Midpoint matching system

• US 20070055607A1
• Filed: 09/07/2005
• Published: 03/08/2007
• Est. Priority Date: 09/07/2005
• Status: Active Grant

• Current Assignee: Deutsche Borse AG
• Original Assignee: International Securities Exchange LLC (Nasdaq, Inc.)
• Inventors: Henderson, Michael, Wunsch, Steve, Books, Robert
• Granted Patent: US 7,761,364 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• 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

An automated system for matching orders to buy and sell securities at the midpoint of a best bid and offer (“BBO”), wherein the automated system is adapted to (i) operate on a fully-anonymous and continuous basis, (ii) process multiple, computer-generated orders, of any size, transmitted by algorithmic, program, and other automated trading systems, (iii) automatically match multiple, executable orders according to a priority scheme, and (iv) execute a matching algorithm that maximizes tradable volume when an executable order can not be matched according to the priority scheme. The system may be executed at a server or participant system, or combination of the two.

Claims

1. An automated system for matching orders to buy and sell securities comprising:

an interface connected to a computer network;

one or more automated trading systems connected to the network, wherein orders for the securities can be communicated between the interface and the trading systems via the network;

a processor connected to the interface, the processor adapted to match orders for the securities according to a priority scheme; and

matching means for maximizing tradable volume when an order can not be matched according to the priority scheme.

2. The automated system of claim 1, wherein the priority scheme is a function of an amount of information provided by a party to the transaction.

3. The automated system of claim 2, wherein the information includes a quantity, identity and price.

4. The automated system of claim 2, wherein the information includes a buy or sell transaction.

5. The automated system of claim 1, wherein the order includes SOI or RFC or reserve orders.

6. A method for matching orders to buy and sell securities comprising the steps of:

receiving an SOI order;

identifying a priority status associated with said SOI order;

providing message data to one or more participant systems, the message data indicative of select attributes of the SOI order;

receiving response orders from the one or more participant systems in response to the message data;

matching the SOI order against one or more executable orders according to a priority scheme; and

executing a matching algorithm that maximizes tradable volume when one or more of the executable orders can not be matched according to the priority scheme.

7. An automated system for matching orders to purchase and sell a financial instrument comprising:

an interface adapted to transmit and receive information from market participants, wherein the interface receives orders to purchase and sell the instrument, and wherein the orders include reserve orders, request for cross (RFC) orders, and solicitation of interest (SOI) orders;

a memory connected with the interface;

a processor connected with the memory and with the interface to match orders to purchase and orders to sell the instrument, wherein the processor matches the orders such that RFC orders are matched before SOI orders and SOI orders are matched before reserve orders.

8. The system according to claim 7 wherein the processor matches the orders to purchase and the orders to sell the instrument at the mid-point of the national best bid and offer (NBBO) price.

9. The system according to claim 7, further comprising a lifetime timer, and wherein the lifetime timer starts when an SOI order is received and the SOI order retains its status as an SOI order until expiry of the lifetime timer.

10. The system according to claim 9, wherein when the lifetime timer expires, the SOI order becomes a reserve order.

11. The system according to claim 9, further comprising a no cancel timer, wherein the interface is adapted to receive an instruction to cancel an order, wherein the no cancel timer starts when the SOI order is received, and wherein the processor will reject the instruction to cancel received before the expiry of the no cancel timer.

12. The system according to claim 7, wherein the SOI orders include instructions for disclosing information about the order to one or more market participants and wherein a priority for matching SOI orders is established based on the amount of information to be disclosed.

13. The system according to claim 7, further comprising an exposure timer, and wherein the exposure timer starts when an RFC order is received and the RFC order retains its status as an RFC order until expiry of the exposure timer.

14. The system according to claim 13, wherein when the exposure timer expires, the RFC order becomes a reserve order.

15. The system according to claim 14, wherein a plurality of RFC orders are received at different times and wherein each of the plurality of RFC orders become reserve orders at the expiry of exposure timer of the earliest of the RFC orders to be received.

16. The system according to claim 12, wherein the instructions for disclosing information about the SOI order include instructions to disclose one or more of (i) the identity of the instrument, (ii) the side, (iii) the size and (iv) the price of the order, and (v) the identity of the person or entity placing the order.

17. The system according to claim 7, further comprising means for maximizing a tradeable volume of RFC orders, SOI orders, and reserve orders.

18. The system according to claim 7, wherein the RFC orders include instructions for disclosing information about the RFC order to one or more market participants and wherein a priority for matching RFC orders is established based on the amount of information to be disclosed.

19. The system according to claim 18, wherein the instructions for disclosing information about the RFC order include instructions to disclose one or more of (i) the identity of the instrument, (ii) the side, (iii) the size and (iv) the price of the order, and (v) the identity of the person or entity placing the order.

20. A system for trading financial instruments comprising:

an interface that receives a first order and a plurality of second orders;

a memory connected to the interface, wherein the memory stores the first and second orders;

a processor adapted to divide the first order into a plurality of order portions and to match one of the second orders with one of the order portions at a first time point and to match another of the second orders with another order portion at a second time point.

21. The system according to claim 20, further comprising a timer, wherein the timer determines a plurality of time points equal to the number of order portions and wherein the processor matches one of the second orders with an order portion at each of the time points.

22. The system according to claim 21, wherein the plurality of time points are equally distributed over a time span.

23. The system according to claim 20, wherein, if at a third time point no second order remains unmatched with an order portion, the processor matches a plurality of order portions with a second order at a fourth time point, the fourth time point being later in time than the third time point.