System and method for facilitating trading of financial instruments

• US 20060026090A1
• Filed: 07/28/2005
• Published: 02/02/2006
• Est. Priority Date: 12/09/2002
• Status: Active Grant

• Current Assignee: Deep Liquidity, Inc.
• Original Assignee: Deep Liquidity, Inc.
• Inventors: Balabon, Sam
• Granted Patent: US 7,769,668 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A system and method for facilitating trading of financial instruments. According to one embodiment, an application receives an indication of interest to trade a financial instrument by a first party, provides the indication of interest to other parties without disclosing a side of trade, receives an offer to trade the financial instrument by a second party based on the provided indication of interest, a side of trade being associated with the offer by the second party but not disclosed to the first party, and receives either a rejection or an acceptance of the second party'"'"'s offer by the first party.

Claims

1. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an indication of interest to trade a financial instrument by a first party;

providing the indication of interest to other parties without disclosing a side of trade;

receiving an offer to trade the financial instrument by a second party based on the provided indication of interest, a side of trade being associated with the offer by the second party but not disclosed to the first party; and

receiving either a rejection or an acceptance of the second party'"'"'s offer by the first party.

2. The method of claim 1, wherein a side of trade is associated with the acceptance by the first party.

3. The method of claim 2, further comprising:

completing a trade based on the second party'"'"'s offer only if the side of trade associated with the second party'"'"'s offer is contra to the side of trade associated with the first party'"'"'s acceptance.

4. The method of claim 2, further comprising:

sending notification of the first party'"'"'s acceptance to a trading application without disclosing the side of trade associated with the acceptance.

5. The method of claim 4, further comprising:

sending the side of trade associated with the acceptance to the trading application only upon occurrence of a specified market event condition.

6. The method of claim 5, wherein the trading application completes a trade based on the second party'"'"'s offer only if the side of trade associated with the second party'"'"'s offer is contra to the side of trade associated with the first party'"'"'s acceptance.

7. The method of claim 6, wherein the trading application resides on a client machine of the second party.

8. The method of claim 7, wherein the trading application completes the trade by submitting details of the trade to a trading server for execution.

9. The method of claim 6, wherein the trading application resides on a trading server.

10. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an acceptance by a first party to an offer to trade a financial instrument by a second party, the offer including a side of trade specified by the second party and the acceptance including a side of trade specified by the first party;

providing notification of the acceptance to a trading application without disclosing the side of trade associated with the acceptance;

determining whether a market event condition associated with the offer is met; and

providing the side of trade associated with the acceptance to the trading application only if and when the market event condition is determined to be met.

11. The method of claim 10, wherein the trading application completes a trade based on the offer only if the side of trade associated with the offer is contra to the side of trade associated with the acceptance.

12. The method of claim 11, wherein the trading application resides on a client machine of the second party.

13. The method of claim 12, wherein the trading application completes the trade by submitting details of the trade to a central trading server for execution.

14. The method of claim 11, wherein the trading application resides on a central trading server.

15. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving at a central order book server an indication of interest to trade a financial instrument by a first party, along with an indication by the first party authorizing the central order book server to automatically offer to trade the financial instrument based on trade information associated with the indication of interest;

searching the central order book to identify a matching indication of interest based on the trade information associated with the first party'"'"'s indication of interest; and

generating an offer to trade the financial instrument based on the trade information associated with the first party'"'"'s indication of interest only if a matching indication of interest is identified.

16. The method of claim 15, further comprising submitting the generated offer to a client machine of a second party associated with the identified matching indication of interest.

17. The method of claim 15, wherein the trade information of the first party'"'"'s indication of interest includes a symbol of the financial instrument, a share amount and a side of trade.

18. The method of claim 17, wherein the identified matching indication of interest specifies trade information including a financial instrument symbol identical to that of the first party'"'"'s indication of interest, a share amount at or above that of the first party'"'"'s indication of interest, and a side of trade contra to that of the first party'"'"'s indication of interest.

19. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving at a central order book server an indication of interest to trade a financial instrument by a first party, along with an indication by the first party authorizing the central order book server to automatically offer to trade the financial instrument based on trade information associated with the indication of interest;

searching the central order book to identify a matching indication of interest based on the trade information associated with the first party'"'"'s indication of interest;

determining if an identified matching indication of interest by a second party includes an indication by the second party authorizing the central order book server to automatically accept an offer to trade; and

completing a trade based on the trade information associated with the first party'"'"'s indication of interest if the identified matching indication of interest is determined to include the second party'"'"'s authorization indication.

20. The method of claim 19, comprising generating an offer to trade the financial instrument based on the trade information associated with the first party'"'"'s indication of interest if the identified matching indication of interest is determined not to include the second party'"'"'s authorization indication.

21. The method of claim 20, further comprising submitting the generated offer to a client machine of the second party.

22. The method of claim 19, wherein the trade information of the first party'"'"'s indication of interest includes a symbol of the financial instrument, a share amount and a side of trade.

23. The method of claim 22, wherein the identified matching indication of interest specifies trade information including a financial instrument symbol identical to that of the first party'"'"'s indication of interest, a share amount at or above that of the first party'"'"'s indication of interest, and a side of trade contra to that of the first party'"'"'s indication of interest.

24. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving at a central order book server an offer to trade a financial instrument by a first party;

searching the central order book to identify a matching indication of interest based on trade information associated with the first party'"'"'s offer to trade; and

providing the offer to trade to a client machine of a second party associated with the identified matching indication of interest.

25. The method of claim 24, wherein the trade information of the first party'"'"'s offer to trade includes a symbol of the financial instrument, a share amount and a side of trade.

26. The method of claim 25, wherein the identified matching indication of interest specifies trade information including a financial instrument symbol identical to that of the first party'"'"'s offer to trade, a share amount at or above that of the first party'"'"'s offer to trade, and a side of trade contra to that of the first party'"'"'s offer to trade.

27. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving at a central order book server an offer to trade a financial instrument by a first party;

searching the central order book to identify a matching indication of interest based on trade information associated with the first party'"'"'s offer to trade;

determining if an identified matching indication of interest by a second party includes an indication by the second party authorizing the central order book server to automatically accept an offer to trade; and

completing a trade based on the trade information associated with the first party'"'"'s offer to trade if the identified matching indication of interest is determined to include the second party'"'"'s authorization indication.

28. The method of claim 27, comprising providing the offer to trade to a client machine of the second party if the identified matching indication of interest is determined not to include the second party'"'"'s authorization indication.

29. The method of claim 27, wherein the trade information of the first party'"'"'s offer to trade includes a symbol of the financial instrument, a share amount and a side of trade.

30. The method of claim 29, wherein the identified matching indication of interest specifies trade information including a financial instrument symbol identical to that of the first party'"'"'s offer to trade, a share amount at or above that of the first party'"'"'s offer to trade, and a side of trade contra to that of the first party'"'"'s offer to trade.

31. A system for facilitating trading of financial instruments, comprising:

a trading server;

a first trading client communicatively linked to the trading server; and

a second trading client communicatively linked to the trading server;

wherein the trading server is configured to

receive two data packets sent by the first trading client commencing a communication regarding a trade negotiation with the second trading client, the first data packet including details of the trade negotiation and encrypted to protect against unauthorized access by the trading server, the second data packet including an identification code of the second trading application, and

route the first data packet to the second trading client based on the identification code included in the second data packet.

32. The system of claim 31, wherein the trading server is further configured to

generate a reference code for the trade negotiation communication, and

associate the reference code with identification information for the first trading client and for the second trading client.

33. The system of claim 32, wherein the trading server is further configured to send the reference code to the first trading client and the second trading client for inclusion in subsequent communication regarding the trade negotiation.

34. The system of claim 33, wherein the trading server is further configured to

receive two data packets sent by the second trading client continuing the trade negotiation communication with the first trading client, the first data packet sent by the second trading client including further details of the trade negotiation and encrypted to protect against unauthorized access by the trading server, the second data packet sent by the second trading client including the reference code, and

routing the first data packet sent by the second trading client to the first trading client based on the reference code included in the second data packet sent by the second trading client.

35. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an order to trade a financial instrument by a first party, the order specifying a market event condition for restricting completion of the order;

receiving acceptance of the order by a second party;

determining whether the market event condition is met; and

completing the order only if and when the market event condition is determined to be met.

36. The method of claim 35, wherein the market event condition comprises a market value reaching a specified price associated with the financial instrument.

37. The method of claim 36, wherein the market value is one of a bid, ask or midpoint.

38. The method of claim 35, wherein the market event condition is based on live market data.

39. The method of claim 38, wherein the live market data is associated with the financial instrument.

40. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an order to trade a financial instrument by a first party, the order specifying an access condition for restricting access to the order by a second party;

receiving acceptance of the access condition by the second party;

determining whether the access condition is met; and

granting access to the order only if and when the access condition is determined to be met.

41. The method of claim 40, wherein the access condition comprises a time period delay.

42. The method of claim 41, wherein the access condition comprises a random time period delay between a specified minimum and maximum time period.

43. The method of claim 40, wherein the access condition is based on occurrence of a market event derived from live market data.

44. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving at a central order book server an indication of interest to trade a financial instrument by a first party, the indication of interest specifying an amount of shares;

determining whether any other one or more indications of interest listed in the central order book specify an amount of shares at or below the amount of shares specified by the first party'"'"'s indication of interest; and

providing to the first party the determined one or more indications of interest.

45. The method of claim 44, wherein the amount of shares specified by the determined one or more indications of interest represent a minimum fill requirement.

46. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an indication of interest to trade a financial instrument by a first party;

calculating a rating representing a probability that a trade offer based on the indication of interest will be accepted or countered by the first party; and

displaying the rating along with the indication of interest via a graphical user interface.

47. The method of claim 46, wherein the rating is based at least in part upon action taken by the first party in response to a trade offer based on a prior indication of interest by the first party.

48. The method of claim 46, wherein the rating is based at least in part upon inaction by the first party in response to a trade offer based a prior indication of interest by the first party.

49. A computer-implemented method for facilitating trading of financial instruments, comprising:

displaying in a first portion of a graphical user interface an indication of interest to trade a financial instrument by a first party;

displaying in a second portion of the graphical user interface an offer to trade the financial instrument by a second party based on the first party'"'"'s indication of interest, a side of trade being associated with the offer by the second party but not disclosed to the first party;

receiving either a rejection or an acceptance of the second party'"'"'s offer by the first party; and

completing a trade based on the second party'"'"'s offer only if the side of trade associated with the second party'"'"'s offer is contra to the side of trade associated with the first party'"'"'s acceptance.

50. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving an order to trade a financial instrument by a first party, the order specifying a price and a side of trade;

calculating a distance and direction of the price in relationship to a best market price on the side of trade;

generating a dummy order to trade the financial instrument on an opposite side of trade, the dummy order specifying a price at an opposite distance and direction in relationship to a best market price on the opposite side of trade; and

displaying the first party'"'"'s order and the dummy order to a second party.

51. The method of claim 50, wherein the side of trade of the first party'"'"'s order is buy and the opposite side of trade of the dummy order is sell.

52. The method of claim 50, wherein the side of trade of the first party'"'"'s order is sell and the opposite side of trade of the dummy order is buy.

53. The method of claim 51, wherein the first party'"'"'s order price is pegged in relationship to the best bid price and the dummy order price is pegged in relationship to the best ask price.

54. The method of claim 52, wherein the first party'"'"'s order price is pegged in relationship to the best ask price and the dummy order price is pegged in relationship to the best bid price.

55. The method of claim 50, further comprising:

receiving an additional one or more orders to trade the financial instrument by the first party, the one or more orders each specifying a price and a side of trade;

calculating for each of the one or more orders a distance and direction of the price in relationship to a best market price on the side of trade;

generating an additional one or more dummy orders to trade the financial instrument for and on an opposite side of trade of each of the one or more orders by the first party, the one or more dummy orders each specifying a price at an opposite distance and direction in relationship to a best market price on the opposite side of trade; and

displaying the one or more orders by the first party and the one more dummy orders to a second party.

56. The method of claim 50, wherein the best market price includes an artificial best bid or ask price calculated using a computer program connected to live market data.

57. The method of claim 56, wherein the first party'"'"'s order includes an offer.

58. The method of claim 50, further comprising:

providing to the first party an indication of interest by the second party.

59. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving a buy order by a first party to trade a financial instrument at a price, distance and direction away from the best bid price;

receiving a sell order by a second party to trade with the first party'"'"'s buy order;

generating a sell order on behalf of the first party to trade the financial instrument to a third party associated with a buy order that is smaller and better priced than the first party'"'"'s buy order.

60. A computer-implemented method for facilitating trading of financial instruments, comprising:

receiving a buy order for a financial instrument, the buy order pegged in relationship to a best bid price of the financial instrument and including an activation condition specifying a maximum percent price deviation and a prior time period;

calculating a percent price deviation by dividing an absolute value of a difference between a current best bid price and a prior best bid price from the specified prior time period by the current best bid price; and

activating the buy order if the calculated percent price deviation is less than or equal to the specified maximum percent price deviation.