SYSTEM AND METHOD FOR MANAGING RISK ASSOCIATED WITH PRODUCT TRANSACTIONS

• US 20110066542A1
• Filed: 11/15/2010
• Published: 03/17/2011
• Est. Priority Date: 05/15/2003
• Status: Active Grant

• Current Assignee: Cantor Index LLC
• Original Assignee: Cantor Index LLC
• Inventors: BURGIS, ADAM, Findlay, Lewis C.
• Granted Patent: US 8,160,953 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 50/34 Betting or bookmaking, e.g. Internet betting
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass
• CPC Class Codes: G07F 15/00 Coin-freed apparatus with meter-controlled dispensing of liquid, gas or electricity
• CPC Class Codes: G07F 17/3288 Betting, e.g. on live events, bookmaking

Abstract

A method of managing trading orders is provided. The method includes receiving a request to place a first order to trade a first product, the request being made using an account having one or more current balances. The method further includes determining a risk value for the first order based at least in part on the first product. The method further includes determining whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account, and if the first order is approved, placing the first order.

Claims

1. A method of managing trading orders, comprising:

receiving a request to place a first order to trade a first product, the request being made using an account that comprises one or more current balances;

determining a risk value for the first order based at least in part on the first product;

determining whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account; and

if the first order is approved, placing the first order.

2. The method of claim 1, wherein the first product comprises a first betting product.

3. The method of claim 1, wherein the first product comprises one of a plurality of types of products and further comprising determining a risk factor for the first product based at least in part on the type of the first product.

4. The method of claim 1, wherein the risk value for the first order is determined based at least in part on an estimated maximum tick liability associated with the first product.

5. The method of claim 4, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

6. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

7. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

8. The method of claim 7, wherein determining the risk factor for the first product comprises selecting the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

9. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on statistical data regarding the first product.

10. The method of claim 1, further comprising determining a risk factor for the first product;

and wherein;

the first order comprises a unit stake; and

determining the risk value for the first order comprises multiplying the risk factor for the first product by the unit stake.

11. The method of claim 1, further comprising:

matching the first order with a second order to at least partially fill the first order; and

adjusting one or more of the current balances associated with the account based at least in part on the risk value determined for the first order.

12. The method of claim 11, wherein the first product is associated with at least one event having an overall duration, the method further comprising:

updating the risk value for the matched first order during the overall duration of the at least one event; and

updating one or more of the current balances associated with the account based at least in part on the updated risk value for the matched first order.

13. The method of claim 12, further comprising:

assigning a so-far value to the product;

updating the so-far value during the overall duration of the at least one event associated with the first product; and

updating the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

14. The method of claim 1, further comprising:

receiving a request to place a second order to trade a second product, the second order at least partially defined by a stake;

placing the second order;

matching the first order with a third order to at least partially fill the first order;

adjusting one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

reducing the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.

15. The method of claim 1, further comprising:

receiving a request to place a second order to trade a second product, the second order at least partially defined by a stake;

determining a risk value for the second order;

placing the second order;

matching the first order with a third order to at least partially fill the first order;

adjusting one or more of the current balances associated with the account based at least in part on the risk value of the matched first order;

determining whether to reduce the stake of the unmatched second trading order based at least in part on the risk value of the unmatched second order and at least one of the adjusted current balances; and

reducing the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.

16. The method of claim 1, further comprising:

receiving a plurality of requests to place a plurality of orders including the first order, each request being made using the account;

each of the plurality of orders being at least partially defined by a stake; and

for each order;

determining a risk value for the order; and

placing the order.

17. The method of claim 16, further comprising, for each order, determining whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account, and wherein placing each order comprises placing each approved order.

18. The method of claim 16, further comprising:

matching the first order with a second order to at least partially fill the first order, the second order not being one of the plurality of orders;

adjusting one or more of the current balances for the account based at least in part on the risk value of the first order; and

for each unmatched order of the plurality of orders;

determining whether to reduce the stake of the unmatched trading order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reducing the stake of the unmatched order by an amount based at least in part on at least one of the adjusted current balances.

19. A system for managing orders, comprising:

a memory operable to store an account; and

a processor operable to;

receive a request to place a first order to trade a first product, the request being made using the account, wherein the account comprises one or more current balances;

determine a risk value for the first order based at least in part on the first product;

determine whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account; and

if the first order is approved, place the first order.

20. The system of claim 19, wherein the first product comprises a first betting product.

21. The system of claim 19, wherein the first product comprises one of a plurality of types of products and the processor determines a risk factor for the first product based at least in part on the type of the first product.

22. The system of claim 19, wherein the processor determines the risk value for the first order based at least in part on an estimated maximum tick liability associated with the first product.

23. The system of claim 22, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

24. The system of claim 19, wherein the processor determines a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

25. The system of claim 19, wherein the processor determines a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

26. The system of claim 25, wherein determining the risk factor for the first product comprises selecting the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

27. The system of claim 19, wherein the processor determines a risk factor for the first product based at least in part on statistical data regarding the first product.

28. The method of claim 19, wherein:

the first order comprises a unit stake;

the processor determines a risk factor for the first product; and

the processor determines the risk value for the first order at least by multiplying the risk factor for the first product by the unit stake.

29. The system of claim 19, wherein the processor:

matches the first trading order with a second trading order to at least partially fill the first trading order; and

adjusts one or more of the current balances associated with the account based at least in part on the risk value determined for the first order.

30. The system of claim 29, wherein:

the first product is associated with one or more events having an overall duration;

the processor updates the risk value for the matched first order during the overall duration of the one or more events; and

the processor updates one or more of the current balances associated with the account based at least in part on the updated risk value for the first order.

31. The system of claim 30, wherein the processor is further operable to:

assign a so-far value to the product;

update the so-far value during the overall duration of the one or more events associated with the first product; and

update the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

32. The system of claim 19, wherein the processor is further operable to:

receive a request to place a second order to trade a second product, the second order at least partially defined by a stake;

place the second order;

match the first order with a third order to at least partially fill the first order;

adjust one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

reduce the stake of the unmatched second order by an amount based at least in part on at least on of the adjusted current balances.

33. The system of claim 19, wherein the processor is further operable to:

receive a request to place a second order to trade a second product, the second order at least partially defined by a stake;

determine a risk value for the second order;

place the second order;

match the first order with a third order to at least partially fill the first order;

adjust one or more of the current balances associated with the account based at least in part on the risk value of the matched first order;

determine whether to reduce the stake of the unmatched second order based at least in part on the risk value of the unmatched second order and at least one of the adjusted current balances; and

reduce the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.

34. The system of claim 19, wherein the processor is further operable to:

receive a plurality of requests to place a plurality of orders including the first order, each request being made using the account, each of the plurality of orders at least partially defined by a stake;

determine a risk value for each order; and

place each order.

35. The system of claim 34, wherein:

the processor determines for each order, whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account; and

the processor places each approved order.

36. The system of claim 34, further comprising a processor operable to:

match the first order with a second order to at least partially fill the first order, the second order not being one of the plurality of orders;

adjust one or more of the current balances for the account based at least in part on the risk value of the matched first order; and

for each unmatched order of the plurality of orders;

determine whether to reduce the stake of the unmatched order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reduce the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.