SYSTEMS AND METHODS FOR MATCHING ONE OR MORE INCOMING ORDER TO A STANDING ORDER AS A FUNCTION OF AN INNER MARKET PARAMETER

• US 20100088212A1
• Filed: 10/07/2008
• Published: 04/08/2010
• Est. Priority Date: 10/07/2008
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Kronstein, Jonathan G., Durkin, Bryan T., McCabe, Thomas G., Wolf, Brian M., Cuba, Donald M., Kane, Troy C., Czupek, Andrew P.
• Granted Patent: US 8,566,218 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 40/06 Asset management; Financial planning or analysis

Abstract

A method of order allocation is disclosed. The method includes receiving an incoming order, establishing an inner market representing a first portion of an order book which may be defined as a function of an inner market parameter, designating the first portion of the order book as a priority and allocating the first portion of the received incoming order based on the priority, establishing an outer market that represents a second portion of the order book that includes the remainder of the order book not represented by the inner market of the order book, assigning the received incoming order to one of the inner or outer markets as a function of the inner market parameter, allocating a first portion of the incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm, and allocating a second portion, in excess of the first portion, of the incoming order to the outer market using a pro-rata algorithm.

Claims

1. A method of order allocation, the method comprising:

establishing an inner market representing a first portion of an order book, wherein the inner market is defined as a function of an inner market parameter;

establishing an outer market, wherein the outer market represents a second portion of the order book that includes the remainder of the order book not represented by the inner market of the order book;

allocating a first portion of an incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm; and

allocating a second portion, in excess of the first portion, of the incoming order to the outer market using a pro-rata algorithm.

2. The method of claim 1 further comprising:

designating the first portion of the order book as a priority and allocating the first portion of the incoming order based on the priority.

3. The method of claim 2, wherein the priority is maintained for a period of time.

4. The method of claim 2, wherein the priority is maintained for until the inner market changes as a function of the inner market parameter.

5. The method of claim 1, wherein the inner market parameter represents at least one tick in a bid/offer spread.

6. The method of claim 1, wherein the inner market parameter represents at least the two best orders.

7. The method of claim 1, wherein the first-in, first-out (FIFO) algorithm includes a FIFO percentage to determine the percentage of the incoming order to be allocated according to the first-in, first-out (FIFO) algorithm.

8. The method of claim 1, wherein the pro-rata algorithm includes a pro-rata percentage to determine the percentage of the incoming order to be allocated according to the pro-rata algorithm.

9. The method of claim 1 further comprising:

receiving the incoming order;

assigning the received incoming order to one of the inner or outer markets as a function of the inner market parameter.

10. The method of claim 1, wherein the incoming order represents a futures contract.

11. The method of claim 1, wherein the incoming order represents an option.

12. The method of claim 1, wherein the order books represents the orders within an over-the-counter market.

13. A trading system configured for the matching and allocation of orders, the system comprising:

a memory, wherein the memory is configured to store computer readable instructions;

a processor in communication with the memory, the processor configured to execute the computer readable instructions, wherein the computer readable instructions are programmed to;

establish an inner market representing a first portion of an order book, wherein the inner market is defined as a function of an inner market parameter;

establish an outer market, wherein the outer market represents a second portion of the order book that includes the remainder of the order book not represented by the first portion of the order book;

allocate a first portion of an incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm; and

allocate a second portion, in excess of the first portion, of the incoming order to the outer market using a pro-rata algorithm.

14. The system of claim 13, wherein the computer readable instructions are further programmed to:

designate the first portion of the order book as a priority and allocating the first portion of the incoming order based on the priority.

15. The system of claim 14, wherein the priority is maintained for a period of time.

16. The system of claim 14, wherein the priority is maintained for until the inner market changes as a function of the inner market parameter.

17. The system of claim 13, wherein the inner market parameter represents at least one tick in a bid/offer spread.

18. The system of claim 13, wherein the inner market parameter represents at least the two best orders.

19. The system of claim 13, wherein the first-in, first-out (FIFO) algorithm includes a FIFO percentage to determine the percentage of the incoming order to be allocated according to the first-in, first-out (FIFO) algorithm.

20. The system of claim 13, wherein the pro-rata algorithm includes a pro-rata percentage to determine the percentage of the incoming order to be allocated according to the pro-rata algorithm.

21. The system of claim 13, wherein the computer readable instructions are further programmed to:

receive the incoming order;

assign the received incoming order to one of the inner or outer markets.

22. The system of claim 13, wherein the incoming order represents a futures contract.

23. The system of claim 13, wherein the incoming order represents an option.

24. The system of claim 13, wherein the order books represents the orders within an over-the-counter market.

25. A method of order allocation, the method comprising:

receiving an incoming order;

establishing an inner market representing a first portion of an order book, wherein the inner market is defined as a function of an inner market parameter;

designating the first portion of the order book as a priority and allocating the first portion of the received incoming order based on the priority;

establishing an outer market, wherein the outer market represents a second portion of the order book that includes the remainder of the order book not represented by the first portion of the order book;

assigning the received incoming order to one of the inner or outer markets as a function of the inner market parameter;

allocating a first portion of the incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm; and

allocating a second portion, in excess of the first portion, of the incoming order to the outer market using a pro-rata algorithm.