Determination of Implied Orders in a Trade Matching System

• US 20100174633A1
• Filed: 01/08/2009
• Published: 07/08/2010
• Est. Priority Date: 01/08/2009
• Status: Active Grant

• Current Assignee: New York Mercantile Exchange Incorporated (CME Group Incorporated)
• Original Assignee: New York Mercantile Exchange Incorporated (CME Group Incorporated)
• Inventors: Milne, Andrew, Sedlin, Aleksandr
• Granted Patent: US 8,229,835 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 computer implemented method for determining implied orders in an electronic trading system is provided. The method comprises receiving a first set of one or more real orders, wherein the orders are not tradable against each other. One or more implied orders are identified within the first set of real orders. Market data corresponding to the implied orders can also be identified. At least one additional order is received and the tradability of the additional order is determined against the real or implied orders within the first set of real orders. A resting set of orders is determined from those real and implied orders within the first set of orders not affected by the tradability of the additional order. Implied orders are determined from within the set of resting orders.

Claims

1. A computer implemented method for trading implied orders in an electronic trading system, comprising:

receiving at a match engine a first set of one or more real orders, wherein the orders are not tradable against each other;

identifying one or more implied orders calculated from the real orders in the first set of real orders, wherein the one or more implied orders form one or more groups of related implied orders;

assigning the one or more groups of related implied orders to parallel threads of execution within the match engine;

receiving at least one additional real order at the match engine;

determining whether the additional real order is tradable against one or more real orders within the first set of real orders utilizing one or more implied order groups;

executing a trade between the at least one additional real order and one or more real orders within the first set of real orders;

updating the first set of real orders to reflect the trade; and

identifying one or more implied orders calculated from the real orders in the updated set of real orders.

2. The computer implemented method of claim 1 further comprising translating the real orders according to a syntactic mapping of a modeling language in which the method for determining implied orders has been specified, said translation associating expressions in the modeling language with transformations of data stored in variables defined in a computer programming language and thereby associated with the memory of the computer.

3. The computer implemented method of claim 2 wherein translating includes mapping a unique trading system identifier associated with an order onto a pair of nodes associated with elements on a contract grid, and mapping of prices with trading system units and decimal precisions onto common unit or unit-free integer prices with either the buy or the sell prices multiplied by negative one so that tradability is represented by a zero or negative sum of order prices.

4. The computer implemented method of claim 2 further comprising translating the identified implied orders according to a syntactic mapping of a modeling language for use in an electronic trading system.

5. The computer implemented method of claim 2 wherein the first set of real orders and the at least one additional real order include order prices for the best bid and best ask for each order in the set, wherein a reweighting procedure is applied so that the best bid and best ask are associated with directed edges having non-negative prices.

6. The computer implemented method of claim 2 wherein identifying one or more orders implied by the first set of real orders includes calculation of one or more shortest path trees, said shortest path trees including one or more nodes.

7. The computer implemented method of claim 6 further comprising:

categorizing the at least one additional real order according to its effect on a directed edge;

analyzing the shortest path trees to determine which trees or nodes within a tree are affected by the at least one additional order;

calculating new values for each affected tree, wherein the calculation for each affected tree is allocated to an independent thread of execution;

merging the new value calculations with identified implied orders; and

reporting the identified implied orders in a message suitable for translation to external form.

8. The computer implemented method of claim 7 wherein categorizing the additional market order comprises the categories of:

better best price, worse best price, greater volume in best level, and less volume in best level.

9. The computer implemented method of claim 7 wherein analyzing the shortest path trees identifies potentially changed trees as members of a root set.

10. The computer implemented method of claim 7 wherein analyzing the shortest path trees identifies the potentially changed nodes within each tree as the members of a global change set or root-specific change set.

11. The computer implemented method of claim 7 wherein allocation to an independent thread further comprises calculation of one or more parameters that an independent thread can use to compute a root specific change set.

12. The computer implemented method of claim 7 further comprising setting filter criteria that limits implied orders or related market data associated with affected trees.

13. The computer implemented method of claim 12 wherein the filter criteria is related the probability that an implied order in a specific tradable contract will result in an executed trade.

14. The computer implemented method of claim 13 wherein the probability is based on relationship between the size of a bid/ask spread and the volume traded at that spread.

15. The computer implemented method of claim 13 wherein the probability is based on a time difference between the identification of an implied order and an order that trades with the implied order.

16. The computer implemented method of claim 7 wherein the filter criteria is adjusted automatically to expand or contract the amount of published market data in response to changes in trading conditions.

17. The computer implemented method of claim 16 wherein the changes in trading conditions comprises the rate at which the first or second set of market orders are received

18. The computer implemented method of claim 7 wherein calculating the shortest path trees includes recording of alternative paths in an implied edge collection when an indirect path is at the same price as a direct path but worse in a non-price property.

19. The computer implemented method of claim 18 wherein the non-price property comprises time, volume, time and volume, or detection order.

20. A computer readable medium having stored thereon a computer program that, when executed causes a computer to perform the steps of:

receiving a first set of one or more real orders, wherein the orders are not tradable against each other;

translating the first set of real orders into a form suitable for the calculation of implied orders, possibly according to a syntactic mapping of a modeling language;

identifying one or more implied orders calculated from the first set of real orders;

identifying publishable market data corresponding to the implied orders;

receiving at least one additional real order;

identifying sets of tradable orders between the at least one additional order and the one or more real orders in the first set of real orders utilizing implied orders;

executing the identified trades;

updating the first set of real orders to account for any executed trades; and

communicating the executed trades and the updated first set of real orders.

21. The computer readable medium of claim 20 wherein identifying one or more implied orders includes calculation of one or more shortest path trees, said shortest path trees including one or more nodes.

22. The computer readable medium of claim 21 further comprising the steps of:

categorizing the at least one additional real order according to its effect on a directed edge;

analyzing the shortest path trees to determine which trees or nodes within a tree are affected by the at least one additional real order;

calculating new values for each affected tree, wherein the calculation for each affected tree is allocated to an independent thread of execution;

merging the new value calculations with the implied orders and associated market data; and

reporting the implied orders and market data in a message suitable for translation to external form.

23. A system for determining implied orders in an electronic trading environment, the system comprising:

a network;

one or more user devices in communication with the network;

a processor in communication with the network, wherein the processor;

receives a first set of one or more real orders, wherein the orders are not tradable against each other and therefore rest in the memory of the processor as resting orders;

translates the first set of real orders into a form suitable for the calculation of implied orders;

identifies one or more implied orders calculated from the first set of real;

identifies publishable market data corresponding to the implied orders;

receives at least one additional real order;

identifies sets of tradable orders and executes the corresponding trades;

updates the set of resting orders stored within the processor; and

communicates the results of the executed trades and the updated set of resting orders.

24. The system of claim 23, further comprising a processor, wherein the processor calculates one or more shortest path trees, associated with the one or more implied orders within the first set of real orders, said shortest path trees including one or more nodes.

25. The system of claim 24 wherein the processor:

categorizes the at least one additional real order according to its effect on a directed edge;

analyzes the shortest path trees to determine which trees or nodes within a tree are affected by the at least one additional real order;

calculates new values for each affected tree, wherein the calculation for each affected tree is allocated to an independent thread of execution;

merges the new value calculations with the implied orders and associated market data; and

reports the implied orders and market data in a message suitable for translation to external form.