Automated auction protocol processor

• US 6,560,580 B1
• Filed: 04/20/1999
• Issued: 05/06/2003
• Est. Priority Date: 12/13/1996
• Status: Expired due to Term

• Current Assignee: Cantor Fitzgerald, L.P., CFPH LLC (Cantor Fitzgerald, L.P.)
• Original Assignee: Cantor Fitzgerald, L.P., CFPH LLC (Cantor Fitzgerald, L.P.)
• Inventors: Paul, Bijoy, Fraser, Stuart A., Lutnick, Howard
• Primary Examiner(s): Myhre, James W.
• Application Number:
  US09/294,526
• Time in Patent Office: 1,477 Days
• Field of Search: 705/35, 705/36, 705/37
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• 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 data processing system for implementing transaction management of auction-based trading for specialized items such as fixed income instruments. The data processing system provides a highly structured trading protocol implemented through a sequence of trading paradigms. The system employs a distributed computer processing network linking together a plurality of commonly programmed controlled workstations. The protocol and its programmed controlling logic enhances trading efficiency, rewards market makers and fairly distributes market opportunity to system users.

Claims

1. A method implemented by a programmed computer system for trading a volume of an item between participants, comprising:

providing a bid/offer system state to enable participants to enter into the system bids and offers at select prices and volumes for the item;

presenting the bids and offers to the participants;

receiving a first hit or lift trade command from a first participant, responding to presented bids and offers, to transact a trade of a desired volume of the item at a desired price;

in response to the first trade command, transitioning from the bid/offer system state to a trading system state to transact a trade of the item at a defined price corresponding to the desired price, and to transact in response to an additional trade command a trade of an additional volume of the item at the defined price; and

if a bid or offer hit or lifted by the first trade command has not aged, transitioning to a second look system state to enable the first participant to refuse to trade at least a portion of the volume of the item associated with the unaged bid or offer.

2. The method of claim 1, wherein the desired volume is all bid or offered volume.

3. The method of claim 1, wherein the first participant is enabled to refuse to trade the entire volume associated with the unaged bid or offer.

4. The method of claim 1, wherein if the first participant refuses to trade a portion of the entire volume associated with the unaged bid or offer, enabling a second participant to enter a second hit or lift trade command to trade the portion at the defined price.

5. The method of claim 1, wherein a bid or offer is not aged if it had been entered into the system within a given period of time prior to receipt of the trade command.

6. The method of claim 5, wherein the given period of time is about 2 seconds.

7. The method of claim 1, wherein a bid or offer is not aged if it increased the total volume of the item that was hit or lifted within a given period of time prior to receipt of the trade command.

8. A method implemented by a programmed computer system for trading a volume of an item between participants, comprising:

providing a bid/offer system state to enable participants to enter into the system bids and offers at select prices and volumes for the item;

presenting the bids and offers to the participants;

receiving a first hit or lift trade command from a first participant, responding to presented bids and offers, to transact a trade of a desired volume of the item at a desired price;

in response to the first trade command, transitioning from the bid/offer system state to a trading system state to transact a trade of the item at a price defined by the desired price, and to transact in response to an additional trade command a trade of an additional volume of the item at the defined price; and

determining that the first participant may not have intended to trade the entire volume that was hit or lifted by the trade command, and responsively entering a second look system state enabling the first participant to refuse to trade at least a portion of the volume of the item that the first participant may not have intended to trade.

9. The method of claim 8, wherein the desired volume is all bid or offered volume.

10. The method of claim 8, wherein the first participant is enabled to refuse to trade the entire volume of the item that the first participant may not have intended to trade.

11. The method of claim 8, wherein if the first participant refuses to trade a portion of the volume of the item that the first participant may not have intended to trade, enabling a second participant to trade the refused volume at the defined price.

12. The method of claim 8, wherein said determining step determines that the first participant may not have intended to trade the entire volume if a bid or offer hit or lifted by the first trade command has not aged.

13. The method of claim 8, wherein said determining step determines that the first participant may not have intended to trade the entire volume that was hit or lifted if that volume had been increased by a bid or offer within a given period of time prior to receipt of the hit or lift.

14. A method implemented by a programmed computer for trading a volume of an item between participants using a system of networked workstations, comprising:

providing a bid/offer system state wherein passive participants enters bids or offers for the item at associated select prices and volumes, and an active participant hits or lifts one or more entered bids or offers to trade a desired volume of the item at a desired price;

determining whether a bid or offer that was hit or lifted had aged;

if the bid or offer had aged, executing a trade of the associated volume of the item at the desired price; and

if the bid or offer had not aged, providing a second look system state that allows the active participant to decide whether or not to trade the volume of the item associated with the unaged bid or offer.

15. The method of claim 14, wherein a bid or offer is not aged if it was received within a given period of time prior to being hit or lifted.

16. The method of claim 15, wherein the given period of time is about 2 seconds.

17. The method of claim 14, wherein a bid or offer is not aged if it caused the total volume of bids or offers that was hit or lifted by the active participant to be increased within a given period of time prior to the bid or offer being hit or lifted.

18. The method of claim 14, wherein the active participant in the second look state may refuse to trade all or a portion of the volume of the item associated with the unaged bid or offer.

19. The method of claim 14, wherein the hit or lift entered by the active participant is a command to hit or lift all of the volume bid or offered by the passive participants.

20. A method implemented on a distributed workstation computer system for trading an item between passive participants and an aggressor participant, the method comprising:

providing a bid/offer system state wherein the passive participants participate by entering bids or offers at select prices and volumes for the item;

distributing the bids or offers to the workstations;

receiving a hit or lift from the aggressor participant in response to one or more of the bids or offers to trade a desired volume of the item at a desired price; and

transitioning to a trading system state wherein;

(a) a trade transaction is executed, at a defined price set by the hit or lift, between the aggressor participant and each passive participant whose bid or offer had been hit or lifted by the aggressor participant;

(b) a period of exclusivity is provided during which the aggressor participant and a designated passive participant may control trading by transacting additional volume of the item with each other at the defined price to the exclusion of other participants desiring to participate in trading; and

(c) upon termination of the period of exclusivity, new trade transactions involving the other participants are tested for and executed at the defined price without providing the other participants a period of exclusivity to control trading.

21. The method of claim 20, wherein said designated passive participant is the first passive participant to have entered a bid or offer that was hit or lifted.

22. A method implemented on a distributed-workstation computer system for trading an item between participants, said method comprising:

providing a bid/offer system state wherein a first participant enters a bid or offer for the item at a select price and volume;

receiving from a second participant a trade command to hit or lift the bid or offer;

entering a trading system state wherein a trade transaction is executed between the first and second participants for a volume of the item at a defined price, and wherein (a) the first and second participants are provided a period to control trading, during which they may transact with each other additional volume of the item at the defined price to the exclusion of other participants desiring to participate in the trade, and (b) upon conclusion of the period, a new trade transaction is automatically executed at the defined price in response to a trade command entered by another participant without providing the other participant a period to control the trade.

23. The method of claim 22, wherein the trade command entered by the other participant is entered during the period to control trading but not executed until the conclusion of said period.

24. A method implemented on a distributed-workstation computer system for trading an item between participants, said method comprising:

providing a bid/offer system state wherein a first participant enters a bid or offer for the item at a select price and volume;

receiving from a second participant a trade command to hit or lift the bid or offer;

entering a trading system state wherein a trade transaction is executed between the first and second participants for a volume of the item at a defined price, and wherein (a) the first and second participants are provided a period to control trading, during which they may transact with each other additional volume of the item at the defined price to the exclusion of other participants desiring to participate in the trade, and (b) upon conclusion of the period, new transactions are automatically executed at the defined price in response to a plurality of trade commands entered by other participants without providing the other participants a period to control the trade.

25. The method of claim 24, wherein the plurality of trade commands are entered during the period to control trading but not executed until the conclusion of said period.

26. A system for transacting the purchase and sale of a select item between participants, the system comprising:

a first workstation that receives from a first participant a bid or offer at a select price and volume for the item;

a second workstation that receives from a second participant a hit or lift of the bid or offer; and

a central server that is coupled to the workstations for communication to the server of the bid or offer and hit or lift, and that transitions between a plurality of states which define the ability of participants to participate in trading, wherein the plurality of states includes a first state enabling the bid or offer to be received, and a second state entered in response to the hit or lift being received within a given time period of the bid or offer, said second state enabling the second participant to refuse the sale or purchase of at least a portion of the volume of the item that was hit or lifted.

27. The system of claim 26, wherein one of the first and second participants is a broker, and the other of the first and second participants is a customer.

28. The system of claim 26, further comprising:

a communication server coupled to the central server and to a remote communications link; and

a remote server located remotely from the communication server and coupled to the communication server via the remote communications link;

wherein;

said first workstation is one of a plurality of first workstations located locally to the central server and coupled to the central server via a local network, each of said first workstations operated by a broker participant; and

said second workstation is remotely located from said central server and coupled to said central server via a remote communications link, and operated by a customer participant.

29. A system for trading an item between an aggressor participant and one or more passive participants, comprising:

a first workstation that receives bids or offers from the passive participants for the item at select prices and volumes;

a second workstation that receives a trade command from the aggressor participant to hit or lift one or more of the bids or offers in order to sell or buy a desired volume of the item at a desired price; and

a programmed computer, coupled to the workstations, that (1) provides a system bid/offer state enabling the passive participants to participate by entering bids or offers with respect to the item and that, in response to a hit or lift of one or more of the entered bids or offers, and (2) transitions to a system trading state which (a) executes a trade transaction in accordance with the hit or lift at a defined price set by the hit or lift, (b) provides a period of exclusivity enabling the aggressor participant and a designated passive participant to control subsequent trading by executing transactions between the aggressor and designated passive participant of additional volume of the item at the defined price to the exclusion of other participants desiring to participate in the trading, and (c) upon termination of the period of exclusivity, executes new trade transactions involving the other participants at the defined price without providing the other participants a period of exclusivity to control trading.

30. The method of claim 29, wherein the other participants may enter trade commands for the new trade transactions during the period of exclusivity, and the new trade transactions are only executed, if at all, after the conclusion of said period.

31. The system of claim 29, wherein said programmed computer determines whether a bid or offer hit or lifted by the trade command is aged and, if the bid or offer is not aged, transitions to a second look state in which the aggressor participant is enabled to refuse the sale or purchase of at least a portion of the volume of the item associated with the unaged bid or offer.