Selective suppression of implied contract generation

• US 10,204,377 B2
• Filed: 06/27/2012
• Issued: 02/12/2019
• Est. Priority Date: 08/11/2011
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Wolf, Brian M., Curran, John F., Farrell, James W., Callaway, Paul J., Galster, Barry L., Milne, Andrew, Scimeca, Giuseppe, Peck-Walden, Pearce, Wilcox, James
• Primary Examiner(s): Wong, Eric T
• Application Number:
  US13/534,416
• Publication Number:
  US 20130041801A1
• Time in Patent Office: 2,421 Days
• Field of Search: 705 35, 705 37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

An electronic trading system utilizes a Match Engine that receives orders, stores them internally, calculates tradable combinations and advertises the availability of real and implied orders in the form of market data. New tradable items defined as combinations of other tradable items may be included in the calculation of tradable combinations. A technique is disclosed for suppression of the calculation and/or subsequent listing of an implied order when the order is either undesired or unnecessary in the market therefore.

Claims

1. A computer implemented method for improving the efficiency of a trading system, the system comprising a processor, the method comprising:

receiving, by the processor from at least one market participant of a plurality of market participants, a first order for a first instrument and a second order for a second instrument, the first and second orders having a relationship there between from which at least a third order for a third instrument may be implied;

determining, by the processor, liquidity of the third instrument based on how many price ticks that a best bid price in a market for the third instrument is within a best ask price in the market for the third instrument, a delivery month of the third instrument, a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants, and/or whether the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument;

selectively generating, by the processor based on the determining, the implied third order from the first and second orders, the implied third order not being generated when

the best bid price in the market for the third instrument is within a threshold number of price ticks of the best ask price in the market for the third instrument, when the delivery month of the third instrument is a defined delivery month, when the delivery month for the third instrument is the current month, when the likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants exceeds a threshold, and/or when the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument; and

the implied third order being generated when the best bid price in the market for the third instrument is not within a threshold number of price ticks of the best ask price in the market for the third instrument, when a delivery month of the third instrument is not the defined delivery month, when a delivery month for the third instrument is not the current month, when a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants does not exceed the threshold, and when the implied third order will improve the spread between the best bid price and the best ask price in the market for the third instrument; and

wherein subsequent to the implied third order being generated, listing, by the processor, the generated implied third order to make it available in the market for the third instrument for trading by the plurality of market participants and otherwise not listing it in the market for the third instrument for trading by the plurality of market participants.

2. The computer implemented method of claim 1 wherein the threshold comprises two price ticks.

3. The computer implemented method of claim 1 wherein the first and second orders each comprise component instruments of a spread order and the third order comprises the spread order.

4. The computer implemented method of claim 1 wherein the first order comprises a first component instrument of a spread order, the spread order being based on first and second component instruments, the second order comprises the spread order and the third order comprises the second component instrument of the spread order.

5. The computer implemented method of claim 1 wherein the first order comprises an order for a back-month contract and the second order comprises an order for a spread between the back-month contract and a front-month contract, the third order comprising an order for the front-month contract.

6. The computer implemented method of claim 1 wherein the market for the third instrument is characterized by a best ask price and a best bid price within 1 price tick thereof.

7. The computer implemented method of claim 1 wherein the preventing further comprises determining whether preventing the making available of the implied third order will result in the market for the third instrument being crossed and not preventing the making available of the implied third order if the preventing the making available of the implied third order will result in the market for the third instrument being crossed.

8. A system for improving the efficiency of a trading system, the system comprising:

an order receiver implemented by a processor and operative to receive from at least one market participant of a plurality of market participants, a first order for a first instrument and a second order for a second instrument, the first and second orders having a relationship there between from which at least a third order for a third instrument may be implied;

an implied order generator implemented by the processor and operative to determine liquidity of the third instrument based on how many price ticks that a best bid price in a market for the third instrument is within a best ask price in the market for the third instrument, a delivery month of the third instrument, a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants, and/or whether the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument and selectively generate, based on determination, the implied third order from the first and second orders, the implied order generator not generating the implied third order when the best bid price in the market for the third instrument is within a threshold number of price ticks of the best ask price in the market for the third instrument, when the delivery month of the third instrument is a defined delivery month, when the delivery month for the third instrument is the current month, when the likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants exceeds a threshold, and/or when the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument, and the implied order generator generating the implied third order when the best bid price in the market for the third instrument is not within a threshold number of price ticks of the best ask price in the market for the third instrument, when a delivery month of the third instrument is not the defined delivery month, when a delivery month for the third instrument is not the current month, when a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants does not exceed the threshold, and when the implied third order will improve the spread between the best bid price and the best ask price in the market for the third instrument; and

the implied order generator being further operative to, subsequent to the generation of the implied third order, list the generated implied third order to make it available in the market for the third instrument for trading by the plurality of market participants and otherwise not listing it in the market for the third instrument for trading by the plurality of market participants.

9. The system of claim 8 wherein the threshold comprises two price ticks.

10. The system of claim 8 wherein the first and second orders each comprise component instruments of a spread order and the third order comprises the spread order.

11. The system of claim 8 wherein the first order comprises a first component instrument of a spread order, the spread order being based on first and second component instruments, the second order comprises the spread order and the third order comprises the second component instrument of the spread order.

12. The system of claim 8 wherein the first order comprises an order for a back-month contract and the second order comprises an order for a spread between the back-month contract and a front-month contract, the third order comprising an order for the front-month contract.

13. The system of claim 8 wherein the market for the third instrument is characterized by a best ask price and a best bid price within 1 price tick thereof.

14. The system of claim 8 wherein the implied order generator is further operative to determine whether prevention of the availability of the implied third order will result in the market for the third instrument being crossed and allow the availability of the implied third order if the prevention thereof will result in the market for the third instrument being crossed.

15. A system for improving the efficiency of a trading system, the system comprising a processor and memory coupled therewith, the system further comprising:

first logic stored in the memory and executable by the processor to receive from at least one market participant of a plurality of market participants, a first order for a first instrument and a second order for a second instrument, the first and second orders having a relationship there between from which at least a third order for a third instrument may be implied;

second logic stored in the memory, coupled with the first logic and executable by the processor to determine liquidity of the third instrument based on how many price ticks that a best bid price in a market for the third instrument is within a best ask price in the market for the third instrument, a delivery month of the third instrument, a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants, and/or whether the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument and selectively generate, based on determination, the implied third order from the first and second orders, the second logic is further executable by the processor to not generate the implied third order when the best bid price in the market for the third instrument is within a threshold number of price ticks of the best ask price in the market for the third instrument, when the delivery month of the third instrument is a defined delivery month, when the delivery month for the third instrument is the current month, when the likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants exceeds a threshold, and/or when the implied third order will not improve a spread between the best bid price and the best ask price in the market for the third instrument, and generate the implied third order when the best bid price in the market for the third instrument is not within a threshold number of price ticks of the best ask price in the market for the third instrument, when a delivery month of the third instrument is not the defined delivery month, when a delivery month for the third instrument is not the current month, when a likelihood of receiving an order, at a better price with respect to a resting counter order thereto, for the third instrument satisfying the relationship between the first and second orders from one of the plurality of market participants does not exceed the threshold, and when the implied third order will improve the spread between the best bid price and the best ask price in the market for the third instrument; and

the second logic being further executable by the processor to, subsequent to the generation of the implied third order, list the generated implied third order to make it available in the market for the third instrument for trading by the plurality of market participants and otherwise not listing it in the market for the third instrument for trading by the plurality of market participants.