System and method for money management using a plurality of profit levels in an electronic trading environment

• US 7,620,579 B2
• Filed: 05/02/2006
• Issued: 11/17/2009
• Est. Priority Date: 01/31/2003
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: West, Robert A., Ziemkiewicz, Peter F., Burns, Michael J., Highland, Ryan J.
• Primary Examiner(s): Weisberger; Richard C
• Application Number:
  US11/415,846
• Publication Number:
  US 20060247997A1
• Time in Patent Office: 1,295 Days
• Field of Search: 705 35- 45
• US Class Current: 705/35
• 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 system and method for money management in an electronic trading environment are presented. According to one embodiment, a money management application intercepts an order before the order is sent to an exchange, and determines a plurality of P/L levels, based on which the money management application then selects a set of money management parameters to be used to control or modify order parameters before the order is sent to the exchange. The plurality of profit levels may include a net profit level determined based on a trader'"'"'s net position and a current market level, a realized profit level determined based on trader'"'"'s sells and buys associated with the tradeable object, or an open profit level determined based on the realized and net profit levels. The set of money management parameters may include a maximum order quantity and a maximum net position so that, for example, if the order quantity associated with the order is higher than the maximum order quantity associated with the applicable set of money management parameters, the order quantity may be modified to the maximum order quantity.

Claims

1. A method for money management in an electronic trading environment, the method comprising:

receiving an order to be sent to an electronic exchange, wherein the order is associated with a tradeable object and has order parameters comprising an order price and an order quantity;

automatically electronically determining a trader'"'"'s net profit/loss level for the tradeable object based on a realized profit/loss and an open profit/loss for the tradeable object, wherein the realized profit/loss represents a profit or loss based on a quantity sold at a sell price and a quantity bought at a buy price, and wherein the open profit/loss represents a possible profit or loss based on a current open position and a difference between a price to get into the current open position and a current price to close the open position based on the trader'"'"'s net profit/loss level, determining a money management filter to be used to control order parameters associated with the order, wherein the money management filter comprises a filter condition that represents a maximum order quantity for a given net profit/loss level; and

automatically electronically applying the money management filter having the filter condition to the order parameters before the order is sent to the exchange;

automatically electronically determining that the order quantity is, greater than the maximum order quantity;

responsively automatically electronically modifying the order quantity based on the maximum order quantity;

and electronically sending the order to the electronic exchange, the order having order parameters that comprise the order price and the adjusted order quantity.

2. The method of claim 1, wherein the current price to close the open position comprises a last traded price.

3. The method of claim 1, wherein the filter condition further comprises a maximum open position.

4. The method of claim 3, wherein applying the filter condition to the order before the order is sent to the exchange comprises:

determining the current open position; and

if the current open position is higher than the maximum open position associated with the money management filter, refraining from sending the order to the electronic exchange.

5. The method of claim 1, further comprising:

defining a plurality of money management filters, each money management filter associated with a criterion comprising a net profit/loss level, wherein each filter is further associated with a filter condition comprising a maximum order quantity and a maximum net position, and wherein the plurality of money management filters are applied to the order before the order is sent to the exchange.

6. The method of claim 1, further comprising:

determining an overall net profit/loss level based on trader'"'"'s realized and open positions associated with a plurality of tradeable objects being traded by a trader and further based on current market levels associated with each of the plurality of tradeable objects, wherein the overall net profit/loss level is used to determine a filter condition to be used to control the order parameters associated with the order.

7. The method of claim 1, further comprising:

determining a realized profit/loss level; and

using the realized profit/loss level to determine the filter condition to be used to control the order parameters associated with the order.

8. The method of claim 7, further comprising:

applying a priority rule to determine if the filter condition corresponding to the realized profit/loss level or the trader'"'"'s net profit/loss level controls the order parameters associated with the order.

9. The method of claim 7, further comprising:

determining which of the filter conditions corresponding to the realized profit/loss level or the trader'"'"'s net profit/loss level is most restrictive, wherein the most restrictive filter condition is one that allows the least order quantity; and

applying the most restrictive filter condition to control the order quantity associated with the order.

10. The method of claim 7, further comprising:

determining an open profit/loss level; and

using the open profit/loss level to determine a money management filter to be used to control the order parameters associated with the order.

11. The method of claim 10, further comprising:

determining which of the filter conditions corresponding to the realized profit/loss level, the trader'"'"'s net profit/loss level, and the open profit/loss level is most restrictive, wherein the most restrictive filter condition is one that allows the least order quantity; and

applying the most restrictive filter condition to control the order quantity associated with the order.

12. The method of claim 10, further comprising:

applying a priority rule to determine if the filter condition corresponding to the realized profit/loss level, the trader'"'"'s net profit/loss level, or the open profit/loss level controls the order parameters associated with the order.

13. The method of claim 1, further comprising:

defining a plurality of time-based money management filters, wherein each time-based money management filter is associated with a time-based trigger criteria and a filter condition for controlling the order parameters;

selecting one of the plurality of time-based money management filters based on time of day; and

applying a filter condition associated with the selected time-based money management filter to the order.

14. The method of claim 1, further comprising:

using data from one or more outside sources to determine the money management filter to be applied to the order.

15. The method of claim 1, further comprising:

using data from at least one exchange to determine the money management filter to be applied to the order.

16. The method of claim 1, wherein the current price to close the open position comprises a best bid price or a best ask price.