Trading system

• US 7,533,052 B2
• Filed: 08/07/2002
• Issued: 05/12/2009
• Est. Priority Date: 02/07/2000
• Status: Active Grant

• Current Assignee: Nasdaq Technology AB (Nasdaq, Inc.)
• Original Assignee: OM Technology AB (OM Gruppen AB)
• Inventors: Bandeen, R. Derek, Tilfors, Jan
• Primary Examiner(s): Trammell; James P.
• Assistant Examiner(s): TROTTER, SCOTT S
• Application Number:
  US10/212,738
• Publication Number:
  US 20040030630A1
• Time in Patent Office: 2,470 Days
• Field of Search: 705/37, 705/26, 705/20, 705/35
• US Class Current: 705/37
• CPC Class Codes: G06Q 20/201 Price look-up processing, e.g. updating
• CPC Class Codes: G06Q 30/08 Auctions
• 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: H04L 12/1804 for stock exchange and similar applications

Abstract

In an automated exchange system functions for automatic hedging and automatic price improvements are provided.

Claims

1. A method for use in an automated trading system, where a market maker is responsible for providing in a first computer-based exchange a buy price and a sell price to trade a financial instrument and where a difference between the buy price and the sell price defines a spread for the financial instrument, comprising the following steps implemented at the first computer-based exchange:

receiving a quote comprising a volume and a price associated with the buying and/or selling of the financial instrument that requires an improved buy price and/or sell price for trading the financial instrument relative to the buy price and/or sell price for trading the financial instrument offered in the first computer-based exchange; and

automatically using a current buy price and/or a current sell price for the financial instrument obtained from a second computer-based exchange to execute the quote of the financial instrument at the improved buy price and/or sell price at the first computer-based exchange,

wherein the quote further includes a multiplier parameter for controlling a volume of the quote by multiplying the multiplier parameter with a volume at the second computer-based exchange.

2. The method according to claim 1, wherein the multiplier parameter is used to control a risk for the market maker with respect to the volume associated with the quote.

3. The method according to claim 1, wherein the quote further includes a volume limit parameter for controlling a risk for the market maker with respect to the volume associated with the quote.

4. The method in claim 1, wherein the improved price is a either a higher buy price if the quote is a buy order or a lower sell price if the quote is a sell order.

5. The method in claim 1, further comprising:

determining that a remainder of an incoming order cannot be filled at the first computer-based exchange;

automatically obtaining additional volume of the financial instrument from the second computer-based exchange; and

executing some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange.

6. The method in claim 5, wherein the execution of some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange is at the improved buy price and/or sell price.

7. The method in claim 6, further comprising:

determining that only some of the remainder of the incoming order can be filled using the additional volume of the financial instrument obtained from the second computer-based exchange, and

executing a non-executed portion of the trade order at the first computer-based exchange without consideration of the improved buy price and/or sell price.

8. The method in claim 5, wherein in order to transfer the additional volume of the financial instrument from the second computer-based exchange to the first computer-based exchange, the first computer-based exchange performs the following steps:

sending a transfer order to the market maker requesting the market maker execute that transfer order at the second computer-based exchange;

receiving from the market maker the additional volume of the financial instrument obtained as a result of the market maker executing the transfer order at the second computer-based exchange; and

executing some or all of the remainder of the trade order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange and received from the market maker.

9. Apparatus for use in an automated trading system, where a market maker is responsible for providing in a first computer-based exchange a buy price and a sell price to trade a financial instrument and where a difference between the buy price and the sell price defines a spread for the financial instrument, comprising electronic circuitry at the first computer-based exchange programmably configured to:

receive a quote comprising a volume and a price associated with the buying and/or selling of the financial instrument that requires an improved buy price and/or sell price for trading the financial instrument relative to the buy price and/or sell price for trading the financial instrument offered in the first computer-based exchange; and

automatically use a current buy price and/or a current sell price for the financial instrument obtained from a second computer-based exchange to execute the quote of the financial instrument at the improved buy price and/or sell price at the first computer-based exchange,

wherein the quote further includes a multiplier parameter for controlling a volume of the quote by multiplying the multiplier parameter with a volume at the second computer-based exchange.

10. The apparatus according to claim 9, wherein the multiplier parameter is used to control a risk for the market maker with respect to the volume associated with the quote.

11. The apparatus according to claim 9, wherein the quote further includes a volume limit parameter for controlling a risk for the market maker with respect to the volume associated with the quote.

12. The apparatus according to claim 9, wherein the improved price is a either a higher buy price if the quote is a buy order or a lower sell price if the quote is a sell order.

13. The apparatus according to claim 9, wherein the electronic circuitry at the first computer-based exchange is further configured to:

determine that a remainder of an incoming order cannot be filled at the first computer-based exchange;

automatically obtain additional volume of the financial instrument from the second computer-based exchange; and

execute some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange.

14. The apparatus according to claim 13, wherein the electronic circuitry at the first computer-based exchange is further configured to execute some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange at the improved buy price and/or sell price.

15. The apparatus according to claim 14, wherein the electronic circuitry at the first computer-based exchange is further configured to:

determine that only some of the remainder of the incoming order can be filled using the additional volume of the financial instrument obtained from the second computer-based exchange, and

execute a non-executed portion of the trade order at the first computer-based exchange without consideration of the improved buy price and/or sell price.

16. The apparatus according to claim 13, wherein in order to transfer the additional volume of the financial instrument from the second computer-based exchange to the first computer-based exchange, the electronic circuitry at the first computer-based exchange is further configured to:

send a transfer order to the market maker requesting the market maker execute that transfer order at the second computer-based exchange;

receive from the market maker the additional volume of the financial instrument obtained as a result of the market maker executing the transfer order at the second computer-based exchange; and

execute some or all of the remainder of the trade order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange and received from the market maker.

17. A computer program for use in an automated trading system, where a market maker is responsible for providing in a first computer-based exchange a buy price and a sell price to trade a financial instrument and where a difference between the buy price and the sell price defines a spread for the financial instrument, wherein the computer program includes program code provided in a computer-readable medium for controlling a computer, comprising program code configured to:

receive a quote comprising a volume and a price associated with the buying and/or selling of the financial instrument that requires an improved buy price and/or sell price for trading the financial instrument relative to the buy price and/or sell price for trading the financial instrument offered in the first computer-based exchange; and

automatically use a current buy price and/or a current sell price for the financial instrument obtained from a second computer-based exchange to execute the quote of the financial instrument at the improved buy price and/or sell price at the first computer-based exchange,

wherein the quote further includes a multiplier parameter for controlling a volume of the quote by multiplying the multiplier parameter with a volume at the second computer-based exchange.

18. The computer program according to claim 17, wherein the multiplier parameter is used to control a risk for the market maker with respect to the volume associated with the quote.

19. The computer program according to claim 17, wherein the quote further includes a volume limit parameter for controlling a risk for the market maker with respect to the volume associated with the quote.

20. The computer program according to claim 17, wherein the improved price is a either a higher buy price if the quote is a buy order or a lower sell price if the quote is a sell order.

21. The computer program according to claim 17, wherein the program code is further configured to:

determine that a remainder of an incoming order cannot be filled at the first computer-based exchange;

automatically obtain additional volume of the financial instrument from the second computer-based exchange; and

execute some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange.

22. The computer program according to claim 21, wherein the program code is further configured to execute some or all of the remainder of the incoming order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange at the improved buy price and/or sell price.

23. The computer program according to claim 22, wherein the program code is further configured to:

determine that only some of the remainder of the incoming order can be filled using the additional volume of the financial instrument obtained from the second computer-based exchange, and

execute a non-executed portion of the trade order at the first computer-based exchange without consideration of the improved buy price and/or sell price.

24. The computer program according to claim 21, wherein in order to transfer the additional volume of the financial instrument from the second computer-based exchange to the first computer-based exchange, the program code is further configured to:

send a transfer order to the market maker requesting the market maker execute that transfer order at the second computer-based exchange;

receive from the market maker the additional volume of the financial instrument obtained as a result of the market maker executing the transfer order at the second computer-based exchange; and

execute some or all of the remainder of the trade order at the first computer-based exchange using the additional volume of the financial instrument obtained from the second computer-based exchange and received from the market maker.