Auction market with price improvement mechanism

• US 20030014354A1
• Filed: 09/12/2002
• Published: 01/16/2003
• Est. Priority Date: 03/19/1999
• Status: Active Grant

• Current Assignee: Primex Holdings LLC
• Original Assignee: Primex Holdings LLC
• Inventors: Keith, Christopher, Madoff, Peter B., Casanova, Alberto C.
• Granted Patent: US 7,162,448 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• 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

Abstract

A system for auctioning financial products over a distributed, networked computer system includes a plurality of workstations for entering orders for financial products into the distributed, networked computer system. The orders specify a price for the financial product, a quantity of the financial product and exposure time which the order can remain active. The system also includes a plurality of workstations for entering predefined relative indication and responses to orders for the product. The predefined relative indications specify a willingness to trade. The responses specify a price and quantity. The system includes a server computer coupled to the workstations for entering the orders, predefined relative indications, and the responses, with the server computer executing a server process that for a first one of said orders, determines a match to said first order with the predefined relative indications, responses and contra-side orders during an interval determined by the exposure time specified by said first order.

Claims

1. A method of auctioning products, said method executed over a distributed networked computer system, said method comprising:

entering an order for a product, the order specifying a price which can be a relative price, a market price or a fixed price, and specifying a quantity and an exposure time;

entering a response to an order, the response specifying a price, which can be a relative, fixed price or a relative price with a price improvement, and quantity; and

matching the order with the response in accordance with the exposure time specified by the order.

2. The method of claim 1 wherein a plurality of orders and responses are entered, and wherein matching further comprises:

matching a first one of the orders with the responses during the exposure time interval specified by the order.

3. The method of claim 1 wherein a plurality of orders and responses are entered, and wherein matching further comprises:

collecting all responses during the exposure interval, and matching a first one of the orders to an optimal one of the responses that is determined in accordance with price and quantity specified in the optimal one of the responses.

4. The method of claim 1 wherein the products are financial instruments.

5. The method of claim 1 wherein matching retrieves an oldest response and determines whether the oldest response includes a price that satisfies a price specified by the order.

6. The method of claim 1 further comprising:

expiring the order if the exposure time specified by the order has elapsed and no matching response was received.

7. The method of claim 1 further comprising:

entering pre-defined relative indications that correspond to a willingness to buy or sell the product; and

wherein the pre-defined relative indications specify a price relative to a current market price.

8. The method of claim 7 wherein the pre-defined relative indications specify a quantity of the product.

9. The method of claim 1 wherein entering orders further comprises:

specifying a product.

10. The method of claim 1 wherein entering responses further comprises:

specifying a product.

11. The method of claim 7 wherein matching further comprises:

retrieving an oldest response, other order, or predefined relative indication and determining whether the oldest response, other order, or pre-defined relative indication satisfies the order.

12. The method of claim 7 wherein retrieving further comprising:

matching pre-defined relative indications to the order with the pre-defined relative indications ranked by price and within a price ranking by time.

13. The method of claim 12 further comprising:

expiring the order if the exposure time specified by the order has elapsed and no matching response, other order, or pre-defined relative indication was received.

15. The method of claim 14 further comprising:

executing a trade between the first order and one of the contra-side orders or responses that matched the first order.

16. The method of claim 15 wherein executing a trade further comprises:

reporting the first order and the matched one of the contra-side orders or responses to a facility of a self-regulatory organization for market validation.

17. The method of claim 14 wherein the orders can further include conditions attached to the order.

18. The method of claim 17 wherein the conditions can include a price improvement.

19. The method of claim 14 wherein entering further includes entering pre-defined relative indications.

20. The method of claim 19 wherein entering pre-defined relative indications can occur before or after an order is entered.

21. The method of claim 14 wherein the process determines whether a match price falls outside of a spread specified for the product.

22. The method of claim 14 wherein for trading by a broker dealer, the system allows the broker/dealer to specify specific trading options when the broker dealer is trading with its own customer.

23. The method of claim 14 wherein an expired order is sent for a guarantee execution by a market maker or for execution on a market or an exchange.

25. The computer program product of claim 24 wherein the products which are auctioned are products that have a value that changes with market conditions.

26. The computer program product of claim 24 wherein instructions that cause the computer to match further comprise instructions that cause the computer to:

retrieve an oldest response and determine whether the oldest response includes a price that satisfies a price specified by the order.

27. The computer program product of claim 24 further comprising instructions that cause a computer to:

expire the order if the exposure time specified by the order has elapsed and no response that matched the order was received.

28. The computer program product of claim 24 further comprising instructions that cause the computer to:

receive pre-defined relative indications that correspond to a willingness to buy or sell the product, with the pre-defined relative indications specifying a price relative to a current market price.

29. The computer program product of claim 25 wherein the pre-defined relative indications specify a quantity.

30. The computer program product of claim 24 wherein orders specify a product.

31. The computer program product of claim 24 wherein responses specify a product.

32. The computer program product of claim 24 wherein instructions that cause the computer to match further comprise instructions that cause a computer to:

retrieve an oldest response, contra-side order, or predefined relative indication and determine whether the oldest response, contra-side order, or pre-defined relative indication satisfies the order.

14. A method of auctioning financial products over a distributed, networked computer system, said method comprising:

entering orders for financial products into the distributed, networked computer system, said orders specifying a price for the financial product, a quantity of the financial product and exposure time which the order can remain active;

entering responses to orders for the product, said responses specifying a price and quantity; and

for a first one of said orders,

matching said first order, to the responses and contra-side orders, during an interval determined by the exposure time specified by said first order; and

expiring the first one of the orders if no matching responses or contra-side orders are received during the exposure period.

24. A computer program product for auctioning products, said computer program product residing on a computer readable medium comprising instructions for causing a computer to:

receive an order that was entered for a product, the order specifying price, quantity and exposure time;

receive a response that was entered in response to an order, the response specifying a price, price improvement, and quantity; and

match the order with the response during the exposure time specified by the order.

33. A system for auctioning financial products over a distributed, networked computer system, said system comprising:

a plurality of workstations for entering orders for financial products into the distributed, networked computer system, said orders specifying a price for the financial product, a quantity of the financial product and exposure time which the order can remain active;

a plurality of workstations for entering responses to orders for the product, said responses specifying a price and quantity;

a server computer coupled to the workstations for entering the orders and the responses, said server computer executing a server process that for a first one of said orders,

determines a match to said first order with the responses and contra-side orders during an interval determined by the exposure time specified by said first order.

34. The system of claim 33 wherein the server process

executes a trade between the first order and one of the other orders or responses that matched the first order.

35. The system of claim 34 wherein the server process executes a trade and reports the first order and the one of the contra-side orders or responses that matched the first order to a facility of a self-regulatory organization for market validation.

36. The system of claim 35 wherein the orders can further include conditions attached to the order.

37. The system of claim 36 wherein the conditions can include a price improvement.

38. The system of claim 33 wherein the response workstations can enter pre-defined relative indications that can exist in the system before an auction for the product has started.

39. The system of claim 33 wherein the response workstations can enter pre-defined relative indications after an order was entered.

40. A system for auctioning financial products over a distributed, networked computer system comprises:

a plurality of workstations for entering orders for financial products into the distributed, networked computer system, the orders specify a price for the financial product, a quantity of the financial product and exposure time which the order can remain active;

a plurality of workstations for entering predefined relative indications and responses to orders for the product, the predefined relative indications specifying a willingness to trade, the responses specifying a price and quantity; and

a server computer coupled to the workstations for entering the orders, predefined relative indications, and the responses, with the server computer executing a server process, said server process comprising software to;

determine a match to a first order with the predefined relative indications, responses and contra-side orders during an interval determined by the exposure time specified by said first order.