U.S. patent number RE44,393 [Application Number 13/542,751] was granted by the patent office on 2013-07-23 for system and method for deriving data.
This patent grant is currently assigned to EBS Group Limited. The grantee listed for this patent is Edward R. Howorka, James A. O'Hagan, Alexander C. Riseman. Invention is credited to Edward R. Howorka, James A. O'Hagan, Alexander C. Riseman.
United States Patent |
RE44,393 |
Riseman , et al. |
July 23, 2013 |
System and method for deriving data
Abstract
Best bid and best offer rate data from deals concluded on an
anonymous trading system in a fungible instrument such as a foreign
currency pair are processed to derive indicative rates. A minimum
indicative rates spread between bid and offer prices is defined.
The indicative rate bid and offer prices are set to the received
best bid and offer prices and alternately an amount is added to the
indicative offer rates and subtracted from the indicative bid rates
until the spread between the indicative bid and offer rates is
greater than or equal to the predefined minimum indicative rates
spread and greater than the spread between the best bid and offer
prices.
Inventors: |
Riseman; Alexander C.
(Irvington, NY), Howorka; Edward R. (Denville, NJ),
O'Hagan; James A. (Englishtown, NJ) |
Applicant: |
Name |
City |
State |
Country |
Type |
Riseman; Alexander C.
Howorka; Edward R.
O'Hagan; James A. |
Irvington
Denville
Englishtown |
NY
NJ
NJ |
US
US
US |
|
|
Assignee: |
EBS Group Limited (London,
GB)
|
Family
ID: |
31978573 |
Appl.
No.: |
13/542,751 |
Filed: |
September 3, 2003 |
PCT
Filed: |
September 03, 2003 |
PCT No.: |
PCT/US03/27333 |
371(c)(1),(2),(4) Date: |
August 22, 2005 |
PCT
Pub. No.: |
WO2004/023244 |
PCT
Pub. Date: |
March 18, 2004 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
Issue Date |
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60408180 |
Sep 3, 2002 |
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Reissue of: |
10525750 |
Aug 22, 2005 |
8036976 |
Oct 11, 2011 |
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Current U.S.
Class: |
705/37; 705/38;
705/36R; 705/35 |
Current CPC
Class: |
G06Q
40/06 (20130101); G06Q 30/08 (20130101); G06Q
40/00 (20130101); G06Q 40/04 (20130101); G06Q
40/025 (20130101) |
Current International
Class: |
G06Q
40/00 (20060101) |
Field of
Search: |
;705/35,36R,37,38 |
References Cited
[Referenced By]
U.S. Patent Documents
Foreign Patent Documents
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100 63 828 |
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May 2001 |
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DE |
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0625275 |
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Nov 1994 |
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EP |
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0 952 536 |
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Oct 1999 |
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EP |
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2002-163451 |
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Jun 2002 |
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JP |
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2002-352114 |
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Dec 2002 |
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JP |
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2002-352115 |
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Dec 2002 |
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JP |
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2002-0017537 |
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Mar 2002 |
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KR |
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WO 00/68846 |
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Nov 2000 |
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WO |
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WO 02/07039 |
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Jan 2002 |
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WO |
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WO 02/07039 |
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Jan 2002 |
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WO |
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Other References
Ref U--Clyde et al., Is it Efficient to impose costs on
small-volume equity traders? International Journal of the Economics
of Business, vol. 6, No. 1. 1999, pp. 81-92. cited by examiner
.
Ref V--D. Freeman, Regional Tests of Okun's Law, International
Advances in Economic Research, vol. 6, No. 3, p. 557, Aug. 2000.
cited by examiner .
The U.K. Search Report issued Aug. 25, 2005. cited by applicant
.
The International Search Report issued for Parent PCT Application
No. PCT/US2003/027333. cited by applicant.
|
Primary Examiner: Monfeldt; Sarah
Assistant Examiner: Amelunxen; Barbara Joan
Attorney, Agent or Firm: Dickstein Shapiro LLP
Parent Case Text
CROSS REFERENCE TO RELATED APPLICATIONS
This application is a National Stage filing under 35 U.S.C. 371 of
International Application No. PCT/US03/27333, filed on Sep. 3,
2003, which designated the United States and which was in the
English language, and claims priority benefit from U.S. Provisional
Application No. 60/408,180, filed on Sep. 3, 2002.
Claims
The invention claimed is:
1. A computer system comprising one or more computers on a network,
the one or more computers being configured to process deal
information relating to completed transactions of a fungible
instrument, comprising: a receiver configured to receive best price
bid and offer rates of completed transactions in the instrument; a
rates processor configured to calculate indicative bid and offer
rates from the received best price bid and offer rates of completed
transactions based on a predefined minimum indicative rates spread
between bid and offer prices by adjusting the received best price
bid and offer rates to maintain a spread: (i) greater than or equal
to the predefined minimum indicative rates spread, and (ii) greater
than a spread between the received best price bid and offer rates;
and a data feed for providing the indicative bid and offer
rates.
2. A computer system according to claim 1, wherein the best price
bid and offer rates are received from an automated trading
system.
3. A computer system according to claim 2, wherein the best price
bid and offer rates are received from an anonymous trading
system.
4. A computer system according to claim 1, wherein the rates
processor is further configured to set the indicative rate bid and
offer prices to the received best bid and offer prices, and to
alternately add an amount to the indicative offer rates and
subtract an amount from the indicative bid rates until the spread
between the indicative bid and offer rates is: (i) greater than or
equal to the predefined minimum indicative rates spread, and (ii)
greater than the spread between the received best price bid and
offer rates.
5. A computer system according to claim 4 wherein the amount to add
or subtract is a single pip.
6. A computer system according to claim 1, wherein the rates
processor is further configured to periodically repeat the
calculation of the indicative rates.
7. A computer system according to claim 1, wherein the rates
processor is further configured to repeat the calculation of the
indicative rates if a received best bid or offer is outside the
range of the indicative rates.
8. A computer system according to claim 1, wherein the rates
processor is further configured to repeat the calculation of the
indicative rates if the spread between the received best prices bid
and offer rates widens such that the best prices are the same as
the indicative rates.
9. A computer system according to claim 1, wherein the rates
processor is further configured to repeat the calculation of the
indicative rates if the spread between the received best price bid
and offer rates plus a predetermined amount is less than the
indicative rates spread and the indicative rates spread is greater
than the minimum indicative rates spread.
10. A computer system according to claim 1, wherein the rates
processor is further configured to repeat the calculation of the
indicative rates if one or both of the bid and offer sides of the
best prices are unavailable and are then restored.
11. A computer system according to claim 1, wherein the one or more
computers are further configured to distribute the calculated
indicative rates to subscribers.
12. A computer system according to claim 11, wherein the one or
more computers are configured to distribute indicative rates by
forming an indicative rates panel for distribution and display at
the subscribers.
13. A computer system according to claim 1, wherein the rates
processor is further configured to calculate a market high rate and
market low rate from the best bid and offer prices and the one or
more computers are configured to distribute the market high rate
and market low rate to subscribers.
14. A computer system according to claim 13, wherein the rates
processor is configured to calculate the market high and low rates
by discarding from the received best bids and offers bids and offer
prices for which less than a predetermined volume has been dealt at
that price between a predetermined number of counterparties over a
predetermined period.
15. A computer system according to claim 1, wherein the rates
processor is configured to record absolute market high and market
low rates.
16. A computer system according to claim 15, wherein the one or
more computers are configured to distribute the absolute market
high and low rates to subscribers.
17. A computer system comprising one or more computers on a
network, the one or more computers being configured to process deal
information relating to completed transactions of a fungible
instrument, comprising: a receiver configured to receive best price
bid and offer rates of completed transactions in the instrument; a
rates processor configured to calculate indicative bid and offer
rates from the received best price bid and offer rates of completed
transactions based on a predefined minimum indicative rates spread
between bid and offer prices, by setting the indicative rate bid
and offer prices to the received best bid and offer prices and by
alternately adding an amount to the indicative offer rates and
subtracting an amount from the indicative bid rates until the
spread between the indicative bid and offer rates is: (i) greater
than or equal to the predefined minimum indicative rates spread,
and (ii) greater than a spread between the received best price bid
and offer rates; and a data feed for providing the indicative bid
and offer rates.
18. A computer system comprising one or more computers on a
network, the one or more computers being configured to process deal
information relating to completed transactions of a fungible
instrument, the computer system comprising: a receiver configured
to receive best price bid and offer rates of completed transactions
in the instrument; a rates processor configured to calculate
indicative bid and offer rates by: filtering the received best
price bid and offer rates of completed transactions to remove high
frequency fluctuations in the received best price bid and offer
rates, and adjusting only the filtered best price bid and offer
rates to maintain a predetermined minimum spread; and a data feed
for providing the calculated indicative bid and offer rates.
19. A computer system according to claim 18, wherein the rates
processor is further configured to adjust indicative rates by
adjusting the received best price bid and offer rates to maintain a
bid/offer price spread: (i) greater than or equal to a predefined
minimum rates spread, and (ii) greater than a spread between the
received best price bid and offer rates.
20. A computer readable storage medium having recorded thereon
computer code which when run on a computer causes the computer to
process deal information relating to completed transactions of a
fungible instrument by: receiving best price bid and offer rates of
completed transactions in the instrument; calculating indicative
bid and offer rates from the received best price bid and offer
rates based on a predefined minimum indicative rates spread between
bid and offer prices and adjusting the received best price bid and
offer rates to maintain a spread: (i) greater than or equal to the
predefined minimum indicative rates spread, and (ii) greater than a
spread between the received best price bid and offer rates; and
providing the indicative bid and offer rates in a data feed.
21. A computer readable storage medium having recorded thereon
computer code which when run on a computer causes the computer to
process deal information relating to completed transactions of a
fungible instrument by: receiving best price bid and offer rates of
completed transactions in the instrument; calculating indicative
bid and offer rates from the received best price bid and offer
rates based on a predefined minimum indicative rates spread between
bid and offer prices, setting the indicative bid and offer rates to
the received best price bid and offer prices and alternately adding
an amount to the indicative offer rates and subtracting an amount
from the indicative bid rates until the spread between the
indicative bid and offer rates is: (i) greater than or equal to the
predefined minimum indicative rates spread, and (ii) greater than a
spread between the received best price bid and offer rates; and
providing the indicative bid and offer rates in a data feed.
Description
This invention relates to a system and method for deriving data. It
is particularly, but not exclusively, related to the derivation of
financial data from data from trades of fungible instruments, such
as financial instruments.
Many financial instruments are traded using automated trading
systems. Many examples of these systems are known for trading a
wide variety of financial instruments such as equities and foreign
exchange (FX) products as well as commodities such as precious
metals. One example of such a system is disclosed in EP-A-0,625,275
of EBS Dealing Resources Inc. This system is an anonymous trading
system, which matches bids and offers entered by counterparties
wishing to trade. A subset of parties' quotes are distributed to
all traders having sufficient credit to deal the quotes and are
displayed to the their at their trader terminals. Quotes input into
the system remain anonymous until a deal has been done, at which
point the identity of the parties, the price, and amount of the
deal are revealed and distributed to traders. The system is used
widely in the foreign exchange markets to trade FX Spot and
commodities such as precious metals.
Trading systems such as that mentioned above generate a lot of
information regarding the state of the market. This information, in
the form of rates information, is very valuable and it is customary
to charge clients for a rates feed, which gives them access to the
current state of the markets.
For many fungible instruments there are different fora in which the
instrument can be traded. However, in some cases, one particular
forum will dominate. This is true of the FX Spot market where each
of the major currency pairs that are traded, such as USD/EUR,
USD/JPY etc, has a substantial proportion of its liquidity in one
of the several trading systems on which it can be traded. Because
of this, the rates feed from the dominant trading system provides
an accurate view of the market and trends in the market.
It is desirable to be able to provide a data feed, which, while
indicative of current rates in the market, does not provide those
exact rates. There are two reasons for this. First, markets are
volatile and a feed of actual rates can be confusing. Second, the
data provider may wish to keep the actual rates information
confidential.
A first aspect of the invention aims to provide a method and system
which can process actual deal information to provide indicative
rates information. Broadly, the indicative rates are derived from
best bid and offer rates from the market by defining a minimum
indicative rates spread between bid and offer prices and adjusting
the best price rates to maintain a spread greater or equal to the
defined minimum indicative rates spread and greater than the best
price spread.
More specifically, there is provided a method of processing deal
information relating to trades of a fungible instrument, comprising
the steps of: receiving best price bid and offer rates for
completed transactions in the instrument; and deriving indicative
bid and offer rates from the best price bid and offer rates by
defining a minimum indicative rates spread between bid and offer
prices and adjusting the best price rates to maintain a spread
greater or equal to the defined minimum indicative rates spread and
greater than the best price spread.
This aspect of the invention also provides a system for processing
deal information relating to trades of a fungible instrument,
comprising: a processing module for receiving best price bid and
offer rates for transactions in the instrument and processing the
received rates to derive indicative bid and offer rates from the
best price bid and offer rates by defining a minimum indicative
rates spread between bid and offer prices and adjusting the best
price rates to maintain a spread greater or equal to the defined
minimum indicative rates spread and greater than the best price
spread.
Preferably the derivation of indicative bid and offer rates
comprises setting the indicative rate bid and offer prices to the
received best bid and offer prices for completed transactions, and
alternately adding an amount to the indicative offer rates and
subtracting an amount from the indicative bid rates until the
spread between the indicative bid and offer rates is greater than
or equal to the predefined minimum indicative rates spread and
greater than the spread between the best bid and offer prices.
Embodiments of the invention have the advantage of providing a
representation of the market that cannot be reverse engineered to
recover the actual bid and offer prices. The indicative prices have
a minimum spread and can be used by subscribing institutions to
pass to their clients knowing that they can make a profit trading
at those rates. The indicative rates are relatively stable compared
to the best rates and provide an envelope within which the best
rates fluctuate. Thus, the slow moving envelope can provide a more
informative view of actual market trends than very volatile actual
deal information that moves at a high frequency within the
envelope.
Preferably, the best price bid and offer rates for completed
transactions are received from an automated trading system, for
example an anonymous trading system. The best rates can then be fed
by an automatic rates feed to the indicative rates processor.
Preferably the derivation of the indicative rates is repeated
periodically. Preferably, the derivation is repeated if a received
best bid or offer is outside the range of the indicative rates.
Preferably, the derivation is repeated if the best prices spread
widens such that the best prices are the same as the indicative
rates. Preferably, the derivation is repeated if the best prices
spread plus a predetermined amount is less than the indicative
rates spread and the indicative rates spread is greater than the
minimum indicative rates spread. Preferably, the derivation is
repeated if one or both of the bid and offer sides of the best
prices are unavailable and are then restored.
Preferably, the derived indicative rates are distributed to
subscribers. This distribution may comprise forming an indicative
rates panel for distribution and display at the subscribers, for
example at a trader workstation or other display.
A second aspect of the invention provides a method of processing
deal information relating to trades of a fungible instrument,
comprising the steps of: receiving best price bid and offer rates
for transactions in the instrument; and filtering received best
price bid and offer rates to remove high frequency fluctuations in
the received rates to obtain indicative bid and offer rates, the
indicative rates being adjusted only to maintain a predetermined
minimum spread.
This aspect of the invention also resides in a system for
processing deal information relating to trades of a fungible
instrument, comprising: a processing module for receiving best
price bid and offer rates for transactions in the instrument; the
processing module comprising: a filter for filtering received best
price bid and offer rates to remove high frequency fluctuations in
the received rates to obtain indicative bid and offer rates, and an
indicative rates adjuster for adjusting the indicative rates only
to maintain a predetermined minimum spread.
Embodiments of this aspect of the invention have the advantage the
indicative rates are a slow moving envelope that removes the high
frequency volatility of the actual dealt rates. This provides the
market with indicative rates that are a better indicative of true
market trends than the actual rates.
According to a third aspect of the invention a market high rate and
market low rate are derived from the best bid and offer prices and
distributed to subscribers. More specifically there is provided a
method of processing deal information relating to trades of a
fungible instrument to obtain market high and market low
information, comprising the steps of: obtaining best bid and offer
prices for completed deals in the instrument; testing the
eligibility of a best price as a market high (offer) or market low
(bid) by performing the steps of: discarding best prices for a deal
amount less than a predetermined amount; and discarding best prices
for which there is no supporting price for an amount greater or
equal to the minimum amount at the same or a higher (for offer) or
lower (for bid) price within a predetermined period; and
establishing a market high or low from the highest or lowest
remaining price if they exceed the existing market high or low.
This aspect of the invention also provides a system for processing
deal information relating to trades of a fungible instrument,
comprising: a processor for obtaining best bid and offer prices for
completed deals in the instrument and processing the received best
bid and offer prices to test the eligibility of a best price as a
market high (offer) or market low (bid) by discarding best prices
for a deal amount less than a predetermined amount and discarding
best prices for which there is no supporting price for an amount
greater or equal to the minimum amount at the same or a higher (for
offer) or lower (for bid) price within a predetermined period, the
processor further establishing a remaining price as a market high
if it exceeds the existing market high or low.
Preferably, the step of testing eligibility further comprises
discarding prices for deals completed between parties within a
predetermined time of an earlier deal between the same parties, and
preferably also discarding prices for deals completed between
different trading floors of the same financial institution.
Preferably, absolute market high and market low rates may also be
distributed to subscribers.
An embodiment of the invention in its various aspects will now be
described with reference to the accompanying drawings in which:
FIG. 1 is a schematic diagram of a system embodying the
invention;
FIG. 2 is a view of an indicative rates display;
FIG. 3 is a view of a live rates panel showing market and touch low
and high prices;
FIG. 4 is a flow chart showing the generation of indicative rates
from market data;
FIG. 5 is a chart of spread rates for a currency pair over a
trading day; and
FIG. 6 is a schematic block diagram of the functions performed by
the rates processor.
Referring initially to FIG. 1, an embodiment of the invention is
shown schematically. An anonymous trading system 10 executes trades
between counterparties based on bids and offers submitted by those
counterparties. The trading system may be, for example that
disclosed in EP-A-625,275 or any other trading system, whether or
not it is anonymous or another source of dealt prices, for example
a voice broker. The trading system 10 outputs a stream of deal
related information in the form of an F/X rates stream 12. This
includes the identities of parties that have traded and the price
and volume of their trades. This information is passed to a rates
processor 14, which operates on the price information to provide a
number of rates based information streams to customers at trader
terminals 16. The rates processor is also referred to as a Market
Rates Feed (MRF). The rates information includes, in the preferred
embodiment, the real time rates for the instrument being traded. In
the case of an instrument such as FX Spot, this will be the real
time spot rate. This data stream may include the best bid and offer
and the last given and paid. An indicative rate feed is also
provided which is derived from the best price data by an algorithm
that will be described. This indicative rate presents an impartial
indicator of the market to customers and is calculated from actual
done deals rather than bids and offers that are pending in the
system. In the case of a rate feed supplied by an anonymous trading
system of the type referred to above, the anonymous trading system
is used by professional interbank traders and so the indicative
rates are an indicator of the professional interbank market.
The following description will describe an algorithm for generating
indicative rates from completed deal information provided from the
anonymous trading system. It will then describe an algorithm for
calculating supported market high and low information from that
completed deal information. First, FIGS. 2 and 3 show how this
information may be presented to users as a price panel which forms
part of a trading or other display. FIG. 2 shows the indicative
rates panel and FIG. 3 shows the market high/low panel. These may
both be displayed on a trader's workstation together with other
information, and may be turned on and off by the trader. The data
may be provided in any other form as convenient and dependent on
the privileges and subscriptions of a receiving party.
The rates processor 14 applies the algorithms to be described to
the data received from the anonymous trading system or other source
of dealt prices to provide the indicative rates embodying the first
aspect of the invention and the market highs and lows embodying the
second aspect of the invention.
FIGS. 2 and 3 show an example of a live rates display, which may be
used where the instrument is FX Spot. Similar displays may be
generated for other instruments but their exact content will depend
on the characteristics of those instruments. In the examples of
FIGS. 2 and 3, the display is one panel of a multipanel display,
which occupies a trader's screen. Other display formats are
possible.
FIG. 2 illustrates the indicative rates panel that may be provided,
for example, to parties who are not trading on the anonymous
trading system from which the rates information is derived. In the
top left hand corner 18 of the display is an indication of the
instrument being traded, in this example EUR/USD (Euro: US Dollar).
In the top middle of the display are two enlarged figures. These
represent the pips, or least significant digits of the currency
being traded. These are the digits that are important to traders as
they fluctuate with the market, whereas the more significant digits
rarely, if ever, change. The enlarged pips, do not display actual
best price information but the spread, or indicative, rates
calculated using the algorithm to be described. Thus the figures
displayed in boxes 20 and 21 are 02 and 05. The rates processor
derives this view by applying an algorithm to the deal feed
information received from the trading system. This is calculated
only from actual done deals on the system and not from pending bids
and offers which may never be dealt. The algorithm does not simply
apply a minimum spread to the rates coming from the trading system.
It is desirable that the best prices information from which the
spread, or indicative, rates data have been calculated cannot be
reverse engineered by the recipients. The live rates information is
valuable and commercially sensitive.
On the left of the bid pips 20 and on the right of the offer pips
21 are the most significant digits 22 in the dealt prices, also
known as the big figure, in this case, 0.89. In the row of figures
below are, on the outside, the touch low and touch high FIGS. 28,
30 and, on their inside, the market low and market high FIGS. 32
34. These figures are explained below. The bottom row of figures
shows the touch and market highs and lows 28a, 30a, 32a and 34a
from the previous day's trading.
Turning now to FIG. 3, there is shown a market low/high rates
display. In the top left hand corner of the display is an
indication 18 of the instrument that is being traded. In this case
it is EUR/USD (Euro/US Dollar). In the centre of the display, shown
enlarged, are the present best bid and offer in the market. The
enlarged numbers 23, here 04 and 05, are only the least significant
digits of the price, known as the `pips`. The pips may have a
background colour, which indicates the direction of change, for
example if the market is going up, the background may be green; if
it is going down the background may be red. A similarly coloured
arrow on the left or right of the big figure also shows the
direction of the market. In FIG. 3, an upwards arrow is shown on
the high side of the display. To the left of the bid and to the
right of the offer pips are shown the most significant digits 22 of
the price, in each case 0.89. Thus the display informs the trader
that the best bid in the market is at 0.8904 Euros to the dollar
and the best offer is 0.8905 Euros/dollar. These prices are pending
quotes rather than done deals.
Beneath the most significant digits, and preferably in a different
colour to other information on the screen is shown the spread or
indicative rates pips field 24 (bid) and 26 (offer). It will be
noted that the spread rate shown is greater than the actual
difference between the rates 04 and 05 shown in the enlarged pips
boxes. The rates processor 14 applies a minimum spread rate, which
is dependent on the instrument being traded. In this case, the
minimum spread for EUR/USD is 3 pips and so the spread is shown as
02/05 indicating rates of 0.8902 and 0.8905. The manner in which
the spread or indicative rates are calculated is discussed below.
The row of figures below the best bid and best offer pips displays
market high and market low information. The outside, far left and
far right figures show the touch low 28 and touch high 30 figures
respectively. These, as the name suggests, are the absolute low and
high values in the market with no parameters attached. Inside these
figures are market low 32 and market high 34 prices. These are
reliable market high and low prices which are calculated according
to an algorithm, which is described below. The market high price 34
is shown highlighted, in practice on a colour display, in a
different colour indicating that the price has changed.
Conveniently this is done by reversing the colour.
The bottom line of the panel shows, at 36 and 38 respectively, the
last dealt low and high prices, and outside them, the times 40, 42
at which they were dealt. Thus, for example, the last dealt low is
0.8904 and was dealt at 13.01.
The indicative rates algorithm will now be described. The algorithm
fixes the indicative rates bid, or offer, as never being better
than the Best bid or offer and fixes the indicative rates spread as
being greater than or equal to a minimum rates spread defined for
the instrument being traded. Generally, this spread will be
broader, the less liquidity there is in the market for the
instrument.
The algorithm requires that the indicative rates spread will be
strictly greater than the best rates spread. Thus, if there is a
spread of 5 pips shown on the best rates display of FIG. 2, the
indicative rates display will be at least 6 pips.
Where there is only a one sided best price, that is there is either
no best bid price or best offer price, or there are no best prices,
the indicative rates are withheld. That is there are no indicative
rates on either side if one or both best bid sides are missing.
This is a consequence of the indicative rates spread being greater
than the best rates spread.
The indicative rates are initially calculated to satisfy the
criteria set out above. The process is indicated in FIG. 4, which
is a flow chart of the indicative rate creation and maintenance
process. On start up, at step 100, the indicative rate bid and
offer is set to the present best price bid and offer. One pip is
then alternately added to the Indicative rates offer side and
subtracted from the bid side until the Indicative rates spread
becomes greater than or equal to the minimum indicative rates
spread defined for that instrument and greater than the best price
spread. Preferably, if the best offer price is odd, the spreading
process starts with the offer side, and if even, with the bid side
although the process may be performed the other way round.
Thus, in FIG. 4, one pip is added to the indicative offer side at
step 102 and at 104 a check is made to determine whether the
indicative rate spread is greater or equal to the minimum spread.
Then at 106, the indicative rate spread is checked to determine
whether it is greater than the best price spread. If either of
conditions 104 and 106 is not fulfilled, the process moves to step
108 in which a pip is subtracted from the indicative bid side. At
steps 110 and 112, the same two tests are applied again as in steps
104 and 106. In this case, if either of the tests is not met, the
process loops back to step 102 and a further pip is added to the
indicative offer side.
Once a stable indicative spread has been achieved recalculation
will be required under a variety of circumstances. The Indicative
rates are first calculated when the system is switched on and the
recalculated at random intervals thereafter. This may be, for
example, at roughly one minute intervals. The rates will be
recalculated when the Best bid or offer moves outside the
Indicative rates range or when the Best Prices spread widens such
that it becomes equal to the Indicative rates. It will be seen that
in the two situations, the initial criteria of steps 104 and 106
are no longer met.
The indicative rates will also be recalculated when the best prices
spread plus an additional pip is less than the indicative rates
spread, while the indicative rates spread is greater than the
minimum defined indicative rates spread for that instrument. In
this case the Indicative rates spread has widened such that it is
now two pips wider than the best prices spread and wider than the
minimum spread for that instrument.
Finally, recalculation is required if the best price disappears or
becomes one sided, in which case the Indicative rate is not shown.
When the best prices become two sided again the indicative rate is
recalculated.
FIG. 5 shows how the best rates and the indicative rates may vary
over a portion of a typical trading day. The indicative or spread
offer rate is shown by line 120 and the indicative or spread bid
rate is shown by line 122. These two rates form an upper and lower
boundary within which the best offer and bid rates, shown by dashed
line 124 and line 126 respectively, fluctuate with a much greater
frequency of movement. It will be seen that there is no fixed
distance between the spread offer and the best offer or the spread
bid and the best bid. Thus, for example, at point 128, the best
offer and the spread offer are the same, whereas at point 130 they
are two pips apart. The same sorts of variations can be seen
between the spread bid and the best bid prices.
Thus it will be appreciated that the best bid and best offer prices
cannot be reverse engineered from the spread bid and offer prices
and that the spread prices form an envelope around the best prices
within which the best prices move.
The chart of FIG. 5 also indicates the touch high price shown as
open triangle 132 and the market high price shown as solid triangle
134. Similarly, cross 136 denotes the touch low price and the solid
diamond 136 denotes the market low price. The touch high and low
prices denote the highest or lowest rates dealt, regardless of the
amount or number of counterparties involved. The market high and
low prices are the absolute highest and lowest rates dealt with
regard to generally accepted market conventions of amounts and/or
the number of counterparties dealing at the rate. The exact
definition of the amounts and numbers will vary from instrument to
instrument. Thus it can be seen that the market highs and lows are
a better indication of the general market conditions.
While a significant advantage of the algorithm described is to make
it impossible to reverse engineer the actual rates information from
the indicative rates, the algorithm does present further
advantages. It will be appreciated from a consideration of FIG. 5
that there is a lot of noise in the deal envelope. This means that
the deal prices move up and down very rapidly, but the market only
moves slowly up and down over time. The algorithm described
operates by only changing the indicative rate when there has been a
significant move in the market and thus acts to filter out the high
frequency volatility in the market. As a result, the prices
presented are a good indication of the actual trends in the market.
In this respect, the algorithm may be considered as performing a
low pass filtering operation on the rates information.
The market high and low rate may be computed using the following
definition: A deal is confirmed for market high (low) computation
if at least X millions are dealt at the deal price or higher
(lower) among at least Y different counterparties within a two
minute time interval centered at the deal time. X and Y are
currency pair or instrument dependent parameters. An example or
EUR/USD might be $10M and two counterparties. The time of two
minutes is not fixed and may be varied as required. Thus the market
high and low is not an absolute measure of the market high and low,
which is given by the touch high and low rates. It is, however, a
supported measure. That is, it is an accurate view of where the
market has actually reached that is based not on a single deal,
which could be a rogue deal, for example by a party with very poor
credit that is forced to accept a price that is not representative
of the true state of the market, or a deal for a very small amount.
The market high/low calulation fixes the market high/low in time by
requiring it to be supported by other prices occurring within a
certain time, for example one minute before and after in the
example above. The result is a price, which is far more reliable
than touch highs and lows, and a more accurate reflection of the
market than previous attempts to define market highs and lows.
In the embodiment described above, a deal is considered to be
supported if there is a deal at the same price or higher (lower for
a market low) a given time (cg one minute) either side of the deal
time. Preferably, intrabank deals, that is deals between different
floors of the same institution are excluded from consideration of a
supported deal. Preferably, deals between the same two parties are
also excluded, to prevent two parties colluding into trying to rig
the market. Thus, deals involving a minimum of three parties must
be involved from different institutions. A minimum deal amount may
also be applied before a deal can qualify to be used to support a
market high or low.
Thus, the market high/low calculation is based on a minimum deal
amount, two or more counterparties (that is three or more parties),
and more than one transaction close in time to each other.
In the embodiment described, the market high/low is the rate of an
actual deal that has taken place. However, it could be a notional
rate that is derived from deals meeting the criteria set out above,
for example an extrapolation that produces a theoretical rate
rather than a rate at which a deal has actually been
transacted.
It will be appreciated from the foregoing discussion that the rates
processor performs the steps illustrated in FIG. 4 and the
recalculation of the indicative rates described above. It also
calculates the market highs and lows, records the actual highs and
lows and distributes all the rates data to the trader terminals.
This functionality is illustrated schematically in FIG. 6.
Thus the rates processor 14 includes a module 200 which applies the
algorithm to calculate the indicative rates and recalculate those
rates according to the rules discussed above. It includes a module
202, which applies the market high and low calculations, and a
module 204 which records the absolute highs and lows. It also
includes a module, which takes the data output from the modules
200, 202 and 204, and forms the rates panels for distribution to
the trader terminals.
Many modifications are possible to the embodiments described and
will occur to those skilled in the art without departing from the
scope of the aspects of the invention which is defined solely by
the following claims. For example, the nature of the source of the
dealt prices from which the indicative rates are calculated, or the
source of the best prices from which the market highs and lows are
calculated are not important and could be a trading system or other
source.
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