System and method for improved order entry using market depth

• US 7,574,391 B1
• Filed: 09/30/2004
• Issued: 08/11/2009
• Est. Priority Date: 09/30/2004
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Burns, Michael J., Singer, Scott F., Monroe, Fred
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Kanervo; Virpi H
• Application Number:
  US10/955,289
• Time in Patent Office: 1,776 Days
• Field of Search: 705/36.R, 705/37
• US Class Current: 705/36.00R
• 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

Market depth information pertaining to the hedging side is utilized to intelligently break a non-hedging order into multiple orders, such that the orders rest at cascading price levels. This way, the trader can benefit from sweeps in the book and still properly account for the market depth on the hedging side. Further, there is a greater probability of receiving “partials” on the spread order. In addition, hedge orders may be sent at multiple price levels, or sent to the market in pieces over time. By applying a more intelligent process to hedge orders (as opposed to “fire and forget”) an alternative beyond limit orders that can be legged or market orders is provided.

Claims

1. A method performed by a computing device for entering an order for a tradeable object being traded at an electronic exchange, wherein the computing device is remotely located from the electronic exchange, the method comprising:

receiving, by the computing device, a definition for a spread to electronically trade between a first tradeable object and a second tradeable object, wherein the first tradeable object and the second tradeable object are listed at an electronic exchange;

receiving, by the computing device, a desired spread price to buy or sell a designated quantity of the spread;

determining, by the computing device, a first total quantity to buy or sell the first tradeable object and a second total quantity to buy or sell the second tradeable object based on the designated quantity;

generating, by the computing device, a plurality of orders to buy or sell the first total quantity of the first tradeable object, wherein each of the plurality of orders comprises a different price level based on a market price in the second tradeable object, the desired spread price, and quantity available at specific price levels comprising the market price in the second tradeable object;

assigning, by the computing device, a quantity to each of the plurality of orders based on the quantity available at the specific price levels in the second tradeable object such that the quantity assigned to the plurality of orders comprises the first total quantity; and

sending, by the computing device, the plurality of orders to the electronic exchange.

2. The method of claim 1, wherein the computing device comprises a trading station.

3. The method of claim 1, wherein the computing device comprises a gateway.

4. The method of claim 1, further comprising:

sending a hedge order for the second tradeable object when the plurality of orders have been filled at the electronic exchange.

5. The method of claim 4, wherein the hedge order comprises the second total quantity to buy or sell the second tradeable object.

6. The method of claim 4, wherein the hedge order comprises the market price in the second tradeable object.

7. The method of claim 1, further comprising:

sending a hedge order for the second tradeable object when fewer than all of the plurality of orders have been filled at the electronic exchange.

8. The method of claim 1, further comprising:

sending a plurality of hedge orders for the second tradeable object when at least two of the plurality of orders have been filled at the electronic exchange.

9. The method of claim 8, wherein the plurality of hedge orders comprises a total hedge quantity based on quantity from the at least two of the plurality of orders that has been filled at the electronic exchange.

10. The method of claim 8, wherein each of the plurality of hedge orders comprises a price level corresponding to one of the specific price levels.

11. The method of claim 1, wherein the quantity assigned to each of the plurality of orders is limited according to a predefined amount.

12. The method of claim 1, wherein a number of the plurality of orders is limited according to a predefined amount.

13. The method of claim 1, wherein the definition for the spread includes a spread ratio, wherein the first total quantity and the second total quantity are determined further based on the spread ratio.

14. The method of claim 1, further comprising sending each of the plurality of orders to the electronic exchange at certain time intervals.

15. The method of claim 1, wherein the first tradeable object and the second tradeable object are listed at a same electronic exchange.

16. A computer readable medium having stored therein instructions to execute a method for sending an order to an electronic exchange, comprising:

receiving, by a computing device, a definition for a spread to electronically trade between a first tradeable object and a second tradeable object, wherein the first tradeable object and the second tradeable object are listed at an electronic exchange;

receiving, by the computing device, a desired spread price to buy or sell a designated quantity of the spread;

determining, by the computing device, a first total quantity to buy or sell the first tradeable object and a second total quantity to buy or sell the second tradeable object based on the designated quantity;

generating, by the computing device, a plurality of orders to buy or sell the first total quantity of the first tradeable object, wherein each of the plurality of orders comprises a different price level based on a market price in the second tradeable object, the desired spread price, and quantity available at specific price levels comprising the market price in the second tradeable object;

assigning, by the computing device, a quantity to each of the plurality of orders based on the quantity available at the specific price levels in the second tradeable object such that the quantity assigned to the plurality of orders comprises the first total quantity; and

sending, by the computing device, the plurality of orders to the electronic exchange.

17. The computer readable medium of claim 16, wherein the computing device comprises a trading station.

18. The computer readable medium of claim 16, wherein the computing device comprises a gateway.

19. The computer readable medium of claim 16, further comprising:

sending a hedge order for the second tradeable object when the plurality of orders have been filled at the electronic exchange.

20. The computer readable medium of claim 19, wherein the hedge order comprises the second total quantity to buy or sell the second tradeable object.

21. The computer readable medium of claim 19, wherein the hedge order comprises the market price in the second tradeable object.

22. The computer readable medium of claim 16, further comprising:

sending a hedge order for the second tradeable object when fewer than all of the plurality of orders have been filled at the electronic exchange.

23. The computer readable medium of claim 16, further comprising:

sending a plurality of hedge orders for the second tradeable object when at least two of the plurality of orders have been filled at the electronic exchange.

24. The computer readable medium of claim 23, wherein the plurality of hedge orders comprises a total hedge quantity based on quantity from the at least two of the plurality of orders that has been filled at the electronic exchange.

25. The computer readable medium of claim 23, wherein each of the plurality of hedge orders comprises a price level corresponding to one of the specific price levels.

26. The computer readable medium of claim 16, wherein the quantity assigned to each of the plurality of orders is limited according to a predefined amount.

27. The computer readable medium of claim 16, wherein a number of the plurality of orders is limited according to a predefined amount.

28. The computer readable medium of claim 16, wherein the definition for the spread includes a spread ratio, wherein the first total quantity and the second total quantity are determined further based on the spread ratio.

29. The computer readable medium of claim 16, further comprising sending each of the plurality of orders to the electronic exchange at certain time intervals.