U.S. patent application number 16/728684 was filed with the patent office on 2020-06-25 for multicomputer distributed processing of trading information.
The applicant listed for this patent is CFPH, LLC. Invention is credited to Andrew Fishkind, Kevin Foley, Brian Gay, HOWARD W. LUTNICK, Mark Miller.
Application Number | 20200202435 16/728684 |
Document ID | / |
Family ID | 44082956 |
Filed Date | 2020-06-25 |
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United States Patent
Application |
20200202435 |
Kind Code |
A1 |
LUTNICK; HOWARD W. ; et
al. |
June 25, 2020 |
MULTICOMPUTER DISTRIBUTED PROCESSING OF TRADING INFORMATION
Abstract
A trading platform and trading method that may allow access to
additional pools of liquidity is described. Other embodiments are
also described.
Inventors: |
LUTNICK; HOWARD W.; (New
York, NY) ; Miller; Mark; (Chicago, IL) ;
Foley; Kevin; (New York, NY) ; Gay; Brian;
(Fair Haven, NJ) ; Fishkind; Andrew; (New York,
NY) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
CFPH, LLC |
New York |
NY |
US |
|
|
Family ID: |
44082956 |
Appl. No.: |
16/728684 |
Filed: |
December 27, 2019 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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12631181 |
Dec 4, 2009 |
|
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16728684 |
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Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 40/04 20130101 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04 |
Claims
1. (canceled)
2. An apparatus comprising: a network interface to communicate with
remote devices via a communications network; at least one processor
to: receive, via the network interface, data indicative of an order
for an alternative trading system from a remote source, in which
the order defines a side of a trade for a financial instrument;
determine a number of processor clock cycles to utilize as a delay
between receiving the data indicative of the order and searching
secretly stored orders for a matching order, in which the matching
order defines the opposite side of the trade; delay searching the
secretly stored orders for the number of processor clock cycles;
determine that the number of processor clock cycles has passed from
receipt of the order; in response to determining that the number of
processor clock cycles has passed, query via the network interface
a plurality of order management systems to search the secretly
stored orders for the matching order, in which each respective
order management system securely stores trading intentions of a
respective buy-side participant of the alternative trading system;
receive, via the network interface, data indicative of the matching
order in response to the query; and in response to receiving the
data indicative of the matching order, execute the trade.
3. The apparatus of claim 2, in which, to query the plurality of
order management systems, the at least one processor is further
configured to: transmit via the network interface an order query
that identifies the order to each of the plurality of order
management systems; and receive, via the network interface from a
first one of the plurality of order matching systems, the data
indicative of the matching order.
4. The apparatus of claim 3, in which the order query indicates
that the trade would be executed without a negotiation.
5. The apparatus of claim 2, in which the order includes a non-firm
order.
6. The apparatus of claim 5, in which to execute the trade the at
least one processor is further configured to: confirm the non-firm
order with the source prior to execution, in which the source
includes a broker; and receive, via the network interface, data
indicative of an agreement that the source will confirm the
non-firm order unless at least one of the non-firm order is
cancelled by a person that provided the order to the broker and the
non-firm order is fulfilled through another exchange.
7. The apparatus of claim 2, in which the at least one processor is
further configured to execute the trade without an electronic
negotiation involving a price and a quantity.
8. The apparatus of claim 2, in which the number of processor clock
cycles is sufficient to prevent information leakage regarding
existing orders stored by the plurality of order management
systems.
9. The apparatus of claim 2, in which the at least one processor is
configured to determine the number of processor clock cycles based
on historic information about prior cancelled orders.
10. The apparatus of claim 9, in which the historic information
about cancelled orders includes information specific to the
source.
11. The apparatus of claim 9, in which the at least one processor
determines the number of processor clock cycles such that a desired
portion of the cancelled orders would historically have been
cancelled within the number of processor clock cycles.
12. The apparatus of claim 11, in which the desired portion
includes a majority.
13. The apparatus of claim 6, in which the at least one processor
is further configured to prevent the source from submitting the
order until the data indicative of the agreement is received.
14. The apparatus of claim 2, in which to delay searching the
secretly stored orders the at least one processor is configured to
delay for at least some time beyond time needed for transmission or
machine processing.
15. The apparatus of claim 2, in which the order provides liquidity
to the alternative trading system.
16. A method comprising: receiving, by at least one processor, data
indicative of an order for an electronic exchange from a remote
source, in which the order defines a side of a trade for a
financial instrument; determining, by the at least one processor, a
number of processor clock cycles to utilize as a delay between
receiving the data indicative of the order and searching secretly
stored orders of liquidity for a matching order, in which the
matching order defines the opposite side of the trade; delaying, by
the at least one processor, searching the secretly stored orders
for the number of processor clock cycles; determining, by the at
least one processor, that the number of processor clock cycles has
passed from receipt of the order; in response to determining that
the number of processor clock cycles has passed, querying, by the
at least one processor, a plurality of order management systems to
search the secretly stored orders of liquidity for the matching
order, in which each respective order management system securely
stores trading intentions of a respective buy-side participant;
receiving, by the at least one processor, data indicative of the
matching order in response to the query; and in response to
receiving the data indicative of the matching order, executing, by
the at least one processor, the trade.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This patent application is a continuation application of
U.S. patent application Ser. No. 12/631,181, filed Dec. 4, 2009,
the disclosures of which is incorporated herein by reference in its
entirety.
BRIEF DESCRIPTION OF THE DRAWINGS
[0002] FIG. 1 illustrates an example computer system;
[0003] FIG. 2 illustrates an example trading system configured to
perform one or more trades;
[0004] FIG. 3 illustrates an example process that may be performed
by one or more trading systems;
[0005] FIG. 4 illustrates an example process that may be performed
by a participant of a trading system;
[0006] FIG. 5 illustrates an example process that may be used to
query a participant;
[0007] FIG. 6 illustrates an example process that may be used in
responding to queries;
[0008] FIG. 7 illustrates an example process that may be used for
order entry;
[0009] FIG. 8 illustrates an example order entry interface;
[0010] FIG. 9 illustrates an example process that may be used to
present order query information; and
[0011] FIG. 10 illustrates an example interface for presenting
order query information; and
[0012] FIG. 11 illustrates an example process that may be used in
some embodiments involving non-firm orders;
[0013] FIG. 12 illustrates an example system involving alternative
trading systems;
[0014] FIG. 13 illustrates an example process that involves orders
from alternative trading systems;
[0015] FIG. 14 illustrates an example process that may be performed
by an alternative trading system.
[0016] FIG. 15 illustrates example trading systems that may be used
in some embodiments; and
[0017] FIG. 16 illustrates an example process that may be performed
in some embodiments.
DETAILED DESCRIPTION
[0018] The following sections I-X provide a guide to interpreting
the present application.
I. TERMS
[0019] The term "product" means any machine, manufacture and/or
composition of matter, unless expressly specified otherwise.
[0020] The term "process" means any process, algorithm, method or
the like, unless expressly specified otherwise.
[0021] Each process (whether called a method, algorithm or
otherwise) inherently includes one or more steps, and therefore all
references to a "step" or "steps" of a process have an inherent
antecedent basis in the mere recitation of the term `process` or a
like term. Accordingly, any reference in a claim to a `step` or
`steps` of a process has sufficient antecedent basis.
[0022] The term "invention" and the like mean "the one or more
inventions disclosed in this application", unless expressly
specified otherwise.
[0023] The terms "an embodiment", "embodiment", "embodiments", "the
embodiment", "the embodiments", "one or more embodiments", "some
embodiments", "certain embodiments", "one embodiment", "another
embodiment" and the like mean "one or more (but not all)
embodiments of the disclosed invention(s)", unless expressly
specified otherwise.
[0024] The term "variation" of an invention means an embodiment of
the invention, unless expressly specified otherwise.
[0025] A reference to "another embodiment" in describing an
embodiment does not imply that the referenced embodiment is
mutually exclusive with another embodiment (e.g., an embodiment
described before the referenced embodiment), unless expressly
specified otherwise.
[0026] The terms "including", "comprising" and variations thereof
mean "including but not limited to", unless expressly specified
otherwise.
[0027] The terms "a", "an" and "the" mean "one or more", unless
expressly specified otherwise.
[0028] The term "plurality" means "two or more", unless expressly
specified otherwise.
[0029] The term "herein" means "in the present application,
including anything which may be incorporated by reference", unless
expressly specified otherwise.
[0030] The phrase "at least one of", when such phrase modifies a
plurality of things (such as an enumerated list of things) means
any combination of one or more of those things, unless expressly
specified otherwise. For example, the phrase "at least one of a
widget, a car and a wheel" means either (i) a widget, (ii) a car,
(iii) a wheel, (iv) a widget and a car, (v) a widget and a wheel,
(vi) a car and a wheel, or (vii) a widget, a car and a wheel. The
phrase "at least one of", when such phrase modifies a plurality of
things does not mean "one of each of" the plurality of things.
[0031] Numerical terms such as "one", "two", etc. when used as
cardinal numbers to indicate quantity of something (e.g., one
widget, two widgets), mean the quantity indicated by that numerical
term, but do not mean at least the quantity indicated by that
numerical term. For example, the phrase "one widget" does not mean
"at least one widget", and therefore the phrase "one widget" does
not cover, e.g., two widgets.
[0032] The phrase "based on" does not mean "based only on", unless
expressly specified otherwise. In other words, the phrase "based
on" describes both "based only on" and "based at least on". The
phrase "based at least on" is equivalent to the phrase "based at
least in part on".
[0033] The term "represent" and like terms are not exclusive,
unless expressly specified otherwise. For example, the term
"represents" do not mean "represents only", unless expressly
specified otherwise. In other words, the phrase "the data
represents a credit card number" describes both "the data
represents only a credit card number" and "the data represents a
credit card number and the data also represents something
else".
[0034] The term "whereby" is used herein only to precede a clause
or other set of words that express only the intended result,
objective or consequence of something that is previously and
explicitly recited. Thus, when the term "whereby" is used in a
claim, the clause or other words that the term "whereby" modifies
do not establish specific further limitations of the claim or
otherwise restricts the meaning or scope of the claim.
[0035] The term "e.g." and like terms mean "for example", and thus
does not limit the term or phrase it explains. For example, in the
sentence "the computer sends data (e.g., instructions, a data
structure) over the Internet", the term "e.g." explains that
"instructions" are an example of "data" that the computer may send
over the Internet, and also explains that "a data structure" is an
example of "data" that the computer may send over the Internet.
However, both "instructions" and "a data structure" are merely
examples of "data", and other things besides "instructions" and "a
data structure" can be "data".
[0036] The term "respective" and like terms mean "taken
individually". Thus if two or more things have "respective"
characteristics, then each such thing has its own characteristic,
and these characteristics can be different from each other but need
not be. For example, the phrase "each of two machines has a
respective function" means that the first such machine has a
function and the second such machine has a function as well. The
function of the first machine may or may not be the same as the
function of the second machine.
[0037] The term "i.e." and like terms mean "that is", and thus
limits the term or phrase it explains. For example, in the sentence
"the computer sends data (i.e., instructions) over the Internet",
the term "i.e." explains that "instructions" are the "data" that
the computer sends over the Internet.
[0038] Any given numerical range shall include whole and fractions
of numbers within the range. For example, the range "1 to 10" shall
be interpreted to specifically include whole numbers between 1 and
10 (e.g., 1, 2, 3, 4, . . . 9) and non-whole numbers (e.g., 1.1,
1.2, . . . 1.9).
[0039] Where two or more terms or phrases are synonymous (e.g.,
because of an explicit statement that the terms or phrases are
synonymous), instances of one such term/phrase does not mean
instances of another such term/phrase must have a different
meaning. For example, where a statement renders the meaning of
"including" to be synonymous with "including but not limited to",
the mere usage of the phrase "including but not limited to" does
not mean that the term "including" means something other than
"including but not limited to".
[0040] The term "facilitating" and like terms may include any
action or set of actions which help to bring about a result.
Throughout this disclosure, examples of facilitation may be given.
Such examples should be interpreted as non-limiting examples
only.
[0041] An order query should be understood to include information
that, when interpreted by a computer module, identifies an order
for which a trade related action is desired. Such information may
be interpreted by the computer module for use in querying stored
information such as a database of stored order information.
[0042] A query should be understood to include information form
which a question may be determined.
[0043] A computer module should be understood to include any
combination of hardware and/or software.
[0044] A firm order should be understood to include an order for a
financial instrument, for which a system will execute a trade with
a matching order without additional intervening authorization from
an originator of the firm order.
[0045] A financial instrument should be understood to include an
instrument that evinces ownership of dept or equity, and/or any
derivative thereof, including equities, stocks, fixed income
instruments, bonds, debentures, certificates of interest or
deposit, warrants, options, futures, forwards, swaps, or generally
any security.
[0046] Although some embodiments are described with reference to
Order Management Systems, which are understood in the art, it
should be understood that other embodiments may include an order
information system. An order information system should be
understood any system through which information about orders to
purchase and/or sell financial instruments is stored, including,
for example, order management systems.
[0047] Two things should be understood to match if they share one
or more properties. The exact properties shared may be different
among various embodiments. Some example properties may include, a
type of financial instrument (e.g., industry, capitalization, risk,
etc.), a security identifier (e.g., stock symbol, etc.), an amount
of shares, a price, etc.
[0048] A representation of a thing includes any indication from
which a part of an underlying thing may be derived.
[0049] Enabling should be understood to include allowing an action
to occur. An action may be enabled by, for example,
providing/activating a mechanism (e.g., a button or other control)
through which the action may be performed (e.g., by clicking a
button or otherwise activating another control).
[0050] Binding acceptance of an order should be understood to
include an acceptance of a trade fulfilling at least part of the
order that does not allow for further intervention in the execution
of the trade and without the ability to revoke the acceptance
(e.g., without the ability to revoke the acceptance in any way,
without the ability to revoke the acceptance without a
penalty).
[0051] An acceptance of an order should be understood to include an
agreement to participate in a trade fulfilling at least part of the
order.
[0052] Suppressing evidence should be understood to include
attempting to prevent others from discovering evidence. Suppressing
evidence of a situation or action may include not disseminating
information about the situation or action, disseminating false or
misleading information about the situation or action, disseminating
false or mislead information at other times to obscure the
dissemination of information about the situation or action, and/or
any other desired actions.
[0053] Facilitating execution of a trade should be understood to
include performing any actions that help to bring about the
execution of a trade. The actions may include, for example,
actually executing the trade, transmitting a request for the
execution of the trade, transmitting any information that helps to
bring about the trade, and/or any other actions.
[0054] A marketplace should be understood to include a platform
through which at least the following actions are performed: order
execution is facilitated, indications of orders are accepted, and
matches for the orders are sought.
[0055] Applying a filter to a set of things should be understood to
include generating a subset of the set of things in which each
thing in the subset has one or more desired properties.
[0056] A trade should be understood to fulfill part of an order for
one or more things if the trade includes transfers of ownership of
at least a portion of the one of more thing in accordance with the
order. Fulfilling may include bringing a trade into effect.
[0057] A participant system should be understood to include any
system that allows an order management system to interface with a
marketplace.
II. DETERMINING
[0058] The term "determining" and grammatical variants thereof
(e.g., to determine a price, determining a value, determine an
object which meets a certain criterion) is used in an extremely
broad sense. The term "determining" encompasses a wide variety of
actions and therefore "determining" can include calculating,
computing, processing, deriving, investigating, looking up (e.g.,
looking up in a table, a database or another data structure),
ascertaining and the like. Also, "determining" can include
receiving (e.g., receiving information), accessing (e.g., accessing
data in a memory) and the like. Also, "determining" can include
resolving, selecting, choosing, establishing, and the like.
[0059] The term "determining" does not imply certainty or absolute
precision, and therefore "determining" can include estimating,
extrapolating, predicting, guessing and the like.
[0060] The term "determining" does not imply that mathematical
processing must be performed, and does not imply that numerical
methods must be used, and does not imply that an algorithm or
process is used.
[0061] The term "determining" does not imply that any particular
device must be used. For example, a computer need not necessarily
perform the determining.
III. FORMS OF SENTENCES
[0062] Where a limitation of a first claim would cover one of a
feature as well as more than one of a feature (e.g., a limitation
such as "at least one widget" covers one widget as well as more
than one widget), and where in a second claim that depends on the
first claim, the second claim uses a definite article "the" to
refer to the limitation (e.g., "the widget"), this does not imply
that the first claim covers only one of the feature, and this does
not imply that the second claim covers only one of the feature
(e.g., "the widget" can cover both one widget and more than one
widget).
[0063] When an ordinal number (such as "first", "second", "third"
and so on) is used as an adjective before a term, that ordinal
number is used (unless expressly specified otherwise) merely to
indicate a particular feature, such as to distinguish that
particular feature from another feature that is described by the
same term or by a similar term. For example, a "first widget" may
be so named merely to distinguish it from, e.g., a "second widget".
Thus, the mere usage of the ordinal numbers "first" and "second"
before the term "widget" does not indicate any other relationship
between the two widgets, and likewise does not indicate any other
characteristics of either or both widgets. For example, the mere
usage of the ordinal numbers "first" and "second" before the term
"widget" (1) does not indicate that either widget comes before or
after any other in order or location; (2) does not indicate that
either widget occurs or acts before or after any other in time; and
(3) does not indicate that either widget ranks above or below any
other, as in importance or quality. In addition, the mere usage of
ordinal numbers does not define a numerical limit to the features
identified with the ordinal numbers. For example, the mere usage of
the ordinal numbers "first" and "second" before the term "widget"
does not indicate that there must be no more than two widgets.
[0064] When a single device, article or other product is described
herein, more than one device/article (whether or not they
cooperate) may alternatively be used in place of the single
device/article that is described. Accordingly, the functionality
that is described as being possessed by a device may alternatively
be possessed by more than one device/article (whether or not they
cooperate).
[0065] Similarly, where more than one device, article or other
product is described herein (whether or not they cooperate), a
single device/article may alternatively be used in place of the
more than one device or article that is described. For example, a
plurality of computer-based devices may be substituted with a
single computer-based device. Accordingly, the various
functionality that is described as being possessed by more than one
device or article may alternatively be possessed by a single
device/article.
[0066] The functionality and/or the features of a single device
that is described may be alternatively embodied by one or more
other devices which are described but are not explicitly described
as having such functionality/features. Thus, other embodiments need
not include the described device itself, but rather can include the
one or more other devices which would, in those other embodiments,
have such functionality/features.
IV. DISCLOSED EXAMPLES AND TERMINOLOGY ARE NOT LIMITING
[0067] Neither the Title (set forth at the beginning of the first
page of the present application) nor the Abstract (set forth at the
end of the present application) is to be taken as limiting in any
way as the scope of the disclosed invention(s). An Abstract has
been included in this application merely because an Abstract of not
more than 150 words is required under 37 C.F.R. .sctn. 1.72(b).
[0068] The title of the present application and headings of
sections provided in the present application are for convenience
only, and are not to be taken as limiting the disclosure in any
way.
[0069] Numerous embodiments are described in the present
application, and are presented for illustrative purposes only. The
described embodiments are not, and are not intended to be, limiting
in any sense. The presently disclosed invention(s) are widely
applicable to numerous embodiments, as is readily apparent from the
disclosure. One of ordinary skill in the art will recognize that
the disclosed invention(s) may be practiced with various
modifications and alterations, such as structural, logical,
software, and electrical modifications. Although particular
features of the disclosed invention(s) may be described with
reference to one or more particular embodiments and/or drawings, it
should be understood that such features are not limited to usage in
the one or more particular embodiments or drawings with reference
to which they are described, unless expressly specified
otherwise.
[0070] No embodiment of method steps or product elements described
in the present application constitutes the invention claimed
herein, or is essential to the invention claimed herein, or is
coextensive with the invention claimed herein, except where it is
either expressly stated to be so in this specification or expressly
recited in a claim.
[0071] The preambles of the claims that follow recite purposes,
benefits and possible uses of the claimed invention only and do not
limit the claimed invention.
[0072] The present disclosure is not a literal description of all
embodiments of the invention(s). Also, the present disclosure is
not a listing of features of the invention(s) which must be present
in all embodiments.
[0073] Devices that are described as in communication with each
other need not be in continuous communication with each other,
unless expressly specified otherwise. On the contrary, such devices
need only transmit to each other as necessary or desirable, and may
actually refrain from exchanging data most of the time. For
example, a machine in communication with another machine via the
Internet may not transmit data to the other machine for long period
of time (e.g. weeks at a time). In addition, devices that are in
communication with each other may communicate directly or
indirectly through one or more intermediaries.
[0074] A description of an embodiment with several components or
features does not imply that all or even any of such
components/features are required. On the contrary, a variety of
optional components are described to illustrate the wide variety of
possible embodiments of the present invention(s). Unless otherwise
specified explicitly, no component/feature is essential or
required.
[0075] Although process steps, algorithms or the like may be
described or claimed in a particular sequential order, such
processes may be configured to work in different orders. In other
words, any sequence or order of steps that may be explicitly
described or claimed does not necessarily indicate a requirement
that the steps be performed in that order. The steps of processes
described herein may be performed in any order possible. Further,
some steps may be performed simultaneously despite being described
or implied as occurring non-simultaneously (e.g., because one step
is described after the other step). Moreover, the illustration of a
process by its depiction in a drawing does not imply that the
illustrated process is exclusive of other variations and
modifications thereto, does not imply that the illustrated process
or any of its steps are necessary to the invention(s), and does not
imply that the illustrated process is preferred.
[0076] Although a process may be described as including a plurality
of steps, that does not imply that all or any of the steps are
preferred, essential or required. Various other embodiments within
the scope of the described invention(s) include other processes
that omit some or all of the described steps. Unless otherwise
specified explicitly, no step is essential or required.
[0077] Although a process may be described singly or without
reference to other products or methods, in an embodiment the
process may interact with other products or methods. For example,
such interaction may include linking one business model to another
business model. Such interaction may be provided to enhance the
flexibility or desirability of the process.
[0078] Although a product may be described as including a plurality
of components, aspects, qualities, characteristics and/or features,
that does not indicate that any or all of the plurality are
preferred, essential or required. Various other embodiments within
the scope of the described invention(s) include other products that
omit some or all of the described plurality.
[0079] An enumerated list of items (which may or may not be
numbered) does not imply that any or all of the items are mutually
exclusive, unless expressly specified otherwise. Likewise, an
enumerated list of items (which may or may not be numbered) does
not imply that any or all of the items are comprehensive of any
category, unless expressly specified otherwise. For example, the
enumerated list "a computer, a laptop, a PDA" does not imply that
any or all of the three items of that list are mutually exclusive
and does not imply that any or all of the three items of that list
are comprehensive of any category.
[0080] An enumerated list of items (which may or may not be
numbered) does not imply that any or all of the items are
equivalent to each other or readily substituted for each other.
[0081] All embodiments are illustrative, and do not imply that the
invention or any embodiments were made or performed, as the case
may be.
V. COMPUTING
[0082] It will be readily apparent to one of ordinary skill in the
art that the various processes described herein may be implemented
by, e.g., appropriately programmed general purpose computers,
special purpose computers and computing devices. One or more such
computers or computing devices may be referred to as a computer
system. FIG. 1 illustrates an example computer system. The computer
system comprises a plurality of server computers 101 and client
computers 103. Typically a processor 105 (e.g., one or more
microprocessors, one or more microcontrollers, one or more digital
signal processors) will receive instructions (e.g., from a memory
107 or like device), and execute those instructions, thereby
performing one or more processes defined by those instructions.
Instructions may be embodied in, e.g., one or more computer
programs, one or more scripts.
[0083] A "processor" means one or more microprocessors, central
processing units (CPUs), computing devices, microcontrollers,
digital signal processors, or like devices or any combination
thereof, regardless of the architecture (e.g., chip-level
multiprocessing/multi-core, RISC, CISC, Microprocessor without
Interlocked Pipeline Stages, pipelining configuration, simultaneous
multithreading).
[0084] Thus a description of a process is likewise a description of
an apparatus for performing the process. The apparatus that
performs the process can include, e.g., a processor and those input
devices and output devices that are appropriate to perform the
process.
[0085] Further, programs that implement such methods (as well as
other types of data) may be stored and transmitted using a variety
of media (e.g., computer readable media) in a number of manners. In
some embodiments, hard-wired circuitry or custom hardware may be
used in place of, or in combination with, some or all of the
software instructions that can implement the processes of various
embodiments. Thus, various combinations of hardware and software
may be used instead of software only.
[0086] The term "computer-readable medium" refers to any medium, a
plurality of the same, or a combination of different media, which
participate in providing data (e.g., instructions, data structures)
which may be read by a computer, a processor or a like device. Such
a medium may take many forms, including but not limited to,
non-volatile media, volatile media, and transmission media.
Non-volatile media include, for example, optical or magnetic disks
109 and other persistent memory. Volatile media include dynamic
random access memory (DRAM) 111, which typically constitutes the
main memory. Transmission media include coaxial cables, copper wire
and fiber optics, including the wires that comprise a system bus
coupled to the processor. Transmission media may include or convey
acoustic waves, light waves and electromagnetic emissions, such as
those generated during radio frequency (RF) and infrared (IR) data
communications. Common forms of computer-readable media include,
for example, a floppy disk, a flexible disk, hard disk, magnetic
tape, any other magnetic medium, a CD-ROM, DVD, any other optical
medium, punch cards, paper tape, any other physical medium with
patterns of holes, a RAM, a PROM, an EPROM, a FLASH-EEPROM, any
other memory chip or cartridge, a carrier wave as described
hereinafter, or any other medium from which a computer can
read.
[0087] Various forms of computer readable media may be involved in
carrying data (e.g. sequences of instructions) to a processor. For
example, data may be (i) delivered from RAM to a processor; (ii)
carried over a wireless transmission medium; (iii) formatted and/or
transmitted according to numerous formats, standards or protocols,
such as Ethernet (or IEEE 802.3), SAP, ATP, Bluetooth.TM., and
TCP/IP, TDMA, CDMA, and 3G; and/or (iv) encrypted to ensure privacy
or prevent fraud in any of a variety of ways well known in the
art.
[0088] Thus a description of a process is likewise a description of
a computer-readable medium storing a program for performing the
process. The computer-readable medium can store (in any appropriate
format) those program elements which are appropriate to perform the
method.
[0089] Just as the description of various steps in a process does
not indicate that all the described steps are required, embodiments
of an apparatus include a computer/computing device operable to
perform some (but not necessarily all) of the described
process.
[0090] Likewise, just as the description of various steps in a
process does not indicate that all the described steps are
required, embodiments of a computer-readable medium storing a
program or data structure include a computer-readable medium
storing a program that, when executed, can cause a processor to
perform some (but not necessarily all) of the described
process.
[0091] A computer system may also include one or more input/output
devices 113. Such input/output devices may include monitors,
keyboards, mice, and r any other desired devices.
[0092] Some computer systems may include transmission medium 115,
which may be referred to as a communication network, that couples
various internal components of the computer system. Such a
communication network may also be referred to in some
implementations as a computer bus. Some computer systems may
include a specialized input/output device 117 configured to connect
to an external communication network. Such a device may be referred
to as a network interface. The external communication network may
include a LAN 119 and/or the Internet 121. In some implementations,
an edge routing device 123 may operate between a LAN and another
network like the Internet 121. Such a device may include a firewall
and/or any other desired security mechanism.
[0093] Where databases are described, it will be understood by one
of ordinary skill in the art that (i) alternative database
structures to those described may be readily employed, and (ii)
other memory structures besides databases may be readily employed.
Any illustrations or descriptions of any sample databases presented
herein are illustrative arrangements for stored representations of
information. Any number of other arrangements may be employed
besides those suggested by, e.g., tables illustrated in drawings or
elsewhere. Similarly, any illustrated entries of the databases
represent exemplary information only; one of ordinary skill in the
art will understand that the number and content of the entries can
be different from those described herein. Further, despite any
depiction of the databases as tables, other formats (including
relational databases, object-based models and/or distributed
databases) could be used to store and manipulate the data types
described herein. Likewise, object methods or behaviors of a
database can be used to implement various processes, such as the
described herein. In addition, the databases may, in a known
manner, be stored locally or remotely from a device which accesses
data in such a database.
[0094] Various embodiments can be configured to work in a network
environment including a computer that is in communication (e.g.,
via a communications network) with one or more devices. The
computer may communicate with the devices directly or indirectly,
via any wired or wireless medium (e.g. the Internet, LAN, WAN or
Ethernet, Token Ring, a telephone line, a cable line, a radio
channel, an optical communications line, commercial online service
providers, bulletin board systems, a satellite communications link,
a combination of any of the above). Each of the devices may
themselves comprise computers or other computing devices, such as
those based on the Intel.RTM. Pentium.RTM., Core, or Centrino.TM.
processor, that are adapted to communicate with the computer. Any
number and type of devices may be in communication with the
computer.
[0095] In an embodiment, a server computer or centralized authority
may not be necessary or desirable. For example, the present
invention may, in an embodiment, be practiced on one or more
devices without a central authority. In such an embodiment, any
functions described herein as performed by the server computer or
data described as stored on the server computer may instead be
performed by or stored on one or more such devices.
[0096] Where a process is described, in an embodiment the process
may operate without any user intervention. In another embodiment,
the process includes some human intervention (e.g., a step is
performed by or with the assistance of a human).
VI. CONTINUING APPLICATIONS
[0097] The present disclosure provides, to one of ordinary skill in
the art, an enabling description of several embodiments and/or
inventions. Some of these embodiments and/or inventions may not be
claimed in the present application, but may nevertheless be claimed
in one or more continuing applications that claim the benefit of
priority of the present application.
[0098] Applicants intend to file additional applications to pursue
patents for subject matter that has been disclosed and enabled but
not claimed in the present application.
VII. 35 U.S.C. .sctn. 112, PARAGRAPH 6
[0099] In a claim, a limitation of the claim which includes the
phrase "means for" or the phrase "step for" means that 35 U.S.C.
.sctn. 112, paragraph 6, applies to that limitation.
[0100] In a claim, a limitation of the claim which does not include
the phrase "means for" or the phrase "step for" means that 35
U.S.C. .sctn. 112, paragraph 6 does not apply to that limitation,
regardless of whether that limitation recites a function without
recitation of structure, material or acts for performing that
function. For example, in a claim, the mere use of the phrase "step
of" or the phrase "steps of" in referring to one or more steps of
the claim or of another claim does not mean that 35 U.S.C. .sctn.
112, paragraph 6, applies to that step(s).
[0101] With respect to a means or a step for performing a specified
function in accordance with 35 U.S.C. .sctn. 112, paragraph 6, the
corresponding structure, material or acts described in the
specification, and equivalents thereof, may perform additional
functions as well as the specified function.
[0102] Computers, processors, computing devices and like products
are structures that can perform a wide variety of functions. Such
products can be operable to perform a specified function by
executing one or more programs, such as a program stored in a
memory device of that product or in a memory device which that
product accesses. Unless expressly specified otherwise, such a
program need not be based on any particular algorithm, such as any
particular algorithm that might be disclosed in the present
application. It is well known to one of ordinary skill in the art
that a specified function may be implemented via different
algorithms, and any of a number of different algorithms would be a
mere design choice for carrying out the specified function.
[0103] Therefore, with respect to a means or a step for performing
a specified function in accordance with 35 U.S.C. .sctn. 112,
paragraph 6, structure corresponding to a specified function
includes any product programmed to perform the specified function.
Such structure includes programmed products which perform the
function, regardless of whether such product is programmed with (i)
a disclosed algorithm for performing the function, (ii) an
algorithm that is similar to a disclosed algorithm, or (iii) a
different algorithm for performing the function.
[0104] Where there is recited a means for performing a function
that is a method, one structure for performing this method includes
a computing device (e.g., a general purpose computer) that is
programmed and/or configured with appropriate hardware to perform
that function.
[0105] Also includes a computing device (e.g., a general purpose
computer) that is programmed and/or configured with appropriate
hardware to perform that function via other algorithms as would be
understood by one of ordinary skill in the art.
VIII. DISCLAIMER
[0106] Numerous references to a particular embodiment does not
indicate a disclaimer or disavowal of additional, different
embodiments, and similarly references to the description of
embodiments which all include a particular feature does not
indicate a disclaimer or disavowal of embodiments which do not
include that particular feature. A clear disclaimer or disavowal in
the present application shall be prefaced by the phrase "does not
include" or by the phrase "cannot perform".
IX. INCORPORATION BY REFERENCE
[0107] Any patent, patent application or other document referred to
herein is incorporated by reference into this patent application as
part of the present disclosure, but only for purposes of written
description in accordance with 35 U.S.C. .sctn. 112, paragraph 1
and enablement in accordance with 35 U.S.C. .sctn. 112, paragraph
1, and should in no way be used to limit, define, or otherwise
construe any term of the present application where the present
application, without such incorporation by reference, would not
have failed to provide an ascertainable meaning, but rather would
have allowed an ascertainable meaning for such term to be provided.
Thus, the person of ordinary skill in the art need not have been in
any way limited by any embodiments provided in the reference
[0108] Any incorporation by reference does not, in and of itself,
imply any endorsement of, ratification of or acquiescence in any
statements, opinions, arguments or characterizations contained in
any incorporated patent, patent application or other document,
unless explicitly specified otherwise in this patent
application.
X. PROSECUTION HISTORY
[0109] In interpreting the present application (which includes the
claims), one of ordinary skill in the art shall refer to the
prosecution history of the present application, but not to the
prosecution history of any other patent or patent application,
regardless of whether there are other patent applications that are
considered related to the present application, and regardless of
whether there are other patent applications that share a claim of
priority with the present application.
XI. SAMPLE EMBODIMENTS
[0110] Information about orders for good or service may be tracked
by an order management system (OMS). An order management system may
include data regarding desired, contemplated, open, completed,
considered, ongoing and/or other order. One typical order
management system used in securities trading includes the Fidessa
Order Management System. Although this order management system and
embodiments below focus largely on the trading of securities (e.g.,
stocks, bonds, futures, options, derivatives, etc.), it should be
recognized that other embodiments may be used in connection with
the trading of any goods and/or services whether tangible (e.g.,
food, oil, collectibles, etc.) or intangible (intellectual property
rights, contract performance, etc.).
[0111] Information that is stored by an OMS may identify a specific
security that is desired (e.g., by a user of the OMS, by a client
of the user of the OMS, etc.), a type or class of security that is
desired, an amount or range of amounts of a security that is
desired, a desired price, price range, and/or pricing method to be
used to buy the security, a limit on a desired price associated
with a limit order for the security, a security to be sold, a
price, price range, and/or pricing method to be used to sell a
security, a security desired or available to be sold (e.g., long
and/or short sale), an amount of a security to be sold, contingent
buying and/or selling information (e.g., information identifying a
purchase to be made if some contingent event occurs, information
setting amounts based on a contingent price, etc.), and/or any
other information.
[0112] Pricing policies may include any desired pricing policy
supported by a trading system. In some embodiments, such a pricing
policy may include, for example, midpoint pricing in which prices
are based on a midpoint between a national best offer and national
best bid, limit pricing in which a maximum or minimum price level
cannot be passed, midpoint pricing subject to such a limit, volume
weighted average pricing in which the weighted average price over a
trading period is the bases of the price. Any other methods or
combinations of pricing policies may be used.
[0113] Market liquidity, a measure a securities ability to be
bought and/or sold readily through a market, is recognized as a
factor that may affect prices at which securities are traded. For
example, one may have a more difficult time selling an illiquid
security because potential buyers may fear they will be unable to
resell the security after purchase. Such fear may artificially
lower the price of the sale of the security from the true market
value of the security to help alleviate the fears of such potential
buyers. Accordingly, a more liquid market may facilitate trading of
securities at their fair market values or closer to their fair
market values than they would be traded at in a less liquid
market.
[0114] In some markets, information identifying orders (e.g., bids,
offers, etc.) that is stored by order management systems, or
otherwise stored internally by a trading organization or trader,
have not traditionally been thought of as liquidity available to
the market. Rather, such orders typically add to the liquidity of
those markets only when they are made public to the market so other
traders in the market may act against those orders. Such secret
orders may be referred to as "dark pools" or "dark books" of
liquidity because they remain unseen by such markets.
[0115] It is recognized that enabling trading to take place using
such orders may improve the liquidity of a market and thereby allow
more trades to occur through a market and/or allow trades to occur
at a price closer to or at a fair market value.
[0116] It is recognized that one problem that may be associated
with using such orders in a market includes a potential that
information associated with the existence of otherwise secret
orders may be used to influence a market and/or to diminish an
advantage attributable to the originator of the information (e.g.,
some insight, knowledge, trading algorithm, etc.). In typical
markets, when bids and offers match, a negotiation may take place
between a buyer and a seller before any transaction is finalized.
Such negotiations typically include revealing the existence of a
matching party, information about a matching order associated with
the matching party, and/or the identity of the matching party to
both parties involved in the negotiation. By revealing this
information, the potential to "game the market" (e.g., artificially
affect a market using knowledge of the existence of orders of other
people) is increased and the possibly secret knowledge embodied by
the orders may be made public. For example, a trader may end a
negotiation by refusing an order in a negotiation. The trader may
subsequently use the knowledge that the matching party is
interested in a transaction related to the security to increase or
decrease the price of the security by entering one or more other
orders at higher or lower prices and/or use the knowledge embodied
by the order to adjust otherwise adjust a trading strategy.
[0117] It is recognized that as the size of orders increases, the
chances that a trader associated with such orders is trying to game
the market may decrease. Accordingly, it is recognized that trading
large blocks of liquidity may decrease the probability that gaming
is occurring. It is also recognized that if a trader agrees to have
an order executed without a negotiation, without receiving
notification before the execution, and/or otherwise automatically,
the chance that the trader is trying to game the market is also
decrease. Furthermore, it is recognized that if anonymity of
trading partners is maintained for part or all of a trading
exchange, the chances of gaming the market are also reduced.
Accordingly, participants in securities markets, such as buy and/or
sell side participants) may be more willing to participate in
markets with one or more such characteristics. Further, such
participants may be more willing to allow orders present in OMS to
add liquidity to such markets. Markets with such characteristics
may, for example, allow large blocks of securities to be moved
relatively quietly compared to traditional trading mechanisms.
[0118] It is recognized that in some markets, such as typical
securities markets, participants exist in an asymmetrical
relationship. For example, participants known as sell side firms in
securities markets generally act as retail brokers and researchers
for investors. Participants known as buy side firms in securities
markets generally include investment institutions that tend to buy
and/or sell large amounts of securities for money-management
purposes and keep information about their trading intentions
secret. Accordingly, the desires of these participants may not be
identical. Some embodiments may be configured to treat differently
participants with different characteristics in an attempt to
balance desires of the different participants.
[0119] Some embodiments of a trading system may allow access to
what might be traditionally untapped pools of liquidity (e.g.,
orders in OMS systems). Such systems may provide asymmetric access
rules to such information to accommodate desires and/or preferences
of market participants. Such systems may include anonymity
policies, order size restrictions, incentives, filtering policies,
and/or automatic execution of types of orders to encourage
participation.
[0120] Some embodiments may read information from an OMS or other
source of orders associated with a buy side market participant.
Information regarding such orders may be used to match information
from other market participants with one or more element of
anonymity, automatic order execution, and/or order size policy
implementations. In some embodiments, the information may be
narrowcast to potential counter parties for matching with orders
associated with the OMS of those parties. Accordingly, market
participants, such as sell side participants and buy side
participants can submit orders, both firm orders and OMS orders
that add liquidity to a market, with a degree of privacy and/or a
security that the market is not being gamed by other participants.
A participant may include a person and/or machine that interfaces
in some way with a marketplace to engage in trading. A participant
may include an OMS, a computer that interfaces with an OMS, and/or
any other type of computer or trading-related apparatus.
[0121] In some embodiments, firm orders (i.e., orders for which
participants agree to automatic order execution with matching
orders) may be viewed anonymously by those unlikely to abuse the
information, and/or by nobody at all. In some implementations, such
participants may include buy side participants who may view
information about firm orders if a matching order exists in an OMS
associated with a respective buy side participant. In some
implementations, such participants may include participants for
which matching firm orders exist (e.g., have been submitted to a
trading system). By limiting the viewing of such information,
trading of high quality block liquidity using pools of liquidity
currently not available may be encouraged.
[0122] In some embodiments, control over one or more aspects of
disclosing information about orders in an OMS may reside with buy
side originators of the orders. In some embodiments, sell side
participants or other buy side participants that enter a firm order
matching an order in a buy side participant's OMS may only be
notified of the existence of such a matching order if the buy side
participant with the order in its OMS agrees to such notification,
and/or agrees to an execution of a trade. In some embodiments, the
sell side participants or other buy side participants may not be
notified of the identity of the buy side participant at all, but
rather only be notified that some matching order was found and/or
executed.
[0123] Example Structures
[0124] FIG. 2 illustrates one example trading system configured to
perform one or more trades. As illustrated, the trading system may
include a plurality of computer systems at one or more locations.
The illustrated embodiment includes a central system along with a
plurality of remote computer systems. Other embodiments may include
different numbers, arrangements and/or types of computer systems.
For example, some embodiments may include fewer or no remote
computer systems. Some other embodiments may include a more
distributed or fully distributed system such as one without any
central system or with a limited central system.
[0125] The central system 201 or a place at which orders are
executed may be called a "marketplace". In some embodiments,
various actions, such as firm order querying, firm order matching,
providing indications of firm orders/firm order matches, receipt of
indications that firm order queries/firm order matches exist and/or
any other desired actions may occur, for example, upstream from
such a marketplace.
[0126] As illustrated, the trading system may include a central
system 201. The central system 201 may include one or more computer
systems, each configured to perform one or more processes. Such
computer systems may receive, transmit, and/or process information
as desired. In some implementations, the central system 201 may be
configured to perform actions including receiving information
relating to orders (e.g., firm orders), matching firm orders,
executing trades, facilitating the execution of trades, clearing
orders, facilitating the clearing of orders, communicating with
remote systems, settling orders, reporting trades, querying remote
systems to determine if matching order exist, querying processes or
databases to determine if matching orders exist, and/or any other
desired actions.
[0127] In some embodiments, the central system 201 may be
distributed among a plurality of regional hubs. Such distribution
may allow a trading system to span a very large geographic area
through which a very large number of trades may be routed. Such
regional hubs may include duplication and/or distribution of
functionality.
[0128] In some embodiments, the central system 201 may be
responsible for facilitating one or more functions typically
referred to as "back office" functions. For example, the central
system 201 may facilitate clearing of trades, settling of trades,
reporting of trades, credit checking of participants, other
functions required for compliance with rules and regulations,
and/or any other desired functions.
[0129] In some embodiments, the central system 201 may include a
firm order matching system. Such a system may be configured to
determine if firm orders match other firm orders and/or perform
other functions related to such firm order matching. In some
embodiments, the central system may include an order router
matching module. Such a module may be configured to route order
queries to one or more participants and/or perform any desired
actions associated with OMS orders. In some embodiments, the
central system may include a regulation NMS system. Such a system
may interface with one or more other securities markets to find
better pricing options for an order. Such action may be required in
some embodiments because of securities regulations.
[0130] In some embodiments, the central system may be coupled to
one or more remote systems by a communication network 203. The
communication network 203 may include the Internet, one or more
local area networks, and/or any other desired communication medium.
The communication network 203 may allow the central system to
transmit and/or receive information to and/or from remote systems,
such as computer systems associated with market participants. In
some embodiments, communication between systems, modules,
processes, and/or programs may include the use of Financial
Information eXchange messaging. Such messaging may be encrypted or
not as desired. In some embodiments, one or more firewalls or other
security device may be included in the communication network
203.
[0131] In some embodiments, system 200 may include one or more sell
side computer systems, each indicated by 205. The sell side systems
205 may include one or more trading computers configured to accept
information regarding security offers (e.g., firm orders to buy
and/or sell securities). The sell side systems 205 may be
configured to receive, send, and/or processes information. In some
embodiments, the sell side systems 205 may be configured to
transmit one or more indications of such orders to the central
system 201 over the communication network 203. In some distributed
embodiments, the sell side systems 205 may be configure to transfer
information to one or more other sell side systems 205 and/or buy
side systems 207. In some embodiments, the sell side systems 205
may be configured to receive information identifying a completed
order execution (e.g., from the central system 201) and may provide
an indication of such an indication to a user (e.g., through a
trading interface). In some embodiments, the sell side systems 205
may be configured to interact with the central system 201 or an
otherwise distributed system. In some embodiments, a separate
computer system may act as an interface between the central system
201 or otherwise distributed system and the rest of the sell side
system 205. Although the sell side systems 205 are shown as a
single system, it should be recognized that any number of computers
may be used to perform any desired functions of a sell side
system.
[0132] Some embodiments may include one or more buy side systems,
each indicated at 207. In some embodiments, all or part of the buy
side systems 207 may be located with a buy side market participant.
In some embodiments, all or part of the buy side systems 207 may be
distributed or located at a central location, such as with central
system 201.
[0133] In some embodiments, the buy side systems 207 may include
one or more trader systems, each indicated at block 209. The trader
systems 209 may provide an interface to one or more traders through
which information may be obtained or provided. Traders, for
example, may enter order information and/or receive indications
associated with orders through a trader systems 209.
[0134] In some embodiments, the buy side systems 207 may include
one or more OMS systems 211. The OMS systems 211 may perform one or
more functions typically performed by an OMS. Such functions may
include storing order information, providing order information to
trader computers, and/or any other desired functions. As mentioned
above, one example OMS system includes the Fidessa OMS system.
[0135] In some embodiments, the buy side systems 207 may include
one or more participant systems 213. In some embodiments, the
participant systems 213 may act as an interface between the central
system 201 or an otherwise distributed system and the rest of the
buy side system 207. In some embodiments, the participant system
may perform function related to trading, such as storing order
information, receiving firm order queries, executing orders,
facilitating execution of orders, clearing orders, facilitating
clearing of orders, transmitting order information, determining if
matching orders exist, providing indication regarding order
queries, searching existing orders, determining if an order is a
firm order or a OMS order, and/or any other desired functions.
Participant systems may enhance the functionality of traditional
OMS systems by allowing otherwise unavailable pools of liquidity to
become available to a market. In various embodiments, participant
systems may query an OMS for updated information (pull information
from the OMS), may receive updates from the OMS as information in
the OMS changes (information may be pushed from the OMS), and/or
synchronize with an OMS in any desired way.
[0136] In some embodiments, participant systems 213 may query
(e.g., periodically, randomly, etc.) OMS systems 211 to generate a
copy of an OMS database. In some embodiments, the OMS systems 211
may send information to the participant systems 213 in response to
such queries and/or without any querying taking place. Such
information may include indications of orders in the OMS database
(e.g., updates of prior orders, changes to orders, deletions of
orders, new orders, complete database copies, etc.) In some
embodiments, a participant system 213 may directly access the OMS
database (e.g., without the need to make a copy) of the OMS system
211, such as by querying the database. In still other embodiments,
the OMs system and participant system may be a single system, and
such distinctions may not be relevant.
[0137] In some embodiments, buy side order information may be
maintained in confidence on buy side systems, which may be located
on respective buy side participants' premises. By so maintaining
the information, buy side participants may feel more secure about
the use of such information for trading and be less worried about
potential information leakage.
[0138] In some embodiments, one or more software modules may act as
part of an OMS system 211 to provide some or all buy side
functionality. Such modules may exist in addition to and/or as an
alternative to the participant system 213. For example, the module
may include an update to an OMS software or a companion program to
an OMS software program.
[0139] Although FIG. 2 shows OMS systems, participant systems and
trading systems as separate systems, it should be understood that
any configuration of systems may be used. For example a single
system may operate as all or part of any other systems (e.g., a
single system may act as an OMS system and a participant system,
etc.) Furthermore, various systems may share information and/or
distribute the performance of functions. For example, an OMS system
may maintain an order database that may be read by one or more or a
trading system, a participant system, and/or any other desired
system.
[0140] In some embodiments, one or more of the buy side or sell
side systems may include mobile devices. Such mobile devices may
include laptop computers, PDAs, cellular telephones, and/or any
other desired mobile device.
[0141] In some embodiments one or more software modules may act as
companions and/or replacements to trading interface software and/or
OMS software. Such companion or replacement software may include
additional and/or different options from traditional interface
and/or OMS software.
[0142] Although FIG. 2 shows buy side systems 207 and sell side
systems 205 as connected to separate parts of communication network
203, it should be understood that such systems may be connected to
a same network such as the Internet or any other communication
network.
[0143] In some embodiments, one or more participants may use a
virtual OMS rather than a traditional OMS. It should be understood
that reference to an OMS includes reference to such a virtual OMS.
A virtual OMS may include a system that acts as a dedicated OMS for
a plurality of participants, but in reality is a shared system. For
example, in some implementations, a virtual OMs may include a
system that is remote from a participant and accessed over the
Internet. The system may include a separate database for each such
participant for tracking typical OMS information. It should be
understood that some systems may include a single database with a
participant identifier, and/or any other method of storing
information that may be used in providing virtual OMS services to
participants. The use of a virtual OMS may provide a participant
with OMS services without the need to maintain and/or purchase a
dedicated OMS system.
[0144] Example System Processes
[0145] FIG. 3 illustrates an example process 300 that may begin at
block 301. In some embodiments, process 300 may be performed by the
central system 201. In other embodiments, process 300 may be
performed by one or more distributed computer systems.
[0146] As indicated at block 303, process 300 may include receiving
an indication of an order. In some implementations, the order may
be a firm order. In some embodiments, such an indication may be
considered a binding indication on the part of the firm order
submitter. For example, central system 201 may receive an
indication of such an order from a buy side system (e.g., 207)
and/or a sell side system (e.g., 205). Such orders may be entered,
for example by a trader using a trading interface at a buy or sell
side firm. The indication of the firm order may identify that an
originator of the order is committed to a transaction (e.g., a bid,
offer, etc.). In some embodiments, an indication of an order may
indicate an amount of a security to buy or sell, a time for a firm
order to remain open, a price at or around which to buy the
security, a limit price, a pricing method, an order identifier,
and/or any other information. The order may define a side of a
trade for a financial instrument. A side of a trade for a financial
instrument may include one of a desire to buy a financial
instrument and a desire to sell a financial instrument.
[0147] As indicated at block 305, process 300 may include
determining if any matching firm orders are available. A matching
order may include an order that includes complementary terms to the
firm order. Such terms may include a security, an amount, a price,
a time frame, and/or any other desired information. For example,
the firm order may indicate that 10,000 shares of eSpeed stock
should be purchased at an average price of $100.00 per share. A
prior firm order may have been received that indicates 10,000
shares of eSpeed stock should be sold at an average price of
$100.00 per share. The prior eSpeed order may be determined to
match the later eSpeed order in such a situation. In some
embodiments, orders within a price range, below a maximum price,
above a minimum price, and/or matching in any other desired ways
may also be determined to be matching. In some embodiments, orders
for a larger number of smaller number of shares may be determined
to be matching. In some embodiments, an indication of a firm order
may identify a minimum and/or maximum order size/percentages for
which other firm orders may be determined to be matching.
[0148] In some embodiments, multiple orders may be determined to be
matching according to some priority mechanism so that a total
number of shares of all matching orders sums to at least as much as
a number indicated by the firm order indication. In some
embodiments, in which multiple orders are determined to be
matching, a priority may be assigned to some of the orders based
one or more characteristics of the orders, an originator of the
orders, and/or any other characteristic.
[0149] In some embodiments, a matching firm order may have been
received from a buy or sell side system. Such a matching order may
have been stored on a machine readable medium (e.g., a disk drive
of the central system 201). Determining if a matching firm order
has previously been received may include searching a database or
other listing of previously received firm orders. Such a database
may be keyed to allow quick lookup, such as by security identifier
(e.g., stock symbol).
[0150] Some embodiments may include maintaining a listing of firm
orders. Such a listing may include a database. Maintaining the
listing may include adding newly received firm orders to the
listing, deleting fulfilled firm orders from the listing, deleting
expired firm orders from the listing, and/or any other desired
actions.
[0151] As indicated at block 307, if one or more matching firm
order is determined to exist, the execution of some or all of those
matching firm orders may be facilitated to fulfill the received
firm order. Each such matching orders may fully or partially
fulfill the received firm order. Facilitating the execution may
include performing an exchange of money for a security, clearing
such an exchange, transmitting information to a remote execution
and/or clearing service, notifying participants, and/or any other
desired action. A trade may be facilitated at a price and/or with a
quantity that may be identified from a query.
[0152] In some embodiments in which multiple matching orders exist,
the matching orders may be matched to the received firm order based
on any desired prioritizing mechanism. Such prioritizing mechanism
may include prioritizing based on price of security, first come
first serve, priority given to older and/or most active originators
of orders, large orders may be matched first, priority given to
closest match in price and/or size, a round robin system, and/or
any other desired prioritizing method. In some embodiments,
multiple orders may be combined together to fully fulfill as many
existing offers as possible. In some embodiments, part of each
matching order may be fulfilled. The part may correspond to some
characteristic of the order or order originator, such as order
size, loyalty of originator, activeness of originator, actual price
compared to desired price, etc.
[0153] In some embodiments, process 300 may end at block 309 if a
matching firm order is found. In some embodiments, if one or more
matching firm orders exist but do not completely fulfill the
received firm order, execution of the matching firm order may be
facilitated, and a remaining balance of the firm order may be
treated as if no matching firm order had been found (e.g., may
continue as described below with a firm order that includes only
the left over order amount).
[0154] In some embodiments, as indicated at block 311, process 300
may include querying one or more participants to find a matching
order. In some embodiments, querying the participants may include
transmitting one or more requests from a central system (e.g., 201)
to a buy side system (e.g., 207). In other embodiments, querying
the participants may include transmitting requests from a computer
of a distributed system to another computer of the distributed
system, such as from one buy side participant to another, or one
sell side participant to a buy side participant, etc. In some
embodiments, such querying may continue from one participant to
another participant in a tree like fashion in which one or more
participants queries one or more further participants which may
themselves continue querying further participants and so on. Such
action may be taken if no matching firm order was found or an
incomplete set of matching firm orders was previously found as
described above. In still other embodiments, querying may include
transmitting requests to other processes, threads, memory
locations, portion of a computer program, etc. executing by a
single system, such as central system 201 or multiple systems, such
as a distributed system.
[0155] Systems associated with market participants (e.g., buy side
system 207, participant systems 205, 207) may be configured to
accept requests and determine if matching OMS orders exist. In some
situations, which are discussed in more detail below, some such
systems may respond to a query indicating that a match exists. In
some implementations such a response may include an indication that
the trade has already been executed and/or cleared (e.g., by a
remote system to which a request was transmitted, some other
system, etc.).
[0156] In some embodiments, the act of querying and/or some or all
response that may be received may be concealed and/or otherwise
suppressed from an originator of the firm order and/or any other
individual. For example, if a negative response is received, such a
response may not be revealed to the originator of the firm order.
In some embodiments, as discussed below, only a positive response
may be revealed. In some embodiments, negative response may be
eliminated or otherwise suppressed. By limiting responses, actions
may be kept secret from originators of the order and the
participants may be granted an additional level of anonymity,
thereby encouraging them to participate in the trading system
because the opportunity and/or chances to game the market may be
reduced.
[0157] As indicated at block 313, process 300 may include receiving
additional firm orders from various other firm order sources such
as buy side and/or sell side participants. Such receipt of new firm
orders may occur substantially simultaneously as the querying of
participants. Such new firm orders may be compared with the
received firm order from block 303 to determine if they are
matching, similar to the description above with respect to block
305.
[0158] As indicated at block 315, process 300 may include
determining if a matching order is found. Finding a matching order
may include receiving a new firm order from another source and/or
receiving a response from a participant that a matching order
exists.
[0159] If no matching order is determined to exist, process 300 may
loop back to block 311. In various embodiments, the participants
may be queried periodically. The period may be any length, such as
30 seconds, 30 minutes, a random length, a length based on some
characteristic of a trader and/or order, etc. In various
embodiments, participants may be queried until either a match is
found, a matching firm order is received, a time period associated
with the firm order expires, the firm order is revoked, and/or any
other desired length of time.
[0160] If one or more matching orders is determined to exist,
process 300 may include facilitating execution of a trade
fulfilling the firm order and the one or more matching orders as
indicated at block 317. In some embodiments, facilitating may
include executing a trade, clearing a trade, transmitting
indications that execution or clearing of a trade should be
performed by a remote system, and/or any other desired actions. In
some embodiments, execution of the trade may occur at a remote
server, such as one or more servers at which a firm order match is
found (e.g., a buy side system, etc.), and/or a central system,
such as central system 201.
[0161] In some embodiments, a matching order may not fulfill a
whole firm order. In such situations, process 300 may continue to
search for matching orders, e.g., by querying remote servers and
awaiting new firm orders in a loop to block 311.
[0162] In some embodiments, multiple matching orders may be found
within a relatively short period of time. For example, multiple
firm orders may be received and/or multiple OMS orders may be found
at participants within a relatively short period of time. Such a
time period may be any amount of time desired, such as 1 second, 1
minute, etc.
[0163] In various embodiments, order execution with such matching
orders found within such a short period of time may be based on
some desired set of priorities. In such embodiments, matching
orders found with in the short period of time may be treated as if
they were found simultaneously and executed based on some other
priority mechanism. For example, firm orders may be executed first,
or orders found through querying participants may be executed
first, first entered orders may be executed first, larger orders
may be executed first, smaller orders may be executed first, older
orders may be executed first, newer orders may be executed first,
best customers may have their orders executed first, highest ranked
customers may have their orders executed first, customers willing
to be charged a fee may have their orders executed first, and/or
any other method may be used to determine execution order. In other
embodiments, order execution may be based strictly on the order in
which the matching order is found.
[0164] Process 300 may end at block 319 after facilitation of the
execution of the orders is complete. In some embodiments, one or
more participants, such as originators of the orders may be
notified of execution. In some embodiments, the order of acts may
not be the same is indicated in process 300. In some embodiments,
process 300 may include additional actions, fewer actions, and/or
different actions. Process 300 or a similar process may be
performed by any computer system or systems in a centralized and/or
distributed manner
[0165] Example Participant Processes
[0166] FIG. 4 illustrates an example process 400 that begins at
block 401 and that may be performed by a participant (e.g., by buy
side system 207). In other embodiments, some or all of process 400
may be performed at a centralized location, such as by central
system 201, or a distributed location, such as by sell side systems
or buy side systems. Process 400 may, in part, be performed to
facilitate responses to queries and/or to provide indications of
firm orders, as those described above with respect to process 300.
In some embodiments, process 400 may be performed by an OMS system,
a separate participant system, a buy side or sell side trader's
computer, or any other computer system such as one configured to
receive and process orders.
[0167] As indicated at block 403, process 400 may include receiving
an indication of an order. Such an indication may be received, for
example, from a trader entering information about desired trades
through a trading interface. The indication may include an
identification of a price, an amount of a security to buy or sell,
a time for an order to remain open, a price at or around which to
buy the security, a limit price, a pricing method, an order
identifier, and/or any other information.
[0168] As indicated at block 405, process 400 may include
determining if the order is a firm order. A firm order, as
described above, may indicate that an order should be executed
substantially automatically. A OMS order, may indicate that the
information about the order is to remain secret from other market
participants and/or should not be automatically executed against.
Some embodiments may not include a separate act of determining a
type of order. For example, in some embodiments, different
processes, threads, and/or systems may receive the different types
of orders, so that the act of receiving the order itself identifies
the type of order. For example, a trader may use one interface to
submit an OMS order (e.g., to an OMS system, to a participant
system, etc.) and use a different interface to submit a firm order
(e.g., to a central system, etc.). In some embodiments, a single
program may be used to submit the different order types, and the
program may make the determination (e.g., based on different
buttons pressed, based on different checkboxes selected, etc.).
[0169] As indicated at block 407, if the order is a firm order,
process 400 may include providing the indication of the order for
firm order execution. Such providing may include transmitting
information about the order to the central system 201, or a
distributed system. Such an order may be received by such system,
which may attempt to execute the order substantially automatically
(e.g., using a process similar to process 300). In some
embodiments, such providing may include providing the information
to a processing thread or program executed by one or more computing
devices. Process 400 may end at block 409 if the order is a firm
order. In other embodiments process 400 may continue to provide
updated information about the execution of the firm order, such as
through an interface of a trading computer.
[0170] As indicated at block 411, if the order is not a firm order,
process 400 may include an act of storing information about the
order. Storing the information may include storing the information
on a machine readable medium, such as in RAM, on a hard disk, etc.
The medium may be part of/associated with one or more of an OMS
system and/or a participant system. The information may be stored
in one or more database tables configured to store information
about orders. Such a database table may be arranged for easy
searching of orders to determining if an incoming order request
matches any of the ordered stored in the database. For example, in
some embodiments, the database may be keyed by a name of a
security.
[0171] Some embodiments may include maintaining stored information.
Such information may be maintained similar to the maintenance of
order information in a typical OMS system. In some embodiments,
maintenance may include the actions of an OMS and/or a participant
system. Maintenance may include updating orders executed in
connection with matching firm order queries. For example, order
information may be removed/updated when an order is fully or
partially fulfilled, an order expires, an order is explicitly
removed or updated by a trader, and/or for any other desired
reason.
[0172] As indicated at block 413, process 400 may include receive
incoming firm order queries. An incoming firm order query may
indicate an identification of a price, an amount of a security to
buy or sell, a time for an order to remain open, a price at or
around which to buy the security, a limit price, a pricing method,
an order identifier, and/or any other information. In some
embodiments, such firm order queries may be received from one or
more computer systems performing a process similar to that shown in
process 300. In some embodiments, the firm order queries may
include orders that would fulfill part or all of the OMS order.
Such queries may be received at a participant system, an OMS system
configured to perform some or all of the action of process 400,
and/or any other desired location.
[0173] As indicated at block 415, process 400 may include
determining that a firm order query matches the order. For example,
a result from a database query that includes terms identified by
the firm order query (e.g., security identifier, price, quantity,
etc.) may return a positive result.
[0174] As indicated at block 417, process 400 may include
attempting to facilitate execution of a trade with the matching
firm order query. Facilitating execution of a trade may include,
for example, displaying an indication of the firm order to a trader
through one or more trading interfaces, as discussed in more detail
below, raising an alarm or other audible alert for such a trader,
and/or any other desired action. In some such embodiments, the
trader may be asked to accept the matching order or reject the
matching order. If the trader, in some embodiments, acceptance of
the order, the system may execute a trade, forward information for
the trade to be executed and/or cleared by another system, and/or
perform any other desired action to further facilitate execution of
the trade.
[0175] In some embodiments, by keeping the OMS orders secret from
other trading participants, a trading system performing process 400
may encourage traders to allow pools of liquidity that would
typically remain inaccessible, such as orders in OMS systems, to be
used to match against firm orders. This encouragement may be
particularly important to buy side participants who may typically
be protective of their order information. Such use of OMS orders
may increase liquidity in a market using such a process.
[0176] Process 400 may end at block 419, after facilitating
execution of the trade. In some embodiments, one or more
participants, such as originators of the orders may be notified of
execution. In some embodiments, stored information regarding the
orders may be updated to reflect the order execution. In some
embodiments, in which only part of the OMS order is fulfilled by
the matching firm order, process 400 may include receiving
additional firm order queries and facilitating execution of those
orders.
[0177] In some embodiments, the order of acts in process 400 may
not be the same is indicated in FIG. 4. In some embodiments,
process 400 may include additional actions, fewer actions, and/or
different actions. Process 400 or a similar process may be
performed by any computer system or systems in a centralized and/or
distributed manner. For example, process 400 may be performed by
the participant systems 205, 207, by an OMS system configured to
perform one or more parts of process 400, and/or by any other
system. In some embodiments, process 400 may be performed only in
connection with a buy side participant.
[0178] Example Querying Processes
[0179] FIG. 5 illustrates an example process 500 that begins at
block 501 and may be used, in some embodiments, to perform, in
part, querying of participants, as indicated by block 311 of
process 300 above. Process 500 may be performed by a central
computer system to query participants for matching orders, may be
performed in a distributed fashion by a plurality of computer
systems, and/or may be performed by any other computer systems. In
some embodiments, such a process may be performed, in part or in
whole, in a tree like distributed fashion in which some
participants may query one or more child participants to search for
matching orders.
[0180] As indicated at block 503, process 500 may include
identifying one or more participants. Participants may include one
or more remote servers, one or more computer processes, threads, or
programs. For example, in some embodiments, participants may
include buy side systems. In other embodiments, participants may
include sell side systems, and/or other systems. Identifying
participants may include querying potential participants in a list
of participants, (e.g., pinging IP addresses, making function
calls, etc.). In some embodiments, identifying participants may
include placing one or more items in a predefined memory location,
querying a predefined memory location for information about
participants, accessing a database or other listing of
participants, receiving an indication that a participant exists
(e.g., from the participant, from an administrator, etc.) and/or
any other actions desired. In some embodiments, the identified
participants may include child participants of a tree-like
participant structure.
[0181] As indicated at block 505, process 500 may include receiving
an indication of a firm order. Such a firm order may be
substantially similar to the firm order received at block 303 in
process 300.
[0182] As indicated at block 507, process 500 may include
transmitting requests to the identified servers. Such requests may
be substantially similar to those discussed above with respect to
block 311 in process 300. In some embodiments, as discussed above
with respect to process 300, the received firm orders may be
matched against other locally stored firm orders instead of or in
addition to querying of participants as discussed with respect to
process 300.
[0183] In some embodiments, participants may be arranged in a
distributed fashion. For example in one embodiment, participants
may be arranged in a tree-like fashion. In such an embodiment, a
first participant may query one or more other participants. The
other participants may determine if matches exist locally. If
matches exist, the participants may return a positive indication
(e.g., to the originating participant, the originator of the firm
order, a marketplace, etc.). If no match is found locally, the
further participants may query additional participants. The order
of querying may be established based on any desired priority
mechanism (e.g., largest customers are queried first, premium
customers queried first, highest ranked customers queried first,
etc.). In some embodiments, a participant may query additional
participants regardless of whether a match is found locally.
[0184] As indicated at block 509, process 500 may include
determining if a response was received from a queried participant.
In some embodiments, determining if a response was received may
include querying a port or socket through which communication may
be received from a communication network. In other embodiments,
determining if a response is received may include querying a
register, memory location, process, thread, program, function
and/or any other action.
[0185] In some embodiments, if no responses is received, process
500 may loop back to block 507 to send one or more additional
requests. Any number of requests may be sent any number of times.
Any period of time may pass between transmission of requests
(random, periodic, etc.). Process 500 may continue to loop until a
response is received, a matching firm order is found otherwise, a
time period expires, and/or any other event occurs.
[0186] In some embodiments, the participants queried at each loop
may be the same or different. For example, in some embodiments, an
initial group of participants may be queried first (e.g., a premium
group of participants, a group of good customers, a group of high
volume customers, etc), and then after some period of time a second
group of participants may be queried. Any number of such subgroups
may be queried in such order.
[0187] As indicated at block 511, process 500 may include
facilitating execution of a trade fulfilling a matching order in
the response. Facilitating may include executing a trade, clearing
a trade, forwarding information requests and/or any other desired
action. In other embodiments, a response may indicate that a trade
has been or will be executed and/or cleared (e.g., by a remote
system).
[0188] In some embodiments, a response may only be received if a
match exists and/or a trader desires to execute a trade. Limiting
response to positive responses may encourage participation because
less information is revealed from the participants. This may
incentivize participants to make orders available to a market to a
great extent than in traditional markets, thereby increasing the
liquidity of the market.
[0189] Other embodiments may include receiving negative response
when no matching order exists and/or a trader does not desire to
execute a trade.
[0190] In some embodiments, a response may be received for a trade
that does not completely fulfill the firm order. In some
implementations, after execution of such an order, process 500 may
loop back to block 507 to query participants again. Future queries
of participants may include an updated order with a requested
amount decreased by the previous order. In other embodiments, such
facilitation of order execution may be limited to complete orders
(e.g., based on preferences indicated by an originator of the
order, based on preferences of a trading system, etc.).
[0191] In some embodiments, multiple responses may be received at
the same time or within a relatively short time period. Orders
received as such may be treated as if they were received at the
same time. A priority mechanism may be used to determine which of
such orders is to be executed first. For example, an order
associated with a high volume customer, a premium customer, a long
term customer, or a customer with any other desired characteristic
may be given higher or lower priority compared with other orders.
In some embodiments, largest or smallest orders may be given
priority. In other embodiments, any desired priority mechanism may
be used.
[0192] In some embodiments, process 500 may end at block 513. In
some embodiments, process 500 may include notifying one or more
traders of the execution. In some embodiments, process 500 may
include additional actions, fewer actions, and/or different
actions. Process 500 or a similar process may be performed by any
computer system or systems in a centralized and/or distributed
manner
[0193] Example Passive Order Processes
[0194] Process 600 of FIG. 6 which begins at block 601 illustrates
an example process that may be performed by one or more
participants. Process 600 may include actions similar to process
400 described above. In some embodiments, process 600 may be
performed only by one or more buy side participants.
[0195] As indicated at block 603, process 600 may include receiving
one or more indication of one or more orders. Such orders may
include OMS orders as discussed above with respect to process 400.
The orders may be stored accordingly, as discussed with respect to
block 411 so that queries may be matched against them.
[0196] As indicated at block 605, process 600 may include receiving
an indication of one or more firm order queries. Such firm order
queries may be transmitted, for example, by an entity performing a
process similar to process 500 and/or process 300 as discussed
above.
[0197] As indicated at block 607, process 600 may include filtering
firm order queries. Firm order queries may be filtered based on
characteristics of the order (e.g., price, security, amount (e.g.,
minimum amount, maximum amount), etc.), characteristics of the
originator of the order (e.g., a rating of the originator, a type
of the originator, specific originators, etc.), and/or orders
queries may be filtered according to any other desired
characteristics. In some embodiments, different filters may be
applied to different types of securities. For example, large
capitalization securities may have one set of filters applied and
small capitalization securities may have a different set of filters
applied. In some embodiments, specific securities (e.g., identified
by stock symbol) may be filtered out or have a specific set of
filters applied.
[0198] In some embodiments, filtering may allow a participant to
filter queries received from or sent to other participants.
Filtering may be performed based on any desired characteristics.
Such characteristics may include characteristics that make the
order less likely to be an order associated with gaming of the
market. For example, in one implementations, a filter may block
firm orders that do not meet a minimum size requirement, a minimum
total dollar amount requirement, and/or any other desired
characteristics.
[0199] In some embodiments, as another example, a participant may
only desire to consider orders associated with originators with
certain characteristics. Such characteristics may include
characteristics that make an order less likely to be an order
associated with gaming of the market. For example, in one
implementations, a filter may block orders that are from a
particular class of traders (e.g., hedge funds, etc.), that are
associated with a particular trader that has been identified by the
participant as being involved with gaming the market, that are not
from a particular trusted set of participants, a from a set of
participants that were rated poorly by other participants, are from
a participant without a history of trading, etc.
[0200] In some embodiments, a firm order submitter may desire to
filter the participants that receive queries regarding their firm
orders. Such a filter may filter the participants based on
characteristics of the participants, behavior of the participants,
and so on. For example, in some implementations, a filter may be
established based on a response pattern of participants (e.g., how
participants have responded to queries in the past). As an example,
a firm order submitter may only desire their orders to be
transmitted to participants that have a history of accepting firm
order queries (e.g., all firm order queries, firm order queries
from a type of trader, firm order queries for a particular
financial instrument, firm order queries for a class of financial
instruments, firm order queries for a quantity range of financial
instruments, firm order queries from the submitter, and so on).
Such filtering may prevent information about the firm order from
being sent to participants that are unlikely to respond positively
to the order. In one implementations, firm order submitters may
choose from one or more ranges of response rates (i.e., number of
queries accepted/number of queries received), which may be referred
to as risk pools, with which participants must be associated to
receive a query (e.g., choose from among participants with positive
response rates of 1-50%, 51-70%, 71-90%, and/or 91-100%).
[0201] Some embodiments may include receiving an indication of
desired filters. The indication may be received from one or more
traders, participant systems, or any other desired source. The
indication may identify any desired characteristics, combination of
characteristics, exceptions to filters, and/or any other
information related to the filters.
[0202] The filters may be applied in a centralized fashions and/or
a distributed fashion. For example, in some implementations,
filters may be applied before requests are transmitted (e.g., by a
central system, by a distributed system, etc.). Applying the
filters before transmitting requests may decrease the amount of
traffic associated with performing process 600. Conversely,
performing such filtering before transmitting may increase the
amount of processing performed before transmitting and may involve
a participant revealing filtering preference they may not desire to
reveal to anyone, even a trading system administrator. In other
embodiments, filtering may occur locally to a participant. By
performing such filtering locally, more traffic may be generated by
a trading system, more processing may take place at participants,
and filtering options may remain private.
[0203] In some embodiments, participants may be filtered from
receiving requests based on the desires of a firm order submitter
(e.g., by a central system or other participant submitting queries,
etc.). Such participants may be filtered by identity, order
availability, and/or any other desired characteristic. Such
filtering may occur for example, by the participants themselves
(e.g., by a participant system configured to perform such filtering
in addition to, before, or otherwise in connection with other
participant functions), by a central system, by a submitting
system, and/or by any other desired system. In some embodiments,
for example, a participant may not be provided with a query if they
do not have a matching firm order to fulfill a minimum percentage
of a firm order. In other embodiments, such information may not be
known until after a query is sent, and in such embodiments, a match
may only be determined to exist if the match meets the minimum
percentage. Filtering before transmitting queries may decrease an
amount of traffic (e.g., TCP/IP packets) transmitted which may be
snooped to reveal trading information, however, a malicious user
may snoop such queries in an attempt to determine a filter
setting.
[0204] In some embodiments, participant systems may transmit
filtering information to a central system. Such information may be
used to perform the filtering at the central system. Such
information may also be used to provide information to users
entering firm orders, as described below.
[0205] A trading system that allows such filtering may enable a
participant to open traditionally untapped pools of liquidity only
to a certain subset of traders. By allowing such limitations, the
participant opening that pool of liquidity (e.g., a set of orders
in an OMS) may be more confident that the traders gaining access to
those pools are not going to use the pools of liquidity for
malicious purposes (e.g., gaming the market).
[0206] As indicated at block 609, process 600 may include
determining if a matching order for the firm order query exists.
Such determination may include searching one or more database or
other listings of OMS orders. The determination may be made at a
same or different location as the filtering. Determining may
include searching a listing of orders in an OMS of a buy side
participant. Such a listing may include all listed orders, a subset
of listed orders identified as searchable by a trader, and/or any
other orders.
[0207] As indicated at block 611, and 613, process 600 may end if
it is determined that no matching order exists. Some embodiments
may end without providing any indication that no order exists. By
not providing specifically identifying that no order exists, others
(e.g., other traders, participants, people snooping packets, etc.)
may be unable to determine if no order exists or no such response
was sent for some other reason (e.g., because a trader indicated
that no trader should occur as discussed below, because a trade was
filtered out, as discussed above, etc.). In some embodiments, no
indication that the query was received may be presented to a trader
or trading system associated with the participant that received the
query. By keeping such information secret, receivers of queries may
be prevented from using the information that the firm order exists
to game the market.
[0208] As indicated at blocks 611 and 615, if a firm order is
determined to exist, process 600 may include providing an
indication that a firm order has been received. Providing such an
indication may include transmitting information over one or more
networks from one computer system to another computer system.
Providing such an indication may include presenting a user (e.g., a
buy side trader associated with the OMS order matched) with one or
more interfaces or icon identifying the firm order. Such an
interface may include options to accept a firm order, reject a firm
order, ignore a firm order, ignore all firm orders (e.g., for a
desire period of time), and/or any other desired options. Such an
indication may be considered a non-binding indication from the
point of view of the participant associated with the OMS in so much
as a recipient (e.g., a participant associated with the matching
OMS order) is not bound to fulfill any order based on the
indication. However, an originator of the firm order may still be
bound to fulfill the order if the recipient of the indication
chooses to accept the order.
[0209] In some embodiments, ignoring a firm order may result in a
participant opting out of receiving/matching using firm order
queries for a minimum amount of time. Such an opt out time may
encourage participants to accept firm order queries. The time may
vary based on characteristics of the order and/or participants.
[0210] In some embodiments, a user may select various options
regarding ignoring future indications. For example, a user may
select that indications should be ignored unless a price associated
with the firm order is at a certain level, a firm order has some
desired characteristic, ignore until a certain time, ignore for a
certain amount of time, ignore until the end of the day, etc.
[0211] In some embodiments, evidence that a user has selected to
ignore an indication may be suppressed. For example, the
information may maintained in confidence at a participant system,
may be kept in confidence at a central system, or may otherwise be
kept secret. In implementations where different options for
ignoring an indication may selected, evidence regarding some or all
of the information regarding the options may also be
suppressed.
[0212] As indicated at block 617, process 600 may include awaiting
a response from such an indication. Some implementations may
include receiving a response and determining if the response is a
positive or negative response. In other implementations a response
may not be received or may only be received if the response is a
positive response. In some embodiments, the amount of time to be
awaited may be indicated to a trader. In some embodiments, the
amount of time may vary based on one or more desired
characteristics of a security, a participant, an originator and/or
other desired entity.
[0213] As indicated at block 619, process 600 may include
determining if a positive response is received. Determining if a
response is a positive response may include determining which if
any mouse buttons were pressed, which if any keyboard buttons were
pressed, which interface control if any was selected, and/or any
other determination of a possible entry of intent, if any.
[0214] As indicated in block 621, process 600 may end if a positive
response is not received. In some embodiments after a period of
awaiting, a presumptive default response may be entered. In some
implementations such a default response may include a negative
response. In some embodiments, an operator of an interface (e.g., a
trader, an administrator, etc.) may determine the appropriate
amount of time and/or the appropriate default command.
[0215] As indicated at block 623, if a positive response is
received, process 600 may include facilitating a trade fulfilling
at least part of the matching order and at least part of the firm
order. Facilitating the trade may include executing the trade,
clear the trade, transmitting information so that the trade is
executed and cleared remotely and/or any other desired actions. In
some implementations, facilitating may include providing a positive
response (e.g., to a central server, to a buy side and/or sell side
participant, etc.). The recipient of the positive response may
further facilitate the execution of the trade if a trade fulfilling
the firm order has not already been executed. Transmission of a
positive response may be considered a binding indication of a trade
in so much as the participant associated with the OMs order may be
bound to fulfill the matching firm order by the indication. In some
embodiments, the binding may be conditioned on the firm order not
having been fulfilled previously, not on actions of the
participant.
[0216] In some implementations, process 600 may include receiving
an update regarding the facilitation of the execution, such an
update may include receiving an indication that the execution was
completed or that the execution was not completed. In some
implementations, a trade may be partially completed and an update
may indicate that the trade was partially completed. For example, a
trade may be partially completed if when the positive response is
received, only part of the firm order is still awaiting execution,
and the OMS order includes a larger volume for trade. In such a
situation, a trade may be cancelled in some embodiments, in other
embodiments, a the OMS order may be executed to the extent that the
firm order remains, and in indication to that extent may be
transmitted to the participants, in still other embodiments, an
originator of the OMS order may be contacted with the updated firm
order information, and/or any other action may be taken.
[0217] Process 600 may end at block 625. Process 600 may include
notifying one or more participants of a result of the facilitation
of the execution of the trade. In some embodiments, process 600 may
include additional actions, fewer actions, and/or different
actions. Process 600 or a similar process may be performed by any
computer system or systems in a centralized and/or distributed
manner. Process 600 may be performed by one or more computer
systems in a centralized and/or distributed fashion.
[0218] It should be understood that the process of querying
participants is given as one example process only. In various
embodiments other methods of pulling order information from one or
more OMS may be used. In still other embodiments, order information
may be pushed from one or more OMS to a central system or other
system through which order matching occurs rather than the pulling
of order information described in process 600. In such
implementations, an OMS and/or participant system may be configured
to provide OMS order information and updates to a trusted system
for order matching to take place without the need for querying.
[0219] Example Order Entry Processes
[0220] FIG. 7 illustrates an example process 700 that begins at
block 701 and that may involve interfaces used in some embodiments.
Process 700 may be performed in part, for example, by an OMS, a
trading terminal, and/or any other computer system.
[0221] As indicated at block 703, process 700 may include providing
an interface through which one or more of a firm order and/or a OMS
order may be entered. Such an interface may allow a user to enter
information identifying a security, a pricing policy, a price, an
amount, and/or any other information about a desired trade.
[0222] FIG. 8 illustrate one example interface through which a user
may enter order information. Through such an interface a user may
be able to enter order types, a security desired, a pricing policy,
a time in force, a limit, a minimum fill amount, a increment fill
amount, an amount, and/or any other desired options. In some
embodiments a same or similar interface may be used for entry of
one or more of firm order and OMS order information.
[0223] Such a trading interface may illustrate information about a
percentage/number of participants that may view a firm order query
associated with an entered order as indicated at 801. This
information may be based on filters established by the participants
to filter out orders as described above. Such information may be
collected by a central system (e.g., from participant systems). One
characteristic that may be frequently used to filter orders
includes size of the order. The percentage/number of participants
may reflect the total number of participants willing to accept
orders with all characteristics except size and the number willing
to accept with the size characteristic. Accordingly, order
originators may adjust their order size to increase or decrease the
number of participants queried.
[0224] As indicated in block 705, process 700 may include receiving
information about an entered order. The information may include
information entered through the provided interface and/or any other
information (e.g., default information, identification information,
etc.).
[0225] As indicated at block 707 process 700 may include
determining if the order is a firm order. Determining if the order
is a firm order may include determining characteristics of an input
signal, an interface control, and/or any other information. Some
implementations may not include such a determination, but rather an
interface, program, computer, etc. at which the indication is
received or through which information related to the indication is
entered may identify the type without a separate action being
taken.
[0226] As indicated at block 709, if the order is a firm order,
process 700 may include transmitting (e.g., to a central system, a
distributed system, etc.) an indication of the firm order for
automatic execution against matching orders (e.g., matching firm
orders previously or later submitted, OMS orders, etc.). Process
700 may then end at block 711. In some implementation, process 700
may also include receiving information about a matching order and
displaying that information through one or more interfaces.
[0227] As indicated at block 713, if the order is determined not to
be a firm order, process 700 may include transmitting a
representation of the order to be matched against incoming order
queries e.g., by a process such as process 400. Transmitting may
include providing to a different process, thread, memory location,
etc. In other embodiments, a same program thread server may perform
query matching, providing interfaces, receiving order information,
and/or any other desired acts. As indicated at block 715, process
700 may then end.
[0228] In some embodiments, process 700 may include receiving
information about the order, such as whether matching queries are
received, etc. In some implementations, process 700 may be
performed, for example by a trading computer, an OMS system, a
central system, and/or a participant server. In some embodiments,
process 700 may include additional actions, fewer actions, and/or
different actions. Process 700 or a similar process may be
performed by any computer system or systems in a centralized and/or
distributed manner. Process 700 may be performed by one or more
computer systems in a centralized and/or distributed fashion. In
some embodiments, entering OMS orders in such a process may be
limited to buy side participants of a market.
[0229] Example Passive Order Query Processes
[0230] FIG. 9 illustrates an example process 900 that begins at
block 901. Process 900 may be performed, for example, by a buy side
system, sell side system, and/or any other computer system. In some
implementations, a participant server, a trader's computer, an OMS,
and/or any other computer system may perform one or more actions
associated with process 900 and/or a similar process.
[0231] As indicated at block 903, process 900 may include receiving
an indication that a firm order matches a OMS order. Such an
indication may be received from one or more OMS systems,
participant servers, central servers, buy side systems, sell side
systems, computer programs, computer processes, computer threads,
memory locations, network interfaces, and/or other desired
sources.
[0232] As indicated at block 905, process 900 may include providing
an interface, icon and/or other indication that a matching order
exists. FIG. 10 illustrates an example interface that may be used
as such an indication in some embodiments. Such an interface, as
illustrated, may display some details of a matching order. Such an
interface may allow a trader to indicate a positive response to the
order or a negative response to the order (e.g., by operating a
control, such as a button).
[0233] Process 900 as indicated at block 907 may include
determining if a positive response is received with some time
period. In some embodiments, the period of time may include a
default time period, an amount of time according to a user profile,
an amount of time according to terms of the firm order, an amount
of time determined in part by a size and/or dollar value of the
order, and/or any other desired amount of time. In some
implementations, receiving a positive response may include
receiving an indication that a control was selected. If a positive
response is not received, process 900 may end at block 909.
[0234] As indicated at block 911, if a positive response is
received, process 900 may include transmitting a request to execute
a trade fulfilling at least part of the firm order and at least
part of the matching order. Other embodiments may include otherwise
facilitating the execution of such a trade (e.g., executing the
trade, clearing the trade, etc.)
[0235] Process 900 may end at block 913. Other embodiments of
process 900 may include receiving information about the execution
of the trade, displaying information about such execution,
displaying terms associated with a trade, displaying information
about an originator of a firm order, updating/maintaining stored
order information and/or any other desired actions.
[0236] In some embodiments, multiple firm orders may match a OMS
order. In such embodiments, an indication of each such matching
order may be provided. In some embodiments, the indications may be
ordered according to a preference mechanism. Such preference
mechanism may include ordering based on preferences of an order
originator, an indication receiver, a computer system
administrator, and/or any other preferences of any individual
regarding any characteristics of an order, computer system, trade,
etc. In some implementations, rather than providing separate
indications, indications may be pooled into a single indication.
Such pooling may include combining multiple firm orders according
to some preference mechanism so that the firm orders fulfill the
matching order. If additional firm orders exist, some
implementations may separately provide information about such firm
orders. In some implementations, even if indications are pooled, an
interface may be provided that allows a user to access information
and enter information (e.g., acceptance of orders) about individual
orders.
[0237] In some embodiments, process 900 may include additional
actions, fewer actions, and/or different actions. Process 900 or a
similar process may be performed by any computer system or systems
in a centralized and/or distributed manner. Process 900 may be
performed by one or more computer systems in a centralized and/or
distributed fashion. In some embodiments, only buy side
participants may receive firm order queries for matching against
OMS orders.
[0238] Processes 300-700 and 900 are arranged to provide convenient
illustration of concepts disclosed herein. It should be recognized
that no such processes need be performed at all.
[0239] Encryption
[0240] In various embodiments, some or all communication may be
encrypted. In various embodiments, some or all information stored
in various media may be encrypted. In some embodiments, comparisons
among information may be made in an encrypted form. In other
embodiments, encrypted data may be unencrypted before a comparison
occurs.
[0241] In some embodiments, an encryption algorithm such as the
well-known PGP, RSA encryption method may be used for communication
among participants, computer systems, etc. Advances in quantum
computing may make such encryption less secure in the future. Some
embodiments, therefore may include use of quantum key encryption
algorithms designed to overcome such vulnerability and or other
future proof encryption algorithms
[0242] User Types
[0243] In some embodiments, different users of a system (e.g.,
central system, buy side system, sell side system, trader computer,
etc.) may have access to different options. Because a market may be
asymmetrical, providing asymmetrical options to such user types may
best capture a dynamic of the market. For example, in a security
trading market, participants may be divided into four example
categories which may include hedge funds, investors, brokers, and
verified naturals. It should be recognized that other embodiments
may include different, additional, alternative, fewer, and/or no
categories of users.
[0244] Referring to the example four category embodiment, investors
may include traders that trade on behalf of their own accounts
(e.g., individuals). Hedge funds may include organizations exempt
from standard securities regulation that typically seek high
returns for accredited investors. Brokers may include originations
that may trade on behalf of others as regulated by standard
securities laws. Verified naturals may include brokers that are not
acting one behalf of their own proprietary accounts. To become a
verified natural, a broker may be required to provide proof that
they are not trading on behalf of their own proprietary accounts.
In some implementations, a single user may act as more than one
type of user at various times. For example, a broker may act as a
broker in some situations and a verified natural in other
situations. Options and treatment given to such different
categories may reflect a likelihood that the participants may be
gaming the market.
[0245] In some embodiments, information provided to users may
depend upon a category or type of user. For example, users may be
limited to receiving certain firm order queries, accepting certain
firm order matches, etc. based on their category. In one
implementation, for example, only buy side participants only may
receive firm order queries. In such situations, information about
possible trade executions with OMS orders may not be provided to
sell side participants until and unless a trade is accepted by a
buy side participant and/or executed.
[0246] In some embodiments, as discussed above, rebates and charges
may be given. In some embodiments, such rebates and/or charges may
depend on a category of participant. For example, in some
implementations, investors may be given a rebate for submitting
firm orders. In other implementations, anyone submitting a firm
order may be given a rebate. In some implementations, brokers may
be charged a fee for each time a OMS order matches a firm order
query. In some implementations, brokers can opt out of having their
firm orders matched against other brokers firm orders because of
pricing rebate that allows brokers to be paid for submitting firm
orders.
[0247] In some embodiments, size or other characteristics of a
participant may affect a participants options. Some
implementations, for example, may be limited to large participants,
others to small participants, others may allow all sized
participants.
[0248] Possible Negotiation
[0249] Although some embodiments described above execute trades
without a negotiation between participants in the trade (e.g., with
only a buy or reject/ignore option presented to participants with
matching OMS orders), some embodiments may include a negotiation.
Such negotiation may be limited in some embodiments to preserve
anonymity, encourage entering of OMS orders, and/or limit the
possibility of gaming the market.
[0250] In some embodiments, for example, where there are multiple
matching orders, a negotiation to determine the counter party that
is willing to adjust their offer the most may be performed.
[0251] In some embodiments, if user accepts a matching firm order
found from a query, the user and/or the originator of the firm
order may be presented with an option to trade more of the
security. By selecting a control in an interface that activates
such an option, a negotiation may begin between the two
participants. Such a negotiation may include asking if the other
party agrees to trade more, the terms of such a trade, etc. Such
negotiation may limit the probability of gaming the market since
the participants may already be aware of each other from the prior
trade.
[0252] Rebate
[0253] Some embodiments may include providing rebates or charging
fees to trade participants. Such fees and/or rebates may be
arranged to incentivize participation in certain aspects of a
trading system. For example, in some embodiments, when an order is
executed based on a firm order matched with a OMS order, the
participant that submitted the firm order may receive a rebate, and
the participant associated with the OMS order may be charged a
fee.
[0254] Types of Trades
[0255] Some embodiments may support various types of trades. Such
trades may include buying securities, selling securities, short
selling securities, and/or any other desired types of trades. In
some embodiments in which a short sell of a security is performed,
a location of a purchased/borrowed security may be required before
a short sell order may be completed.
[0256] Tracking Users
[0257] Some embodiments may include tracking information about one
or more participants. For example, a trade history, a number of
trades, a type of trades, characteristics of trades, etc. may be
tracked for buy and/or sell side participants. In some information,
a participant may view some or all of such information about itself
and/or about other participants. In some embodiments, such
information may be used to generate a rating of a participant. Such
a rating may be used, for example, as a filter of participants
querying a participant server.
[0258] It should be recognized that while embodiments described
herein generally included a computer-human interactions (e.g.,
through an interface), other embodiments may be performed
completely though a computer (e.g., a computer may respond to firm
order queries, etc.).
[0259] It should also be recognized that while embodiments
described herein generally included various securities trading,
other embodiments may be used to trade any desired goods or
services.
[0260] Some Information Revealed
[0261] In some embodiments, one or more participants may be given
some, but not all, information about pending orders. Such
information may be provided, for example, as a way of incentivizing
the participant to submit an order, and/or take some action. In
some implementations, the pending orders may include firm orders,
and the participants may include participants with orders in an
OMS. In other implementations, the pending orders may include
orders in an OMS and the participants may include any participant
(e.g., a participant inquiring about present orders, a participant
with OMS orders, a participant with firm orders, etc.). In some
implementations, the participants that are told such information
may include buy side participants. In such implementations, buy
side participants may be given the information, for example,
without having to submit orders of their own, after submitting OMS
orders related to the pending orders, after submitting firm orders
related to the pending orders, and/or after any other desired
event.
[0262] In some implementations, the some information may include
information about one or more pending orders that does not include
all the information about the pending orders. For example, the
information may include the fact that one or more orders for a
financial instrument are pending. The information may, for example,
withhold which side the orders are for, who the orders were
submitted by, the quantity of the orders, the price of the orders,
and/or any other information. In other implementations, some or all
of such information may be provided and other information may be
withheld. In some implementations, the information may be
sufficient to entice a participant who may be interested in a trade
involving the pending orders to perform one or more actions but may
be limited so that an effect on behavior of other participants is
limited to legitimate trading activity (e.g., limit gaming of the
market).
[0263] In some implementations, if the participant that was shown
the information takes one or more specific actions, additional
information about the pending orders may be provided. For example,
if an order is submitted for the financial instrument, if an OMS
order is converted to a firm order, if a positive response to an
OMS query is guaranteed, etc., then the remaining information about
the pending orders may be provided. Such a method of providing some
but not all information before an action is taken may be used to
incentive a participant to take a particular action to obtain the
remained of information (e.g., if the initial information was
enticing). In some implementations, orders in an OMS, order
histories, and/or any other information about a participant may be
tracked and used to determine if providing some information may
encourage the one or more actions. In some implementations, market
conditions may be tracked to determine that the one or more actions
may provide needed liquidity to a market (e.g., may encourage
submission of firm orders when they are lacking).
Non-Firm Orders
[0264] FIG. 11 illustrates another embodiment. In some embodiments,
an indication of a non-firm order may be received (e.g., over a
communication network, etc.) from a first participant as indicated
at block 1101. The non-firm order may define a side of a trade
(e.g., a desire to buy, a desire to sell). Such an indication may
be received from an order submitter (e.g., a sell side trader,
etc.). In some embodiments, the receipt of such an indication may
be similar to the receipt of an order (e.g., as described with
respect to process 300. In some embodiments, a non-firm order may
be treated similar to a firm order, as described above with respect
to process 300. In some embodiments, a process similar to process
300 may be performed with the addition of an act of confirming a
trade with a submitter of the non-firm order before facilitating
execution of the trade. In some embodiments, such a process may
differ from process 300 in any number of ways. In some
implementations, a non-firm order may include an order to buy or
sell a financial instrument that is contingent on a confirmation
before a trade fulfilling the order is facilitated.
[0265] In some embodiments, an indication of a non-firm order may
be received and in response, a search for matching orders may be
performed. If a matching order is found, instead of facilitating
execution in response to finding the matching order the non-firm
order may be confirmed before such facilitation is performed. If
such confirmation is received, execution of the trade may be
facilitated.
[0266] Some embodiments may include determining whether a matching
order to the non-firm order is stored in an order management system
and whether an offer to enter into a trade that fulfills at least a
portion of each of the non-firm order and the matching order is
accepted. As described below such determining may include, for
example, transmitting one or more queries, receiving responses, and
any other actions. In other implementations, such determining may
include other actions, such as searching one or more databases, and
so on.
[0267] In some embodiments, after the indication of the non-firm
order is received, one or more queries may be transmitted (e.g.,
using a querying process such as those described above, if a
matching firm order is not found, in parallel with a search for
matching firm orders, etc.). The queries may ask if a matching
order to the non-firm order is stored in an order management system
(e.g., similar to process 500) as indicated at block 1103 and/or if
an offer to enter into a trade that fulfills at least a portion of
each of the non-firm order and the matching order is accepted as
indicated at block 1105. In some implementations, a single query
may be transmitted, for example, to a computer system configured to
interpret the single query as asking if the matching order is
stored in the order management system and, if the matching order is
stored in the order management system, if the offer is accepted
(e.g., by a trader associated with the order management system. In
some implementations, transmitting a query may include transmitting
a query to a system configured to determine if a matching order is
stored in the order management system, determine if an offer to
enter into a trade regarding that order is accepted, and respond to
the query only if the matching order is stored in the order
management system and the offer is accepted (e.g., a participant
system as described above).
[0268] In some implementations, such querying may include
identifying that the order is a non-firm order (e.g., by color
coding an indication provided to a trader, by including a text
description in an indication provided to a trader, by including an
icon in an indication provided to a trader, by including a flag or
other indicator in data transmitted, etc.). In other
implementations, such querying may include treating a non-firm
order as if it were a firm order (e.g., by not identifying that the
non-firm order is not a firm order, by identifying that the
non-firm order is a firm order, by not providing any distinction
between firm orders and non-firm orders, etc).
[0269] In some implementations, an indication of an acceptance of
the non-form order may be received (e.g., from a participant that
was queried) as indicated at block 1107. The acceptance of the
non-firm order may identify that a trader agrees to enter into a
trade fulfilling at least part of the firm order and at least part
of a matching order stored in an order management system. The
acceptance may indicate that the trader agrees to enter into the
trade (e.g., without any further negotiation, etc.).
[0270] In response to receiving the indication of the acceptance or
otherwise making a determination, a request for confirmation of the
non-firm order may be transmitted to a submitter of the non-firm
order as indicated at block 1109. A request for confirmation may
include a request to respond, a request to not respond, a request
for information identifying whether the submitter is obligated to
confirm, a request for information identifying circumstances that
overcome an obligation to confirm, and so on. In some
implementations, a request to confirm may be similar to a request
to accept a firm order in which the firm order includes the
matching order.
[0271] In some embodiments, an indication of a confirmation of the
non-firm order may be received as indicated at block 1111. The
indication may include for example, an indication that the trade
should occur, an indication that the non-firm order is still
available, an indication that the submitter of the non-firm order
agrees to make the non-firm order firm, an indication that one or
more events has or has not happened, an indication of an acceptance
of the matching order, and/or any other indications. In some
implementations, a confirmation may be similar to an acceptance of
a firm order, in which the firm order includes the matching order.
It should be recognized that in some implementations, a non-firm
order may be considered confirmed if an indication to the opposite
is not received. A confirmation may include an agreement to enter
into a trade that relates to the non-firm order.
[0272] In some embodiments, if such confirmation is received,
execution of the trade may be facilitated as indicated at block
1113. If such confirmation is not received, the participant may be
notified that the trade will not be executed.
[0273] In some embodiments, those participants that are queried may
not desire to respond to non-firm order queries because of a
possibility that the submitter of the non-firm order may reject the
trade and use the information about the acceptance by the
participant to affect the market. In some embodiments, not all
traders may be able to submit non-firm orders. For example, in some
embodiments, non-firm orders may be submitted that meet one or more
desired characteristics. Such characteristics may reflect the
likelihood that the submitter will game the market and/or will
confirm an accepted matching order. Some example characteristics
may include that the submitter trades on behalf of others, that the
submitter does not trade based for proprietary purposes, that the
trader agrees to one or more restrictions, and so on. In some
embodiments, all traders may be able to submit non-firm orders, and
participants may be able to establish filters to block queries from
some types of submitters of non-firm orders and/or only allow
queries from some types of submitters of non-firm orders.
[0274] In some embodiments, a submitter of a non-firm order may be
asked/required to agree to one or more restrictions regarding the
non-firm orders. Such restrictions, for example, may affect the
circumstances of when a submitter of a non-firm order may confirm
and/or not-confirm a non-firm order and/or any other aspect of the
confirmation process. In some implementations, a submitter of a
non-firm order may be asked and/or required to agree to confirm an
order unless the at least one of the order is cancelled and at
least a part of the order is fulfilled so that the matching order
(or a portion of it that is accepted in response to a query) is no
longer available before at least one the transmission of and the
receipt of the request for confirmation. Some implementations may
include receiving an indication of such an agreement from a
submitter of the non-firm order before the submitter is allowed to
submit the non-firm order. In other implementations, other
restrictions regarding when a non-firm order submitter may not
confirm a non-firm order may be established. In some
implementations, such restrictions may only apply for a limited
time after submission and/or receipt of the non-firm order. For
example, in some implementations, such restrictions may only apply
for an initial 30 seconds. In some implementations, the time period
may be similar to a time period for a shot clock, as described
below. In other implementations, there may be no such time period
limitation.
[0275] Some implementations may include determining whether one or
more restrictions are met. Such determining may include receiving
information identifying circumstances that meet such restrictions
or identify that such restrictions are met. For example, in some
implementations, a determination as to whether or not a non-firm
order is cancelled may be made based, on information received about
the cancellation of the non-firm order. A non-firm order may be
cancelled for example if at least one of a request to cancel the
non-firm order is received from an originator of the non-firm order
by the submitter of the non-firm order, a request to cancel the
non-firm order is processed by the submitter of the non-firm order,
a time period during which the non-firm order is scheduled to
remain active expires, and so on. As another example, a
determination as to whether or not at least a part of the non-firm
has been fulfilled. The part of the non-firm order may be fulfilled
if at least one of an agreement to execute a trade fulfilling the
at least the part of the non-firm order and another order has been
entered into, a trade fulfilling the at least the part of the
non-firm order has been executed, an act entering the submitter
into a trade fulfilling the at least part of the non-firm order and
another order has occurred, and so on.
[0276] In some implementations, a submitter of a firm order may be
prevented from making a change to a price and or quantity related
to a trade. In some implementations, a trade may be facilitated
without a negotiation regarding the price and or quantity. In some
implementations the price and/or quantity may be determined, at
least in part, based on information in a non-firm order indication,
a market, a machining order, a query, and/or nay other
information.
[0277] In some embodiments, a non-firm order submitter may be
asked/required to respond to confirmation requests within a limited
time period. Such a time period may include, for example 5 seconds,
half a second, 50 milliseconds, etc. In some implementations, such
a time period may be too small for a human to effectively confirm
an order. In such implementations, the confirmation process may be
computerized (e.g., a computer may determine if the order has been
cancelled by an originator or was fulfilled otherwise, and if not
may confirm the order). In some implementations the time period may
begin when a request for confirmation is transmitted, received,
and/or at any other time. In some implementations the time period
may include between about 10 milliseconds and about 1 second. A
time period may include a period of time having a beginning and an
end point. In some implementations, a confirmation may be received
within the time period, transmitted in the time period, and so
on.
[0278] In some embodiments, a non-firm order submitter may be
asked/required to abide by a set of procedures for treatment of
non-firm order confirmation requests. For example, a confirmation
requests transmitted to and/or received by non-firm order
submitters may have privacy policies applied to it. For example, in
some implementations, no humans may be allowed to view such
confirmation, but rather the process of responding to confirmation
requests may be computerized. Some implementations may include
receiving an indication of an agreement to prevent humans from
obtaining information regarding confirmation of non-firm orders
unless the non-firm order is confirmed. In some implementations,
restrictions on the storage of confirmation requests may be
imposed. For example, in some implementations, computer systems
that respond to confirmation requests and/or otherwise process
portions of such requests may be restricted from storing
information about the request, from displaying information about
the request, from transmitting information about the request, and
so on.
[0279] In some embodiments, information regarding rejections of
confirmation requests may be provided by a non-firm order
submitter. Such information, for example, may include documentary
proof that one or more circumstances in which a rejection is
allowed had occurred (e.g., a document showing that an order was
cancelled at a certain time, a document showing that an order was
fulfilled at a certain time, etc.). Such information may be used
for auditing purposes to ensure that the non-firm order submitter
is complying with restrictions established for the submission of
non-firm orders in some implementations. In some implementations,
if the non-firm order submitter violates such restrictions a number
of times, a fine may be assessed, the non-firm order submitter
maybe restricted from submitting non-firm orders, and/or any other
penalty may be provided. In some implementations, privacy policies
may apply to such information. Such policies may include preventing
humans from viewing the information, removing stored information
from one or more computer systems, preventing information from
being stored one or more computer systems and so on.
[0280] In some embodiments, when a query is made to a participant
to determine if a matching order is available (e.g., stored in an
OMS), the query may only present a portion of a quantity of a
non-firm order. For example, because there may be a chance that
part of the non-firm order may be fulfilled otherwise (e.g.,
through another exchange, etc.), the quantity associated by the
firm order may be reduced to reflect a quantity that is likely not
to be otherwise fulfilled within a desired period of time.
Accordingly, an offer to enter into a trade represented by a query
may include an offer to enter into a trade that fulfills only a
portion of the non-firm order. Some implementations may include
determining the portion to be presented. As a specific example, in
one implementation, if a non-firm order for 100 shares of X stock
is received, it may be determined that there is a 99% chance that
the submitter of the order will still be looking for 90 shares of X
stock in 30 seconds, so one or more queries maybe transmitted to
one or more participants for 90 shares of X stock. In various
implementations, the percentage of confidence, the amount of time,
and other characteristics may be altered. In some implementations,
such a determination may be made based on historic data regarding
the liquidity of a financial instrument, based on current market
conditions, based on open orders on other exchanges, and so on. In
some implementations, if the remaining portion of a non-firm order
is left unfulfilled when a confirmation request is sent to the
non-firm order submitter, one or more parties to the trade may be
given an option to present the other party with an offer to trade
the remaining portion. In some implementations, one or more
algorithms that include any number of variable inputs, some of
which are mentioned above, may be used to determine a portion to be
presented. In some implementations, a portion presented may include
a portion that is expected to be confirmed by a submitter of the
non-firm order. The portion expected to be confirmed may include a
portion that is likely to be available at a future time (e.g.,
based on an algorithm, based on historic information, based on a
guess, and so on).
[0281] Some embodiments may include one or more systems interacting
with a system configured to perform a method such as one described
above. Some implementations may include, for example, transmitting
an indication of a non-firm order (e.g., after entry into an
interface, receipt from an originator, etc,). Some implementations
may include receiving, an indication defining a matching firm order
to the non-firm order. The indication may be received from a system
configured to find matching orders in the content of a plurality of
order management systems, as described above. Some implementations
may include determining if the non-firm order is available for a
tread involving the matching firm order (e.g., has not been
canceled or otherwise fulfilled). If the order is available, some
implementations may include transmitting a confirmation (e.g.,
within a time period, according to various restrictions that have
been agreed to, etc.). The confirmation may include an indication
that a trade should take place without a negotiation about a price
and/or quantity. In some implementations, an interface or system
may prevent a negotiation from taking place by blocking one or more
communication medium, during the time period, for example.
Trading System Interaction
[0282] Some embodiments may include interaction with one or more
trading systems. In some implementations, such trading systems may
include alternative trading systems. An alternative trading system
may include a non-exchange trading venue. A non-exchange trading
venue may include, for example, a trading venue in which only
secondary trading of financial instruments occurs. An ATS may keep
a book of orders, determine matches among orders in the book, and
execute trades. In some embodiments, an ATS may include a system
that operates in accordance with Securities and Exchange Commission
regulation ATS and/or 242 Code of federal Regulations 300-303. FIG.
12 illustrates an example embodiment that may include interaction
with one or more ATS. Although examples are described with respect
to alternative trading systems, it should be recognized that other
embodiments may include any trading system, including exchanges. An
exchange may allow primary and secondary trading of financial
instruments. Similar to an ATS, an exchange may keep any number of
order books regarding any number of financial instruments and/or
orders. As illustrated in FIG. 11, a trading system 1201 (e.g., an
alternative trading system) may be coupled to one or more
participants 1203 through one or more communication networks 1205.
Such coupling is discussed above. Operation of example participants
and example trading systems are also discussed above. In some
embodiments, as illustrated, the trading system may be coupled to
one or more alternative trading systems 1207 through one or more
communication networks 1209. Each alternative trading system 1207
may store information about an order book 1211 associated with the
alternative trading system 1207. An order book may include a
collection of pending orders for one or more financial instruments.
An order book may include a queue of orders ordered based on some
priority, a database of orders keyed based on some priority, and/or
any other collection of orders with any other ordering or lack of
ordering. Each alternative trading system may be coupled to one or
more customers 1213 through one or more communication networks
1215. The customers may submit information about orders and/or
receive information about orders from the alternative trading
systems 1207 related to orders that may be and/or are stored in an
order book 1211. The customers may include computer systems,
people, and/or any other entity that may participate in trading.
Communication networks 1205, 1209, and/or 1215 may include the same
or different communication networks. An order book includes at
least one of a database, a queue, a list, and a collection.
[0283] FIG. 13 illustrates an example method 1300 that may be
performed in some embodiments. Method 1300 may be performed by one
or more computers, such as computers of trading system 1201.
[0284] As indicated at block 1301, method 1300 may include
receiving an indication of order that is pending in an order book
(e.g., 1211) of an alternative trading system (e.g., 1207). The
indication may be received from the alternative trading system
(e.g., 1207) through a communication network (e.g., 1209). The
order may define a financial instrument, a side of a trade, a
quantity, a price, and/or any other desired information. In some
implementations, an order may be pending in an order book of an
alternative trading system if the order is stored in the order
book. In some implementations, an order may be pending in an order
book of an alternative trading system if the order has not been
cancelled or otherwise fulfilled after it has been received by the
alternative trading system.
[0285] In some implementations, the indication of the order may
include an indication that the order is pending in the order book
of the alternative trading system. In some implementations, such an
indication may be treated similarly to a non-firm order as
described above. For example, in some implementations, the
indication may be an indication that if the trading system
identifies a matching order, the matching order may be fulfilled if
the order has not been cancelled or otherwise fulfilled by another
order. In other implementations, the indication may include an
indication that the order is firm with respect to the trading
system (e.g., 1201). For example, in such implementations, if a
matching order is identified by the trading system, a trade
fulfilling the order and the matching order may be facilitated
without regard for matching orders pending on the alternative
trading system.
[0286] As indicated at block 1303, method 1300 may include
determining that a matching order to the order is stored in an
order management system and that an offer to enter into a trade
that fulfills at least a portion of each of the order and the
matching order is accepted. The matching order may define an
opposite side of the trade for the financial instrument. Such a
determination may be similar to such determination discussed above
(e.g., with respect to non-firm order).
[0287] In some embodiments, making such a determination may include
transmitting a first query asking if a matching order to the order
is stored in an order management system, and transmitting a second
query asking if an offer to enter into a trade that fulfills at
least a portion of each of the order and the matching order is
accepted. Such querying may be similar to the querying discussed
above with respect to non-firm orders. Such querying may include
transmitting a single query as discussed above. In some
implementations, such querying may include identifying that the
order may not be executed by the trading system. In some
implementations, such querying may include identifying that the
order is associated with the alternative trading system. In some
implementations, such querying may include identifying that the
order is not a firm order. In some implementations, such querying
may include treating the order as if it were a firm order received
from a participant (e.g., not making any identification
otherwise).
[0288] In some embodiments, making such a determination may include
receiving an indication of an acceptance of the offer from a
participant. Receiving such an indication may be similar to
receiving an indication as discussed above with respect to non-firm
orders.
[0289] In some embodiments, the indication of the order may
identify a quantity of a financial instrument to be trading.
Determination may include determining if a matching order with a
smaller quantity is available. Similar to the non-firm orders
discussed above, determining the availability of orders for only a
portion of the quantity may result in fewer instances of an offer
being accepted, but a trade not being executed. In some
implementations, a determination of the portion may be made. Such a
determination may be made based on a likelihood of a quantity of
financial instruments related to the order being available, as
discussed above with respect to non-firm orders. In some
implementations, the portion may be based on an expected amount of
time to communicate with the alternative trading system. For
example, if the time is a long time, the opportunity that a
cancellation or other fulfillment of the order occurs during
transmission may be greater, so the portion may be smaller. If the
time is a short time, the opportunity that a cancellation or other
fulfillment of the order occurs during transmission may be less, so
the portion may be larger. The time may be based on a speed of
communication networks, a number of hops between source and
destination of transmission, a protocol's requirements for
confirmation, and/or any other information. Because alternative
trading systems generally operate at a much faster rate and with
much more bandwidth than typical computer systems, the portion may
be larger than in some non-firm order embodiments discussed above.
Other characteristics may be used to determine the portion and some
implementations may include a full quantity.
[0290] As indicated at block 1305, method 1300 may include
transmitting an indication that the trade should be executed to the
alternative trading system. Such an indication may be transmitted
through a communication network to the alternative trading system.
Such an indication may identify that a trade that fulfills at least
a part of the order pending in the order book and at least part of
the matching order should be executed. In some implementations,
such an indication may be transmitted in response to receiving the
indication of the acceptance as discussed above.
[0291] In some implementations, the alternative trading system may
execute the trade or otherwise facilitate execution of the trade if
the order is still available (e.g., if the order has not been
cancelled or otherwise fulfilled). In some implementations, the
alternative trading system may provide a information about the
execution of the trade to the trading system and/or to the
participant taking part in the trade. Such information may identify
whether the trade has been executed or not.
[0292] Some embodiments may include receiving orders from a
plurality of different alternative trading systems. Some
embodiments may include determining that respective matching orders
are stored in respective order management systems and that offers
to enter into respective trades for the orders are accepted. Some
embodiments may include transmitting respective indications that
respective trades should be executed to respective alternative
trading systems for each order. Such transmission may occur in
response to a determination regarding the respective matching
order.
[0293] FIG. 14 illustrates an example method 1400 that may be
performed by one or more alternative trading systems in some
embodiments. Such a method, for example, may be performed by an
alternative trading system that interacts with a trading system
performing a method similar to method 1300 or any other desired
method or system.
[0294] As indicated at block 1401, method 1400 may include
receiving an indication of one or more orders. An order may define
a side of a trade for a financial instrument. The indication may be
received, for example, from a customer 1213 of the alternative
trading system. Such a customer may include a sell side trader, any
other person or system that desires to trade a financial instrument
using the alternative trading system, and/or any other entity. The
indication may be received through a communication network (e.g.,
1215).
[0295] As indicated at block 1403, method 1400 may include storing
information about the one or more orders in an order book of an
alternative trading system. Storing such information may include
placing the information in a database, a list, a queue, and/or any
other structure in which order information may be stored. In some
implementations, storing such information may include placing the
information in a queue of orders for the financial instrument. In
some implementations, if a matching order is received by the
alternative trading system, the next order in the queue of orders
may used to trade against the matching order. Such an order book
may be associated with a matching engine that determines if
matching orders are pending and facilitates the execution of such
orders. A matching engine may include software and/or hardware that
facilitates determinations of matches between orders for a
financial instrument.
[0296] As indicated at block 1405, method 1400 may include
transmitting an indication of an order to a trading system (e.g.,
1201). Such an indication may be transmitted through a
communication network (e.g., 1209). The indication may be similar
to the indication received at block 1301 as discussed above.
[0297] As indicated at block 1407, method 1400 may include
receiving an indication of an acceptance of an offer to enter into
a trade that fulfills at least part of the order. The indication
may be received from the trading system. Such an indication be
similar to the indication transmitted at block 1305 discussed
above. The indication may identify information about a matching
order sufficient to allow the alternative trading system to execute
a trade involving the order and the matching order. The indication
may indicate that the trade should be executed. The indication may
indicate that the trade should be executed if one or more
conditions are met. In some implementations, such conditions may
include that the order is available. In some implementations, such
conditions may include that the order has not been cancelled and/or
that the order has not been previously fulfilled. In some
implementations, the matching order may fulfill only a portion of
the order. In other implementations, the matching order may fulfill
the entire order.
[0298] As indicated at block 1409, method 1400 may include
determining if the order is available. In some implementations,
determining if the order is available may include determining if
the order is in the order book (e.g., by searching the order book).
In some implementations, determining if the order is available may
include determining if the order has been cancelled. In some
implementations, determining if the order is available may include
determining if the order has been otherwise fulfilled (e.g., by a
previous order that was identified by the alternative trading
system). An order may have been otherwise fulfilled, for example,
if another matching order was previously submitted to the
alternative trading system before the matching order was identified
by the trading system.
[0299] Some embodiments may include determining if an acceptance is
identified by the trading system before a matching order is
identified by the alternative trading system. Some embodiments may
include determining if an acceptance is identified by the
alternative trading system before a matching order is identified by
the trading system. Identifying an order or an acceptance may
include ant action that makes the existence of the order or the
acceptance consequential. For example, a matching order may be
identified when an indication of the matching order is received by
the first alternative trading system, the matching order is stored
in the order book, a matching engine of the first alternative
trading system identifies that the matching order and the first
order match, the first order is removed from the order book, the
matching order is processed by the first alternative trading
system, and/or any other desired action occurs. As another example,
an acceptance may be identified when an indication of the
acceptance is received by the second alternative trading system, an
indication of the acceptance is transmitted from the second
alternative trading system to the first alternative trading system,
an indication of the acceptance is received by the first
alternative trading system, the indication of the acceptance is
processed by the first alternative trading system, and/or any other
desired action occurs.
[0300] In some embodiments, if an acceptance of an offer to enter
into a trade that fulfills at least part of the order is identified
by the trading system before a matching order to the order is
identified by the alternative trading system, the trade may be
executed. In some embodiments, if the matching order to the order
is identified by the alternative trading system before the
acceptance is identified by the trading system, a trade that
fulfills at least part of the matching order and the order may be
executed. In some embodiments, if a cancellation is identified
before either the acceptance or the matching order, neither trade
may be executed.
[0301] As indicated at block 1411, method 1400 may include
facilitating execution of the trade that fulfills at least part of
the order if it is determined that the order is available. Various
examples of facilitating execution are discussed herein. In some
implementations, the alternative trading system may execute the
trade.
[0302] Some embodiments may include providing information about the
execution to one or more customers, participants, the trading
system, and/or any other entity.
[0303] Some embodiments of a trading system (e.g., 1201), may
require and/or ask an operator of an alternative trading system to
accept certain restrictions before participating in a method such
as method 1300 and/or method 1400. In some such implementations,
the restrictions may include, for example, that if an acceptance of
a trade related to an order is identified through the trading
system before either an order is cancelled or otherwise fulfilled,
that the trade will be executed. The restriction may include that
the alternative trading system is used for non-proprietary trading
(e.g., at least some, primarily, to some degree, exclusively,
etc.). Some implementations may be limited to alternative trading
systems that meet some or all such requirements. Some
implementations of an alternative trading system may include
providing an indication of an agreement to such restrictions. Some
implementations of a trading system may include receiving such an
indication. Similar indications are discussed above with respect to
non-firm orders.
[0304] In some embodiments, an alternative trading system may
transmit information about all orders to a trading system, some
orders to a trading system, orders that meet certain
characteristics to the trading system and/or any other set or
subset of orders associated with the alternative trading system to
the trading system. For example, in some implementations, an
alternative trading system may transmit indication about orders
that are for financial instruments that are not traded frequently
through the alternative trading system to the trading system. In
other implementations, an alternative trading system may transmit
indication about orders over a particular size to the trading
system. In still other implementations, an alternative trading
system may transmit indications about orders for financial
instruments for which there are over a certain number of orders
pending in the alternative trading system to the trading system. In
other implementations, any set of characteristics may be used to
determine if any, all, and/or which orders should be transmitted to
a trading system. In some implementations, an operator of the
alternative trading system may establish such characteristics and
may control the alternative trading system to provide only such
desired information.
[0305] In some implementations, a trading system may have direct
and/or semi direct access to an order book of an alternative
trading system. Such access may include for example access to a
copy of the order book, access to a database or other
representation of the order book, and/or any other access to the
order book and/or a copy of the order book. The trading system may
obtain information about orders in the order book using such
access. In such implementations, the trading system may not wait
for indications from the alternative trading system, but may
proactively search the order book for order information. Such
searching may be performed for example, by querying a database,
querying a copy of an order book, transmitting a query to an
alternative trading system, and/or performing any other actions. In
some implementations, an alternative trading system may receive and
process a query. Processing a query may be part of a process for
responding to queries. In some implementations, an operator of an
alternative trading system may establish characteristics related to
order that may be obtained from the order book by the trading
system, similar to the characteristics discussed above. The trading
system may follow such characteristics in determining which orders
in the order book to obtain.
[0306] In some implementations, access to an order book may be
provide through an SSL link. In some implementations, access to an
order book may involve authentication to a trading system that
maintains the order book. Such authentication may include
authentication using a password, an IP address, a username, and/or
any other information.
[0307] In some embodiments, trading system may be coupled to a
plurality of other trading systems. The trading system may allow
the other trading systems to access orders received by the trading
system (e.g., accessing an order book, transmitting information
about orders in an order book, etc.). In some implementations, such
a trading system may determine which of the plurality of trading
systems first identifies a matching order to an order (e.g., base
don information received from one or more of the trading systems).
Based on such a determination, the trading system may execute a
trade that fulfills at least part of the order. The trade may also
fulfill at least part of a matching order that was identified first
by a trading system (e.g., one of the plurality and/or the trading
system).
[0308] It should be recognized that FIGS. 12, 13, and 14 are
provided as examples only and that other embodiments may include
different methods and/or systems.
Shot Clock
[0309] In some embodiments, a firm order submitter may have
restrictions placed on their actions during a period of time after
transmission and/or receipt of such orders. For example, for a
period of time after an indication of a firm order defining a side
of a trade is received, the submitter of the firm order may be
constrained from cancelling the firm order for a first period of
time. The amount of time may include an amount of time that may
allow a participant to be queried and respond. In some
implementations, such time may include, for example, between about
20 seconds and about 1 minute, about 5 seconds, and so on.
[0310] In some implementations, if the firm order, during that
first time period, is accepted, a trade fulfilling at least a
portion of the order may be facilitated, even if a request to
cancel the order has been received before the acceptance. If
queries are rejected during that time, the firm order may still not
be cancelled until the time period ends.
[0311] In some embodiments, after the first time period,
cancellation of the firm order may be allowed if a matching order
is not determined to be stored in an order management system and/or
if a participant is nor determined to accept the order before the
first time period expired (i.e., ends).
[0312] In some implementations, constraining may include limiting
the ability to perform an act of cancellation. For example,
constraining may include not allowing an action to occur in a time
period (e.g., preventing an action from occurring). Constraining
may include imposing a penalty for taking an action. Some
implementations, for example may fine a participant for cancelling
in the first time period. Some implementations may prevent a
cancellation in the first time period completely. Some
implementations may place restrictions on cancellation in the first
time period that are not placed after the first time period. In
some implementations, if a request to cancel is received during the
first time period, for example, it may be ignored. In some
implementations if a request to cancel is received during the first
time period, the request may be queued until the first time period
ends and may be processed at the end of the first time period
(e.g., the order may be cancelled if it was not accepted before the
end of the first time period). In some implementations,
cancellation may include cancelling an order, revoking an order,
invalidating an order, and so on. In some implementations, allowing
may include letting an act happen with a penalty or without a
constraint.
[0313] In some implementations, by constraining cancellation of the
firm order during the time period, information leakage about orders
pending in an OMS may be prevented. For example, in other
implementations, a firm order may be cancelled after either (a) it
is determined that no matching orders are present with any
participants or (b) all queries sent to participants with matching
orders are negatively responded to or a time period passes. In some
implementations, option (a) may take a short a mount of time (e.g.,
less than a second) and option (b) may take a variable amount of
time depending on how quickly the participants respond to queries.
Accordingly, if option (a) occurs, then the firm order submitter
will be able to cancel orders quickly, but if option (b) occurs
then the firm order submitter will not be able to cancel orders
until some time longer amount of time passes. By tracking such
time, the firm order submitter may be able to tell whether there
were matching orders pending or not based on how long the wait to
cancel was. By requiring a standard level (e.g., 20 seconds, 1
minute, etc.) before cancellation is allowed, firm order submitters
may not be able to tell the difference between these different
situations and therefore less information about the contents of OMS
may be leaked to firm order submitters. An indication of a
remainder of the time period may be shown to a submitter (e.g.,
though an interface). An indication of the end of the time period
may be shown to a submitter (e.g., through an interface). In some
implementations, a standard time period determined before an
indication of an order is received may be used as the first time
period.
[0314] In some embodiments, a time period during which cancellation
is constrained may be randomly determined for one or more firm
orders. Such random time period may simulate a time period for
reply of a participant. In some implementations, the time period
may be randomly determined between a minimum and maximum period of
time (e.g., between 5 seconds and 20 seconds, 1 minute, etc.). In
some implementations, such time period may be shown to the
submitter of the firm order (e.g., through an interface, as a
counting down clock, etc.). In some implementations, an indication
that the end of the period is reached may be sent to the submitter
(e.g., in addition to the time period, instead of the time period,
by changing a color, by playing a tone, through an interface, and
so on).
[0315] In some embodiments, an indication of an amount of time
remaining in the first time period and/or whether the first time
period has passed may be transmitted to one or more participants.
In some embodiments, the amount of time remaining in the time
period before the order may be cancelled may be shown to a
recipient of a query (e.g., a clock may be shown in an interface
window, a query may include the indication, etc.). In some
implementations, an indication that the time period has ended may
be shown to the recipient of a query (e.g., a window may change
colors, an icon may be shown, an amount of time remaining may be
shown, etc.). In some implementations, an indication of the query
may be removed from an interface after the end of the time period
(e.g., a window may be closed or removed from an interface). In
some implementations, the recipient may respond to the query after
the time period, but the firm order may be cancelled before such
response is processed. In some implementations, if the firm order
is cancelled, an indication of the query may be removed (e.g.,
removed from an interface, a window may be closed, etc.).
[0316] In some embodiments, an indication of whether the first time
period has passed may be provided to a submitter of the firm order.
Such an indication may include an amount of time until the time
period ends, an indication that the time period has not passed, an
indication that a time period has changed, and so on.
[0317] Some implementations may include a system configured to
interface with a system such as those describe above. In some
implementations, for example, information about a firm order may be
accepted (e.g., through an interface). In some implementations, an
indication of the firm order may be transmitted (e.g., to a system
configured to find matching orders to firm orders in the content of
a plurality of order management systems). Some implementations may
include providing an indication of a time period during which the
firm order may not be cancelled (e.g., through an interface, to a
trader that submitted information about the firm order, and so on).
Some implementations may include receiving an indication of the
time period (e.g., from a system to which the order was submitted,
etc.). In some implementations the indication may include a color
coding of an interface, an indication of an amount of time
remaining in the first time period, and so on.
[0318] In some embodiments, a cancellation of an order may be
constrained as discussed above and/or in any other way. When an
order is submitted, some embodiments may determine whether
cancellation should be constrained for that order. Determining
whether cancellation should be constrained may include determining
whether a number of orders has been submitted prior to the order.
The number of orders may include orders that meet certain criteria,
some of which are discussed below. In other implementations, a
determination about cancellation constraining may be randomly made.
For example, each order may have a 10% chance of having
cancellation constrained. A random number generator or other method
of random selection may determine that the order should or should
not have cancellation constrained. It should be recognized that any
method of making such a determination may be used and that examples
are non-limiting.
[0319] In some implementations that constrain cancellation of an
order after a number of orders have been submitted may keep a count
of orders submitted. For example, such embodiments may constrain
cancellation of every 20.sup.th order submitted. In some
implementations, Cancellation of the other (e.g., non 20.sup.th
orders) orders may not be constrained. In some implementations,
cancellation of the other orders may not be constrained unless a
matching order to the other orders has been identified (e.g., in an
order management system). Such constraining for the other orders
may be for a period of time that gives the participant associated
with the order management system a chance to accept or reject the
order. Cancellation of the order (e.g., the 20.sup.th order) may be
constrained even if a matching order is not identified.
Accordingly, a submitter of the order may not know whether a match
is found based on whether cancellation is constrained.
[0320] In some implementations, a number of other orders may be
submitted. The other orders may be treated as described elsewhere
herein. In some implementations, the number may be any desired
number. For example, the number may be 20 orders. In some
implementations, the number may be a random number. The number may
be determined periodically. The number may be determined randomly.
The number may be determined to simulate random market actions.
[0321] In some implementations, the other orders may all be
submitted from a same submitter (e.g., the same submitter as the
order (e.g., the 20.sup.th order)). Each submitter may be tracked
to determine whether the number has been submitted by the
submitter. In other implementations, the number may be submitted
from different submitters.
[0322] In some implementations, the other orders may include all
orders submitted (e.g., by one submitter, by many submitters). In
other implementations, the other orders may include orders that
meet one or more criteria. For example, in some implementations,
the other orders may include only orders that have not been
fulfilled (e.g., within a time period after submission). In some
implementations, the other orders may include orders for which at
least one of (i) no matching order has been found in an order
management system and (ii) no offer to enter into a trade for the
order was accepted.
[0323] Some embodiments may include determining that no matching
order is stored in the order management system associated with any
of the plurality of participants for one or more of the other
orders. In such an implementation, each of such other orders may
not have their cancellation constrained. In some such
implementations, each of such other orders may have their
cancellation constrained only until the determination is made but
not past that point. Such a determination may take about 100
milliseconds or less.
[0324] In some implementations, a determination of whether a
matching order is stored in an order management system may be made.
In some implementations, a database of orders may be searched to
make such a determination. In some implementation, such a
determination may be made, for example, based on whether an
indication that a matching order is stored in the order management
system has been received. In some implementations, a participant
may be queried as discussed elsewhere herein. In some
implementations, the participant may be configured to transmit an
indication that a matching order is stored in an order management
system. Such an indication may be sent regardless of whether an
offer has been accepted, unlike some embodiments discussed
herein.
[0325] In some embodiments, all orders may have cancellation
constrained for an initial determination to be made. The time to
make the determination may be minimal (e.g., less than about 100
ms). In some implementations, to make the determination,
participants may be queried. Each participant may respond with an
indication that a matching order is or is not stored in an order
management system associated with the respective participant. In
some implementations, a lack of response may be an indication of a
default value (e.g., no response before the end of some initial
period means no matching order is stored). In some implementations,
if a determination is made that any of the participants has a
matching order stored in an order management system, cancellation
of the order may be constrained for a period of tie to allow the
participant to accept the order if desired. If a determination is
made that no matching orders are stored, then cancellation may be
allowed after that determination is made. In some implementations,
that cancellation may be constrained as if the determination that
the matching order was stored was made in some circumstances (e.g.,
if such a constraining decision is made as described above, if a
number of prior orders have been submitted, etc.). Such
constraining may make it difficult for a submitter to determine
whether a matching order was found or not.
[0326] As mentioned above, in some embodiments, if it is determined
that an order is stored in an order management system of a
participant, cancellation may be constrained for a time period so
that the participants may respond to an offer. The time period may
be about 5 seconds. In some embodiments, if it is determined that
no such order is stored in the order management system, then
cancellation may not be constrained except under certain
circumstances, as discussed herein.
[0327] Some embodiments may include determining that none of the
plurality of participants accepts an offer to enter into the
respective first trade defined by one or more of the number of
orders. Such a determination may be made based on whether an
indication that such an acceptance to an offer has been received
(e.g., from a participant as discussed above).
[0328] In some embodiments, the other orders may be limited to
orders with one set of criteria or more than one set of criteria in
any combination. For example, in some embodiments, the number may
be accepted orders, order without matching orders, and orders with
matching orders that are unaccepted. In other implementations, the
orders may be any subset or other set of such orders. Orders that
do not meet such criteria, in some implementations, may not be
included in a count of orders to determine if a constraint should
be made to cancellation of the order.
[0329] As discussed above, if cancellation is determined to be
constrained, cancellation may be constrained during a first time
period and allowed after the first time period. As discussed above,
the time period may be a random time period. In other
implementations, the time period may be a fixed time period (e.g.,
about 5 seconds).
[0330] In some implementations, a determination that no orders
matching orders are stored in order management systems associated
with a plurality of participants may be made before an end of the
first time period. Such a determination may have no affect on the
ending of the time period. Rather, in some implementations, the
constraining may continue despite there being no matching orders
available for the order.
[0331] It should be recognized that various examples above are
non-limiting and other methods of constraining orders may be used.
Such constraining may limit an order submitter's ability to
determine whether a matching order exists based on his or her
ability to cancel an order.
Miss Alternatives
[0332] In some embodiments, it may be possible for one party (e.g.,
a buy side participant) to miss an opportunity to trade with
respect to an order from another party (e.g., a firm order from a
sell side participant). For example, in some situations, a buy side
participant may be occupied or away from a desk when an indication
of an order from an order submitter is provided to the buy side
participant (e.g., through a computer interface). In such a
situation, the firm order may be cancelled, fulfilled, or otherwise
become inactive before the buy side participant has an opportunity
to respond to the indication. In some embodiments, a party, such as
the buy side participant in the example, may be provided with an
opportunity to submit information related to a trading intention
for the financial instrument after such a missed opportunity. In
some embodiments, submitting such information may allow a party to
use the information gained by the receipt of the indication of the
order. In some embodiments, submitting such information may limit
opportunities for information leakage about the party's
interests.
[0333] In some embodiments, for example, a party that has missed an
opportunity to engage in trading related to an order for a
financial instrument may submit a request to engage in trading
related to the financial instrument and/or a substitutable
financial instrument as described else where herein. In some
implementations, the request may indentify the financial instrument
or instruments, the submitter of the order, a quantity of the
financial instrument, a time period, a price, and/or any other
order characteristics. In some implementations, an interface may be
provided to the party so that the party may identify any desired
trading characteristics. In various embodiments, some further
examples of such characteristics may include whether or not the
order must be from the same submitter as the original order,
whether the order must be a firm order, a time that the request
should remain in force, a maximum and or minimum price for the
trade, a pricing method for the trade, and/or any other desired
information. In some embodiments, a trading system may receive such
a request from a participant system. In some embodiments, if an
order that satisfies the order characteristics is received during
the time period, then a trade fulfilling the order may be executed
on behalf of the party that submitted the request without verifying
the request with the party.
[0334] Various embodiments may include a system configured to give
a party such opportunities, a method of giving such opportunity, a
set of instructions that when executed cause a system to perform
such a method, and so on. In some embodiments, such a system or
method may allow a party that has missed an opportunity to engage
in treading for an order to still take advantage of some
information without risk of significant information leakage. For
example, in some circumstances, there may be a correlation between
a first order for a financial instrument being active and a later
order for the same financial instrument being active within a
period of time In some embodiments, a party may take advantage of
the information that the first order was active at some point to
submit a request to engage in trading if another or the same order
becomes active again in some period of time.
[0335] In some embodiments, if multiple parties would like to take
advantage of such trading opportunities, various methods may be
used to determine which party may be given priority. For example,
in some methods, a FIFO method may be used, a LIFO method may be
used, a method based on size of an order may be used, a method
based on price may be used, and/or any other method may be used.
Various priority determining methods are described elsewhere
herein.
[0336] In one example, a first order may be submitted. The order
may be shown to a participant. The presentation may include
presenting a time period during which the first order may not be
cancelled. The time period may expire and the order may be
cancelled before the party has an opportunity to respond to the
indication. The party may then be provided with an indication that
the order is no longer available and may be provided with another
possible opportunity to engage in trading for the financial
instrument. The party may submit a request to execute a trade for
an order with a desired set of characteristics becomes active
during a time period. The original order submitter may again submit
the order and execution of the order may be facilitated if the
order becomes active again in the period of time. In some
implementations, other orders for same or different price,
quantity, originators, and/or other characteristics may also be
used. The party may be notified of the order execution.
[0337] Although some embodiments above may be discussed with
respect to a human trader being involved in trading, it should be
recognized that various embodiments may not include such a human
trader and may instead be performed by computer systems. For
example, in some embodiments a computer system may be configured to
perform algorithmic trading and respond to various order
indications and trading opportunities. In another example, some
computer systems may be configured to automatically send a request
to engage in certain trading opportunities as a default. In another
example, some computer systems may be configured to provide a
single click interface allowing a human trader to indicate that the
computer system should engage in the trading opportunity. As yet
another example, in some embodiments, a computer system may allow a
trader to establish default values for order characteristics and/or
change or enter characteristics through an interface.
[0338] Some embodiments may include receiving an indication of an
order. Various examples of such receiving and of indications and of
order types (e.g., firm order, non-firm order, etc.) are described
elsewhere. In some embodiments, such an order may be received from
an order submitter (e.g., a sell side participant, a buy side
participant, etc.) In some embodiments, an order may define a side
of a trade for a financial instrument. In some embodiments, the
indication may indicate that the order is an active order. An
active order may include an order that has not been cancelled or
otherwise fulfilled. In some implementations the indication may
identify a quantity of the financial instrument. In some
embodiments, the indication may be received by a trading system
from a computer system (e.g., a sell side participant system).
[0339] Some embodiments may include determining that a matching
order to the order is stored in an order management system
associated with a participant. Examples of order management systems
and how such orders may be determined to match other orders are
described elsewhere. In some embodiments such a determination may
be made by a trading system and/or a participant system.
[0340] Some embodiments may include constraining cancellation of an
order. Various examples of such constraining are given elsewhere
herein. In some embodiments, such constraining may occur for a
period of time. Some embodiments may include determining such
period of time. In some embodiments, making such a determination
may include randomly making such a determination. Various examples
of determining the time are given elsewhere herein. In some
embodiments, such constraining may be done to the order for which
the indication was received. In some embodiments, constraining may
be performed by a trading system.
[0341] Some embodiments may include providing an indication of an
order to a participant. The indication may be provided to a buy
side participant, for example. In some implementations, the
indication may identify a time period during which cancellation is
constrained. Various examples of participants, indications, and
providing indication of orders to participants are given elsewhere
herein. In some embodiments, the indication may be provided by a
trading system and/or a participant system.
[0342] Some embodiments may include determining that the order is
no longer an active order. In some implementations, determining
that the order is now longer an active order may include
determining that the order has been cancelled, determining that the
order has been at least partially fulfilled, and/or making any
other desired determination. In some embodiments such a
determination may be made by a trading system.
[0343] Some embodiments may include determine that the firm order
has been cancelled (e.g., by a submitter of the order). Determining
that an order has been cancelled may include determining that a
cancellation request has been received. In some embodiments, the
cancellation of the order may take place after a time period.
Various examples of cancellation and cancellation timing are given
elsewhere herein.
[0344] Some embodiments may include providing an indication that
the order is no longer active. In some embodiments, providing such
an indication may include providing and indication the order has
been cancelled. Such an indication may be provided to a participant
to which the indication of the order was provided. In some
implementations, such an indication may be provided in response to
determining that the order has been cancelled and/or that an order
is no longer available. In some embodiments such an indication may
be provided by a trading system and/or a participant system.
[0345] Some embodiments may include receiving an indication to
execute a trade. The trade may include a same and/or similar trade
as the trade indicated by the order provided to the participant as
described above. In some embodiments, the indication may identify a
time period during which such an execution is requested. In some
embodiments, such an indication may be received after a
determination that the order is no longer active is made. In some
embodiments, such an indication may be received after the
indication that the order has been cancelled has been provided. In
some embodiments, such an indication may be received from a
participant. In some embodiments, such an indication may be
received by a trading system from a participant system. In some
embodiments, such an indication may include an indication of a
quantity of the financial instrument and/or a replaceable financial
instrument. In some implementations the quantity may be at least a
portion of the quantity defined by the order described above. In
various embodiments, the indication may define various
characteristics of an order.
[0346] Some embodiments may include receiving an indication of an
order. The indication of the order may include an indication of the
same order previously received as discussed above. In some
implementations, it may be a different order. In some
implementations, the order may be for a same or different quantity
of a same or different financial instrument (e.g., a financial
instrument that is replaceable for the financial instrument). As
described elsewhere, in some implementations one financial
instrument may be replaceable for another financial instrument. In
some implementations, the indication may identify that the order is
an active order. In some embodiments, the order may be the same
order as described above, another order, an order from the same
order submitter as the order above, an order from a different order
submitter, an order with a same quantity, an order for a different
quantity, and so on. In some implementations, the indication may be
received during a time period identified by the submitted order as
described above. In some embodiments, the indication may identify a
quantity of the financial instrument and/or a financial instrument
that is replaceable to the financial instrument. In some
implementations, the quantity may include a quantity that is at
least as great as the at least the portion of the quantity
identified by the indication to execute a trade as described above.
In some embodiments, the order may include various other
characteristics that may or may not match the characteristics of
the indication to execute the trade described above. In some
embodiments, the indication may be received by a trading system
and/or a participant system.
[0347] In some embodiments, a determination about whether the
characteristics of the order match characteristics indicated by the
indication to execute a trade match may be made. In some
embodiments, such characteristics may include a price or other
price mechanism, a quantity, a financial instrument, and so on.
Various price mechanisms are described above. In some embodiments
such a determination may include a determination that the order and
the request match. In some embodiments, such a determination may be
made by a trading system and/or a participant system. Various
examples of making determinations regarding matches are described
elsewhere.
[0348] Some embodiments may include facilitating execution of a
trade. The execution may be facilitated without verification from
the participant that submitted the indication to execute the trade
described above. In some embodiments, the facilitation may take
place in response to receiving the indication of the order.
Facilitation may be performed in response to determination that the
orders match. Various examples of facilitation execution are
described elsewhere herein. In some embodiments such facilitation
may be performed by a trading system and/or a participant
system.
[0349] Some embodiments may include providing an indication that a
trade has been executed. For example, such an indication may be
provided to each party involved in a trade. Various examples of
providing such an indication are given elsewhere herein.
[0350] Various actions described may be performed by one or more
trading systems, participant systems, and/or any other computing
systems.
[0351] Some embodiments may include receiving an indication of an
order. In some embodiments, the indication may be received by a
participant system (e.g., from a trading system). In some
embodiments, the order may be an order for which a matching order
is present in an order management system associated with the
participant system.
[0352] Some embodiments may include providing an indication of the
order. In some embodiments, such a providing may include a display
made to a trader (e.g., a buy side trader). Such a providing may be
performed by a participant system.
[0353] Some embodiments may include receive an indication that the
order is no longer an active order. Such an indication may be
received by a participant system (e.g., from a trading system).
[0354] Some embodiments may include providing an indication that
the order is no longer an active order. In some embodiments, such
providing may include a display made to a trader. Such providing
may be performed by a participant system.
[0355] As described elsewhere herein, participants system may
display various information to traders as desired. Such information
may include status of trades, clocks for time remainders, and so
on.
[0356] Some embodiments may include receiving an indication to
execute a trade. Such an indication may be received by a
participant system. In some implementations, a trader may enter
such an indication through an interface. Such an indication may
include various characteristics of a trade. In some embodiments,
such characteristics may be entered by a trader through an
interface.
[0357] Some embodiments may include transmitting an indication to
execute the trade if an order for the financial instrument becomes
active. In some embodiments, such an indication may be transmitted
to a trading system form a participant system.
[0358] Some embodiments may include receiving an indication that
the order for the financial instrument became active and that in
response, the trade was executed. In some embodiments, such an
indication may be received from a trading system by a participant
system.
[0359] Some embodiments may include providing an indication that
the trade has been executed. Such providing may include displaying
to a trader. In some embodiments, a participant system may perform
such providing.
[0360] It should be recognized that while the above description may
include examples that provide and/or receive information from a
human trader, various other embodiments may not include any trader
at all. For example, various embodiments include various
algorithmic trading systems Accordingly various information may be
received and/or provided to a computer system that implements a
trading algorithm and/or any other computer system. In various
implementations, such a system may perform any desired actions.
Fund Participants
[0361] In some embodiments, one or more funds (e.g., mutual funds,
bond funds, stock funds, index funds, actively managed funds,
commodities funds, exchange traded funds, etc.) may
participate.
[0362] Some such funds may use OMS systems and may participate in a
similar way as other participants with OMS systems, as described
above (e.g., buy side participants). Other fund participants may
not use such OMS systems and/or may not want to provide access to
such OMS systems. In some embodiments, a publication of a fund
composition may be used to determine what types of queries and/or
other information to transmit to fund participant.
[0363] In some embodiments, an indication of a composition of a
fund may be received (e.g., over a communication network, as a
printed publication of a fund prospectus, and so on). The
composition of the fund may include a plurality of financial
instruments that are owned by a fund (e.g., a listing of stocks
owned by a mutual fund, and so on). The composition may include an
amount of each financial instrument owned or desired to be owned by
the fund. The composition may include a target percentage of the
fund made up of each financial instrument. The composition may
include a snap shot view of the fund at a particular time, at a
desired future time, and so on.
[0364] The indication of the composition may include any
information from which at least a portion of a composition of a
fund may be determined. For example, a composition of a fund may
include a written statement of the desired composition of the
target composition of the fund, such as may be found in a published
prospectus. In some embodiments, an indication of a composition may
be obtained directly from an operator of a fund, from a website
that tracks fund information, from a third party, and so on. The
indication may include information from a plurality of sources that
taken together identify the composition.
[0365] An interest in trading related to a particular financial
instrument may be approximated/determined based on the composition
of the fund and/or any other information (e.g., price changes). For
example, in some implementations, one or more orders to buy or sell
a financial instrument may be received. For one or more such
orders, a determination may be made if the financial instrument
defined by the order is part of the composition of the fund. Such a
determination may include comparing the financial instrument to the
composition (e.g., searching the composition for the financial
instrument, searching a database, and so on). If the financial
instrument is part of the composition of the fund, a query may be
transmitted asking if a fund operator (e.g., anything or one that
has the capacity to enter into trades on behalf of the fund)
desires to enter into a trade fulfilling the order and a matching
order for the financial instrument. Transmitting the query may in
some implementations include querying an order management system of
the fund as described above, transmitting a query to a trader or
machine operated by a trader, and/or soliciting an acceptance in
any other way.
[0366] In some implementations, queries may only be sent to a fund
if the composition indicates that the fund holds a certain amount
of a financial instrument. For example, a query asking if the fund
is interested in a trade to sell a financial instrument may only be
sent to the fund if the composition indicates that the fund holds
enough of the financial instrument to fulfill the order. In some
implementations, a query may only be sent if the fund holds some
other threshold amount of the financial instrument (e.g., a million
shares), holds some minimum percentage of the threshold instrument
(e.g., 10% of the makeup of the fund is the financial instrument),
the financial instrument is one of the top number of financial
instruments that make up the fund (e.g., 1 of the top 10
constituents of the fund), and/or any other set of filters may be
used.
[0367] In some implementations, changes in price of one or more
financial instruments in the composition of a fund may be used to
determine whether to query a fund regarding a trade. For example,
in some embodiments, a change to a price of a financial instrument
defined by an order may be determined. Such a change in price may
be based on the time when the composition was received, a time that
the composition identifies and so on. Such a change may be
determined based on historic and current information about a price
of the financial instrument (e.g., such information may be received
from a third party such as a stock tracker, a marketplace, and so
on).
[0368] In some embodiments, based on a determined change in price,
a determination of whether an operator of a fund is likely to be
interested in a trade that matches the trade defined by a received
order may be made. The operator may be likely to be interested if a
current situation indicates that there is a heightened chance that
an operator would accept an offer for a trade. Operators may
attempt to keep a fund close to or at the composition levels based
on value of the holding of each financial instrument in the
composition, so when a price increases or decreases the relative
value of the holdings of that financial instrument may be changed
and a sale may be desired to return the composition to the target
level. Determining if the operator is likely to be interested in
the opposite side of the trade for the financial instrument
includes determining if the price change includes an increase or a
decrease in price. For example, if a price change includes an
increase in price, then the operator may be determined to likely be
interested if the order includes a sale of the financial
instrument. If the price change includes a decrease in price, then
the operator may be determined to be likely to be interested if the
order includes a buy of the financial instrument. Some
implementations may take into account changes in the prices of
other financial instruments in the composition with respect to the
financial instrument. Some implementations may take into account a
relative change in price of the financial instrument with respect
to changes in price of other financial instruments in the
composition (e.g., to determine if a sale or purchase may be needed
to return a composition to a target level).
[0369] If the operator of the fund accepts an order, an indication
of an acceptance may be transmitted from the fund. The acceptance
may be received by some embodiments. As described above, a trade
may be facilitated in response to receiving the acceptance.
Risk Pools
[0370] Some embodiments may perform/allow filtering of participants
based on the participants' prior actions. For example, in some
embodiments, when a participant is queried regarding an order, the
response of the participant may be tracked. Participants may be
arranged into groups based on the frequency of positive responses
to queries. For example, participants may be arranged into groups
as follows: participants with 100% to 75% positive response rate,
participants with 75% to 50% positive responses, and participants
with less than 50% positive responses. It should be recognized that
these groups are given as an example only, and that other
embodiments may include any number of groups and any arrangement of
groups. Such groups may be referred to as risk pools. Submitters of
orders may indicate that queries regarding the orders should be
sent to participants in one or more of the groups and/or not to
participants in one or more of the groups. Because sending a query
to a participant reveals information about an order, the submitter
of the order may use the response rate to limit exposure of that
information to participants that are historically likely to respond
positively.
[0371] In some embodiments, a plurality of sets of queries may be
transmitted to a plurality of participants. Each set of queries may
ask the plurality of participants about a respective order. Each
query of each set of queries may ask a respective participant if a
respective matching order to the respective order is stored in a
respective order management system associated with the respective
participant and if the respective participant accepts a respective
offer to enter into a respective trade that fulfills at least a
portion of each of the order and the respective matching order. If
the participant accepts the offer, a positive response/indication
of the acceptance may be received. In some implementations, if the
matching order is stored in the order management system, an
indication of that storage may be received. Accordingly, in some
implementations, it may be determined from this information if the
matching order is stored in the order management system, and if it
is stored, whether or not it was rejected or accepted. If the order
is accepted, some implementations may include facilitating
execution of the trade. In other embodiments, as described above,
queries to order management systems may not be used, but rather
databases may be searched or any other methods may be used.
[0372] In some embodiments, the plurality of participants may be
assigned to one or more risk pools based on the results of the
querying. Each risk pool may correspond to at least one rate of
positive responses to offers to enter into trades. The rate of
positive responses may, for example, include a comparison (e.g., a
ratio, a percentage, etc.) between a number of positive responses
and a number of offers (e.g., offers with a characteristic, offers
associated with a submitter, and so on). Such a rate, for example,
may correspond to offers made to participants if the matching order
is stored in the order management system, to all queries sent to
participants, and/or to queries/orders having one or more
characteristics. In some implementations, a rate of positive
responses includes a rate of positive responses to all offers to
enter into a trade when a matching order is stored in an order
management system. In some implementations, a rate of positive
responses includes a rate of positive responses to offers to enter
into a trade when a matching order is stored in an order management
system and a query is associated with the submitter. In some
implementations, a rate of positive responses includes a rate of
positive responses to offers to enter into a trade when a matching
order is stored in an order management system and associated with
an order having at least one similar characteristic to the order.
In some implementations, such a characteristic may include a
financial instrument, a quantity range, a price range, a market
capitalization, an industry, and a financial instrument type.
[0373] In some embodiments, a submitter of an order may be allowed
to identify one or more risk pools to which queries regarding the
order should and/or should not be transmitted. For example, a
submitter may use an interface to identify such information, may
transmit an electronic message identifying such information, may
establish default risk pools that identify such information, and/or
may identify such information in any other way. Some
implementations may include providing an interface through which
the one or more risk pools may be selected. Queries regarding the
order may subsequently be made to participants in accordance with
such information.
[0374] Some embodiments, may include submitting one or more orders
and/or indications identifying risk pools. Some embodiments may
include receiving an indication of a plurality of risk pools. Such
an indication may be presented to a person though an interface to
allow selection from among the plurality of risk pools. Some
implementations may include receiving a selection of at least one
risk pool (e.g., through an interface, through an electronic
message, etc.). Some implementations may include transmitting an
indication that participants associated with the at least one
selected risk pool should be queried regarding an order (e.g.,
through an electronic message, etc.). Some implementations may
include receiving an indication that execution of a trade
fulfilling an order has been facilitated. Some implementations may
include providing an indication of such a facilitation (e.g., as a
display on an interface to a person, as an electronic message,
etc.).
[0375] It should be recognized that risk pools may be combined with
any other implementations and/or concepts described herein and that
any methods and/or apparatus may be used in various
embodiments.
Substitutability
[0376] In some embodiments, one financial instrument may be
substitute for another financial instrument. A substitutable
financial instrument may include an instrument that is replaceable
for another instrument (e.g., fulfills a same reason for existence,
has similar characteristics, and so on). For example, if an order
is for a first financial instrument, a second financial instrument
may be used to fulfill the order instead of the first financial
instrument. The order may be an order pending in an order
management system, an order submitted by a sell side participant,
and/or any other type of order. For example, a participant that
desires to buy stock in a soda company may enter an order for
Coca-Cola; however, the order may be fulfilled with stock for
PepsiCo that fulfills the desire to buy stock in a soda company,
bonds in Coca-Cola, derivatives related to Coca-Cola, a futures
contract for soda, and so on. Various criteria/tests may be used to
establish if one financial instrument is substitutable for another
financial instrument. Participants may identify which financial
instruments are substitutable for each other. Exchange rates
between financial instruments may be established based on prices
and/or desires of the various participants.
[0377] As described above, some embodiments may include receiving
an indication of an order. The order may define a side of a trade
for a first financial instrument. The indication may include an
identification of one or more other financial instruments that may
be substituted for the first financial instrument to fulfill the
order. The identification may include identification of
characteristics of such other financial instruments (e.g., market
cap, industry, type of instrument, etc.), a specific enumeration of
the other financial instruments, and/or any other information from
which such other financial instruments may be determined. In some
implementations, such characteristics may include an industry, a
type of financial instrument, and a market capitalization, a
company, and/or any other characteristics.
[0378] As discussed above, some embodiments may include determining
if a matching order is stored in an order management system
associated with a participant. As described above, such
determination may include transmitting one or more queries. The
matching order may be for the first financial instrument or may be
for another financial instrument. For example, in some
implementations, the matching order may be for a different
financial instrument that is substitutable for the first financial
instrument. The order management system may identify what financial
instruments are substitutable for the financial instrument for
which the matching order is for. For example, the first financial
instrument may be stock in Coca-Cola and the matching order may be
for stock in PepsiCo. The order management system may identify that
Coca-Cola is substitutable for PepsiCo. Such identification may be
made directly through a list of substitutable instruments, may be
made through asset of characteristics that identify substitutable
instruments, and/or in any other way.
[0379] In some implementations, if an order is for a quantity of a
first financial instrument, and a trade fulfilling the order is for
a substitutable financial instrument, the quantity of instruments
traded and/or the price at which the instruments are traded may not
be the same as those identified by the order for the first
financial instrument. For example, an order for 100 shares of
Coca-Cola may be fulfilled by a trade for 50 shares of PepsiCo. The
quantity and/or price at which a trade takes place may be
identified by an order management system (e.g., the OMs may
identify a set of exchange rates between the financial
instruments). The quantity and/or price at which the trade takes
place may be identified from a market price (e.g., the market price
of the two financial instruments may be used to determine an
exchange rate between them, the most recent trade price, a current
bid and/or offer, a midpoint price, etc.). The price and/or
quantity may be determined in any other way.
[0380] As discussed above, a trader may be presented with an offer
to enter into a trade. The trade may include a trade for the first
financial instrument even if the matching order is for a different
financial instrument. In other implementations, the trade may
include the other financial instrument even if the order is for the
first financial instrument. The trader may accept or reject such an
offer.
[0381] In some embodiments, an acceptance of the order may be
received (e.g., if the trader accepts the offer). The acceptance
may indicate that a trade fulfilling an order should be executed.
In response to receiving the acceptance, execution of a trade
fulfilling an order may be facilitated.
[0382] From the point of view of a participant with an order in an
order management system, an indication may be received for an order
for a first financial instrument. A determination may be made that
a matching order for a second financial instrument that is
substitutable for the first financial instrument is stored in the
order management system. A trader may be solicited for a binding
acceptance to enter into a trade that fulfills the order and the
matching order. Some implementations may include providing an
interface through which the binding acceptance may be requested,
transmitting a request for the binding acceptance (e.g., through an
electronic message, and/or any other method of soliciting a binding
acceptance. The trade may be for the first financial instrument
even though the matching order is for a different financial
instrument. In other implementations, the trade may be for the
other financial instrument even though the order is for the first
financial instrument. Only if an acceptance is received (e.g.,
though an interface, from the trader, etc.) execution of the trade
may be
[0383] It should be recognized that substitutability may be
combined with any other implementations and/or concepts described
herein and that any methods and/or apparatus may be used in various
embodiments.
Order Grouping
[0384] In some embodiments, a trading system (e.g., an alternative
trading system), may receive an indication of a first order. The
first order, for example, may be received from a participant (e.g.,
a buy side participant, a sell side participant, a proprietary
trading system, and so on). A participant may include any system
that submits order information and/or receives order information
from the trading system. In some implementations, the first order
may define a desire by the participant, a trader and/or another
person or program associated with the participant (e.g., a
customer, an algorithm, etc.).
[0385] In some embodiments, a trading system may receive an
indication of one or more second orders. The second orders may each
define respective trades that the participant is willing to enter
into if entering into one or more such trades may bring about the
execution of the first trade.
[0386] In one example, a participant may desire to purchase stock
in company X. The first order, for example, may include an order to
buy a number of shares of the stock in company X. The participant
may be willing to buy stock in company Y or company Z as well, but
only if the purchase of the stock of company Y or the stock of
company Z is made to bring about the purchase of the stock in
company X. The second orders, for example, may include orders to
purchase either a number of shares of stock in company Y or a
number of shares of stock in company Z. It should be recognized
that in some implementations, more than one order of the second
orders may be entered into (e.g., company Y and/or company Z rather
than company Y or company Z).
[0387] It should be recognized that an indication of a first order
may be anything from which the first order may be derived (e.g., an
electronic message, multiple packets, a message identifying
characteristics of the first order, a message identifying the first
order directly, etc.).
[0388] It should be recognized that an indication of a second order
may be anything from which one or more second orders may be derived
(e.g., an electronic message, multiple packets, a message
identifying characteristics of one or more second orders, a message
identifying one or more second orders directly, etc.). In some
implementations, separate messages may be received to identify one
or more second orders of a larger plurality of second orders. In
some implementations, a single message may be received that
identifies a plurality of second orders.
[0389] In some implementations, second orders may be identified by
characteristics of financial instruments. For example, an
indication of a plurality of second orders may include an
indication of one or more types of financial instruments (e.g.,
bonds, stocks, etc.), an indication of one or more industries
(e.g., financial services, manufacturing, etc.), an indication of
one or more regions (e.g., U.S. companies, European companies,
etc.) an indication of one or more market capitalizations (e.g.,
small cap, large cap, etc.), and/or any other indication of any
other characteristics.
[0390] In some embodiments, a trading system may determine one or
more second orders based on the indicated characteristics. For
example, a trading system may determine that bonds for company Y
and bonds for company Z meet satisfy the characteristics.
Accordingly, in such an example, an order regarding company Y and
company Z may be determined.
[0391] In some embodiments, an indication of a relationship
between/among second orders may be received. For example, a
relationship may include that only an exclusive OR, an inclusive
OR, and AND, and/or any other type of regular expression should be
applied the second orders to determine which if any second orders
may be satisfactory to the participant.
[0392] In some embodiments, a quantity of financial instruments
associated with the first order and the one or more second orders
may be related. For example, in some implementations, the
quantities may be related to a common cash value. For example, in
some implementations, the first order and the second order may be
for quantities of financial instruments valued at a substantially
similar amount. Such a valuation may be based on market values when
the orders are placed, for example. In one implementation for
example, the first order may have a quantity associated with it,
and the second order quantity may be set based on a dollar value of
the first order so that the second order is for a similar dollar
value (e.g., the same dollar value, a dollar value such that the
quantity of the second order is closest to the dollar value of the
first order but for a round lot size, etc.).
[0393] In some implementations, an indication of an order may
include a dollar amount. For example, in some implementations, the
second order includes an indication of a dollar amount. In some
implementations, the dollar amount includes a dollar amount
associated with the first order and a current value of the
financial instrument associated with the second order.
[0394] In some implementations, a processor may be configured to
constrain cancellation of the first order and the second order for
a period of time. The processor may be configured to determine the
period of time. As described above, a period may be determined to
obscure circumstances, may be determined randomly, and so on.
[0395] In some embodiments, the trading system may determine if one
or more other participants desires to perform a trade of that
matches the first order. If so, the system may facilitate the
trade. Determining may include searching a set of firm orders
submitted, querying one or more participants, and so on.
[0396] In some embodiments, a trading system may determine if a
participant desires to enter into a trade that matches one or more
second orders. It should be recognized that while the example given
here is for second orders that have an OR relationship, other
relationships may be used in other embodiments. In this example
embodiment, such determining may take place if it is determined
that no participant desires to perform a trade that matches the
first order, simultaneously with such a determination, and so on.
Such a determination may include, for example, searching a set of
firm order, querying one or more participants, and so on.
[0397] In some embodiments, if it is determined that one or more
participants desire to enter into a trade that matches one or more
second orders, an offer may be presented to each such participant
to enter into a trade fulfilling one or more of the one or more
second orders and the first order. In other implementations, the
determination may include making such an offer.
[0398] For example, in some implementations, a set of firm orders
may be received from various participants. The firm orders may be
searched for orders that match the one or more second orders. If a
match is found, request for an acceptance to enter into a trade
that fulfills the first order may be sent to the respective
participant associated with the firm order. In some
implementations, the request may include the one or more second
orders.
[0399] As another example, in some implementations, a set of
queries may be sent out to participants to determine if orders are
stored in OMS's associated with the participants and if the
participants desire to enter into trades. The queries may include
queries to enter into combination trades that fulfill the first
order and one or more second order. A plurality of such queries may
be sent to each participant depending on the number of second
orders.
[0400] As yet another example, in some implementations, information
about OMS content may be known without remote querying (e.g., from
a database). In such an implementation, such a database may be
searched for orders that match one or more second orders. For
participants with matching orders, queries regarding the first
order being executed in combination with the matching order may be
transmitted.
[0401] In some embodiments, a trading system may receive an
indication of for a acceptance of the first order from the
participant. the indication may include an indication of acceptance
of the one or more second orders. In some implementations, in
response to receiving the indication, the trading system may
facilitate execution of a trade fulfilling the first order, and a
trade fulfilling the one or more second orders.
[0402] Some embodiments may include a system using interprogram
communication The system may comprise a first processor configured
to execute a first program, the first program may be configured to
receive a first message indicating a first order, in which the
first order defines a side of a first trade for a first financial
instrument, receive a second message indicating a second order, in
which the second order defines a side of a second trade for a
second financial instrument, determine that an order management
system of a participant includes a third order that defines an
opposite side of the second trade for the second financial
instrument, transmit a first message to a second program requesting
an acceptance to enter into the first trade and the second trade,
receive a second message indicating the acceptance, and in response
to receiving the second message, facilitate execution of the first
trade and the second trade. The system may include a second
processor configured to execute the second program. The second
program may be configured to receive the first message from the
first program, in response to receiving the first message, provide
n request for the acceptance to an operator of a computer, receive
an indication of a positive response from the operator, and in
response to receiving the positive response, transmit the second
message to the first program.
Automatic Execution
[0403] In some embodiments, a participant may be configured to
perform automatic acceptance of trades. Automatic may include
acceptance without human confirmation. Confirmation may include a
separate indication that a trade should be entered into.
[0404] In some implementations, a participant (e.g., a processor of
a computer, etc.) may receive an instruction to accept orders
without confirmation. The orders may define a respective side of a
trade for a financial instrument. The participant may receive any
number of such instructions for respective orders. An instruction
may include a request to perform or not perform an action. The
performance may be conditioned on the occurrence of one or more
events and/or the satisfaction of one or more parameters.
[0405] In some implementations, the participant may store
information identifying the side of the trade on a machine readable
medium. Such storage may include storing information in a database
so that it may be accessed at a later time, and so on.
[0406] Information may include data that has a meaning to a machine
configured to interpret the data.
[0407] In some implementations, the participant may receive an
indication of an order from a trading system (e.g., an alternative
trading system). The order may define the side of the trade for the
financial instrument. In some implementations, the indication may
include a query form a trading system.
[0408] In some implementations, the participant may determine
whether the information stored on the machine readable medium and
the indication of the order involve the side of the trade for the
financial instrument. It should be recognized that this is given as
an example only. In other examples, stored information may include
the opposite side, or may otherwise identify any aspect of an order
in any way. A match between stored information and received orders
may be determined in any way. Orders and information may match if
they identify opposite sides, same sides, or any other desired
combination of information in any way that the participant is
configure to determine matches. Such determination may include
comparing at least a part of the information and the side of the
trade.
[0409] In some implementations, if it is determined that the
information and the order match, in response to the determination,
a request to facilitate execution of the trade may be transmitted
to the trading system. In some implementations, the request may
include an indication of an acceptance in response to a query.
[0410] In some implementations, transmitting the request may
include transmitting the request after a waiting period. A
processor may determine the waiting period between a minimum and
maximum period of time. As described above, a waiting period may be
determined to obscure circumstances, may be determined randomly,
and so on.
[0411] In some implementations, if matching information is not
stored in a determined location, some implementations may determine
if a matching order is stored in an order management system
associated with the participant. If such a matching order is stored
in an order management system, a request for a binding acceptance
may be presented to a user, as described in detail elsewhere.
[0412] In some embodiments, rather than some actions taking place
at a participant, actions may take place at a trading system. For
example, a trading system may receive receiving an instruction to
enter into a side of a trade for a financial instrument from a
first participant (e.g., an order management system). Information
identifying the side of the trade and the first participant may be
stored in a data structure such that participants may not obtain
the information. Such information, for example, may be encrypted,
may be restricted from being accessed, and so on. A trading system
may receive an indication of an order from a second participant.
The order may define the opposite side of the trade for the
financial instrument.
[0413] In some implementations, a processor of the trading system
may determine that the information and the order involve opposite
sides of the trade for the financial instrument. In response to the
determination, the trading system may facilitate execution of the
trade. Such execution may take place without querying of the
participant. The trading system may transmit a notification to the
first participant and a notification to the second participant
identifying the execution of the trade. Such a notification may be
transmitted in response to the determination.
[0414] Some embodiments include a multi-computer system for
distributed processing. A first computer may be configured to
receive an instruction to accept orders without confirmation, in
which the orders define a side of a trade for a financial
instrument, receive an indication of an order from a second
computer, in which the order defines the side of the trade for the
financial instrument, process the indication to determine whether
the order involve the side of the trade for the financial
instrument, and if a determination is made that the information and
the order involve the side of the trade for the financial
instrument, in response to the determination, transmit a request to
facilitate execution of the trade to the second computer. A second
computer may be configured to receive information defining the
order, transmit the indication of the order to the first computer,
receive the request to facilitate execution, process the request to
determine if the order is available for execution, and if a
determination is made that the order is available for execution, in
response to the determination, facilitate execution of the
order.
Execution of Order Portions
[0415] In some embodiments, a trading system (e.g., an alternative
trading system), may divide an order into a plurality of portions.
The trading system may receive an indication of an order. The order
may define a side of a trade for a quantity of a financial
instrument. It should be recognized that such a system may allow
participants to limit the spread of information about a complete
order size to other participants. As will be clear from explanation
below, in some implementations, such information may be limited to
those participants that have established automatic acceptance of
orders for the financial instrument.
[0416] In some embodiments, the trading system may transmit
respective indications of respective portions of the order to each
of a plurality of participants. The transmissions may include
queries as described elsewhere herein. In some implementations, the
portions may sum to the quantity. In some implementations, the
portions may sum to less than the quantity (e.g., 10% of the
quantity, 50% of the quantity, 1% of the quantity, etc.).
[0417] In some embodiments, one or more of the participants may
respond to the transmission by accepting an offer to enter into a
trade fulfilling a respective portion of the order. An indication
of the acceptance may be received by the trading system.
[0418] In some embodiments, in response to receiving such an
acceptance, an indication of a remainder of the order may be
transmitted to the participants. The remainder may include, for
example, an amount of the order that was not acceptance by other
participants, an amount of the order that was not transmitted to
other participants, and/or any other amount.
[0419] In some embodiments, transmitting the indication of the
remainder may include transmitting the indication of the remainder
after a waiting period. A processor may determine the waiting
period between a minimum and maximum period of time. As described
above, a waiting period may be determined to obscure circumstances,
may be determined randomly, and so on.
[0420] Some embodiments, may include determining that a period of
time has passed after transmitting the indications of the portions
before transmitting the indication of the remainder. In some such
embodiments, the offers to enter into the respective trades for the
portions may only be valid during that period of time. In some
implementations, the period of time may include 1 second, 10
seconds, 10 milliseconds, 50 milliseconds, and/or any other amount
of time. In some implementations, the period of time may be
configured such that if the participants are configured to
automatically accept the order for the portion, the automatic
acceptance may be received in the period of time. In some
implementations, the period of time may be configured such that if
the participants are configured to not automatically accept the
order for the portion, an acceptance is unlikely to be received in
the period of time.
[0421] In some embodiments, one or more acceptance of respective
portions may be received in the period of time. In some
implementations, a trade fulfilling each respective portion may be
facilitated in response to receiving the acceptance. In some
implementations, an indication of a remainder of the order may be
transmitted to each participant from which an acceptance of a
respective portion was received in the time period, at/after the
end of the time period. The remainder may include an quantity of
the financial instrument that has not been fulfilled by the
accepted portion(s).
[0422] It should be recognized that in transmitting indication may
include transmitting any information. For example, transmitting
indications of portions/remainders may include querying
participants as described elsewhere herein.
[0423] In some implementations, a participant (e.g., a computer
system) may be configured to interact with such a trading system.
For example, a participant may receive an indication of a trading
intention. Such a trading intention may identify a desire to
automatically (i.e., without human confirmation), enter into a
trade for one or more financial instruments if an offer to enter
into such trades is received.
[0424] In some implementations, the participant may receive an
indication of a portion of an order. The indication may be received
from a remote processor through a communication network. The remote
processor may be part of the trading system. The indication of the
portion of the order may include a request to enter into a trade
that fulfills the portion of the order. The portion of the order
may be for an trade that matches the trading intention.
[0425] In some implementations, the participant may determine that
the order is for the opposite side of the trade. In response to the
determination, the participant may transmit an acceptance of the
portion of the order. The participant may be configured to make the
transmission in a particular time period. The time period may be
determined by the remote processor. The time period may be, for
example, 1 second, 10 seconds, 10 milliseconds, 50 milliseconds.
The time period may begin when the indication of the portion is
transmitted to the participant, received by the participant,
processed by the participant, and/or any other determined time. The
time period may end when the indication of the acceptance is
received by the trading system, when the indication of the
acceptance is transmitted by the participant, and/or at any other
determined time.
[0426] In some implementations, participant may receive an
indication of a remainder of the order. In some implementations,
the participant may provide an interface through which the
remainder of the order may be accepted by a trader. In some
implementations, the participant may automatically accept the
remainder of the order.
Intentional Delay
[0427] In some embodiments, a trading system (e.g., an alternative
trading system) may intentionally delay an action related to an
order. For example, in some embodiments, orders may be used by a
submitter of the order to determine interest or other information
about potential counterparties. A delay in taking an action in such
an instance may reduce information leakage about the potential
counterparties. As another example, in some embodiments,
participants may have an adverse reaction to order queries
regarding non-firm orders if the non-firm orders are cancelled or
otherwise fulfilled and therefore do not result in an executed
trade with the participants. A delay in taking an action in such an
instance may reduce the adverse reaction of the participants.
[0428] As discussed above, some embodiments may include receiving
an indication of an order from a source. The order may include a
firm order. The order may include a non-firm order. The source may
include a participant. The source may include a broker.
[0429] Some embodiments may include determining a time period for
an intentional delay. The delay may include a delay between a first
time associated with the order and a second time associated with
determining a matching order. For example, the delay may include a
delay between receiving the indication of the order and determining
a matching order to the order. As another example, the delay may
include a delay between a submission of the order and a
transmission of an order query.
[0430] The time period may be determined specifically for each
source. The time period may be determined specifically for each
risk pool. The time period may be determined specifically for each
type of source. The time period may be a generic time period for
all sources. The time period may be determined specifically for
each financial instrument. The time period may be determined
specifically for each type of financial instrument. The time period
may be determined for each range of quantities. Any combination of
sources, types of financial instruments, and/or quantity may be
used in various embodiments. Some embodiments may include
exceptions for certain orders and/or sources.
[0431] In some embodiments, the time period may be determined such
that an intentional delay of the time period may prevent
information leakage regarding existing orders. The existing orders
may include orders pending in one or more OMS's associated with one
or more participants. For example, in some embodiments, a
determination may be made that orders cancelled within 10 seconds
of being received have a potential to cause too much information
leakage. In some embodiments, determining matching orders may be
delayed for such 10 seconds so that such orders are cancelled
without causing information leakage. In other embodiments, any
other time period may be used, for example 10 milliseconds, and so
on.
[0432] Some embodiments may include determining the time period
based on historical information. For example, such historical
information may include information about cancelled orders. In some
embodiments, the time period may be determined so that a portion of
the historical cancelled orders would have been cancelled within
the time period. In some embodiments, such a portion may include a
majority of cancelled orders. In some embodiments, such a portion
may include a desired percentage of cancelled orders. For example,
in some embodiments, in which a first order was cancelled 5
milliseconds after being received, a second order was cancelled 8
milliseconds after being received, and a third order was cancelled
1 second after being received, the time period may be determined to
be about 9 milliseconds. In some embodiments, such cancelled orders
may include orders having a particular characteristic.
[0433] Some embodiments may include intentionally delaying for the
period of time. Intentionally delaying may include intentionally
not acting to find a matching order for the order. Intentionally
delaying may include intentionally not querying one or more OMS's
and/or participants. Intentionally delaying may include more than
delay introduced by transmission and/or machine processing.
[0434] Some embodiments may include determining that the period of
time has passed. Such a determination may be made at the end of the
period of time. Such a determination may be made based on a clock
such as a processor clock and/or a number of clock cycles. Such a
determination may include determining that the period of time from
the first time associated with the order has passed.
[0435] Some embodiments may include determining a matching order in
response to determining that the period of time has passed. As
discussed above, in some embodiments, determining the matching
order may include querying one or more remote systems. In some
embodiments, determining the matching order may include
transmitting an order query identifying the order to each of a
plurality of systems and receiving from a first one of the
plurality of systems, an indication of the matching order. Each of
the plurality of systems may include a participant system. Each of
the plurality of systems may be associated with a respective order
management system. In some embodiments, such a query may indicate
that the trade would be executed without a negotiation (e.g., a
negotiation involving a price and/or a quantity).
[0436] Some embodiments may include facilitating execution of the
trade in response to determining the matching order. In some
embodiments, facilitating execution may include confirmation a
non-firm order with a source associated with the non-firm order as
discussed above. Some embodiments may include receiving an
indication of an agreement that the source will confirm the
non-firm order unless at least one of the non-firm order is
cancelled and the non-firm order is fulfilled. In some embodiments,
facilitating execution includes facilitating execution without a
negotiation involving a price and a quantity. It should be
recognized that the above description of actions are given as an
example only and that other embodiments may include any desired
ordering of actions, additional and/or alternative action and so on
as desired.
Trading System Cooperation
[0437] Some embodiments may include two or more trading systems
(e.g., electronic marketplaces such as alternative trading systems)
cooperating with one another to execute one or more trades. Such
cooperation may allow, for example, capabilities of one electronic
marketplace to be used by one or more other electronic
marketplaces.
[0438] FIG. 15 illustrates an example of two electronic
marketplaces 1501 and 1503 that may cooperate with one another.
First electronic marketplace 1501 may include a trading system such
as one described herein in which one or more participants may be
queried to determine matching orders. Second electronic marketplace
1503 may include any desired marketplace in any configuration able
to perform primary and/or secondary trading in any desired manner.
In some embodiments, first electronic marketplace and second
electronic marketplace may communicate with one another through one
or more communication networks. Such networks may include private
and/or dedicated networks. Such networks may include public
networks such as the Internet.
[0439] In some embodiments, Financial Information Exchange (FIX)
messages may be used to transmit information from one electronic
marketplace to another electronic marketplace.
[0440] As illustrated in FIG. 15, an order source 1505 may be
coupled to first marketplace 1501. For example, order source 1505
may communicate with first electronic marketplace 1501 through one
or more communication networks. In some embodiments, order source
1505 may include a participant, and/or an order submitter. In some
embodiments, order source may include a firm order submitter. In
some embodiments order source may include a broker (e.g., a
computer system associated with a broker).
[0441] FIG. 16 illustrates an example method 1600 that may be
performed in some embodiments (e.g., to facilitate cooperation
between two or more trading systems such as those illustrated in
FIG. 15). Method 1600 may include a method of interaction between
electronic marketplaces to facilitate trade execution. Method 1600
may be performed by the first electronic trading system of FIG. 15.
As illustrated, method 1600 may begin at block 1601.
[0442] As indicated by block 1603, method 1600 may include
receiving a first indication of a firm order from a source. The
indication may be received by a first electronic marketplace.
Various examples of receiving indications of orders are described
above. As mentioned above, the source may include a broker.
[0443] As indicated by block 1605, method 1600 may include
transmitting a second indication of the firm order to an electronic
marketplace without attempting to execute the firm order. The
transmitting may be performed by a first electronic marketplace to
a second electronic marketplace. Attempted execution may include
any typical actions of an electronic marketplace to execute the
order at the electronic marketplace. In some embodiments, for
example, the firm order may not be placed in an active order book
of orders of the first electronic marketplace. In some embodiments,
for example, order queries regarding the firm order may not be
transmitted to one or more participants.
[0444] In some embodiments, the second electronic marketplace may
receive the second indication (e.g., through a communication
network).
[0445] In some embodiments, in response to receiving the second
indication, the second electronic marketplace may attempt to
determine a matching order for the firm order.
[0446] In some embodiments, the second electronic marketplace, in
response to receiving the second indication, may transmit a third
indication of a non-firm order to the first electronic marketplace.
The non-firm order may be defined by the firm order. In some
embodiments, the firm order may remain a firm order at the second
electronic marketplace and be submitted as a non-firm order to the
first electronic marketplace and/or any other desired
marketplaces.
[0447] As indicated by block 1607, some embodiments may include
receiving, from the electronic marketplace, the third indication of
a non-firm order defined by the firm order. The indication may be
received by the first electronic marketplace from the second
electronic marketplace. The non-firm order may include an order
that is defined by the firm order. The two order may be for the
same order received for the source allowing both the first
electronic marketplace and the second electronic market place to
attempt to fulfill the same order.
[0448] In some embodiments, the third indication of the non-firm
order may include a FIX message. In some embodiments, the FIX
message may include a portion that identifies the firm order. In
some embodiments, such a portion may include a tag in a body of the
FIX message that identifies an order number of the firm order
received in the second indication by the second financial
marketplace. Such information may allow the first financial
marketplace to determine where a matching order for the firm order
is found (e.g., at the second electronic marketplace in the form of
the firm order, at the first electronic marketplace in the form of
the non-firm order). For example, the first electronic marketplace
may record the identification of the firm order with information
about the non-firm order, such that if a matching order is found,
the first financial marketplace may determine that the matching
order may fulfill the firm order.
[0449] As indicated by block 1609, some embodiments may include, in
response to receiving the third indication, determining a matching
order for the non-firm order. The determination may be made by the
first electronic marketplace. In some embodiments, such a
determination may be made by transmitting one or more order queries
that identify the non-firm order to each of a plurality of systems.
In some embodiments, one or more of such order queries may identify
the non-firm order as firm. In some embodiments, one or more such
order queries may identify that the trade may be executed without a
negotiation (e.g., one involving a price and/or quantity). In some
embodiments, each system may be associated with a respective order
management system. Each system may include a participant system. In
some embodiments, such a determination may include receiving from a
first one of the plurality of systems, an indication of the
matching order. In some embodiments, such an indication may include
an identification that the trade should be executed without a
negotiation (e.g., one involving a price and/or quantity). Various
examples of determining matching orders are described elsewhere
herein.
[0450] As indicated by block 1611, some embodiments may include, in
response to determining the matching order, confirming the non-firm
order with the electronic marketplace. Confirming may include
confirming by the first electronic marketplace the non-firm order
with the second electronic marketplace. In some embodiments,
confirming the non-firm order may include transmitting a request
for confirmation to execute the trade to the second electronic
marketplace from the first electronic marketplace. In some
embodiments, confirming may include receiving an indication that
the trade should be executed from the second electronic
marketplace. In some embodiments, in order for the non-firm order
to be confirmed, the indication must be received within a time
period. In some embodiments, if the indication is not received in
the time period, no execution of the trade may be performed, the
non-firm order may be cancelled, a second confirmation request may
be transmitted, and/or any other desired action may be taken. In
some embodiments, the time period may include a period between
about 10 milliseconds and 1 second. Some embodiments may include
receiving an indication of an agreement that the second electronic
marketplace will confirm the non-firm order unless at least one of
the firm order is cancelled and the firm order is fulfilled.
Various examples of confirming a non-firm order are described
elsewhere herein.
[0451] As indicated by block 1613, some embodiments may include
facilitating execution of a trade. The trade may include a trade
defined by one or more of the non-firm order and the matching
order. Facilitating execution may be performed by the first
electronic marketplace. Facilitating execution may be performed in
response to determining the matching order at the first electronic
marketplace. In some embodiments, facilitating execution may
include at least one of executing the trade and transmitting an
indication to a remote destination indicating that the trade should
be executed. In some embodiments, facilitating execution may
include facilitating execution without a negotiation involving a
price and a quantity. Various examples of facilitating execution of
a trade are described elsewhere herein.
[0452] In some embodiments, the second electronic marketplace may
determine the facilitation of the execution. For example, in some
embodiments, an indication that the non-firm order has been
fulfilled may be transmitted to the second electronic marketplace
from the first electronic marketplace. Such an indication may be
received by the second electronic marketplace. In some embodiments,
the second electronic marketplace may know that the non-firm order
was fulfilled based on a confirmation of the non-firm order in
stead of or in addition to a separate indication. It should be
recognized that in various embodiments, any method of determining
such facilitation and/or fulfillment may be used. In some
embodiments, in response to such a determination, the second
electronic marketplace may cancel the firm order, may mark the firm
order as fulfilled, and/or take any desired actions.
[0453] In some embodiments, in response to such a determination, a
fourth indication that the firm order has been fulfilled may be
transmitted from the second electronic marketplace to the first
electronic marketplace. In some embodiments, such an indication may
be transmitted in response to receiving an indication that the
non-firm order has been fulfilled.
[0454] As indicated by block 1615, some embodiments may include
receiving a fourth indication that the firm order has been
fulfilled. In some embodiments, the fourth indication may be
received by the first marketplace from the second marketplace. In
some embodiments, the fourth indication may be received in response
to facilitating execution of the trade. For example, the second
electronic marketplace, as described above may determine that the
facilitation of the execution of the trade occurred and in
response, transmit the fourth indication. In some embodiments, the
fourth indication may identify that the firm order was fulfilled in
the form of the non-firm order by the first electronic
marketplace.
[0455] In some embodiments the fourth indication may include a FIX
message. The FIX message may include a portion identifying the
non-firm order. In some embodiments, such a portion may include a
tag in a body of the FIX message that identifies an order number of
the non-firm order received in the third indication by the first
financial marketplace. Such information may allow the first
financial marketplace to determine where a matching order for the
firm order is found (e.g., at the second electronic marketplace in
the form of the firm order, at the first electronic marketplace in
the form of the non-firm order). For example, the first electronic
marketplace may record the identification of the firm order with
information about the non-firm order, such that if a matching order
is found, the first financial marketplace may determine that the
matching order may fulfill the firm order.
[0456] As indicated by block 1617, some embodiments may include
transmitting a fifth indication that the firm order has been
fulfilled. The fifth indication may be transmitted to the source
from the first electronic marketplace. The transmission may be
performed in response to receiving the fourth indication.
[0457] Some embodiments may include determining by which electronic
marketplace the firm order was fulfilled. Some embodiments may
include determining whether the firm order was fulfilled at the
first electronic marketplace in the form of the non-firm order or
fulfilled at the second electronic marketplace (e.g., in the form
of the firm order). Such a determination may be performed by the
first electronic marketplace. In some embodiments, such a
determination may be made based on information from one or more
indications, such as a portion of a FIX message identifying one or
more of the firm order or the non-firm order as described above.
For example, in some embodiments, the first electronic marketplace
may record an order number or tag related to the firm order after
receiving the firm order from the source. Future communication
regarding the firm order and the non-firm order may include such a
number or tag (e.g., in a FIX message). Such information may then
be reference to determine that the non-firm order corresponds to
the firm order.
[0458] Some embodiments may include determining a fee to charge the
broker based on at which of electronic marketplaces the firm order
was fulfilled. For example, in some embodiments, if the firm order
was fulfilled at the first electronic marketplace in the form of
the non-firm order, a first fee may be charged and if the firm
order was fulfilled by the second electronic marketplace (e.g., in
the form of the firm order), a second fee may be charged. In some
embodiments, the first fee may be higher than the second fee. In
some embodiments, the second fee may be higher than the first fee.
In some embodiments, there may be no fee for fulfillment by some
electronic marketplaces. For example, there may be a fee if the
firm order was fulfilled by the first electronic marketplace, but
there may be no fee if the firm order was fulfilled by the second
electronic marketplace. Such a fee may be determined based on a
portion of a FIX message that may identify one or more of firm
order and the non-firm order as described above.
[0459] Method 1600 may end at block 1619. It should be recognized
that method 1600 may include any desired steps in any ordering as
desired. It should be recognized that method 1600 is given as an
example only and that various embodiments may include any desired
alternative and/or additional actions as desired. Some embodiments
may allow the first electronic marketplace to take advantage of
algorithms and/or capacities of the second electronic marketplace
without developing those same internally to the first electronic
marketplace.
[0460] It should be recognized that although the above examples may
refer to fulfilling an entirety of an order in one exchange, it
should be recognized that in some embodiments, various portions of
an order may be executed at different exchanges and/or against
different matching orders. For example, in some embodiments, a
first portion of the firm order may be executed at the first
electronic marketplace and a second portion of the firm order may
be executed at the second electronic marketplace. A fee may be
determined based on portion, for example in proportion to the
portions.
[0461] It should be recognized that although in the above example,
the order may be fulfilled at the first electronic marketplace, in
some embodiments, the order may be fulfilled at the second
electronic marketplace. In some embodiments, the second electronic
marketplace may, in response to receiving an indication of the firm
order attempt to find matching orders. If the second electronic
marketplace finds a matching order (e.g., before the first
electronic marketplace finds a matching order for the corresponding
non-firm order), the second electronic marketplace may facilitate
execution of a corresponding trade. The second market place may
cancel the non-firm order, may inform the first electronic
marketplace of the fulfillment and/or take any other desired
actions. The first electronic marketplace may in response,
information the source. As described above, a fee charged to the
source may depend on the location of the fulfillment.
XII. MISCELLANEOUS INFORMATION 1
[0462] Numbering of elements in the below section may not match to
numbering of elements in the previous sections. This section
provides additional disclosure of relevant material, and should not
be interpreted to limit any prior disclosures. For example, no
definitions below should be applied to disclosure above unless
explicitly stated otherwise and descriptions of preference do not
apply to above disclosed embodiments.
[0463] Although computers are heavily used to facilitate trading of
securities, manual intervention may still be required at certain
steps in the trading process. For example, most traders at
institutional investment management firms record their orders to
purchase or sell securities in computerized order management
systems (OMS's). However, one or more traders at each firm may
manually review the orders in the OMS and attempt to fill the
orders by contacting one or more market intermediaries. Typically,
the traders transmit the orders in the OMS by telephone or separate
data entry links to registered broker-dealers for the securities,
to electronic marketplaces that trade the securities, or to other
market intermediaries. Accordingly, manual effort is often required
to actually execute the orders in the OMS.
[0464] One problem arising from this manual effort is that
institutional traders may be unable to execute trades involving
large quantities of securities without adversely affecting the
market price of the securities. For example, institutional traders
often need to trade large quantities of securities due to the
continuing need of investment managers to respond to changes in
market conditions by altering the contents of their investment
portfolios. As these portfolios increase in size due to increased
investor activity, the corresponding quantity of securities to be
traded in order to achieve a similar portfolio balance also
increases. Market impact costs, or adverse costs resulting from the
institutional traders' activities, rise in such circumstances
because locating parties with whom to trade such large quantities
of securities becomes more difficult for the market
intermediaries.
[0465] Moreover, if the market intermediaries become aware that an
institutional firm wants to, say, sell a large block of a
particular equity security, this awareness is likely to lower the
sale price that the institutional firm can obtain due to the normal
processes of supply and demand. The effect is also likely to be
exacerbated by speculation from others with knowledge of the order
as to why the particular investor wishes to sell such a large
quantity of the security. Similarly, if market intermediaries
become aware of the fact than an institutional firm wants to buy a
large block of a particular equity security, this awareness will
likely increase the purchase price that the institutional firm will
have to pay. This adverse effect on price is further exacerbated by
the fact that traditional market intermediaries trade for their own
accounts.
[0466] One strategy commonly employed by institutional traders to
offset market impact costs is to spread out trade orders for a
large quantity of a security into small orders each handled by a
different market intermediary, sometimes over several trading days.
Of course, this strategy brings about its own problems in that the
market price can change significantly during this extended trading
period due to the unforeseeable activities of others.
[0467] Another strategy that may be employed is to spread the
orders for the security among one or more electronic marketplaces.
However, the traders may need to manually transmit each order to
the electronic marketplaces using a telephone or a separate data
entry link. The fact that the traders may need to perform these
extra steps, which include duplicate entry of basic order data
already recorded in the OMS, causes many traders to use these
electronic marketplaces infrequently, and to supply the
marketplaces with only a small subset of the total orders. As a
result, these electronic marketplaces often lack the liquidity
required by a trader to timely execute orders.
[0468] The lack of integration between the OMS and the electronic
marketplaces also poses problems when an institutional trader
wishes to trade a particular security simultaneously within an
electronic marketplace and, for example, over the telephone with a
traditional broker. For example, some electronic marketplaces
attempt to find matches at only specific time intervals. If a
trader wishes to buy 100,000 shares of IBM, and has placed an order
for half that amount in an electronic marketplace, the trader will
not know how much, if any, IBM stock was purchased until after the
next scheduled match attempt. In the meantime, the trader
potentially could have purchased more than 50,000 shares from a
broker over the phone at a better price.
[0469] Therefore, there is a need in the art for an electronic
trading marketplace that does not require a significant amount of
manual intervention by traders or other parties, offers anonymity,
and offers a high amount of liquidity.
[0470] Some embodiments address the above need by providing for the
automated transmission of orders (i.e., without manual trader
intervention) from the various order management systems (OMS's)
used by investment management firms or other entities having
trading systems to an electronic trading marketplace (ETM). A firm
with a trading system stores information about orders in an OMS to
manage its order flow, to monitor the initiation, placement, and
execution of orders, and for related purposes. Software providing
the functionality of an OMS is well known in the art.
[0471] OMS interfacing modules (OIMs) at the firms may
automatically transmit orders from the OMS's to the ETM and
preferably update the OMS's in response to orders executed at the
ETM. Traders can communicate with the ETM to anonymously negotiate
trades of securities. As used herein, a "security" is an ownership
or creditorship interest, such as a stock certificate, bond, or any
other financial instrument, contract or transaction, such as a
forward, futures, option, put, call, collar, swap, or currency
contract on any security. This description uses the term "security"
for convenience but it should be understood that the term covers
financial instruments generally. It should also be understood that
other embodiments may be used for trading of other goods and/or
services.
[0472] The ETM may include an OMS data integration module (ODIM)
for receiving and processing data representative of orders received
from the OIMs. In a preferred embodiment, the data from the OIMs
are provided to the ETM in a standardized format that requires
little processing by the ODIM. The orders processed by the ODIM may
be stored in an ETM database.
[0473] A negotiation module in the ETM may support negotiations
between traders. In one embodiment, an indications module transmits
orders received by the ETM among the traders based upon filtering
criteria established by the traders and/or the ETM. These orders
are transmitted among the traders in the form of non-binding
indications. Based upon these indications, traders at one
institution can enter into negotiations with traders at other
institutions, through the negotiation module of the ETM. In one
embodiment, at least parts of the negotiations are conducted
anonymously.
[0474] A trader authentication module may authorize and/or
authenticate traders who log into the ETM in order to perform
trading negotiations and/or other functions. A transaction history
module may record transactions performed by the ETM in the ETM
database. The transaction history module also preferably records
other data processed by the ETM including, for example, the orders
received from and sent to the trading systems and the conducted
negotiations.
[0475] A typical trading system at an investment management firm or
other entity at which trading is performed includes a number of
workstations coupled to an OMS server via a network, with a trader
at each workstation. Each workstation preferably executes a trader
OMS interaction module (TOIM) for facilitating interactions between
the trader's workstation and the OMS server. In one embodiment of
the present invention, the TOIM allows a trader to add, delete, or
modify open or contemplated orders stored in the OMS database. The
OMS, which includes the OMS server, OMS database, and TOIM, is
typically provided by an OMS vendor, though some firms have
developed their own OMS's.
[0476] In connection with the present invention, each workstation
also preferably executes an ETM interaction module (EIM) for
facilitating interactions with the ETM. The EIM allows a trader to
send information to the ETM and view and respond to information
received from the ETM. Typically, this information includes
information about the trader's indications, information about other
traders' indications, and orders transmitted to and received by a
trader during a negotiation.
[0477] The OMS database holds data representative of open,
contemplated, and/or completed orders to buy and/or sell securities
by traders using the trading system. The OIM is in communication
with the OMS database and the ETM. An OMS database integration
module in the OIM may read data records stored in the OMS database
and, in a preferred embodiment, also creates and modifies data
records stored in the OMS database upon execution of a trade
through the ETM. In one embodiment, the OMS database interaction
module directly accesses the OMS database and in another embodiment
it sends commands to an application programming interface (API) in
the OMS for accessing the database.
[0478] The OIM may include an ETM communication module for
communicating with the ETM. In one embodiment, the ETM
communication module provides selected data records in the OMS
database to the ETM and, in a preferred embodiment, receives data
and/or instructions from the ETM regarding changes to make to the
OMS database. In addition, the OIM preferably includes a data
record conversion module for modifying the format of data records
sent to the ETM and/or received from the ETM. The OIM also
preferably includes a filtering module for filtering out specified
orders by security type, security name, order type, order price,
order quantity, or other category, so that those orders are not
transmitted to the ETM.
[0479] In some embodiments, the OIM or some other component may
include a reasoning module. Such a reasoning module may determine
why a particular order is present in an OMS database (e.g., by
asking a trader entering the order, by receiving such information
from a trader, by searching strategy information that also may be
stored by an OMS, by analyzing trading behavior, by receiving
information from a risk model associated with a trader, etc.). In
some embodiments, the reasoning module may be used to suggest
and/or enter orders for securities that fulfill reasons for other
orders being present. Such functionality may be useful if an order
would otherwise go unfulfilled and a reasonable alternative
security is available.
[0480] Preferably, the OIM transmits to the ETM data records in the
OMS database relating to a trader's orders when the trader logs on
to the ETM. Once the OIM determines that the trader has logged on
to the ETM, the OIM retrieves data records about that trader's
orders suitable for transmission to the ETM from the OMS database.
In one embodiment, the OIM converts the data records retrieved from
the OMS database into a standardized format understood by the ETM.
In another embodiment, this functionality is part of the ETM.
[0481] After a trader has logged on to the ETM, the OIM determines
whether the contents of the OMS database have changed. If the OMS
database has changed, the OIM determines whether the change should
be transmitted to the ETM. In one embodiment, the OIM continues to
determine whether the contents of the OMS database have changed
between the time that a trader logs on to the ETM and the time that
the ETM commences trading. In another embodiment, the OIM does not
commence making this determination until the time that the ETM
commences trading.
[0482] Because typical OMS's are complex and multi-featured, and
because securities of types not handled by the ETM may be traded
using the OMS, some changes to the OMS database do not necessitate
a transmission of updated data to the ETM. The OIM preferably
transmits changes to the database to the ETM if the changes
represent new or modified orders.
[0483] The OIM preferably updates the database in response to
information received from the ETM indicating executed trades or
other information. In a preferred embodiment, if an execution
occurred in the ETM involving an order in the OMS associated with
the OIM, the OIM receives information from the ETM describing the
execution. This information includes, for example, the type,
amount, and price of securities traded, the time of execution,
and/or information identifying the original order in the OMS
database on which the execution was based. The OIM converts the
received information about the execution into the format used by
the OMS and updates the OMS database accordingly. As a result of
these steps, the OMS is updated automatically and transparently to
reflect executions performed at the ETM. The executions appear to
the OMS as typical trades conducted at another broker, so no
special functionality needs to be added to the OMS in order to
interact with the ETM beyond that functionality described
herein.
[0484] Although several embodiments may be described as involving
"traders" it should be recognized that other embodiments may not
involve traders in all the same ways as described or at all. Rather
than involving traders in negotiations, entering of trades in an
OMS, and/or other actions, some embodiments may be automated
through a trading algorithm. Such a trading algorithm may control
the entry of traders, the negotiation of deals, and/or any other
actions that would traditionally be controlled by one or more
traders at a trading institution.
[0485] FIG. 17 is a high-level block diagram illustrating an
electronic trading marketplace (ETM) environment according to an
embodiment of the present invention;
[0486] FIG. 18 is a high-level block diagram illustrating more
details of the ETM;
[0487] FIG. 19 is a lower-level block diagram illustrating a
trading system like those illustrated in FIG. 15;
[0488] FIG. 20 is a diagram illustrating a data record stored in
the order management system (OMS) database to identify an order
according to one embodiment of the present invention;
[0489] FIG. 21 is a diagram illustrating a placement record
preferably stored in the OMS database to indicate a placement of an
order at a particular venue;
[0490] FIG. 22 is a diagram illustrating an execution record
preferably stored in the OMS database to indicate the execution of
an order;
[0491] FIG. 23 is a flow diagram illustrating actions performed by
an embodiment of the present invention when a trader logs on to the
ETM;
[0492] FIG. 24 is a flow diagram illustrating actions performed by
an embodiment of the present invention after a trader has logged on
to the ETM; and
[0493] FIG. 25 is a flow diagram illustrating actions performed by
a preferred embodiment of the present invention when the OMS
database is updated in response to a trade executed by the ETM.
[0494] U.S. Pat. No. 7,136,834 to Merrin (hereinafter, "Merrin"),
et al. is hereby incorporated herein by reference in its entirety,
including, the specification of Merrin, the prosecution file
history of Merrin, and any other material that provides meaning to
any portion of the patent. Accordingly, terms that have a meaning
in Merrin (e.g., based on the specification, based on the
prosecution file history, based on other material that provides a
meaning to the any portion of the patent, etc.) are intended to
have the same meaning herein. Thus, the person of ordinary skill in
the art would understand terms used in Merrin and used herein to
have the same meaning.
[0495] FIG. 17 is a high-level block diagram illustrating an
electronic trading marketplace (ETM) environment according to an
embodiment of the present invention. An ETM 110 is in communication
with three trading systems 112A, 112B, 112C. Although only three
trading systems 112 are illustrated, embodiments of the present
invention can have many more (or fewer) trading systems 112 in
communication with the ETM 110. FIG. 17 illustrates only three
trading systems 112 in order to enhance the clarity of this
description.
[0496] In some embodiments, an ETM may be configured to couple to
other ETMs and/or other marketplaces. For example, one particular
ETM may be configured to facilitate trades between traders coupled
to the particular ETM. That particular ETM may, in some
circumstances (e.g., if no counter parties for a particular order
is available at the particular ETM) may transmit information about
orders to another ETM to try to find counter parties through that
other ETM. Accordingly, one ETM may be able to avail itself of
orders/traders associated with other ETMs. Transmitting order
information to other ETMs may be performed after asking a trader
associated with a particular order if such transmission is
acceptable and/or according to a previously established trading
preference of a particular trader. In some embodiments, different
ETMs may be configured to trade different things. For example, one
ETM may be configured to trade stocks, and another ETM may be
configured to trade derivatives. The coupling of such ETMs
configured to trade different things may be particularly useful in
embodiments configured to offer additional products and/or services
to traders based on knowledge regarding orders submitted by
traders, as discussed in more detail below.
[0497] The trading systems 112A, 112B, 112C are used by investment
management firms or other entities that have established a
relationship with the ETM 110. The trading systems 112 communicate
with the ETM 110 to facilitate the trading of securities. As used
herein, a "security" is any ownership or creditorship interest,
such as a stock certificate or bond, or any other financial
instrument, contract, or transaction, such as a forward, futures,
option, put, call, collar, swap, or currency contract. This
definition includes, for example, any note, stock, bond, debenture,
certificate of interest or participation in any profit-sharing
agreement or in any oil, gas, or other mineral royalty or lease,
any collateral trust certificate, investment contract, voting-trust
certificate, certificate of deposit, any put, call, straddle,
option, or privilege on any of the foregoing, or group or index of
securities (including any interest therein or based on the value
thereof). This list is not all-inclusive. For purposes of clarity,
this description will describe the trading of stock.
[0498] Within each trading system 112 is a database 114A, 114B,
114C associated with an order management system (OMS). Each OMS
database 114 holds data representative of open, contemplated,
and/or completed orders to buy and/or sell securities (collectively
referred to herein as "orders for securities") by traders using the
trading system 112. For example, assume that the database 114A of
trading system 112A contains orders to sell 50,000 shares of DELL
and 75,000 shares of MSFT and orders to buy 25,000 shares of CPQ
and 100,000 shares of IBM. Also assume that the database 114B of
trading system 112B contains orders to sell 30,000 shares of CPQ
and buy 62,000 shares of T.
[0499] The orders in the OMS databases 114 may be automatically
transmitted to the ETM 110. Likewise, any changes in the orders,
such as modifications and/or withdrawals, may be automatically
transmitted to the ETM 110. As used herein, the term
"automatically" means that the associated action is performed
without any human or manual intervention. Thus, there is no need
for traders to specifically request that individual orders in the
OMS databases 114 are transmitted to the ETM 110; orders in the
databases are sent to the ETM 110 without the traders' input
(subject to filtering criteria).
[0500] In some embodiments, orders in OMS databases may not be
automatically transmitted to the ETM 110. Rather, traders may
individually select orders from an OMS database to be transmitted
to the ETM 110. Because some trading firms may fear that
information about some of the orders stored within their OMS
databases may be used maliciously if that information is revealed,
using such selective transmission rather than automatic
transmission may enable trading firms to keep particularly
sensitive order information from being transmitted while allowing
less sensitive order information to be transmitted.
[0501] Preferably, the ETM 110 anonymously transmits information
about a trader's orders to other traders using the ETM, subject to
filtering in accordance with filtering criteria established by the
traders and/or the ETM. Moreover, the ETM 110 preferably manages
anonymous negotiations between traders using the trading systems
112 for the purpose of executing the orders and sends data about
the completed trades to the OMS's of the traders involved in the
transaction.
[0502] Thus, one embodiment of the present invention selectively
broadcasts information about the orders received by the ETM 110
from the database 114A of trading system 112A to the other trading
systems 112B, 112C. Likewise, the ETM 110 selectively broadcasts
information about the orders received from the database 114B of
trading system 112B to the other trading systems 112A, 112C. If the
traders desire such a trade, the ETM 110 will facilitate the
anonymous negotiation and sale of 25,000 shares of CPQ from a
trader using trading system 112B to a trader using trading system
112A.
[0503] In some embodiments, an order from a first trader may be
narrowcast to potential counter parties. To determine which other
traders are potential counter parties, the ETM may match the order
from the first trader with orders received from other traders
(e.g., by security name, type, order size, price, etc.). If
matching orders are available from other traders, those traders may
be identified as potential counter parties and information about
the order from the first trader may be transmitted to those
traders.
[0504] Data may be communicated between the trading systems 112 and
the ETM 110 using interfacing links 116A, 116B, 116C. Any known
interfacing technologies can be used to effectuate these links,
including, but not limited to, transmission control
protocol/Internet protocol (TCP/IP), satellite, cellular, and/or
radio frequency (RF) links, or some combination thereof. The links
may pass through one or more intermediate data processing systems,
such as telephone switches or Internet servers, before reaching the
ETM 110 or a trading system 112. In embodiments where data travels
over shared links, such as embodiments where data travels over the
public Internet, the data is preferably encrypted using a secure
protocol, such as the secure sockets layer (SSL).
[0505] FIG. 18 is a high-level block diagram illustrating more
details of the ETM 110. Those of skill in the art will recognize
that FIG. 18 illustrates only one possible embodiment of the ETM
110. Obviously, different combinations of hardware and software can
be used to provide the functionality of the ETM 110 described
herein.
[0506] Data received by the ETM 110 from the trading systems 112
over the interfacing links 116 may be received by a firewall 210.
As is known in the art, the firewall 210 preferably prevents
unauthorized users from gaining access to the rest of the ETM 110
and monitors transfers of data to and from the network.
[0507] Data that pass through the firewall 210 may be received by
one or more modules that perform the functionality of the ETM 110.
As used herein, the term "module" refers to machine-executable code
and/or data, but may also include associated circuitry, such as
processing circuitry, as well as data storage areas, and/or any
other software or hardware. Thus, it will be appreciated that one
or a combination of hardware and software, such as a computer
system executing software for performing the functionality of the
modules, may implement each of the modules shown in FIG. 18. It
will also be appreciated by those skilled in the art that the ETM
110 may comprise one or more other types of modules, circuitry,
etc., not shown in FIG. 18 in order to avoid unnecessarily
obscuring understanding of the invention. For instance, the ETM 110
may include one or more microprocessors, network connection
circuitry, and/or data storage areas, such as read-only memory
(ROM), random-access memory (RAM), CDROM, DVD, tape drive, hard
disk (HD), and/or other types of storage areas. It will also be
appreciated that the functionality of multiple modules described
herein can be combined into a single module and the functionality
of a single module can be split or shared among multiple modules.
Moreover, alternative embodiments of the present invention can lack
one or more of the modules described herein and/or have modules not
described herein.
[0508] The ETM 110 preferably includes an OMS data integration
module (ODIM) 212. The ODIM 212 receives and processes data
representative of orders received from the OMS databases 114 in the
trading systems 112. In a preferred embodiment, the data from the
OMS databases 114 are provided to the ETM 110 in a standardized
format that requires little processing by the ODIM 212. In an
alternative embodiment, the data from the OMS databases 114 are
provided to the ETM 110 in one or more different formats depending
upon factors such as the type of OMS used by the trading systems
112, the types of interfacing links supplying the data to the ETM,
the type of security or orders to which the data pertains, and the
like. In this latter embodiment, the ODIM 212 preferably converts
the data into a standardized format for use by other modules in the
ETM 110.
[0509] The orders processed by the ODIM 212 may be stored in an ETM
database 214. Data in the database 214 are preferably accessible to
the other modules in the ETM 110. In addition, the other modules in
the ETM 110 can store other data in the illustrated database 214 or
other databases as may be required during normal operation.
[0510] In a preferred embodiment, an indications module 216
transmits information about orders received by the ETM 110 among
the various traders based upon filtering criteria established by
the traders and/or the ETM. This information is transmitted among
the traders in the form of non-binding indications.
[0511] Based upon these indications, traders may be able to enter
into negotiations with other traders through a negotiation module
218. The negotiation module 218 may facilitate negotiations between
traders using trading systems and having contra interests. In one
embodiment, at least parts of the negotiations are conducted
anonymously, in order to limit the spread of information about the
traders' activities.
[0512] A market data module 220 may receive real-time and/or other
market data from an input 222. The market data module 220 may
provide the market data to the negotiation module 218 and/or to the
traders. The traders preferably use the market data during the
negotiations to determining market prices for the securities.
[0513] A transaction history module 224 may record transactions
performed by the ETM 110 in the database 214. The transaction
history module 224 also preferably records other data processed by
the ETM 110 including, for example, information about orders
received from and sent to the trading systems 112 and the
negotiations conducted (successful or not). This module 224 is
preferably used to audit the transactions conducted on the ETM
110.
[0514] In some embodiments, the transaction history module may
record transaction information as well as information about orders
that were placed but unfulfilled. Such information may be used to
provide products, and/or services to traders. For example,
information about a frequency of orders placed for a particular
security may be recorded and used to inform traders about how
liquid a market for the security has been historically and/or how
long an order may take to be fulfilled based on historic trades. As
another example, information about fulfilled transactions for a
particular trader may be used to provide information about other
goods or services that the trader may desire, such as hedging
opportunities related to the trades (e.g., available futures trades
on a same or different ETM that may be used to hedge an equity
purchase, etc.). As yet another example, some embodiments may use
recorded information to determine that major changes in a trading
pattern of a security (e.g., a major price drop, a major change in
liquidity, etc.) has occurred, and use such information to adjust
performance (e.g., prepare for a major increase in trading
activity, offload orders to a different market, pause acceptance of
orders temporarily until trading has stabilized, etc.) trade on a
security (e.g., for an account/fund associated with an ETM
operator) and/or provide such information to traders.
[0515] A trader authentication module 226 may authorize and/or
authenticate traders who log into the ETM 110 in order to perform
trading negotiations and/or other functions. In one embodiment, the
trader authentication module 226 stores authentication information,
such as a login ID/password pair in the database 214. The trader
authentication module 226 also preferably stores profiles for the
registered traders.
[0516] Other modules that may be present in the ETM 110 include
load monitoring modules for monitoring the load on various servers
comprising the ETM, fault tolerance modules for providing fault
tolerance to the ETM, security modules for preventing and detecting
security violations on the ETM, and back office modules for
providing back office functionality. These modules are not shown in
FIG. 18 in order to avoid unnecessarily complicating the
figure.
[0517] FIG. 19 is a lower-level block diagram illustrating a
trading system 112 like those illustrated in FIG. 17. Those of
ordinary skill in the art will recognize that FIG. 19 illustrates
only one possible embodiment of a trading system 112 and
alternative embodiments of the trading system exist. FIG. 19
illustrates three workstations 310A, 310B, 310C coupled to an OMS
server 312 via a network 314. The workstations 310 are preferably
general- or specific-purpose computer systems executing specialized
software for facilitating trading of securities. Although only
three workstations 310 are illustrated, a trading system 112 can
have any practical number of workstations.
[0518] In a typical trading system that interacts with the ETM 110,
each workstation 310 executes a trader OMS interaction module 316
(TOIM) for facilitating interactions with the OMS server 312. In
this typical trading system, the TOIM 316 allows a trader to add,
delete, or modify open or contemplated orders stored in the OMS
database 114. Contemplated orders may be stored in the OMS database
114, for example, because the trader intends to execute certain
transactions in stages, or because the contemplated transactions
are desirable only if the market prices of the securities to be
traded are within a certain range (e.g., limit orders). Therefore,
such orders serve as placeholders indicating the total quantity of
a security that a trader wishes to transact and conditions for
transacting other orders; other data in the database 114 indicate
the quantity of the security that has been transacted to date.
[0519] Each workstation 310 may execute an ETM interaction module
318 (EIM) for facilitating interactions with the ETM 110. In
alternative embodiments of the present invention, the EIM 318 is
incorporated into the TOIM 316 or other modules on the workstation
310. The EIM 318 allows a trader to send information to the ETM 110
and view and respond to information received from the ETM 110.
Typically, the received information includes information about
orders (through the indications module 216) and orders (through the
negotiation module 218) that the ETM 110 receives from other
traders or trading institutions. The trader uses the EIM 318 to
enter into and transact negotiations to buy and/or sell securities
through the ETM 110.
[0520] The network 314 connects the workstations 310 to the OMS 312
and to external networks such as the network in communication with
the ETM 110. The network 314 can utilize any networking technology
that supports bi-directional transfer of data among the OMS 312,
workstations 310, and external networks. In a typical embodiment,
the network 314 is a private local area network (LAN) installed at
a financial institution and interfacing with one or more external
gateways. In alternate embodiments, the network may be wireless,
connect devices over a wide area, and/or at least partially carry
data over a public network (such as the Internet). Other network
components, such as a firewall, may also be present. Those of
ordinary skill in the art will recognize that many different types
of networks can perform the functionality described herein.
[0521] The OMS 312 is preferably comprised of one or more computer
systems for executing and maintaining an order management system.
The OMS 312 receives instructions from the workstations to create,
modify, and/or delete orders and updates the database 114
accordingly. Software providing the functionality of the OMS 312 is
well known in the art. Commercial OMS software packages are
available from The MacGregor Group, Eze Castle Software, Advent
Software, and Decalog, to name but a few. In addition, some trading
institutions utilize custom OMS software.
[0522] As described above, the database 114 may hold data
representative of open, contemplated, and/or completed orders to
buy and/or sell securities. FIG. 20 is a diagram illustrating a
data record 400 stored in the database 114 to identify an order
according to one embodiment of the present invention. Different OMS
systems utilize different order data records and, therefore, it
should be understood that FIG. 20 illustrates only one possible
data record. However, many OMS systems store the same general
information and the illustrated order data record 400 is intended
to represent a typical order data record for an OMS system.
[0523] The order data record 400 has multiple fields, each field
holding different information about an order. The Order ID field
410 preferably holds a value uniquely identifying the order
associated with the data record 400. Similarly, the Trader ID field
412 preferably holds a value uniquely identifying the trader or
other person who placed the order. The Order Status field 414
identifies whether the order is open, contemplated, completed,
canceled, or any other possible status. The next field, Order Last
Update Time 416, preferably holds a timestamp that identifies the
last time that the data record 400 was modified in any way. This
field 416 is useful for determining whether the most recent version
of the data record 400 has been considered.
[0524] The Transaction Type field 418 preferably indicates whether
the data record 400 corresponds to an order to buy or sell a
security. The Security Symbol field 420 preferably uniquely
identifies the security to be transacted. The Security Symbol field
420 can hold, for example, a Committee on Uniform Securities
Identification Procedures (CUSIP) number, a ticker symbol, or any
other identifier of the security. The Security Type field 422 is
preferably used to interpret the other data in the data record 400
according to the given security type. For example, treasury bills
are priced in terms of a discount to face value; inherent in the
pricing formula is the yield that would be obtained if the bill
were held to maturity. In contrast, equity securities are priced in
actual per-share values. The information in the Security Type field
422 can also be used to filter out certain types of securities.
[0525] The Order Type field 424 preferably indicates whether the
order is a market or a limit order, although the field can also
indicate other order types. If the order is a limit order, the
Limit Price Field 426 preferably identifies the price set by the
trader.
[0526] The Total Order Size field 428 preferably identifies the
actual number of shares that the trader desires to transact. The
Quantity Placed Elsewhere field 430 is a value either equal to or
less than the value in the Total Order Size field 428. In an
embodiment of the present invention, the ETM 110 uses the values of
these two fields 428, 430 to determine a quantity of a security, if
any, that are available to be transacted by the ETM.
[0527] Preferably, the OMS 312 allows for the possibility that
trading a large quantity of a given security may occur over several
days at several different venues. For example, to fill an order to
buy 1,000,000 shares of IBM, a trader may need to place an order
for 300,000 shares with one broker, and record numerous executions
of portions thereof until the full 300,000 shares placed with that
broker are purchased. If the broker cannot provide additional
shares at a suitable price, the trader may then place an additional
quantity, up to the 700,000 shares remaining to be purchased, via
another broker, electronic marketplace, or other venue. Preferably,
the broker enters a placement record into the OMS database 114 to
indicate that the trader anticipates executing a portion of the
order through the second venue. This second venue may also fill the
quantity it was asked to provide in several executions. Thus, an
order can have one or more placements and each placement can have
one or more executions associated with it.
[0528] FIG. 21 is a diagram illustrating a placement record 500
preferably stored in the OMS database 114 to indicate a placement
of an order at a particular venue. The Order ID field 510
preferably holds a value that uniquely identifies the order
associated with the placement. The Order ID field 510 ties the
placement information to the overall order. Thus, all placements
for the same order preferably have the same value in this field
510. The Broker field 512 preferably contains an alphanumeric value
identifying the venue associated with the placement record. Lastly,
the Quantity Placed with Broker field 514 preferably lists the
portion of the total order size that is placed for fulfillment
through the venue.
[0529] When a transaction is executed in a specified venue, such as
the ETM 110, a corresponding execution record is preferably stored
in the OMS database 114. FIG. 22 is a diagram illustrating an
execution record 600 according to an embodiment of the present
invention. An execution ID field 608 preferably holds a value
identifying the particular execution. As before, the Order ID field
610 preferably holds a value that uniquely identifies the order
associated with the execution and all executions for the same order
preferably have the same value in this field 610. The Broker field
612 preferably contains an alphanumeric value identifying the venue
that performed the execution. The Quantity Executed field 614
preferably specifies the number of securities transacted in this
execution while the Price field 616 specifies the price at which
the securities were executed. The Timestamp field 618 preferably
records the time at which the execution took place.
[0530] The OMS interfacing module (OIM) 320 may be in communication
with the OMS database 114 via the network 314 or a direct
connection. In alternative embodiments, the OIM 320 is in
communication with the OMS 312 and/or the workstations 310. The OIM
320 may also be in communication with the ETM 110 via an external
gateway or some other form of network connection. In another
alternative embodiment, the OIM 320 is integrated into the ETM 110
and is remote from the OMS 312, although some functionality is
present at the OMS in order to provide OMS data to the OIM.
[0531] In a preferred embodiment, the OIM 320 includes a computer
system storing and executing software for performing the
functionality described herein. In an alternative embodiment, the
OIM 320 executes on the same computer system as the OMS 312. In one
embodiment, the OIM 320 includes an OMS database interaction module
322 for interacting with the OMS database 114. The OMS database
interaction module 322 reads records stored in the OMS database 114
and, in a preferred embodiment, creates and modifies data records
stored in the OMS database 114. In one embodiment, the OMS database
interaction module 322 directly accesses the OMS database 114 and
in another embodiment it sends commands to an applications
programming interface (API) in the OMS 312 for accessing the
database.
[0532] The OIM 320 also preferably includes an ETM communication
module 324 for communicating with the ETM 110. In one embodiment,
the ETM communication module 324 automatically provides selected
data records in the OMS database 114 to the ETM 110 and, in a
preferred embodiment, receives data and/or instructions from the
ETM. In addition, the OIM 320 also preferably includes a data
record conversion module 326 for modifying the format of the data
records sent to and/or received from the ETM 110 and a filtering
module 238 for filtering out specified orders by security type,
security name, order type, order quantity, order price, or some
other factor or category, so that filtered orders are not
transmitted to the ETM.
[0533] FIG. 23 is a flow diagram illustrating actions performed by
an embodiment of the present invention when a trader logs on to the
ETM 110. Although the actions of FIG. 23 and subsequent figures are
attributed herein to the OIM 320, one of ordinary skill in the art
will recognize that all or some of the actions can be carried out
by other entities.
[0534] Preferably, the OIM 320 waits 710 until a trader logs on to
the OMS 312 before transmitting data records for that trader to the
ETM 110. In one embodiment, the ETM 110 sends a message to the OIM
320 when a trader at the institution in which the OIM 320 resides
logs into the ETM. The OIM 320 interprets this message as a sign to
commence receiving orders. In other embodiments of the present
invention, the OIM 320 uses other techniques, such as querying the
OMS database 114 for specific entries, listening for an
inter-process message sent by the OMS 312, polling individual
trader workstations 310, or implementing a timer-based algorithm,
to determine that a trader has logged on to the OMS 312.
[0535] Once a determination 710 is made that a trader has logged on
to the OMS 312 the OIM 320 may retrieve 712 data records about
orders suitable for transmission to the ETM from the OMS database
114. In one embodiment of the present invention, all open orders
are suitable for transmission to the ETM 110. In other embodiments
of the present invention, the OIM 320, through the filtering module
328, makes the determination of suitable orders based on other
criteria, such as the security type (e.g., stock or bond), security
name (e.g., IBM or T), order type (e.g., market or limit order),
order quantity, and/or order price. In still other embodiments,
only orders selected by a trading firm (e.g., by the trader)
associated with the OMS may be suitable for transmission.
[0536] If necessary, the data record conversion module 326 within
the OIM 320 preferably converts 714 the data records retrieved from
the OMS database 114 into a standardized format understood by the
ETM 110. As described above, the functionality of the data record
conversion module 326 can also be performed by the ODIM 212 in the
ETM 110. Alternative embodiments of the present invention may send
the data records individually or in multiple batches. The data
transmitted to the ETM 110 depend on factors such as the types of
securities being traded, and/or the fields required in order to
accurately trade such securities.
[0537] FIG. 24 is a flow diagram illustrating the actions performed
by an embodiment of the present invention after a trader has logged
on to the OMS during the trading day. The actions of FIG. 24 are
preferably automatically performed multiple times during the
trading day. Initially, the OIM 320 may determine 810 whether the
contents of the OMS database 114 have changed. The OIM 320 can
perform this step by, for example, polling the database 114 at
regular, near-real-time intervals, querying the database for
contents of specified fields such as timestamps, and/or listening
for network or specific interprocess communication message
traffic.
[0538] If the database has changed, the OIM 320 preferably
determines whether the change should be transmitted to the ETM 110.
Because typical OMS's are complex and multi-featured, and because
securities of types not handled by the ETM 110 may be traded using
the OMS 312, some changes to the OMS database 114 may not
necessitate a transmission of updated data to the ETM 110. Thus,
the OIM 320 may determine 812 whether the change to the database
114 reflects a new order of a type that is traded in the ETM 110
(and in some embodiments, other ETMs and/or marketplaces coupled to
the ETM 110). If so, then the OIM 320 may retrieve 816 the
pertinent data for the order from the database 114. If the change
does not reflect a new order, then the OIM 320 preferably
determines 814 whether the database change pertains to a
modification of an existing order that has already been sent to the
ETM 110. If so, the OIM 320 may retrieve 818 the data records
corresponding to the modified order from the database 114. Once the
appropriate data records, if any, are retrieved from the database,
the OIM 320 preferably converts 820 the data records into the
appropriate format and transmits the records to the ETM 110 as
described above with respect to FIG. 23.
[0539] FIG. 25 is a flow diagram illustrating the actions performed
by an embodiment of the present invention when the OMS database 114
is updated in response to a trade executed by the ETM 110. The
illustrated steps can be performed each time a trade is executed,
or in batch. However, the steps are preferably performed frequently
enough so that the OMS database 114 is updated in substantially
real-time.
[0540] The OIM 320 initially may determine 910 whether an execution
occurred in the ETM 110 involving an order in the OMS 312
associated with the OIM. The step may be performed, for example, by
receiving a message from the ETM 110 identifying a particular
execution that occurred at the ETM, by filtering a list of all
executions or other data from the ETM for executions listed in the
OMS 312, or by periodically polling the ETM for performed
executions.
[0541] If an execution occurred in the ETM 110 involving an order
in the OMS 312 associated with the OIM 320, the OIM receives 912
information from the ETM describing the execution. This information
includes, for example, the type, amount, and price of securities
traded, the time of execution, and/or information identifying the
original order in the OMS database 114 on which the execution was
based. The OIM 320 may convert 914 the received information about
the execution into the format used by the OMS 312. Then, the OIM
320 may update 916 the OMS database 114 with the converted
execution data. As a result of these steps, the OMS 312 may be
updated automatically and transparently to reflect executions
performed at the ETM 110. The executions appear to the OMS 312 as
typical trades conducted at another broker.
[0542] In some embodiments information about orders in an OMS
database and/or any other information about a trading institution
may be used to provide additional (e.g., complimentary,
alternative) products and/or services to traders. The information
about the orders may include the existence of the orders, the
existence of counter orders, the lack of counter orders, historical
data about similar orders, historical data about counter orders,
knowledge that an order was unfulfilled (e.g., for some time
period, was removed from the system in an unfulfilled state, etc.),
knowledge about a broader trading plan that may be embodied by
specific orders (e.g., knowledge that a particular order is present
because of a desire to trade in a particular industry, market
capitalization, etc.), knowledge that an order was fulfilled,
knowledge that an order is now inactive (e.g., was fulfilled,
expired, was unfulfilled, etc.) information about a risk model,
and/or any other information. In some embodiments, such features
may be available to premium users of an ETM (e.g., users willing to
pay a fee). The additional products and/or service may be available
through a single ETM and/or additional ETMs.
[0543] In some embodiments, an ETM, OIM, OMS, and/or other
component may track (e.g., determine when an order becomes inactive
and store information about it) unfulfilled orders (e.g., expired
orders and/or orders that were removed (e.g., removed from an OMS,
removed from consideration by the ETM, etc.)). The knowledge that
an order was once placed and was not fulfilled may reveal that a
trader associated with the order may desire a trade in a security
associated with the order in the future. When new orders are
received, there may be no available counter parties currently
trading in a security identified by the order. The existence of
counter parties may be determined by searching (e.g., through a
listing maintained in a database of the ETM) for matching offers
received from a plurality of other traders using an ETM. In some
implementations, if no such parties are available, unfulfilled
orders may be used to find such parties. Such use of unfulfilled
orders may occur after a new order has been active (e.g., near an
expiration time of the order, after an indication that the order is
being otherwise removed from the system is received, etc.).
[0544] The use of such unfulfilled orders may include querying a
party associated with the unfilled order (or any other inactive
order). Such query may ask if the party is still interested in a
trade related to the security and/or identify that a matching
counter order is now available. The party may then reenter an
order, enter into negotiations with the party associated with the
new order, ignore the request, and/or take any other desired
actions.
[0545] In some embodiments, before such unfulfilled orders are
used, a party associated with the new order may be asked if such
use is desired. To encourage the use of such orders for matching,
the party associated with the new order may be provided with
statistics related to the usefulness of such orders. The statistics
may be gathered by a transactional history module of an ETM and may
include, for example, a percentage of times when such orders have
successfully fulfilled an order, and/or any other desired
information. The information may be selected at a degree of
abstraction that is most convincing (e.g., overall securities,
securities in a related industry, a specific security, a specific
counter party, etc.).
[0546] In some embodiments in which multiple unfulfilled orders
exist, priority may be given according to any desired priority
mechanism. For example, possible counter parties associated with
larger orders may be queried first, possible counter parties
associated with most recently expired orders may be queried first,
etc.
[0547] In some embodiments, counter party identities may be kept
anonymous during part or all of a querying process associated with
the use of unfulfilled orders. Also, size of orders, and/or any
other information related to new and/or inactive unfulfilled orders
may be kept confidential during the process until the
counterparties choose to reveal such information.
[0548] Any number of unfulfilled orders may be tracked for any
desired time period. For example, in some embodiments some number
of the most recently expired orders may be tracked. In some
embodiments, all unfulfilled orders may be tracked for some desired
period. In some embodiments, the tracking may relate to
characteristics of the security. For example, orders associated
with a less liquid security may be tracked for a longer time than
orders associated with a more liquid security.
[0549] Fulfilled orders, may be tracked for use in fulfilling
future orders, in a substantially similar method to tracking
unfulfilled orders described above. This may be useful because a
trader that has previously traded in a security may be more likely
to trade in that security again. The fulfilled orders may be
fulfilled through the ETM and/or through some other method (e.g., a
different marketplace).
[0550] In some embodiments, if it is determined that no matching
counter parties (e.g., counter parties with orders matching the
order in their OMS's) are available (e.g., a counter party is not
found for an order (e.g., after some time period, near an
expiration time for an order, etc.)) alternative products and/or
services may be offered to a trader. The alternative products
and/or services may be based, at least in part, on a characteristic
of an order entered by the trader. The desired characteristics may
include, for example, market capitalization, geographic area,
industry, risk level, profit to loss ratio, volume of trades,
profit level, sales level, cash on hand amount, analyst
recommendation, and/or any other information. For example,
derivatives based on the security may be offered (e.g., from other
orders available to the ETM, from another market, etc.), other
securities may be offered (e.g., securities with similar profiles
such as capitalization, industry, etc., securities that were
purchased by other traders who also placed similar orders (e.g.,
after a similar order went unfulfilled), securities that fulfill a
desire associated with the order (e.g., a desire to adjust a
portfolio to include a particular industry, etc.)). In some
embodiments, information about how long an order may take to be
fulfilled based on historical trading trends may be provided. Such
information may encourage a trader to take an alternative to the
order if the time is too long or wait for order fulfillment if the
time is short.
[0551] In some embodiments, an alternative product and/or service
may include a trade that is based on a reason for the order in the
trader's OMS database. For example, an ETM may receive information
about the reason that the order is present in the OMS (e.g., a
desire to own a security in a particular industry), and based on
that reason may determine that an alternative available order may
fulfill the same reason and offer that order as an alternative. In
some embodiments a reason may be part of a broader trading strategy
and/or risk model that may be shared with the ETM, so that the ETM
may offer alternatives that more closely fulfill reasons embodied
by the order and that fits into the broader trading strategy and/or
risk model.
[0552] In some embodiments, if a matching order is found for an
order, additional (e.g., complementary) products and/or services
may be offered. For example, the fact that an order has been, at
least partly, fulfilled may be determined, and in response, an
additional product and/or service may be offered. The order may be
fulfilled through the ETM and/or through some other method and
identified as fulfilled to the ETM (e.g., through a status change
in an OMS). The product and/or service may be offered from a
marketplace operator, a participant of a marketplace, and/or any
other source. For example, a trader may be offered a hedging
opportunity after an order for a security is fulfilled. Such a
hedging opportunity may include a future related to the security.
The hedging opportunity may be available through a different
counter party on the same ETM (e.g., may be found in similar
fashion to finding an original counter party) and/or through
another marketplace.
[0553] In some embodiments, historical data about previous orders
may be used to recommend additional products and/or services. For
example, if a trader has a trade go unfulfilled, the trader may be
presented with an available order that was often entered by traders
that also had similar orders go unfulfilled.
[0554] In some embodiments, historical information may be used to
adjust treatment of new orders. For example, if an order is entered
for a historically illiquid security, additional avenues may be
used to find a matching order, such as prior traders who had
entered orders for the security, other marketplaces, etc. In some
embodiments, other traders may be information of the existence of
an order for an illiquid security. Traders may be encouraged to
enter counter orders for illiquid securities through any desired
incentivizing method. For example, traders may be offered priority
in liquid orders if they enter an order for an illiquid security,
traders may be offered rebates for entering such orders, and/or
traders may be offered any desired incentive for entering such
orders.
[0555] In various embodiments, trades may be related to any desired
currency or country (e.g., stocks of U.S. companies, stocks of
Chinese companies, British savings bonds, etc.). In some
embodiments, a trader in one country may enter into a trade
involving another country and/or the currency of another country
(e.g., a U.S. trader may purchase debt of a Japanese company).
[0556] In some such embodiments, additional products or services
may be offered based on the knowledge of a currency associated with
a trade. For example, one or more currency trade contracts may be
offered to a trader involved in such trading. A currency trade
contract may act as a hedging instrument against volatility in
currency markets. Such a contract may allow a trader to exchange
the contract for some cash value if the currency associated with
the trade changes in value compared to the trader's native
currency. In some embodiments, the availability of such contracts
may be included as a negotiation option between traders when
negotiating a trade. In some embodiments, traders may trade in such
contracts among each other independently of any other trade (e.g.,
through the ETM and/or some other marketplace). In some
embodiments, a trader may be offered such a contract as a service
from a marketplace (e.g., the operator of the ETM may offer such
contracts for a fee as a service to users of the ETM).
[0557] Some embodiments may include participants from different
time zones. Such participants may not always be active at the same
time due, in part, to the differences in the time zones.
Accordingly, one or more mechanisms may be used to address these
time zone differences.
[0558] For example, in some embodiments, participants may be able
to establish automatic trading profiles that can be used to
automatically negotiate, accept, and/or reject trades during times
when the participants are not active (e.g., at night, on holidays,
etc.). Such profiles, for example may indicate that orders for
securities in a certain price range should always be accepted,
and/or any other desired actions should be taken.
[0559] In some embodiments, active trading times may be tied to a
particular market (e.g., the New York Stock Exchange). By limiting
trading to hours similar to a particular market, participants may
be sure that they can participate in trades by being present during
that period of time.
[0560] In some embodiments, a marketplace (e.g., the ETM) may
determine if a participant is active and involve active
participants in potential trades with some level of preference.
Such determining may include monitoring a level of activity at a
computer terminal, presenting a query through a computer interface,
and/or any other desired action. In some embodiments, if a
participant is not active (e.g., has gone home for the day), the
participant may not be eligible to be part of a trade until the
participant becomes active again. In other embodiments, active
participants may be given preference over inactive participants,
but inactive participants may still be offered an opportunity to be
involved in trades.
[0561] In some embodiments, if a matching order involves an active
trader and an inactive trader, a negotiation may be started between
the two traders. The active trader may be informed that the
inactive trader is inactive. The active trader may be given an
estimate of when the inactive trader may be active (e.g., an
indication of a time zone difference, historic data, etc.). While
waiting for the inactive trader to become active to enter into a
negotiation, the order associated with the active trader may still
be used to search for other matches (e.g., with other active
traders). When the inactive trader returns to active status, the
previously inactive trader may enter into a negotiation about the
trade with the previously active trader. The previously active
trader may have gone inactive by the time the previously inactive
trader becomes active. Because such a problems may occur due to
time difference, a negotiation may take a long time to complete. In
some embodiments, one or more sides of the negotiation may enter
information to automate the negotiation (e.g., preferences, limit
prices, etc.), so that the negotiation may complete in a shorter
time.
[0562] Some embodiments may be limited to buy side trading
participants (i.e., investing institutions that tend to buy large
portions of securities for money-management purposes). Other
embodiments may include buy side participants and sell side
participants (e.g., brokers, retail analysts, etc.). Buy side
participants are typically protective of revealing trading
intentions because of a fear of malicious market manipulation and a
fear of revealing proprietary trading strategies. Some embodiments
which allow sell side participation may include mechanisms to
address such fears of buy side participants.
[0563] For example, in some embodiments, buy side participants may
be able to opt out of trading with sell side participants. In some
embodiments, buy side participants may be able to establish filters
that allow only some sell side participant orders to be traded with
the buy side participants. For example, filters may allow sell side
participant orders for a sufficient amount of a security, if the
sell side agrees to a non-negotiated fulfillment of the order
(e.g., according to a standard price such as the most recent traded
price, etc.) and/or if the sell side and/or the sell side
participant's order meets any other desired criteria of the buy
side participant.
[0564] In some embodiments, indications of one or more criteria for
use in filtering orders may be received. The criteria may be used
to establish appropriate filters so that orders not meeting the
criteria are filtered. If orders do meet the criteria, the orders
may be presented to the market participant that established the
criteria. In some embodiments, the criteria may include a time
related criteria (e.g., when the order is received, when the order
may be presented to the market participant (e.g., orders for XXX
security may only be presented between noon and 2 pm, etc.), etc.).
In some embodiments, the criteria may include quantity-related
criteria, an identification criteria, a price-related criteria, a
type-related criteria, an industry-related criteria, and/or any
other criteria.
[0565] Some embodiments may limit options available to sell side
participants. For example, sell side participants may only be able
to enter binding orders. If a sell side participant's order finds a
counter party in a buy side participant, the sell side participant
may be bound to fulfill the order. In some embodiments, even though
a sell side participant is bound to fulfill an order, a negotiation
for price and/or quantity may still occur between a buy side
participant and a sell side participant. In other embodiments, no
negotiation may be started, but, rather, a trade may be facilitated
without a negotiation (e.g., if the buy side accepts the offer, the
trade may occur automatically, according to a standard pricing
mechanism, for a quantity of securities identified in the sell side
order, etc.).
[0566] In some embodiments, a request for acceptance of an order
may be transmitted to one or more market participants (e.g., buy
side participants). In some embodiments, such participants may
receive the requests for acceptance of an order. In some
embodiments, the market participants may be allowed to respond to
the request for acceptance within a limited amount of time. If the
participant responds affirmatively to the request for acceptance
within the limited time, then an indication of acceptance may be
transmitted and/or an execution of a trade fulfilling at least a
portion of an order may be facilitated.
[0567] In some embodiments, a sell side participant may be required
to enter a quantity of a security to be traded when entering an
order. A sell side participant may be bound to that quantity if an
order from a buy side participant matches the sell side order. In
some embodiments, the sell side participant may negotiate to
increase the quantity, but may be limited to the quantity as a
minimum. In some embodiments, a sell side participant may only
enter orders above a threshold minimum quantity.
[0568] In some embodiments, to avoid negotiations between sell side
and buy side participants, sell side participants may be bound to
have their orders fulfilled according to a standard pricing
mechanism. Such a pricing mechanism may include fulfilling the
order based on a well-known midpoint pricing policy and/or any
other desired mechanism.
[0569] In some embodiments, when two sell side participants become
counter parties to a trade, they may not be restricted in the same
manner as when a sell side participant is a counter party to a buy
side participant. For example, if two sell side participants enter
a negotiation, both may enter negotiations for price and/or
quantity even if such negotiations are limited or not allowed at
all when a sell side participant and a buy side participant are
counter parties.
[0570] In some embodiments, parties with matching orders may enter
into a limited negotiation. For example, execution of a trade
fulfilling matching orders may include a negotiation that does not
include a negotiation about price and/or a negotiation about
quantity. A price, for example, may be determined using a VWAP,
midpoint, and/or any other desired pricing policy. A quantity may
be determined based on quantities defined by the matching orders.
If there are any other issues to be negotiated, some embodiments
may allow a negotiation for those issues (e.g., time of execution,
platform to use for execution, etc.).
[0571] In some embodiments, evidence of actions/things may be
suppressed from one or more parties. For example, in some
embodiments, when a determination is made that one order matches
another order, any evidence of that determination may be suppressed
from one or more parties associated with the orders and/or any
other parties; when a criteria for a filter is established, any
evidence of the criteria and/or the establishment of the filter may
be suppressed; when a determination about whether an order meets
criteria of a filter is made, evidence of that determination may be
suppressed. Such suppression of evidence may occur until some
action occurs and/or for some amount of time. For example, in one
implementation, evidence that a first party's order matches a
second party's order may be suppressed from the first party until
and unless the second party decides to proceed with the order
and/or until the execution of the order is facilitated.
[0572] In some embodiments, suppressing evidence of an event may
include performing any action or not performing any action so that
an observer is led to believe that the event did not occur. For
example, suppressing evidence may include performing one or more
actions that would occur if the event did not occur (e.g.,
transmitting requests, transmitting indications that the event did
not occur, etc.), transmitting misleading information regarding the
event (e.g., transmitting indications that the event did not occur,
transmitting indications that another event occurred, transmitting
information before the event and/or after the event that obscure
the occurrence of the event (e.g., indications that the event
happened earlier and/or later so that the actually occurrence of
the vent is obscured)), not transmitting information that the event
occurred, transmitting imitations information to mislead observers,
encrypting information transmissions, using onion routing
techniques, obscuring a source of transmissions, obscuring a
destination of transmissions, obscuring the timing of events,
and/or any other actions.
[0573] In some embodiments, an order may include an order to
purchase or sell a quantity of a financial instrument. The side of
the order may refer to whether the order is for a purchase or a
sale of a financial instrument. Two orders may match if the orders
are for the same financial instrument and are for opposite side of
a trade for that financial instrument. Other criteria, such as
quantity, price, etc., may also be sued to determine if orders
match each other.
[0574] In some implementations, an order may indicate a price range
in which a execution of a trade fulfilling at least part of the
order is agreed. In such implementations, a first order may match a
second order if the two orders are for opposite sides of a trade
for a single financial instrument and the two orders have at least
partially overlapping price ranges. In some implementations, an
actual price of a trade may be determined according to a VWAP
and/or midpoint pricing model.
[0575] In some embodiments, facilitating execution of a trade may
include taking any actions which help to bring about the execution
of a trade. In some implementations, facilitating execution may
include, for example, executing the trade, beginning a negotiation
between the first market participant and the second market
participant that does not involve the price of the trade and does
not involve the quantity of financial instruments in the trade,
transmitting information about the trade to a third party to
execute the trade, and/or any other actions. Such actions may
include centralized actions and/or distributed actions.
[0576] In some embodiments, one or more market participants may be
charged a fee for use of a trading system. For example, if matching
orders are found and/or facilitation of order execution is
performed, a fee may be charged to the parties related to the
matching orders. In some embodiments, some parties may be
incentivized to use a trading system by providing a financial
incentive regarding such fees. For example, in some embodiments,
some participants may not be charged a fee, orders meeting certain
criteria may not be charged a fee, some participants may be given a
payment to submit orders, and so on. Such incentivizing may help to
increase liquidity in a market where certain participants may be
otherwise unwilling to provide such liquidity.
[0577] In some implementations, for example, a portion of a fee
charged to a first participant may be provided to a second
participant. In some implementations, providing the portion of the
fee to the second participant may include paying at least part of a
second fee for the second participant (e.g., discounting the fee of
the second participant by the portion). In some implementations,
providing the portion may include crediting an account of the
second participant (e.g., providing a payment to a financial
account). In some implementations, buy side participants may be
given a discount and/or a payment for use and sell side
participants may be charged a fee. The fee charged to sell side
participants may be sued to pay the discount or payment given to
buy side participants. In some implementations when two buy side
participants interact, no discount, no fee, and/or no payment may
be made to either party. In some implementations, the first party
to submit an order may be given a discount and/or payment.
[0578] In some embodiments, various actions taken by traders and/or
information presented to traders may be taken/presented through one
or more user interfaces of computing devices. For example,
indications of orders, negotiations, etc. may be facilitated by
user interfaces through which traders may interact. Traders may
enter order information, accept order requests, establish criteria
for filters, etc. through suitable user interfaces of computing
devices. In other embodiments, such user interfaces may not be used
and/or needed to perform all of some of such actions (e.g.,
computers may perform such actions without user interfaces,
etc.).
[0579] In summary, the present invention includes an electronic
trading marketplace that generates liquidity, at least in part, by
receiving order information directly from the databases of OMS
systems at trading institutions. Since orders are extracted from
the OMS databases automatically, and information about executed
orders is inserted into the databases automatically, the OMS
databases "see" the marketplace as "just another market
intermediary." Moreover, traders are able to conduct trades in the
electronic marketplace without any duplicative manual efforts.
[0580] The above description is included to illustrate the
operation of the preferred embodiments and is not meant to limit
the scope of the invention. The scope of the invention is to be
limited only by the following claims. From the above discussion,
many variations will be apparent to one skilled in the relevant art
that would yet be encompassed by the spirit and scope of the
invention.
XIII. MISCELLANEOUS INFORMATION 2
[0581] Numbering of elements in the below section may not match to
numbering of elements in the previous sections. This section
provides additional disclosure of relevant material, and should not
be interpreted to limit any prior disclosures. For example, no
definitions below should be applied to disclosure above unless
explicitly stated otherwise and descriptions of preference do not
apply to above disclosed embodiments.
[0582] FIG. 26 is a schematic diagram depicting a preferred
embodiment of the subject invention.
[0583] FIG. 27 is a schematic diagram depicting a preferred system
for targeted dissemination of confidential information regarding
trading interests.
[0584] FIG. 28 is a flowchart illustrating steps of a preferred
method of targeted dissemination of confidential information
regarding trading interests.
[0585] FIG. 29 is a flowchart showing steps of a preferred method
of matching interests identified by targeted dissemination in an
auction execution.
[0586] The subject invention relates to a method for managing
certified trading information to direct and execute confidential
trading interests over a computer network such as the Internet.
[0587] The term "trading interest" is used herein to describe any
expressed interest in trading a given security or securities, and
the term "certified trading interest" is used herein to describe a
trading interest that has been verified as genuine and certified as
such by some trusted third party. One example of a genuine trading
interest is an order that has been placed on a securities market
automatic matching system. A second example of a genuine trading
interest is a trading interest expressed by a party with a
documented history of aggressive trading. An example of a trading
interest that would not be certified is an undocumented indication
of interest (known in the art as an IOI).
[0588] In public securities markets, market mechanics and trading
psychology create barriers to efficient information dissemination
and price discovery. A market participant's decision to reveal
information regarding a large trading interest typically represents
a tradeoff between confidentiality and liquidity. By publicly
revealing the details of a significant active buying interest, for
example, a market participant assumes the risk of adverse price
action. Other market participants with legitimate selling interests
and market makers can "fade" their offers (become much less
aggressive sellers). There is also an empirically demonstrable risk
of adverse price action due to "front running" (buying activity by
market participants in anticipation of price movement resulting
from the large revealed order). Confidentiality can be maintained
by splitting the large order up into many small orders to avoid
arousing interest, but this is inefficient and will fail to attract
substantial natural contra-interests. An economically efficient
transaction is therefore avoided because the trading costs
associated with disseminating information are too high. Also, the
common practice of splitting large interests into smaller orders
affects all price discovery. When confronting each order, a market
participant must incorporate the possibility that the order is only
a small part of a much larger interest, because it is often
impossible for the market participant to verify that many such
orders are not being sent simultaneously.
[0589] Another serious obstacle to efficient dissemination of
trading interests and price discovery is the lack of validated
information about trading interests. The validated trading interest
information which does exist (e.g., displayed executable orders) is
often of little assistance. Displayed orders are miniscule compared
to undisclosed interest, and typically equate to no more than one
or two minutes of trading in a liquid stock in the U.S. market.
Displayed orders can therefore be easily manipulated, for example,
to indicate excess buying interest when sellers are in fact
abundant. In addition, non-validated misinformation is often
created and disseminated by unscrupulous market participants to
manipulate market prices. Voluntarily disseminated trading
interests can be false or misleading if they are not verified
either by proof of a current executable order, actual trades
executed, or canceled orders which were at one point executable at
risk in the market. Because there is often no way for a market
participant to verify an expressed trading interest or to know
which other market participants have a history of unscrupulous
trading behavior, all prices must incorporate the possibility of
such behavior.
[0590] One known approach to voluntary selective dissemination of
non-validated trading interests and activity in public equity
markets is used by the AutEx+.RTM. system. This is an electronic
database and online network that provides users with the ability to
voluntarily publicly indicate trading interests and executed
trades. AutEx+.RTM. users can limit the recipients of a message
regarding a trading interest by inclusion (a user-defined list) or
exclusion (blocking specific named market participants). Users can
also limit by name the securities on which they receive information
and the other users from whom they receive information.
[0591] In the AutEx+.RTM. system the expressed trading interests
and reported trades are not certified, however, and this creates
the opportunity for deceptive dissemination. In addition, users of
the system are not obligated to report all trades, which offers
further opportunities to create false impressions of trading
interests. Significantly, this approach does not enable the use of
analysis of certified trading interests (CTI) to limit information
dissemination to those market participants likely to have a
contra-interest. It also does not enable using such CTI analysis to
permit market participants to limit the trading interest
indications received. It also does not provide the ability to
initiate an auction based on disseminated CTI analysis information.
It also does not enable the monitoring of user trading activity to
generate a rating of the accuracy of disclosures or the correlation
of trading activity to inappropriate trading practices.
[0592] One known approach to matching trading interests and
executing trades while limiting information dissemination is
employed by the POSIT.RTM. matching system. The POSIT.RTM. system
allows trading interests to accumulate and initiates a matching
sequence at set intervals. Market participants place confidential
orders in the system and are unaware of the amount or
aggressiveness of other orders on the same or contra side until the
matching is released. This approach does not enable targeted
communication of trading interests based on analysis of verified
executable interests and trading activity, and does not provide the
ability to initiate private auctions based on this analysis. It
also does not enable granting the auction initiator any exclusivity
over contra-orders entered in response to the targeted
dissemination.
[0593] In this environment, there is an acute need for efficient
dissemination of confidential information regarding trading
interests. Market participants with large confidential trading
interests wish to notify only those other market participants
likely to have a significant contra-interest. Other market
participants wish to be notified of confidential certified trading
interests to which they are likely to have a contra-interest. Both
groups wish to have a place to transact a trade once they have been
connected through analysis of their certified trading interests.
Market participants also desire certified information regarding the
trading behavior of other market participants and a means of
certifying expressed trading information.
[0594] Preferred embodiments of the subject invention overcome the
limitations of known trading interest dissemination and execution
systems by (1) enabling market participants to limit dissemination
of trading interests to only those other market participants likely
to have a significant contra-interest, (2) enabling market
participants to ensure that other market participants' disseminated
trading interests are legitimate, and (3) enabling auctions among
trading interests targeted and validated in this manner. Software
of a preferred embodiment identifies likely contra-interests by
analyzing information from various sources regarding certified
trading interests.
[0595] A preferred embodiment comprises a method of managing market
information, comprising the steps of: electronically receiving data
including confidential information regarding market participants;
electronically storing said received data regarding market
participants; electronically receiving information from a first
market participant computer; electronically storing said
information received from said first market participant computer;
producing a targeted dissemination list of market participants
based on said stored data regarding market participants and said
information received from said first market participant computer;
and electronically transmitting to the market participants on said
targeted dissemination list data based on said information received
from said first market participant computer.
[0596] Advantageously, this is done without revealing the
confidential information of the market participants to the first
market participant. In one embodiment, the identity of the first
market participant is not revealed to the other participants.
[0597] Further embodiments are described below.
[0598] FIG. 26 illustrates a system configuration of a preferred
embodiment of the subject invention that comprises a certified
trading interest (CTI) manager 10 connected to various users 20 via
a communication network 30. CTI manager 10 is a computer comprising
a processor, a memory, and input/output including a communications
interface. Computer programs stored in the memory operate the CTI
manager in accordance with the invention. In the preferred
embodiment, communication network 30 is the Internet, but alternate
embodiments can employ dedicated communication networks, as is well
known in the art. In the preferred embodiment, communication
between users and the CTI manager is secured, because of the
confidential nature of the information communicated. The CTI
manager 10 is also connected to various external data sources 40, a
CTI user database 50, and an auction server 60.
[0599] External data sources 40 provide information regarding
positions held, trades executed, and active orders for the users
20. This enables the CTI manager to identify and verify users'
historical and current trading interests. In an alternate
embodiment, the CTI manager does not receive external data, but
only uses data generated within the system. In a preferred
embodiment applied to the U.S. equity market, the external data
sources 40 include various electronic communication networks (ECNs)
such as Instinet.TM., public markets such as NASDAQ.TM., stock
exchanges, matching networks such as POSIT.RTM., and publicly
available data such as the published holdings of various
institutional investors. In a preferred embodiment, the data
regarding market participants used by the CTI manager comprises
confidential information. For example, the identity of an
executable order on an ECN is not typically available. Since the
confidential information is not publicly available, the CTI system
must obtain permission from the users 20 to utilize it. In the
preferred embodiment users 20 agree to release this confidential
information to the CTI system, with the understanding that the
secure CTI system will use the information only for supplying the
user with valuable confidential trading interests of others. In
other words, the confidential information with which users 20
entrust the CTI manager 10 gives them access to more information
(in particular, certified trading interests), but the confidential
information provided by users 20 does not leak out to third
parties.
[0600] In a preferred embodiment, the CTI manager 10 communicates
in real time with external data sources 40 via the Internet.
Alternate embodiments employ dedicated communication networks as is
well known in the art. Also, alternate embodiments store
information from external data sources 40 in a database and update
the information periodically rather than in real time. For example,
an alternate embodiment receives information regarding the
published holdings of various institutional investors, stores the
information in a database, and updates the information from the
news service source only as frequently as new information is
published. As will be apparent to those skilled in the art, the
subject invention could also be used to direct confidential
information in markets other than U.S. equities, since virtually
all markets for fungible items of value pose the same informational
inefficiencies.
[0601] In a preferred embodiment, the CTI user database 50 contains
user data such as security and contact information, CTI
notification parameters, and an activity history. The preferred
embodiment maintains an activity history for each user that
includes auctions initiated and their outcome (e.g., whether the
auction was canceled, unsuccessful in locating a contra-interest,
or resulted in a partial or full execution of the initiating
interest). The activity history also includes the CTI notifications
received, the orders placed in response, and their outcome (whether
the responding order was canceled, unsuccessful, or resulted in a
partial or full execution of the response order). In an alternate
preferred embodiment, the CTI user database 50 simply maintains
overall statistics regarding this activity history for each
user.
[0602] The CTI notificatio