Adaptive Implied Spread Matching

• US 20100017321A1
• Filed: 07/18/2008
• Published: 01/21/2010
• Est. Priority Date: 07/18/2008
• Status: Active Application

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Galster, Barry Lee, Siddall, John Jacob, Steuber, Neil, Callaway, Paul Joseph
• Application Number:
  US12/176,130
• Publication Number:
  US 20100017321A1
• 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

Systems and methods for determining implied spreads are provided. An example includes receiving a new order for a financial instrument and determining if the new order in combination with pending orders creates an implied spread. The implied spread may be submitted with information to facilitate matching the legs of the implied spread using the new order. The detection of the implied spread may be performed outside of a match engine; thus, permitting the detection to occur in parallel and apart from the operation of the match engine.

Claims

1. A method comprising:

receiving a new order for a financial instrument;

determining if the new order in combination with one or more resting orders creates an implied spread, the determining occurring in parallel with and apart from an electronic match engine in an exchange, and the implied spread comprising multiple legs, a first of the multiple legs corresponding to the new order and a second leg of the multiple legs corresponding to a resting order of the one or more resting orders; and

sending a notification of the implied spread to the electronic match engine for matching, the notification comprising order book identifiers, the matching including executing all the multiple legs of the implied spread.

2. The method of claim 1, further comprising:

comparing the financial instrument of the new order to a search list, the search list comprising a plurality of financial instruments to be monitored for implied spreads;

determining, by the electronic match engine in the exchange, if the new order in combination with one or more resting orders for financial instruments in the search list creates an implied spread; and

updating the search list based on the determining occurring in parallel apart from the electronic match engine.

3. The method of claim 1, where the determining includes:

comparing the new order to a collection of needed orders which are generated based on requirements of acceptable trade templates; and

if the new order matches a needed order of the of the collection of needed orders, then creating the implied spread, where the needed order is a resting order.

4. The method of claim 3, further comprising:

updating the collection of needed orders based on the determining occurring in parallel apart from the electronic match engine.

5. The method of claim 1, where the new order is a synthetic implied spread order comprising information to facilitate matching by the electronic match engine of the synthetic implied spread order with the one or more resting orders, the information comprising the order book identifiers for use in the notification;

where the determining includes verifying the information that facilitates matching of the synthetic implied spread order, including confirming status of orders in order books corresponding to the order book identifiers; and

where the matching by the electronic match engine includes using the information of the implied spread order to facilitate matching.

6. The method of claim 1, the determining occurring in at least one remote computer outside the exchange and simultaneous with processing by the electronic match engine.

7. The method of claim 1, the determining occurring in at least one processing thread running in parallel with the electronic matching engine, the at least one processing thread running on a computer inside the exchange.

8. The method of claim 1, where the new order is an outright order for a futures contract.

9. The method of claim 1, where the new order is a spread order for a futures contract.

10. The method of claim 9, where the spread order is a crack spread.

11. The method of claim 1, where the new order is an outright order for an options contract.

12. A system comprising:

communication interface configured to receive a new order and to send a notification of an implied spread to an electronic matching device in an exchange;

implied spread determination module configured to determine if the new order and resting orders existing in order books create the implied spread, the determining occurring apart from the electronic match engine, and the implied spread comprising a first leg corresponding to the new order and a second leg corresponding to a resting order; and

the electronic match engine in the exchange configured to execute all legs of the implied spread.

13. The system of claim 12, the electronic match engine further configured to:

receive a notification of the implied spread, the notification comprising information to facilitate matching of all legs of the implied spread including a first order book identifier and a second order book identifier; and

match the first leg of the implied spread in a first order book corresponding to the first order book identifier, and the second leg of the implied spread in a second order book corresponding to the second order book identifier.

14. The system of claim 12, where the implied spread determination module is executing on at least one remote computer outside the exchange.

15. The system of claim 12, where the implied spread determination module is running in a processing thread in parallel with the electronic match engine, the processing thread running on a computer inside the exchange.

16. The system of claim 12, the electronic match engine including a search list comprising a plurality of financial instruments as candidates for implied spreads, where the electronic match engine is further configured to:

determine if the new order and resting orders for financial instruments in the search list create an implied spread; and

update the search list based on the determining in the implied spread determination module.

17. A method comprising:

receiving an outright order for a financial instrument, the outright order comprising information to facilitate matching by the electronic match engine of the outright order with the one or more resting orders, the information to facilitate matching comprising order book identifiers;

verifying the information that facilitates matching, including confirming status of orders in order books corresponding to the order book identifiers, the verifying occurring in a separate thread running in parallel with an electronic match engine in an exchange,

if the outright order in combination with one or more resting orders in the order books creates an implied spread, then sending notification of the implied spread to the electronic match engine for matching, the notification comprising order book identifiers, the matching including executing all legs of the implied spread.

18. The method of claim 17, where the executing of all legs of the implied spread occurs with no slippage risk to a user.

19. The method of claim 18, where the outright order is for an options contract.

20. A tangible computer-readable medium storing computer-executable instructions configured to perform a method comprising:

receiving an order for a financial instrument, the order comprising information to facilitate matching of the order by an electronic match engine with the one or more resting orders, the information to facilitate matching comprising order book identifiers;

confirming status of resting orders in order books corresponding to the order book identifiers, the confirming occurring in an electronic match engine in an exchange; and

matching in a nearly simultaneous manner all legs of the implied spread using the order book identifiers.