Method and system for providing option spread indicative quotes

• US 7,584,140 B2
• Filed: 12/02/2003
• Issued: 09/01/2009
• Est. Priority Date: 10/15/2003
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Dahl, Jon, Whittington, Christopher S., Paronis, Tom, Schmid, Paul A., Brady, Neal
• Primary Examiner(s): Hamilton; Lalita M
• Application Number:
  US10/726,851
• Publication Number:
  US 20050119964A1
• Time in Patent Office: 2,100 Days
• Field of Search: 705/35, 705/36.R
• 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

Abstract

A computer network and method for electronically trading combinations of derivatives. One preferred method of trading includes providing quotes information to a central server, and determining indicative quotes for combination trades, and providing the non-binding, indicative quotes to market participants (which typically includes subscribers, but may also include market makers). A participant may then submit an e-RFQ, which is a request for a binding quote for the combination of derivatives. Market Makers may then elect to submit a binding quote for the corresponding derivative combination. Market participants may then elect to enter a binding order.

Claims

1. A computer implemented method for minimizing communications bandwidth among parties trading derivatives using computers, the method comprising:

(a) receiving, by a network computer, via a network, market data, the market data representative of a state of a market for a plurality of products;

(b) receiving, by the network computer, via the network, quote data from at least one market maker computer, the quote data operative to facilitate derivation, by the network computer, of at least one indicative quote for at least a subset of the plurality of products;

(c) generating, by the network computer, a plurality of indicative quotes for the subset of the plurality of products based on the market data and the quote data, and transmitting the plurality of indicative quotes to a subscriber computer via the network; and

(d) facilitating, by the network computer, the subscriber computer to generate a request for actionable quote for at least one product of the subset of the plurality of products based on the plurality of quotes and transmit the request for actionable quote to all of the at least one market maker computer via the network, each of the at least one market maker computer being responsive thereto to generate an actionable quote in response to the request for actionable quote and transmit the actionable quote back to the subscriber computer via the network wherein the subscriber computer may generate an order based on the actionable quote.

2. The computer implemented method of claim 1 wherein the subset comprises at least one combination of at least two of the plurality of products, wherein the at least one combination comprises a product having a plurality of legs, the method further comprising generating, by the network computer, at least one indicative quote for the at least one combination in response to at least one theoretical price for the plurality of legs.

3. The computer implemented method of claim 2 wherein quote data includes at least one spread parameter provided by the at least one market maker computer.

4. The computer implemented method of claim 1 wherein the quote data comprises at least bid and ask non-binding prices for the plurality of products, the method further comprises analyzing, by the network computer, the quote data to eliminate crossed quotes by sorting the bid non-binding prices into descending order and the ask non-binding prices in ascending order;

determining, by the network computer, if a cross condition exists in the quote data set; and

disregarding, by the network computer, the crossed quotes based on said determining, and

wherein the generating further comprises generating, by the network computer, the plurality of indicative quotes that are non-crossed.

5. The computer implemented method of claim 4 wherein the determining further comprises searching, by the network computer, an ordered list of bid prices and ask prices for a first instance of non-crossed quotes.

6. The computer implemented method of claim 1, wherein the quote data comprises a table having quotes for at least each of the subset of the plurality of products and from which the plurality of indicative quotes may be extracted by the network computer.

7. The computer implemented method of claim 1, further comprising receiving other quote data, by the network computer, from another of the at least one market maker computer, the other quote data being operative to facilitate derivation, by the network computer, of at least one indicative quote for at least a subset of the plurality of products and generating another plurality of indicative quotes for the subset of the plurality of products based on the market data and the other quote data, and transmitting the other plurality of indicative quotes to a subscriber computer via the network, and wherein the quote data may be different than the other quote data.

8. The computer implemented method of claim 1, further comprising receiving, by the network computer, updated quote data from the at least one market maker computer, the plurality of indicative quotes being generated based the market data and the updated quote data.