System and method for dynamically determining quantity for risk management

• US 7,640,207 B1
• Filed: 05/03/2006
• Issued: 12/29/2009
• Est. Priority Date: 12/30/2003
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Tanpoco, Alvin F.
• Primary Examiner(s): Trammell; James P.
• Assistant Examiner(s): LIU, I JUNG
• Application Number:
  US11/417,873
• Time in Patent Office: 1,336 Days
• Field of Search: 705 1- 50, 205 1- 20, 215/5, 215/7, 215/9
• US Class Current: 705/37
• CPC Class Codes: G06Q 20/382 insuring higher security of transaction
• 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 dynamically determining quantity for risk management are described. According to one example embodiment, as a trader positions an order icon at a desired price or price-derivative value on a graphical interface, an order quantity for the order is dynamically determined based on the order price and a selected risk management formula. A trader can change the price or the price-related value for one or more orders by moving the order icons relative to a price axis on a graphical interface. In such an embodiment, the initially calculated order quantity for each order will be dynamically recalculated based on the modified orders for the trading strategy.

Claims

1. A method for managing risk by dynamically computing an order quantity to associate with an order to be placed at an electronic exchange comprising:

setting a first risk parameter associated with a first order icon;

displaying a screen region on a graphical interface comprising a plurality of locations, each location corresponding to one of a plurality of price levels positioned along a price axis;

selecting and moving the first order icon with a user input device to a first location of the plurality of locations corresponding to a price level along the price axis;

dynamically computing a first order quantity based on the first risk parameter and based on the price level corresponding to the first location that the first order icon has been moved to; and

sending a first order associated with the first order icon to an electronic exchange, wherein the first order has a plurality of order parameters comprising the first order quantity and the price corresponding to the particular location.

2. The method of claim 1, further comprising:

selecting and moving a second order icon with a user input device to a second location of the plurality of locations corresponding to a price level along the price axis;

dynamically computing a second order quantity based on the first risk parameter and based on the price level corresponding to the second location that the second order icon has been moved to; and

sending a second order associated with the second order icon to an electronic exchange, wherein the second order has a plurality of order parameters comprising the second order quantity and the price corresponding to the second location, and wherein the first order and the second order are associated with the same trading strategy.

3. The method of claim 2, wherein the first order quantity and the second order quantity are the same.

4. The method of claim 2, further comprising:

selecting and moving a third order icon with a user input device to a third location of the plurality of locations corresponding to a price level along the price axis;

sending a third order associated with the third order icon to an electronic exchange when the first order is at least partially filled at the electronic exchange, wherein the third order has a plurality of order parameters comprising a third order quantity and the price corresponding to the third location, and wherein the first order, the second order, and the third order are associated with the same trading strategy.

5. The method of claim 4, wherein the first order represents an entry order, the second order represents a risk order, and the third order represents a profit order.

6. The method of claim 4, wherein the first and second orders are submitted to the electronic exchange before the third order is submitted to the electronic exchange.

7. The method of claim 4, further comprising dynamically computing the quantity of the third order based on the at least partial fill quantity of the first order.

8. The method of claim 4, further comprising deleting the second order from the electronic exchange when the first order quantity is completely filled.

9. The method of claim 1, further comprising selecting a risk management formula that requires entry of the first risk parameter.

10. The method of claim 1, further comprising setting an additional risk parameter and dynamically computing the first order quantity based on the first risk parameter and additional risk parameter.

11. The method of claim 1, wherein the first risk parameter is a user-configured value.

12. The method of claim 1, further comprising dynamically modifying the first risk parameter and dynamically updating the first order quantity based on the modified risk parameter.

13. The method of claim 1, wherein the dynamically computed first order quantity is displayed in relation to the first order icon.

14. The method of claim 1, wherein the dynamically computed first order quantity can be manually overridden by a user-defined order quantity.

15. The method of claim 1, wherein the first order icon is selected from a plurality of order icons, and wherein each of the plurality of order icons is associated with a trading strategy.

16. The method of claim 1, wherein the price levels comprise prices or price based values corresponding to market information received from the electronic exchange, the market information comprises an inside market representing the highest bid price and the lowest ask price, a last traded price, and a last traded quantity.

17. The method of claim 1, further comprising displaying price values at the price levels on the screen region of the graphical user interface.

18. The method of claim 1, further comprising modifying the price of the first order and dynamically computing the first order quantity based on the first risk parameter and based on the modified price.