Automated securities trading system

• US 4,674,044 A
• Filed: 01/30/1985
• Issued: 06/16/1987
• Est. Priority Date: 01/30/1985
• Status: Expired due to Term

• Current Assignee: Bank of America Corp.
• Original Assignee: Merrill Lynch Pierce Fenner & Smith Incorporated (Bank of America Corp.)
• Inventors: Trojan, Donald R., Strampfer, John, Kalmus, Leslie P., Mott, Bradley
• Primary Examiner(s): Smith, Jerry
• Assistant Examiner(s): Hayes, G.
• Application Number:
  US06/696,407
• Time in Patent Office: 867 Days
• Field of Search: 364/408, 364/200, 364/900, 340/825.26, 340/825.27
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

Data processing based apparatus makes an automated trading market for one or more securities. The system retrieves the best obtaining bid and asked prices from a remote data base, covering the ensemble of institutions or others making a market for the relevant securities. Data characterizing each securities buy/sell order requested by a customer is supplied to the system. The order is qualified for execution by comparing its specifics against predetermined stored parameters. The stored parameters include the operative bid and asked prices, the amount of stock available for customer purchase or sale, and maximum single order size.

Once qualified, the order is executed and the appropriate parameters are updated. The system provides inventory (position) control and profit accounting for the market maker. Finally, the system reports the executed trade details to the customer, and to national stock price reporting systems. Upon a change in the quoted price for a security, the system updates all relevant qualification parameters.

Claims

1. A data processing system for making a trading market in at least one security in which the system proprietor is acting, as a principal;

said system including means for receiving trade orders for said at least one security from system customers, said trade orders including fields identifying the stock to traded and characterization of the trade as customer purchase or sale, and the number of shares for the transaction;

means for retrieving and for storing operative bid and asked prices for said at least one security;

means for entering and for storing order qualification parameters, said parameters and said stored prices determining which received orders are qualified for execution;

means for storing data characterizing position, cost and profit for said at least one security;

qualifying means responsive to said received trade offers and said stored prices and order qualification parameters for qualifying a trade order for execution when the received trade order fields do not violate the stored prices and qualification parameters;

means for executing each trade order qualified by said qualification means; and

post-execution updating means for incrementing said stored position in said at least one security by the amount of a trade order upon execution of a customer sale and decrementing said stored position by the amount of a trade order upon execution of a customer purchase and means for updating at least one of said stored cost and profit upon execution of a trade.

2. A system as in claim 1, further including means for storing said trade order without execution if said trade order is not within said qualification parameters.

3. A system as in claim 1, wherein said stored order qualifying parameters include the amount of said at least one security available for customer purchase and the amount of said at least one security available for customer sale, said data processing system further including means for decrementing said amount of said security available for customer purchase by the amount of said security in a trade order upon execution of a customer purchase, and means for decrementing said amount of said security available for customer sales by the amount of said security in a trade order upon execution of a customer sale.

4. A system as in claim 3, wherein said stored order qualifying parameters include a maximum amount of said at least one security acceptable in a single customer trade order.

5. A system as claimed in claim 1, wherein said trade orders further include data characterizing the order as being executable at market or within price stated price limit bounds, said data processing system further including means for comparing said predetermined price limit bounds with said stored operative bid and asked prices to determine if said trade is executable.

6. A system as in claim 1, wherein said market making data processing system includes means for storing the last position for said at least one security, and means for calculating profit in an executed transaction which algebraically reduces toward or beyond zero on the number line, said position relative to said stored last position.

7. A system as in claim 1, wherein said post-execution updating means includes means for updating said average per share cost of the stocks in said position.

8. A system as in claim 1, further including interrupt means for halting data processing upon retrieval of a changed bid or asked price, said data processing system further including means for updating said bid and asked prices upon receipt of a new operative bid or asked price for said at least one security, interactive means for manual entry of updated order qualification parameters, and means for reprocessing said unexecuted stored trades.

9. A system as in claim 1, further including means for communicating data regarding executed trades to further data processing apparatus.

10. A system as in claim 1, wherein said means for receiving trade orders includes both related and unrelated, third party order origination means, and network means interconnecting said order origination means with said market making data processing system.