AN AUTOMATED EXCHANGE FOR MATCHING BIDS BETWEEN A PARTY AND A COUNTERPARTY BASED ON A RELATIONSHIP BETWEEN THE COUNTERPARTY AND THE EXCHANGE

• US 20010056393A1
• Filed: 11/05/1998
• Published: 12/27/2001
• Est. Priority Date: 11/05/1998
• Status: Active Grant

• Current Assignee: International Securities Exchange LLC (Nasdaq, Inc.)
• Original Assignee: International Securities Exchange LLC (Nasdaq, Inc.)
• Inventors: TILFORS, JAN, KATZ, GARY
• Granted Patent: US 6,405,180 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

In an automated exchange system means are provided by means of which a market maker can enter a course of action in advance, so that the volume in the orderbook is continuously updated, and where the updating is performed differently with respect to different counter parts. Also, quotes that may result in a trade between Market Makers are hidden for some time before being matched, thus giving the Market Makers a chance to back off. The system employs a function that supports that Market Makers through pre-defined parameters will have new orders generated by the system and that a market maker can act differently with respect to different counterparts. The parameters specify if a Market Maker should add extra volume on an existing price or generate a new order at a worse price. In order to make it possible for market makers to have a very tight spread without forcing them to take larger risks, additional logic is used when matching orders. The algorithm used for this purpose protects the market makers in certain situations and gives market makers the possibility to have a tight spread without taking a large risk. The algorithm also supports that the market makers can take the risk to quote large volumes.

Claims

1. An automated exchange system for matching bids between a buyer and a seller, and where the buyer or seller is a market maker, comprising:

means for executing the matching according to at least two different matching schemes in response to the counterpart of the market maker.

2. A system according to

claim 1

, wherein means are arranged to automatically generate more volume at a worse price, if all volume at a first price is traded in the matching.

3. A system according to any of claims 1-2, when both the buyer and the seller is a market maker comprising means for delaying the match during a predetermined period of time.

4. A system according to

claim 3

, further comprising means connected to the delay means for executing the match if the selling price and the buying price still indicate a match after the period of time has elapsed and to not match if the selling price and the buying price no longer match each other.

5. A system according to

claim 1

, wherein means are arranged to automatically generate more volume at the same price, if the volume traded in the matching results in that the remaining volume is less than a minimum volume specified by the exchange.

6. A method of matching bids between a buyer and a seller in an automated exchange system, where the buyer or seller is a market maker, comprising the steps of:

identifying the type of counterpart of the market maker, and

executing the matching according to at least two different matching schemes in response to the type counterpart of the market maker.

7. A method according to

claim 6

, wherein more volume at a worse price is generated , if all volume at a first price is traded in the matching.

8. A method according to any of claims 6-7, when both the buyer and the seller is a market maker, comprising the further step of:

delaying the match during a predetermined period of time.

9. A method according to

claim 8

, further comprising means connected to the delay means for executing the match if the selling price and the buying price still indicate a match after the period of time has elapsed, and to not match if the selling price and the buying price no longer match each other.

10. A method according to

claim 9

, wherein more volume at the same price is generated if the volume traded in the matching results in that the remaining volume is less than a minimum volume specified by the exchange.