System and Method for Estimating a Spread Value

• US 20090228400A1
• Filed: 04/28/2009
• Published: 09/10/2009
• Est. Priority Date: 03/05/2002
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Burns, Michael J., Harris, John
• Granted Patent: US 8,239,314 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• 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 40/03 Credit; Loans; Processing thereof
• 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

An estimated spread value is computed that represents a price at which a trader might have been able to buy or sell a spread given the current market conditions of the legs. In particular, when an event occurs in one of the legs, price information is gathered from each of the other legs based on the spread definition, in addition to the defined event, and is used in estimating the value of a spread. According to one feature, the computations may be triggered by any predefined event. According to another feature, the computation may be programmed by a user to tailor the estimation process according to the type of spread being traded. The estimated spread value may be used to analyze spreads, it may be fed to other trading related software tools, or it may be used in charting.

Claims

1. A computer readable medium having stored therein instructions executable by a processor to perform a method comprising:

receiving by a computing device a definition for a spread, wherein the spread is between a first tradeable object and a second tradeable object, the definition determining whether the first tradeable object is to be bought or sold and whether the second tradeable object is to be bought or sold to complete the spread;

receiving by the computing device a first market data from an electronic exchange, the first market data comprising a highest bid price and a lowest ask price currently available for the first tradeable object and a last traded price for the first tradeable object;

receiving by the computing device a second market data from an electronic exchange, the second market data comprising a highest bid price and a lowest ask price currently available for the second tradeable object and a last traded price for the second tradeable object;

detecting by the computing device a change in the first market data;

electronically estimating by the computing device a spread value responsive to the change in the first market data using the definition for the spread;

wherein the spread value is based on a highest bid price for the second tradeable object when the second tradeable object is to be sold or the spread value is based on a lowest offer price for the second tradeable object when the second tradeable object is to be bought; and

displaying the spread value on a screen of an electronic terminal in relation to an axis of price levels.

2. The computer readable medium of claim 1 further comprising instructions to perform the step of detecting a change in the first market data by detecting a subsequent last traded price indicating a new trade has occurred for the first tradeable object.

3. The computer readable medium of claim 2 further comprising instructions to perform the step of characterizing a last trade that has occurred at the subsequent last traded price as a trade to buy the first tradeable object when the subsequent last traded price is below the highest bid price for the first tradeable object.

4. The computer readable medium of claim 3 further comprising instructions to perform the step of estimating the spread value according to the spread definition when the first tradeable object is to be bought.

5. The computer readable medium of claim 3 further comprising instructions to perform the step of estimating the spread value according to an inverse of the spread definition when the first tradeable object is to be sold.

6. The computer readable medium of claim 2 further comprising instructions to perform the step of characterizing a last trade that has occurred at the subsequent last traded price as a trade to sell the first tradeable object when the subsequent last traded price is above the lowest ask price for the first tradeable object.

7. The computer readable medium of claim 6 further comprising instructions to perform the step of estimating the spread value according to the spread definition when the first tradeable object is to be sold.

8. The computer readable medium of claim 6 further comprising instructions to perform the step of estimating the spread value according to an inverse of the spread definition when the first tradeable object is to be bought.

9. The computer readable medium of claim 1 further comprising instructions to perform the step of detecting a change in the first market data by detecting a new highest bid price, and characterizing the change as a result of buying the first tradeable object.

10. The computer readable medium of claim 9 further comprising instructions to perform the step of estimating the spread value according to the spread definition when the first tradeable object is to be bought.

11. The computer readable medium of claim 9 further comprising instructions to perform the step of estimating the spread value according to an inverse of the spread definition when the first tradeable object is to be sold.

12. The computer readable medium of claim 1 further comprising instructions to perform the step of detecting a change in the first market data by detecting a new lowest ask price, and characterizing the change as a result of selling the first tradeable object.

13. The computer readable medium of claim 12 further comprising instructions to perform the step of estimating the spread value according to the spread definition when the first tradeable object is to be sold.

14. The computer readable medium of claim 12 further comprising instructions to perform the step of estimating the spread value according to an inverse of the spread definition when the first tradeable object is to be bought.

15. The computer readable medium of claim 1 further comprising instructions to perform the step of estimating a quantity associated with the spread value.

16. The computer readable medium of claim 1 wherein the spread value is further based on a weighted average of a plurality of highest bid prices that it would take to sell the second tradeable object or based on a weighted average of a plurality of lowest offer prices that it would take to buy the second tradeable object.

17. A system for estimating a spread value between at least a first tradeable object and a second tradeable object, the system including:

an automatic spreader computing device adapted to receive a definition for a spread, wherein the spread is between a first tradeable object and a second tradeable object, the definition determining whether the first tradeable object is to be bought or sold and whether the second tradeable object is to be bought or sold to complete the spread, the automatic spreader computing device further adapted to receive a first market data from an electronic exchange, the first market data comprising a highest bid price and a lowest ask price currently available for the first tradeable object and a last traded price for the first tradeable object, the automatic spreader computing device further adapted to receive a second market data from an electronic exchange, the second market data comprising a highest bid price and a lowest ask price currently available for the second tradeable object and a last traded price for the second tradeable object, the automatic spreader computing device further adapted to detect a change in the first market data, the automatic spreader computing device further adapted to electronically estimate a spread value responsive to the change in the first market data using the definition for the spread, wherein the spread value is based on a highest bid price for the second tradeable object when the second tradeable object is to be sold or the spread value is based on a lowest offer price for the second tradeable object when the second tradeable object is to be bought; and

an electronic terminal including a screen, wherein the electronic terminal is adapted to display the spread value on the screen in relation to an axis of price levels.

18. The system of claim 17 wherein the automatic spreader computing device is further adapted to detect a change in the first market data by detecting a subsequent last traded price indicating a new trade has occurred for the first tradeable object.

19. The system of claim 18 wherein the automatic spreader computing device is further adapted to characterize a last trade that has occurred at the subsequent last traded price as a trade to buy the first tradeable object when the subsequent last traded price is below the highest bid price for the first tradeable object.

20. The system of claim 19 wherein the automatic spreader computing device is further adapted to estimate the spread value according to the spread definition when the first tradeable object is to be bought.

21. The system of claim 19 wherein the automatic spreader computing device is further adapted to estimate the spread value according to an inverse of the spread definition when the first tradeable object is to be sold.

22. The system of claim 18 wherein the automatic spreader computing device is further adapted to characterize a last trade that has occurred at the subsequent last traded price as a trade to sell the first tradeable object when the subsequent last traded price is above the lowest ask price for the first tradeable object.

23. The system of claim 22 wherein the automatic spreader computing device is further adapted to estimate the spread value according to the spread definition when the first tradeable object is to be sold.

24. The system of claim 22 wherein the automatic spreader computing device is further adapted to estimate the spread value according to an inverse of the spread definition when the first tradeable object is to be bought.

25. The system of claim 17 wherein the automatic spreader computing device is further adapted to detect a change in the first market data by detecting a new highest bid price, and characterize the change as a result of buying the first tradeable object.

26. The system of claim 25 wherein the automatic spreader computing device is further adapted to estimate the spread value according to the spread definition when the first tradeable object is to be bought.

27. The system of claim 25 wherein the automatic spreader computing device is further adapted to estimate the spread value according to an inverse of the spread definition when the first tradeable object is to be sold.

28. The system of claim 17 wherein the automatic spreader computing device is further adapted to detect a change in the first market data by detecting a new lowest ask price, and characterize the change as a result of selling the first tradeable object.

29. The system of claim 28 wherein the automatic spreader computing device is further adapted to estimate the spread value according to the spread definition when the first tradeable object is to be sold.

30. The system of claim 28 wherein the automatic spreader computing device is further adapted to estimate the spread value according to an inverse of the spread definition when the first tradeable object is to be bought.

31. The system of claim 17 wherein the automatic spreader computing device is further adapted to estimate a quantity associated with the spread value.

32. The system of claim 17 wherein the spread value is further based on a weighted average of a plurality of highest bid prices that it would take to sell the second tradeable object or based on a weighted average of a plurality of lowest offer prices that it would take to buy the second tradeable object.