System and method for managing and trading auction limit orders in a hybrid auction market

• US 20060015441A1
• Filed: 07/15/2005
• Published: 01/19/2006
• Est. Priority Date: 07/15/2004
• Status: Active Grant

• Current Assignee: New York Stock Exchange LLC (Intercontinental Exchange, Inc.)
• Original Assignee: New York Stock Exchange LLC (Intercontinental Exchange, Inc.)
• Inventors: Burkhardt, Roger, McSweeney, Robert J., Allen, Anne E., Pastina, Louis G.
• Granted Patent: US 10,699,336 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 40/03 Credit; Loans; Processing thereof
• 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

A buy order is received with a limit price that is above a published best offer, and represented in the auction market. If the buy order is not immediately executed, it is quoted at a minimum variation better than a published best bid, and the price of the quoted buy order becomes the published best bid. Alternatively, a sell order is received with a limit price that is below a published best bid, and represented in the auction market. If the sell order is not immediately executed, it is quoted at a minimum variation better than a published best offer, and the price of the quoted sell order becomes the published best offer.

Claims

1. A method for handling securities orders in an auction market comprising:

receiving a first buy order with a limit price that is above a published best offer;

representing the first buy order in the auction market;

determining whether the first buy order is immediately executed; and

if the first buy order is not immediately executed, quoting the first buy order at a minimum variation better than a published best bid, whereby the price of the quoted first buy order becomes the published best bid.

2. A method according to claim 1, further comprising:

receiving a second buy order with a price that is better than the price of the quoted first buy order; and

re-quoting the first buy order at a minimum variation better than the second buy order up to the limit price of the first buy order, whereby the price of the re-quoted first buy order becomes the published best bid.

3. A method according to claim 1, wherein the best bid and best offer is the national best bid and offer.

4. A method according to claim 1, wherein the best bid and best offer is at the auction market.

5. A method according to claim 1, wherein the first buy order is designated as an auction limit order.

6. A method for handling securities orders in an auction market comprising:

receiving a first sell order with a limit price that is below a published best bid;

representing the first sell order in the auction market;

determining whether the first sell order is immediately executed; and

if the first sell order is not immediately executed, quoting the first sell order at a minimum variation better than a published best offer, whereby the price of the quoted first sell order becomes the published best offer.

7. A method according to claim 6, further comprising:

receiving a second sell order with a price that is better than the price of the quoted first sell order; and

re-quoting the first sell order at a minimum variation better than the second sell order up to the limit price of the first sell order, whereby the price of the re-quoted first sell order becomes the published best offer.

8. A method according to claim 6, wherein the best bid and best offer is the national best bid and offer.

9. A method according to claim 6, wherein the best bid and best offer is at the auction market.

10. A method according to claim 6, wherein the first buy order is designated as an auction limit order.

11. A method for trading a security in an auction market comprising:

receiving a buy order with a limit price that is above a published best offer;

receiving a sell order with a limit price that is below a published best bid;

determining a midpoint price of the best bid and best offer; and

executing the buy order and the sell order at the midpoint price, whereby the buy order and the sell order both receive price improvement.

12. A method according to claim 11, further comprising:

determining that the midpoint price is not an even penny; and

adjusting the midpoint price to give more price improvement to the order with time priority.

13. A method according to claim 12, wherein the adjustment to the midpoint price is a minimum price variation.

14. A method according to claim 12, wherein the adjustment to the midpoint price is to the next penny.

15. A system for handling securities orders in an auction market comprising:

means for receiving a first buy order with a limit price that is above a published best offer;

means for representing the first buy order in the auction market;

means for determining whether the first buy order is immediately executed; and

if the first buy order is not immediately executed, means for quoting the first buy order at a minimum variation better than a published best bid, whereby the price of the quoted first buy order becomes the published best bid.

16. A computer-readable medium having computer executable software code stored thereon, the code for handling securities orders in an auction market the code comprising:

code to receive a first buy order with a limit price that is above a published best offer;

code to represent the first buy order in the auction market;

code to determine whether the first buy order is immediately executed; and

if the first buy order is not immediately executed, code to quote the first buy order at a minimum variation better than a published best bid, whereby the price of the quoted first buy order becomes the published best bid.

17. A programmed computer for handling securities orders in an auction market comprising:

a memory having at least one region for storing computer executable program code; and

a processor for executing the program code stored in the memory;

wherein the program code comprises;

code to receive a first buy order with a limit price that is above a published best offer;

code to represent the first buy order in the auction market;

code to determine whether the first buy order is immediately executed; and

if the first buy order is not immediately executed, code to quote the first buy order at a minimum variation better than a published best bid, whereby the price of the quoted first buy order becomes the published best bid.