U.S. patent application number 16/052071 was filed with the patent office on 2018-11-29 for system and method for determining a stable quoting quantity for use in a trading strategy.
The applicant listed for this patent is Trading Technologies International, Inc.. Invention is credited to Andrew Gottemoller, Patricia A. Messina.
Application Number | 20180342011 16/052071 |
Document ID | / |
Family ID | 50548285 |
Filed Date | 2018-11-29 |
United States Patent
Application |
20180342011 |
Kind Code |
A1 |
Gottemoller; Andrew ; et
al. |
November 29, 2018 |
System and Method for Determining a Stable Quoting Quantity For Use
in a Trading Strategy
Abstract
Identification of a stable quoting quantity is disclosed. An
example method includes setting a quoting quantity for a trading
strategy based on a distribution associated with a tradeable object
of the trading strategy; defining a range having first and second
boundaries based on the distribution; updating a first tracked
value according to changes in the distribution; and changing the
quoting quantity in response to the first tracked value falling
outside the range.
Inventors: |
Gottemoller; Andrew;
(Chicago, IL) ; Messina; Patricia A.; (Chicago,
IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Trading Technologies International, Inc. |
Chicago |
IL |
US |
|
|
Family ID: |
50548285 |
Appl. No.: |
16/052071 |
Filed: |
August 1, 2018 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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13664164 |
Oct 30, 2012 |
10068290 |
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16052071 |
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Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 40/04 20130101 |
International
Class: |
G06Q 40/04 20120101
G06Q040/04 |
Claims
1. (canceled)
2. A non-transitory computer readable medium having instructions
stored thereon which when executed by a processor cause the
processor to carry out acts comprising: receiving a definition for
a spread trading strategy including a quoting leg for a first
tradeable object and a lean leg for a second tradeable object;
receiving market data for the second tradeable object, the market
data being received from an electronic exchange and identifying an
available quantity of the second tradeable object at a price level
determined according to the trading strategy; monitoring the market
data for the second tradeable object identifying the available
quantity of the second tradeable object at the price level as the
market data is received; in response to monitoring the market data:
dynamically generating a distribution for the available quantity of
the second tradeable object based on the market data, wherein the
distribution is representative of the available quantity of the
second tradeable object at the price level determined according to
the trading strategy over a previous period of time, where the
distribution establishes a range having at least one threshold, and
wherein the distribution for the available quantity and the at
least one threshold are updated with changes to the available
quantity of the second tradeable object based on the market data;
dynamically calculating a stable quoting quantity for the quoting
led based on the monitored market data identifying the available
quantity of the first tradeable object, the distribution and the
received definition for the trading strategy; in response to
receiving by the processor a user command to trade the spread
trading strategy, sending a trading strategy order for the
calculated stable quoting quantity of the first tradeable object;
and dynamically updating the trading strategy order according to
changing the calculated stable quoting quantity to a new calculated
stable quoting quantity of the trading strategy order in response
to the calculated stable quoting quantity being beyond the at least
one threshold.
3. The non-transitory computer readable medium of claim 2, wherein
the distribution is generated based on a change in the available
quantity of the first tradeable object between at least a first
time and a second time.
4. The non-transitory computer readable medium of claim 2, wherein
the range established by the distribution includes a first
threshold and a second threshold.
5. The non-transitory computer readable medium of claim 4, wherein
the first and second thresholds are calculated to be at least one
standard deviation away from the mean of the distribution.
6. The non-transitory computer readable medium of claim 4, wherein
the first threshold is defined based on a first multiplier, and
wherein the second threshold is defined based on a second
multiplier.
7. The non-transitory computer readable medium of claim 2, wherein
the distribution is generated based on a stability multiplier.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] The present application is a continuation of U.S. patent
application Ser. No. 13/664,164, filed Oct. 30, 2012, the entire
contents of which are incorporated herein by reference for all
purposes.
BACKGROUND
[0002] An electronic trading system generally includes a trading
device in communication with an electronic exchange. The electronic
exchange sends information about a market, such as prices and
quantities, to the trading device. The trading device sends
messages, such as messages related to orders, to the electronic
exchange. The electronic exchange attempts to match quantity of an
order with quantity of one or more contra-side orders.
[0003] In addition to trading single items, a user may trade more
than one item according to a trading strategy. One common trading
strategy is a spread and trading according to a trading strategy
may also be referred to as spread trading. Spread trading may
attempt to capitalize on changes or movements in the relationships
between the items in the trading strategy, for example.
BRIEF DESCRIPTION OF THE FIGURES
[0004] Certain embodiments are disclosed with reference to the
following drawings.
[0005] FIG. 1 illustrates a block diagram representative of an
example electronic trading system in which certain embodiments may
be employed.
[0006] FIG. 2 illustrates a block diagram of another example
electronic trading system in which certain embodiments may be
employed.
[0007] FIG. 3 illustrates a block diagram of an example computing
device which may be used to implement the disclosed
embodiments.
[0008] FIG. 4 illustrates a block diagram of a trading strategy
which may be employed with certain disclosed embodiments.
[0009] FIGS. 5A and 5B are flowcharts representative of example
machine readable instructions that may be executed to implement
examples disclosed herein.
[0010] FIG. 6 is an example distribution calculated in connection
with the example instructions of FIGS. 5A and 5B.
[0011] FIG. 7 is a diagram illustrative of an example range managed
by the example instructions of FIGS. 5A and 5B.
[0012] FIG. 8 is a block diagram representative of an example
stable quoting quantity identifier to implement the example
instructions of FIGS. 5A and 5B.
[0013] Certain embodiments will be better understood when read in
conjunction with the provided figures, which illustrate examples.
It should be understood, however, that the embodiments are not
limited to the arrangements and instrumentality shown in the
attached figures.
DETAILED DESCRIPTION
[0014] The disclosed embodiments relate to trading strategies and,
more particularly, to quoting quantities for trading
strategies.
[0015] Certain dynamic trading tools enable an adjustment of one or
more quantities associated with, for example, a spread. When a
spread includes a quoting leg having a quoting quantity and a lean
or hedge leg having a leaned-on quantity, the dynamic trading tools
provide the ability to change the quantity of the quoting leg in
response to changes in, for example, an available quantity of the
leaned-on tradeable object. However, such changes often cause a
corresponding user to incur fees and/or are subject to restrictions
put in place by an exchange. For example, an exchange may require a
user to receive at least one fill for every twenty quoting orders
placed (or changes made those orders) or be subject to having
orders rejected or assessed a fee. Therefore, in some instances,
frequent changes to a quoting quantity of a spread leads to
excessive fees and/or other types of undesirable outcomes.
[0016] Embodiments disclosed herein reduce a number of times a
quoting quantity is changed in connection with, for example, a
dynamically adjusted spread. In particular, embodiments disclosed
herein monitor an available amount of a leaned-on tradeable object
to identify a stable quoting quantity. The stable quoting quantity
to be identified by the embodiments disclosed herein refers to a
quoting quantity that is unlikely to result in an insufficient
amount of the leaned-on tradeable object being available when the
quoting leg is filled. As described in greater detail below,
embodiments disclosed herein generate a distribution (for example,
a standard deviation from a mean over a plurality of measurements
or a period of time) associated with an available amount of the
leaned-on tradeable object for use in identifying the stable
quoting quantity. The embodiments disclosed herein utilize the
distribution to set an initial stable quoting quantity for a
spread. Further, the embodiments disclosed herein utilize the
distribution to define a range and to maintain a plurality of
tracked values. The tracked values of the embodiments disclosed
herein are updated according to changes in the distribution over
time.
[0017] According to the embodiments disclosed herein, when one of
the tracked values falls outside the defined range, the stable
quoting quantity is updated. According to the embodiments disclosed
herein, when the tracked values are within the defined range, the
stable quoting quantity is maintained at its current value. In
other words, according to embodiments disclosed herein, the stable
quoting quantity may not be updated or changed despite some change
in the available quantity of the leaned-on tradeable object. Thus,
through use of the embodiments disclosed herein, the quoting
quantity of the spread is only dynamically updated when significant
change (for example, a significant change in the mean available
amount and/or a significant change in the standard deviation from
the mean available amount) occurs in connection with the leaned-on
tradeable object.
[0018] By identifying the stable quoting quantity for a spread, the
embodiments disclosed herein enable the spread to lean on a
reliable amount of the leaned-on tradeable object. Further, the
embodiments disclosed herein reduce the frequency of dynamic
updates to the quoting quantity of the spread.
[0019] Although this description discloses embodiments including,
among other components, software executed on hardware, it should be
noted that the embodiments are merely illustrative and should not
be considered as limiting. For example, it is contemplated that any
or all of these hardware and software components may be embodied
exclusively in hardware, exclusively in software, exclusively in
firmware, or in any combination of hardware, software, and/or
firmware. Accordingly, certain embodiments may be implemented in
other ways.
I. Brief Description of Certain Embodiments
[0020] Certain embodiments provide a method including setting a
quoting quantity for a trading strategy based on a distribution
associated with a tradeable object of the trading strategy;
defining a range having first and second boundaries based on the
distribution; updating a first tracked value according to changes
in the distribution; and changing the quoting quantity in response
to the first tracked value falling outside the range.
[0021] Certain embodiments provide a tangible machine readable
storage medium comprising instructions that, when executed, cause a
machine to set a quoting quantity for a trading strategy based on a
distribution associated with a tradeable object of the trading
strategy; define a range having first and second boundaries based
on the distribution; update a first tracked value according to
changes in the distribution; and change the quoting quantity in
response to the first tracked value falling outside the range.
[0022] Certain embodiments provide an apparatus including a memory
storing machine readable instructions and a processor which, upon
executing the instructions performs operations including
determining a distribution associated with a tradeable object of a
trading strategy; defining a range having first and second
boundaries each based on the distribution; initiating a quoting
quantity to a value equal to the first boundary; updating first and
second tracked values based on changes in the distribution; if the
first tracked value is updated to be less than the first boundary,
changing the quoting quantity; and if the second tracked value is
updated to be greater than the second boundary, changing the
quoting quantity.
II. Example Electronic Trading System
[0023] FIG. 1 illustrates a block diagram representative of an
example electronic trading system 100 in which certain embodiments
may be employed. The system 100 includes a trading device 110, a
gateway 120, and an exchange 130. The trading device 110 is in
communication with the gateway 120. The gateway 120 is in
communication with the exchange 130. As used herein, the phrase "in
communication" encompasses direct communication and/or indirect
communication through one or more intermediary components. The
exemplary electronic trading system 100 depicted in FIG. 1 may be
in communication with additional components, subsystems, and
elements to provide additional functionality and capabilities
without departing from the teaching and disclosure provided
herein.
[0024] In operation, the trading device 110 may receive market data
from the exchange 130 through the gateway 120. A user may utilize
the trading device 110 to monitor this market data and/or base a
decision to send an order message to buy or sell one or more
tradeable objects to the exchange 130.
[0025] Market data may include data about a market for a tradeable
object. For example, market data may include the inside market,
market depth, last traded price ("LTP"), a last traded quantity
("LTQ"), or a combination thereof. The inside market is the lowest
available ask price (best offer) and the highest available bid
price (best bid) in the market for a particular tradable object at
a particular point in time (since the inside market may vary over
time). Market depth refers to quantities available at the inside
market and at other prices away from the inside market. Due to the
quantity available, there may be "gaps" in market depth.
[0026] A tradeable object is anything which may be traded. For
example, a certain quantity of the tradeable object may be bought
or sold for a particular price. A tradeable object may include, for
example, financial products, stocks, options, bonds, future
contracts, currency, warrants, funds derivatives, securities,
commodities, swaps, interest rate products, index-based products,
traded events, goods, or a combination thereof. A tradeable object
may include a product listed and/or administered by an exchange
(for example, the exchange 130), a product defined by the user, a
combination of real or synthetic products, or a combination
thereof. There may be a synthetic tradeable object that corresponds
and/or is similar to a real tradeable object.
[0027] An order message is a message that includes a trade order. A
trade order may be, for example, a command to place an order to buy
or sell a tradeable object, a command to initiate managing orders
according to a defined trading strategy, a command to change or
cancel a previously submitted order (for example, modify a working
order), an instruction to an electronic exchange relating to an
order, or a combination thereof.
[0028] The trading device 110 may include one or more electronic
computing platforms. For example, the trading device 110 may
include a desktop computer, hand-held device, laptop, server, a
portable computing device, a trading terminal, an embedded trading
system, a workstation, an algorithmic trading system such as a
"black box" or "grey box" system, cluster of computers, or a
combination thereof. As another example, the trading device 110 may
include a single or multi-core processor in communication with a
memory or other storage medium configured to accessibly store one
or more computer programs, applications, libraries, computer
readable instructions, and the like, for execution by the
processor.
[0029] As used herein, the phrases "configured to" and "adapted to"
encompass that an element, structure, or device has been modified,
arranged, changed, or varied to perform a specific function or for
a specific purpose.
[0030] By way of example, the trading device 110 may be implemented
as a personal computer running a copy of X_TRADER.RTM., an
electronic trading platform provided by Trading Technologies
International, Inc. of Chicago, Ill. ("Trading Technologies"). As
another example, the trading device 110 may be a server running a
trading application providing automated trading tools such as
ADL.TM., AUTOSPREADER.RTM., and/or AUTOTRADER.TM., also provided by
Trading Technologies. In yet another example, the trading device
110 may include a trading terminal in communication with a server,
where collectively the trading terminal and the server are the
trading device 110.
[0031] The trading device 110 is generally owned, operated,
controlled, programmed, configured, or otherwise used by a user. As
used herein, the phrase "user" may include, but is not limited to,
a human (for example, a trader), trading group (for example, group
of traders), or an electronic trading device (for example, an
algorithmic trading system). One or more users may be involved in
the ownership, operation, control, programming, configuration, or
other use, for example.
[0032] The trading device 110 may include one or more trading
applications. As used herein, a trading application is an
application that facilitates or improves electronic trading. A
trading application provides one or more electronic trading tools.
For example, a trading application stored by a trading device may
be executed to arrange and display market data in one or more
trading windows. In another example, a trading application may
include an automated spread trading application providing spread
trading tools. In yet another example, a trading application may
include an algorithmic trading application that automatically
processes an algorithm and performs certain actions, such as
placing an order, modifying an existing order, deleting an order.
In yet another example, a trading application may provide one or
more trading screens. A trading screen may provide one or more
trading tools that allow interaction with one or more markets. For
example, a trading tool may allow a user to obtain and view market
data, set order entry parameters, submit order messages to an
exchange, deploy trading algorithms, and/or monitor positions while
implementing various trading strategies. The electronic trading
tools provided by the trading application may always be available
or may be available only in certain configurations or operating
modes of the trading application.
[0033] A trading application may include computer readable
instructions that are stored in a computer readable medium and
executable by a processor. A computer readable medium may include
various types of volatile and non-volatile storage media,
including, for example, random access memory, read-only memory,
programmable read-only memory, electrically programmable read-only
memory, electrically erasable read-only memory, flash memory, any
combination thereof, or any other tangible data storage device. As
used herein, the term non-transitory or tangible computer readable
medium is expressly defined to include any type of computer
readable storage media and to exclude propagating signals.
[0034] One or more components or modules of a trading application
may be loaded into the computer readable medium of the trading
device 110 from another computer readable medium. For example, the
trading application (or updates to the trading application) may be
stored by a manufacturer, developer, or publisher on one or more
CDs or DVDs, which are then loaded onto the trading device 110 or
to a server from which the trading device 110 retrieves the trading
application. As another example, the trading device 110 may receive
the trading application (or updates to the trading application)
from a server, for example, via the Internet or an internal
network. The trading device 110 may receive the trading application
or updates when requested by the trading device 110 (for example,
"pull distribution") and/or un-requested by the trading device 110
(for example, "push distribution").
[0035] The trading device 110 may be adapted to send order
messages. For example, the order messages may be sent to through
the gateway 120 to the exchange 130. As another example, the
trading device 110 may be adapted to send order messages to a
simulated exchange in a simulation environment which does not
effectuate real-world trades.
[0036] The order messages may be sent at the request of a user. For
example, a trader may utilize the trading device 110 to send an
order message or manually input one or more parameters for a trade
order (for example, an order price and/or quantity). As another
example, an automated trading tool provided by a trading
application may calculate one or more parameters for a trade order
and automatically send the order message. In some instances, an
automated trading tool may prepare the order message to be sent but
not actually send it without confirmation from a user.
[0037] An order message may be sent in one or more data packets or
through a shared memory system. For example, an order message may
be sent from the trading device 110 to the exchange 130 through the
gateway 120. The trading device 110 may communicate with the
gateway 120 using a local area network, a wide area network, a
wireless network, a virtual private network, a T1 line, a T3 line,
an integrated services digital network ("ISDN") line, a
point-of-presence, the Internet, and/or a shared memory system, for
example.
[0038] The gateway 120 may include one or more electronic computing
platforms. For example, the gateway 120 may implemented as one or
more desktop computer, hand-held device, laptop, server, a portable
computing device, a trading terminal, an embedded trading system,
workstation with a single or multi-core processor, an algorithmic
trading system such as a "black box" or "grey box" system, cluster
of computers, or any combination thereof.
[0039] The gateway 120 may facilitate communication. For example,
the gateway 120 may perform protocol translation for data
communicated between the trading device 110 and the exchange 130.
The gateway 120 may process an order message received from the
trading device 110 into a data format understood by the exchange
130, for example. Similarly, the gateway 120 may transform market
data in an exchange-specific format received from the exchange 130
into a format understood by the trading device 110, for
example.
[0040] The gateway 120 may include a trading application, similar
to the trading applications discussed above, that facilitates or
improves electronic trading. For example, the gateway 120 may
include a trading application that tracks orders from the trading
device 110 and updates the status of the order based on fill
confirmations received from the exchange 130. As another example,
the gateway 120 may include a trading application that coalesces
market data from the exchange 130 and provides it to the trading
device 110. In yet another example, the gateway 120 may include a
trading application that provides risk processing, calculates
implieds, handles order processing, handles market data processing,
or a combination thereof.
[0041] In certain embodiments, the gateway 120 communicates with
the exchange 130 using a local area network, a wide area network, a
virtual private network, a T1 line, a T3 line, an ISDN line, a
point-of-presence, the Internet, and/or a shared memory system, for
example.
[0042] The exchange 130 may be owned, operated, controlled, or used
by an exchange entity. Example exchange entities include the CME
Group, the London International Financial Futures and Options
Exchange, the Intercontinental Exchange, and Eurex. The exchange
130 may include an electronic matching system, such as a computer,
server, or other computing device, which is adapted to allow
tradeable objects, for example, offered for trading by the
exchange, to be bought and sold. The exchange 130 may include
separate entities, some of which list and/or administer tradeable
objects and others which receive and match orders, for example. The
exchange 130 may include an electronic communication network
("ECN"), for example.
[0043] The exchange 130 may be an electronic exchange. The exchange
130 is adapted to receive order messages and match contra-side
trade orders to buy and sell tradeable objects. Unmatched trade
orders may be listed for trading by the exchange 130. The trade
orders may include trade orders received from the trading device
110 or other devices in communication with the exchange 130, for
example. For example, typically the exchange 130 will be in
communication with a variety of other trading devices (which may be
similar to trading device 110) which also provide trade orders to
be matched.
[0044] The exchange 130 is adapted to provide market data. Market
data may be provided in one or more messages or data packets or
through a shared memory system. For example, the exchange 130 may
publish a data feed to subscribing devices, such as the trading
device 110 or gateway 120. The data feed may include market
data.
[0045] The system 100 may include additional, different, or fewer
components. For example, the system 100 may include multiple
trading devices, gateways, and/or exchanges. In another example,
the system 100 may include other communication devices, such as
middleware, firewalls, hubs, switches, routers, servers,
exchange-specific communication equipment, modems, security
managers, and/or encryption/decryption devices.
III. Expanded Example Electronic Trading System
[0046] FIG. 2 illustrates a block diagram of another example
electronic trading system 200 in which certain embodiments may be
employed. In this example, a trading device 210a is in
communication with an exchange 230a through a gateway 220a. The
following discussion mainly focuses on the trading device 210a,
gateway 220a, and the exchange 230a. However, the trading device
210a may also be connected to and communicate with any number of
gateways 220n connected to exchanges 230n. The communication
between the trading device 110a and other exchanges 230n may be the
same, similar, or different than the communication between the
trading device 210a and exchange 230a. Generally, each exchange has
its own preferred techniques and/or formats for communicating with
a trading device, a gateway, the user, or another exchange.
[0047] The trading device 210a, which may be similar to the trading
device 110 in FIG. 1, may include a server 212a in communication
with a trading terminal 214a. The server 212a may be located
geographically closer to the gateway 120 than the trading terminal
214a. As a result, the server 212a latency benefits that are not
afforded to the trading terminal 214a. In operation, the trading
terminal 214a may provide a trading screen to a user and
communicate commands to the server 212a for further processing. For
example, a trading algorithm may be deployed to the server 212a for
execution based on market data. The server 212a may execute the
trading algorithm without further input from the user. In another
example, the server 212a may include a trading application
providing automated trading tools and communicate back to the
trading terminal 214a. The trading device 210a may include,
additional, different, or fewer components.
[0048] The trading device 210a may communicate with the gateway
220a using one or more communication networks. As used herein, a
communication network is any network, including the Internet, which
facilitates or enables communication between, for example, the
trading device 210a, the gateway 220a and the exchange 220a. For
example, as shown in FIG. 2, the trading device 210a may
communicate with the gateway 220a across a multicast communication
network 202a. The data on the network 202a may be logically
separated by subject (for example, prices, orders, or fills). As a
result, the server 212a and trading terminal 214a can subscribe to
and receive data (for example, data relating to prices, orders, or
fills) depending on their individual needs.
[0049] The gateway 220a, which may be similar to the gateway 120 of
FIG. 1, may include a price server 222a, order server 224a, and
fill server 226a. The gateway 220a may include additional,
different, or fewer components. The price server 222a may process
price data. Price data includes data related to a market for one or
more tradeable objects. The order server 224a may process order
data. Order data is data related to a user's trade orders. For
example, order data may include order messages, confirmation
messages, or other types of messages. The fill server collects and
provides fill data. Fill data includes data relating to one or more
fills of trade orders. For example, the fill server 226a may
provide a record of trade orders, which have been routed through
the order server 224a, that have and have not been filled. The
servers 222a, 224a, 226a may run on the same machine or separate
machines.
[0050] The gateway 220a may communicate with the exchange 230a
using one or more communication networks. For example, as shown in
FIG. 2, there may be two communication networks connecting the
gateway 220a and the exchange 230a. The network 204a may be used to
communicate market data to the price server 222a. In some
instances, the exchange 230a may include this data in a data feed
that is published to subscribing devices. The network 206a may be
used to communicate order data.
[0051] The exchange 230a, which may be similar to the exchange 130
of FIG. 1, may include an order book 232a and a matching engine
234a. The exchange 230a may include additional, different, or fewer
components. The order book 232a is a database that includes data
relating to unmatched quantity of trade orders. For example, an
order book may include data relating to a market for a tradeable
object, such as the inside market, market depth at various price
levels, the last traded price, and the last traded quantity. The
matching engine 234a may match contra-side bids and offers. For
example, the matching engine 234a may execute one or more matching
algorithms that match contra-side bids and offers. A sell order is
contra-side to a buy order with the same price. Similarly, a buy
order is contra-side to a sell order with the same price.
[0052] In operation, the exchange 230a may provide price data from
the order book 232a to the price server 222a and order data and/or
fill data from the matching engine 234a to the order server 224a.
Servers 222a, 224a, 226a may translate and communicate this data
back to the trading device 210a. The trading device 210a, for
example, using a trading application, may process this data. For
example, the data may be displayed to a user. In another example,
the data may be utilized in a trading algorithm to determine
whether a trade order should be submitted to the exchange 230a. The
trading device 210a may prepare and send an order message to the
exchange 230a.
[0053] In certain embodiments, the gateway 220a is part of the
trading device 210a. For example, the components of the gateway
220a may be part of the same computing platform as the trading
device 210a. As another example, the functionality of the gateway
220a may be performed by components of the trading device 210a. In
certain embodiments, the gateway 220a is not present. Such an
arrangement may occur when the trading device 210a does not need to
utilize the gateway 220a to communicate with the exchange 230a, for
example. For example, if the trading device 210a has been adapted
to communicate directly with the exchange 230a.
[0054] Additional trading devices 210b-210e, which are similar to
trading device 210a, may be connected to one or more of the
gateways 220a-220n and exchanges 230a-230n. Furthermore, additional
gateways, similar to the gateway 220a, may be in communication with
multiple exchanges, similar to the exchange 230a. Each gateway may
be in communication with one or more different exchanges, for
example. Such an arrangement may, for example, allow one or more
trading devices 210a to trade at more than one exchange (and/or
provide redundant connections to multiple exchanges).
IV. Example Computing Device
[0055] FIG. 3 illustrates a block diagram of an example computing
device 300 which may be used to implement the disclosed
embodiments. The trading device 110 of FIG. 1 may include one or
more computing devices 300, for example. The gateway 120 of FIG. 1
may include one or more computing devices 300, for example. The
exchange 130 of FIG. 1 may include one or more computing devices
300, for example.
[0056] The computing device 300 includes a communication network
310, a processor 312, a memory 314, an interface 316, an input
device 318, and an output device 320. The computing device 300 may
include additional, different, or fewer components. For example,
multiple communication networks, multiple processors, multiple
memory, multiple interfaces, multiple input devices, multiple
output devices, or any combination thereof, may be provided. As
another example, the computing device 300 may not include an input
device 318 or output device 320.
[0057] As shown in FIG. 3, the computing device 300 may include a
processor 312 coupled to a communication network 310. The
communication network 310 may include a communication bus, channel,
electrical or optical network, circuit, switch, fabric, or other
mechanism for communicating data between components in the
computing device 300. The communication network 310 may be
communicatively coupled with and transfer data between any of the
components of the computing device 300.
[0058] The processor 312 may be any suitable processor, processing
unit, or microprocessor. The processor 312 may include one or more
general processors, digital signal processors, application specific
integrated circuits, field programmable gate arrays, analog
circuits, digital circuits, programmed processors, and/or
combinations thereof, for example. The processor 312 may be a
single device or a combination of devices, such as one or more
devices associated with a network or distributed processing. Any
processing strategy may be used, such as multi-processing,
multi-tasking, parallel processing, and/or remote processing.
Processing may be local or remote and may be moved from one
processor to another processor. In certain embodiments, the
computing device 300 is a multi-processor system and, thus, may
include one or more additional processors which are communicatively
coupled to the communication network 310.
[0059] The processor 312 may be operable to execute logic and other
computer readable instructions encoded in one or more tangible
media, such as the memory 314. As used herein, logic encoded in one
or more tangible media includes instructions which may be
executable by the processor 312 or a different processor. The logic
may be stored as part of software, hardware, integrated circuits,
firmware, and/or micro-code, for example. The logic may be received
from an external communication device via a communication network
such as the network 340. The processor 312 may execute the logic to
perform the functions, acts, or tasks illustrated in the figures or
described herein.
[0060] The memory 314 may be one or more tangible media, such as
computer readable storage media, for example. Computer readable
storage media may include various types of volatile and
non-volatile storage media, including, for example, random access
memory, read-only memory, programmable read-only memory,
electrically programmable read-only memory, electrically erasable
read-only memory, flash memory, any combination thereof, or any
other tangible data storage device. As used herein, the term
non-transitory or tangible computer readable medium is expressly
defined to include any type of computer readable medium and to
exclude propagating signals. The memory 314 may include any desired
type of mass storage device including hard disk drives, optical
media, magnetic tape or disk, etc.
[0061] The memory 314 may include one or more memory devices. For
example, the memory 314 may include local memory, a mass storage
device, volatile memory, non-volatile memory, or a combination
thereof. The memory 314 may be adjacent to, part of, programmed
with, networked with, and/or remote from processor 312, so the data
stored in the memory 314 may be retrieved and processed by the
processor 312, for example. The memory 314 may store instructions
which are executable by the processor 312. The instructions may be
executed to perform one or more of the acts or functions described
herein or shown in the figures.
[0062] The memory 314 may store a trading application 330. In
certain embodiments, the trading application 330 may be accessed
from or stored in different locations. The processor 312 may access
the trading application 330 stored in the memory 314 and execute
computer-readable instructions included in the trading application
330.
[0063] In certain embodiments, during an installation process, the
trading application may be transferred from the input device 318
and/or the network 340 to the memory 314. When the computing device
300 is running or preparing to run the trading application 330, the
processor 312 may retrieve the instructions from the memory 314 via
the communication network 310.
[0064] [The following section is for inclusion in cases that deal
with strategy trading and should be removed (along with the
corresponding FIG. 4) if not applicable.]
V. Strategy Trading
[0065] In addition to buying and/or selling a single tradeable
object, a user may trade more than one tradeable object according
to a trading strategy. One common trading strategy is a spread and
trading according to a trading strategy may also be referred to as
spread trading. Spread trading may attempt to capitalize on changes
or movements in the relationships between the tradeable object in
the trading strategy, for example.
[0066] An automated trading tool may be utilized to trade according
to a trading strategy, for example. For example, the automated
trading tool may AUTOSPREADER.RTM., provided by Trading
Technologies.
[0067] A trading strategy defines a relationship between two or
more tradeable objects to be traded. Each tradeable object being
traded as part of a trading strategy may be referred to as a leg or
outright market of the trading strategy.
[0068] When the trading strategy is to be bought, the definition
for the trading strategy specifies which tradeable object
corresponding to each leg should be bought or sold. Similarly, when
the trading strategy is to be sold, the definition specifies which
tradeable objects corresponding to each leg should be bought or
sold. For example, a trading strategy may be defined such that
buying the trading strategy involves buying one unit of a first
tradeable object for leg A and selling one unit of a second
tradeable object for leg B. Selling the trading strategy typically
involves performing the opposite actions for each leg.
[0069] In addition, the definition for the trading strategy may
specify a spread ratio associated with each leg of the trading
strategy. The spread ratio may also be referred to as an order size
for the leg. The spread ratio indicates the quantity of each leg in
relation to the other legs. For example, a trading strategy may be
defined such that buying the trading strategy involves buying 2
units of a first tradeable object for leg A and selling 3 units of
a second tradeable object for leg B. The sign of the spread ratio
may be used to indicate whether the leg is to be bought (the spread
ratio is positive) or sold (the spread ratio is negative) when
buying the trading strategy. In the example above, the spread ratio
associated with leg A would be "2" and the spread ratio associated
with leg B would be "-3."
[0070] In some instances, the spread ratio may be implied or
implicit. For example, the spread ratio for a leg of a trading
strategy may not be explicitly specified, but rather implied or
defaulted to be "1" or "-1."
[0071] In addition, the spread ratio for each leg may be
collectively referred to as the spread ratio or strategy ratio for
the trading strategy. For example, if leg A has a spread ratio of
"2" and leg B has a spread ratio of "-3", the spread ratio (or
strategy ratio) for the trading strategy may be expressed as "2:-3"
or as "2:3" if the sign for leg B is implicit or specified
elsewhere in a trading strategy definition.
[0072] Additionally, the definition for the trading strategy may
specify a multiplier associated with each leg of the trading
strategy. The multiplier is used to adjust the price of the
particular leg for determining the price of the spread. The
multiplier for each leg may be the same as the spread ratio. For
example, in the example above, the multiplier associated with leg A
may be "2" and the multiplier associated with leg B may be "-3,"
both of which match the corresponding spread ratio for each leg.
Alternatively, the multiplier associated with one or more legs may
be different than the corresponding spread ratios for those legs.
For example, the values for the multipliers may be selected to
convert the prices for the legs into a common currency.
[0073] The following discussion assumes that the spread ratio and
multipliers for each leg are the same, unless otherwise indicated.
In addition, the following discussion assumes that the signs for
the spread ratio and the multipliers for a particular leg are the
same and, if not, the sign for the multiplier is used to determine
which side of the trading strategy a particular leg is on.
[0074] FIG. 4 illustrates a block diagram of a trading strategy 410
which may be employed with certain disclosed embodiments. The
trading strategy 410 includes "n" legs 420 (individually identified
as leg 420a to leg 420n). The trading strategy 410 defines the
relationship between tradeable objects 422 (individually identified
as tradeable object 422a to tradeable object 422n) of each of the
legs 420a to 420n using the corresponding spread ratios 424a to
424n and multipliers 426a to 426n.
[0075] Once defined, the tradeable objects 422 in the trading
strategy 410 may then be traded together according to the defined
relationship. For example, assume that the trading strategy 410 is
a spread with two legs, leg 420a and leg 420b. Leg 420a is for
tradeable object 422a and leg 420b is for tradeable object 422b. In
addition, assume that the spread ratio 424a and multiplier 426a
associated with leg 420a are "1" and that the spread ratio 424b and
multiplier 426b associated with leg 420b are "-1". That is, the
spread is defined such that when the spread is bought, 1 unit of
tradeable object 422a is bought (positive spread ratio, same
direction as the spread) and 1 unit of tradeable object 422b is
sold (negative spread ratio, opposite direction of the spread). As
mentioned above, typically in spread trading the opposite of the
definition applies. That is, when the definition for the spread is
such that when the spread is sold, 1 unit of tradeable object 422a
is sold (positive spread ratio, same direction as the spread) and 1
unit of tradeable object 422b is bought (negative spread ratio,
opposite direction of the spread).
[0076] The price for the trading strategy 410 is determined based
on the definition. In particular, the price for the trading
strategy 410 is typically the sum of price the legs 420 comprising
the tradeable objects 422 multiplied by corresponding multipliers
426. The price for a trading strategy may be affected by price tick
rounding and/or pay-up ticks. However, both of these implementation
details are beyond the scope of this discussion and are well-known
in the art.
[0077] As discussed above, a real spread may be listed at an
exchange, such as exchange 130 and/or 230, as a tradeable product.
In contrast, a synthetic spread may not be listed as a product at
an exchange, but rather the various legs of the spread are
tradeable at one or more exchanges. For the purposes of the
following example, the trading strategy 410 described is a
synthetic trading strategy. However, similar techniques to those
described below may also be applied by an exchange when a real
trading strategy is traded.
[0078] Continuing the example from above, if it is expected or
believed that tradeable object 422a typically has a price 10
greater than tradeable object 422b, then it may be advantageous to
buy the spread whenever the difference in price between tradeable
objects 422a and 422b is less than 10 and sell the spread whenever
the difference is greater than 10. As an example, assume that
tradeable object 422a is at a price of 45 and tradeable object 422b
is at a price of 40. The current spread price may then be
determined to be (1)(45)+(-1)(40)=5, which is less than the typical
spread of 10. Thus, a user may buy 1 unit of the spread, which
results in buying 1 unit of tradeable object 422a at a price of 45
and selling 1 unit of tradeable object 422b at 40. At some later
time, the typical price difference may be restored and the price of
tradeable object 422a is 42 and the price of tradeable object 422b
is 32. At this point, the price of the spread is now 10.
[0079] If the user sells 1 unit of the spread to close out the
user's position (that is, sells 1 unit of tradeable object 422a and
buys 1 unit of tradeable object 422b), the user has made a profit
on the total transaction. In particular, while the user bought
tradeable object 422a at a price of 45 and sold at 42, losing 3,
the user sold tradeable object 422b at a price of 40 and bought at
32, for a profit of 8. Thus, the user made 5 on the buying and
selling of the spread.
[0080] The above example assumes that there is sufficient liquidity
and stability that the tradeable objects can be bought and sold at
the market price at approximately the desired times. This allows
the desired price for the spread to be achieved. However, more
generally, a desired price at which to buy or sell a particular
trading strategy is determined. Then, an automated trading tool,
for example, attempts to achieve that desired price by buying and
selling the legs at appropriate prices. For example, when a user
instructs the trading tool to buy or sell the trading strategy 410
at a desired price, the automated trading tool may automatically
place an order (also referred to as quoting an order) for one of
the tradeable objects 422 of the trading strategy 410 to achieve
the desired price for the trading strategy (also referred to as a
desired strategy price, desired spread price, and/or a target
price). The leg for which the order is placed is referred to as the
quoting leg. The other leg is referred to as a lean leg and/or a
hedge leg. The price that the quoting leg is quoted at is based on
a target price that an order could be filled at in the lean leg.
The target price in the hedge leg is also known as the leaned-on
price, lean price, or lean level. Typically, if there is sufficient
quantity available, the target price may be the best bid price when
selling and the best ask price when buying. The target price may be
different than the best price available if there is not enough
quantity available at that price or because it is an implied price,
for example. As the leaned-on price changes, the price for the
order in the quoting leg may also change to maintain the desired
strategy price.
[0081] The leaned-on price may also be determined based on a lean
multiplier and/or a lean base. A lean multiplier may specify a
multiple of the order quantity for the hedge leg that should be
available to lean on that price level. For example, if a quantity
of 10 is needed in the hedge leg and the lean multiplier is 2, then
the lean level may be determined to be the best price that has at
least a quantity of 20 available. A lean base may specify an
additional quantity above the needed quantity for the hedge leg
that should be available to lean on that price level. For example,
if a quantity of 10 is needed in the hedge leg and the lean base is
5, then the lean level may be determined to be the best price that
has at least a quantity of 15 available. The lean multiplier and
lean base may also be used in combination. For example, the lean
base and lean multiplier may be utilized such that larger of the
two is used or they may be used additively to determine the amount
of quantity to be available.
[0082] When the quoting leg is filled, the automated trading tool
may then submit an order in the hedge leg to complete the strategy.
This order may be referred to as an offsetting or hedging order.
The offsetting order may be placed at the leaned-on price or based
on the fill price for the quoting order, for example. If the
offsetting order is not filled (or filled sufficiently to achieve
the desired strategy price), then the strategy order is said to be
"legged up" or "legged" because the desired strategy relationship
has not been achieved according to the trading strategy
definition.
[0083] In addition to having a single quoting leg, as discussed
above, a trading strategy may be quoted in multiple (or even all)
legs. In such situations, each quoted leg still leans on the other
legs. When one of the quoted legs is filled, typically the orders
in the other quoted legs are cancelled and then appropriate hedge
orders are placed based on the lean prices that the now-filled
quoting leg utilized.
VI. Dynamic Leaning
[0084] Dynamic leaning involves adjusting quantity in a quoting leg
based on an available leaned-on quantity. For example, the quantity
in the quoting leg may be reduced when the available leaned-on
quantity decreases. Some dynamic leaning mechanisms and techniques
are discussed in U.S. Pat. No. 7,729,978, filed on Mar. 28, 2007,
and U.S. patent application Ser. No. 13/245,406, filed Sep. 26,
2011. The contents of U.S. Pat. No. 7,729,978 and the contents of
U.S. patent application Ser. No. 13/245,406 are fully incorporated
herein by reference.
[0085] In some previous implementations of dynamic leaning, the
quoting quantities are adjusted each time a change occurs in the
corresponding available leaned-on quantity, regardless of a
magnitude of the change in the available leaned-on quantity. Such
previous implementations have the potential of adjusting the
quoting quantities a significant number of times. In many
exchanges, adjustment of the quoting quantity incurs a fee or
penalty. Alternatively, some exchanges require a certain amount of
quoting quantity to be filled. Thus, in some instances, a large
number of quoting quantity adjustments may be undesirable.
VII. Stable Quoting Quantity Identification
[0086] FIGS. 5A and 5B are flowcharts representative of example
operations that can be executed to implement the teachings of this
disclosure. The example operations of FIGS. 5A and 5B can be
implemented by, for example, the example trading device 110 of FIG.
1 and/or the example trading device 210 of FIG. 2. While the
example trading device 110 of FIG. 1 is described as executing the
example operations of FIGS. 5A and 5B below, any suitable device
can execute the example operations of FIGS. 5A and 5B. The example
operations of FIGS. 5A and 5B reduce an amount of times a quoting
quantity of a spread is adjusted in response to changes in an
available quantity of a leaned-on tradeable object. To achieve this
processing efficiency, the example operations of FIGS. 5A and 5B
include identifying a stable quoting quantity based on a mean
quantity of the leaned-on tradeable object and a distribution of
the quantity around the mean. Further, the example operations of
FIGS. 5A and 5B include defining first and second (for example, low
and high, upper and lower, etc.) configurable watermarks based on
the identified stable quoting quantity. The established watermarks
define a range representing the amount or volume of available
quantity in the leaned-on tradeable object that warrant an
adjustment of the stable quoting quantity. When either of the
established watermarks is met or exceeded, the stable quoting
quantity is adjusted according to the example operations of FIGS.
5A and 5B. As a result, the example operations of FIGS. 5A and 5B
limit dynamic changes to the quoting quantity to instances in which
the available quantity of the leaned-on tradeable object has
changed beyond a threshold amount.
[0087] The example of FIG. 5A begins with the trading device 100
obtaining a trading strategy (block 500). For example, the obtained
trading strategy may have been placed by a user and/or generated by
an automated trading tool. The order is analyzed to identify a
total quoting quantity of the order (block 502). In particular, a
total quoting quantity of a quoting leg of the order is identified.
In other words, the example trading device 110 determines how many
units of a tradeable object of the quoting leg are to be bought or
sold according to the obtained order. Additional or alternative
aspects of the spread are also determined such as, for example,
whether the spread includes a ratio and/or a multiplier to further
define the trading strategy. In some instances, the example trading
device 110 executing the example operations of FIGS. 5A and 5B may
determine that the stable quoting quantity is less than the total
quoting quantity of the order. Accordingly, only a portion of the
total quoting quantity of the order may be placed at a given time.
Thus, the example trading device 110 can use the calculated total
quoting quantity to, for example, determine when the entire quoting
leg of the obtained order has been filled.
[0088] The tradeable objects of a lean leg and the corresponding
quoting leg of the order are identified (block 504). In some
examples, the example trading device 110 may also determine
exchange information associated with the order such as, for
example, at which exchange the quoting and/or lean legs are to be
executed.
[0089] The example trading device 100 calculates a mean available
quantity of the leaned-on tradeable object over a period of time or
over a number of measurements (block 506). The period of time over
which the mean is calculated can be adjusted by, for example, a
user or an automated trading device. The example trading device 110
takes a plurality of measurements of a market depth (e.g.,
available quantity) of the leaned-on tradeable object and averages
the measured depths to generate the mean (.mu.). In the illustrated
example, the mean (.mu.) is calculated using the following
equation:
.sigma. = i = 0 n T i ( V i - .mu. ) 2 i = 0 n T i Equation 1
##EQU00001##
where V, is the measured volume for depth measurement i, and
T.sub.i is the duration of V.sub.i until V.sub.i+1.
[0090] The example trading device 110 also generates a distribution
including the calculated mean (.mu.) of the available quantity of
the leaned-on tradeable object over a specified period of time
(block 508). In the illustrated example of FIG. 5A, the example
trading device 110 generates a standard normal or Gaussian
distribution as a function of a standard deviation (.sigma.) from
the calculated mean (.mu.). However, any other suitable
distribution or type of distribution can be utilized. In the
illustrated example, the standard deviation (.sigma.) is calculated
using the following equation:
.sigma. = i = 0 n T i ( V i - .mu. ) 2 i = 0 n T i Equation 2
##EQU00002##
[0091] FIG. 6 illustrates an example distribution 600 generated in
connection with the example operations of FIGS. 5A and 5B. The
example distribution 600 of FIG. 6 is representative of a standard
normal distribution or bell curve where each band or region has a
width of one (1) standard deviation centered on the calculated mean
(.mu.). The example distribution 600 of FIG. 6 is indicative of how
the available quantity of the leaned-on tradeable object has varied
over a recent period of time. As the mean (.mu.) and the standard
deviation (.sigma.) are continuously calculated and generated over
time based on the market depth of the leaned-on tradeable object,
the example distribution 600 of FIG. 6 can shift (for example, from
left to right or right to left) and/or change shape in accordance
with changes in the available quantity of the leaned-on tradeable
object. When more market depth measurements deviate farther from
the mean (.mu.), the example distribution 600 becomes wider and
flatter. When more market depth measurements deviate closer to the
mean (.mu.), the example distribution 600 becomes taller and
thinner. The period of time over which the mean (.mu.) and the
standard deviation (.sigma.) are calculated is configurable by, for
example, a user and/or the trading device 110 acting on behalf of
the user. For example, the mean (.mu.) and the standard deviation
(.sigma.) can be calculated for the previous twenty (20) minutes,
two (2) months, two (2) years, etc. In some examples, the mean
(.mu.) and the standard deviation (.sigma.) are calculated for a
previous period of time that does not immediately preceded a
current time. That is, the mean (.mu.) and the standard deviation
(.sigma.) may be calculated for any suitable set or subset of
historical data for any suitable period of time.
[0092] According to the example operations of FIGS. 5A and 5B, a
plurality of values are generated based on the mean (.mu.) and the
standard deviation (.sigma.) to establish a stable quoting
quantity, to define a range of acceptable changes to the market
depth of the leaned tradeable object, and to determine when the
stable quoting quantity should be updated. In the illustrated
example, a configurable stability multiplier, a low multiplier, and
a high multiplier are utilized to set the plurality of values. In
particular, a set quoting quantity (Q) is set (block 510). In the
illustrated example, the set quoting quantity (Q) corresponds to
the stable quoting quantity to be utilized by the trading strategy.
In the illustrated example, the set quoting quantity (Q) is
calculated using the following equation:
Q=.mu.-m.sigma., Equation 3:
where the stability multiplier is represented by (m). The stability
multiplier is a configurable multiplier set by, for example, a user
and/or a trading device operating on behalf of the user. In some
examples, the stability multiplier may be set between a value of
two (2) and three (3). When the stability multiplier increases, the
stability of the spread (i.e., a likelihood of the spread being
filled and not legged) increases because the stable quoting
quantity (Q) corresponding to a calculated available quantity of
the leaned-on tradeable object decreases. In other words, a lower
stable quoting quantity is relatively more likely to be filled as a
lower quantity of the leaned-on tradeable object needs to be
available. Further an increased stability multiplier causes less
frequent updates to the set quoting quantity (Q). Thus, the
stability multiplier represents and can be adjusted according to an
amount of risk that a user is willing to take regarding the
stability of the spread. The stability multiplier may correlate to
a likelihood and/or a range of likelihoods that the spread is
stable and will be filled. For example, a value of in a range of
two (2) to three (3) for the stability multiplier may correspond to
an approximately ninety-five percent (95%) likelihood that the
spread is stable. In some examples, the stability multiplier may be
assigned a negative value, which represents a higher degree of risk
that the spread will be legged. For example, a value of negative
two (-2) for the stability multiplier may correspond to an
approximately five percent (5%) likelihood that the spread is
stable.
[0093] The example operations of FIGS. 5A and 5B also establish a
value referred to herein as a low watermark (L) (block 512). The
low watermark (L) is continuously updated as each market depth
measurement is obtained. In other words, when a change occurs in
the available quantity of the leaned-on tradeable object, the
example low watermark (L) is updated. The low watermark (L) is used
to determine when the market depth of the leaned-on tradeable
object has decreased to a point at which a downwards adjustment of
the set quoting quantity (Q) is desired (for example, so that the
set quoting quantity (Q) represents a stable quantity that is
unlikely to be legged as a result of insufficient quantity in the
leaned-on market). The low multiplier, which is configurable by a
user and/or a trading device acting on behalf of the user, is used
to define a distance from the mean (.mu.) at which the low
watermark (L) is to be set. The example low watermark (L) is
established and tracked according to the following equation:
L=.mu..sub.NEW-1.sigma..sub.NEW, Equation 4:
where the low multiplier is represented by (1). In the illustrated
example, the low multiplier is less than the stability
multiplier.
[0094] The example operations of FIGS. 5A and 5B also establish a
value referred to herein as a high watermark (H) (block 512).
Similar to the set quoting quantity (Q), the high watermark (H) is
set and maintained until conditions in the leaned-on market
indicate that the set quoting quantity (Q) should be updated. Each
time the set quoting quantity (Q) is set or updated, the example
high watermark (H) is calculated. The high watermark (H) is used to
determine when the market depth of the leaned-on tradeable object
has been increased to a point at which an upwards adjustment of the
set quoting quantity (Q) is desired. The high multiplier, which is
configurable by a user and/or a trading device acting on behalf of
the user, is used to define a distance from the mean (.mu.) at
which the high watermark (H) is to be set. In the illustrated
example, the value of the high watermark (H) is set according to
the following equation:
H=.mu.-h.sigma., Equation 5:
where the high multiplier is represented by (h). In the illustrated
example, the high multiplier is less than the stability
multiplier.
[0095] The example operations of FIGS. 5A and 5B also track a value
referred to herein as a current quoting quantity (Q.sub.NEW).
Similar to the low watermark (L), the current quoting quantity
(Q.sub.NEW) is continuously updated as each market depth
measurement is obtained. The current quoting quantity (Q.sub.NEW)
represents the value of the quoting quantity according to current
conditions of the leaned-on tradeable object. While the set quoting
quantity (Q) is only updated when certain condition exist or are
reached, the current quoting quantity (Q.sub.NEW) is continuously
updated as each market depth measurement is obtained. The set
quoting quantity (Q) is updated to (Q.sub.NEW) when the certain
conditions exist or are reached in the leaned market. In the
illustrated example, the following equation is used for the current
quoting quantity (Q.sub.NEW):
Q.sub.NEW=.mu..sub.NEW-m.sigma..sub.NEW, Equation 6:
[0096] Thus, in accordance with the example operations of FIGS. 5A
and 5B, the example trading device 110 generates and/or tracks a
plurality of values associated with the leaned-on tradeable object.
While some of the values (the set quoting quantity (Q) and the high
watermark (H)) are maintained until certain conditions are
detected, other ones of the values (the current quoting quantity
(Q.sub.NEW) and the low watermark (L)) are tracked and continuously
updated.
[0097] In operation, the low watermark (L) and the high watermark
(H) shown in FIG. 7 illustrate an example configuration of the
values utilized by the example operations of FIGS. 5A and 5B. The
horizontal axis of FIG. 7 represents the available quantity of the
leaned-on tradeable object of the received order. The set quoting
quantity (Q) and the example high watermark (H) form first and
second boundaries, respectively, that define a range. The current
quoting quantity (Q.sub.NEW) and the low watermark (L) move along
the horizontal axis in accordance with changes in the available
quantity of the leaned-on tradeable object. Initially, the current
quoting quantity (Q.sub.NEW) and the low watermark (L) are within
the range defined by the set quoting quantity (Q) and the example
high watermark (H). The example range defined in FIG. 7 corresponds
to an acceptable deviation in the available quantity of the
leaned-on tradeable object. In other words, a first region 700
within the range defined by the set quoting quantity (Q) and the
high watermark (H) corresponds to instances in which the
initialized stable quoting quantity is still considered stable.
Further, second and third regions 702 and 704 of FIG. 7 that fall
outside the range correspond to instances in which the stable
quoting quantity should be adjusted to remain stable.
[0098] With reference to FIG. 5B, when new market data related to
the lean leg of the order is received (block 514), the example
trading device 110 calculates the value of the current quoting
quantity (Q.sub.NEW) and updates the low watermark (L) according to
the new market data (block 516). When the tracked values
(Q.sub.NEW) and (L) are updated, the value of the set quoting
quantity (Q) is compared to the low watermark (L) (block 518). The
low watermark (L) becoming less than the set quoting quantity (Q)
corresponds to the low watermark (L) falling into the second region
702 of FIG. 7. If the trading device 110 determines that the low
watermark (L) has become less than the set quoting quantity (Q),
the set quoting quantity (Q) is to be updated. When the tracked
values (Q.sub.NEW) and (L) are updated, the value of the high
watermark (H) is compared to the current quoting quantity
(Q.sub.NEW) (block 520). The current quoting quantity (Q.sub.NEW)
becoming greater than the high watermark (H) corresponds to the
current quoting quantity (Q.sub.NEW) falling into the third region
704 of FIG. 7. If the current quoting quantity (Q.sub.NEW) has
become greater than the high watermark (H), the set quoting
quantity is to be updated.
[0099] In the example of FIG. 5B, the low watermark (L) is less
than the set quoting quantity (Q) (block 518), or the current
quoting quantity (Q.sub.NEW) is greater than the high watermark (H)
(block 520), the set quoting quantity (Q) is updated to the value
of the current quoting quantity (Q.sub.NEW) (block 522). Further,
in conjunction with the update of the set quoting quantity (Q) to
the value of the current quoting quantity (Q.sub.NEW), the example
high watermark (H) is set or updated according to the corresponding
market depth of the leaned-on tradeable object at that time (block
524).
[0100] Thus, with reference to FIG. 7, the set quoting quantity (Q)
is updated to the value of the current quoting quantity (.sub.QNEW)
when the current quoting quantity (.sub.QNEW) moves into the third
region 704. Additionally, the set quoting quantity (Q) is updated
to the value of the current quoting quantity (.sub.QNEW) when the
low watermark (L) moves into the second region 702. Further, the
high watermark (H) is updated when the set quoting quantity (Q) is
updated to the value of the current quoting quantity (.sub.QNEW).
Accordingly, each time the set quoting quantity (Q) is updated to
reflect a stable quantity, a new range defined by (Q) and (H) is
defined.
[0101] In some examples, a timer is utilized to define a grace
period for the market depth of the leaned-on tradeable object to
recover before updating the set quoting quantity (Q). That is, in
response to determining that the set quoting quantity should be
updated (for example, when the current quoting quantity (Q.sub.NEW)
moves into the third region 704 or when the low watermark (L) moves
into the second region 702), the example trading device 110 may
wait for a defined period of time, determine whether conditions for
the update still exist, and perform the update if the update
conditions still exist. As such, if one of the tracked values falls
outside of the defined acceptable deviation range for only a brief
period of time (or for only a few market depth measurements), the
set quoting quantity (Q) is not updated for that particular
instance.
[0102] If the total quoting quantity of the received order (as
determined upon receipt of the order), the operations of FIGS. 5A
and 5B end (block 528). Otherwise, the example operations wait for
new market data (block 514).
[0103] FIG. 8 is block diagram of an example stable quoting
quantity module 800 that may implement and/or execute the example
operations of FIGS. 5A and 5B. In some examples, the stable quoting
quantity module 800 may be implemented as a part of a trading
application associated with the trading device 110 of FIG. 1 and/or
the trading device 210 of FIG. 2. In some examples, the stable
quoting quantity module 800 may be implemented as computer
implemented code or instructions operable independent of a trading
application. In some examples, the features and functionality of
the stable quoting quantity module 800 may be implemented in
hardware operable in connection with the trading device 110 of FIG.
1 and/or the trading device 210 of FIG. 2.
[0104] The example stable quoting quantity module 800 of FIG. 8
includes an order analysis module 802 to receive and process a
trading strategy, such as a spread, being executed by, for example,
the trading device 110 of FIG. 1. The example order analysis module
802 identifies certain quantities associated with the spread. In
the illustrated example, the order analysis module 802 identifies a
total quoting quantity of a quoting leg of the spread and/or
whether a definition of the spread includes a ratio and/or
multiplier.
[0105] The example stable quoting quantity module 800 of FIG. 8
includes an object identification module 804 to identify the
tradeable object of a lean leg and/or the quoting leg of the
spread. The example stable quoting quantity module 800 of FIG. 8
also includes a mean calculation module 806 to calculate the mean
(.mu.) of the available quantity of the leaned-on tradeable object
over a period of time and/or over a set of market depth
measurements. In the example of FIG. 8, the mean calculation module
806 calculates the mean (.mu.) according to Equation 1 above. Using
the calculated mean (.mu.) and market depth measurements, a
quantity distribution module 808 generates a distribution
associated with the leaned-on tradeable object. In the example of
FIG. 8, the quantity distribution module 808 calculates a standard
deviation (.sigma.) from the mean (.mu.) using Equation 2
above.
[0106] The example stable quoting quantity module 800 of FIG. 8
includes a quantity determination module 810 to establish and
maintain the set quoting quantity (Q) according to the configurable
stability multiplier 812. Using the calculated standard deviation
(.sigma.), the calculated mean (.mu.), and the stability multiplier
812, the example quantity determination module 810 establishes or
initializes the set quoting quantity (Q) according to Equation 3
above. The example stable quoting quantity module 800 of FIG. 8
also includes a watermark definition module 813 to establish and
maintain the low and high watermarks (L) and (H). In the
illustrated example, the watermark definition module 813 implements
a low watermark definition routine 814, which references a first
multiplier 816. The first multiplier 816 of FIG. 8 corresponds to
the low multiplier (1) referred to in connection with FIGS. 5A and
5B. The example watermark definition module 813 of FIG. 8 also
implements a high watermark definition routine 818, which
references a second multiplier 820. The second multiplier 820 of
FIG. 8 corresponds to the high multiplier (h) referred to in
connection with FIGS. 5A and 5B. In the illustrated example, the
low watermark definition routine 814 sets and tracks the low
watermark (L) according to Equation 4 above. Further, in the
illustrated example, the high watermark definition routine 818 sets
the high watermark (H) according to Equation 5 above.
[0107] When new market data related to the leaned-on tradeable
object (for example, a new amount of available quantity) is
detected and/or received, the example quantity determination module
810 calculates and/or updates the current quoting quantity
(Q.sub.NEW) and the example low watermark definition routine 814
updates the low watermark (L). The new market data may correspond
to a shift in the mean (.mu.) and/or a change in the standard
deviation (.sigma.) associated with the leaned-on tradeable object.
Such changes may correspond to a change in the quoting quantity
that is considered to be stable (for example, unlikely to result in
the spread being legged).
[0108] When the tracked values (Q.sub.NEW) and (L) have been
calculated and/or updated, an example comparator module 822
determines whether the low watermark (L) is less than or equal to
the set quoting quantity (Q). That is, with reference to FIG. 7,
the comparator 822 determines whether the low watermark (L) has
fallen outside of the range and into the second region 702. If not,
the example comparator 822 determines whether the current quoting
quantity (Q.sub.NEW) is greater than or equal to the high watermark
(H). That is, with reference to FIG. 7, the comparator 822
determines whether the current quoting quantity (Q.sub.NEW) has
fallen outside of the range and into the third region 704. If not,
the example stable quoting quantity module 800 waits for new market
data.
[0109] On the other hand, if the example comparator 822 determines
that the low watermark (L) is less than or equal to the set quoting
quantity (Q) or that the current quoting quantity (Q.sub.NEW) is
greater than or equal to the high watermark (H), the example stable
quoting quantity module 800 determines that the set quoting
quantity (Q) should be updated. In particular, the example quantity
determination module 810 updates the set quoting quantity (Q) to
equal the current quoting quantity (Q.sub.NEW). Further, the
example high watermark definition routine 818 updates the high
watermark (H) according to current conditions (the mean (.mu.) and
standard deviation (.sigma.)) of the available quantity of the
leaned-on tradeable object.
[0110] The example stable quoting quantity module 800 also utilizes
a timer module 824 to define a grace period for the market depth of
the leaned on tradeable object to recover before updating the set
quoting quantity (Q). That is, in response to determining that the
set quoting quantity should be updated (for example, when the
current quoting quantity (Q.sub.NEW) moves into the third region
704 or when the low watermark (L) moves into the second region
702), the example timer module 824 may enforce a waiting period of
time before update is executed. At the expiration of the waiting
period, if the update conditions still exist, the example stable
quoting quantity module 800 performs the corresponding updates.
[0111] Some of the described figures depict example block diagrams,
systems, and/or flow diagrams representative of methods that may be
used to implement all or part of certain embodiments. One or more
of the components, elements, blocks, and/or functionality of the
example block diagrams, systems, and/or flow diagrams may be
implemented alone or in combination in hardware, firmware, discrete
logic, as a set of computer readable instructions stored on a
tangible computer readable medium, and/or any combinations thereof,
for example.
[0112] The example block diagrams, systems, and/or flow diagrams
may be implemented using any combination of application specific
integrated circuit(s) (ASIC(s)), programmable logic device(s)
(PLD(s)), field programmable logic device(s) (FPLD(s)), discrete
logic, hardware, and/or firmware, for example. Also, some or all of
the example methods may be implemented manually or in combination
with the foregoing techniques, for example.
[0113] The example block diagrams, systems, and/or flow diagrams
may be performed using one or more processors, controllers, and/or
other processing devices, for example. For example, the examples
may be implemented using coded instructions, for example, computer
readable instructions, stored on a tangible computer readable
medium. A tangible computer readable medium may include various
types of volatile and non-volatile storage media, including, for
example, random access memory (RAM), read-only memory (ROM),
programmable read-only memory (PROM), electrically programmable
read-only memory (EPROM), electrically erasable read-only memory
(EEPROM), flash memory, a hard disk drive, optical media, magnetic
tape, a file server, any other tangible data storage device, or any
combination thereof. The tangible computer readable medium is
non-transitory.
[0114] Further, although the example block diagrams, systems,
and/or flow diagrams are described above with reference to the
figures, other implementations may be employed. For example, the
order of execution of the components, elements, blocks, and/or
functionality may be changed and/or some of the components,
elements, blocks, and/or functionality described may be changed,
eliminated, sub-divided, or combined. Additionally, any or all of
the components, elements, blocks, and/or functionality may be
performed sequentially and/or in parallel by, for example, separate
processing threads, processors, devices, discrete logic, and/or
circuits.
[0115] While embodiments have been disclosed, various changes may
be made and equivalents may be substituted. In addition, many
modifications may be made to adapt a particular situation or
material. Therefore, it is intended that the disclosed technology
not be limited to the particular embodiments disclosed, but will
include all embodiments falling within the scope of the appended
claims.
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