Dynamic Peg Orders in an Electronic Trading System

• US 20160055581A1
• Filed: 07/15/2015
• Published: 02/25/2016
• Est. Priority Date: 08/22/2014
• Status: Active Grant

• Current Assignee: IEX Group, Inc.
• Original Assignee: IEX Group, Inc.
• Inventors: Trudeau, Matthew Norbert, Sokoloff, Constantine, Park, Robert, Aisen, Daniel, Chung, Francis, Katsuyama, Bradley Toshio, Small, Benjamin Aaron, Facini, Adrian Branko, Bollerman, Donald
• Granted Patent: US 10,185,993 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

In order to protect a trading party from predatory trading strategies employed by some market participants, especially during certain periods when quotes for a particular security are experiencing rapid changes or transitions, embodiments of the present invention facilitate and support a new type of trading orders whose booking and execution behaviors are dynamically varied in response to environmental market conditions. Pursuant to predefined rules for the new type of trading orders, the orders may be allowed to trade at more aggressive price levels if the market is relatively stable, and the orders can only trade at less aggressive price levels when the market is unstable.

Claims

1. An apparatus for facilitating dynamic peg orders in an electronic trading system, the apparatus comprising:

a first communication interface configured to receive a trading order concerning an item of interest;

a second communication interface configured to receive price data of said item of interest from at least one other electronic trading system;

a matching engine, operatively coupled to the first and second communication interfaces, configured to vary price discretion of said trading order based on the received price data, wherein;

the matching engine restricts execution of said trading order to a first pricing range when the received price data indicate an instability in quotes for said item of interest, and

the matching engine permits execution of said trading order in a second pricing range when the received price data indicate a stability in quotes for said item of interest, said second pricing range being more aggressive than said first pricing range.

2. The apparatus of claim 1, being further configured to:

examine said trading order to determine whether it meets predetermined requirements of a dynamic peg order (DPO).

3. The apparatus of claim 1, being further configured to:

calculate a crumbling quote indicator (CQI) value based on a predetermined algorithm and the received price data.

4. The apparatus of claim 1, being further configured to:

issue a trigger signal to indicate to the matching engine said instability or said instability in the quotes for said item of interest.

5. The apparatus of claim 4, being further configured to:

maintain said trigger signal for predetermined period of time after issuing trigger signal.

6. The apparatus of claim 1, being further configured to book said trading order at:

the greater of a national best offer (NBO) price or said trading order'"'"'s limit price, if said trading order is a sell order;

or

the lesser of a national best bid (NBB) price or said trading order'"'"'s limit price, if said trading order is a buy order.

7. The apparatus of claim 1, wherein the first pricing range is bound at one end by:

a national best offer (NBO) price, if said trading order is a sell order with a limit price lower than the NBO;

or

a national best bid (NBB) price, if said trading order is a buy order with a limit price higher than the NBB.

8. The apparatus of claim 1, wherein the second pricing range is bound at one end by:

the greater of a national best bid and offer (NBBO) midpoint price or said trading order'"'"'s limit price, if said trading order is a sell order;

or

the lesser of a national best bid and offer (NBBO) midpoint price or said trading order'"'"'s limit price, if said trading order is a buy order.

9. The apparatus of claim 1, further comprising:

an order delay module, operatively coupled to at least the first communication interface, configured to impose an additional latency on transmission of the said trading order to the matching engine.

10. An apparatus for facilitating dynamic peg orders in an electronic trading system, the apparatus comprising:

a first communication interface configured to receive a trading order concerning an item of interest;

a second communication interface configured to receive price data of said item of interest from at least one other electronic trading system;

a matching engine, operatively coupled to the first and second communication interfaces, configured to vary price discretion of said trading order based on the received price data, wherein;

the matching engine restricts execution of said trading order to a first pricing range when the received price data indicate an instability in quotes for said item of interest, and

the matching engine permits execution of said trading order in a second pricing range when the received price data indicate a stability in quotes for said item of interest, said second pricing range being more aggressive than said first pricing range; and

an order delay module, operatively coupled to at least the first communication interface, configured to impose an additional latency on transmission of the said trading order to the matching engine.