Tracking liquidity order

• US 20060253382A1
• Filed: 05/03/2006
• Published: 11/09/2006
• Est. Priority Date: 05/05/2005
• Status: Active Grant

• Current Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: Archipelago Holdings, Inc. (Intercontinental Exchange, Inc.)
• Inventors: Haller, Thomas F., Adcock, Paul D., Cormack, Michael A., Hill, Robert A.
• Granted Patent: US 10,614,520 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 tracking liquidity order and related market center and process are disclosed which allow posting market centers (e.g. exchanges) to fill routable, smaller orders that would have otherwise routed off the posting market center. Such tracking liquidity orders increase the liquidity of that posting market center and allow it to execute more orders internally, without having to route them to an away market center.

Claims

1. A method for increasing internal order fills on a market center, comprising:

providing a posting market center with displayed and nondisplayed orders on an order book;

receiving and maintaining a tracking liquidity order on the posting market center, wherein the tracking liquidity order has a nondisplayed price and size component;

reviewing orders coming into the market center to determine if said orders are marketable against a contra side order in the order book;

wherein when an order is determined to be marketable against the order book, determining whether the contra side order is at the national best bid or offer, whether the contra side order is a tracking liquidity order and whether the incoming order is eligible for routing;

wherein when a determination is made that the contra side order is at the national best bid or offer and is a tracking liquidity order and that the incoming order is eligible for routing, determining whether the size of said incoming order is not greater than the size component of the tracking liquidity order; and

wherein if the incoming order is not greater in size than the tracking liquidity order size component, executing said incoming order against the tracking liquidity order.

2. The method of claim 1, wherein the tracking liquidity order is a buy order and the incoming order is a sell order.

3. The method of claim 2, wherein the tracking liquidity buy order defines a maximum price that the tracking liquidity buy order can be set at and a fluctuating current price parameter and wherein the current price parameter of the tracking liquidity buy order is capped at the national best bid price to prevent a trade through violation.

4. The method of claim 3, wherein the current price parameter of the tracking liquidity buy order is reset every time the national best bid price changes.

5. The method of claim 4, wherein the current price parameter of the tracking liquidity order is set no higher than the maximum price, regardless of what the national best bid price changes to.

6. The method of claim 3, wherein if the current price parameter of the tracking liquidity buy order is superior to the price of the displayed and nondisplayed buy orders on the order book, the tracking liquidity buy order has priority for execution with an incoming marketable sell order that is about to be routed off the posting market center.

7. The method of claim 3, wherein if the current price parameter of the tracking liquidity buy order is equal to the price of the displayed and nondisplayed buy orders on the order book, the tracking liquidity buy order is eligible for execution with an incoming marketable sell order only after the incoming sell order has matched all displayed and nondisplayed buy orders first and is about to be routed off the posting market center.

8. The method of claim 1, wherein the tracking liquidity order is a sell order and the incoming order is a buy order.

9. The method of claim 8, wherein the tracking liquidity sell order defines a minimum price that the tracking liquidity sell order can be set at and a fluctuating current price parameter and wherein the current price parameter of the tracking liquidity sell order is capped at the national best offer price to prevent a trade through violation.

10. The method of claim 9, wherein the current price parameter of the tracking liquidity sell order is reset every time the national best offer price changes.

11. The method of claim 10, wherein the current price parameter of the tracking liquidity order is set no lower than the minimum price, regardless of what the national best offer price changes to.

12. The method of claim 9, wherein if the current price parameter of the tracking liquidity sell order is superior to the price of the displayed and nondisplayed sell orders on the order book, the tracking liquidity sell order has priority for execution with the incoming marketable buy order that is about to be routed off the posting market center.

13. The method of claim 9, wherein if the current price parameter of the tracking liquidity sell order is equal to the price of the displayed and nondisplayed sell orders on the order book, the tracking liquidity sell order is eligible for execution with an incoming marketable buy order only after the incoming buy order has matched all displayed and nondisplayed sell orders first and is about to be routed off the posting market center.

14. A method for increasing internal order fills on a market center, comprising:

providing a market center with an order book having displayed orders, partially displayed orders, nondisplayed orders and published market maker quotes;

receiving and maintaining a tracking liquidity order having a nondisplayed price and size component on the posting market center, wherein the tracking liquidity order is not displayed to the marketplace and wherein the tracking liquidity order has a superior price to the displayed orders, market maker quotes and partially displayed orders; and

wherein an incoming order is eligible for routing and is not greater in size than the tracking liquidity order size component and wherein the tracking liquidity order having a superior price that grants it price priority ahead of the displayed orders, market maker quotes and partially displayed orders, the tracking liquidity order executes prior to the displayed orders, market maker quotes and partially displayed orders.

15. A method for increasing internal order fills on a market center, comprising:

providing a market center with an order book having displayed orders, partially displayed orders, nondisplayed orders and published market maker quotes;

receiving and maintaining a tracking liquidity order having a nondisplayed price and size component on the posting market center, wherein the tracking liquidity order is not displayed to the marketplace and wherein the tracking liquidity order has a price equal to the displayed orders, market maker quotes and partially displayed orders; and

wherein an incoming order is eligible for routing and the remaining size of the incoming order is not greater than the tracking liquidity order size component and wherein the tracking liquidity order having a price that is the same as the displayed orders, market maker quotes and partially displayed orders, the tracking liquidity order executes subsequent to the displayed orders, market maker quotes and partially displayed orders.

16. A posting market center, comprising:

an order book with displayed and nondisplayed orders;

an interface for receiving orders, including tracking liquidity orders;

a posting market center memory for storing code for analyzing and processing tracking liquidity orders;

a processor for interacting with the interface and executing the code for analyzing and processing tracking liquidity orders stored in the memory when the interface receives a tracking liquidity order, wherein the code, when executed;

reviews orders coming into the market center to determine if said orders are marketable against a contra side order in the order book;

wherein when an order is determined to be marketable against the order book, determines whether the contra side order is at the national best bid or offer, whether the contra side order is a tracking liquidity order and whether the incoming order is eligible for routing;

wherein when a determination is made that the contra side order is at the national best bid or offer and is a tracking liquidity order and that the incoming order is eligible for routing, determines whether the size of said incoming order is not greater than the size component of the tracking liquidity order; and

wherein if the incoming order is not greater in size than the tracking liquidity order size component, executes said incoming order against the tracking liquidity order.

17. The posting market center of claim 16, further comprising an interface for maintaining and publishing market maker quotes and for automatically generating an order on behalf of such a quote when such quote is determined to be marketable.