Hybrid trading system for concurrently trading securities or derivatives through both electronic and open-outcry trading mechanisms

• US 7,613,650 B2
• Filed: 04/24/2003
• Issued: 11/03/2009
• Est. Priority Date: 04/24/2003
• Status: Active Grant

• Current Assignee: Cboe Exchange, Inc. (Cboe Global Markets, Inc.)
• Original Assignee: Chicago Board Options Exchange Incorporated (Cboe Global Markets, Inc.)
• Inventors: Tilly, Edward T., Smith, Eileen C., Montesano, Anthony, Kipnes, Stuart J., Esposito, Mark A., Carone, Anthony J.
• Primary Examiner(s): Havan; Thu Thao
• Assistant Examiner(s): Hammond, III; Thomas M
• Application Number:
  US10/423,201
• Publication Number:
  US 20040215538A1
• Time in Patent Office: 2,385 Days
• Field of Search: 705 35- 40
• 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

Abstract

A system and method of allocating orders in an exchange configured for trading by a combination of electronic and open-outcry trading mechanisms is provided. One method includes permitting multiple quotes to be disseminated to the market, but limiting market making to only those entities having a physical presence on the floor of the exchange. Methods of enhancing the hybrid electronic and open-outcry exchange also include automatically eliminating crossed quotes and locked quotes while permitting certain orders to trade against locked quotes.

Claims

1. A method of routing orders for derivatives in an exchange having both real-time screen-based trading and open-outcry trading capabilities for a derivative, the method comprising:

receiving, via a computer workstation, electronic orders at a derivatives trade engine;

concurrently receiving, via an exchange electronic quoting device, at the derivatives trade engine and in open-outcry, quotes generated by a plurality of market makers for a particular derivative, wherein the plurality of market makers are physically present on the trading floor;

determining, via a trade processor, whether at least a portion of the electronic orders qualify for immediate execution according to a first order routing rule or open-outcry trading according to a second order routing rule;

automatically allocating, via the trade processor, a portion of the electronic orders from the derivatives trade engine for immediate execution based on the determination according to the first order rule;

automatically allocating, via the trade processor, a portion of the electronic orders from the derivatives trade engine to a trading floor for open-outcry trading based on the determination according to the second order rule; and

automatically routing, via the trade processor, any remaining portion of the electronic orders to an electronic order book after the allocation of electronic orders for immediate execution and open-outcry trading.

2. The method of claim 1,

wherein market makers, permitted to disseminate quotes, disseminate quotes by entering a quote electronically into the exchange electronic quoting device.

3. The method of claim 2,

wherein the market makers, permitted to disseminate quotes, also disseminate a quote by public outcry on the trading floor of the exchange in response to a request for a quote.

4. The method of claim 1,

further comprising allowing a broker/dealer physically present on the trading floor to place electronic orders for immediate execution while denying access to placing electronic orders for immediate execution to any broker/dealer not physically present on the trading floor.

5. The method of claim 1,

further comprising sending an electronic order from an ICM that did not immediately execute to the electronic order book while sending an electronic order from a non-ICM that did not immediately execute directly to the trading floor.

6. The method of claim 1,

wherein the exchange manages a plurality of classes of derivatives, each of the plurality of classes of derivatives associated with an underlying asset.

7. The method of claim 6,

wherein the underlying asset comprises one of a stock, a bond, a note, a future, an exchange traded fund, an index or a commodity.