RISK MITIGATION IN AN ELECTRONIC TRADING SYSTEM

• US 20150213553A1
• Filed: 04/10/2015
• Published: 07/30/2015
• Est. Priority Date: 12/31/2013
• Status: Active Grant

• Current Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Inventors: Farnstrom, Amy Joy
• Granted Patent: US 10,152,750 B2
• Time in Patent Office: Days
• US Class Current: 1/1
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

An electronic trading system (ETS) implements risk mitigation methods for orders and quotes associated with a market participant on the ETS. The methods determine a measure of risk associated with one or more trading positions. One of the methods globally counts the number of breaches of risk thresholds associated with a trading symbol and market participant across all matching engines on the ETS over a rolling time period, and if this global risk counter exceeds a maximum, disables all further trades by the market participant on the ETS. Another method limits the number of automatic re-enablements that a market participant can request in response to prior breaches of risk thresholds that resulted in disabling any further trading by the market participant on the ETS.

Claims

1. A computer-implemented method for mitigating trading risks of a market participant, the method comprising:

receiving, by a global risk mitigation (GRM) module, an electronic message associated with a market participant, the electronic message indicating a breach of a trading risk threshold, said GRM module comprising computer-readable instructions stored on a non-transitory computer readable storage medium and executed by at least one processor;

determining, by the GRM module, whether the breach of the trading risk threshold causes a global risk counter to exceed a predetermined maximum; and

disabling, by the GRM module, execution of any further trades associated with the market participant if it is determined that the breach exceeds the predetermined maximum.

2. The method of claim 1, wherein the GRM module is in communication with one or more matching engines, each of which comprises computer-readable instructions stored on a non-transitory computer readable storage medium and executed by at least one processor,

wherein the electronic message is received by the GRM module from at least one of the one or more matching engines, and

wherein disabling further trades comprises disabling trades associated with a plurality of trading symbols across said one or more matching engines.

3. The method of claim 1, wherein determining whether the breach of the trading risk threshold causes the global risk counter to exceed the predetermined maximum comprises:

determining whether the breach of the trading risk threshold occurred within a particular time period;

incrementing the global risk counter if the breach occurred within the particular time period;

and comparing the incremented global risk counter to the predetermined maximum.

4. The method of claim 1, further comprising:

generating and transmitting, by the GRM module, a system alert notifying the market participant of said disabling.

5. The method of claim 1, wherein the disabling execution of any further trades is imposed for a predetermined period of time or until an electronic re-enable requested is received and accepted by the GRM module, the method further comprising:

re-enabling, by the GRM module, execution of further trades involving all trading symbols on all matching engines associated with the market participant.

6. The method of claim 1, wherein the market participant comprises at least one of an agency broker, a market maker, and a proprietary trader.

7. A system for mitigating trading risks of a market participant comprising:

a global risk mitigation (GRM) module comprising computer-readable instructions stored on a non-transitory computer readable storage medium and executed by at least one processor, said computer-readable instructions, when executed, causing the GRM module to;

receive an electronic message associated with a market participant, the electronic message indicating a breach of a trading risk threshold;

determine whether the breach of the trading risk threshold causes a global risk counter to exceed a predetermined maximum; and

disable execution of any further trades associated with the market participant if it is determined that the breach exceeds the predetermined maximum.

8. The system of claim 7, further comprising one or more matching engines in communication with the GRM module, said matching engines each comprising computer-readable instructions stored on a non-transitory computer readable storage medium and executed by at least one processor,

wherein the electronic message is received by the GRM module from at least one of the one or more matching engines, and

wherein the GRM module is configured to disable further trades by disabling trades associated with a plurality of trading symbols across said one or more matching engines.

9. The system of claim 7, wherein the GRM module is further configured to determine whether the breach of the trading risk threshold causes the global risk counter to exceed the predetermined maximum by:

determining whether the breach of the trading risk threshold occurred within a particular time period;

incrementing the global risk counter if the breach occurred within the particular time period;

and comparing the incremented global risk counter to the predetermined maximum.

10. The system of claim 7, wherein the GRM module is further configured to:

generate and transmit a system alert notifying the market participant of said disabling.

11. The system of claim 7, wherein the GRM module is further configured to:

disable execution of any further trades for a predetermined period of time or until an electronic re-enable requested is received and accepted by the GRM module; and

re-enable execution of further trades involving all trading symbols on all matching engines associated with the market participant.

12. The system of claim 7, wherein the market participant comprises at least one of an agency broker, a market maker, and a proprietary trader.