System and method for changing order priority levels in an electronic trading environment

• US 7,769,652 B1
• Filed: 08/29/2003
• Issued: 08/03/2010
• Est. Priority Date: 08/29/2003
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Monroe, Fred
• Primary Examiner(s): Trammell; James P.
• Assistant Examiner(s): Greene, Jr.; Daniel L
• Application Number:
  US10/652,180
• Time in Patent Office: 2,531 Days
• Field of Search: 705/35, 705/36.R
• US Class Current: 705/35
• CPC Class Codes: G06Q 30/00 Commerce
• CPC Class Codes: G06Q 30/0601 Electronic shopping [e-shopping]
• 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 fee-based order priority level modification in an electronic trading environment are described. When an order reaches an exchange, a priority level of the order may be changed to a higher priority level, and the priority level of the order initially at the higher priority level may be changed to a lower priority level of the received order. In one embodiment, a trader who is gaining a higher priority level will be preferably charged a fee for having his order moved to the higher priority level, and at least a portion of that fee may be paid to a trader who is giving up his high priority level.

Claims

1. A method for changing priority levels of orders in an electronic trading environment, the method comprising:

sorting a plurality of orders into a plurality of price levels of an order book for a tradeable object at an electronic exchange according to an order price of each of the plurality of orders, where orders having a common order price are further sorted in an order queue associated with a price level for the common order price according to a match algorithm of the electronic exchange;

receiving a new order for the tradeable object at the electronic exchange, wherein the new order is received in a message comprising a first price and an order parameter defining a priority preference;

placing the new order in the order book at a first price level for the first price and in a first priority level in an order queue associated with the first price level according to the match algorithm for the electronic exchange;

comparing the priority preference of the new order with a priority preference of a pending order at a second priority level in the order queue associated with the first price level to determine whether to swap the new order and the pending order;

in response to the comparison, moving at least a portion of an order quantity associated with the new order from the first priority level to the second priority level, and at least a portion of an order quantity associated with the pending order from the second priority level to the first priority level;

determining a fee for moving the at least a portion of the order quantity associated with the first order and the at least a portion of the order quantity associated with the pending order;

applying the fee to an account of a trader associated with the new order for moving at least a portion of the order quantity associated with the new order to the second priority level; and

matching the at least a portion of the order quantity associated with the new order at the second priority level with at least a portion of an order quantity of a counter-order prior to matching a remaining portion of the order quantity associated with the new order at the first priority level.

2. The method of claim 1, wherein the order queue is processed by the electronic exchange so that orders are matched based at least in part on a first in, first out (“

FIFO”

) priority.

3. The method of claim 1, wherein the order queue is processed by the electronic exchange so that orders are matched based at least in part on a pro-rata priority.

4. The method of claim 1, wherein the fee comprises a direct fee, and wherein at least a portion of the direct fee is transferred directly from the trader associated with the new order to a trader associated with the pending order.

5. The method of claim 1, wherein the fee comprises an indirect fee, and wherein at least a portion of the indirect fee is to be transferred indirectly from the trader associated with the new order to a trader associated with the pending order via the electronic exchange.

6. The method of claim 1, wherein a portion of the fee is paid to the electronic exchange.

7. The method of claim 1, wherein the fee is payable by the trader associated with the new order when the at least a portion of the order quantity of the new order at the second priority level gets filled.

8. The method of claim 1, wherein at least a portion of the fee is payable by the trader associated with the new order when the at least a portion of the order quantity associated with the new order is changed from the first priority level to the second priority level.

9. The method of claim 1, wherein the fee is at least in part based on the order quantity of the new order being changed to the second priority level.

10. The method of claim 1, wherein the fee is at least in part based on a difference between the first priority level and the second priority level.

11. The method of claim 1, further comprising:

detecting a third order in the order queue having a third priority level falling between the first priority level and the second priority level, wherein the third order comprises a priority preference that does allow other orders to be moved from priority levels lower than the third priority level to priority levels higher than the third priority level; and

in response to detecting, moving at least a portion of an order quantity associated with the new order from the first priority level to the second priority level at least a portion of an order quantity associated with the pending order from the second priority level to the first priority level.

12. A method for changing priority levels of orders in an electronic trading environment, the method comprising:

sorting a plurality of orders into a plurality of price levels of an order book for a tradeable object at an electronic exchange according to an order price of each of the plurality of orders, where orders having a common order price are further sorted into one of a plurality of priority levels of an order queue associated with a price level for the common order price according to a match algorithm of the electronic exchange;

comparing a first priority preference of a first order at a first priority level in the order queue associated with the price level for the common order price to a second priority preference of a second order at a second priority level in the order queue to determine whether to move the first order from the first priority level to the second priority level, wherein the first order is received at the electronic exchange in a first message comprising the common order price and an order parameter defining the first priority preference and the second order is received at the electronic exchange in a second message comprising the common order price and an order parameter defining the second priority preference, where the electronic exchange matches orders according to price, then according to the queue;

in response to the comparison, changing at least a portion of an order quantity associated with the first order from the first priority level to the second priority level in the order queue associated with the price level for the common order price;

changing at least a portion of an order quantity associated with the second order from the second priority level to the first priority level in the order queue associated with the price level for the common order price;

applying a fee to an account of a trader associated with the first order for changing the at least a portion of the first order from the first priority level to the second priority level; and

matching the at least a portion of the order quantity associated with the first order at the second priority level with at least a portion of an order quantity of a counter-order prior to matching a remaining portion of the order quantity associated with the new order at the first priority level.

13. The method of claim 12, wherein the order queue is processed by the electronic exchange so that orders are matched based on a pro-rata priority, and wherein changing the at least a portion of an order quantity associated with the first order from the first priority level to the second priority level comprises:

adjusting a pro-rata matching algorithm such that the at least a portion of an order quantity associated with the first order is increased when a trade occurs at the common order price.

14. The method of claim 13, further comprising:

adjusting a pro-rata matching algorithm such that the at least a portion of an order quantity associated with the second order is decreased.

15. The method of claim 12, wherein the first priority level has a lower priority than the second priority level.

16. The method of claim 12, wherein the order queue comprises a data structure.

17. The method of claim 12, wherein the order queue is processed by the electronic exchange so that orders are matched based on a first in, first out (“

FIFO”

) priority.

18. The method of claim 12, wherein the fee comprises a direct fee transferred between an account of the trader associated with the first order and an account of a trader associated with the second order.

19. The method of claim 12, wherein the fee comprises an indirect fee transferred between an account of a trader associated with the first order and an account of a trader associated with the second order via the electronic exchange.

20. The method of claim 12, wherein a portion of the fee is received by the electronic exchange.

21. The method of claim 12, wherein at least a portion of the fee is paid by the trader associated with the first order when the first order gets filled.

22. The method of claim 12, wherein at least a portion of the fee is paid by the trader associated with the first order when the at least a portion of the first order is changed from the first priority level to the second priority level.

23. The method of claim 12, wherein the fee comprises an exchange-defined fee.

24. The method of claim 12, wherein at least a portion of the fee is based on the at least a portion of an order quantity of the first order being changed to the second priority level.

25. The method of claim 12, wherein at least a portion of the fee is based on a difference between the first priority level and the second priority level.

26. The method of claim 12, further comprising:

detecting a third order in the order queue having a third priority level falling between the first priority level and the second priority level, wherein the third order comprises a priority preference that does allow other orders to be moved from priority levels lower than the third priority level to priority levels higher than the third priority level; and

in response to detecting, changing at least a portion of an order quantity associated with the first order from the first priority level to the second priority level in the order queue associated with the price level for the common order price.

27. A computer-readable medium having computer-program instructions executable by a processor stored therein for performing the method comprising:

sorting a plurality of orders into a plurality of price levels of an order book for a tradeable object at an electronic exchange according to an order price of each of the plurality of orders, where orders having a common order price are further sorted in an order queue associated with a price level for the common order price according to a match algorithm of the electronic exchange;

receiving a new order for the tradeable object at the electronic exchange, wherein the new order is received in a message comprising a first price and an order parameter defining a priority preference;

placing the new order in the order book at a first price level for the first price and in a first location in an order queue associated with the first price level according to the match algorithm for the electronic exchange;

comparing the priority preference of the new order with a priority preference of a pending order at a second priority level in the order queue associated with the first price level to determine whether to swap the new order and the pending order may be swapped;

in response to the comparison, moving at least a portion of an order quantity associated with the new order from the first priority level to the second priority level at least a portion of an order quantity associated with the pending order from the second priority level to the first priority level;

determining a fee for moving the at least a portion of the order quantity associated with the first order and the at least a portion of the order quantity associated with the pending order;

applying the fee to an account of a trader associated with the new order for moving at least a portion of the order quantity associated with the first order to the second priority level; and

matching the at least a portion of the order quantity associated with the new order with at least a portion of an order quantity of a counter-order prior to matching a remaining portion of the order quantity associated with the new order at the first priority level.

28. A computer-readable medium having computer-program instructions executable by a processor stored therein for performing the method comprising:

sorting a plurality of orders into a plurality of price levels of an order book for a tradeable object at an electronic exchange according to an order price of each of the plurality of orders, where orders having a common order price are further sorted into one of a plurality of priority levels of an order queue associated with a price level for the common order price according to a match algorithm of the electronic exchange;

comparing a first priority preference of a first order at a first priority level in the order queue associated with the price level for the common order price to a second priority preference of a second order at a second priority level in the order queue to determine whether to move the first order from the first priority level to the second priority level, wherein the first order is received at the electronic exchange in a first message comprising the common order price and an order parameter defining the first priority preference and the second order is received at the electronic exchange in a second message comprising the common order price and an order parameter defining the second priority preference where the electronic exchange matches orders according to the price of the order, then according to the queue;

in response to the comparison, changing at least a portion of an order quantity associated with the first order from the first priority level to the second priority level in the order queue associated with the price level for the common order price;

changing at least a portion of an order quantity associated with the second order from the second priority level to the first priority level in the order queue associated with the price level for the common order price;

applying a fee to an account of a trader associated with the first order for changing the at least a portion of the first order from the first priority level to the second priority level; and

matching the at least a portion of the order quantity associated with the first order with at least a portion of an order quantity of a counter-order prior to matching a remaining portion of the order quantity associated with the first order at the first priority level.