Automated system for conditional order transactions in securities or other items in commerce

• US 6,418,419 B1
• Filed: 07/23/1999
• Issued: 07/09/2002
• Est. Priority Date: 07/23/1999
• Status: Expired due to Term

• Current Assignee: 5th Market Incorporated
• Original Assignee: 5th Market Incorporated
• Inventors: Nieboer, Robert Scott, Balcarce, Pedro V., Zhidov, Ivan N., Eldred, Micah James
• Primary Examiner(s): Coggins, Wynn
• Assistant Examiner(s): Thompson, Jr., Forest
• Application Number:
  US09/359,686
• Time in Patent Office: 1,082 Days
• Field of Search: 705/37
• US Class Current: 705/37
• 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 50/16 Real estate

Abstract

An apparatus and method of automatically and anonymously buying and selling positions in fungible properties between subscribers. The specific embodiment described in the disclosure relates to the buying and selling of securities or contracts where the offer to purchase or sell the property may be conditioned upon factors such as the ability to purchase or sell other property or the actual purchase or sale of other property. Specifically, the system described includes methods by which the system will sort and display the information available on each order, methods by which the system will match buy and sell order and attempt to use other markets to effect the execution of transactions without violating conditions set by the subscriber, methods by which the apparatus will execute transaction and report prices to third parties such that the user is satisfied and short sales are reported as prescribed by the rules and regulations of the appropriate regulatory body governing each subscriber in the associated transaction. A communication system is described which allows subscribers to communicate anonymously for the purpose of effecting transactions in such property under such conditions.

Claims

1. A conditional order transaction network that matches or compares buy and sell orders for a plurality of security instruments based upon conditions set forth within the order, including price represented as an algorithm with constraints thereon, the transaction network comprising:

a variable number of trader terminals for entering an order for a security instrument in the form of an algorithm with constraints thereon that represent a willingness to transact, where price of one security is a dependent variable of the algorithm within the constraints and dynamically changing price of another security is an independent variable thereof, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, the algorithm representing a buy or sell order; and

at least one controller computer coupled to each of the trader terminals over a communications network and receiving as inputs,

a) each algorithm with its corresponding constraints and

b) at least one external price feed depicting prices of various securities and contracts from external multiple exchanges which may be used as an independent variable of the algorithm or an input to a constraint variable, the controller computer comprising,

means for matching, in accordance with the constraints and conditions, algorithmic buy orders with algorithmic sell orders, one of the conditions being the requirement that two or more securities are tradable contemporaneously as a contingent trade of those respective securities, and

means for matching or comparing, in accordance with the constraints and conditions, algorithmic buy/sell orders with algorithmic or non-algorithmic sell/buy orders through the use of the external multiple data sources.

2. The conditional order transaction network of claim 1 wherein the order price, as represented in the form of an algorithm, includes an order quantity subject to another algorithm.

3. The conditional order transaction network of claim 2 wherein the price may be a yield.

4. The conditional order transaction network of claim 2 wherein the price may be a volatility.

5. The conditional order transaction network of claim 2 wherein the price may be a yield spread.

6. The conditional order transaction network of claim 1 wherein the controller computer matches/compares orders in real-time as each order is received at the controller computer and as each new price of each other underlying security is received at the controller computer.

7. The conditional order transaction network of claim 1 further comprising means for maintaining the identity of the terminal on which the order was entered.

8. The conditional order transaction network of claim 1 wherein the order algorithm can be represented as a line in two dimensional space with constraints having the price of one security as one axis and the price of another security as its other axis.

9. The conditional order transaction network of claim 1 wherein the instrument includes bonds.

10. The conditional order transaction network of claim 1 wherein the instrument includes warrants.

11. The conditional order transaction network of claim 1 wherein the independent variable may include multiple independent variables.

12. The conditional order transaction network of claim 1 wherein the sell order includes a sell short order.

13. The conditional order transaction network of claim 1 wherein the instrument includes convertible securities.

14. The conditional order transaction network of claim 1 wherein the instrument includes stocks.

15. The conditional order transaction network of claim 1 wherein the instrument includes options.

16. The conditional order transaction network of claim 1 wherein the instrument includes futures.

17. The conditional order transaction network of claim 1 wherein the instrument includes forward contracts.

18. The conditional order transaction network of claim 1 wherein the instrument includes swap contracts.

19. The conditional order transaction network of claim 1 wherein one of the conditions is that no transaction can occur when the independent variable price is above or below set limits.

20. The conditional order transaction network of claim 1 wherein one of the conditions is that the price is not to exceed a specified level regardless of the results produced by the algorithm.

21. The conditional order transaction network of claim 1 wherein one of the conditions is that the price is not to be less than a specified level regardless of the results produced by the algorithm.

22. The conditional order transaction network of claim 1 wherein one of the conditions is the requirement that the orders be matched/compared without use of prices fed from said external multiple exchanges.

23. The conditional order transaction network of claim 1, further including a plurality of trader workstations for trading and negotiating prospective trades for instruments referenced in buy and sell orders, based upon conditions set forth in the orders including price represented by an algorithm with constraints thereon, each workstation comprising;

a display device for displaying the selected parameters of buy and sell orders in a prioritized sequence in a descending order of favorability across a display field, with the most favorable order at one distal end and the least favorable at the other distal end;

an input device for entering outgoing orders to be traded or negotiated into the trader workstation; and

a computer for receiving the outgoing orders and incoming order information from traders'"'"' terminals, and for controlling the display device, said computer including,

a comparator for comparing all incoming orders relative to outgoing orders, and

a sorter that resequences the orders in real-time in the display field as each order is received to reflect changes in the relative favorability of the orders responsive to changes in price of said another item as the independent variable.

24. A trader workstation for trading and negotiating prospective trades for securities referenced in buy and sell orders, based upon conditions set forth in the orders including price represented by an algorithm with constraints thereon, said algorithm representing a willingness to transact wherein price is a dependent variable of the algorithm and dynamically changing price of another security is an independent variable, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, comprising;

a display device for displaying the selected parameters of buy and sell orders in a prioritized sequence in a descending order of favorability across a display field, with the most favorable order at one distal end and the least favorable at the other distal end;

an input device for entering outgoing orders to be traded or negotiated into the trader workstation; and

a computer for receiving the outgoing orders and incoming order information from traders'"'"' terminals, and for controlling the display device, said computer including,

a comparator for comparing all incoming orders relative to outgoing orders, and

a sorter that resequences the orders in real-time in the display field as each order is received to reflect changes in the relative favorability of the orders responsive to dynamic changes in price of said another security as the independent variable.

25. The workstation of claim 24 wherein the order price, as represented by an algorithm, includes an order quantity subject to another algorithm.

26. The workstation of claim 25 wherein price may be a yield.

27. The workstation of claim 25 wherein price may be a volatility.

28. The workstation of claim 25 wherein price may be a yield spread.

29. The workstation of claim 24 wherein the computer matches/compares orders in real-time as each order is received at the computer and as each new price of each other conditional security is received at the computer.

30. The workstation of claim 24 further comprising means for maintaining the identity of the trader'"'"'s terminal on which the order was entered.

31. The workstation of claim 24 wherein the order algorithm can be represented as a line in two-dimensional space with constraints having price of one security as one axis and price of another security as its other axis.

32. The workstation of claim 24 wherein the sell order includes a sell short order.

33. The workstation of claim 24 wherein the instrument includes convertible securities.

34. The workstation of claim 24 wherein the instrument includes stocks.

35. The workstation of claim 24 wherein the instrument includes options.

36. The workstation of claim 24 wherein the instrument includes futures.

37. The workstation of claim 24 wherein the instrument includes forward contracts.

38. The workstation of claim 24 wherein the instrument includes swap contracts.

39. The workstation of claim 24 wherein the relative favorability is determined by the current value of the underlying security.

40. The workstation of claim 24 wherein said display device further includes a ticker field, for displaying changing security values from external markets, an order entry field, for displaying current order information of the algorithms to be negotiated/traded, and a wild card field, for displaying research data related to the algorithms.

41. A conditional order transaction network that matches or compares buy and sell orders for a plurality of items based upon conditions set forth within the order, including price represented as an algorithm with constraints thereon, the conditional order transaction network comprising:

a variable number of trader terminals for entering an order for an item in the form of an algorithm with constraints thereon that represent a willingness to transact, where price of one item is a dependent variable of the algorithm within the constraints and dynamically changing price of another item is an independent variable thereof, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, the algorithm representing a buy or sell order; and

controller computer means coupled to each of the trader terminals over a communications network and receiving as inputs, each algorithm with its corresponding constraints; and

means for matching, in accordance with the constraints and conditions, algorithmic or non-algorithmic buy orders with algorithmic or non-algorithmic sell orders, one of the conditions being the requirement that two or more securities are tradable contemporaneously as a contingent trade of those respective securities responsive to changes in price of said another item as the independent variable.

42. The conditional order transaction network of claim 41, further including a plurality of trader workstations for trading and negotiating prospective trades for instruments referenced in buy and sell orders, based upon conditions set forth in the orders including price represented by an algorithm with constraints thereon, each workstation comprising;

a display device for displaying the selected parameters of buy and sell orders in a prioritized sequence in a descending order of favorability across a display field, with the most favorable order at one distal end and the least favorable at the other distal end;

an input device for entering outgoing orders to be traded or negotiated into the trader workstation; and

a computer for receiving the outgoing orders and incoming order information from traders'"'"' terminals, and for controlling the display device, said computer including,

a comparator for comparing all incoming orders relative to outgoing orders, and

a sorter that resequences the orders in real-time in the display field as each order is received to reflect changes in the relative favorability of the orders responsive to changes in price of said another item as the independent variable.

43. A conditional order transaction network that electronically matches or compares buy and sell orders for a plurality of items from the same or diverse markets based upon conditions set forth within the order, including the represented as an algorithm with constraints thereon, the conditional order transaction network comprising:

a variable number of trader terminals for entering an order for an item in the form of an algorithm with constraints thereon that represent a willingness to transact, where dynamically changing price is the dependent variable of the algorithm within the constraints and price of another item as an independent variable, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, the algorithm representing a buy or sell order; and

controller computer means coupled to each of the trader terminals over a communications network and receiving as inputs, each algorithm with its corresponding constraints;

means for matching, in accordance with the constraints and conditions, algorithmic or non-algorithmic buy orders with algorithmic or non-algorithmic sell orders, one of the conditions being the requirement that two or more items are tradable contemporaneously as a contingent trade of those respective items; and

simultaneously executing a trade of said items in the same or diverse markets as a single electronically matched trade responsive to dynamic changes in price of said another item as the independent variable.