U.S. patent application number 13/743208 was filed with the patent office on 2014-07-17 for methods and systems for monitoring and controlling order message traffic.
This patent application is currently assigned to Trading Technologies International, Inc.. The applicant listed for this patent is TRADING TECHNOLOGIES INTERNATIONAL, INC.. Invention is credited to Sagy Pundak Mintz.
Application Number | 20140201052 13/743208 |
Document ID | / |
Family ID | 51165936 |
Filed Date | 2014-07-17 |
United States Patent
Application |
20140201052 |
Kind Code |
A1 |
Mintz; Sagy Pundak |
July 17, 2014 |
Methods and Systems for Monitoring and Controlling Order Message
Traffic
Abstract
Example methods, systems, and tangible computer readable storage
media disclosed herein provide for tracking of order messages. An
example method includes tracking, using a computing device, an
order message, the order message including an order for a tradeable
object in a trading market. The trading market includes an inside
market. The example method includes determining, using the
computing device, whether the order is directed to the inside
market of the trading market. If the order is determined to be
directed to the inside market, the example method includes
adjusting a weighting factor to decrease a message ratio. The
message ratio compares a weighted order message total to a fill
total. If the order is determined to be directed away from the
inside market, the example method includes adjusting a weighting
factor to increase the message ratio. The example method includes
determining, using the computing device, if the message ratio
satisfies a message ratio threshold. The example method includes
implementing, using the computing device, message ratio handling if
the message ratio satisfies the message ratio threshold.
Inventors: |
Mintz; Sagy Pundak;
(Lincolnshire, IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
TRADING TECHNOLOGIES INTERNATIONAL, INC. |
Chicago |
IL |
US |
|
|
Assignee: |
Trading Technologies International,
Inc.
Chicago
IL
|
Family ID: |
51165936 |
Appl. No.: |
13/743208 |
Filed: |
January 16, 2013 |
Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. A method comprising: tracking, using a computing device, an
order message, the order message including an order for a tradeable
object in a trading market and wherein the trading market includes
an inside market; determining, using the computing device, whether
the order is directed to the inside market of the trading market;
adjusting, if the order is determined to be directed to the inside
market, a weighting factor to decrease a message ratio
corresponding to a predetermined tracking time period, wherein the
message ratio compares a weighted order message total to a fill
total; adjusting, if the order is determined to be directed away
from the inside market, a weighting factor to increase the message
ratio; determining, using the computing device, if the message
ratio satisfies a message ratio threshold; and implementing, using
the computing device, message ratio handling if the message ratio
satisfies the message ratio threshold.
2. The method of claim 1, wherein the order is determined to be
directed to the inside market if the order is filled.
3. The method of claim 1, wherein the order is determined to be
directed away from the inside market if the order is deleted within
a threshold period of time from the order being placed.
4. The method of claim 1, wherein the message ratio threshold
defines a limit of a weighted order message total per fill
total.
5. The method of claim 1, wherein the message ratio is decreased by
one when the order is filled.
6. The method of claim 1, wherein the message ratio is decreased by
a fraction of one when the order is directed to the inside
market.
7. The method of claim 1, wherein the weighting factor increases
based on a distance of the order from the inside market.
8. The method of claim 1, wherein implementing message ratio
handling includes at least one of implementing a fine, suspending a
user associated with the order message, or implementing a
reward.
9. The method of claim 1, further comprising providing, using the
computing device, a warning to a user associated with the order
message if the message ratio approaches the message ratio
threshold.
10. A system comprising: a message identifying module to track an
order message, the order message including an order for a tradeable
object in a trading market and wherein the trading market includes
an inside market; a ratio calculator module to: determine whether
the order is directed to the inside market of the trading market;
adjust, if the order is determined to be directed to the inside
market, a weighting factor to decrease a message ratio
corresponding to a predetermined tracking time period, wherein the
message ratio compares a weighted order message total to a fill
total; and adjust, if the order is determined to be directed away
from the inside market, a weighting factor to increase the message
ratio; a threshold comparator module to determine if the message
ratio satisfies a message ratio threshold; and a warning module to
implement message ratio handling if the message ratio satisfies the
message ratio threshold.
11. The system of claim 10, wherein the order is determined to be
directed to the inside market if the order is filled.
12. The system of claim 10, wherein the order is determined to be
directed away from the inside market if the order is deleted within
a threshold period of time from the order being placed.
13. The system of claim 10, wherein the message ratio threshold
defines a limit of a weighted order message total per fill
total.
14. The system of claim 10, wherein the message ratio is to be
decreased by one when the order is filled.
15. The system of claim 10, wherein the message ratio is to be
decreased by a fraction of one when the order is directed to the
inside market.
16. The system of claim 10, wherein the weighting factor is to be
increased based on a distance of the order from the inside
market.
17. The system of claim 10, wherein to implement message ratio
handling, the warning module is to at least one of implement a
fine, suspend a user associated with the order message, or
implement a reward.
18. The system of claim 10, wherein the warning module is to
provide a warning to a user associated with the order message if
the message ratio approaches the message ratio threshold.
19. A tangible computer readable storage medium comprising
instructions that, when executed, cause a computing device to at
least: track an order message, the order message including an order
for a tradeable object in a trading market and wherein the trading
market includes an inside market; determine whether the order is
directed to the inside market of the trading market; adjust, if the
order is determined to be directed to the inside market, a
weighting factor to decrease a message ratio corresponding to a
predetermined tracking time period, wherein the message ratio
compares a weighted order message total to a fill total; adjust, if
the order is determined to be directed away from the inside market,
a weighting factor to increase the message ratio; determine if the
message ratio satisfies a message ratio threshold; and implement
message ratio handling if the message ratio satisfies the message
ratio threshold.
Description
BACKGROUND
[0001] An electronic trading system generally includes a trading
device in communication with an electronic exchange. The electronic
exchange sends information about a trading market, such as prices
and quantities, to the trading device. The trading device sends
messages, such as messages related to orders, to the electronic
exchange. The electronic exchange attempts to match quantity of an
order with quantity of one or more contra-side orders.
[0002] Some messages and/or orders sent by the trading device to
the electronic exchange may adversely impact the trading market.
For example, messages attempting to place an order with a large
price difference from a best bid or offer in the trading market may
decrease trading market liquidity. In some examples, submitting
orders and deleting the orders may decrease trading market
liquidity.
BRIEF DESCRIPTION OF THE FIGURES
[0003] Certain embodiments are disclosed with reference to the
following drawings.
[0004] FIG. 1 illustrates a block diagram representative of an
example electronic trading system in which certain embodiments may
be employed.
[0005] FIG. 2 illustrates a block diagram of another example
electronic trading system in which certain embodiments may be
employed.
[0006] FIG. 3 illustrates a block diagram of an example computing
device which may be used to implement the disclosed
embodiments.
[0007] FIG. 4 illustrates a block diagram of a trading strategy
which may be employed with certain disclosed embodiments.
[0008] FIG. 5 illustrates a flow diagram of an example method for
tracking order messages using message ratios.
[0009] FIG. 6 illustrates a flow diagram of an example method for
setting message tracking settings.
[0010] FIG. 7 illustrates another flow diagram of an example method
for tracking order messages.
[0011] FIG. 8 illustrates a flow diagram of an example method for
presenting warnings associated with tracking order messages.
[0012] FIG. 9 illustrates a block diagram of an example messaging
monitoring and control system to facilitate tracking of order
messages.
[0013] Certain embodiments will be better understood when read in
conjunction with the provided figures, which illustrate examples.
It should be understood, however, that the embodiments are not
limited to the arrangements and instrumentality shown in the
attached figures.
DETAILED DESCRIPTION
[0014] Trading devices communicate order messages to exchanges to
buy or sell tradeable objects. Order messages may include, for
example, commands to place orders to buy or sell tradable objects,
commands to initiate managing orders according to a defined trading
strategy, and/or commands to change or cancel previously submitted
orders. It is desirable for an order message attempting to place an
order to buy a particular tradable object to be filled at the
exchange. If an order associated with an order message is not
filled, it is desirable for the order to be within the inside
market, or close to the inside market. The inside market is defined
as a range between the lowest available ask price and the highest
available bid price in a trading market. Orders within the inside
market facilitate trading market liquidity. Trading market
liquidity is the ability of a tradeable object to be sold without
causing a significant movement in the price and with minimum loss
of value.
[0015] In some examples, it is undesirable for orders in order
messages to be outside of the inside market because such orders are
unlikely to be filled. It may be undesirable for an excessive
amount of order messages to be sent to exchanges. It may be
undesirable for orders in order messages to be sent and then
altered and/or deleted (e.g., orders that are sent and then
immediately deleted in another order message). Such undesirable
order messages adversely affect electronic trading systems (e.g.,
including exchanges, trading devices, etc.). For example,
undesirable order messages can adversely impact exchange and/or
trading device bandwidth. Orders outside of the inside market may
cause exchanges to adjust price distributions in the trading
market.
[0016] Examples disclosed herein provide a messaging monitoring and
control system to encourage order messages being sent that improve
trading markets (e.g., orders within the inside market that
increase trading market liquidity) and to discourage order messages
being sent that adversely affect trading markets and/or trading
systems (e.g., orders that are outside of the inside market that
decrease trading market liquidity). An example messaging monitoring
and control system disclosed herein determines a message ratio for
a user (e.g., a trader). In some examples, the message ratio
compares a weighted message total to a fill total. In some
examples, a message ratio having a large amount of weighted total
messages and a small amount of fills is penalized. In some
examples, a trading system with a message ratio having a small
amount of weighted total messages and a large amount of total fills
is rewarded.
[0017] In some examples, when order messages are sent that improve
trading markets (e.g., increase trading market liquidity), the
message ratio is credited. In some examples, order messages are
weighted such that order messages with orders that are filled
decrease the weighted order message total by one full order and
order messages with orders that are within the inside market
decrease the weighted order message total by one half of an order.
For example, an order message with an order that is filled is
weighted as "-1" and an order message with an order within the
inside market is weighted as "-0.5."
[0018] In some examples, when order messages are sent that
adversely affect trading markets, the message ratio is debited. In
some examples, order messages are weighted such that order messages
with orders that are farther outside of the inside market count as
more messages. For example, an order message with an order that is
one ticks away from the inside market increases the weighted
message total by "1" and an order message with an order that is two
ticks away from the inside market increases the weighted message
total by "1.5."
[0019] Example messaging monitoring and control systems disclosed
herein are implemented by different participants of trading
systems. In some examples, an example messaging monitoring and
control system is implemented by an exchange to track order
messages by trading firm. In some examples, an example messaging
monitoring and control system is implemented by a trading firm to
track order messages by trader.
[0020] Although this description discloses embodiments including,
among other components, software executed on hardware, it should be
noted that the embodiments are merely illustrative and should not
be considered as limiting. For example, it is contemplated that any
or all of these hardware and software components may be embodied
exclusively in hardware, exclusively in software, exclusively in
firmware, or in any combination of hardware, software, and/or
firmware. Accordingly, certain embodiments may be implemented in
other ways.
I. Brief Description of Certain Embodiments
[0021] Example methods, systems, and tangible computer readable
storage media disclosed herein provide for tracking of order
messages. An example method includes tracking, using a computing
device, an order message, the order message including an order for
a tradeable object in a trading market. The trading market includes
an inside market. The example method includes determining, using
the computing device, whether the order is directed to the inside
market of the trading market. If the order is determined to be
directed to the inside market, the example method includes
adjusting a weighting factor to decrease a message ratio. The
message ratio compares a weighted order message total to a fill
total. If the order is determined to be directed away from the
inside market, the example method includes adjusting a weighting
factor to increase the message ratio. The example method includes
determining, using the computing device, if the message ratio
satisfies a message ratio threshold. The example method includes
implementing, using the computing device, message ratio handling if
the message ratio satisfies the message ratio threshold.
[0022] An example system includes a message identifying module to
track an order message, the order message including an order for a
tradeable object in a trading market. The trading market includes
an inside market. The example system includes a ratio calculator
module to determine whether the order is directed to the inside
market of the trading market. If the order is determined to be
directed to the inside market, the example ratio calculator module
is to adjust a weighting factor to decrease a message ratio. The
message ratio compares a weighted order message total to a fill
total. If the order is determined to be directed away from the
inside market, the example ratio calculator module is to adjust a
weighting factor to increase the message ratio. The example system
includes a threshold comparator module to determine if the message
ratio satisfies a message ratio threshold. The example system
includes a warning module to implement message ratio handling if
the message ratio satisfies the message ratio threshold.
[0023] An example tangible computer readable storage medium
comprises instructions that, when executed, cause a computing
device to track an order message, the order message including an
order for a tradeable object in a trading market. The trading
market includes an inside market. The example instructions cause
the computing device to determine whether the order is directed to
the inside market of the trading market. If the order is determined
to be directed to the inside market, the example instructions cause
the computing device to adjust a weighting factor to decrease a
message ratio. The message ratio compares a weighted order message
total to a fill total. If the order is determined to be directed
away from the inside market, the example instructions cause the
computing device to adjust a weighting factor to increase the
message ratio. The example instructions cause the computing device
to determine if the message ratio satisfies a message ratio
threshold. The example instructions cause the computing device to
implement message ratio handling if the message ratio satisfies the
message ratio threshold.
II. Example Electronic Trading System
[0024] FIG. 1 illustrates a block diagram representative of an
example electronic trading system 100 in which certain embodiments
may be employed. The system 100 includes a trading device 110, a
gateway 120, and an exchange 130. The trading device 110 is in
communication with the gateway 120. The gateway 120 is in
communication with the exchange 130. As used herein, the phrase "in
communication" encompasses direct communication and/or indirect
communication through one or more intermediary components. The
exemplary electronic trading system 100 depicted in FIG. 1 may be
in communication with additional components, subsystems, and
elements to provide additional functionality and capabilities
without departing from the teaching and disclosure provided
herein.
[0025] In operation, the trading device 110 may receive trading
market data from the exchange 130 through the gateway 120. A user
may utilize the trading device 110 to monitor this trading market
data and/or base a decision to send an order message to buy or sell
one or more tradeable objects to the exchange 130.
[0026] Trading market data may include data about a trading market
for a tradeable object. For example, trading market data may
include the inside market, market depth, last traded price ("LTP"),
a last traded quantity ("LTQ"), or a combination thereof. The
inside market is the lowest available ask price (best offer) and
the highest available bid price (best bid) in the trading market
for a particular tradable object at a particular point in time
(since the inside market may vary over time). Market depth refers
to quantities available at the inside market and at other prices
away from the inside market. Due to the quantity available, there
may be "gaps" in market depth.
[0027] A tradeable object is anything which may be traded. For
example, a certain quantity of the tradeable object may be bought
or sold for a particular price. A tradeable object may include, for
example, financial products, stocks, options, bonds, future
contracts, currency, warrants, funds derivatives, securities,
commodities, swaps, interest rate products, index-based products,
traded events, goods, or a combination thereof. A tradeable object
may include a product listed and/or administered by an exchange
(for example, the exchange 130), a product defined by the user, a
combination of real or synthetic products, or a combination
thereof. There may be a synthetic tradeable object that corresponds
and/or is similar to a real tradeable object.
[0028] An order message is a message that includes a trade order. A
trade order may be, for example, a command to place an order to buy
or sell a tradeable object, a command to initiate managing orders
according to a defined trading strategy, a command to change or
cancel a previously submitted order (for example, modify a working
order), an instruction to an electronic exchange relating to an
order, or a combination thereof.
[0029] The trading device 110 may include one or more electronic
computing platforms. For example, the trading device 110 may
include a desktop computer, hand-held device, laptop, server, a
portable computing device, a trading terminal, an embedded trading
system, a workstation, an algorithmic trading system such as a
"black box" or "grey box" system, cluster of computers, or a
combination thereof. As another example, the trading device 110 may
include a single or multi-core processor in communication with a
memory or other storage medium configured to accessibly store one
or more computer programs, applications, libraries, computer
readable instructions, and the like, for execution by the
processor.
[0030] As used herein, the phrases "configured to" and "adapted to"
encompass that an element, structure, or device has been modified,
arranged, changed, or varied to perform a specific function or for
a specific purpose.
[0031] By way of example, the trading device 110 may be implemented
as a personal computer running a copy of X_TRADER.RTM., an
electronic trading platform provided by Trading Technologies
International, Inc. of Chicago, Ill. ("Trading Technologies"). As
another example, the trading device 110 may be a server running a
trading application providing automated trading tools such as
ADL.TM., AUTOSPREADER.RTM., and/or AUTOTRADER.TM., also provided by
Trading Technologies. In yet another example, the trading device
110 may include a trading terminal in communication with a server,
where collectively the trading terminal and the server are the
trading device 110.
[0032] The trading device 110 is generally owned, operated,
controlled, programmed, configured, or otherwise used by a user. As
used herein, the phrase "user" may include, but is not limited to,
a human (for example, a trader), trading group (for example, group
of traders), or an electronic trading device (for example, an
algorithmic trading system). One or more users may be involved in
the ownership, operation, control, programming, configuration, or
other use, for example.
[0033] The trading device 110 may include one or more trading
applications. As used herein, a trading application is an
application that facilitates or improves electronic trading. A
trading application provides one or more electronic trading tools.
For example, a trading application stored by a trading device may
be executed to arrange and display trading market data in one or
more trading windows. In another example, a trading application may
include an automated spread trading application providing spread
trading tools. In yet another example, a trading application may
include an algorithmic trading application that automatically
processes an algorithm and performs certain actions, such as
placing an order, modifying an existing order, deleting an order.
In yet another example, a trading application may provide one or
more trading screens. A trading screen may provide one or more
trading tools that allow interaction with one or more trading
markets. For example, a trading tool may allow a user to obtain and
view trading market data, set order entry parameters, submit order
messages to an exchange, deploy trading algorithms, and/or monitor
positions while implementing various trading strategies. The
electronic trading tools provided by the trading application may
always be available or may be available only in certain
configurations or operating modes of the trading application.
[0034] A trading application may include computer readable
instructions that are stored in a computer readable medium and
executable by a processor. A computer readable medium may include
various types of volatile and non-volatile storage media,
including, for example, random access memory, read-only memory,
programmable read-only memory, electrically programmable read-only
memory, electrically erasable read-only memory, flash memory, any
combination thereof, or any other tangible data storage device. As
used herein, the term non-transitory or tangible computer readable
medium is expressly defined to include any type of computer
readable storage media and to exclude propagating signals.
[0035] One or more components or modules of a trading application
may be loaded into the computer readable medium of the trading
device 110 from another computer readable medium. For example, the
trading application (or updates to the trading application) may be
stored by a manufacturer, developer, or publisher on one or more
CDs or DVDs, which are then loaded onto the trading device 110 or
to a server from which the trading device 110 retrieves the trading
application. As another example, the trading device 110 may receive
the trading application (or updates to the trading application)
from a server, for example, via the Internet or an internal
network. The trading device 110 may receive the trading application
or updates when requested by the trading device 110 (for example,
"pull distribution") and/or un-requested by the trading device 110
(for example, "push distribution").
[0036] The trading device 110 may be adapted to send order
messages. For example, the order messages may be sent to through
the gateway 120 to the exchange 130. As another example, the
trading device 110 may be adapted to send order messages to a
simulated exchange in a simulation environment which does not
effectuate real-world trades.
[0037] The order messages may be sent at the request of a user. For
example, a trader may utilize the trading device 110 to send an
order message or manually input one or more parameters for a trade
order (for example, an order price and/or quantity). As another
example, an automated trading tool provided by a trading
application may calculate one or more parameters for a trade order
and automatically send the order message. In some instances, an
automated trading tool may prepare the order message to be sent but
not actually send it without confirmation from a user.
[0038] An order message may be sent in one or more data packets or
through a shared memory system. For example, an order message may
be sent from the trading device 110 to the exchange 130 through the
gateway 120. The trading device 110 may communicate with the
gateway 120 using a local area network, a wide area network, a
wireless network, a virtual private network, a T1 line, a T3 line,
an integrated services digital network ("ISDN") line, a
point-of-presence, the Internet, and/or a shared memory system, for
example.
[0039] The gateway 120 may include one or more electronic computing
platforms. For example, the gateway 120 may implemented as one or
more desktop computer, hand-held device, laptop, server, a portable
computing device, a trading terminal, an embedded trading system,
workstation with a single or multi-core processor, an algorithmic
trading system such as a "black box" or "grey box" system, cluster
of computers, or any combination thereof.
[0040] The gateway 120 may facilitate communication. For example,
the gateway 120 may perform protocol translation for data
communicated between the trading device 110 and the exchange 130.
The gateway 120 may process an order message received from the
trading device 110 into a data format understood by the exchange
130, for example. Similarly, the gateway 120 may transform trading
market data in an exchange-specific format received from the
exchange 130 into a format understood by the trading device 110,
for example.
[0041] The gateway 120 may include a trading application, similar
to the trading applications discussed above, that facilitates or
improves electronic trading. For example, the gateway 120 may
include a trading application that tracks orders from the trading
device 110 and updates the status of the order based on fill
confirmations received from the exchange 130. As another example,
the gateway 120 may include a trading application that coalesces
trading market data from the exchange 130 and provides it to the
trading device 110. In yet another example, the gateway 120 may
include a trading application that provides risk processing,
calculates implieds, handles order processing, handles trading
market data processing, or a combination thereof.
[0042] In certain embodiments, the gateway 120 communicates with
the exchange 130 using a local area network, a wide area network, a
virtual private network, a T1 line, a T3 line, an ISDN line, a
point-of-presence, the Internet, and/or a shared memory system, for
example.
[0043] The exchange 130 may be owned, operated, controlled, or used
by an exchange entity. Example exchange entities include the CME
Group, the London International Financial Futures and Options
Exchange, the Intercontinental Exchange, and Eurex. The exchange
130 may include an electronic matching system, such as a computer,
server, or other computing device, which is adapted to allow
tradeable objects, for example, offered for trading by the
exchange, to be bought and sold. The exchange 130 may include
separate entities, some of which list and/or administer tradeable
objects and others which receive and match orders, for example. The
exchange 130 may include an electronic communication network
("ECN"), for example.
[0044] The exchange 130 may be an electronic exchange. The exchange
130 is adapted to receive order messages and match contra-side
trade orders to buy and sell tradeable objects. Unmatched trade
orders may be listed for trading by the exchange 130. The trade
orders may include trade orders received from the trading device
110 or other devices in communication with the exchange 130, for
example. For example, typically the exchange 130 will be in
communication with a variety of other trading devices (which may be
similar to trading device 110) which also provide trade orders to
be matched.
[0045] The exchange 130 is adapted to provide trading market data.
Trading market data may be provided in one or more messages or data
packets or through a shared memory system. For example, the
exchange 130 may publish a data feed to subscribing devices, such
as the trading device 110 or gateway 120. The data feed may include
trading market data.
[0046] The system 100 may include additional, different, or fewer
components. For example, the system 100 may include multiple
trading devices, gateways, and/or exchanges. In another example,
the system 100 may include other communication devices, such as
middleware, firewalls, hubs, switches, routers, servers,
exchange-specific communication equipment, modems, security
managers, and/or encryption/decryption devices.
III. Expanded Example Electronic Trading System
[0047] FIG. 2 illustrates a block diagram of another example
electronic trading system 200 in which certain embodiments may be
employed. In this example, a trading device 210a is in
communication with an exchange 230a through a gateway 220a. The
following discussion mainly focuses on the trading device 210a,
gateway 220a, and the exchange 230a. However, the trading device
210a may also be connected to and communicate with any number of
gateways 220n connected to exchanges 230n. The communication
between the trading device 110a and other exchanges 230n may be the
same, similar, or different than the communication between the
trading device 210a and exchange 230a. Generally, each exchange has
its own preferred techniques and/or formats for communicating with
a trading device, a gateway, the user, or another exchange.
[0048] The trading device 210a, which may be similar to the trading
device 110 in FIG. 1, may include a server 212a in communication
with a trading terminal 214a. The server 212a may be located
geographically closer to the gateway 120 than the trading terminal
214a. As a result, the server 212a latency benefits that are not
afforded to the trading terminal 214a. In operation, the trading
terminal 214a may provide a trading screen to a user and
communicate commands to the server 212a for further processing. For
example, a trading algorithm may be deployed to the server 212a for
execution based on trading market data. The server 212a may execute
the trading algorithm without further input from the user. In
another example, the server 212a may include a trading application
providing automated trading tools and communicate back to the
trading terminal 214a. The trading device 210a may include,
additional, different, or fewer components.
[0049] The trading device 210a may communicate with the gateway
220a using one or more communication networks. As used herein, a
communication network is any network, including the Internet, which
facilitates or enables communication between, for example, the
trading device 210a, the gateway 220a and the exchange 220a. For
example, as shown in FIG. 2, the trading device 210a may
communicate with the gateway 220a across a multicast communication
network 202a. The data on the network 202a may be logically
separated by subject (for example, prices, orders, or fills). As a
result, the server 212a and trading terminal 214a can subscribe to
and receive data (for example, data relating to prices, orders, or
fills) depending on their individual needs.
[0050] The gateway 220a, which may be similar to the gateway 120 of
FIG. 1, may include a price server 222a, order server 224a, and
fill server 226a. The gateway 220a may include additional,
different, or fewer components. The price server 222a may process
price data. Price data includes data related to a trading market
for one or more tradeable objects. The order server 224a may
process order data. Order data is data related to a user's trade
orders. For example, order data may include order messages,
confirmation messages, or other types of messages. The fill server
collects and provides fill data. Fill data includes data relating
to one or more fills of trade orders. For example, the fill server
226a may provide a record of trade orders, which have been routed
through the order server 224a, that have and have not been filled.
The servers 222a, 224a, 226a may run on the same machine or
separate machines.
[0051] The gateway 220a may communicate with the exchange 230a
using one or more communication networks. For example, as shown in
FIG. 2, there may be two communication networks connecting the
gateway 220a and the exchange 230a. The network 204a may be used to
communicate trading market data to the price server 222a. In some
instances, the exchange 230a may include this data in a data feed
that is published to subscribing devices. The network 206a may be
used to communicate order data.
[0052] The exchange 230a, which may be similar to the exchange 130
of FIG. 1, may include an order book 232a and a matching engine
234a. The exchange 230a may include additional, different, or fewer
components. The order book 232a is a database that includes data
relating to unmatched quantity of trade orders. For example, an
order book may include data relating to a trading market for a
tradeable object, such as the inside market, market depth at
various price levels, the last traded price, and the last traded
quantity. The matching engine 234a may match contra-side bids and
offers. For example, the matching engine 234a may execute one or
more matching algorithms that match contra-side bids and offers. A
sell order is contra-side to a buy order with the same price.
Similarly, a buy order is contra-side to a sell order with the same
price.
[0053] In operation, the exchange 230a may provide price data from
the order book 232a to the price server 222a and order data and/or
fill data from the matching engine 234a to the order server 224a.
Servers 222a, 224a, 226a may translate and communicate this data
back to the trading device 210a. The trading device 210a, for
example, using a trading application, may process this data. For
example, the data may be displayed to a user. In another example,
the data may be utilized in a trading algorithm to determine
whether a trade order should be submitted to the exchange 230a. The
trading device 210a may prepare and send an order message to the
exchange 230a.
[0054] In certain embodiments, the gateway 220a is part of the
trading device 210a. For example, the components of the gateway
220a may be part of the same computing platform as the trading
device 210a. As another example, the functionality of the gateway
220a may be performed by components of the trading device 210a. In
certain embodiments, the gateway 220a is not present. Such an
arrangement may occur when the trading device 210a does not need to
utilize the gateway 220a to communicate with the exchange 230a, for
example. For example, if the trading device 210a has been adapted
to communicate directly with the exchange 230a.
[0055] Additional trading devices 210b-210e, which are similar to
trading device 210a, may be connected to one or more of the
gateways 220a-220n and exchanges 230a-230n. Furthermore, additional
gateways, similar to the gateway 220a, may be in communication with
multiple exchanges, similar to the exchange 230a. Each gateway may
be in communication with one or more different exchanges, for
example. Such an arrangement may, for example, allow one or more
trading devices 210a to trade at more than one exchange (and/or
provide redundant connections to multiple exchanges).
IV. Example Computing Device
[0056] FIG. 3 illustrates a block diagram of an example computing
device 300 which may be used to implement the disclosed
embodiments. The trading device 110 of FIG. 1 may include one or
more computing devices 300, for example. The gateway 120 of FIG. 1
may include one or more computing devices 300, for example. The
exchange 130 of FIG. 1 may include one or more computing devices
300, for example.
[0057] The computing device 300 includes a communication network
310, a processor 312, a memory 314, an interface 316, an input
device 318, and an output device 320. The computing device 300 may
include additional, different, or fewer components. For example,
multiple communication networks, multiple processors, multiple
memory, multiple interfaces, multiple input devices, multiple
output devices, or any combination thereof, may be provided. As
another example, the computing device 300 may not include an input
device 318 or output device 320.
[0058] As shown in FIG. 3, the computing device 300 may include a
processor 312 coupled to a communication network 310. The
communication network 310 may include a communication bus, channel,
electrical or optical network, circuit, switch, fabric, or other
mechanism for communicating data between components in the
computing device 300. The communication network 310 may be
communicatively coupled with and transfer data between any of the
components of the computing device 300.
[0059] The processor 312 may be any suitable processor, processing
unit, or microprocessor. The processor 312 may include one or more
general processors, digital signal processors, application specific
integrated circuits, field programmable gate arrays, analog
circuits, digital circuits, programmed processors, and/or
combinations thereof, for example. The processor 312 may be a
single device or a combination of devices, such as one or more
devices associated with a network or distributed processing. Any
processing strategy may be used, such as multi-processing,
multi-tasking, parallel processing, and/or remote processing.
Processing may be local or remote and may be moved from one
processor to another processor. In certain embodiments, the
computing device 300 is a multi-processor system and, thus, may
include one or more additional processors which are communicatively
coupled to the communication network 310.
[0060] The processor 312 may be operable to execute logic and other
computer readable instructions encoded in one or more tangible
media, such as the memory 314. As used herein, logic encoded in one
or more tangible media includes instructions which may be
executable by the processor 312 or a different processor. The logic
may be stored as part of software, hardware, integrated circuits,
firmware, and/or micro-code, for example. The logic may be received
from an external communication device via a communication network
such as the network 340. The processor 312 may execute the logic to
perform the functions, acts, or tasks illustrated in the figures or
described herein.
[0061] The memory 314 may be one or more tangible media, such as
computer readable storage media, for example. Computer readable
storage media may include various types of volatile and
non-volatile storage media, including, for example, random access
memory, read-only memory, programmable read-only memory,
electrically programmable read-only memory, electrically erasable
read-only memory, flash memory, any combination thereof, or any
other tangible data storage device. As used herein, the term
non-transitory or tangible computer readable medium is expressly
defined to include any type of computer readable medium and to
exclude propagating signals. The memory 314 may include any desired
type of mass storage device including hard disk drives, optical
media, magnetic tape or disk, etc.
[0062] The memory 314 may include one or more memory devices. For
example, the memory 314 may include local memory, a mass storage
device, volatile memory, non-volatile memory, or a combination
thereof. The memory 314 may be adjacent to, part of, programmed
with, networked with, and/or remote from processor 312, so the data
stored in the memory 314 may be retrieved and processed by the
processor 312, for example. The memory 314 may store instructions
which are executable by the processor 312. The instructions may be
executed to perform one or more of the acts or functions described
herein or shown in the figures.
[0063] The memory 314 may store a trading application 330. In
certain embodiments, the trading application 330 may be accessed
from or stored in different locations. The processor 312 may access
the trading application 330 stored in the memory 314 and execute
computer-readable instructions included in the trading application
330.
[0064] In certain embodiments, during an installation process, the
trading application may be transferred from the input device 318
and/or the network 340 to the memory 314. When the computing device
300 is running or preparing to run the trading application 330, the
processor 312 may retrieve the instructions from the memory 314 via
the communication network 310.
V. STRATEGY TRADING
[0065] In addition to buying and/or selling a single tradeable
object, a user may trade more than one tradeable object according
to a trading strategy. One common trading strategy is a spread and
trading according to a trading strategy may also be referred to as
spread trading. Spread trading may attempt to capitalize on changes
or movements in the relationships between the tradeable object in
the trading strategy, for example.
[0066] An automated trading tool may be utilized to trade according
to a trading strategy, for example. For example, the automated
trading tool may AUTOSPREADER.RTM., provided by Trading
Technologies.
[0067] A trading strategy defines a relationship between two or
more tradeable objects to be traded. Each tradeable object being
traded as part of a trading strategy may be referred to as a leg or
outright market of the trading strategy.
[0068] When the trading strategy is to be bought, the definition
for the trading strategy specifies which tradeable object
corresponding to each leg should be bought or sold. Similarly, when
the trading strategy is to be sold, the definition specifies which
tradeable objects corresponding to each leg should be bought or
sold. For example, a trading strategy may be defined such that
buying the trading strategy involves buying one unit of a first
tradeable object for leg A and selling one unit of a second
tradeable object for leg B. Selling the trading strategy typically
involves performing the opposite actions for each leg.
[0069] In addition, the definition for the trading strategy may
specify a spread ratio associated with each leg of the trading
strategy. The spread ratio may also be referred to as an order size
for the leg. The spread ratio indicates the quantity of each leg in
relation to the other legs. For example, a trading strategy may be
defined such that buying the trading strategy involves buying 2
units of a first tradeable object for leg A and selling 3 units of
a second tradeable object for leg B. The sign of the spread ratio
may be used to indicate whether the leg is to be bought (the spread
ratio is positive) or sold (the spread ratio is negative) when
buying the trading strategy. In the example above, the spread ratio
associated with leg A would be "2" and the spread ratio associated
with leg B would be "-3."
[0070] In some instances, the spread ratio may be implied or
implicit. For example, the spread ratio for a leg of a trading
strategy may not be explicitly specified, but rather implied or
defaulted to be "1" or "-1."
[0071] In addition, the spread ratio for each leg may be
collectively referred to as the spread ratio or strategy ratio for
the trading strategy. For example, if leg A has a spread ratio of
"2" and leg B has a spread ratio of "-3", the spread ratio (or
strategy ratio) for the trading strategy may be expressed as "2:-3"
or as "2:3" if the sign for leg B is implicit or specified
elsewhere in a trading strategy definition.
[0072] Additionally, the definition for the trading strategy may
specify a multiplier associated with each leg of the trading
strategy. The multiplier is used to adjust the price of the
particular leg for determining the price of the spread. The
multiplier for each leg may be the same as the spread ratio. For
example, in the example above, the multiplier associated with leg A
may be "2" and the multiplier associated with leg B may be "-3,"
both of which match the corresponding spread ratio for each leg.
Alternatively, the multiplier associated with one or more legs may
be different than the corresponding spread ratios for those legs.
For example, the values for the multipliers may be selected to
convert the prices for the legs into a common currency.
[0073] The following discussion assumes that the spread ratio and
multipliers for each leg are the same, unless otherwise indicated.
In addition, the following discussion assumes that the signs for
the spread ratio and the multipliers for a particular leg are the
same and, if not, the sign for the multiplier is used to determine
which side of the trading strategy a particular leg is on.
[0074] FIG. 4 illustrates a block diagram of a trading strategy 410
which may be employed with certain disclosed embodiments. The
trading strategy 410 includes "n" legs 420 (individually identified
as leg 420a to leg 420n). The trading strategy 410 defines the
relationship between tradeable objects 422 (individually identified
as tradeable object 422a to tradeable object 422n) of each of the
legs 420a to 420n using the corresponding spread ratios 424a to
424n and multipliers 426a to 426n.
[0075] Once defined, the tradeable objects 422 in the trading
strategy 410 may then be traded together according to the defined
relationship. For example, assume that the trading strategy 410 is
a spread with two legs, leg 420a and leg 420b. Leg 420a is for
tradeable object 422a and leg 420b is for tradeable object 422b. In
addition, assume that the spread ratio 424a and multiplier 426a
associated with leg 420a are "1" and that the spread ratio 424b and
multiplier 426b associated with leg 420b are "-1". That is, the
spread is defined such that when the spread is bought, 1 unit of
tradeable object 422a is bought (positive spread ratio, same
direction as the spread) and 1 unit of tradeable object 422b is
sold (negative spread ratio, opposite direction of the spread). As
mentioned above, typically in spread trading the opposite of the
definition applies. That is, when the definition for the spread is
such that when the spread is sold, 1 unit of tradeable object 422a
is sold (positive spread ratio, same direction as the spread) and 1
unit of tradeable object 422b is bought (negative spread ratio,
opposite direction of the spread).
[0076] The price for the trading strategy 410 is determined based
on the definition. In particular, the price for the trading
strategy 410 is typically the sum of price the legs 420 comprising
the tradeable objects 422 multiplied by corresponding multipliers
426. The price for a trading strategy may be affected by price tick
rounding and/or pay-up ticks. However, both of these implementation
details are beyond the scope of this discussion and are well-known
in the art.
[0077] Recall that, as discussed above, a real spread may be listed
at an exchange, such as exchange 130 and/or 230, as a tradeable
product. In contrast, a synthetic spread may not be listed as a
product at an exchange, but rather the various legs of the spread
are tradeable at one or more exchanges. For the purposes of the
following example, the trading strategy 410 described is a
synthetic trading strategy. However, similar techniques to those
described below may also be applied by an exchange when a real
trading strategy is traded.
[0078] Continuing the example from above, if it is expected or
believed that tradeable object 422a typically has a price 10
greater than tradeable object 422b, then it may be advantageous to
buy the spread whenever the difference in price between tradeable
objects 422a and 422b is less than 10 and sell the spread whenever
the difference is greater than 10. As an example, assume that
tradeable object 422a is at a price of 45 and tradeable object 422b
is at a price of 40. The current spread price may then be
determined to be (1)(45)+(-1)(40)=5, which is less than the typical
spread of 10. Thus, a user may buy 1 unit of the spread, which
results in buying 1 unit of tradeable object 422a at a price of 45
and selling 1 unit of tradeable object 422b at 40. At some later
time, the typical price difference may be restored and the price of
tradeable object 422a is 42 and the price of tradeable object 422b
is 32. At this point, the price of the spread is now 10. If the
user sells 1 unit of the spread to close out the user's position
(that is, sells 1 unit of tradeable object 422a and buys 1 unit of
tradeable object 422b), the user has made a profit on the total
transaction. In particular, while the user bought tradeable object
422a at a price of 45 and sold at 42, losing 3, the user sold
tradeable object 422b at a price of 40 and bought at 32, for a
profit of 8. Thus, the user made 5 on the buying and selling of the
spread.
[0079] The above example assumes that there is sufficient liquidity
and stability that the tradeable objects can be bought and sold at
the market price at approximately the desired times. This allows
the desired price for the spread to be achieved. However, more
generally, a desired price at which to buy or sell a particular
trading strategy is determined. Then, an automated trading tool,
for example, attempts to achieve that desired price by buying and
selling the legs at appropriate prices. For example, when a user
instructs the trading tool to buy or sell the trading strategy 410
at a desired price, the automated trading tool may automatically
place an order (also referred to as quoting an order) for one of
the tradeable objects 422 of the trading strategy 410 to achieve
the desired price for the trading strategy (also referred to as a
desired strategy price, desired spread price, and/or a target
price). The leg for which the order is placed is referred to as the
quoting leg. The other leg is referred to as a lean leg and/or a
hedge leg. The price that the quoting leg is quoted at is based on
a target price that an order could be filled at in the lean leg.
The target price in the hedge leg is also known as the leaned on
price, lean price, or lean level. Typically, if there is sufficient
quantity available, the target price may be the best bid price when
selling and the best ask price when buying. The target price may be
different than the best price available if there is not enough
quantity available at that price or because it is an implied price,
for example. As the leaned on price changes, the price for the
order in the quoting leg may also change to maintain the desired
strategy price.
[0080] The leaned on price may also be determined based on a lean
multiplier and/or a lean base. A lean multiplier may specify a
multiple of the order quantity for the hedge leg that should be
available to lean on that price level. For example, if a quantity
of 10 is needed in the hedge leg and the lean multiplier is 2, then
the lean level may be determined to be the best price that has at
least a quantity of 20 available. A lean base may specify an
additional quantity above the needed quantity for the hedge leg
that should be available to lean on that price level. For example,
if a quantity of 10 is needed in the hedge leg and the lean base is
5, then the lean level may be determined to be the best price that
has at least a quantity of 15 available. The lean multiplier and
lean base may also be used in combination. For example, the lean
base and lean multiplier may be utilized such that larger of the
two is used or they may be used additively to determine the amount
of quantity to be available.
[0081] When the quoting leg is filled, the automated trading tool
may then submit an order in the hedge leg to complete the strategy.
This order may be referred to as an offsetting or hedging order.
The offsetting order may be placed at the leaned on price or based
on the fill price for the quoting order, for example. If the
offsetting order is not filled (or filled sufficiently to achieve
the desired strategy price), then the strategy order is said to be
"legged up" or "legged" because the desired strategy relationship
has not been achieved according to the trading strategy
definition.
[0082] In addition to having a single quoting leg, as discussed
above, a trading strategy may be quoted in multiple (or even all)
legs. In such situations, each quoted leg still leans on the other
legs. When one of the quoted legs is filled, typically the orders
in the other quoted legs are cancelled and then appropriate hedge
orders are placed based on the lean prices that the now-filled
quoting leg utilized.
VI. MESSAGING MONITORING AND CONTROL
[0083] Trading devices communicate order messages to exchanges to
buy or sell tradeable objects. It is desirable for an order message
attempting to place an order to buy a particular tradable object to
be filled at the exchange. If an order associated with order
message is not filled, it is desirable for the position of the
order message to be within the inside market, or close to the
inside market. It is undesirable for orders associated with order
messages to be outside of the inside market because such orders are
unlikely to be filled. It is undesirable for an excessive amount of
order messages to be sent to exchanges. It may be undesirable for
order messages to be sent to the exchange and subsequently altered
and/or deleted (e.g., orders that are sent and then immediately
deleted). Such undesirable order messages may adversely affect
electronic trading systems (e.g., including exchanges, trading
devices, etc.) as such order messages may harm trading market
liquidity, and impact trading system bandwidth, etc.
[0084] Example messaging monitoring and control systems disclosed
herein enable tracking of order messages in trading systems and
provide mechanism by which messaging traffic may be managed to
encourage the sending of order messages that improve trading
markets and discourage the sending of order messages that adversely
affect trading markets. Example messaging monitoring and control
systems disclosed herein implement a mechanism utilizing message
ratios and message ratio thresholds to establish a reward system
that, in turn, encourages efficient messaging and resource
allocation at an exchange. Example message ratios compare weighted
order message totals (e.g., the total number of messages
communicated to an exchange multiplied by a weighting factor) to a
total number of filled totals. Order messages are weighted so that
order messages that improve trading markets decrease the weighted
order message total and order messages that do not improve trading
markets increase the weighted order message total. In other words,
the example mechanism has the effect of encouraging (e.g.,
rewarding) the communication of desirable messages (e.g., message
that improve the market) to the exchange and discouraging the
communication of less desirable messages (e.g., messages away from
the inside market or messages that remain in the market for only a
brief period of time.)
[0085] In an example messaging monitoring and control system, a
message ratio threshold defines a limit on weighted order message
totals based on fill totals. For example, the message ratio
threshold hold could be defined such that for every two hundred
(200) messages communicated to the exchange, there must be at least
one (1) fill. In other words, the message ratio threshold could be
set to a ratio of 200:1. In this example, the 200:1 ratio could be
determined by summing the adjusted weight of each of the sent
messages. The adjusted weight, in turn, can be calculated by either
a positive or negative weighting factor based on the effect each
message has on the market. Thus, as a user trades in a trading
market, an example messaging monitoring and control system tracks
the order messages being sent by the user and updates a message
ratio for the user. For example, if the user sends many order
messages with orders outside of the inside market (e.g., five ticks
off the inside market) and fills few orders in comparison, the user
is likely to satisfy (e.g., exceed) the message ratio threshold. If
the user's message ratio exceeds the message ratio threshold (e.g.,
the user receives fewer than one fill for every two hundred
weighted messages sent to the exchange), the user's message traffic
is considered to be adverse message traffic and is impermissible
and even discouraged. Example penalties for adverse message traffic
could include one-time fines, suspension of trading privileges for
a period of time, an increase in trading fees and/or a reduction in
the user's trading priority. The example messaging monitoring and
control system may alternatively reward or otherwise encourage
messaging traffic determined to be positive message traffic.
Example encouragement for disciplined message traffic may include
reduced trading fees, an increase in trading priority, a refund of
trading fees and/or other direct monetary reimbursement.
[0086] In another example messaging monitoring and control system,
a message ratio threshold defines a limit on weighted order message
totals based on weighted fill totals. In this example, order
messages are weighted so that order messages that improve trading
markets increase the weighted fill total and do not increase the
weighted order message totals and order messages that do not
improve trading markets increase the weighted order message total
and do not increase the weighted fill total. For example, a fill
may increase the weighted fill total by one (1) and an order
message with an order that improves the trading market may increase
the weighted fill total by a fraction of one (e.g., 0.5). Order
messages outside of the inside market may increase the weighted
order message total. For example, an order one tick off the inside
market increases the weighted order message total by one (1) and an
order two ticks off the inside market increases the weighted order
message total by one and one half (1.5).
[0087] FIG. 5 illustrates a flow diagram of an example method 500
to track order messages using weighted message ratios. Tracking
order messages enables an example messaging monitoring and control
system to encourage order messages to be sent to exchanges that
improve trading markets (e.g., order messages with orders within
the inside market that increase trading market liquidity) and to
discourage order messages from being sent to exchanges that
adversely affect trading markets and/or trading systems (e.g.,
order messages with orders that are outside of the inside market
that decrease trading market liquidity). In the illustrated
example, order messages are tracked as they are sent and/or
received, and a message ratio is updated. A message ratio compares
a weighted order message total to a fill total. If an order message
improves the trading market, the message ratio is credited. If an
order message does not improve the trading market, the message
ratio is debited. The message ratio is compared to a message ratio
threshold.
[0088] The message ratio threshold may be set to penalize users
reaching a particular amount of order messages per fills and/or set
to reward users reaching a particular amount of fills per order
messages. One or more message ratio thresholds may be implemented
by the example messaging monitoring and control system to
facilitate management of messaging traffic to the exchange. In an
example system, if the message ratio satisfies (e.g., exceeds) the
message ratio threshold (e.g., the message ratio is excessive), a
user is notified of the excessive message ratio, and/or a fine
and/or a penalty may be assessed. To implement the example system,
the message ratio threshold is used to define limits on excessive
order message totals. In an example reward system, if the message
ratio satisfies (e.g., exceeds) the message ratio threshold, a user
is rewarded. To implement the example system, the message ratio
threshold is used to define a minimum amount of fills which, if
exceeded, results in a reward for the user. The example system
provides dynamic mechanism by which the behavior of automated
trading algorithms may be influenced to insure the overall
efficiency of the market.
[0089] Initially, in the illustrated example, message tracking
settings are set (block 502). Message tracking settings describe
how the example messaging monitoring and control system is to be
implemented. The message tracking settings describe how a message
ratio is to be calculated. The message tracking settings describe
message counts, message weights, message ratio thresholds, time
periods for message tracking, users to be tracked, etc. In some
examples, the message tracking settings are set by users (e.g.,
traders), administrators, exchanges, trading firms, etc.
Alternatively, the message tracking settings are set automatically
(e.g., default values are used to implement the messaging
monitoring and control system). A method 600 for setting message
tracking settings corresponding to block 502 of FIG. 5 is described
in greater detail below with reference to FIG. 6.
[0090] Once message tracking settings are set (block 502), the
example messaging monitoring and control system tracks order
messages and fills (block 504). The example messaging monitoring
and control system monitors order messages and/or fill
confirmations that are sent and/or received between, for example, a
trading device and an exchange. When an order message and/or fill
confirmation is sent and/or received, the example messaging
monitoring and control system determines if the order message
and/or fill confirmation improves the trading market (block 506).
Fill confirmations confirm that an order associated with an order
message was filled. If a fill confirmation is sent and/or received,
the example messaging monitoring and control system determines that
the corresponding order message (e.g., the order message including
the order that was filled) improves the trading market. If an order
message is sent and/or received with an order that is within the
inside market, the example messaging monitoring and control system
determines that the order message improves the trading market. If
an order associated with an order message is outside or away from
the inside market, the example messaging monitoring and control
system determines that the order message does not improve the
trading market. If an order message with an order is sent and then
the order is deleted in a subsequent order message (e.g., the order
is deleted within a threshold period of time), the example
messaging monitoring and control system determines that the order
message does not improve the trading market.
[0091] If an order message improves the trading market, the message
ratio is credited (block 508). The message ratio is credited based
on the type of order message (e.g., an order within the inside
market or a fill) using message weights defined by the message
tracking settings. In one example, the message weight could be a
negative factor that when applied against the order message that
improves the trading market decreases the weighted order message
total by of by half (e.g., a weighting multiplier of -0.5 reduces
the value of the favorable order message by -0.5). Table 1 depicts
an example messaging monitoring and control weighting scheme.
Alternate weighting schemes and multipliers may be utilized to
encourage and control trade messaging behavior. Similarly, if an
order message does not improve the trading market, the message
ratio is debited (block 510). The message ratio is debited based on
the type of order message (e.g., how far the order is from the
inside market) using message weights defined by the message
tracking settings. A method 700 for monitoring order messages and
determining message ratios corresponding to blocks 504, 506, 508,
and 510 of FIG. 5 is described in greater detail below with
reference to FIG. 7.
TABLE-US-00001 TABLE 1 Messaging Monitoring and Control Weighting
Scheme Price Difference From The Weighting Inside Market Multiplier
Description Best bid or best offer -1.0 If the order price is at
the best bid or offer, the order message decreases the weighted
order message total by one full order. None - At the Inside -0.5 If
the order price is at the best Market bid or offer, the order
message decreases the weighted order message total by one half of
an order. 1 Tick off the Inside 1.0 If the order price is one tick
Market away from the Inside Market, the order message counts as a
full order when calculating the weighted order message total. 2
Ticks off the Inside 1.5 If the order price is two ticks Market
away from the Inside Market, the order message increases the
weighted order message total by one and a half orders.
[0092] If the message ratio approaches the message ratio threshold
(e.g., a limit on order messages that fail to improve and/or harm
the trading market, a minimum number of fills to receive a reward,
etc.), the example messaging monitoring and control system
optionally issues a warning or alert associated with the message
ratio threshold (block 512). The warning or alert is issued to
inform a user that the message ratio is approaching the message
ratio threshold to aid the user in determining message orders to be
sent in the future (e.g., to encourage the user to send order
messages that improve the trading market and to discourage the user
from sending order messages that harm the trading market). A method
800 for presenting a warning or alert when a message ratio is
approaching a message ratio threshold corresponding to block 512 of
FIG. 5 is described in greater detail below with reference to FIG.
8. In some examples, the process 500 does not include block 512 and
a warning associated with the message ratio approaching the message
ratio threshold is not issued.
[0093] The example messaging monitoring and control system
determines if the message ratio satisfies and/or exceeds the
message ratio threshold (block 514). If the message ratio does not
exceed the message ratio threshold, control returns to block 504
and the example messaging monitoring and control system continues
to track order messages and/or fills. If the message ratio exceeds
the message ratio threshold (e.g., too many order messages have
been sent that fail to improve and/or harm the trading market,
enough fills have been achieved to receive a reward, etc.), the
example messaging monitoring and control system implements
excessive message ratio handling (block 516). The example messaging
monitoring and control system issues a notification to a user
informing the user that the message ratio associated with order
messages being sent by the user has exceeded the message ratio
threshold. In some examples, the notification is issued on a
display of a trading device associated with the user. Additionally
or alternatively, the example messaging monitoring and control
system issues a notification to a trading firm informing the
trading firm that the message ratio associated with order messages
being sent by the trading firm (e.g., by multiple traders of a
single trading firm) has exceeded the message ratio threshold. The
example messaging monitoring and control system may issue a fine
associated with the excessive message ratio to a user and/or
trading firm. The example messaging monitoring and control system
may issue a reward associated with the excessive message ratio to a
user and/or trading firm. Once the example trading system has
implemented the excessive message ratio handling, control returns
to block 504 and the example trading system continues to track
order messages and/or fills.
[0094] FIG. 6 illustrates a flow diagram of an example method 600
to set message tracking settings. The example method 600
corresponds to block 502 of FIG. 5. In some examples, the message
tracking settings are set by users (e.g., traders), administrators,
exchanges, trading firms, etc. Alternatively, the message tracking
settings are set automatically (e.g., default values are used to
implement the messaging monitoring and control system). Initially,
in the illustrated example, message counts are set (block 602).
Message counts describe how order messages are to be counted. In
some examples, each order message, including related order
messages, counts as one message. For example, where a first order
message is sent and a second order message is sent deleting the
order of the first order message, the first order message and the
second order message each count as one message. Where order
messages each count as one message, each order message associated
with a spread trading strategy counts as one message.
[0095] In the illustrated example, message weights are set (block
604). Message weights describe how order messages are to be
weighted when calculating message ratios. An order message that
improves a trading market is weighted such that the message ratio
improves when the order message is factored into the message ratio.
To improve the message ratio (e.g., to credit the message ratio),
the order message is weighted so that the weighted order message
total of the message ratio decreases. In some examples, order
messages are weighted such that order messages with orders that are
filled decrease the weighted order message total by one (e.g.,
-1.0) and order messages with orders that are within the inside
market decrease the weighted order message total by a fraction of
one. For example, an order message with an order that is filled
decreases the weighted order message total of the message ratio by
"1" and an order message with an order within the inside market
decreases the weighted fill total of the message ratio by
"0.5."
[0096] An order message that does not improve and/or harms a
trading market is weighted such that the message ratio worsens when
the order message is factored into the message ratio. To worsen the
message ratio (e.g., to debit the message ratio), the order message
is weighted so that the weighted message total of the message ratio
increases and the weighted fill total of the message ratio remains
constant. In some examples, order messages are weighted such that
order messages with orders that are farther outside of the inside
market count as multiple messages in the weighted message total of
the message ratio. For example, an order message with an order that
is one tick away from the inside market increases the weighted
message total by "1." An order message with an order that is two
ticks away from the inside market increases the weighted message
total by "1.5."
[0097] In some examples, message weights are fixed values.
Alternatively, message weights may vary based on the user (e.g.,
more experienced traders may be tracked with different message
weights than less experienced traders). Message weights may vary
based on the time of day (e.g., message weights may be different
one hour before trading markets close than when trading markets
open).
[0098] In the illustrated example, a message ratio threshold is set
(block 606). In some examples, to implement a discipline system,
the message ratio threshold compares a maximum weighted order
message total to a fill total. The message ratio threshold may
describe a limit of weighted messages that may be sent when
compared to a number of fills. For example, the message ratio
threshold is set such that when the threshold is satisfied (e.g.,
exceeded), excessive ratio handling is implemented to discipline
(e.g., punish) users that exceeded the message ratio threshold.
Users are disciplined that have sent too many order messages that
harm the trading market when compared to the number of fills that
the users have achieved.
[0099] In some examples, to implement a reward system, the message
ratio threshold compares a minimum fill total to a weighted order
message total. The message ratio threshold may describe a minimum
number of fills that may be achieved when compared to a weighted
message total. For example, the message ratio threshold is set such
that when the threshold is satisfied (e.g., exceeded), excessive
ratio handling is implemented to reward users that exceeded the
message ratio threshold. Users are rewarded that have achieved a
sufficient number of fills that improve the trading market when
compared to the number of order messages that have been sent.
[0100] In the illustrated example, a tracking time period is set
(block 608). The tracking time period describes a time period over
which the messaging monitoring and control system will monitor
order messages. In some examples, the tracking time period is one
day. Alternatively, the tracking time period may be one week, one
month, etc.
[0101] In the illustrated example, user tracking is set (block
610). User tracking settings describe users that are to be tracked
by the example messaging monitoring and control system. In some
examples, particular users (e.g., traders) are tracked. For
example, less experienced users are tracked. Additionally or
alternatively, trading firms are collectively tracked. For example,
traders associated with a trading firm are tracked and a message
ratio for the trading firm is updated based on order messages sent
by each of the associated traders.
[0102] In the illustrated example, excessive ratio handling is set
(block 612). Excessive ratio handling settings describe actions
that are to be taken when message ratio thresholds are exceeded. A
user and/or trading firm is notified when a message ratio threshold
is exceeded. In some examples, where a discipline system is
implemented, a user and/or trading firm is fined (e.g., with a
monetary amount) when a message ratio threshold is exceeded.
Additionally or alternatively, a user and/or trading firm is
suspended from trading when a message ratio threshold is exceeded.
The user and/or trading firm is penalized because a larger amount
of order messages have been sent when compared with a total number
of fills that have been achieved.
[0103] In some examples, where a reward system is implemented, a
user and/or trading firm is rewarded (e.g., with a monetary amount)
when a message ratio threshold is exceeded. The user and/or trading
firm is rewarded because a larger amount of order fills have been
achieved when compared with a total number of order messages that
have been sent. Once the excessive ratio handling is set, the
process 600 ends and the example messaging monitoring and control
system begins tracking order messages according to the set message
tracking settings.
[0104] FIG. 7 illustrates a flow diagram of an example method 700
for monitoring order messages and determining message ratios. The
example method 700 corresponds to blocks 504, 506, 508, and 510 of
FIG. 5. Initially, the example messaging monitoring and control
system determines if an order message and/or fill confirmation has
been sent and/or received (block 702). In some examples, the
example messaging monitoring and control system is implemented at a
trading device and tracks when order messages are sent to an
exchange and when fill confirmations are received from the
exchange. Additionally or alternatively, the example messaging
monitoring and control system is implemented at an exchange and
tracks when order messages are received from a trading device and
when fill confirmations are sent to the trading device. Control
remains at block 702 until an order message and/or fill
confirmation is sent and/or received.
[0105] Once an order message and/or a fill confirmation has been
sent and/or received, the example messaging monitoring and control
system identifies a user associated with the order message and/or
the fill confirmation (block 704). The example messaging monitoring
and control system may identify an individual user (e.g., an
individual trader), a trading firm, or both an individual user and
a trading firm associated with the individual user.
[0106] The example messaging monitoring and control system
identifies a message type of the order message and/or the fill
confirmation (block 706). For example, the example messaging
monitoring and control system may determine that an order message
is within the inside market. The example messaging monitoring and
control system may determine that an order message resulted in a
fill based on the fill confirmation. The example messaging
monitoring and control system may determine that an order
associated with an order message is outside of the inside market.
The example messaging monitoring and control system may determine
how far the order of the order message is from the inside market
(e.g., 5 ticks away). The example messaging monitoring and control
system may determine that an order message deletes an order within
a threshold period of time from when the order was placed (e.g.,
the order was placed and immediately deleted).
[0107] The example messaging monitoring and control system
identifies a message weight of the order message and/or the fill
confirmation (block 708). The message weight is based on the
message type determined at block 706. In some examples, a fill and
an order message with an order in the inside market decreases the
weighted order message total. An order message with an order
outside of the inside market is weighted as a multiple of one order
message in the weighted order message total. An order message may
be weighted more heavily the farther the order of the order message
is from the inside market (e.g., an order message with an order one
tick from the inside market counts as one order message and an
order message with an order two ticks from the inside market counts
as one and one half order messages).
[0108] The example messaging monitoring and control system updates
a message ratio based on the message weight (block 710). In some
examples, the weighted order message total decreases when a fill is
achieved (e.g., decreases by one) or when an order associated with
an order message is within the inside market (e.g., decreases by
one half). The weighted message total may be increased by a
multiple of one when an order associated with an order message is
outside of the inside market (e.g., increases by one, one and one
half, etc.). Once the message ratio is updated, the process 700
ends and the message ratio is analyzed as described in connection
with FIG. 5.
[0109] FIG. 8 illustrates a flow diagram of an example method 800
for presenting a warning when a message ratio is approaching a
message ratio threshold. The example method 800 corresponds to
optional block 512 of FIG. 5 (e.g., the example method 800 may or
may not be used in the example method 500 of FIG. 5 to track
messages). Initially, the example messaging monitoring and control
system determines if a message ratio has been updated (block 802).
Message ratios are updated when order messages are sent and/or
received. Control remains at block 802 until a message ratio has
been updated. If a message ratio has been updated, the example
messaging monitoring and control system determines if the message
ratio is approaching a message ratio threshold (block 804). For
example, where a discipline system is implemented, the example
messaging monitoring and control system determines the message
ratio is approaching the message ratio threshold if the message
ratio is within a particular number of weighted order messages from
the weighted order message total defined in the message ratio
threshold. Where a reward system is implemented, the example
messaging monitoring and control system determines the message
ratio is approaching the message ratio threshold if the message
ratio is within a particular number of fills from the fill total
defined in the message ratio threshold. If the message ratio is not
approaching the message ratio threshold, control returns to block
802. If the message ratio is approaching the message ratio
threshold, the example messaging monitoring and control system
implements an excessive ratio warning or alert (block 806). The
example messaging monitoring and control system notifies a user
that the message ratio is approaching the message ratio threshold
(e.g., via a display on a trading device). Notifying the user that
the message ratio is approaching the message ratio threshold
enables the user to alter trading strategies (e.g., including order
messages) to avoid exceeding the message ratio threshold and, thus,
to avoid penalties associated with exceeding the message ratio
threshold. Once the excessive ratio warning has been implemented,
control returns to block 802.
[0110] FIG. 9 illustrates a block diagram of an example messaging
monitoring and control system 900 to facilitate tracking of order
messages. The example messaging monitoring and control system 900
of the illustrated example implements the example methods 500, 600,
700, and/or 800 of FIGS. 5, 6, 7, and/or 8 to track order messages.
In some examples, the messaging monitoring and control system 900
is implemented at a trading device (e.g., the trading device 110 of
FIG. 1). In some examples, the messaging monitoring and control
system 900 is implemented at an exchange (e.g., the exchange 130 of
FIG. 1). In some examples, a trading device implements a messaging
monitoring and control system 900 and an exchange implements a
messaging monitoring and control system 900 and message tracking is
cross-referenced between the trading device and the exchange. For
example, if the exchange fines a trading firm using a messaging
monitoring and control system 900, a trading firm may use a
messaging monitoring and control system 900 at a trading device to
determine a particular user (e.g., trader) responsible for the
fine.
[0111] The example messaging monitoring and control system 900
monitors order messages and/or fill confirmations that are sent
and/or received between, for example, a trading device and an
exchange, and calculates a message ratio. The message ratio
compares weighted message totals with fill totals. When an order
message and/or fill confirmation is sent and/or received, the
example messaging monitoring and control system 900 determines if
the order message and/or fill confirmation improves the trading
market. If an order message improves the trading market, the
message ratio is credited. If an order message does not improve the
trading market, the message ratio is debited. The message ratio is
used by the example messaging monitoring and control system 900 to
implement warnings, fines, rewards, etc. based on the message
ratio. The trading system 900 of the illustrated example includes
an example settings module 902, an example database 904, an example
message identifying module 906, an example ratio calculator module
908, an example threshold comparator module 910, and an example
warning module 912.
[0112] The example settings module 902 sets message tracking
settings. Message tracking settings describe how the example
messaging monitoring and control system 900 is to be implemented.
In some examples, the message tracking settings describe how a
message ratio is to be calculated. In some examples, the message
tracking settings describe message counts, message weights, message
ratio thresholds, time periods for message tracking, users to be
tracked, etc. In some examples, the message tracking settings are
set at the example settings module 902 by users (e.g., traders),
administrators, exchanges, trading firms, etc. In some examples,
the message tracking settings are set automatically at the example
settings module 902 (e.g., default values are used to implement the
messaging monitoring and control system 900). The message tracking
settings are stored at the database 904.
[0113] The example message identifying module 906 tracks and/or
identifies order messages and fills. Once an order message and/or a
fill confirmation has been sent and/or received, the example
message identifying module 906 identifies a user associated with
the order message and/or the fill confirmation. The example message
identifying module 906 identifies a message type of the order
message and/or the fill confirmation. In some examples, the example
messaging monitoring and control system 900 determines that an
order associated with an order message is within the inside market.
In some examples, the example messaging monitoring and control
system 900 determines that an order associated with an order
message resulted in a fill based on the fill confirmation. In some
examples, the example messaging monitoring and control system 900
determines that an order associated with an order message is
outside of the inside market. In some such examples, the example
messaging monitoring and control system 900 determines how far the
order of the order message is from the inside market (e.g., 5 ticks
away). In some examples, the example messaging monitoring and
control system 900 determines that an order message deletes an
order within a threshold period of time from when the order was
placed (e.g., the order was placed and immediately deleted).
[0114] The example ratio calculator module 908 calculates and/or
updates a message ratio based on the message weight. In some
examples, a weighted order message total of the message ratio is
decreased by one when a fill is achieved and the weighted order
message total of the message ratio is decreased by a fraction of
one (e.g., one half) when an order associated with an order message
is within the inside market. The weighted order message total may
be increased by a multiple of one when an order associated with an
order message is outside of the inside market.
[0115] The example threshold comparator module 910 determines if
the message ratio exceeds the message ratio threshold. If the
message ratio exceeds the message ratio threshold (e.g., too many
order messages have been sent that fail to improve and/or harm the
trading market, enough fills have been achieved to receive a
reward, etc.), the example warning module 912 implements excessive
message ratio handling. In some examples, the example warning
module 912 issues a notification to a user informing the user that
the message ratio associated with order messages being sent by the
user has exceeded the message ratio threshold. In some examples,
the notification is issued on a display of a trading device
associated with the user. In some examples, the example warning
module 912 issues a notification to a trading firm informing the
trading firm that the message ratio associated with order messages
being sent by the trading firm (e.g., by multiple traders of a
single trading firm) has exceeded the message ratio threshold. In
some examples, the example warning module 912 issues a fine
associated with the excessive message ratio to a user and/or
trading firm. In some examples, the example warning module 912
issues a reward associated with the excessive message ratio to a
user and/or trading firm.
[0116] Some of the described figures depict example block diagrams,
systems, and/or flow diagrams representative of methods that may be
used to implement all or part of certain embodiments. One or more
of the components, elements, blocks, and/or functionality of the
example block diagrams, systems, and/or flow diagrams may be
implemented alone or in combination in hardware, firmware, discrete
logic, as a set of computer readable instructions stored on a
tangible computer readable medium, and/or any combinations thereof,
for example.
[0117] The example block diagrams, systems, and/or flow diagrams
may be implemented using any combination of application specific
integrated circuit(s) (ASIC(s)), programmable logic device(s)
(PLD(s)), field programmable logic device(s) (FPLD(s)), discrete
logic, hardware, and/or firmware, for example. Also, some or all of
the example methods may be implemented manually or in combination
with the foregoing techniques, for example.
[0118] The example block diagrams, systems, and/or flow diagrams
may be performed using one or more processors, controllers, and/or
other processing devices, for example. For example, the examples
may be implemented using coded instructions, for example, computer
readable instructions, stored on a tangible computer readable
medium. A tangible computer readable medium may include various
types of volatile and non-volatile storage media, including, for
example, random access memory (RAM), read-only memory (ROM),
programmable read-only memory (PROM), electrically programmable
read-only memory (EPROM), electrically erasable read-only memory
(EEPROM), flash memory, a hard disk drive, optical media, magnetic
tape, a file server, any other tangible data storage device, or any
combination thereof. The tangible computer readable medium is
non-transitory.
[0119] Further, although the example block diagrams, systems,
and/or flow diagrams are described above with reference to the
figures, other implementations may be employed. For example, the
order of execution of the components, elements, blocks, and/or
functionality may be changed and/or some of the components,
elements, blocks, and/or functionality described may be changed,
eliminated, sub-divided, or combined. Additionally, any or all of
the components, elements, blocks, and/or functionality may be
performed sequentially and/or in parallel by, for example, separate
processing threads, processors, devices, discrete logic, and/or
circuits.
[0120] While embodiments have been disclosed, various changes may
be made and equivalents may be substituted. In addition, many
modifications may be made to adapt a particular situation or
material. Therefore, it is intended that the disclosed technology
not be limited to the particular embodiments disclosed, but will
include all embodiments falling within the scope of the appended
claims.
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