EXCHANGE TRADING SYSTEM AND METHOD HAVING A MODIFIED PARTICIPATION ENTITLEMENT

• US 20110040667A1
• Filed: 07/16/2010
• Published: 02/17/2011
• Est. Priority Date: 07/16/2009
• Status: Abandoned Application

• Current Assignee: Anthony Montesano, Edward T. Tilly, Eileen C. Smith
• Original Assignee: Anthony Montesano, Edward T. Tilly, Eileen C. Smith
• Inventors: Tilly, Edward T., Smith, Eileen C., Montesano, Anthony
• Application Number:
  US12/838,141
• Publication Number:
  US 20110040667A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/08 Auctions
• 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 system and method of determining a participation entitlement for orders for the purchase or sale of securities or derivatives in an exchange configured for trading securities or derivatives is provided. One method includes determining a first participation entitlement based on a presence of a first-in-time public customer order at an executable price and determining a second participation entitlement in an absence of a public customer order on the electronic book. The system includes an electronic trade engine with electronic book configured for receiving orders from market makers on and away from the trading floor. The system also includes executable instructions for determining participation entitlements according to the method noted above.

Claims

1. A method of determining a participation entitlement for orders for the purchase or sale of securities or derivatives in an exchange configured for trading securities or derivatives, the method comprising:

receiving an incoming electronic order at a trade engine of the exchange, the incoming order having a time of entry associated therewith;

receiving at least one remote electronic quote at the trade engine from at least one market participant;

determining at the trade engine the presence or absence of a public customer order at an execution price in an electronic book, the public customer order having a time of entry associated therewith;

determining at the trade engine a first participation entitlement based on the presence of the public customer order at the execution price in an electronic book, the public customer order having a time of entry prior to all non-public customer orders in the electronic book;

determining at the trade engine a second participation entitlement based upon the absence of the public customer order at the execution price in the electronic book;

allocating the incoming order with the trade engine to each eligible market participant based on the first or second participation entitlement; and

wherein the incoming order is allocated solely on a pro-rata basis when the public customer order has a time of entry that is not prior to all non-public customer orders in the electronic book.

2. An automated exchange system for the purchase or sale of securities or derivatives in an exchange configured for trading securities or derivatives comprising:

an electronic trade engine configured for receiving incoming orders generated by a market maker;

an electronic book configured for storing the incoming orders received by the electronic trade engine;

a database comprising an allocation algorithm, the database in communication with the electronic trade engine; and

a trade processor in communication with the database for analyzing and executing orders according to an allocation algorithm selected from the database, the trade processor comprising;

a first set of instructions for determining a presence or an absence of a public customer order at an execution price in an electronic book, the public customer order having a time of entry associated therewith;

a second set of instructions for determining a first participation entitlement based on the presence of the public customer order at the execution price in an electronic book, the public customer order having a time of entry prior to all non-public customer orders in the electronic book or a second participation entitlement based upon the absence of the public customer order at the execution price in the electronic book; and

a third set of instructions for allocating to each eligible market participant based on the first or second participation entitlement, and wherein the incoming order is allocated solely on a pro-rata basis when the public customer order has a time of entry that is not prior to all non-public customer orders in the electronic book.