U.S. patent application number 14/133109 was filed with the patent office on 2014-05-01 for conversational dealing in an anonymous trading system.
This patent application is currently assigned to EBS GROUP LIMITED. The applicant listed for this patent is EBS GROUP LIMITED. Invention is credited to John R. Capuano, John C. Gaudio, August Hochenberger, Edward Howorka, Neena Jain, Srivathsan Krishnasami, Gregory Mills.
Application Number | 20140122318 14/133109 |
Document ID | / |
Family ID | 24415225 |
Filed Date | 2014-05-01 |
United States Patent
Application |
20140122318 |
Kind Code |
A1 |
Hochenberger; August ; et
al. |
May 1, 2014 |
Conversational Dealing in an Anonymous Trading System
Abstract
An anonymous trading system for financial instruments comprises
a network of broking nodes each performing a bid and offer matching
function and a market view distribution function. Trader terminals
are connected to the network via trading agent nodes. During deal
execution a credit check is performed and once the deal is complete
the identity of the counterparty becomes known to the other
counterparty to the deal. The originating counterparty may send a
More quantity message to the other party proposing a further deal
at the same price. The other party may decline, partially accept,
accept or accept and propose a still further amount. Credit for the
further deal is drawn from an external source and the internal
credit limits are temporarily increased or disabled to prevent the
deal from being rejected.
Inventors: |
Hochenberger; August; (East
Islip, NY) ; Howorka; Edward; (Denville, NJ) ;
Jain; Neena; (South Plainfield, NJ) ; Gaudio; John
C.; (Middletown, NJ) ; Capuano; John R.;
(Chatham, NJ) ; Mills; Gregory; (Flanders, NJ)
; Krishnasami; Srivathsan; (New York, NY) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
EBS GROUP LIMITED |
London |
|
GB |
|
|
Assignee: |
EBS GROUP LIMITED
London
GB
|
Family ID: |
24415225 |
Appl. No.: |
14/133109 |
Filed: |
December 18, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
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12891246 |
Sep 27, 2010 |
8639607 |
|
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14133109 |
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09603390 |
Jun 23, 2000 |
7827085 |
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12891246 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/025 20130101;
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20120101
G06Q040/04 |
Claims
1. A computerized trading system, comprising: one or more computers
connected to a plurality of trader terminals, each trading terminal
being associated with a respective trading party, the one or more
computers receiving quotes and orders from the trader terminals
and, in response thereto; executing an anonymous trade between
first and second trading parties based upon the received quotes and
orders; sending information to the trader terminals associated with
the first and second trading parties identifying the trading
parties to each other after the anonymous trade has been executed;
and thereafter permitting the first and second trading parties to
execute a conversational trade between each other using the one or
more computers.
2. The computerized trading system of claim 1, wherein the
anonymous trade is made as a function if stored credit limits and
the conversational trade is not.
3. A computerized trading system, comprising: one or more computers
connected to a plurality of trader terminals, each trading terminal
being associated with a respective trading party, the one or more
computers receiving quotes and orders from the trader terminals
and, in response thereto; executing a first anonymous trade between
first and second trading parties based on bilateral credit limits
related to the first and second trading parties; and thereafter
permitting the first and second trading parties to execute a second
trade, without regard to credit limits, based upon the fact that
the first trade has been executed.
4. The computerized trading system of claim 3, wherein the stored
credit limits are stored within the anonymous trading system and
indicate how much credit the first trading party extends to the
second trading party and how much credit the second trading party
extends to the first trading party.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] The present application is a continuation of application
Ser. No. 12/891,246, filed Sep. 27, 2010 which is a continuation of
application Ser. No. 09/603,390, filed Jun. 23, 2000.
FIELD OF THE INVENTION
[0002] This invention relates to electronic brokerage systems and
in particular to systems in which counterparties trade anonymously
within fixed credit limits. Such systems may trade financial
instruments such as foreign exchange and forward rate
agreements.
BACKGROUND TO THE INVENTION
[0003] A number of anonymous trading systems are known in the art.
EP-A-0,399,850, EP-A-0,406,026 and EP-A-0,411,748 all assigned to
Reuters Ltd disclose aspects of an automated matching system in
which a host computer maintains a central database of bids and
offers submitted by terminals connected to the host via a network.
The host also maintains records of credit limits between each
trading bank and the possible counterparties with which it is
willing to trade. The host computer uses information in its central
database to match bids and offers and buy and sell orders based on
matching criteria which include the counter party credit
limits.
[0004] Generally, counterparty credit limits are set for each bank
or each trading floor and the host computer establishes a gross
counter party credit limit for each possible pair of
counterparties. The gross counter party credit limit is the minimum
amount of remaining credit between two counterparties.
[0005] A trader's terminal will display a subset of the trading
book, typically the best few bids and offers. These will be updated
periodically to ensure that the trader sees the true state of the
market.
[0006] A problem with the system outlined above is that the trader
sees the bids and offers irrespective of whether he has sufficient
credit with the counter party submitting that bid or offer to
trade. As a result, a trader can attempt to trade when there is no
available credit. As the system is anonymous the trader has no
knowledge of the counterparty until a trade as been completed and
so, when he hits a bid or offer, has no idea as to whether it is
likely to be accepted or rejected for lack of credit. This is
extremely frustrating for a trader, particularly in a fast moving
market in which trading opportunities can easily be lost. The
problem arises as the host computer only checks available credit
after a deal has been proposed and a potential match
identified.
[0007] This problem was solved in WO93/15467 now assigned to EBS
Dealing Resources Inc. Instead of displaying the actual trading
book, or a part of it, to each trader, a different market view is
shown to each trader in which bids and offers from counterparties
which whom they have insufficient or no credit are screened out.
Thus, the trader only sees prices with which he knows he can
deal.
[0008] The architecture of the system of WO93/15467 is very
different from the of the Reuters system and is based on a
distributed network with a number of arbitrators which perform
matching. Actual credit limits are stored at local bank nodes to
which each of a bank's trading terminals are connected ensuring
that sensitive credit data does not leave the bank's physical site.
The actual trading book is sent by the arbitrators to the market
distributor. The market distributor forms a market view specific to
a given trading floor and sends it to the relevant bank node. A
different market view may be formed for each trading floor
depending on credit criteria. Thus, the market view which is
distributed to each of the bank nodes is the complete market view
with credit screening taking place, the market distributor to
filter out any prices with which the bank, or a given trading floor
within the bank, has insufficient credit.
[0009] In addition, the market distributors also have limited
credit information, maintaining a credit matrix which may store a
simple "yes-no" credit indicator for given counterparties. When a
match is made, the prices having already been screened for credit,
the bank node will make a second credit check using the credit
matrix to see whether any previously extended credit has already
been exhausted.
[0010] While both the above systems have been used successfully in
the financial trading markets for a number of years, they both
suffer from the disadvantage that they require banks to tie up
large amounts of credit in one area of their trading activities. A
typical bank will be trading a number of financial instruments and
a number of different markets and will want to trade up to its
credit limits in each trading day. If one particular market is
quiet it will want to be able to divert the credit assigned to that
market to a different field. Similarly, if a particular market is
very active it will want to be able to take advantage of that
activity. It should be remembered that a given bank may be dealing
with many of the same counterparties in different markets. It is
thus undesirable to tie up credit to trades in one particular
instrument with a given counterparty as this may diminish the
bank's trading capacity within its own global trading limits.
SUMMARY OF THE INVENTION
[0011] The invention aims to overcome this disadvantage and in its
broadest form provides for the temporary resetting or resetting of
credit limits within an anonymous trading system once two parties
have concluded an anonymous deal, their identities have been
revealed and they have agreed that they would like to trade
further.
[0012] In a presently preferred embodiment the credit limits of the
counterparties within the anonymous trading system are raised by
the amount of the further trade. To avoid the true anonymous
trading limits being affected, the system stores assigned credit,
utilised credit and available credit. Both the assigned credit and
the utilised credit limits are revised by the same amount leaving
available credit unchanged.
[0013] An advantage of such a system is that further trades may be
performed once two parties know each other's identity that are
outside the credit limits initially assigned to the anonymous
trading system but the further trade is performed by the anonymous
trading system. As a result banks do not have to tie up large
amounts of credit in the anonymous trading system, which may not be
fully utilised, but may move credit from an external source to
allow a specific deal to be completed. This allows the bank to
maximise the benefits of an anonymous system to locate a potential
counterparty for a large deal without having to declare its
identity and without preventing the credit required for that deal,
which may never happen, from being used or available elsewhere so
maximising the trading capacity of the bank.
[0014] In accordance with one embodiment of the invention the
credit checking procedure within the anonymous trading system is
bypassed during a conversational more quantity deal. Credit
checking is less important as a trader must have authority, for
example, from a trading floor administrator, to propose or accept a
more quantity trade and the credit utilised may be drawn down from
a credit limit with the counterparty external to the anonymous
trading system.
[0015] In accordance with the invention trader terminals are
connected via a communications network and the anonymous trading
system comprises at least one matching engine connected to the
network matching bids and offers and for executing deals, and at
least one market distributor connected to the network for
distributing price messages to the trade terminals and responsive
to the price quotation messages and the matching engine. In a
preferred embodiment of the invention the matching engine and the
market distributor are amalgamated into a broking node. The network
has a plurality of broking nodes each of which has equal status
within the system.
[0016] In a preferred embodiment the identity of the counterparty
to a deal is displayed at the trader's terminal together with an
identification of the actual counterparty trader, a further trade
is initiated by selecting a completed deal and sending a `further
trade` request message across the network. This message is treated
as a private targeted message and is sent via the quickest route
through the network and not distributed to any other broking nodes.
Other traders are not aware of the further deal but may be made
aware once it has been completed.
[0017] In one embodiment of the invention the further deal is
initiated through a soft key on the traders terminal. In another
embodiment it is initiated through a hard key on the traders
keypad.
BRIEF DESCRIPTION OF THE DRAWINGS
[0018] An embodiment of the invention will now be described, by way
of example only, and with reference to the accompanying drawings,
in which:
[0019] FIG. 1 is an overview of a trading system embodying the
invention;
[0020] FIG. 2 shows the flow of messages when a new quote is
submitted in the system;
[0021] FIG. 3 depicts the production of a market view to
traders;
[0022] FIG. 4 shows the flow of messages when a trader submits a
buy or sell order;
[0023] FIG. 5 shows the flow of messages to update broker nodes
following a buy or sell order;
[0024] FIG. 6 shows the message flow when a broker updates a
quote;
[0025] FIG. 7 shows the deal execution process;
[0026] FIG. 8 shows a typical trader display;
[0027] FIG. 9 shows a trader keypad with a hard More key;
[0028] FIG. 10 shows a More quantity screen;
[0029] FIG. 11 is a table showing credit limits of one party with
another after three trades;
[0030] FIG. 12 shows how the table of FIG. 11 may be adjusted to
allow a More quantity trade; and
[0031] FIG. 13 shows the counterparty's display when a More request
is received.
DESCRIPTION OF PREFERRED EMBODIMENT
[0032] The present invention will be described with reference to
the dealing architecture illustrated in FIGS. 1 to 7 and which will
be hereinafter described. However, it should be understood that the
invention is not limited to that architecture but could be
implemented in any anonymous trading system. For example, it could
be implemented on either of the Reuters and EBS Dealing Resources
prior art systems known in the art and referred to earlier.
[0033] The electronic brokerage system to be described provides a
platform for trading at least the following instruments: FX
(Foreign Exchange) Spot, FRA's, and Forwards and also FX Forwards,
CFDs, short-dated government and/or central bank paper, commercial
bills, CDs, inter-bank deposits, commercial paper, repos,
interest-rate futures, swaps, options and a miscellany of
tailor-made variants on these basic products. These are all
referred to as financial instruments. It may also be used for
trading non-financial products such as commodities.
[0034] Traders at trader terminals are connected to a
communications network which allows electronic messages to be
passed between terminals, submit quotes and hits which are then
passed on to each of a plurality of broker nodes throughout the
system. A quote is a bid or offer order submitted by a trader to
"make a market" and is distributed to other traders as part of a
market view. Quotes are thus orders visible to other traders. A hit
is a buy or sell order submitted by a trader wishing to create a
deal on the basis of a price displayed on his market view derived
from one or more quotes. Hits are orders which are invisible to
other traders.
[0035] The computer trading system of FIG. 1 comprises a plurality
of trading agents 10 each connected to at least one of a plurality
of broker nodes 12. Each trading agent is the means by which the
trader terminals access the trading system with a given trader
terminal being attached to one or more trading agents.
[0036] Trader terminals (not shown) may be workstations or other
computer terminals configured to generate and submit electronic
price quotation messages including bid and/or offer prices, quotes
and orders (usually through use of a specialised key pad) and to
communicate market view data, including price and amount available,
for financial instruments to be traded. The communication is
usually by display but could also be by printing the information,
voice synthesis or otherwise.
[0037] Traders are typically grouped as part of a financial
institution, such as a bank, which arranges traders as part of a
trading floor. A trading floor is a group of traders under common
control of a trading floor administrator who allocates credit lines
for the trading floor against other trading floors. The market view
for a trader, or group of traders, is the market information
(price, volume, etc.) that the traders can see that reflect the
market. The market views are preferably pre-screened for credit
compatibility, as described in WO93/15467. Thus, traders only see
displayed quotes with which they can trade. As well as extending
credit to a trading floor, credit may be extended to a bank as a
whole (many banks have several trading floors in different
locations), or to an individual trader or group of traders. Credit
may be extended from the bank as a whole, from a trading floor or
from an individual trader.
[0038] The system is an anonymous trading system in which the
market views produced by the brokers comprise price and amount
information without identifying the source of the price. The prices
displayed for available bids and offers and the amounts available
at those prices, are thus aggregates of one or more quotes. Only
the quotes of parties satisfying the pre-screen credit criteria are
included in the aggregate price displayed. The market views
produced by the broker nodes thus differ from one trading floor to
another depending on the credit allocation.
[0039] The trading agent node provides services to a specific
trading floor or group of traders. These services include providing
access to the network for each trading work station, completing
deals, producing deal tickets and maintaining historical dealing
information for traders. Each trading agent node must connect to at
least one broker node to access the trading system. A group of
trader terminals thus connects to a trading agent 10 (shown
individually in FIG. 1 as trading agents 10a through 100 to access
the system.
[0040] Each Broker node 12 provides the basic order matching and
price distribution services. The Broker nodes are arranged in a
structure called a Clique Tree which enables faster communications
routing, following very specific but simple rules. The Clique Tree
is a network structure where individual nodes are grouped into
Cliques, and the Cliques are then arranged into a tree structure.
Each Broker can be linked logically to a number of Brokers, which
are referred to as its neighbour Brokers. Communication between
Brokers is on an equal level, with no "up" or "down" direction in
the network.
[0041] In the embodiment of FIG. 1, there are three Cliques: that
formed by brokers 12a, 12b and 12c, that formed by brokers 12b,
12d, 12e and 12f and that formed by brokers 12e and 12f. It will be
seen that brokers 12b and 12e are both in two Cliques.
[0042] While Trading Agents must be connected to at least one
Broker node, they are not members of the Clique Tree, but remain
outside the structure. A Trading Agent connected to multiple Broker
nodes will receive multiple sets of market prices. Even though the
price information from different Broker nodes can be substantially
the same, the information may be received at different intervals. A
Trading Agent will send a given trading order to only one Broker
node.
[0043] The term Broker node is used to describe a computer arranged
as a physical or logical node in a computer network providing a
broking function. The basic broking function is the storing of
quotes, providing the quotes to traders in the form of a market
view and matching quotes and orders. The Broker nodes in the
described embodiment also perform further functions, but these are
not essential features of what is defined as a Broker node.
[0044] Thus, the broker nodes each provide a matching engine which
is connected to the network for matching submitted bids and offers
and, when a match is made, for executing deals. They also perform
the function of market distributors distributing prices messages to
the trader terminals in response to the price quotation messages
and the matching engine. Within the context of the present
embodiment it is preferred that the matching and market
distribution functions are amalgamated in the broking node but the
invention is equally applicable to systems in which the functions
are separate and performed at geographically and/or logically
separate locations. An example of such a system is disclosed in
WO93/15467 referred to earlier.
[0045] The Broker nodes are equal to each other, and perform the
same functions. The arrangement of the network or their position in
it is transparent to the broker nodes. They only need to know about
their neighbours. Each Broker node has knowledge of all orders in
the market, and is able to match orders as soon as they are
submitted. As each Broker node maintains a full list of orders in
the market, it is therefore able to customize market views as
needed by the Trading Agents and is able to react faster to market
information as soon as it is received.
[0046] To understand the purpose of the distributed broker node
arrangement, price distribution and deal execution will now be
described with reference to FIG. 2.
[0047] The deal process begins with one or more traders submitting
orders into trader terminals. An order is a dealing request from a
trader, with instructions to buy or sell with specific
restrictions, such as price and amount. A quote is a persistent
order that remains available in the system and is distributed as
part of the market price information. Quotes are used to "make the
market", and are known to traders as bids or offers. A hit is an
order that has "invisible" and "fill or kill" properties
("invisible"). Hits are not distributed as part of the market
price. A hit does not remain in the system; if it can not be dealt
when entered, it is removed.
[0048] An Order Book is a list of all the available orders in the
market. Since the Quotes are the only available orders, the book
consists of a list of Quotes. The Quotes are arranged in a queue in
the correct dealing order. The sort order of the queue may vary for
different trading instruments. The default sort order is by price
and time. In the system, each Broker node maintains a complete list
of all available quotes. In a system such as foreign exchange there
will, effectively, be two books, one showing orders to buy and the
other showing orders to sell.
[0049] The message flow in the system is described by named
messages, each carrying appropriate parameters throughout the
network. The process of submitting a quote (persistent order)
begins when a Trading Agent receives information from a trader
workstation that a trader has issued a bid or offer. The Trading
Agent then starts the quote submission process. When the Trading
Agent receives the quote information from the trader workstation,
it will create and maintain a context for the quote. It will then
send a Quote Submit message to the Broker node that it is connected
to. The Broker node will validate the quote and accept it if valid.
This first Broker node that receives the quote becomes the "owner"
Broker node for this quote. In the example shown in FIG. 2 this is
Broker node 5. This is the only Broker node that can commit the
quote to a deal. The Broker node will create a context or "quote
object" and sort it into its queue for the correct tradable
instrument.
[0050] After the quote is placed into its queue, the owner Broker
node will then distribute the quote throughout the network by
sending QuoteAvailable messages to other Broker nodes. In this
example, Broker node 5 sends the QuoteAvailable message to Broker
nodes 2 and 6. As each Broker node receives the message, it creates
a context (quote object) and sorts it into its queue (order book).
It notes in the context which Broker node had sent it the message.
After placing it into the queue, the Broker node then sends the
QuoteAvailable message on, using broadcast routing rules, to all
neighbours except those in the same clique as the broker who sent
the message. Therefore, Broker node 2 sends it to 1, 3 and 4.
Broker node 4 then sends it to Broker node 7. At this point, all
Broker nodes know about the quote, and update their order books
accordingly.
[0051] The broadcast routing rules are applied to ensure that
network traffic is handled in an efficient manner and to reduce any
duplication of message flow.
[0052] The broadcast rules are: 1. The Broker node originating
information will send it to all of its neighbour Broker nodes. 2. A
Broker node receiving the information will send it to all of its
neighbours Broker nodes except those in the same clique as the
Broker node that sent the information. 3. If a message contains
persistent information, such as a quote, the information will be
stored with the identifier of the Broker node from which the
information was received.
[0053] Note that these rules refer to the information, not the
message that contains it. For example, information about a quote
may be sent to one Broker node in a ProposeDeal_message and to
another Broker node in a MarketUpdate message. However, the same
information is sent to both Broker nodes, and so the above rules
apply.
[0054] Price distribution is the process of providing market
information to the traders at the trader terminals. This
information is created by the Broker nodes and sent to the Trading
Agents for distribution to the traders. This process is shown in
FIG. 3.
[0055] Each Broker node will examine its queue of quotes (order
book) and calculate a view of the market for each Trading Agent
connected to it. This view is built specifically for the trading
floor that the agent represents. Views may be different based on
credit or other factors. The exact process for determining a market
view will vary based on the trading instrument. The view
information is sent to the Trading Agent in a MarketView message.
It follows, therefore, that each of the brokers hold credit
information for each trader and the possible counterparties.
[0056] Hitting a quote is the basic process of creating a deal
between two traders. A hit from one trader is matched to a quote
from another trader. This process is shown in the FIG. 4. The
Trading Agent of the trader terminal hitting a price shown on his
market view display sends a HitSubmit message to the Broker node.
This message targets a price, not a specific quote. The Broker node
will scan its queue and find the first quote in the queue that can
be matched with the hit. The matching rules may vary based on the
trading instrument.
[0057] When the hit is matched to a quote, the Broker node will
modify its context for the quote, moving the amount matched from
"available" to "reserved pending deal". This will prevent the same
amount of the quote to be matched with another hit. The Broker node
will then send a ProposeDeal message to the Broker node from which
it received the quote. This message will target the specific quote.
In this example, the hit comes from a trader connected to a trading
agent connected to broker 7. Broker 7 will send the message to
Broker 4.
[0058] As each Broker node receives the ProposeDeal message, it
checks the quote in its queue. If the amount of the proposed deal
is still available in the queue, the Broker node performs a similar
process as the matching Broker node. The amount of the proposed
deal is moved from "available" to "reserved pending deal". The
ProposeDeal message is then sent to the Broker node from which it
received the quote. In the example, Broker node 4 sends it to
Broker node 2. Broker node 2 will then send it to Broker node
5.
[0059] The routing of a ProposeDeal message follows targeted
routing rules. Targeted routing is used to deliver information to a
specific Broker node. Since knowledge of specific Broker nodes is
not built into the system, the target is not a specific Broker
node, but is the Broker node from which the information originated.
For example, a message is not sent to "Broker node 714", but is
sent as to "the Broker node originating quote 42". The targeted
rules are: 1. A Broker node originating a message about a specific
piece of information will send the message to the Broker node from
which it received the original information. 2. A Broker node
receiving a message about a specific piece of information that it
did not originate, will send the message to the Broker node from
which it received the original information.
[0060] The message will thus follow the path of the original
information back to its source. In the example this is from Broker
node 7, to Broker node 5, via Broker nodes 4 and 2.
[0061] When the Broker node that originally created the quote
receives the ProposeDeal message, it performs the same checks and
amount reservation as the other brokers. Since this Broker node
owns the quote, it has the authority to commit the quote to a deal.
The ProposeDeal message represents the authority to commit the hit
to the deal. The Broker node will then initiate the deal process by
sending a HitAmount message to the Trading Agent that submitted the
quote. The deal execution process is described later.
[0062] As the deal matching process takes place, it is necessary
that the list of quotes maintained at each Broker node be keep up
to date. This is accomplished by each Broker node notifying others
when it makes a change to a quote, as shown in FIG. 5.
[0063] As each Broker node changes a quote in its queue, it
notifies all neighbour Broker nodes except those in the clique from
which it received the change. In the example above, Broker node 4
received notice of a change in a quote from Broker node 7 in a
ProposeDeal message. It notifies Broker node 2 by sending the
ProposeDeal message. Broker node 4 must now notify Broker nodes 1
and 3. This is done by sending a MarketUpdate message to these
Broker nodes.
[0064] Following the normal routing rules, the information about
the quote is distributed to each Broker node in the network. Any
Broker node receiving the MarketUpdate message will pass it to all
neighbours not in the clique from which it is received. Note that a
Broker node sending a ProposeDeal message should not also send a
MarketUpdate message to the same Broker node. This would result in
duplicate information being received and the deal amount being
reserved twice.
[0065] When the deal matching process is completed, as described
above, the deal execution process begins. This process completes
the deal and commits the traders to a deal. The process is shown in
FIG. 6. As matches are made and deals initiated, information is
made available for traders. This information can be used to inform
a trader that a deal is pending. Any given trading application can
decide if the trader should be informed. In any case, the
information is available.
[0066] The Taker's Trading Agent will be notified as soon as the
initial match is made and the ProposeDeal message is sent. This
agent can notify the traders workstation at this time. This pending
deal information may change as the matching process continues. The
maker workstation is notified of the pending deal when the maker's
Trading Agent checks credit and sends the DealStatusMaker
message.
[0067] The deal execution process begins when the maker's Trading
Agent receives a HitAmount message from its Broker node. This
message informs the Agent that a match was made for one of its
quotes. The message identifies the quote as well as the amount of
the hit, counterparty and the identity of the hit. The Agent will
check with the trader workstation to make sure that the quote is
still available. The Agent will send a HitAmountWS message to the
workstation. The workstation will reply with a HitAmountWK message
to show that the workstation is still working and that the trader
did not interrupt the quote. At this point, the trader can no
longer interrupt the deal.
[0068] The Trading Agent will next check for available credit with
the counterparty. The credit check may allow the deal, reduce the
amount of the deal or disallow the deal. The Agent will then reduce
the available credit by the amount needed for the deal. This
reduction in available credit may affect future deals. The maker's
Trading Agent will now inform the taker's Trading Agent of the deal
by sending a DealStatusMaker message to its Broker node. The
message is targeted to the identity of the hit. The network Broker
nodes will route the message to the owner Broker node of the hit,
and that Broker node will deliver it to the taker's Agent. Once
this message is sent, the maker's Agent knows that a deal may have
been done, but the deal is in doubt pending a reply. The taker's
Trading Agent completes the deal execution process. This part of
the process takes place when the Agent receives the DealStatusMaker
message from the maker. If the message shows a valid deal, the
process continues.
[0069] The taker's Trading Agent will next check for available
credit with the counterparty in a similar manner as the maker. The
credit check may allow the deal, reduce the amount of the deal or
disallow the deal. The Agent will then reduce the available credit
by the amount needed for the deal. This reduction in available
credit may affect future deals. The taker's Trading Agent will now
log the deal to its disk. As soon as the information is committed
to persistent storage, the deal is done. Any checks on the deal
status will now show a binding deal. The agent will now notify the
trader, print a deal ticket and perform any other post deal
processing. At this point, the deal is done but the maker doesn't
yet know. As soon as the deal is done, the taker's Trading Agent
will notify the maker by sending a DealStatusTaker message to its
Broker node. This message is targeted to the quote and will be
routed to the maker's Agent.
[0070] The DealStatusTaker message contains final information about
the deal, and therefore the final changes to the quote. This
information is used by the network Broker nodes and the Trading
Agent. As the DealStatusTaker message is routed through the Broker
nodes, each routing Broker node will use the information to update
its quote context. The amount of the deal is moved from "reserved"
to "complete". The portion not done is moved from "reserved" to
"available" if the quote is still active. It will then notify other
Broker nodes of the changes and of the deal by sending a
MarketUpdate message to all other Broker nodes using network
routing rules.
[0071] When the DealStatusTaker message gets to the owner Broker
node of the quote, it will send it to the Trading Agent. The Agent
will record the deal to disk. At this point the deal is no longer
in doubt. The Agent will notify the trader, print a ticket and
perform any other processing that is required. Some trading
instruments may require additional information to be exchanged for
a deal. An example of this is the settlement instructions for EBS
spot F/X. This type of information is sent in a Deallnformation
message. After the deal is processed, the Agents can develop this
information. The Deallnformation message is sent to the Broker
node. The network Broker nodes will then route the message to the
other Agent where the information is processed as required by the
instrument. A deal is thus completed.
[0072] Once the deal is complete, the two parties will know the
identity of their respective counterparty for the first time. The
identity will be displayed on their terminal screen and shown, for
example, in a listing of deals performed in that trading session as
well as printed on the deal ticket and logged to disk. Each of
these comprises a means for identifying to each of the parties to
an executed deal the counterparty to the deal.
[0073] If one of the counterparties would like to deal further with
that particular trader, at the same price, they would not normally
deal though an anonymous trading system as, by definition, that
system does not permit the identity of the counterparty to be
known. Also, the available credit assigned to that anonymous system
may not allow large deals to be performed. Traditionally further
dealing would have to be performed by external means such as a
voice broker.
[0074] When a bank or a trader wants to trade a very large amount
they are often reluctant to offer the whole quantity to the market
until the identity of possible counterparties is known. Thus, the
trader will first identify possible counterparties by offering a
small amount of the potential trade to try and identify a suitable
counterparty for a larger trade. Once a suitable counterparty has
been identified, the trader offers that counterparty the
possibility of a further trade at the same price as the first
trade. This is conducted over the broking system described but is a
private trade between the parties.
[0075] The trader may identify the counterparty with whom he wants
to investigate a further trade. This may be done by scrolling
through the lists of trades which have been completed and double
clicking on a trade with the selected counterparty using a mouse or
a similar pointer device. FIG. 8 illustrates a typical trader
display with a window showing completed deals and a particular
deal, identified by the reference numeral 20, highlighted. The
display tells the trader that at 20:53 $10 million was sold on the
US Dollar/Canadian Dollar market at a rate of 1.3516 to a counter
party identified as MGDL. As an alternative to double clicking, the
trader could highlight or select a deal and hit a further deal or
"More" key. This may be a soft key on the display or a hard key on
the traders key pad or keyboard. FIG. 9 shows a keypad with a hard
More key 110. The keypad shown in FIG. 9 is intended for a FRA
dealing system and is shown only to illustrate the hard more
key.
[0076] Once a trader double clicks a deal or hits a More key, a
More screen is displayed at his terminal. This screen will ask the
trader for the identity of the bank with which he wants to deal
further, the actual trader within the bank with whom he wants to
deal, and the amount of the further deal. An example of a More
screen is shown in FIG. 10. As the trader's terminal already has
the bank and trader details these can be entered into the screen
automatically from the selected deal once the More key is hit or
the deal double clicked. The trader then sends the More request by,
for example, hitting a submit key on the keypad. This may be the
quote submit key used for submitting conventional quotes to the
system. It will be appreciated that the More display screen is one
example of a means for offering to the counterparty a trade at the
same price as the executed deal.
[0077] The proposed further trade is a private conversational deal;
that is it is a deal between two known parties outside the usual
parameters of the anonymous trading system. The system handles the
More request as a targeted message which obeys the targeted
messaging rules described above. Thus, using the example of FIG. 4
above, a deal was concluded between a trader coupled through its
trading agent to broker 5 and a trader coupled through its trading
agent to broker 7. The More request would be sent from broker 5 to
broker 7 via broker 2 and 4. The intermediate brokers 2 and 4 are
transparent to the message and do not send update messages on
receipt of a More trade request. Thus, the market does not show the
More trade request and it will not appear in other trade market
views. However, once a deal has been concluded privately, details
of the deal may be passed to the market to ensure that traders have
as much information about the market as possible.
[0078] Credit for the More deal is dealt with outside the
conventional credit limits of the system. If a trader were to try
and trade an amount over his normal credit limit with the
counterparty, the deal would be rejected under the credit checking
procedures. In conventional systems, the counterparty credit limits
can be varied during the day but usually only by a trading floor
administrator (TFA). In the More routine the individual trader
assumes the functionality of the TFA for the purposes of the
proposed More deal only. It is left to the trader's bank to
authorise the trader to conduct More quantity trades and
accessibility to the More screen may be controlled, for example by
the TFA.
[0079] The trader will increase the trading limits with the
counterparty with whom he wants to trade by the amount of the
proposed More trade. However, the amount of credit utilised is also
increased by the same amount so that the net available balance
after the trade is the same. Thus the credit limit increases is
specific to the More trade only and is transparent to further
dealings between the parties. This principle is shown in FIGS. 11
and 12. FIG. 11 shows a credit limit between a party A and a
counterparty B. At the beginning of the trading day a credit limit
of $20 m is assigned. Before trading commences none of that credit
has been utilised and the amount of available credit is $20 m.
Several deals are then made and the amount of credit utilised and
available are increased/drawn down respectively by the amount of
the deals. Thus after three deals $16 m of credit has been utilised
and $4 m remains.
[0080] In FIG. 12, the dealer concludes a More quantity deal for a
further $50 M. Acting as TFA for that deal he increases the credit
limit by $50 to $70 but as it is a More quantity deal the system
automatically increases the credit utilised by the same amount, the
this case from $16 m to $66 m. As a result, the credit available is
unchanged at $4 m.
[0081] As an alternative to the procedure set out above, the system
can be set up such that a More trade bypasses the conventional
credit checking procedures implemented when a deal is proposed on
the system. This can be justified on the basis that the identity of
the two parties is known and the credit for the deal is drawn from
outside the anonymous trading system. Whether credit checking is
suppressed for the More quantity trade or whether credit limits are
temporarily adjusted for the More quantity trade it will be seen
that the system provides a means of executing the further trade
irrespective of whether the further trade exceeds the initially
stored credit limits assigned by each of the parties to the trade
to the other. The More trade is conducted irrespective of whether
or not it exceeds the credit limit of one or both of the
counterparties when the original deal was made.
[0082] When a counterparty receives a More quantity request he can
deny the amount, approve less than the amount, approve the amount,
or approve the amount and request that even more be done at the
same rate. Whichever of the two credit options described above is
adopted, showing an amount to a counterparty at this or any stage
of the More trade is tantamount to credit approval. If the
counterparty denies the More request then the deal is unchanged
from its initial amount. If the More amount requested is reduced
then the amount done is the original amount plus the reduced amount
and if the whole of the amount of the More request is done then the
total amount is the basic deal plus the More amount. Where the
counterparty suggests an amount greater that the More request then
the More request is done and the originator of the More request
must approve, approve less or deny the request increase. The
originator could seek to increase it still further in which case
the process s repeated again. FIG. 13 shows the counterparty's
display when a More request is received identifying the deal number
to which the request relates, the price, the originating bank and
trader and the amount of the More request. The counterparty also
enters the amount of the request he wishes to approve together with
any further amount. In the example shown in FIG. 13 the screen also
has a soft submit key to transmit the response back to the
originating trader but this may also be a hard key, for example on
the key pad.
[0083] The More quantity process enables banks to pre-allocate
credit only on a limited basis. Credit which is available is only
partially allocated to the bank's other trading activities. If it
is required for a trade using the anonymous trading system it may
be reallocated to that system and used up. However, the bank is not
required to tie up large amounts of credit in one system which
cannot be used in other trading activities. This avoids the
possibility of the bank reaching its credit limits in some trading
areas but still having unutilised credit in the anonymous system.
While that is still possible in the system as described, the amount
of credit which needs to be allocated to the anonymous system is
relatively small. Thus, the system described enables the user banks
to maximise their trading capacity over all the available trading
mechanisms.
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