Crossing network utilizing satisfaction density profile with price discovery features

• US 6,012,046 A
• Filed: 10/16/1997
• Issued: 01/04/2000
• Est. Priority Date: 12/12/1995
• Status: Expired due to Term

• Current Assignee: Optimark, Inc. (Optimark Holdings, Inc.)
• Original Assignee: Optimark Technologies Incorporated (Optimark Holdings, Inc.)
• Inventors: Rickard, John T., Lupien, William A.
• Primary Examiner(s): Tkacs, Stephen R.
• Application Number:
  US08/951,304
• Time in Patent Office: 810 Days
• Field of Search: 705/1, 705/7, 705/26, 705/30, 705/35, 705/36, 705/37, 705/38, 705/42, 395/172, 704/9, 704/4, 364/709.04, 364/710.04
• 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

A crossing network that matches buy and sell orders based upon a satisfaction and quantity profile is disclosed. The crossing network includes a number of trader terminals that can be used for entering orders. The orders are entered in the form of a satisfaction density profile that represents a degree of satisfaction to trade a particular instrument at various (price, quantity) combinations. Typically, each order is either a buy order or a sell order. The trader terminals are coupled to a matching controller computer. The matching controller computer can receive as input the satisfaction density profiles entered at each one of the trading terminals. The matching controller computer matches orders (as represented by each trader'"'"'s satisfaction density profile) so that each trader is assured that the overall outcome of the process (in terms of average price and size of fill) has maximized the mutual satisfaction of all traders. Typically, the matching process is anonymous. The matching process can be continuous or a batch process, or a hybrid of the two. Unmatched satisfaction density profiles can be used to provide spread and pricing information. Factors other than price and quantity also may be used to determine the degree of satisfaction.

Claims

1. A method for matching orders for a plurality of instruments based upon a satisfaction and size profile, the method being performed on a computer, the method comprising the steps of:

receiving a plurality of orders as a satisfaction density profile, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

pairing each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

calculating for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

ranking according to the degree of mutual satisfaction every (price, quantity) combinations of every mutual satisfaction function;

wherein possible, matching in accordance with the ranking buy orders with sell orders; and

comparing unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments.

2. The method of claim 1 further comprising the step of outputting the spread information.

3. A method for matching orders for a plurality of instruments based upon a satisfaction and size profile, the method being performed on a computer, the method comprising the steps of:

receiving a plurality of orders as a satisfaction density profile, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

aggregating information from each entered satisfaction density profile to obtain an aggregate density profile;

outputting the aggregate density profile to provide price information to users;

pairing each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

calculating for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

ranking according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function;

matching, in accordance with the ranking, buy orders with sell orders.

4. The method of claim 3 wherein the aggregate density profile is a market depth profile representing quantities of non-zero (price, quantity) combinations for all received satisfaction density profiles relating to a predetermined instrument.

5. A method for trading a plurality of instruments based upon a satisfaction density profile, the method comprising the steps of:

creating an order for an instrument in the form of a satisfaction density profile that represents a degree of satisfaction to trade the instrument at a plurality of (price, quantity) combinations, the satisfaction density profile representing either a buy order or a sell order for the instrument;

causing the order to be communicated to a matching controller computer that matches orders so that an outcome of the matching process in terms of individual allocations is a maximization of mutual satisfaction for all parties who submit orders and the instrument corresponding to the matched orders is traded;

receiving from the matching controller computer an indication of matched trades; and

displaying the indication of the matched trades.

6. The method of claim 5 wherein the step of creating comprises entering the satisfaction density profile on a two-dimensional graph having a price axis and a quantity axis.

7. The method of claim 5 wherein the step of creating comprises utilizing factors other than price and size to determine the degree of satisfaction at each (price, quantity) combination.

8. A method for matching orders for a plurality of instruments based upon a satisfaction density profile but giving priority to orders exhibiting a best price, the method being performed on a computer, the method comprising the steps of:

receiving a plurality of orders as a set of satisfaction density profiles, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

pairing each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

calculating for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

ranking according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function;

matching in accordance with the ranking buy orders with sell orders;

allocating trades first to unmatched satisfaction density profiles comprising a complete satisfaction indication at a better price than the matched buy orders and sell orders, and then in accordance with the ranking.

9. The method of claim 8 further comprising the steps of:

comparing any unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments; and

outputting the spread information to provide users with generalized price information.

10. A method for matching orders for a plurality of instruments based upon a satisfaction density profile but giving priority to orders having time priority, the method being performed on a computer, the method comprising the steps of:

receiving a plurality of orders as a set of satisfaction density profiles, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

pairing each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

calculating for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

ranking according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function;

matching in accordance with the ranking buy orders with sell orders

allocating trades first to unmatched satisfaction density profiles comprising a complete satisfaction indication at an equal price to the matched buy orders and sell orders if said unmatched orders have time priority, and then in accordance with the ranking.

11. The method of claim 10 further comprising the steps of:

comparing any unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments; and

outputting the spread information to provide users with generalized price information.

12. An article of manufacture, comprising:

a computer-readable medium having stored thereon a plurality of instructions which, when executed by a computer, cause the computer to;

(a) receive a plurality of orders as a satisfaction density profile, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

(b) pair each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

(c) calculate for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

(d) rank according to the degree of mutual satisfaction every (price, quantity) combinations of every mutual satisfaction function;

(e) wherein possible, match in accordance with the ranking buy orders with sell orders; and

(f) compare unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments.

13. The article of manufacture of claim 12, wherein the instructions, when executed by the computer, further cause the computer to output the spread information.

14. An article of manufacture, comprising:

a computer-readable medium having stored thereon a plurality of instructions which, when executed by a computer, cause the computer to;

(a) receive a plurality of orders as a satisfaction density profile, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

(b) aggregate information from each entered satisfaction density profile to obtain an aggregate density profile;

(c) output the aggregate density profile to provide price information to users;

(d) pair each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

(e) calculate for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

(f) rank according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function; and

(g) match, in accordance with the ranking, buy orders with sell orders.

15. The article of manufacture of claim 14 wherein the aggregate density profile is a market depth profile representing quantities of non-zero (price, quantity) combinations for all received satisfaction density profiles relating to a predetermined instrument.

16. An article of manufacture, comprising:

a computer-readable medium having stored thereon a plurality of instructions which, when executed by a computer, cause the computer to;

(a) create an order for an instrument in the form of a satisfaction density profile that represents a degree of satisfaction to tarde the instrument at a plurality of (price, quantity) combinations, each satisfaction density profile representing either a buy order or a sell order for the instrument;

(b) cause the order to be communicated to a matching controller computer that matches orders so that an outcome of the matching process in terms of individual allocations is a maximization of mutual satisfaction for all parties who submit orders; and

(c) receive from the matching controller computer an indication of matched trades.

17. The article of manufacture of claim 16, wherein the instructions, when executed by the computer, cause the computer to create an order by:

(I) receiving the satisfaction density profile entered on a two-dimensional graph having a price axis and a quantity axis.

18. The article of manufacture of claim 16, wherein the instructions, when executed by the computer, cause the computer to create an order by:

(I) utilizing factors other than price and size to determine the degree of satisfaction at each (price, quantity) combination.

19. An article of manufacture for matching orders for a plurality of instruments based upon a satisfaction density profile but giving priority to orders exhibiting a best price, comprising:

a computer-readable medium having stored thereon a plurality of instructions which, when executed by a computer, cause the computer to;

(a) receive a plurality of orders as a set of satisfaction density profiles, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

(b) pair each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

(c) calculate for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

(d) rank according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function;

(e) match in accordance with the ranking buy orders with sell orders; and

(f) allocate trades first to unmatched satisfaction density profiles comprising a complete satisfaction indication at a better price than the matched buy orders and sell orders, and then in accordance with the ranking.

20. The article of manufacture of claim 19, wherein the instructions, when executed by the computer, further cause the computer to:

(g) compare any unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments; and

(h) output the spread information to provide users with generalized price information.

21. An article of manufacture for matching orders for a plurality of instruments based upon a satisfaction density profile but giving priority to orders having time priority, comprising:

a computer-readable medium having stored thereon a plurality of instructions which, when executed by a computer, cause the computer to;

(a) receive a plurality of orders as a set of satisfaction density profiles, each satisfaction density profile representing a degree of satisfaction to trade an instrument at a plurality of (price, quantity) combinations and representing either a buy order or a sell order for the instrument;

(b) pair each satisfaction density profile representing a sell order with each satisfaction density profile representing a buy order;

(c) calculate for each satisfaction density profile pair a mutual satisfaction function, each mutual satisfaction function including a plurality of (price, quantity) combinations representing a degree of mutual satisfaction for trading said quantity at said price;

(d) rank according to the degree of mutual satisfaction every (price, quantity) combination of every mutual satisfaction function;

(e) match in accordance with the ranking buy orders with sell orders; and

(f) allocate trades first to unmatched satisfaction density profiles comprising a complete satisfaction indication at an equal price to the matched buy orders and sell orders if said unmatched orders have time priority, and then in accordance with the ranking.

22. The article of manufacture of claim 21, wherein the instructions, when executed by a computer, further cause the computer to:

(g) compare any unmatched satisfaction density profiles representing buy orders for one or more predetermined instruments with unmatched satisfaction density profiles representing sell orders for corresponding one or more predetermined instruments to obtain spread information for each one or more predetermined instruments; and

(h) output the spread information to provide users with generalized price information.