U.S. patent application number 14/332031 was filed with the patent office on 2015-01-22 for system and method for trading financial instruments based on undisclosed values.
This patent application is currently assigned to Bloomberg L.P.. The applicant listed for this patent is Bloomberg L.P.. Invention is credited to Eric S. Berger, Christopher James Hodder, David Klein.
Application Number | 20150026030 14/332031 |
Document ID | / |
Family ID | 36228524 |
Filed Date | 2015-01-22 |
United States Patent
Application |
20150026030 |
Kind Code |
A1 |
Berger; Eric S. ; et
al. |
January 22, 2015 |
SYSTEM AND METHOD FOR TRADING FINANCIAL INSTRUMENTS BASED ON
UNDISCLOSED VALUES
Abstract
In electronic trading venues, there may be orders for which the
full information is not publicly displayed. For example, the full
quantity of an order available for trading or the most aggressive
price at which an order can be traded may not be made public. A
system and method are disclosed that facilitates trading based on
this non-public information. A first order associated with a
financial instrument is placed at a venue to probe for non-public
information related to the financial instrument. The results of the
probe may then be used to place a second order at the venue that
takes advantage of any discovered non-public information.
Inventors: |
Berger; Eric S.; (Tel Aviv,
IL) ; Hodder; Christopher James; (Philadelphia,
PA) ; Klein; David; (Maale Adumim, IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Bloomberg L.P. |
New York |
NY |
US |
|
|
Assignee: |
Bloomberg L.P.
New York
NY
|
Family ID: |
36228524 |
Appl. No.: |
14/332031 |
Filed: |
July 15, 2014 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
13334386 |
Dec 22, 2011 |
8788397 |
|
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14332031 |
|
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11263622 |
Oct 27, 2005 |
8099352 |
|
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13334386 |
|
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60622527 |
Oct 27, 2004 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/10 20130101;
G06Q 40/00 20130101; G06Q 40/04 20130101 |
Class at
Publication: |
705/37 |
International
Class: |
G06Q 40/04 20120101
G06Q040/04 |
Claims
1. A method for facilitating electronic trading of a financial
instrument by a system comprising at least one computer and at
least one database comprising stored data relating to orders for
the financial instrument in a plurality of electronic trading
venues, the method comprising: (a) receiving, by the at least one
computer, an initial order for the financial instrument, the
initial order including a price and a quantity; (b) determining, by
the at least one computer, a price limit, based at least on the
price of the initial order, for a price probe order for the
financial instrument on a same side as the initial order; (c)
identifying, by the at least one computer, one or more trading
venues of the plurality of electronic trading venues eligible to
receive the price probe order based at least on the respective
trading venue having at least one order for the financial
instrument with a displayed price or quantity on an opposite side
of the initial order; (d) automatically creating, by the at least
one computer, the price probe order for a first trading venue of
the eligible electronic trading venues the price probe order
comprising (i) a price within the determined price limit and
different from displayed prices for all orders for the financial
instrument in the first trading venue and (ii) a quantity less than
the quantity of the initial order and at least equal to a minimum
trade quantity for the first trading venue; (e) automatically
placing, by the at least one computer, the price probe order in the
first trading venue; (f) after execution of the price probe order
for the entire quantity thereof, automatically creating, by the at
least one computer, another order for the financial instrument on
the same side as the initial order comprising (i) a price equal to
the price of the price probe order and (ii) a quantity at least
equal to the minimum trade quantity for the first trading venue and
up to a remaining quantity of the initial order after execution of
the price probe order; and (g) automatically placing, by the at
least one computer, the other order in the first trading venue.
2. The method of claim 1, wherein: (h) if the other order is
executed for less than the remaining quantity, repeating steps (f)
and (g) for one or more respective other orders until any remaining
quantity is less than the minimum trade quantity for the first
trading venue or a trade is not executed.
3. The method of claim 1, comprising: automatically creating, by
the at least one computer, a price probe order for at least one
other trading venue of the electronic eligible trading venues in
addition to the first trading venue, the price probe order for each
other trading venue comprising (i) a price within the determined
price limit and different from displayed prices for all orders for
the financial instrument in the respective other trading venue and
(ii) a quantity up to a remaining quantity in the initial order
after creation of a previous price probe order and at least equal
to a minimum trade quantity for the respective other trading venue;
automatically placing, by the at least one computer, a respective
price probe order created in the previous step in each other
respective trading venue; after execution of a respective price
probe order placed in the previous step for the entire quantity
thereof, automatically creating, by the at least one computer, a
further order for the financial instrument on the same side as the
initial order comprising (i) a price equal to the price of the
respective executed price probe order and (ii) a quantity at least
equal to the minimum trade quantity for the respective other
trading venue and up to a remaining quantity of the initial order
after execution of the respective price probe order; and
automatically placing, by the at least one computer, a respective
further order in a respective other trading venue.
4. The method of claim 1, comprising: (h) if the other order is
executed for less than the remaining quantity, repeating steps (f)
and (g) for one or more respective other orders until any remaining
quantity is less than the minimum trade quantity for the first
trading venue or a trade is not executed; then (i) identifying, by
the at least one computer, one or more second trading venues of the
plurality of electronic trading venues in which a probe order was
not placed and which is otherwise eligible to receive a quantity
probe order based at least on the one or more second trading venues
having at least one order for the financial instrument on the
opposite side of the initial order with a displayed price and a
displayed quantity; (j) automatically creating, by the at least one
computer, the quantity probe order for the financial instrument,
the quantity probe order comprising (i) a price within the
determined price limit and equal to the displayed price of the at
least one order in a second trading venue and (ii) a quantity less
than a remaining quantity of the initial order and more than the
quantity of the at least one order; (k) automatically placing, by
the at least one computer, the quantity probe order in the second
trading venue; (l) after execution of the quantity probe order for
the entire quantity thereof, automatically creating, by the at
least one computer, a further order for the financial instrument on
the same side as the initial order comprising (i) a price equal to
the price of the quantity probe order and (ii) a quantity at least
equal to the minimum trade quantity for the second trading venue
and up to a remaining quantity of the initial order after execution
of the quantity probe order; and (m) automatically placing, by the
at least one computer, the further order in the second trading
venue.
5. The method of claim 4, comprising: (n) if the further order is
executed for less than the remaining quantity, repeating steps (l)
and (m) until any remaining quantity is less than the minimum trade
quantity for the second trading venue or a trade is not
executed
6. The method of claim 1, wherein the original order includes
information characterizing the initial order as a pegged order and
additional information relating thereto, or information
characterizing the initial order as an order with discretion and
additional information relating thereto, and wherein the step of
determining the price limit comprises determining the price limit
also based on such characterizing and additional information.
7. The method of claim 1, wherein the quantity of the created price
probe order is equal to the minimum trade quantity for the first
trading venue.
8. The method of claim 1, wherein the quantity of the other order
is a predetermined quantity up to the remaining quantity.
9. The method of claim 4, wherein the quantity of the further order
is greater than the quantity of the quantity probe order by a
predetermined amount up to the remaining quantity of the initial
order.
10. The method of claim 4, wherein identifying one or more second
trading venues comprises identifying a plurality of second trading
venues eligible to receive a quantity probe order, and wherein
creating the quantity probe order comprises creating the quantity
probe order with a price within the determined price limit and
equal to the displayed best price of an order on the opposite side
in any of the plurality of eligible second trading venues.
11. The method of claim 1, wherein automatically creating the price
probe order comprises automatically creating the price probe order
as an "immediate or cancel" order.
12. A method for facilitating electronic trading of a financial
instrument by a system comprising at least one computer and at
least one database comprising stored data relating to orders for
the financial instrument in a plurality of electronic trading
venues, the method comprising: (a) receiving, by the at least one
computer, an initial order for the financial instrument, the
initial order including a price and a quantity; (b) determining, by
the at least one computer, a price limit, based at least on the
price of the initial order, for a quantity probe order for the
financial instrument on a same side as the initial order; (c)
identifying, by the at least one computer, a first trading venue of
the plurality of electronic trading venues eligible to receive the
quantity probe order based on the first trading venue having at
least one order for the financial instrument on an opposite side of
the initial order with a displayed price and a displayed quantity;
(d) automatically creating, by the at least one computer, the
quantity probe order for the financial instrument, the quantity
probe order comprising (i) a price within the determined price
limit and equal to the displayed price of the at least one order
and (ii) a quantity less than the quantity of the initial order and
more than the quantity of the at least one order; (e) automatically
placing, by the at least one computer, the quantity probe order in
the first trading venue; (f) after execution of the quantity probe
order for the entire quantity thereof, automatically creating, by
the at least one computer, another order for the financial
instrument on the same side as the initial order comprising (i) a
price equal to the price of the quantity probe order and (ii) a
quantity at least equal to the minimum trade quantity for the
trading venue and up to a remaining quantity of the initial order
after execution of the quantity probe order; and (g) automatically
placing, by the at least one computer, the other order in the first
trading venue.
13. The method of claim 12, comprising: (h) if the other order is
executed for less than the remaining quantity, repeating steps (f)
and (g) for one or more respective other orders until any remaining
quantity is less than the minimum trade quantity for the first
trading venue or a trade is not executed.
14. The method of claim 12, comprising: (h) if the other order is
executed for less than the remaining quantity, repeating steps (f)
and (g) until any remaining quantity is less than the minimum trade
quantity for the first trading venue or a trade is not executed;
then (i) identifying, by the at least one computer, one or more
second trading venues of the plurality of electronic trading venues
in which a probe order was not placed and which is otherwise
eligible to receive a price probe order based at least on the one
or more second trading venues having at least one order with a
displayed price or quantity on the opposite side of the initial
order; (j) automatically creating, by the at least one computer, a
price probe order for a second trading venue of the eligible
trading venues, the price probe order being on the same side as the
initial order and comprising (i) a price within the determined
price limit and different from displayed prices for all orders for
the financial instrument in the second trading venue and (ii) a
quantity less than a remaining quantity of the initial order and at
least equal to a minimum trade quantity for the second trading
venue; (k) automatically placing, by the at least one computer, the
price probe order in the second trading venue; (l) after execution
of the price probe order, automatically creating, by the at least
one computer, a further order for the financial instrument on the
same side as the initial order comprising (i) a price equal to the
price of the price probe order and (ii) a quantity at least equal
to the minimum trade quantity for the second trading venue and up
to a remaining quantity of the initial order after execution of the
price probe order; and (m) automatically placing, by the at least
one computer, the further order in the second trading venue.
15. The method of claim 14, comprising: (n) if the further order is
executed for less than the remaining quantity, repeating steps (l)
and (m) until any remaining quantity is less than the minimum trade
quantity for the second trading venue or a trade is not
executed
16. The method of claim 12, wherein the original order includes
information characterizing the initial order as a pegged order and
additional information relating thereto, or information
characterizing the initial order as an order with discretion and
additional information relating thereto, and wherein the step of
determining the price limit comprises determining the price limit
also based on such characterizing and additional information.
17. The method of claim 12, wherein the quantity of the created
price probe order is equal to the minimum trade quantity for the
second trading venue.
18. The method of claim 12, wherein the quantity of the other order
is a predetermined quantity up to the remaining quantity.
19. The method of claim 12, wherein the quantity of the other order
is greater than the quantity of the quantity probe order by a
predetermined amount up to the remaining quantity of the initial
order.
20. The method of claim 12, wherein identifying one or more second
trading venues comprises identifying a plurality of second trading
venues eligible to receive a quantity probe order, and wherein
creating the quantity probe order comprises creating the quantity
probe order with a price within the determined price limit and
equal to the displayed best price of an order on the opposite side
in any of the plurality of eligible second trading venues.
21. The method of claim 12, wherein automatically creating the
price probe order comprises automatically creating the price probe
order as an "immediate or cancel" order.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application claims the benefit of provisional patent
application No. 60/622,527, "SYSTEMS AND METHODS FOR PROBING FOR
HIDDEN LIQUIDITY AND FINANCIAL MARKETS", filed Oct. 27, 2004, and
is a continuation of Application Ser. No. 13/334,386 filed Dec. 22,
2011, which is a continuation of Application Ser. No. 11/263,622
filed Oct. 27, 2005, now U.S. Pat. No. 8,099,352 issued Jan. 17,
2012, which both claimed the benefit of provisional patent
application No. 60/622,527. The entire contents of Application Ser.
Nos. 60/622,527, 13/334,386, and 11/263,622 are hereby incorporated
herein by reference.
COPYRIGHT AND LEGAL NOTICES
[0002] A portion of the disclosure of this patent document contains
material which is subject to copyright protection. The copyright
owner has no objection to the facsimile reproduction by anyone of
the patent document or the patent disclosure, as it appears in the
Patent and Trademark Office patent files or records, but otherwise
reserves all copyrights whatsoever.
[0003] This application contains material relating to the trading
of financial interests. The trading of some financial interests is
regulated, as for example by the United States Government, the
various State governments, and other governmental agencies within
the United States and elsewhere. The disclosure herein is made
solely in terms of logical and financial possibility and advantage,
without regard to possible statutory, regulatory, or other legal
considerations. Nothing herein is intended as a statement or
representation of any kind that any method or process proposed or
discussed herein does or does not comply with any statute, law,
regulation, or other legal requirement whatsoever, in any
jurisdiction; nor should it be taken or construed as doing so.
BACKGROUND OF THE INVENTION
[0004] The invention relates to trading of financial instruments,
and in particular to computer programs, methods, and systems for
trading of financial instruments based on undisclosed values, e.g.,
undisclosed price and quantity values.
SUMMARY OF THE INVENTION
[0005] Hidden values of financial markets may exist in various
forms. For example, in the equities market, sources of liquidity
having hidden values may include orders with reserve, orders with
discretion, hidden orders, odd lot orders, mixed orders, sub-penny
orders and OTC orders.
[0006] Because hidden values may exist in several different types
of orders (e.g., in the sources mentioned above), a user may wish
to probe for hidden values to determine if they do indeed exist,
where they are and to what degree. In certain situations, a user
may wish to probe for hidden size or otherwise a quantity of
financial instruments available for a trade at a listed price.
[0007] The system and method of the present invention enables the
placement of orders for a financial instrument based on undisclosed
(e.g., hidden) values (e.g., price and quantity values) associated
with the financial instrument. For example, according to an
embodiment of the present invention, hidden price and quantity
values of the financial instrument are probed by placing a first
order to determine a hidden price and/or hidden quantity of the
financial instrument, and optionally placing a second order based
on an execution of the first order in order to trade against the
hidden price and/or hidden quantity so determined.
[0008] An embodiment of the invention provides a method for
facilitating the trading of financial instruments. First, at least
one computer placing a first order associated with a financial
instrument in a venue in which the financial instrument is traded,
the first order having terms such that execution of the first order
reveals non-public information related to the financial instrument
and the venue. In response to the first order being executed, the
at least one computer automatically placing a second order
associated with the financial instrument in the venue, the terms of
the second order being based on the non-public information revealed
by the execution of the first order.
[0009] According to an embodiment of the invention, the non-public
information revealed by the execution of the first order describes
an undisplayed quantity associated with the financial instrument
and the venue.
[0010] According to, another embodiment of the invention, the
non-public information revealed by the execution of the first order
describes an undisplayed price associated with the financial
instrument and the venue.
[0011] According to another embodiment of the invention, a method
is provided for facilitating the trading of financial instruments.
First, at least one computer placing a first order associated with
a financial instrument and a first of two transaction sides in a
venue in which the financial instrument is traded, the first order
having a price different from any disclosed prices of orders at the
venue associated with the financial instrument and a second
transaction side. Then, in response to the first order being
executed for the entire quantity of the first order, the at least
one computer automatically placing a second order associated with
the financial instrument and the first transaction side in the
venue at the same price at which the first order was executed.
[0012] In an embodiment of the invention, the first order has a
first quantity and the second order has a second quantity larger
than the first quantity.
[0013] In another embodiment of the invention, prior to the at
least one computer placing the first order, the at least one
computer receives a third order associated with the financial
instrument and the first transaction side, the third order having a
third quantity. Furthermore, the first quantity of the first order
is derived from the third quantity of the third order.
[0014] In an embodiment of the invention, a method is provided for
facilitating the trading of financial instruments. First, at least
one computer places a first order associated with a financial
instrument and a first of two transaction sides in a venue in which
the financial instrument is traded, the first order having a price
identical to a price of a second order previously placed in the
venue associated with the financial instrument and a second
transaction side, the first order having a quantity greater than
the quantity of the second order. In response to the first order
being executed against the second order for the entire quantity of
the first order, the at least one computer automatically places a
third order associated with the financial instrument and the first
transaction side in the venue at the same price at which the first
order was executed.
[0015] In an embodiment of the invention, the quantity of the third
order is greater than the quantity of the first order.
[0016] According to another embodiment of the invention, prior to
the at least one computer placing the first order, the at least one
computer receives a fourth order associated with the financial
instrument and the first transaction side. Furthermore, the
quantity of the first order is derived from the quantity of the
fourth order.
[0017] According to another embodiment of the invention, a method
is provided for facilitating the trading of financial interests.
First, at least one computer receives a first order associated with
a financial instrument and a first of two transaction sides, the
first order having a first quantity. Next, the at least one
computer determines a price related to the financial instrument
based on the prices associated with the financial instrument and
the second transaction side disclosed by a plurality of venues in
which the financial instrument is traded. Then, the at least one
computer places a quantity probe order associated with the
financial instrument and the first transaction side in one venue of
the plurality of venues, wherein a second order in the one venue
associated with the financial instrument and a second transaction
side and the quantity probe order both have prices identical to the
determined price, and wherein the quantity probe order has a
quantity derived from the first quantity and that is greater than
the quantity of the second order. Finally, the at least one
computer places a price probe order associated with a financial
instrument and the first transaction side in another venue of the
plurality of venues, wherein the price probe order has a quantity
derived from the first quantity and has a price identical to the
determined price and different from any disclosed prices of orders
in the other venue associated with the financial instrument and the
second transaction side.
[0018] Another embodiment of the invention involves a system for
facilitating the trading of financial interests comprising at least
one computer programmed to perform the following: Place a first
order associated with a financial instrument in a venue in which
the financial instrument is traded, the first order having terms
such that execution of the first order reveals non-public
information related to the financial instrument and the venue. In
response to the first order being executed, automatically place a
second order associated with the financial instrument in the venue,
the terms of the second order being based on the non-public
information revealed by the execution of the first order.
[0019] Another embodiment of the invention involves a computer
readable medium or media having programming stored thereon that
when executed by at least one computer causes the at least one
computer to: Place a first order associated with a financial
instrument in a venue in which the financial instrument is traded,
the first order having terms such that execution of the first order
reveals non-public information related to the financial instrument
and the venue. In response to the first order being executed,
automatically place a second order associated with the financial
instrument in the venue, the terms of the second order being based
on the non-public information revealed by the execution of the
first order.
[0020] Another embodiment of the invention relates to a system for
facilitating the trading of financial interests comprising at least
one computer programmed to: Place a first order associated with a
financial instrument and a first of two transaction sides in a
venue in which the financial instrument is traded, the first order
having a price different from any disclosed prices of orders at the
venue associated with the financial instrument and a second
transaction side. In response to the first order being executed for
the entire quantity of the first order, automatically place a
second order associated with the financial instrument and the first
transaction side in the venue at the same price at which the first
order was executed.
[0021] According to another embodiment of the invention, a computer
readable medium or media is provided having programming stored
thereon that when executed by at least one computer causes the at
least one computer to: Place a first order associated with a
financial instrument and a first of two transaction sides in a
venue in which the financial instrument is traded, the first order
having a price different from any disclosed prices of orders at the
venue associated with the financial instrument and a second
transaction side. In response to the first order being executed for
the entire quantity of the first order, automatically place a
second order associated with the financial instrument and the first
transaction side in the venue at the same price at which the first
order was executed.
[0022] Another embodiment of the invention involves a system for
facilitating the trading of financial interests comprising at least
one computer programmed to: Place a first order associated with a
financial instrument and a first of two transaction sides in a
venue in which the financial instrument is traded, the first order
having a price identical to a price of a second order previously
placed in the venue associated with the financial instrument and a
second transaction side, the first order having a quantity greater
than the quantity of the second order. In response to the first
order being executed against the second order for the entire
quantity of the first order, automatically place a third order
associated with the financial instrument and the first transaction
side in the venue at the same price at which the first order was
executed.
[0023] In another embodiment of the invention, a computer readable
medium or media is provided having programming stored thereon that
when executed by at least one computer causes the at least one
computer to: Place a first order associated with a financial
instrument and a first of two transaction sides in a venue in which
the financial instrument is traded, the first order having a price
identical to a price of a second order previously placed in the
venue associated with the financial instrument and a second
transaction side, the first order having a quantity greater than
the quantity of the second order. In response to the first order
being executed against the second order for the entire quantity of
the first order, automatically place a third order associated with
the financial instrument and the first transaction side in the
venue at the same price at which the first order was executed.
[0024] According to another embodiment of the invention, a system
is provided for facilitating the trading of financial interests
comprising at least one computer programmed to: Receive a first
order associated with a financial instrument and a first of two
transaction sides, the first order having a first quantity.
Determine a price related to the financial instrument based on the
prices associated with the financial instrument and the second
transaction side disclosed by a plurality of venues in which the
financial instrument is traded. Place a quantity probe order
associated with the financial instrument and the first transaction
side in one venue of the plurality of venues, wherein a second
order in the one venue associated with the financial instrument and
a second transaction side and the quantity probe order both have
prices identical to the determined price, and wherein the quantity
probe order has a quantity derived from the first quantity and that
is greater than the quantity of the second order. Place a price
probe order associated with a financial instrument and the first
transaction side in another venue of the plurality of venues,
wherein the price probe order has a quantity derived from the first
quantity and has a price identical to the determined price and
different from any disclosed prices of orders in the other venue
associated with the financial instrument and the second transaction
side.
[0025] According to another embodiment of the invention, a computer
readable medium or media is provided having programming stored
thereon that when executed by at least one computer causes the at
least one computer to: Receive a first order associated with a
financial instrument and a first of two transaction sides, the
first order having a first quantity. Determine a price related to
the financial instrument based on the prices associated with the
financial instrument and the second transaction side disclosed by a
plurality of venues in which the financial instrument is traded.
Place a quantity probe order associated with the financial
instrument and the first transaction side in one venue of the
plurality of venues, wherein a second order in the one venue
associated with the financial instrument and a second transaction
side and the quantity probe order both have prices identical to the
determined price, and wherein the quantity probe order has a
quantity derived from the first quantity and that is greater than
the quantity of the second order. Place a price probe order
associated with a financial instrument and the first transaction
side in another venue of the plurality of venues, wherein the price
probe order has a quantity derived from the first quantity and has
a price identical to the determined price and different from any
disclosed prices of orders in the other venue associated with the
financial instrument and the second transaction side.
BRIEF DESCRIPTION OF THE FIGURES
[0026] The invention is illustrated in the figures of the
accompanying drawings, which are meant to be exemplary and not
limiting, and in which like references are intended to refer to
like or corresponding parts.
[0027] FIG. 1 is a block diagram of an embodiment of the system of
the present invention showing the environment in which the system
operates.
[0028] FIG. 2 is a flowchart showing an operative embodiment of the
present invention;
[0029] FIG. 3 is an example of a graphical user interface capable
of being used with the present invention; and
[0030] FIG. 4 is flowchart showing another operative embodiment of
the present invention.
DETAILED DESCRIPTION
[0031] FIG. 1 is a block diagram showing an embodiment of the
Probe-Based Trading ("PBT") System of the present invention and the
environment in which it operates. As shown in FIG. 1, the PBT
System 110 of the present invention communicates with one or more
users at User Systems 300 through Network 200. PBT System 110 also
is in communication with one or more Market Trading Venues 400 (via
computers within each of those venues) and Database 120.
[0032] Network 200 may comprise any communications network or other
means through which computers may communicate with each other,
including, but not limited to, one or more of the following:
private, dedicated telecommunication lines, wired or wireless LANs
and WANs, and the Internet. Also, although Network 200 is shown in
FIG. 1 as a single network, it should be understood that First
Network 200 may comprise a plurality of networks in communication
with each other.
[0033] User Systems 300 enable users to interact with PBT System
110 through Network 200. Users may include traders of financial
instruments or agents working on behalf of traders. Financial
instruments may include any item that may be traded in a market,
such as, for example, equity securities, e.g., stocks, fixed income
securities, e.g., bonds, commodities, energy contracts, and foreign
currencies. User Systems 300 may comprise any computers that enable
users to enter and send data to and receive and view data from PBT
System 110 via Network 200, such as, for example, personal
computers equipped with software that provides a graphical user
interface ("GUI") through which trading data is presented to and
received from the user.
[0034] Market Trading Venues 400 represent markets in which
financial instruments are traded, e.g., the New York Stock Exchange
("NYSE"), the National Association of Securities Dealers Automatic
Quotation System ("NASDAQ") via SuperMontage ("SM"), and Electronic
Communication Networks ("ECNs") such as Archipelago ("ARCX"), Brut,
Bloomberg TradeBook, and Instinet ("INET"). Each Market Trading
Venue 400 includes one or more computers that handle trading within
the venue and communication with other venues and other computers.
Communication links 410 between the Market Trading Venues 400 and
PBT System 110 enable PBT System 110 to send to and receive from
Market Trading Venues 400 data related to financial instruments and
proposed trades involving financial instruments traded in the
respective markets of the Market Trading Venues 400. Communication
links 410 may include any means through which computer systems may
exchange data, including means such as those described above for
Network 200.
[0035] As mentioned above, PBT System 110 enables users at User
Systems 300 to trade financial instruments in the markets
corresponding to Market Trading Venues 400 based on undisclosed
values. In an embodiment of the present invention, PBT System 110
may comprise any computer that facilitates trading of financial
instruments based on undisclosed values by (a) placing a first
order associated with a financial instrument at a Market Trading
Venue, the first order being associated with a financial instrument
and a first of two transaction sides (e.g., buy or sell side) and
having a certain price and quantity (as described further below),
and (b) if the first order is executed for its entire quantity,
automatically placing a second order associated with the financial
instrument and the first transaction side at the Market Trading
Venue at the same price at which the first order was executed.
[0036] PB System 110 may comprise a computer including hardware
and/or computer code that enables the computer to perform the
functionality mentioned above and described in detail below. For
example, PBT System 110 may comprise a computerized trading system,
such as the TRADEBOOK.RTM. system available over the BLOOMBERG
PROFESSIONAL.RTM. Service, that provides the functionality
described below. In another example, PBT System 110 may comprise an
order management system, such as BLOOMBERG Sell Side Equity Order
Management System ("SSEOMS"), with the capability of routing orders
to various Market Trading Venues, as described below.
[0037] Referring again to FIG. 1, PBT System 110 is also in
communication with Database 120 such that PBT System 110 can store
data in and retrieve data from Database 120. For example, Database
120 may reside in the same computer system as PBT System 110 or
Database 120 may reside in a separate computer system that has
communication links with PBT System 110. Database 120 stores all
the orders entered by the users associated with PBT System 110.
Database 120 may also store user configuration information such as
the identities and order of priority of Market Trading Venues 400
eligible for probing.
[0038] FIG. 2 is a flowchart showing one way in which the PBT
System 110 of the present invention may operate. First, as
represented in block 1000, information describing a first order is
received at PBT System 110. This first order may be referred to as
an "initial order." The information describing the initial order
may include information identifying the financial instrument with
which the order is associated (e.g., where the financial instrument
is a stock, the identifying information may be a ticker symbol), a
transaction side with which the order is associated (e.g., buy side
or sell side), a price, and a quantity.
[0039] This information describing the initial order may also
include other information characterizing the order. For example,
the initial order may be characterized as a pegged order and/or an
order with discretion. Such characteristics may require additional
information to be provided. For example, if the initial order is
characterized as a pegged order, such additional required
information may include the price to which the price of the initial
order is to be pegged (e.g., the market price of the financial
instrument with which the initial order is associated) and an
amount by which the price of the initial order is offset from the
pegged price. Where the initial order is characterized as an order
with discretion, such additional required information may include
(a) an upper price range (e.g., +$0.50) or a lower price range
(e.g., -$0.50) depending on whether the initial order is associated
with the buy side (e.g., the initial order is a bid) or with the
sell side (e.g., the initial order is an offer), respectively, and
(b) a trigger quantity (a trigger quantity of zero indicates there
is no trigger quantity). Trigger quantity may refer to a quantity
threshold which must be met in order for an order with discretion
to be executed. For example, if a buy order with discretion having
a trigger quantity of 300 shares has been placed in a Market
Trading Venue, sell orders in that venue having quantities
(disclosed or undisclosed) of less than 300 shares will not be
executed against the buy order even if the prices associated with
those sell orders fall within the price discretion of the buy
order.
[0040] It should be noted that although all currency amounts
described herein refer to U.S. Dollars, the invention is not
limited to U.S. Dollars and other currencies may be used as
well.
[0041] The information describing the initial order may also
include information identifying other functionality associated with
the order. For example, the initial order may be identified as a
single layer bang ("SLB") order or a multi-layer bang ("MLB")
order. SLB and MLB refer to functionality provided in Bloomberg
TRADEBOOK.RTM.. The SLB function sends orders first to the market
makers/ECNs at the inside price, until they fill or drop out, and
then to those at the next price level. MLB sends orders to market
makers/ECNs at all price levels, up to the order's limit, at the
same time.
[0042] The information mentioned above that describes the initial
order may be received by PBT System 110 from a variety of sources.
For example, this information may be received as data from another
computer.
[0043] Alternatively, the information may be provided manually by a
user. For example, PBT System 110 may present to a user at a User
System 300 a graphical user interface ("GUI"), such as GUI 101 of
FIG. 3, with which the user can interact to enter the information
describing the initial order as mentioned above.
[0044] As can be seen in FIG. 3, a user may determine from GUI 101
the trading posture of a particular financial instrument disclosed
in a Market Trading Venue 400 (e.g., Bloomberg TRADEBOOK listed as
"BRTD" in GUI 101) by viewing bid column 102 and size column 104.
Bid column 102 shows the bid price for a particular security (in
this case Qualcomm) in descending order with the corresponding lot
size for each price level displayed in column 104. Similarly, Ask
column 106 shows the asking price for a particular security in
ascending order with the corresponding lot size for each price
level displayed in column 108.
[0045] The aggregate volume of shares that may be purchased or sold
is reflected by the values in columns 105 and 109. For example, the
last entry in column 105 illustrates the sum of Qualcomm shares
looking to be purchased at the listed prices (although additional
bids may exist at lower prices). Column 109 performs a similar
function for shares that are for sale. Columns 103 and 107 list the
market makers responsible for the corresponding bids and asks.
[0046] GUI 101 also shows user controls, such as the "BUY" and
"SELL" buttons near the top of the screen. By selecting these
controls, a user would be presented with further interactive
elements, e.g., dialog boxes with further user controls (not
shown), that would enable the user to enter the information
describing the initial order mentioned above
[0047] Referring again to FIG. 2, after the information describing
the initial order is received in block 1000, the PBT System 110
determines whether the initial order should be probed, as
represented in Block 1010. For example, certain types of orders may
be excluded from probing such that when an order of that type is
received, the PBT System 110 does not perform any of the
functionality described below, but rather routes the order directly
to a predetermined venue, as represented in block 1020. For
instance, the PBT System 110 may allow users to specify certain
types of orders (e.g., pegged orders) to be excluded from probing
such that, when the PBT System 110 receives an initial order of the
specified type, the order will be routed directly to a venue
selected by the user.
[0048] In another example, due to regulatory requirements, certain
embodiments of PBT System 110 would send initial orders of certain
types directly to certain venues and would forgo sending probe
orders based on those initial orders to any venues. For instance,
where PBT System 110 is in the form of a computer capable of
routing orders to venues such as Bloomberg SSEOMS, and is not the
trading system component of a broker-dealer such as Bloomberg
TRADEBOOK.RTM., then PBT System 110 may be required to route
initial orders that are pegged orders and non-marketable orders
without discretion directly to SuperMontage.
[0049] If the initial order is not directly routed to predetermined
venue, then operation continues with block 1100 where the PBT
System 110 places one or more orders at each of one or more Market
Trading Venues 400. These orders, which may be referred to as
"probe" orders, are used to determine whether a venue has hidden
prices and/or hidden quantity, as described below. These probe
orders may be based on the initial order in that the probe orders
will be associated with the same financial instrument with which
the initial order is associated and the price and quantity of each
probe order will be derived from the price and quantity of the
initial order, as described below.
[0050] One way in which the operations represented in block 1100 of
FIG. 2 may be performed is depicted in the flowchart of FIG. 4.
First, as represented in block 1110, PBT System 110 identifies all
venues eligible for quantity probing and price probing. Quantity
probing refers to determining whether undisclosed quantity exists
at a venue that displays quantity at a particular price. Price
probing refers to determining whether undisclosed quantity exists
at a venue that is not displaying any quantity at that price.
Quantity probing and price probing are independent of each other
and can each be done separately.
[0051] In an embodiment of the invention, all Market Trading Venues
400 in which the financial instrument associated with the initial
order are traded are eligible for quantity probing. In another
embodiment, PBT System 110 may allow a user to select which venues
are eligible for quantity probing and to define the order in which
they will be probed. For example, a user may specify that INET,
ARCX, BRUT and SM are eligible for quantity probing in that
order.
[0052] In an embodiment of the invention, all Market Trading Venues
400 in which the financial instrument associated with the initial
order are traded are eligible for price probing. In another
embodiment, PBT System 110 may allow a user to select which venues
are eligible for price probing and to define the order in which
they will be probed. For example, a user may specify that NET,
ARCX, BRUT and SM are eligible for price probing in that order.
[0053] Next, PBT System 110 determines the price limit for probe
orders, as represented in block 1120. PBT System 110 determines
this price limit based on the price of the initial order and other
characteristics of the initial order that affect price.
[0054] For example, if an initial order is marketable by virtue of
its given price alone or its given price combined with a discretion
range, then the price limit for probe orders based on that initial
order may be set at the best disclosed price on the opposite
transaction side for all venues. For instance, where INET and SM
disclose offers for 300@$30.03 and 1000@$30.04, respectively, an
initial order to buy 30,000@$30.05 would be marketable. In the same
example, an initial order to buy 30,000@$30.02 with discretion of
+$0.01 and a trigger quantity of 300 or less would also be
marketable. Consequently, the price limit for probe orders based on
these initial orders would be $30.03, which is the best disclosed
price on the sell side for all venues.
[0055] In another example, if the initial order is not marketable,
then the price limit for probe orders based on that initial order
may be set at the initial order's given price or, if the initial
order has discretion, the initial order's given price combined with
the discretion range. For instance, where INET and SM disclose
offers for 300@$30.03 and 1000@$30.04, respectively, an initial
order to buy 30,000@$30.00 would be non-marketable and the price
limit for probe orders based on this initial order would be the
initial order's price of $30.00. An initial order to buy
30,000@$30.00 with a discretion of $+0.01 would also be
non-marketable and the price limit for probe orders based on this
initial order would be the initial order's price combined with the
discretion range or, in this case, $30.01.
[0056] After the price limit for probe orders is determined,
another determination may be made as to whether the initial order's
quantity is sufficient to place any quantity probes, as represented
in block 1130. As described further below, to place a quantity
probe at a given venue, the initial order's quantity must be
greater than the quantity disclosed at the venue within the probe
price limit. For example, if INET shows an offer for 3,000 at the
probe price limit of $30.03, an initial order to buy for
1,000@$30.05 would not have sufficient quantity to support a
quantity probe at this venue.
[0057] If the determination from block 1130 is negative, then
operation of PBT System 110 returns (via block 1190) to the
operations represented in block 1200 of FIG. 2, described
below.
[0058] If the determination from block 1130 is positive, then
operation of PBT System 110 continues with the operations
represented in block 1140 of FIG. 4, placing one or more quantity
probe orders at one or more Market Trading Venues 400 that were
identified as eligible for quantity probing and that have disclosed
quantity on the transaction side opposite the transaction side of
the initial order at a price within the probe price limit
previously determined. Each quantity probe order is associated with
the same financial instrument and transaction side as the initial
order, has a price matching the price of the disclosed quantity of
the venue to which the quantity probe order will be placed, and has
a quantity equal to this disclosed quantity increased by a
predetermined amount. In an embodiment of the invention, this
predetermined amount is the smallest amount of the financial
instrument tradable in the venue. For example, where the financial
instrument is a stock, this predetermined amount may be 100 shares.
Alternatively, this predetermined amount may be user
configurable.
[0059] Each quantity probe order may be placed as an immediate or
cancel ("IOC") order so that any amount of the quantity probe order
not immediately executed is canceled. Thus, the placed quantity
probe orders do not themselves create liquidity in the venues at
which they are placed.
[0060] As stated above, one or more quantity probe orders may be
placed at a given venue. For example, as described further below,
where an initial order is associated with the single layer bang
functionality of Bloomberg TRADEBOOK.RTM., only one quantity probe
order (e.g., at the probe limit price) is sent to a venue.
[0061] Also, as stated above, quantity probe orders may be placed
at one or more venues. If the initial order has sufficient
quantity, one or more quantity probe orders are sent to each Market
Trading Venues 400 in the manner described above. However, if the
initial order does not have sufficient quantity for this, then the
placement of quantity probe orders is prioritized first based on
price (e.g., where quantity probe orders are placed at various
prices such as where an initial order is associated with the
multi-layer bang functionality of Bloomberg TRADEBOOK.RTM.) and
then according to the venue order provided by the user, as
described above in connection with the operations represented by
block 1110.
[0062] In an embodiment of the invention, each venue that received
quantity probes are marked as ineligible for receiving further
probing, as represented in block 1150. Specifically, each venue so
marked is ineligible for probing at the probe price limit or less
aggressive limits (e.g., a higher limit on the sell side or a lower
limit on the buy side) until certain conditions occur. These
conditions may include, for example, (a) a venue receiving a
complete fill for a quantity or price probe order or a refire order
(described further below), or (b) a venue quoting additional
quantity at the probe price limit or a more aggressive price.
[0063] Following the placement of quantity probe orders, a
determination may be made as to whether the initial order has
sufficient remaining quantity for the placement of price probe
orders, as represented in block 1160. The threshold which the
remaining quantity must exceed for the placement of price probe
orders to take place may be a predetermined amount (e.g., 500
shares where the financial instruments being traded are stocks) or
it may be user configurable. If the determination is negative, then
operation of PBT System 110 returns (via block 1190) to the
operations represented in block 1200 of FIG. 2, described
below.
[0064] If the determination of block 1160 is positive, then
operation of PBT System 110 continues with the operations
represented in block 1170, with placing a price probe order at one
or more Market Trading Venues 400 that were identified as eligible
for price probing and that have no disclosed quantity on the
transaction side opposite the transaction side of the initial order
at a price within the probe price limit previously determined. Each
price probe order is associated with the same financial instrument
and transaction side as the initial order, has a price at the probe
price limit, and has a quantity of a predetermined amount. In an
embodiment of the invention, this predetermined amount is the
smallest amount of the financial instrument tradable in the venue.
For example, where the financial instrument is a stock, this
predetermined amount may be 100 shares. Alternatively, this
predetermined amount may be user configurable. In addition, each
price probe order may be placed as an IOC order.
[0065] Also, as stated above, price probe orders may be placed at
one or more venues. If the initial order has sufficient quantity,
price probe orders are sent to each Market Trading Venues 400 in
the manner described above. However, if the initial order does not
have sufficient quantity for this, then the placement of price
probe orders is prioritized according to the venue order provided
by the user, as described above in connection with the operations
represented by block 1110.
[0066] In an embodiment of the invention, each venue that received
price probes are marked as ineligible for receiving further
probing, as represented in block 1180. Specifically, each venue so
marked is ineligible for probing at the probe price limit or less
aggressive limits until certain conditions occur, such as those
mentioned above in connection with block 1150.
[0067] Following the operations represented in block 1180,
operation of the PBT System 110 returns (via block 1190) to the
operations represented in block 1200 of FIG. 2, described
below.
[0068] Although, in the embodiment of the invention shown in FIG.
4, quantity probe orders are placed prior to the placement of price
probe orders, this order is not required and in other embodiments
of the invention the order in which quantity probe and price probe
orders are placed may be reversed.
[0069] Returning to FIG. 2, following the placement of probe
orders, the quantity remaining of the initial order is quoted, as
represented in block 1200. For example, where PBT System 110 is the
computerized trading system of a broker-dealer, such as Bloomberg
TRADEBOOK.RTM., the remaining quantity of the initial order may be
quoted on this system and may be given known trading
characteristics, e.g., known anti-lock and display/reserve
settings.
[0070] Then, for each quantity or price probe order that is
completely filled (e.g., executed for the full amount of the probe
order), PBT System 110 automatically places another order (which
may be referred to as a "refire" order) at the same venue in which
the respective probe order was executed if the initial order has
sufficient remaining quantity, as represented in block 1300. The
refire order is given the price at which the respective probe order
was executed. Also, the refire order is given a predetermined
quantity (e.g., 10,000 shares if the financial instruments being
traded are equities) up to the remaining quantity of the initial
order. In an embodiment of the invention, this predetermined amount
is user configurable.
[0071] Then, as represented in block 1400, for each previously
placed refire order that is completely filled, PBT System 110
automatically places another refire order at the same venue in
which the earlier refire order was executed if the initial order
has sufficient remaining quantity. This subsequent refire order is
given the same price as the previously executed refire and is given
a quantity that is the greater of a predetermined amount (e.g.,
10,000 shares) or an amount calculated based on the previous
execution (e.g., twice the amount filled for the previous refire
order) up to the remaining quantity of the initial order. In an
embodiment of the invention, the predetermined and calculated
amounts may be user configurable.
[0072] The operations represented in block 1400 may repeat for as
long as the initial order has remaining quantity.
[0073] In an embodiment of the invention, the operations
represented in blocks 1100, 1200, 1300 and 1400 of FIG. 2 may be
repeated for different price levels. For example, if an initial
order is associated with the single layer bang functionality of
Bloomberg TRADEBOOK.RTM., after the operations represented in
blocks 1100, 1200, 1300 and 1400 were performed for a first price
level, they may be performed again for the next price level, and so
on until they are finally performed for the price given to the
initial order.
[0074] The probing logic described above may be restarted under
certain circumstances. Specifically, the probing logic may be
restarted under the following conditions: (a) the price of the
initial order is modified (e.g., by the user) to be more aggressive
(e.g., higher for a bid or lower for an offer); (b) the initial
order had no remaining quantity and is modified by adding quantity;
or (c) the initial order is associated with single layer bang
functionality of Bloomberg TRADEBOOK.RTM. or has discretion and the
National Best Bid or Offer ("NBBO") changed to make the initial
order's price more aggressive.
[0075] Where the initial order is a non-marketable order with
discretion, the probing logic described above may be restarted
under the following conditions: (a) the discretion limit becomes
more aggressive (either though user modification or due to a pegged
order); (b) the opposite side of the NBBO becomes more aggressive
or has its displayed size increased; (c) a predetermined time
period (the predetermined time period may be user configurable) has
elapsed (e.g., 5 seconds); or a trade executes within the initial
order's discretion limit.
[0076] The concepts described above are further illustrated in the
following example:
EXAMPLE
[0077] In this example, PBT System 110 is Bloomberg TradeBook.
[0078] The offer side of a TradeBook trading screen shows INET
1000@30.03, SM 1000@30.04
[0079] Time Event
[0080] 10:30:00 [0081] BUY order entered on TradeBook for
30000@30.05 SLB [0082] Oversize 1100 to INET, probe 100 to ARCX and
100 to SM, all at 30.03 [0083] Set SM and ARCX to non probable from
10:30:00 at limit 30:03 [0084] Quote 28700 from the initial order
on TradeBook using standard anti-lock and display/reserve
settings.
[0085] 10:30:00.1 [0086] SM returns a fill for 100@30.03 [0087]
Decrement quote from 28700 to 18700 [0088] Refire 10,000@30.03 to
SM [0089] Set SM to non probable from 10:30:00.1 at limit 30.03
[0090] 10:30:00.2 [0091] INET fills for 1000 [0092] This is a
partial fill, and the initial order has quantity remaining, so the
probe logic is not restarted again. [0093] Increment the quote
(e.g., initial order) from 18700 to 18800.
[0094] 10:30:00.3 [0095] ARCX rejects 100 shares [0096] The initial
order has remaining quantity, so the probing logic is not restarted
again.
[0097] 10:30:00.4 [0098] ARCX enters a quote at 1000@30.03 [0099]
Reset ARCX to be probable. [0100] Decrement the quote from 18800 to
17700. [0101] Oversize 1100@30.03 to ARCX
[0102] While the invention has been described and illustrated in
connection with preferred embodiments, many variations and
modifications as will be evident to those skilled in this art may
be made without departing from the spirit and scope of the
invention, and the invention is thus not to be limited to the
precise details of methodology or construction set forth above as
such variations and modifications are intended to be included
within the scope of the invention. Except to the extent necessary
or inherent in the processes themselves, no particular order to
steps or stages of methods or processes described in this
disclosure, including the Figures, is implied. In many cases the
order of process steps may be varied without changing the purpose,
effect or import of the methods described.
* * * * *