System and Method for Aggressively Trading a Strategy in an Electronic Trading Environment

• US 20090299890A1
• Filed: 05/28/2008
• Published: 12/03/2009
• Est. Priority Date: 05/28/2008
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Kontos, Nicholas, Mintz, Sagy P., Deitz, Alexander D.
• Granted Patent: US 8,249,977 B2
• 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

System and method for aggressively trading a spread trading strategy in an electronic environment are provided herein. According to the example embodiments, a trader may configure the automated trading tool to trade as aggressively as possible by leaning on a price without an associated quantity. This allows a trader to possibly obtain a more profitable price as well as get filled faster. Traders submit an order for a spread and the automated trading tool calculates the quote order price based on a defined level of aggressiveness, the leaned on price, and the desired spread price. Based on the level of defined aggressiveness and the gap in the market, the automated trading tool may lean on a mildly, moderately, or extremely aggressive price.

Claims

1. A system and method for aggressively trading a strategy in an electronic trading environment, comprising:

defining a spread trading strategy, wherein the spread trading strategy comprises buying or selling a first tradeable object and buying or selling a second tradeable object, and wherein the first and second tradeable objects are listed at an electronic exchange;

defining a level of aggressiveness to associate with the spread trading strategy, wherein the level of aggressiveness is used to determine a price for which a quote order will be placed in the first tradeable object based on a leaned on price in the second tradeable object;

setting a desired spread price and quantity to buy or sell the spread trading strategy;

determining if a market gap exists in the second tradeable object, wherein the market gap comprises a price level without an available bid or offer quantity;

determining the leaned on price in the second tradeable object, wherein the leaned on price is determined based on the market gap and the level of aggressiveness;

calculating a quote order price to associate with the first tradeable object, wherein the quote order price is calculated based on the leaned on price; and

placing a quote order at the calculated quote order price in the first tradeable object.

2. A method of claim 1, further comprising:

determining if a market fluctuation in the second tradeable object has occurred, and if so,

adjusting the leaned on price in the second tradeable object based on the level of aggressiveness and the market gap; and

re-pricing the quote order in the first tradeable object to coincide with the adjusted leaned on price in the second tradeable object.

3. A method of claim 1, wherein the leaned on price is based on the defined level of aggressiveness and the desired spread price.

4. A method of claim 1, wherein the quote price is based on the leaned on price and further based on the desired spread price.

5. A method of claim 1, wherein the level of aggressiveness is user-defined.

6. A method of claim 1, wherein the level of aggressiveness is mild, wherein a mild level of aggressiveness represents a certain level of risk that a trader is willing to accept.

7. A method of claim 6, further comprising:

determining if the trader is buying the spread, and if so, leaning on one price level above a best bid in the second tradeable object;

determining if the trader is selling the spread, and if so, leaning on one price level below the best ask in the second tradeable object; and

placing the quote order in the first tradeable object based on the leaned on price.

8. A method of claim 1, wherein the level of aggressiveness is moderate, wherein a moderate level of aggressiveness represents a certain level of risk that a trader is willing to accept.

9. A method of claim 8, further comprising:

determining if the trader is buying the spread, and if so, leaning on two price levels above the best bid in the second tradeable object;

determining if the trader is selling the spread, and if so, leaning on two price levels below the best ask in the second tradeable object; and

placing the quote order in the first tradeable object based on the leaned on price.

10. A method of claim 1, wherein the level of aggressiveness is extreme, wherein a extreme level of aggressiveness represents a certain level of risk that a trader is willing to accept.

11. A method of claim 10, further comprising:

determining if the trader is buying the spread, and if so, leaning on the price level below the best ask in the second tradeable object;

determining if the trader is selling the spread, and if so, leaning on the price level above the best bid in the second tradeable object; and

placing the quote order in the first tradeable object based on the leaned on price.

12. A method of claim 1, wherein the level of aggressiveness is dynamically modified.

13. A method of claim 12, wherein dynamically modifying the level of aggressiveness is based on trading volume in the tradeable object.

14. A method of claim 12, wherein dynamically modifying the level of aggressiveness is based on market activity in the tradeable object.

15. A method of claim 12, wherein dynamically modifying the level of aggressiveness is based on a trader'"'"'s historical trading activity in the tradeable object.

16. A method of claim 12, wherein dynamically modifying the level of aggressiveness is based on current trading activity in the tradeable object.

17. A method of claim 1, wherein the level of aggressiveness is manually modified by a trader on the fly.

18. A method of claim 1, wherein the quote order is a limit order.

19. A method of claim 1, wherein the offsetting hedge order is a limit order.

20. A computer readable medium having program code recorded thereon for execution on a computer for aggressively trading a spread trading strategy, comprising:

a first program code for defining a spread trading strategy, wherein the spread trading strategy comprises buying or selling a first tradeable object and buying or selling a second tradeable object, and wherein the first and second tradeable objects are listed at an electronic exchange;

a second program code defining a level of aggressiveness to associate with the spread trading strategy, wherein the level of aggressiveness is used to determine a price for which a quote order will be placed in the first tradeable object based on a leaned on price in the second tradeable object;

a third program code setting a desired spread price and quantity to buy or sell the spread trading strategy;

a fourth program code determining if a market gap exists in the second tradeable object, wherein the market gap comprises a price level without an available bid or offer quantity;

a fifth program code determining the leaned on price in the second tradeable object, wherein the leaned on price is determined based on the market gap and the level of aggressiveness;

a sixth program code calculating a quote order price to associate with the first tradeable object, wherein the quote order price is calculated based on the leaned on price; and

a seventh program code placing a quote order at the calculated quote order price in the first tradeable object.