U.S. patent application number 16/534015 was filed with the patent office on 2019-11-28 for mitigation of latency disparity in a transaction processing system.
This patent application is currently assigned to Chicago Mercantile Exchange Inc.. The applicant listed for this patent is Chicago Mercantile Exchange Inc.. Invention is credited to Sean Castette, Bernard Hosman, Fred Malabre, Pearce Peck-Walden, Ari Studnitzer.
Application Number | 20190362423 16/534015 |
Document ID | / |
Family ID | 56555338 |
Filed Date | 2019-11-28 |
United States Patent
Application |
20190362423 |
Kind Code |
A1 |
Hosman; Bernard ; et
al. |
November 28, 2019 |
MITIGATION OF LATENCY DISPARITY IN A TRANSACTION PROCESSING
SYSTEM
Abstract
Systems and methods are disclosed which match or otherwise
allocate an incoming transaction with previously received but not
yet fully satisfied transactions counter thereto as well as to
mitigation of disparities in latencies between the client devices
of the market participants and the electronic data transaction
processing system which may result in disparities in the time of
receipt of competing transactions. The disclosed embodiments may
mitigate such disparities by buffering or otherwise grouping
temporally proximate competing transactions together upon receipt,
e.g. into a group, collection, set, bucket, etc., and subsequently
arbitrating among those grouped competing transactions, in a manner
other than solely based on the order in which the competing
transactions in the group were received, to determine the order in
which those competing transactions will be processed, thereby
equalizing priority of transactions received from participants
having varying abilities to rapidly submit transactions or
otherwise capitalize on transactional opportunities.
Inventors: |
Hosman; Bernard; (Amsterdam,
NL) ; Castette; Sean; (Chicago, IL) ; Malabre;
Fred; (Middletown, NJ) ; Peck-Walden; Pearce;
(Chicago, IL) ; Studnitzer; Ari; (Northbrook,
IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Chicago Mercantile Exchange Inc. |
Chicago |
IL |
US |
|
|
Assignee: |
Chicago Mercantile Exchange
Inc.
Chicago
IL
|
Family ID: |
56555338 |
Appl. No.: |
16/534015 |
Filed: |
August 7, 2019 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
14991654 |
Jan 8, 2016 |
10417709 |
|
|
16534015 |
|
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|
62203965 |
Aug 12, 2015 |
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Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 40/04 20130101;
G06Q 40/06 20130101; H04L 67/42 20130101 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04; G06Q 40/06 20060101 G06Q040/06; H04L 29/06 20060101
H04L029/06 |
Claims
1. A system for mitigating latency disparity between different
client devices and an electronic data transaction processing system
in which data items are transacted by a hardware matching processor
that matches, as they are received, incoming electronic data
transaction request messages, for one of the data items based on a
set of transaction parameters, received from the different client
devices over a data communication network with at least one other
previously received but unsatisfied electronic data transaction
request message counter thereto to at least partially satisfy one
or both of the incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, the system comprising: first
logic stored in a first memory and executable by a first processor
coupled therewith to cause the first processor to determine an
occurrence of a first event and a subsequent occurrence of a second
event; second logic stored in the first memory and executable by
the first processor to cause, upon determination of occurrence of
the first event, the first processor to receive a set of incoming
electronic data transaction request messages, each including a set
of transaction parameters which further includes a first parameter
having a first value and a second parameter having a second value,
and store the set of received incoming electronic data transaction
request messages in a second memory coupled with the first
processor prior to forwarding the set of received incoming
electronic data transaction request messages to the hardware
matching processor; third logic stored in the first memory and
executable by the first processor to cause the first processor to,
upon the occurrence of the second event, identify a first subset of
at least two of the stored incoming electronic data transaction
request messages wherein values of at least a subset of the set of
transaction parameters thereof, including the first parameter, are
identical, and determine whether the hardware matching processor
would match any of the first subset of stored incoming electronic
data transaction request messages, based on the set of transaction
parameters thereof, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message; fourth logic stored in the first memory and
executable by the first processor to cause the first processor to,
upon the occurrence of the second event, modify the first value of
the first parameter of the set of transaction parameters of each of
the first subset of the set of stored incoming electronic data
transaction request messages based on the second value of the
second parameter at least one second subset thereof which would be
matched by the hardware matching processor, based on the modified
first values, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the second
subset of stored incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, and forward each stored
electronic data transaction request message of each of the at least
one second subset, each having the modified first value, to the
hardware matching processor in the order in which they were
received by the first processor and, subsequent thereto, forward
each remaining stored electronic data transaction request message
of the first subset, each having their associated set of
transaction parameters, to the hardware matching processor in the
order in which they were received by the first processor.
2. The system of claim 1 wherein the incoming electronic data
transaction request messages may include a request to modify at
least one other previously received electronic data transaction
request message, the system further comprising: fifth logic stored
in the first memory and executable by the first processor to cause
the first processor to, upon the occurrence of the second event and
wherein it is determined that the hardware matching processor would
match any of the first subset of stored incoming electronic data
transaction request messages, based on the set of transaction
parameters thereof, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message, identify and forward to the hardware matching
processor any of the stored incoming electronic data transaction
request messages comprising a request to modify any of at least one
other previously received but unsatisfied electronic data
transaction request messages to the extent those identified stored
incoming electronic data transaction request messages comprising a
request to modify any of at least one other previously received but
unsatisfied electronic data transaction request messages would have
been effective if at least all of the subset of stored incoming
electronic data transaction request messages and the identified
stored incoming electronic data transaction request messages
comprising a request to modify any of at least one other previously
received but unsatisfied electronic data transaction request
messages were forwarded to the hardware matching processor in the
order in which they were received by the first processor; and
wherein the fourth logic is further executable by the processor
upon the occurrence of the second event and subsequent to the
forwarding of any of the stored incoming electronic data
transaction request messages comprising a request to modify any of
at least one other previously received but unsatisfied electronic
data transaction request messages, and wherein it is subsequently
determined that the hardware matching processor would still match
any of the first subset of stored incoming electronic data
transaction request messages.
3. The system of claim 1 wherein the first, second, third and
fourth logic are comprised by the hardware matching processor.
4. The system of claim 1 wherein the first and second events define
an elapse of an interval of time.
5. The system of claim 4 wherein the time interval begins to elapse
upon receipt of an incoming electronic data transaction request
subsequent to a prior elapse of the time interval.
6. The system of claim 4 wherein the time interval begins to elapse
upon transmission of notification of a previously received but not
satisfied electronic data transaction request to the different
client devices.
7. The system of claim 4 wherein the duration of the time interval
is variable.
8. The system of claim 1 wherein the first event comprises receipt
of an acknowledgment from the hardware matching processor
acknowledging receipt of previously forwarded incoming orders.
9. The system of claim 1 wherein the second event comprises the
number of stored received incoming orders exceeding a
threshold.
10. The system of claim 1 wherein the received incoming electronic
data transaction requests are stored in the memory in association
with data indicative of time and/or order of receipt by the
incoming order receiver.
11. A method for mitigating latency disparity between different
client devices and an electronic data transaction processing system
in which data items are transacted by a hardware matching processor
that matches, as they are received, incoming electronic data
transaction request messages, for one of the data items based on a
set of transaction parameters, received from the different client
devices over a data communication network with at least one other
previously received but unsatisfied electronic data transaction
request message counter thereto to at least partially satisfy one
or both of the incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, the method comprising:
determining, by a processor, an occurrence of a first event and a
subsequent occurrence of a second event; receiving, by the
processor, a set of incoming electronic data transaction request
messages, each including a set of transaction parameters which
further includes a first parameter having a first value and a
second parameter having a second value, and storing the received
set of incoming electronic data transaction request messages in a
memory coupled with the processor prior to forwarding the received
incoming electronic data transaction request messages to the
hardware matching processor; identifying, by the processor, upon
the occurrence of the second event, a first subset of at least two
of the stored incoming electronic data transaction request messages
wherein values of at least a subset of the set of transaction
parameters thereof, including the first parameter, are identical,
and determining whether the hardware matching processor would match
any of the first subset of stored incoming electronic data
transaction request messages, based on the set of transaction
parameters thereof, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message; modifying, by the processor, upon the occurrence
of the second event, the first value of the first parameter of each
of the first subset of the set of stored incoming electronic data
transaction request messages based on the second value of the
second parameter and determining at least one second subset thereof
which would be matched by the hardware matching processor, based on
the modified first values, with at least one other previously
received but unsatisfied electronic data transaction request
message counter thereto to at least partially satisfy one or both
of the second subset of stored incoming electronic data transaction
request messages or the at least one other previously received
electronic data transaction request message, and forwarding each
stored electronic data transaction request message of each of the
at least one second subset, each having the modified first value,
to the hardware matching processor in the order in which they were
received by the processor and, subsequent thereto, forward each
remaining stored electronic data transaction request message of the
first subset, each having their associated set of transaction
parameters, to the hardware matching processor in the order in
which they were received by the processor.
12. The method of claim 11 wherein the incoming electronic data
transaction request messages may include a request to modify at
least one other previously received electronic data transaction
request message, the method further comprising: identifying and
forwarding, upon the occurrence of the second event and wherein it
is determined that the hardware matching processor would match any
of the first subset of stored incoming electronic data transaction
request messages, based on the set of transaction parameters
thereof, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message, to the hardware matching processor any of the
stored incoming electronic data transaction request messages
comprising a request to modify any of at least one other previously
received but unsatisfied electronic data transaction request
messages to the extent those identified stored incoming electronic
data transaction request messages comprising a request to modify
any of at least one other previously received but unsatisfied
electronic data transaction request messages would have been
effective if at least all of the subset of stored incoming
electronic data transaction request messages and the identified
stored incoming electronic data transaction request messages
comprising a request to modify any of at least one other previously
received but unsatisfied electronic data transaction request
messages were forwarded to the hardware matching processor in the
order in which they were received by the processor; wherein the
modifying is further subject to the occurrence of the second event
and subsequent to the forwarding of any of the stored incoming
electronic data transaction request messages comprising a request
to modify any of at least one other previously received but
unsatisfied electronic data transaction request messages, and
wherein it is subsequently determined that the hardware matching
processor would still match any of the first subset of stored
incoming electronic data transaction request messages.
13. The method of claim 11 wherein the determining, receiving,
identifying, modifying and forwarding are performed by the hardware
matching processor.
14. The method of claim 11 wherein the first and second events
define an elapse of an interval of time.
15. The method of claim 14 wherein the time interval begins to
elapse upon receipt of an incoming electronic data transaction
request subsequent to a prior elapse of the time interval.
16. The method of claim 14 wherein the time interval begins to
elapse upon transmission of notification of a previously received
but not satisfied electronic data transaction request to the
different client devices.
17. The method of claim 14 wherein the duration of the time
interval is variable.
18. The method of claim 11 wherein the first event comprises
receipt of an acknowledgment from the hardware matching processor
acknowledging receipt of previously forwarded incoming orders.
19. The method of claim 11 wherein the second event comprises the
number of stored received incoming orders exceeding a
threshold.
20. The method of claim 11 wherein the received incoming electronic
data transaction requests are stored in the memory in association
with data indicative of time and/or order of receipt.
21. A system for mitigating latency disparity between different
client devices and an electronic data transaction processing system
in which data items are transacted by a hardware matching processor
that matches, as they are received, incoming electronic data
transaction request messages, for one of the data items based on a
set of transaction parameters, received from the different client
devices over a data communication network with at least one other
previously received but unsatisfied electronic data transaction
request message counter thereto to at least partially satisfy one
or both of the incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, the system comprising: means for
determining an occurrence of a first event and a subsequent
occurrence of a second event; means for receiving a set of incoming
electronic data transaction request messages, each including a set
of transaction parameters which further includes a first parameter
having a first value and a second parameter having a second value,
and storing the received set of incoming electronic data
transaction request messages in a memory prior to forwarding the
received incoming electronic data transaction request messages to
the hardware matching processor; means for identifying upon the
occurrence of the second event, a first subset of at least two of
the stored incoming electronic data transaction request messages
wherein values of at least a subset of the set of transaction
parameters thereof, including the first parameter, are identical,
and determining whether the hardware matching processor would match
any of the first subset of stored incoming electronic data
transaction request messages, based on the set of transaction
parameters thereof, with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message; means for modifying upon the occurrence of the
second event, the first value of the first parameter of each of the
first subset of the set of stored incoming electronic data
transaction request messages based on the second value of the
second parameter and determining at least one second subset thereof
which would be matched by the hardware matching processor, based on
the modified first values, with at least one other previously
received but unsatisfied electronic data transaction request
message counter thereto to at least partially satisfy one or both
of the second subset of stored incoming electronic data transaction
request messages or the at least one other previously received
electronic data transaction request message, and forwarding each
stored electronic data transaction request message of each of the
at least one second subset, each having the modified first value,
to the hardware matching processor in the order in which they were
received by the means for receiving and, subsequent thereto,
forward each remaining stored electronic data transaction request
message of the first subset, each having their associated set of
transaction parameters, to the hardware matching processor in the
order in which they were received by the means for receiving.
Description
REFERENCE TO RELATED APPLICATIONS
[0001] This application is a divisional under 37 C.F.R. .sctn.
1.53(b) of U.S. patent application Ser. No. 14/991,654, filed Jan.
8, 2016, (Attorney Docket No. 004672-15009B-US), now U.S. Pat. No.
______, which claims the benefit of the filing date under 35 U.S.C.
.sctn. 119(e) of U.S. Provisional Application Ser. No. 62/203,965
filed Aug. 12, 2015, each of which is hereby incorporated by
reference and relied upon.
BACKGROUND
[0002] A financial instrument trading system, such as a futures
exchange, referred to herein also as an "Exchange", such as the
Chicago Mercantile Exchange Inc. (CME), is an electronic data
transaction processing system which implements or otherwise
provides, via the processing of electronic data transaction request
messages, a contract market where financial products/instruments,
for example futures and options on futures, are traded.
[0003] Futures is a term used to designate all contracts for the
purchase or sale of financial instruments or physical commodities
for future delivery or cash settlement on a commodity futures
exchange. A futures contract is a legally binding agreement to buy
or sell a commodity at a specified price at a predetermined future
time, referred to as the expiration date or expiration month. An
option is the right, but not the obligation, to sell or buy the
underlying instrument (in this case, a futures contract) at a
specified price within a specified time. The commodity to be
delivered in fulfillment of the contract, or alternatively, the
commodity, or other instrument/asset, for which the cash market
price shall determine the final settlement price of the futures
contract, is known as the contract's underlying reference or
"underlier." The terms and conditions of each futures contract are
standardized as to the specification of the contract's underlying
reference commodity, the quality of such commodity, quantity,
delivery date, and means of contract settlement. Cash Settlement is
a method of settling a futures contract whereby the parties effect
final settlement when the contract expires by paying/receiving the
loss/gain related to the contract in cash, rather than by effecting
physical sale and purchase of the underlying reference commodity at
a price determined by the futures contract price.
[0004] Typically, the electronic data transaction processing system
of an Exchange implements or otherwise provides for a centralized
"clearing house" through which all trades made must be confirmed,
matched, and settled each day until offset or delivered. The
clearing house is an adjunct to the Exchange, and may be an
operating division thereof, which is responsible for settling
trading accounts, clearing trades, collecting and maintaining
performance bond funds, regulating delivery, and reporting trading
data. The essential role of the clearing house is to mitigate
credit risk. Clearing is the procedure through which the Clearing
House becomes buyer to each seller of a futures contract, and
seller to each buyer, also referred to as a novation, and assumes
responsibility for protecting buyers and sellers from financial
loss due to breach of contract, by assuring performance on each
contract. This process further enables anonymity between those
buyers and sellers. A clearing member is a firm qualified to clear
trades through the Clearing House.
[0005] Current electronic data transaction processing systems which
implement financial instrument trading systems allow traders to
submit orders and receive confirmations, market data, and other
information electronically from client devices via a network. These
"electronic" marketplaces have largely supplanted the pit based
trading systems whereby the traders, or their representatives, all
physically stand in a designated location, i.e. a trading pit, and
trade with each other via oral and hand based communication. In
contrast to the pit based trading system where like-minded buyers
and sellers can readily find each other to trade, electronic
marketplaces must electronically "match" the orders placed by
buyers and sellers on behalf thereof. Electronic trading systems
may offer a more efficient and transparent system of trading. For
example, in pit trading, subjective elements and limits on human
interaction may influence the process by which buyers and sellers
come together to trade or otherwise limit the trading
opportunities, limiting market liquidity. In contrast, an
electronic exchange may be more objective when matching up a buyer
and seller, relying solely on objective factors such as offer-price
and time of order receipt/placement, etc. As such, electronic
trading systems may achieve more fair and equitable matching among
traders as well as identify more opportunities to trade, thereby
improving market liquidity.
BRIEF DESCRIPTION OF THE DRAWINGS
[0006] FIG. 1 depicts an illustrative computer network system that
may be used to implement aspects of the disclosed embodiments.
[0007] FIG. 2 depicts a block diagram of an exemplary
implementation of the system of FIG. 1 for mitigating latency among
competing incoming electronic data transaction request
messages.
[0008] FIG. 3 depicts a flow chart showing operation of the system
of FIGS. 1 and 2.
[0009] FIG. 4 shows an illustrative embodiment of a general
computer system for use with the system of FIGS. 1-3.
DETAILED DESCRIPTION
[0010] The disclosed embodiments relate to systems and methods
which match or otherwise allocate, e.g., automatically, an incoming
transaction, i.e., order to trade, with "resting," i.e. previously
received but not yet matched (fully satisfied), transactions
counter thereto, recognizing that the algorithm or rules by which
the incoming transaction is matched/allocated may impact the
expectations of the participants and affect the operation of the
system, e.g. of a market for a financial product being transacted.
In particular, the disclosed embodiments relate to mitigation of
disparities in the latencies between the client devices of the
market participants and the electronic data transaction processing
system which may result in disparities in the time of receipt of
competing transactions. The disclosed embodiments may mitigate such
disparities by buffering or otherwise grouping or collecting, e.g.
into a bucket, group, set, or other collection, e.g.,
automatically, temporally proximate competing transactions together
as they are received and subsequently arbitrating, e.g.,
automatically, among those grouped competing transactions, in a
manner other than solely based on the order in which the competing
transactions in the group were received, e.g. using a secondary
order parameter, such as a secondary/reservation price, provided
with each grouped transaction by the submitting participant, to
determine the order in which those competing transactions will be
processed and thereby equalizing priority of transactions received
from participants having varying abilities, e.g. technical
capability, to rapidly submit transactions or otherwise capitalize
on transactional opportunities.
[0011] As will be discussed, the grouping of incoming transactions
may be continuous, i.e. as one group is closed another opens and
groups comprising singular non-competing transactions may be
immediately transacted, thereby maintaining continuous trading.
Further, by grouping incoming transactions within a defined
interval, as discussed below in more detail, the participants, by
virtue of their responsiveness or lack thereof to opportunities,
effectively define level of competition for available
opportunities. Furthermore, delay by any one participant in
submitting a transaction in order to capitalize upon an
opportunity, such as to observer the actions of other participants,
is dis-incentivized as, there is advantage to later participation
and there is risk in missing out on the opportunity.
[0012] The disclosed embodiments further feature logic which
enables trading venues to supplement their regular matching model
by dynamically triggered resolutions to micro shocks in supply of,
and demand for liquidity. Its responsiveness to the market
microstructure characteristics of each individual event allows this
logic to seamlessly reduce the dominance of message arrival time in
the trade allocation process.
[0013] While the disclosed embodiments may be discussed in relation
to futures and/or options on futures trading, it will be
appreciated that they may be applicable to any electronic
transaction processing system where there are disparities in the
latencies of electronic communications networks between the
transaction processing system and the devices by which the
participants therein become aware of transactional opportunities
and submit competing electronic transaction requests seeking to
capitalize thereon. Electronic trading systems, such as an equity,
options or futures trading system, e.g., exchange, Electronic
Communication Network ("ECN"), Alternative Trading System ("ATS"),
or Swap Execution Facility ("SEF"), or market now available or
later developed, e.g. cash, Futures, etc., as well as any
instrument traded thereon, are only a few examples. However, the
disclosed embodiments may be applicable to any transaction
processing system where responses to centralized events, in a
system which applies those responses based on order of receipt at
the centralized location, are transmitted from logically and/or
physically remote locations via electronic communications networks
having disparate latencies resulting in receipt of those responses
at the central location within a narrow temporal window where
discrimination of the order of those received responses may be
difficult if not impossible. For example, remote sensor networks
which communicate temporally sensed data to a central collection
system over a multipath network. In such cases, communicating time
of transmission along with the response may be insufficient to
resolve any ambiguities in time of receipt as time of transmission
may not be trusted or otherwise controlled, e.g. due to
heterogeneity of the remote devices, lack of synchronization, e.g.
between clocks, among the remote locations, likelihood of
manipulation of the time of transmission at the remote location or
in transit, etc.
[0014] It will be appreciated that an electronic transaction
processing system of a trading environment, such as a futures
exchange as described herein, implements one or more economic
markets where rights and obligations may be traded. As such, a
trading environment may be characterized by a need to maintain
market integrity, transparency, predictability, fair/equitable
access and participant expectations with respect thereto. For
example, the transaction processing system of an exchange, also
referred to herein as an electronic trading system, must respond to
inputs, such as trade orders, cancellation, etc., in a manner as
expected by the market participants, such as based on market data,
e.g. prices, available counter-orders, etc., to provide an expected
level of certainty that transactions will occur in a consistent and
predictable manner and without unknown or unascertainable risks. In
addition, it will be appreciated that electronic trading systems
further impose additional expectations and demands by market
participants as to transaction processing speed, latency, capacity
and response time, while creating additional complexities relating
thereto. Accordingly, as will be described, the disclosed
embodiments may further include functionality to ensure that the
expectations of market participant are met, e.g. that transactional
integrity and predictable system responses are maintained.
[0015] As was discussed above, electronic trading systems ideally
attempt to offer an objective, efficient, fair and balanced market
where market prices reflect a true consensus of the value of
products traded among the market participants, where the
intentional or unintentional influence of human interaction is
minimized if not eliminated, and where arguably disproportional or
inequitable advantages with respect to information access and
responsiveness thereto are minimized if not eliminated.
[0016] Further, as discussed above, an exchange provides one or
more markets for the purchase and sale of various types of products
including financial instruments such as stocks, bonds, futures
contracts, options, currency, cash, and other similar instruments.
Agricultural products and commodities are also examples of products
traded on such exchanges. A futures contract is a product that is a
contract for the future delivery of another financial instrument
such as a quantity of grains, metals, oils, bonds, currency, or
cash. Generally, each exchange establishes a specification for each
market provided thereby that defines at least the product traded in
the market, minimum quantities that must be traded, and minimum
changes in price (e.g., tick size). For some types of products
(e.g., futures or options), the specification further defines a
quantity of the underlying product represented by one unit (or lot)
of the product, and delivery and expiration dates. As will be
described, the Exchange may further define the matching algorithm,
or rules, by which incoming orders will be matched/allocated to
resting orders.
[0017] Some products on an exchange are traded in an open outcry
environment where the exchange provides a location for buyers and
sellers to meet and negotiate a price for a quantity of a product.
Other products are traded on an electronic transaction processing
system (e.g., an electronic exchange), also referred to herein as a
trading platform, electronic trading system, trading host or
Electronic trading system, where market participants, e.g. traders,
use software to send electronic data transaction request messages,
e.g. orders, to the electronic trading system. The electronic data
transaction request message may comprise an order which identifies
the product, the quantity of the product the trader wishes to
trade, a price at which the trader wishes to trade the product, and
a direction or side of the order (i.e., whether the order is a bid,
i.e. an offer to buy, or an ask, i.e. an offer to sell). It will be
appreciated that there may be other order types or messages that
traders can send including requests to modify or cancel a
previously submitted order.
[0018] In particular, electronic trading of financial instruments,
such as futures contracts, is conducted by market participants
sending orders, such as to buy or sell one or more futures
contracts, in electronic form to the Exchange such as via an
electronic communications network. These electronically submitted
orders to buy and sell are then matched, e.g., automatically, if
possible, by the Exchange, i.e. by the Exchange's matching
engine/hardware processor, to execute a trade. Outstanding
(unmatched, wholly unsatisfied/unfilled or partially
satisfied/filled) orders are maintained in one or more data
structures or databases coupled with the hardware matching
processor referred to as "order books," such orders being referred
to as "resting," and the present state of the order books, and/or
the changes thereto, are made visible, i.e., the availability of
the resting orders for trading is advertised, to the market
participants through electronic notifications/broadcasts over a
communications network, referred to as market data feeds. An order
book is typically maintained for each product, e.g. instrument,
traded on the electronic trading system and generally defines or
otherwise represents the state of the market for that product, i.e.
the current prices at which the market participants are willing buy
or sell that product. As such, as used herein, an order book for a
product may also be referred to as a market for that product.
[0019] In the exemplary embodiments, all transactions for a
particular market may be communicated over disparate electronic
communications networks/paths which converge such that the
transactions are ultimately received at the electronic trading
system via one or more points of entry, e.g. one or more
communications interfaces, at which the disclosed embodiments apply
determinism, which as described may be at the point where matching
occurs, e.g. at each match engine (where there may be multiple
match engines, each for a given product/market, or moved away from
the point where matching occurs and closer to the point where the
electronic trading system first becomes "aware" of the incoming
transaction, such as the point where transaction messages, e.g.
orders, ingress the electronic trading system. Generally, the terms
"determinism" or "transactional determinism" may refer to the
processing, or the appearance thereof, of orders in accordance with
defined business rules. Accordingly, as used herein, the point of
determinism may be the point at which the electronic trading system
ascribes an ordering to incoming transactions/orders relative to
other incoming transactions/orders such that the ordering may be
factored, e.g., automatically, into the subsequent processing, e.g.
prioritization, matching, of those transactions/orders as will be
described. See U.S. patent application Ser. No. 14/074,675, filed
on Nov. 7, 2013, published as U.S. Patent Application Publication
No. 2015/0127516 A1, entitled "TRANSACTIONALLY DETERMINISTIC HIGH
SPEED FINANCIAL EXCHANGE HAVING IMPROVED, EFFICIENCY,
COMMUNICATION, CUSTOMIZATION, PERFORMANCE, ACCESS, TRADING
OPPORTUNITIES, CREDIT CONTROLS, AND FAULT TOLERANCE", incorporated
by reference herein.
[0020] Upon receipt of an incoming electronic data transaction
request message which specifies an order to trade in a particular
financial instrument, whether for a single component financial
instrument, e.g. a single futures contract, or for multiple
component financial instruments, e.g. a combination contract such
as a spread contract, a match engine, as will be described in
detail below, will attempt, e.g., automatically, to identify a
previously received but unsatisfied order counter thereto received
in a prior electronic data transaction request message, i.e. for
the opposite/counter transaction (buy or sell) in the same
financial instrument at the same or better price (but not
necessarily for the same quantity unless, for example, either order
specifies a condition that it must be entirely filled or not at
all). Data derived from prior received electronic data transaction
request messages indicative of previously received but unsatisfied
orders, i.e. orders which either did not match with a counter order
when they were received by the electronic trading system or their
quantity was only partially satisfied, referred to as a partial
fill, are maintained, as discussed above, by the electronic trading
system in an order book database/data structure to await the
subsequent arrival of matching orders or the occurrence of other
conditions, such as receipt of a request to cancel or modify the
order, which may cause the order to be removed from the order
book.
[0021] If the match engine identifies one or more suitable
previously received but unsatisfied counter orders, they, and the
incoming order, are matched to execute a transaction, i.e. a trade,
there between to at least partially satisfy the quantities of one
or both the incoming order or the identified orders which may then
result in the creation of corresponding positions is a portfolio
database or record therein in association with each participant in
the trade. If there remains any residual unsatisfied quantity of
the identified one or more orders, those orders are left on the
order book with their remaining quantity to await a subsequent
suitable counter order, i.e. to rest. If the match engine does not
identify a suitable previously received but unsatisfied counter
order, or the one or more identified suitable previously received
but unsatisfied counter orders are for a lesser quantity than the
incoming order, the incoming order is placed on the order book,
referred to as "resting", with the original or remaining
unsatisfied quantity, to await a subsequently received suitable
order counter thereto. The match engine then generates match event
data, as was described above, reflecting the result of this
matching process. Other components of the electronic trading
system, as will be described, then generate the respective order
acknowledgment and market data messages and transmit those messages
to the client devices of the market participants via the
communications network.
[0022] As was described above, the financial instruments which are
the subject of the orders to trade, may include one or more
component financial instruments. While each financial instrument
may have its own order book, i.e. market, in which it may be
traded, in the case of a financial instrument having more than one
component financial instrument, those component financial
instruments may further have their own order books in which they
may be traded. Accordingly, when an order for a financial
instrument is received, it may be matched against a suitable
counter order in its own order book or, possibly, against a
combination of suitable counter orders in the order books the
component financial instruments thereof, or which share a common
component financial instrument. For example, an order for a spread
contract comprising component financial instruments A and B may be
matched against another suitable order for that spread contract.
However, it may also be matched against suitable separate counter
orders for the A and for the B component financial instruments
found in the order books therefore. Similarly, if an order for the
A contract is received and suitable match cannot be found in the A
order book, it may be possible to match order for A against a
combination of a suitable counter order for a spread contract
comprising the A and B component financial instruments and a
suitable counter order for the B component financial instrument.
This is referred to as "implication" where a given order for a
financial instrument may be matched via a combination of suitable
counter orders for financial instruments which share common, or
otherwise interdependent, component financial instruments.
Implication increases the liquidity of the market by providing
additional opportunities for orders to be traded. Increasing the
number of transactions may further increase the number of
transaction fees collected by the electronic trading system.
[0023] The order for a particular financial instrument actually
received from a market participant, whether it comprises one or
more component financial instruments, is referred to as a "real" or
"outright" order, or simply as an outright. The one or more orders
which must be synthesized and submitted into order books other than
the order book for the outright order in order to create matches
therein, are referred to as "implied" orders. Upon receipt of an
incoming order, the identification or derivation of suitable
implied orders which would allow at least a partial trade of the
incoming outright order to be executed is referred to as
"implication" or "implied matching", the identified orders being
referred to as an "implied match." Depending on the number
component financial instruments involved, and whether those
component financial instruments further comprise component
financial instruments of their own, there may be numerous different
implied matches identified which would allow the incoming order to
be at least partially matched and mechanisms may be provided to
arbitrate, e.g., automatically, among them, such as by picking the
implied match comprising the least number of component financial
instruments or the least number of synthesized orders.
[0024] Upon receipt of an incoming order, or thereafter, a
combination of one or more suitable/hypothetical counter orders
which have not actually been received but if they were received,
would allow at least a partial trade of the incoming order to be
executed, may be, e.g., automatically, identified or derived and
referred to as an "implied opportunity." As with implied matches,
there may be numerous implied opportunities identified for a given
incoming order. Implied opportunities are advertised to the market
participants, such as via suitable synthetic orders, e.g. counter
to the desired order, being placed on the respective order books to
rest (or give the appearance that there is an order resting) and
presented via the market data feed, electronically communicated to
the market participants, to appear available to trade in order to
solicit the desired orders from the market participants. Depending
on the number component financial instruments involved, and whether
those component financial instruments further comprise component
financial instruments of their own, there may be numerous implied
opportunities, the submission of a counter order in response
thereto, would allow the incoming order to be at least partially
matched.
[0025] Implied opportunities, e.g. the advertised synthetic orders,
may frequently have better prices than the corresponding real
orders in the same contract. This can occur when two or more
traders incrementally improve their order prices in the hope of
attracting a trade, since combining the small improvements from two
or more real orders can result in a big improvement in their
combination. In general, advertising implied opportunities at
better prices will encourage traders to enter the opposing orders
to trade with them. The more implied opportunities that the match
engine of an electronic trading system can calculate/derive, the
greater this encouragement will be and the more the Exchange will
benefit from increased transaction volume. However, identifying
implied opportunities may be computationally intensive. In a high
performance trading system where low transaction latency is
important, it may be important to identify and advertise implied
opportunities quickly so as to improve or maintain market
participant interest and/or market liquidity.
[0026] Matching, which is a function typically performed by the
Exchange, e.g., automatically, is a process, for a given order
which specifies a desire to buy or sell a quantity of a particular
instrument at a particular price, of seeking/identifying one or
more wholly or partially, with respect to quantity, satisfying
counter orders thereto, e.g. a sell counter to an order to buy, or
vice versa, for the same instrument at the same, or sometimes
better, price (but not necessarily the same quantity), which are
then paired for execution to complete a trade between the
respective market participants (via the Exchange) and at least
partially satisfy the desired quantity of one or both of the order
and/or the counter order, with any residual unsatisfied quantity
left to await another suitable counter order, referred to as
"resting."
[0027] The Electronic trading system, as will be described below,
monitors incoming orders received thereby and attempts, e.g.,
automatically, to identify, i.e., match or allocate, as will be
described in more detail below, one or more previously received,
but not yet matched, orders, i.e. limit orders to buy or sell a
given quantity at a give price, referred to as "resting" orders,
stored in an order book database, wherein each identified order is
contra to the incoming order and has a favorable price relative to
the incoming order. An incoming order may be an "aggressor" order,
i.e., a market order to sell a given quantity at whatever may be
the current resting bid order price(s) or a market order to buy a
given quantity at whatever may be the current resting ask order
price(s). An incoming order may be a "market making" order, i.e. a
market order to buy or sell at a price for which there are
currently no resting orders. In particular, if the incoming order
is a bid, i.e. an offer to buy, then the identified order(s) will
be an ask, i.e. an offer to sell, at a price that is identical to
or lower than the bid price. Similarly, if the incoming order is an
ask, i.e. an offer to sell, the identified order(s) will be a bid,
i.e. an offer to buy, at a price that is identical to or higher
than the offer price.
[0028] Upon identification (matching) of a contra order(s), a
minimum of the quantities associated with the identified order(s)
and the incoming order is matched and that quantity of each of the
identified and incoming orders become two halves of a matched trade
that is sent to a clearinghouse. The Electronic trading system
considers each identified order in this manner until either all of
the identified orders have been considered or all of the quantity
associated with the incoming order has been matched, i.e. the order
has been filled. If any quantity of the incoming order remains, an
entry may be created in the order book database and information
regarding the incoming order is recorded therein, i.e. a resting
order is placed on the order book for the remaining quantity to
await a subsequent incoming order counter thereto.
[0029] Traders access the markets of a electronic trading
system/trading platform using trading software which operates on
their client device that, via a wired and/or wireless electronic
data communications network, receives and displays market data
comprising at least a portion of the order book for a market, i.e.
at least a portion of the currently resting orders, enables a
trader to provide parameters for an order for the product traded in
the market, and transmits electronic data transaction request
messages comprising orders to the electronic trading system via the
network. The trading software typically includes a graphical user
interface to display at least a price and quantity of some of the
entries in the order book associated with the market. The number of
entries of the order book displayed is generally preconfigured by
the trading software, limited by the Electronic trading system, or
customized by the user. Some graphical user interfaces display
order books of multiple markets of one or more trading platforms.
The trader may be an individual who trades on his/her behalf, a
broker trading on behalf of another person or entity, a group, or
an entity. Furthermore, the trader may be, or may operate, an
electronic system that automatically analyzes incoming market data
and/or other information, e.g. weather data, news events, other
economic data, and automatically generates and submits electronic
data transaction request messages comprising orders based
thereon.
[0030] If the electronic trading system identifies that an incoming
market order may be filled by a combination of multiple resting
orders, e.g. the incoming order quantity meets or exceeds the sum
of the quantities of one or more resting orders having the same or
a better price as the incoming order, all of the resting orders
having the same or better price as the incoming order will be
matched and satisfied. Any excess unsatisfied quantity of the
incoming order will be rested on the order book to await a suitable
counter order, or cancellation/modification, etc.
[0031] Where the electronic trading system identifies multiple
orders contra to the incoming order and that have a price which is
favorable to the price of the incoming order, i.e. the price is
equal to or better, e.g. lower if the incoming order is a buy or
higher if the incoming order is a sell, than the price of the
incoming order, and the quantity of the incoming order is
insufficient to satisfy the total quantity of the identified
resting orders, the electronic trading system may allocate, e.g.,
automatically, the quantity of the incoming order among such
identified orders in accordance with prioritization and allocation
rules/algorithms, referred to as "allocation algorithms" or
"matching algorithms," as, for example, may be defined in the
specification of the particular financial product or defined by the
Exchange for multiple financial products.
[0032] As was noted above, an Exchange must respond to inputs, such
as trader orders, cancellation, etc., in a manner as expected by
the market participants, such as based on market data, e.g. prices,
available counter-orders, etc., to provide an expected level of
certainty that transactions will occur in a consistent and
predictable manner and without unknown or unascertainable risks.
Accordingly, the method by which incoming orders are matched with
resting orders must be defined so that market participants have an
expectation of what the result will be when they place an order or
have resting orders and an incoming order is received, even if the
expected result is, in fact, at least partially unpredictable due
to some component of the process being random or arbitrary or due
to market participants having imperfect or less than all
information, e.g. unknown position of an order in an order book.
Typically, the Exchange defines the matching/allocation algorithm
that will be used for a particular financial product, with or
without input from the market participants. Once defined for a
particular product, the matching/allocation algorithm is typically
not altered, except in limited circumstance, such as to correct
errors or improve operation, so as not to disrupt trader
expectations. It will be appreciated that different products
offered by a particular Exchange may use different matching
algorithms.
[0033] For example, a first-in/first-out (FIFO) matching algorithm,
also referred to as a "Price Time" algorithm, considers each
identified order sequentially in accordance with when the
identified order was received. The quantity of the incoming order
is matched to the quantity of the identified order at the best
price received earliest, then quantities of the next earliest best
price orders, and so on until the quantity of the incoming order is
exhausted. Some product specifications define the use of a pro-rata
matching algorithm, wherein a quantity of an incoming order is
allocated to each of plurality of identified orders proportionally.
Some Electronic trading systems provide a priority to certain
standing orders in particular markets. An example of such an order
is the first order that improves a price (i.e., improves the
market) for the product during a trading session. To be given
priority, the trading platform may require that the quantity
associated with the order is at least a minimum quantity. Further,
some electronic trading systems cap the quantity of an incoming
order that is allocated to a standing order on the basis of a
priority for certain markets. In addition, some electronic trading
systems may give a preference to orders submitted by a trader who
is designated as a market maker for the product. Other electronic
trading systems may use other criteria to determine whether orders
submitted by a particular trader are given a preference. Typically,
when the electronic trading system allocates a quantity of an
incoming order to a plurality of identified orders at the same
price, the trading host allocates a quantity of the incoming order
to any orders that have been given priority. The electronic trading
system thereafter allocates any remaining quantity of the incoming
order to orders submitted by traders designated to have a
preference, and then allocates any still remaining quantity of the
incoming order using the FIFO or pro-rata algorithms. Pro-rata
algorithms used in some markets may require that an allocation
provided to a particular order in accordance with the pro-rata
algorithm must meet at least a minimum allocation quantity. Any
orders that do not meet or exceed the minimum allocation quantity
are allocated to on a FIFO basis after the pro-rata allocation (if
any quantity of the incoming order remains). More information
regarding order allocation may be found in U.S. Pat. No. 7,853,499,
the entirety of which is incorporated by reference herein.
[0034] Other examples of matching algorithms which may be defined
for allocation of orders of a particular financial product include:
[0035] Price Explicit Time [0036] Order Level Pro Rata [0037] Order
Level Priority Pro Rata [0038] Preference Price Explicit Time
[0039] Preference Order Level Pro Rata [0040] Preference Order
Level Priority Pro Rata [0041] Threshold Pro-Rata [0042] Priority
Threshold Pro-Rata [0043] Preference Threshold Pro-Rata [0044]
Priority Preference Threshold Pro-Rata [0045] Split Price-Time
Pro-Rata
[0046] For example, the Price Explicit Time trading policy is based
on the basic Price Time trading policy with Explicit Orders having
priority over Implied Orders at the same price level. The order of
traded volume allocation at a single price level may therefore be:
[0047] Explicit order with oldest timestamp first. Followed by
[0048] Any remaining explicit orders in timestamp sequence (First
In, First Out--FIFO) next. Followed by [0049] Implied order with
oldest timestamp next. Followed by [0050] Any remaining implied
orders in timestamp sequence (FIFO).
[0051] In Order Level Pro Rata, also referred to as Price Pro Rata,
priority is given to orders at the best price (highest for a bid,
lowest for an offer). If there are several orders at this best
price, equal priority is given to every order at this price and
incoming business is divided among these orders in proportion to
their order size. The Pro Rata sequence of events is: [0052] 1.
Extract all potential matching orders at best price from the order
book into a list. [0053] 2. Sort the list by order size, largest
order size first. If equal order sizes, oldest timestamp first.
This is the matching list. [0054] 3. Find the `Matching order size,
which is the total size of all the orders in the matching list.
[0055] 4. Find the `tradable volume`, which is the smallest of the
matching volume and the volume left to trade on the incoming order.
[0056] 5. Allocate volume to each order in the matching list in
turn, starting at the beginning of the list. If all the tradable
volume gets used up, orders near the end of the list may not get
allocation. [0057] 6. The amount of volume to allocate to each
order is given by the formula:
[0057] (Order volume/Matching volume)*Tradable volume [0058] The
result is rounded down (for example, 21.99999999 becomes 21) unless
the result is less than 1, when it becomes 1. [0059] 7. If tradable
volume remains when the last order in the list had been allocated
to, return to step 3. [0060] Note: The matching list is not
re-sorted, even though the volume has changed. The order which
originally had the largest volume is still at the beginning of the
list. [0061] 8. If there is still volume left to trade on the
incoming order, repeat the entire algorithm at the next price
level.
[0062] Order Level Priority Pro Rata, also referred to as Threshold
Pro Rata, is similar to the Price (or `Vanilla`) Pro Rata algorithm
but has a volume threshold defined. Any pro rata allocation below
the threshold will be rounded down to 0. The initial pass of volume
allocation is carried out in using pro rata; the second pass of
volume allocation is carried out using Price Explicit Time. The
Threshold Pro Rata sequence of events is: [0063] 1. Extract all
potential matching orders at best price from the order book into a
list. [0064] 2. Sort the list by explicit time priority, oldest
timestamp first. This is the matching list. [0065] 3. Find the
`Matching volume`, which is the total volume of all the orders in
the matching list. [0066] 4. Find the `tradable volume`, which is
the smallest of the matching volume and the volume left to trade on
the incoming order. [0067] 5. Allocate volume to each order in the
matching list in turn, starting at the beginning of the list.
[0068] 6. The amount of volume to allocate to each order is given
by the formula:
[0068] (Order volume/Matching volume)*Tradable volume [0069] The
result is rounded down to the nearest lot (for example, 21.99999999
becomes 21) unless the result is less than the defined threshold in
which case it is rounded down to 0. [0070] 7. If tradable volume
remains when the last order in the list had been allocated to, the
remaining volume is allocated in time priority to the matching
list. [0071] 8. If there is still volume left to trade on the
incoming order, repeat the entire algorithm at the next price
level.
[0072] In the Split Price Time Pro-Rata algorithms, a Price Time
Percentage parameter is defined. This percentage of the matching
volume at each price is allocated by the Price Explicit Time
algorithm and the remainder is allocated by the Threshold Pro-Rata
algorithm. There are four variants of this algorithm, with and
without Priority and/or Preference. The Price Time Percentage
parameter is an integer between 1 and 99. (A percentage of zero
would be equivalent to using the respective existing Threshold
Pro-Rata algorithm, and a percentage of 100 would be equivalent to
using the respective existing Price Time algorithm). The Price Time
Volume will be the residual incoming volume, after any priority
and/or Preference allocation has been made, multiplied by the Price
Time Percentage. Fractional parts will be rounded up, so the Price
Time Volume will always be at least 1 lot and may be the entire
incoming volume. The Price Time Volume is allocated to resting
orders in strict time priority. Any remaining incoming volume after
the Price Time Volume has been allocated will be allocated
according to the respective Threshold Pro-Rata algorithm. The
sequence of allocation, at each price level, is therefore: [0073]
1. Priority order. if applicable [0074] 2. Preference allocation,
if applicable [0075] 3. Price Time allocation of the configured
percentage of incoming volume [0076] 4. Threshold Pro-Rata
allocation of any remaining incoming volume [0077] 5. Final
allocation of any leftover lots in time sequence.
[0078] Any resting order may receive multiple allocations from the
various stages of the algorithm.
[0079] It will be appreciated that there may be other allocation
algorithms, including combinations of algorithms, now available or
later developed, which may be utilized with the disclosed
embodiments, and all such algorithms are contemplated herein.
[0080] One exemplary system for matching is described in U.S.
patent application Ser. No. 13/534,499, filed on Jun. 27, 2012,
entitled "MULTIPLE TRADE MATCHING ALGORITHMS," published as U.S.
Patent Application Publication No. 2014/0006243 A1, incorporated by
reference herein, discloses an adaptive match engine which draws
upon different matching algorithms, e.g. the rules which dictate
how a given order should be allocated among qualifying resting
orders, depending upon market conditions, to improve the operation
of the market. For example, for a financial product, such as a
futures contract, having a future expiration date, the match engine
may match incoming orders according to one algorithm when the
remaining time to expiration is above a threshold, recognizing that
during this portion of the life of the contract, the market for
this product is likely to have high volatility. However, as the
remaining time to expiration decreases, volatility may decrease.
Accordingly, when the remaining time to expiration falls below the
threshold, the match engine switches to a different match algorithm
which may be designed to encourage trading relative to the
declining trading volatility. Thereby, by conditionally switching,
e.g., automatically, among matching algorithms within the same
financial product, as will be described, the disclosed match engine
automatically adapts to the changing market conditions of a
financial product, e.g. a limited life product, in a
non-preferential manner, maintaining fair order allocation while
improving market liquidity, e.g., over the life of the product.
[0081] In one implementation, this trading system may evaluate
market conditions on a daily basis and, based thereon, change,
e.g., automatically, the matching algorithm between daily trading
sessions, i.e. when the market is closed, such that when the market
reopens, a new trading algorithm is in effect for the particular
product. As will be described, the disclosed embodiments may
facilitate more frequent changes to the matching algorithms so as
to dynamically adapt to changing market conditions, e.g. intra-day
changes, and even intra-order matching changes. It will be further
appreciated that hybrid matching algorithms, which match part of an
order using one algorithm and another part of the order using a
different algorithm, may also be used.
[0082] With respect to incoming orders, some traders, such as
automated and/or algorithmic traders, attempt to respond to market
events, such as to capitalize upon a mispriced resting order or
other market inefficiency, as quickly as possible. It will be
appreciated that there maybe at least three parts to this ability
to respond, the latency in receipt of data indicative of an
opportunity, the latency is computing or otherwise generating a
response thereto, and the latency in communicating that response to
the electronic trading system to capitalize on the opportunity.
This may result in penalizing the trader who makes an errant trade,
or whose underlying trading motivations have changed, and who
cannot otherwise modify or cancel their order faster than other
traders can submit trades there against.
[0083] It may considered that an electronic trading system that
rewards the trader who submits their order first creates a
potential advantage to those trader which happen to have access to
lower latency devices and/or connections or otherwise creates an
incentive to take advantage of disparities in the latencies of the
communications networks which connect the client devices of the
market participants with the electronic trading system, and/or the
disparate latencies of those devices in responding to
opportunities, by: exploiting existing inequities in those
latencies, e.g. investing substantial capital in lower latency
proprietary client devices and/or communications networks, e.g.
using faster technology and/or closer proximity to the electronic
trading system, etc.; participating in the market substantially to
capitalize on opportunities (aggressor side/lower risk trading) as
opposed to creating new opportunities (market making/higher risk
trading); modifying existing systems to streamline business logic
at the cost of trade quality; and/or reducing one's activities and
exposure in the market. The result may be a lesser quality market
and/or reduced transaction volume due to shifting of capital from
trading to infrastructure investment, and corresponding thereto,
reduced fees to the Exchange.
[0084] The disclosed embodiments may attempt to automatically
regulate incoming orders or otherwise equalize the rate at which
incoming orders are processed upon receipt to, for example, reduce,
but not eliminate, the impact of minor discrepancies in response
latency. Incoming orders, once equalized, are then allocated, e.g.,
automatically, for matching in a manner which may incentivize
desired behavior. The disclosed embodiments may incentivize market
making behavior over aggressor behavior to improve and maintain
market liquidity or health by, for example, reducing penalties for
providing liquidity, e.g. providing new or additional transactional
opportunities, and incentivizing submission of orders which reflect
the true intent of the market participant, or at least a close
approximation thereof, even if that intent is to leverage anomalies
or inefficiencies in the operations of market or the electronic
trading system. Furthermore, by reducing the incentive to invest in
faster trading systems, the cost of which may exponentially
increase with respect to linear improvements therein, market
participants can devote more capital to investment and market
participation. In addition, by not eliminating the benefit of speed
altogether, speedy order submission may be rewarded where it
improves market liquidity/health. See U.S. patent application Ser.
No. 14/644,460, filed on Mar. 11, 2015, published as U.S. Patent
Application Publication No. ______, entitled "IMPROVED MARKET
OPERATION THROUGH REGULATION OF INCOMING ORDER MATCH ALLOCATION
AND/OR DYNAMIC RESTING ORDER MATCH ALLOCATION PRIORITIES",
incorporated by reference herein.
[0085] With respect to resting orders, allocation/matching suitable
resting orders to match against an incoming order can be performed,
as described above, in many different ways. Generally, it will be
appreciated that allocation/matching algorithms are only needed
when the incoming order quantity is less than the total quantity of
the suitable resting orders as, only in this situation, is it
necessary to decide which resting order(s) will not be fully
satisfied, which trader(s) will not get their orders filled. It can
be seen from the above descriptions of the matching/allocation
algorithms, that they fall generally into three categories: time
priority/first-in-first-out ("FIFO"), pro rata, or a hybrid of FIFO
and pro rata. While the disclosed embodiments will be described
with respect to a matching processor 106 which implements a FIFO
matching algorithm, it will be appreciated that the described
matching processor 106 may use other matching algorithms, such as
pro-rata or combinations of FIFO or pro-rata. See U.S. patent
application Ser. No. 14/644,525, filed on Mar. 11, 2015, published
as U.S. Patent Application Publication No. ______, entitled
"IMPROVED MARKET OPERATION THROUGH REGULATION OF INCOMING ORDER
MATCH ALLOCATION AND/OR DYNAMIC RESTING ORDER MATCH ALLOCATION
PRIORITIES", incorporated by reference herein.
[0086] The disclosed embodiments are preferably implemented with
computer devices and computer networks, such as those described
with respect FIG. 4 and improved as described herein, that allow
users, e.g. market participants or traders, to exchange trading
information with an electronic trading system as described. It will
be appreciated that the plurality of entities utilizing the
disclosed embodiments, e.g. the market participants, may be
referred to by other nomenclature reflecting the role that the
particular entity is performing with respect to the disclosed
embodiments and that a given entity may perform more than one role
depending upon the implementation and the nature of the particular
transaction being undertaken, as well as the entity's contractual
and/or legal relationship with another market participant and/or
the exchange. An exemplary trading network environment for
implementing trading systems and methods is shown in FIG. 1. An
electronic trading system 100, referred also to as the "exchange"
or "exchange computer system," receives orders and transmits market
data related to orders and trades to users, e.g., automatically,
such as via wide area network 126 and/or local area network 124 and
computer devices 114, 116, 118, 120 and 122, as will be described
below, coupled with the electronic trading system 100.
[0087] Herein, the phrase "coupled with" is defined to mean
directly connected to or indirectly connected through one or more
intermediate components. Such intermediate components may include
both hardware and software based components. Further, to clarify
the use in the pending claims and to hereby provide notice to the
public, the phrases "at least one of <A>, <B>, . . .
and <N>" or "at least one of <A>, <B>, . . .
<N>, or combinations thereof" are defined by the Applicant in
the broadest sense, superseding any other implied definitions
herebefore or hereinafter unless expressly asserted by the
Applicant to the contrary, to mean one or more elements selected
from the group comprising A, B, . . . and N, that is to say, any
combination of one or more of the elements A, B, . . . or N
including any one element alone or in combination with one or more
of the other elements which may also include, in combination,
additional elements not listed.
[0088] The electronic trading system 100 may be implemented with
one or more mainframe, desktop or other computers, such as the
computer 400 described below with respect to FIG. 4. A user
database 102 may be provided which includes information identifying
traders and other users of electronic trading system 100, such as
account numbers or identifiers, user names and passwords. An
account data module 104 may be provided which may process account
information that may be used during transactions, such as trades. A
match engine module 106 may be included to match bid and offer
prices and may be implemented with software and/or hardware that
executes one or more algorithms for matching bids and offers as
will be described in more detail elsewhere herein. A trade database
108 may be included to store information identifying trades and
descriptions of trades. In particular, a trade database may store
information identifying the time that a trade took place and the
contract price. An order book module 110 may be included to compute
or otherwise determine current bid and offer prices and may further
include a database or other data structure which stores data
indicative of previously received but unsatisfied orders as
described herein. A market data module 112 may be included to
collect market data and prepare the data for transmission to users.
A risk management module 134 may be included to compute and
determine a user's risk utilization in relation to the user's
defined risk thresholds. An order processing module 136 may be
included to decompose delta based and bulk order types for
processing by the order book module 110 and/or match engine module
106. A volume control module 140 may be included to, among other
things, control the rate of acceptance of mass quote messages in
accordance with one or more aspects of the disclosed embodiments.
It will be appreciated that concurrent processing limits may be
defined by or imposed separately or in combination, as was
described above, on one or more of the trading system components,
including the user database 102, the account data module 104, the
match engine module 106, the trade database 108, the order book
module 110, the market data module 112, the risk management module
134, the order processing module 136, or other component of the
electronic trading system 100.
[0089] The trading network environment shown in FIG. 1 includes
exemplary computer/client devices 114, 116, 118, 120 and 122 which
depict different exemplary methods or media by which a
computer/client device may be coupled with the electronic trading
system 100 or by which a user may communicate, e.g. send and
receive, electronic data transaction request messages and responses
thereto, e.g. trade or other information therewith. It will be
appreciated that the types of computer/client devices deployed by
traders and the methods and media by which they communicate with
the electronic trading system 100 is implementation dependent and
may vary and that not all of the depicted computer devices and/or
means/media of communication may be used and that other computer
devices and/or means/media of communications, now available or
later developed may be used. Each computer/client device, which may
comprise a computer 400 described in more detail below with respect
to FIG. 4, may include a central processor that controls the
overall operation of the computer and a system bus that connects
the central processor to one or more conventional components, such
as a network card or modem. Each computer device may also include a
variety of interface units and drives for reading and writing data
or files and communicating with other computer devices and with the
electronic trading system 100. Depending on the type of
computer/client device, a user can interact with the computer with
a keyboard, pointing device, microphone, pen device or other input
device now available or later developed.
[0090] An exemplary computer/client device 114 is shown directly
connected to electronic trading system 100, such as via a T1 line,
a common local area network (LAN) or other wired and/or wireless
medium for connecting computer devices, such as the network 420
shown in FIG. 4 and described below with respect thereto. The
exemplary computer device 114 is further shown connected to a radio
132. The user of radio 132, which may include a cellular telephone,
smart phone, or other wireless proprietary and/or non-proprietary
device, may be a trader or exchange employee. The radio user may
transmit orders or other information to the exemplary
computer/client device 114 or a user thereof. The user of the
exemplary computer/client device 114, or the exemplary
computer/client device 114 alone and/or autonomously, may then
transmit the trade or other information to the electronic trading
system 100.
[0091] Exemplary computer/client devices 116 and 118 are coupled
with a local area network ("LAN") 124 which may be composed of one
or more public or private wired and/or wireless networks and
configured in one or more of the well-known LAN topologies, e.g.
star, daisy chain, etc., and may use a variety of different
protocols, such as Ethernet, TCP/IP, etc. The exemplary computer
devices 116 and 118 may communicate with each other and with other
computer and other devices which are coupled with the LAN 124.
Computer and other devices may be coupled with the LAN 124 via
twisted pair wires, coaxial cable, fiber optics or other wired or
wireless media. As shown in FIG. 1, an exemplary wireless personal
digital assistant device ("PDA") 122, such as a mobile telephone,
tablet based computer device, or other wireless device, may
communicate with the LAN 124 and/or the Internet 126 via radio
waves, such as via WiFi, Bluetooth and/or a cellular telephone
based data communications protocol. PDA 122 may also communicate
with electronic trading system 100 via a conventional wireless hub
128.
[0092] As was described above, different client devices 114, 116,
118, 120 and 122 may feature different capabilities, e.g.
processing speed, processing efficiency, etc., resulting in varying
latencies between receipt of notification of some event, e.g. a
change in a market, and transmission of a response thereto, e.g. an
electronic data transaction request message comprising an order,
seeking to capitalize on this event. For example, some client
devices 114, 116, 118, 120 and 122 may be fully automated and
automatically analyze received data indicative of market events and
generate and transmit response thereto without human intervention,
such as may be used by high frequency traders. Other client devices
114, 116, 118, 120 and 122 may simply present received data
indicative of market events to the user thereof and await input
from the user directing the device 114, 116, 118, 120 and 122 to
generate a response. Still some devices 114, 116, 118, 120 and 122
may feature hardware and or software architectures specifically
designed/optimized to reduce such latencies, e.g. using intelligent
network communications devices to place the order processing
capability of the device 114, 116, 118, 120 and 122 as close to the
network connection as possible. Some devices 114, 116, 118, 120 and
122 may lack safeguards which are designed to prevent errant
submissions but which increase latency, such as functions which
require secondary confirmation before submission, functions which
validate submissions for errors, e.g. extreme or uncharacteristic
variations in price or quantity of an order, etc.
[0093] FIG. 1 also shows the LAN 124 coupled with a wide area
network ("WAN") 126 which may be comprised of one or more public or
private wired or wireless networks. In one embodiment, the WAN 126
includes the Internet 126. The LAN 124 may include a router to
connect LAN 124 to the Internet 126. Exemplary computer/client
device 120 is shown coupled directly to the Internet 126, such as
via a modem, DSL line, satellite dish or any other device for
connecting a computer device to the Internet 126 via a service
provider therefore as is known. LAN 124 and/or WAN 126 may be the
same as the network 420 shown in FIG. 4 and described below with
respect thereto. It will be appreciated where the interconnections
124, 126 between the client devices 114, 116, 118, 120 and 122 and
the electronic trading system 100 utilize multipath protocols such
as mesh networking, packet switching, TCP/IP, etc., multiple
physical and/or logical communications routes may be available over
which a given electronic data transaction request message may
travel when being communicated over these networks. The choice of
route over all or a portion of the networks 124, 126 may or may not
be under the control user, the client device 114, 116, 118, 120 and
122 and/or the electronic trading system 100, e.g. routing may be
subject to error correction protocols, congestion control
protocols, quality of service protocols, outages or intermittent
errors.
[0094] Furthermore, the addition, by electronic trading systems
100, of additional channels of communication 124, 126 in an effort
to increase capacity and opportunity, along with increased
bandwidth of each channel, allows for more transactions to be
submitted over multiple parallel paths into the system.
Accordingly, not only must the electronic trading system 100
discriminate among closely received incoming transactions, but must
further arbitrate among transactions received simultaneously, or
temporally so close together as to be considered simultaneously
received, i.e. the difference in their time of receipt being to
close to measure by the implemented discrimination mechanisms, also
referred to as "substantially simultaneously".
[0095] As was described above, the various interconnections 124,
126 by which the exemplary computer/client devices 114, 116, 118,
120 and 122 communicate with the electronic trading system 100 may
be characterized by different static or dynamic latencies such that
a communication broadcast by the electronic trading system 100 to
more than one of the exemplary computer/client devices 114, 116,
118, 120 and 122 may be received by at least one of those devices
114, 116, 118, 120 and 122 at a different time, earlier or later,
relative to the receipt of that broadcasted communication by
another of those devices 114, 116, 118, 120 and 122, a
communication initiated by one device 114, 116, 118, 120 and 122
and another communication initiated substantially simultaneously
therewith by another device 114, 116, 118, 120 and 122, may be
received at different times, either earlier or later, at the
electronic trading system 100, or a communication initiated by one
device 114, 116, 118, 120 and 122 may be received later in time by
the electronic trading system than another communication initiated
by another device 114, 116, 118, 120 and 122, later in time. Some
interconnections may be characterized by latencies which are
significantly less than other interconnections allowing those users
connected thereby to communicate electronic data transactions
request messages to the electronic trade system 100 much more
quickly than others.
[0096] The arbitrary nature of the variance in latency between
devices 114, 116, 118, 120 and 122 and/or the networks 124, 126
which interconnect them with the electronic trading system 100 may
provide a desirable random or pseudo random variation in the
capability of users to learn of and capitalize on market events,
mitigating convergence of multiple responses at the electronic
trading system 100, which in concert with the mechanisms which
arbitrate among, or otherwise distinguish between substantially
simultaneously received competing transactions, implements a system
which may be observed to be fair and balanced in the aggregate.
[0097] However, such variance in latencies of the client devices
114, 116, 118, 120 and 122 and the networks 124, 126 which
interconnect them with the electronic trading system 100, in
concert with the transaction processing system implemented thereby
generally allocating transactional opportunities to competing
transaction requests based on order of receipt thereby, may
incentivize users to exploit such inequities in the architecture
and infrastructure of the devices 114, 116, 118, 120 and 122,
networks 124, 126 and/or electronic trading system 100, and/or
incentivize investment in technologies directed to minimizing or
otherwise reducing these latencies, e.g. faster client devices 114,
116, 118, 120 and 122, faster networks 124, 126, and/or shorter
paths between them and the electronic trading system 100. As minor
decreases in latency may come at exponentially increasing costs,
such investment reduces capital which may be otherwise used for
other purposes. Users may be incentivized to expend significant
resources to gain minor improvements. Users unable to make such
investments may be at a disadvantage and may be discouraged from
participating. Furthermore, as latencies are reduced, the ability
of the electronic trading system 100 to discriminate among these
ever-more closely converging competing incoming transactions for
the purpose of discerning order of receipt may be exceeded which
may then result in non-deterministic operation.
[0098] In particular, a user who wishes to cancel a pending
yet-unsatisfied transaction, e.g. because the transaction was
placed in error or a change in circumstances has rendered the
pending transaction disadvantageous to that user, may be unable to
do so before a user having a lower latency is able to submit a
counter transaction to capitalize upon the opportunity.
[0099] It will be appreciated that a solution to the issue of
converging response latencies is to improve the discriminatory
capability of the electronic trading system 100 to distinguish
among closely received competing transactions, such as by
implementing high speed communications interfaces, high resolution
time keeping, etc. However, such solutions may not alleviate the
issue where users will continue to invest in improvements which
parallel or exceed the improvements to the electronic trading
system.
[0100] Another solution may be to group or collect together
incoming competing transactions over a time window, predefined or
otherwise, and then allocate the transactional opportunity to or
among those competing transactions randomly. However, as such a
system would likely implement a pseudo random algorithm, such as a
system would be vulnerable to users learning the pseudo random
algorithm and timing their submission in accordance therewith.
Further, users may be incentivized to submit numerous orders,
referred to as "stuffing," in order to increase the probability
that one of those orders will succeed.
[0101] The disclosed embodiments relate to systems and methods
which mitigate latency as a factor in allocating transactional
opportunities by, e.g., automatically, grouping, collecting or
otherwise buffering together, e.g. into a group, bucket, set,
collection, etc., competing transactions requests for the
transactional opportunity that are received within a defined
window/period prior to forwarding those transaction requests to the
matching processor 106 and, subsequent to the closing of that
window/period, allocating, e.g., automatically, the transactional
opportunity among the grouped transaction requests based on a
secondary factor included with each request defined by the user and
unrelated to order of receipt, e.g. determined based on the best
secondary/reservation price value(s) optionally provided
with/defined by each incoming transaction request. The resulting
transaction request(s) which succeed in this process may then be
submitted, e.g., automatically, to the matching processor 106 at
the secondary, i.e. improved, price. In this manner, the benefit of
low latency is reduced as will be described. Further, the user
holding the previously unsatisfied transaction request that has now
been satisfied, receives the benefit of the improved secondary
price.
[0102] As was described above, the users of the electronic trading
system 100 may include one or more market makers 130 which may
maintain a market by providing constant bid and offer prices for a
derivative or security to the electronic trading system 100, such
as via one of the exemplary computer devices depicted. The
electronic trading system 100 may also exchange information with
other trade engines, such as trade engine 138. One skilled in the
art will appreciate that numerous additional computers and systems
may be coupled to electronic trading system 100. Such computers and
systems may include clearing, regulatory and fee systems.
[0103] The operations of computer devices and systems shown in FIG.
1 may be controlled by computer-executable instructions stored on a
non-transitory computer-readable medium. For example, the exemplary
computer device 116 may include computer-executable instructions
for receiving order information from a user and transmitting that
order information to electronic trading system 100. In another
example, the exemplary computer device 118 may include
computer-executable instructions for receiving market data from
electronic trading system 100 and displaying that information to a
user.
[0104] Of course, numerous additional servers, computers, handheld
devices, personal digital assistants, telephones and other devices
may also be connected to the electronic trading system 100.
Moreover, one skilled in the art will appreciate that the topology
shown in FIG. 1 is merely an example and that the components shown
in FIG. 1 may include other components not shown and be connected
by numerous alternative topologies.
[0105] FIG. 2 depicts a block diagram of an order processor module
136 according to one embodiment, which in an exemplary
implementation, is implemented as part of the electronic
transaction processing system implementing an electronic trading
system 100 described above. As used herein, an electronic trading
system 100, i.e. exchange, includes an electronic transaction
processing system that receives electronic data transaction request
messages comprising orders to trade and/or executes those orders
via a hardware matching processor 106 as described. It will be
appreciated that the disclosed embodiments may be implemented by or
in conjunction with other modules or components of the electronic
trading system 100. While the disclosed embodiments will be
described with respect to a separate implementation for each
hardware match engine processor, market or order book database, it
will be appreciated that the disclosed embodiments may also be
implemented across the entire electronic trading system 100 such as
for example, by further denoting incoming orders by their intended
market and separately processing orders received for a given market
as described herein.
[0106] In particular, FIG. 2 depicts a block diagram of a system
200, which may also be referred to as an architecture, for
mitigating latency disparity between different client devices 114,
116, 118, 120 and 122 and an electronic data transaction processing
system 100, due to, for example, disparity in client device 114,
116, 118, 120 and 122 capabilities and/or interconnection 124/126
capabilities, in which data items are transacted, e.g.,
automatically, by a hardware matching processor 106 that matches,
as they are received, incoming electronic data transaction request
messages, for one of the data items based on a first set of
transaction parameters, received from the different client devices
114, 116, 118, 120 and 122 over a data communication network
124/126 with at least one other previously received but unsatisfied
electronic data transaction request message counter thereto to at
least partially satisfy one or both of the incoming electronic data
transaction request messages or the at least one other previously
received electronic data transaction request message, wherein the
first set of transaction parameters comprises a first parameter,
e.g. an offer price, having a first value, and further wherein each
of the incoming electronic data transaction request messages may
include a second parameter having a second value, e.g. a secondary
or reservation price. In one embodiment, the secondary value is a
price value. In an alternative embodiment, the secondary value may
be a price increment used to modify the first parameter to derive a
secondary price value. The secondary value may be optional. In one
embodiment, if the secondary value is not provided, the secondary
value is assumed, in the embodiment where the value is an
increment, to be 0, and in the embodiment where the secondary value
is a price value, assumed to be the same as the first parameter
value. In an alternate embodiment, the lack of a secondary value in
a received incoming electronic data transaction message indicates
that the user who submitted the request does not wish their request
to be evaluated in concert with competing requests, e.g. does not
wish to take part in the disclosed grouping/allocation process.
Alternatively, a separate indicator may be included within each
electronic transaction data request to indicate whether submitting
user wishes to partake in below described grouping/allocation
process or not. Generally, the secondary parameter may specify or
define an alternative price value, specifically or via an increment
of the offer price, to be used in the grouping/allocation process
describe below. In one embodiment, the secondary parameter may be
specified in whole ticks/price increments or in fractions thereof.
It will be appreciated that the fractional precision, i.e. number
of decimal places, at which the second parameter may be specified
may be defined so as to minimize the probability of two or more
market participants specifying the same value thereof. In an
alternative embodiment, the matching processor 106 may be
implemented by a combination of hardware and software as described
above.
[0107] The system 200 includes an interval processor 206, which may
be implemented as a separate component or as one or more logic
components, such as on an FPGA which may include a memory or
reconfigurable component to store logic and processing component to
execute the stored logic, or as first logic 206, e.g. computer
program logic, stored in a memory 204, or other non-transitory
computer readable medium, and executable by a processor 202, such
as the processor 402 and memory 404 described below with respect to
FIG. 4, to cause the processor 202 to, or otherwise be operative
to, determine, e.g., automatically, an occurrence of a first event
and a subsequent occurrence of a second event. In one
embodiment.
[0108] In one embodiment, the first and second events define an
elapse of an interval of time. In particular, in one embodiment,
the time interval may begin to elapse upon receipt, e.g. the first
event, of an incoming order subsequent to a prior elapse of the
time interval. In one embodiment, the time interval may begin to
elapse upon transmission, e.g. the first event, of notification of
a previously received but not satisfied electronic data transaction
request to the different client devices 114, 116, 118, 120 and 122,
i.e. upon resting of an order on the order book, at any price or at
the best price, and subsequent transmission of a market data
message advertising this transaction opportunity to the market
participants via the client devices 114, 116, 118, 120 and 122. In
one embodiment, the first event may comprise receipt of an
acknowledgment from the hardware matching processor acknowledging
receipt of previously forwarded incoming orders. In all cases, the
interval may then close, e.g., automatically, upon expiration of a
defined period of time, e.g. the second event, such as 5
microseconds, the accumulation of a defined number of incoming
transaction requests, e.g. meeting or exceeding a threshold, or
other measure or event or combination thereof. In one embodiment,
the duration of the time interval may be variable and may be
random. Regardless, the disclosed embodiments may enable the
participants to dynamically define or otherwise control when,
and/or how many, competing incoming transactions are grouped
together, as described, via or otherwise based on the participants'
responsiveness to transactional opportunities, e.g. the number of
responses and/or the rate or latency with which the participants
respond to such opportunities. For example, the more that
participants rapidly respond to an opportunity, the more they will
have to compete to capitalize upon that opportunity. Furthermore,
the disclosed embodiments eliminate any incentive for waiting to
submit a transaction, as there is no advantage to such delay and
participants may risk failing to timely submit their transaction in
order participate, and thereby maintain continuous price
discovery.
[0109] The system 200 further includes an incoming order receiver
208 coupled with the interval processor 206 , which may be
implemented as a separate component or as one or more logic
components, such as on an FPGA which may include a memory or
reconfigurable component to store logic and processing component to
execute the stored logic, or as second logic 208, e.g. computer
program logic, stored in a memory 204, or other non-transitory
computer readable medium, and executable by a processor 202, such
as the processor 402 and memory 404 described below with respect to
FIG. 4, to cause the processor 202 to, or otherwise be operative
to, receive, e.g., automatically, incoming electronic data
transaction request messages and store, accumulate, buffer or
otherwise group or collect the received incoming electronic data
transaction request messages in a memory 204/214 coupled with the
incoming order receiver 206 prior to forwarding the received
incoming electronic data transaction request messages to the
hardware matching processor 106. The memory 204/214 may be a part
of the memory 204 or separate therefrom. In one embodiment, the
received incoming electronic data transaction requests may be
stored in the memory in association with data indicative of time
and/or order of receipt by the incoming order receiver.
[0110] The system 200 further includes an order identifier 210,
coupled with the memory 214/204, the order receiver 208 and the
interval processor 206, and which may be implemented as a separate
component or as one or more logic components, such as on an FPGA
which may include a memory or reconfigurable component to store
logic and processing component to execute the stored logic, or as
third logic 210, e.g. computer program logic, stored in a memory
204, or other non-transitory computer readable medium, and
executable by a processor 202, such as the processor 402 and memory
404 described below with respect to FIG. 4, to cause the processor
202 to, or otherwise be operative to, upon the occurrence of the
second event, identify, e.g., automatically, a first subset of at
least two of the stored incoming electronic data transaction
request messages wherein values of at least a subset of the first
set of transaction parameters thereof are identical, e.g. same
product and side, or otherwise indicative of the orders therein
competing for the same transactional opportunity but not
necessarily the same quantity, and determine whether the hardware
matching processor would match any of the first subset of stored
incoming electronic data transaction request messages, based on the
first set of transaction parameters thereof, with at least one
other previously received but unsatisfied electronic data
transaction request message counter thereto to at least partially
satisfy one or both of the stored incoming electronic data
transaction request messages or the at least one other previously
received electronic data transaction request message. If the first
subset contains only a single electronic data transaction request
message or there are no previously received but unsatisfied
electronic data transaction requests, i.e. no resting orders on the
order book database, which would match against the transaction
requests in the first subset, those transaction requests may be
forwarded, e.g., automatically, to the hardware matching processor
106 in the order in which they were received, e.g. no
grouping/bucketing is necessary because there is no competition for
any resting quantity. In one embodiment, incoming electronic data
transaction request messages may be tested, e.g., automatically,
for a possible match against previously received but unsatisfied
electronic data transaction request messages as the incoming
requests are received rather than waiting until the second event
occurs.
[0111] Where the stored incoming electronic data transaction
request messages include multiple subsets thereof having identical
values of the first set of transaction parameters, the system 200
may process, e.g., automatically, each subset in turn as described
herein, such as in the order of receipt of the earliest electronic
data transaction request message in each subset.
[0112] In one embodiment, the first set of parameters of each of
the transactions included in the first subset must specify the same
price. Alternatively, the first set of parameters of each of the
transactions included in the first subset must specify the same or
a better price.
[0113] In one embodiment, the first set of parameters may include
an identifier indicative of the product or data item, e.g.
financial instrument, to which the electronic data transaction
request message pertains. This may permit the system 200 to buffer
transaction requests for different order book databases linked by
implication allowing for application of the disclosed embodiments
to markets offering implication, e.g. to implied transactional
opportunities.
[0114] The system 200 further includes an order forwarder 212,
coupled with the memory 214/204, the order identifier 210, the
order receiver 208 and the interval processor 206, and which may be
implemented as a separate component or as one or more logic
components, such as on an FPGA which may include a memory or
reconfigurable component to store logic and processing component to
execute the stored logic, or as fourth logic 212, e.g. computer
program logic, stored in a memory 204, or other non-transitory
computer readable medium, and executable by a processor 202, such
as the processor 402 and memory 404 described below with respect to
FIG. 4, to cause the processor 202 to, or otherwise be operative
to, upon the occurrence of the second event, based on the first set
of transaction parameters thereof, with at least one other
previously received but unsatisfied electronic data transaction
request message counter thereto to at least partially satisfy one
or both of the stored incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, modify, e.g., automatically, the
first value of the first transaction parameter of the first set of
transaction parameters of each of the stored incoming electronic
data transaction request messages based on the second value of the
second parameter, e.g. add the secondary price increment to the
originally specified price or otherwise substitute the secondary
price for the original price, if included therewith, and determine,
e.g., automatically, based on the modified first set of transaction
parameters of each of the stored incoming electronic data
transaction request messages, at least one second subset, e.g. one
or more of those transaction requests, thereof which would be
matched, e.g. has the best price or would otherwise win the
competition among the grouped requests, by the hardware matching
processor with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the second
subset of stored incoming electronic data transaction request
messages or the at least one other previously received electronic
data transaction request message, and forward each stored
electronic data transaction request message of each of the at least
one second subset, each having, if modified, the modified first set
of transaction parameters, to the hardware matching processor in
the order in which they were received by the incoming order
receiver and, subsequent thereto, forward each remaining stored
electronic data transaction request message of the first subset,
each having their associated first set of transaction parameters,
to the hardware matching processor in the order in which they were
received by the incoming order receiver, i.e. FIFO with respect to
the order in which these transaction were received by the
electronic trading system 100. Any other orders not included in the
first subset, e.g. non-competing orders, would be then be similarly
processed, i.e. subject to the above described grouping/allocation
process and/or forwarded to the hardware matching processor 106 in
order of time of receipt. As the transactions in the second subset
are forwarded to the hardware matching processor 106 with the
modified price values, they will match with the previously received
but unsatisfied transaction requests at the improved price
providing a benefit to the submitting market participant(s) of
those previously received but unsatisfied, i.e. resting,
transaction requests.
[0115] In one embodiment, if the transactions included in the
second subset exceed the available quantity of the previously
received but unsatisfied transaction requests, the transactions of
the second subset may be broken down, e.g., automatically, in to
separate transaction requests, one characterized by the specific
available quantity of the previously received but unsatisfied
transactions, one characterized by the remaining quantity wherein
the former is forwarded first to the matching processor 106 as
described above, and the latter is forwarded along with the
remaining transactions of the first subset in FIFO order as
described. By splitting transactions in this manner, the disclosed
embodiments may exercise more discrete control over the matching
process, especially in embodiments implemented in conjunction with
existing matching processors 106.
[0116] As will be described in more detail below, where the
incoming electronic data transaction request messages in the first
subset include requests to modify, e.g. alter or cancel, a
previously received but unsatisfied electronic data transaction
request, those requests may be forwarded, e.g., automatically, to
the hardware matching processor 106 to be processed to the extent
those requests would have been effective if all of the transaction
requests in the first subset were executed in the order in which
they were received. If the processing of a request to modify a
prior request results in entirely eliminating the prior request,
the remaining transaction within the first subset may simply be
forwarded to the hardware matching processor 106 in the order in
which they were received.
[0117] As was noted above, in embodiments where the lack of a
secondary parameter, a secondary parameter value of 0, or a
separate indicator indicates a desire by a market participant not
to participate in the grouping/allocation process, those electronic
data transaction request messages having such parameters may be
excluded, e.g., automatically, from inclusion in the second subset
and otherwise processed in accordance with their submitted
transaction parameters.
[0118] It will be appreciated that the grouping/allocation process
described above can be iteratively performed across sets of the
transaction request messages having different price levels, until
all suitable previously received but unsatisfied transaction
requests have been satisfied.
[0119] As described above, the above process effectively defines,
e.g., automatically, the order in which incoming electronic data
transaction requests will be forwarded to the match engine
processor 106 which then performs the matching process according to
whatever matching algorithm, e.g. FIFO or pro-rata, etc., the
hardware matching processor 106 is configured for. For competing
transactions, the above described grouping process, by virtue of
defining the order of submission to the hardware matching processor
106, determine which of those competing transactions will be
allocated a given transactional opportunity and may be irrespective
of the order in which the competing electronic data transaction
request messages were received by the electronic trading system
100. Thereby, differences in latencies among these competing
transaction requests are mitigated, e.g., automatically, in favor
of a grouping/competition therebetween based on arbitrarily
specified price improvements. In embodiments for use with
transaction processing systems which do not offer implication, the
matching processor 106 may not be altered to accommodate the
disclosed reservation price system, i.e. the matching processor 106
merely matches incoming transactions according to whatever matching
algorithm it is configured to apply wherein the order in which the
matching processor 106 received those transaction may be altered by
the disclosed embodiments to be different than the order in which
those transactions were received by the electronic trading system
100 based on the above described grouping and allocation process.
In embodiments for use with transaction processing systems which
offer implication but where allowing transactions with reservation
prices to match with implied opportunities may complicate system
operation, as described elsewhere herein, the matching processor
106 may be configured so as to, upon receipt of an transaction
request having a reservation price for matching, ignore, e.g.,
automatically, any resting implied opportunities and only match the
transaction request against real resting transactions. In this
case, the disclosed embodiments, and in particular, the order
forwarder 212, may be configured to signal, e.g., automatically,
via data indicative thereof included with the forwarded request, to
the matching processor 106 that a forwarded transaction request
includes a reservation price value rather than its originally
specified price value. It will be appreciated that in other
embodiments, no distinction may be made between real orders and
implied opportunities with respect to the disclosed process for
arbitrating among incoming transaction requests.
[0120] In one embodiment, the interval processor 206, incoming
order receiver 208, order identifier 210 and order forwarder 212
are comprised by the hardware matching processor 106.
[0121] In one embodiment, wherein the incoming electronic data
transaction request messages may include a request to modify, e.g.
alter or cancel, at least one other previously received electronic
data transaction request message, the system 200 may further
include an order modifier 216, coupled with the memory 214/204, the
order identifier 210, the order receiver 208 and the interval
processor 206, and which may be implemented as a separate component
or as one or more logic components, such as on an FPGA which may
include a memory or reconfigurable component to store logic and
processing component to execute the stored logic, or as fifth logic
216, e.g. computer program logic, stored in a memory 204, or other
non-transitory computer readable medium, and executable by a
processor 202, such as the processor 402 and memory 404 described
below with respect to FIG. 4, to cause the processor 202 to, or
otherwise be operative to, upon the occurrence of the second event
and wherein it is determined that the hardware matching processor
would match any of the first subset of stored incoming electronic
data transaction request messages, based on the first set of
transaction parameters thereof, with at least one other previously
received but unsatisfied electronic data transaction request
message counter thereto to at least partially satisfy one or both
of the stored incoming electronic data transaction request messages
or the at least one other previously received electronic data
transaction request message, identify and forward, e.g.,
automatically, to the hardware matching processor any of the stored
incoming electronic data transaction request messages comprising a
request to modify, e.g. alter or cancel, any of at least one other
previously received but unsatisfied electronic data transaction
request messages to the extent those identified stored incoming
electronic data transaction request messages comprising a request
to modify any of at least one other previously received but
unsatisfied electronic data transaction request messages would have
been effective if at least all of the subset of stored incoming
electronic data transaction request messages and the identified
stored incoming electronic data transaction request messages
comprising a request to modify any of at least one other previously
received but unsatisfied electronic data transaction request
messages were forwarded to the hardware matching processor in the
order in which they were received by the incoming order receiver.
In this embodiment, the order identifier 210 is further operative
upon the occurrence of the second event and subsequent to the
forwarding of any of the stored incoming electronic data
transaction request messages comprising a request to modify any of
at least one other previously received but unsatisfied electronic
data transaction request messages, and wherein it is subsequently
determined that the hardware matching processor would still match
any of the first subset of stored incoming electronic data
transaction request messages. That is, requests to modify
previously received transactions contained within the first subset,
i.e. the grouped transaction requests, are executed, e.g.,
automatically, by the hardware matching processor 106 to the extent
those requests would have been effective had they been executed in
the order in which they were received relative to the other
transactions in the group.
[0122] In one embodiment, the incoming order receiver 208 is
further operative to receive the incoming order when the incoming
order's arrival relative to another incoming order has been
determined, e.g. at the match engine 106 or otherwise at the point
of incoming order ingress or other point of determinism as was
described above. Incoming order receiver may preserve or otherwise
store data indicative of the order of arrival with each incoming
order. In one embodiment, the interval processor 206, incoming
order receiver 208 and order forwarder 210 are comprised by the
match engine 106.
[0123] In one embodiment, each order is characterized by any of a
set of order types, the order forwarder being further operative to
forward or otherwise bypass, e.g., automatically, the incoming
order to the match engine upon receipt thereof when the order type
thereof is one of a subset of the set of order types. For example,
in one embodiment, the subset of order types includes at least one
of administrative message, control message, cancel message, order
modification message, or combinations thereof. Order modification
messages may include messages which alter an order that was earlier
received but not yet matched or a resting order, e.g. modifies the
resting quantity. This may permit the match engine act on cancel or
modify messages, for example, in advance of other messages, such as
orders which would have matched against the order to be canceled.
It will be appreciated that whether cancel or modify messages are
processed first or last, or otherwise in order of receipt, is
implementation dependent and may depend on business and/or
regulatory rules defining how and when a trader may cancel an
order. As an alternative to bypassing orders around the grouping
mechanism, these order types may be flagged to be allocated first
or last out of the group when the group of orders is forwarded to
the match engine. In an implementation designed, at least in part,
to regulate incoming order flow relative to the capacity of the
system, e.g. where the event which triggers forwarding is based on
a signal indicative of processing capacity, this would allow the
match engine 106 process such messages according to its processing
capacity.
[0124] In one embodiment, the order forwarder 210 may be further
operative to allow, e.g., automatically, a subsequently received
incoming transaction/order to modify or cancel a stored received
incoming order prior to a forwarding thereof to the match engine.
By, for example, allowing orders to be canceled or modified prior
to forwarding, the processing demands on the match engine 106 may
be reduced.
[0125] FIG. 3 depicts a flow chart showing operation of the system
200 of FIG. 2. In particular FIG. 3 shows a computer implemented
method for mitigating latency disparity between different client
devices 114, 116, 118, 120 and 122 and an electronic data
transaction processing system 100 in which data items are
transacted, e.g., automatically, by a hardware matching processor
106 that matches, as they are received, incoming electronic data
transaction request messages, for one of the data items based on a
first set of transaction parameters, received from the different
client devices 114, 116, 118, 120 and 122 over a data communication
network 124, 126 with at least one other previously received but
unsatisfied electronic data transaction request message counter
thereto to at least partially satisfy one or both of the incoming
electronic data transaction request messages or the at least one
other previously received electronic data transaction request
message, wherein the first set of transaction parameters comprises
a first parameter having a first value, and further wherein each of
the incoming electronic data transaction request messages may
include a second parameter having a second value. In one
embodiment, the secondary value is a price value. In an alternative
embodiment, the secondary value may be a price increment used to
modify the first parameter to derive a secondary price value. The
secondary value may be optional. In one embodiment, if the
secondary value is not provided, the secondary value is assumed, in
the embodiment where the value is an increment, to be 0, and in the
embodiment where the secondary value is a price value, assumed to
be the same as the first parameter value. In an alternate
embodiment, the lack of a secondary value in a received incoming
electronic data transaction message indicates that the user who
submitted the request does not wish their request to be evaluated
in concert with competing requests, e.g. does not wish to take part
in the grouping/arbitration process. Alternatively, a separate
indicator may be included within each electronic transaction data
request to indicate whether submitting user wishes to partake in
below described grouping/arbitration process or not. Generally, the
secondary parameter may specify or define an alternative price
value, specifically or via an increment of the offer price, to be
used in the grouping/arbitration process describe below. In one
embodiment, the secondary parameter may be specified in whole
ticks/price increments or in fractions thereof. It will be
appreciated that the fractional precision, i.e. number of decimal
places, at which the second parameter may be specified may be
defined so as to minimize the probability of two or more market
participants specifying the same value thereof.
[0126] The operation of the system 200 includes: determining, e.g.,
automatically, by an incoming order processor, an occurrence of a
first event and a subsequent occurrence of a second event [Block
302]; and receiving, by the incoming order processor, incoming
electronic data transaction request messages and storing the
received incoming electronic data transaction request messages in a
memory coupled with the incoming order processor prior to
forwarding the received incoming electronic data transaction
request messages to the hardware matching processor [Block
304].
[0127] In one embodiment, the first and second events define an
elapse of an interval of time. In particular, in one embodiment,
the time interval may begin to elapse upon receipt, e.g. the first
event, of an incoming order subsequent to a prior elapse of the
time interval. In one embodiment, the time interval may begin to
elapse upon transmission, e.g. the first event, of notification of
a previously received but not satisfied electronic data transaction
request to the different client devices 114, 116, 118, 120 and 122,
i.e. upon resting of an order on the order book, at any price or at
the best price, and subsequent transmission of a market data
message advertising this transaction opportunity to the market
participants via the client devices 114, 116, 118, 120 and 122. In
one embodiment, the first event may comprise receipt of an
acknowledgment from the hardware matching processor acknowledging
receipt of previously forwarded incoming orders. In all cases, the
interval may then close upon expiration of a defined period of
time, e.g. the second event, such as 5 microseconds, the
accumulation of a defined number of incoming transaction requests,
e.g. meeting of exceeding a threshold, or other measure or event or
combination thereof. In one embodiment, the duration of the time
interval may be variable and may be random.
[0128] The operation of the system 200 further includes:
identifying, e.g., automatically, by the incoming order processor,
upon the occurrence of the second event, a first subset of at least
two of the stored incoming electronic data transaction request
messages wherein values of at least a subset of the first set of
transaction parameters thereof are identical, and determining
whether the hardware matching processor would match any of the
first subset of stored incoming electronic data transaction request
messages, based on the first set of transaction parameters thereof,
with at least one other previously received but unsatisfied
electronic data transaction request message counter thereto to at
least partially satisfy one or both of the stored incoming
electronic data transaction request messages or the at least one
other previously received electronic data transaction request
message [Block 306].
[0129] Where the stored incoming electronic data transaction
request messages include multiple subsets thereof having identical
values of the first set of transaction parameters, the system 200
may process each subset in turn as described herein, such as in the
order of receipt of the earliest electronic data transaction
request message in each subset.
[0130] In one embodiment, the first set of parameters of each of
the transactions included in the first subset must specify the same
price. Alternatively, the first set of parameters of each of the
transactions included in the first subset must specify the same or
a better price.
[0131] In one embodiment, the first set of parameters may include
an identifier indicative of the product or data item, e.g.
financial instrument, to which the electronic data transaction
request message pertains. This may permit the system 200 to buffer
transaction requests for different order book databases linked by
implication allowing for application of the disclosed embodiments
to implied transactional opportunities.
[0132] The operation of the system 200 further includes: modifying,
e.g., automatically, by the incoming order processor, upon the
occurrence of the second event, based on the first set of
transaction parameters thereof, with at least one other previously
received but unsatisfied electronic data transaction request
message counter thereto to at least partially satisfy one or both
of the stored incoming electronic data transaction request messages
or the at least one other previously received electronic data
transaction request message, the first value of the first
transaction parameter of the first set of transaction parameters of
each of the stored incoming electronic data transaction request
messages based on the second value of the second parameter, if
included therewith, and determining based on the modified first set
of transaction parameters of each of the stored incoming electronic
data transaction request messages, at least one second subset
thereof which would be matched by the hardware matching processor
with at least one other previously received but unsatisfied
electronic data transaction request message counter thereto to at
least partially satisfy one or both of the second subset of stored
incoming electronic data transaction request messages or the at
least one other previously received electronic data transaction
request message, and forwarding each stored electronic data
transaction request message of each of the at least one second
subset, each having, if modified, the modified first set of
transaction parameters, to the hardware matching processor in the
order in which they were received by the incoming order processor
and, subsequent thereto, forward each remaining stored electronic
data transaction request message of the first subset, each having
their associated first set of transaction parameters, to the
hardware matching processor in the order in which they were
received by the incoming order processor [Block 308].
[0133] In one embodiment, if the transactions included in the
second subset exceed the available quantity of the previously
received but unsatisfied transaction requests, the transactions of
the second subset may be broken down in to separate transaction
requests, one characterized by the specific available quantity of
the previously received but unsatisfied transactions, one
characterized by the remaining quantity wherein the former is
forwarded first to the matching processor 106 as described above,
and the latter is forwarded along with the remaining transactions
of the first subset in FIFO order as described. By splitting
transactions in this manner, the disclosed embodiments may exercise
more discrete control over the matching process, especially in
embodiments implemented in conjunction with existing matching
processors 106.
[0134] As will be described in more detail below, where the
incoming electronic data transaction request messages in the first
subset include requests to modify, e.g. alter or cancel, a
previously received but unsatisfied electronic data transaction
request, those requests may be forwarded to the hardware matching
processor 106 to be processed to the extent those requests would
have been effective if all of the transaction requests in the first
subset were executed in the order in which they were received. If
the processing of a request to modify a prior request results in
entirely eliminating the prior request, the remaining transaction
within the first subset may simply be forwarded to the hardware
matching processor 106 in the order in which they were
received.
[0135] As was noted above, in embodiments where the lack of a
secondary parameter, a secondary parameter value of 0, or a
separate indicator indicates a desire by a market participant not
to participate in the grouping/arbitration process, those
electronic data transaction request messages having such parameters
may be excluded from inclusion in the second subset.
[0136] It will be appreciated the grouping/arbitration process
described above can be iteratively performed across sets of the
transaction request messages having different price levels, until
all suitable previously received but unsatisfied transaction
requests have been satisfied.
[0137] As described above, the above process effectively defines
the order in which incoming electronic data transaction requests
will be forwarded to the match engine processor 106 which then
performs the matching process according to whatever matching
algorithm, e.g. FIFO or pro-rata, etc., the hardware matching
processor 106 is configured for. For competing transactions, the
above described grouping/arbitration process, by virtue of defining
the order of submission to the hardware matching processor 106,
determines which of those competing transactions will be allocated
a given transactional opportunity and may be irrespective of the
order in which the competing electronic data transaction request
messages were received by the electronic trading system 100.
Thereby, differences in latencies among these competing transaction
requests are mitigated, e.g., automatically, in favor of an
grouping/arbitration based on arbitrarily specified price
improvements.
[0138] In one embodiment, the interval processor 206, incoming
order receiver 208, order identifier 210 and order forwarder 212
are comprised by the hardware matching processor 106.
[0139] In one embodiment, wherein the incoming electronic data
transaction request messages may include a request to modify at
least one other previously received electronic data transaction
request message, the operation of the system 200 may further
include identifying and forwarding, upon, e.g., automatically, the
occurrence of the second event and wherein it is determined that
the hardware matching processor would match any of the first subset
of stored incoming electronic data transaction request messages,
based on the first set of transaction parameters thereof, with at
least one other previously received but unsatisfied electronic data
transaction request message counter thereto to at least partially
satisfy one or both of the stored incoming electronic data
transaction request messages or the at least one other previously
received electronic data transaction request message, to the
hardware matching processor any of the stored incoming electronic
data transaction request messages comprising a request to modify
any of at least one other previously received but unsatisfied
electronic data transaction request messages to the extent those
identified stored incoming electronic data transaction request
messages comprising a request to modify any of at least one other
previously received but unsatisfied electronic data transaction
request messages would have been effective if at least all of the
subset of stored incoming electronic data transaction request
messages and the identified stored incoming electronic data
transaction request messages comprising a request to modify any of
at least one other previously received but unsatisfied electronic
data transaction request messages were forwarded to the hardware
matching processor in the order in which they were received by the
incoming order processor [Block 310]; wherein the modifying is
further subject to the occurrence of the second event and
subsequent to the forwarding of any of the stored incoming
electronic data transaction request messages comprising a request
to modify any of at least one other previously received but
unsatisfied electronic data transaction request messages, and
wherein it is subsequently determined that the hardware matching
processor would still match any of the first subset of stored
incoming electronic data transaction request messages.
[0140] In one embodiment, the determining, receiving, identifying,
modifying and forwarding are performed by the hardware matching
processor.
[0141] In an electronic trading system 100 which offers implication
across order book databases, as described above, to improve
transaction opportunities, i.e. liquidity, competing incoming
transaction requests which desire to participate in the above
described grouping/arbitration process may, in one embodiment, be
prevented, e.g., automatically, from matching with an implied
transactional opportunity as part of the process by which the
winner(s) of the grouping/arbitration process are determined
whereas any transaction which do succeed in the
grouping/arbitration may be submitted, as was described, to the
hardware matching processor 106 in the order of receipt by the
electronic trading system 100 and, according to the matching
algorithm implemented by the hardware matching processor 106, match
any resting transaction, including an implied opportunity. By
keeping the grouping/arbitration process winner(s), having the
improved secondary/reservation price, from matching implied
opportunities, allocation of the improved price to the real
transaction underlying the implied opportunity is simplified. In an
alternative embodiment, the above described grouping/arbitration
process may match against any suitable real or implied
transactional opportunity. In embodiments for use with transaction
processing systems which do not offer implication, the matching
processor 106 may not be altered to accommodate the disclosed
reservation price system, i.e. the matching processor 106 merely
matches incoming transactions according to whatever matching
algorithm it is configured to apply wherein the order in which the
matching processor 106 received those transaction may be altered by
the disclosed embodiments to be different than the order in which
those transactions were received by the electronic trading system
100 based on the above described grouping and arbitration process.
In embodiments for use with transaction processing systems which
offer implication but where allowing transactions with reservation
prices to match with implied opportunities may complicate system
operation, as described elsewhere herein, the matching processor
106 may be configured so as to, upon receipt of an transaction
request having a reservation price for matching, ignore any resting
implied opportunities and only match the transaction request
against real resting transactions. In this case, the disclosed
embodiments, and in particular, the order forwarder 212, may be
configured to signal, via data indicative thereof included with the
forwarded request, to the matching processor 106 that a forwarded
transaction request includes a reservation price value rather than
its originally specified price value. It will be appreciated that
in other embodiments, no distinction may be made between real
orders and implied opportunities with respect to the disclosed
process for arbitrating among incoming transaction requests.
[0142] In another alternative embodiment, incoming electronic data
transaction request messages specifying orders at prices better
than the best currently resting price, an order which may match
across multiple price levels, will be excluded from inclusion in
the first subset. Accordingly, only incoming requests for the same
price will be grouped together.
[0143] Consider the following example:
[0144] At a past time when the order book database for product X is
empty, an order to sell 10 unit at price 10 is received and is
placed on the order book and advertised to the market
participants.
[0145] At a later time four incoming electronic data transaction
requests are received within a defined time interval in the
following order: [0146] A a new order to buy 5 at price 10
(reservation price increment 0.10) [0147] B a request to cancel the
resting 10 unit order to sell [0148] C a new order to buy 10 at
price 10 (reservation price 0.20) [0149] D a new order to buy 10 at
price 10 (reservation price 0.15)
[0150] These four orders, being received within the defined
interval, are grouped together. The request to cancel is then
processed to the extent it would have been processed in the order
it was received, i.e. since order A would have been processed first
before the cancelation, the cancelation is only effective as to 5
units of the resting quantity. Next, the orders A, C and D are
evaluated as to their reservation prices 10.10, 10.20 and 10.15
respectively. In this case, order C wins the
arbitration/competition and is submitted first to the hardware
matching processor 106 at its reservation price of 10.20 where it
is matched to the resting quantity of 5 and partially filled. The
remainder of order C is then rested on the order book. Orders A and
D are then submitted to the hardware matching processor 106 at
their originally provided limit prices, where by virtue of the
normal operation of the hardware matching processor 106, they are
rested on the order book database.
[0151] Note that in the above example: had the B request to cancel
been for only 5 units or the order A had been for 10 units, the B
request to cancel would have been ignored or rejected back to the
submitting trader as the request, in processed in the order of
receipt, would have been ineffective. In one embodiment, if prior
to receipt of order A, there was ONLY a resting implied opportunity
to sell 5 at price 10, this implied opportunity would have been
ignored when determining whether or not the incoming orders A, B or
D would have matched is submitted in time order and therefore,
since no "real" match would have been identified, the orders A, B,
and D would be submitted to the match engine processor 106 in the
order of receipt at their originally provided limit prices where,
under normal operation, order A would match with the implied
opportunity and orders C and D would be rested on the order book.
In an alternative embodiment, the implied opportunity may not be
distinguished from a real resting order resulting in the same
result as with the first example. Where the implied opportunity to
sell 5 units at 10 is resting in addition to the real order to sell
5 units at 10, the implied opportunity is disregarded and real
order of 5 units gets executed against the aggressive order C for
price 10.20. At that point there is nothing else to match based on
reservation price and order A, partial order C and order D get
forwarded to the matching engine on pure FIFO. A would match with
the implied opportunity of 5 contracts. A would rest with 5
contracts, C would rest with 5 contracts, D would rest with 10
contracts.
[0152] Referring to FIG. 4, an illustrative embodiment of a general
computer system 400 is shown. The computer system 400 can include a
set of instructions that can be executed to cause the computer
system 400 to perform any one or more of the methods or computer
based functions disclosed herein. The computer system 400 may
operate as a standalone device or may be connected, e.g., using a
network, to other computer systems or peripheral devices. Any of
the components or modules discussed above, such as the processors
202 and 302, may be a computer system 400 or a component in the
computer system 400. The computer system 400 may implement a match
engine, margin processing, payment or clearing function on behalf
of an exchange, such as the Chicago Mercantile Exchange, of which
the disclosed embodiments are a component thereof.
[0153] In a networked deployment, the computer system 400 may
operate in the capacity of a server or as a client user computer in
a client-server user network environment, or as a peer computer
system in a peer-to-peer (or distributed) network environment. The
computer system 400 can also be implemented as or incorporated into
various devices, such as a personal computer (PC), a tablet PC, a
set-top box (STB), a personal digital assistant (PDA), a mobile
device, a palmtop computer, a laptop computer, a desktop computer,
a communications device, a wireless telephone, a land-line
telephone, a control system, a camera, a scanner, a facsimile
machine, a printer, a pager, a personal trusted device, a web
appliance, a network router, switch or bridge, or any other machine
capable of executing a set of instructions (sequential or
otherwise) that specify actions to be taken by that machine. In a
particular embodiment, the computer system 400 can be implemented
using electronic devices that provide voice, video or data
communication. Further, while a single computer system 400 is
illustrated, the term "system" shall also be taken to include any
collection of systems or sub-systems that individually or jointly
execute a set, or multiple sets, of instructions to perform one or
more computer functions.
[0154] As illustrated in FIG. 4, the computer system 400 may
include a processor 402, e.g., a central processing unit (CPU), a
graphics processing unit (GPU), or both. The processor 402 may be a
component in a variety of systems. For example, the processor 402
may be part of a standard personal computer or a workstation. The
processor 402 may be one or more general processors, digital signal
processors, application specific integrated circuits, field
programmable gate arrays, servers, networks, digital circuits,
analog circuits, combinations thereof, or other now known or later
developed devices for analyzing and processing data. The processor
402 may implement a software program, such as code generated
manually (i.e., programmed).
[0155] The computer system 400 may include a memory 404 that can
communicate via a bus 408. The memory 404 may be a main memory, a
static memory, or a dynamic memory. The memory 404 may include, but
is not limited to computer readable storage media such as various
types of volatile and non-volatile storage media, including but not
limited to random access memory, read-only memory, programmable
read-only memory, electrically programmable read-only memory,
electrically erasable read-only memory, flash memory, magnetic tape
or disk, optical media and the like. In one embodiment, the memory
404 includes a cache or random access memory for the processor 402.
In alternative embodiments, the memory 404 is separate from the
processor 402, such as a cache memory of a processor, the system
memory, or other memory. The memory 404 may be an external storage
device or database for storing data. Examples include a hard drive,
compact disc ("CD"), digital video disc ("DVD"), memory card,
memory stick, floppy disc, universal serial bus ("USB") memory
device, or any other device operative to store data. The memory 404
is operable to store instructions executable by the processor 402.
The functions, acts or tasks illustrated in the figures or
described herein may be performed by the programmed processor 402
executing the instructions 412 stored in the memory 404. The
functions, acts or tasks are independent of the particular type of
instructions set, storage media, processor or processing strategy
and may be performed by software, hardware, integrated circuits,
firm-ware, micro-code and the like, operating alone or in
combination. Likewise, processing strategies may include
multiprocessing, multitasking, parallel processing and the
like.
[0156] As shown, the computer system 400 may further include a
display unit 414, such as a liquid crystal display (LCD), an
organic light emitting diode (OLED), a flat panel display, a solid
state display, a cathode ray tube (CRT), a projector, a printer or
other now known or later developed display device for outputting
determined information. The display 414 may act as an interface for
the user to see the functioning of the processor 402, or
specifically as an interface with the software stored in the memory
404 or in the drive unit 406.
[0157] Additionally, the computer system 400 may include an input
device 416 configured to allow a user to interact with any of the
components of system 400. The input device 416 may be a number pad,
a keyboard, or a cursor control device, such as a mouse, or a
joystick, touch screen display, remote control or any other device
operative to interact with the system 400.
[0158] In a particular embodiment, as depicted in FIG. 4, the
computer system 400 may also include a disk or optical drive unit
406. The disk drive unit 406 may include a computer-readable medium
410 in which one or more sets of instructions 412, e.g. software,
can be embedded. Further, the instructions 412 may embody one or
more of the methods or logic as described herein. In a particular
embodiment, the instructions 412 may reside completely, or at least
partially, within the memory 404 and/or within the processor 402
during execution by the computer system 400. The memory 404 and the
processor 402 also may include computer-readable media as discussed
above.
[0159] The present disclosure contemplates a computer-readable
medium that includes instructions 412 or receives and executes
instructions 412 responsive to a propagated signal, so that a
device connected to a network 420 can communicate voice, video,
audio, images or any other data over the network 420. Further, the
instructions 412 may be transmitted or received over the network
420 via a communication interface 418. The communication interface
418 may be a part of the processor 402 or may be a separate
component. The communication interface 418 may be created in
software or may be a physical connection in hardware. The
communication interface 418 is configured to connect with a network
420, external media, the display 414, or any other components in
system 400, or combinations thereof. The connection with the
network 420 may be a physical connection, such as a wired Ethernet
connection or may be established wirelessly as discussed below.
Likewise, the additional connections with other components of the
system 400 may be physical connections or may be established
wirelessly.
[0160] The network 420 may include wired networks, wireless
networks, or combinations thereof. The wireless network may be a
cellular telephone network, an 802.11, 802.16, 802.20, or WiMax
network. Further, the network 420 may be a public network, such as
the Internet, a private network, such as an intranet, or
combinations thereof, and may utilize a variety of networking
protocols now available or later developed including, but not
limited to TCP/IP based networking protocols.
[0161] Embodiments of the subject matter and the functional
operations described in this specification can be implemented in
digital electronic circuitry, or in computer software, firmware, or
hardware, including the structures disclosed in this specification
and their structural equivalents, or in combinations of one or more
of them. Embodiments of the subject matter described in this
specification can be implemented as one or more computer program
products, i.e., one or more modules of computer program
instructions encoded on a computer readable medium for execution
by, or to control the operation of, data processing apparatus.
While the computer-readable medium is shown to be a single medium,
the term "computer-readable medium" includes a single medium or
multiple media, such as a centralized or distributed database,
and/or associated caches and servers that store one or more sets of
instructions. The term "computer-readable medium" shall also
include any medium that is capable of storing, encoding or carrying
a set of instructions for execution by a processor or that cause a
computer system to perform any one or more of the methods or
operations disclosed herein. The computer readable medium can be a
machine-readable storage device, a machine-readable storage
substrate, a memory device, or a combination of one or more of
them. The term "data processing apparatus" encompasses all
apparatus, devices, and machines for processing data, including by
way of example a programmable processor, a computer, or multiple
processors or computers. The apparatus can include, in addition to
hardware, code that creates an execution environment for the
computer program in question, e.g., code that constitutes processor
firmware, a protocol stack, a database management system, an
operating system, or a combination of one or more of them.
[0162] In a particular non-limiting, exemplary embodiment, the
computer-readable medium can include a solid-state memory such as a
memory card or other package that houses one or more non-volatile
read-only memories. Further, the computer-readable medium can be a
random access memory or other volatile re-writable memory.
Additionally, the computer-readable medium can include a
magneto-optical or optical medium, such as a disk or tapes or other
storage device to capture carrier wave signals such as a signal
communicated over a transmission medium. A digital file attachment
to an e-mail or other self-contained information archive or set of
archives may be considered a distribution medium that is a tangible
storage medium. Accordingly, the disclosure is considered to
include any one or more of a computer-readable medium or a
distribution medium and other equivalents and successor media, in
which data or instructions may be stored.
[0163] In an alternative embodiment, dedicated hardware
implementations, such as application specific integrated circuits,
programmable logic arrays and other hardware devices, can be
constructed to implement one or more of the methods described
herein. Applications that may include the apparatus and systems of
various embodiments can broadly include a variety of electronic and
computer systems. One or more embodiments described herein may
implement functions using two or more specific interconnected
hardware modules or devices with related control and data signals
that can be communicated between and through the modules, or as
portions of an application-specific integrated circuit.
Accordingly, the present system encompasses software, firmware, and
hardware implementations.
[0164] In accordance with various embodiments of the present
disclosure, the methods described herein may be implemented by
software programs executable by a computer system. Further, in an
exemplary, non-limited embodiment, implementations can include
distributed processing, component/object distributed processing,
and parallel processing. Alternatively, virtual computer system
processing can be constructed to implement one or more of the
methods or functionality as described herein.
[0165] Although the present specification describes components and
functions that may be implemented in particular embodiments with
reference to particular standards and protocols, the invention is
not limited to such standards and protocols. For example, standards
for Internet and other packet switched network transmission (e.g.,
TCP/IP, UDP/IP, HTML, HTTP, HTTPS) represent examples of the state
of the art. Such standards are periodically superseded by faster or
more efficient equivalents having essentially the same functions.
Accordingly, replacement standards and protocols having the same or
similar functions as those disclosed herein are considered
equivalents thereof.
[0166] A computer program (also known as a program, software,
software application, script, or code) can be written in any form
of programming language, including compiled or interpreted
languages, and it can be deployed in any form, including as a
standalone program or as a module, component, subroutine, or other
unit suitable for use in a computing environment. A computer
program does not necessarily correspond to a file in a file system.
A program can be stored in a portion of a file that holds other
programs or data (e.g., one or more scripts stored in a markup
language document), in a single file dedicated to the program in
question, or in multiple coordinated files (e.g., files that store
one or more modules, sub programs, or portions of code). A computer
program can be deployed to be executed on one computer or on
multiple computers that are located at one site or distributed
across multiple sites and interconnected by a communication
network.
[0167] The processes and logic flows described in this
specification can be performed by one or more programmable
processors executing one or more computer programs to perform
functions by operating on input data and generating output. The
processes and logic flows can also be performed by, and apparatus
can also be implemented as, special purpose logic circuitry, e.g.,
an FPGA (field programmable gate array) or an ASIC (application
specific integrated circuit).
[0168] Processors suitable for the execution of a computer program
include, by way of example, both general and special purpose
microprocessors, and anyone or more processors of any kind of
digital computer. Generally, a processor will receive instructions
and data from a read only memory or a random access memory or both.
The essential elements of a computer are a processor for performing
instructions and one or more memory devices for storing
instructions and data. Generally, a computer will also include, or
be operatively coupled to receive data from or transfer data to, or
both, one or more mass storage devices for storing data, e.g.,
magnetic, magneto optical disks, or optical disks. However, a
computer need not have such devices. Moreover, a computer can be
embedded in another device, e.g., a mobile telephone, a personal
digital assistant (PDA), a mobile audio player, a Global
Positioning System (GPS) receiver, to name just a few. Computer
readable media suitable for storing computer program instructions
and data include all forms of nonvolatile memory, media and memory
devices, including by way of example semiconductor memory devices,
e.g., EPROM, EEPROM, and flash memory devices; magnetic disks,
e.g., internal hard disks or removable disks; magneto optical
disks; and CD ROM and DVD-ROM disks. The processor and the memory
can be supplemented by, or incorporated in, special purpose logic
circuitry.
[0169] To provide for interaction with a user, embodiments of the
subject matter described in this specification can be implemented
on a device having a display, e.g., a CRT (cathode ray tube) or LCD
(liquid crystal display) monitor, for displaying information to the
user and a keyboard and a pointing device, e.g., a mouse or a
trackball, by which the user can provide input to the computer.
Other kinds of devices can be used to provide for interaction with
a user as well; for example, feedback provided to the user can be
any form of sensory feedback, e.g., visual feedback, auditory
feedback, or tactile feedback; and input from the user can be
received in any form, including acoustic, speech, or tactile
input.
[0170] Embodiments of the subject matter described in this
specification can be implemented in a computing system that
includes a back end component, e.g., as a data server, or that
includes a middleware component, e.g., an application server, or
that includes a front end component, e.g., a client computer having
a graphical user interface or a Web browser through which a user
can interact with an implementation of the subject matter described
in this specification, or any combination of one or more such back
end, middleware, or front end components. The components of the
system can be interconnected by any form or medium of digital data
communication, e.g., a communication network. Examples of
communication networks include a local area network ("LAN") and a
wide area network ("WAN"), e.g., the Internet.
[0171] The computing system can include clients and servers. A
client and server are generally remote from each other and
typically interact through a communication network. The
relationship of client and server arises by virtue of computer
programs running on the respective computers and having a
client-server relationship to each other.
[0172] The illustrations of the embodiments described herein are
intended to provide a general understanding of the structure of the
various embodiments. The illustrations are not intended to serve as
a complete description of all of the elements and features of
apparatus and systems that utilize the structures or methods
described herein. Many other embodiments may be apparent to those
of skill in the art upon reviewing the disclosure. Other
embodiments may be utilized and derived from the disclosure, such
that structural and logical substitutions and changes may be made
without departing from the scope of the disclosure. Additionally,
the illustrations are merely representational and may not be drawn
to scale. Certain proportions within the illustrations may be
exaggerated, while other proportions may be minimized. Accordingly,
the disclosure and the figures are to be regarded as illustrative
rather than restrictive.
[0173] While this specification contains many specifics, these
should not be construed as limitations on the scope of the
invention or of what may be claimed, but rather as descriptions of
features specific to particular embodiments of the invention.
Certain features that are described in this specification in the
context of separate embodiments can also be implemented in
combination in a single embodiment. Conversely, various features
that are described in the context of a single embodiment can also
be implemented in multiple embodiments separately or in any
suitable sub-combination. Moreover, although features may be
described above as acting in certain combinations and even
initially claimed as such, one or more features from a claimed
combination can in some cases be excised from the combination, and
the claimed combination may be directed to a sub-combination or
variation of a sub-combination.
[0174] Similarly, while operations are depicted in the drawings and
described herein in a particular order, this should not be
understood as requiring that such operations be performed in the
particular order shown or in sequential order, or that all
illustrated operations be performed, to achieve desirable results.
In certain circumstances, multitasking and parallel processing may
be advantageous. Moreover, the separation of various system
components in the embodiments described above should not be
understood as requiring such separation in all embodiments, and it
should be understood that the described program components and
systems can generally be integrated together in a single software
product or packaged into multiple software products.
[0175] One or more embodiments of the disclosure may be referred to
herein, individually and/or collectively, by the term "invention"
merely for convenience and without intending to voluntarily limit
the scope of this application to any particular invention or
inventive concept. Moreover, although specific embodiments have
been illustrated and described herein, it should be appreciated
that any subsequent arrangement designed to achieve the same or
similar purpose may be substituted for the specific embodiments
shown. This disclosure is intended to cover any and all subsequent
adaptations or variations of various embodiments. Combinations of
the above embodiments, and other embodiments not specifically
described herein, will be apparent to those of skill in the art
upon reviewing the description.
[0176] The Abstract of the Disclosure is provided to comply with 37
C.F.R. .sctn. 1.72(b) and is submitted with the understanding that
it will not be used to interpret or limit the scope or meaning of
the claims. In addition, in the foregoing Detailed Description,
various features may be grouped together or described in a single
embodiment for the purpose of streamlining the disclosure. This
disclosure is not to be interpreted as reflecting an intention that
the claimed embodiments require more features than are expressly
recited in each claim. Rather, as the following claims reflect,
inventive subject matter may be directed to less than all of the
features of any of the disclosed embodiments. Thus, the following
claims are incorporated into the Detailed Description, with each
claim standing on its own as defining separately claimed subject
matter.
[0177] It is therefore intended that the foregoing detailed
description be regarded as illustrative rather than limiting, and
that it be understood that it is the following claims, including
all equivalents, that are intended to define the spirit and scope
of this invention.
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