U.S. patent application number 14/816163 was filed with the patent office on 2016-01-21 for automated trading system.
The applicant listed for this patent is EBS GROUP LIMITED. Invention is credited to Edward R. Howorka, Leong Fai Mah, Snezhana Malkin, Tracey Riordan, Steven J. Scully, Karen Ilse Setz, James Sinclair.
Application Number | 20160019645 14/816163 |
Document ID | / |
Family ID | 30769919 |
Filed Date | 2016-01-21 |
United States Patent
Application |
20160019645 |
Kind Code |
A1 |
Setz; Karen Ilse ; et
al. |
January 21, 2016 |
Automated Trading System
Abstract
A computer trading system includes a quote screening function
configured to accept quotes specifying a quote amount in a price
where the quote amount is greater than a minimum quote amount to
produce screen quote messages and to reject quotes specifying a
quote amount less than the minimum quote amount. A market view
generator generates market views from those quotes which specify an
amount greater than or equal to the minimum quote amount. An order
screening function only accepts orders specifying an amount less
than a maximum transaction amount submitted in response to the
market views to produce screened order messages. A transaction
processor receives screened quote messages and screened order
messages and matches appropriate messages with each other. The
minimum quote amount is substantially equal to or greater than the
maximum transaction amount whereby a screened order message can be
matched entirely with one screened quote message.
Inventors: |
Setz; Karen Ilse;
(Tarrytown, NY) ; Malkin; Snezhana; (Morris
Plains, NJ) ; Mah; Leong Fai; (Bridgewater, NJ)
; Scully; Steven J.; (Chatham, NJ) ; Riordan;
Tracey; (Bernardsville, NJ) ; Howorka; Edward R.;
(Morris Plains, NJ) ; Sinclair; James; (New York,
NY) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
EBS GROUP LIMITED |
London |
|
GB |
|
|
Family ID: |
30769919 |
Appl. No.: |
14/816163 |
Filed: |
August 3, 2015 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
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13487306 |
Jun 4, 2012 |
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14816163 |
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Current U.S.
Class: |
705/37 |
Current CPC
Class: |
G06Q 40/06 20130101;
G06Q 40/04 20130101; G06Q 40/00 20130101; G06Q 20/10 20130101 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. A method of matching instruments between counterparties in a
computerized trading system having one or more computers, the
method comprising: receiving quotes specifying a quote amount and a
quote price; identifying, from the received quotes, quotes that
specify the quote amount greater than a minimum quote amount, and
producing screened quote messages from the identified quotes;
generating market views from the screened quote messages using a
processor; distributing the market views to one or more users of
the trading system; receiving orders after distribution of the
market views, each order specifying an order amount and an order
price; screening the received orders so as to produce screened
order messages comprising only those received orders specifying the
order amount less than a maximum order amount; and matching
screened order messages with appropriate screened quote messages,
wherein the minimum quote amount is substantially equal to or
greater than the maximum order amount.
2. The method according to claim 1, further comprising: modifying
each screened quote message when an order message is matched
therewith by decrementing the quote amount specified in each
screened quote message; and removing each screened quote message
from the market views when the quote amount specified in each
screened quote message is less than the minimum quote amount.
3. The method according to claim 1, wherein the order screening
rejects orders specifying an order amount greater than the maximum
order amount.
4. The method according to claim 1, wherein the order screening
segments an order specifying an order amount greater than the
maximum order amount into at least a first reduced value order and
a second reduced value order each specifying an order amount which
is less than the maximum order amount.
5. The method according to claim 4, wherein the matching of
screened order messages comprises matching the screened order
message derived from the first reduced value order with an
appropriate screened quote message.
6. The method according to claim 4, wherein the order screening
rejects at least the second reduced value order.
7. The method according to claim 5, wherein the matching of
screened order messages matches the at least second reduced value
order with the appropriate screened quote message.
8. The method according to claim 1, further comprising: storing the
screened quote messages in a quote available store; decrementing
the quote amount specified in a given screened quote message in the
quote available store each time a screened order message is matched
therewith; and removing the given screened quote message from the
quote available store when the quote amount specified in that given
screened quote message falls below the minimum quote amount.
9. The method according to claim 8, wherein matching of screened
order messages comprises matching order messages only with those
quote messages stored in the quote available store.
10. The method according to claim 1, wherein the screening of
quotes is performed, at least in part, on each of a plurality of
trader terminals such that quotes specifying an amount less than
the minimum quote amount are not transmitted to the trading
system.
11. The method according to claim 8, wherein the quotes specifying
an amount less than the minimum quote amount are removed from the
quote available store.
12. A computer readable storage medium having stored thereon
program code which, when executed on a computer trading system for
matching instruments causes the computer to: receive quotes
specifying a quote amount and a quote price; identify, from the
received quotes, quotes specifying the quote amount greater than a
minimum quote amount, and produce screened quote messages from the
identified quotes; generate market views from the screened quote
messages using a processor; distribute the market views to one or
more users of the system; receive orders after distribution of the
market views, each order specifying an order amount and an order
price; screening the received orders so as to produce screened
order messages comprising only those received orders specifying the
order amount less than a maximum order amount; and matching the
screened order messages with appropriate screened quote messages,
wherein the minimum quote amount is substantially equal to or
greater than the maximum order amount.
13. The computer readable storage medium according to claim 12,
wherein the computer further: modifies each screened quote message
when an order message is matched therewith by decrementing the
quote amount specified in each screened quote message; and removes
each screened quote message from the market views when the quote
amount specified in each screened quote message is less than the
minimum quote amount.
14. The computer readable storage medium according to claim 12,
wherein the order screening rejects orders specifying an order
amount greater than the maximum order amount.
15. The computer readable storage medium according to claim 12,
wherein the order screening segments an order specifying an order
amount greater than the maximum order amount into at least a first
reduced value order and a second reduced value order each
specifying an order amount which is less than the maximum order
amount.
16. The computer readable storage medium according to claim 15,
wherein the matching of screened order messages comprises matching
the screened order message derived from the first reduced value
order with an appropriate screened quote message.
17. The computer readable storage medium according to claim 15,
wherein the order screening rejects at least the second reduced
value order.
18. The computer readable storage medium according to claim 16,
wherein the matching of screened order messages matches the at
least second reduced value order with the appropriate screened
quote message.
19. The computer readable storage medium according to claim 12,
wherein the computer further: stores the screened quote messages in
a quote available store; decrements the quote amount specified in a
given screened quote message in the quote available store each time
a screened order message is matched therewith; and removes the
given screened quote message from the quote available store when
the quote amount specified in that given screened quote message
falls below the minimum quote amount.
20. The computer readable storage medium according to claim 19,
wherein matching of screened order messages comprises matching
order messages only with those quote messages stored in the quote
available store.
21. The computer readable storage medium according to claim 19,
wherein the quotes specifying an amount less than the minimum quote
amount are removed from the quote available store.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] The present application is a continuation of application
Ser. No. 13/487,306, filed Jun. 4, 2012, which is a continuation of
application Ser. No. 10/202,827, filed Jul. 26, 2002, and issued as
a U.S. Pat. No. 8,209,254, issue date Jun. 26, 2012, the entire
contents of which are incorporated herein by reference.
FIELD OF THE INVENTION
[0002] This invention relates to an automated trading system. In
particular, the automated trading system allows subscriber parties
to buy and sell instruments in a single transaction up to a
predefined maximum value. Typically, but not exclusively, the
automated trading system may be used to enable spot foreign
exchange dealing with a maximum transaction value of approximately
1 million currency units (e.g. $1 million, in the case of USD/JPY
and EUR 1 million in the case of EUR/USD)
BACKGROUND OF THE INVENTION
[0003] In the financial exchange market, smaller and regional banks
frequently conduct foreign exchange deals for small amounts of
currency, for example up to approximately 1 million units,
(so-called Asmalls.RTM. transactions) with larger or global banks.
When dealing with transactions of this type, the party wishing to
buy or sell the currency (the Amarket User.RTM.) has to obtain
Aquoteso for current bid and/or offer prices from a number of
larger players (Amarket Makers.RTM.) who deal in that particular
currency in order to try to obtain an optimal price. The market
user responds to a quote by submitting an Aorder.RTM. to buy or
sell. If the market user is not prepared to conclude the
transaction immediately, he cannot guarantee that a particular
quote will remain valid whilst he checks with other market makers
to try to locate the best deal. We have appreciated that a
considerable volume of direct dealing conducted on a daily basis is
smalls transactions. The number of market users conducting these
deals and the number of deals transacted per day is high. Although
the amount generated by such smalls business is generally only a
relatively small proportion of the overall business conducted by
market makers, it requires a larger proportion of dealer time than
some larger value business transactions. This makes the known
trading systems inefficient. The transaction process is time
consuming and inefficient for the market makers who have to respond
to a large number of requests for bid/offer prices on an ad hoc
basis and only achieve a modest amount of business on such smalls
transactions compared to their overall turnover. The overhead per
transaction for both the market users and market makers is
therefore high and the satisfaction rate low.
[0004] U.S. Pat. No. 5,375,055 teaches a computerized trading
system for trading of financial instruments between traders trading
at a plurality of trading floors. The trading system provides for
composite transactions where, in order to fulfill a taker deal, the
transaction is executed between the taker and a plurality of
makers. For small value trades, this system becomes impractical,
requiring complicated and unnecessary processing.
[0005] We have appreciated the problem of encouraging submission of
quotes for trading whilst avoiding the technical difficulty of
increased unwanted message flow.
SUMMARY OF THE INVENTION
[0006] The automated trading system of the present invention aims
to overcome or ameliorate these disadvantages.
[0007] The invention resides in two broad aspects. First,
constraints are placed on the amount of an instrument that can be
specified in a quote or an order. This is used to encourage trading
whilst avoiding the generation of too many quote or order messages
which could not match, unnecessarily degrading performance of the
system.
[0008] Second, users are categorized and constraints placed on the
matching of quotes and orders depending upon the categorization of
the user. This again encourages trading whilst preventing unwanted
matching between certain categories of user, which again could
degrade performance of the system.
[0009] The invention thus resides in providing an automated trading
system for simplifying the execution of limited value transactions
between parties subscribing to the system.
[0010] It further resides in providing an automated trading
environment using an automated trading system to execute
transactions valued below a maximum transaction value between
subscriber parties located in different geographical locations and
using different computer equipment and network connections.
[0011] More specifically, in the first aspect the invention resides
in a computer trading system for trading instruments between
counterparties of the type in which quotes to bid or offer
instruments are matched with orders to buy or sell instruments,
comprising: [0012] a quote screening function configured to accept
quotes specifying a quote amount and a price where the quote amount
is greater than a minimum quote amount to produce screened Quote
Messages, and to reject quotes specifying a quote amount less than
the minimum quote amount; [0013] a market view generator configured
to generate market views from those quotes which specify an amount
greater than or equal to the minimum quote amount; [0014] an order
screening function configured to only accept orders specifying an
amount less than a maximum transaction amount submitted in response
to the market views to produce screened order messages, and [0015]
a transaction processor configured to receive screened Quote
Messages and screened order messages and to match the screened
order messages with appropriate screened Quote Messages.
[0016] Preferably, in the first aspect the minimum quote amount is
substantially equal to or greater than the maximum transaction
amount, whereby a screened order message can be matched entirely
with one screened Quote Message. This ensures that any order to
buy/sell can be completed in a single transaction with a matching
quote to bid/offer.
[0017] Preferably, in the first aspect the market view generator is
arranged: [0018] to modify each screened Quote Message when an
order message is matched therewith by decrementing the amount
specified in each screened Quote Message, and [0019] to remove each
screened Quote Message from the market views when the amount
specified in each screened Quote Message is less than the minimum
quote amount.
[0020] This feature further ensures that, as quotes are matched,
only quotes which can match with an order in a single transaction
remain available.
[0021] A further preferred feature in the first aspect is that the
order screening function is further configured to segment an order
specifying an amount greater than the maximum order amount into a
first reduced value order specifying an amount which is less than
the maximum order amount to produce a screened order message and at
least a second reduced value order. This feature ensures that any
order entered can be matched, at least in part, with a quote in a
single transaction, thereby increasing transactions whilst avoiding
flows of non-matching quote/order messages.
[0022] Preferably, in the first aspect the transaction processor is
configured: [0023] to store screened Quote Messages in a quote
available store; [0024] to decrement the amount specified in a
given screened Quote Message in the quote available store each time
a screened order message is matched therewith; and [0025] to remove
the given screened Quote Message from the quote available store
when the amount specified in that given screened Quote Message
falls below the minimum quote amount.
[0026] This ensures, together with features discussed above, that
only Quote Messages which can be matched with order messages in a
single transaction are made available in the system.
[0027] In the second aspect of the invention, the invention resides
in a computer trading system for trading instruments between
parties of the type in which quotes to bid or offer instruments are
matched with orders to buy or sell instruments, comprising: [0028]
a user parameter store arranged to store a user category parameter
specifying whether each party is categorized as a market maker or
market user; and [0029] a transaction processor arranged to prevent
parties categorized as market users from submitting quotes.
[0030] The invention offers market makers and market users the
opportunity to earn from the Asmalls.RTM. market where banks are
less price sensitive and to do this with minimal dealer
intervention. It also offers market makers the opportunity to turn
nuisance business into revenue generating activity and market users
the ability to cover small amounts quickly and conveniently in
conveniently sized units, whilst avoiding degrading system
performance.
BRIEF DESCRIPTION OF THE DRAWINGS
[0031] Embodiments of the present invention will now be described
with reference to the accompanying drawings of which:
[0032] FIG. 1 is a logical diagram of a computer trading system
embodying the invention;
[0033] FIG. 2 is a logical diagram of a maker floor of the computer
trading system;
[0034] FIG. 3 is a logical diagram of the computer trading system
showing message flow;
[0035] FIG. 4 is a logical diagram of the computer trading system
showing the key functional components; and
[0036] FIGS. 5a & 5b are flow charts showing the functions
performed by the automated trading system during a transaction.
DESCRIPTION OF BEST MODE
[0037] In a limited value, or Asmalls.RTM., transaction system, a
number of parties wish to trade instruments. The embodiment of the
computer trading system which will now be described enables spot
dealing of foreign currencies. In this description the terms
computer trading system or automated trading system are used to
describe the system as a whole. The term Atrading System.RTM. is
used to refer to a subset of the whole system. It will be
immediately apparent that the invention could be used to trade any
instrument where the maximum transaction value for a single
transaction is limited.
[0038] Before the functional elements of the automated trading
system and their location are described in detail, a brief overview
of the computer trading system will be given.
[0039] Transaction prices are determined by market makers who offer
to sell currencies at Abid.RTM. prices and/or offer to buy
currencies at Aoffer.RTM. prices (jointly termed Aquote
Prices.RTM.). The bid and offer prices are specified by currency
pairs, for example GBP/USD. The market makers may specify bids
and/or offers for any number of currency pairs by submitting
suitable Aquotes.RTM.. Quotes include at least a quote price, an
amount indicating the value of the instrument that they are
prepared to deal, and preferably include data identifying the
currency pair and transaction type. Parties wishing to use the
automated trading system will be required to subscribe to the
service provider. Market makers may be entitled to subscribe free
to the automated trading system whilst market users (or takers)
would be charged a standard fee for their subscription and also
charged per transaction (corresponding to a brokerage fee).
Subscribing parties are categorized as market makers or market
users depending on whether they are making the market or merely
trading at prices set by the market Makers. Additionally, a
subscribing party may be categorized as both a market maker and a
market user and may be allowed both to submit quotes to the trading
system and react to submitted quotes in an attempt to execute a
transaction.
[0040] Market makers are typically large banks but may, for example
in` the case of specialist markets, be a smaller or small bank
responsible say for making the market in a niche currency. Market
users similarly are typically smaller or small banks but may be
individual companies or large banks trading in an under used
instrument. Market users do not set the prices of bids and/or
offers available via the automated trading system but only react to
those prices submitted to the system by market makers.
[0041] An important aspect of the automated trading system is that
a maximum transaction amount for a single transaction is rigidly
imposed. Typically the maximum transaction amount is set at a value
of 995,000 currency units (e.g. United States Dollars or USD). A
market maker submitting a quote must indicate how many currency
units he is prepared to trade at the quote price (the Aquote
Amount.RTM.). Quotes offered by market makers are only used by the
system as a whole if they are associated with an amount which is at
least as large as the minimum quote amount which is preferably
substantially equal to the maximum transaction amount imposed by
the automated trading system. Thus, at least one transaction with a
market user is possible for each market maker price seen by a
market user. There is, therefore, never a requirement for the
automated trading system to Awork the Balance.RTM., that is to find
a second Maker to pick up an outstanding amount of a single
transaction.
[0042] Market makers who submit quotes specifying a higher amount
benefit when a number of transactions are executed without any
intervention from a dealer at the market maker. Preferably, the
minimum quote amount specified in a quote accepted by the automated
trading system is 1 unit larger than the maximum transaction amount
imposed by the system.
[0043] Typically, the minimum amount acceptable in a quote is
1,000,000 dollars.
[0044] Transactions are indicated by market users submitting an
order specifying an amount and identifying an instrument and price
which together specify the deal that they wish to enter into. If a
market user tries to initiate a transaction for more than the
maximum transaction amount accepted by the automated trading
system, the order request may be handled by the system in one of
three ways. Firstly, the system may simply reject the order request
outright. Secondly, the system may segment the order request into a
first portion specifying an amount less than or equal to the
maximum transaction amount, match the first portion with the
appropriate market maker quote and reject a second portion
specifying the remaining amount. Thirdly, the system may operate as
described above in the second manner except that instead of
summarily rejecting the second portion, it may either try to match
that portion with the same or another market maker quote or pass
the second portion to a subsidiary system for possible automatic
processing. The system may be configured to restrict matching of
the various portions of the oversize order to a single market maker
quote thereby constraining all the component parts of the single
oversize order to be transacted between a single market maker and
the market user.
[0045] The automated trading system is equipped with a credit
management system which ensures that market users are only able to
view prices from market makers with whom they are authorized to
enter into transactions. Authorization to enter into transactions
is monitored by way of bilateral credit ratings maintained by a
credit management system. When sufficient bilateral credit is
available between market user/market maker counterparties, the
market maker=s price quote is included in the generation of a
market user specific Market User View. This reduces instances where
a market user Dealer views a price which he is unable to
obtain.
[0046] In the computer trading system incorporating a preferred
embodiment of the invention, the system functionality is split over
a number of separate, but interconnected, logical components
indicated in FIG. 1. A brief description of the interconnection of
the various components within the computer trading system follows.
Details of the functionality of the automated trading system and
where the various functionality resides in the automated trading
system is described later.
[0047] The computer trading system 2 provides a plurality of
workstations 10 at trading floor 11 of the various market maker and
market user parties subscribing to the service provider operating
the trading system. The workstations of a trader are
bi-directionally coupled to a trading system 13. The trading system
13 is that part of the whole computer trading system which deals
with matching of quotes and orders and distribution of market views
and includes at least one Broker Node (BN) 12. Broker Nodes 12 are
physically hosted by the `respective party and may hold proprietary
information not for general circulation to other subscribers of the
automated trading system. All communication between the automated
trading system and market maker and market user workstations is
routed through the appropriate Broker Node 12.
[0048] A BN 12 is typically a dedicated client side computer under
control of a client floor administrator. A BN 12 maintains
transaction records, credit limit information for any number of
parties with whom the subscriber is prepared to trade and any other
confidential information associated with the trading floor. A
market maker BN 12 accepts submitted quotes. Under the control of
the central city node 18, a BN 12 imposes restrictions on the type
of data message that may be passed to and received from the
automated trading system, for example, by preventing market users
from submitting quotes.
[0049] The service provider defines cells covering specific
geographic locations. Each separate geographic location is provided
with a City Node (CTY) (here shown combined with the central node
for simplicity). A CTY acts as an information router. Broker nodes
are bi-directionally coupled via a suitable network to the
appropriate CTY. Thus a CTY may communicate with a plurality of
Broker Nodes 12 but a Broker Node communicates with only one
CTY.
[0050] The automated trading system is provided with at least one
Arbitrator Node (ARB) 16. For simplicity, only one ARB 16 is shown
in FIG. 1 and the following description assumes that a single ARB
16 is provided. The function of the ARB 16 is to perform high level
processing of data originating from a plurality of Broker Nodes 12
covering a plurality of cells and to distribute this information
across the automated trading system. The ARB 16 is therefore
coupled via a suitable network to the plurality of Broker Nodes 12
and to the plurality of CTYs.
[0051] A central node (CNL) 18 is also provided in the trading
environment. The CNL 18 is bi-directionally coupled to the ARB 16
and indirectly coupled to the Broker Nodes 12 via the network of
CTYs 14. The CNL stores information on the system parameters of the
automated trading system.
[0052] FIG. 2 shows the logical elements of a maker floor. A
trading floor comprises a number of workstations 10 logically
connected together so as to provide traders of a particular concern
(e.g. bank) to trade with traders at other trading floors
(typically other banks). In this case, the trading floor is
categorized as being for makers, that is for traders that submit
quotes.
[0053] In addition to manually submitting quotes, a price engine 26
is provided which allows prices to be fed from other systems and to
be converted to quotes at workstations 11. The actual
implementation of the conversion of price feeds to quotes is not
required to be discussed herein. It is simply noted that some
workstations at maker trading floors 11 may have this functionality
and that this will be used as part of user categorization discussed
later. The quotes derived from prices at the workstations are
provided to the trading system 13 as previously described, but may
be identified as being automatically derived from a price feed.
[0054] FIG. 3 shows the overall message flow between separate
logical components. The price engine 26 of a maker trading floor
provides prices messages 40 to a workstation designated as a maker
workstation 11. The price messages are then converted to quotes at
the maker workstation and are transmitted to the trading system 13
as quote order messages 44. The trading system provides market data
42, 46 to maker and taker workstations in the whole system
providing market views. The market views include prices of the
instrument to be traded and also an instrument type where the
system can trade more than one instrument. In response to a price
of quote displayed in a market view, a trader at a taker
workstation may submit an order, which is transmitted to the
trading system 13 as a transaction order message.
[0055] FIG. 4 is intended to aid description of the functional
elements of the automated trading system. The various functional
elements are, in the presently preferred embodiment, distributed
between, and in some cases over, the various components shown in
FIG. 1.
[0056] In FIG. 4 market maker and market user subscribers to the
automated trading system connect to a communication network 20 via
Broker Nodes 12 to which the trader workstations 10 are coupled.
The network may be a Virtual Private Network (VPN), LAN or WAN or
the Internet, World Wide Web. The trading system 13 is connected to
the network 16 at a point in the network which is conceptually
between the market user workstations and the market maker
workstations.
[0057] The functional elements of automated trading system 22
include quote screening means (for example a quote screening
function 24), market view means (for example a market view
generator 28), matching means (for example a transaction processor
30) and order screening means (for example order screening function
32).
[0058] Communication of all prices from market makers to market
users occurs through and is controlled by>the trading system 13
part of the whole computer trading system 2. Routing of signals to
and from functional elements (and to and from the network 20) is
controlled by the trading system 13.
[0059] The automated trading system 13 receives data signals or
AMessages.RTM. from market maker workstations and market taker
workstations. These signals are fed to the appropriate functional
elements, or components, of the trading system where they are
processed and appropriate responses are communicated to the market
makers and market users via the network.
[0060] Details of the functional elements of the automated trading
system will now be described in more detail.
[0061] Quote Screening Function
[0062] The quote screening function 24 receives all quotes
submitted to the automated trading system. The purpose of the
screening function 28 is to screen all quotes and to reject quotes
specifying an amount which is lower than the minimum quote amount
imposed by the automated trading system. Quotes specifying an
amount equal to or greater than the minimum quote amount are passed
as screened Quote Messages from the screening processor to the
market view generator. As soon as the specified amount associated
with a quote in the screened Quote Message falls below the minimum
quote amount, the Quote Message is rejected. This may occur from
the outset if the quote submitted by the market maker initially
specifies an amount less than the minimum quote amount or may occur
after one or more transactions have been executed such that the
amount has been decremented to take account of any executed
transactions and in doing so has fallen below the minimum quote
amount.
[0063] The functionality of the quote screening function is
provided by the workstation which receives the quote provided by a
trader on a direct feed and conducts the initial check that the
quote satisfies the minimum quote amount. The functionality of the
quote screening function is also provided by the broker nodes 12
which verify that the minimum quote amount is met. The CNL 18
provides for configuration of system parameters such as the type of
trading floor (whether a particular party is a market maker, a
market user or both), the minimum amount for which quotes will be
accepted (which may be more than the maximum transaction amount but
will not be less than the maximum transaction amount) and maximum
transaction amount itself. These parameters define the scope of
transactions permitted by the automated trading system. Data
signals containing the parameter for the minimum quote amount are
communicated to the ARB 16 from the CNL 18. The ARB 16 monitors the
size of the amount specified in each Quote Message and removes a
Quote Message if and when the amount falls below the minimum quote
amount. Thus the ARB also provides some quote screening
functionality.
[0064] When a Quote Message is rejected by the quote screening
processor, the ARB communicates a Quote Rejection Message to the
market maker Broker Node (MBN) responsible for the Quote Message.
The MBN generates an error message which is used to alert the floor
administrator that a quote has been rejected by the automated
transaction system because the amount specified in the quote was
below the minimum quote amount set by the automated trading
system.
[0065] The screening processor 24 may additionally normalize all
Quote Messages to ensure that they conform to the automated trading
system standard. Normalization may be performed before or after
screening the quote to confirm that the specified amount is greater
than the minimum quote amount. Normalization is achieved by
recognizing different formats for the same transaction type and
instrument and converting the data to a standard format.
[0066] Market View Generator
[0067] The function of the market view generator 28 is to generate,
for each market user, a Market user View which is communicated to
the market user over the network. The market view generator 28 is
coupled to the quote screening function 24. Market User Views must
include enough information for the market user to decide whether or
not he wishes to deal on the specified terms. The Market User Views
may be market maker prices or alternatively, could be more
sophisticated indicating for example how far a market maker price
is from a given price.
[0068] Only Quote Messages which specify an amount of at least
minimum quote amount which is greater than the maximum transaction
amount (whether manually entered by a market maker dealer or
automatically generated) are communicated to the market view
generator 28 by the quote screening function 24. Hence, the Market
User Views only include prices which are valid for transactions of
at least the minimum quote amount on hence the maximum transaction
value. This in turn means that the automated trading system is
never required to Awork the Balance.RTM. of a transaction because
at least one transaction is possible for each Screened Quote
Message received by the market view generator 28. Any trade
executed by the automated trading system will, therefore, be
conducted between a single maker and a single market user.
[0069] The functionality of the market view generator 28 is
provided by the ARB 16 in conjunction with bi-lateral credit
information held at both market maker and market user Broker Nodes
12 which is communicated to the ARB 16. The generated Market User
Views are distributed to the respective market users by the CTYs
18.
[0070] The market view generator is preferably configured to
generate for each market user a Customized Market User View.
Customization may take account of the subscription type of the
market user. For example, one subscription type may entitle market
users to view an anonymous price for a smalls deal whilst another
type of subscription may entitle market users to view the prices of
a number of market makers with details of which price is being
quoted by which market maker. This requires two types of Market
User View, Dealable Prices and Executable Price Lists. Both are
generated by the price feed generator.
[0071] A ADealable Price.RTM. is the best price for the particular
instrument/trade type (i.e. buy or sell) being offered by any
market maker. Preferably the Dealable Price is restricted to the
best price for the particular instrument offered by a market maker
with whom the market user is authorized to transact. A Dealable
Price Message does not contain any information regarding the market
maker offering the price and is, therefore, anonymous.
[0072] To generate a Dealable Price, the market view generator
compares quote prices provided in Quote Messages for an instrument
and selects the best price. The Dealable Price is communicated to
the respective market user workstation where it is displayed.
[0073] The market user workstation may be capable of displaying
Dealable Prices for a number of different currency pairs. A market
user dealer may select, from a list on the display, which currency
pair Dealable Price he wishes to view. The market user sees only
one Dealable Price per transaction type. A market user may, for
example, view one Dealable Price each for buying GBP/JPY, selling
GBP/JPY and for buying USD/JPY and will see a total of 3 Dealable
Prices.
[0074] As Quote Messages specifying an amount less than the minimum
quote amount and hence the maximum transaction value are rejected,
at least one market user will theoretically be able to complete a
transaction at any Dealable Price. All smalls transactions
conducted using the automated trading system will be conducted
between two parties in a single hit transaction.
[0075] The automated trading system may be configured to provide
market users who regularly conduct large amounts of smalls
transactions access to prices for a certain currency pair from a
number of market makers as shown in FIG. 3. The market users for
whom this service is available are identified by the market view
generator 28 causing the market view generator 28 to generate an
Executable Price List by incorporating a number of the prices
rather than selecting the best price.
[0076] Transaction Function
[0077] The transaction function 30 is configured to receive Order
Messages submitted to the automated trading system 22 by market
users wishing to initiate a trade at a price quoted by a market
maker. It resides at the ARB 16 and matches market user Order
Messages to market maker Quote Messages. In conjunction with the
market maker and market user Broker Nodes 12 of the relevant
counterparties, it verifies and completes the trade.
[0078] It is possible that several Order Messages are received from
one or more market users in response to a single Quote Message and
that the total transaction amount of all the Order Messages would
exceed the amount specified in the Quote Message. If this is the
case, the automated trading system 10 recognizes that there are
conflicting Order Messages. It selects one or more Order Messages
for execution. A warning is sent to market users of the remaining
Order Messages that the quote price was withdrawn prior to their
Order Message being processed.
[0079] Order Messages which are selected may ultimately result in a
trade being executed between the market maker and market user
counterparties and the trade being recorded by the automated
trading system 22. The transaction function may, or may not,
execute further checks on the credit status of one or both parties
before it finally clears a matched Order Message and Quote Message
for a trade execution. Once a transaction has been executed,
Transaction Confirmation Messages are generated by the transaction
processor and communicated to both the market maker and market user
counterparties. Details of the transaction may be printed at the
market maker and market user. The bilateral credit between the
counterparties is amended as necessary and the amount specified in
the Quote Message of the market maker is decremented by the amount
of the executed trade. The adjusted Quote Message is rescreened and
rejected if the amount specified has fallen below the minimum quote
amount.
[0080] The automated trading system 22 may also store a limit on
the number of deals per day for a market maker with a particular
market user, a maximum market maker credit limit for each market
user and/or a maximum market maker debit limit for each currency
pair and any appropriate running totals. When a running total
reaches the maximum credit limit, the transaction processor 30 may
prevent execution of a transaction between the two parties.
[0081] The ARB 16 performs the function of the transaction
function, matching market maker Quote Messages with market user
Order Messages.
[0082] Order Screening Function
[0083] The amount specified in an order is constrained to be below
a maximum transaction amount. Initially this function is provided
by the market user workstation.
[0084] The value of trades permitted by the automated trading
system may be also constrained to discrete values, for example, the
minimum trade may be 5000 units and trades sizes of 5000 units
intervals only (i.e. 10,000, 15,000 etc.) may be allowed. These
detailed system parameters are stored by the CNL and accessed as
required by, or transferred to, the ARB 16. The ARB 16 rejects
Order Messages which request a trade of an unsupported amount. If a
submitted Order Message is unsupported by smalls, for example if
the size of the trade is greater than the maximum trade size
supported by the smalls system or if the size of the transaction
specified is a non-standard size it is advisable that the market
user is alerted. The ARB 16 generates an error message which is
communicated to the particular market user BN to alert the market
user floor administrator, or particular work station user that the
automated trading system cannot accept the Order Message.
[0085] In an alternative embodiment, the automated trading system
may be configured to process partial amounts of Order Messages
where the amount specified is greater than the maximum transaction
value of the Smalls System. In such an embodiment, the
Aoversized.RTM. Order Message (specifying an amount greater than
the maximum transaction amount) is segmented into two or more
reduced value Order Messages, one or more of which may be matched
with an appropriate Price Message and executed.
[0086] For example, if the maximum transaction value is $1,000,000
and the amount specified in a particular Order Message is
$1,500,000 the oversized Order Message may be segmented into a
first reduced value Order Message specifying $1,000,000 and a
second reduced value Order Message specifying $500,000. The first
reduced value Order Message would then be matched with an
appropriate Quote Message and the reduced value transaction of
$1,000,000 executed between the market user submitting the oversize
Order Message and a market user whose Quote Message is
indicated.
[0087] The second reduced value Order Message may then either be
rejected and the market user notified that that portion of his
Order Message was rejected or, if the system allows, the second
reduced value Order Message may be matched with a Price Message to
result in a second transaction for the remaining $500,000. The
second transaction will also be conducted in a single deal but may
have a different market maker if the system allows.
[0088] The automated trading system may be set up such that the
transaction function only allows the component parts of an oversize
buy/or sell order indicated by an oversize Order Message to be
transacted between a single market maker and the market user. Any
components which would exceed the amount specified by the market
maker in his Quote Message would then be rejected. There would be
no opportunity for the remaining components to be transacted
between the market user and one or more different market
makers.
[0089] It will be obvious to one skilled in the art that an
oversize Order Message specifying an amount more than two or more
times greater than the maximum transaction value could be further
segmented. Where segmentation of an oversize Order Message is
permitted by the automated trading system, the functionality is
performed by the transaction function. It remains true to say that
there is a strict maximum transaction amount imposed by the
automated trading system operating in this second manner because
any oversize Order Message if executed entirely, is executed in at
least two separate transactions. No single transaction is executed
for an amount above the maximum transaction value of the trading
system.
[0090] Credit Management System
[0091] A credit management system may be provided as an integral
part of the market view generator 28. The task of the credit
management system is to customize Market User Views. To do so it
maintains bi-lateral authorization information between market maker
and market user counterparties. Using a credit management system,
the Market User Views may be made to reflect prices at which the
market user is able to trade.
[0092] Any number of market users may be interested in selling to
or buying from a market maker at the quote price specified in the
Price Message. Whilst a particular market maker may be prepared to
deal with a particular market user he may impose a limit on the
value of their transactions to limit his exposure with that market
user or he may not be prepared to deal with that market user at
all. Similarly, market users may wish to limit the value of their
transactions with a particular market maker or to avoid dealing
with a particular market maker. In order to establish an efficient
automated trading system, details of the circumstances under which
market makers and market users are prepared to deal with each other
must be stored and updated.
[0093] U.S. Pat. No. 5,375,055 teaches credit management for an
electronic brokerage system. Its teaching is incorporated herein by
reference. In particular, U.S. Pat. No. 5,375,055 teaches credit
limit administration means for automatically determining whether a
predetermined level of credit is currently respectively available
between two parties and dealable price processing means responsive
to price quotation messages as well as to the credit limit
administration processing means for automatically transmitting
dealable price messages to terminals of at least one party. The
Dealable Price messages are derived only from price quotation
messages from those parties for which the credit limit
administration means has determined that the predetermined level of
credit is currently available on a bilateral basis both from and to
the particular party.
[0094] Preferably a restricted version of the credit management
system of U.S. Pat. No. 5,375,055 is used in the automated trading
system 2. In the context of the present invention, the price
quotation messages described in U.S. Pat. No. 5,375,055 are Quote
Messages (whether automatically or manually generated). If the
credit management system of U.S. Pat. No. 5,375,055 is used, it is
preferably restricted to prevent automaton between two market
makers. Market users may wish to sell currency or buy currency and
theoretically it would be possible for two market users to execute
a transaction meeting both their requirements. However, this is
prevented in the automated trading system of the present invention.
Market users are not permitted to submit Price Messages quoting
prices and direct transactions between market users are, therefore,
prevented. Thus, matching can only occur between a market user and
a market maker.
[0095] When the credit management system is used, each Dealable
Price and all entries in an Executable Price List represent the
best price or all the prices respectively available to the
particular market user at that time for a particular transaction
taking into account counterparty credit limitations. It may,
therefore, not represent the best price covered by the system.
[0096] General Operation of the Automated Trading System
[0097] The general operation of the automated trading system will
now be described with reference to the flowcharts of FIG. 5a and
FIG. 5b. FIG. 5a shows the process of quote submission and 5b shows
the process of quote and order matching and the flow of information
required for the automated trading system to operate and culminate
in execution of a transaction.
[0098] In FIG. 5a, the screening function may receive quotes at 62
both manual quotes at 61 and Automatic Quotes at 60 generated
automatically from feeds but customized according to a market
maker=s requirements. Quotes which specify an amount which is less
than the minimum quote amount of the automated trading system are
rejected at 64 and the remaining screened quotes converted to Quote
Messages at 65 and are subjected to credit management at 66. When
the amount specified in a market maker=s Quote Message falls below
the minimum quote amount, the Quote Message is automatically
removed from the system regardless of the size of the transaction
which caused the removal. This encourages market makers to specify
a higher amount in their Quote Messages to ensure persistence of
quote. Market makers may set a default amount which all Quote
Messages will specify unless an override is detected by the
automated trading system. The minimum value allowed is set at or
above the maximum value for transactions and it is preferable that
market makers are not able to override this minimum.
[0099] Bilateral credit between the market maker and market user
counterparties is monitored at 67. Market User Views are generated
68 from Quote Messages originating from market makers with whom the
market user has sufficient credit to trade and is authorized to
trade. Each customized Market User View is communicated to the
appropriate market user.
[0100] In FIG. 5b a Dealer at a market user workstation may view
the price or prices detailed in the appropriate Market User Views.
When a Dealer at a market user wishes to execute a transaction he
submits an Order Message at 70 specifying the amount of the
transaction and enough details of the Quote Message whose quote
price he is viewing to identify a relevant Quote Message. If the
market user is viewing a Dealable price theoretically the price may
be offered by more than one market maker. If this is the case, the
Order Message is matched with the Quote Message having the highest
priority generated by a market maker with whom the market user has
adequate bilateral credit screened at 72. If the market user is
viewing an Executable Price List, the Order Message will identify
the particular market maker whose price he wishes to take and any
matching will be constrained to that market maker=s Quote
Message.
[0101] The Order Message 70 is received by the transaction function
30 and is matched by the automated trading system to the Quote
Message of the market maker whose price was selected at 74. The
automated trading system may perform some additional credit
screening at 72 and, assuming that everything is in order, executes
the transaction at 76. A Transaction Confirmation Message is sent
to both the market maker and market user counterparties at 78.
[0102] Dealers at both market maker and market user subscribers
need to be able to view the day=s transactions. As the automated
trading system executes a trade between a market maker and a market
user it transmits a Transaction Confirmation Message over the
network to the market maker and market user broker nodes. The
details of the trade contained in the Transaction Confirmation
Message may be displayed at market maker and market user
workstations in a Dynamic Transaction Summary (DTS) to show a
dealer monitoring trading that a transaction has been executed.
[0103] The DTS may be displayed in real time for each currency pair
being traded. The amount transacted that day or over a particular
period specified by the dealer may be displayed by
instrument/currency pair.
[0104] Advanced Features
[0105] To make the automated trading system a level playing field,
account may be taken of the physical locations of the various
market users and market makers. Market users physically close to a
particular market maker will otherwise receive Market User Views
containing more recent Quote Messages which are, at that time,
un-available to more remote market users leading to the closer
market users being party to the most favorable transactions.
[0106] The automated trading system may provide an alarm function.
Various alarm systems are envisaged. Market makers may instruct the
automated trading system of a number of circumstances about which
the market maker wishes to be alerted. For example, a market maker
may opt to be alerted with a first level warning if the value of
transactions executed that day reaches a certain level or the
general price for a currency pair estimated by the smalls pricing
unit moves a set number of pips in a specified time. A second level
warning, accompanied by the market maker Quote Message being
removed from the automated trading system, may also be provided.
First and second level warnings for each currency pair and/or for
all transactions would be configurable by the market maker. The
alarm may be set to function when the total daily number of trades
executed on behalf of the market maker for each currency pair is
exceeded or when the total trade volume across all currency pairs
is reached. Other warnings may be based on the value or volume of
executed transactions.
[0107] Generally a first level warning will sound an audible alert
and a second level warning will suspend at least one type of
transaction according to the type of alert. The market maker will
be able to reset the running total counters associated with each
warning or to reconfigure the first and second warning levels at
any time.
[0108] The automated trading system may also operate a number of
security measures. For example, it may require a market maker
workstation to transmit an acknowledgement every X minutes if the
market maker Quote Message is to remain within the automated
trading system. If a dealer at the market maker workstation does
not react to a prompt or has not hit a key within the X minutes, a
security alert signal may be transmitted from the market maker
workstation to the automated trading system which may remove the
market maker=s Quote Message and notify the market maker via a
security acknowledgement signal sent to the market maker
workstation. This security measure can be particularly useful to
prevent trading continuing after all the dealers at the market
maker have left the trading floor, for example overnight.
[0109] If market user and market maker workstations are configured
with the same basic functionality, the subscriber category (e.g.
market user only, market maker only or both market maker and market
user) is used by the automated trading system to override bid and
offer keys (for market users only) and buy and sell keys (for
market makers only) on the workstation.
[0110] The liquidity offered by automatic feeds setting the price
in Quote Messages for market makers minimizes dealer intervention.
It offers a market maker the means to extend dealing efficiently to
include weaker currency pairs.
[0111] Numerous modifications and changes to the automated trading
system as described above will readily occur to those skilled in
the art. It is not desired to limit the invention to the exact
construction and operation shown and described.
[0112] The smalls pricing engine 26 may be housed centrally in the
automated trading system 22 rather than distributed over the
network at each Broker node. Similarly, credit management may be
hosted by the service provider or partially or wholly distributed
between Broker Nodes. The automated trading system may be
configured to minimize the amount of information a Dealer at a
market user must enter into the system to initiate a transaction.
For example, the system may create a default amount for a
transaction based on the value of the previous transaction which
the Dealer would need to override if he wished to specify a
different amount for the new transaction. The Dealer would
preferably be alerted that a default value was being used.
[0113] Customized Market User Views may be transmitted regardless
of whether or not a market user has an active session open.
Alternatively, the automated trading system may continuously
monitor which market users are logged on at any given time and only
transmit Market User Views for those market users who are logged
on. The automated trading system may automatically cease
transmission of Market User Views at the end of a market user
defined trading day.
[0114] A minimum credit level between market maker and market user
counterparties may be imposed by the automated trading system.
Typically, for an automated trading system where the maximum value
of a single transaction is set at 1 million units, the minimum
credit level would be 50,000 units. Provision for setting this
minimum credit level, and/or the maximum transaction value,
respective to the most expensive currency available for trade by
the system, may be made. Any such provision would not prevent
market maker or market user subscribers from indicating to the
automated trading system that they refuse to deal with a particular
party.
* * * * *