System and method for reducing the risks involved in trading multiple spread trading strategies

• US 10,037,571 B2
• Filed: 03/07/2014
• Issued: 07/31/2018
• Est. Priority Date: 08/17/2007
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Deitz, Alexander D., Mintz, Sagy P., Garrison, David W.
• Primary Examiner(s): Baird, Edward J
• Application Number:
  US14/200,019
• Publication Number:
  US 20140297501A1
• Time in Patent Office: 1,607 Days
• Field of Search: 705 35- 40
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

System and methods for reducing the risks involved in trading multiple spread trading strategies in an electronic trading environment are provided. Specifically, reducing the risks involved in trading multiple spreads that share a leg by, among other things, quoting a single order in the shared leg instead of quoting orders for each of the corresponding spread legs. Based on the computed quote price for the single order, associating the single order with the leaned on price that results in the price closest to the inside market in the shared leg. The single quote order is based on the market conditions in the spread legs and the desired spread price. Once the single order fills, a hedge order is sent to the leg that obtains the most advantageous price for the spread based on the other spread options.

Claims

1. A system for executing trading strategies, comprising:

a computing device configured to;

define a plurality of spread trading strategies, each of the plurality of spread trading strategies comprising at least a request to trade a first tradeable object and a request to trade a second tradeable object, wherein the first tradeable object of each of the plurality of spread trading strategies is a common tradeable object to the plurality of spread trading strategies, and the second tradeable object of each of the plurality of spread trading strategies is different from the common tradeable object, and the second tradeable object is different in each of the plurality of spread trading strategies,

receive market data from one or more electronic exchanges, the market data relating to the first tradeable object and the second tradeable object, wherein each of the first tradeable object and the second tradeable object is available to trade at one of the one or more electronic exchanges;

calculate a quote price for the common tradeable object for each of the plurality of spread trading strategies based on a desired price to buy or sell each of the plurality of spread trading strategies and further based on the market data received from the one or more electronic exchanges for the second tradeable object of each of the plurality spread trading strategies,

from the calculated quote prices for the common tradeable object of the plurality of spread trading strategies, select a first quote price closest to a price level based on either an inside market price or a last traded price of the common tradeable object at a first electronic exchange of the one or more electronic exchanges, wherein the first tradeable object is available to trade at the first electronic exchange, wherein the first quote price is for a first spread trading strategy of the plurality of spread trading strategies; and

send a first quote order for the common tradeable object at the selected first quote price to the first electronic exchange where the common tradeable object is available to trade, wherein at least one second quote order at a second quote price of the calculated quote prices is not sent to the first electronic exchange, wherein the second quote price is not closest to the price level based on either the inside market price or the last traded price of the common tradeable object when the first quote price is selected.

2. The system of claim 1, wherein the computing device is further configured to:

detect a condition;

in response to the detected condition,

recalculate the quote price for the common tradeable object for each of the plurality of spread trading strategies;

from the quote prices for the common tradeable object calculated after the detected condition, select a second quote price closest to the price level based on either the inside market price or the last traded price of the common tradeable object; and

re-price the first quote order to the second quote price.

3. The system of claim 2, wherein the condition comprises a user-defined condition.

4. The system of claim 2, wherein the condition comprises a market fluctuation in the second tradeable object corresponding to a spread trading strategy associated with the first quote price selected prior to detecting the condition.

5. The system of claim 2, wherein the condition comprises a time expiration.

6. The system of claim 2, wherein the condition comprises detecting a fill of at least a portion of a total order quantity for the first order.

7. The system of claim 6, wherein the at least a portion of the total order quantity to be filled is user-defined.

8. The system of claim 6, wherein the at least a portion of the total order quantity to be filled comprises a percentage of the total order quantity.

9. The system of claim 6, wherein the at least a portion of the total order quantity to be filled comprises a value.

10. The system of claim 1, wherein the computing device is further configured to:

detect a fill of a total order quantity of the first quote order; and

place an offsetting hedge order for the second tradeable object in one of the plurality of spread trading strategies.

11. The system of claim 10, wherein the offsetting hedge order comprises a market order.

12. The system of claim 10, wherein the offsetting hedge order comprises a limit order.

13. The system of claim 12, wherein the limit order is placed at a price level based on a leaned on price for each tradeable object that is not the common tradeable object and that corresponds to each hedge leg of one of the plurality of spread trading strategies that results in the first quote price closest to the price level, wherein the leaned on price is used to determine the first quote price.

14. The system of claim 12, wherein the limit order is placed at a price level that is calculated based on a fill price of the first order and the desired price for one of the plurality of spread trading strategies.

15. The system of claim 1, wherein the price level is user-defined.

16. The system of claim 1, wherein the inside market price comprises a highest bid price and a lowest ask price currently available in a market.

17. The system of claim 1, wherein the computing device is further configured to:

define a precedence level for each of the plurality of spread trading strategies;

select one of the plurality of spread trading strategies based on the precedence level for each of the plurality of spread trading strategies; and

send an offsetting hedge order for the second tradeable object of the selected spread trading strategy.

18. The system of claim 17, wherein at least one precedence level is user-defined.

19. The system of claim 17, wherein at least one precedence level is based on trading volume in at least one of the first tradeable object and second tradeable object associated with each of the plurality of spread trading strategies.

20. The system of claim 17, wherein at least one precedence level is based on trading activity in at least one of the first tradeable object and the second tradeable object associated with each of the plurality of spread trading strategies.

21. The system of claim 1, wherein the computing device is further configured to:

determine that two or more calculated quote prices result in the same price closest to the price level;

select a spread trading strategy having a highest precedence level from two or more spread trading strategies associated with the two or more calculated quote prices closest to the price level; and

send a hedge order for the second tradeable object of the selected spread trading strategy having the highest precedence level.

22. The system of claim 1, wherein the quote price for the common tradeable object of each of the plurality of spread trading strategies is determined using the desired price and a leaned on price for each second tradeable object that corresponds to a hedge leg of each of the plurality of spread trading strategies.

23. The system of claim 1, wherein the desired price to buy or sell each of the plurality of spread trading strategies is different.

24. The system of claim 1, wherein the desired price to buy or sell each of the plurality of spread trading strategies is the same.