Computer-implemented securities trading system with a virtual specialist function

• US 5,950,176 A
• Filed: 03/25/1996
• Issued: 09/07/1999
• Est. Priority Date: 03/25/1996
• Status: Expired due to Term

• Current Assignee: CFPH LLC (Cantor Fitzgerald, L.P.)
• Original Assignee: HSX Incorporated
• Inventors: Keiser, Timothy Maxwell, Burns, Michael R.
• Primary Examiner(s): MacDonald, Allen R.
• Assistant Examiner(s): CRECCA, MICHELE S
• Application Number:
  US08/620,906
• Time in Patent Office: 1,261 Days
• Field of Search: 705/37, 705/36
• US Class Current: 705/36.00R
• 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

The present invention discloses a method, apparatus, and article of manufacture for a computer-implemented financial management system that permits the trading of securities via a network. A server computer receives buy and sell orders for derivative financial instruments from a plurality of client computers. The server computer matches the buy orders to the sell orders and then generates a market price through the use of a virtual specialist program executed by the server computer. The virtual specialist program responds to an imbalance in the matching of the buy and sell orders.

Claims

1. A computerized method for regulating market price in a computerized trading system, the system receiving buy orders and sell orders for an instrument, the method comprising:

measuring an imbalance between buy orders and sell orders for the instrument received over a given period;

computing a projected price movement based on the measured imbalance between the number of buy and sell orders;

setting a market price for the instrument based upon the received buy and sell orders and the measured imbalance; and

automatically generating additional buy orders or sell orders for the instrument at the market price to guarantee execution of some or all of the received buy or sell orders if the projected price movement is greater than or equals a predetermined price movement threshold.

2. The method of claim 1, wherein the step of measuring the imbalance comprises computing an absolute difference between the number of buy orders and the number of sell orders.

3. The method of claim 2, wherein the projected price movement is computed from the difference and stored variables.

4. The method of claim 3, wherein the stored variables include a sweep increment variable and a lot movement variable.

5. The method of claim 3, wherein the step of computing the projected price movement comprises computing the projected price movement using the following equation:

space="preserve" listing-type="equation">PM=(NMS/LMV)*SIV,

where PM represents the projected price movement, NMS represents the absolute difference between the number of buy and sell orders, LMV represents the lot movement variable, and SIV represents the sweep increment variable.

6. The method of claim 1, further comprising generating a number of additional orders in direct proportion to an amount by which the projected price movement exceeds the predetermined price movement threshold.

10. The method of claim 1, wherein the step of automatically generating additional buy and sell orders comprises automatically generating orders to guarantee execution of all of the received buy and sell orders.

7. A computerized method for regulating market price in a computerized trading system that receives buy orders and sell orders for an instrument, the method comprising:

measuring an imbalance between buy and sell orders received for the instrument over a plurality of periods;

computing a projected price movement for each of the periods based on the measured imbalance between the number of buy and sell orders;

computing a total price movement in the instrument for the plurality of periods based upon the projected price movement during the periods; and

stopping trading activity in the instrument if the computed total price movement exceeds an excessive order threshold.

8. The method of claim 7, comprising computing the excessive order threshold from an opening market price for the instrument determined prior to the plurality of periods.

9. The method of claim 8, wherein the step of computing the excessive order threshold comprises computing the excessive order threshold as 50% of the opening market price for the instrument.

11. A computer-readable storage medium for storing program code means for, when executed, causing a computer to perform a computerized method for regulating market price in a computerized trading system that receives buy orders and sell orders for an instrument, the method comprising:

measuring an imbalance between buy and sell orders received for the instrument over a plurality of periods;

computing a projected price movement for each of the periods based on the measured imbalance between the number of buy and sell orders;

computing a total price movement in the instrument for the plurality of periods based upon the projected price movement during the periods; and

stopping trading activity in the instrument if the computed total price movement exceeds an excessive order threshold.

12. A computer-readable storage medium for storing program code means for, when executed, causing a computer to perform a computerized method for regulating market price in a computerized trading system that receives buy orders and sell orders for an instrument, the method comprising:

measuring an imbalance between buy and sell orders received for the instrument over a plurality of periods;

computing a projected price movement for each of the periods based on the measured imbalance between the number of buy and sell orders;

computing a total price movement in the instrument for the plurality of periods based upon the projected price movement during the periods; and

stopping trading activity in the instrument if the computed total price movement exceeds an excessive order threshold.