System and method for aggregation of implied bids and offers for short-term interest rate futures and options

• US 20070100732A1
• Filed: 10/28/2005
• Published: 05/03/2007
• Est. Priority Date: 10/28/2005
• Status: Abandoned Application

• Current Assignee: LIFFE Administration and Management company
• Original Assignee: LIFFE Administration and Management company
• Inventors: Ward, Declan, Ibbotson, Mark, Sudworth, Amanda, Robins, Andrew
• Application Number:
  US11/260,492
• Publication Number:
  US 20070100732A1
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method and system for facilitating trading of financial products is provided. The method includes receiving bids and/or offers for a financial product and aggregating bids and offers that are at the same price level. For financial products that include calendar spreads, such as short-term interest rate futures or options, bids and/or offers may be implied in or implied out of other bids and offers by combining them appropriately. When an offer or bid having a matching price level to the aggregated bid or offer is received, the aggregated bid or offer is divided in a prorated proportion based on the number of lots in the matching offer or bid and based on the numbers of lots in the individual bids and offers that make up the aggregated bid or offer. Trades are then executed using the matching offers or bids and the corresponding prorated portions of the original bids or offers.

Claims

1. A system for facilitating trading of financial products, the system comprising:

a server at which the financial products are actively traded; and

an interface in communication with the server, the interface being configured to enable at least one of a bid and an offer for a financial product to be entered,

wherein the server is configured to receive bids and offers for each financial product via the interface, each bid or offer including a price and a number of lots, and

when, for a first product, the server receives a first bid for a first number of lots at a first time and a second bid for a second number of lots at a second time, the first bid having a same price as the second bid, and when the server receives an offer for the first product having a third number of lots and the same price as the first and second bids at a third time, the third time being after both the first time and the second time, and the third number of lots being less than a sum of the first and second numbers of lots, the server is configured to divide the received offer into a first partial offer and a second partial offer by respectively allotting the third number of lots into a fourth number of lots and a fifth number of lots, wherein the fourth and fifth numbers are respectively determined to be in a same relative proportion as the first and second numbers, and wherein a sum of the fourth and fifth numbers is equal to the third number; and

wherein the server is further configured to match the first bid to the first partial offer and to match the second bid to the second partial offer, and to execute trades respectively corresponding to the matched bids and partial offers.

2. The system of claim 1, wherein when a trade is executed such that, for a given bid, a number of lots actually traded is less than the number of lots included in the given bid, the server is configured to retain an open bid including a remaining number of untraded lots.

3. The system of claim 1, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises one of the first bid or the second bid.

4. The system of claim 1, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises the received offer.

5. The system of claim 3 or claim 4, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

6. A system for facilitating trading of financial products, the system comprising:

a server at which the financial products are actively traded; and

an interface in communication with the server, the interface being configured to enable at least one of a bid and an offer for a financial product to be entered,

wherein the server is configured to receive bids and offers for each financial product via the interface, each bid or offer including a price and a number of lots, and

when, for a first product, the server receives a first offer for a first number of lots at a first time and a second offer for a second number of lots at a second time, the first offer having a same price as the second offer, and when the server receives a bid for the first product having a third number of lots and the same price as the first and second offers at a third time, the third time being after both the first time and the second time, and the third number of lots being less than a sum of the first and second numbers of lots, the server is configured to divide the received bid into a first partial bid and a second partial bid by respectively allotting the third number of lots into a fourth number of lots and a fifth number of lots, wherein the fourth and fifth numbers are respectively determined to be in a same relative proportion as the first and second numbers, and wherein a sum of the fourth and fifth numbers is equal to the third number; and

wherein the server is further configured to match the first offer to the first partial bid and to match the second offer to the second partial bid, and to execute trades respectively corresponding to the matched offers and partial bids.

7. The system of claim 6, wherein when a trade is executed such that, for a given offer, a number of lots actually traded is less than the number of lots included in the given offer, the server is configured to retain an open offer including a remaining number of untraded lots.

8. The system of claim 6, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises one of the first offer or the second offer.

9. The system of claim 6, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises the received bid.

10. The system of claim 8 or claim 9, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

11. A system for facilitating trading of financial products, the system comprising:

a server at which the financial products are actively traded; and

an interface in communication with the server, the interface being configured to enable at least one of a bid and an offer for a financial product to be entered,

wherein the server is configured to receive bids and offers for each financial product via the interface, each bid or offer including a price and a number of lots, and

when, for a first product, the server receives N bids at N different times, each of the N bids having a same price, and when the server receives an offer for the first product after all N bids have been received, the offer including a number of lots that is less than a sum of the numbers of lots of the N received bids, the server is configured to divide the received offer into N partial offers by respectively allotting the offered number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N bids; and

wherein the server is further configured to match each of the N bids to a corresponding one of the N partial offers, and to execute trades corresponding to the matched bids and partial offers.

12. The system of claim 11, wherein when a trade is executed such that, for a given bid, a number of lots actually traded is less than the number of lots included in the given bid, the server is configured to retain an open bid including a remaining number of untraded lots.

13. The system of claim 11, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises one of the N received bids.

14. The system of claim 11, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises the received offer.

15. The system of claim 13 or claim 14, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

16. A system for facilitating trading of financial products, the system comprising:

a server at which the financial products are actively traded; and

an interface in communication with the server, the interface being configured to enable at least one of a bid and an offer for a financial product to be entered,

wherein the server is configured to receive bids and offers for each financial product via the interface, each bid or offer including a price and a number of lots, and

when, for a first product, the server receives N offers at N different times, each of the N offers having a same price, and when the server receives a bid for the first product after all N offers have been received, the bid including a number of lots that is less than a sum of the numbers of lots of the N received offers, the server is configured to divide the received bid into N partial bids by respectively allotting the bidded number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N offers; and

wherein the server is further configured to match each of the N offers to a corresponding one of the N partial bids, and to execute trades corresponding to the matched offers and partial bids.

17. The system of claim 16, wherein when a trade is executed such that, for a given offer, a number of lots actually traded is less than the number of lots included in the given offer, the server is configured to retain an open offer including a remaining number of untraded lots.

18. The system of claim 16, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises one of the N received offers.

19. The system of claim 16, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the server is further configured to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises the received bid.

20. The system of claim 18 or claim 19, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

21. A method of trading a financial product, comprising the steps of:

receiving a first bid for the financial product at a first time, the first bid including a first number of lots and a price;

receiving a second bid for the financial product at a second time, the second bid including a second number of lots and a same price as the price included in the first bid;

receiving an offer for the financial product at a third time, the third time occurring after both the first time and the second time, the offer including a third number of lots and the same price as the price included in each of the first and second bids, and the third number being less than a sum of the first and second numbers;

dividing the received offer into a first partial offer and a second partial offer by allotting the third number of lots into a fourth number of lots and a fifth number of lots, wherein the fourth and fifth numbers are respectively determined to be in a same relative proportion as the first and second numbers, and wherein a sum of the fourth and fifth numbers is equal to the third number;

matching the first bid to the first partial offer;

matching the second bid to the second partial offer; and

executing trades corresponding to the matched bids and partial offers.

22. The method of claim 21, wherein when a trade is executed such that, for a given bid, a number of lots actually traded is less than the number of lots included in the given bid, the method further comprises the step of retaining an open bid including a remaining number of untraded lots.

23. The method of claim 21, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises one of the first bid or the second bid.

24. The method of claim 21, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises the received offer.

25. The method of claim 23 or claim 24, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

26. A method of trading a financial product, comprising the steps of:

receiving a first offer for the financial product at a first time, the first offer including a first number of lots and a price;

receiving a second offer for the financial product at a second time, the second offer including a second number of lots and a same price as the price included in the first offer;

receiving a bid for the financial product at a third time, the third time occurring after both the first time and the second time, the bid including a third number of lots and the same price as the price included in each of the first and second offers, and the third number being less than a sum of the first and second numbers;

dividing the received bid into a first partial bid and a second partial bid by allotting the third number of lots into a fourth number of lots and a fifth number of lots, wherein the fourth and fifth numbers are respectively determined to be in a same relative proportion as the first and second numbers, and wherein a sum of the fourth and fifth numbers is equal to the third number;

matching the first offer to the first partial bid;

matching the second offer to the second partial bid; and

executing trades corresponding to the matched offers and partial bids.

27. The method of claim 26, wherein when a trade is executed such that, for a given offer, a number of lots actually traded is less than the number of lots included in the given offer, the method further comprises the step of retaining an open offer including a remaining number of untraded lots.

28. The method of claim 26, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises one of the first offer or the second offer.

29. The method of claim 26, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises the received bid.

30. The method of claim 28 or claim 29, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

31. A method of trading a financial product, comprising the steps of:

receiving N bids for the financial product, each of the N bids including a respective number of lots and a same price;

receiving an offer for the financial product after all of the N bids have been received, the offer including a same price as the price included in each of the N bids and a number of lots that is less than a sum of the numbers of lots included in the N bids;

dividing the received offer into N partial offers by allotting the offered number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N bids;

matching each of the N bids to a corresponding partial offer; and

executing trades corresponding to the matched bids and partial offers.

32. The method of claim 31, wherein when a trade is executed such that, for a given bid, a number of lots actually traded is less than the number of lots included in the given bid, the method further comprises the step of retaining an open bid including a remaining number of untraded lots.

33. The method of claim 31, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises one of the N received bids.

34. The method of claim 31, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises the received offer.

35. The method of claim 33 or claim 34, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

36. A method of trading a financial product, comprising the steps of:

receiving N offers for the financial product, each of the N offers including a respective number of lots and a same price;

receiving a bid for the financial product after all of the N offers have been received, the bid including a same price as the price included in each of the N offers and a number of lots that is less than a sum of the numbers of lots included in the N offers;

dividing the received bid into N partial bids by allotting the offered number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N offers;

matching each of the N offers to a corresponding partial bid; and

executing trades corresponding to the matched offers and partial bids.

37. The method of claim 36, wherein when a trade is executed such that, for a given offer, a number of lots actually traded is less than the number of lots included in the given offer, the method further comprises the step of retaining an open offer including a remaining number of untraded lots.

38. The method of claim 36, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises one of the N received offers.

39. The method of claim 36, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the method further comprises the step of combining received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises the received bid.

40. The method of claim 38 or claim 39, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles;

and condors.

41. A storage medium for storing software for facilitating trading of a financial product, the software being computer-readable, wherein the software includes instructions for causing a computer to:

receive N bids for the financial product, each of the N bids including a respective number of lots and a same price;

receive an offer for the financial product after all of the N bids have been received, the offer including a same price as the price included in each of the N bids and a number of lots that is less than a sum of the numbers of lots included in the N bids;

divide the received offer into N partial offers by allotting the offered number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N bids;

match each of the N bids to a corresponding partial offer; and

execute trades corresponding to the matched bids and partial offers.

42. The storage medium of claim 41, wherein when a trade is executed such that, for a given bid, a number of lots actually traded is less than the number of lots included in the given bid, the software further comprises instructions for causing a computer to retain an open bid including a remaining number of untraded lots.

43. The storage medium of claim 41, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the software further comprises instructions for causing a computer to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises one of the N received bids.

44. The storage medium of claim 41, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the software further comprises instructions for causing a computer to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises the received offer.

45. The storage medium of claim 43 or claim 44, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.

46. A storage medium for storing software for facilitating trading of a financial product, the software being computer-readable, wherein the software includes instructions for causing a computer to:

receive N offers for the financial product, each of the N offers including a respective number of lots and a same price;

receive a bid for the financial product after all of the N offers have been received, the bid including a same price as the price included in each of the N offers and a number of lots that is less than a sum of the numbers of lots included in the N offers;

divide the received bid into N partial bids by allotting the offered number of lots according to a same relative proportion as the corresponding numbers of lots included in each of the N offers;

match each of the N offers to a corresponding partial bid; and

execute trades corresponding to the matched offers and partial bids.

47. The storage medium of claim 46, wherein when a trade is executed such that, for a given offer, a number of lots actually traded is less than the number of lots included in the given offer, the software further comprises instructions for causing a computer to retain an open offer including a remaining number of untraded lots.

48. The storage medium of claim 46, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the software further comprises instructions for causing a computer to combine received bids and offers for the STIR futures contract into an implied offer, and wherein the implied offer comprises one of the N received offers.

49. The storage medium of claim 46, at least one of the financial products comprising a number of deliveries of a short term interest rate (STIR) futures contract, wherein the software further comprises instructions for causing a computer to combine received bids and offers for the STIR futures contract into an implied bid, and wherein the implied bid comprises the received bid.

50. The storage medium of claim 48 or claim 49, wherein the at least one financial product comprising a number of deliveries of a STIR future contract is selected from the group consisting of strips, packs, bundles, and condors.