rules of the Securities and
Exchange Commission (SEC), which do not require an order in an
alternative trading system to be displayed publicly if the order is
shown only to one other person or entity. For example, the Exchange
Act Release No. 40760 of Dec. 8, 1998, published at 63 Federal
Register 70844 on Dec. 22, 1998, states after note 190 that
"alternative trading systems are not required to provide the public
quote stream orders displayed to only one other alternative trading
system subscriber, such as through the use of a negotiation
feature". The system 10 using the "TRADEBOOK" server 12 executing
the "TRADEBOOK" software available from "BLOOMBERG TRADEBOOK LLC"
may be used as or in conjunction with an alternative trading system
for allowing users to negotiate orders for the "NASDAQ" trading
system 32.
[0071] Accordingly, while negotiations occur anonymously using
hidden orders in steps 78-84 shown in FIG. 4 after no initial match
of booked public orders, orders may enter the book during the
anonymous negotiations. While the anonymous negotiations occurs,
the system 10 continues to consult the book of public trades in
step 86 for a match of a public trade with either side of the
anonymously negotiated trade. In step 88, the system 10 determines
if there is a match of one party in the anonymous trade with the
book 36. If not, for example, if the company stock or the type of
company stock of the negotiated trade differ from every entry in
the book 36, then no match with the book 36 exists and so the
negotiated trade is executed in step 90.
[0072] However, if there is a matching trade in step 88, the system
10 determines if the prices of the book trade and the negotiated
trade are identical in step 92. If not, the trade having the better
price is executed in step 94. For example, Participant A is
interested in buying 10,000 shares of INTEL at 62, and has
negotiated with Participant B to buy the shares of INTEL at 64.
After negotiations are finalized, if an order in the book 36 is
present from Participant C to sell 10,000 shares of INTEL at 63,
then from the perspective of Participant A, Participant C has the
lower and therefore better price of 63 per share instead of 64 per
share from Participant B. Accordingly, despite negotiations with
Participant B, a trade between Participants A and C is executed at
the better price of 63.
[0073] After anonymous negotiations, the terms of the trade may be
identical to a later book entry, including identical in price.
Therefore, in step 92, the prices are identical, but the negotiated
trade takes precedence so the system 10 executes the negotiated
trade at the negotiated price 96. In this matter, the system 10
maintains price/time priority, in which the best price governs the
trade and, if prices are identical, the negotiated trade is deemed
to have time priority over a later-received trade in the book 36.
Accordingly, traders having identical trades with later book trades
are not penalized for entering into negotiations.
[0074] Any parties rejected during negotiation may later propose
new trades and so may enter into the final trade outside of
negotiation as per steps 86-96. For example, Participant A selects
Participants B and C for anonymous negotiation, but finalizes an
anonymously negotiated trade with Participant B. Participant C is
thus rejected during negotiation, but may re-enter a trade in the
book 36. During steps 86-88, despite the negotiation between
Participants A and B, the negotiated trade is compared to the
publicly booked trade of Participant C. If Participant C can beat
the price of Participant B in step 92, then Participant C may enter
into the final trade with Participant A at the better price.
[0075] Accordingly, trading and liquidity are improved by the
system 10 using anonymous negotiations which comply with
appropriate regulatory market rules for improved prices and market
efficiency.
Indications of Interest
[0076] Referring to FIG. 3, the system 10 also supports the use of
an indications feature which allows only certain participants
(e.g., institutional participants) to advertise a desire to
negotiate by sending indication of interest (IOI) messages to other
institutional participants via IOI software applications or
services. Such indications may specify only the security ticker and
the side of the indication as being for a buy or a sell, and may
also include a notation that the security is negotiable on the
system 10. Indications may be set to not show any price, size, or
identification of the participant.
[0077] The system 10 maintains user profiles to control the
transmission of IOIs, with a default setting permitting
transmission by any particular user. These profiles are in effect
subsets of system users to which a user wants IOIs to be
transmitted by the system. A user accesses a list of users from
which the user creates the profile. In the preferred embodiment,
the system 10 also supports the use of IOIs only between
institutional traders and not from individual brokers, in order to
reduce or eliminate "fishing" for interest. The user profile may
specify whether or not the user is an institution. The user profile
may be modified by the user to change the IOI default setting, but
may not be modified by the user to change the user's designation of
being or not being an institutional trader.
[0078] As shown in FIG. 5, the system 10 uses the components and
modules of FIGS. 1 and 3 to perform the steps 98-114. Upon
receiving an order for stock in step 98 from an initiator of the
trade, the system 10 checks the user profile of the initiator in
step 100 to determine the present value of the IOI setting, which
may be the default value or a customized setting. If the IOI
setting is determined in step 102 as being set to transmit an IOI
with the trade, then the method proceeds to step 104.
[0079] Otherwise, the system 10 determines in step 106 whether the
initiator has entered an toggle command to override the current IOI
setting in the initiator's profile. For example, when entering an
order in the tool line 50 of FIG. 6, the initiator may include a
"IN" command, such that the order shown in FIG. 6 instead reads:
[0080] <BUY>INTC 10000 62/N<GO> which toggles the
system 10 to use, for this trade only, the exact opposite of the
IOI setting in the initiator's profile. The "N" in the "/N" command
represents NATURAL Institution-to-Institution-Only Indications of
Interest. Accordingly, the initiator of orders need not
continuously reset the IOI setting in the user's profile to
transmit IOIs. It is understood that other commands, function keys,
or hotkeys may be used to toggle the initiator's profile
settings.
[0081] If no toggle command is present and the IOI setting is set
to not transmit an IOI message as determined in steps 102 and 106,
then the system 10 in step 108 does not send an IOI message.
However, in step 106, if a toggle command is present in step 106 to
use the opposite of the IOI setting to not transmit as determined
in step 102, then the system proceeds to step 104.
[0082] In step 104, the system 10 may optionally determine if the
initiator is an institutional trader, for example, by checking the
profile of the initiator which may include a designation or flag
indicating whether or not the initiator is an institutional trader.
If the initiator is not an institutional trader, then the system 10
performs step 108 to not send the IOI message, since such IOI
functionality is reserved for institutional traders to prevent
fishing for trades, as described herein.
[0083] However, in step 104, if the initiator is an institutional
trader, then the system 10 determines if a combined quantity of the
stock from all uncancelled orders for the stock exceeds a
predetermined threshold in step 110. For example, the system 10 may
support IOIs which involve a combined total of, for example, 10,000
shares of a given stock, in order to ensure that enough overall
interest is present for serious institutional traders to enter into
trades of the stock.
[0084] If the predetermined threshold is not met in step 110, the
system 10 holds the IOI message in step 112 for every initiator and
returns to step 98 to receive more orders for the stock. Otherwise,
in step 110, with the predetermined threshold met, the system 10
sends the IOI message associated with the order or orders of the
particular stock in step 114.
[0085] As shown in FIG. 15, the system 10 responds to a command
from a user to display a screen on the respective monitor 22-24 of
the user for viewing the settings of a user's profile, such as the
setting for sending out IOIs. Using a mouse and GUI as the data
inputs 26-28 for moving a cursor to the "Y" in a field adjacent to
the "SEND IOIs" setting, or alternatively using highlighted
portions of the screen of FIG. 12 with a cursor moved by tabs or
other keystrokes through a keyboard, a user can select the field
and so to cause the system 10 to generate a change-of-setting
pop-up window or menu 132, as shown in FIG. 16. Once the user
inputs a new setting, the change of setting is confirmed by the
user using, for example, the GO key and/or other predetermined keys
or keystrokes, which causes the updated setting to be stored with
other settings in the memory 36. Thereafter, the system 10 responds
to the updated IOI setting as the current IOI setting.
[0086] By entering a "BTP" command, a trader is then presented with
a BTP stock price status screen shown in FIG. 17, which lists for
the indicated stock the most recent activity of the stock such as
orders for selling and buying in screen portions 116-118,
respectively, as well as best bids and best offers in screen
portions 134. Upon entering a predetermined command such as BTRN,
the trader is then presented with an audit trail screen as shown in
FIG. 18, in which any activity corresponding to the text at the
screen portions 134 in FIG. 17 are indicated, for example, in text
messages 136 shown in FIG. 18. In particular, any IOIs associated
with the orders in FIG. 17 are displayed.
[0087] In response to an IOI display command from a trader, such as
IIA<GO>, the system 10 displays all IOI messages on an IOI
screen shown in FIG. 19, with the IOI in FIG. 18 associated with
the buy order of 68.5 per share in FIG. 17 being shown in more
detail as the IOI 138 in FIG. 19.
[0088] Unlike traditional broker-dealer IOIs in the prior art, the
disclosed IOIs are fully executable and associated with the actual
order. The IOIs are anonymous, and may be sent for both listed and
over-the-counter stocks and only to institutions over both the
"BLOOMBERG LP" and AUTEX systems. In one embodiment of the
disclosed system 10 using the TRADEBOOK server 12 and applications,
the only permissible way to enter and send an IOI is by entering an
order to be associated with the IOI in the TRADEBOOK system.
Accordingly, any user of the system 10 seeing an IOI knows that
there is a real TRADEBOOK order attached to the IOI, and so the IOI
is not being used for fishing for orders and trades.
[0089] Such IOI functionality may only be available to the
buy-side, so only the buy-side has the ability to view brokers'
IOIs. Using commands associated with TRADEBOOK such as broker:BTRD,
users are allowed to view the available and posted IOIs, and so
users of the system 10 may engage in trades using IOIs with
confidence that the initiator is not fishing and wasting the users'
time. Thus the IOIs represent real liquidity which is immediately
executable.
[0090] The disclosed trading system 10 and method have been
described by way of the preferred embodiment. However, numerous
modifications and substitutions may be made without departing from
the spirit of the invention. For example, while the preferred
embodiment discusses trades complying with NASDAQ trading rules, it
is wholly within the purview of the invention to contemplate
negotiation and processing of trades under different market rules
to ensure anonymity yet comply with the market rules in the manner
as set forth above. Accordingly, the invention has been described
by way of illustration rather than limitation.
* * * * *