Market participant issue selection system and method

• US 20060229968A1
• Filed: 04/07/2005
• Published: 10/12/2006
• Est. Priority Date: 04/07/2005
• Status: Active Grant

• Current Assignee: Cboe Exchange, Inc. (Cboe Global Markets, Inc.)
• Original Assignee: Chicago Board Options Exchange Incorporated (Cboe Global Markets, Inc.)
• Inventors: Smollen, John E., Hustad, Daniel R., Pfaffenbach, Larry
• Granted Patent: US 7,809,629 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

Abstract

A system and method of allocating rights for quoting issues on a trading facility such as an exchange is described. The method may include providing market participants such as remote market makers with a listing of issues available for remote quote streaming where the available issues are ranked according to predetermined trading parameters. A market participant requests allocations of rights to certain issues and the request is filtered according to a value associated with the ranking of the selected issues. The system includes an issue selection database having a listing of issues available for trading where each issue is ranked based on a trading parameter. An issue selection communication module communicates with the issue selection database and is configured to list available issues and rankings. An issue allocation filter receives a market participant request and compares the selected issues in that request to one or more exchange-based rules.

Claims

1. A method of allocating rights for quoting issues on a trading facility, the method comprising:

generating a ranking for each of a plurality of available issues based on a trading parameter associated with each issue;

assigning a selection value to each of the plurality of available issues corresponding to the ranking;

receiving a request from a market participant for allocation of rights to submit quotes in a subset of the plurality of available issues;

filtering the request based on at least a cumulative selection value of issues contained in the subset of the plurality of available issues; and

authorizing access to the trading facility for the market participant to submit quotes for issues contained in the subset of the plurality of available issues.

2. The method of claim 1, wherein the market participant is a market maker, remotely located market maker, DPM or eDPM.

3. The method of claim 1, wherein the trading facility comprises an exchange.

4. The method of claim 3, wherein the exchange comprises an all-electronic exchange.

5. The method of claim 1, wherein the trading parameter comprises national average daily volume and generating a ranking comprises associating a first tier ranking with each of the plurality of available issues having an national average trading volume greater than a predetermined threshold and assigning a different tier ranking to each of the plurality of available issues having an national average trading volume less than the predetermined threshold.

6. The method of claim 5, wherein generating a ranking comprises dividing the plurality of available issues into a plurality of ranked tiers, and wherein assigning a selection value comprises associating a tier value with each tier such that the selection value of each of the plurality of available issues in a particular tier comprises the tier value.

7. The method of claim 6, wherein the selection value comprises an amount of trading facility ownership.

8. The method of claim 7, wherein the trading facility comprises an exchange and wherein the amount of trading facility ownership comprises at least one of a number of seats owned or leased on the exchange, or a number of shares of stock in the exchange.

9. The method of claim 1, wherein filtering the request further comprises determining whether a maximum number of market participants authorized to submit quotes in an issue already exists for a selected issue in the subset of the plurality of issues.

10. The method of claim 1, wherein authorizing access to the trading facility comprises communicating an authorization message to a trading engine, the authorization message comprising information identifying the market participant and information identifying issues in the subset of the plurality of issues.

11. An issue allocation system for determining which market participants for a trading facility are authorized to disseminate quotes on the trading facility for a particular issue, the issue allocation system comprising:

an issue selection database, the issue selection database comprising a listing of a plurality of issues available for trading on the trading facility, wherein each issue is associated with a ranking based on a trading parameter associated with the issue;

an issue selection communication module in communication with the issue selection database, the issue selection communication module configured to transmit the listing of the plurality of issues available and the ranking associated with each issue in response to an issue selection query; and

an issue allocation filter in communication with the issue selection database and responsive to receipt of an allocation request for a market participant to compare a list of issues in the allocation request to a cumulative allocation value of issues identified in the allocation request, wherein the cumulative allocation value is based on the ranking of each issue in the allocation request.

12. A method of allocating rights for quoting issues on an exchange, the method comprising:

maintaining a ranked database of issues available for trading by market participants associated with the exchange;

receiving a request from a market participant associated with the exchange to obtain rights to submit quotes in a subset of the plurality of available issues;

determining if the request complies with an exchange ownership value associated with the market participant, where each issue in the subset of the plurality of available issues is assigned an exchange ownership value correlating to the ranking.

13. The method of claim 12, wherein receiving the request from the market participant comprises receiving the request from a remote market maker.

14. The method of claim 13, wherein receiving the request further comprises displaying issue selection options to the remote market maker.

15. The method of claim 13 further comprising determining whether a maximum number of market participants are authorized to submit quotes for a particular issue in the subset of the plurality of issues.

16. The method of claim 15, further comprising placing a remote market maker on a waiting list for the particular issue if a maximum number of market participants is already authorized to submit quotes for the particular issue, and automatically notifying the remote market maker when the particular issue is available.

17. The method of claim 12, further comprising:

re-ranking issues in the ranked database of issues at predetermined intervals;

reviewing a value of issues in the subset of the plurality of issues;

notifying the market participant if the value of issues in the subset exceeds the exchange ownership value associated with the market participant.

18. A computer readable medium containing computer executable instructions for allocating quoting rights to market participants on an exchange:

generating a ranking for each of a plurality of available issues based on a trading parameter associated with each issue;

assigning a selection value to each of the plurality of available issues corresponding to the ranking;

receiving a request from a market participant for allocation of rights to submit quotes in a subset of the plurality of available issues;

filtering the request based on at least a cumulative selection value of issues contained in the subset of the plurality of available issues; and

authorizing access to the exchange for the market participant to submit quotes for issues contained in the subset of the plurality of available issues.

19. The computer readable medium of claim 18, wherein the trading parameter comprises national average daily volume and wherein the instructions for generating a ranking comprises instructions for associating a first tier ranking with each of the plurality of available issues having an national average trading volume greater than a predetermined threshold and for assigning a different tier ranking to each of the plurality of available issues having an national average trading volume less than the predetermined threshold.

20. The computer readable medium of claim 19, wherein the instructions for generating a ranking comprises instructions for dividing the plurality of available issues into a plurality of ranked tiers, and wherein assigning a selection value comprises associating a tier value with each tier such that the selection value of each of the plurality of available issues in a particular tier comprises the tier value.

21. The computer readable medium of claim 20, wherein the selection value comprises an exchange ownership value.

22. The computer readable medium of claim 21, wherein the exchange ownership value comprises an amount of owned or leased seats on the exchange.

23. The computer readable medium of claim 18, wherein the instructions for filtering the request further comprises instructions for determining whether a maximum number of quoters already exists for a selected issue in the subset of the plurality of issues.

24. The computer readable medium of claim 18, wherein the instructions for authorizing access to the exchange comprises instructions for communicating an authorization message to a trading engine at the exchange, the authorization message comprising information identifying the market participant and information identifying issues in the subset of the plurality of issues.