METHOD AND APPARATUS FOR MULTI-LEG TRADING

• US 20100145874A1
• Filed: 12/09/2008
• Published: 06/10/2010
• Est. Priority Date: 12/09/2008
• Status: Abandoned Application

• Current Assignee: TradeHelm Incorporated
• Original Assignee: TradeHelm Incorporated
• Inventors: Janowski, Braden S.
• Application Number:
  US12/331,081
• Publication Number:
  US 20100145874A1
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Trading of multi-leg strategies is facilitated by a computerized system and method that enables a trader to efficiently define and trade a multi-leg instrument while minimizing leg risk. The multi-leg instrument may be defined to include one or more execution triggers, such as contingencies that delay submittal of trade orders for contingent leg instruments until the contingencies are met, and dynamic re-pricing that re-prices the leg instruments when a market update is received. The precise method of execution will vary according to how the multi-leg instrument is configured. Trade orders for contingent legs (including contingent legs configured for dynamic re-pricing) are held in abeyance until all contingencies have been met. Trade orders for non-contingent dynamically re-priced legs are submitted immediately at a leg price and leg quantity. Trade orders for non-contingent, non-dynamically re-priced legs are submitted to an exchange when the market crosses the multi-leg instrument (i.e., when current market data reflects that all legs of the multi-leg instrument is available for acquisition at the leg price and leg quantity). For any leg which is not fully filled after an initial trade order for that leg is submitted, a subsequent trade order will be sent for the remaining leg quantity at a leg price that is determined based on the fill price of all fully and partially filled legs.

Claims

1. A method for trading a multi-leg financial instrument, said method comprising:

defining a multi-leg instrument having two or more legs where each leg represents a financial instrument (leg instrument), a price (leg price) for the financial instrument, and a quantity (leg quantity) of the financial instrument that comprises one unit of the multi-leg instrument, said multi-leg instrument having a synthetic price represented by a multi-leg definition that equates the synthetic price for one unit of the multi-leg instrument to an aggregation of items including the leg price and leg quantity of each leg;

determining a leg submittal trigger for each leg representing one or more requirements that must be met before a trade order for the leg instrument can be submitted to an exchange;

monitoring current market activity for each leg instrument to determine a current status for leg price availability and leg quantity availability;

submitting a first trade order to an exchange at a leg price determined by the multi-leg definition and for the leg quantity for each leg in which the leg submittal trigger is met;

for each leg in which the leg quantity is not fully filled (remainder leg) after any quantity for any leg has been filled, calculating an updated leg price for such remainder leg based on the fill price(s) for all filled and partially filled legs;

sending a subsequent trade order to an exchange for each remainder leg at the updated leg price and for the amount of the leg quantity that remains unfilled (remainder quantity) when the leg submittal trigger for the remainder leg is met; and

repeating said calculating and sending steps until all legs of the multi-leg instrument are fully filled.

2. The method of claim 1 wherein the leg submittal trigger for one or more legs includes a wait requirement that delays submittal of:

the first trade order to an exchange until current market activity shows that each leg is available at the leg price and leg quantity; and

any subsequent trade order to an exchange until current market activity shows that each remainder leg is available at the leg price and remainder quantity.

3. The method of claim 2 wherein:

each leg is available at the leg price and leg quantity when current market activity shows that the leg quantity of the respective trade order can be fully filled at a current market price that is equal to or more favorable than the leg price; and

each remainder leg is available at the updated leg price and at the remainder quantity when current market activity shows that the remainder leg quantity can be fully filled at a current market price that is equal to or more favorable than the updated leg price.

4. The method of claim 1 wherein the leg submittal trigger for one or more legs includes a no wait requirement that immediately submits the first trade order to an exchange.

5. The method of claim 1 wherein the leg submittal trigger for one or more legs includes a contingency requirement that delays submittal of the first trade order to an exchange until all contingency requirements have been met.

6. The method of claim 5 wherein said contingency requirement includes delaying submittal of the first trade order until all other non-contingent legs have been fully filled.

7. The method of claim 1 wherein said programmable electronic processing device is further operable to:

discretely submit a trade order to an exchange prior to when each leg becomes available; and

update the leg price for all remainder legs based on the fill price of the discretely submitted trade order and all other fully and partially filled trade orders.

8. The method of claim 1 wherein said programmable electronic processing device is further operable to dynamically adjust the leg price of at least one leg of the multi-leg instrument when current market activity reflects a change in market price of an instrument used for pricing a leg of the multi-leg instrument.

9. The method of claim 1 wherein:

the synthetic price for the multi-leg instrument is specified by a trader; and

the leg price for each leg instrument is determined by solving the multi-leg definition.

10. An apparatus for trading a multi-leg financial instrument, said apparatus comprising:

a graphical user display device;

a user input device;

a communication network for electronically communicating with one or more electronic exchanges; and

a programmable electronic processing device in communication with the display device, user input device, and communication network, the electronic processing device being programmed to take the following actions in response to input received from the user input device;

define a multi-leg instrument having two or more legs where each leg represents a financial instrument (leg instrument), a price (leg price) for the financial instrument, and a quantity (leg quantity) of the financial instrument that comprises one unit of the multi-leg instrument, said multi-leg instrument having a synthetic price represented by a multi-leg definition that equates the synthetic price for one unit of the multi-leg instrument to an aggregation of other items including the leg price and leg quantity of each leg;

determine a leg submittal trigger for each leg representing one or more requirements that must be met before the trade order for the leg can be submitted to an exchange;

monitor current market activity for each leg instrument to determine a current status for leg price availability and leg quantity availability;

submit a first trade order to an exchange at a leg price determined by the multi-leg definition and for the leg quantity for each leg in which the leg submittal trigger is met;

for each leg in which the leg quantity is not fully filled (remainder leg) after any quantity for any leg has been filled, calculate an updated leg price for such remainder leg based on the fill price(s) for all filled and partially filled legs;

send a subsequent trade order to an exchange for each remainder leg at the updated leg price and for the amount of the leg quantity that remains unfilled (remainder quantity) when the leg submittal trigger for the remainder leg is met;

and

repeating said calculate and send actions until all legs of the multi-leg instrument are fully filled.

11. The apparatus of claim 10 wherein the leg submittal trigger for one or more legs includes a wait requirement that delays submittal of:

the first trade order to an exchange until current market activity shows that each leg is available at the leg price and leg quantity; and

any subsequent trade order to an exchange until current market activity shows that each remainder leg is available at the leg price and remainder quantity.

12. The apparatus of claim 11 wherein:

each leg is available at the leg price and leg quantity when current market activity shows that the leg quantity of the respective trade order can be fully filled at a current market price that is equal to or more favorable than the leg price; and

each remainder leg is available at the updated leg price and at the remainder quantity when current market activity shows that the remainder leg quantity can be fully filled at a current market price that is equal to or more favorable than the updated leg price.

13. The apparatus of claim 10 wherein the leg submittal trigger for one or more legs includes a no wait requirement that immediately submits the first trade order to an exchange.

14. The apparatus of claim 10 wherein the leg submittal trigger for one or more legs includes a contingency requirement that delays submittal of the first trade order to an exchange until all contingency requirements have been met.

15. The apparatus of claim 14 wherein said contingency requirement includes delaying submittal of the first trade order until all other non-contingent legs have been fully filled.

16. The apparatus of claim 10 wherein said programmable electronic processing device is further operable to:

discretely submit a trade order to an exchange; and

update the leg price for all remainder legs based on the fill price of the discretely submitted trade order and all other fully and partially filled trade orders.

17. The apparatus of claim 10 wherein said programmable electronic processing device is further operable to dynamically adjust the leg price of at least one leg of the multi-leg instrument when current market activity reflects a change in market price of an instrument used for pricing a leg of the multi-leg instrument.

18. The apparatus of claim 10 wherein:

the synthetic price for the multi-leg instrument is specified by a trader; and

the leg price for each leg instrument is determined by solving the multi-leg definition.

19. A method for trading a multi-leg financial instrument, said method comprising:

defining a multi-leg instrument having two or more legs where each leg represents a financial instrument (leg instrument), a price (leg price) for the financial instrument, and a quantity (leg quantity) of the financial instrument that comprises one unit of the multi-leg instrument, said multi-leg instrument having a synthetic price represented by a multi-leg definition that equates the synthetic price for one unit of the multi-leg instrument to an aggregation of items including the leg price and leg quantity of each leg;

monitoring current market activity for each financial instrument of each leg to determine a current status for leg price availability and leg quantity availability;

submitting a first trade order to an exchange for each leg at the leg price and leg quantity when current market activity shows that each leg is available at the leg price and leg quantity;

for each leg in which the leg quantity is not fully filled (remainder leg) after any quantity for any leg has been filled, calculating an updated leg price for such remainder leg based on the fill price(s) for all filled and partially filled legs;

sending a subsequent trade order to an exchange for each remainder leg at the updated leg price and for the quantity of the leg that remains unfilled (remainder quantity) when current market activity shows that each remainder leg is available at the updated leg price and at the remainder quantity; and

repeating said calculating and sending steps until the multi-leg order is fully filled.

20. The method of claim 19, further comprising:

discretely submitting a trade order to an exchange prior to when each leg becomes available; and

updating the leg price for all remainder legs based on the fill price of the discretely submitted trade order and all other fully and partially filled trade orders.

21. The method of claim 19 wherein the financial instrument for at least one leg of the multi-leg instrument is a native instrument.

22. The method of claim 19 wherein the financial instrument for at least one leg of the multi-leg instrument is a synthetic instrument.

23. The method of claim 19 wherein at least one leg of the multi-leg instrument includes a dynamically adjustable leg price that changes when current market activity reflects a change in market price of an instrument used for pricing a leg of the multi-leg instrument.

24. The method of claim 19 wherein:

each leg is available at the leg price and leg quantity when current market activity shows that the leg quantity of the respective trade order can be fully filled at a current market price that is equal to or more favorable than the leg price; and

each remainder leg is available at the updated leg price and at the remainder quantity when current market activity shows that the remainder leg quantity can be fully filled at a current market price that is equal to or more favorable than the updated leg price.

25. The method of claim 19 wherein:

the synthetic price for the multi-leg instrument is specified by a trader; and

the leg price for each leg instrument is determined by solving the multi-leg definition.

26. An apparatus for allowing a trader to submit trade orders for a multi-leg financial instrument from an electronic processing device to one or more electronic exchanges, the apparatus comprising:

a graphical user display device;

a user input device;

a communication network for electronically communicating with one or more electronic exchanges; and

a programmable electronic processing device in communication with the display device, user input device, and communication network, the electronic processing device being programmed to take the following actions in response to input received from the user input device;

define a multi-leg instrument having two or more legs where each leg represents a financial instrument (leg instrument), a price (leg price) for the financial instrument, and a quantity (leg quantity) of the financial instrument that comprises one unit of the multi-leg instrument, said multi-leg instrument having a synthetic price represented by a multi-leg definition that equates the synthetic price for one unit of the multi-leg instrument to an aggregation of other items including the leg price and leg quantity of each leg;

monitor current market activity for each financial instrument of each leg to determine a current status for leg price availability and leg quantity availability;

submit a first trade order to an exchange for each leg at the leg price and leg quantity when current market activity shows that each leg is available at the leg price and leg quantity;

for each leg in which the leg quantity is not fully filled (remainder leg) after any quantity for any leg has been filled, calculate an updated leg price for such remainder leg based on the fill price for all filled and partially filled legs;

send a subsequent trade order to an exchange for each remainder leg at the updated leg price and for the quantity of the leg that remains unfilled (remainder quantity) when current market activity shows that each remainder leg is available at the updated leg price and at the remainder quantity; and

repeat said calculate and send actions until the multi-leg order is fully filled.

27. The apparatus of claim 26 wherein said programmable electronic processing device is further operable to:

discretely submit a trade order to an exchange prior to when each leg becomes available; and

update the leg price for all remainder legs based on the fill price of the discretely submitted trade order and all other fully and partially filled trade orders.

28. The apparatus of claim 26 wherein said programmable electronic processing device is further operable to dynamically adjust the leg price of at least one leg of the multi-leg instrument when current market activity reflects a change in market price of an instrument used for pricing a leg of the multi-leg instrument.

29. The apparatus of claim 26 wherein:

the synthetic price for the multi-leg instrument is specified by a trader; and

the leg price for each leg instrument is determined by solving the multi-leg definition.

30. The apparatus of claim 26 wherein:

each leg is available at the leg price and quantity when current market activity shows that the leg quantity of the respective trade order can be fully filled at a current market price that is equal to or more favorable than the leg price; and

each remainder leg is available at the updated leg price and at the remainder quantity when current market activity shows that the remainder leg quantity can be fully filled at a current market price that is equal to or more favorable than the updated leg price.