Rule Based Vector Space Model For Creating Implied Trade Templates

• US 20110066567A1
• Filed: 09/14/2009
• Published: 03/17/2011
• Est. Priority Date: 09/14/2009
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Acuña-Rohter, José Antonio, Peck-Walden, Pearce
• Granted Patent: US 10,529,020 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• 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 match engine is utilized by either a market participant or an electronic trading system. The match engine receives orders, stores them internally, calculates tradable combinations and displays or otherwise publishes the tradable combinations or the order(s) needed to complete tradable combinations. The match engine operates under a set of rules that may be customized to provide only the tradable combinations that are likely to be executed and contribute to total trading volume. At least some tradeable combinations that are not likely to be traded are not calculated, which frees up the computing capacity of the electronic trading system.

Claims

1. A computer implemented method of optimizing the computation of implied orders to a electronic trading system, the method comprising:

representing three or more financial products using a plurality of vectors having a number of columns, wherein the number of columns is equal to the number of unique legs making up the financial products;

defining a first order as a first vector of the plurality of vectors;

identifying a list of candidate vectors from the plurality of vectors, each candidate vector having at least one nonzero column in common with the first vector;

selecting a second vector from the list of candidate vectors;

adding the first vector to the second vector to define a first intermediate vector;

removing the second vector from the list of candidate vectors; and

outputting, to the electronic trading system, a first implied order corresponding to the second vector, if the first intermediate vector has no nonzero columns.

2. The method of claim 1, further comprising:

selecting a third vector from the list of candidate vectors and adding the third vector to the first intermediate vector to define a second intermediate vector, if the first intermediate vector has one or more nonzero columns; and

outputting a second implied order corresponding to the second vector and third vector, if the second intermediate vector has no nonzero columns.

3. The method of claim 2, wherein the third vector and the second are not tradable.

4. The method of claim 1, further comprising:

executing a tradable cycle corresponding to the first vector and the second vector.

5. The method of claim 1, wherein the second vector is selected because it has as many or more nonzero columns as each vector in the list of candidate vectors.

6. The method of claim 5, wherein selecting a second vector from the list of candidate vectors further comprises selecting the second vector based on expiry when there are more than one vector that has as many or more nonzero columns in common with the first vector as each vector in the list of candidate vectors.

7. The method of claim 1, further comprising:

selecting the list of financial instruments or strategies based on a user input.

8. The method of claim 1, further comprising:

restricting the list of candidate vectors based on a user input.

9. The method of claim 1, further comprising:

removing, if the second vector is a butterfly spread, all other butterfly spreads from the list of candidate vectors.

10. The method of claim 1, further comprising:

performing the selecting, adding, removing, and outputting for a subsequent vector and a subsequent candidate vector according to a predetermined maximum number of iterations.

11. The method of claim 10, further comprising:

specifying the predetermined maximum number of iterations according to a user input.

12. The method of claim 10, further comprising:

specifying the predetermined maximum number of iteration according to the type of financial instrument or strategy represented by the first vector.

13. The method of claim 1, wherein the first implied order is a second generation implied order generated without defining any first generation implied orders.

14. An electronic trading system comprising:

a match engine processor configured to represent three or more financial products using a plurality of vectors having a number of columns, wherein the number of columns is equal to the number of unique legs making up the financial products;

a candidate list generator configured to define a first order as a first vector of the plurality of vectors and identify a list of candidate vectors from the plurality of vectors, each candidate vector having at least one nonzero column in common with the first vector;

a comparator configured to select a second vector from the list of candidate vectors that has one or more nonzero columns as each vector in the list of candidate vectors and add the first vector to the second vector to define a first intermediate vector, wherein the candidate list generator is configured to remove the second vector from the list of candidate vectors; and

an implied order generator configured to output, to the electronic trading system, a first implied order corresponding to the second vector, if the first intermediate vector has no nonzero columns.

15. The electronic trading system of claim 14, wherein the second vector is selected because it has as many or more nonzero columns as each vector in the list of candidate vectors.

16. The electronic trading system of claim 15, wherein selecting a second vector from the list of candidate vectors further comprises selecting the second vector based on expiry when there are more than one vector that has as many or more nonzero columns in common with the first vector as each vector in the list of candidate vectors.

17. The electronic trading system of claim 14, wherein the comparator is further configured to select a third vector from the list of candidate vectors and adding the third vector to the first intermediate vector to define a second intermediate vector, if the first intermediate vector has one or more nonzero columns.

18. The electronic trading system of claim 15, wherein the implied order generator is configured to output a second implied order corresponding to the second vector and third vector, if the second intermediate vector has no nonzero columns.

19. The electronic trading system of claim 14, wherein the third vector and the second are not tradable.

20. The electronic trading system of claim 14, wherein the match engine process is further configured to execute a tradable cycle corresponding to the first vector and the second vector.

21. The electronic trading system of claim 14, wherein the order submission interface is configured to select the list of financial instruments or strategies based on a user input.

22. The electronic trading system of claim 14, wherein the list of candidate vectors is restricted based on a user input.

23. The electronic trading system of claim 14, wherein the candidate list generator is configured to remove all butterfly spreads from the list of candidate vectors if the second vector is a butterfly spread.

24. A computer implemented method of optimizing the computation of implied orders to a electronic trading system, the method comprising:

representing three or more financial products using a plurality of vectors having a number of columns, wherein the number of columns is equal to the number of unique legs making up the financial products;

defining a first order as a first vector of the plurality of vectors;

reducing the plurality of vectors to a list of candidate vectors using one or more constraints,

selecting a second vector from the list of candidate vectors that has one or more nonzero columns as each vector in the list of candidate vectors;

adding the first vector to the second vector to define a first intermediate vector;

removing the second vector from the list of candidate vectors; and

outputting, to the electronic trading system, a first implied order corresponding to the second vector, if the first intermediate vector has no nonzero columns.