AUTOMATED PRICE IMPROVEMENT PROTOCOL PROCESSOR

• US 20020169703A1
• Filed: 12/18/1998
• Published: 11/14/2002
• Est. Priority Date: 12/13/1996
• Status: Active Grant

• Current Assignee: Cantor Fitzgerald, L.P., CFPH LLC (Cantor Fitzgerald, L.P.)
• Original Assignee: Cantor Fitzgerald, L.P., CFPH LLC (Cantor Fitzgerald, L.P.)
• Inventors: PAUL, BIJOY, FRASER, STUART, LUTNICK, HOWARD
• Granted Patent: US 6,850,907 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A data processing system for implementing transaction management of auction-based trading for specialized items such as fixed income instruments. The data processing system provides a highly structured trading protocol implemented through a sequence of trading paradigms. The system employs a distributed computer processing network linking together a plurality of commonly configured program controlled workstations. The protocol and its program controlling logic enhances trading efficiency, rewards market Makers, and fairly distributes market opportunity to system users.

Claims

1. In combination with a data processing system implementing a structured trading environment for the price discovery and transaction of select items, having a predetermined set of characteristics wherein said data processing system is utilized by Participants through a specific communication platform that defines the ability of various Participants to engage in said trading activity, comprising:

a plurality of communication links to Participants to transmit trading information on price and transaction attributes of said select items and Participant interactive inputs in response to said information, said inputs include Bid, Offer, and trade execution commands; and

a central server, linked to, and in communication with said Participants, said server programmed with a predetermined trading control logic comprising a set protocol of trade sequences directed to implementing interactive bidding, offering, and trading commands directed by Participants, wherein trading proceeds on one or multiple price levels in one or more trading states, said states define the Participants'"'"' abilities to engage in item trading activity.

2. The trading system of claim 1, wherein said protocol is defined by a stored program comprising a logic structure that defines conditions where a Participant buys or sells the selected item through Hit and/or Take commands at a set price or set of prices.

3. The trading system of claim 1, where Participants are provided access to said information through a workstation and selectively arranged screen display.

4. The trading system of claim 1, wherein said protocol is controlled by a stored program comprising a logic structure that defines conditions where a Participant becomes a trader and conditions where a trader and other Participants may participate in a trade and obtain price improvements from their declared buy and/or sell orders.

5. The trading system of claim 4, where price improvements occur when existing and/or additional Participants enter select item trading position changes or commands.

6. The trading system of claim 2, wherein said logic structure rank bids and/or offers.

7. The trading system of claim 6, wherein said system states comprise a Bid-Offer State and a trading Workup State.

8. The trading system of claim 7, wherein said trading states further comprise a Workdown State.

9. The trading system of claim 8, wherein said trading states further comprise a Second Look State.

10. The trading system of claim 9, wherein said trading states further comprise a When State.

11. The trading system of claim 1, wherein said trading states are a function of commands entered by said Participants.

12. The trading system of claim 1, wherein said trading states include select time interval control for uncleared bids/offers.

13. The trading system of claim 3, wherein said display further comprises a presentation of a bid side and/or an offer side of the market.

14. The trading system of claim 13, wherein said display further provides information as to the size of uncleared or cleared bids and/or offers.

15. The trading system of claim 13, wherein said display further provides a queue of Participants organized in groups corresponding to their respective participation in the bid and/or offer side of the market.

16. The trading system of claim 15, wherein said Participants queue is ordered by time of entry.

17. The trading system of claim 15, wherein said Participants queue is ordered by a metric derived from among time entry, size, and/or price.

18. The trading system of claim 16, wherein said Participants queue order is further based on quality of entry in terms of price.

19. The trading system of claim 18, wherein said display provides information regarding the entry of a Hit and/or Take by a Participant.

20. The trading system of claim 15 wherein said Participants'"'"' entries are controlled by size of entry limits.

21. The trading system of claim 3 wherein a hierarchy of Participants can control and limit the actions of other Participants.

29. A method of select item trading implemented on the system of claim 1, wherein said system provides for a predetermined trading protocol;

providing a Price Improvement Bid-Offer System State wherein Participants participate by entry of bids, offers, and volume information;

queuing said Participant'"'"'s Bids and Offers by price level and/or time;

receiving Hits and/or Lifts from said Participants responding to these bids-offers whereby Participants enter a Price Improvement Trade State; and

completing trade transactions at a single price or multiple prices as established during the Price Improvement Trade State.

36. The trading system of claim 1, wherein Participant validation is monitored and confirmed in real time.

37. The trading system of claim 1, wherein Participants are notified of current validation in real time.

38. The trading system of claim 1, wherein Participants may be prevented from trading access at set time and/or system controlled intervals.

39. The trading system of claim 1, wherein Participants are notified in real time of the status of their Bids and Offers.

40. The trading system of claim 14, wherein Participants are notified in real time of the status of their Hits, Takes, and/or Price Improvement Hits or Takes.

41. The trading system of claim 1, wherein Participants can post sequences of bids or offers at multiple prices.

43. The trading system of claim 3, wherein bid-offer clearance times and execution priority times are system or manually controlled.

44. The trading system of claim 3, that allows for the addition or reduction, in price, of a Bid or Offer and stated size volume.

45. The trading system of claim 3, that allows for the input of increases of Bids and/or Offers and Hits and Takes size volumes on a gross or incremental basis.

46. The trading system of claim 3, that allows queued Participants to increase the size of their open Bid or Offers, by joining the bottom of the queue for that additional amount.

47. The trading system of claim 3, that allows inputs to decrease the amount of the Bid or Offer, canceling the Bid or Offers lowest position in the queue first.

48. The trading system of claim 3, that allows inputs to Clear an Uncleared Bid or Offer before the interval timer automatically clears the Bid or Offer.

49. The trading system of claim 3, that allows inputs to Cancel one side of a Bid or Offer, if the Participant is both a Bidder and Offerer.

50. The trading system of claim 3, that allows for an Unclear Bid or Offer to become a Cleared Bid-Offer and open to immediate execution by any input of a Hit or Take for the specific product when a clearing interval timer reaches zero.

51. The trading system of claim 3, that allows for all Bids and/or Offers to be entered Clear, if a clearing interval timer is set to zero.

52. The trading system of claim 3, that allows for all Bids and/or Offers to be entered Clear, if there is no counter Bid and/or Offer at the time of input.

53. The trading system of claim 3, that allows the input of a Hit or Take order that is less than the amount of the contra-Bid or Offer, and automatically stops an inputting Participant from further buying or selling.

54. The trading system of claim 3, that allows the Participant to Hit or Take a Cleared Bid or Offer to trade the entire amount showing in a single keystroke.

55. The trading system of claim 3, that allows the input of a Hit or Take order that is larger than the total contra-Bid or Offer amount.

56. The trading system of claim 3, that allows for the creation of select item Hit and Take each having different timers.

57. The trading system of claim 3, that establishes a contingent Passive Hit and/or Take timer.

58. The trading system of claim 3, that allows for the Passive Hit and/or Take input corresponding to Hit or Take orders, resetting a timer at each volume increment.

59. The trading system of claim 3, that allows for Hit or Take inputs to queue by time entered.

60. The data processing system of claim 3, wherein at least one of said workstations comprise an input device having keys with indicia that are dynamically altered in response to trading conditions.

61. The data processing system of claim 60, wherein key indicia is altered electronically in real time.

62. The data processing system of claim 60, wherein key indicia indicates the price of a select item.

63. The data processing system of claim 60, wherein key indicia indicates the difference between the corresponding cash market price and its derivative market price of a select item.

64. The data processing system of claim 63, wherein key indicia indicates the difference in corresponding prices and/or yields among two or more select items.

65. The data processing system of claim 63, wherein key indicia indicates the price of select items.

66. The data processing system of claim 63, wherein key indicia indicates the yield of select items.

67. The data processing system of claim 63, wherein key indicia indicates the market of an issue to be traded.

68. The data processing system of claim 63, wherein key indicia displays whether the keyboard is enabled or disabled.

69. The data processing system of claim 63, wherein said workstation comprises a display screen with one or more quad indicia of market information.

70. The data processing system of claim 60, wherein said input device has at least one key for undoing a function.

71. The data processing system of claim 70, wherein the input device has four keys for each of said functions.

72. The data processing system of claim 71, wherein each four keys for each function are arranged in a symmetrical orientation.

73. The data processing system of claim 60, wherein said keyboard has at least one key for canceling a bid, placing a bid, executing a buy, executing a sell, placing an offer, undoing a function, and completing a transaction.

74. The data processing system of claim 4, wherein said communication link includes an input device.

75. The data processing system of claim 72, wherein the columns keys for placing an offer, undoing a function, and completing a transaction are disposed to the right of the buy and sell columns of the keys.

76. The data processing system of claim 72, wherein a numeric keypad is disposed between the buy and sell columns of the keyboard.

77. The data processing system of claim 74, wherein said keyboard has at least one key for canceling a bid, placing a bid, executing a buy, executing a sell, placing an offer, undoing a function, and completing a transaction.

78. The data processing system of claim 77, wherein the keyboard has sets of up to four keys for each of said functions.

79. The data processing system of claim 78, wherein each set of keys for each function are arranged in a column.

80. The data processing system of claim 79, wherein the columns of keys for canceling a bid and placing a bid are disposed on the keyboard to the left of the buy and sell columns of keys.

81. The data processing system of claim 80, wherein the columns of keys for placing an offer, undoing a function, and completing a transaction are disposed to the right of the buy and sell columns of keys.

82. The data processing system of claim 81, wherein a numeric keypad is disposed between the buy and sell column keys.

86. The method of claim 74, wherein said keyboard includes a key dedicated to a particular select item.

87. The data processing system of claim 74, wherein said keyboard includes a plurality of keys each dedicated to a particular select item.

88. The data processing system of claim 4, wherein said keyboard includes a key dedicated to a particular select item.

89. The data processing system of claim 4, wherein said keyboard includes a plurality of keys each dedicated to a particular select item.

106. The trading system of claim 1, wherein said item is a financial instrument.

107. The trading system of claim 1, wherein said item is a futures contract.

108. The trading system of claim 1, wherein said item is an options contract.

109. The trading system of claim 1, wherein said item is an equity instrument.

22. A computer trading system for use by multiple Participants wherein one or more Participants operate a selectively configured input device for data entry and receive information about market conditions from a display comprising:

a data processor with associated control logic in communication with said input device, for providing a trading protocol wherein trading proceeds on one or multiple price levels in one or more trading states that establishes trading hierarchy among Participants; and

allows a trade entry by a Participant to take place on select items;

said input device comprises one or more trade execute keys, individually assigned to a particular item available for trading, said device further comprises a plurality of Participant entry keys assigning trade commands to a particular Participant for entry of Bids, Offers, Hits, and Lifts; and

said display means for presenting a trading information profile wherein said trading profile includes pending offers and bids at select price points and sizes.

23. The trading system of claim 22, wherein said input device provides single keystroke entry for a Bid-Offer command.

24. The trading system of claim 23, wherein said trading states include Price Improvement Trading at one or multiple price points.

25. The trading system of claim 23, wherein said data processor provides for an interactive Bid-Offer State wherein Participants'"'"' price(s) and size(s) are displayed on said display means.

26. The trading system of claim 25, wherein said Bid-Offer State is terminated by a Participant'"'"'s entry of a Hit or a Take command.

27. The trading system of claim 25, wherein said Bid-Offer State is moved to a “

When”

State by a new Participant'"'"'s entry of a Hit or Take.

28. The trading system of claim 22, wherein said display means presents information on trade transactions and Participant'"'"'s access to said information is contingent on system trading state and/or interval timers.

30. The method of claim 29, wherein said Trade State is further delineated into a Workdown and Workup State.

31. The method of claim 30, wherein said Workup State is created by a single Participant hitting or taking all pending size within a system and/or Participant-controlled designated range.

32. The method of claim 30, wherein said Workdown State is created by a single Participant hitting or taking all or less than all pending size within a system and/or Participant-controlled designated range.

33. The method of claim 29, wherein said Bid-Offer State is characterized by system creation of plural pricing queues.

34. The method of claim 29, wherein said trading protocol is encoded in programming logic controlling said computer system.

35. The method of claim 29, further comprising an input device that includes a keypad with dynamically changing trade keys.

42. The method of claim 29, wherein the multiple trade prices are determined by sharing Trader Surplus as determined by system controlled logic.

83. The method of claim 29, wherein said Hits and/or Takes are entered using a keyboard.

84. The method of claim 30, wherein said keyboard includes a key dedicated to a particular select item.

85. The method of claim 30, wherein said keyboard includes a plurality of keys each dedicated to a particular select item.

90. A trading computer system for operation by a Participant in an electronic trading environment where items are offered for sale via electronic communication between plural of said Participants, comprising:

network interconnection establishing communication between plural computers and one or more computer servers;

one or more computer servers capable of receiving inputs from said plural computers and providing output to said plural computers in accordance with a trading defining protocol;

said plural computers individually including at least an output system for presenting trading information in a format comprehendible by said Participants, and an input system for transferring commands from said Participants to said server(s) regarding trading positions and the entry of executed trades at multiple price levels in one or more trading states in response to said trading information.

91. The trading computer system of claim 90, wherein said output system on said plural computers includes a display for visual presentation of said trading information.

92. The trading system of claim 90, wherein said output system on said plural computers includes audio presentation of said trading information.

93. The trading system of claim 90, wherein said trading defined protocol includes logic that controls access to and entry of electronic trading commands in accordance with plural trading states.

94. The trading system of claim 93, wherein said states include a Bid-Offer State that provides trading information to said plural computers regarding current items and prices thereof and permits Participants to input trading commands including a Hit or Take of a pending bid or offer.

95. The trading system of claim 94, wherein said Bid-Offer State further provides one or more pricing queues for organizing Participants based on bid or offer pricing and time.

96. The trading system of claim 95, wherein said states include a Workup state established by said server upon entry of a Hit or Take of all bids or offers, respectively.

97. The trading system of claim 96, wherein said Workup state further sets for a predetermined interval the number of Participants provided trade command access.

98. The trading system of claim 97, wherein said server computer establishes extended trading access during the Workup state at price levels calculated based on last bid or offer positions of Participants.

99. The trading system of claim 98, wherein said states further comprise a Workdown state and said server computer establishes said Workdown state upon entry of a trading order for less than all of pending bids or offers in said trading information.

100. The trading system of claim 90, wherein said item is a financial instrument.

101. The trading system of claim 90, wherein said item is a fixed income instrument.

102. The trading system of claim 90, wherein said item is a U.S. Treasury debt instrument.

103. The trading system of claim 90, wherein said item is a derivative financial product.

104. The trading system of claim 90, wherein said item is a physical commodity.

105. The trading system of claim 90, wherein said item is selected from the group consisting of art, automobiles, electricity, pollution rights, carbon dioxide, and wine.

110. The trading system of claim 90, wherein said item is an equity/debt hybrid instrument.

111. The trading system of claim 90, wherein said item is a municipal debt instrument.

112. The trading system of claim 90, wherein said item is a preferred stock.

113. The trading system of claim 90, wherein said item is a convertible bond.

115. The input device of claim 114 wherein said input keys further comprise at least one key pre-programmed for trade entry for one pre-select customer.

116. The input device of claim 114 wherein said dynamic display changes upon changes in trade states.

114. An input device for use with a computer system supporting interactive trading of select items, said input device comprising:

a plurality of input keys wherein said keys are arranged with important trade command keys having size and/or position priority;

said input keys further comprising at least one key that includes a dynamic key display wherein said key display presents changeable information regarding functions associated with said key.