System and method for trading financial instruments based on undisclosed values

• US 20070100734A1
• Filed: 10/27/2005
• Published: 05/03/2007
• Est. Priority Date: 10/27/2004
• Status: Active Grant

• Current Assignee: Bloomberg LP
• Original Assignee: Bloomberg LP
• Inventors: Klein, David, Berger, Eric, Hodder, Christopher
• Granted Patent: US 8,099,352 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
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

In electronic trading venues, there may be orders for which the full information is not publicly displayed. For example, the full quantity of an order available for trading or the most aggressive price at which an order can be traded may not be made public. A system and method are disclosed that facilitates trading based on this non-public information. A first order associated with a financial instrument is placed at a venue to probe for non-public information related to the financial instrument. The results of the probe may then be used to place a second order at the venue that takes advantage of any discovered non-public information.

Claims

1. A method for facilitating the trading of financial instruments comprising:

at least one computer placing a first order associated with a financial instrument in a venue in which the financial instrument is traded, the first order having terms such that execution of the first order reveals non-public information related to the financial instrument and the venue; and

in response to the first order being executed, the at least one computer automatically placing a second order associated with the financial instrument in the venue, the terms of the second order being based on the non-public information revealed by the execution of the first order.

2. The method of claim 1, wherein the non-public information revealed by the execution of the first order describes an undisplayed quantity associated with the financial instrument and the venue.

3. The method of claim 1, wherein the non-public information revealed by the execution of the first order describes an undisplayed price associated with the financial instrument and the venue.

4. A method for facilitating the trading of financial instruments comprising:

at least one computer placing a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price different from any disclosed prices of orders at the venue associated with the financial instrument and a second transaction side; and

in response to the first order being executed for the entire quantity of the first order, the at least one computer automatically placing a second order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

5. The method of claim 4, wherein the first order has a first quantity and the second order has a second quantity larger than the first quantity.

6. The method of claim 5, comprising:

prior to the at least one computer placing the first order, the at least one computer receiving a third order associated with the financial instrument and the first transaction side, the third order having a third quantity; and

wherein the first quantity of the first order is derived from the third quantity of the third order.

7. A method for facilitating the trading of financial instruments comprising:

at least one computer placing a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price identical to a price of a second order previously placed in the venue associated with the financial instrument and a second transaction side, the first order having a quantity greater than the quantity of the second order; and

in response to the first order being executed against the second order for the entire quantity of the first order, the at least one computer automatically placing a third order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

8. The method of claim 7, wherein the quantity of the third order is greater than the quantity of the first order.

9. The method of claim 8, comprising:

prior to the at least one computer placing the first order, the at least one computer receiving a fourth order associated with the financial instrument and the first transaction side; and

wherein the quantity of the first order is derived from the quantity of the fourth order.

10. A method for facilitating the trading of financial interests comprising:

at least one computer receiving a first order associated with a financial instrument and a first of two transaction sides, the first order having a first quantity;

the at least one computer determining a price related to the financial instrument based on the prices associated with the financial instrument and the second transaction side disclosed by a plurality of venues in which the financial instrument is traded;

the at least one computer placing a quantity probe order associated with the financial instrument and the first transaction side in one venue of the plurality of venues, wherein a second order in the one venue associated with the financial instrument and a second transaction side and the quantity probe order both have prices identical to the determined price, and wherein the quantity probe order has a quantity derived from the first quantity and that is greater than the quantity of the second order; and

the at least one computer placing a price probe order associated with a financial instrument and the first transaction side in another venue of the plurality of venues, wherein the price probe order has a quantity derived from the first quantity and has a price identical to the determined price and different from any disclosed prices of orders in the other venue associated with the financial instrument and the second transaction side.

11. The method of claim 10, wherein, in response to the quantity probe order being executed against the second order for the entire quantity of the probe order, the at least one computer automatically placing a third order associated with the financial instrument and the first transaction side in the venue at the same price at which the quantity probe order was executed.

12. The method of claim 10, wherein, in response to the price probe order being executed for the entire quantity of the price probe order, the at least one computer automatically placing a third order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

13. A system for facilitating the trading of financial interests comprising at least one computer programmed to:

place a first order associated with a financial instrument in a venue in which the financial instrument is traded, the first order having terms such that execution of the first order reveals non-public information related to the financial instrument and the venue; and

in response to the first order being executed, automatically place a second order associated with the financial instrument in the venue, the terms of the second order being based on the non-public information revealed by the execution of the first order.

14. A computer readable medium or media having programming stored thereon that when executed by at least one computer causes the at least one computer to:

place a first order associated with a financial instrument in a venue in which the financial instrument is traded, the first order having terms such that execution of the first order reveals non-public information related to the financial instrument and the venue; and

in response to the first order being executed, automatically place a second order associated with the financial instrument in the venue, the terms of the second order being based on the non-public information revealed by the execution of the first order.

15. A system for facilitating the trading of financial interests comprising at least one computer programmed to:

place a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price different from any disclosed prices of orders at the venue associated with the financial instrument and a second transaction side; and

in response to the first order being executed for the entire quantity of the first order, automatically place a second order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

16. A computer readable medium or media having programming stored thereon that when executed by at least one computer causes the at least one computer to:

place a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price different from any disclosed prices of orders at the venue associated with the financial instrument and a second transaction side; and

in response to the first order being executed for the entire quantity of the first order, automatically place a second order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

17. A system for facilitating the trading of financial interests comprising at least one computer programmed to:

place a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price identical to a price of a second order previously placed in the venue associated with the financial instrument and a second transaction side, the first order having a quantity greater than the quantity of the second order; and

in response to the first order being executed against the second order for the entire quantity of the first order, automatically place a third order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

18. A computer readable medium or media having programming stored thereon that when executed by at least one computer causes the at least one computer to:

place a first order associated with a financial instrument and a first of two transaction sides in a venue in which the financial instrument is traded, the first order having a price identical to a price of a second order previously placed in the venue associated with the financial instrument and a second transaction side, the first order having a quantity greater than the quantity of the second order; and

in response to the first order being executed against the second order for the entire quantity of the first order, automatically place a third order associated with the financial instrument and the first transaction side in the venue at the same price at which the first order was executed.

19. A system for facilitating the trading of financial interests comprising at least one computer programmed to:

receive a first order associated with a financial instrument and a first of two transaction sides, the first order having a first quantity;

determine a price related to the financial instrument based on the prices associated with the financial instrument and the second transaction side disclosed by a plurality of venues in which the financial instrument is traded;

place a quantity probe order associated with the financial instrument and the first transaction side in one venue of the plurality of venues, wherein a second order in the one venue associated with the financial instrument and a second transaction side and the quantity probe order both have prices identical to the determined price, and wherein the quantity probe order has a quantity derived from the first quantity and that is greater than the quantity of the second order; and

place a price probe order associated with a financial instrument and the first transaction side in another venue of the plurality of venues, wherein the price probe order has a quantity derived from the first quantity and has a price identical to the determined price and different from any disclosed prices of orders in the other venue associated with the financial instrument and the second transaction side.

20. A computer readable medium or media having programming stored thereon that when executed by at least one computer causes the at least one computer to:

receive a first order associated with a financial instrument and a first of two transaction sides, the first order having a first quantity;

determine a price related to the financial instrument based on the prices associated with the financial instrument and the second transaction side disclosed by a plurality of venues in which the financial instrument is traded;

place a quantity probe order associated with the financial instrument and the first transaction side in one venue of the plurality of venues, wherein a second order in the one venue associated with the financial instrument and a second transaction side and the quantity probe order both have prices identical to the determined price, and wherein the quantity probe order has a quantity derived from the first quantity and that is greater than the quantity of the second order; and

place a price probe order associated with a financial instrument and the first transaction side in another venue of the plurality of venues, wherein the price probe order has a quantity derived from the first quantity and has a price identical to the determined price and different from any disclosed prices of orders in the other venue associated with the financial instrument and the second transaction side.