System and method for directed request for quote

• US 20070118455A1
• Filed: 06/14/2006
• Published: 05/24/2007
• Est. Priority Date: 11/18/2005
• Status: Abandoned Application

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Studnitzer, Ari, Callaway, Paul, Mitchell, Jeffrey, Glinberg, Dmitriy, Labuszewski, John, Gogol, Edward, Flemm, Lori, Yoo, Tae Seok, Lichter, Paul, Goldman, Stephen, Bauerschmidt, Paul, Albert, William, Thiruthuvadoss, Shanthi, Hunter, Bryan, Kelly, Matthew, Greta, Andrew
• Application Number:
  US11/452,653
• Publication Number:
  US 20070118455A1
• 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

The disclosed systems and methods relate to allowing trading of over the counter (“OTC”) foreign exchange (“FX”) contracts on a centralized matching and clearing mechanism, such as that of the Chicago Mercantile Exchange'"'"'s (“CME”'"'"'s) futures exchange system (the “Exchange”). The disclosed systems and methods allow for anonymous transactions, centralized clearing, efficient settlement and the provision of risk management/credit screening mechanisms to lower risk, reduce transaction costs and improve the liquidity in the FX market place. In particular, the disclosed embodiments increase speed of execution facilitating growing demand for algorithmic trading, increased price transparency, lower cost of trading, customer to customer trading, and automated asset allocations, recurring trades as well as clearing and settlement efficiencies.

Claims

1. A method of trading financial instruments among a plurality of entities participating in a market, the method comprising:

receiving a request for quote from a first entity of the plurality of entities, the request for quote identifying the first entity and specifying an interest in trading a first instrument;

transmitting the request for quote to at least a subset of the plurality of entities without identifying the first entity;

receiving at least one response from at least one second entity of the subset, the at least one response identifying the request for quote and including an actionable quote in response thereto; and

transmitting the at least one response exclusively to the first entity.

2. The method of claim 1, wherein the subset comprises the entire plurality of entities.

3. The method of claim 1, further comprising incentivising the subset to respond to the transmitted request for quote.

4. The method of claim 1, wherein the subset comprises at least one market maker.

5. The method of claim 1, wherein the transmitting of the at least one response further includes transmitting the at least one response to the first entity without identifying the at least one second entity.

6. The method of claim 1, further comprising identifying the at least one second entity of the plurality of entities in response to the request for quote, the at least one second entity being identified as being interested in providing a quote for the first instrument, the subset including at least the at least one second entity.

7. The method of claim 6, further comprising maintaining an interest profile for each of the plurality of entities wherein the identifying is based on the interest profile of the associated at least one second entity.

8. The method of claim 1, further comprising:

logging an identification of the first entity in relation to the request for quote; and

associating the at least one response with the first entity based on the logging;

wherein the transmitting of the at least one response is based thereon.

9. The method of the claim 1, further comprising:

generating a unique identification code having no relation to the first entity;

creating a relationship between the unique identification code, the request for quote and the first entity; and

wherein the transmitting of the request for quote further includes transmitting the unique identification code along with the request for quote, and further wherein the at least one response includes the unique identification code, the transmitting of the at least one response to the first entity being based the unique identification code from the at least one response and the relationship.

10. The method of claim 1 further comprising maintaining the anonymity of the first entity with respect to at least the subset of the plurality of entities.

11. The method of claim 1 further comprising obviating a need for a bilateral relationship between the first entity and the at least one second entity.

12. The method of claim 1 further comprising buffering risk of loss with respect to the first instrument as between the first entity and the at least one second entity.

13. The method of claim 1 wherein the request for quote further specifies a time period which may expire, the method further comprising determining when the time period has expired.

14. The method of claim 13, wherein the time period is specified by the first entity.

15. The method of claim 13, wherein the time period is automatically specified.

16. The method of claim 13, further comprising canceling the request for quote upon expiration of the time period.

17. The method of claim 13, further comprising canceling the actionable quote upon expiration of the time period.

18. The method of claim 13, further comprising rejecting the at least one response when the at least one response is received subsequent to the expiration of the time period.

19. The method of claim 13, further comprising specifying the time period as a specific point in time.

20. The method of claim 13, further comprising specifying the time period as the elapse of a specified duration measured from a defined origin.

21. The method of claim 1 wherein the actionable quote further specifies a first time period which may expire, the method further comprising determining when the first time period has expired.

22. The method of claim 21, wherein the first time period is specified by the at least one second entity.

23. The method of claim 21, wherein the first time period is automatically specified.

24. The method of claim 21, further comprising determining whether the actionable quote has been accepted and canceling the actionable quote upon expiration of the first time period when the actionable quote has not been accepted prior to expiration of the first time period.

25. The method of claim 24 further comprising transmitting a cancellation message to the at least one second entity in response to the canceling.

26. The method of claim 21, further comprising rejecting the at least one response when the at least one response is received subsequent to the expiration of the first time period.

27. The method of claim 21, further comprising specifying the first time period as a specific point in time.

28. The method of claim 21, further comprising specifying the first time period as the elapse of a specified duration measured from a defined origin.

29. The method of claim 21 wherein the request for quote further specifies a second time period which may expire, the method further comprising determining when the second time period has expired and permitting acceptance of the actionable quote as long as the first time period has not expired.

30. The method of claim 1, further comprising receiving a cancellation of the actionable quote and preventing acceptance of the actionable quote in response thereto when the cancellation is received prior to acceptance.

31. The method of claim 1, further comprising determining acceptance of the actionable quote.

32. The method of claim 31, wherein the determining further comprises receiving the acceptance from the first entity.

33. The method of claim 31, wherein the determining further comprises automatically accepting the actionable quote.

34. The method of claim 33, further comprising automatically accepting the actionable quote of a first of the at least one response to be received.

35. The method of claim 33, further comprising automatically accepting the best actionable quote out of all of the at least one response to be received.

36. The method of claim 31, wherein the request for quote further specifies at least one criteria for acceptance of an actionable quote in response thereto, the determining further comprising determining a degree to which the at least one criteria are satisfied by the actionable quote of the received at least one response.

37. The method of claim 36, wherein the at least one criteria includes at least one of request lifetime, quantity, maximum price, minimum price, buy order, sell order, or combinations thereof.

38. The method of claim 36, further comprising receiving a plurality of responses from a plurality of second entities of the subset, each of the plurality of responses identifying the request for quote and including an actionable quote in response thereto, the determining further comprising determining at least one of the actionable quotes of the plurality of responses which best satisfies the at least one criteria.

39. The method of claim 38, wherein the determining further comprises determining at least two of the actionable quotes of the plurality of responses best satisfy the at least one criteria, the method further comprising allocating acceptance among the at least two actionable quotes.

40. The method of claim 39, further comprising notifying the second entity associated with unaccepted actionable quotes that the unaccepted actionable quotes were not accepted.

41. The method of claim 31, further comprising sending the request for quote and the actionable quote to an exchange upon acceptance.

42. The method of claim 1, wherein the request for quote further specifies an intent of the first entity to one of buy or sell the first instrument, the transmitting the request for quote further comprising transmitting the request for quote without identifying the intent.

43. The method of claim 1, further comprising permitting the first entity to manage a plurality concurrently pending requests for quote.

44. The method of claim 1, further comprising permitting the at least one second entity to manage a plurality of concurrent actionable quotes.

45. The method of claim 1, wherein the at least one response is further characterized by time of transmission and a time of receipt different from the time of transmission, the method further comprising compensating for the difference between the time of transmission and the time of receipt.

46. The method of claim 1 wherein plurality of entities are coupled with a network, the receiving a request for quote further comprising receiving a request for quote via the network, the transmitting the request for quote further comprising transmitting the request for quote via the network, the receiving at least one response further comprising receiving at least one response via the network, and the transmitting the at least one response further comprising transmitting the at least one response via the network.

47. A system for trading financial instruments among a plurality of entities coupled with a network and participating in a market, the system comprising:

a request receiver coupled with the network and operative to receive a request for quote from a first entity of the plurality of entities, the request for quote identifying the first entity and specifying an interest in trading a first instrument;

a request transmitter coupled with the request receiver and the network and operative to transmit the request for quote to at least a subset of the plurality of entities without identifying the first entity;

a response receiver coupled with the network and operative to receive at least one response from at least one second entity of the subset, the at least one response identifying the request for quote and including an actionable quote in response thereto; and

a response transmitter coupled with the response receiver and operative to transmit the at least one response exclusively to the first entity.

48. The system of claim 47, wherein the response transmitter is further operative to transmit the at least one response to the first entity without identifying the at least one second entity.

49. The system of claim 47, further comprising an entity selector coupled with the request receiver and request transmitter and operative to identify the at least one second entity of the plurality of entities in response to the request for quote, the at least one second entity being identified as being interested in providing a quote for the first instrument, the subset including at least the at least one second entity.

50. The system of claim 49, wherein the entity selector is further operative to maintain an interest profile for each of the plurality of entities wherein the entity selector identifies the at least one second entity based on the interest profile of the associated at least one second entity.

51. The system of claim 47 further comprising a request identification log coupled with the request receiver and response transmitter, wherein the request receiver is further operative to store an identification of the first entity in relation to the request for quote in the request identification log and the request transmitter is further operative to associate the at least one response with the first entity based on the identification stored in the request identification log and transmit the at least one response based thereon.

52. The system of the claim 47, further comprising a request identifier coupled with the request receiver, the request transmitter and the response transmitter, wherein the request identifier is operative to generate a unique identification code having no relation to the first entity and create a relationship between the unique identification code, the request for quote and the first entity, wherein the request transmitter is further operative to transmit the unique identification code along with the request for quote, and further wherein the at least one response includes the unique identification code, the response transmitter being further operative to transmit the at least one response to the first entity based the unique identification code from the at least one response and the relationship.

53. The system of claim 47 further comprising a risk manager coupled with the request receiver and response receiver and operative to buffer a risk of loss with respect to the first instrument as between the first entity and the at least one second entity.

54. The system of claim 47 wherein the request for quote further specifies a time period which may expire, the system further comprising a request expiration processor coupled with the request receiver and operative to determine when the time period has expired.

55. The system of claim 54, wherein the time period is specified by the first entity.

56. The system of claim 54, wherein the time period is automatically specified by the request expiration processor.

57. The system of claim 54, wherein the request expiration processor is further operative to cancel the request for quote upon expiration of the time period.

58. The system of claim 54, wherein the request expiration processor is further operative to cancel the actionable quote upon expiration of the time period.

59. The system of claim 54, wherein the request expiration processor is further operative to reject the at least one response when the at least one response is received subsequent to the expiration of the time period.

60. The system of claim 54, wherein the time period is specified as a specific point in time.

61. The system of claim 54, wherein the time period is specified as the elapse of a specified duration measured from a defined origin.

62. The system of claim 47 wherein the actionable quote further specifies a first time period which may expire, the system further comprising a response expiration processor coupled with the response receiver and response transmitter and operative to determine when the first time period has expired.

63. The system of claim 62, wherein the first time period is specified by the at least one second entity.

64. The system of claim 62 wherein the first time period is automatically specified by the response expiration processor.

65. The system of claim 62, wherein the response expiration processor is operative to determine whether the actionable quote has been accepted and cancel the actionable quote upon expiration of the first time period when the actionable quote has not been accepted prior to expiration of the first time period.

66. The system of claim 65 wherein the response transmitter is further operative to transmit a cancellation message to the at least one second entity in response to the canceling.

67. The system of claim 62, wherein the response expiration processor is further operative to reject the at least one response when the at least one response is received subsequent to the expiration of the first time period.

68. The system of claim 62, wherein the first time period is specified as a specific point in time.

69. The system of claim 62, wherein the first time period is specified as the elapse of a specified duration measured from a defined origin.

70. The system of claim 62 wherein the request for quote further specifies a second time period which may expire, the system further comprising a request expiration processor coupled with the request receiver and the response expiration processor and operative to determine when the second time period has expired and permit acceptance of the actionable quote as long as the first time period has not expired.

71. The system of claim 47, wherein the response receiver is further operative to receive a cancellation of the actionable quote and prevent acceptance of the actionable quote in response thereto when the cancellation is received prior to acceptance.

72. The system of claim 47, further comprising a matching processor coupled with the request receiver and the response receiver and operative to determine acceptance of the actionable quote.

73. The system of claim 72, further comprising an acceptance receiver coupled with the matching processor and operative to receive the acceptance from the first entity.

74. The system of claim 72, wherein the matching processor is further operative to automatically accept the actionable quote.

75. The system of claim 74, wherein the matching processor is further operative to automatically accept the actionable quote of a first of the at least one response to be received.

76. The system of claim 74, wherein the matching processor is further operative to automatically accept the best actionable quote of all of the at least one response to be received.

77. The system of claim 72, wherein the request for quote further specifies at least one criteria for acceptance of an actionable quote in response thereto, the matching processor further operative to determine a degree to which the at least one criteria are satisfied by the actionable quote of the received at least one response.

78. The system of claim 77, wherein the at least one criteria includes at least one of request lifetime, quantity, maximum price, minimum price, buy order, sell order, or combinations thereof.

79. The system of claim 77, wherein the response receiver receives a plurality of responses from a plurality of second entities of the subset, each of the plurality of responses identifying the request for quote and including an actionable quote in response thereto, the matching processor being further operative to determine at least one of the actionable quotes of the plurality of responses which best satisfies the at least one criteria.

80. The system of claim 79, wherein the matching processor is further operative to determine at least two of the actionable quotes of the plurality of responses best satisfy the at least one criteria and allocate acceptance among the at least two actionable quotes.

81. The system of claim 80, wherein the matching processor is further operative to notify the second entity associated with unaccepted actionable quotes that the unaccepted actionable quotes were not accepted.

82. The system of claim 72, further comprising an exchange transmitter coupled with the matching processor and operative to transmit the request for quote and the accepted actionable quote to an exchange upon acceptance.

83. The system of claim 47, wherein the request for quote further specifies an intent of the first entity to one of buy or sell the first instrument, the request transmitter being further operative to transmit the request for quote without identifying the intent.

84. The system of claim 47, further comprising request manager coupled with the request receiver and operative to permit the first entity to manage a plurality concurrently pending requests for quote.

85. The system of claim 47, further comprising a response manager coupled with the response receiver and operative to permit the at least one second entity to manage a plurality of concurrent actionable quotes.

86. The system of claim 47, wherein the at least one response is further characterized by time of transmission and a time of receipt different from the time of transmission, the system further comprising a synchronization processor coupled with the response receiver and operative to compensate for the difference between the time of transmission and the time of receipt.

87. A system for trading financial instruments among a plurality of entities coupled with a network and participating in a market, the system comprising:

means for receiving a request for quote via the network from a first entity of the plurality of entities, the request for quote identifying the first entity and specifying an interest in trading a first instrument;

means for transmitting the request for quote via the network to at least a subset of the plurality of entities without identifying the first entity;

means for receiving at least one response via the network from at least one second entity of the subset, the at least one response identifying the request for quote and including an actionable quote in response thereto; and

means for transmitting via the network the at least one response exclusively to the first entity.

88. A system for trading financial instruments among a plurality of entities coupled with a network and participating in a market, the system comprising a processor, a memory coupled with the processor and a network interface coupled with the processor and the network and operative to facilitate communications therebetween, the system further comprising:

first logic stored in the memory and executable by the processor to receive a first communication comprising a request for quote via the network from a first entity of the plurality of entities, the request for quote identifying the first entity and specifying an interest in trading a first instrument;

second logic, coupled with the first logic, stored in the memory and executable by the processor to transmit a second communication comprising the request for quote via the network to at least a subset of the plurality of entities without identifying the first entity;

third logic stored in the memory and executable by the processor to receive at least one third communication comprising a response via the network from at least one second entity of the subset, the response identifying the request for quote and including an actionable quote in response thereto; and

fourth logic, coupled with the third logic, stored in the memory and executable by the processor to transmit via the network a fourth communication comprising the response exclusively to the first entity.