System and method for facilitating trading in an electronic market

• US 7,689,500 B2
• Filed: 10/02/2006
• Issued: 03/30/2010
• Est. Priority Date: 10/02/2006
• Status: Active Grant

• Current Assignee: LIFFE Administration and Management company
• Original Assignee: LIFFE Administration and Management company
• Inventors: Cottrell, Stephen
• Primary Examiner(s): Kazimi; Hani
• Assistant Examiner(s): CAMPBELL, KELLIE L
• Application Number:
  US11/537,733
• Publication Number:
  US 20080091586A1
• Time in Patent Office: 1,275 Days
• Field of Search: 705/1, 705/35, 705/36.R, 705/37
• 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 method and system for facilitating trading of financial instruments in a market are provided. The system comprises a server and an interface. The interface is configured to enable buy orders and sell orders to be entered. Each order has a price, a volume, and an entry time and relates to a respective futures contract. The server is configured to match received buy orders having a first price to received sell orders having the first price. The match is effected by ensuring that the prices match, and then using the volume and entry time for each buy order and each sell order to assign a volume weight and a time weight, and then using the volume weights and the time weights to determine each match. The server uses the matches to complete respective trades. The volume and time weights may be adjusted based on market conditions.

Claims

1. A system for facilitating trading of futures contracts in a market, the system comprising:

a server at which futures contracts are traded; and

an interface in communication with the server, the interface being configured to receive entry of at least one of a buy order and a sell order, each buy order and each sell order having a price, a volume, and an entry time and relating to a respective futures contract;

wherein the server is configured to receive a plurality of buy orders and sell orders from the interface, and to match buy orders relating to a first futures contract and having a first price to sell orders relating to the first futures contract and having the first price by, for each buy order and each sell order, using the volume and entry time to assign a volume weight and a time weight, and using the volume weights and the time weights to determine each match; and

wherein the server is further configured to use each determined match to complete a respective trade, and

wherein the server is further configured to determine each match according to a first algorithm which is expressible as

$f_n=\frac{w_v\left(\frac{v_n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>v_r}\right)+w_t\left(\frac{\left(N+C\right)-n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>r}\right)}{w_v+w_t}$

wherein each buy or sell order relating to the first futures contract is assigned a value of n based on a time order of receipt;

N=a total number of buy or sell orders relating to the first futures contract;

v_n=a volume of the n^th buy or sell order;

r=a whole number greater than or equal to 1 and less than or equal to N;

v_r=a volume of the r^th buy or sell order;

C=a time offset;

w_v=the assigned volume weight;

w_t=the assigned time weight; and

f_n=a resultant pro-rata factor for the n^th buy or sell order.

3. The system of claim 1, wherein each buy order and each sell order is assigned at least a third weight value relating to a third characteristic, and wherein the server is further configured to use at least the assigned third weight values in conjunction with the assigned volume weights and the assigned time weights to determine each match.

4. The system of claim 3, wherein the third characteristic comprises an association with a trader and the third weight value comprises a preference value relating to the associated trader.

5. The system of claim 1, wherein the server is further configured to assign the volume weights and the time weights by using observable data relating to the market.

6. The system of claim 5, wherein the server is further configured to adjust at least one of the previously assigned volume weights and the time weights by using observable data relating to the market.

2. A system for facilitating trading of futures contracts in a market, the system comprising:

a server at which futures contracts are traded; and

an interface in communication with the server, the interface being configured to receive entry of at least one of a buy order and a sell order, each buy order and each sell order having a price, a volume, and an entry time and relating to a respective futures contract;

wherein the server is configured to receive a plurality of buy orders and sell orders from the interface, and to match buy orders relating to a first futures contract and having a first price to sell orders relating to the first futures contract and having the first price by, for each buy order and each sell order, using the volume and entry time to assign a volume weight and a time weight, and using the volume weights and the time weights to determine each match; and

wherein the server is further configured to use each determined match to complete a respective trade, and wherein the server is further configured to determine each match according to a second algorithm which is expressible as

$f_n={\left(\frac{v_n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>v_r}\right)}^{\frac{w_v}{S}}\times <br><br>{\left(\frac{\left(N+C\right)-n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>r}\right)}^{\frac{w_t}{S}}$

wherein each buy or sell order relating to the first futures contract is assigned a value of n based on a time order of receipt;

N=a total number of buy or sell orders relating to the first futures contract;

v_n=a volume of the n^th buy or sell order;

r=a whole number greater than or equal to 1 and less than or equal to N;

v_r=a volume of the r^th buy or sell order;

C=a time offset;

w_v=the assigned volume weight;

w_t=the assigned time weight;

S=a smoothing factor; and

f_n=a resultant pro-rata factor for the n^th buy or sell order.

7. A method of trading of futures contracts in a market, the method comprising the steps of:

receiving from a plurality of users entry of buy orders and sell orders, each buy order and each sell order having a price, a volume, and an entry time and relating to a respective futures contract;

using a computer to assign a volume weight and a time weight to each buy order relating to a first futures contract and having a first price based on its respective volume and entry time;

using a computer to assign a volume weight and a time weight to each sell order relating to the first futures contract and having the first price based on its respective volume and entry time;

using a computer to match buy orders having the first price to sell orders having the first price using the assigned respective volume weights and time weights; and

using the matched buy orders and sell orders to complete at least one trade,

wherein the step of using a computer to match buy orders to sell orders further comprises using the assigned respective volume weights and time weights according to a first algorithm which is expressible as

$f_n=\frac{w_v\left(\frac{v_n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>v_r}\right)+w_t\left(\frac{\left(N+C\right)-n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>r}\right)}{w_v+w_t}$

wherein each buy or sell order relating to the first futures contract is assigned a value of n based on a time order of receipt;

N=a total number of buy or sell orders relating to the first futures contract;

v_n=a volume of the n^th buy or sell order;

r=a whole number greater than or equal to 1 and less than or equal to N;

v_r=a volume of the r^th buy or sell order;

C=a time offset;

w_v=the assigned volume weight;

w_t=the assigned time weight; and

f_n=a resultant pro-rata factor for the n^th buy or sell order.

9. The method of claim 7, the method further comprising the step of using a computer to assign at least a third weight value to each buy order and to each sell order, the third weight value relating to a third characteristic, and wherein the step of using a computer to match buy orders to sell orders further comprises using a computer to match buy orders having the first price to sell orders having the first price using the assigned respective volume weights, time weights, and at least third weight values.

10. The method of claim 9, wherein the third characteristic comprises an association with a trader and the third weight value comprises a preference value relating to the associated trader.

11. The method of claim 7, wherein the step of using a computer to assign the volume weight and the time weight to each buy order further comprises using a computer to assign the volume weight and the time weight to each buy order by using observable data relating to the market.

12. The method of claim 11, further comprising the step of, for at least one buy order, using a computer to adjust at least one of the previously assigned volume or time weights by using observable data relating to the market.

13. The method of claim 7, wherein the step of using a computer to assign the volume weight and the time weight to each sell order further comprises using a computer to assign the volume weight and the time weight to each sell order by using observable data relating to the market.

14. The method of claim 13, further comprising the step of, for at least one sell order, using a computer to adjust at least one of the previously assigned volume or time weights by using observable data relating to the market.

8. A method of trading of futures contracts in a market, the method comprising the steps of:

receiving from a plurality of users entry of buy orders and sell orders, each buy order and each sell order having a price, a volume, and an entry time and relating to a respective futures contract;

using a computer to assign a volume weight and a time weight to each buy order relating to a first futures contract and having a first price based on its respective volume and entry time;

using a computer to assign a volume weight and a time weight to each sell order relating to the first futures contract and having the first price based on its respective volume and entry time;

using a computer to match buy orders having the first price to sell orders having the first price using the assigned respective volume weights and time weights; and

using the matched buy orders and sell orders to complete at least one trade,

wherein the step of using a computer to match buy orders to sell orders further comprises using the assigned respective volume weights and time weights according to a second algorithm which is expressible as

$f_n={\left(\frac{v_n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>v_r}\right)}^{\frac{w_v}{S}}\times <br><br>{\left(\frac{\left(N+C\right)-n}{\underset{r=1}{\overset{N}{\sum <br><br>}}<br><br>r}\right)}^{\frac{w_t}{S}}$

wherein each buy or sell order relating to the first futures contract is assigned a value of n based on a time order of receipt;

N=a total number of buy or sell orders relating to the first futures contract;

v_n=a volume of the n^th buy or sell order;

r=a whole number greater than or equal to 1 and less than or equal to N;

v_r=a volume of the r^th buy or sell order;

C=a time offset;

w_v=the assigned volume weight;

w_t=the assigned time weight;

S=a smoothing factor; and

f_n=a resultant pro-rata factor for the n^th buy or sell order.