Computer method and system for intermediated exchanges

• US 6,968,318 B1
• Filed: 12/11/1998
• Issued: 11/22/2005
• Est. Priority Date: 05/15/1997
• Status: Expired due to Fees

• Current Assignee: ITG Software Solutions, Inc. (Virtu Financial, Inc.)
• Original Assignee: ITG Software Solutions, Inc. (Virtu Financial, Inc.)
• Inventors: Ferstenberg, Robert A., Karchmer, Mauricio, Hilai, Ran
• Primary Examiner(s): Myhre, James W.
• Application Number:
  US09/209,815
• Time in Patent Office: 2,538 Days
• Field of Search: 705/37, 705/38, 705/36
• 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 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 50/188 Electronic negotiation

Abstract

In a preferred embodiment, this invention includes software processes distributed on one or more computer systems that exchange messages in order to facilitate an intermediated exchange of financial commodities between a plurality of participants. The messages are exchanged according to a preferred protocol that leads to a satisfactory exchange that meets the objectives of the participants, and that substantially maximizes in a fair manner the total amount of financial commodities exchanged. Optionally, the invention employs heuristic rules in association with the preferred protocol that adapt the protocol to the time and exchange requirements of financial commodities. In other embodiments, this invention is equally applicable to the exchange of any tangible or intangible commodities. In a general embodiment, this invention further includes a preferred message-exchange protocol for the construction of computer programs representing exchange participants and an intermediary. These constructed computer programs exchange messages such that a satisfactory intermediated exchange of commodities is substantially certain to be achieved.

Claims

1. A computer implemented method for an electronic intermediated exchange of a plurality of commodities among a plurality of participants comprising the electronic negotiation steps of:

(a) generating electronic opening messages from the participants to the intermediary, wherein the opening messages comprise digital data representing opening requests of the participants to buy and/or to sell amounts of one or more commodities, and wherein, for at least one commodity both buy and sell requests are generated by participants;

(b) generating electronic offer messages to the participants from the intermediary in response to received messages from said participants, wherein the content of the electronic offer messages are determined by the intermediary based on said received messages and comprise digital data representing offers to the participants respectively to buy and/or to sell amounts of one or more commodities requested in said opening messages by said participants respectively to be sold and/or bought, with each offer being less than or equal to the amounts represented in the corresponding opening request, and wherein, for at least one commodity, the offer messages comprise both buy and sell offers, and wherein, for said at least one commodity, the total of the amounts offered for sale in all the generated offer messages equals the total of the amounts offered for purchase in all the generated offer messages,

(c) generating electronic counter-offer messages from the participants to the intermediary in response to received electronic offer messages, wherein the electronic counter-offer messages comprise digital data representing further requests to buy and/or to sell amounts of one or more commodities with each further request being less than or equal to the amounts represented in the corresponding opening request, wherein, for at least one commodity, the counter-offer messages comprise both buy and sell requests; and

(d) repeating steps (b) and (c), if necessary, until the last offer message to each participant from the intermediary is indicated in a responsive message to the intermediary from that participant to represent offered amounts of one or more commodities to buy and/or to sell in the exchange that are substantially satisfactory according to that participant'"'"'s individual exchange objectives,

whereby the substantially-satisfactory offered amounts as negotiated through the intermediary determine an exchange of a plurality of commodities among a plurality of participants.

2. The method of claim 1 wherein the intermediated exchange is determined without any messages being sent directly from any one participant to any other participant.

3. The method of claim 1 further comprising, before the step of generating opening messages, a step of generating a plurality of electronic initial messages from the participants to the intermediary, and wherein the initial messages comprise digital data representing the identities of the commodities that the participants may exchange in the intermediated exchange.

4. The method of claim 1 wherein electronic offer messages are generated so that, after a number of repeats of steps (b) and (c), there is at least one commodity and at least one participant for which the amount offered for sale or purchase is less than the amount previously offered.

5. The method of claim 1 wherein counter-offer messages sent from each participant are generated so that counter-offered commodity amounts are less than or equal to corresponding offered commodity amounts represented in the previous offer message.

6. The method of claim 1 wherein the messages are generated so that the exchange is determined in 90 seconds or less.

7. The method of claim 1 further comprising, before the step of generating opening messages, a step of receiving and storing by the intermediary of electronic objective messages from an operator of the electronic intermediated exchange, each of the electronic objective messages including digital data representing the objectives of said intermediated exchange.

8. The method of claim 1 further comprising a step of determining, for each participant, the monies due from and the monies due to the participant in dependence on the participant'"'"'s substantially-satisfactory commodity amounts and on concurrent commodity prices.

9. The method of claim 8 further comprising obtaining the concurrent commodity prices from an external source.

10. A computer implemented method for intermediating electronic exchange of a plurality of commodities among a plurality of participants comprising the steps of:

(a) receiving from the participants

(i) electronic opening messages, which comprise digital data representing opening requests of the participants to buy and/or to sell amounts of one or more commodities, and

(ii) electronic counter-offer messages, which comprise digital data representing further requests of the participants to buy and/or to sell amounts of one or more commodities, with each further request being less than or equal to the amounts represented in the corresponding opening request, and

(b) generating electronic offer messages to the participants,

wherein the offer messages are generated in response to previously received opening messages and/or to previously received counter-offer messages,

wherein electronic offer messages comprise digital data representing respective offers to the participants to buy and/or to sell amounts of one or more commodities corresponding to respective received requests to sell and/or to buy, with each offer being less than or equal to the amounts represented in the corresponding opening request, and

wherein, for at least one commodity, the opening messages and the offer messages comprise requests to buy and requests to sell, and, for each commodity, the total of the amounts offered for sale in all the generated offer messages equals the total of the amounts offered for purchase in all the generated offer messages, and

(c) repeating steps (a) and (b), if necessary, until the last offer message to each participant is indicated in a responsive message from that participant to represent offered amounts of one or more commodities to buy and/or to sell in the exchange that are substantially satisfactory according to that participant'"'"'s individual exchange objectives,

whereby the substantially-satisfactory offered amounts determine an intermediated exchange of a plurality of commodities among a plurality of participants.

11. The method of claim 10 wherein the offer messages are generated so that the total amounts of the commodities offered for exchange in all offer messages are substantially maximized.

12. The method of claim 10 wherein the offer messages are generated so that a measure of the unfairness of the share of commodities offered to each participant is substantially minimized.

13. The method of claim 12 wherein the measure of unfairness increases as the share of commodities offered to the participants differs from a pro-rata share.

14. The method of claim 10 wherein the step of generating the electronic offer messages further comprises substantially maximizing the value of a utility function of the amounts of commodities subject to constraints.

15. The method of claim 14 wherein the utility function comprises a difference of a first term and a second term, the first term representing the total amount of all commodities offered to the participants and the second term representing the unfairness of the share of commodities offered to the participants.

16. The method of claim 10 wherein offer messages are generated so that, after a number of repeats of steps (a) and (b), there is at least one commodity and at least one participant for which the amount offered for sale or purchase is less than the amount previously offered.

17. The method of claim 10 further comprising:

obtaining commodity prices concurrent with the intermediated exchange from an external source, and

determining, for each participant, the monies due from and the monies due to the participant in dependence on the participant'"'"'s substantially-satisfactory commodity amounts and on the concurrent commodity prices.

18. A computer system for automatically intermediating a single simultaneous exchange of a plurality of commodities among a plurality of participants comprising:

a processor, and

a memory accessible by the processor and storing program instructions for causing the processor to perform the method of claim 10.

19. The system of claim 18 further comprising a communication link to an external source of commodity prices.

20. A computer implemented method for representing a participant in an intermediated exchange of commodities with at least one other participant, comprising the steps of:

generating an electronic opening message to an intermediary, wherein the electronic opening message comprises digital data representing an opening request of the participant to buy and/or to sell amounts of one or more commodities;

receiving an electronic offer message from said intermediary to respectively sell and/or buy amounts of one or more commodities in response to said electronic opening message and a corresponding electronic opening message from said at least one other participant; and

generating one or more electronic counter-offer messages to the intermediary in response to said electronic offer message in accordance with the participant'"'"'s individual exchange objectives,

wherein the electronic counter-offer messages comprise digital data representing (i) further requests to buy and/or to sell amounts of one or more commodities with each further request being less than or equal to the amounts represented in the corresponding opening request, or (ii) an indication that the amounts in a received offer message are substantially satisfactory to the participant,

wherein each counter-offer message is generated in response to an electronic offer message,

wherein an electronic offer message comprises digital data representing offers to the participant to buy and/or to sell amounts of one or more commodities in accordance with objectives of the intermediated exchange, with the offers being less than or equal to the amounts represented in the corresponding opening request, and

whereby the substantially-satisfactory, offered amounts represent each participant'"'"'s objectives in the intermediated exchange.

21. The method of claim 20 wherein the sending participant'"'"'s substantial satisfaction with the previous offer message is indicated when the following counter-offer message represents the same amounts of one or more commodities to buy and/or to sell as are represented in the previous offer message.

22. The method of claim 20 wherein the counter-offer messages are generated so that counter-offered commodity amounts are less than or equal to corresponding offered commodity amounts represented in the previous offer message.

23. The method of claim 20 wherein the step of generating counter-offer messages further comprises evaluating one or more procedural rules.

24. The method of claim 20 wherein the step of generating counter-offer messages further comprises evaluating a portfolio theory.

25. The method of claim 20 wherein the step of generating counter-offer messages further comprises substantially maximizing a utility function.