Method and apparatus for automating negotiations between parties

• US 6,112,189 A
• Filed: 03/19/1997
• Issued: 08/29/2000
• Est. Priority Date: 03/19/1997
• Status: Expired due to Term

• Current Assignee: Optimark, Inc. (Optimark Holdings, Inc.)
• Original Assignee: Optimark Technologies Incorporated (Optimark Holdings, Inc.)
• Inventors: Wallace, George A., Rickard, John T., Lupien, William A.
• Primary Examiner(s): Voeltz, Emanuel Todd
• Assistant Examiner(s): KALINOWSKI, ALEXANDER G
• Application Number:
  US08/820,788
• Time in Patent Office: 1,259 Days
• Field of Search: 705/37, 705/35, 705/36, 707/1, 707/102, 709/200, 709/201, 709/204, 709/205, 709/206, 709/217, 709/218, 709/227, 709/228, 709/229
• US Class Current: 705/36.00R
• 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 system calculates the mutual satisfaction between negotiating parties and maximizes their mutual satisfaction over a range of decision variables and does so without requiring the parties to identify themselves and their positions to each other. For automatically negotiating agreements between multiple parties, a computer accepts a satisfaction function from an offering party who defines his degree of satisfaction to agree to a range of terms upon which the party is desirous of negotiating as a function of the relevant decision variables. The computer then accepts input from all other parties regarding their degree of satisfaction to agree to each of the terms as a function of a particular relevant decision variable. The computer then calculates a satisfaction function for each of these terms based on all of the individual inputs. Next, the computer calculates a joint satisfaction function for all of the terms as a function of the particular relevant decision variable, and then calculates the mutual satisfaction function for the offering party and the other parties, also as a function of the particular relevant decision variable. Finally, the computer calculates the set of decision variable yielding the maximum mutual satisfaction and provides this output to the parties.

Claims

1. A method for determining trading parties, trading prices and trading volumes for simultaneous trading of a plurality of different securities, comprising the steps of:

a) mapping data from a first party regarding a simultaneous trade of a plurality of different securities as a group into a first function expressing degrees of satisfaction of the first party to trade the plurality of different securities simultaneously as a group over a desired range of costs;

b) collecting in a central database input from a plurality of traders regarding a degree of satisfaction of each of the plurality of traders to take a position opposite to the first party in at least one of the plurality of different securities as a function of price;

c) determining from the input of the plurality of traders a joint function expressing a joint degree of satisfaction by one or more second parties among the plurality of traders to take an opposite position in all of the plurality of different securities as a function of price in each of the plurality of different securities;

d) determining a composite function of the first function and the joint function, wherein the composite function represents a mutual degree of satisfaction to execute a trade in all of the plurality of different securities between the first party and the one or more second parties; and

e) identifying for each of the plurality of different securities a trading price, a trading volume and a trading party among the one or more second parties that maximizes the composite function.

2. The method according to claim 1, wherein the step b) of collecting further comprises the steps of:

(i) collecting information from the plurality of traders regarding the degrees of satisfaction of the each of the plurality of traders to take either position in the plurality of different securities; and

(ii) selecting from the information collected in step b)(i) the input regarding the degrees of satisfaction of the plurality of traders to take a position opposite to the first party in each of the plurality of different securities.

3. The method according to claim 1, further comprising the steps of:

f) determining a minimum percentage of desired volume that is available in any of the involved securities if adequate contra volume does not exist in one or more securities; and

g) adjusting all volumes, and the first function and the second functions to reflect this downsized trade.

4. The method according to claim 1, further comprising the step of:

f) executing a scaled-down version of the desired trade on a pro-rata basis for each security and preserving the relative volume mix among the individual securities if adequate contra volume does not exist in one or more securities.

5. The method according to claim 1, further comprising the steps of:

f) determining a minimum volume available in each involved security, not to exceed the desired volume if adequate contra volume does not exist in one or more securities; and

g) adjusting those volumes that are less than the desired volume, and the satisfaction functions S_L (c) and S_C (P₁, . . . , P_N) to reflect the reduced trade.

6. The method according to claim 1, further comprising the step of:

f) performing an eclectic execution of the desired trade, preserving as much of the original desired volume in each security as possible if adequate contra volume does not exist in one or more securities.

7. The method according to claim 1, further comprising the step of:

f) adjusting upward the volume in securities where adequate liquidity is available in order to keep the same S_L (c), while adjusting S_C (P₁, . . . P_N) to reflect the new volumes if adequate contra volume does not exist in one or more securities.

8. The method according to claim 1, further comprising the step of:

f) executing a trade of similar overall net cost to the original desired trade, but with a different mix of volumes of the requisite securities.

9. The method according to claim 1, further comprising the steps of:

f) using a dedicated terminal to enter data when performing a linked trade; and

g) providing a graphical user interface via which the first party enters data regarding the linked trade, said graphical user interface includes a menu selection for selecting a linked trading profile entry, and the linked trading profile includes fields for each security a desired volume, a plurality of fields for entering the costs for the linked trade and each associated satisfaction.

10. The method according to claim 1, further comprising the step of:

f) executing simultaneously with the first party and the trading parties a trade in the plurality of different securities at the trading prices and the trading volumes identified in step e).

11. The method according to claim 10, wherein the step b) of collecting further comprises the steps of:

(i) collecting information from the plurality of traders regarding the degrees of satisfaction of the plurality of traders to take either position in the plurality of different securities; and

(ii) selecting from the information collected in step b)(i) the input regarding the degrees of satisfaction of the plurality of traders to take a position opposite to the first party in each of the plurality of different securities.

12. The method according to claim 1, wherein the step e) of identifying further comprises the steps of:

(i) determining an absolute maximum value of the composite function;

(ii) defining a region about the absolute maximum value of the composite function; and

(iii) determining a trading price, a trading volume and a trading party for each security of the plurality of different securities so that a resulting value of the composite function lies within the region defined in step e)(ii).

13. The method according to claim 12, wherein the step e)(iii) of determining further comprises the step of selecting the trading price, the trading volume and the trading party using predetermined criteria.

14. The method according to claim 12, wherein the predetermined criteria includes a nearest practical trading volume.

15. The method according to claim 12, wherein the predetermined criteria includes a nearest practical trading price.

16. The method according to claim 12, wherein the predetermined criteria includes a maximization within said region of a trading price in each of the plurality of different securities in favor of the trading parties.

17. The method according to claim 1, further comprising the step of:

f) defining the composite function by

space="preserve" listing-type="equation">MS(P.sub.1, . . . , P.sub.N)=S.sub.L (c)·

S.sub.C (P.sub.1, . . . , P.sub.N)

where c is a function of P_i, V_i, i=1 to N, and S_L (c) is the first function and S_C (P₁, . . . , P_N) is the joint function.

18. The method according to claim 17, further comprising the step of:

g) determining the maximum mutual satisfaction from an intersection between support regions of S_L (c) and S_C (P₁, . . . P_N).

19. The method according to claim 18, further comprising the step of:

h) selecting any point in a particular region of price space over which MS(P₁, . . . , P_N) is unity to determine the trading price, trading parties and trading volume in which to execute the trade when unity satisfaction regions of S_L (c) and S_C (P₁, . . . , P_N) intersect, and hence the mutual satisfaction MS(P₁, . . . , P_N) is unity over said particular region of price space.

20. The method according to claim 19, further comprising the step of:

i) selecting the point by selecting a unique centroid point in a hyperplane section bounding a region of unity values of MS(P₁, P_N), which hyperplane corresponds to a maximum value of c for which S_L (c) has unity value, thereby yielding a most favorable price to each of the trading parties in the region of unity values of MS(P₁, P_N).

21. A method for automatically determining a set of terms of an agreement between a first party and at least one other party, wherein the agreement includes a plurality of terms, comprising the steps of:

a) mapping input from the first party regarding the plurality of terms in the agreement into a first function expressing a degree of satisfaction of the first party to agree to the plurality of terms over a range of values of a decision variable;

b) collecting input in a central database from at least one other party regarding the degree of satisfaction of the at least one other party to enter into the agreement with the first party on individual ones of the plurality of terms;

c) mapping the input into a second function expressing the degree of satisfaction of the at least one other party to agree to the plurality of terms as a function of the decision variable in each of the plurality of terms;

d) determining a composite function of the first function and the second function, wherein the composite function represents a mutual degree of satisfaction between the first party and the at least one other party to agree to the plurality of terms; and

e) determining a set of terms and a value for each of the decision variables for the agreement from a maximum of the composite function.

22. The method according to claim 21, wherein the step b) of collecting further comprises:

(i) collecting information from a plurality of other parties regarding the degrees of satisfaction of the plurality of other parties to enter into an agreement on individual ones of the plurality of terms; and

(ii) selecting from the information collected in step b)(i) the input regarding the degrees of satisfaction of the at least one other party to enter into the agreement with the first party on the individual ones of each of the plurality of terms in the agreement.

23. The method according to claim 21, wherein the at least one party includes a plurality of parties, and the step e) of determining a set of terms further comprises the step of identifying a set of parties that agree to the set of terms and values for the decision variables.

24. The method according to claim 21, further comprising the step of:

f) executing automatically an agreement according to the set of terms and decision variables determined in step e).

25. The method according to claim 24, wherein the step b) of collecting further comprises the steps of:

(i) collecting information from a plurality of other parties regarding the degrees of satisfaction of the plurality of other parties to enter into an agreement on the individual ones of the plurality of terms; and

(ii) selecting from the information collected in step b)(i) the input regarding the degrees of satisfaction of the at least one other party to enter into the agreement with the first party on the individual ones of each of the plurality of terms in the agreement.

26. The method according to claim 21, wherein the step e) of determining further comprises the steps of:

(i) determining an absolute maximum value of the composite function;

(ii) defining a region about the absolute maximum value of the composite function; and

(iii) determining a set of values for each of the decision variables yielding a value of the composite function that lies within the region defined in step e)(ii).

27. The method according to claim 26, wherein the step e)(iii) of determining further comprises the step of selecting the set of values for each of the decision variables using predetermined criteria.

28. The method according to claim 26, wherein the predetermined criteria includes a nearest practical decision variable.

29. The method according to claim 26, wherein the predetermined criteria includes within said region maximizing the decision variable in favor of the at least one other party.

30. A method for automatically negotiating an agreement between a first party and a plurality of other parties, wherein the agreement includes a plurality of terms and the identity of the plurality of other parties is not known to the first party or to each other but the parties have expressed a willingness to enter into a binding agreement regarding the plurality of terms, comprising the steps of:

a) inputting to a computer a first function expressing a degree of willingness of the first party to agree to the plurality of terms over a range of values of a decision variable;

b) collecting input from the plurality of other parties including a plurality of second functions expressing a degree of preference by the plurality of other parties to agree to individual ones of each of the plurality of terms as a function of the decision variable in each of the terms;

c) determining a joint function of the plurality of second functions as a function of the decision variable in each of the terms;

d) determining a composite function of the first function and the joint function, wherein the composite function represents the mutual degree of preference between the first party and the plurality of other parties to agree to the plurality of terms;

e) determining a maximum of the composite function;

f) obtaining a set of terms and decision points for the agreement represented by a point within a predetermined range about the maximum of the composite function; and

g) executing an agreement which includes the terms obtained in step f).

31. A method for collectively trading a plurality of different items, comprising the steps of:

a) collecting data from a first party desirous of simultaneously trading the plurality of different items that indicates a volume for each item, a range of costs for the collective trade, and a first factor indicative of the first party'"'"'s willingness to trade the plurality of different items at the specified volumes for each cost within the range of costs, while also collecting data from other parties that indicates for a given item, a particular price/volume combination and a second factor indicative of the party'"'"'s willingness to trade at that particular price/volume combination;

b) maximizing a mutual satisfaction for the first party and the other parties, wherein the maximum mutual satisfaction solution defines a trade in each of the plurality of different items between the first party and a subset of the other parties; and

c) executing automatically a trade defined in step b).

32. The method according to claim 31, further comprising the step of maintaining secret the identities of the first party and the other parties, unless a trade is executed, at which time only the parties involved in the trade are disclosed.

33. The method according to claim 31, further comprising the step of maintaining secret the first factor and the second factors even after the trade is executed.

34. The method according to claim 31, wherein the plurality of different items comprises a plurality of different securities.

35. The method according to claim 31, wherein the plurality of different items comprises a plurality of different non-securities.

36. The method according to claim 31, wherein the plurality of different items comprises a plurality of different goods.

37. The method according to claim 31, wherein the plurality of different items comprises a plurality of different services.

38. The method according to claim 31, wherein the first party defines the collective trade by specifying a volume of each item to be traded, and a degree of willingness to trade for each cost within the desired range of costs.

39. A method for performing simultaneous trading of a plurality of securities, comprising the steps of:

a) mapping data from a first party regarding a simultaneous trade of a plurality of securities as a group into a first function expressing degrees of satisfaction of the first party to trade the plurality of securities simultaneously as a group over a desired range of costs;

b) collecting in a central database input from a plurality of traders regarding a degree of satisfaction of each of the plurality of traders to take a position opposite to the first party in at least one of the plurality of securities as a function of price;

c) determining from the input of the plurality of traders a joint function expressing a joint degree of satisfaction by one or more second parties among the plurality of traders to take an opposite position in all of the plurality of securities as a function of price in each of the plurality of securities by

(i) constructing a sell contra satisfaction function for each security to be purchased by determining a minimum price for which the volume can be purchased, along with a corresponding volume-weighted satisfaction at that price;

(ii) incrementing the price upward from the minimum price;

(iii) calculating the volume-weighted satisfaction at each price increment until a volume-weighted satisfaction value of unity is obtained;

(iv) constructing a buy contra satisfaction function for each security to be sold by determining a maximum price for which the volume can be sold, along with a corresponding volume-weighted satisfaction at that price;

(vi) incrementing the price downward from the maximum price; and

(vii) calculating the volume-weighted satisfaction at each price increment until a volume-weighted satisfaction value of unity is obtained,

wherein the joint function is a function of each of the buy and sell contra satisfaction functions;

d) determining a composite function of the first function and the joint function, wherein the composite function represents a mutual degree of satisfaction to execute a trade of the plurality of securities between the first party and the one or more second parties; and

e) identifying for each of the plurality of securities a trading price, a trading volume and a trading party among the one or more second parties that maximizes the composite function.

40. The method according to claim 39, wherein the joint function is a product of the buy and sell contra side satisfaction functions.

41. The method according to claim 39, wherein the buy and sell contra side satisfaction functions include limit orders.

42. A system for trading a collection of different assets or liabilities simultaneously, comprising:

a) a plurality of terminals via which a first party desirous of trading the collection enters data regarding its degree of satisfaction in trading the collection and a plurality of second parties enter data regarding their degree of satisfaction in trading components of the collection; and

b) a controller executing a trade of the collection of different assets or liabilities simultaneously in accordance with a maximization of a mutual satisfaction of the first and second parties.

43. A method for trading a collection of different assets or liabilities that includes the steps of executing a simultaneous trade of the collection of different assets or liabilities in accordance with a maximization of the mutual satisfaction of a party desirous of trading the collection and a plurality of other parties desirous of taking a contra position in individual components of the collection.

44. A system for automatically trading a plurality of different securities simultaneously comprising:

a) a first workstation at which a linked trader can input a satisfaction density profile that defines its degree of satisfaction to trade different securities simultaneously based on the overall cost of the transaction;

b) a plurality of other workstations at which individual securities traders can enter a satisfaction density profile that indicates their degree of satisfaction to trade particular securities as a function of price/volume; and

c) a central control engine determining;

(1) a satisfaction density function for each of the individual securities based on the input of the traders,

(2) determining a joint satisfaction function for all of the different securities from the individual satisfaction density functions,

(3) determining a mutual satisfaction function from the joint satisfaction function and the satisfaction density profile entered by the linked trader, and

(4) maximizing the mutual satisfaction function, which establishes a set of prices, volumes and parties for trading each of the individual securities, and

(5) executing simultaneously a trade among the identified parties for the different securities at the established prices and volumes.

45. The system according to claim 44, wherein the plurality of other workstations include a plurality of personal computers.

46. The system according to claim 44, wherein the plurality of other workstations include a plurality of display terminals operated by the central control engine.

47. The system according to claim 44, wherein the plurality of other workstations include a high performance workstation.

48. The system according to claim 44, wherein the plurality of other workstations include a RISC based workstation.

49. The system according to claim 44, wherein the plurality of other workstations include a UNIX based workstation.

50. The system according to claim 44, wherein the central control engine includes a mainframe computer.

51. The system according to claim 44, further comprising a central database coupled to the plurality of other workstations, the first workstation and the central control engine, and storing input from each of the plurality of traders regarding a degree of satisfaction of each of the plurality of traders to take a position in a plurality of different securities as a function of price.

52. The system according to claim 51, further comprising an extraction routine operating under control of the central control engine and extracting from information stored in the database the degrees of satisfaction of the plurality of traders to take a position opposite to the first party in each of the different securities.

53. An apparatus for determining trading parties, trading prices and trading volumes for performing simultaneous trading of a plurality of different securities, comprising:

a) a graphical user interface mapping data from a first party regarding a simultaneous trade of a plurality of different securities as a group into a first function expressing degrees of satisfaction of the first party to trade the plurality of different securities simultaneously as a group over a desired range of costs;

b) a central database for collecting input from a plurality of traders regarding a degree of satisfaction of each of the plurality of traders to take a position opposite to the first party in at least one of the plurality of different securities as a function of price; and

c) a processor determining from the input of the plurality of traders a joint function expressing a joint degree of satisfaction by one or more second parties among the plurality of traders to take an opposite position in all of the plurality of different securities as a function of price in each of the plurality of different securities, determining a composite function of the first function and the joint function, wherein the composite function represents a mutual degree of satisfaction to execute a trade of the plurality of different securities between the first party and the one or more second parties, and identifying for each of the plurality of different securities a trading price, a trading volume and a trading party among the one or more second parties that maximizes the composite function.

54. The apparatus according to claim 53, further comprising means for executing simultaneously with the first party and the trading parties a trade in the plurality of different securities at the trading prices and the trading volumes identified by the processor.

55. The apparatus according to claim 53, further comprising a routine running under control of the processor for extracting information from the database under control of the processor, wherein the database collects and stores information from the plurality of traders regarding the degrees of satisfaction of the plurality of traders to take either position in the plurality of different securities, and the extraction routine selects from the information collected by the database the input regarding the degrees of satisfaction of the plurality of traders to take a position opposite to the first party in each of the plurality of different securities.

56. A device for automatically determining a set of terms of an agreement between a first party and at least one other party, wherein the agreement includes a plurality of terms, comprising:

a) a user terminal for mapping input from the first party regarding the plurality of terms in the agreement into a first function expressing a degree of satisfaction of the first party to agree to the plurality of terms over a range of decision variables;

b) a plurality of terminals via which other parties enter input regarding a degree of satisfaction to enter into an agreement on individual ones of the plurality of terms;

c) a database collecting input from at least one other party entered via the plurality of terminals regarding the degree of satisfaction of the at least one other party to enter into the agreement with the first party on the plurality of terms; and

d) a processor mapping the input from the database into a second function expressing the degree of satisfaction of the at least one other party to agree to the terms as a function of decision variables in each of the terms, determining a composite function of the first function and the second function, wherein the composite function represents a mutual degree of satisfaction between the first party and the at least one other party to agree to the plurality of terms, and determining a set of terms and a value for each of the decision variables for the agreement from a maximum of the composite function.

57. The device according to claim 56, further comprising:

e) means for executing automatically an agreement according to the set of terms determined by the processor.

58. The device according to claim 56, further comprising a routine for extracting information from the database under control of the processor, wherein the database collects information from a plurality of other parties regarding the degrees of satisfaction of the plurality of other parties to enter into an agreement about the plurality of terms, and the extraction routine selects from the information collected in the database the input regarding the degrees of satisfaction of the at least one other party to enter into the agreement with the first party in each of the plurality of terms in the agreement.

59. In a system for performing simultaneous trading of a plurality of different securities, a device for determining trading parties, trading prices and trading volumes for the simultaneous trading of the plurality of different securities, comprising:

a) means for mapping data from a first party regarding a simultaneous trade of a plurality of different securities as a group into a first function expressing degrees of satisfaction of the first party to trade the plurality of different securities simultaneously as a group over a desired range of costs;

b) means for collecting input from a plurality of traders regarding a degree of satisfaction of each of the plurality of traders to take a position opposite to the first party in at least one of the plurality of different securities as a function of price;

c) means for determining from the input of the plurality of traders a joint function expressing a joint degree of satisfaction by one or more second parties among the plurality of traders to take an opposite position in all of the plurality of different securities as a function of price in each of the plurality of different securities;

d) means for determining a composite function of the first function and the joint function, wherein the composite function represents a mutual degree of satisfaction to execute a trade of the plurality of different securities between the first party and the one or more second parties; and

e) means for identifying for each of the plurality of different securities a trading price, a trading volume and a trading party among the one or more second parties that maximizes the composite function.

60. The device according to claim 59, further comprising means for executing simultaneously with the first party and the trading parties a trade in the plurality of different securities at the trading prices and the trading volumes identified by the means for identifying.

61. The device according to claim 59, wherein the means for collecting further comprises:

means for collecting information from the plurality of traders regarding the degrees of satisfaction of the plurality of traders to take either position in the plurality of different securities; and

means for selecting from the information collected by the means for collecting the input regarding the degrees of satisfaction of the plurality of traders to take a position opposite to the first party in each of the plurality of different securities.

62. The device according to claim 59, wherein the means for identifying further comprises:

means for determining an absolute maximum value of the composite function;

defining a region about the absolute maximum value of the composite function; and

determining a trading price, a trading volume and a trading party for each security of the plurality of different securities so that a resulting value of the composite function lies within the defined region.