Systems and methods for providing anonymous requests for quotes for financial instruments

• US 7,680,715 B2
• Filed: 04/21/2006
• Issued: 03/16/2010
• Est. Priority Date: 06/01/2000
• Status: Expired due to Fees

• Current Assignee: Virtu ITG Software Solutions LLC
• Original Assignee: Aritas Group, Inc.
• Inventors: Federspiel, Fred J., Gamse, Brent, Waelbroeck, Henri
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Ebersman; Bruce I
• Application Number:
  US11/409,534
• Publication Number:
  US 20070005484A1
• Time in Patent Office: 1,425 Days
• Field of Search: 705/35, 705/36, 705/36.R, 705/37, 705/38, 705/39
• 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 40/03 Credit; Loans; Processing thereof
• 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

Embodiments of the invention provide an anonymous RFQ system for financial instruments that resolves the inherent conflict between a capital provider'"'"'s need for information and a market participant'"'"'s need for confidentiality by creating an environment where market participants and capital providers can realize the benefits of sharing confidential trading interest (CTI) information without sacrificing anonymity or enabling information leakage. This secure environment preferably is created within an electronic matching book that distills all CTI information related to each Request for Quote (RFQ) into a risk class that is sent to capital providers in lieu of order-identifying or trader-identifying information. These risk classes give capital providers enough information to offer customized, risk-adjusted quotes without requiring the market participant to reveal confidential information about herself or her order.

Claims

1. A computer-implemented method for providing an anonymous request for quotation environment that enables sharing of confidential trading interest information without sacrificing anonymity or enabling information leakage, comprising:

receiving, by a computer, a request for quotation and confidential information regarding said request for quotation from a market participant;

determining, by said computer, a risk categorization for said request for quotation, wherein said risk categorization provides information from which to generate a quotation without revealing said confidential information;

communicating said request for quotation and said risk categorization to at least one capital provider that provides quotations based on risk categorizations that do not reveal said confidential information;

transmitting a message to said at least one capital provider, said message comprising a symbol for said request for quotation but not said risk categorization;

receiving at least two one-sided or two-sided conditional quotations from one or more of said at least one capital provider in response to said message, wherein each of said at least two conditional quotations specifies a maximum risk level for requests for quotation for which said conditional quotation can be revealed; and

for each of said at least two conditional quotations, displaying said conditional quotation to said market participant only if said risk categorization for said request for quotation is less than said maximum risk level specified by said conditional quotation.

2. The computer-implemented method of claim 1, wherein said request for quotation comprises an initial block quantity for which a quotation is requested, the method further comprising receiving, by said computer, after a time lag following said request for quotation, an additional request for quotation for an additional block quantity.

3. The computer-implemented method of claim 1, wherein communicating said request for quotation comprises communicating at least one of:

a symbol for a financial instrument, information for pairs trading, and information for basket trading.

4. The computer-implemented method of claim 1, wherein determining said risk categorization comprises performing a risk analysis based at least in part on said confidential information regarding said request for quotation and said market participant.

5. The computer-implemented method of claim 4, wherein said confidential information includes information about price movements following past requests for quotation from said market participant.

6. The computer-implemented method of claim 4, wherein said risk analysis is further based on current market conditions.

7. The computer-implemented method of claim 1, further comprising receiving, from a responding capital provider among said at least one capital provider, a two-sided quotation in response to said request for quotation based on said risk categorization.

8. The computer-implemented method of claim 7, further comprising:

comparing, by said computer, said two-sided quotation to said request for quotation;

concluding, by said computer, that said two-sided quotation is mismatched with said request for quotation and cannot be auto-executed between said market participant and said responding capital provider; and

communicating said two-sided quotation to said market participant to enable said market participant to initiate a negotiation with the responding capital provider.

9. The computer-implemented method of claim 7, further comprising:

comparing, by said computer, said request for quotation to said two-sided quotation;

concluding, by said computer, that said two-sided quotation is matched with said request for quotation; and

executing, by said computer, a trade between said market participant and said responding capital provider.

10. The computer-implemented method of claim 9, wherein executing a trade between said market participant and said responding capital provider comprises maintaining permanent anonymity of said market participant when executing said trade.

11. The computer-implemented method of claim 9, further comprising:

maintaining a list of trusted capital providers for which said market participant does not require anonymity;

determining that said responding capital provider is in said list of trusted capital providers; and

revealing said market participant to said responding capital provider.

12. The computer-implemented method of claim 7, further comprising communicating said two-sided quotation to a graphical user interface of said market participant for display.

13. The computer-implemented method of claim 12, further comprising:

receiving, by said computer, an indication from said graphical user interface of said market participant that said market participant has modified pricing of said request for quotation;

concluding, by said computer, that said two-sided quotation is matched with said modified pricing of said request for quotation; and

executing, by said computer, a trade between said market participant and said responding capital provider.

14. The computer-implemented method of claim 12, further comprising at least one of:

receiving an indication from said graphical user interface of said market participant to cancel said request for quotation, and

receiving an indication from a graphical user interface of said responding capital provider to cancel said two-sided quotation.

15. The computer-implemented method of claim 7, further comprising receiving from said responding capital provider a two-sided quotation for each of at least two risk categorizations with which said responding capital provider is willing to trade.

16. The computer-implemented method of claim 1, wherein said risk categorization is determined based on a risk model comprising a distribution of overall risk measures, wherein distinct portions of said distribution correspond to distinct risk categorizations.

17. The computer-implemented method of claim 1, wherein determining a risk categorization for said request for quotation comprises:

for each of a plurality of rules, applying said rule to said request for quote and said confidential information to determine a corresponding risk measure; and

selecting a largest risk measure among said corresponding risk measures to be said risk categorization.