SYSTEM AND METHOD FOR MANAGING TRADING USING ALERT MESSAGES FOR OUTLYING TRADING ORDERS

• US 20110060680A1
• Filed: 11/15/2010
• Published: 03/10/2011
• Est. Priority Date: 08/04/2004
• Status: Active Grant

• Current Assignee: Howard Lutnick, Joseph C. Noviello, Michael Sweeting
• Original Assignee: Howard Lutnick, Joseph C. Noviello, Michael Sweeting
• Inventors: Sweeting, Michael, NOVIELLO, JOSEPH C., Lutnick, Howard W.
• Granted Patent: US 8,756,137 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
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass

Abstract

According to one embodiment, a method of managing trading is provided. In a market for a particular type of instrument, buy orders and sell orders are received from a plurality of traders. Each buy order has an associated bid price and each sell order has an associated offer price. A determination is made of whether the particular trading order is an outlying trading order by determining whether the particular trading order differs from at least one comparison price by more than a threshold value. If it is determined that the particular trading is an outlying trading order, a restrictive action is taken regarding the outlying trading order. For example, if a trader subsequently submits another trading order that would trade with the outlying trading order, an alert message may be sent to the trader and the subsequent trading order may be prevented from trading with the outlying trading order at least temporarily.

Claims

1. A method of managing trading, comprising:

in a market for a particular type of instrument, receiving trading orders from a plurality of traders, each trading order having an associated price;

placing each of the received trading orders on a trading exchange such that the trading orders may be executed, including placing each of the received trading orders in one of a plurality of trading order stacks;

determining whether the price of a particular trading order differs from at least one comparison price by more than a threshold value; and

if it is determined that the price of the particular trading order differs from the at least one comparison price by more than the threshold value, restricting the promotion of the particular trading order within its respective trading order stack.

2. The method of claim 1, wherein restricting the promotion of the particular trading order within its respective trading order stack comprises at least temporarily preventing promotion of the particular trading order within its respective trading order stack.

3. The method of claim 1, further comprising, if it is determined that the price of the particular trading order does not differ from the at least one comparison price by more than the threshold value, promoting the particular trading order within its respective trading order stack.

4. The method of claim 1, further comprising:

receiving from a particular trader a subsequent trading order having an original price that would trade with the price of the particular trading order; and

wherein taking a restrictive action regarding the particular trading order further comprises;

generating an alert message regarding the subsequent trading order;

communicating the alert message to the particular trader; and

preventing the subsequent trading order from trading with the particular trading order at least until a response to the alert message is received from the particular trader.

5. The method of claim 4, wherein taking a restrictive action regarding the particular trading order further comprises preventing the subsequent trading order from being placed on the trading exchange at least until a response to the alert message is received from the particular trader.

6. The method of claim 1, further comprising:

receiving market information regarding one or more markets related to the market for the particular type of instrument; and

wherein determining whether the price of the particular trading order differs from at least one comparison price by more than a threshold value comprises determining whether the price of the particular trading order differs from at least one comparison price by more than a threshold value based at least on the received market information.

7. The method of claim 6, further comprising:

determining a current market price for the particular type of instrument based at least on the received market information; and

wherein determining whether the price of the particular trading order differs from at least one comparison price by more than a threshold value comprises determining whether the price of the particular trading order differs from the determined current market price by more than a threshold value.

8. The method of claim 1, further comprising:

receiving market information regarding one or more markets related to the market for the particular type of instrument;

determining a current market price for the particular type of instrument based at least on the received market information; and

wherein determining whether the price of the particular trading order differs from at least one comparison price by more than a threshold value comprises;

making a first determination of whether the price of the particular trading differs from a previous trade price by more than a first current threshold value;

making a second determination of whether the price of the particular trading differs from another existing trading order by more than a second current threshold value; and

making a third determination of whether the price of the particular trading differs from the determined current market price by more than a third current threshold value.

9. The method of claim 8, wherein the first, second and third current threshold values are the same.

10. The method of claim 8, further comprising:

estimating the volatility of one or more markets; and

updating at least one of the first, second and third current threshold values based at least on the estimated volatility of the one or more markets.

11. The method of claim 8, further comprising:

receiving price movement information indicating price movements in a related market, the related market comprising a market related to the market for the particular type of instrument; and

updating at least one of the first, second and third current threshold values based at least on the received price movement information.

12. The method of claim 8, wherein the price of the particular trading order is determined to differ from at least one comparison price by more than a threshold value if at least one of the following are true:

the first determination indicates that the price of the particular trading differs from the previous trade price by more than the first current threshold value;

the second determination indicates that the price of the particular trading differs from the other existing trading order by more than the second current threshold value; and

the third determination indicates that the price of the particular trading differs from the determined current market price by more than the third current threshold value.

13. The method of claim 8, wherein the price of the particular trading order is determined to differ from at least one comparison price by more than a threshold value if at least two of the following are true:

the first determination indicates that the price of the particular trading differs from the previous trade price by more than the first current threshold value;

the second determination indicates that the price of the particular trading differs from the other existing trading order by more than the second current threshold value; and

the third determination indicates that the price of the particular trading differs from the determined current market price by more than the third current threshold value.

14. The method of claim 8, wherein the price of the particular trading order is determined to differ from at least one comparison price by more than a threshold value if all of the following are true:

the first determination indicates that the price of the particular trading differs from the previous trade price by more than the first current threshold value;

the second determination indicates that the price of the particular trading differs from the other existing trading order by more than the second current threshold value; and

the third determination indicates that the price of the particular trading differs from the determined current market price by more than the third current threshold value.

15. The method of claim 1, further comprising:

estimating the volatility of one or more markets; and

updating the threshold value based at least on the estimated volatility of the one or more markets.

16. The method of claim 1, further comprising:

receiving price movement information indicating price movements in a related market, the related market comprising a market related to the market for the particular type of instrument; and

updating the threshold value based at least on the received price movement information.

17. A system for managing trading, comprising:

a computer system having a processor; and

a computer-readable medium coupled to the computer system, the computer-readable medium comprising a program operable, when executed by the processor, to;

receive trading orders from a plurality of traders in a market for a particular type of instrument, each trading order having an associated price;

place each of the received trading orders on a trading exchange such that the trading orders may be executed, including placing each of the received trading orders in one of a plurality of trading order stacks;

determine whether the price of a particular trading order differs from at least one comparison price by more than a threshold value; and

if it is determined that the price of the particular trading order differs from the at least one comparison price by more than the threshold value, restrict the promotion of the particular trading order within its respective trading order stack.