Method and apparatus for setting a price for a security on an automated exchange based on a comparison of prices on other exchanges

• US 6,377,940 B2
• Filed: 11/05/1998
• Issued: 04/23/2002
• Est. Priority Date: 11/05/1998
• Status: Expired due to Term

• Current Assignee: International Securities Exchange LLC (Nasdaq, Inc.)
• Original Assignee: International Securities Exchange LLC (Nasdaq, Inc.)
• Inventors: Katz, Gary, Tilfors, Jan
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): AKERS, GEOFFREY R
• Application Number:
  US09/186,155
• Publication Number:
  US 20020019794A1
• Time in Patent Office: 1,265 Days
• Field of Search: 705/35, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

In an automated exchange system a method and a device which automatically checks the corresponding price in other exchange'"'"'s order books is provided the exchange only allows a match if a better price cannot be found elsewhere. In a preferred embodiment the order is automatically transferred to the exchange having the better price if this is the case, and the order is further processed at that exchange the method and device provides means so that investors will not have to worry about getting a better price elsewhere, when entering bids into an automated exchange.

Claims

1. A method in an automated exchange being connected to one or more remote exchanges, comprising the steps of:

receiving an adjusted price parameter by the automated exchange from a market maker, wherein the adjusted price parameter includes a price differential and an adjusted size;

receiving an order by the automated exchange;

establishing an automated exchange price;

checking prices for matching the order on the one or more remote exchanges;

determining which of the automated exchange price and the prices on the one or more remote exchanges is a best price for matching the received order;

determining that a difference between the automated exchange price and the best price equals the price differential;

determining that a size of the order is less than the adjusted size; and

automatically offering the best price to trade the received order without adjusting the automated exchange price.

2. A method according to claim 1, further comprising:

determining that the size of the order is greater than the adjusted size;

issuing a message to the market maker; and

receiving from the market maker a manually entered price.

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

storing the automated exchange price at a time the order is received.

9. A method according to claim 2, comprising the further step of:

storing the automated exchange price at a time the order is received.

3. A method in an automated exchange being connected to one or more remote exchanges, comprising the steps of:

receiving an order by the automated exchange;

storing a price offered by the automated exchange at a time the order is received;

checking prices for matching the order on the one or more remote exchanges;

establishing a next automated exchange price to match the order at a time after the order is received;

determining which of the next automated exchange price and the prices on the one or more remote exchanges is a best price for matching the order; and

comparing the stored price with the best price and, if the stored price is better than the best price, automatically trading the received order at the stored price.

4. An automated exchange connected with one or more remote exchanges, the automated exchange comprising:

means for receiving an adjusted price parameter from a market maker, wherein the adjusted price parameter includes a price differential and an adjusted size;

means for receiving an order;

means for establishing an automated exchange price;

means for comparing the automated exchange price with prices for matching the received order on the one or more remote exchanges to determine a best price for matching the received order;

means for determining that a difference between the automated exchange price and the best price equals the price differential;

means for determining that a size of the order is less than the adjusted size; and

means for automatically offering the best price to trade the received order without adjusting the automated exchange price.

5. An automated exchange according to claim 4, further comprising:

means for determining that the difference is greater than the price differential;

means for issuing a message to the market maker; and

means for receiving from the market maker a manually entered price.

8. An automated exchange according to claim 4, further comprising means for storing the automated exchange price at a time the order is received.

10. An automated exchange according to claim 5, further comprising means for storing the automated exchange price at a time the order is received.

6. An automated exchange connected with one or more remote exchanges, the automated exchange comprising:

means for receiving an order;

means for storing a price offered by the automated exchange at a time the order is received;

means for establishing a next price for matching the order at a time after the order is received;

means for comparing the next price for matching the order with prices for matching the order on the one or more remote exchanges to determine a best price for matching the order;

means for comparing the stored price with the best price; and

means for automatically offering the better of the stored price and the best price.

11. A method in an automated exchange being connected to one or more remote exchanges, comprising the steps of:

receiving an adjusted price parameter by the automated exchange from a market maker, wherein the adjusted price parameter includes a price differential and an adjusted size;

receiving an order by the automated exchange;

establishing a first automated exchange price;

storing the first automated exchange price at a time the order is received;

checking prices for matching the order on the one or more remote exchanges;

establishing a second automated exchange price at a time after the order is received;

comparing the second automated exchange price with the prices offered by the remote exchanges to determine a best price;

determining that a difference between the second automated exchange price and the best price equals the price differential;

determining that a size of the order is less than the adjusted size;

comparing the stored first automated exchange price with the best price; and

if the stored first automated exchange price is better than the best price, automatically offering the stored first automated exchange price without adjusting the second automated exchange price.

12. An automated exchange connected with one or more remote exchanges, comprising:

means for receiving an adjusted price parameter by the automated exchange from a market maker, wherein the adjusted price parameter includes a price differential and an adjusted size;

means for receiving an order;

means for establishing a first automated exchange price;

means for storing the first automated exchange price at a time the order is received;

means for checking prices for matching the order on the one or more remote exchanges;

means for establishing a second automated exchange price at a time after the order is received;

means for comparing the second automated exchange price with the prices offered by the remote exchanges to determine a best price;

means for determining that a difference between the second automated exchange price and the best price equals the price differential;

means for determining that a size of the order is less than the adjusted size;

means for comparing the stored first automated exchange price with the best price; and

if the stored first automated exchange price is better than the best price, means for automatically offering the stored first automated exchange price without adjusting the second automated exchange price.