Automated trading system in an electronic trading exchange

• US 20060259417A1
• Filed: 06/27/2006
• Published: 11/16/2006
• Est. Priority Date: 10/14/1999
• Status: Active Grant

• Current Assignee: DCFB LLC
• Original Assignee: Edge Capture LLC, International Specialists Inc., Thomas M O'Donnell and Bradley G Griffith
• Inventors: Voinescu, Catalin D., Puscasu, Stefan, Marynowski, John M., O'Donnell, Thomas M.
• Granted Patent: US 8,725,621 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• 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

Abstract

An electronic exchange system network includes a trader site having an automated trading system capable of submitting orders to an exchange site. The automated trading system determines whether an order should be submitted based on, for example, the current market price of an option and theoretical buy and sell prices. The theoretical buy and sell prices are derived from, among other things, the current market price of the security underlying the option. A look-up table stores a range of theoretical buy and sell prices for a given range of current market price of the underlying security. Accordingly, as the price of the underlying security changes, a new theoretical price may be indexed in the look-up table, thereby avoiding calculations that would otherwise slow automated trading decisions. Other techniques may be used in addition or in the alternative to speed automatic decision-making. In addition, a system of checks may be conducted to ensure accurate and safe automated trading. The automated trading system may be capable of automatically submitting orders in connection with the underlying security in order to hedge part of the delta risk associated with the automated option trades.

Claims

1. An automated trading system for use in an electronic exchange system network, comprising:

a receiver interface that receives market price information for a first traded item from an exchange;

data reference logic that outputs a transaction value for the first traded item from a data structure based on price information for a second traded item related to the first traded item;

decision logic using at least a portion of the received market price information and the transaction value to generate a decision whether to submit an order for the first traded item; and

an output interface for outputting a request for market transaction for one of the first traded item and the second traded item for transmission to the exchange in response to said decision logic.

2. The automated trading system according to claim 1, wherein data reference logic receives current price information for the second traded item and uses the current price information to output the transaction value.

3. The automated trading system according to claim 2, wherein said data reference logic comprises:

memory storing the data structure, wherein the data structure maps pre-calculated transaction values of the first traded item over a range of price values of the second traded item; and

reference logic for identifying one of the pre-calculated transaction values based at least in part on a current price value for the second traded item.

4. The automated trading system according to claim 3, wherein the data structure is a two-dimensional data structure mapping pre-calculated transaction values of the first traded item over a range of prices of the second traded item.

5. The automated trading system according to claim 3, wherein the data structure is an n-dimensional data structure, where n is 3 or more.

6. The automated trading system according to claim 3, wherein the data structure is a look-up table.

7. The automated trading system according to claim 3, wherein the data structure comprises a linked list.

8. The automated trading system according to claim 3, wherein the data structure comprises a tree structure.

9. The automated trading system according to claim 1, said decision logic compares at least a portion of the received market price information to the transaction value when automated trading in the first item first becomes enabled.

10. The automated trading system according to claim 1, further comprising safety check logic, responsive to said decision logic, to prevent transmission of a request for market transaction for the first traded item to the exchange if the request does not meet a predetermined criterion.

11. The automated trading system according to claim 10, where the predetermined criterion is maximum trade quantity for the first traded item.

12. The automated trading system according to claim 10, wherein said predetermined criterion is a maximum number of market transaction attempts within a predetermined period of time and said decision logic compares at least a portion of the received market price information to the transaction value when the maximum number of attempts is increased.