U.S. patent application number 16/238442 was filed with the patent office on 2019-07-11 for system and method for managing trading using alert messages for outlying trading orders.
The applicant listed for this patent is BGC Partners, Inc.. Invention is credited to Howard W. Lutnick, Joseph C. Noviello, Michael Sweeting.
Application Number | 20190213680 16/238442 |
Document ID | / |
Family ID | 35758563 |
Filed Date | 2019-07-11 |
United States Patent
Application |
20190213680 |
Kind Code |
A1 |
Noviello; Joseph C. ; et
al. |
July 11, 2019 |
SYSTEM AND METHOD FOR MANAGING TRADING USING ALERT MESSAGES FOR
OUTLYING TRADING ORDERS
Abstract
According to one embodiment, a method of managing trading is
provided. In a market for a particular type of instrument, buy
orders and sell orders are received from a plurality of traders.
Each buy order has an associated bid price and each sell order has
an associated offer price. A determination is made of whether the
particular trading order is an outlying trading order by
determining whether the particular trading order differs from at
least one comparison price by more than a threshold value. If it is
determined that the particular trading is an outlying trading
order, a restrictive action is taken regarding the outlying trading
order. For example, if a trader subsequently submits another
trading order that would trade with the outlying trading order, an
alert message may be sent to the trader and the subsequent trading
order may be prevented from trading with the outlying trading order
at least temporarily.
Inventors: |
Noviello; Joseph C.;
(Summit, NJ) ; Sweeting; Michael; (Hampshire,
GB) ; Lutnick; Howard W.; (New York, NY) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
BGC Partners, Inc. |
New York |
NY |
US |
|
|
Family ID: |
35758563 |
Appl. No.: |
16/238442 |
Filed: |
January 2, 2019 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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14305176 |
Jun 16, 2014 |
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16238442 |
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12946277 |
Nov 15, 2010 |
8756137 |
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14305176 |
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12191138 |
Aug 13, 2008 |
7835979 |
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12946277 |
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10911879 |
Aug 4, 2004 |
7577605 |
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12191138 |
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12191075 |
Aug 13, 2008 |
8224733 |
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14305176 |
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10911879 |
Aug 4, 2004 |
7577605 |
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12191075 |
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Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 40/04 20130101;
G06Q 40/00 20130101; G06Q 40/06 20130101; G06Q 99/00 20130101 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04; G06Q 99/00 20060101 G06Q099/00; G06Q 40/00 20060101
G06Q040/00; G06Q 40/06 20060101 G06Q040/06 |
Claims
1. (canceled)
2. An apparatus comprising: a memory; a network interface; a
display device; at least one processor to: receive trading orders,
via the network interface, each trading order having a price;
render, on the display device, the trading orders on an order
stack; sort the trading orders on the order stack in accordance
with a sort criteria such that an order at the top of the order
stack is the first order; in response to removing a given order
from the order stack, compare a price of the first order to a
value; in response to determining that the price of the first order
does not differ from the value by more than a threshold, permit
interaction with the first order; in response to determining that
the price of the first order does differ from the value by more
than the threshold, classify the first order as an outlying order,
promote a new order to the top of the order stack, and render, via
the display device, at least one space between the new order and
the outlying order; and in response to detecting interaction with
the outlying order, render an alert on the display device
indicating that the outlying order may have an erroneous price and
render on the display device an opportunity to change the erroneous
price.
3. The apparatus of claim 2, wherein the at least one processor is
further configured to determine a proposed modified price for the
outlying order; and render the proposed modified price on the
alert.
4. The apparatus of claim 3, wherein the at least one processor is
further configured to render on the display device a price of the
outlying order, the price including a whole number component and a
fractional number component.
5. The apparatus of claim 4, wherein the proposed modified price
for the outlying order includes a modification to the whole number
component of the price.
6. The apparatus of claim 4, wherein the at least one processor is
further configured to modify an appearance of the whole number
component on the display device.
7. The apparatus of claim 2, wherein the at least one processor is
further configured to prevent the outlying order from being
transmitted to a trading exchange at least until a response to the
alert is detected.
8. The apparatus of claim 2, wherein the at least one processor is
further configured to receive market information from one or more
market information sources and determine the threshold based at
least on the market information.
9. A method executed by at least one processor, the method
comprising: receiving trading orders, via a network interface, each
trading order having a price; rendering, on a display device, the
trading orders on an order stack; sorting the trading orders on the
order stack in accordance with a sort criteria such that an order
at the top of the order stack is the first order; in response to
removing a given order from the order stack, comparing a price of
the first order to a value; in response to determining that the
price of the first order does not differ from the value by more
than a threshold, permitting interaction with the first order; in
response to determining that the price of the first order does
differ from the value by more than the threshold, classifying the
first order as an outlying order, promoting a new order to the top
of the order stack, and rendering, via the display device, at least
one space between the new order and the outlying order; and in
response to detecting interaction with the outlying order,
rendering an alert on the display device indicating that the
outlying order may have an erroneous price and rendering on the
display device an opportunity to change the erroneous price.
10. The method of claim 9, further comprising determining a
proposed modified price for the outlying order and rendering the
proposed modified price on the alert.
11. The method of claim 10, further comprising rendering on the
display device a price of the outlying order, the price including a
whole number component and a fractional number component.
12. The method of claim 11, wherein the proposed modified price for
the outlying order includes a modification to the whole number
component of the price.
13. The method of claim 11, further comprising modifying an
appearance of the whole number component on the display device.
14. The method of claim 9, further comprising preventing the
outlying order from being transmitted to a trading exchange at
least until a response to the alert is detected.
15. The method of claim 9, further comprising receiving market
information from one or more market information sources and
determining the threshold based at least on the market information.
Description
CROSS-REFERENCE TO RELATED APPLICATION
[0001] This application is a divisional of U.S. patent application
Ser. No. 10/911,879 filed Aug. 4, 2004, entitled System and Method
for Managing Trading Using Alert Messages for Outlying Trading
Orders.
TECHNICAL FIELD OF THE INVENTION
[0002] This invention relates in general to market trading and,
more particularly, to a system and method for using alert messages
for outlying trading orders (such as buy and sell orders).
BACKGROUND OF THE INVENTION
[0003] In recent years, electronic trading systems have gained a
widespread acceptance for trading items. For example, electronic
trading systems have been created which facilitate the trading of
financial instruments such as stocks, bonds, currency, futures, or
other suitable financial instruments.
[0004] Many of these electronic trading systems use a bid/offer
process in which traders submit buy (or bid) and sell (or offer)
orders for a particular tradable instrument. The buy and sell
orders are received by a trading platform and placed onto a trading
exchange for the particular tradable instrument. Received buy
orders may be placed in a buy order queue, or stack, and received
sell orders may be placed in a sell order queue, or stack. Received
orders may be placed into such stacks in various different manners,
such as using a FIFO (first in, first out), a first buyer/first
seller system as detailed in U.S. Pat. No. 6,560,580, or based on
the bid and offer prices associated with each of the received buy
and sell orders, for example.
[0005] In some markets, the bid and offer prices of buy and sell
orders, respectively, are displayed in a numerical format having
(a) a whole number component, which may be referred to as a
"handle," and (b) a fractional number component, which may be
expressed as a decimal, a fraction, a combination of a decimal and
fraction, or otherwise expressed. For example, a bid price
displayed as 94.261/4 includes a whole number (or handle) component
of "94" and a fractional number component of "0.261/4." Similarly,
an offer price displayed as 52 3/32 includes a whole number (or
handle) component of "52" and a fractional number component of "
3/32." As another example, a bid or offer price displayed as 100.12
includes a whole number (or handle) component of "100" and a
fractional number component of "0.12."
[0006] Often, an order having a price that differs by a relatively
large amount from the current contra market for the same
instrument, which may be referred to as an "outlying order," is
promoted to the top of an order stack, such as when no better order
is currently present, for example. In some instances, a trader may
mistakenly attempt to trade with such an outlying order without
realizing the actual price of outlying order, such as when the
trader is concentrating only on the fractional number component of
existing orders. For example, when an order that has a fractional
number component similar to the current market but a whole number
(or handle) component that is different from the current market
(e.g., one or more points higher or lower than the current market)
is promoted to the top of an order stack, traders may place orders
attempting to trade with such an outlying order without realizing
that the handle of the outlying order differs from the current
market. In other words, the trader may have mistakenly viewed or
considered only the fractional number component of the outlying
order when submitting his order. In any event, the resulting
executed trade is typically disadvantageous to the mistaken trader,
who may then notify the trading platform of the mistaken trade. The
trading platform may then have to undo one or more executed trades
with the outlying order, which may require the trading platform to
halt trading on the instrument, and which may cost the trading
platform or either customer both time and money as a result of the
ensuing confusion over whether a trade is to be cancelled or
not.
SUMMARY OF THE INVENTION
[0007] In accordance with the present invention, system and methods
are provided for determining whether a trading order (such as a buy
or sell order, for example) is an outlying order. Systems and
methods are also provided for using alert messages for outlying
trading orders.
[0008] According to one embodiment, a method of managing trading is
provided. In a market for a particular type of instrument, buy
orders and sell orders are received from a plurality of traders.
Each buy order has an associated bid price and each sell order has
an associated offer price. Each of the received buy orders and sell
orders are placed on a trading exchange such that the buy orders
and sell orders may be executed. A determination is made of whether
the particular trading order is an outlying trading order by
determining whether the particular trading order differs from at
least one comparison price by more than a threshold value. The
comparison price may be another existing price, a price of a
previous trade, a price determined based on one or more other
markets, or any other suitable comparison price. If it is
determined that the particular trading order is an outlying trading
order, a restrictive action is taken regarding the outlying trading
order. For example, if a trader subsequently submits another
trading order that would otherwise match and execute a trade with
the outlying trading order, an alert message may be sent to that
trader and the subsequent trading order may be prevented from
trading with the outlying trading order at least until a response
to the alert message is received.
[0009] According to another embodiment, a system for managing
trading is provided. The system includes a computer having a
processor, and a computer-readable medium coupled to the computer.
The computer-readable medium includes a program. When executed by
the processor, the program is operable to receive trading orders
from a plurality of traders in a market, each trading order having
an associated price; place each of the received trading orders on a
trading exchange such that the trading orders may be executed;
determine whether the price of a particular trading order differs
from a comparison price by more than a threshold value; and if it
was determined that the price of the particular trading order
differs from the comparison price by more than the threshold value,
take a restrictive action regarding the particular trading
order.
[0010] The restrictive action may be taken with respect to either,
or both of, the trader placing the outlying trading order or the
trader attempting to execute on the outlying trading order. The
possible restrictive action is not limited to an alert message and
may include other actions such as, for example, preventing or
restricting promotion of the outlying order to the top of a bid or
offer stack, preventing the display of the outlying order in a bid
or offer stack (or modifying the display of the outlying order,
such as by displaying the outlying order in a different color, for
example), and preventing traders from executing trades on the
outlying order.
[0011] Various embodiments of the present invention may benefit
from numerous advantages. It should be noted that one or more
embodiments may benefit from some, none, or all of the advantages
discussed below.
[0012] One advantage of the invention is that a trading system is
provided in which outlying trading orders (such as a buy order
having a bid price significantly lower than the current market or a
sell order having an offer price significantly higher than the
current market) are identified and alert messages are sent to
traders attempting to execute a trade on such outlying trading
orders. An alert message may notify the trader that the price of
his trading order may be mistaken and may provide the trader an
opportunity to correct the mistaken price. As a result, the number
of mistaken trades in a market may be reduced, thus saving the
trading platform providing access to the market both time and money
that would otherwise be spent identifying and undoing or otherwise
managing mistaken trades.
[0013] Other advantages will be readily apparent to one having
ordinary skill in the art from the following figures, descriptions,
and claims.
BRIEF DESCRIPTION OF THE DRAWINGS
[0014] For a more complete understanding of the present invention
and for further features and advantages, reference is now made to
the following description, taken in conjunction with the
accompanying drawings, in which:
[0015] FIG. 1 illustrates an example system for managing trading
using alert messages for outlying trading orders in accordance with
an embodiment of the invention;
[0016] FIG. 2 illustrates an example method of identifying outlying
trading orders by comparing trading orders with contra market
prices, and sending alert messages to traders attempting to trade
on such outlying trading orders, in accordance with an embodiment
of the present invention; and
[0017] FIG. 3 illustrates an example method of identifying outlying
trading orders by comparing trading orders with previous trade
prices, and sending alert messages to traders attempting to trade
on such outlying trading orders, in accordance with an embodiment
of the present invention.
DETAILED DESCRIPTION OF THE DRAWINGS
[0018] Example embodiments of the present invention and their
advantages are best understood by referring now to FIGS. 1 through
3 of the drawings, in which like numerals refer to like parts. In
general, according to at lease one embodiment, a trading system is
provided that identifies a buy or sell trading order having an
outlying bid or offer price and sends an alert message to a trader
who submits a subsequent order in an attempt to execute a trade on
the outlying buy or sell order. The alert message may provide the
trader an opportunity to change, or correct, the price of the
order, and the system may prevent the trader's order from being
executed or even placed on the trading exchange until the system
receives a response to the alert message from the trader.
[0019] In some embodiments, for example, buy and sell orders may be
displayed in "stacks" on a trading exchange and may migrate to the
tops of such stacks based on various rules or criteria. For
example, buy orders having the highest current bid price may
migrate to the top of a buy order stack and sell orders having the
lowest current offer price may migrate to the top of a sell order
stack. When a buy or sell order is promoted to the top of the buy
order stack or the sell order stack, respectively, the system
determines whether the newly promoted order is an outlying order by
determining whether the price of the newly promoted order differs
from the price of the existing (or last existing if there are none
currently existing) contra market by more than some threshold
value, which may vary according to market conditions. For example,
the system may determine whether a newly promoted sell order is an
outlying order by determining whether the offer price of the newly
promoted sell order exceeds the bid price of the current top buy
order by more than the threshold value. Similarly, the system may
determine whether a newly promoted buy order is an outlying order
by determining whether the bid price of the newly promoted buy
order is less than the offer price of the current top sell order by
more than the threshold value. The system may also determine
whether newly placed orders are outlying orders in a similar
manner.
[0020] It should be understood that in some situations, references
to the "top order" or the "top of a stack" may refer to the best
existing (buy or sell) order or the order at the front of a stack
of orders, which orders may not be located at the physical "top" of
their respective stack. For example, as discussed below in greater
detail, in particular embodiments, buy orders are displayed on one
side of a vertical list of numbers and sell orders are displayed on
the opposite side of the same vertical list of numbers such that
both buy orders and sell orders are arranged by price from high to
low moving downward along the vertical list of numbers. Is such
embodiments, although the existing sell order having the lowest
offer price is actually located below the other existing sell
orders, such existing sell order may be referred to as the top sell
order or the sell order at the top of the sell order stack.
[0021] In another embodiment, when a buy or sell order is promoted
to the top of the buy order stack or the sell order stack,
respectively, the system determines whether the newly promoted
order is an outlying order by determining whether the price of the
newly promoted order differs from the price of a previous trade
(such as the price at which the most recent trade was executed, for
example) by more than some threshold value. As mentioned above, the
threshold values may vary according to market conditions. For
example, the threshold values may be determined and/or updated
based on the historical or current volatility of related markets.
Similarly, the value to which the order being analyzed is compared
(i.e., to determine whether a threshold is exceeded) may itself be
equal to or based on a value obtained from historical or current
related market analysis.
[0022] In yet another embodiment, a confluence of the two
embodiments above may be used whereby the system determines whether
the newly promoted order is an outlying order by determining
whether the price of the newly promoted order differs from both (1)
the price of the best contra market and (2) the price of a previous
trade by more than some threshold value. Such a methodology may be
used, for example, in a thinly traded and/or fast moving market to
ensure that orders are identified as outlying orders only if the
price of such an order is sufficiently different from both the
nearest contra price and the last traded price.
[0023] In still other embodiments, when one or more trading orders
in a trading order stack (e.g., a buy order stack or a sell order
stack) are removed, the system may determine whether the new top
order in that stack is an outlying order based on one or more
criteria. If the new top order in that stack is determined to be an
outlying order, the system may prevent the outlying order from
being promoted to the top of its order stack on a trading display
or electronic price feed, thus leaving one or more open spaces at
the top of the order stack above the outlying order. This may
notify other traders that the outlying order is indeed an outlying
order and that such traders should carefully consider the price of
the outlying order. In addition, the system may send an alert
message to a trader who submits an order in an attempt to execute a
trade on the outlying buy or sell order. It should be noted that
references to "top orders" or the "top of the stack" are only
intended as examples to convey a relative position of one order in
a stack as compared to other orders in that stack. The relative
positioning of orders in a stack may be accomplished according to
any suitable preferences or criteria. For example, the buy order
stack could be configured such that the sell order with the lowest
offer price is positioned at the bottom of the stack rather than at
the top.
[0024] As discussed above, when the system identifies an outlying
trading order, and a subsequent trader attempts to execute a trade
on the outlying order, the system may generate and communicate an
alert message to the subsequent trader. The alert message may
indicate that the price of the subsequent trader's order may be
mistaken and provide the subsequent trader an opportunity to
change, or correct, the price of the order. In some embodiments in
which the price of the subsequent trader's order includes a whole
number component and a fractional number component (such as 94.26),
the system may determine that the whole number component (94) of
the price is erroneous and thus modify the whole number component
(e.g., from 94 to 95) to attempt to arrive at the price that the
trader actually intended to submit for the order. The system may
then display this proposed modified price (95.26) to the subsequent
trader in the alert message and ask the subsequent trader whether
he or she accepts this proposed modified price. In some
embodiments, the subsequent trader may circumvent the alert message
by resubmitting his or her order at the original price.
[0025] FIG. 1 illustrates an example trading system 10 for managing
trading by determining outlying orders and using alert messages
according to an embodiment of the present invention. As shown,
system 10 may include one or trader terminals 12 and one or more
market information sources 14 coupled to a trading platform 16 by a
communications network 18.
[0026] A trader terminal 12 may provide a trader 20 access to
engage in trading activity via trading platform 16. A trader
terminal 12 may include a computer system and appropriate software
to allow trader 20 to engage in trading activity on one or more
trading exchanges provided by trading platform 16. As used in this
document, the term "computer" refers to any suitable device
operable to accept input, process the input according to predefined
rules, and produce output, for example, a personal computer,
workstation, network computer, wireless data port, wireless
telephone, personal digital assistant, one or more processors
within these or other devices, or any other suitable processing
device. A trader terminal 12 may include one or more human
interface, such as a mouse, keyboard, or pointer, for example.
[0027] Traders 20 may include any entity, such as an individual,
group of individuals or firm, that engages in trading activity via
trading system 10. For example, a trader 20 may be an individual
investor, a group of investors, or an institutional investor.
Traders 20 may also include market makers, such as any individual
or firm that submits and/or maintains both bid and ask orders
simultaneously for the same instrument.
[0028] Traders 20 may place various trading orders 22 onto one or
more trading exchanges provided by trading platform 16. Trading
platform 16 may provide any suitable type of trading exchanges for
trading orders 22, such as for example, auction-type exchanges,
entertainment-type exchanges, and trading exchanges for trading
various financial instruments (such as stocks or other equity
securities, bonds, mutual funds, options, futures, derivatives,
swaps, and currencies, for example). Such trading orders 22 may
include buy orders 24, sell orders 26, or both, and may be any type
of order which may be managed by a trading platform 16, such as
market orders, limit orders, day orders, open orders, GTC ("good
till cancelled") orders, "good through" orders, an "all or none"
orders, or "any part" orders, for example and not by way of
limitation.
[0029] Each buy order 24 may be at least partially defined by a bid
price and size, while each sell order 26 may be at least partially
defined by an offer price and size. The price for each order--in
other words, the bid price for each buy order 24 and the offer
price for each sell order 26--may include (a) a whole number
component, which may be referred to as a "handle," and (b) a
fractional number component, which may be expressed as a decimal, a
fraction, a combination of a decimal and fraction, or otherwise
expressed. For example, in a market in which the tick size is 1/4
of 1/32 (i.e., 1/4/32) of a point, a price displayed as 94.261/4 is
defined by a handle of 94 and a fractional number component of
261/4, which represents 261/4/32 of a point (or approximately
0.8203). The 1/4 may also be represented as 2/8 making a price
display of 94.262. Table 1 illustrates example prices, example
formats in which prices may be displayed by trading platform 16,
the handle for such prices, and the fractional number component of
such prices.
TABLE-US-00001 TABLE 1 Example formats for displaying prices and
the components of such prices. May be Handle Price displayed as:
component Fractional component 94 26/32 94.26 94 .26 (i.e., 26/32
or 0.8125) 94.sup.261/4/32 94.261/4 94 .261/4 (i.e., 26.25/32 or
0.8203) 94.sup.261/4/32 94.262 94 .262 (i.e., 26.25/32 or 0.8203)
42.5125 42.5125 42 .5125
[0030] Market information sources 14 may be operable to communicate
market information 28 to trading platform 16. Market information 28
may include any current and/or historical information regarding one
or more markets for various instruments, such as price information,
price movement information, volatility information, and trading
volume information, for example. Market information 28 may also
include current and/or historical financial or monetary
information, such as interest rate information and information
regarding currencies, for example. As discussed in greater detail
below, trading platform 16 may use market information for various
purposes, such as for determining and updating threshold values 40
used for identifying outlying trading orders 22. Market information
sources 14 may include any source or recipient of market
information 28 that may communicate such market information 28 to
trading platform 16. For example, market information sources 14 may
include other trading platforms, trading exchanges, brokers,
financial institutions, data vendors or a Government Statistical
Bureau.
[0031] Communications network 18 is a communicative platform
operable to exchange data or information between trader terminals
12, market information sources 14, and trading platform 16. In a
particular embodiment of the present invention, communications
network 18 represents an Internet architecture which provides
traders 20 with the ability to electronically execute trades or
initiate transactions to be delivered to an authorized exchange
trading floor. Alternatively, communications network 18 could be a
plain old telephone system (POTS), which traders 20 could use to
perform the same operations or functions. Such transactions may be
assisted by a broker associated with trading platform 16 or
manually keyed into a telephone or other suitable electronic
equipment in order to request that a transaction be executed. In
other embodiments, communications system 14 could be any packet
data network (PDN) offering a communications interface or exchange
between any two nodes in system 10. Communications network 18 may
alternatively be any local area network (LAN), metropolitan area
network (MAN), wide area network (WAN), wireless local area network
(WLAN), virtual private network (VPN), intranet, or any other
appropriate architecture or system that facilitates communications
in a network or telephonic environment.
[0032] Trading platform 16 is a trading architecture that provides
access to one or more trading exchanges in order to facilitate the
trading of trading orders 22. Trading platform 16 may be a
computer, a server, a management center, a single workstation, or a
headquartering office for any person, business, or entity that
seeks to manage the trading of trading orders 22. Accordingly,
trading platform 16 may include any suitable hardware, software,
personnel, devices, components, elements, or objects that may be
utilized or implemented to achieve the operations and functions of
an administrative body or a supervising entity that manages or
administers a trading environment.
[0033] In some embodiments, trading platform 16 may be associated
with or comprise one or more web servers 30 operable to store
websites and/or website information 32 in order to host one or more
web pages 34. Web servers 30 may be coupled to communication
network 18 and may be partially or completely integrated with, or
distinct from, trading platform 16. A trading terminal 12 may
include a browser application 36 operable to provide an interface
to web pages 34 hosted by web servers 30 such that traders 20 may
communicate information to, and receive information from, trading
module 50 via communication network 18. In particular, browser
application 36 may allow a trader 20 to navigate through, or
"browse," various Internet web sites or web pages 34 hosted by a
web server 30 to provide an interface for communications between
the trader 20 and trading platform 16. For example, one or more web
pages 34 may facilitate the communication of trading orders 22 from
traders 20 to trading platform 16, the communication of alert
messages 40 from trading platform 16 to traders 20, and the
communication of responses 42 to alert messages 40 from traders 20
to trading platform 16.
[0034] Trading platform 16 may include a trading module 50 operable
to receive trading orders 22 from traders 20 and to manage or
process those trading orders 22 such that financial transactions
among and between traders 20 may be performed. Trading module 50
may have a link or a connection to a market trading floor, or some
other suitable coupling to any suitable element that allows for
such transactions to be consummated.
[0035] Trading module 50 may be operable to identify buy orders 24
and sell orders 26 having outlying bid or offer prices and to send
alert messages 40 to the traders 20 who placed such outlying
trading orders 22. As discussed above, each such alert message 40
may indicate that the bid or offer price of the outlying order 22
may be erroneous and may allow the relevant trader 20 to modify bid
or offer price for the order 22 or to place the order 22 at the
original price.
[0036] As show in FIG. 1, trading module 50 may include a
processing unit 52 and a memory unit 54. Processing unit 52 may
process data associated with trading orders 22 or otherwise
associated with system 10, which may include executing software 56
or other coded instructions that may in particular embodiments be
associated with trading module 50. Memory unit 56 may store
software 56, trading orders 22 received from traders 20, a set of
trading management rules 58, one or more threshold values 60, and
market information 28 received from market information sources 14.
Memory unit 56 may be coupled to data processing unit 52 and may
include one or more databases and other suitable memory devices,
such as one or more random access memories (RAMs), read-only
memories (ROMs), dynamic random access memories (DRAMs), fast cycle
RAMs (FCRAMs), static RAM (SRAMs), field-programmable gate arrays
(FPGAs), erasable programmable read-only memories (EPROMs),
electrically erasable programmable read-only memories (EEPROMs), or
any other suitable volatile or non-volatile memory devices.
[0037] It should be understood that the functionality provided by
communications network 18 and/or trading module 50 may be partially
or completely manual such that one or more humans may provide
various functionality associated with communications network 18 or
trading module 50. For example, a human agent of trading platform
16 may act as a proxy or broker for placing trading orders 22 on
trading platform 16.
[0038] Trading module 50 may manage and process trading orders 22
based at least on trading management rules 58. Trading management
rules 58 may include rules defining, for example, how to determine
whether particular trading orders 22 are outlying orders, how to
generate alert messages 40, how to determine and/or update
threshold values 60, and how to manage the promotion of buy orders
24 and sell orders 26 within queues, or stacks, of such orders 24
and 26.
Identifying Outlying Orders Based on Contra Market Prices
[0039] In some embodiments, trading management rules 58 generally
provide for identifying outlier trading orders 22 by comparing the
price of each trading order 22 that is promoted to the top of its
respective order stack (i.e., the buy order stack or the sell order
stack) with the price of the top order 22 in the contra market. For
example, when a sell order 26 is promoted to the top of the sell
order stack, trading module 50 determines whether the newly
promoted sell order 26 is an outlying order by determining whether
the offer price of the newly promoted sell order 26 exceeds the bid
price of one or more buy orders 24 in the buy order stack by more
than a threshold value 60. In a particular embodiments, trading
module 50 determines whether the newly promoted sell order 26 is an
outlying order by determining whether the offer price of the newly
promoted sell order 26 exceeds the bid price of the top buy order
24 by more than a threshold value 60.
[0040] When an outlying buy order is identified, trading module 50
initiates or effects a restrictive action regarding the either, or
both of, the outlying buy order or a subsequent attempt to execute
a trade with the outlying buy order. As discussed above, the
restrictive action may include any suitable restrictive action,
such as sending an alert message 40 to a trader attempting to
execute a trade with the outlying buy order, preventing the
outlying buy order from being promoted or advanced within the buy
order stack, preventing the outlying buy order from being
displayed, and preventing other traders from executing trades on
the outlying buy order, for example.
[0041] To illustrate, suppose at a particular point in time, the
trading exchange for a 10-year US Treasury bond includes a buy
order stack and a sell order stack including the following buy
orders 24 and sell orders 26, respectively:
TABLE-US-00002 Buy orders (bid price) Sell orders (offer price)
98.261/4 98.261/2 98.26 99.26 98.253/4
[0042] Now suppose that the 98.261/2 sell order is removed from the
sell order stack, such as if the 98.261/2 sell order is cancelled
or traded with a newly received buy order having a bid price at or
above 98.261/2. As a result, the 99.26 sell order is promoted to
the top of the sell order stack. As a result of the 99.26 sell
order being promoted to the top of the sell order stack, trading
module 50 determines whether the 99.26 sell order is an outlying
order by determining whether the 99.26 offer price of the sell
order exceeds the bid price of the current top buy order, 98.261/4,
by more than the threshold value. Further suppose that the current
threshold value 60 for a 10-year US Treasury bond is 3/32 of a
point. Here, the 99.26 offer price of the top sell order exceeds
the 98.261/4 bid price of the top buy order by more than the
threshold value of 3/32, and thus the 99.26 sell order is
determined to be an outlying sell order.
[0043] As a result of determining that the 99.26 sell order is an
outlying sell order, trading module 50 may generate and communicate
an alert message 40 to any trader who submits a buy order that
would naturally trade with the 99.26 sell order. For example, if a
subsequent trader submits a subsequent buy order with a bid price
of 99.26 (in an attempt to trade with the 99.26 sell order),
trading module 50 may generate and communicate an alert message 40
to the subsequent trader indicating that the bid price of the
subsequent buy order 24 may be mistaken and providing the
subsequent trader an opportunity to change, or correct, the price
of the subsequent buy order 24. One rationale for sending such an
alert message 40 is that the subsequent trader may not have noticed
that the handle (i.e., the whole number component) of the top sell
order had jumped from 98 to 99, and may have thus intended to enter
a bid price of 98.26 rather than 99.26. In addition, as discussed
below in greater detail, trading module 50 modify the whole number
component of the subsequent trader's bid price from 99 to 98 (e.g.,
to attempt to match the subsequent trader's actual intent), display
the proposed modified bid price of 98.26 to the subsequent trader,
and ask the subsequent trader whether he or she would like to place
the subsequent buy order 24 at the proposed modified bid price of
98.26.
[0044] Similarly, when a buy order 24 is promoted to the top of the
buy order stack, trading module 50 determines whether the newly
promoted buy order 24 is an outlying order by determining whether
the bid price of the newly promoted buy order 24 is less than the
offer price of one or more sell orders 26 in the sell order stack
by more than a threshold value 60. In a particular embodiments,
trading module 50 determines whether the newly promoted buy order
24 is an outlying order by determining whether the bid price of the
newly promoted buy order 26 is less than the offer price of the top
sell order 26 by more than a threshold value 60. As discussed
above, in some embodiments, the "top" sell order 26 is the sell
order at the top of the sell order stack, which may or may not be
the sell order 26 having the lowest current offer price, depending
on the particular embodiment. When an outlying sell order is
identified, trading module 50 may initiate or effect a restrictive
action regarding the either, or both of, the outlying sell order or
a subsequent attempt to execute a trade with the outlying sell
order. As discussed above, the restrictive action may include any
suitable restrictive action.
[0045] To illustrate, suppose at a particular point in time, the
trading exchange for a 30-year US Treasury bond includes a buy
order stack and a sell order stack including the following buy
orders 24 and sell orders 26, respectively:
TABLE-US-00003 Buy orders (bid price) Sell orders (offer price)
98.261/4 98.263/4 97.27 98.263/4 98.27
[0046] Now suppose that the 98.261/4 buy order is removed from the
buy order stack, such as if the 98.261/4 buy order is cancelled or
traded with a newly received sell order having an offer price at or
below 98.261/4. As a result, the 97.27 buy order is promoted to the
top of the buy order stack. As a result of the 97.27 buy order
being promoted to the top of the sell order stack, trading module
50 determines whether the 97.27 buy order is an outlying order by
determining whether the 97.27 bid price of the buy order is less
than the offer price of the current top sell order, 98.263/4, by
more than the threshold value. Further suppose that the current
threshold value 60 for a 30-year US Treasury bond is 7/32 of a
point. Here, the 97.27 bid price of the top buy order is less than
the 98.263/4 offer price of the top sell order by more than the
threshold value of 7/32, and thus the 97.27 buy order determined to
be an outlying buy order.
[0047] As a result of determining that the 97.27 buy order is an
outlying sell order, trading module 50 may generate and communicate
an alert message 40 to any trader who submits a sell order that
would naturally trade with the 97.27 buy order. For example, if a
subsequent trader submits a subsequent sell order with a offer
price of 97.27 (in an attempt to trade with the 97.27 buy order),
trading module 50 may generate and communicate an alert message 40
to the subsequent trader indicating that the offer price of the
subsequent sell order 26 may be mistaken and providing the
subsequent trader an opportunity to change, or correct, the price
of the subsequent sell order. As discussed above, one rationale for
sending such an alert message 40 is that the subsequent trader may
not have noticed that the handle (i.e., the whole number component)
of the top buy order had jumped from 98 to 97, and may have thus
intended to enter an offer price of 98.27 rather than 97.26. In
addition, as discussed below in greater detail, trading module 50
modify the whole number component of the subsequent trader's offer
price from 97 to 98 (e.g., to attempt to match the subsequent
trader's actual intent), display the proposed modified offer price
of 98.27 to the subsequent trader, and ask the subsequent trader
whether he or she would like to place the subsequent sell order 26
at the proposed modified offer price of 98.27. FIG. 2 illustrates
an example method of identifying outlying trading orders 22 by
comparing trading orders 22 with contra market prices, and sending
alert messages 40 to traders 20 attempting to trade on such
outlying trading orders 22, in accordance with an embodiment of the
present invention. The example discussed below regards identifying
an outlying sell order 26 and sending an alert message 40 to a
trader 20 attempting to trade on such outlying sell order 26.
However, it should be understood that the method may similarly
apply for identifying an outlying buy order 24 and sending an alert
message 40 to a trader 20 attempting to trade on such outlying buy
order 24. It should also be understood that various other
restrictive actions (i.e., other than sending an alert message 40)
may be implemented as a result of identifying outlying trading
orders 22.
[0048] At step 100, one or more buy orders 24 and one or more sell
orders 26 are received from traders 20 and placed onto a trading
exchange by trading platform 16.
[0049] The buy orders 24 and sell orders 26 are placed in a buy
order stack (or queue) and a sell order stack (or queue),
respectively, and ordered according to any suitable criteria, such
as using a FIFO (first in, first out) system, an interactive
matching system as detailed in U.S. Pat. No. 6,560,580, or based on
the relative bid and offer prices associated with such received buy
orders 24 and sell orders 26, for example.
[0050] At step 102, one or more sell orders 26 are removed from the
sell order stack (such as if the one or more sell orders 26 are
cancelled or traded with one or more buy orders 24). As a result, a
particular sell order 26 is promoted to the top of the sell order
stack, thus becoming the current top sell order.
[0051] At step 104, as a result of the particular sell order 26
being promoted to the top of the sell order stack, trading module
50 determines whether the particular sell order 62 is an outlying
order by determining whether the offer price of the particular sell
order 26 exceeds the bid price of the current top buy order--i.e.,
the bid price of the buy order 24 currently at the top of the buy
order stack--by more than a current threshold value 60. As
discussed in greater detail below, the threshold value 60 may be
based on market conditions and may be variable over time.
[0052] If it is determined that the particular sell order 26 is not
an outlying order, the method may return to step 100 such that
other buy orders 24 and/or sell orders 26 may be received, placed,
traded, cancelled, or otherwise managed. However, if it is
determined at step 104 that the particular sell order is an
outlying sell order, trading module 50 may note the outlying sell
order at step 106 and wait for buy orders 24 that would naturally
cause a trade with the outlying sell order. In some alternative
embodiments, the identified outlying sell order may be removed
temporarily from the sell order stack or cancelled altogether.
[0053] At step 108, trading platform 16 receives from a subsequent
trader a subsequent buy order 24 that would naturally trade with
the outlying sell order. In other words, the bid price of the
subsequent buy order 24 is greater than or equal to the offer price
of the outlying sell order. In some instances, the handle (i.e.,
the whole number component) of the outlying sell order may be
larger than the current market and the subsequent trader may have
submitted the subsequent buy order 24 without realizing the larger
handle of the outlying sell order. In other words, the subsequent
trader may have mistakenly considered only the fractional number
component of the outlying sell order when submitting his or her buy
order 24.
[0054] At step 110, as a result of receiving the subsequent buy
order 24 that would naturally trade with the outlying sell order,
trading module 50 generates and communicates an alert message 40 to
the subsequent trader indicating that the bid price of the
subsequent trader's buy order 24 may be mistaken and providing the
subsequent trader an opportunity to change, or correct, the bid
price of his or her buy order 24. In some embodiments, trading
module 50 may modify the handle of the bid price of the subsequent
trader's buy order 24 (e.g., to attempt to match the trader's
actual intent), display the proposed modified bid price to the
subsequent trader, and ask the subsequent trader whether he or she
would like to place the subsequent buy order 24 at the proposed
modified bid price.
[0055] At step 112, trading module 50 prevents the subsequent
trader's buy order 24 from being placed on the trading exchange at
least until a response 42 to the alert message 40 is received from
the subsequent trader 20. At step 114, trading module 50 receives a
response 42 to the alert message 40 from the subsequent trader 20.
If the response 42 indicates that the subsequent trader 20 accepts
the proposed modified bid price for his or her buy order 24,
trading module 50 places the subsequent trader's buy order 24 on
the trading exchange at the proposed modified bid price at step
116. Alternatively, the subsequent trader's response 42 may
indicate that the subsequent trader 20 declines the proposed
modified bid price for his or her buy order 24. For example, at
step 118, the subsequent trader 20 may choose to cancel his or her
buy order 42 in response to receiving the alert message 40. As
another example, at step 120, the subsequent trader 20 may choose
to circumvent the alert message 40 by resubmitting his or her buy
order 24 at the original bid price. If the subsequent trader 20
resubmits his or her buy order 24 at the original bid price,
trading module 50 may place the resubmitted buy order 24 on the
trading exchange at the original bid price and/or execute a trade
between the resubmitted buy order 24 and the outlying sell order
(if the outlying sell order is still available) at step 122.
[0056] It should be understood that the techniques discussed above
for determining whether a sell order 26 is an outlying sell order
and sending an alert message to a trader 20 submitting a subsequent
buy order 24 may be similarly used to determine whether a buy order
24 is an outlying buy order and sending an alert message to a
trader 20 submitting a subsequent sell order 26.
Identifying Outlying Orders Based on Previous Trade Prices
[0057] In some embodiments, trading management rules 58 generally
provide for identifying outlier trading orders 22 by comparing the
price of each trading order 22 that is promoted to the top of its
respective order stack (i.e., the buy order stack or the sell order
stack) with the price of one or more previous trades. For example,
when a sell order 26 is promoted to the top of the sell order
stack, trading module 50 determines whether the newly promoted sell
order 26 is an outlying order by determining whether the offer
price of the newly promoted sell order 26 exceeds the price(s) of
one or more previous trades in the trading exchange by more than a
threshold value 60. Comparing an order price to the price(s) of one
or more previous trades may comprise comparing the order price to
the price(s) at which one or more previous trades were executed or
submitted for execution. In a particular embodiment, the order
price in question is compared with the price at which the most
recent trade was executed or submitted for execution. When an
outlying trading order 22 is identified, trading module 50 may
initiate or effect a restrictive action regarding the either, or
both of, the outlying trading order 22 or a subsequent attempt to
execute a trade with the outlying trading order 22. As discussed
above, the restrictive action may include any suitable restrictive
action.
[0058] To illustrate, suppose at a particular point in time, the
trading exchange for a 5-year US Treasury bond includes a buy order
stack and a sell order stack including the following buy orders 24
and sell orders 26, respectively:
TABLE-US-00004 Buy orders (bid price) Sell orders (offer price)
93.141/2 [traded] 93.141/2 [traded] 93.141/4 93.143/4 93.133/4
94.131/2 93.131/2
[0059] Suppose that a trade is executed (or submitted for
execution) between the matching 93.141/2 buy order and 93.141/2
sell order at the price of 93.141/2. The 93.141/2 buy order and
93.141/2 sell order are thus removed from the buy and sell order
stacks. As a result, the 93.131/4 buy order is promoted to the top
of the buy order stack, thus becoming the current top buy order,
and the 93.143/4 sell order is promoted to the top of the sell
order stack, thus becoming the current top sell order. As a result
of the 93.131/4 buy order and the 93.143/4 sell order being
promoted to the top of the their respective order stacks, trading
module 50 may determine whether either (or both) of the 93.131/4
buy order and the 93.143/4 sell order are outlying orders. Trading
module 50 may determine whether the 93.131/4 buy order is an
outlying order by determining whether the 93.131/4 bid price is
less than the price of the previous trade--here, 93.141/2--by more
than a threshold value 60. Suppose that the current threshold value
for 5-year US Treasury bonds is 2/32. Trading module 50 would
determine that the 93.131/4 bid price of the buy order is not less
than the 93.141/2 trade price by more than the 2/32 threshold
value, and that the 93.131/4 buy order is not an outlying order.
(Recall from Table 1 that the displayed bid price of 93.131/4
represents an actual bid price of 93 13.25/32 and the previous
trade price of 93.141/2 represents an actual trade price of 93
14.5/32. Thus, the 93.131/4 bid price is within 2/32 of the
93.141/2 trade price.) Similarly, trading module 50 may determine
whether the 93.143/4 sell order is an outlying order by determining
whether the 93.143/4 offer price exceeds the previous trade price
of 93.141/2 by more than the 2/32 threshold value. Trading module
50 would determine that the 93.143/4 offer price of the sell order
does not exceed the 93.141/2 trade price by more than the 2/32
threshold value, and that the 93.143/4 sell order is not an
outlying order.
[0060] Next suppose that the 93.143/4 sell order is removed from
the sell order stack, such as if the 93.143/4 sell order is
cancelled or traded with a newly received buy order having a bid
price at or above 93.143/4. As a result, the 94.131/2 sell order is
promoted to the top of the sell order stack, thus becoming the new
current top sell order on the exchange. As a result of the 94.131/2
sell order being promoted to the top of the sell order stack,
trading module 50 determines whether the 94.131/2 sell order is an
outlying order by determining whether the 94.131/2 offer price of
the sell order exceeds the previous trade price of 93.141/2 by more
than the 2/32 threshold value. Trading module 50 would determine
that the 94.131/2 offer price of the sell order does exceed the
93.141/2 trade price by more than the 2/32 threshold value, and
that the 94.131/2 sell order is thus an outlying order.
[0061] As a result of determining that the 94.131/2 sell order is
an outlying sell order, trading module 50 may generate and
communicate an alert message 40 to any subsequent trader who
submits a subsequent buy order 24 that would naturally trade with
the 94.131/2 sell order. For example, if a subsequent trader
submits a subsequent buy order 24 with a bid price of 94.131/2 (in
an attempt to trade with the 94.131/2 sell order), trading module
50 may generate and communicate an alert message 40 to the
subsequent trader indicating that the bid price of the subsequent
trader's buy order 24 may be mistaken and providing the subsequent
trader an opportunity to change, or correct, the bid price of his
or her order. In addition, as discussed below in greater detail,
trading module 50 modify the whole number component of the
subsequent trader's bid price from 94 to 93 (e.g., to attempt to
match the subsequent trader's actual intent), display the proposed
modified bid price of 93.131/2 to the subsequent trader, and ask
the subsequent trader whether he or she would like to place the buy
order 24 at the proposed modified bid price of 93.131/2.
[0062] In a similar manner, when trading module 50 determines that
a particular buy order 24 promoted to the top of the buy order
stack is an outlying order, trading module 50 may generate and
communicate an alert message 40 to any trader who submits a sell
order 26 that would naturally trade with the particular buy order
24.
[0063] FIG. 3 illustrates an example method of identifying outlying
trading orders 22 by comparing trading orders 22 with a previous
trade price, and sending alert messages 40 to traders 20 attempting
to trade on such outlying trading orders 22, in accordance with an
embodiment of the present invention. The example discussed below
regards identifying an outlying sell order 26 and sending an alert
message 40 to a trader 20 attempting to trade on such outlying sell
order 26. However, it should be understood that the method may
similarly apply for identifying an outlying buy order 24 and
sending an alert message 40 to a trader 20 attempting to trade on
such outlying buy order 24. It should also be understood that
various other restrictive actions (i.e., other than sending an
alert message 40) may be implemented as a result of identifying
outlying trading orders 22.
[0064] At step 150, one or more buy orders 24 and one or more sell
orders 26 are received from traders 20 and placed onto a trading
exchange by trading platform 16. The buy orders 24 and sell orders
26 are placed in a buy order stack and a sell order stack,
respectively, and ordered according to any suitable criteria, such
as using a FIFO (first in, first out) system, an interactive
matching system such as that defined in U.S. Pat. No. 6,560,580, or
based on the relative bid and offer prices associated with such
received buy orders 24 and sell orders 26, for example.
[0065] At step 152, one or more trades are executed between buy
orders 24 in the buy order stack and sell orders 26 in the sell
order stack. Each of the executed buy orders 24 and sell orders 26
may be removed from their respective stacks as they are executed.
At step 154, one or more sell orders 26 are removed from the sell
order stack (as a result of such sell order(s) being cancelled or
executed (i.e., traded) with one or more buy orders 24, for
example). As a result, a particular sell order 26 is promoted to
the top of the sell order stack, thus becoming the current top sell
order on the exchange.
[0066] At step 156, as a result of the particular sell order 26
being promoted to the top of the sell order stack, trading module
50 determines whether the particular sell order 62 is an outlying
order by determining whether the offer price of the particular sell
order 26 exceeds a previous trade price--for example, the price at
which the most recent trade at step 152 was executed--by more than
a current threshold value 60. As discussed in greater detail below,
the threshold value 60 may be based on market conditions and may be
variable over time.
[0067] If it is determined that the particular sell order 26 is not
an outlying order, the method may return to step 150 such that
other buy orders 24 and/or sell orders 26 may be received, placed,
traded, cancelled, or otherwise managed. However, if it is
determined at step 156 that the particular sell order is an
outlying sell order, trading module 50 may note the outlying sell
order at step 158 and wait for buy orders 24 that would naturally
cause a trade with the outlying sell order.
[0068] At step 160, trading platform 16 receives from a subsequent
trader a subsequent buy order 24 that would naturally trade with
the outlying sell order. In other words, the bid price of the
subsequent buy order 24 is greater than or equal to the offer price
of the outlying sell order. As discussed above, in some instances,
the handle (i.e., the whole number component) of the outlying sell
order may be larger than the current market and the subsequent
trader may have submitted the subsequent buy order 24 without
realizing the larger handle of the outlying sell order.
[0069] At step 162, as a result of receiving the subsequent buy
order 24 that would naturally trade with the outlying sell order,
trading module 50 generates and communicates an alert message 40 to
the subsequent trader indicating that the bid price of the
subsequent trader's buy order 24 may be mistaken and providing the
subsequent trader an opportunity to change, or correct, the bid
price of his or her buy order 24. In some embodiments, trading
module 50 modify the handle of the bid price of the subsequent
trader's buy order 24 (e.g., to attempt to match the trader's
actual intent), display the proposed modified bid price to the
subsequent trader, and ask the subsequent trader whether he or she
would like to place the buy order 24 at the proposed modified bid
price.
[0070] At step 164, trading module 50 prevents the subsequent
trader's buy order 24 from being placed on the trading exchange at
least until a response 42 to the alert message 40 is received from
the subsequent trader 20. At step 166, trading module 50 receives a
response 42 to the alert message 40 from the subsequent trader 20.
If the response 42 indicates that the subsequent trader 20 accepts
the proposed modified bid price for the buy order 24, trading
module 50 places the subsequent buy order 24 on the trading
exchange at the proposed modified bid price at step 168.
Alternatively, the subsequent trader's response 42 may indicate
that the subsequent trader 20 declines the proposed modified bid
price for the buy order 24. For example, at step 170, the
subsequent trader 20 may choose to cancel his or her buy order 42
in response to receiving the alert message 40. As another example,
at step 172, the subsequent trader 20 may choose to circumvent the
alert message 40 by resubmitting his or her buy order 24 at the
original bid price. If the subsequent trader 20 resubmits his or
her buy order 24 at the original bid price, trading module 50 may
place the resubmitted buy order 24 on the trading exchange at the
original bid price and/or execute a trade between the resubmitted
buy order 24 and the outlying sell order (if the outlying sell
order is still available) at step 174.
[0071] It should be understood that the techniques discussed above
for determining whether a sell order 26 is an outlying sell order
and sending an alert message to a trader 20 submitting a subsequent
buy order 24 may be similarly used to determine whether a buy order
24 is an outlying buy order and sending an alert message to a
trader 20 submitting a subsequent sell order 26.
Managing the Promotion of Orders in an Order Stack
[0072] In some embodiments, trading management rules 58 generally
provide for identifying outlier trading orders 22 on a trading
exchange and managing the promotion of such identified outlier
trading orders 22 on the trading exchange. For example, when one or
more sell orders 26 are removed from a sell order stack (such as
when such sell order(s) are cancelled or executed (i.e., traded)
with one or more buy orders 24, for example), trading system 30 may
determine whether to (a) promote the highest remaining sell order
26 in the sell order stack to the top of the sell order stack, or
(b) to not promote the highest remaining sell order 26 in the sell
order stack to the top of the stack, but rather to leave the one or
more positions in the sell order stack above the highest remaining
sell order 26 open, and to send an alert message 40 to any trader
20 that subsequently submits a buy order 24 that would naturally
trade with the outlying sell order 26. As discussed above,
references to "top orders" or the "top of the stack" are only
intended as examples to convey relative positions of orders in a
stack, which positioning of orders may be managed according to any
suitable preferences or criteria. For example, in some embodiments,
a bid-offer stack includes a vertical list of numbers representing
prices increasing from the bottom to the top of the list, wherein
existing buy orders are displayed (indicating the order size of
each buy order) on one side of the number list based on their
respective bid prices and existing sell orders are displayed
(indicating the order size of each sell order) on the other side of
the number list based on their respective offer prices. Thus, in
such embodiments, the existing buy order having the highest bid
price is physically located above other existing buy orders, and
such buy order may be referred to as the top buy order or the buy
order at the top of the buy order stack. Further, in such
embodiments, the existing sell order having the lowest offer price
is physically located below other existing sell orders. However,
for the purposes of the present document, despite being physically
located below the other existing sell orders, the existing sell
order having the lowest offer price may be referred to as the top
sell order or the sell order at the top of the sell order stack.
Thus, it should be understood that in some situations, references
to the "top order" or the "top of a stack" may refer to the best
existing order or the order at the front (or in the example
embodiment discussed above, at the physical bottom) of a stack of
orders.
[0073] Similarly, when one or more buy orders 24 are removed from a
buy order stack (such as when such buy order(s) are cancelled or
executed (i.e., traded) with one or more buy orders 24, for
example), trading system 30 may determine whether to (a) promote
the highest remaining buy order 24 in the buy order stack to the
top of the buy order stack, or (b) to not promote the highest
remaining buy order 24 in the buy order stack to the top of the
stack, but rather to leave the one or more positions in the buy
order stack above the highest remaining buy order 24 open, and to
send an alert message 40 to any trader 20 that subsequently submits
a sell order 26 that would naturally trade with the outlying buy
order 24.
[0074] In some embodiments, trading module 50 determines whether
the trading order 22 in question is an outlying order by
determining whether the price of the trading order differs from one
or more other prices by more than one or more threshold values 60.
For example, trading module 50 may determine whether a sell order
26 in question is an outlying order by determining whether the
price of the sell order 26 exceeds the price of the top current buy
order 24 (i.e., the buy order 24 currently at the top of the buy
order stack) by more than a threshold value 60, such as discussed
above with reference to FIG. 2. As another example, trading module
50 may determine whether a sell order 26 in question is an outlying
order by determining whether the price of the sell order 26 exceeds
the price(s) of one or more previous trades in the trading exchange
by more than a threshold value 60, such as discussed above with
reference to FIG. 3.
[0075] As yet another example, trading module 50 may determine
whether a sell order 26 in question is an outlying order by
determining whether the price of the sell order 26 exceeds an
estimated current market price by more than a threshold value 60.
The estimated current market price may be determined by trading
module 30 based on various data, such as various market information
28 received from one or more market information sources 14. For
example, in some embodiments, trading module 30 may determine an
estimated current market price for an instrument by executing one
or more algorithms (using market information 28 as input) that
estimate the current middle of the market (for example, the midway
point between the current bid market and the current offer market)
for the instrument. In particular embodiments, the market
information 28 used as input for determining the estimated current
market price for a particular instrument includes information from
one or more futures markets that are related to the market for the
particular instrument.
[0076] In certain embodiments, to determine whether a particular
sell order 26 is an outlying order includes determining each of the
following:
[0077] (a) Does the offer price of the sell order 26 exceed the bid
price of the top current buy order 24 in the buy order stack by
more than a first threshold value 60a?
[0078] (b) Does the offer price of the sell order 26 exceed the
price(s) of one or more recent trades in the trading exchange by
more than a second threshold value 60b? and
[0079] (c) Does the offer price of the sell order 26 exceed an
estimated current market price determined by trading module 30 by
more than a third threshold value 60c?
[0080] In some embodiments, first threshold value 60a, second
threshold value 60b, and third threshold value 60c are the same. In
other embodiments, one or more of first threshold value 60a, second
threshold value 60b, and third threshold value 60c are different
from the others. In addition, as discussed above, each of the
threshold values 60a, 60b, and 60c may vary over time according to
market conditions. For example, trading module 30 may vary
threshold values 60a, 60b, and 60c over time based at least on
market information 28 received from various market information
sources 14.
[0081] In one embodiment, trading module 30 determines that a
particular sell order 26 is an outlying order if it is determined
that at least one of the three questions (a), (b) and (c) listed
above are answered in the affirmative. In another embodiment,
trading module 30 determines that a particular sell order 26 is an
outlying order if it is determined that at least two of the three
questions (a), (b) and (c) listed above are answered in the
affirmative. In yet another embodiment, trading module 30
determines that a particular sell order 26 is an outlying order if
it is determined that all three of the three questions (a), (b) and
(c) listed above are answered in the affirmative. Thus, the
standard for determining a trading order 22 to be an outlying order
may vary according to the particular embodiment.
[0082] It should be understood that the techniques discussed above
for determining whether a sell order 26 is an outlying sell order
and sending an alert message to a trader 20 submitting a subsequent
buy order 24 may be similarly used to determine whether a buy order
24 is an outlying buy order and sending an alert message to a
trader 20 submitting a subsequent sell order 26.
Threshold Values 60
[0083] As discussed above, threshold values 60 may vary over time
at least according to market conditions. For example, a threshold
value 60 for a particular market may be determined and/or updated
based on the historical or current volatility of that market or one
or more related markets. In some embodiments, a threshold value 60
for a particular market may be determined and/or updated based on
market information 28 received from one or more market information
sources 14. Such market information 28 may indicate the historical
or current volatility of that market or one or more related
markets. In addition, such market information 28 may include
current and/or historical financial or monetary information, such
as interest rate information and information regarding currencies,
for example.
[0084] Trading module 30 may use such market information 28 as
input for various algorithms to estimate, for example, the current
volatility or current price of the market in question. Trading
module 30 may then determine and/or update the threshold value(s)
60 for that market based on the current estimated volatility or
price for that market. In some embodiments, trading module 30 may
receive market information 28 in real time or substantially in real
time and may thus update threshold values 60 in real time or
substantially in real time according to current market
conditions.
[0085] Although an embodiment of the invention and its advantages
are described in detail, a person skilled in the art could make
various alterations, additions, and omissions without departing
from the spirit and scope of the present invention as defined by
the appended claims.
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