U.S. patent application number 17/066659 was filed with the patent office on 2021-01-28 for securities trading system with multiple levels of interest.
The applicant listed for this patent is BGC PARTNERS, INC.. Invention is credited to David LAWRENCE.
Application Number | 20210027374 17/066659 |
Document ID | / |
Family ID | 1000005137398 |
Filed Date | 2021-01-28 |
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United States Patent
Application |
20210027374 |
Kind Code |
A1 |
LAWRENCE; David |
January 28, 2021 |
SECURITIES TRADING SYSTEM WITH MULTIPLE LEVELS OF INTEREST
Abstract
Disclosed is a securities trading program for trading individual
lots of a security which can be run at a security trader's computer
station. The program generates a trading screen comprising a
listing of multiple bids for the security, each bid having a price,
as well as a listing of multiple priced offers for the security.
The bid and offer listings are active, enabling the trader to hit
any one of the displayed bids or take any one of the displayed
offers, for example by selecting and clicking on a displayed bid or
offer. In one embodiment, the bids and offers are arranged in
side-by-side columns on the trader's screen, helping the trader to
rapidly overview the market for a particular security, and compare
different, possibly competitive, securities by paging through
level-of-interest windows for each security. The invention's easily
manipulated insights into market dynamics offers a sophisticated
trader new opportunities to profitably exploit market niches, for
example by browsing for attractive bids or offers on closely
comparable securities.
Inventors: |
LAWRENCE; David; (New York,
NY) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
BGC PARTNERS, INC. |
New York |
NY |
US |
|
|
Family ID: |
1000005137398 |
Appl. No.: |
17/066659 |
Filed: |
October 9, 2020 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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16215185 |
Dec 10, 2018 |
10810670 |
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17066659 |
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13224483 |
Sep 2, 2011 |
10152747 |
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16215185 |
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10150476 |
May 17, 2002 |
8015097 |
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13224483 |
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60294851 |
May 31, 2001 |
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Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 30/08 20130101;
G06Q 40/04 20130101 |
International
Class: |
G06Q 40/04 20060101
G06Q040/04; G06Q 30/08 20060101 G06Q030/08 |
Claims
1. (canceled)
2. An apparatus comprising: at least one processor configured to
control: receiving a plurality of bids and offers for a financial
instrument, the plurality of bids and offers being submitted
electronically over a communication network by a plurality of
computers; displaying at a display device of a user computer an
interface for trading of the financial instrument by a user,
wherein the displaying the interface includes: displaying bid
information comprising bid listings for trading a plurality of bids
for the financial instrument, the bid information comprising a
first bid indicia corresponding to a best bid price and at least
one other bid indicia corresponding to other bids having off-best
bid prices lower than the best bid price; display offer information
comprising offer listings for trading a plurality of offers for the
financial instrument, the offer information comprising a first
offer indicia corresponding to a best offer price and at least one
other offer indicia corresponding to other offers having off-best
offer prices higher than the best offer price; displaying the bid
and offer listings in side-by-side vertical lists at the display
device respectively ordered by bid value and offer value, with the
best bid positioned associated with the best offer; and omitting
display of at least some predetermined price levels between
displayed levels; receiving from the user computer at least one
electronic message comprising a selection via the interface of at
least one off-best bid or off-best offer and instructions to
execute the selected off-best bid or off-best offer; executing the
selected off-best bid or off-best offer at, respectively, a price
worse than the best bid or best offer; and determining that the
user selected two or more of the off-best displayed bids or two or
more of the off-best displayed offers, and executing the selected
two or more off-best displayed bids or two or more off-best
displayed offers simultaneously.
3. The apparatus of claim 2 wherein: the at least one processor is
configured to control displaying to the user computer a
proportion-of-par value of each bid or offer adjacent the bid or
offer price.
4. The apparatus of claim 2, wherein: the selected two or more
off-best displayed bids or selected two or more of the off-best
displayed offers are at different price levels.
5. The apparatus of claim 4, wherein: the at least one processor is
configured to control receiving a user selection of multiple of the
displayed bids or offers simultaneously, the multiple of the
displayed bids and offers being selected simultaneously via the
interface.
6. The apparatus of claim 4, wherein the selected two or more
off-best displayed bids or two or more of the off-best displayed
offers comprise two selected off-best displayed offers.
7. The apparatus of claim 4, in which the at least one processor is
configured to control: receiving a selection of at least two
displayed offers at different prices; and executing the at least
two selected displayed offers sequentially in a sequence based on
the prices of the offers.
8. The apparatus of claim 7, in which the at least one processor is
configured to control: executing the at least two selected
displayed offers sequentially in an ascending-price sequence.
9. The apparatus of claim 4, wherein the at least one processor is
configured to control: receiving a selection from the user of a
third offer of the displayed plurality of offers; determining that
a fourth offer has been received after receiving the selection from
the user of the third offer, the fourth offer having a price better
than the price of the third offer; and displaying a dialog window
at the user computer, the dialog window comprising information
regarding the fourth offer and at least one element for the user to
selectably accept or ignore the fourth offer.
10. The apparatus of claim 2, in which the at least one processor
is configured to control: executing orders pending at prices at or
better than the selected off-best bid or off-best offer in
combination with the selected off-best bid or offer.
11. The apparatus of claim 10, in which to the processor is
configured to control: executing the best bid or best offer as part
of the combination.
12. A method comprising: controlling, by at least one processor:
receiving, over a communication network, a plurality of bids and
offers for a financial instrument, the plurality of bids and offers
being submitted electronically by a plurality of computers;
displaying at a display device of a user computer an interface for
trading of the financial instrument by a user, in which the
displaying the interface comprises: displaying bid information
comprising bid listings for trading a plurality of bids for the
financial instrument, the bid information comprising a first bid
indicia corresponding to a best bid price and at least one other
bid indicia corresponding to other bids having off-best bid prices
lower than the best bid price; displaying offer information
comprising offer listings for trading a plurality of offers for the
financial instrument, the offer information comprising a first
offer indicia corresponding to a best offer price and at least one
other offer indicia corresponding to other offers having off-best
offer prices higher than the best offer price; displaying the bid
and offer listings in side-by-side vertical lists respectively
ordered by bid value and offer value, with the best bid positioned
associated with the best offer; and omitting display of at least
some predetermined price levels between displayed price levels;
receiving from the user computer at least one electronic message
comprising a selection via the interface of at least one off-best
bid or off-best offer and instructions to execute the selected
off-best bid or off-best offer; and executing the selected off-best
bid or off-best offer at, respectively, a price worse than the best
bid or best offer, in which the selected off-best bid or off-best
offer comprises two or more of the off-best displayed bids or two
or more of the off-best displayed offers, and in which the selected
two or more off-best displayed bids or two or more off-best
displayed offers are executed simultaneously.
13. The method of claim 12, in which the financial instrument is a
fixed income security, and in which the displaying the interface
including displaying at the display device a proportion-of-par
value of each bid or offer adjacent the bid or offer price.
14. The method of claim 12, wherein: the financial instrument to be
traded is a United States treasury bill, note or bond, a municipal
bond or a corporate bond, and in which the selected two or more
off-best displayed bids or selected two or more of the off-best
displayed offers are at different price levels.
15. The method of claim 12, in which the receiving the at least one
electronic message comprising the selection of the at least one
off-best bid or off-best offer and the instructions to execute the
selected off-best bid or off-best offer comprises: receiving a
simultaneous selection of multiple of the displayed bids or offers,
the multiple of the displayed bids or offers being selected by the
user simultaneously via the interface.
16. The method of claim 12, further comprising: controlling, by the
at least one processor: receiving an instruction comprising a
selection of at least two displayed bids at different prices; and
executing the at least two displayed bids sequentially in a
descending price sequence.
17. The method of claim 12, further comprising: controlling, by the
at least one processor: receiving a selection from the user of a
third offer of the displayed plurality of offers; determining that
a fourth offer has been received after receiving the selection from
the user of the third offer, the fourth offer having a price better
than the price of the third offer, the price of the fourth offer
being lower than the price of the third offer; and displaying a
dialog window at the interface, the dialog window comprising
information regarding the fourth offer and at least one element for
the user to selectably accept or ignore the fourth offer.
18. The method of claim 12, further comprising: controlling, by the
at least one processor, executing orders pending at prices at or
better than the selected off-best bid or off-best offer in
combination with the selected off-best bid or offer, in which the
best bid or best offer is executed as part of the combination.
19. A non-transitory machine-readable medium configured to store
instructions which, when executed by at least one processor,
control: receiving, over a communication network, a plurality of
bids and offers for a financial instrument, the plurality of bids
and offers being submitted electronically over the communication
network by a plurality of computers; displaying at a display device
of a user computer an interface for trading of the financial
instrument by a user, in which the displaying the interface
comprises: displaying bid information comprising bid listings for
trading a plurality of bids for the financial instrument, the bid
information comprising a first bid indicia corresponding to a best
bid price and at least one other bid indicia corresponding to other
bids having off-best bid prices lower than the best bid price;
displaying offer information comprising offer listings for trading
a plurality of offers for the financial instrument, the offer
information comprising a first offer indicia corresponding to a
best offer price and at least one other offer indicia corresponding
to other offers having off-best offer prices higher than the best
offer price; displaying the bid and offer listings in side-by-side
vertical lists respectively ordered by bid value and offer value,
with the best bid positioned associated with the best offer; and
omitting display of at least some predetermined price levels
between displayed price levels; receiving from the user computer at
least one electronic message comprising a selection via the
interface of at least one off-best bid or off-best offer and
instructions to execute the selected off-best bid or off-best
offer; and executing the selected off-best bid or off-best offer
at, respectively, a price worse than the best bid or best offer, in
which the selected off-best bid or off-best offer comprises two or
more of the off-best displayed bids or two or more of the off-best
displayed offers, and in which the selected two or more off-best
displayed bids or two or more off-best displayed offers are
executed simultaneously.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation of U.S. patent
application Ser. No. 16/215,185 filed Dec. 10, 2018 which is a
continuation of U.S. patent application Ser. No. 13/224,483 filed
Sep. 2, 2011 (now U.S. Pat. No. 10,152,747 issued on Dec. 11, 2018)
which is a continuation of U.S. patent application Ser. No.
10/150,476 filed May 17, 2002 (now U.S. Pat. No. 8,015,097 issued
on Sep. 6, 2011), which claims the benefit of provisional
application No. 60/294,851 filed May 31, 2001.
STATEMENT REGARDING FEDERALLY SPONSORED RESEARCH OR DEVELOPMENT
[0002] (Not applicable.)
BACKGROUND OF THE INVENTION
1. Field of the Invention
[0003] The present invention relates to a securities trading system
comprising computer implementable program software intended for
implementation with supporting hardware. It relates to a securities
trading system which enables securities traders, or other users, to
make and hit bids and to make and take offers for purchase or sale
of securities, especially, but without limitation, bonds or other
fixed income securities.
[0004] More particularly, the invention relates to such a
securities trading system which is suitable for deployment on the
Internet, or an equivalent wide area network to enable a
multiplicity of users located remotely from one another to
effectively create and transact trades in U.S. government,
municipal, corporate or other bonds or other fixed income
securities or instruments. It is also contemplated that the
invention may be applicable to trading in fixed income futures and
derivatives as well as to trading in stocks and stock futures and
derivatives, albeit with suitable adaptations of conventional
practices as will be apparent to those skilled in the art.
2. Description of Related Art Including Information Disclosed Under
37 CFR 1.97 and 37 CFR 1.98
[0005] In recent years, many systems have been proposed and
employed to facilitate electronic trading in valuable financial
securities. Nevertheless, even in the year 2001, available
electronic systems fail to provide a trader with adequate
functionality to enable him or her to fully realize the potential
of electronic commerce.
[0006] The invention relates particularly to an improved system for
trading securities especially fixed income securities, such as
treasury, municipal or corporate bonds, in real time, or near real
time, employing electronically linked user stations, which system
provides an individual trader with enhanced functionality enhancing
the trader's performance. The user stations are equipped for data
processing, being, for example, computerized. The Internet provides
one suitable medium for linking the user stations and preferred
embodiments of the invention are adapted for use with the Internet.
Use of the invention with other communications media suitable for
linking users stations, such as local area networks, intranets or
other wide area networks or modifications or subsets will be
apparent to those of ordinary skill in the art.
[0007] Financial securities, for example stocks and bonds, oil,
grain and other commodities, as well as many other products as
diverse as livestock and fine art, have long been traded by means
of what is known as an "open outcry auction". Typically, buyers and
sellers assemble at a location where they present bids or offers to
the assembled group, via simple vocal bids and offerings, a process
sometimes known as a "bid-ask" or "ask-bid" system. In many cases,
the presentations are made by a broker acting on behalf of client
buyers or sellers. In some instances professional brokers may be
required, especially for specialized valuable commodities such as
financial securities. Open outcry auctions lie at the heart of
traditional exchanges, where they may provide a useful price
determining mechanism. While open outcry auctions have provided an
effective marketplace for many different products, they can be
expensive and inconvenient. Furthermore, open outcry auctions have
limited capacity and become increasingly error-prone as trading
volumes increase.
[0008] Another drawback of the open outcry auction system of market
making is a lack of price transparency, in that participating
traders may know only the tip of the iceberg of the book of
unfilled orders, namely the ones that are vocalized. There is no
way for a trader to see or execute on other levels of interest in
the market than those that are vocalized.
[0009] An important class of fixed income securities are those
issued by the United States Government, which are known as U.S.
treasuries. There are three different types of U.S. treasuries
having different maturity terms at issue, namely, Treasury bills
having maturities of 13 to 52 weeks, Treasury notes or "MTNs"
(medium term notes) having maturities of one to ten years, and
Treasury bonds having maturities of up to 30 years. Treasury bills,
being short term instruments, are pure discount securities having
no coupons whereas notes and bonds, having longer terms, have a
defined payment cycle of semi-annual interest payments to the
holder. The interest rate is known as the "coupon", which term is
derived from a detachable paper portion which was found on older,
paper, bearer bonds.
[0010] Advantages of Treasuries to investors include their low and
uniform default risk, attributable to their backing by the full
faith and credit of the U.S. government, and their liquidity.
Market pricing reflects these benefits.
[0011] New Treasury securities issue with a face or "par" value,
for example $10,000,000.00, an interest rate or "coupon" payable,
for example 5.500 percent and a maturity date, for example Feb. 22,
2011. Such a note constitutes a promise by the issuer, the United
States government, to pay the par value on the maturity date.
Treasury bills are auctioned by the U.S. government on
preestablished auction dates and the auction prices define the
issuance yields of the security. After the auction, the Treasuries
enter the secondary market and are traded typically "over the
counter", i.e., without a defined exchange. As inflation
expectations, supply and demand and other conditions change, so the
prices Treasuries fluctuate on the secondary market. These new
prices are reflected by competing bid and ask prices communicated
among institutions, banks, brokers, and dealers in the secondary
market using electronic notification systems such as DOW JONES
(trademark), TELERATE (trademark) and BLOOMBERG (trademark). The
yield of a fixed income security, such as a Treasury note increases
as its price drops in the market, typically reflecting an overall
increase in the interest rates for that term of security.
[0012] Newly auctioned Treasuries, and other fixed income
securities, are traded alongside securities issued in earlier
auctions, with the more recently issued securities usually being
more active in the market, which is to say traded more often than
older securities. Some older securities are infrequently traded,
and suffer an illiquid market that may or may not reflect the
current, market-determined interest rate for a security of that
maturity.
[0013] Similar considerations apply to securities from other
issuers including other governments, municipalities and utilities
as well as commercial entities such as corporations. However,
United States Treasuries, by virtue of their security and volume,
occupy their own unique, and dominant, position as the most liquid
securities in the market. Other bond issuers must pay higher yields
to compensate for the market's lower confidence in the issuer's
ability to pay, and lower liquidity. Furthermore, other bonds and
notes are issued less frequently, in smaller volumes and in fewer
denominations. In most cases, emphatically less frequently, smaller
and fewer.
[0014] There is a need for effective electronic systems for
facilitating trading in fixed income and other securities which
systems can provide the market-making benefits of the outcry
auction, yet which can accommodate high trading volumes with a low
error rate and provide enhanced opportunities to brokers or other
participant traders to make trades or deals. A number of electronic
bond trading systems are known to the art.
[0015] In my U.S. Pat. No. 5,915,209, the disclosure of which is
hereby incorporated herein by reference thereto, there is disclosed
a computer-implemented bond trading system providing a private
electronic auction enabling a trader to conduct a private auction
to find and transact with a high bidder for, or low offerer of, a
bond lot such as a municipal or other fixed income security lot.
The auction can be conducted anonymously between remotely located
brokers and dealers, across a wide area network, for example the
Internet, so that only the trader conducting the auction sees the
levels of interest expressed in the bids or offers for the bond
lot. It would be desirable to have a trading system providing
additional options to the trader.
[0016] Harrington et al. U.S. Pat. No. 6,161,099 teaches a method
of conducting municipal bond auctions over the Internet wherein a
bidder communicates with a bond issuer's computer to compute
interest cost values specifying a borrowing cost, and to transmit
bids to the issuer. Harrington et al. addresses the primary market
wherein bonds are brought to market, and is of no help to traders
seeking additional electronic trading options in the secondary
market where bonds are traded after issue.
SUMMARY OF THE INVENTION
[0017] The present invention solves the problem of providing a bond
trading program which provides a trader user of the program added
trading functionality. According to the invention this problem is
solved by providing a computer-implementable fixed income security
trading program for effecting sales of one or more lots of a fixed
income security, the program having an active trading screen
comprising, on a single screen:
[0018] a) a listing of multiple bids for the fixed income security;
and
[0019] b) a listing of multiple offers for the fixed income
security.
[0020] The novel screen display provided by the invention enables a
trader to execute transactions in a novel manner, for example by
hitting multiple bids, or taking multiple offers in a single
transaction.
[0021] Preferred embodiments of the invention enable a trader to
execute on multiple lots, show the public market a bid or offer
which is less than their total order, spread a trade to another
instrument and to obtain price improvement from a new bid or
offer.
BRIEF DESCRIPTION OF THE SEVERAL VIEWS OF THE DRAWING
[0022] Some embodiments of the invention, and of making and using
the invention, as well as the best mode contemplated of carrying
out the invention, are described in detail below, by way of
example, with reference to the accompanying drawings, in which like
reference characters designate like elements throughout the several
views, and in which:
[0023] FIG. 1 shows a level-of-interest window on a given security,
listing prices and lot sizes of a given security, much like a
specialist's "book" in a conventional stock exchange, which
level-of interest window is available in a bond trading program
according to the invention, the program being implemented at a
user's computer station;
[0024] FIG. 2 shows a pop-up window for managing the
levels-of-interest shown in the window of FIG. 1;
[0025] FIG. 3 shows a trade creation window, pursuant to an element
of the bond trading program illustrated in FIG. 1;
[0026] FIG. 4 shows a price improvement window, pursuant to an
optional element of the bond trading program illustrated in FIG.
1;
[0027] FIG. 5 shows a spread window for spreading a transaction to
another instrument, pursuant to another optional element of the
bond trading program illustrated in FIG. 1;
[0028] FIG. 6 shows a swap, or switch window for simultaneously
executing a buy and a sell of different instruments, being another
optional element of the bond trading program illustrated in FIG.
1;
[0029] FIG. 7 is a schematic block diagram showing one possible
implementation of the bond trading program illustrated in Figure I,
in a system comprising multiple remotely connected users;
[0030] FIG. 8 is a schematic block flow diagram of the bond trading
program illustrated in FIGS. 1-7; and
[0031] FIG. 9 is a screen of a modified or alternative security
trading program.
DETAILED DESCRIPTION OF THE INVENTION
[0032] Referring to FIGS. 1-3, a computer-implemented bond trading
program according to the invention, intended for use by
professional securities traders, who may be brokers acting on
behalf of a client, or dealers acting on their own account,
comprises, in addition to customary data entry, storage, reporting
and management screens, similar for example to those described in
my parent U.S. Pat. No. 5,915,209, a level-of-interest window
10.
[0033] Level-of-interest window 10 shown comprises, on its
left-hand side a bid-listing pane 12 and, on its right hand side,
an offer-listing pane 14. The top of level-of interest window 10
bears a title bar 16 displaying the descriptive particulars of a
selected bond or bond category, the subject security, in this case
a 5-year U.S. Treasury Note. As noted in title bar 16, the note
matures on May 31, 2005 and has a coupon of 5.500 percent which is
to say the rate of interest, based on par value. The note is
designated "ON-THE RUN" meaning that the security is the current,
or latest, issue for the maturity stated.
[0034] The system is applicable to trading in other fixed income
securities including all types of United States treasury bills,
notes or bonds, municipal bonds and corporate bonds. Some of its
benefits may also be applicable to the trading of commodities,
corporate stocks, mutual stocks, futures and derivatives of the
foregoing, as will be apparent to those skilled in the art.
[0035] The user station is electronically linked, for example, via
the Internet, to retrieve trading data whereby level-of-interest
window 10 can be refreshed to display updated data in real time or
with a slight delay.
[0036] "Real time" is used in a conventional sense herein and
should be understood to suggest immediacy, subject to normal
electronic processing delays and interruptions. Whether or not a
user experiences a significant delay before receiving information
or a response in what the invention contemplates as real time may
depend upon the capabilities of the user's system the server system
and any intervening network, or the efficiency of an external data
source.
[0037] As will be explained in more detail below, panes 12 and 14
anonymously list information regarding the current market for the
selected security which information comprises a number of active
bids and offers, preferably all the active bids and offers known to
the system regarding the selected security, a full listing. In a
desirable embodiment of the invention, all trades, or all trades in
a geographical area or other logical category are conducted
employing the bond trading system of the invention and In a
preferred embodiment of the inventive bond trading system,
information regarding the bidding or offering trader or owner is
not made available, until after a trade has been transacted and the
bought and sold tickets are cut.
[0038] Beneath title bar 16 appear four rows 18, 20, 22 and 24 of
screen controls. The various screen controls shown are divided into
two groups: bid-related controls on the left, located above
bid-listing pane 12; and offer-related controls on the right,
located above offer-listing pane 14. Thus, beneath title bar 16,
level-of-interest window 10 has a bidding side on the left and an
offering side on the right, enabling the user to view bids and
offers side-by-side, on a real time basis, in a convenient and
beneficial manner not heretofore provided in a computerized system.
Furthermore, in a preferred embodiment, the system enables a trader
to execute a transaction with any displayed bid or offer, as will
be explained in more detail hereinbelow.
[0039] The controls in row 18 determine the nature of the
transaction the system will execute when actuated and comprise two
pairs of "either/or" radio buttons, 26-28 and 30-32. When radio
button 26, "This Bid", on the far left, is selected, e.g. by a
mouse or other screen-pointing device, the system will execute a
hit only for the bid selected. Alternatively, adjacent radio button
28 "All Bids Higher" may be selected, in which case, the system
will execute a hit for the selected bid and for all higher bids
displayed in bid-listing pane 12 at the moment of the hit.
[0040] Similarly, selecting radio button 30, "This Offering", on
the right, sets the system to execute a take of an offering on the
selected offering only and selecting alternative, adjacent radio
button 32, "All Offerings Lower", sets the system to execute a take
for the selected offering and all lower offerings displayed in
offer-listing pane 14, at the moment of the take.
[0041] The particular value to the trader of this novel capability
to simultaneously execute on multiple bids or offerings in a
selected price bracket, will be apparent to those skilled in the
art and will be more fully explained below.
[0042] Bids higher than a pre-existing and active offer, or
offerings lower than a pre-existing bid are essentially improper
and accordingly, none is shown. Such bids or offers, if attempted,
are labelled "off-the-market" and are preferably denied posting by
the system. Optionally, a user attempting to enter such an order is
given the opportunity to execute "on-the-market", for example by
adjusting the order price. The system can suggest an adjusted order
price. If desired, a log of such off-the-market bids and offers may
be system-maintained and made available to system administrators,
or others on a restricted access basis.
[0043] The controls in row 20 provide, on the left a Hit button 34
which can be pressed to transact a hit on the selected bid and, on
the right, a Take button 36 enabling the user to take a selected
offer. Optionally, the system can provide for multiple bids or
offers to be selected simultaneously, for example by dragging a
pointer or using the customary control key, enabling multiple
simultaneous hits or takes.
[0044] Box 38 to the right of hit button 34 prominently displays
the amount, "99.097" of the bid being hit, and box 40 displays the
lot size, "10". Box 42 to the right of Take button 36 prominently
displays the amount, "99.11" of the offer being taken, and box 44
displays the lot size, "10". Boxes 38-44 clearly indicate to the
user key data regarding the action to be effected by pressing Hit
button 34 or Take button 36, for convenience, and to reduce the
risk of error.
[0045] The controls in row 22 are passive, calculated data
displays: display 46 indicates the Average Price of all the trading
units bid, on a price per million basis; and display 48 indicates
the Average Price of all the trading units offered, on a price per
million basis. The number of trading units in each bid or offer is
shown in the par columns, described below. Optionally, totals for
the par values of all the outstanding bids and offers, and/or the
difference between the totals, can be shown.
[0046] The controls in row 24 comprise two depressable bars:
lefthand bar 50 "Negotiate With Bid" enables the user to submit a
modified offer price or lot size; and righthand bar 52 "Negotiate
With Offer" enables the user to submit a modified bid price or lot
size. Preferably, such price negotiations are kept private, being
displayed only to the counterparty, and possibly, the system
operator.
[0047] Bars 50 and 52 can open new windows or programs wherein the
user can submit an offer or bid different from any of the current
bids or offers. For example, a trader--user seeking to buy 25 units
(millions) of the subject note might negotiate with offer number 2
in offer-listing pane 14, by selecting the offer, pressing
righthand bar 52 and entering a bid price, e.g. 99.093, along with
the lot size. The price is calculated to appeal to the offerer
having regard to the displayed "board" of bids and offers shown in
Figure I, which is public and therefore also available to the
offerer. In this example, the price of 99.093 is significantly
higher than bid number 3, which might be divided to take advantage
of offer number 2, but less than bid number 2 which has too small a
lot size to take offer number 2.
[0048] It is probable that bid number 1 and offer number 1 will
shortly go off the screen, possibly after minor negotiation to
reduce the spread, a deal having been made and a sale transacted
between the two listings. However, commission payment practices may
influence the market dynamics.
[0049] The usual commission practice in the fixed income industry
in the United States in 2001 is for the activator or "aggressor" to
pay the commission. This practice may lead to a standoff, neither
party wanting to become the aggressor and incur commission costs.
Thus, instead of trading the parties may prefer to wait and see how
the market develops and whether new levels appear on the bid side
or the offer side. Thus, commission considerations provide one
reason why the best offer may not transact with the best bid. There
can be others.
[0050] The price difference, or spread, between bid #1 and lot #1
which is one thirty-second and one eighth, $3,515.00 on lot of 10
m, at the displayed prices must include the trader's commission,
which is paid by the active deal maker, the trader who takes an
offer or hits a bid. A typical commission on a U.S. Treasury deal
is $30.065 per million par amount so that the commission on $10
million would be $300.65.
[0051] Alternatively, pursuant to the invention the practice of
aggressor pays can be abandoned in favor of a split commission
where the system charges both sides a commission, usually, but not
necessarily, the same commission. In this event, the bid and offer
prices will be the same. It is contemplated that the system may
significantly lower transaction expenses through cost savings in
professional personnel and support, enabling commission rates to be
reduced and improving transaction efficiencies. Such productivity
gains can be expected to improve market dynamics and increase
transaction volume.
[0052] Panes 12 and 14, labeled "Bid Depth" and "Offer Depth",
respectively, in a header row 53, comprise five columns each,
referenced 54-72. Columns 54-72 display data regarding various
characteristics of a number of bids or offers that are active in
the system. The characteristics are labeled in a header row 55
which extends across the tops of columns 54-72. Columns 54 and 56
show the dollar price, in the case treasury note case illustrated,
to eight decimal places and increments of one-two hundred and
fifty-sixth ( 1/256) of a dollar. Columns 58 and 60 number the bids
and offers, respectively in value order, descending for bids and
ascending for offers. Columns 62 and 64 indicate for how long the
bid or offer is good, in the example shown, "GTC",
"good-'till-canceled" or revoked by the customer. The par value of
the lot is shown in columns 66 and 68. In the treasury note case
shown the par value is shown in trading units of millions of
dollars, as is the practice for government bonds. Similarly, the
par value can display in thousands for corporate and municipal
bonds, as is their practice. The bid and offer amounts are shown in
columns 70 and 72. The prices bid in columns 54 and 70 are shown in
descending order while the offer prices asked in columns 56 and 72
are arranged in ascending order.
[0053] Columns 54-72 are arranged symmetrically in the middle of
level-of-interest window 10, on either side of the border between
panes 12 and 14, enabling the bid and offer prices in columns 70-72
to be viewed side-by-side with the highest bid and lowest offer
adjacent one another. This carefully organized screen display has a
number of advantages and is of particular value to a busy trader
working in a hectic market. The best prices are clearly apparent at
the tops of columns 70-72 and are easily compared with one another
so that a user can see the spread between the bid and offer, or ask
price. The next-best prices are also close to this point of
attention where they are easily found and utilized. Other less
close prices of less interesting bids and offers are ranked by
their downward distance from the best prices, with bid prices
descending and offer prices ascending.
[0054] Color coding or other graphic features can be employed, if
desired, to emphasize these relationships and facilitate
comprehension of the visual image. For example, the top line might
be in larger type or highlighted or presented on a yellow or orange
background, being colors which draw the eye. Descending colors
could be yellow, then green then blue, suggesting distance from the
top level, the level of greatest interest. All orders at the same
price could be the same color, providing another area of visual
acuity.
[0055] It will be appreciated that other screen placement
configurations may be adopted which produce the result of
emphasizing the best bid and offer levels, showing bids and offers
side-by-side and making other bids and offers easily available for
a trader-user to act upon. While the display of all levels known to
the market on a single screen, or in a single window, is preferred,
it will be understood that alternative embodiments are
contemplated. For example, the best bid and offer levels might be
shown on a screen, provided with an option button for displaying
other levels. Also, it is contemplated that in an active market,
there may be too many levels of interest to fit level-of-interest
window 10, so that, at any given moment, not all levels of interest
are displayed. In this case, the more interesting levels of
interest can be automatically displayed and other, less interesting
levels of interest can be made readily available by known means,
for example by vertical scrolling, as is commonly used for file
list displays.
[0056] This novel arrangement of bids and offers on a trader's
screen, provided by the invention, facilitates comprehension of the
market by the trader, and enables the trader to rapidly gain an
overview of the market for a particular security, and to easily
compare different, possibly competitive, securities by paging
through level-of-interest windows for each using known paging
means, for example by pressing "Next", "Previous", "Top" and
"Bottom" buttons (not shown) or by opening a list window, or
pop-up, or other comparable means. Such easily manipulated insights
into market dynamics can give a sophisticated trader new
opportunities to profitably exploit market niches, for example by
browsing for attractive bids or offers on closely comparable
securities. Alternatively, a trader may successfully predict that a
surge in activity for one security will shortly spill over into
another slightly different security whose activity appears to lag
the market, bolstered by knowledge of the interest level in that
security.
[0057] Par value amounts for the bids and offers, in columns 66-68,
which indicate lot sizes, are carefully located closely adjacent
the bid and offer prices in columns 70-72 where they are most
useful to the trader. Thus, the center of the screen is the high
interest zone for the trader and may be graphically enhanced to
draw the user's attention, by screen lines, illustrations, icons,
coloring or the like. If desired a zoom feature can be provided to
expand a central zone containing information of greatest
interest.
[0058] The dollar prices, columns 54 and 56 are the decimal prices,
bid or asked, in dollars, per one hundred dollars of par value,
i.e. a percentage. These columns serve as a reference tool and are
useful for arithmetical purposes.
[0059] The bid and offer prices, in columns 70 and 72, are
percentages of par value so that all prices shown represent a small
discount on par, presumably because prevailing market interest
rates are slightly higher than the illustrated note's coupon of
5.500 percent.
[0060] By tradition, the first two places of "decimals", i.e. the
first two figures after the point, indicate the number of
thirty-seconds ( 1/32) of a full point that are bid. A colon or
dash may be used in place of the decimal point. Thus the first
offer price, "99.11" is asking for a price of 99 11/32 percent of
par for the lot offered.
[0061] The third place after the point subdivides the
thirty-seconds into eighths so that the third place digit indicates
the number of eighths of a thirty-second that is bid or offered,
i.e. the number of two-hundred and fifty-sixths. By convention, a
plus sign "+" is used instead of "4" to indicate an intermediate
price of four/eighths or one-half of a thirty-second. Thus, the
first bid price "99.097" is ninety-nine and nine thirty-seconds and
seven eighths, i.e. one-eighth of a thirty-second short of
ninety-nine and ten thirty seconds, "99.10". The second bid price
"99.09+" is ninety-nine and nine-thirty-seconds and one half of a
thirty-second.
[0062] Each horizontal entry in bid-listing pane 12 or
offer-listing pane 14 comprises a level of interest in the market
for the subject security, in this case a 5-year Treasury Note. The
horizontal entries in bid-listing pane 12 are bids and those in
offer-listing pane 14 are offers or offerings. Each bid or offer is
a legal proposition by a qualified market participant which may be
accepted by another qualified market participant. Preferably also,
each bid and offer is active on screen so that a user may invoke a
program routine employing the bid or offer by pointing, clicking,
highlighting or otherwise selecting the bid or offer. For example,
the user may double-click on the bid or offer to open a new window,
e.g. a transaction window, or may right click and open a menu of
options including, for example, "Hit" or "Take", as appropriate,
"Negotiate", "Modify" and so on.
[0063] Usually, it will be a rule of participation that each
participant must be able to fulfill a bid or offer made within the
specified trading period, or with on-hand inventory or funds.
Accordingly, it is preferred that participants are qualified to
avoid fulfillment problems and to exclude deceptive or dishonest
participation, for example, the making of bids or offers that a
participant has no intention to fulfill, because such activities
may disrupt the market and the trading process.
[0064] Accordingly, a bid shown in bid-listing pane 12 may be "hit"
by the user's selecting the bid and pressing Hit button 34. The
system then enables, and executes, transaction wherein the user
sells the bond lot described in the bid to the bidder. Similarly,
an offer shown in offer-listing pane 14 may be taken, or "lifted",
to use a term often seen or heard in the art, by selecting the
offer and pressing Take button 36. Preferably, when a bid or offer
is hit or taken, the system promptly locks out other participants
from hitting or taking the bid or offer and removes the respective
bid or offer from the interest level displays of all users, or
marks it sold.
[0065] Optionally, level-of-interest window 10 may also show, or
provide button access to one or more recent transactions for the
security. If desired, the security's transaction history can be
made available in a separate window or pane.
[0066] Bids or offers can be imported, for example by APIs
(application-program interfaces) or entered into the program by any
desired method including import from other software programs or
data sources via files received over common carriers, private lines
or links, landlines, airwaves, satellite and so on. Preferably,
however, bids and offers are posted into a trading program module
of the inventive bond trading system, to ensure the bid and offer
data is fully integrated into the system and can be made available
to other users immediately, or shortly after posting. Suitable data
entry screens and procedures are described with reference to FIGS.
1-8 of my U.S. Pat. No. 5,915,209.
[0067] In another embodiment of the invention, bids and offers are
manually entered at the trader's station, or at a linked station in
the trader's office, to the data entry system, employing data entry
screens, from customer sources such as phone calls, emails and
faxes. Manual data entry can be supplemented by electronically
posting information regarding the security which is retrieved from
source databases, or less desirably, from other available
databases. Such information is preferably authenticated. A customer
ID, or customer information, which is maintained in private, and
identifies the seller or the buyer to be recorded for the security
can be included by selection from a list or the like. Desirably,
each new bid or offer is approved by an authorized professional
before posting to the system and release for public distribution.
For additional security and audit purposes, an electronic signature
or other electronic imprint associated with the responsible trader
can be stamped on each bid and offer record and centrally archived
by the system, if desired. Such authorization stamp would not be
publicly available. Known techniques such as public key
infrastructure can be employed to facilitate security.
[0068] Although some enterprises may benefit from deploying the
inventive bond trading program or system in-house, it is preferred
that the system be deployed among a multiplicity of remotely
located traders and that bids and offers be received into the
system from any such, duly qualified traders wishing to participate
and are system-presented to all other users to solicit hits or
takes.
[0069] New bids and offers may be screened and organized in any
desired manner. Preferably, new bids are electronically screened
for authenticity, for example by identifying their source as being
from an authorized program user. Public key-private key
infrastructure ("PKI") can be used for this purpose. In one example
of how such a security system might work, trader stations, or other
authorized users, communicate all new bids, offers or other
listings to an administrator station in an encoded form locked with
a private key and accompanied by a public key. The private key is
known only to the administrator and the particular trader, being
communicated between them by means other than electronic file
transmission, e.g. regular hand-delivery mail. The public key
identifies the user enabling the administrator to select the
appropriate private key to unlock the encoded new bid or offer.
[0070] Preferably also, new bids and offers are promptly integrated
with existing bids and offers and the displays in bid-listing pane
12 and offer-listing pane 14 are automatically refreshed to display
the new bids and offers without user intervention. Optionally,
level-of-interest window 10 can include a Refresh button, not shown
to refresh the screen to control the display of new bids and offers
and remove traded and expired bids and offers. Choice of these
functions may be user-settable, if desired.
[0071] If desired, a user alert, such as a flashing or highlighting
of a new bid or offer for the subject bond, with a limited duration
of perhaps five or ten seconds, can be provided to attract
attention to newly arrived bids and offers. Alternative means such
as a ticker tape crawling across the bottom or top of the screen
can be provided to display to the user new bids and offers for all
securities of interest to the trader, if desired. Optionally also,
securities of interest may be specified in a setup routine for the
ticker tape or other display. Other variables such as the size and
price ranges of orders of interest that are newly bid or offered
may also be set.
[0072] The traders or other users may be located locally,
regionally, nationally or globally and their user stations may
communicate via the Internet, other wide area network or by any
other suitable means, as will be apparent to those skilled in the
art. Such network or other means preferably also includes security
means to ensure that data exchanged between users cannot be misused
if intercepted. Alternatively, the inventive trading program or
system can be deployed on a secure network which may, if desired,
be a dedicated private-use or limited-access network, having
reduced risk of intrusion or data misappropriation or corruption,
for example a virtual private network overlaid on or supported by
the Internet or the like. Such a network contrasts with the
open-access general-purpose character of the Internet but might be
deployed over the Internet.
[0073] The ability to view multiple levels of interest in a
security, for example at least three and preferably five or more,
or all available levels of interest, provides a number of
advantages, to a prospective bond seller or purchaser and
particularly to a user trader interested in rapidly transacting
deals at favorable prices for their clients. The invention can also
provide additional benefits by permitting the viewing of multiple
levels of interest on multiple securities. Such multiple viewing
can be enabled by tiling, listing, windowing or other techniques
known in the computer arts.
[0074] Preferably, the bond trading program provides one or more
users with an ability to view all the levels of interest expressed
by system participants. Toward the end of a dynamic efficient
market it is also preferred to enlist as participants, as many
people as possible that wish to bid or offer on a particular
security at a given time.
[0075] A particular advantage of the adjacent display on a single
screen, or the bringing to a single window, of multiple levels of
interest in a bond is the flexibility provided to a trader user
including the ability to transact on multiple lots and the ability
to hit any bid or take any offer displayed, even if it is not the
best price.
[0076] Thus, a trader-user may wish to hit multiple smaller bids to
subdivide a large offer or take multiple offers and combine them
into a single lot to satisfy a client order which is larger than a
single best price lot. For example, a trader with an order to sell
100 million of the subject security may satisfy this order by
hitting bid #1 (10 m), bid #2 (15 m), bid #3 (50 m) and bid #5 (25
m), getting an average price slightly above 99.09, which is
significantly better than the only bid for 100 m, bid #6 at 99.082.
While the price would be substantially lower than other offerings,
a quick sale results, which may be the best strategy in what
appears to be a bear market, top-heavy on the offer side.
[0077] The speed with which it is expected that the invention will
enable reasonable market orders to be satisfied is contemplated to
give a trader new options and greater flexibility. Thus, a large
parcel may quickly be unloaded in smaller units, with skilful price
adjustments that avoid significantly impacting the market.
Furthermore, because a trader can immediately see the impact on the
market constituted by the group of actively participating traders,
as new bids and offers are automatically posted to
level-of-interest window 10, the trader can adjust both price and
timing in the best interests of his client, for example by delaying
release of additional lots of the parcel if the market clearly
responds to initial lot postings with a distinct negative price
movement. Alternatively, more lots can be quickly released if the
market shows a clear appetite for the security at a price which is
acceptable to the client.
[0078] An alternative strategy available to the trader, pursuant to
the invention, is to select bid #6 and press button 50 to open a
negotiation window (not shown) and negotiate with the bidder for a
100 m lot. The actual price offered in a negotiation will be
influenced by prevailing commission rates, but, by way of
illustrative example of the capabilities provided by the invention,
the negotiating trader might offer 99.12, the same price as offer
#4 for 111 m. The advantage to the sponsor of bid #6 is that they
will not have to pay the commission: it will be paid by the
offering trader in the negotiation, as the active party. The new
offer can be presented to the sponsor of bid #6 in a number of
ways, but is preferably directly, privately and anonymously
system-presented to the relevant trader for example by completion
of a negotiation window which can entail entry of the offer price
and pressing a "Send to Bidding trader" button. Negotiation with an
offer can be effected in a corollary manner.
[0079] A trader with an order to purchase 60 m, an awkward amount,
not large enough to obtain price improvement, but too large to fill
quickly, might take offers #s 1 and 2 only, regarding the price of
99.12 on offers #s 3-5 as too high, and enter a new bid for the
relatively small and easily filled balance of 15 m.
[0080] These strategies, enabled by the inventive bond trading
program, are not possible with systems which display only a single
bid and offer price level at any given time.
[0081] A further and significant benefit of the simultaneous active
display onscreen of both sides of the market, in depth, i.e.
showing multiple levels of bids and offers at various prices is the
ability to gain an overview of the state of the market for the bond
in question. The total number of levels of interest, in this case
17, is indicative of the liquidity of the bond, a small number of
bids and offers suggesting that the bond may be hard to move and a
large number indicating that it will be easy to resell the bond or
to augment a holding. Such considerations provide valuable
additional information to the user which was not available prior to
the invention and which may help a trader or other user make a more
efficient decision to buy or sell the subject bond, or a
competitive bond, having a more favorable level of interest. The
balance between bids and offers is suggestive of the direction in
which the price will move: if the lot value bid within a defined
price bracket, say one or two thirty-seconds, of the market
clearing price, significantly exceeds the lot value of offers
within a similar bracket, it may be inferred that the market in the
particular security displayed will rise and vice versa, that it
will fall.
[0082] In the example shown, bid-listing pane 12 comprises a total
of six bids having a total par value of $224,000,000.00 within a
price bracket of 15/8 thirty-secondths (subtracting the price bid
for lot #6 from the price bid for lot #1). The first ten lots in
offer-listing pane 14 fall within the same price bracket of 15/8
thirty-secondths of the lowest offer and have a total value of
$186,000,000.00, which is a significantly smaller number than the
bid value total, suggesting that the price may rise unless a higher
proportion of offers comes to the market. This is an example of a
simple analytical deduction which may be made from the displayed
levels of interest. The invention contemplates that other more
sophisticated analyses may be made, as will be apparent to those
skilled in the art.
[0083] Optionally, the program may display such helpful analytical
results statistically, if desired, either in an additional display
box or boxes in level-of-interest window 10, or in a pop-up window,
or the like. For example, the program may permit the user to select
a price bracket and show the total lot values bid and offered
within that bracket; or to select a total par value bid or offered
and selectively display the most favorable selection of countering
lots that are available, preferably providing a price bracket
indicator or an average price or both. Alternatively, or
additionally, the system may provide lot value totals and average
or bracket price information for the total level of interest
available or displayed.
[0084] Thus, the ability to view multiple levels of interest
provides a trader valuable, real-time information, that was
previously unavailable regarding liquidity and market direction,
enabling more and more profitable trading decisions and
transactions.
[0085] A further benefit to the trader, pursuant to the present
invention, can be obtained by providing an optional pop-up window,
public level window 73, as shown in FIG. 2 to control the level of
interest a trader shows when their bid or offer is displayed in
level-of-interest window 10. Public level window 73 permits a user
to show All 1 m, 5 m, 10 m, 25 m, 100 m or to enter any desired
amount, e.g. 50 m, to show publicly. Showing more than an order is
improper and attempts to do so will preferably be system-rejected,
assuming the system has knowledge of the relevant order.
Preferably, the show level is displayed only so long as the system
is capable of executing on the larger, hidden amount, should that
larger order level be accepted by another user. The system should
be capable of doing this so long as an adequate order is present in
the system. Public level window 73 can be activated from a bid or
offer entry screen (not shown) and system-stored as a property of
the bid or offer.
[0086] Using public level window 73, a trader can show less than
their entire interest, thereby hiding the full extent of their
interest. This feature may enable a trader to obtain a better price
for a large lot or order than would be possible if the entire bid
or offer were published. The presence of the large bid or offer can
often adversely affect the market, causing levels to be withdrawn
from the other side of the market and repriced unfavorably.
[0087] The bond trading software of the invention preferably also
includes a procedure for transacting or executing a trade in
response to a trader user pressing Hit button 34 or Take button 36,
which trade transaction procedure can include a trade transaction
window 74, such as is shown in FIG. 3. Preferably, when a trader
accepts a bid or offer by activating button 34 or 36, the system
removes the level from level-of-interest window 10, verifies that
the accepted level still exists and is live, which is to say it has
not been canceled, withdrawn or expired. If it is not still live,
the trader is so notified and returned to level-of-interest window
10.
[0088] As shown in FIG. 3, trade transaction window 74 comprises a
transaction type display 76 indicating the nature of the trade,
"Hit Bid" and a bid description 78 which recapitulates the subject
security and the bid details. If these are correct and the trader
wishes to proceed and consummate the transaction they press OK
button 80. The system then generates buy and sell tickets, forwards
them to the appropriate parties and removes the bid from public
display. Preferably transaction histories are system-maintained,
with trader-related data, and made available to the respective
trader.
[0089] Alternatively, the bond trading system can forward the
transaction details to a trade capture program, utilized by the
trader or to the trader's back office systems, for completion of
the administrative part of the transaction. API's or other known
means can provide a transparent interface between systems, if
necessary.
[0090] Completion of the trade is preferably effected with fully
automated systems providing straight-through processing from the
front office, where the trader operates, to the back office where
the transaction is reconciled with the buyer's and seller's
accounts, file histories and archives are prepared and trade
confirmations, or buy and sell tickets, are prepared and forwarded
for settlement, possibly via electronic communication with the
counterparty trader.
[0091] If the details are incorrect, or the trader no longer wishes
to complete the transaction, they can press Cancel button 82.
[0092] Transaction of a taken offer can be effected in a corollary
manner to hitting a bid, in which case transaction type display 76
will display "Take Offer".
[0093] When the trader hits a bid, the system can prompt the
hitting trader to provide information as to the security lot, or
lots, in the trader's inventory, or the trader's customer's
inventory that should be used to fulfill the order. Alternatively,
the system may automatically check the appropriate inventory and
suggest one or more lots that should be used to fulfill the order,
final determination or confirmation being made by the trader.
Similarly, the system can prompt for information as to the identity
of the purchaser and any other necessary information in response to
a take of an offer. Alternatively, and additionally, if desired,
the system can search through pending customer orders for a match
or close match and prompt for confirmation or changes.
[0094] If the system finds a pending offering for the security
larger than the lot hit, the system can prompt for additional bids
to hit. Similarly, if the system finds an order for a larger lot of
the offered security the system can prompt for additional offers to
take.
[0095] In a valuable optional feature of the invention, prior to
executing the trade, the system responds to activation of OK button
80 by invoking a price improvement procedure which searches for any
new bids or offers that may have recently entered the system and
have not yet been displayed to the accepting trader. The system
checks the new bids or offers for a better price which, if found
with all other particulars identical to the hit bid or taken offer,
is system-accepted and displayed to the trader. The system
functions on the premise that a higher selling or lower buying
price will automatically be acceptable. A trader willing to sell at
99.10 will certainly be willing to sell at 99.11.
[0096] However, as a user-settable option, if desired, a
confirmation procedure can be provided, for example in a window
such as Price Improvement window 84 shown in FIG. 4. Price
Improvement window 84 comprises a bid description 86 which provides
details of the type and nature of the new bid or offer. These may
differ slightly from the hit bid or taken offer, for example with
regard to lot size, or possibly, as a result of system error. The
trader can accept the new bid, in which case the system returns to
trade transaction window 74, FIG. 3 substituting the new bid for
the prior bid and redisplaying the prior bid for action in
level-of-interest window 10. The trader again presses OK button 80
to complete the transaction. Again, the system checks for a better
price, and if none is found, which is probable in view of the short
time interval since the last check, completes the transaction as
described above. If a still better price is found, Price
Improvement window 84 is again displayed and the procedure is
repeated.
[0097] The novel price improvement procedure of the invention
enables a trader to obtain a better price in a way which was not
heretofore possible. Such price improvement may be of great value
in a fast moving market. Up-to-the second price improvement where a
transaction can be improved after acceptance of a level and prior
to completion is believed to be new to the bond trading marketplace
and is beneficial in creating a more even trading environment
without use of an exchange.
[0098] If, for any reason, the trader does not wish to complete the
transaction with the new bid, for example, because the lot size or
other parameter does not meet the trader's requirements they can
press Ignore New Bid button 88 and complete the transaction with
the prior bid. Price improvement of an accepted offer can be
effected in a corollary manner to that for a bid, in which case the
term "bid" is replaced with the term "offer" throughout Price
Improvement window 84.
[0099] Another valuable optional feature of the inventive bond
trading program is illustrated by spread window 92 shown in FIG. 5
which provides a dynamic pricing option for bids and offers whereby
the system can automatically adjust the price of a bid or offer in
response to a trader-specified market parameter available to the
system whereby the price bid or offered is changed without further
trader intervention after setup.
[0100] In one example of such a spread, the price of a bid or offer
order for a low activity bond, such as one with only a few months
to maturity, can be linked to the price of a more frequently traded
instrument such as a 2 yr note. Preferably, the trader has the
option to insert a spread margin indicating the relationship of the
subject security's price to the reference price, for example a
yield difference, expressed in basis points, each of which is
one-hundredth of a percentage point (0.01%).
[0101] A header bar 94 in an upper pane 95 of spread window 92
identifies the trader using the program. Immediately beneath header
bar 94, line 96, the trader's last sale is described. Box 98 on the
left below line 96 has a number of descriptors and drop-down menus
providing the trader a range of options, where the various
alternatives and optional features of the invention that have been
described herein may be accessed. For example, "System Order" under
which the spread function is grouped, might be switched to "Client
Order" or another category bringing up a different data entry
screen; "Spread to" can be changed to "Swap for" (see FIG. 6) and
other system functions; settlement may be switched to other than
"regular"; and other categories may be changed as is apparent from
the right-hand column of box 98. The price label in this case is
"S" for swap.
[0102] Line 100 beneath box 98 gives the particulars of the
security for which a bid or offer is to be placed. In this case it
has a maturity of March 2002, three months from a hypothetical
trading date of Jan. 1, 2002, a coupon of 67/8 percent, a par bid
price of 100.22 (one hundred dollars and twenty-two
thirty-secondths of a dollar per one hundred dollars par value) and
a par offer price of 100.233, a lot size of 100 million, a bid
price yield of 5.3546% and an offer price yield 0.1555% lower. The
bond was down on the last trade with par 23 bid.
[0103] Lower pane 102 lists possible target securities for price
linking, one of which can be selected and displayed in spread entry
box 104 where the details may be adjusted and the trader can decide
to enter or not enter the spread. As shown, the price of the March
2002 bond is going to be spread to the 2 yr instrument maturing in
June 2003, for the full amount of 25 pieces of 1 m, i.e.
$25,000,000.00 par value, with a spread of 10, i.e. ten basis
points, one tenth of a percent. Once entered, a new bid for 25
million of the March 2002 bond is posted and made available to all
system users. As sales of the liquid June 2003 bond are made, the
publicly displayed bid price of the March 2002 bond is changed to
reflect the change in the June 2003 bond price. The spread to
function enables a trader to keep a bid (or offer) for an inactive
security in line with the market price of a liquid, frequently
traded security.
[0104] A still further valuable optional feature of the inventive
bond trading program is illustrated by swap window 106 illustrated
in FIG. 6. A swap enables the trader to take advantage of a
compatible bid and offer by simultaneously buying one security and
sell another at a suitable spread. Swap window 106 is similar to
spread window 92 with the "Swap for" function selected in box 98 to
display a swap entry box 108. In the case shown, the trader is
buying 25 Mar. 2002 67/8 and selling 25 2 yr "on-the-run" notes at
10 spread. The system executes both transactions.
[0105] FIG. 7 provides a schematic illustration of one possible
implementation and use of the bond trading program and system of
the invention. Bond trading system 120 comprises a bond trading
program according to the invention as described herein implemented
on a suitable computer in a subject bond trader's office. The
computer may, for example, be a state-of-the-art personal computer,
such as, in early 2001, a DELL OPTIPLEX (trademark, Dell Computer
Corporation) GX200 system with an 866 MHz PENTIUM III (trademark,
Intel Corp.) processor, 256 MB RDRAM and a 20 GB hard drive. Some
features of the implementation shown are similar to the disclosure
of my U.S. Pat. No. 5,915,209 from which further detail may be
obtained.
[0106] Bidding-and-offering-traders 122 communicate bids and offers
at various levels, box 124 via data lines 126, for viewing by the
subject trader. Acceptances 128 and buy-and-sell tickets 130 can be
returned to bidding-and-offering traders 122 also over data lines
126.
[0107] The subject trader 120 can also communicate with clients
132, who may also be traders, over data lines 126 for the receipt
of orders to buy or sell security lots, for transmission of
bid/offer forms 134, of completed forms 136 requesting transactions
on bids or offers received on the client's behalf by the subject
trader, and "bought from" and "sold to" tickets 138. If desired,
bid/offer forms 134 can be transmitted via an Internet service 140
or fax 142.
[0108] Formal particulars of securities traded, including CUSIP
(trademark) numbers can be obtained by bond trading system 120 from
a local security master database 144 or a remote reference database
146, as described in my U.S. Pat. No. 5,915,209.
[0109] Data lines 126 may indicate any suitable electronic
communication system including a preferred virtual or real private
network carried by public carriers, preferably with global reach,
the Internet, a wide area network, local area network or other
suitable system.
[0110] Optionally, each of bidding-and-offering traders 122 and
clients 132 may implement bond trading system 120, with the modules
or implementations communicating one with another across data lines
126.
[0111] It will be understood that an individual trader may play the
role of a bidding or offering trader 122 for one transaction while
becoming a client trader for another transaction.
[0112] FIG. 7 illustrates how a public auction of a fixed income
security lot, for example a United States treasury bill, note or
bond may be conducted between many parties with all bids and offers
being anonymously posted on the system to be viewed by all parties.
All participants may see all levels of interest.
[0113] Referring now to FIG. 8, in one example of the use of bond
trading system 120, the subject trader receives a customer order,
step 150, to purchase a specified quantity of a particular bond.
The trader selects a level-of-interest window 10 for the particular
bond and views the full depth of market interest in the bond in the
system, as shown by the pending bids and offers in
level-of-interest window 10, step 152. Utilizing their skill and
experience 154, the trader evaluates the displayed bids and offers,
making judgments as to how best to fulfill their client's interest,
and decides whether or not become the aggressor, step 155 and take
or negotiate with an offer. If the decision is not to become the
aggressor, step 155N, because the trader judges none of the pending
offers to be acceptable or negotiable, the trade enters the market
on the passive side and posts a new bid, step 156.
[0114] Also factored into the trader's decision to become an
aggressor or not, step 155, is the prevailing commission protocol,
which may require the aggressor to pay the commission and will
therefore influence the trader's judgment of the price levels of
current offers.
[0115] If the subject trader decides to become the aggressor, step
155Y, the trader then has the options of lifting or negotiating
with one or more of the pending offers. In step 157, the trader
decides whether or not to take the offer. If the offer is taken,
step 157Y, the system transacts the sale, step 158. If the trader
decides not to take an existing offer as is, step 157N, but has
identified one or more of the pending offers as being of sufficient
interest to be negotiable, they highlight the offer and activate
negotiate-with-offer bar 52, to negotiate with the offering trader,
step 159. If the two traders agree a price, step 160Y the system is
so instructed and transacts the sale, step 158. If a price cannot
be agreed and no other offer is judged adequate for negotiation,
the subject trader proceeds to post a new bid, step 156.
[0116] After posting a new bid, the trader passively awaits a hit,
step 162, enabling the trader to get on with other business.
Optionally, if a hit is not received within a trader-determined
time interval, the bid is withdrawn, repriced and re-posted to the
system, step 164. If necessary steps 162 and 164 can be repeated.
When a hit is received, step 166, the system transacts a sale, step
158.
[0117] The duration of step 162 may be trader-determined, operating
"manually", i.e. the trader simply intervenes and performs step 164
on his own schedule, or, more preferably is system-effected. To
this end, the system can permit the trader to select a time
interval, e.g. 15 minutes, 30 minutes, 1 hour, two hours, etc after
which the system withdraws and re-presents the bid to the trader
for repricing. The system can suggest a new price. Alternatively,
re-pricing may be automated up to (or down to, in the case of
offers) a predetermined limit, on a trader-determined schedule,
whereby the price is system adjusted, without consulting the trader
at regular intervals until the limit is reached or the transaction
is effected.
[0118] Orders to sell can be effected by processing offers in a
corollary manner.
[0119] Referring now to the program screen shown in FIG. 9 another
embodiment of bond trading program according to the invention
provides the trader the ability to choose among different trade
procedures including the methods of the invention described herein
and the novel auction processes described in my U.S. Pat. No.
5,915,209. The screen shown is a multi-purpose bid/offer entry form
which comprises multiple drop-down menus 170-174 enabling the
trader to choose different system procedures including the bonds to
display, menu 170, the type of lots to display menu 172 and a menu
of sort keys, menu 174 for listing live orders the trader has in
the system so that the user may manage and monitor their exposure
in the market place. The system enables the trader to check the
level of bid.
[0120] As may be seen, the trader can not only prepare, and using
other system functionality distribute, bid and offering wanted lots
for conducting private auctions, but can also prepare offerings
lots and bids (not shown) for public posting for transaction or
negotiation, as described herein. After the auction or other
transaction is concluded, the status field displays whether or not
the lot traded" was priced to market was priced to the high bidder
or was withdrawn.
[0121] The invention makes possible a variety of novel optional
features to assist a securities trader which derive from or can be
associated with the convenient display to the trader, in
transactable form, of multiple levels of interest in a security.
For example, level-of-interest window 10 can include dynamic price
and volume indices conveniently displaying price movement in unit
time and/or volume transacted in unit time for the security shown.
A price volatility index could also be displayed indicating price
change per unit volume transacted. Such indices would preferably be
calculated upon and immediately updated from system-completed
transactions. Corresponding statistical indices could also be
system-calculated and displayed to track the prices and volumes of
bids and offers posted to the system. Equivalent dynamic indices
could be provided for a group of securities regarded as fungible
i.e. having some degree of interchangeability: if one is not
available at an acceptable price, then the other will probably be
acceptable to the client.
[0122] The present invention is particularly suitable for
application in the financial industry providing marketable or
licensable systems for trading fixed interest securities including
bonds. It will be understood that the systems and software
referenced herein include, either explicitly or implicitly,
software implemented on computers or other appropriate hardware,
including such other intelligent data processing devices having a
processor, data storage means and the ability to support an
operating system, with or without user interfaces, for example,
file servers, as may be useful in achieving the objectives of this
invention.
[0123] Suitable developer tools for creating the software programs
disclosed herein are well known to those skilled in the art and
include for example MICROSOFT VISUAL FOXPRO 6.0 (trademarks)
database development system.
[0124] Software components and applications embodying the invention
can be distributed in electronic bit storage on magnetic, optical,
bubble or other media, and optionally in transportable form to be
interactive with an electronic reading device, for example, on
computer or optical diskettes, or may be distributed by downloading
over wired or wireless networks, including the Internet,
derivatives, modifications and offspring of the Internet, for
storage by the recipient on such media.
[0125] It will further be appreciated that such media-stored
software constitutes an electronic customizing device which can
interact with a magnetically or optically cooperative
computer-based input device enabling the computer to be customized
as a special purpose computer, according to the contents of the
software.
[0126] While illustrative embodiments of the invention have been
described above, it is, of course, understood that various
modifications will be apparent to those of ordinary skill in the
art. Many such modifications are contemplated as being within the
spirit and scope of the invention.
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